2007 Stock Compensation Plan



APPENDIX B 


SMITHTOWN BANCORP, INC. 

2007 Stock Compensation Plan 













Contents 


Article 1. Establishment,
Purpose, and Duration 


Article 2. Definitions 


Article 3. Administration 


Article 4. Shares Subject to
the Plan and Maximum Awards 


Article 5. Eligibility
and Participation 


Article 6. Stock Options 


Article 7. Stock
Appreciation Rights 


Article 8. Restricted
Stock and Restricted Stock Units 


Article 9. Performance
Shares and Performance Units 


Article 10. Stock-Based
Awards 


Article 11. Performance Measures 


Article 12. Beneficiary Designation 


Article 13. Deferrals and
Share Settlements 


Article 14. Rights of
Employees and Independent Contractors 


Article 15. Change in Control 


Article 16. Amendment,
Modification, Suspension, and Termination 


Article 17. Withholding 


Article 18. Successors 


Article 19. General
Provisions 


Article 20. Legal
Construction 









Article 1.
Establishment, Purpose, and Duration 


        1.1
Establishment of the Plan. Smithtown Bancorp, Inc., a New York State corporation
(hereinafter referred to as the “Company”), establishes an incentive
compensation plan to be known as the Smithtown Bancorp 2007 Stock Compensation Plan
(hereinafter referred to as the “Plan”), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights (“SARs”), Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, and Stock-Based Awards. 


        The
Plan shall become effective upon shareholder approval of the Plan (the “Effective
Date”) and shall remain in effect as provided in Section 1.3 hereof. 


        1.2
Purpose of the Plan. The purpose of the Plan is to promote the success and enhance
the value of the Company by linking the personal interests of the Participants to those of
the Company’s shareholders, and by providing Participants with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the services of Participants upon
whose judgment, interest, and special effort the successful conduct of its operation
largely is dependent. 


        1.3
Duration of the Plan. Unless sooner terminated as provided herein, the Plan shall
terminate ten (10) years from the Effective Date. After the Plan is terminated, no future
Awards may be granted, but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the Plan’s terms and
conditions. Notwithstanding the foregoing, no Incentive Stock Options may be granted more
than ten (10) years after the earlier of (a) the adoption of the Plan by the Board, and
(b) the Effective Date. 


        1.4
Successor Plan. This Plan shall serve as the successor to the Smithtown Bancorp,
Inc. Restricted Stock Plan (the “Predecessor Plan”), and no further grants can
be made under the Predecessor Plan on or after the Effective Date. All outstanding awards
under the Predecessor Plan shall continue to be governed by the terms and conditions of
the instrument evidencing such grant or issuance and the Predecessor Plan. Any Shares of
common stock reserved for issuance under the Predecessor Plan in excess of the number of
Shares as to which awards have been awarded as of Effective Date, thereunder shall be
deemed available for grant under Section 4.1 of the Plan. Any Shares as to which awards
granted or issued under the Predecessor Plan that may lapse, expire, terminate, or be
cancelled, are settled in cash in lieu of common stock, are tendered (either by actual
delivery or attestation) to pay the Option Price, or satisfy any tax withholding
requirements also shall be deemed available for issuance or reissuance under Section 4.1
of the Plan, and not under the Predecessor Plan. 


Article 2. Definitions 


        Whenever
used in the Plan, the following terms shall have the meaning set forth below, and when the
meaning is intended, the initial letter of the word shall be capitalized. 


	  	  	2.1 	  	
“Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations of the Exchange Act. 





	  	  	2.2 	  	
“Award” means, individually or collectively, a grant under this Plan of
NQSOs, ISOs, SARs, Restricted Stock, Restricted Stock Units, Performance Shares,
Performance Units, or Stock-Based Awards. 





	  	  	2.3 	  	
“Award Agreement” means either (i) an agreement entered into by the
Company and each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan; or (ii) a statement issued by the Company to a Participant
describing the terms and provisions of such Award. 







	  	  	2.4 	  	
“Bank” shall mean Bank of Smithtown, a New York State banking
corporation, and any successor thereto as provided in Article 18 herein. The Bank is a
wholly owned subsidiary of the Company. 





	  	  	2.5 	  	
“Beneficial Owner or Beneficial Ownership” shall have the meaning
ascribed to such term in rule 13d-3 of the General Rules and Regulations under the
Exchange Act. 





	  	  	2.6 	  	
“Board” or “Board of Directors ” means the Board of Directors of the Company.
 





	  	  	2.7 	  	
“Cause” means:
 





          	(a) 	  	
               Gross negligence or gross neglect of duties; 



               


          	(b) 	  	
               Commission of a felony or of a gross misdemeanor involving moral turpitude; or 



               


          	(c) 	  	
               Fraud, disloyalty, dishonesty or willful violation of any law or significant
               Company policy committed in connection with the person’s employment in
               service and resulting in an adverse effect on the Company. 



               


	  	  	2.8 	  	
“Change in Control ” shall mean any one of the following events:
 





          	(a) 	  	
               Merger: The Company merges into or consolidates with another corporation, or
               merges another corporation into the Company and, as a result, less than a
               majority of the combined voting power of the resulting corporation immediately
               after the merger or consolidation is held by persons who were stockholders of
               the Company immediately before the merger or consolidation; 



               


          	(b) 	  	
               Acquisition of Significant Share Ownership: A report on Schedule 13D or another
               form or schedule (other than Schedule 13G) is filed or is required to be filed
               under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the
               schedule discloses that the filing person(s) has or have become the beneficial
               owner(s) of 25% or more of a class of the Company’s voting securities, but
               this clause (b) shall not apply to beneficial ownership of Company voting shares
               held in a fiduciary capacity by an entity of which the Company directly or
               indirectly beneficially owns 50% or more of its outstanding voting securities; 



               


          	(c) 	  	
               Change in Board Composition: During any period of two consecutive years,
               individuals who constitute the Company’s or the Bank’s Board of
               Directors at the beginning of the two-year period cease for any reason to
               constitute at least a majority of the Company’s or the Bank’s Board of
               Directors; provided, however, that for purposes of this clause (c), each
               director who is first elected by such board (or first nominated by such board
               for election) by a vote of at least two-thirds (2/3) of the directors who were
               directors at the beginning of the period shall be deemed to have been a director
               at the beginning of the two-year period; or 



               


          	(d) 	  	
               Sale of Assets: The Company or the Bank sell to a third party all or
               substantially all of their assets. 



               


	  	  	2.9 	  	
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any
successor thereto.
 





	  	  	2.10 	  	
“Committee” means the Compensation Committee of the Board of Directors.
The members of the Committee shall be appointed from time to time by and shall serve at
the discretion of the Board. If a member of the Compensation Committee is not an
“outsider director” within the meaning of Section 162(m) of the Code or is not a
“non-employee director” within the meaning of Rule 16b-3 under the Exchange Act,
the Compensation Committee may from time to time delegate some or all of its functions
under the Plan to a committee or subcommittee composed of members that meet the 






	  	
relevant
requirements. The term “Committee” includes any such committee or subcommittee,
to the extent of the Compensation Committee’s delegation. 





	  	  	2.11 	  	
“Company” means Smithtown Bancorp, Inc., a New York State corporation, and any successor
thereto as provided in Article 18 herein.
 






	  	  	2.12 	  	
“Covered Employee” means a Participant who is a “covered
employee,” as defined in Section 162(m) of the Code and the regulations promulgated
under Section 162(m) of the Code, or any successor statute. 





	  	  	2.13 	  	
“Director” means any individual who is a member of the Board of Directors of the Company
and/or its Subsidiaries.
 





	  	  	2.14 	  	
“Employee” means any employee of the Bank, its Affiliates, and/or its
Subsidiaries. Directors who are not otherwise employed by the Bank, its Affiliates, and/or
its Subsidiaries shall not be considered Employees under this Plan. 





	  	
Individuals
described in the first sentence of this definition who are foreign nationals or are
employed outside of the United States, or both, are considered to be Employees and may be
granted Awards on the terms and conditions set forth in the Plan, or on such other terms
and conditions as may, in the judgment of the Committee, be necessary or desirable to
further the purpose of the Plan 





	  	  	2.15 	  	
“Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, or any successor act thereto. 





	  	  	2.16 	  	
“Fair Market Value” or “FMV” means a price that is based
on the opening, closing, actual, high, low, or average selling prices of a Share on NASDAQ
or the New York Stock Exchange (“NYSE”) or other established stock exchange (or
exchanges) on the applicable date, the preceding trading day, the next succeeding trading
day, or an average of trading days, as determined by the Committee in its discretion. Such
definition of FMV shall be specified in the Award Agreement and may differ depending on
whether FMV is in reference to the grant, exercise, vesting, or settlement or payout of an
Award. If, however, the accounting standards used to account for equity awards granted to
Participants are substantially modified subsequent to the Effective Date of the Plan, the
Committee shall have the ability to determine an Award’s FMV based on the relevant
facts and circumstances. If Shares are not traded on an established stock exchange, FMV
shall be determined by the Committee based on objective criteria. 





	  	  	2.17 	  	
“Fiscal Year” means the year commencing on January 1 and ending December
31 or other time period as approved by the Board. 





	  	  	2.18 	  	
“Freestanding SAR” means an SAR that is granted independently of any
Options, as described in Article 7 herein. 





	  	  	2.19 	  	
“Grant Price” means the price at which a SAR may be exercised by a
Participant, as determined by the Committee and set forth in Section 7.1 herein. 





	  	  	2.20 	  	
“Incentive Stock Option” or “ISO” means an Option to
purchase Shares granted under Article 6 herein and that is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the Code, or any
successor provision. 





	  	  	2.21 	  	
“Independent Contractor” means an individual providing services to the
Company, the Bank, its Affiliates, and/or its Subsidiaries, other than a Director who is
not also an Employee of the Company, its Affiliates, and/or its Subsidiaries. Such
Independent Contractor shall be eligible to participate in the Plan as selected by the
Committee in 







	  	
accordance
with Article 5. Notwithstanding any other provision in the Plan to the contrary, the
following shall apply in the case of an Independent Contractor who is allowed to
participate in the Plan: (a) with respect to any reference in this Plan to the working
relationship between such Independent Contractor and the Company, its Affiliates, and/or
its Subsidiaries, the term “service” shall apply as may be appropriate in lieu
of the term “employment” or “employ”; (b) no such Independent
Contractor shall be eligible for a grant of an ISO; and (c) the exercise period and
vesting of an Award following such Independent Contractor’s termination from service
shall be specified and governed under the terms and conditions of the Award as may be
determined by the Committee and set forth in the Independent Contractor’s Award
Agreement related to such Award. 





	  	  	2.22 	  	
“Insider” shall mean an individual who is, on the relevant date, an
officer, Director, or more than ten percent (10%) Beneficial Owner of any class of the
Company’s equity securities that is registered pursuant to Section 12 of the Exchange
Act, as determined by the Board in accordance with Section 16 of the Exchange Act. 





	  	  	2.23 	  	
“Nonqualified Stock Option” or “NQSO” means an Option to
purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive
Stock Option or that otherwise does not meet such requirements. 





	  	  	2.24 	  	
“Option” means an Incentive Stock Option or a Nonqualified Stock Option,
as described in Article 6 herein. 





	  	  	2.25 	  	
“Option Price” means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee. 





	  	  	2.26 	  	
“Participant” means an Employee or Independent Contractor who has been
selected to receive an Award or who has an outstanding Award granted under the Plan. 





	  	  	2.27 	  	
“Performance-Based Compensation” means compensation under an Award that
satisfies the requirements of Section 162(m) of the Code for deductibility of remuneration
paid to Covered Employees. 





	  	  	2.28 	  	
“Performance Measures” means measures as described in Article 11 on which
the performance goals are based and which are approved by the Company’s shareholders
pursuant to this Plan in order to qualify Awards as Performance-Based Compensation. 





	  	  	2.29 	  	
“Performance Period” means the period of time during which the
performance goals must be met in order to determine the degree of payout and/or vesting
with respect to an Award. 





	  	  	2.30 	  	
“Performance Share” means an Award granted to a Participant, as described in Article 9 herein.
 





	  	  	2.31 	  	
“Performance Unit” means an Award granted to a Participant, as described in Article 9 herein.
 





	  	  	2.32 	  	
“Period of Restriction” means the period when Awards are subject to
forfeiture based on the passage of time, the achievement of performance goals, and/or upon
the occurrence of other events as determined by the Committee, at its discretion. 





	  	  	2.33 	  	
“Person” shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) thereof. 





	  	  	2.34 	  	
“Restricted Stock” means an Award of Shares granted to a Participant pursuant to Article 8 herein.
 







	  	  	2.35 	  	
“Restricted Stock Unit” means an Award granted to a Participant pursuant to Article 8 herein.
 





	  	  	2.36 	  	
“Shares” or “Stock” means the Shares of common stock of the Company.
 





	  	  	2.37 	  	
“Stock Appreciation Right” or “SAR” means an Award,
designated as an SAR, pursuant to the terms of Article 7 herein. 





	  	  	2.40 	  	
“Stock-based Award” means an Award granted pursuant to the terms of Section 10.2 herein.
 






	  	  	2.41 	  	
“Subsidiary” means any corporation, partnership, joint venture, limited
liability company, or other entity (other than the Company and the Bank) in an unbroken
chain of entities beginning with the Company or the Bank if each of the entities other
than the last entity in the unbroken chain owns at least fifty percent (50%) of the total
combined voting power in one of the other entities in such chain. 





	  	  	2.42 	  	
“Tandem SAR” means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the
right to purchase a Share under the related Option (and when a Share is purchased under
the Option, the Tandem SAR shall similarly be cancelled) or an SAR that is granted in
tandem with an Option but the exercise of such Option does not cancel the SAR, but rather
results in the exercise of the related SAR. 





Article 3.
Administration 


        3.1
General. The Committee shall be responsible for administering the Plan. The Committee
may employ attorneys, consultants, accountants, and other persons, and the Committee, the
Company, the Bank, and its officers and Directors shall be entitled to rely upon the
advice, opinions, or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee shall be final, conclusive, and
binding upon the Participants, the Company, the Bank and all other interested parties. 


        3.2
Authority of the Committee. The Committee shall have full and exclusive discretionary
power to interpret the terms and the intent of the Plan and to determine eligibility for
Awards and to adopt such rules, regulations, and guidelines for administering the Plan as
the Committee may deem necessary or proper. Such authority shall include, but not be
limited to, selecting Award recipients, establishing all Award terms and conditions and,
subject to Article 16, adopting modifications and amendments, or subplans to the Plan or
any Award Agreement, including without limitation, any that are necessary to comply with
federal laws and state laws in which the Company, its Affiliates, and/or its Subsidiaries
operate. 


        3.3
Delegation. The Committee may delegate to one or more of its members or to one or more
officers of the Company or the Bank, its Affiliates and/or its Subsidiaries, or to one or
more agents or advisors such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee or such
person may have under the Plan. Except with respect to Awards to Insiders, the Committee
may, by resolution, authorize one or more officers of the Company or the Bank to do one or
both of the following: (a) designate officers, Employees, Directors, or Independent
Contractors of the Company, the Bank, its Affiliates, and/or its Subsidiaries to be
recipients of Awards; and (b) determine the size of the Award; provided, however, that the
resolution providing such authorization sets forth the total number of Awards such officer
or officers may grant. 




Article 4. Shares
Subject to the Plan and Maximum Awards 


        4.1
Number of Shares Available for Awards. Subject to adjustment as provided in this
Article 4, the number of Shares hereby reserved for issuance to Participants under the
Plan (the “Share Authorization”) shall be 874,163 Shares (inclusive of the
remaining shares reserved under the Predecessor Plan). The maximum number of Shares that
may be granted pursuant to any Award granted in any one Fiscal Year to any one Participant
shall be 50,000 Shares. The maximum number of Shares that may be issued for Awards, other
than Options or SARs (including SARs which are settled by the issuance of Shares), shall
be limited to fifty percent (50%) of the Share Authorization. Any Shares related to
Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the
issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the
Committee’s permission for Awards not involving Shares, shall be available again for
grant under the Plan. Moreover, if the Option Price of any Option granted under the Plan
or the tax withholding requirements with respect to any Award granted under the Plan are
satisfied by tendering Shares to the Company (by either actual delivery or by
attestation), or if an SAR is exercised, only the number of Shares issued, net of the
Shares tendered, if any, will be deemed delivered for purposes of determining the maximum
number of Shares available for delivery under the Plan. Further, outstanding awards under
the Predecessor Plan that lapse, expire, terminate, are cancelled, or are otherwise
satisfied without payment of the underlying shares as described in Section 1.4 shall also
be available for issuance under the Plan and credited to the Share Authorization. The
maximum number of Shares available for issuance under the Plan shall not be reduced to
reflect any dividends or dividend equivalents that are reinvested into additional Shares
or credited as additional Restricted Stock, Restricted Stock Units, Performance Shares, or
Stock-Based Awards. The Shares available for issuance under the Plan may be authorized and
unissued Shares or treasury Shares. 


        4.2
Adjustments in Authorized Shares. In the event of any corporate event or
transaction (including, but not limited to, a change in the Shares of the Company or the
capitalization of the Company) such as a merger, consolidation, reorganization,
recapitalization, separation, Stock dividend, Stock split, reverse Stock split, split up,
spin-off, or other distribution of Stock or property of the Company, combination of
securities, exchange of securities, dividend in kind, or other like change in capital
structure or distribution (other than normal cash dividends) to shareholders of the
Company, or any similar corporate event or transaction, the Committee, in its sole
discretion, in order to prevent dilution or enlargement of Participants’ rights under
the Plan, shall substitute or adjust, in an equitable manner, as applicable, the number
and kind of Shares that may be issued under the Plan, the number and kind of Shares
subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding
Awards, the Award Limits, and other value determinations applicable to outstanding Awards. 


        Appropriate
adjustments may also be made by the Committee in the terms of any Awards under the Plan to
reflect such changes or distributions and to modify any other terms of outstanding Awards
on an equitable basis, including modifications of performance goals and changes in the
length of Performance Periods. The determination of the Committee as to the foregoing
adjustments, if any, shall be conclusive and binding on Participants under the Plan. 


        Subject
to the provisions of Article 15 and any applicable law or regulatory requirement, without
affecting the number of Shares reserved or available hereunder, the Committee may
authorize the issuance, assumption, substitution, or conversion of Awards under this Plan
in connection with any merger, consolidation, acquisition of property or Stock, or
reorganization, upon such terms and conditions as it may deem appropriate. Additionally,
the Committee may amend the Plan, or adopt supplements to the Plan, in such manner as it
deems appropriate to provide for such issuance, assumption, substitution, or conversion,
all without further action by the Company’s shareholders. 




Article 5. Eligibility
and Participation 


        5.1
Eligibility. Individuals eligible to participate in the Plan include all Employees, Directors, and Independent
Contractors.


        5.2
Actual Participation. Subject to the provisions of the Plan, the Committee may from
time to time, select from all eligible Employees, Directors, and Independent Contractors,
those to whom Awards shall be granted and shall determine the nature and amount of each
Award. 


Article 6. Stock
Options 


        6.1
Grant of Options. Subject to the terms and provisions of the Plan, Options may be
granted to Participants in such number, and upon such terms, and at any time and from time
to time as shall be determined by the Committee, provided that ISOs shall not be granted
to Non-Employee Directors and Independent Contractors. 


        6.2
Award Agreement. Each Option grant shall be evidenced by an Award Agreement that
shall specify the Option Price, the duration of the Option, the number of Shares to which
the Option pertains, the conditions upon which an Option shall become vested and
exercisable, and such other provisions as the Committee shall determine which are not
inconsistent with the terms of the Plan. The Award Agreement also shall specify whether
the Option is intended to be an ISO or a NQSO. 


        6.3
Option Price. The Option Price for each grant of an Option under this Plan shall be
determined by the Committee and shall be specified in the Award Agreement. The Option
Price shall be at least one hundred percent (100%) of the FMV of the Shares on the date of
grant. 


        6.4
Duration of Options. Each Option granted to a Participant shall expire at such time
as the Committee shall determine at the time of grant; provided, however, no Option shall
be exercisable later than the tenth (10th) anniversary date of its grant. 


        6.5
Exercise of Options. Options granted under this Article 6 shall be exercisable at such
times and be subject to such restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or for each Participant. 


        6.6
Payment. Options granted under this Article 6 shall be exercised by the delivery of
a written notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for the
Shares. 


        The
Option Price upon exercise of any Option shall be payable to the Company in full either:
(a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation)
previously acquired Shares having an aggregate FMV at the time of exercise equal to the
total Option Price (provided, if required to maintain favorable accounting treatment for
the Options granted, the Shares that are tendered must have been held by the Participant
for at least six (6) months prior to their tender to satisfy the Option Price or have been
purchased on the open market); (c) by a combination of (a) and (b); or (d) any other
method approved by the Committee in its sole discretion at the time of grant and as set
forth in the Award Agreement. 


        The
Committee also may allow cashless exercise as permitted under the Federal Reserve
Board’s Regulation T, subject to applicable securities law restrictions, or by any
other means which the Committee determines to be consistent with the Plan’s purpose
and applicable law. 


        Subject
to Section 6.7 and any governing rules or regulations, as soon as practicable after
receipt of a written notification of exercise and full payment, the Company shall deliver
to the Participant, Share certificates or evidence of book entry Shares, in an appropriate
amount based upon the number of Shares purchased under the Option(s). 




        Unless
otherwise determined by the Committee, all payments under all of the methods indicated
above shall be paid in United States dollars. 


        6.7
Restrictions on Share Transferability. The Committee may impose such restrictions
on any Shares acquired pursuant to the exercise of an Option granted under this Article 6
as it may deem advisable, including, without limitation, requiring the Participant to hold
the Shares acquired pursuant to exercise for a specified period of time, restrictions
under applicable federal securities laws, under the requirements of any stock exchange or
market upon which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares. 


        6.8
Termination of Employment. Each Participant’s Award Agreement shall set
forth the extent to which the Participant shall have the right to exercise the Option
following termination of the Participant’s employment with the Bank, its Affiliates,
and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each Participant,
need not be uniform among all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination. 


      6.9
Transferability of Options. 


          	(a) 	  	
               Incentive Stock Options. No ISO granted under the Plan may be sold,
               transferred, pledged, assigned, or otherwise alienated or hypothecated, other
               than by will or by the laws of descent and distribution. Further, all ISOs
               granted to a Participant under this Article 6 shall be exercisable during his or
               her lifetime only by such Participant. 



               


          	(b) 	  	
               Nonqualified Stock Options. Except as otherwise provided in a
               Participant’s Award Agreement or otherwise at any time by the Committee, no
               NQSO granted under this Article 6 may be sold, transferred, pledged, assigned,
               or otherwise alienated or hypothecated, other than by will or by the laws of
               descent and distribution; provided that the Board or Committee may permit
               further transferability, on a general or a specific basis, and may impose
               conditions and limitations on any permitted transferability. Further, except as
               otherwise provided in a Participant’s Award Agreement or otherwise at any
               time by the Committee, or unless the Board or the Committee decides to permit
               further transferability, all NQSOs granted to a Participant under this Article 6
               shall be exercisable during his or her lifetime only by such Participant. 



               


        6.10
Notification of Disqualifying Disposition. The Participant will notify the Company
upon the disposition of Shares issued pursuant to the exercise of an ISO. The Company will
use such information to determine whether a disqualifying disposition as described in
Section 421(b) of the Code has occurred. 


Article 7. Stock
Appreciation Rights 


        7.1
Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to
Participants at any time and from time to time as shall be determined by the Committee.
The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms
of SARs. 


        Subject
to the terms and conditions of the Plan, the Committee shall have complete discretion in
determining the number of SARs granted to each Participant and, consistent with the
provisions of the Plan, in determining the terms and conditions pertaining to such SARs. 


        The
SAR Grant Price for each grant of a Freestanding SAR shall be determined by the Committee
and shall be specified in the Award Agreement. The SAR Grant Price must be at least one
hundred percent (100%) of the FMV of the Shares on the date of the grant. The Grant Price
of Tandem SARs shall be equal to the Option Price of the related Option. 




        7.2
SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall
specify the Grant Price, the term of the SAR, and such other provisions as the Committee
shall determine. 


        7.3
Term of SAR. The term of an SAR granted under the Plan shall be determined by the
Committee, in its sole discretion, and except as determined otherwise by the Committee and
specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth
(10th) anniversary date of its grant. 


        7.4
Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms
and conditions the Committee, in its sole discretion, imposes upon them. 


        7.5
Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares
subject to the related Option upon the surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR may be exercised only with respect to the
Shares for which its related Option is then exercisable. 


        Notwithstanding
any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in
connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the
underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no
more than one hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the FMV of the Shares subject to the underlying ISO at the time the
Tandem SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of the
Shares subject to the ISO exceeds the Option Price of the ISO. 


        7.6
Payment of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to
receive payment from the Company in an amount determined by multiplying: 


          	(a) 	  	
               The difference between the FMV of a Share on the date of exercise over the Grant
               Price; by 



               


          	(b) 	  	
               The number of Shares with respect to which the SAR is exercised. 



               


        At
the discretion of the Committee, the payment upon SAR exercise may be in cash, in Shares
of equivalent value, in some combination thereof, or in any other manner approved by the
Committee at its sole discretion. The Committee’s determination regarding the form of
SAR payout shall be set forth or reserved for later determination in the Award Agreement
pertaining to the grant of the SAR. 


        7.7
Termination of Employment. Each Award Agreement shall set forth the extent to which
the Participant shall have the right to exercise the SAR following termination of the
Participant’s employment with the Bank, its Affiliates, and/or its Subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee, shall be included
in the Award Agreement entered into with Participants, need not be uniform among all SARs
issued pursuant to the Plan, and may reflect distinctions based on the reasons for
termination. 


        7.8
Nontransferability of SARs. Except as otherwise provided in a Participant’s Award
Agreement, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of descent and
distribution; provided that the Board or Committee may permit further transferability, on
a general or a specific basis, and may impose conditions and limitations on any permitted
transferability. Further, except as otherwise provided in a Participant’s Award
Agreement or otherwise unless the Board or the Committee decides to permit further
transferability, all SARs granted to a Participant under this Article 7 shall be
exercisable during his or her lifetime only by such Participant. 


        7.9
Other Restrictions. The Committee shall impose such other conditions and/or
restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as
it may deem 




     advisable.
          This includes, but is not limited to, requiring the Participant to hold the
          Shares received upon exercise of an SAR for a specified period of time. 


Article 8. Restricted
Stock and Restricted Stock Units 


        8.1
Grant of Restricted Stock or Restricted Stock Units. Subject to the terms and
provisions of the Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted Stock and/or Restricted Stock Units to Participants in such amounts, as the
Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock
except that no Shares are actually awarded to the Participant on the date of grant. 


        8.2
Restricted Stock or Restricted Stock Unit Agreement. Each Restricted Stock and/or
Restricted Stock Unit grant shall be evidenced by an Award Agreement that shall specify
the Period(s) of Restriction, the number of Shares of Restricted Stock or the number of
Restricted Stock Units granted, and such other provisions as the Committee shall
determine. 


        8.3
Transferability. Except as provided in this Article 8, the Shares of Restricted Stock
and/or Restricted Stock Units granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Award Agreement (and in the
case of Restricted Stock Units until the date of delivery or other payment), or upon
earlier satisfaction of any other conditions, as specified by the Committee, in its sole
discretion, and set forth in the Award Agreement. All rights with respect to the
Restricted Stock and/or Restricted Stock Units granted to a Participant under the Plan
shall be available during his or her lifetime only to such Participant. 


        8.4
Other Restrictions. The Committee shall impose such other conditions and/or
restrictions on any Shares of Restricted Stock or Restricted Stock Units granted pursuant
to the Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock or each
Restricted Stock Unit, restrictions based upon the achievement of specific performance
goals, time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, restrictions under applicable federal or state securities
laws, or any holding requirements or sale restrictions placed on the Shares by the Company
upon vesting of such Restricted Stock or Restricted Stock Units. 


        To
the extent deemed appropriate by the Committee, the Company may retain the certificates
representing Shares of Restricted Stock in the Company’s possession until such time
as all conditions and/or restrictions applicable to such Shares have been satisfied or
lapse. 


        Except
as otherwise provided in this Article 8, Shares of Restricted Stock covered by each
Restricted Stock Award shall become freely transferable by the Participant after all
conditions and restrictions applicable to such Shares have been satisfied or lapse, and
Restricted Stock Units shall be paid in cash, Shares, or a combination of cash and Shares
as the Committee, in its sole discretion shall determine. 


        8.5
Certificate Legend. In addition to any legends placed on certificates pursuant to
Section 8.4 herein, each certificate representing Shares of Restricted Stock granted
pursuant to the Plan may bear a legend such as the following: 


	  	
“The
sale or other transfer of the Shares of Stock represented by this certificate, whether
voluntary, involuntary, or by operation of law, is subject to certain restrictions on
transfer as set forth in the Smithtown Bancorp Inc. 2007 Stock Compensation Plan, and in
the associated Restricted Stock Award Agreement. A copy of the Plan and such Restricted
Stock Award Agreement may be obtained from Smithtown Bancorp” 





        8.6
Voting Rights. To the extent permitted or required by law, as determined by the
Committee, Participants holding Shares of Restricted Stock granted hereunder may be
granted the right to 




exercise full voting rights with
respect to those Shares during the Period of Restriction. A Participant shall have no
voting rights with respect to any Restricted Stock Units granted hereunder. 


        8.7
Dividends and Dividend Equivalents. During the Period of Restriction, Participants
holding Shares of Restricted Stock or Restricted Stock Units granted hereunder may, if the
Committee so determines, be credited with dividends paid with respect to Restricted Stock
or dividend equivalents with respect to Restricted Stock Units while they are so held in a
manner determined by the Committee in its sole discretion. The Committee may apply any
restrictions to the dividends or dividend equivalents that the Committee deems
appropriate. The Committee, in its sole discretion, may determine the form of payment of
dividends or dividend equivalents, including cash, Shares, Restricted Stock, or Restricted
Stock Units and such dividends or dividend equivalents may be subject to accrual,
forfeiture, or payout restrictions as determined by the Committee. 


        8.8
Termination of Employment. Each Award Agreement shall set forth the extent to which
the Participant shall have the right to retain Restricted Stock and/or Restricted Stock
Units following termination of the Participant’s employment with the Bank, its
Affiliates, and/or its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered into with
each Participant, need not be uniform among all Shares of Restricted Stock or Restricted
Stock Units issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination. 


        8.9
Section 83(b) Election. The Committee may provide in an Award Agreement that the Award
of Restricted Stock is conditioned upon the Participant making or refraining from making
an election with respect to the Award under Section 83(b) of the Code. If a Participant
makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock
Award, the Participant shall be required to file promptly a copy of such election with the
Company. 


Article 9. Performance
Shares and Performance Units 


        9.1
Grant of Performance Shares and Performance Units. Subject to the terms of the Plan,
Performance Shares and/or Performance Units may be granted to Participants in such amounts
and upon such terms, and at any time and from time to time, as shall be determined by the
Committee. 


        9.2
Value of Performance Shares and Performance Units. Each Performance Share shall have
an initial value equal to the FMV of a Share on the date of grant. Each Performance Unit
shall have an initial value that is established by the Committee at the time of grant. The
Committee shall set performance goals in its discretion which, depending on the extent to
which they are met, will determine the value and/or number of Performance
Shares/Performance Units that will be paid out to the Participant. 


        9.3
Earning of Performance Shares and Performance Units. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of Performance
Shares/Performance Units shall be entitled to receive payout on the value and number of
Performance Shares/Performance Units earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the corresponding
performance goals have been achieved. Notwithstanding the foregoing, the Company has the
ability to require the Participant to hold the Shares received pursuant to such Award for
a specified period of time. 


        9.4
Form and Timing of Payment of Performance Shares and Performance Units. Payment of
earned Performance Shares/Performance Units shall be as determined by the Committee and as
evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its
sole discretion, may pay earned Performance Shares/Performance Units in the form of cash
or in Shares (or in a combination thereof) equal to the value of the earned Performance
Shares/Performance Units as soon as practicable after the end of the applicable
Performance Period. Any Shares may be granted subject to any restrictions deemed
appropriate by the Committee. The determination of the Committee with respect to the 




form of payout of such Awards shall
be set forth in the Award Agreement pertaining to the grant of the Award. 


        9.5
Dividend Equivalents. At the discretion of the Committee, Participants holding
Performance Shares may be entitled to receive dividend equivalents with respect to
dividends declared with respect to the Shares. Such dividends may be subject to accrual,
forfeiture, or payout restrictions as determined by the Committee in its sole discretion. 


        9.6
Termination of Employment. Each Award Agreement shall set forth the extent to which
the Participant shall have the right to retain Performance Shares and/or Performance Units
following termination of the Participant’s employment with the Bank, its Affiliates,
and/or its Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each Participant,
need not be uniform among all Awards of Performance Shares or Performance Units issued
pursuant to the Plan, and may reflect distinctions based on the reasons for termination. 


        9.7
Nontransferability. Except as otherwise provided in a Participant’s Award
Agreement, Performance Shares/Performance Units may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution. Further, except as otherwise provided in a Participant’s
Award Agreement, a Participant’s rights under the Plan shall be exercisable during
his or her lifetime only by such Participant. 


Article 10.
Stock-Based Awards 


        10.1
Stock-Based Awards. The Committee may grant other types of equity-based or
equity-related Awards (including the grant or offer for sale of unrestricted Shares) in
such amounts and subject to such terms and conditions, as the Committee shall determine.
Such Awards may entail the transfer of actual Shares to Participants, or payment in cash
or otherwise of amounts based on the value of Shares and may include, without limitation,
Awards designed to comply with or take advantage of the applicable local laws of
jurisdictions other than the United States. 


        10.2
Value of Stock-Based Awards. Each Stock-Based Award shall have a value based on the
value of a Share, as determined by the Committee. The Committee may establish performance
goals in its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Stock-Based Awards that will be paid out to
the Participant will depend on the extent to which the performance goals are met. 


        10.3
Earning of Stock-Based Awards. Subject to the terms of this Plan, the holder of
Stock-Based Awards shall be entitled to receive payout on the number and value of
Stock-Based Awards earned by the Participant, to be determined as a function of the extent
to which applicable performance goals, if any, have been achieved. 


        10.4
Form and Timing of Payment of Stock-Based Awards. Payment of earned Stock-Based Awards
shall be as determined by the Committee and as evidenced in the Award Agreement. Subject
to the terms of the Plan, the Committee, in its sole discretion, may pay earned
Stock-Based Awards in the form of cash or in Shares (or in a combination thereof) that
have an aggregate FMV equal to the value of the earned Stock-Based Awards. Such Shares may
be granted subject to any restrictions deemed appropriate by the Committee. The
determination of the Committee with respect to the form of payout of such Awards shall be
set forth in the Award Agreement pertaining to the grant of the Award. 


        10.5
Termination of Employment. Each Award Agreement shall set forth the extent to which
the Participant shall have the right to receive Stock-Based Awards following termination
of the Participant’s employment with the Bank, its Affiliates, and/or its
Subsidiaries. Such provisions shall be determined in the sole discretion of the Committee,
shall be included in the Award Agreement entered into 




with each Participant, need not be
uniform among all Awards of Stock-Based Awards issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination. 


        10.6
Nontransferability. Except as otherwise provided in a Participant’s Award
Agreement, Stock-Based Awards may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a Participant’s Award
Agreement, a Participant’s rights under the Plan shall be exercisable during the
Participant’s lifetime only by the Participant. 


        10.7
Dividend Equivalents. At the discretion of the Committee, Participants holding
Stock-Based Awards may be entitled to receive dividend equivalents with respect to
dividends declared with respect to the Shares. Such dividends may be subject to accrual,
forfeiture, or payout restrictions as determined by the Committee in its sole discretion. 


Article 11.
Performance Measures 


        Unless
and until the Committee proposes for shareholder vote and the shareholders approve a
change in the general Performance Measures set forth in this Article 11, the performance
goals upon which the payment or vesting of an Award to a Covered Employee that is intended
to qualify as Performance-Based Compensation shall be limited to the following Performance
Measures: 


               	(a) 	  	
                   Earnings per share (actual or targeted growth);



               	(b) 	  	
                   Net income after capital costs; 



               	(c) 	  	
                   Net income (before or after taxes); 



               	(d) 	  	
                   Return measures (including, but not
                    limited to, return on average assets, risk-adjusted return on capital, or return
                    on average equity); 



               	(e) 	  	
                   Efficiency ratio;



               	(f) 	  	
                   Full-time equivalency control; 



               	(g) 	  	
                   Stock price (including, but not limited to, growth measures and total
                    shareholder return); 



               	(h) 	  	
                   Noninterest income compared to net interest income
                    ratio; 



               	(i) 	  	
                   Expense targets or ratios; 



               	(j) 	  	
                   Margins; 



               	(k) 	  	
                   Operating efficiency; 



               	(l) 	  	
                   Asset quality measures; 



               	(m) 	  	
                   Customer satisfaction; 



               	(n) 	  	
                   Loan growth; 



               	(o) 	  	
                   Deposit growth; 



               	(p) 	  	
                   Core deposit growth; 



               	(q) 	  	
                   Net interest margin; 



               	(r) 	  	
                   Fee income, and 



               	(s) 	  	
                   Operating expense. 


                    


        In
addition to the foregoing, the Committee may consider the following individual/unit
production Performance Measures: cost per dollar loan growth; cost per dollar deposit
growth; revenue per personnel; operating expense to group budget; service levels (group),
and personal performance. The Committee may also choose to consider any of the foregoing
Performances Measures on either a cash basis or operating basis. 


        Any
Performance Measure(s) may be used to measure the performance of the Company or the Bank
as a whole or any business unit of the Company or any combination thereof, as the
Committee may deem appropriate, or any of the above Performance Measures as compared to
the performance of a group of comparator companies, or published or special index that the
Committee, in its sole discretion, deems appropriate. The Committee also has the authority
to provide for accelerated vesting of any Award based on the achievement of performance
goals pursuant to the Performance Measures specified in this Article 11. 




        The
Committee may provide in any such Award that any evaluation of performance may include or
exclude any of the following events that occurs during a Performance Period: (a) asset
write-downs; (b) litigation, claims, judgments or settlements; (c) the effect of changes
in tax laws, accounting principles, or other laws or provisions affecting reported
results; (d) reorganization or restructuring programs; (e) extraordinary or nonrecurring
items as described in Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial condition and results of operations
appearing in the Company’s annual report to shareholders for the applicable year; (f)
acquisitions or divestitures; and (g) foreign exchange gains and losses. To the extent
such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed
in a form that meets the requirements of Code Section 162(m) for deductibility. 


        Awards
that are designed to qualify as Performance-Based Compensation, and that are held by
Covered Employees, may not be adjusted upward. The Committee shall retain the discretion
to adjust such Awards downward. 


        In
the event that applicable tax and/or securities laws change to permit Committee discretion
to alter the governing Performance Measures without obtaining shareholder approval of such
changes, the Committee shall have sole discretion to make such changes without obtaining
shareholder approval. In addition, in the event that the Committee determines that it is
advisable to grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code Section 162(m). 


Article 12.
Beneficiary Designation 


        A
Participant’s “beneficiary” is the person or persons entitled to receive
payments or other benefits or exercise rights that are available under the Plan in the
event of the Participant’s death. A Participant may designate a beneficiary or change
a previous beneficiary designation at any time by using forms and following procedures
approved by the Committee for that purpose. If no beneficiary designated by the
Participant is eligible to receive payments or other benefits or exercise rights that are
available under the Plan at the Participant’s death the beneficiary shall be the
Participant’s estate. 


        Notwithstanding
the provisions above, the Committee may in its discretion, after notifying the affected
Participants, modify the foregoing requirements, institute additional requirements for
beneficiary designations, or suspend the existing beneficiary designations of living
Participants or the process of determining beneficiaries under this Article 12, or both.
If the Committee suspends the process of designating beneficiaries on forms and in
accordance with procedures it has approved pursuant to this Article 12, the determination
of who is a Participant’s beneficiary shall be made under the Participant’s will
and applicable state law. 


Article 13. Deferrals
and Share Settlements 


        Notwithstanding
any other provision under the Plan, the Committee may permit or require a Participant to
defer such Participant’s receipt of the payment of cash or the delivery of Shares
that would otherwise be due to such Participant by virtue of the exercise of an Option or
SAR, or with respect to the lapse or waiver of restrictions with respect to Restricted
Stock or Restricted Stock Units or the satisfaction of any requirements or performance
goals with respect to Performance Shares, Performance Units, or Stock-Based Awards. If any
such deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals. 


Article 14. Rights of
Employees and Independent Contractors 


        14.1
Employment. Nothing in the Plan or an Award Agreement shall interfere with or limit in
any way the right of the Company, the Bank, its Affiliates, and/or its Subsidiaries to
terminate any Participant’s employment or other service relationship at any time, nor
confer upon any Participant any 




right to continue in the capacity in
which he or she is employed or otherwise serves the Company or the Bank, its Affiliates,
and/or its Subsidiaries. 


        Neither
an Award nor any benefits arising under this Plan shall constitute part of an employment
contract with the Company, the Bank, its Affiliates, and/or its Subsidiaries and,
accordingly, subject to Articles 3 and 16, this Plan and the benefits hereunder may be
terminated at any time in the sole and exclusive discretion of the Committee without
giving rise to liability on the part of the Company or the Bank, its Affiliates, and/or
its Subsidiaries for severance payments. 


        For
purposes of the Plan, transfer of employment of a Participant between the Bank, its
Affiliates, and/or its Subsidiaries shall not be deemed a termination of employment.
Additionally, the Committee shall have the ability to stipulate in a Participant’s
Award Agreement that a transfer to a company that is spun-off from the Bank shall not be
deemed a termination of employment with the Bank for purposes of the Plan until the
Participant’s employment is terminated with the spun-off company. 


        14.2
Participation. No Employee or Independent Contractor shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award. 


        14.3
Rights as a Shareholder. A Participant shall have none of the rights of a shareholder
with respect to Shares covered by any Award until the Participant becomes the record
holder of such Shares. 


Article 15. Change in
Control 


        Upon
the occurrence of a Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental agencies or
national securities exchanges, or unless the Committee shall determine otherwise in the
Award Agreement (which may include a modification to the definition of a Change in Control
as determined by the Committee): 


               	(a) 	  	
                    Any and all Options and SARs granted hereunder shall become immediately
                    exercisable; additionally, if a Participant’s employment is terminated for
                    any other reason except Cause within twelve (12) months (or such longer period
                    that would entitle the Participant to payment under a Change In Control
                    Agreement between the Participant and the Company) of such Change in Control,
                    the Participant shall have until the earlier of: (i) twelve (12) months
                    following such termination date; or (ii) the expiration of the Option or SAR
                    term, to exercise any such Option or SAR; 



                    


               	(b) 	  	
                    Any Period of Restriction for Restricted Stock and Restricted Stock Units
                    granted hereunder that have not previously vested shall end, and such Restricted
                    Stock and Restricted Stock Units shall become fully vested; 



                    


               	(c) 	  	
                    The target payout opportunities attainable under all outstanding Awards under
                    the Plan which are subject to achievement of any of the Performance Measures
                    specified in Article 11, or any other performance conditions or restrictions
                    that the Committee has made the Award contingent upon, shall be deemed to have
                    been fully earned as of the effective date of the Change in Control. 



                    


     	  	(i) 	  	The vesting of all Awards denominated in Shares shall be accelerated as of the
          effective date of the Change in Control, and there shall be paid out to
          Participants a pro rata number of Shares based upon an assumed achievement of
          all relevant targeted performance goals and upon the length of time within the
          Performance Period, if any, that has elapsed prior to the Change in Control. The
          Committee has the authority to pay all or any portion of the value of the Shares
          in cash. 


          




     	  	(ii) 	  	
          Awards denominated in cash shall be paid pro rata to Participants with the
          proration determined as a function of the length of time within the Performance
          Period, if any, that has elapsed prior to the Change in Control, and based on an
          assumed achievement of all relevant targeted performance goals. 


          


               	(d) 	  	
                    Subject to Article 16, herein, the Committee shall have the authority to make
                    any modifications to the Awards as determined by the Committee to be appropriate
                    before the effective date of the Change in Control. 



                    


Article 16. Amendment,
Modification, Suspension, and Termination 


        16.1
Amendment, Modification, Suspension, and Termination. The Committee or Board may, at
any time and from time to time, alter, amend, modify, suspend, or terminate the Plan in
whole or in part. Notwithstanding anything herein to the contrary, without the prior
approval of the Company’s shareholders, Options issued under the Plan will not be
repriced, replaced, or regranted through cancellation, or by lowering the exercise price
of a previously granted Option. No amendment of the Plan shall be made without shareholder
approval if shareholder approval is required by law, regulation, or stock exchange rule. 


        16.2
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.
The Committee may make adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4.2 hereof) affecting the Company or the Bank
or the financial statements of the Company or of changes in applicable laws, regulations,
or accounting principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent unintended dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and binding on
Participants under the Plan. 


        16.3
Awards Previously Granted. Notwithstanding any other provision of the Plan to the
contrary, no termination, amendment, suspension, or modification of the Plan shall
adversely affect in any material way any Award previously granted under the Plan, without
the written consent of the Participant holding such Award. 


Article 17. Withholding 


        17.1
Tax Withholding. The Company shall have the power and the right to deduct or withhold,
or require a Participant to remit to the Company, an amount sufficient to satisfy federal,
state, and local taxes, domestic or foreign (including the Participant’s FICA
obligation), required by law or regulation to be withheld with respect to any taxable
event arising or as a result of this Plan. 


        17.2
Share Withholding. With respect to withholding required upon the exercise of Options
or SARs, upon the lapse of restrictions on Restricted Stock or Restricted Stock Units, or
upon the achievement of performance goals related to Performance Shares, or any other
taxable event arising as a result of Awards granted hereunder, the Company may require or
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold Shares having
a FMV of a Share on the date the tax is to be determined equal to the tax that could be
imposed on the transaction, provided that if required by the accounting rules and
regulations to maintain favorable accounting treatment for the Awards, the tax is to be
determined equal to the minimum statutory total tax that could be imposed on the
transaction. All elections shall be irrevocable, made in writing, and signed by the
Participant, and shall be subject to any restrictions or limitations that the Committee,
in its sole discretion, deems appropriate. 




Article 18. Successors 


        All
obligations of the Company under the Plan with respect to Awards granted hereunder, shall
be binding on any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company. 


Article 19. General
Provisions 


        19.1
Forfeiture Events. The Committee may specify in an Award Agreement that the
Participant’s rights, payments, and benefits with respect to an Award shall be
subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of
certain specified events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events shall include, but shall not be limited to,
termination of employment for Cause, violation of material Company, Bank, Affiliate,
and/or Subsidiary policies, breach of noncompetition, confidentiality, or other
restrictive covenants that may apply to the Participant, or other conduct by the
Participant that is detrimental to the business or reputation of the Company, the Bank,
its Affiliates, and/or its Subsidiaries. 


        19.2
Legend. The certificates for Shares may include any legend that the Committee deems
appropriate to reflect any restrictions on transfer of such Shares. 


        19.3
Delivery of Title. The Company shall have no obligation to issue or deliver evidence
of title for Shares issued under the Plan prior to: 


          	(a) 	  	
               Obtaining any approvals from governmental agencies that the Company determines
               are necessary or advisable; and 



               


          	(b) 	  	
               Completion of any registration or other qualification of the Shares under any
               applicable national or foreign law or ruling of any governmental body that the
               Company determines to be necessary or advisable. 



               


        19.4
Investment Representations. The Committee may require each Participant
receiving Shares pursuant to an Award under this Plan to represent and warrant in writing
that the Participant is acquiring the Shares for investment and without any present
intention to sell or distribute such Shares. 


        19.5
Employees Based Outside of the United States. Notwithstanding any provision of the
Plan to the contrary, in order to comply with the laws in other countries in which the
Company, its Affiliates, and/or its Subsidiaries operate or have Employees or Independent
Contractors, the Committee, in its sole discretion, shall have the power and authority to: 


          	(a) 	  	
               Determine which Affiliates and Subsidiaries shall be covered by the Plan; 



               


          	(b) 	  	
               Determine which Employees and Independent Contractors outside the United States
               are eligible to participate in the Plan; 



               


          	(c) 	  	
               Modify the terms and conditions of any Award granted to Employees or Independent
               Contractors outside the United States to comply with applicable foreign laws; 



               


          	(d) 	  	
               Establish subplans and modify exercise procedures and other terms and
               procedures, to the extent such actions may be necessary or advisable. Any
               subplans and modifications to Plan terms and procedures established under this
               Section 19.5 by the Committee shall be attached to this Plan document as
               appendices; and 



               




          	(e) 	  	
               Take any action, before or after an Award is made that it deems advisable to
               obtain approval or comply with any necessary local government regulatory
               exemptions or approvals. 



               


        Notwithstanding
the above, the Committee may not take any actions hereunder, and no Awards shall be
granted, that would violate the Exchange Act, the Code, any securities law, or governing
statute or any other applicable law. 


        19.6
Uncertificated Shares. To the extent that the Plan provides for issuance of
certificates to reflect the transfer of Shares, the transfer of such Shares may be
effected on a noncertificated basis, to the extent not prohibited by applicable law or the
rules of any stock exchange. 


        19.7
Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or
to any investments that the Company, its Affiliates, and/or its Subsidiaries may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create a trust of
any kind, or a fiduciary relationship between the Company, its Affiliates, and/or its
Subsidiaries and any Participant, beneficiary, legal representative, or any other person.
To the extent that any person acquires a right to receive payments from the Company, its
Affiliates, and/or its Subsidiaries under the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company. All payments to be made
hereunder shall be paid from the general funds of the Company and no special or separate
fund shall be established and no segregation of assets shall be made to assure payment of
such amounts except as expressly set forth in the Plan. The Plan is not intended to be
subject to ERISA. 


        19.8
No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to
the Plan or any Award. The Committee shall determine whether cash, Awards, or other
property shall be issued or paid in lieu of fractional Shares or whether such fractional
Shares or any rights thereto shall be forfeited or otherwise eliminated. 


        19.9
Retirement and Welfare Plans. The Awards under this Plans will not be included as
“compensation” for purposes of computing benefits payable to any Participant
under the Company’s retirement plans (both qualified and nonqualified) or welfare
benefit plans unless such other plan expressly provides that such compensation shall be
taken into account in computing a Participant’s benefit. 


Article 20. Legal
Construction 


        20.1
Gender and Number. Except where otherwise indicated by the context, any masculine term
used herein also shall include the feminine, the plural shall include the singular, and
the singular shall include the plural. 


        20.2
Severability. In the event any provision of the Plan shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included. 


        20.3
Requirements of Law. The granting of Awards and the issuance of Shares under the Plan
shall be subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required. The Company
shall receive the consideration required by law for the issuance of Awards under the Plan.
The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary to
the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained. 


        20.4
Securities Law Compliance. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Award with the United States Securities and
Exchange Commission or to effect compliance with the registration, qualification, and
listing requirements of any national or foreign securities laws, stock exchange, or
automated quotation system. With respect to 




Insiders, transactions under this
Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors
under the Exchange Act. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. 


        20.5
Governing Law. The Plan and each Award Agreement shall be governed by the laws of the
State of New York, excluding any conflicts or choice of law rule or principle that might
otherwise refer construction or interpretation of the Plan to the substantive law of
another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an
Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the
federal or state courts of New York, to resolve any and all issues that may arise out of
or relate to the Plan or any related Award Agreement. 


        The
foregoing Plan was adopted and approved as set forth in the first paragraph hereof and is
effective as of the date of approval by the shareholders of the Company as set forth
above. 


	
SMITHTOWN BANCORP, INC.



By:____________________________________  

Printed Name___________________________ 

Title:_________________________________
	
BANK OF SMITHTOWN



By:____________________________________  

Printed Name___________________________ 

Title:_________________________________