Document:

ex107.htm

    
Exhibit
10.7

    
 

     

     

     

     

    TXCO
RESOURCES, INC.

     

    2005
STOCK INCENTIVE PLAN

     

    AS
AMENDED AND RESTATED

    (effective
January 1, 2008)

     

     

     

    

     

    

    
      
        
           

        

        
          
            

          

        

         

      

    

    

    TABLE
OF CONTENTS

    

    
      	 
      	 
      	
              Page

            
	
              ARTICLE I

            	
              PURPOSE

            	
              1

            
	
              Section
      1.1

            	
                   Purpose

            	
              1

            
	
              Section
      1.2

            	
                   Establishment

            	
              1

            
	
              Section
      1.3

            	
                   Number
      of Shares Available For Grant

            	
              1

            
	
              Section
      1.4

            	
                   Shareholder
      Approval

            	
              1

            
	
              ARTICLE
      II

            	
              DEFINITIONS

            	
              1

            
	
              ARTICLE
      III

            	
              ADMINISTRATION

            	
              5

            
	
              Section
      3.1

            	
                   Administration
      of the Plan; the Committee

            	
              5

            
	
              Section
      3.2

            	
                   Committee
      to Make Rules and Interpret Plan

            	
              6

            
	
              ARTICLE
      IV

            	
              GRANT
      OF AWARDS

            	
              6

            
	
              ARTICLE
      V

            	
              STOCK
      OPTIONS

            	
              6

            
	
              Section
      5.1

            	
                   Grant
      of Options

            	
              6

            
	
              Section
      5.2

            	
                   Conditions
      of Options

            	
              6

            
	
              Section
      5.3

            	
                   Options
      Not Qualifying as Incentive Stock Options

            	
              8

            
	
              Section
      5.4

            	
                   Restrictions
      on Assignment

            	
              9

            
	
              ARTICLE
      VI

            	
              RESTRICTED
      STOCK AWARDS

            	
              10

            
	
              Section
      6.1

            	
                   Grant
      of Restricted Stock Awards

            	
              10

            
	
              Section
      6.2

            	
                   Conditions
      of Restricted Stock Awards

            	
              10

            
	
              ARTICLE
      VII

            	
              STOCK
      ADJUSTMENTS

            	
              11

            
	
              ARTICLE
      VIII

            	
              GENERAL

            	
              11

            
	
              Section
      8.1

            	
                   Amendment
      or Termination of Plan

            	
              11

            
	
              Section
      8.2

            	
                   Acceleration
      of Awards on Death, Disability or Other Special
    Circumstance

            	
              12

            
	
              Section
      8.3

            	
                   Withholding
      Taxes

            	
              12

            
	
              Section
      8.4

            	
                   Certain
      Additional Payments by the Company

            	
              12

            
	
              Section
      8.5

            	
                   Regulatory
      Approval and Listings

            	
              12

            
	
              Section
      8.6

            	
                   Right
      to Continued Employment

            	
              13

            
	
              Section
      8.7

            	
                   Reliance
      on Reports

            	
              13

            
	
              Section
      8.8

            	
                   Construction

            	
              13

            
	
              Section
      8.9

            	
                   Governing
      Law

            	
              13

            

    

    

    
      
        
           

        

        
          -i-

        

         

      

    

    

    TABLE
OF CONTENTS

    (continued)

    

    
      	 
      	 
      	
              Page

            
	
              ARTICLE
      IX

            	
              ACCELERATION
      OF AWARDS UPON CORPORATE EVENT

            	
              13

            

    

    

    

    

    

    
      
        
           

        

        
          -ii-

        

         

      

    

    

    TXCO
RESOURCES, INC.

    2005
STOCK INCENTIVE PLAN

    AS
AMENDED AND RESTATED

    (effective January 1,
2008)

    

    ARTICLE
I

     

    PURPOSE

     

    Section
1.1                                Purpose.  The TXCO
Resources, Inc. 2005 Stock Incentive Plan as Amended and Restated, effective
January 1, 2008 (the "Plan"), is established by TXCO Resources, Inc. (the
"Company") to create incentives which are designed to motivate Employees,
Consultants and Directors to put forth maximum effort toward the success and
growth of the Company and to enable the Company to attract and retain
experienced individuals who by their position, ability and diligence are able to
make important contributions to the Company's success. Toward these objectives,
the Plan provides for the granting of Options and Restricted Stock Awards to
Employees, Consultants and Directors on the terms and subject to the conditions
set forth in the Plan. The Plan is designed to align the interests of
participants with those of shareholders through the use of stock-based
incentives.

     

    Section
1.2                                Establishment and
Amendment.  The Plan was effective as of April 29, 2005 and for
a period of 10 years from such date. The Plan will terminate on April 28, 2015;
however, it will continue in effect until all matters relating to the exercise
of Options, distribution of Awards and administration of the Plan have been
settled.  The Plan was amended and restated effective January 1, 2008
to (i) change the name of the Plan to the TXCO Resources, Inc. 2005 Stock
Incentive Plan as Amended and Restated, and (ii) change the references in the
Plan from The Exploration Company of Delaware, Inc. to TXCO Resources,
Inc.

     

    Section
1.3                                Number of Shares Available For
Grant.  Subject to the limitations and adjustments set forth in
this Plan, the maximum number of Shares that may be issued with respect to
future Awards under this Plan shall be ten percent (10%) of the total number of
then issued and outstanding Shares (rounded downward, if necessary, to eliminate
fractional shares) of Company, reduced by shares issued under, and outstanding
grants issued under the 1995 Flexible Incentive Plan. The Shares issued pursuant
to this Plan may be authorized but unissued Shares, or may be issued Shares
which have been reacquired by the Company. At Plan inception, 828,056 shares
registered and still available under the 1995 Flexible Incentive Plan are
transferred to this Plan, as well as 20,000 shares available under that Plan but
not yet registered.

     

    Section
1.4                                Shareholder
Approval.  The Plan shall be subject to Shareholder Approval,
which must occur within the period ending twelve months after the date the Plan
is adopted by the Board. Pending such Shareholder Approval, Awards under the
Plan may be granted, but Options may not be exercised nor may Restricted Stock
Awards vest prior to receipt of such Shareholder Approval. In the event such
Shareholder Approval is not obtained within such twelve-month period, all such
Awards shall be void.

     

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    ARTICLE  II

     

    DEFINITIONS

     

    Section
2.1                                "Affiliated Entity" means any
partnership or limited liability company in which a majority of voting power
thereof is owned or controlled, directly or indirectly, by the Company or one or
more of its Subsidiaries or Affiliated Entities or a combination
thereof.

     

    Section
2.2                                "Award" means, individually or
collectively, any Option or Restricted Stock Award granted under the Plan to an
Eligible Person by the applicable Committee pursuant to such terms, conditions,
restrictions, and/or limitations, if any, as the applicable Committee may
establish by the Award Agreement or otherwise.

     

    Section
2.3                                "Award Agreement" means any
written instrument that establishes the terms, conditions, restrictions, and/or
limitations applicable to an Award in addition to those established by this Plan
and by the Committee's exercise of its administrative powers.

     

    Section
2.4                                "Board" means the Board of
Directors of the Company.

     

    Section
2.5                                "Change of Control" means, for
Participants other than employees, the occurrence of any of the
following:

     

    
      	
               
      

            	
              (i)

            	
              the
      acquisition by any individual, entity or group (within the meaning of
      Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
      beneficial ownership (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"). For purposes of this paragraph
      2.5 the following acquisitions by a Person will not constitute a Change of
      Control: (1) any acquisition directly from the Company; (2) any
      acquisition by the Company; (3) any acquisition by any employee benefit
      plan (or related trust) sponsored or maintained by the Company or any
      corporation controlled by the Company; or (4) any acquisition by any
      corporation pursuant to a transaction which complies with clauses (A), (B)
      and (C) of paragraph (iii) below;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              the
      individuals who, as of the date hereof, constitute the board of directors
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of the board of directors. Any individual becoming a director
      subsequent to the date hereof whose election, or nomination for election
      by the Company's shareholders, is approved by a vote of at least a
      majority of the directors then comprising the Incumbent Board will be
      considered a member of the Incumbent Board as of the date hereof, but 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 Incumbent Board
      will not be deemed a member of the Incumbent Board as of the date
      hereof;

            

    

     

    

    
      
        
           

        

        
          - 2
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              (iii)

            	
              the
      consummation of a reorganization, merger, consolidation or sale or other
      disposition of all or substantially all of the assets of the Company (a
      "Business Combination"), unless following such Business Combination: (A)
      all or substantially all of the individuals and entities who were the
      beneficial owners, respectively, of the Outstanding Company Common Stock
      and Outstanding Company Voting Securities immediately prior to such
      Business Combination beneficially own, directly or indirectly, more than
      60% of, respectively, the then outstanding shares of common stock and the
      combined voting power of the then outstanding voting securities entitled
      to vote generally in the election of directors, as the case may be, of the
      corporation resulting from such Business Combination (including, without
      limitation, a corporation which 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 Outstanding
      Company Voting Securities, as the case may be, (B) no Person (excluding
      any corporation resulting from such Business Combination or any employee
      benefit plan (or related trust) of the Company or such corporation
      resulting from such Business Combination) beneficially owns, directly or
      indirectly, 20% or more of, respectively, the then outstanding shares of
      common stock of the corporation resulting from such Business Combination
      or the combined voting power of the then outstanding voting securities of
      such corporation 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 of the corporation resulting from 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;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              the
      approval by the shareholders of the Company of a complete liquidation or
      dissolution of the Company; or

            

    

     

    For
employees, a Change of Control means the occurrence of any of the foregoing
events or a change of control as defined in such employee's change of control
agreement, in force at the time of determination.

     

    Section
2.6                                "Code" means the Internal
Revenue Code of 1986, as amended. Reference in the Plan to any Section of the
Code shall be deemed to include any amendments or successor provisions to such
Section and any regulations under such Section.

     

    Section
2.7                                "Committee" has the meaning
set forth in Section 3.1.

     

    Section
2.8                                "Common Stock" means the
common stock, par value $.01 per share, of the Company and, after substitution,
such other stock as shall be substituted therefor as provided in Article VII or
Article IX of the Plan.

     

    Section
2.9                                "Compensation Committee" means
a committee designated by the Board which will consist of not less than two
members of the Board who meet the definition of "non

     

    

    
      
        
           

        

        
          - 3
-

        

         

      

    

    

    employee
directors" pursuant to Rule 16b-3, or any successor rule, promulgated under
Section 16 of the Exchange Act unless another committee is designated by the
Board of Directors.

     

    Section
2.10                                "Consultant" means any person
who is engaged by the Company, a Subsidiary or an Affiliated Entity to render
consulting or advisory services.

     

    Section
2.11                                "Date of Grant" means the date
on which the grant of an Award is authorized by the Committee or such later date
as may be specified by the Committee in such authorization.

     

    Section
2.12                                "Director" means a
non-employee member of the Company's Board of Directors.

     

    Section
2.13                                "Disability" has the meaning
set forth in Section 22(e)(3) of the Code.

     

    Section
2.14                                "Eligible Person" means any
Employee, Director or Consultant.

     

    Section
2.15                                "Employee" means any employee
of the Company, a Subsidiary or an Affiliated Entity.

     

    Section
2.16                                "Employee Compensation
Committee" means a committee designated by the Board which shall consist
of not less than two members of the Board.

     

    Section
2.17                                "Exchange Act" means the
Securities Exchange Act of 1934, as amended.

     

    Section
2.18                                "Executive Officer
Participants" means Participants who are subject to the provisions of
Section 16 of the Exchange Act with respect to the Common Stock.

     

    Section
2.19                                "Fair Market Value" means, as
of any date, (i) if the principal market for the Common Stock is a national
securities exchange or the Nasdaq stock market, the closing price of the Common
Stock on that date on the principal exchange on which the Common Stock is then
listed or admitted to trading; or (ii) if sale prices are not available or if
the principal market for the Common Stock is not a national securities exchange
and the Common Stock is not quoted on the Nasdaq stock market, the average of
the highest bid and lowest asked prices for the Common Stock on such day as
reported on the Nasdaq OTC Bulletin Board Service or by the National Quotation
Bureau, Incorporated or a comparable service. If the day is not a business day,
and as a result, clauses (i) and (ii) are inapplicable, the Fair Market Value of
the Common Stock shall be determined as of the last preceding business day. If
clauses (i) and (ii) are otherwise inapplicable, the Fair Market Value of the
Common Stock shall be determined in good faith by the Committee.

     

    Section
2.20                                "Incentive Stock Option" means
an Option within the meaning of Section 422 of the Code.

     

    Section
2.21                                "Non-Executive Officer
Participants" means Participants who are not subject to the provisions of
Section 16 of the Exchange Act.

     

    Section
2.22                                "Nonqualified Stock Option"
means an Option to purchase shares of Common Stock which is not an Incentive
Stock Option within the meaning of Section 422(b) of the Code.

     

    

    
      
        
           

        

        
          - 4
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    Section
2.23                                "Option" means an Incentive
Stock Option or Nonqualified Stock Option granted under Article V of the
Plan.

     

    Section
2.24                                "Participant" means an
Eligible Person to whom an Award has been granted by the Committee under the
Plan.

     

    Section
2.25                                "Plan" means the TXCO
Resources, Inc. 2005 Stock Incentive Plan as Amended and Restated.

     

    Section
2.26                                "Restricted Stock Award" means
an Award granted to an Eligible Person under Article VI of the
Plan.

     

    Section
2.27                                "Shareholder Approval" means
approval by the holders of a majority of the outstanding shares of Common Stock,
present or represented and entitled to vote at a meeting called for such
purposes.

     

    Section
2.28                                "Subsidiary" shall have the
same meaning set forth in Section 424(f) of the Code.

     

    ARTICLE
III

     

    ADMINISTRATION

     

    Section
3.1                                Administration of the Plan; the
Committee.  The Compensation Committee shall administer the
Plan with respect to all Participants, including the grant of Awards. Although
the Committee is generally responsible for the administration of the Plan, the
Board in its sole discretion may take any action under the Plan that would
otherwise be the responsibility of the Committee.

     

    Unless
otherwise provided in the bylaws of the Company or resolutions adopted from time
to time by the Board establishing the Committee, the Board may from time to time
remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. The Committee shall
hold meetings at such times and places as it may determine. A majority of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present shall be the valid acts of
the Committee. Any action which may be taken at a meeting of the Committee may
be taken without a meeting if all the members of the Committee consent to the
action in writing.

     

    Subject
to the provisions of the Plan and review by the Board, the Committee shall have
exclusive power to:

     

    
      	
               
      

            	
              (a)

            	
              Select
      the Eligible Persons to participate in the
Plan;

            

    

     

    
      	
               
      

            	
              (b)

            	
              Determine
      the time or times when Awards will be
granted;

            

    

     

    
      	
               
      

            	
              (c)

            	
              Determine
      the form of Award, whether an Incentive Stock Option, a Nonqualified Stock
      Option or a Restricted Stock Award, the number of shares of Common Stock
      subject to any Award, all the terms, conditions (including performance
      requirements), restrictions and/or limitations, if any, of an Award,
      including the time and conditions of exercise or vesting, and the terms of
      any Award

            

    

     

    

    
      
        
           

        

        
          - 5
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              Agreement,
      which may include the waiver or amendment of prior terms and conditions or
      acceleration of the vesting or exercise of an Award under certain
      circumstances determined by the Committee. However, the Committee will not
      reprice outstanding Awards;

            

    

     

    
      	
               
      

            	
              (d)

            	
              Determine
      whether Awards will be granted singly or in
  combination;

            

    

     

    
      	
               
      

            	
              (e)

            	
              Take
      any and all other action it deems necessary or advisable for the proper
      operation or administration of the
Plan.

            

    

     

    Section
3.2                                Committee to Make Rules and
Interpret Plan.  The Committee in its sole discretion shall
have the authority, subject to the provisions of the Plan and review by the
Board, to establish, adopt, or revise such rules and regulations and to make all
such determinations relating to the Plan as it may deem necessary or advisable
for the administration of the Plan. The Committee's interpretation of the Plan
or any Awards granted pursuant hereto and all decisions and determinations by
the Committee with respect to the Plan shall be final, binding, and conclusive
on all parties unless otherwise determined by the Board.

     

    ARTICLE
IV

     

    GRANT
OF AWARDS

     

    The
Committee may, from time to time, grant Awards to one or more Participants,
provided, however, that:

     

    
      	
               
      

            	
              (a)

            	
              Any
      shares of Common Stock related to Awards which terminate by expiration,
      forfeiture, cancellation or otherwise shall be available again for grant
      under the Plan;

            

    

     

    
      	
               
      

            	
              (b)

            	
              Common
      Stock delivered by the Company upon exercise of an Option or upon payment
      of an Award under the Plan may be authorized and unissued Common Stock or
      Common Stock held in the treasury of the
  Company;

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Committee shall, in its sole discretion, determine the manner in which
      fractional shares arising under this Plan shall be
  treated;

            

    

     

    
      	
               
      

            	
              (d)

            	
              Subject
      to Article VII, the aggregate number of shares of Common Stock made
      subject to Options and Restricted Stock Awards granted to any Employee in
      any calendar year may not exceed two million
  shares.

            

    

     

    ARTICLE
V

     

    STOCK
OPTIONS

     

    Section
5.1                                Grant of
Options.  The Committee may, from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may determine,
grant Nonqualified Stock Options to any Eligible Persons and Incentive Stock
Options to Employees. Subject to the limitations of Section 5.2(e), these
Options may be Incentive Stock Options or Nonqualified Stock Options, or a
combination of both. Each grant of an Option shall be evidenced by an Award
Agreement executed by the Company and the Participant, and shall

     

    

    
      
        
           

        

        
          - 6
-

        

         

      

    

    

    contain
such terms and conditions and be in such form as the Committee may from time to
time approve, subject to the requirements of Section 5.2.

     

    Section
5.2                                Conditions of
Options.  Each Option so granted shall be subject to the
following conditions:

     

    
      	
               
      

            	
              (a)

            	
              Exercise Price. As
      limited by Section 5.2(e) below, the Award Agreement for each Option shall
      state the exercise price set by the Committee on the Date of Grant. No
      Option shall be granted at an exercise price which is less than the Fair
      Market Value of the Common Stock on the Date of
  Grant.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Form of
      Payment.  The payment of the exercise price of an Option
      shall be subject to the following:

            

    

     

    
      	
               
      

            	
              (i)

            	
              The
      full exercise price for shares of Common Stock purchased upon the exercise
      of any Option shall be paid at the time of such
  exercise;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              The
      exercise price shall be payable in cash (including a check acceptable to
      the Committee, bank draft or money order) or by tendering, by either
      actual delivery of shares or by attestation, shares of Common Stock
      acceptable to the Committee and valued at Fair Market Value as of the day
      of exercise, or any combination thereof, as determined by the
      Committee;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              The
      Committee may permit an Option granted under the Plan to be exercised by a
      participant in conjunction with a broker-dealer acting on behalf of a
      Participant, such broker-dealer to remit the exercise price and any
      applicable withholding taxes directly to the Company, through procedures
      approved by the Committee.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Exercise of
      Options.  Options granted under the Plan shall be
      exercisable, in whole or in such installments and at such times, and shall
      expire at such time, as shall be provided by the Committee in the Award
      Agreement. Exercise of an Option shall be by written notice stating the
      election to exercise in the form and manner determined by the Committee.
      Every share of Common Stock acquired through the exercise of an Option
      shall be deemed to be fully paid at the time of exercise and payment of
      the exercise price. Upon the exercise of any Option, the Company shall
      issue and deliver to the Participant who exercised the Option a
      certificate representing the number of shares of Common Stock purchased
      thereby.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Other Terms and
      Conditions.  Among other conditions that may be imposed
      by the Committee, if deemed appropriate, are those relating to (i) the
      period or periods and the conditions of exercisability of any Option; (ii)
      the minimum periods during which Participants must be employed by the
      Company, a Subsidiary or Affiliated Entity, or must hold Options before
      they may be exercised; (iii) the minimum periods during which shares
      acquired upon exercise must be held before sale or transfer shall be
      permitted; (iv) the maximum period that Participants will be allowed to be
      inactively employed or on a leave
of

            

    

     

    

    
      
        
           

        

        
          - 7
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              absence
      before their vesting is suspended until they return to active employment;
      (v) conditions under which such Options or shares may be subject to
      forfeiture; (vi) the frequency of exercise or the minimum or maximum
      number of shares that may be acquired at any one time; (vii) the
      achievement by the Company of specified performance criteria; and (viii)
      protection of business matters.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Special Restrictions Relating
      to Incentive Stock Options.  Options issued in the form
      of Incentive Stock Options shall only be granted to Employees of the
      Company or a Subsidiary and not to Employees of an Affiliated Entity
      unless such entity is classified as a "disregarded entity" of the Company
      or the applicable Subsidiary under the Code. In addition to being subject
      to all applicable terms, conditions, restrictions and/or limitations
      established by the Committee, Options issued in the form of Incentive
      Stock Options shall comply with the requirements of Section 422 of the
      Code (or any successor Section thereto), including, without limitation,
      the requirement that the exercise price of an Incentive Stock Option not
      be less than 100% of the Fair Market Value of the Common Stock on the Date
      of Grant, the requirement that each Incentive Stock Option, unless sooner
      exercised, terminated or canceled, expire no later than 10 years from its
      Date of Grant, and the requirement that the aggregate Fair Market Value
      (determined on the Date of Grant) of the Common Stock with respect to
      which Incentive Stock Options are exercisable for the first time by a
      Participant during any calendar year (under this Plan or any other plan of
      the Company or any Subsidiary) not exceed $100,000. Incentive Stock
      Options which are in excess of the applicable $100,000 limitation will be
      automatically recharacterized as Nonqualified Stock Options as provided
      under Section 5.3 of this Plan. No Incentive Stock Options shall be
      granted to any Employee if, immediately before the grant of an Incentive
      Stock Option, such Employee owns more than 10% of the total combined
      voting power of all classes of stock of the Company or its Subsidiaries
      (as determined in accordance with the stock attribution rules contained in
      Sections 422 and 424(d) of the Code). Provided, the preceding sentence
      shall not apply if, at the time the Incentive Stock Option is granted, the
      exercise price is at least 110% of the Fair Market Value of the Common
      Stock subject to the Incentive Stock Option, and such Incentive Stock
      Option by its terms is exercisable no more than ten years from the date
      such Incentive Stock Option is
granted.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Application of
      Funds.  The proceeds received by the Company from the
      sale of Common Stock issued upon the exercise of Options will be used for
      general corporate purposes.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Shareholder
      Rights.  No Participant shall have any rights as a
      shareholder with respect to any share of Common Stock subject to an Option
      prior to the purchase of such share of Common Stock by exercise of the
      Option.

            

    

     

    Section
5.3                                Options Not Qualifying as Incentive
Stock Options.  With respect to all or any portion of any
Option granted under this Plan not qualifying as an "incentive stock option"
under Section 422 of the Code, such Option shall be considered a Nonqualified
Stock Option granted

     

    

    
      
        
           

        

        
          - 8
-

        

         

      

    

    

    under
this Plan for all purposes. Further, this Plan and any Incentive Stock Options
granted hereunder shall be deemed to have incorporated by reference all the
provisions and requirements of Section 422 of the Code (and the Treasury
Regulations issued thereunder) necessary to ensure that all Incentive Stock
Options granted hereunder shall be "incentive stock options" described in
Section 422 of the Code. Further, in the event that the $100,000 limitation
contained in Section 5.2(e) herein is exceeded in any Incentive Stock Option
granted under this Plan, the portion of the Incentive Stock Option in excess of
such limitation shall be treated as a Nonqualified Stock Option under this Plan
subject to the terms and provisions of the applicable Award Agreement, except to
the extent modified to reflect recharacterization of the Incentive Stock Option
as a Nonqualified Stock Option.

     

    Section
5.4                                Restrictions on Assignment.
Options are not transferable except as otherwise provided below:

     

    
      	
               
      

            	
              (a)

            	
              Incentive Stock
      Options. Incentive Stock Options may not be transferred other than
      by will or the laws of descent and distribution. Any attempted transfer,
      assignment, pledge, hypothecation or other disposition of, or the levy of
      execution, attachment or similar process upon, any Incentive Stock Option
      contrary to the provisions hereof shall be void and ineffective, shall
      give no right to any purported transferee, and may, at the sole discretion
      of the Committee, result in forfeiture of the Incentive Stock Option
      involved in such attempt.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Nonqualified Stock
      Options. Nonqualified Stock Options may be transferred by the
      Participants to whom such Nonqualified Stock Options were granted without
      consideration, subject to such rules as the Committee may adopt to
      preserve the purposes of the Plan,
to:

            

    

     

    
      	
               
      

            	
              (i)

            	
              The
      Participant's spouse, children or grandchildren, including adopted
      children and stepchildren (collectively, the "Immediate
      Family");

            

    

     

    
      	
               
      

            	
              (ii)

            	
              A
      trust solely for the benefit of the Participant and/or his or her
      Immediate Family; or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              A
      partnership, corporation or limited liability company whose only partners,
      members or shareholders are the Participant and his or her Immediate
      Family.

            

    

     

    any
Nonqualified Stock Option transferred in accordance with the immediately
preceding sentence shall apply to the Permitted Transferee and any reference in
the Plan or in an Award Agreement to a Participant shall be deemed to refer to
the Permitted Transferee, except that (i) Permitted Transferees shall not be
entitled to transfer any Nonqualified Stock Options, other than by will or the
laws of descent and distribution, (ii) Permitted Transferees shall not be
entitled to exercise any transferred Nonqualified Stock Options unless there
shall be in effect a registration statement on an appropriate form covering the
Shares to be acquired pursuant to the exercise of such Nonqualified Stock Option
if the Committee determines that such a registration statement is necessary or
appropriate, (iii) the Committee or the Company shall not be required to provide
any notice to a Permitted

     

    

    
      
        
           

        

        
          - 9
-

        

         

      

    

    

    Transferee,
whether or not such notice is or would otherwise have been required to be given
to the original Participant under the Plan or otherwise, and (iv) the
consequences of termination of the original Participant's employment by, or
services to, the Company under the terms of the Plan and the applicable Award
Agreement shall continue to be applied with respect to the Permitted Transferee,
following which the Nonqualified Stock Options shall be exercisable by the
Permitted Transferee only to the extent, and for the periods, specified in the
Plan and the applicable Award Agreement.

     

    ARTICLE
VI

     

    RESTRICTED
STOCK AWARDS

     

    Section
6.1                                Grant of Restricted Stock
Awards.  The Committee may, from time to time, subject to the
provisions of the Plan and such other terms and conditions as it may determine,
grant a Restricted Stock Award to any Eligible Person. Restricted Stock Awards
shall be awarded in such number and at such times during the term of the Plan as
the Committee shall determine. Each Restricted Stock Award may be evidenced in
such manner as the Committee deems appropriate, including, without limitation, a
book-entry registration or issuance of a stock certificate or certificates into
escrow until the restrictions associated with such Award are satisfied, and by
an Award Agreement setting forth the terms of such Restricted Stock
Award.

     

    Section
6.2                                Conditions of Restricted Stock
Awards.  The grant of a Restricted Stock Award shall be subject
to the following:

     

    
      	
               
      

            	
              (a)

            	
              Restriction
      Period.  Each Restricted Stock Award shall require the
      holder to remain in the employment of the Company, a Subsidiary, or an
      Affiliated Entity for a prescribed period (a "Restriction Period"). The
      Committee shall determine the Restriction Period or Periods that shall
      apply to the shares of Common Stock covered by each Restricted Stock Award
      or portion thereof. In addition to any time vesting conditions determined
      by the Committee, Restricted Stock Awards may be subject to the
      achievement by the Company of specified performance criteria based upon
      the Company's achievement of target levels of earnings per share, share
      price, net income, cash flows, reserve additions or replacements,
      production volume, finding and operating costs, drilling results,
      acquisitions and divestitures, risk management activities, return on
      equity, and/or total or comparative shareholder return, or other
      individual criteria as determined by the Committee. At the end of the
      Restriction Period, assuming the fulfillment of any other specified
      vesting conditions, the restrictions imposed by the Committee shall lapse
      with respect to the shares of Common Stock covered by the Restricted Stock
      Award or portion thereof.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Restrictions.  The
      holder of a Restricted Stock Award may not sell, transfer, pledge,
      exchange, hypothecate, or otherwise dispose of the shares of Common Stock
      represented by the Restricted Stock Award during the applicable
      Restriction Period. The Committee shall impose such other restrictions and
      conditions on any shares of Common Stock covered by a Restricted Stock
      Award as it may deem advisable including, without limitation, restrictions
      under applicable Federal or state securities laws, and may legend the
      certificates representing the shares
of

            

    

     

    

    
      
        
           

        

        
          - 10
-

        

         

      

    

    

    
      	
               
      

            	
              Common
      Stock subject to the Restricted Stock Award to give appropriate notice of
      such restrictions.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Shareholder
      Rights.  During any Restriction Period, the Committee
      may, in its discretion, grant to the holder of a Restricted Stock Award
      all or any of the rights of a shareholder with respect to the shares,
      including, but not by way of limitation, the right to vote such shares and
      to receive dividends. If any dividends or other distributions are paid in
      shares of Common Stock, all such shares shall be subject to the same
      restrictions on transferability as the shares of Common Stock subject to
      the Restricted Stock Award with respect to which they were
      paid.

            

    

     

    ARTICLE
VII

     

    STOCK
ADJUSTMENTS

     

    Subject
to the provisions of Article IX of this Plan, in the event that the shares of
Common Stock, as presently constituted, shall be changed into or exchanged for a
different number or kind or shares of stock or other securities of the Company
or of another corporation (whether by reason of merger, consolidation,
recapitalization, reclassification, stock split, combination of shares or
otherwise), or if the number of such shares of Common Stock shall be increased
through the payment of a stock dividend, then there shall be substituted for or
added to each share available under and subject to the Plan as provided in
Section 1.3 hereof, and each share then subject or thereafter subject or which
may become subject to Awards under the Plan, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchanged or to which
each such share shall be entitled, as the case may be, on a fair and equivalent
basis in accordance with the applicable provisions of Section 424 of the Code;
provided, however, in no such event will such adjustment result in a
modification of any Award as defined in Section 424(h) of the Code. In the event
there shall be any other change in the number or kind of the outstanding shares
of Common Stock, or any stock or other securities into which the Common Stock
shall have been changed or for which it shall have been exchanged, then if the
Committee shall, in its sole discretion, determine that such change equitably
requires an adjustment in the shares available under and subject to the Plan, or
in any Award theretofore granted or which may be granted under the Plan, such
adjustments shall be made in accordance with such determination, except that no
adjustment of the number of shares of Common Stock available under the Plan or
to which any Award relates that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made would require an increase or decrease of at least 1% of the
number of shares of Common Stock available under the Plan or to which any Award
relates immediately prior to the making of such adjustment (the "Minimum
Adjustment"). Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment together
with other adjustments required by this Article VII and not previously made
would result in a Minimum Adjustment. Notwithstanding the foregoing, any
adjustment required by this Article VII which otherwise would not result in a
Minimum Adjustment shall be made with respect to shares of Common Stock relating
to any Award immediately prior to exercise or settlement of such
Award.

     

    

    
      
        
           

        

        
          - 11
-

        

         

      

    

    

    No
fractional shares of Common Stock or units of other securities shall be issued
pursuant to any such adjustment, and any fractions resulting from any such
adjustment shall be eliminated in each case by rounding downward to the nearest
whole share.

     

    ARTICLE
VIII

     

    GENERAL

     

    Section
8.1                                Amendment or Termination of
Plan.  The Board may suspend or terminate the Plan at any time.
In addition, the Board may, from time to time, amend the Plan in any manner, but
may not adopt any amendment without Shareholder Approval if (i) the amendment
relates to Incentive Stock Options and Section 422 of the Code requires
Shareholder Approval of such amendment, or (ii) in the opinion of counsel to the
Company, Shareholder Approval is required by any federal or state laws or
regulations or the rules of any stock exchange on which the common stock may be
listed.

     

    Section
8.2                                Acceleration of Awards on Death,
Disability or Other Special Circumstance.  With respect to (i)
a Participant who terminates employment due to a Disability, (ii) the personal
representative of a deceased Participant, or (iii) any other Participant who
terminates employment upon the occurrence of special circumstances (as
determined by the Committee), the Committee, in its sole discretion, may permit
the purchase of all or any part of the shares subject to any unvested Option or
waive the vesting requirements of a Restricted Stock Award on the date of the
Participant's termination of employment due to a Disability, death or special
circumstances, or as the Committee otherwise so determines. With respect to
Options which have already vested at the date of such termination or the vesting
of which is accelerated by the Committee in accordance with the foregoing
provision, the Participant or the personal representative of a deceased
Participant shall have the right to exercise such vested Options within such
period(s) as the Committee shall determine.

     

    Section
8.3                                Withholding
Taxes.  A Participant must pay in cash to the Company the
amount of taxes required to be withheld by law upon the exercise of an Option.
Required withholding taxes associated with a Restricted Stock Award must also be
paid in cash unless the Committee permits a Participant to pay the amount of
taxes required by law to be withheld from a Restricted Stock Award by directing
the Company to withhold from any Award the number of shares of Common Stock
having a Fair Market Value on the date of vesting equal to the amount of
required withholding taxes.

     

    Section
8.4                                Certain Additional Payments by the
Company.  The Committee may, in its sole discretion, provide in
any Award Agreement for certain payments by the Company in the event that
acceleration of vesting of any Award under the Plan is subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, interest and penalties, collectively, the
"Excise Tax"). An Award Agreement may provide that the Participant shall be
entitled to receive a payment (a "Gross-Up Payment") in an amount such that
after payment by the Participant of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon such acceleration of vesting of any
Award.

     

    

    
      
        
           

        

        
          - 12
-

        

         

      

    

    

    Section
8.5                                Regulatory Approval and
Listings.  The Company has transferred into this plan 828,056
shares of its common stock that were registered and still available under the
predecessor plan, the 1995 Flexible Incentive Plan. The Company shall use its
best efforts to file with the Securities and Exchange Commission within one year
after the date this Plan is approved by the shareholders, and keep continuously
effective and usable, a Registration Statement on Form S-8 with respect to
shares of Common Stock subject to Awards hereunder. Notwithstanding anything
contained in this Plan to the contrary, the Company shall have no obligation to
issue or deliver certificates representing shares of Common Stock evidencing
Awards prior to:

     

    
      	
               
      

            	
              (a)

            	
              the
      obtaining of any approval from, or satisfaction of any waiting period or
      other condition imposed by, any governmental agency which the Committee
      shall, in its sole discretion, determine to be necessary or
      advisable;

            

    

     

    
      	
               
      

            	
              (b)

            	
              the
      listing of such shares on any exchange on which the Common Stock may be
      listed; and

            

    

     

    
      	
               
      

            	
              (c)

            	
              the
      completion of any registration or other qualification of such shares under
      any state or federal law or regulation of any governmental body which the
      Committee shall, in its sole discretion, determine to be necessary or
      advisable.

            

    

     

    Section
8.6                                Right to Continued
Employment.  Participation in the Plan shall not give any
Participant any right to remain in the employ of the Company, a Subsidiary or an
Affiliated Entity. Further, the adoption of this Plan shall not be deemed to
give any Employee, Director or Consultant or any other individual any right to
be selected as a Participant or to be granted an Award.

     

    Section
8.7                                Reliance on
Reports.  Each member of the Committee and each member of the
Board shall be fully justified in relying or acting in good faith upon any
report made by the independent public accountants of the Company and its
Subsidiaries and upon any other information furnished in connection with the
Plan by any person or persons other than the Committee or Board member. In no
event shall any person who is or shall have been a member of the Committee or
the Board be liable for any determination made or other action taken or any
omission to act in reliance upon any such report or information or for any
action taken, including the furnishing of information, or failure to act, if in
good faith.

     

    Section
8.8                                Construction.  The
titles and headings of the sections in the Plan are for the convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

     

    Section
8.9                                Governing Law.  The
Plan shall be governed by and construed in accordance with the laws of the State
of Delaware except as superseded by applicable federal law.

     

    ARTICLE
IX

     

    ACCELERATION
OF AWARDS UPON CORPORATE EVENT

     

    If the
Company shall, pursuant to action by the Board, at any time propose to dissolve
or liquidate or merge into, consolidate with, or sell or otherwise transfer all
or substantially all of its assets to another corporation and provision is not
made pursuant to the terms of such transaction

     

    

    
      
        
           

        

        
          - 13
-

        

         

      

    

    

    for the
assumption by the surviving, resulting or acquiring corporation of outstanding
Options under the Plan, or for the substitution of new awards therefor, the
Committee shall cause written notice of the proposed transaction to be given to
each Participant no less than 40 days prior to the anticipated effective date of
the proposed transaction, and the Participant's Award shall become 100% vested.
Prior to a date specified in such notice, which shall be not more than 10 days
prior to the anticipated effective date of the proposed transaction, each
Participant shall have the right to exercise his or her Option to purchase any
or all of the Common Stock then subject to such Option or to receive the shares
subject to any unvested Restricted Stock Award, free of any restrictions. Each
Participant, by so notifying the Company in writing, may, in exercising his or
her Option, condition such exercise upon, and provide that such exercise shall
become effective immediately prior to the consummation of the transaction, in
which event such Participant need not make payment for the Common Stock to be
purchased upon exercise of such Option until five days after receipt of written
notice by the Company to such Participant that the transaction has been
consummated. If the transaction is consummated, each Option, to the extent not
previously exercised prior to the date specified in the foregoing notice, shall
terminate on the effective date such transaction is consummated. If the
transaction is abandoned, (i) any Common Stock not purchased upon exercise of
such Option shall continue to be available for purchase in accordance with the
other provisions of the Plan and (ii) to the extent that any Option not
exercised prior to such abandonment and any Restricted Stock Award shall have
vested solely by operation of this Article IX, such vesting shall be deemed
voided as of the time such acceleration otherwise occurred pursuant to Article
IX, and the vesting schedule set forth in the Participant's Award Agreement
shall be reinstituted as of the date of such abandonment.

     

    Upon the
occurrence of a Change of Control, in the event that the provisions of the
foregoing paragraph are not already invoked, each Participant shall have the
right to exercise his or her Option to purchase any or all of the Common Stock
then subject to such Option or to receive the shares subject to any unvested
Restricted Stock Award, free of any restrictions. Each Participant, by so
notifying the Company in writing, may, in exercising his or her Option,
condition such exercise upon, and provide that such exercise shall become
effective immediately prior to the Change of Control, in which event such
Participant need not make payment for the Common Stock to be purchased upon
exercise of such Option until five days after receipt of written notice by the
Company to such Participant that the Change of Control has occurred. If the
Change of Control has occurred, each Option, to the extent not previously
exercised prior to the date specified in the foregoing notice, shall terminate
on the effective date of such Change of Control. If the Change of Control is
abandoned, (i) any Common Stock not purchased upon exercise of such Option shall
continue to be available for purchase in accordance with the other provisions of
the Plan and (ii) to the extent that any Option not exercised prior to such
abandonment and any Restricted Stock Award shall have vested solely by operation
of this Article IX, such vesting shall be deemed voided as of the time such
acceleration otherwise occurred pursuant to Article IX, and the vesting schedule
set forth in the Participant's Award Agreement shall be reinstituted as of the
date of such abandonment.

     

    

    
      
        
           

        

        
          - 14
-tobemployagree_10k2007.htm

    

      Exhibit 10 m) (iii)

       

      
        AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

        

        This Employment Agreement (the
“Agreement”) is made and entered into as of December 10, 2007 by and among State
Bancorp, Inc., a New York business corporation (the “Company”), State Bank of
Long Island, a banking corporation organized and operating under the laws of the
State of New York (the “Bank”), and Thomas M. O’Brien, an individual (the
“Executive”).

        

        

        INTRODUCTORY
STATEMENT

        

        The Company is a bank holding company
whose common stock is listed for trading on the Nasdaq Stock Market Global
Market. The Bank is a wholly owned subsidiary of the Company and conducts a
commercial and consumer banking business in the New York metropolitan area. The
Executive has substantial prior experience as a senior executive at public and
private banking companies in the New York metropolitan area, including service
as chief executive officer. The Board of Directors of the Company (the “Company
Board”) and the Board of Directors of the Bank (the “Bank Board”) have caused
the Bank and the Company to enter into an EmploymentAgreement with the Executive
as of November 6, 2006 (the “Prior Agreement”) to secure his
services.  The Executive, the Company and the Bank wish to amend and
restate the Prior Agreement pursuant to section 31 thereof.  The terms
and conditions which the Company, the Bank and the Executive have agreed to are
as follows.

        

        

        AGREEMENT

        

        1.  Employment.

        

        The Company and the Bank hereby offer
to employ the Executive, and the Executive hereby accepts such employment,
during the period and on the terms and conditions set forth in this
Agreement.

        

        2.  Employment
Period; Remaining Unexpired Employment Period.

        

        (a)           
The Bank shall employ the Executive for a period of five (5) years beginning on
November 6, 2006 (the “Employment Commencement Date”) and ending on the fifth
(5th) anniversary of the Employment Commencement Date (the “Employment
Period”).

        

        (b)           
Except as otherwise expressly provided in this Agreement, any reference in this
Agreement to the term “Remaining Unexpired Employment Period” as of any date
shall mean the period beginning on such date and ending on the last day of the
Employment Period.

      

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

    
      

      (c)           
Nothing in this Agreement shall be deemed to prohibit the Bank or the Company
from terminating the Executive’s employment before the end of the Employment
Period with or without notice and for any reason or without reason. This
Agreement shall determine the relative rights and obligations of the Company,
the Bank and the Executive in the event of any such termination. In addition,
nothing in this Agreement shall require a termination, or prohibit a
continuation, of the Executive’s employment at the expiration of the Employment
Period. Any such continuation shall be on an “at-will” basis unless the Company,
the Bank and the Executive agree otherwise.

      

      3.  Duties/Investment.

      

      (a)           
The Executive shall be elected to the position of President and Chief Operating
Officer of the Bank and the Company as of the Employment Commencement Date and
to the additional positions of Chief Executive Officer of the Bank and the
Company effective upon the retirement of the incumbent Chief Executive Officer
from such positions, shall have such power, authority and responsibility and
perform such duties as are prescribed by or under the Bank’s By-Laws and as are
customarily associated with such position and shall report only to the Company
Board and the Bank Board.

      

      (b)           
The Executive shall also serve as a member of the Bank Board and the Company
Board and as an officer or director of any subsidiary or affiliate of the Bank
or the Company, if duly elected or appointed to serve in such
capacities.

      

      (c)           
The Executive shall devote his full business time and attention (other than
during weekends, holidays, approved vacation periods, and periods of illness or
approved leaves of absence) to the business and affairs of the Company and the
Bank and shall use all of his skill and efforts to advance their best interests.
On the Employment Commencement Date, the Executive shall execute a copy of the
Company’s Code of Business Conduct and Ethics.

      

      (d)           
Within a reasonable period after the Employment Commencement Date, the Executive
agrees to invest $1,000,000 in the Company’s Common Stock on a basis reasonably
acceptable to the Company and the Executive consistent with the Company’s stock
ownership guidelines for executives.

      

      4.  Outside
Activities.

      

      The Executive may serve as a member of
the boards of directors or other governing bodies of such business, community
and charitable organizations as he may disclose to and as may be approved by the
Company Board, or the Compensation Committee or Executive Committee thereof
(which approval shall not be unreasonably withheld); provided, however, that
such service shall not materially interfere with the performance of his duties
under this Agreement. The Executive may also engage in personal business and
investment activities which do not materially interfere with the performance of
his duties hereunder; provided, however, that such activities are not prohibited
under any code of conduct or investment or securities trading policy established
by the Bank or the Company and generally applicable to all similarly situated
executives. As of the date of thisAgreement,
the Executive has disclosed to, the Company Board has approved, the Executive’s
service as a director of the entities enumerated on Exhibit A to this
Agreement.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

    
      5.  Working
Facilities and Expenses.

      

      The Executive’s principal place of
employment shall be at the Company’s executive offices as of the Employment
Commencement Date, or at such other location as the Company and the Executive
may mutually agree upon. The Company or the Bank shall provide the Executive at
his principal place of employment with a private office, secretarial services
and other support services and facilities (including but not limited to a
Company owned or leased automobile) suitable to his positions with the Company
and the Bank and necessary or appropriate in connection with the performance of
his assigned duties under this Agreement. The Company shall reimburse the
Executive for such ordinary and necessary travel, entertainment and business
expenses consistent with past practice or as the Executive and the Company shall
mutually agree are necessary and appropriate for business purposes, upon
presentation of an itemized account of such expenses in such form as the Company
may reasonably require.

      

      6.  Compensation.

      

      For his services under this Agreement
during the Employment Period, the Bank and the Company shall provide the
Executive with a compensation package consisting of the following: (i) a base
salary; (ii) a stock-based signing bonus in the form of a restricted stock
grant; (iii) an annual incentive; and (iv) a long-term incentive in the form of
stock options, as follows:

      

      (i)  Base Salary. The Company
and the Bank shall pay the Executive a base salary at the annual rate of Fifty
Thousand Dollars ($50,000) prior to July 1, 2007 and One Hundred Thousand
Dollars ($100,000) thereafter, payable in approximately equal installments in
accordance with the Bank’s customary payroll practices.  The Company
Board, or the Compensation Committee or Executive Committee thereof, shall
review the Executive’s annual rate of salary at such times during the Employment
Period as it deems appropriate, but not less frequently than once every twelve
(12) months, and may, in its discretion, approve a salary increase.

      

      (ii)  Annual Incentive. The
Executive shall be eligible for an annual incentive award, which may be payable
in cash or stock-based compensation, on a basis no less favorable than members
of the office of the Chairman of the Company (the “Annual Bonus”). The Executive
shall have a target Annual Bonus (the “Target Bonus”) of $225,000.

      

      (iii)  Long-term Incentive.
In consideration of the Executive’s acceptance of employment and execution of
this Agreement, the Company shall grant to the Executive non-qualified stock
options (the “Initial Stock Options”) to purchase a number of shares of Common
Stock of the Company (“Common Stock”) equal to the quotient of (i) One Million
Dollars ($1,000,000) divided by (ii) thirty-four percent (34%) of the closing
sales price for a share of Common Stock as reported in the New York City Edition
of the Wall Street Journal for the fourth (4th) trading day after the Company's
issuance of a press release announcing the Executive's employment as President
and Chief Operating Officer of the Company (the date of such announcement, the
“Announcement Date”). Twenty (20%) of the Initial Stock Options shall vest and
become exercisable on each anniversary of the Announcement Date until all of the
Initial Stock Options have become exercisable. The Initial Stock Options shall
have a term that expires on the tenth (10th) anniversary of the Announcement
Date or, if earlier, at the date and time of the Executive’s discharge with
Cause (as defined herein) and an exercise price per share equal to fair market
value of the Common Stock subject to the Initial Stock Options on the date of
grant. The Initial Stock Options shall be evidenced by a written stock option
agreement in a form prescribed by the Company that is consistent with the terms
of this Agreement and otherwise is substantially the same as the form of stock
option agreement used by the Company for other executive officer stock option
grants as of the date of this Agreement.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

    (iv)  Signing
Bonus. In consideration of the Executive’s acceptance of employment and
execution of this Agreement, the Company shall pay to the Executive a signing
bonus (the “Signing Bonus”) by delivery to the Executive of a number of shares
of Common Stock equal to the quotient of (A) One Million Five Hundred Thousand
Dollars ($1,500,000.00) divided by (B) the average of the closing sales price
for a share of Common Stock as reported in the New York City Edition of the Wall
Street Journal for each trading day during the period of seven (7) consecutive
trading days commencing on the fourth (4th) trading day after the Announcement
Date (such period, the “Averaging Period” and such number of shares of Common
Stock, the “Bonus Stock”). The Signing Bonus shall be delivered by issuance to
the Executive of a certificate evidencing the Bonus Stock with a record date of
the last day of the Averaging Period. The Executive may, in his discretion,
timely file an election under section 83(b) of the Internal Revenue Code of
1986, as amended (the “Code”) with respect to the Bonus Stock. The Bonus Stock
shall vest in twenty (20) equal quarterly installments commencing with the end
of the first quarter in which the Employment Commencement Date occurs, subject
to acceleration upon death, Disability and termination without Cause or
termination by the Executive with Good Reason.  The Signing Bonus
shall be in lieu of participation during the Employment Period in any
non-qualified deferred compensation or supplemental executive retirement program
provided for other senior executives of the Bank or the Company, however
denominated (except for any program providing for the voluntary or mandatory
deferral of compensation otherwise earned and payable).

    

    7.  Employee
Benefit Plans and Programs.

    

    (a)           
Except as expressly provided herein to the contrary, during the Employment
Period, the Executive shall be treated as an employee of the Bank and the
Company and shall be entitled to participate in and receive benefits under any
and all qualified retirement, pension, savings, profit-sharing or stock bonus
plans, any and all group life, health (including hospitalization, medical
andmajor
medical), dental, accident and long-term disability insurance plans, and any
other employee benefit and compensation plans (including, but not limited to,
any incentive compensation plans or programs, stock option and appreciation
rights plans and restricted stock plans) as may from time to time be maintained
by, or cover employees of, the Bank and the Company, in accordance with
theterms and
conditions of such employee benefit plans and programs and compensation plans
and programs and consistent with the Bank’s and the Company’s customary
practices.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (b)          
The Company and the Bank shall provide the Executive and his eligible dependents
with coverage under the Bank’s and the Company’s group health (including
hospitalization, medical and major medical), dental and vision care plans
through the last day of the first calendar month in which the both the Executive
and his spouse are eligible for coverage under Medicare. In lieu thereof, the
Bank and the Company may provide substitute coverage by direct payment to the
carrier of the Executive’s share of premiums for continuation coverage under the
corresponding plan of a prior employer or for coverage under an individual
policy providing substantially equivalent benefits and approved by the Executive
(which approval shall not be unreasonably withheld or delayed). The Company may
require the Executive, while employed, to pay a portion of the premium cost of
such coverage; provided, however, that the Executive’s dollar cost for any
period shall not exceed the dollar cost borne by senior executives of the
Company for corresponding coverage. Following the Executive’s termination of
employment, the Company shall use all reasonable efforts to have such coverage
continued and the Company may require the Executive to pay the full premium cost
for such coverage (but in no event in excess of the aggregate premium cost paid
by the Company and an actively employed executive for the same or substantially
similar coverage), provided that if the Company cannot provide continuing
coverage under its then existing plans, it shall have no obligation to acquire
alternative coverage. The obligation to provide this coverage shall survive the
termination of the Agreement unless the Executive is terminated with Cause or
resigns without Good Reason (as defined in this Agreement).

    

    (c)           
In addition to coverage under any group-term life insurance program maintained
generally for employees of the Bank and the Company, the Bank and the Company
shall pay directly to the carrier all required premiums under [redacted] that
are to become due during the period beginning on the Employment Commencement
Date and ending on December 31, 2007. The obligation to make these payments
shall survive the termination or expiration of this Agreement for any reason
other than the Executive’s discharge with Cause or resignation without Good
Reason (as defined in this Agreement).

    

    8.  Indemnification
and Insurance.

    

    (a)           
During the Employment Period and thereafter, the Bank and the Company shall
cause the Executive to be covered by any policy or contract of insurance
obtained by them to insure their respective directors and officers against
personal liability for acts or omissions in connection with service as an
officer or director or service in other capacities at their request. The
coverage provided to the Executive pursuant to this section 8 shall be of the
same scope and on the same terms and conditions as the coverage (if any)
provided to other officers or directors of the Bank and the
Company.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      (b)           
To the maximum extent permitted under applicable law, during the Employment
Period and thereafter, the Bank and the Company shall indemnify the Executive
against and hold him harmless from any costs, liabilities, losses and exposures
to the fullest extent and on the most favorable terms and conditions that
similar indemnification is offered to any director or officer of the Bank or any
subsidiary or affiliate thereof.

      

      9.  Termination
of Employment Due to Death.

      

      (a)          The
Executive’s employment with the Bank and the Company shall terminate,
automatically and without any further action on the part of any party to this
Agreement, on the date of the Executive’s death. In such event:

      

      (i)           
The Bank and the Company shall pay to the Executive’s estate his earned but
unpaid compensation (including, without limitation, salary, any Annual Incentive
payable in respect of a completed fiscal year, and all other items which
constitute wages under applicable law) as of the date of his termination of
employment. This payment shall be made at the time and in the manner prescribed
by law applicable to the payment of wages but in no event later than 30 (thirty)
days after the date of the Executive’s termination of employment.

      

      (ii)           
The Bank and the Company shall provide the benefits, if any, due to the
Executive’s estate, surviving dependents or designated beneficiaries under the
employee benefit plans and programs and compensation plans and programs
maintained for the benefit of the officers and employees of the Bank and the
Company. The time and manner of payment or other delivery of these benefits and
the recipients of such benefits shall be determined according to the terms and
conditions of the applicable plans and programs.

      

      The
payments and benefits described in sections 9(a)(i) and (ii) shall be referred
to in this Agreement as the “Standard Termination Entitlements.”

      

      (b)           
In addition to the Standard Termination Entitlements, in the event of the
Executive’s death during the Employment Period, the entire unvested portion of
the Signing Bonus and the Initial Stock Options shall vest as of the Executive’s
date of death.

      

      10.  Termination
Due to Disability.

      

      The Bank and the Company may terminate
the Executive’s employment upon a determination, by vote of a majority of the
members of the Company Board, or the members of the Compensation Committee or
Executive Committee thereof, acting in reliance on the written advice of a
medical professional acceptable to them, that the Executive is suffering from a
physical or mental impairment which, at the date of the determination, has
prevented the Executive from performing his assigned duties on a substantially
full-time basis for a period of at least sixty (60) days during the period of
six (6) months ending with the date of the determination or is likely to result
in death or prevent the Executive from performing his assigned duties on a
substantially full-time basis for a period of at leastsixty
(60) days during the period of six (6) months beginning with the date of the
determination. In such event:

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

     

    
      (a)           
The Bank shall pay and deliver to the Executive (or in the event of his death
before payment, to his estate, surviving dependents or beneficiaries, as
applicable) the Standard Termination Entitlements.

      

      (b)           
In addition to the Standard Termination Entitlements (i) the Signing Bonus and
the Initial Stock Options shall continue to vest as if the Executive remained in
the active service of the Bank and the Company and (ii) upon the Executive’s
death prior to full vesting, any unvested portion of the Signing Bonus and the
Initial Stock Options shall vest as of the Executive’s date of
death.

      

      A
termination of employment due to disability under this section 10 shall be
effected by notice of termination given to the Executive by the Bank and the
Company and shall take effect on the later of the effective date of termination
specified in such notice or sixty (60) days after the date on which the notice
of termination is deemed given to the Executive.

      

      11.  Discharge
with Cause.

      

      (a)  The Bank and the Company
may terminate the Executive’s employment during the Employment Period, and such
termination shall be deemed to have occurred with “Cause” only if the Company
Board and the Bank Board, by majority vote of their entire membership, each
determines that the Executive (i) has willfully failed or refused to perform his
assigned duties under this Agreement in any material respect (including, for
these purposes, the Executive’s inability to perform such duties as a result of
drug or alcohol dependency); (ii) has committed gross negligence in the
performance of, or is guilty of continual neglect of, his assigned duties; (iii)
has been convicted or entered a plea of guilty or nolo contendere to, the
commission of a felony or any other crime involving dishonesty, personal profit
or other circumstance likely, in the reasonable judgment of the Company Board
and Bank Board, to have a material adverse effect on the Bank and the Company or
their business, operations or reputation taken as a whole; (iv) has violated, in
any material respect, any law, rule, regulation, written agreement or final
cease-and-desist order applicable to the Bank in his performance of services for
the Bank or the Company or the Company’s or the Bank’s Code of Conduct; or (v)
has willfully and intentionally breached the material terms of this Agreement in
any material respect. For purposes of this section 11, 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 authority given pursuant
to a resolution duly adopted by the Company Board or the Bank Board or the
Executive Committee thereof or based upon the written 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 Bank and the Company.
Termination with Cause shall be effected by written notice to the
Executivesetting
forth with particularity the grounds for termination.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      
        (b)  If
the Executive is discharged during the Employment Period with Cause, the Bank
and the Company shall pay and provide to him (or, in the event of his death, to
his estate, his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements only; any unvested Bonus Stock, any
unexercised options to purchase Common Stock, whether or not vested shall be
forfeited. While a proceeding to discharge the Executive with Cause is pending,
the Company Board and the Bank Board may, by written notice to the Executive,
temporarily suspend the Executive’s duties and authority and, in such event, may
also suspend the payment of salary and other cash compensation and the vesting
of Bonus Stock and the exercise of stock options, but not the Executive’s
participation in retirement, insurance and other employee benefit plans. If the
Executive is not discharged within ninety (90) days after the commencement of
such a suspension, payments of salary and cash compensation shall resume, and
all compensation withheld during the period of suspension shall be promptly
restored. If the Executive is discharged without Cause during such ninety (90)
day period, all compensation withheld during the period of suspension shall be
promptly restored and shall be paid in addition to amounts due to the Executive
under this Agreement on account of his discharge without Cause. If the Executive
is discharged with Cause not later than ninety (90) days after the commencement
of such a suspension, all payments withheld during the period of suspension
shall be deemed forfeited and shall not be included in the Standard Termination
Entitlements.

        

        12.  Discharge
without Cause.

        

        The Bank may discharge the Executive at
any time during the Employment Period and, unless such discharge constitutes a
discharge with Cause:

        

        (a)           
The Bank shall pay and deliver to the Executive (or in the event of his death
before payment, to his estate, surviving dependents or beneficiaries, as
applicable) the Standard Termination Entitlements.

        

        (b)           
In addition to the Standard Termination Entitlements:

        

        (i)           
The shares of Bonus Stock (if any) and the Initial Stock Options that are not
vested as of the date of termination of employment) shall vest as of the date of
termination of employment.

        

        (ii)           
The Bank or the Company shall pay to the Executive (or, in the event of his
death, his estate or designated beneficiaries) ten (10) business days after
termination of employment a pro rata Annual Bonus for the year of termination
based on the Target Bonus.

        

        (iii)           
The Bank or the Company shall pay to the Executive (or, in the event of his
death, his estate or designated beneficiaries) ten (10) business days after
termination of employment, an additional lump sum payment equal to two times the
sum of the Executive’s most recent Base Salary plus the Executive’s Target
Bonus.

         

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

      

    

     

    
      (iv)           
If the Executive’s termination of employment occurs upon, following or in
connection with a Change of Control (as defined in this Agreement), (A) any
options to purchase Common Stock (including but not limited to Initial Stock
Options) and any unvested restricted stock or other Common Stock or stock-based
awards that are scheduled to vest during the Remaining Unexpired Employment
Period shall vest as of the date of termination of employment and (B) if the
Remaining Unexpired Employment Period is less than 3 years, the Company shall
pay to the Executive (or, in the event of his death, his estate or designated
beneficiaries), subject to Section 21, ten (10) business days after termination
of employment a lump sum payment equal to three times the sum of the Executive’s
most recent Base Salary plus the Executive’s Target Bonus in lieu of the payment
described in section 12(b)(iii).

      

      The
payments and benefits enumerated in section 12(b)(i), (ii), (iii) and (iv) shall
be referred to collectively in this Agreement as the “Additional Termination
Entitlements”.

      

      13.  Resignation.

      

      (a)           
The Executive may resign from his employment with the Bank and the Company any
time. A resignation under this section 13 shall be effected by notice of
resignation given by the Executive to the Bank and the Company and shall take
effect on the effective date of termination specified in such notice (which
shall in no event be sooner than sixty (60) days after the notice is deemed
given) or such earlier or later date as the Executive, the Company and the Bank
may mutually agree upon. The Executive’s resignation of any of the positions
within the Bank and the Company to which he has been assigned shall be deemed a
resignation from all such positions unless the Bank, the Company and the
Executor agree in writing otherwise.

      

      (b)           
The Executive’s resignation shall be deemed to be for “Good Reason” if the
effective date of resignation occurs within six (6) months after any of the
following, where the Executive has given the Company notice of such event and a
reasonable opportunity to cure:

      

      (i)           
the failure of the Bank or the Company (whether by act or omission of the Bank
Board, the Company Board or otherwise), to appoint or re-appoint or elect or
re-elect the Executive to the position(s) with the Bank or the Company that he
holds immediately prior to such failure, or to a more senior
position;

      

      (ii)           
the failure of the Bank’s shareholders or the Company’s shareholders to elect or
re-elect the Executive to membership at the expiration of his term of membership
(whether or not the Executive is a nominee for election), unless such failure is
a result of the Executive’s refusal to stand for election or attainment of a
mandatory retirement age generally imposed all employee-members of the
Board;

      

      (iii)           
a material failure by the Bank or the Company, whether by amendment of its
certificate of incorporation or organization, by-laws, action of its Board or
otherwise, to vest in the Executive the functions, duties, or responsibilities
prescribed in section 3 of this Agreement or the functions, duties and
responsibilities associated with a more senior position, provided that the
Executive shall have given written notice of such failure to the Bank and the
Company, and the Bank and the Company shall not have substantially cured such
failure within thirty (30) days after such notice is deemed
given;

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (iv)           
any reduction of the Executive’s rate of Base Salary in effect from time to
time, whether or not material, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion of
the Executive’s cash compensation as and when due;

     

    
      (v)           
any change in the terms and conditions of any compensation or benefit program in
which the Executive participates (other than an across-the-board change having
substantially the same effect on all similarly situated employees) which, either
individually or together with other changes, has a material adverse effect on
the aggregate value of his total compensation package; provided that the
Executive shall have given written notice of such material adverse effect to the
Bank and the Company, and the Bank and the Company shall not have substantially
cured such failure within thirty (30) days after such notice is deemed
given;

    (vii)           
any material breach by the Bank or the Company of any material term, condition
or covenant contained in this Agreement (including but not limited any failure
to provide the Executive with a Recommended Compensation Package for any portion
of the Employment Period after the Initial Employment Period; provided that the
Executive shall have given notice of such material breach to the Bank and the
Company, and the Bank and the Company shall not have substantially cured such
breach within thirty (30) days after such notice is deemed given;
or

    

    (viii)          a
change in the Executive’s principal place of employment to a place that is not
the principal executive office of the Company or other mutually agreeable
location, or a relocation of the Company’s principal executive office to a
location that is both more than twenty-five miles farther away from the
Executive’s principal residence than the distance between the Executive’s
principal residence and principal place of employment immediately prior to the
change or relocation and more than fifty (50) miles away from the location of
the Bank’s principal executive office on the date of this
Agreement.

    

    In all
other cases, a resignation by the Executive shall be deemed to be without Good
Reason.

    

    (c)  In the event of the
Executive’s resignation, the Bank and the Company shall pay and deliver the
Standard Termination Entitlements. In addition, if the Executive’s resignation
is deemed to be a resignation with Good Reason, the Bank and the Company shall
also pay and deliver the Additional Termination Entitlements.

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      14.  Terms
and Conditions of the Additional Termination Entitlements.

      

      The Bank, the Company and the Executive
hereby stipulate that the damages which may be incurred by the Executive
following any termination of employment are not capable of accurate measurement
as of the date first above written and that the Additional Termination
Entitlements constitute reasonable damages under the circumstances and shall be
payable without any requirement of proof of actual damage and without regard to
the Executive’s efforts, if any, to mitigate damages. The Bank, the Company and
the Executive further agree that the Bank and the Company may condition the
payment and delivery of the Additional Termination Entitlements on the receipt
of the Executive’s resignation from any and all positions which he holds as an
officer, director or committee member with respect to the Company, the Bank or
any subsidiary or affiliate and on the execution by the Executive of a
reasonable release of the Company and the Bank that is limited to
employment-related claims.

      

      15.  Definition
of “Change of Control.”

      

      For the purpose of this Agreement, a
"Change of Control" shall mean:

      

                  (a)
The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i)
the then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) 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 subsection (a), 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
corporation controlled by the Company or (iv) any acquisition pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of
this section 15; or

      

                  (b)
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 were 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; or

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    (c)
Consummation by the Company of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another entity (a "Business Combination"), in each
case, unless, following such Business Combination, (i) all or substantially all
of the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which 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 Outstanding Company Voting Securities, as the case may
be, (ii) no Person(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from 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

    

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

    

    16.  Excise
Tax.

    

    (a)           
Anything in this Agreement to the contrary notwithstanding, in the event that
Crowe Chizek and Company LLC or such other accounting firm as shall be
designated by the Company prior to the effective time of a Change of Control
(the “Accounting Firm”) shall determine that receipt of all payments, benefits
or distributions by the Company or its affiliates in the nature of compensation
to or for the Executive’s benefit, whether paid or payable pursuant to this
Agreement or otherwise (a “Payment”) would subject the Executive to the excise
tax under Section 4999 of the Code, the Accounting Firm shall determine whether
to reduce any of the Payments paid or payable pursuant to this Agreement that
are taxable in the year in which the change in ownership or control occurs (the
“Agreement Payments”) to the Reduced Amount (as defined below). The Agreement
Payments shall be reduced to the Reduced Amount only if the Accounting Firm
determines that the Executive would have a greater Net After-Tax Receipt (as
defined below) of aggregate Payments if the Executive’s Agreement Payments were
reduced to the Reduced Amount. If such a determination is not made by the
Accounting Firm, the Executive shall receive all Agreement Payments to which the
Executive is entitled under this Agreement.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    (b)           
If the Accounting Firm determines that aggregate Agreement Payments should be
reduced to the Reduced Amount, 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, in 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 (determined for all purposes of section 16 of this
Agreement in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of Code)
of the aggregate Agreement Payments equals the Reduced Amount), and shall advise
the Company in writing of the Executive’s election within ten days of the
Executive’s receipt of notice. If no such election is made by the Executive
within such ten-day period, the Company may elect which of such 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) and
shall notify the Executive promptly of such election. All determinations made by
the Accounting Firm under this section 16 shall be binding upon the Company and
the Executive in the absence of manifest error and shall be made within 60 days
of the effective time of the Change of Control. As promptly as practicable
following such determination, the Company shall pay to or distribute for the
Executive’s benefit such Agreement Payments as are then due to the Executive
under this Agreement and shall promptly pay to or distribute for the Executive’s
benefit in the future such Agreement Payments as become due to the Executive
under this Agreement. All fees and expenses of the Accounting Firm shall be
borne solely by the Company.

    

    (c)           
As a result of the uncertainty in the application of Sections 280G and 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
Company to or for the benefit of the Executive pursuant to this Agreement which
should not have been so paid or distributed (“Overpayment”) or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of the Executive pursuant to this Agreement could have been so paid
or distributed (“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
either the Company or the Executive which the Accounting Firm believes has a
high probability of success determines that an Overpayment has been made, the
Executive shall pay any such Overpayment to the Company together with interest
at the applicable federal rate provided for in section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Executive to the
Company if and to the extent such payment 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
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)           
For purposes hereof, the following terms have the meanings set forth
below:

    

    (i)           
“Reduced Amount” shall mean the greatest amount of Agreement Payments that can
be paid that would not result in the imposition of the excise tax under section
4999 of the Code if the Accounting Firm determines to reduce Agreement Payments
pursuant to section 16(a).

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (ii)           
“Net After-Tax Receipt” shall mean the present value (as determined in
accordance with sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) 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
certifies, in the Executive’s sole discretion, as likely to apply to him in the
relevant tax year(s).

    

    17.  Confidentiality.

    

    Unless he obtains the prior written
consent of the Company, the Executive shall keep confidential and shall refrain
from using for the benefit of himself, or any person or entity other than the
Company or any entity which is a subsidiary of the Company, any material
document or information obtained from the Company, or from its subsidiaries, in
the course of his employment with any of them concerning their properties,
operations or business (unless such document or information is readily
ascertainable from public or published information or trade sources or has
otherwise been made available to the public through no fault of his own) until
the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 18 shall prevent the Executive,
with or without the Company’s consent, from participating in or disclosing
documents or information in connection with any judicial or administrative
investigation, inquiry or proceeding to the extent that such participation or
disclosure is compelled under applicable law; in such Event, the Executive
shall, to the extent practicable under the circumstances, notify the Company in
advance of and afford the Company an opportunity, at its own expense, to take
action to prevent or limit the scope of such participation or
disclosure.

    

    18.  Noncompetition.

    

    (a)           
The Executive agrees that, while he is employed by the Company and for one year
thereafter he will not engage in Competition (as defined below). The Executive
shall be deemed to be engaging in “Competition” if he directly or indirectly,
owns, manages, operates, controls or participates in the ownership, management,
operation or control of or is connected as an officer, employee, partner,
director, consultant or otherwise with, or has any financial interest in, any
business engaged in the financial services business (a “Competing Business”) in
any city or county in which the Company or its affiliates operates a commercial
banking or other material financial services business which is a material part
of such business and is in material competition with the business conducted by
the Company at the time of the termination of his employment with the Company.
Ownership for personal investment purposes only of less than 2% of the voting
stock of any publicly held corporation shall not constitute a violation hereof.
In no event shall services in any capacity described on Exhibit A attached here
to be deemed a violation of this section 18(a). In no event shall the Executive
have any obligation under this Section 18(a) following a Change of
Control.

    

    (b)           
The Executive acknowledges that the Company would be irreparably injured by a
violation of this section 18 or of section 17 or section 19 and he agrees that
the Company, in addition to any other remedies available to it for such breach
or threatened breach, shall be entitled to a preliminary injunction, temporary
restraining order, or other equivalent relief, restraining the Executive from
any actual or threatened breach of sections 17, 18 or 19. If a bond is required
to be posted in order for the Company to secure an injunction or other equitable
remedy, the parties agree that said bond need not be more than a nominal
sum.

     

     

    
      
        
        

      

      
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    19.  Solicitation.

    

    The Executive hereby covenants and
agrees that, for a period of one (1) year following his termination of
employment with the Bank and the Company, he shall not, without the written
consent of the Company, either directly or indirectly:

    

    (a)           
solicit, offer employment to, or take any other action intended, or that a
reasonable person acting in like circumstances would expect, to have the effect
of causing any officer or employee of the Company or any of its subsidiaries or
affiliates to terminate his or her employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other institution engaged in the business
of accepting deposits, making loans or doing business within the cities and
counties in which the Bank maintains an office as of the date of the executive’s
termination of employment;

    

    (b)           
provide any information, advice or recommendation with respect to any such
officer or employee of any savings bank, savings and loan association, bank,
bank holding company, savings and loan holding company, or other institution
engaged in the business of accepting deposits, making loans or doing business
within the cities and counties specified in section 16 that is intended, or that
a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Company or any of its
subsidiaries or affiliates to terminate his employment and accept employment or
become affiliated with, or provide services for compensation in any capacity
whatsoever to, any savings bank, savings and loan association, bank, bank
holding company, savings and loan holding company, or other institution engaged
in the business of accepting deposits, making loans or conducting any other
banking business in direct or indirect competition with the Company and its
subsidiaries within the cities and counties specified in section
19(a);

    

    (c)           
solicit, provide any information, advice or recommendation or take any other
action intended, or that a reasonable person acting in like circumstances would
expect, to have the effect of (i) causing any customer of the Company or its
subsidiaries to terminate an existing business or commercial relationship with
them or (ii) interfering with their efforts to establish a business or
commercial relationship with any person or entity known by the Executive to have
been identified by the Company or its subsidiaries as a potential customer as of
the date of the Executive’s termination of employment.

     

     

    
      
        
        

      

      
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    20.  No
Effect on Employee Benefit Plans or Programs.

    

    The termination of the Executive’s
employment during the term of this Agreement or thereafter, whether by the
Company, the Bank or by the Executive, shall have no effect on the rights and
obligations of the parties hereto under the Bank’s and Company’s qualified or
non-qualified retirement, pension, savings, thrift, profit-sharing or stock
bonus plans, group life, health (including hospitalization, medical and major
medical), dental, accident and long term disability insurance plans or such
other employee benefit plans or programs, or compensation plans or programs, as
may be maintained by, or cover employees of, the Bank or the Company from time
to time.

    

    21.  Mandatory
Deferral of Compensation; Section 409A.

    

    (a)  Notwithstanding anything
in this Agreement to the contrary, if, in the written opinion of the Company’s
independent tax advisors, any payment or vesting of any compensation, other than
Bonus Stock or resulting from the exercise of stock options, during a taxable
year would be nondeductible for federal income tax purposes for such taxable
year due to the application of section 162(m) of the Code (or the corresponding
provisions of any succeeding statute) but would be deductible for such taxable
year if section 162(m) of the Code (or corresponding provision of a succeeding
statute) did not apply, the payment or delivery of such nondeductible
compensation shall be deferred. For each taxable year, such mandatory deferral
shall be applied in reverse chronological order such that the last payments due
and payable for a taxable year are the first payments to be subject to the
mandatory deferral. All such deferred compensation shall be deposited in a
grantor trust which meets the requirements of Revenue Procedure 92-65 (as
amended or superseded from time to time), the trustee of which shall be a
financial institution selected by the Executive with the approval of the Company
(which approval shall not be unreasonably withheld or delayed), pursuant to a
trust agreement the terms of which are approved by the Executive (which approval
shall not be unreasonably withheld or delayed) (the “Rabbi Trust”). Deferred
compensation payable in shares of Common Stock shall be deposited in such shares
of Common Stock and, when distributed, shall be distributed in kind. Deferred
Compensation payable in cash shall be deposited in cash. Provision shall be made
for deferred compensation deposited in cash, as well as accumulated cash
dividends received with respect to deposited Common Stock, to be adjusted for
investment returns on the basis of investment benchmarks selected by the
Executive from time to time with the approval of the Company (which approval
shall not be unreasonably withheld or delayed). Deferred Common Stock and other
amounts deferred hereunder (as adjusted for investment returns) shall be
distributed to the Executive at the earliest of (a) January 1 of the calendar
year following the calendar year in which the Executive’s termination of service
(within the meaning of section 409A of the Code) occurs, (b) the Executive’s
death; or (c) immediately prior to the occurrence of a change in control of the
Company (within the meaning of section 409A of the Code), or, if later, at the
earliest date permitted under section 409A of the Code and the regulations
thereunder. This section shall be construed, administered and enforced so as to
prevent the imposition of an excise tax on the Executive under section 409A of
the Code. Compensation deferred under this section 21 shall be 100%
vested.

     

     

    
      
        
        

      

      
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    (b)  Notwithstanding
anything in this Agreement to the contrary, to the extent necessary to comply
with section 409A of the Internal Revenue Code of 1986, no Additional
Termination Entitlements shall be paid, and the payment of Additional
Termination Entitlements shall be deferred if necessary, until the date of the
Executive’s separation from service (within the meaning of section 409A of the
Internal Revenue Code of 1986).  In addition, if the Executive is a
“specified employee” within the meaning of section 409A of the Internal Revenue
Code of 1986) on the date of his separation from service (within the meaning of
section 409A of the Internal Revenue Code of 1986), payments that become due
under this Agreement as a result of the Executive’s separation from service
shall be deferred until the first business day that is six months and one day
after such separation fro service.    The amount of any
payments required to deferred under this section 21(b) shall be deposited in a
Rabbi Trust for investment pending distribution to the Executive; the payments
due to the executive shall be increased to reflect the investment earnings of
the Rabbi Trust. If any compensation or benefits provided by this Agreement may
result in the application of section 409A of the Code, the Company shall, in
consultation with the Executive, modify the Agreement in the least restrictive
manner necessary in order to exclude such compensation from the definition of
“deferred compensation” within the meaning of such section 409A or in order to
comply with the provisions of section 409A, other applicable provision(s) of the
Code and/or any rules, regulations or other regulatory guidance issued under
such statutory provisions and without any diminution in the value of the
payments to the Executive.

    

    22.  Provisions
Relating to Common Stock.

    

    (a)           
In the event any recapitalization, forward or reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or exchange of Common
stock for other securities, stock dividend or other special and nonrecurring
dividend or distribution (whether in the form of cash, securities or other
property), liquidation, dissolution, or other similar corporate transaction or
event, affects the Common Stock such that an adjustment is appropriate in order
to prevent the dilution or enlargement of the rights of the Executive with
respect to Bonus Stock or Initial Stock Options deliverable under this
Agreement, the Company Board or its Compensation Committee shall, in such manner
as it may determine, adjust any or all of (i) the number and kind of securities
underlying Bonus Stock and Initial Stock Options, and (iii) the exercise price
of Initial Stock Options, to prevent such dilution or enlargement.

    

    (b)           
As soon as practicable, the Company shall prepare and file with the Securities
and Exchange Commission a registration statement on Form S-8 covering a
sufficient number of shares of Common Stock to provide for all of the Common
Stock contemplated to be issued or delivered to the Executive under this
Agreement. Thereafter, the Company shall take all actions required to maintain
the effectiveness of such registration statement until all Common Stock issuable
or deliverable to the Executive under this Agreement has been so issued and/or
delivered or the Company’s obligation to issue or deliver any such Common Stock
has lapsed.

    

    23.  Successors
and Assigns.

    

    This Agreement will inure to the
benefit of and be binding upon the Executive, his legal representatives and
testate or intestate distributees, and the Bank and the Company and their
respective successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Bank and the
Company may be sold or otherwise transferred. Failure of the Bank or the Company
to obtain from any successor its express written assumption of their obligations
hereunder at least 60 days in advance of the scheduled effective date of any
such succession shall be deemed a material breach of this
Agreement.

     

    
      
        
        

      

      
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    24.  Notices.

    

    Any communication required or permitted
to be given under this Agreement, including any notice, direction, designation,
consent, instruction, objection or waiver, shall be in writing and shall be
deemed to have been given at such time as it is delivered personally, or five
(5) days after mailing if mailed, postage prepaid, by registered or certified
mail, return receipt requested, addressed to such party at the address listed
below or at such other address as one such party may by written notice specify
to the other party:

    

    If to the Executive, to the most recent
address on file for him in the Company’s or the Bank’s personnel records, with a
copy to:

    

    Thacher Proffitt & Wood
LLP

    Two World Financial
Center

    New York, NY 10281

    Attention: W. Edward Bright,
Esq.

    

    If to the Bank:

    

    Two Jericho Plaza

    Jericho, New
York  11753

    Attention: General
Counsel

    

    If to the Company:

    

    Two Jericho Plaza

    Jericho, New
York  11753

    Attention: General
Counsel

    

    25.  Reimbursement
for Attorneys’ Fees.

    

    The Company shall indemnify the
Executive against reasonable costs, including legal fees and expenses, incurred
by him in connection with or arising out of any action suit or proceeding in
which he may be involved as a result of his efforts, in good faith, to defend or
enforce his rights under this Agreement; provided, however, that he shall have
substantially prevailed on the merits. The Company shall reimburse the Executive
for his reasonable attorneys’ fees and costs incurred in the structuring and
negotiation of this Agreement.

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    26.  Severability.

    

    A determination that any provision of
this Agreement is invalid or unenforceable shall not affect the validity or
enforceability of any other provision hereof.

    

    27.  Waiver.

    

    Failure to insist upon strict
compliance with any of the terms, covenants or conditions hereof shall not be
deemed a waiver of such term, covenant, or condition. A waiver of any provision
of this Agreement must be made in writing, designated as a waiver, and signed by
the party against whom its enforcement is sought. Any waiver or relinquishment
of any right or power hereunder at any one or more times shall not be deemed a
waiver or relinquishment of such right or power at any other time or
times.

    

    28.  Counterparts.

    

    This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.

    

    29.  Governing
Law.

    

    Except to the extent preempted by
federal law, this Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to contracts
entered into and to be performed entirely within the State of New York by
parties all of whom are citizens and residents of the State of New
York.

    

    30.  Headings
and Construction.

    

    The headings of sections in this
Agreement are for convenience of reference only and are not intended to qualify
the meaning of any section. Any reference to a section number shall refer to a
section of this Agreement, unless otherwise stated.

    

    31.  Entire
Agreement; Modifications.

    

    This instrument contains the entire
agreement of the parties relating to the subject matter hereof, and supersedes
in its entirety any and all prior agreements, understandings or representations
relating to the subject matter hereof. No modifications of this Agreement shall
be valid unless made in writing and signed by the parties hereto.

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    32.  Non-Duplication.

    

    Any compensation or benefits provided
to the Executive by any direct or indirect subsidiary of the Company or the Bank
shall be applied to offset the obligations of the Company and the Bank hereunder
in such manner as the Company and the Bank may mutually agree, it being intended
that this Agreement set forth the aggregate compensation and benefits payable to
the Executive for all services to the Company, the Bank and all of their
respective direct or indirect subsidiaries and affiliates.

    

    33.  Required
Regulatory Provisions.

    

    Notwithstanding anything herein
contained to the contrary, any payments to the Executive by the Bank or the
Company, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. Section 1828(k), and any regulations promulgated
thereunder.

    

    In Witness Whereof, the Bank and the
Company have caused this Agreement to be executed and the Executive has hereunto
set his hand, all as of the day and year first above written.

    

    

    ____________________________________

               Thomas
M. O’Brien

    

    

    State Bancorp, Inc.

    

    Attest:

    

    By:
_________________                                                                           
By: _______________________________

    Name:
Janice
Clark                                           
           
                                
Name: Patricia M. Schaubeck

    Title:
Secretary                                                                           Title: General
Counsel

    

    

    State Bank of Long Island

    

    Attest:

    

    By:
__________________                                                                       
By: ________________________________.

    Name:
Janice
Clark                                                      
                                
Name: Patricia M. Schaubeck

    Title:
Secretary                                                                           Title: General
Counsel

     

     

    
      
        
        

      

      
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    EXHIBIT
A

    

    Prudential
Insurance Company of America. Serve as Independent Trustee of the $65B mutual
fund complex.

    

    Catholic
Healthcare System of NY. Serve as trustee and finance chair. Catholic Healthcare
Foundation, Inc. Serve as trustee of affiliated charitable
foundation.

    

    

    Niagara
University. Member of the Board of Trustees

    

    

    Friendly
Sons of St. Patrick in the City of New York. 1st Vice President.

    

    

    Galway
Bay Foundation, Inc. President & Founder of personal charitable foundation
specializing in supporting programs for the emotionally/physically challenged,
affordable housing and educational institutions.

    

    

    Jacob
Marley Foundation, Manhasset, NY. Secretary/Treasurer of foundation created by
close friend lost on Sept. 11, 2001. Dedicated to working with disadvantaged
populations in Manhasset, Great Neck and Bayshore, LI.

     

    
      
        
        

      

      
        21

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