Net Exercise. To the extent that a Stock Option Award Agreement so provides, payment may be made by a “net exercise” arrangement pursuant to which the number of Shares issuable upon exercise of an NSO shall be reduced by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate Exercise Price (plus tax withholdings, if applicable) and any remaining balance of the aggregate Exercise Price (and/or applicable tax withholdings) not satisfied by such reduction in the number of whole Shares to be issued shall be paid by the Participant in cash or any other form of payment permitted under the Stock Option Award Agreement.

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.

Deemed Net-Stock Exercise. If provided for in the Award Agreement, by forfeiture of Shares equal to the value of the exercise price pursuant to a “deemed net-stock exercise” by requiring the Grantee to accept that number of Shares determined in accordance with the following formula, rounded down to the nearest whole integer:

Net Income and Net Loss. After giving effect to the special allocations set forth in Section 6.1(b), if there is Net Income remaining for a taxable period, the remaining Net Income shall be allocated among the Partners so as to reduce proportionately (based on the amounts that need to be reduced) the differences between their respective Target Capital Account Balances and Partially Adjusted Capital Account Balances for the taxable period. After giving effect to the special allocations set forth in Section 6.1(b), if there is Net Loss remaining for a taxable period, the remaining Net Loss shall be allocated among the Partners so as to reduce proportionately (based on the amounts that need to be reduced) the differences between their respective Partially Adjusted Capital Account Balances and Target Capital Account Balances for the taxable period. If in the fiscal period of liquidation of the Company or in the fiscal period of the sale of substantially all of its assets, at least one Partner has a Targeted Capital Account Balance in excess of its Partially Adjusted Capital Account Balance or at least one Partner has a Partially Adjusted Capital Account Balance in excess of its Targeted Capital Account Balance, the General Partner may apply the foregoing provisions by allocating items of income and gain taken into account in determining Net Income or Net Loss (other than items allocated pursuant to Section 6.1(b)) in lieu of Net Income and by allocating items of loss and deduction taken into account in determining Net Income or Net Loss (other than items allocated pursuant to Section 6.1(b)) in lieu of Net Loss.

Net Income. Net Income of the Partnership with respect to any fiscal period shall mean the excess of the gross sales for such period over all operating expenses for such period, as those terms are defined herein, determined on an accrual basis and determined without regard to amounts deducted by the Partnership for cost recovery of tangible assets or amortization of capitalized or other capital accounts.

Net Lease. This shall be a net Lease and Base Rent shall be paid to Landlord net of all costs and expenses, except as specifically provided to the contrary in this Lease. The provisions for payment of Operating Expenses and the Operating Expense Reconciliation are intended to pass on to Tenant and reimburse Landlord for all costs and expenses of the nature described in Paragraph 4.1. incurred in connection with the ownership, management, maintenance, repair, preservation, replacement and operation of the Building and/or Project and its supporting facilities and such additional facilities now and in subsequent years as may be determined by Landlord to be necessary or desirable to the Building and/or Project.

Any and all payments made by or on behalf of the Borrower or any Guarantor under this Agreement or any other Loan Document shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes; provided that if the Borrower or any Guarantor or the Administrative Agent shall be required by applicable Requirements of Law to deduct or withhold any Taxes from such payments, then # the Borrower or such Guarantor or the Administrative Agent shall make such deductions or withholdings as are reasonably determined by the Borrower, such Guarantor or the Administrative Agent to be required by any applicable Requirement of Law, # the Borrower, such Guarantor or the Administrative Agent, as applicable, shall timely pay the full amount deducted or withheld to the relevant Governmental Authority within the time allowed and in accordance with applicable Requirements of Law, and # to the extent withholding or deduction is required to be made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower or such Guarantor shall be increased as necessary so that after making all required deductions and withholdings (including deductions or withholdings applicable to additional sums payable under this Section 5.4) the Administrative Agent or any Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made. Whenever any Indemnified Taxes or Other Taxes are paid by the Borrower or such Guarantor, as promptly as possible thereafter, the Borrower or Guarantor shall send to the Administrative Agent for its own account or for the account of a Lender, a certified copy of an official receipt received by the Borrower or such Guarantor showing payment thereof (or other evidence of such payment reasonably acceptable to the Administrative Agent).

Tangible Net Worth. The Borrower and its Subsidiaries on a consolidated basis shall have, on the last day of each fiscal quarter, Tangible Net Worth greater than $55,000,000.

In this Agreement, unless the contrary intention appears, a reference to:

cashless exercise or net exercise.