Document:

Exhibit 10.25

Exhibit 10.25

The Cortland Savings and Banking Company

Salary Continuation Agreement

This Salary Continuation
Agreement (this “Agreement”) is entered into as
of this 1st day of June, 2010, by and between The Cortland
Savings and Banking Company (the “Bank”), an Ohio-chartered, FDIC-insured member bank, and Stanley
P. Feret, Senior Vice President and Chief Lending Officer of the Bank (the “Executive”).

Whereas, the Bank expects that the Executive will make substantial contributions 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, 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 Internal Revenue 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 effective control, or
change in ownership of a substantial portion of 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.

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 June 1, 2010.

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.

 

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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

(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 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 initial existence of the condition.

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 $92,000.
	 
	 	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 benefit under
this section 2.1 to the Executive in equal monthly installments on the last day of each
month. The benefit shall be paid to the Executive for 180 months.

2.2 Early Termination. For Early Termination the Bank shall pay to the Executive the benefit
described in this section 2.2 instead of any other benefit under 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. No benefits shall be
payable under this Agreement if the Executive’s Separation from Service is a Termination with Cause
or if this Agreement terminates under Article 5.

	 	2.2.1	 	Amount of benefit. The annual benefit under this section 2.2 is calculated as
the amount that fully amortizes the vested portion of the Accrual Balance existing at
the end of the month immediately before the month in which Separation from Service
occurs, amortizing that vested Accrual Balance over 15 years and taking into account
interest at the discount rate or rates established by the Plan Administrator. Until the
Executive is 100% vested on the tenth anniversary of the Effective Date the Executive
shall become vested in the benefit under this section 2.2 in equal 10% increments on
each anniversary of the Effective Date, provided the Executive remains employed by the
Bank on each vesting date. However, if a Change in
Control occurs before Separation from Service the Executive shall be considered 100%
vested when the Change in Control occurs.

 

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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.

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.

 

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	 	2.4.1	 	Amount of benefit. The benefit under this section 2.4 is the Accrual Balance
when Separation from Service occurs.
	 
	 	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 sections
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, or vested Accrual Balance in the case of
Early Termination benefits payable under section 2.2.

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.

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.

 

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Article 3

Death Benefits

Unless the Accrual Balance or vested Accrual Balance shall have been paid to the Executive
under sections 2.4 or 2.5 after a Change in Control, if at death the Executive is receiving or
entitled to receive benefits under sections 2.1, 2.2, or 2.3 but dies before receiving all 180
monthly benefit payments under sections 2.1, 2.2, or 2.3, at the Executive’s death the Bank shall
pay to the Executive’s Beneficiary the Accrual Balance existing at the time of the Executive’s
death, or vested Accrual Balance for death occurring after Early Termination. If a benefit is
payable to the Executive’s Beneficiary, the benefit shall be paid in a single lump sum within 90
days after the Executive’s death.

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 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 benefit payments 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. 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.

5.2 Misstatement. No benefits shall be paid under this Agreement 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.

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, if 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.

 

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	 	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.
	 
	 	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:

 

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	 	(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 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 (x) to make, amend, interpret, and enforce all appropriate rules and regulations for the
administration of this Agreement and (y) to 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.

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.

 

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Article 8

Miscellaneous

8.1 Amendments and Termination. Subject to section 8.14, 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. This
Agreement does not give the Executive the right to remain an employee of the Bank nor does this
Agreement interfere with the Bank’s right to discharge the Executive. This Agreement 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 Bank’s business
or assets to expressly assume and agree to perform this Agreement in the same manner and to the
same extent 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.

8.9 Entire Agreement. This Agreement constitutes 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.

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 herein solely for convenience of reference and shall not
affect the meaning or interpretation of any provision of this Agreement.

 

11

 

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 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].

 

12

 

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 after a
Change in Control.

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

	 	 	 	 	 
	Executive: 

	 Bank:

The Cortland Savings and Banking
Company

 	 
	Stanley P. Feret 	By:  	
 	 
	 	 	 	James M. Gasior 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 

 

13

 

Beneficiary Designation

The Cortland Savings and Banking Company

Salary Continuation Agreement

I, Stanley P. Feret, designate the following as beneficiary of any death benefits under this
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:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Stanley P. Feret	 	 
	 
	 	 	 	 
	Date:

	 	 	, 2010
	 

	 	 	 	 

Accepted by the Bank this                 day of                               , 2010

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	Title:  
	 	James M. Gasior

President and Chief Executive Officer

 

14Exhibit 10.34

Exhibit 10.34

Severance Agreement

This Severance Agreement (this “Agreement”) is entered into and shall be effective as
of this 1st day of June, 2010 by and between Cortland Bancorp, an
Ohio corporation (the “Corporation”), and Stanley P. Feret (the “Executive”).

Whereas, the Executive is expected to make substantial contributions to the
profitability, growth, and financial strength of the Corporation and its wholly owned subsidiary
The Cortland Savings and Banking Company, an Ohio-chartered bank (the “Bank”), and

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 Corporation, is
contemplated insofar as the Corporation or the Bank or any subsidiaries is concerned.

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

1. Termination. (a) Cash benefit. If the Executive’s employment terminates involuntarily
but without Cause or voluntarily but with Good Reason, within five business days after the
Executive’s employment termination the Corporation shall make a lump-sum payment to the Executive
in an amount in cash equal to one times the Executive’s compensation. For this purpose the
Executive’s compensation means (x) the sum of the Executive’s base salary when employment
termination occurs, including salary deferred at the Executive’s election but excluding any
compensation earned by the Executive in the Executive’s capacity as a director, plus (y) the
average cash performance bonus earned for the three calendar years immediately preceding the year
in which employment termination occurs (or such shorter period as the Executive has been employed
by the Bank), regardless of whether the bonus is paid in the year earned and regardless of whether
the bonus is vested or subject to elective deferral. A signing bonus, a bonus that is not based
upon individual or corporate performance, or compensation paid in exchange for an agreement not to
compete shall not be considered a cash performance bonus for purposes of this calculation. The
amount payable under this section 1(a) shall not be reduced to account for the time value of money
or discounted to present value.

(b) Possible payment delay because of Internal Revenue Code section 409A. If when employment
termination occurs the Executive is a specified employee within the meaning of section 409A of the
Internal Revenue Code of 1986, if the cash severance benefit under this section 1(a) would be
considered deferred compensation under section 409A, and finally if an exemption from the six-month
delay requirement of section 409A(a)(2)(B)(i) is not available, the benefit under this section 1(a)
shall be paid to the Executive in a single lump sum without interest on the first day of the
seventh month after the month in which the Executive’s employment terminates. References in this
Agreement to section 409A of the Internal Revenue Code of 1986 include rules, regulations, and
guidance of general application issued by the Department of the Treasury under Internal Revenue
Code section 409A.

(c) Entire cash severance benefit. If the Executive becomes entitled to the cash benefit
under section 1(a) because of the Executive’s involuntary termination without Cause or voluntary
termination with Good Reason, the Executive shall be entitled to no other cash severance benefits
payable by the Corporation, the Bank, or any of their affiliates after employment termination.
Accordingly, and except for any benefits to which the Executive may be entitled under a salary
continuation agreement, the Executive shall not be entitled and hereby agrees not to claim
entitlement to cash severance benefits for employment termination under any
other agreement or arrangement, formal or informal and written or unwritten, whether for the
benefit of the

 

 

 

Executive in particular or for the benefit of executives or employees generally, and
whether the agreement or arrangement is entered into or sponsored by the Corporation, the Bank, or
any of their affiliates, regardless of how that other agreement or arrangement defines the term
change in control and regardless of whether that other agreement or arrangement provides for cash
severance payable in a lump sum, in installments, or in the form of continued salary. For purposes
of this Agreement the term affiliate means any corporation, partnership, or other entity
controlling, controlled by, or under common control with the Corporation or the Bank.

(d) Involuntary termination with Cause defined. Involuntary termination of the Executive’s
employment shall be considered involuntary termination with Cause if the Executive shall have
committed any of the following acts or if any of the following conditions exist —

	 	(1)	 	an act of fraud, embezzlement, or theft while employed by Cortland Bancorp or the Bank,
or conviction of the Executive of 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, or
	 
	 	(2)	 	gross negligence, insubordination, disloyalty, or dishonesty in the performance of the
Executive’s duties as an officer of Cortland Bancorp or the Bank; willful or reckless failure
by the Executive to adhere to Cortland Bancorp’s or the Bank’s written policies; intentional
wrongful damage by the Executive to the business or property of Cortland Bancorp or the Bank,
including without limitation its reputation, which in Cortland Bancorp’s sole judgment causes
material harm to Cortland Bancorp or the Bank; breach by the Executive of fiduciary duties to
Cortland Bancorp and its stockholders, whether in the Executive’s capacity as an officer or
as a director of Cortland Bancorp or the Bank,
	 
	 	(3)	 	removal of the Executive from office or permanent prohibition of the Executive 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), or
	 
	 	(4)	 	intentional wrongful disclosure of secret processes or confidential information of
Cortland Bancorp or the Bank, which in Cortland Bancorp’s sole judgment causes material harm
to Cortland Bancorp or the Bank, or
	 
	 	(5)	 	any actions that cause the Executive to be terminated for cause under any employment
agreement existing on the date hereof or hereafter entered into between the Executive and
Cortland Bancorp or the Bank, or
	 
	 	(6)	 	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 Cortland
Bancorp or the Bank, under a blanket bond or other fidelity or insurance policy covering
directors, officers, or employees.

For purposes of this Agreement, no act or failure to act on the Executive’s part 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 Cortland Bancorp’s
best interests. Any act or failure to act based upon authority granted by resolutions duly
adopted by the board of directors or based upon the advice of counsel for Cortland Bancorp
shall be conclusively presumed to be in good faith and in Cortland Bancorp’s best interests.

 

2

 

(e) Voluntary termination with Good Reason defined. For purposes of this Agreement a
voluntary termination by the Executive shall be considered a voluntary termination with Good Reason
if the conditions stated in both clauses (x) and (y) are satisfied —

	 	(x)	 	a voluntary termination by the Executive shall be considered a voluntary termination with
Good Reason if any of the following occur without the Executive’s advance written consent,
and the term Good Reason shall mean the occurrence of any of the following without the
Executive’s advance written consent —

	 	1)	 	a material diminution of the Executive’s base salary, or
	 
	 	2)	 	a material diminution of the Executive’s authority, duties, or responsibilities, or
	 
	 	3)	 	a material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report, or
	 
	 	4)	 	a material diminution in the budget over which the Executive retains authority, or
	 
	 	5)	 	a material change in the geographic location at which the Executive must perform
services, or
	 
	 	6)	 	any other action or inaction that constitutes a material breach by the Corporation
of this Agreement.

	 	(y)	 	the Executive must give notice to the Corporation 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 Corporation 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 initial
existence of the condition.

(f) No cash benefit is payable under paragraph (a) if change-in-control benefits are payable
under section 2. No cash benefit shall be payable under paragraph (a) of this section 1 if a
benefit is payable or shall have been paid under section 2.

2. Change-in-Control Benefit. (a) Cash benefit. If a Change in Control occurs before
termination of the Executive’s employment, the Corporation shall make a lump-sum payment to the
Executive in an amount in cash equal to one times the Executive’s compensation. For this purpose
the Executive’s compensation means (x) the sum of the Executive’s base salary when the Change in
Control occurs, including salary deferred at the Executive’s election, plus (y) any bonus awarded
to the Executive by the Corporation or the Bank for the most recent whole calendar year before the
year in which the Change in Control occurs,
regardless of whether the bonus is paid in the year earned and regardless of whether the bonus is
vested or subject to elective deferral. The term bonus means cash or non-cash compensation of the
type that is required to be reported as bonus by Securities and Exchange Commission rules governing
tabular disclosure of

 

3

 

executive compensation, specifically Regulation S-K Item 402 (17 CFR 229.402,
currently Item 402(c)(2)(iv)). The amount payable to the Executive hereunder shall not be reduced
to account for the time value of money or discounted to present value. Subject to the provisions
of this Agreement, including section 16, the payment required under this section 2(a) shall be made
within five business days after the Change in Control occurs. The Executive shall be entitled to a
payment under this section 2(a) on no more than one occasion during the term of this Agreement. If
the Executive receives or becomes entitled to receive the benefit under this section 2(a), the
Executive shall be entitled to no benefits under section 1 and this Agreement shall terminate
immediately after payment by the Corporation to the Executive of the benefit payable under this
section 2.

(b) Change in Control defined. For purposes of this Agreement the term Change in Control
means a change in control as defined in Internal Revenue Code section 409A and rules, regulations,
and guidance of general application thereunder issued by the Department of the Treasury, including
—

	 	(1)	 	Change in ownership: a change in ownership of the Corporation occurs on the date any one
person or group accumulates ownership of Corporation stock constituting more than 50% of the
total fair market value or total voting power of Corporation stock,
	 
	 	(2)	 	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 Corporation stock possessing 30% or more of
the total voting power of Corporation stock, or (y) a majority of the Corporation’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 the Corporation’s board of directors, or
	 
	 	(3)	 	Change in ownership of a substantial portion of assets: a change in ownership of a
substantial portion of the Corporation’s assets occurs if in a 12-month period any one person
or more than one person acting as a group acquires from the Corporation assets having a total
gross fair market value equal to or exceeding 40% of the total gross fair market value of all
of the Corporation’s assets immediately before the acquisition or acquisitions. For this
purpose gross fair market value means the value of the Corporation’s assets or the value of
the assets being disposed of, determined without regard to any liabilities associated with
the assets.

3. Termination for Which No Benefits Are Payable. Despite anything in this Agreement to the
contrary, the Executive shall not be entitled to benefits under this Agreement if the Executive’s
employment terminates with Cause, if the Executive dies while actively employed by the Corporation
or the Bank, or if the Executive becomes totally disabled while actively employed by the
Corporation or the Bank. For purposes of this Agreement the term totally disabled means that
because of injury or sickness the Executive is unable to perform the Executive’s duties. The
benefits, if any, payable to the Executive or the Executive’s beneficiary or estate relating to the
Executive’s death or disability shall be determined solely by such benefit plans or arrangements as
the Corporation or the Bank may have with the Executive relating to death or disability, not by
this Agreement.

4. Term of Agreement. (a) Unless terminated sooner in accordance with the provisions of this
Agreement, this Agreement shall terminate on the second anniversary of the effective date first
written above.

 

4

 

(b) The Corporation and the Executive agree to make a good faith effort to finalize by the end
of the two-year term of this Agreement the terms of a new severance agreement to take effect at the
end of the two-year term of this Agreement. The terms and conditions of the new severance
agreement taking effect at the end of the term of this Agreement shall be (x) no less favorable to
the Executive than the severance agreements between the Corporation and the Corporation’s Chief
Executive Officer and Chief Financial Officer in effect at the end of the two-year term of this
Agreement or (y) if there are no such severance agreements in effect at the end of the term of this
Agreement, no less favorable to the Executive than the severance agreements between the Corporation
and the Corporation’s Chief Executive Officer and Chief Financial Officer in effect on the date of
this Agreement.

5. This Agreement Is Not an Employment Contract. The parties hereto acknowledge and agree
that this Agreement is not a management or employment agreement and that nothing in this Agreement
shall give the Executive any rights or impose any obligations to continued employment by the
Corporation, the Bank, or any subsidiary of or successor to the Corporation or the Bank, nor shall
it give the Corporation or the Bank any rights or impose any obligations for the continued
performance of duties by the Executive for the Corporation, the Bank, or any subsidiary of or
successor to the Corporation or the Bank.

6. Withholding of Taxes. The Corporation may withhold from any benefits payable under this
Agreement all Federal, state, local or other taxes as may be required by law, governmental
regulation, or ruling.

7. Successors and Assigns. (a) This Agreement is binding on the Corporation’s successors.
This Agreement shall be binding upon the Corporation and any successor to the Corporation,
including any persons acquiring directly or indirectly all or substantially all of the business or
assets of the Corporation by purchase, merger, consolidation, reorganization, or otherwise. But
this Agreement and the Corporation’s obligations under this Agreement are not otherwise assignable,
transferable, or delegable by the Corporation. By agreement in form and substance satisfactory to
the Executive, the Corporation shall require any successor to all or substantially all of the
business or assets of the Corporation expressly to assume and agree to perform this Agreement in
the same manner and to the same extent the Corporation would be required to perform had no
succession occurred.

(b) This Agreement is enforceable by the Executive’s heirs. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s personal or legal representatives, executors,
administrators, successors, heirs, distributes, and legatees.

(c) This Agreement is personal and is not assignable. This Agreement is personal in nature.
Without written consent of the other party, neither party shall assign, transfer, or delegate this
Agreement or any rights or obligations under this Agreement except as expressly provided in this
section 7. Without limiting the generality of the foregoing, the Executive’s right to receive
payments hereunder is not assignable or transferable, whether by pledge, creation of a security
interest, or otherwise, except for a transfer by Executive’s will or by the laws of descent and
distribution. If the Executive attempts an assignment or transfer that is contrary to this section
7, the Corporation shall have no liability to pay any amount to the assignee or transferee.

8. Notices. Any notice under this Agreement shall be deemed to have been effectively made or
given if in writing and personally delivered, delivered by mail properly addressed in a sealed
envelope, postage prepaid by certified or registered mail, delivered by a reputable overnight
delivery service, or sent by facsimile. Unless otherwise changed by notice, notice shall be
properly addressed to the Executive if addressed to the address of the Executive on the books and
records of the Corporation at the time of the delivery of such notice, and properly addressed to
the Corporation if addressed to Cortland Bancorp, 194 West Main Street, Cortland, Ohio 44410,
Attention: Chief Executive Officer.

 

5

 

9. Captions and Counterparts. The headings and subheadings used in this Agreement are
included solely for convenience and shall not affect the interpretation of this Agreement. This
Agreement may be executed in one or more counterparts, each of which shall be deemed to be an
original but all of which together shall constitute one and the same agreement.

10. Amendments and Waivers. No provision of this Agreement may be modified, waived, or
discharged unless the waiver, modification, or discharge is agreed to in a writing or writings
signed by the Executive and by the Corporation. No waiver by either party of a breach by the other
party or waiver of compliance with any condition or provision of this Agreement to be performed by
the other party shall be deemed to be a waiver of other provisions or conditions at the same or at
any prior or subsequent time.

11. Severability. The provisions of this Agreement are severable. The invalidity or
unenforceability of any provision shall not affect the validity or enforceability of the other
provisions of this Agreement. Any provision held to be invalid or unenforceable shall be reformed
to the extent (and only to the extent) necessary to make it valid and enforceable.

12. Governing Law. The validity, interpretation, construction, and performance of this
Agreement shall be governed by and construed in accordance with the substantive laws of the State
of Ohio, without giving effect to the principles of conflict of laws of the State of Ohio.

13. Entire Agreement. This Agreement constitutes the entire agreement between the Corporation
and the Executive concerning the subject matter. No rights are granted to the Executive under this
Agreement other than those specifically set forth. No agreements or representations, oral or
otherwise, expressed or implied concerning the subject matter of this Agreement have been made by
either party that are not set forth expressly in this Agreement.

14. No Mitigation Required. The Corporation hereby acknowledges that it will be difficult and
could be impossible (x) for the Executive to find reasonably comparable employment after
termination and (y) to measure the amount of damages the Executive suffers because of termination.
Additionally, the Corporation acknowledges that its general severance pay plans do not provide for
mitigation, offset, or reduction of any severance payment received thereunder. The Corporation
further acknowledges that the payment of benefits by the Corporation under this Agreement is
reasonable and shall be liquidated damages. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor
shall any profits, income, earnings, or other benefits from any source whatsoever create any
mitigation, offset, reduction, or any other obligation on the part of the Executive hereunder or
otherwise.

15. No Reduction of Severance Benefits under Internal Revenue Code Sections 280G and 4999.
Despite any contrary provision in any other agreement, plan, or arrangement by and between the Bank
and the Executive or between the Corporation and the Executive, the benefits payable under this
Agreement shall not be reduced, withheld, or considered owing to the Corporation or the Bank if the
benefits would (x) cause imposition of excise taxes on the Executive under section 4999 of the
Internal Revenue Code of 1986 or (y) cause loss of the Corporation’s or the Bank’s compensation
expense deduction as a result of the application of section 280G of the Internal Revenue Code.

 

6

 

16. Internal Revenue Code Section 409A. The Corporation and the Executive intend that their
exercise of authority or discretion under this Agreement shall comply with section 409A of the
Internal Revenue Code of 1986. If when the Executive’s employment terminates the Executive is a
specified employee, as defined in section 409A of the Internal Revenue Code of 1986, and if any
payments or benefits under this Agreement will result in additional tax or interest to the
Executive because of section 409A, then despite any provision of this Agreement to the contrary the
Executive shall not be entitled to the payments or benefits 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. As promptly as possible
after the end of the period during which payments or benefits are delayed under this provision, the
entire amount of the delayed payments shall be paid to the Executive in a single lump sum. If any
provision of this Agreement does not satisfy the requirements of section 409A, the provision shall
nevertheless be applied in a manner consistent with those requirements. If any provision of this
Agreement would subject the Executive to additional tax or interest under section 409A, the
Corporation shall reform the provision. However, the Corporation 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 Corporation shall not be required to incur any additional
compensation expense as a result of the reformed provision.

17. No Golden Parachute Payments. Despite any provision in this Agreement to the contrary,
the Corporation shall not be required to make any payment under this Agreement that would be a
prohibited golden parachute payment within the meaning of section 18(k) of the Federal Deposit
Insurance Act and FDIC rules at 12 CFR Part 359. If any payment or agreement to make a payment
under this Agreement would be considered a golden parachute payment under 12 CFR section 359.1(f),
the agreement to make the payment shall be void unless (x) the payment receives the prior approval
of the appropriate Federal banking agency, if required at that time by 12 U.S.C. section 1828(k),
12 CFR Part 359, or other Federal or state laws, rules, or regulations, and (y) the obligation and
the payment comply in all other respects with 12 U.S.C. section 1828(k), 12 CFR Part 359, and other
Federal and state laws, rules, or regulations, to the extent applicable at the time.

In Witness Whereof, the parties have executed this Severance Agreement as of the date
first written above.

	 	 	 	 	 	 
	Witnesses: 	 	Cortland Bancorp

 	 
	 	 	By:  	 	 
	 	 	 	 	James M. Gasior 	 
	 	 	 	Its:  	President and Chief Executive Officer 	 
	 
	Witnesses: 	 	Executive

 	 
	 	 	
 	 
	 	 	Stanley P. Feret 	 
	 	 	 	 

 

7

 

	 	 	 	 	 

	 	 	 
	County of Trumbull
	 	)
	 
	 	) ss:
	State of Ohio
	 	)

Before me this                 day of                                , 2010 personally
appeared the above named James M. Gasior and Stanley P. Feret, who acknowledged that they did sign
the foregoing instrument and that the same was their free act and deed.

(Notary Seal)                    Notary Public

My Commission Expires:                        

 

8

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