Document:

Filed by Bowne Pure Compliance

Exhibit 10.20

The Cortland Savings and Banking Company

Second Amended Salary Continuation Agreement

This Second Amended Salary Continuation Agreement (this “Agreement”) is entered into
as of this
third day of
December, 2008, by and between The
Cortland Savings and Banking Company (the “Bank”), an Ohio-chartered, FDIC-insured member bank, and
Marlene J. Lenio, Vice President of the Bank (the “Executive”).

Whereas, the Executive has contributed substantially to the success of the Bank and
its parent company, Cortland Bancorp, an Ohio corporation, and the Bank desires that the Executive
continue in its employ,

Whereas, to encourage the Executive to remain an employee, the Bank is willing to
provide to the Executive salary continuation benefits payable from the Bank’s general assets,

Whereas, none of the conditions or events included in the definition of the term
“golden parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit
Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule
359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is
contemplated insofar as the Bank is concerned,

Whereas, the Bank and the Executive intend that this Agreement shall amend and
restate in its entirety the September 9, 2002 Amended Salary Continuation Agreement between the
Executive and the Bank, and

Whereas, the parties hereto intend that this Agreement shall be considered an
unfunded arrangement maintained primarily to provide supplemental retirement benefits for the
Executive, and to be considered a non-qualified benefit plan for purposes of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). The Executive is fully advised of
the Bank’s financial status.

Now Therefore, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.

Article 1

Definitions

1.1 “Accrual Balance” means the liability that should be accrued by the Bank under generally
accepted accounting principles (“GAAP”) for the Bank’s obligation to the Executive under this
Agreement, applying Accounting Principles Board Opinion No. 12, as amended by Statement of
Financial Accounting Standards No. 106, and the calculation method and discount rate specified
hereinafter. The Accrual Balance shall be calculated such that when it is credited with interest
each month the Accrual Balance at Normal Retirement Age equals the present value of the normal
retirement benefits. The discount rate means the rate used by the Plan
Administrator for determining the Accrual Balance. In its sole discretion the Plan Administrator
may adjust the discount rate to maintain the rate within reasonable standards according to GAAP.

 

 

 

1.2 “Beneficiary” means each designated person, or the estate of the deceased Executive,
entitled to benefits, if any, upon the death of the Executive, determined according to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan
Administrator that the Executive completes, signs, and returns to the Plan Administrator to
designate one or more Beneficiaries.

1.4 “Change in Control” means a change in control as defined in Code section 409A and rules,
regulations, and guidance of general application thereunder issued by the Department of the
Treasury, including —

(a) Change in ownership: a change in ownership of Cortland Bancorp occurs on the date any one
person or group accumulates ownership of Cortland Bancorp stock constituting more than 50% of the
total fair market value or total voting power of Cortland Bancorp stock,

(b) Change in effective control: (x) any one person, or more than one person acting as a
group, acquires within a 12-month period ownership of Cortland Bancorp stock possessing 30% or more
of the total voting power of Cortland Bancorp stock, or (y) a majority of Cortland Bancorp’s board
of directors is replaced during any 12-month period by directors whose appointment or election is
not endorsed in advance by a majority of Cortland Bancorp’s board of directors, or

(c) Change in ownership of a substantial portion of assets: a change in ownership of a
substantial portion of Cortland Bancorp’s assets occurs if in a 12-month period any one person or
more than one person acting as a group acquires from Cortland Bancorp assets having a total gross
fair market value equal to or exceeding 40% of the total gross fair market value of all of Cortland
Bancorp’s assets immediately before the acquisition or acquisitions. For this purpose, gross fair
market value means the value of Cortland Bancorp’s assets, or the value of the assets being
disposed of, determined without regard to any liabilities associated with the assets.

1.5 “Code” means the Internal Revenue Code of 1986, as amended, and rules, regulations, and
guidance of general application issued by the Department of the Treasury under the Internal Revenue
Code of 1986, as amended.

1.6 “Disability” means, because of a medically determinable physical or mental impairment
that can be expected to result in death or that can be expected to last for a continuous period of
at least 12 months, (x) the Executive is unable to engage in any substantial gainful activity, or
(y) the Executive is receiving income replacement benefits for a period of at least three months
under an accident and health plan of the employer. Medical determination of
disability may be made either by the Social Security Administration or by the provider of an
accident or health plan covering employees of the Bank. Upon request of the Plan Administrator,
the Executive must submit proof to the Plan Administrator of the Social Security Administration’s
or provider’s determination.

 

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1.7 “Early Termination” means Separation from Service before Normal Retirement Age for reasons
other than death, Disability, or Termination with Cause. Early Termination excludes a Separation
from Service governed by section 2.4.

1.8 “Effective Date” means March 1, 2001.

1.9 “Intentional,” for purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed to have been intentional if it was due primarily to an error in judgment
or negligence. An act or failure to act on the Executive’s part shall be considered intentional if
it is not in good faith and if it is without a reasonable belief that the action or failure to act
is in the best interests of the Bank.

1.10 “Normal Retirement Age” means the Executive’s 65th birthday.

1.11 “Plan Administrator” or “Administrator” means the plan administrator described in Article
7.

1.12 “Plan Year” means a twelve-month period commencing on March 1 and ending on the last day
of February of each year. The initial Plan Year commenced on the Effective Date.

1.13 “Separation from Service” means the Executive’s service as an executive and independent
contractor to the Bank and any member of a controlled group, as defined in Code section 414,
terminates for any reason, other than because of a leave of absence approved by the Bank or the
Executive’s death. For purposes of this Agreement, if there is a dispute about the employment
status of the Executive or the date of the Executive’s Separation from Service, the Bank shall have
the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

1.14 “Termination with Cause” and “Cause” shall have the same meaning specified in any
effective severance or employment agreement existing on the date hereof or hereafter entered into
between the Executive and the Bank. If the Executive is not a party to a severance or employment
agreement containing a definition of termination with cause, Termination with Cause means the Bank
terminates the Executive’s employment because of —

(a) the Executive’s gross negligence or gross neglect of duties or intentional and material
failure to perform stated duties after written notice thereof, or

 

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(b) disloyalty or dishonesty by the Executive in the performance of the Executive’s duties, or
a breach of the Executive’s fiduciary duties for personal profit, in any case whether in the
Executive’s capacity as a director or officer, or

(c) intentional wrongful damage by the Executive to the business or property of the Bank or
its affiliates, including without limitation the reputation of the Bank, which in the judgement of
the Bank causes material harm to the Bank or affiliates, or

(d) a willful violation by the Executive of any applicable law or significant policy of the
Bank or an affiliate that, in the Bank’s judgement, results in an adverse effect on the Bank or the
affiliate, regardless of whether the violation leads to criminal prosecution or conviction. For
purposes of this Agreement applicable laws include any statute, rule, regulatory order, statement
of policy, or final cease-and-desist order of any governmental agency or body having regulatory
authority over the Bank, or

(e) the occurrence of any event that results in the Executive being excluded from coverage, or
having coverage limited for the Executive as compared to other executives of the Bank, under the
Bank’s blanket bond or other fidelity or insurance policy covering its directors, officers, or
employees, or

(f) the Executive is removed from office or permanently prohibited from participating in the
Bank’s affairs by an order issued under section 8(e)(4) or section 8(g)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or

(g) conviction of the Executive for or plea of no contest to a felony or conviction of or plea
of no contest to a misdemeanor involving moral turpitude, or the actual incarceration of the
Executive for 45 consecutive days or more.

1.15 “Voluntary Termination with Good Reason” means a voluntary Separation from Service by the
Executive within 24 months after a Change in Control if the following conditions (x) and (y) are
satisfied: (x) a voluntary Separation from Service by the Executive will be considered a Voluntary
Termination with Good Reason if any of the following occur without the Executive’s advance written
consent —

1) a material diminution of the Executive’s base salary,

2) a material diminution of the Executive’s authority, duties, or responsibilities,

3) a material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report,

4) a material diminution in the budget over which the Executive retains authority,

 

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5) a material change in the geographic location at which the Executive must perform
services for the Bank, or

6) any other action or inaction that constitutes a material breach by the Bank of the
agreement under which the Executive provides services to the Bank.

(y) the Executive must give notice to the Bank of the existence of one or more of the
conditions described in clause (x) within 90 days after the initial existence of the condition, and
the Bank shall have 30 days thereafter to remedy the condition. In addition, the Executive’s
voluntary termination because of the existence of one or more of the conditions described in clause
(x) must occur within 24 months after the earlier of the initial existence of the condition or the
Change in Control.

Article 2

Lifetime Benefits

2.1 Normal Retirement. Unless Separation from Service occurs before Normal Retirement Age,
when the Executive attains Normal Retirement Age the Bank shall pay to the Executive the benefit
described in this section 2.1 instead of any other benefit under this Agreement. If the
Executive’s Separation from Service thereafter is a Termination with Cause or if this Agreement
terminates under Article 5, no further benefits shall be paid.

	 	2.1.1	 	Amount of benefit. The annual benefit under this section 2.1 is $12,500.
	 
	 	2.1.2	 	Payment of benefit. Beginning with the month immediately after the month in
which the Executive attains Normal Retirement Age, the Bank shall pay the annual
benefit to the Executive in equal monthly installments on the last day of each month.
The annual benefit shall be paid to the Executive for 15 years.

2.2 Early Termination. If Early Termination occurs before Normal Retirement Age but on or
after the date the Executive attains age 62, the Bank shall pay to the Executive the benefit
described in this section 2.2 instead of any other benefit under this Agreement. If Early
Termination occurs before the Executive attains age 62, no benefit shall be payable under this
Agreement. Additionally, no benefits shall be payable under this Agreement if the Executive’s
employment is terminated under circumstances described in Article 5 of this Agreement. Neither the
Bank nor the Executive shall be entitled to elect in the 24-month period after a Change in Control
between the benefit under this section 2.2 versus the benefit under section 2.4. If the
Executive’s Separation from Service within 24 months after a Change in Control is an involuntary
termination without Cause or a Voluntary Termination with Good Reason, no benefit shall be payable
under this section 2.2 and the Executive shall instead be entitled to the benefit under section 2.4
or, if the Executive first attained Normal Retirement Age, section 2.1.

	 	2.2.1	 	Amount of benefit. The annual benefit under this section 2.2 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs, amortizing
that Accrual Balance over 15 years and taking into account interest at the discount
rate or rates established by the Plan Administrator.

 

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	 	2.2.2	 	Payment of benefit. The Bank shall pay the annual benefit to the Executive in
equal monthly installments on the last day of each month, except that the first six
monthly installments after the Executive’s Separation from Service shall not be paid to
the Executive until the seventh month after the month in which Separation from Service
occurs. In the seventh month after the month in which Separation from Service occurs
the Executive shall be entitled to the first six monthly installments and the regular
monthly installment for the seventh month. The Executive shall be entitled to a total
of 180 monthly installments, including the first six installments that are paid in the
seventh month.

2.3 Disability. For Separation from Service because of Disability before Normal Retirement
Age, the Bank shall pay to the Executive the benefit described in this section 2.3 instead of any
other benefit under this Agreement.

	 	2.3.1	 	Amount of benefit. The annual benefit under this section 2.3 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over 15 years and taking into account interest at the discount rate or
rates established by the Plan Administrator.
	 
	 	2.3.2	 	Payment of Benefit. Beginning with the later of (x) the seventh month after
the month in which the Executive’s Separation from Service occurs, or (y) the month
immediately after the month in which the Executive attains Normal Retirement Age, the
Bank shall pay the annual benefit to the Executive in equal monthly installments on the
last day of each month. If the benefit is paid under clause (x) in the seventh month
after Separation from Service, the first six monthly installments after Separation from
Service shall not be paid to the Executive until the seventh month after the month in
which Separation from Service occurs. In the seventh month the Executive shall be
entitled to the first six monthly installments and the regular monthly installment for
the seventh month. The Executive shall be entitled to a total of 180 monthly
installments, including the first six installments that are paid in the seventh month.

 

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2.4 Change in Control. If the Executive’s Separation from Service is an involuntary
termination without Cause or a Voluntary Termination with Good Reason, in either case within 24
months after a Change in Control, the Bank shall pay to the Executive the benefit described in this
section 2.4 instead of any other benefit under this Agreement. However, no benefits shall be
payable under this Agreement if the Executive’s employment is terminated under circumstances
described in Article 5 of this Agreement. Neither the Bank nor the Executive shall be entitled to
elect in the 24-month period after a Change in Control between the benefit under this section 2.4
versus the Early Termination benefit under section 2.2. If the Executive’s Separation from Service
within 24 months after a Change in Control is an involuntary termination without Cause or a
Voluntary Termination with Good Reason, no benefit shall be payable under section 2.2 and the
Executive shall instead be entitled to the benefit under this section 2.4. But if the Executive
shall have attained Normal Retirement Age when Separation from Service within 24 months after a
Change in Control occurs, whether Separation from Service is voluntary or involuntary for any
reason other than Termination with Cause, the Executive shall be entitled solely to the benefit
provided by section 2.1, not this section 2.4.

	 	2.4.1	 	Amount of benefit. The benefit under this section 2.4 is the Normal
Retirement Age Accrual Balance required by section 2.1, discounting the Normal
Retirement Age Accrual Balance to present value using a discount rate selected by the
Plan Administrator, but the discount rate selected by the Plan Administrator shall not
exceed the discount rate employed at the time of the Change in Control for purposes of
calculating the Accrual Balance.
	 
	 	2.4.2	 	Payment of benefit. The Bank shall pay the benefit under this section 2.4 to
the Executive in a single lump sum on the first day of the seventh month after the
month in which Separation from Service occurs.

2.5 Lump-Sum Payout of Remaining Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefit When a Change in Control Occurs. If a Change in Control occurs while the
Executive is receiving the Normal Retirement Age benefit under section 2.1, the Bank shall pay the
remaining salary continuation benefits to the Executive in a single lump sum within three days
after the Change in Control. If a Change in Control occurs after Separation from Service but while
the Executive is receiving or is entitled to receive the Early Termination benefit under section
2.2 or the Disability benefit under section 2.3, the Bank shall pay the remaining salary
continuation benefits to the Executive in a single lump sum within three days after the later of
(x) the Change in Control or (y) the first day of the seventh month after the month in which the
Executive’s Separation from Service occurs. The lump-sum payment due to the Executive as a result
of a Change in Control shall be an amount equal to the Accrual Balance amount corresponding to the
particular benefit when the Change in Control occurs.

2.6 Annual Benefit Statement. Within 120 days after the end of each Plan Year the Plan
Administrator shall provide or cause to be provided to the Executive an annual benefit statement
showing benefits payable or potentially payable to the Executive under this Agreement. Each annual
benefit statement shall supersede the previous year’s annual benefit statement. If there is a
contradiction between this Agreement and the annual benefit statement concerning the amount of a
particular benefit payable or potentially payable to the Executive under sections 2.2, 2.3, or 2.4
hereof, the amount of the benefit determined under this Agreement shall control.

 

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2.7 Savings Clause Relating to Compliance with Code Section 409A. Despite any contrary
provision of this Agreement, if when the Executive’s employment terminates the Executive is a
specified employee, as defined in Code section 409A, and if any payments under Article 2 of this
Agreement will result in additional tax or interest to the Executive because of section 409A, the
Executive shall not be entitled to the payments under Article 2 until the earliest of (x) the date
that is at least six months after termination of the Executive’s employment for reasons other than
the Executive’s death, (y) the date of the Executive’s death, or (z) any earlier date that does not
result in additional tax or interest to the Executive under section 409A. If any provision of this
Agreement would subject the Executive to additional tax or interest under section 409A, the Bank
shall reform the provision. However, the Bank shall maintain to the maximum extent practicable the
original intent of the applicable provision without subjecting the Executive to additional tax or
interest, and the Bank shall not be required to incur any additional compensation expense as a
result of the reformed provision.

2.8 One Benefit Only. Despite anything to the contrary in this Agreement, the Executive and
Beneficiary are entitled to one benefit only under this Agreement, which shall be determined by the
first event to occur that is dealt with by this Agreement. Except as provided in section 2.5 or
Article 3, subsequent occurrence of events dealt with by this Agreement shall not entitle the
Executive or Beneficiary to other or additional benefits under this Agreement.

Article 3

Death Benefits

3.1 Death in Active Service Before Normal Retirement Age. If the Executive dies both before
Normal Retirement Age and before Separation from Service, instead of any other benefit payable
under this Agreement the Executive’s Beneficiary shall be entitled at the Executive’s death solely
to the benefit, if any, payable under the Split Dollar Agreement and Endorsement, as amended,
attached to this Agreement as Addendum A.

3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2
commence but before receiving all such payments, the Bank shall pay the remaining benefits to the
Executive’s Beneficiary at the same time and in the same amounts they would have been paid to the
Executive had the Executive survived. In that case, no death benefit shall be payable under the
Split Dollar Agreement and Endorsement, as amended. If the Executive is entitled to benefit
payments under Article 2 but dies before payments commence, the benefits shall be payable to the
Executive’s Beneficiary but payments shall commence on the last day of the month after the month in
which the Executive’s death occurs, and no death benefit shall be payable under the Split Dollar
Agreement and Endorsement, as amended.

3.3 Lump-Sum Payout of Remaining Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefit When a Change in Control Occurs. If a Change in Control occurs while the
Beneficiary is receiving under section 3.2 the section 2.1 Normal Retirement Age benefit after the
Executive’s death or if a Change in Control occurs after the Executive’s Separation from Service
but while the Beneficiary is receiving or is entitled to
receive because of section 3.2 the section 2.2 Early Termination benefit or the section 2.3
Disability benefit after the Executive’s death, the Bank shall pay the remaining benefits to the
Beneficiary in a single lump sum within three days after the Change in Control. The lump-sum
payment due to the Beneficiary as a result of a Change in Control shall be an amount equal to the
Accrual Balance amount corresponding to the particular benefit when the Change in Control occurs.

 

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Article 4

Beneficiaries

4.1 Beneficiary Designations. The Executive shall have the right to designate at any time a
Beneficiary to receive any benefits payable under this Agreement after the Executive’s death. The
Beneficiary designated under this Agreement may be the same as or different from the beneficiary
designation under any other benefit plan of the Bank in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator
or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically
revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as
Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to
change a Beneficiary by completing, signing, and otherwise complying with the terms of the
Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from
time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form,
all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be
entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by
the Plan Administrator before the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be
effective until received, accepted, and acknowledged in writing by the Plan Administrator or its
designated agent.

4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation
or if all designated Beneficiaries predecease the Executive, the Executive’s spouse shall be the
designated Beneficiary. If the Executive has no surviving spouse the benefits shall be made to the
personal representative of the Executive’s estate.

4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared
incapacitated, or to a person incapable of handling the disposition of his or her property, the
Bank may pay the benefit to the guardian, legal representative, or person having the care or
custody of the minor, incapacitated person, or incapable person. The Bank may require proof of
incapacity, minority, or guardianship as it may deem appropriate before distribution of the
benefit. Distribution shall completely discharge the Bank from all liability for the benefit.

 

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Article 5

General Limitations

5.1 Termination with Cause and Termination Before Vesting. Despite any contrary provision of
this Agreement, the Bank shall not pay any benefit under this Agreement and this Agreement shall
terminate if Separation from Service is a Termination with Cause or if Separation from Service is
an Early Termination before the Executive attains age 62.

5.2 Misstatement. No benefits shall be paid under this Agreement or under the Split Dollar
Agreement and Endorsement, as amended, if the Executive makes any material misstatement of fact on
any application or resume provided to the Bank, on any application for life insurance purchased by
the Bank, or on any application for benefits provided by the Bank.

5.3 Removal. If the Executive is removed from office or permanently prohibited from
participating in the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank under
this Agreement shall terminate as of the effective date of the order, and the Split Dollar
Agreement and Endorsement, as amended, also shall terminate as of the effective date of the order.

5.4 Default. Despite any contrary provision of this Agreement, if the Bank is in “default” or
“in danger of default,” as those terms are defined in section 3(x) of the Federal Deposit Insurance
Act, 12 U.S.C. 1813(x), all obligations under this Agreement shall terminate.

5.5 FDIC Open-Bank Assistance. All obligations under this Agreement shall terminate, except
to the extent determined that continuation of the contract is necessary for the continued operation
of the Bank, when the Federal Deposit Insurance Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in section 13(c) of the
Federal Deposit Insurance Act. 12 U.S.C. 1823(c). Any rights of the parties that have already
vested shall not be affected by such action, however.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. Any person who has not received benefits under this Agreement that he
or she believes should be paid (the “claimant”) shall make a claim for benefits as follows.

	 	6.1.1	 	Initiation — written claim. The claimant initiates a claim by submitting to
the Administrator a written claim for the benefits. If the claim relates to the
contents of a notice received by the claimant, the claim must be made within 60 days
after the notice was received by the claimant. All other claims must be made within
180 days after the date of the event that caused the claim to arise. The claim must
state with particularity the determination desired by the claimant.

 

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	 	6.1.2	 	Timing of Administrator response. The Administrator shall respond to the
claimant within 90 days after receiving the claim. If the Administrator determines
that special circumstances require additional time for processing the claim, the
Administrator can extend the response period by an additional 90 days by notifying the
claimant in writing, before the end of the initial 90-day period, that an additional
period is required. The notice of extension must set forth the special circumstances
and the date by which the Administrator expects to render its decision.
	 
	 	6.1.3	 	Notice of decision. If the Administrator denies part or all of the claim, the
Administrator shall notify the claimant in writing of the denial. The Administrator
shall write the notification in a manner calculated to be understood by the claimant.
The notification shall set forth —

	 	(a)	 	The specific reasons for the denial,
	 
	 	(b)	 	A reference to the specific provisions of this Agreement on
which the denial is based,
	 
	 	(c)	 	A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of why it is
needed,
	 
	 	(d)	 	An explanation of the Agreement’s review procedures and the
time limits applicable to such procedures, and
	 
	 	(e)	 	A statement of the claimant’s right to bring a civil action
under ERISA section 502(a) after an adverse benefit determination on review.

6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant
shall have the opportunity for a full and fair review by the Administrator of the denial, as
follows.

	 	6.2.1	 	Initiation — written request. To initiate the review, the claimant must file
with the Administrator a written request for review within 60 days after receiving the
Administrator’s notice of denial.
	 
	 	6.2.2	 	Additional submissions — information access. The claimant shall then have
the opportunity to submit written comments, documents, records, and other information
relating to the claim. Upon request and free of charge, the Administrator shall also
provide the claimant reasonable access to and copies of all documents, records, and
other information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits.
	 
	 	6.2.3	 	Considerations on review. In considering the review, the Administrator shall
take into account all materials and information the claimant submits relating to the
claim, without regard to whether the information was submitted or considered in the
initial benefit determination.

 

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	 	6.2.4	 	Timing of Administrator response. The Administrator shall respond in writing
to the claimant within 60 days after receiving the request for review. If the
Administrator determines that special circumstances require additional time for
processing the claim, the Administrator can extend the response period by an additional
60 days by notifying the claimant in writing before the end of the initial 60-day
period that an additional period is required. The notice of extension must set forth
the special circumstances and the date by which the Administrator expects to render its
decision.
	 
	 	6.2.5	 	Notice of decision. The Administrator shall notify the claimant in writing of
its decision on review. The Administrator shall write the notification in a manner
calculated to be understood by the claimant. The notification shall set forth:

	 	(a)	 	The specific reasons for the denial,
	 
	 	(b)	 	A reference to the specific provisions of the Agreement on
which the denial is based,
	 
	 	(c)	 	A statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to and copies of all documents,
records, and other information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits, and
	 
	 	(d)	 	A statement of the claimant’s right to bring a civil action
under ERISA section 502(a).

Article 7

Administration of Agreement

7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator
consisting of the Board or such committee or person(s) as the Board shall appoint. The Executive
may not be a member of the Plan Administrator. The Plan Administrator shall have the discretion
and authority to (x) make, amend, interpret and enforce all appropriate rules and regulations for
the administration of this Agreement and (y) decide or resolve any and all questions that may
arise, including interpretations of this Agreement.

7.2 Agents. In the administration of this Agreement the Plan Administrator may employ agents
and delegate to them such administrative duties as it sees fit (including acting through a duly
appointed representative) and may from time to time consult with counsel, who may be counsel to the
Bank.

7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator about any
question arising out of the administration, interpretation and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and binding upon all
persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have
any right, vested or nonvested, regarding the continued use of any
previously adopted assumptions, including but not limited to the discount rate and calculation
method employed in the determination of the Accrual Balance.

 

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7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members
of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities
arising from any action or failure to act with respect to this Agreement, except in the case of
willful misconduct by the Plan Administrator or any of its members.

7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank
shall supply full and timely information to the Plan Administrator on all matters relating to the
date and circumstances of the retirement, Disability, death, or Separation from Service of the
Executive and such other pertinent information as the Plan Administrator may reasonably require.

Article 8

Miscellaneous

8.1 Amendments and Termination. Subject to section 8.14 of this Agreement, this Agreement may
be amended solely by a written agreement signed by the Bank and by the Executive, and except for
termination occurring under Article 5 this Agreement may be terminated solely by a written
agreement signed by the Bank and by the Executive.

8.2 Binding Effect. This Agreement shall bind the Executive and the Bank and their
beneficiaries, survivors, executors, successors, administrators, and transferees.

8.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It
does not give the Executive the right to remain an employee of the Bank nor does it interfere with
the Bank’s right to discharge the Executive. It also does not require the Executive to remain an
employee or interfere with the Executive’s right to terminate employment at any time.

8.4 Non-Transferability. Benefits under this Agreement may not be sold, transferred,
assigned, pledged, attached, or encumbered.

8.5 Successors; Binding Agreement. By an assumption agreement in form and substance
satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of the business or
assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Bank would be required to perform this Agreement had no succession
occurred.

8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from
the benefits provided under this Agreement.

 

13

 

8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of
the State of Ohio, except to the extent preempted by the laws of the United States of America.

8.8 Unfunded Arrangement. The Executive and beneficiary are general unsecured creditors of
the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise
by the Bank to pay benefits. The rights to benefits are not subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any
insurance on the Executive’s life is a general asset of the Bank to which the Executive and
beneficiary have no preferred or secured claim.

8.9 Entire Agreement. This Agreement and the Split Dollar Agreement and Endorsement attached
as Addendum A, as amended, constitute the entire agreement between the Bank and the Executive
concerning the subject matter. No rights are granted to the Executive under this Agreement other
than those specifically set forth. This Agreement amends and restates in its entirety the
September 9, 2002 Amended Salary Continuation Agreement.

8.10 Severability. If any provision of this Agreement is held invalid, such invalidity shall
not affect any other provision of this Agreement not held invalid, and to the full extent
consistent with law each such other provision shall continue in full force and effect. If any
provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder
of such provision not held invalid, and to the full extent consistent with law the remainder of
such provision, together with all other provisions of this Agreement, shall continue in full force
and effect.

8.11 Headings. Headings are included solely for convenience of reference and shall not affect
the meaning or interpretation of any provision of this Agreement.

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or
registered mail, return receipt requested, with postage prepaid, to the following addresses or to
such other address as either party may designate by like notice. If to the Bank, notice shall be
given to the board of directors, The Cortland Savings and Banking Company, 194 W. Main Street, P.O.
Box 98, Cortland, Ohio 44410-1466, or to such other or additional person or persons as the Bank
shall have designated to the Executive in writing. If to the Executive, notice shall be given to
the Executive at the Executive’s address appearing on the Bank’s records, or to such other or
additional person or persons as the Executive shall have designated to the Bank in writing.

 

14

 

8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of
the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under
this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation
seeking to have this Agreement declared unenforceable, or could take or attempt to take other
action to deny the Executive the benefits intended under this Agreement. In
these circumstances the purpose of this Agreement would be frustrated. The Bank desires that the
Executive not be required to incur the expenses associated with the enforcement of rights under
this Agreement, whether by litigation or other legal action, because the cost and expense thereof
would substantially detract from the benefits intended to be granted to the Executive hereunder.
The Bank desires that the Executive not be forced to negotiate settlement of rights under this
Agreement under threat of incurring expenses. Accordingly, if after a Change in Control it appears
to Executive that (x) the Bank has failed to comply with any of its obligations under this
Agreement, or (y) the Bank or any other person has taken any action to declare this Agreement void
or unenforceable, or instituted any litigation or other legal action designed to deny, diminish, or
recover from the Executive the benefits intended to be provided to the Executive hereunder, the
Bank irrevocably authorizes the Executive from time to time to retain counsel of the Executive’s
choice, at the Bank’s expense as provided in this section 8.13, to represent the Executive in the
initiation or defense of any litigation or other legal action, whether by or against the Bank or
any director, officer, stockholder or other person affiliated with the Bank, in any jurisdiction.
Despite any existing or previous attorney-client relationship between the Bank and any counsel
chosen by the Executive under this section 8.13, the Bank irrevocably consents to the Executive
entering into an attorney-client relationship with that counsel, and the Bank and the Executive
agree that a confidential relationship shall exist between the Executive and that counsel. The
fees and expenses of counsel selected from time to time by Executive as provided in this section
shall be paid or reimbursed to Executive by the Bank on a regular, periodic basis upon presentation
by the Executive of a statement or statements prepared by counsel in accordance with counsel’s
customary practices, up to a maximum aggregate amount of $500,000, whether suit be brought or not
and regardless of whether incurred in trial, bankruptcy, or appellate proceedings. The Bank’s
obligation to pay the Executive’s legal fees provided by this section 8.13 operates separately from
and in addition to any legal fee reimbursement obligation the Bank or the Bank’s parent Cortland
Bancorp may have with the Executive under a severance or employment agreement by and among the
Executive, the Bank, and Cortland Bancorp. Despite any contrary provision within this Agreement
however, the Bank shall not be required to pay or reimburse the Executive’s legal expenses if doing
so would violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule
359.3 of the Federal Deposit Insurance Corporation [12 CFR 359.3].

8.14 Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations.
The Bank is entering into this Agreement on the assumption that certain existing tax laws, rules,
and regulations will continue in effect in their current form. If that assumption materially
changes and the change has a material detrimental effect on this Agreement, then the Bank reserves
the right to terminate or modify this Agreement accordingly, subject to the written consent of the
Executive, which shall not be unreasonably withheld. This section 8.14 shall become null and void
effective immediately upon a Change in Control.

 

15

 

In Witness Whereof, the Executive and a duly authorized Bank officer have executed
this Second Amended Salary Continuation Agreement as of the date first written above.

	 	 	 	 	 	 	 	 	 
	Executive:	 	Bank:

The Cortland Savings and Banking
Company	 	 
	 
	 	 	 	 	 	 	 	 
	 

Marlene J. Lenio

	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

Lawrence A. Fantauzzi
	 	 
	 

	 	 	 	 	 	Title: President and CEO	 	 

 

16

 

Beneficiary Designation

The Cortland Savings and Banking Company

Second Amended Salary Continuation Agreement

Marlene J. Lenio

I designate the following as beneficiary of any death benefits under this Second Amended
Salary Continuation Agreement:

	 	 	 
	Primary:
	 	 
	 

	 	 
	 
	 	 
	 
	 
	 	 
	Contingent:
	 	 
	 

	 	 
	 
	 	 
	 

Note: To name a trust as beneficiary, please provide the name of the trustee(s) and
the exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new written
designation with the Bank. I further understand that the designations will be automatically
revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our
marriage is subsequently dissolved.

	 	 	 	 	 	 	 
	 

	 	Signature:	 	 	 	 
	 

	 	 	 	 

Marlene J. Lenio
	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:
	 	                                        , 2008	 	 

Accepted by the Bank this
 _____ 

day of
 _____, 2008

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Lawrence A. Fantauzzi
	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 

 

17Filed by Bowne Pure Compliance

Exhibit 10.21

The Cortland Savings and Banking Company

Amended Salary Continuation Agreement

This Amended Salary Continuation Agreement (this “Agreement”) is entered into as of
this
third
day of
December, 2008, by and between The Cortland
Savings and Banking Company (the “Bank”), an Ohio-chartered, FDIC-insured member bank, and Craig M.
Phythyon, Senior Vice President, Chief Investment Officer, and Treasurer of the Bank (the
“Executive”).

Whereas, the Executive has contributed substantially to the success of the Bank and
its parent company, Cortland Bancorp, an Ohio corporation, and the Bank desires that the Executive
continue in its employ,

Whereas, to encourage the Executive to remain an employee, the Bank is willing to
provide to the Executive salary continuation benefits payable from the Bank’s general assets,

Whereas, none of the conditions or events included in the definition of the term
“golden parachute payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit
Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule
359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, is
contemplated insofar as the Bank is concerned,

Whereas, the Bank and the Executive intend that this Agreement shall amend and
restate in its entirety the December 15, 2003 Salary Continuation Agreement between the Executive
and the Bank, and

Whereas, the parties hereto intend that this Agreement shall be considered an
unfunded arrangement maintained primarily to provide supplemental retirement benefits for the
Executive, and to be considered a non-qualified benefit plan for purposes of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). The Executive is fully advised of
the Bank’s financial status.

Now Therefore, in consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows.

Article 1

Definitions

1.1 “Accrual Balance” means the liability that should be accrued by the Bank under generally
accepted accounting principles (“GAAP”) for the Bank’s obligation to the Executive under this
Agreement, applying Accounting Principles Board Opinion No. 12, as amended by Statement of
Financial Accounting Standards No. 106, and the calculation method and discount rate specified
hereinafter. The Accrual Balance shall be calculated such that when it is credited with interest
each month the Accrual Balance at Normal Retirement Age equals the present value
of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator
for determining the Accrual Balance. In its sole discretion the Plan Administrator may adjust the
discount rate to maintain the rate within reasonable standards according to GAAP.

 

 

 

1.2 “Beneficiary” means each designated person, or the estate of the deceased Executive,
entitled to benefits, if any, upon the death of the Executive, determined according to Article 4.

1.3 “Beneficiary Designation Form” means the form established from time to time by the Plan
Administrator that the Executive completes, signs, and returns to the Plan Administrator to
designate one or more Beneficiaries.

1.4 “Change in Control” means a change in control as defined in Code section 409A and rules,
regulations, and guidance of general application thereunder issued by the Department of the
Treasury, including –

(a) Change in ownership: a change in ownership of Cortland Bancorp occurs on the date any one
person or group accumulates ownership of Cortland Bancorp stock constituting more than 50% of the
total fair market value or total voting power of Cortland Bancorp stock,

(b) Change in effective control: (x) any one person, or more than one person acting as a
group, acquires within a 12-month period ownership of Cortland Bancorp stock possessing 30% or more
of the total voting power of Cortland Bancorp stock, or (y) a majority of Cortland Bancorp’s board
of directors is replaced during any 12-month period by directors whose appointment or election is
not endorsed in advance by a majority of Cortland Bancorp’s board of directors, or

(c) Change in ownership of a substantial portion of assets: a change in ownership of a
substantial portion of Cortland Bancorp’s assets occurs if in a 12-month period any one person or
more than one person acting as a group acquires from Cortland Bancorp assets having a total gross
fair market value equal to or exceeding 40% of the total gross fair market value of all of Cortland
Bancorp’s assets immediately before the acquisition or acquisitions. For this purpose, gross fair
market value means the value of Cortland Bancorp’s assets, or the value of the assets being
disposed of, determined without regard to any liabilities associated with the assets.

1.5 “Code” means the Internal Revenue Code of 1986, as amended, and rules, regulations, and
guidance of general application issued by the Department of the Treasury under the Internal Revenue
Code of 1986, as amended.

1.6 “Disability” means, because of a medically determinable physical or mental impairment
that can be expected to result in death or that can be expected to last for a continuous period of
at least 12 months, (x) the Executive is unable to engage in any substantial gainful activity, or
(y) the Executive is receiving income replacement benefits for a period of at least three months
under an accident and health plan of the employer. Medical determination of
disability may be made either by the Social Security Administration or by the provider of an
accident or health plan covering employees of the Bank. Upon request of the Plan Administrator,
the Executive must submit proof to the Plan Administrator of the Social Security Administration’s
or provider’s determination.

 

2

 

1.7 “Early Termination” means Separation from Service before Normal Retirement Age for reasons
other than death, Disability, or Termination with Cause. Early Termination excludes a Separation
from Service governed by section 2.4.

1.8 “Effective Date” means July 1, 2003.

1.9 “Intentional,” for purposes of this Agreement, no act or failure to act on the part of the
Executive shall be deemed to have been intentional if it was due primarily to an error in judgment
or negligence. An act or failure to act on the Executive’s part shall be considered intentional if
it is not in good faith and if it is without a reasonable belief that the action or failure to act
is in the best interests of the Bank.

1.10 “Normal Retirement Age” means the Executive’s 65th birthday.

1.11 “Plan Administrator” or “Administrator” means the plan administrator described in Article
7.

1.12 “Plan Year” means a twelve-month period commencing on March 1 and ending on the last day
of February of each year. The initial Plan Year commenced on the Effective Date.

1.13 “Separation from Service” means the Executive’s service as an executive and independent
contractor to the Bank and any member of a controlled group, as defined in Code section 414,
terminates for any reason, other than because of a leave of absence approved by the Bank or the
Executive’s death. For purposes of this Agreement, if there is a dispute about the employment
status of the Executive or the date of the Executive’s Separation from Service, the Bank shall have
the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

1.14 “Termination with Cause” and “Cause” shall have the same meaning specified in any
effective severance or employment agreement existing on the date hereof or hereafter entered into
between the Executive and the Bank. If the Executive is not a party to a severance or employment
agreement containing a definition of termination with cause, Termination with Cause means the Bank
terminates the Executive’s employment because of –

(a) the Executive’s gross negligence or gross neglect of duties or intentional and material
failure to perform stated duties after written notice thereof, or

 

3

 

(b) disloyalty or dishonesty by the Executive in the performance of the Executive’s duties, or
a breach of the Executive’s fiduciary duties for personal profit, in any case whether in the
Executive’s capacity as a director or officer, or

(c) intentional wrongful damage by the Executive to the business or property of the Bank or
its affiliates, including without limitation the reputation of the Bank, which in the judgement of
the Bank causes material harm to the Bank or affiliates, or

(d) a willful violation by the Executive of any applicable law or significant policy of the
Bank or an affiliate that, in the Bank’s judgement, results in an adverse effect on the Bank or the
affiliate, regardless of whether the violation leads to criminal prosecution or conviction. For
purposes of this Agreement applicable laws include any statute, rule, regulatory order, statement
of policy, or final cease-and-desist order of any governmental agency or body having regulatory
authority over the Bank, or

(e) the occurrence of any event that results in the Executive being excluded from coverage, or
having coverage limited for the Executive as compared to other executives of the Bank, under the
Bank’s blanket bond or other fidelity or insurance policy covering its directors, officers, or
employees, or

(f) the Executive is removed from office or permanently prohibited from participating in the
Bank’s affairs by an order issued under section 8(e)(4) or section 8(g)(1) of the Federal Deposit
Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or

(g) conviction of the Executive for or plea of no contest to a felony or conviction of or plea
of no contest to a misdemeanor involving moral turpitude, or the actual incarceration of the
Executive for 45 consecutive days or more.

1.15 “Voluntary Termination with Good Reason” means a voluntary Separation from Service by the
Executive within 24 months after a Change in Control if the following conditions (x) and (y) are
satisfied: (x) a voluntary Separation from Service by the Executive will be considered a Voluntary
Termination with Good Reason if any of the following occur without the Executive’s advance written
consent –

1) a material diminution of the Executive’s base salary,

2) a material diminution of the Executive’s authority, duties, or responsibilities,

3) a material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report,

4) a material diminution in the budget over which the Executive retains authority,

 

4

 

5) a material change in the geographic location at which the Executive must perform
services for the Bank, or

6) any other action or inaction that constitutes a material breach by the Bank of the
agreement under which the Executive provides services to the Bank.

(y) the Executive must give notice to the Bank of the existence of one or more of the
conditions described in clause (x) within 90 days after the initial existence of the condition, and
the Bank shall have 30 days thereafter to remedy the condition. In addition, the Executive’s
voluntary termination because of the existence of one or more of the conditions described in clause
(x) must occur within 24 months after the earlier of the initial existence of the condition or the
Change in Control.

Article 2

Lifetime Benefits

2.1 Normal Retirement. Unless Separation from Service occurs before Normal Retirement Age,
when the Executive attains Normal Retirement Age the Bank shall pay to the Executive the benefit
described in this section 2.1 instead of any other benefit under this Agreement. If the
Executive’s Separation from Service thereafter is a Termination with Cause or if this Agreement
terminates under Article 5, no further benefits shall be paid.

	 	2.1.1	 	Amount of benefit. The annual benefit under this section 2.1 is $20,300.
	 
	 	2.1.2	 	Payment of benefit. Beginning with the month immediately after the month in
which the Executive attains Normal Retirement Age, the Bank shall pay the annual
benefit to the Executive in equal monthly installments on the last day of each month.
The annual benefit shall be paid to the Executive for 15 years.

2.2 Early Termination. If Early Termination occurs before Normal Retirement Age but on or
after the date the Executive attains age 62, the Bank shall pay to the Executive the benefit
described in this section 2.2 instead of any other benefit under this Agreement. If Early
Termination occurs before the Executive attains age 62, no benefit shall be payable under this
Agreement. Additionally, no benefits shall be payable under this Agreement if the Executive’s
employment is terminated under circumstances described in Article 5 of this Agreement. Neither the
Bank nor the Executive shall be entitled to elect in the 24-month period after a Change in Control
between the benefit under this section 2.2 versus the benefit under section 2.4. If the
Executive’s Separation from Service within 24 months after a Change in Control is an involuntary
termination without Cause or a Voluntary Termination with Good Reason, no benefit shall be payable
under this section 2.2 and the Executive shall instead be entitled to the benefit under section 2.4
or, if the Executive first attained Normal Retirement Age, section 2.1.

	 	2.2.1	 	Amount of benefit. The annual benefit under this section 2.2 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs,
amortizing that Accrual Balance over 15 years and taking into account interest at
the discount rate or rates established by the Plan Administrator.

 

5

 

	 	2.2.2	 	Payment of benefit. The Bank shall pay the annual benefit to the Executive in
equal monthly installments on the last day of each month, except that the first six
monthly installments after the Executive’s Separation from Service shall not be paid to
the Executive until the seventh month after the month in which Separation from Service
occurs. In the seventh month after the month in which Separation from Service occurs
the Executive shall be entitled to the first six monthly installments and the regular
monthly installment for the seventh month. The Executive shall be entitled to a total
of 180 monthly installments, including the first six installments that are paid in the
seventh month.

2.3 Disability. For Separation from Service because of Disability before Normal Retirement
Age, the Bank shall pay to the Executive the benefit described in this section 2.3 instead of any
other benefit under this Agreement.

	 	2.3.1	 	Amount of benefit. The annual benefit under this section 2.3 is calculated as
the amount that fully amortizes the Accrual Balance existing at the end of the month
immediately before the month in which Separation from Service occurs, amortizing that
Accrual Balance over 15 years and taking into account interest at the discount rate or
rates established by the Plan Administrator.
	 
	 	2.3.2	 	Payment of Benefit. Beginning with the later of (x) the seventh month after
the month in which the Executive’s Separation from Service occurs, or (y) the month
immediately after the month in which the Executive attains Normal Retirement Age, the
Bank shall pay the annual benefit to the Executive in equal monthly installments on the
last day of each month. If the benefit is paid under clause (x) in the seventh month
after Separation from Service, the first six monthly installments after Separation from
Service shall not be paid to the Executive until the seventh month after the month in
which Separation from Service occurs. In the seventh month the Executive shall be
entitled to the first six monthly installments and the regular monthly installment for
the seventh month. The Executive shall be entitled to a total of 180 monthly
installments, including the first six installments that are paid in the seventh month.

 

6

 

2.4 Change in Control. If the Executive’s Separation from Service is an involuntary
termination without Cause or a Voluntary Termination with Good Reason, in either case within 24
months after a Change in Control, the Bank shall pay to the Executive the benefit described in this
section 2.4 instead of any other benefit under this Agreement. However, no benefits shall be
payable under this Agreement if the Executive’s employment is terminated under circumstances
described in Article 5 of this Agreement. Neither the Bank nor the Executive shall be entitled to
elect in the 24-month period after a Change in Control between the benefit under this section 2.4
versus the Early Termination benefit under section 2.2. If the Executive’s Separation from Service
within 24 months after a Change in Control is an involuntary termination without Cause
or a Voluntary Termination with Good Reason, no benefit shall be payable under section 2.2 and the
Executive shall instead be entitled to the benefit under this section 2.4. But if the Executive
shall have attained Normal Retirement Age when Separation from Service within 24 months after a
Change in Control occurs, whether Separation from Service is voluntary or involuntary for any
reason other than Termination for Cause, the Executive shall be entitled solely to the benefit
provided by section 2.1, not this section 2.4.

	 	2.4.1	 	Amount of benefit. The benefit under this section 2.4 is the Normal
Retirement Age Accrual Balance required by section 2.1, discounting the Normal
Retirement Age Accrual Balance to present value using a discount rate selected by the
Plan Administrator, but the discount rate selected by the Plan Administrator shall not
exceed the discount rate employed at the time of the Change in Control for purposes of
calculating the Accrual Balance.

	 	2.4.2	 	Payment of benefit. The Bank shall pay the benefit under this section 2.4 to
the Executive in a single lump sum on the first day of the seventh month after the
month in which Separation from Service occurs.

2.5 Lump-Sum Payout of Remaining Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefit When a Change in Control Occurs. If a Change in Control occurs while the
Executive is receiving the Normal Retirement Age benefit under section 2.1, the Bank shall pay the
remaining salary continuation benefits to the Executive in a single lump sum within three days
after the Change in Control. If a Change in Control occurs after Separation from Service but while
the Executive is receiving or is entitled to receive the Early Termination benefit under section
2.2 or the Disability benefit under section 2.3, the Bank shall pay the remaining salary
continuation benefits to the Executive in a single lump sum within three days after the later of
(x) the Change in Control or (y) the first day of the seventh month after the month in which the
Executive’s Separation from Service occurs. The lump-sum payment due to the Executive as a result
of a Change in Control shall be an amount equal to the Accrual Balance amount corresponding to the
particular benefit when the Change in Control occurs.

2.6 Annual Benefit Statement. Within 120 days after the end of each Plan Year the Plan
Administrator shall provide or cause to be provided to the Executive an annual benefit statement
showing benefits payable or potentially payable to the Executive under this Agreement. Each annual
benefit statement shall supersede the previous year’s annual benefit statement. If there is a
contradiction between this Agreement and the annual benefit statement concerning the amount of a
particular benefit payable or potentially payable to the Executive under sections 2.2, 2.3, or 2.4
hereof, the amount of the benefit determined under this Agreement shall control.

 

7

 

2.7 Savings Clause Relating to Compliance with Code Section 409A. Despite any contrary
provision of this Agreement, if when the Executive’s employment terminates the Executive is a
specified employee, as defined in Code section 409A, and if any payments under Article 2 of this
Agreement will result in additional tax or interest to the Executive because of
section 409A, the Executive shall not be entitled to the payments under Article 2 until the
earliest of (x) the date that is at least six months after termination of the Executive’s
employment for reasons other than the Executive’s death, (y) the date of the Executive’s death, or
(z) any earlier date that does not result in additional tax or interest to the Executive under
section 409A. If any provision of this Agreement would subject the Executive to additional tax or
interest under section 409A, the Bank shall reform the provision. However, the Bank shall maintain
to the maximum extent practicable the original intent of the applicable provision without
subjecting the Executive to additional tax or interest, and the Bank shall not be required to incur
any additional compensation expense as a result of the reformed provision.

2.8 One Benefit Only. Despite anything to the contrary in this Agreement, the Executive and
Beneficiary are entitled to one benefit only under this Agreement, which shall be determined by the
first event to occur that is dealt with by this Agreement. Except as provided in section 2.5 or
Article 3, subsequent occurrence of events dealt with by this Agreement shall not entitle the
Executive or Beneficiary to other or additional benefits under this Agreement.

Article 3

Death Benefits

3.1 Death in Active Service Before Normal Retirement Age. If the Executive dies both before
Normal Retirement Age and before Separation from Service, instead of any other benefit payable
under this Agreement the Executive’s Beneficiary shall be entitled at the Executive’s death solely
to the benefit, if any, payable under the Split Dollar Agreement and Endorsement, as amended,
attached to this Agreement as Addendum A.

3.2 Death During Benefit Period. If the Executive dies after benefit payments under Article 2
commence but before receiving all such payments, the Bank shall pay the remaining benefits to the
Executive’s Beneficiary at the same time and in the same amounts they would have been paid to the
Executive had the Executive survived. In that case, no death benefit shall be payable under the
Split Dollar Agreement and Endorsement, as amended. If the Executive is entitled to benefit
payments under Article 2 but dies before payments commence, the benefits shall be payable to the
Executive’s Beneficiary but payments shall commence on the last day of the month after the month in
which the Executive’s death occurs, and no death benefit shall be payable under the Split Dollar
Agreement and Endorsement, as amended.

3.3 Lump-Sum Payout of Remaining Normal Retirement Benefit, Early Termination Benefit, or
Disability Benefit When a Change in Control Occurs. If a Change in Control occurs while the
Beneficiary is receiving under section 3.2 the section 2.1 Normal Retirement Age benefit after the
Executive’s death or if a Change in Control occurs after the Executive’s Separation from Service
but while the Beneficiary is receiving or is entitled to receive because of section 3.2 the section
2.2 Early Termination benefit or the section 2.3 Disability benefit after the Executive’s death,
the Bank shall pay the remaining benefits to the Beneficiary in a single lump sum within three days
after the Change in Control. The lump-sum payment due to the Beneficiary as a result of a Change
in Control shall be an amount equal to the
Accrual Balance amount corresponding to the particular benefit when the Change in Control occurs.

 

8

 

Article 4

Beneficiaries

4.1 Beneficiary Designations. The Executive shall have the right to designate at any time a
Beneficiary to receive any benefits payable under this Agreement after the Executive’s death. The
Beneficiary designated under this Agreement may be the same as or different from the beneficiary
designation under any other benefit plan of the Bank in which the Executive participates.

4.2 Beneficiary Designation: Change. The Executive shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator
or its designated agent. The Executive’s Beneficiary designation shall be deemed automatically
revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as
Beneficiary and the marriage is subsequently dissolved. The Executive shall have the right to
change a Beneficiary by completing, signing, and otherwise complying with the terms of the
Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from
time to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form,
all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be
entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by
the Plan Administrator before the Executive’s death.

4.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be
effective until received, accepted, and acknowledged in writing by the Plan Administrator or its
designated agent.

4.4 No Beneficiary Designation. If the Executive dies without a valid beneficiary designation
or if all designated Beneficiaries predecease the Executive, the Executive’s spouse shall be the
designated Beneficiary. If the Executive has no surviving spouse the benefits shall be made to the
personal representative of the Executive’s estate.

4.5 Facility of Payment. If a benefit is payable to a minor, to a person declared
incapacitated, or to a person incapable of handling the disposition of his or her property, the
Bank may pay the benefit to the guardian, legal representative, or person having the care or
custody of the minor, incapacitated person, or incapable person. The Bank may require proof of
incapacity, minority, or guardianship as it may deem appropriate before distribution of the
benefit. Distribution shall completely discharge the Bank from all liability for the benefit.

 

9

 

Article 5

General Limitations

5.1 Termination with Cause and Termination Before Vesting. Despite any contrary provision of
this Agreement, the Bank shall not pay any benefit under this Agreement
and this Agreement shall terminate if Separation from Service is a Termination with Cause or if
Separation from Service is an Early Termination before the Executive attains age 62.

5.2 Misstatement. No benefits shall be paid under this Agreement or under the Split Dollar
Agreement and Endorsement, as amended, if the Executive makes any material misstatement of fact on
any application or resume provided to the Bank, on any application for life insurance purchased by
the Bank, or on any application for benefits provided by the Bank.

5.3 Removal. If the Executive is removed from office or permanently prohibited from
participating in the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank under
this Agreement shall terminate as of the effective date of the order, and the Split Dollar
Agreement and Endorsement, as amended, also shall terminate as of the effective date of the order.

5.4 Default. Despite any contrary provision of this Agreement, if the Bank is in “default” or
“in danger of default,” as those terms are defined in section 3(x) of the Federal Deposit Insurance
Act, 12 U.S.C. 1813(x), all obligations under this Agreement shall terminate.

5.5 FDIC Open-Bank Assistance. All obligations under this Agreement shall terminate, except
to the extent determined that continuation of the contract is necessary for the continued operation
of the Bank, when the Federal Deposit Insurance Corporation enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in section 13(c) of the
Federal Deposit Insurance Act. 12 U.S.C. 1823(c). Any rights of the parties that have already
vested shall not be affected by such action, however.

Article 6

Claims and Review Procedures

6.1 Claims Procedure. Any person who has not received benefits under this Agreement that he
or she believes should be paid (the “claimant”) shall make a claim for benefits as follows.

	 	6.1.1	 	Initiation – written claim. The claimant initiates a claim by submitting to
the Administrator a written claim for the benefits. If the claim relates to the
contents of a notice received by the claimant, the claim must be made within 60 days
after the notice was received by the claimant. All other claims must be made within
180 days after the date of the event that caused the claim to arise. The claim must
state with particularity the determination desired by the claimant.
	 
	 	6.1.2	 	Timing of Administrator response. The Administrator shall respond to the
claimant within 90 days after receiving the claim. If the Administrator determines
that special circumstances require additional time for processing the claim, the
Administrator can extend the response period by an additional 90 days by notifying the
claimant in writing, before the end of the initial 90-day period, that
an additional period is required. The notice of extension must set forth the
special circumstances and the date by which the Administrator expects to render its
decision.

 

10

 

	 	6.1.3	 	Notice of decision. If the Administrator denies part or all of the claim, the
Administrator shall notify the claimant in writing of the denial. The Administrator
shall write the notification in a manner calculated to be understood by the claimant.
The notification shall set forth –

	 	(a)	 	The specific reasons for the denial,
	 
	 	(b)	 	A reference to the specific provisions of this Agreement on
which the denial is based,
	 
	 	(c)	 	A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of why it is
needed,
	 
	 	(d)	 	An explanation of the Agreement’s review procedures and the
time limits applicable to such procedures, and
	 
	 	(e)	 	A statement of the claimant’s right to bring a civil action
under ERISA section 502(a) after an adverse benefit determination on review.

6.2 Review Procedure. If the Administrator denies part or all of the claim, the claimant
shall have the opportunity for a full and fair review by the Administrator of the denial, as
follows.

	 	6.2.1	 	Initiation – written request. To initiate the review, the claimant must file
with the Administrator a written request for review within 60 days after receiving the
Administrator’s notice of denial.
	 
	 	6.2.2	 	Additional submissions – information access. The claimant shall then have the
opportunity to submit written comments, documents, records, and other information
relating to the claim. Upon request and free of charge, the Administrator shall also
provide the claimant reasonable access to and copies of all documents, records, and
other information relevant (as defined in applicable ERISA regulations) to the
claimant’s claim for benefits.
	 
	 	6.2.3	 	Considerations on review. In considering the review, the Administrator shall
take into account all materials and information the claimant submits relating to the
claim, without regard to whether the information was submitted or considered in the
initial benefit determination.
	 
	 	6.2.4	 	Timing of Administrator response. The Administrator shall respond in writing
to the claimant within 60 days after receiving the request for review. If the
Administrator determines that special circumstances require additional time for
processing the claim, the Administrator can extend the response period by an additional
60 days by notifying the claimant in writing before the end of the initial 60-day
period that an additional period is required. The notice of extension must
set forth the special circumstances and the date by which the Administrator expects
to render its decision.

 

11

 

	 	6.2.5	 	Notice of decision. The Administrator shall notify the claimant in writing of
its decision on review. The Administrator shall write the notification in a manner
calculated to be understood by the claimant. The notification shall set forth:

	 	(a)	 	The specific reasons for the denial,
	 
	 	(b)	 	A reference to the specific provisions of the Agreement on
which the denial is based,
	 
	 	(c)	 	A statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to and copies of all documents,
records, and other information relevant (as defined in applicable ERISA
regulations) to the claimant’s claim for benefits, and
	 
	 	(d)	 	A statement of the claimant’s right to bring a civil action
under ERISA section 502(a).

Article 7

Administration of Agreement

7.1 Plan Administrator Duties. This Agreement shall be administered by a Plan Administrator
consisting of the Board or such committee or person(s) as the Board shall appoint. The Executive
may not be a member of the Plan Administrator. The Plan Administrator shall have the discretion
and authority to (x) make, amend, interpret and enforce all appropriate rules and regulations for
the administration of this Agreement and (y) decide or resolve any and all questions that may
arise, including interpretations of this Agreement.

7.2 Agents. In the administration of this Agreement the Plan Administrator may employ agents
and delegate to them such administrative duties as it sees fit (including acting through a duly
appointed representative) and may from time to time consult with counsel, who may be counsel to the
Bank.

7.3 Binding Effect of Decisions. The decision or action of the Plan Administrator about any
question arising out of the administration, interpretation and application of the Agreement and the
rules and regulations promulgated hereunder shall be final and conclusive and binding upon all
persons having any interest in the Agreement. No Executive or Beneficiary shall be deemed to have
any right, vested or nonvested, regarding the continued use of any previously adopted assumptions,
including but not limited to the discount rate and calculation method employed in the determination
of the Accrual Balance.

7.4 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless the members
of the Plan Administrator against any and all claims, losses, damages, expenses or liabilities
arising from any action or failure to act with respect to this Agreement, except in the case of
willful misconduct by the Plan Administrator or any of its members.

 

12

 

7.5 Bank Information. To enable the Plan Administrator to perform its functions, the Bank
shall supply full and timely information to the Plan Administrator on all matters relating to the
date and circumstances of the retirement, Disability, death, or Separation from Service of the
Executive and such other pertinent information as the Plan Administrator may reasonably require.

Article 8

Miscellaneous

8.1 Amendments and Termination. Subject to section 8.14 of this Agreement, this Agreement may
be amended solely by a written agreement signed by the Bank and by the Executive, and except for
termination occurring under Article 5 this Agreement may be terminated solely by a written
agreement signed by the Bank and by the Executive.

8.2 Binding Effect. This Agreement shall bind the Executive and the Bank and their
beneficiaries, survivors, executors, successors, administrators, and transferees.

8.3 No Guarantee of Employment. This Agreement is not an employment policy or contract. It
does not give the Executive the right to remain an employee of the Bank nor does it interfere with
the Bank’s right to discharge the Executive. It also does not require the Executive to remain an
employee or interfere with the Executive’s right to terminate employment at any time.

8.4 Non-Transferability. Benefits under this Agreement may not be sold, transferred,
assigned, pledged, attached, or encumbered.

8.5 Successors; Binding Agreement. By an assumption agreement in form and substance
satisfactory to the Executive, the Bank shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, or otherwise) to all or substantially all of the business or
assets of the Bank to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Bank would be required to perform this Agreement had no succession
occurred.

8.6 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from
the benefits provided under this Agreement.

8.7 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of
the State of Ohio, except to the extent preempted by the laws of the United States of America.

8.8 Unfunded Arrangement. The Executive and beneficiary are general unsecured creditors of
the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise
by the Bank to pay benefits. The rights to benefits are not subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Bank to
which the Executive and beneficiary have no preferred or secured claim.

 

13

 

8.9 Entire Agreement. This Agreement and the Split Dollar Agreement and Endorsement attached
as Addendum A, as amended, constitute the entire agreement between the Bank and the Executive
concerning the subject matter. No rights are granted to the Executive under this Agreement other
than those specifically set forth. This Agreement amends and restates in its entirety the December
15, 2003 Salary Continuation Agreement.

8.10 Severability. If any provision of this Agreement is held invalid, such invalidity shall
not affect any other provision of this Agreement not held invalid, and to the full extent
consistent with law each such other provision shall continue in full force and effect. If any
provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder
of such provision not held invalid, and to the full extent consistent with law the remainder of
such provision, together with all other provisions of this Agreement, shall continue in full force
and effect.

8.11 Headings. Headings are included solely for convenience of reference and shall not affect
the meaning or interpretation of any provision of this Agreement.

8.12 Notices. All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered by hand or mailed, certified or
registered mail, return receipt requested, with postage prepaid, to the following addresses or to
such other address as either party may designate by like notice. If to the Bank, notice shall be
given to the board of directors, The Cortland Savings and Banking Company, 194 W. Main Street, P.O.
Box 98, Cortland, Ohio 44410-1466, or to such other or additional person or persons as the Bank
shall have designated to the Executive in writing. If to the Executive, notice shall be given to
the Executive at the Executive’s address appearing on the Bank’s records, or to such other or
additional person or persons as the Executive shall have designated to the Bank in writing.

8.13 Payment of Legal Fees. The Bank is aware that after a Change in Control management of
the Bank could cause or attempt to cause the Bank to refuse to comply with its obligations under
this Agreement, or could institute or cause or attempt to cause the Bank to institute litigation
seeking to have this Agreement declared unenforceable, or could take or attempt to take other
action to deny the Executive the benefits intended under this Agreement. In these circumstances
the purpose of this Agreement would be frustrated. The Bank desires that the Executive not be
required to incur the expenses associated with the enforcement of rights under this Agreement,
whether by litigation or other legal action, because the cost and expense thereof would
substantially detract from the benefits intended to be granted to the Executive hereunder. The
Bank desires that the Executive not be forced to negotiate settlement of rights under this
Agreement under threat of incurring expenses. Accordingly, if after a Change in Control it appears
to Executive that (x) the Bank has failed to comply with any of its obligations under this
Agreement, or (y) the Bank or any other person has taken any action to declare this Agreement void
or unenforceable, or

 

14

 

instituted
any litigation or other legal action designed to deny, diminish, or recover from the Executive the benefits intended to be provided to the Executive
hereunder, the Bank irrevocably authorizes the Executive from time to time to retain counsel of the
Executive’s choice, at the Bank’s expense as provided in this section 8.13, to represent the
Executive in the initiation or defense of any litigation or other legal action, whether by or
against the Bank or any director, officer, stockholder or other person affiliated with the Bank, in
any jurisdiction. Despite any existing or previous attorney-client relationship between the Bank
and any counsel chosen by the Executive under this section 8.13, the Bank irrevocably consents to
the Executive entering into an attorney-client relationship with that counsel, and the Bank and the
Executive agree that a confidential relationship shall exist between the Executive and that
counsel. The fees and expenses of counsel selected from time to time by Executive as provided in
this section shall be paid or reimbursed to Executive by the Bank on a regular, periodic basis upon
presentation by the Executive of a statement or statements prepared by counsel in accordance with
counsel’s customary practices, up to a maximum aggregate amount of $500,000, whether suit be
brought or not and regardless of whether incurred in trial, bankruptcy, or appellate proceedings.
The Bank’s obligation to pay the Executive’s legal fees provided by this section 8.13 operates
separately from and in addition to any legal fee reimbursement obligation the Bank or the Bank’s
parent Cortland Bancorp may have with the Executive under a severance or employment agreement by
and among the Executive, the Bank, and Cortland Bancorp. Despite any contrary provision within
this Agreement however, the Bank shall not be required to pay or reimburse the Executive’s legal
expenses if doing so would violate section 18(k) of the Federal Deposit Insurance Act [12 U.S.C.
1828(k)] and Rule 359.3 of the Federal Deposit Insurance Corporation [12 CFR 359.3].

8.14 Termination or Modification of Agreement Because of Changes in Law, Rules or Regulations.
The Bank is entering into this Agreement on the assumption that certain existing tax laws, rules,
and regulations will continue in effect in their current form. If that assumption materially
changes and the change has a material detrimental effect on this Agreement, then the Bank reserves
the right to terminate or modify this Agreement accordingly, subject to the written consent of the
Executive, which shall not be unreasonably withheld. This section 8.14 shall become null and void
effective immediately upon a Change in Control.

In Witness Whereof, the Executive and a duly authorized Bank officer have executed
this Amended Salary Continuation Agreement as of the date first written above.

	 	 	 	 	 	 	 	 	 
	Executive:	 	Bank:

The Cortland Savings and Banking Company	 	 
	 
	 	 	 	 	 	 	 	 
	 

Craig M. Phythyon

	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

Lawrence A. Fantauzzi
	 	 
	 

	 	 	 	 	 	Title: President and CEO	 	 

 

15

 

Beneficiary Designation

The Cortland Savings and Banking Company

Amended Salary Continuation Agreement

Craig M. Phythyon

I designate the following as beneficiary of any death benefits under this Amended Salary
Continuation Agreement:

	 	 	 
	Primary:
	 	 
	 

	 	 
	 
	 	 
	 
	 
	 	 
	Contingent:
	 	 
	 

	 	 
	 
	 	 
	 

Note: To name a trust as beneficiary, please provide the name of the trustee(s) and
the exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new written
designation with the Bank. I further understand that the designations will be automatically
revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our
marriage is subsequently dissolved.

	 	 	 	 	 	 	 
	 

	 	Signature:	 	 	 	 
	 

	 	 	 	 

Craig M. Phythyon
	 	 
	 
	 	 	 	 	 	 
	 

	 	Date:
	 	                                        , 2008	 	 

Accepted by the Bank this
 _____ 

day of
 _____, 2008

	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Lawrence A. Fantauzzi
	 	 
	 

	 	 	 	Title: President and Chief Executive Officer	 	 

 

16

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