Cashless Exercise. On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:

GLOBAL SETTLEMENT AND ABSOLUTE RELEASE AGREEMENT – PAGE 6

I certify that if I transfer the stock purchased by this exercise I will not do so in a manner that violates Cortland Bancorp’s policy on insider trading.

Automatic Cashless Exercise upon Expiration. In the event that, upon the Expiration Date, the fair market value of one Share as determined in accordance with Section 2.3 above is greater than the Exercise Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to have been exercised pursuant to Section 2.2 above as to all Shares for which it shall not previously have been exercised, and the Company shall, within a reasonable time following Holder’s written request, deliver a certificate, which may be in electronic form (or, in the case of uncertificated securities, provide notice of book entry) representing the Shares issued to Holder upon such exercise.

cashless exercise or net exercise.

Cashless Settlement. Notwithstanding anything to the contrary contained in this Agreement, any Lender may exchange, continue or rollover all or a portion of its Loans in connection with any refinancing, extension, loan modification or similar transaction permitted by the terms of this Agreement, pursuant to a cashless settlement mechanism approved by the Borrowers, the Administrative Agent and such Lender.

• a “cashless exercise” with a third party who provides simultaneous financing for the purposes of (or who otherwise facilitates) the exercise of the Option.

delivery of the Exercise Units, provided that payment of the Aggregate Strike Price (other than in the case of a cashless exercise) is received by the Company.

If the Participant exercises this option using either the cashless sell-all exercise method or the cashless sell-to-cover method, it is not necessary to obtain a Tax Clearance Certificate (as described above) or a transfer of funds application form. In addition, under a cashless sell-to-cover method, the Participant may acquire and hold shares up to any amount, even in excess of [[Unknown Identifier]]. The value of the shares acquired using a cashless sell-to-cover exercise method will not be counted against the [[Unknown Identifier]] limit. The sale proceeds of such shares may be held offshore and will not count against the investment limit.

(A) = the VWAP on the trading day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;