Exhibit 10.3

CHANGE OF CONTROL EMPLOYMENT AGREEMENT

CHANGE OF CONTROL EMPLOYMENT AGREEMENT, dated as of the 30 day of December, 2011
(this “Agreement”), by and among (i) The Suffolk County National Bank
(hereinafter referred to as “Bank”), a National Banking Association, a wholly
owned subsidiary of Suffolk Bancorp (hereinafter referred to as “Company”), a
New York Corporation, (ii) the Company and (iii) Howard C. Bluver (“Executive”).

WHEREAS, the Board of Directors of the Company (the “Board”), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Bank and the Company will have the continued dedication of the
Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined herein). The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive’s full attention and dedication to the Bank and the Company in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that provide the Executive with compensation and benefits
arrangements that are competitive with those of other corporations. Therefore,
in order to accomplish these objectives, the Board has caused the Bank and the
Company to enter into this Agreement.

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

Section 1. Certain Definitions. (a) “Effective Date” means the first date during
the Change of Control Period (as defined herein) on which a Change of Control
occurs. Notwithstanding anything in this Agreement to the contrary, if (A) the
Executive’s employment with the Bank and the Company is terminated by the Bank
and/or the Company, (B) the Date of Termination is prior to the date on which a
Change of Control occurs, and (C) it is reasonably demonstrated by the Executive
that such termination of employment (i) was at the request of a third party that
has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement, the “Effective Date” means the date
immediately prior to such Date of Termination.

(b) “Change of Control Period” means the period commencing on the date hereof
and ending on the third anniversary of the date hereof; provided, however, that,
commencing on the date one year after the date hereof, and on each annual
anniversary of such date (such date and each annual anniversary thereof, the
“Renewal Date”), unless previously terminated, the Change of Control Period
shall be automatically extended so as to terminate three years from such Renewal
Date, unless, at least 60 days prior to the Renewal Date, the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.

(c) “Affiliated Company” means any company controlled by, controlling or under
common control with the Company, including, without limitation, the Bank.

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(d) “Change of Control” means:

(1) Any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the
then-outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however,
that, for purposes of this Section 1(d), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
Affiliated Company or (iv) any acquisition pursuant to a transaction that
complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C);

(2) Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual was a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board;

(3) Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar transaction involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or securities of another
entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (A) all
or substantially all of the individuals and entities that were the beneficial
owners of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the then-outstanding shares of
common stock (or, for a non-corporate entity, equivalent securities) and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors (or, for a non-corporate entity,
equivalent governing body), as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity that, as a
result of such transaction, owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership immediately prior to such
Business Combination of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding any
entity resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock (or, for a
non-corporate entity, equivalent securities) of the entity resulting from such
Business Combination or the combined voting power of the then-outstanding voting
securities of such entity, except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority of the members of
the board of directors (or, for a non-corporate entity, equivalent governing
body) of the entity resulting from

 

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such Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or

(4) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

Section 2. Employment Period. The Bank and the Company hereby agree to continue
the Executive in its employ, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
third anniversary of the Effective Date (the “Employment Period”). The
Employment Period shall terminate upon the Executive’s termination of employment
for any reason.

Section 3. Terms of Employment. (a) Position and Duties. (1) During the
Employment Period, (A) the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all respects with the most significant of those
held, exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date, (B) the Executive’s services shall be performed at
the office where the Executive was employed immediately preceding the Effective
Date, and (C) the Executive shall not be required to travel on Bank or Company
business to a substantially greater extent than required during the 120-day
period immediately prior to the Effective Date.

(2) During the Employment Period, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the business and
affairs of the Bank and the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive’s
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Bank or the Company in
accordance with this Agreement. It is expressly understood and agreed that, to
the extent that any such activities have been conducted by the Executive prior
to the Effective Date, the continued conduct of such activities (or the conduct
of activities similar in nature and scope thereto) subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Bank and the Company.

(b) Compensation. (1) Base Salary. During the Employment Period, the Executive
shall receive an annual base salary (the “Annual Base Salary”) at an annual rate
at least equal to 12 times the highest monthly base salary paid or payable,
including any base salary that has been earned but deferred, to the Executive by
the Company and the Affiliated Companies in respect of the one-year period
immediately preceding the month in which the Effective Date occurs. The Annual
Base Salary shall be paid at such intervals as the Bank and the Company pay
executive salaries generally. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months
after the last salary increase

 

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awarded to the Executive prior to the Effective Date. Any increase in the Annual
Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. The Annual Base Salary shall not be reduced
after any such increase and the term “Annual Base Salary” shall refer to the
Annual Base Salary as so increased.

(2) Annual Bonus. In addition to the Annual Base Salary, the Executive shall be
eligible to earn, for each fiscal year ending during the Employment Period, an
annual bonus (the “Annual Bonus”) in cash with a target at least equal to the
Executive’s target or guaranteed bonus, as applicable, under the Bank’s or the
Company’s annual incentive plan, or any comparable bonus under any predecessor
or successor plan, for the fiscal year in which the Effective Date occurs (or,
if no target or guaranteed bonus was established for such fiscal year, the
target or guaranteed bonus for the immediately preceding fiscal year) (the
“Target Annual Bonus”). Each such Annual Bonus shall be paid no later than two
and a half months after the end of the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus pursuant to an arrangement that meets the requirements of Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”).

(3) Long-Term Cash and Equity Incentives, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
long-term cash incentive, equity incentive, savings and retirement plans,
practices, policies, and programs applicable generally to other peer executives
of the Company and the Affiliated Companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and the Affiliated Companies, for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies.

(4) Welfare Benefit Plans. During the Employment Period, the Executive, the
Executive’s spouse and/or eligible dependents, as the case may be, shall be
eligible for participation in and shall receive all benefits under welfare
benefit, fringe benefit, vacation and paid time off and expense reimbursement
plans, practices, policies and programs provided by the Company and the
Affiliated Companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits that are less favorable, in the aggregate, than the most favorable
of such plans, practices, policies and programs in effect for the Executive at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies.

Section 4. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically if the Executive dies during the
Employment

 

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Period. If the Bank or the Company determines in good faith that the Disability
(as defined herein) of the Executive has occurred during the Employment Period
(pursuant to the definition of “Disability”), it may give to the Executive
written notice in accordance with Section 11(b) of its intention to terminate
the Executive’s employment. In such event, the Executive’s employment with the
Bank and the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the “Disability Effective Date”), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive’s duties. “Disability” means the absence
of the Executive from the Executive’s duties with the Bank and the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness that is determined to be total and permanent by a
physician selected by the Bank or the Company or the applicable insurers and
acceptable to the Executive or the Executive’s legal representative (such
agreement as to acceptability not to be unreasonably withheld).

(b) Cause. The Bank and/or Company may terminate the Executive’s employment
during the Employment Period with or without Cause. “Cause” means:

(1) the willful and continued failure of the Executive to perform substantially
the Executive’s duties (as contemplated by Section 3(a)(1)(A)) with the Company
or any Affiliated Company (other than any such failure resulting from incapacity
due to physical or mental illness or following the Executive’s delivery of a
Notice of Termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company that specifically identifies the manner in which the
Board or the Chief Executive Officer of the Company believes that the Executive
has not substantially performed the Executive’s duties, or

(2) the willful engaging by the Executive in illegal conduct or gross misconduct
that is materially and demonstrably injurious to the Bank or the Company.

For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Bank and the
Company. Any act, or failure to act, based upon (A) authority given pursuant to
a resolution duly adopted by the Board, or if the Company is not the ultimate
parent corporation of the Affiliated Companies and is not publicly-traded, the
board of directors of the ultimate parent of the Company (the “Applicable
Board”) or (B) the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Applicable Board (excluding the Executive, if the Executive is a member of the
Applicable Board) at a meeting of the Applicable Board called and held for such
purpose (after reasonable notice is provided to the Executive and the Executive
is given an opportunity, together with counsel for the Executive, to be heard
before the Applicable Board), finding that, in the good faith opinion of the
Applicable Board, the Executive is guilty of the conduct described in
Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.

 

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(c) Good Reason. The Executive’s employment may be terminated during the
Employment Period by the Executive for Good Reason or by the Executive
voluntarily without Good Reason. “Good Reason” means actions taken by the Bank
and/or the Company resulting in a material negative change in the employment
relationship. For these purposes, a “material negative change in the employment
relationship” shall include, without limitation:

(1) the assignment to the Executive of duties materially inconsistent with the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Section 3(a)(1)(A), or a material diminution in such position, authority, duties
or responsibilities or a material diminution in the budget over which the
Executive retains authority;

(2) a material diminution in the authorities, duties or responsibilities of the
person to whom the Executive is required to report, including, where applicable,
a requirement that the Executive report to an officer or employee instead of
reporting directly to the Applicable Board;

(3) a material breach of Section 3(b), including without limitation a material
reduction in the Executive’s Annual Base Salary or Target Annual Bonus;

(4) the Bank or the Company requiring that the Executive be based at any office
or location other than as provided in Section 3(a)(1)(B) resulting in a material
increase in the Executive’s commute to and from the Executive’s primary
residence (for this purpose an increase in the Executive’s commute by 35 miles
or more shall be deemed material); or

(5) any other action or inaction that constitutes a material breach by the Bank
or the Company of this Agreement, including any failure by the Company to comply
with and satisfy Section 10(c).

In order to invoke a termination for Good Reason, the Executive shall provide
written notice to the Bank or the Company, as applicable, of the existence of
one or more of the conditions described in clauses (1) through (5) within 90
days following the initial existence of such condition or conditions, specifying
in reasonable detail the conditions constituting Good Reason, and the Bank or
the Company shall have 30 days following receipt of such written notice (the
“Cure Period”) during which it may remedy the condition. In the event that the
Bank or the Company (whichever was provided notice by the Executive) fails to
remedy the condition constituting Good Reason during the applicable Cure Period,
the Executive’s “separation from service” (within the meaning of Section 409A of
the Code) must occur, if at all, within two years following such Cure Period in
order for such termination as a result of such condition to constitute a
termination for Good Reason. The Executive’s mental or physical incapacity
following the occurrence of an event described above in clauses (1) through
(5) shall not affect the Executive’s ability to terminate employment for Good
Reason and the Executive’s death following delivery of a Notice of Termination
for Good Reason shall not affect the Executive’s estate’s entitlement to
severance payments benefits provided hereunder upon a termination of employment
for Good Reason.

 

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(d) Notice of Termination. Any termination of employment by the Bank or the
Company for Cause, or by the Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
Section 11(b). “Notice of Termination” means a written notice that (1) indicates
the specific termination provision in this Agreement relied upon, (2) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated, and (3) if the Date of Termination (as defined
herein) is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice) (subject to Bank’s or the Company’s right to cure in the
case of a resignation for Good Reason). The failure by the Executive or the Bank
and/or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive, the Bank or the Company, respectively,
hereunder or preclude the Executive, the Bank or the Company, respectively, from
asserting such fact or circumstance in enforcing the Executive’s, the Bank’s, or
the Company’s respective rights hereunder.

(e) Date of Termination. “Date of Termination” means (1) if the Executive’s
employment is terminated by the Bank and/or Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
such later date specified in the Notice of Termination, as the case may be,
(2) if the Executive’s employment is terminated by the Bank and/or the Company
other than for Cause or Disability, the date on which the Bank and/or the
Company notifies the Executive of such termination, (3) if the Executive resigns
without Good Reason, the date on which the Executive notifies the Bank or the
Company of such termination, and (4) if the Executive’s employment is terminated
by reason of death or Disability, the date of death of the Executive or the
Disability Effective Date, as the case may be.

Section 5. Obligations of the Bank or the Company upon Termination. (a) By the
Executive for Good Reason; By the Bank and/or the Company Other Than for Cause,
Death or Disability. If, during the Employment Period, the Bank and/or Company
terminates the Executive’s employment other than for Cause, death or Disability
or the Executive terminates employment for Good Reason:

(1) the Bank or the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination (or the applicable later date if
the Executive has elected to defer compensation as described below), the
aggregate of the following amounts:

(A) the sum of (i) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the Executive’s business
expenses that are reimbursable pursuant to Section 3(b)(4) but have not been
reimbursed by the Bank or the Company as of the Date of Termination; (iii) the
Executive’s Annual Bonus for the fiscal year immediately preceding the fiscal
year in which the Date of Termination occurs, if such bonus has been determined
but not paid as of the Date of Termination; (iv) any accrued vacation pay to the
extent not theretofore paid (the sum of the amounts described in sub-clauses
(i), (ii), (iii) and (iv), the “Accrued Obligations”) and (v) an amount equal to
the product of (x) the Target Annual Bonus and (y) a fraction, the numerator of
which

 

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is the number of days in the current fiscal year through the Date of Termination
and the denominator of which is 365 (the “Pro Rata Bonus”); provided that
notwithstanding the foregoing, if the Executive has made an irrevocable election
under any deferred compensation arrangement subject to Section 409A of the Code
to defer any portion of the Annual Base Salary or Annual Bonus described in
clause (i) or (iii) above, then for all purposes of this section 5, such
deferral election, and the terms of the applicable arrangement shall apply to
the same portion of the amount described in such clauses (i) or (iii), and such
portion shall not be considered as part of the “Accrued Obligations” but shall
instead be an “Other Benefit” (as defined in Section 6 below);

(B) the amount equal to the product of (i) three and (ii) the sum of (x) the
Executive’s Annual Base Salary and (y) the Target Annual Bonus; and

(2) for three years following the Date of Termination (the “Benefits Period”),
the Bank or the Company shall provide the Executive and his eligible dependents
with medical and dental insurance coverage (the “Health Care Benefits”) no less
favorable than those which the Executive and his spouse and eligible dependents
were receiving immediately prior to the Date of Termination or, if more
favorable to such persons, as in effect generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies;
provided, however, that the Health Care Benefits shall be provided during the
Benefits Period in such a manner that such benefits are excluded from the
Executive’s income for federal income tax purposes; provided, further, however,
that if the Executive becomes re-employed with another employer and is eligible
to receive health care benefits under another employer-provided plan, the health
care benefits provided hereunder shall be secondary to those provided under such
other plan during such applicable period of eligibility. The receipt of the
Health Care Benefits shall be conditioned upon the Executive continuing to pay
the Applicable COBRA Premium with respect to the level of coverage that the
Executive has elected for the Executive and the Executive’s spouse and eligible
dependents (i.e., single, single plus one, or family). During the portion of the
Benefits Period in which the Executive and his eligible dependents continue to
receive coverage under the Bank’s or the Company’s Health Care Benefits plans,
the Bank or the Company shall pay to the Executive a monthly amount equal to
(i) 140 percent of the Applicable COBRA Premium in respect of the maximum level
of coverage in effect for the Executive and his spouse and dependents at the
Date of Termination minus (ii) the monthly employee contribution rate that is
paid by Bank or Company employees generally for the same or similar coverage, as
in effect from time to time (and which amount shall in no event be greater than
the employee contribution rate for the applicable level of coverage as in effect
immediately prior to the Effective Date), which payment shall be paid in advance
on the first payroll day of each month, commencing with the month immediately
following the Executive’s Date of Termination. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree welfare benefits pursuant to the Bank’s or the Company’s retiree welfare
benefit plans, if any, the Executive shall be considered to have remained
employed until the end of the Benefit Period and to have retired on the last day
of such period. For purposes of this provision, “Applicable COBRA Premium” means
the monthly premium in effect from time to time for coverage provided to former
employees of the

 

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Bank or the Company under Section 4980B of the Code and the regulations
thereunder with respect to a particular level of coverage during the COBRA
health care continuation coverage period under Section 4980B of the Code (the
“COBRA Period”) (i.e., single, single plus one, or family); provided that,
following the COBRA Period, to the extent determined by the Bank or the Company
to be necessary to provide the Health Care Benefits during the Benefits Period
in such a manner that such benefits are excluded from the Executive’s income for
federal income tax purposes, the “Applicable COBRA Premium” shall be the Bank’s
or the Company’s deemed premium cost of such medical coverage for the Executive
and his eligible dependents, which shall be determined actuarially by the Bank’s
or the Company’s advisors; and

(3) except as otherwise set forth in the last sentence of Section 6, to the
extent not theretofore paid or provided, the Bank or the Company shall timely
pay or provide to the Executive any Other Benefits (as defined in Section 6) in
accordance with the terms of the underlying plans or agreements.

(b) Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, the Bank or the Company shall
provide the Executive’s estate or beneficiaries with the Accrued Obligations and
the Pro Rata Bonus and the timely payment or delivery of the Other Benefits, and
shall have no other severance obligations under this Agreement. The Accrued
Obligations and the Pro Rata Bonus shall be paid to the Executive’s estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of the Other Benefits, the term
“Other Benefits” as utilized in this Section 5(b) shall include, without
limitation, and the Executive’s estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and the Affiliated Companies to the estates and beneficiaries of peer
executives of the Company and the Affiliated Companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in
effect on the date of the Executive’s death with respect to other peer
executives of the Company and the Affiliated Companies and their beneficiaries.

(c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Period, the Bank or the Company
shall provide the Executive with the Accrued Obligations and Pro Rata Bonus and
the timely payment or delivery of the Other Benefits in accordance with the
terms of the underlying plans or agreements, and shall have no other severance
obligations under this Agreement. The Accrued Obligations and the Pro Rata Bonus
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination. With respect to the provision of the Other Benefits, the term
“Other Benefits” as utilized in this Section 5(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable of those
generally provided by the Company and the Affiliated Companies to disabled
executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally
with respect to other peer executives and their families at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive’s eligible dependents, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and the Affiliated Companies and their eligible dependents.

 

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(d) Cause; Other Than for Good Reason. If the Executive’s employment is
terminated for Cause during the Employment Period, the Bank or the Company shall
provide the Executive with the Accrued Obligations, except for the Executive’s
Annual Bonus for the fiscal year immediately preceding the fiscal year in which
the Date of Termination occurs (if such bonus has been determined but not paid
as of the Date of Termination), and the timely payment or delivery of the Other
Benefits, and shall have no other severance obligations under this Agreement. If
the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, the Bank or the Company shall provide
to the Executive the Accrued Obligations and the Pro Rata Bonus and the timely
payment or delivery of the Other Benefits and shall have no other severance
obligations under this Agreement. In such case, all the Accrued Obligations and
the Pro Rata Bonus shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.

Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, program,
policy or practice provided by the Company or the Affiliated Companies and for
which the Executive may qualify, nor, subject to Section 11(f), shall anything
herein limit or otherwise affect such rights as the Executive may have under any
other contract or agreement with the Company or the Affiliated Companies.
Amounts that are vested benefits or that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any other contract or
agreement with the Company or the Affiliated Companies at or subsequent to the
Date of Termination (“Other Benefits”) shall be payable in accordance with such
plan, policy, practice or program or contract or agreement, except as explicitly
modified by this Agreement. Without limiting the generality of the foregoing,
the Executive’s resignation under this Agreement with or without Good Reason,
shall in no way affect the Executive’s ability to terminate employment by reason
of the Executive’s “retirement” under, or to be eligible to receive benefits
under, any compensation and benefit plans, programs or arrangements of the
Company or the Affiliated Companies, including without limitation any retirement
or pension plans or arrangements or substitute plans adopted by the Company, the
Affiliated Companies or their respective successors, and any termination which
otherwise qualifies as Good Reason shall be treated as such even if it is also a
“retirement” for purposes of any such plan. Notwithstanding the foregoing, if
the Executive receives payments and benefits pursuant to Section 5(a) of this
Agreement, the Executive shall not be entitled to any severance pay or benefits
under any severance plan, program or policy of the Company and the Affiliated
Companies, including, without limitation, the severance letter, dated as of
July 11, 2011, from the Bank to the Executive, unless otherwise specifically
provided therein in a specific reference to this Agreement.

Section 7. Full Settlement; Legal Fees. The Bank’s or the Company’s obligation
to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right or action that the Bank or the
Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and except as specifically provided in
Section 5(a)(2), such amounts shall not be reduced

 

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whether or not the Executive obtains other employment. The Bank and the Company
agree to pay as incurred (within 10 days following the Bank’s or the Company’s
receipt of an invoice from the Executive), at any time from the Change of
Control through the Executive’s remaining lifetime (or, if longer, through the
20th anniversary of the Effective Date) to the full extent permitted by law, all
legal fees and expenses that the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Bank or the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus, in each case, interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code (“Interest”) determined as of the date such legal fees and expenses
were incurred.

Section 8. Section 280G.

(a) Anything in this Agreement to the contrary notwithstanding, in the event
that the Accounting Firm shall determine that receipt of all Payments would
subject the Executive to tax under Section 4999 of the Code, the Accounting Firm
shall determine whether some amount of Agreement Payments meets the definition
of “Reduced Amount.” If the Accounting Firm determines that there is a Reduced
Amount, then the aggregate Agreement Payments shall be reduced to such Reduced
Amount.

(b) If the Accounting Firm determines that the aggregate Agreement Payments
should be reduced to the Reduced Amount, the Bank or the Company shall promptly
give the Executive notice to that effect and a copy of the detailed calculation
thereof, and the Executive may then elect, the Executive’s sole discretion,
which and how much of the Agreement Payments shall be eliminated or reduced (as
long as after such election the Present Value of the aggregate Agreement
Payments equals the Reduced Amount); provided, that the Executive shall not be
permitted to elect to reduce any Agreement Payment that constitutes
“nonqualified deferred compensation” for purposes of Section 409A of the Code,
and shall advise the Bank or the Company in writing of her election within ten
days of her receipt of notice. If no such election is made by the Executive
within such ten-day period, the Bank or the Company shall reduce the Agreement
Payments in the following order: (1) by reducing benefits payable pursuant to
Section 5(a)(1)(B) of the Agreement and then (2) by reducing amounts payable
pursuant to Section 5(a)(2) of the Agreement. All determinations made by the
Accounting Firm under this Section 8 shall be binding upon the Bank, the Company
and the Executive and shall be made within 60 days of the Executive’s Date of
Termination. In connection with making determinations under this Section 8, the
Accounting Firm shall take into account the value of any reasonable compensation
for services to be rendered by the Executive before or after the Change of
Control, including any non-competition provisions that may apply to the
Executive and the Bank and the Company shall cooperate in the valuation of any
such services, including any non-competition provisions.

(c) As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that amounts will have been paid or distributed by the Bank or
the Company to or for the benefit of the Executive pursuant to this Agreement
which should not have been so paid or distributed (each, an “Overpayment”) or
that additional amounts which will have not been paid or distributed

 

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by the Bank or the Company to or for the benefit of the Executive pursuant to
this Agreement could have been so paid or distributed (each, an “Underpayment”),
in each case, consistent with the calculation of the Reduced Amount hereunder.
In the event that the Accounting Firm, based upon the assertion of a deficiency
by the Internal Revenue Service against the Bank, the Company or the Executive
which the Accounting Firm believes has a high probability of success determines
that an Overpayment has been made, any such Overpayment paid or distributed by
the Bank or the Company to or for the benefit of the Executive shall be repaid
by the Executive to the Bank or the Company (as applicable) together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code; provided, however, that no such repayment shall be required if and to
the extent such deemed repayment would not either reduce the amount on which the
Executive is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Bank or the Company to or for the benefit of the Executive together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code.

(d) All fees and expenses of the Accounting Firm in implementing the provisions
of this Section 8 shall be borne by the Bank or the Company, as applicable.

(e) Definitions. The following terms shall have the following meanings for
purposes of this Section 8.

(1) “Accounting Firm” shall mean a nationally recognized certified public
accounting firm that is selected by the Bank or the Company for purposes of
making the applicable determinations hereunder and is reasonably acceptable to
the Executive, which firm shall not, without the Executive’s consent, be a firm
serving as accountant or auditor for the individual, entity or group effecting
the Change of Control;

(2) “Agreement Payment” shall mean a Payment paid or payable pursuant to this
Agreement (disregarding this Section);

(3) “Net After-Tax Receipt” shall mean the Present Value of a Payment net of all
taxes imposed on the Executive with respect thereto under Sections 1 and 4999 of
the Code and under applicable state and local laws, determined by applying the
highest marginal rate under Section 1 of the Code and under state and local laws
which applied to the Executive’s taxable income for the immediately preceding
taxable year, or such other rate(s) as the Executive shall certify, in the
Executive’s sole discretion, as likely to apply to the Executive in the relevant
tax year(s);

(4) “Parachute Value” of a Payment shall mean the present value as of the date
of the change of control for purposes of Section 280G of the Code of the portion
of such Payment that constitutes a “parachute payment” under Section 280G(b)(2),
as determined by the Accounting Firm for purposes of determining whether and to
what extent the Excise Tax will apply to such Payment;

 

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(5) A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise;

(6) “Present Value” of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code; or

(7) “Reduced Amount” shall mean the amount of Agreement Payments that (x) has a
Present Value that is less than the Present Value of all Agreement Payments and
(y) results in aggregate Net After-Tax Receipts for all Payments that are
greater than the Net After-Tax Receipts for all Payments that would result if
the aggregate Present Value of Agreement Payments were any other amount that is
less than the Present Value of all Agreement Payments.

Section 9. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Bank or the Company all secret or confidential
information, knowledge or data relating to the Company or the Affiliated
Companies, and their respective businesses, which information, knowledge or data
shall have been obtained by the Executive during the Executive’s employment by
the Company or the Affiliated Companies and which information, knowledge or data
shall not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive’s employment with the Bank or the Company, the
Executive shall not, without the prior written consent of the Bank or the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
or the Affiliated Companies and those persons designated by the Bank or the
Company. In no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.

Section 10. Successors. (a) This Agreement is personal to the Executive, and,
without the prior written consent of the Bank or the Company, shall not be
assignable by the Executive other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Bank,
the Company and their respective permitted successors and assigns. Except as
provided in Section 10(c), without the prior written consent of the Executive
this Agreement shall not be assignable by the Bank or the Company.

(c) The Bank and the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Bank or the Company to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Bank and the Company would be required to perform it if
no such succession had taken place. “Company” means the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid that
assumes and agrees to perform this Agreement by operation of law or otherwise.
“Bank” means the Bank as hereinbefore defined and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law or otherwise.

 

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Section 11. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. Subject to the last
sentence of Section 11(g), this Agreement may not be amended or modified other
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall
be given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

if to the Executive:

At the most recent address on file at the Bank or the Company.

if to the Bank or the Company:

4 West Second Street

P.O. Box 9000

Riverhead, NY 11901

Attention: Corporate Secretary

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.

(d) The Bank or the Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive’s, the Bank’s, or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive, the Bank or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.

 

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(f) The Executive, the Bank and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive,
the Bank and the Company, the employment of the Executive by the Bank or the
Company is “at will” and, subject to Section 1(a), the Executive’s employment
may be terminated by the Executive, the Bank or the Company at any time prior to
the Effective Date, in which case the Executive shall have no further rights
under this Agreement. From and after the Effective Date, except as specifically
provided herein, this Agreement shall supersede any other agreement between the
parties with respect to the subject matter hereof in effect immediately prior to
the execution of this Agreement.

(g) The Agreement is intended to comply with the requirements of Section 409A of
the Code or an exemption or exclusion therefrom and, with respect to amounts
that are subject to Section 409A of the Code, shall in all respects be
administered in accordance with Section 409A of the Code. Any payments that
qualify for the “short-term deferral” exception, the separation pay exception or
another exception under Section 409A of the Code shall be paid under the
applicable exception. Each payment under this Agreement shall be treated as a
separate payment for purposes of applying the exclusion under Section 409A of
the Code for short-term deferral amounts, the separation pay exception or any
other exception or exclusion under Section 409A of the Code. In no event may the
Executive, directly or indirectly, designate the calendar year of any payment to
be made under this Agreement. Notwithstanding the foregoing provisions of
Sections 5(a)(1), 5(a)(2), 5(c) and 5(d), in the event that the Executive is a
“specified employee” within the meaning of Section 409A of the Code (as
determined in accordance with the methodology established by the Company as in
effect on the Date of Termination) (a “Specified Employee”), amounts that
constitute “nonqualified deferred compensation” within the meaning of
Section 409A of the Code that would otherwise be payable and benefits that would
otherwise be provided under Sections 5(a)(1), 5(a)(2), 5(c) and 5(d) during the
six-month period immediately following the Date of Termination shall instead be
paid, with Interest determined as of the Date of Termination, or provided on the
first business day after the date that is six months following the Executive’s
Date of Termination (the “Delayed Payment Date”). If the Executive dies
following the Date of Termination and prior to the payment of any amounts
delayed on account of Section 409A of the Code, such amounts shall be paid to
the personal representative of the Executive’s estate within 30 days after the
date of the Executive’s death. All reimbursements and in-kind benefits provided
under this Agreement that constitute deferred compensation within the meaning of
Section 409A of the Code shall be made or provided in accordance with the
requirements of Section 409A of the Code, including, without limitation, that
(i) in no event shall reimbursements by the Bank or the Company under this
Agreement be made later than the end of the calendar year next following the
calendar year in which the applicable fees and expenses were incurred, provided,
that the Executive shall have submitted an invoice for such fees and expenses at
least 10 days before the end of the calendar year next following the calendar
year in which such fees and expenses were incurred; (ii) the amount of in-kind
benefits that the Bank or the Company is obligated to pay or provide in any
given calendar year (other than medical reimbursements described in Treas. Reg.
§ 1.409A-3(i)(1)(iv)(B)) shall not affect the in-kind benefits that the Bank or
the Company is obligated to pay or provide in any other calendar year; (iii) the
Executive’s right to have the Bank or the Company pay or provide such
reimbursements and in-kind benefits may not be liquidated or exchanged for any
other benefit; and (iv) in no event shall the Bank’s or the Company’s
obligations to make such reimbursements or to provide such in-kind benefits
apply later than the Executive’s remaining lifetime (or if longer, through the
20th

 

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anniversary of the Effective Date). Prior to the Change of Control but within
the time period permitted by Section 409A of the Code or any IRS or Department
of Treasury rules or other guidance issued thereunder, the Bank or the Company
may, in consultation with the Executive, modify the Agreement, in the least
restrictive manner necessary and without any diminution in the value of the
payments to the Executive, in order to cause the provisions of the Agreement to
comply with the requirements of Section 409A of the Code, so as to avoid the
imposition of taxes and penalties on the Executive pursuant to Section 409A of
the Code.

Section 12. Survivorship. Upon the expiration or other termination of this
Agreement or the Executive’s employment, the respective rights and obligations
of the parties hereto shall survive to the extent necessary to carry out the
intentions of the parties under this Agreement.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to the authorization from the Board, the Bank and the Company have each
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

 

/s/ Howard C. Bluver

Howard C. Bluver Suffolk County National Bank By  

/s/ Edgar F. Goodale

Name:   Edgar F. Goodale Title:   Chairman Suffolk Bancorp By  

/s/ Edgar F. Goodale

Name:   Edgar F. Goodale Title:   Chairman

 

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