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•	Increased Income: For 2012, the Company reported its fifth consecutive year of record net income.

•	Asset Quality: We continue to have excellent asset quality, as measured by low levels of charge-offs and non-performing assets.

•	Shareholder Value: Shareholders' equity grew to a record high. In addition, cash dividends paid to shareholders increased 3% in 2012, and we distributed a 2% stock dividend in September.

•	Insurance Growth: We have seen continued growth in insurance commission income due to acquisitions of insurance agencies in recent years. This has been an important strategy for us in this historically low interest rate environment.

•	Industry Recognition: Our commitment to excellence was acknowledged in 2012 by several national banking industry publications, including Bank Director Magazine, American Banker Magazine and the ABA Banking Journal.

•	Expansion: We expanded the Glens Falls, New York, headquarters of Glens Falls National Bank and Trust Company to enhance operational efficiencies, demonstrate our commitment to the community and improve the level of service we provide to our customers.

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1.	The election of four Class C Directors to three-year terms and one Class A Director to a one-year term.

2.	Approval of the Arrow Financial Corporation 2013 Long Term Incentive Plan to succeed and replace the existing similar plan.

3.	Approval of the Arrow Financial Corporation 2013 Directors' Stock Plan to succeed and replace the existing similar plan.

4.	Ratification of the selection of KPMG LLP as our independent registered public accounting firm for 2013.

5.	Any other business that may properly come before the meeting, or any adjournment or postponement thereof.

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•	Vote Recommendation: Your Board recommends you vote “For” each of the Board's five nominees: Class C Directors Gary C. Dake, Mary-Elizabeth T. FitzGerald and Thomas L. Hoy; Class C Director nominee Colin L. Read; and Class A Director Thomas J. Murphy.

•

Gary C. Dake, age 52, has been a Director of the Company since 2003 and a Director of the Company's subsidiary bank, Saratoga National Bank and Trust Company (“SNB”), since 2001. Mr. Dake is President of Stewart's Shops Corp., a large, privately owned, vertically integrated, multi-state convenience store chain, and of Stewart's Processing Corp., an affiliated dairy manufacturing and processing company. Mr. Dake holds a bachelor's degree from St. Lawrence University. He has extensive experience with large business operations as a result of his management of Stewart's, which also gives him a unique and extensive understanding of the many communities the Company serves.

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•

Mary-Elizabeth T. FitzGerald, age 73, has been a Director of the Company and a Director of GFNB since 2001. Ms. FitzGerald was the Executive Director of the Tri-County United Way from 1986 to 1998. She has also served as Director of Medical Records, Consultant and Accreditation Coordinator for hospitals in each of the areas in which she has lived and as Quality Assurance Coordinator at the Adirondack Professional Standards Review Organization. Ms. FitzGerald received a bachelor's degree from Colby-Sawyer College and Massachusetts General Hospital. She has a strong background in professional standards and multi-board trustee experience and service with several local community organizations.

•

Thomas L. Hoy, age 64, has been a Director of the Company since 1996 and has served as Chairman since 2004. He was President of the Company from 1996 to June 30, 2012, and CEO from 1997 until his retirement on December 31, 2012. In addition, Mr. Hoy has served as a Director of GFNB since 1994 and was President of GFNB from 1995 to June 2011. Mr. Hoy's nearly four-decade career with GFNB started in 1974 as a Management Trainee. He held various roles in GFNB's Trust and Investment Division before being named President in 1995. Mr. Hoy also was elected to serve on the Board of Directors of the Federal Home Loan Bank of New York beginning January 1, 2012. Mr. Hoy holds a bachelor's degree from Cornell University. His extensive expertise in the banking, investment and financial services industries will continue to be of great value to the Company.

•

Colin L. Read, PhD, age 53, has been a Director of GFNB since 2010. Dr. Read teaches banking and finance as a tenured full professor in the State University of New York system. He writes a weekly business column and a weekly regional history column for the Plattsburgh Press-Republican newspaper and is a regular contributor to Bloomberg's online magazine and American Bankers Association publications. Dr. Read has authored eight books on global finance and appears monthly on a regional PBS business and economics show. He has a PhD in economics from Queen's University, an MBA from the University of Alaska, a JD in law from the University of Connecticut, and a Master of Accountancy in Taxation from the University of Tulsa. His expertise in economics and understanding of the Plattsburgh area are key strengths.

•

Thomas J. Murphy, CPA, age 54, has been a Director of the Company since July 2012 and a Director of GFNB since July 2011; he is also President and CEO of the Company and GFNB. Mr. T. Murphy joined GFNB in 2004 as Manager of the Personal Trust Department after 16 years as a founding partner in CMJ, LLP, a Glens Falls certified public accounting firm. He was named President of GFNB in July 2011, President of the Company in July 2012, and CEO of both GFNB and the Company effective December 31, 2012. Prior to these appointments, he served in many banking, trust and corporate capacities, including as Manager of the GFNB Trust Department, Assistant Corporate Secretary, Corporate Secretary, Senior Trust Officer of GFNB and Cashier of GFNB. Mr. T. Murphy holds a bachelor's degree in Business Administration from Siena College. His 24 years of public accounting experience and more than eight years in various management positions with the Company and its subsidiaries provide valuable experience and expertise.

•

Elizabeth O'Connor Little, age 72, has been a Director of the Company and a Director of GFNB since 2001. She is a New York State Senator representing the 45th District since 2003. Prior to that, Senator Little served as a member of the New York State Assembly representing the 109th District from 1995 to 2002 and was the At-Large Supervisor on the Warren County Board of Supervisors from 1986 to 1991. Senator Little received a bachelor's degree from the College of St. Rose. Her organizational leadership skills and community involvement as a state politician as well as her experience on numerous state commissions and councils are key strengths. The vast majority of our bank branches and offices are located in Senator Little's District, which allows her a unique perspective on issues that affect the Company.

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John J. Murphy, age 61, has been a Director of the Company since 2007 and a Director of GFNB since 2003. Before his retirement on December 31, 2006, Mr. J. Murphy served as Executive Vice President, Treasurer and Chief Financial Officer (“CFO”) of the Company, and as Senior Executive Vice President and CFO of GFNB. He started his career with GFNB in 1973 as a Management Trainee and over the following three decades held various roles in the Credit Department and Accounting Division, including 23 years as CFO. Mr. J. Murphy has a bachelor's degree from Niagara University. His expertise in the banking, investment and financial services business and his long tenure with the Company and GFNB are valuable strengths.

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•

Richard J. Reisman, DMD, age 67, has been a Director of the Company and a Director of GFNB since 1999. Dr. Reisman is an oral and maxillofacial surgeon and serves as Chairman of the Section of Dentistry at Glens Falls Hospital, a regional medical center. Dr. Reisman received a bachelor's degree from the University of Massachusetts-Amherst and a DMD from Harvard University. He also completed an oral surgery residency at Mt. Sinai Hospital in New York City. Dr. Reisman is a member of the New York State Board for Dentistry. His oral surgery practice in our community and his service at Glens Falls Hospital provide him with both small business acumen and large business organization experience and expertise.

•

John J. Carusone, Jr., age 71, has been a Director of the Company since 1996 and a Director of SNB since its formation in 1988. Mr. Carusone is an attorney with the law firm Carusone & Carusone, located in Saratoga Springs, New York. He received a bachelor's degree from Hamilton College and a law degree from Albany Law School. Mr. Carusone has practiced law in the greater Saratoga Springs community for over 40 years and has a strong community knowledge base.

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Michael B. Clarke, age 66, has been a Director of the Company and a Director of GFNB since 2006. He previously served as a Director of the Company from 1988 to 1999 and as a Director of GFNB from 1987 to 1999, before temporarily relocating out of the area. Mr. Clarke is a Management Consultant with Bradshaw Consulting, Inc. in Lake George, New York, and has extensive experience in the business of cement manufacturing. Prior to his current position, he served as President of Glens Falls Cement Company from 1985 to 1999, President and CEO of Lone Star Industries in Indiana from 1999 to 2004, and President of the Midwest Division of Buzzi Unicem, USA, from 2004 to 2005. Mr. Clarke has a bachelor's degree from McGill University and a master's degree from Harvard University. In addition to his executive experience at manufacturing companies, Mr. Clarke has a finance background and a longstanding historical knowledge of the Company.

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David G. Kruczlnicki, age 60, has been a Director of the Company and a Director of GFNB since 1989. Mr. Kruczlnicki has served since 1989 as President and CEO of Glens Falls Hospital, a regional medical center employing over 3,000 people. He received a bachelor's degree from Siena College and a master's degree from Rensselaer Polytechnic Institute. Mr. Kruczlnicki serves on the boards of directors of several health-related affiliates of Glens Falls Hospital as well as Pruyn & Company, a local, privately owned paper company. Mr. Kruczlnicki has extensive experience as a health care executive overseeing finance and human resources and as a director at numerous private and regional organizations.

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David L. Moynehan, age 67, has been a Director of the Company since 1987 and a Director of GFNB since 1986. Mr. Moynehan is the President and owner of Riverside Gas & Oil Co., Inc., a motor fuels distributor and convenience store retailer, and of Riverside Real Estate Assoc., Inc., a related real estate holding company. He holds a bachelor's degree from Providence College and an MBA from the University of Denver. Mr. Moynehan has a longstanding historical knowledge of the Company. He has also served on several local and regional economic development boards and, with his chain of convenience stores, has a thorough knowledge of the communities the Company serves.

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(a)	In 2012, $9,500 of the basic annual retainer for service as a Director of the Company and $5,000 of the basic annual retainer for service as a Director of the subsidiary banks was payable in shares of the Company's common stock.

(b)	Per meeting attended.

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•	The basic annual retainer fees payable to non-Management Directors in 2013 for serving on the Company Board and the Boards of the subsidiary banks will be the same in 2013 as in 2012.

•	The supplemental annual retainer fee amounts payable to those non-Management Directors who also serve as Chairs of Committees of the Boards of the Company and subsidiary banks also will remain the same in 2013 as in 2012.

•	A supplemental annual retainer fee in the amount of $9,000 will be payable to those non-Management Directors who serve as Chair of the Company's Board or as Chair of either subsidiary bank Board in 2013.

•	The meeting fees payable to non-Management Directors of the Company and its subsidiary banks for attendance at Board meetings will increase $50 per meeting over the meeting fees paid to them for attendance at such meetings in 2012.

•	The meeting fees payable to non-Management Directors for attendance at Committee meetings in 2013 will remain the same as they were in 2012.

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(a)

Represents that portion of the listed Director's total Directors' fees that were payable in shares of Company stock. In 2012, this amount consisted of $9,500 of each Director's basic annual retainer fee for serving as a Company Director and $5,000 of each Director's basic annual retainer fee for serving as a Director of one the Company's subsidiary banks. For purposes of determining the number of shares distributable to Directors, the shares of the Company's common stock are valued at the market price of such shares on the date of distribution. Each Director received approximately 599 shares in accordance with FASB ASC TOPIC 718. These shares were distributed to each Director in two installments: approximately 304 shares at a per share price of $23.86 on May 31, 2012, and approximately 295 shares at a per share price of $24.59 on November 29, 2012.

(b)	Stock options are valued in accordance with FASB ASC TOPIC 718. Each listed Director received 1,000 stock options on January 25, 2012, at an exercise price of $25.42, the closing price of our common stock on the date of grant. Options vest ratably over a period of four years following the date of grant.

(c)	Mr. Kruczlnicki deferred receipt of $15,450 of such amount under the Directors' Deferred Compensation Plan.

(d)	Dr. Reisman deferred receipt of $24,800 of such amount under the Directors' Deferred Compensation Plan.

(e)	Represents interest earned during 2012 on the principal balance in the Director's account under the Directors' Deferred Compensation Plan.

(f)	Represents consulting fees earned and paid under his consulting agreement. See “Mr. J. Murphy Consulting Agreement” in the Voting Item 1 – Election of Directors section.

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•	Vote Recommendation: Your Board recommends you vote “For” the Arrow Financial Corporation 2013 Long Term Incentive Plan.

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•	Vote Recommendation: Your Board recommends you vote “For” the new 2013 Directors' Stock Plan.

•	Vote Recommendation: Your Board recommends you vote “For” the ratification of the independent registered public accounting firm, KPMG LLP, as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2013.

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•

Director Carpenter is Chairman of the Board of The Northeast Group, a printing, warehousing and distribution company located in Plattsburgh, New York, whose subsidiary Northeast Printing and Distribution Company owns and publishes Strictly Business, a monthly business magazine. During 2012, GFNB made $34,257 in payments to Northeast Printing and Distribution Company for printing and $11,525 to Strictly Business for advertising. The Board determined that these payments were below the objective limits for independence set forth in NASDAQ's® listing standards and that the payments were not material in amount and, therefore, did not compromise the independence of Mr. Carpenter.

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•

Director Carusone is an attorney at the local law firm Carusone & Carusone. During 2012, the Company's subsidiary bank, SNB, made $5,000 in payments to Carusone & Carusone as a retainer for legal services to be rendered by the firm to or on behalf of SNB. Additionally, Mr. Carusone received payments from certain SNB loan customers in connection with his representation of SNB at loan closings. The Board determined that the payments received by Mr. Carusone were well below the objective limits for independence set forth in NASDAQ's® listing standards, were not material in amount and did not compromise the independence of Mr. Carusone.

•

Director Dake is President of Stewart's Shops Corporation, a large, privately owned business that owns and operates a regional chain of convenience stores. During 2012, our subsidiary banks made $189,977 in payments to Stewart's Shops for rent of leased space and other immaterial purchases. The Board determined that these payments were below the objective limits for independence set forth in NASDAQ's® listing standards and were not material to the Company, its subsidiary banks, or Stewart's Shops, and, therefore, did not compromise the independence of Mr. Dake. See “Related Party Transactions” later in this section for further information on these transactions.

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•	The Audit Committee reviews financial risk exposures through monitoring the independence and performance of the Company's internal and external auditors, and the quality and integrity of the Company's financial reporting process and systems of internal controls.

•	The Governance Committee focuses on the management of risks associated with Board organization, membership and structure, through its nomination process and Director independence assessment, its review of the organizational and governance structure of the Company, and its periodic review of Board practices and policies concerning corporate governance and the Board's performance.

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The Compensation Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs through its review of all aspects of the compensation paid to Executive Officers, Directors and employees in general. The Committee assesses the ways, if any, in which this compensation may, as an unintended consequence, incentivize action or activities that expose the Company to inappropriate risks, and it recommends to the Board ways to modify those compensation practices appropriately.

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(a)	The use of an asterisk (“*”) denotes a percentage ownership of less than 1%.

(b)	Includes 16,850 shares held directly by Mr. Clarke's wife in a revocable trust. These shares are pledged for a loan arrangement.

(c)	Includes 72 shares held as custodian for Mr. Goodemote's child.

(d)	Includes 2,938 shares held directly by Mr. Hoy's wife, 2,460 shares held by Mr. Hoy's wife in an individual retirement account and 3,346 shares held in a Hoy family irrevocable trust as to which Mr. Hoy is grantor.

(e)	Includes 8,200 shares pledged as security for a loan arrangement.

(f)	Includes 25,313 shares held jointly by Mr. J. Murphy with his wife.

(g)	Includes 501 shares held directly by Dr. Reisman's wife.

(h)	The total excludes Mr. O'Conor as a result of his retirement in December 2012 and Mr. Read since he is a Director Nominee.

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(a)	Percentage based on 12,141,799 shares of our common stock outstanding on March 4, 2013.

(b)

The listed number of our shares and percentage ownership of the Company's common stock by BlackRock, Inc. is based solely upon a Schedule 13G, Amendment No. 3, filed by BlackRock, Inc. on February 6, 2013, with the SEC. In that amendment, BlackRock, Inc. reported that as of December 31, 2012, it had sole and dispositive voting power over all of these shares. BlackRock, Inc. is an asset management company that provides asset management services to numerous mutual funds.

(c)

The listed number of our shares and percentage of the Company's common stock by The Vanguard Group is based solely upon a Schedule 13G filed by The Vanguard Group on February 13, 2013, with the SEC. In that filing, The Vanguard Group reported that as of December 31, 2012, it had sole power to vote 15,273 shares, sole power to dispose of 685,256 shares and shared power to dispose of 13,873 shares. The Vanguard Group is an asset management company that provides asset management services to numerous mutual funds.

•	Net income for the year was $22.2 million.

•	Assets grew by $60.1 million to $2.02 billion.

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•	Nonperforming assets were only 0.45% of total assets as of December 31, 2012.

•	Net loan charge-offs represented just 0.05% of average loans outstanding for the year.

•	Insurance commission income rose 11.8%.

•	A 2% stock dividend was distributed to our shareholders during 2012.

•	Cash dividends increased 3%.

•	Shareholders' equity reached a record high of $175.8 million at year-end, up 5.7%.

•	Book value per share increased 5.4%.

•

Short-Term Incentive Bonus Awards: At year-end 2012, the Compensation Committee made determinations regarding the short-term incentive bonus awards payable to Messrs. Hoy and O'Conor for 2012 under the Company's Short-Term Incentive Plan (“STIP”). In light of the personal year-end tax and financial considerations of Messrs. Hoy and O'Conor and upon a review of the estimated overall results of the Company for 2012, as well as the estimated performances for 2012 on the particular Company and individual performance targets established for Messrs. Hoy and O'Conor under the STIP, the Compensation Committee determined that estimated payments be made to each of them in December 2012 instead of in January 2013, as would otherwise have been typical. Accordingly, under the STIP Mr. Hoy received a December bonus payment of $153,000 and Mr. O'Conor received a December bonus payment of $42,000. Additional payments were approved for Messrs. Hoy and O'Conor in January 2013 based on the final results of the Company's performance, when the other short-term incentive bonus awards were approved by the Compensation Committee in the amounts of $6,104 and $2,243, respectively. In total, Mr. Hoy's bonus approximated 95.8% of his 2012 annual incentive target opportunity under the STIP and Mr. O'Conor's bonus payment approximated 99.1% of his 2012 annual incentive target opportunity under the STIP. In January 2013, the Compensation Committee determined the short-term incentive bonus awards for fiscal 2012 payable to the remaining NEOs, which averaged 98.8% of their individual target bonuses. All of these bonus awards under the STIP

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•

Special SERP Award: Upon Mr. Hoy's retirement as CEO at year-end 2012, he was entitled to receive certain benefits under the Company's nonqualified Select Executive Retirement Plan (“SERP”). The Compensation Committee and Board determined many years prior to 2012 that Mr. Hoy would be entitled to receive under the SERP a “makeup” benefit payment upon retirement equal to (i) the total benefit he would have received under the Company's qualified defined benefit retirement plan (“Retirement Plan”) absent the limitations in the Internal Revenue Code on the maximum amount of compensation payable to senior executives under such plan, minus (ii) the total amount he would actually receive under the Retirement Plan. Subsequently, in 2005, the Compensation Committee and the Board determined that, as an additional benefit payable to Mr. Hoy under the SERP upon his retirement, the makeup payment then payable to him, described above, would be calculated as though he had rendered three additional years of service to the Company upon retirement, in addition to the years of service actually rendered by him at such time. The present value of the makeup benefit as defined in accordance with this amendment, payable to Mr. Hoy upon his retirement, was calculated by the Company at year-end 2012 to be approximately $1,630,000. Under the SERP, this amount was payable to him in the form of an annuity, joint or separate, at his election. Mr. Hoy elected to receive the makeup benefit in the form of a joint-and-fifty-percent-survivor monthly annuity. Based upon Mr. Hoy's age and circumstances, this annuity was calculated by the Company at year-end as generating an annuity of approximately $8,900 per month, commencing on his retirement and ending on the death of the last to survive of Mr. Hoy and his spouse.

•

Consulting Agreements: In connection with the retirements of Messrs. Hoy and O'Conor at year-end 2012 and to assist in the transition of our leadership, the Company, upon approval thereof by the Compensation Committee and the Board, entered into a three-year consulting agreement with Mr. Hoy and a one-year consulting agreement with Mr. O'Conor. The agreement with Mr. Hoy is described in “Mr. Hoy Consulting Agreement” within the Voting Item 1 – Election of Directors section.

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Hedging and Pledging Policies: All NEOs are prohibited from engaging in any speculative transaction designed to hedge or offset any decrease in market value of the Company's securities, including hedging of the Company's common stock. The Company also restricts the pledging of any Company stock by requiring NEOs to obtain Board approval prior to entering into any such agreement in a financial arrangement.

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•	Clawback Policy: In 2012, the Compensation Committee approved a Clawback Policy for its Executive Officers that states any incentives paid on the achievement of financial or operational goals that subsequently are deemed by the Company to be inaccurate, misstated or misleading shall be recoverable from such Officer by the Company.

•	Consultant Independence: The Compensation Committee periodically engages an independent compensation consultant, historically Pearl Meyer & Partners, LLC.

•	Double-Trigger Mechanism: Employment agreements for all NEOs include a “double-trigger” mechanism for change of control payments, i.e., to collect, the NEO must also be actively or constructively terminated.

•	Stock Ownership Guidelines: The Company has stock ownership guidelines for NEOs.

•	No Tax Gross-ups: The Company never pays any taxes that are otherwise owed by its Executive Officers.

•	No Stock Option Repricing: The Company has never repriced stock options. The 2008 LTIP, as well as the 2013 LTIP subject to shareholder approval under Item 2 of this Proxy Statement, prohibits repricing without shareholder approval.

•	Risk Assessment: The Company implements a robust risk oversight and assessment framework to monitor our compensation programs for excessive risk to the Company or its shareholders.

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•	(1) Company Performance: The Company's performance is assessed on a weighted combination of five financial performance measures, which the Compensation Committee believes provide an appropriate portfolio of performance goals and a balanced perspective while ensuring sound risk management. The following table shows the performance measure and goal weighting for 2012.

•	(2) Individual Performance: The Compensation Committee performs an overall assessment of the NEO's performance based on subjective and objective criteria weighted toward Company and team-oriented goals. The Compensation Committee relies on input from the CEO for the other NEOs.

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(3) Relative Weighting of Corporate and Individual Performance: The third and final step in assessing a NEO's ultimate performance measure for purposes of the short-term incentive bonus awards is the determination by the Compensation Committee of the relative weighting to be assigned to Company performance versus individual performance for that particular NEO. Typically, the relative weighting for each NEO is based on his particular position with the Company. For 2012, Messrs. Hoy and T. Murphy were evaluated exclusively, or 100%, on the Company's performance, and Messrs. Goodemote, DeMarco and O'Conor were evaluated 50% on the Company's performance and 50% on individual performance.

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•

Retirement and Select Executive Retirement Plans: The Company provides a defined benefit retirement plan, an ESOP and a non-matching Retirement Plan to all eligible full-time employees. Additionally, the Compensation Committee may permit NEOs to participate in the SERP. There are two components of the SERP: (i) a “makeup” benefit that is designed to provide participants with a level of benefit that they would have received under the Retirement Plan if there were no limitations on eligible compensation in the Internal Revenue Code, and (ii) additional benefits that are granted by the Compensation Committee on a discretionary basis to provide retirement benefits that appropriately reflect the Executive's service and contribution to the Company. Of our NEOs in 2012, Mr. Hoy participated in both SERP components and Mr. O'Conor participated in the “makeup” benefit only. The Company's retirement plan and SERP are discussed further in “Pension Benefits Table” within the Executive Compensation section.

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Deferred Compensation Plan: The Company maintains a nonqualified deferred compensation plan for NEOs, under which they may elect to defer some or all of their salary and bonus until retirement. The deferred amounts accumulate interest at a rate equal to the highest rate currently being paid on individual retirement accounts by GFNB. Although all of the NEOs were eligible to participate, Messrs. Hoy and O'Conor were the only active participants of that group during 2012. This deferral plan is further discussed in “Nonqualified Deferred Compensation Table” within the Executive Compensation section.

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•	Executive Perquisites: The Company provides very limited perquisites to its NEOs. In 2012, Messrs. Hoy, T. Murphy, Goodemote, O'Conor and DeMarco each received the personal use of a company automobile. Messrs. T. Murphy, Goodemote and DeMarco also received the reimbursement of country club dues. No other perks were provided.

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Employment Agreements with Named Executive Officers: Historically, the Company has entered into employment agreements or limited change of control agreements with its NEOs. In 2012, the Company had employment agreements with Messrs. Hoy and O'Conor that ended upon their retirements at year-end. The Company currently has three-year employment agreements with Messrs. T. Murphy and Goodemote and a two-year agreement with Mr. DeMarco. The Compensation Committee reviews and approves the key terms of all employment agreements on an annual basis. At its January 2013 meeting, the Committee recommended and the Board approved a renewal of the agreements with Messrs. T. Murphy, Goodemote and DeMarco effective February 1, 2013.

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(a)	Messrs. Hoy and O'Conor each requested no stock option grants be awarded to them due to their substantial individual holdings of Company stock and existing outstanding unexercised options.

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•	Our compensation program contains an appropriate balance of fixed and variable compensation.

•	The Company offers incentive compensation in multiple forms, including, historically, the award of stock options that are tied to multi-year performance.

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Our STIP contains both a threshold and maximum payment, protecting the Company from the extreme levels of risk that accompany unlimited upside incentive compensation programs and inappropriate pay and performance alignment. Although there is a formula for determining the dollar amount of the annual STIP bonus awards, the Compensation Committee retains full discretion for making STIP bonus awards to all our NEOs. There have been years in which these awards would have been made based on the formula but were not given to the NEOs.

•	The Company has share ownership guidelines that further promote long-term thinking and “skin in the game.”

•	Our benefits programs are competitive with the market and provide for reasonable base line levels of health, welfare and security, further enhancing the risk-mitigating aspects of our overall program.

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•	Summary Compensation

•	Grants of Plan-Based Awards

•	Outstanding Equity Awards at Fiscal Year-End

•	Option Exercises and Stock Vested

•	Pension Benefits

•	Nonqualified Deferred Compensation

(a)	Represents a one-time cash bonus payment for Mr. DeMarco in connection with his promotion to CEO of SNB on December 31, 2012. Mr. DeMarco has agreed that if he terminates his employment from the Company and its affiliated group without

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(b)

This column sets forth the dollar value of option awards granted to each of the NEOs under the 2008 LTIP for each of the listed years, calculated in accordance with FASB ASC TOPIC 718. The estimated value of each stock option granted in 2010 was $6.62 per option share (all grants made on January 27, 2010); the estimated value of each stock option granted in 2011 was $6.43 per option share (all grants made on January 26, 2011); and the estimated value of each stock option granted in 2012 was $6.13 per option share (all grants made on January 25, 2012), in each case using the Black-Scholes model to estimate fair value. All options granted in 2012 to the NEOs were granted at an exercise price of $25.42, the closing price of our common stock on the date of grant. All stock options vest ratably in equal installments over the first four anniversaries following the date of grant.

(c)

This column sets forth the short-term incentive bonus payments made to each NEO under the Company's STIP for each of the listed years, based on the financial performance of the Company, strategic Company results and individual performance factors during that year. STIP amounts payable for a given year are generally paid in January of the succeeding year. However, in light of the personal year-end tax and financial considerations of Messrs. Hoy and O'Conor, the Compensation Committee approved estimated short-term incentive bonus payments to each of them in December 2012. Additional payments were approved for Messrs. Hoy and O'Conor in January 2013 based on the final results of the Company's 2012 fiscal year performance.

(d)

This column sets forth the actuarial increase during each of the listed years in the present value of the NEO's retirement benefits under qualified pension plans and nonqualified deferred compensation plans established by the Company that cover such NEO, determined using interest rate, mortality rate and other assumptions consistent with those used in the Company's financial statements. The increase in present value of retirement benefits reported for each of the NEOs, other than Mr. Hoy, for 2012 includes: (i) under the Company's Employees' Pension Plan (“Pension Plan”), $17,790 for Mr. T. Murphy, $31,486 for Mr. Goodemote, $41,542 for Mr. DeMarco and $55,949 for Mr. O'Conor, and (ii) under the Company's SERP, $7,304 for Mr. O'Conor. For Mr. Hoy, the present value of his retirement benefits under the Pension Plan decreased by $168,959 in connection with his request to be paid a lump sum payout for the accumulated benefit thereunder in two installments. The first installment was paid on December 31, 2012, the date of his retirement, in the amount of $1,176,560, and the second will be paid in December 2013. As discussed in “Key Compensation Decisions and Actions” earlier in this section, the Compensation Committee approved an additional benefit under the SERP for Mr. Hoy, which resulted in an additional annuity benefit for him of approximately $342,000, leading to a total increase in the present value of his SERP of $621,866. In accordance with SEC rules, the loss in present value of Mr. Hoy's Pension Plan benefit has not been used to offset the positive change in present value associated with his SERP.

(e)	All Other Compensation includes the following components for 2012:

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(a)	The threshold award under the STIP is not the minimum short-term incentive bonus payment. The Compensation Committee may choose not to pay a short-term incentive bonus award under the STIP to any covered person, including a NEO, even if applicable performance thresholds or targets have been met for the year in question.

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(a)	Includes all exercisable and unexercisable options, whether “in-the-money” or “out-of-the-money” at year-end. “Out-of-the-money” options are options that have an exercise price that exceeds the current market price of the Company's common

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(b)	All stock options granted after December 21, 2005, vest in equal installments over the first four anniversary dates after the date of the grant.

(a)	Represents the total number of shares subject to stock options that the NEO exercised during the year.

(b)	Represents the “spread” of options on the date of exercise, i.e., the difference between the dollar value of the shares of common stock as to which options were exercised, based on the market price of our common stock on the date of exercise, and the exercise price (purchase price) of such shares under the options.

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(a)	In connection with Mr. Hoy's retirement on December 31, 2012, he received a distribution from his Pension Plan of one-half of his accumulated benefit on December 31, 2012, in the amount of $1,176,560. The remaining amount of $1,176,560 will be paid to Mr. Hoy in December 2013.

(b)

Includes an additional annuity benefit having an approximate present value of $342,000 granted to Mr. Hoy by the Compensation Committee under the SERP as described under “Key Compensation Decisions and Actions” in the Compensation Discussion and Analysis section. The entire SERP benefit granted to Mr. Hoy with a value of $2,048,102 at December 31, 2012, is paid by an annuity and is not eligible for a lump sum cash payout.

(a)	Represents amounts deferred during 2012 under the Officers' Deferral Plan of a portion of salary otherwise payable. The total salary amount, including the deferral, is listed in the Salary column of the “Summary Compensation Table” in this section.

(b)	Represents amounts deferred during 2012 under the Officers' Deferral Plan of the 2011 STIP awards otherwise payable. The total incentive payment amount, including the deferral, is listed in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” in this section.

(c)	Represents accrued interest during 2012 on amounts previously deferred under the Officers' Deferral Plan.

(d)	Represents the 2012 year-end balance of the Executive's account under the Officers' Deferral Plan.

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(a)	Messrs. T. Murphy, DeMarco and Goodemote will each receive a lump-sum payment equal to the greater of the amount of (i) their base salary payable during the remaining term of the agreement or (ii) one year's base salary.

(b)	Reflects accelerated vesting of stock options.

(c)	For Mr. DeMarco, represents $1,286 of ESOP account value which is payable in a lump sum.

(d)	Represents the projected cost for 24 months for medical and dental insurance coverage under the Company's fully insured medical and self-insured dental plans, assuming continued cost-sharing by the NEO, plus continued premium payments for 24 months of term life insurance and split dollar insurance policies.

(e)

Messrs. T. Murphy, DeMarco and Goodemote will each receive an amount payable in installments or, in the event of unforeseeable emergency, in a lump-sum equal to, for Messrs. T. Murphy and Goodemote, 2.99 times their average annual taxable compensation for the five years preceding the event, and in the case of Mr. DeMarco, 1.99 times such five-year average, in each case, adjusted downward to reflect any other “change of control” payment or benefits they might receive under other compensatory arrangements then in effect, which would also include a downward adjustment as a result of

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(a)	Administrator means that entity charged with administration of the Plan pursuant to Section 3, which shall be either the Committee or the Board, as provided in Section 3.

(b)	Award means any grant of Option(s), Restricted Stock, Restricted Stock Unit(s), Performance Unit(s) or Performance

(c)	Award Agreement means a written agreement evidencing an Award under the Plan as further defined in Section 12.

(d)	Board means the Board of Directors of the Company.

(e)	Change of Control means:

(i)	The acquisition by one person, or more than one person acting as a group, of ownership of Stock that, together with Stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the Stock of the Company;

(ii)	The acquisition by one person, or more than one person acting as a group, of ownership of Stock that, together with Stock acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group, constitutes 30% or more of the total voting power of the Stock of the Company;

(iii)	A majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or

(iv)

One person, or more than one person acting as a group, acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group) assets from the Company that have a total gross fair market value (determined without regard to any liabilities associated with such assets) equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

(f)	Code means the Internal Revenue Code of 1986, as amended and in effect from time to time.

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(g)	Committee means the Compensation Committee of the Board, any subcommittee thereof duly designated by the Committee under Section 3 to perform certain duties of the Committee under the Plan, or any successor to such committee that is charged by the Board with performance of the duties of the Committee hereunder.

(h)	Company means Arrow Financial Corporation, a New York corporation.

(i)	Consultant means any individual other than an Employee who has been retained to render consulting or advisory services to the Company or any Subsidiary.

(j)	Date of Grant for any Award granted under the Plan means the date the Administrator formally determines to grant such Award, at a meeting duly called and held or by written action of the Administrator.

(k)	Director means any director of the Company or any Subsidiary who is not also an Employee of the Company or any Subsidiary, but shall not include any individual whose title includes the word “director” but who does not possess all powers possessed by a director as a matter of law, as would typically be the case, for example, for an honorary, advisory or emeritus director.

(l)	Disability means permanent and total disability as defined in Section 22(e)(3) of the Code, as determined by the Administrator in good faith upon receipt of and in reliance on sufficient competent medical advice.

(m)	Employee means any employee (including any officer or Director who is also an employee) of the Company or any Subsidiary.

(n)	Exercise Price of an Option means the purchase price per share of Stock upon exercise of the Option as specified in the Award Agreement, subject to adjustment as provided in Section 13.

(o)	Fair Market Value of the Stock as of any particular date means the fair market price per share of Stock for such date, determined in the manner specified from time to time by the Administrator, taking into consideration applicable legal requirements and prevailing regulatory and industry standards.

(p)	Option means a right granted under this Plan to purchase Stock at the Exercise Price for a specified period of time and subject to specified conditions; such an Option may be either an Incentive Stock Option within the meaning of Section 422 of the Code or a Nonqualified Stock Option, not qualifying under Section 422 of the Code.

(q)	Participant means any Employee or Consultant designated by the Committee or any Director designated by the Board to receive an Award under the Plan.

(r)	Performance Award means any Award of Performance Shares or Performance Units to a Participant under the Plan, pursuant to which, upon the satisfaction of predetermined Company or individual performance goals and/or objectives over the designated Performance Period, cash or shares of Stock, or a combination thereof, shall be paid or payable to the Participant.

(s)	Performance Goal shall have the meaning set forth in Section 11(a).

(t)	Performance Period means the period during which the performance of the Company or an individual Participant will be measured for purposes of determining the Stock or cash ultimately payable to the Participant, as set forth in and subject to the Performance Award granted to the Participant under the Plan.

(u)	Performance Share means a share of Stock subject to a Performance Award granted to a Participant under the Plan, which share, or the cash value or increase in the cash value of which share, may be payable to the Participant, in cash or stock, or a combination thereof, at or after the end of the Performance Period, depending upon the satisfaction of predetermined Company or individual goals.

(v)	Performance Unit means a unit subject to a Performance Award granted to a Participant under the Plan, which unit, or the cash value or increase in the cash value of which unit, may be payable to the Participant, in cash or stock, or a combination thereof, at or after the end of the Performance Period, depending upon the satisfaction of predetermined Company or individual goals.

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(w)	Period of Restriction means the period during which any Restricted Stock or a Restricted Stock Unit awarded under the Plan is restricted pursuant to Section 10.

(x)	Permitted Transferee means any person to whom an Award has been transferred pursuant to Section 14(b).

(y)	Restricted Stock means shares of Stock awarded to a Participant under the Plan, which shares during a specified Period of Restriction are both subject to certain restrictions on transfer and subject to forfeiture, as specified in Section 10.

(z)	Restricted Stock Unit means a right to receive a designated number of shares of Stock at some future date or dates following a Period of Restriction, which shares during such period are both subject to certain restrictions on transfer and subject to forfeiture, as specified in Section 10.

(aa)

Retirement means (i) for an Employee, any retirement where the employee is eligible for normal or early retirement benefits under the terms of the Company's principal retirement plan in effect at such time, (ii) for a Consultant, the termination of the Consultant's period of service under one or more continuous agreements with the Company or its Subsidiaries, and (iii) for a Director, the termination of such Director's continuous period of service as a Director, other than, in each case, any such termination for cause.

(ab)	Service Period shall have the meaning set forth in Section 11(e).

(ac)	Stock means the common stock, par value $1.00 per share, of the Company.

(ad)	Subsidiary means a subsidiary corporation of the Company as defined in Section 425 of the Code.

(ae)

Taxable Event means an event requiring Federal, state or local tax to be withheld with respect to an Award granted hereunder, including under usual circumstances the exercise of a Nonqualified Stock Option, the expiration of a Period of Restriction with respect to Restricted Stock, the delivery of shares of Stock subject to a Restricted Stock Unit, the delivery of shares of Stock, cash or some combination thereof in satisfaction of a Performance Award, or the making by a Participant of an election under Section 83(b) of the Code with respect to any Award.

(af)

Termination Event means the termination of a Participant's service with the Company and its Subsidiaries including, without limitation, termination of service by virtue of the death, Disability or Retirement of the Participant. Leaves of absence required by law or otherwise granted by the Company to Employees and transfers of the employment or service of a Participant within the Company and its Subsidiaries as a group, or to a successor to the Company or a Subsidiary incident to a merger or similar business combination involving the Company or such Subsidiary, shall not constitute a Termination Event.

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(a)

Awards authorized for grant under the Plan include Incentive Stock Options, that is, “incentive stock options” intended to qualify under Section 422 of the Code, provided Incentive Stock Options may not be granted to Directors, Consultants or other persons not authorized to receive such Awards under the Code. Incentive Stock Options shall be Options to purchase shares of Stock at an Exercise Price established by the Administrator, i.e., the Committee, upon grant, which shall not be less than, but may be more than, one hundred percent (100%) of the Fair Market Value of the Stock as of the Date of Grant. Under no circumstances may the Exercise Price of any Incentive Stock Option granted under the Plan be less than the Fair Market

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(b)

The Committee shall establish upon grant of an Incentive Stock Option the period of time during which such Option may be exercisable by the Participant, provided that (i) no Incentive Stock Options will vest or first become exercisable, in whole or in part, prior to the date of one (1) year after the Date of Grant, except, if the Committee so provides, upon the earlier death, Disability or Retirement of the Participant or the earlier occurrence of a Change of Control, and (ii) no Incentive Stock Option will continue to be exercisable, in whole or in part, more than ten years after the Date of Grant. Subject to these limitations, the Committee may provide that full exercisability of such Option will be phased in and/or phased out over some designated period of time. Subject to subsection (b)(i), above, the Committee also may provide at any time that exercisability of an Incentive Stock Option is or will be accelerated, to the extent such Option is not already then exercisable, for such reasons and as of such times, including, if appropriate, upon the occurrence of such event or events (e.g., the death, Disability or Retirement of the Participant or a Change of Control), as the Committee may specify. Generally, exercisability of an Incentive Stock Option granted under the Plan is conditioned upon continued service of the Participant with the Company or its Subsidiaries, consistent with Section 422 of the Code, provided that the Committee may specify, upon its grant of an Incentive Stock Option or subsequently, that exercisability of such Option will continue for some designated period of time after a Termination Event for the Participant, which may vary depending upon the particular type of Termination Event. The maximum period of time for exercisability of an Incentive Stock Option after a Termination Event (which shall be the applicable period of time of exercisability after a Termination Event for each Incentive Stock Option granted under the Plan if the Committee does not specify otherwise), to the extent such Option was exercisable at the time of the Termination Event, is as follows: (x) if the Termination Event is not the death or Disability of the Participant, exercisability may be extended for a maximum of 3 months after the date of termination; (y) if the Termination Event is the Disability of the Participant, exercisability may be extended for a maximum of 12 months after the date of termination (unless the Participant dies within such 12-month period, in which event exercisability may be extended until the later of the date 3 months after the date of death or the last day of such 12-month period); and (z) if the Termination Event is the death of the Participant, exercisability may be extended until the date ten years after the Date of Grant. Notwithstanding the preceding sentence, in no event may any Incentive Stock Option granted under the Plan be exercised after the date ten years after the Date of Grant.

(c)

Upon exercise of an Incentive Stock Option, in whole or in part, the Exercise Price with respect to the number of shares as to which the Option is then being exercised may be paid by check or, if the Committee has so authorized (and subject to any conditions imposed by the Committee) and if the holder of the Option so elects, in whole or in part by delivery to the Company of shares of Stock then owned by the holder. Any holder-owned Stock to be used in full or partial payment of the Exercise Price shall be valued at the Fair Market Value of the Stock on the date of exercise. Upon such exercise, the Company shall issue the shares as to which an Incentive Stock Option has been exercised to the holder of the Option or the designee of such holder, evidenced by book entry or by delivery of a duly executed stock certificate. If so provided by the Committee upon the grant of such an Option, the shares of Stock issuable upon exercise thereof may be subject to certain restrictions upon their subsequent transfer or sale. In the event the Exercise Price is to be paid in full or in part by surrender of Stock, in lieu of actual surrender of shares of Stock by the holder, the Company may waive such surrender (under circumstances in which such waiver is consistent with the purposes and functioning of the Plan) and deem such shares to have been surrendered, and thereafter issue to or on behalf of the holder a number of shares equal to the total number of shares as to which the Option is then being exercised less the number of shares which absent such waiver would have been surrendered by the holder to the Company upon such exercise.

(d)	The Committee may require reasonable advance notice of exercise of an Incentive Stock Option, normally not to exceed three calendar days, and may condition exercise of such Option upon the availability of an effective registration statement or exemption from registration under applicable federal and state securities laws relating to the Stock being issued upon exercise.

(e)

Under no circumstances may the Committee make or approve “reload” grants of Incentive Stock Options under the Plan; that is, the Committee may not grant or provide for the grant of one or more Incentive Stock Options to any Participant under the Plan if the timing of such grant or the number of shares of Stock subject thereto is contingent upon or related to the coincident exercise by the Participant in a stock-for-stock exercise of one or more outstanding stock options previously granted to the Participant under this Plan or any other stock plans of the Company or any predecessor or successor of the Company. In addition, the Committee shall not, without the approval of the Company's shareholders, “reprice” any outstanding Incentive Stock Options previously granted under the Plan to a lower Exercise Price, or cancel any such

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(a)

Awards authorized for grant under the Plan include Nonqualified Stock Options, that is, Options that are not intended to qualify as “incentive stock options” under Section 422 of the Code. Such Nonqualified Stock Options shall consist of Options to purchase shares of Stock at an Exercise Price established by the Administrator upon grant, which Exercise Price shall not be less than, but may be more than, one hundred percent (100%) of the Fair Market Value of the Stock as of the Date of Grant. Under no circumstances may the Exercise Price of any Nonqualified Stock Option granted under the Plan be less than the Fair Market Value of the Stock on the Date of Grant.

(b)

The Administrator shall establish upon grant of a Nonqualified Stock Option the period of time during which such Option may be exercisable by the Participant, provided that (i) no Nonqualified Stock Options will vest or first become exercisable, in whole or in part, prior to the date of one (1) year after the Date of Grant, except, if the Administrator so provides, upon the earlier death, Disability or Retirement of the Participant or the earlier occurrence of a Change of Control and (ii) no Nonqualified Stock Option will continue to be exercisable, in whole or in part, later than ten years after the Date of Grant. Subject to these limitations, the Administrator may provide that full exercisability of the Option will be phased in and/or phased out over some designated period of time. The Administrator also may provide at any time that exercisability of a Nonqualified Stock Option is or will be accelerated, to the extent such Option is not already then exercisable, for such reasons and as of such times, including, if appropriate, upon the occurrence of such event or events (e.g., the death, Disability or Retirement of the Participant or a Change of Control ), as the Administrator may specify. Generally, exercisability of a Nonqualified Stock Option granted under the Plan is conditioned upon continued service of the Participant with the Company or its Subsidiaries, provided that the Administrator may specify, upon grant of a Nonqualified Stock Option or subsequently, that exercisability of such Option will continue for some designated period of time after a Termination Event for the Participant, which may vary depending upon the particular type of Termination Event. If the Administrator does not specify otherwise, a Nonqualified Stock Option granted under the Plan will continue to be exercisable after a Termination Event for the Participant, to the extent such Option was exercisable at the time of such Termination Event, as follows: (x) if the Termination Event is not the death, Disability or Retirement of the Participant, exercisability will continue for 3 months after the date of termination; (y) if the Termination Event is the Disability or Retirement of the Participant, exercisability will continue for 12 months after the date of termination (unless the Participant dies within such 12-month period, in which event exercisability will continue until the later of the date 3 months after the date of death or the last day of such 12-month period); and (z) if the Termination Event is the death of the Participant, exercisability will extend until the date ten years after the Date of Grant. Notwithstanding the preceding sentence, in no event may any Nonqualified Stock Option granted under the Plan be exercised after the tenth anniversary of the Date of Grant.

(c)

Upon exercise of a Nonqualified Stock Option, in whole or in part, the Exercise Price with respect to the number of shares as to which the Option is then being exercised may be paid by check or, if the Administrator has so authorized (and subject to any conditions imposed by the Administrator) and if the holder of the Option so elects, in whole or in part by delivery to the Company of shares of Stock then owned by the holder. Any holder-owned Stock to be used in full or partial payment of the Exercise Price shall be valued at the Fair Market Value of the Stock on the date of exercise. Upon such exercise, the Company shall issue the shares as to which a Nonqualified Stock Option has been exercised to the holder of the Option or the designee of such holder, evidenced by book entry or delivery of a duly executed stock certificate, and subject to withholding of a portion of such shares in payment of withholding and other taxes as may be provided under Section 15. If so provided by the Administrator upon the grant of such Option, the shares of Stock issuable upon exercise thereof may be subject to certain restrictions upon their subsequent transfer or sale. In the event the Exercise Price is to be paid in full or in part by surrender of Stock, in lieu of actual surrender of shares of Stock by the holder, the Company may waive such surrender (under circumstances in which such waiver is consistent with the purposes and functioning of the Plan) and deem such shares to have been surrendered, and thereafter issue to the holder or the designee of such holder a number of shares equal to the total number of shares as to which the Option is then being exercised less the number of shares which absent such waiver would have been surrendered by the holder to the Company upon such exercise, subject to withholding of a portion of such shares in payment of withholding and other taxes as may be provided under Section 15.

(d)	The Administrator may require reasonable advance notice of exercise of a Nonqualified Stock Option, normally not to exceed three calendar days, and may condition exercise of such Option upon the availability of an effective registration statement or

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(e)

Under no circumstances may the Administrator make or approve “reload” grants of Nonqualified Stock Options under the Plan; that is, the Administrator may not grant one or more Nonqualified Stock Options to any Participant under the Plan if the timing of such grant or the number of shares of Stock subject thereto is contingent upon or related to the coincident exercise by the Participant in a stock-for-stock exercise of one or more outstanding stock options previously granted to the Participant under this Plan or any other stock plans of the Company or any predecessor or successor of the Company. In addition, the Administrator may not, without the approval of the Company's shareholders, “reprice” any Nonqualified Stock Options previously granted under the Plan to a lower exercise price, or cancel any such outstanding Nonqualified Stock Options and, incident to such cancellation, regrant to the former holders thereof new Options relating to the same or a similar number of shares at a lower Exercise Price, regardless of any negative developments in the market price of the Stock since the Date of Grant of such canceled Options.

(a)

Awards authorized under the Plan include Restricted Stock. Restricted Stock consists of shares of Stock which, during a Period of Restriction specified by the Administrator upon grant, shall be subject to (i) restriction on sale or other transfer by the Participant and (ii) forfeiture by the Participant to the Company upon a Termination Event relating to the Participant occurring prior to the end of such Period of Restriction (i.e., prior to vesting), in each case as further defined and described in this Plan and by the Administrator upon grant. Restricted Stock may be granted at no purchase price to Participants or, if subject to a purchase price, such price shall not exceed the par value of the Stock and shall be payable by the Participant to the Company in cash or by any other means that the Administrator deems appropriate, including recognition of past service.

(b)

Awards authorized under the Plan include Restricted Stock Units, consisting of rights to receive shares of Stock at some future date or dates following the completion of a Period of Restriction for such units (i.e., the vesting of such units). Upon grant of Restricted Stock Units, the Administrator will specify both the vesting date(s) and the ultimate delivery date(s) for the units and shares subject thereto. Normally there will be a significant lapse of time between the vesting dates and the delivery dates. During the Period of Restriction between the Date of Grant of Restricted Stock Units and the vesting of the units, the units shall be subject to (i) restriction upon sale or other transfer by the Participant, and (ii) forfeiture by the Participant to the Company upon a Termination Event relating to the Participant occurring prior to the end of such Period of Restriction (i.e., prior to vesting), in each case as further defined and described in the Plan and by the Administrator upon grant. Restricted Stock Units shall be granted at no purchase price to Participants. Following expiration of the Period of Restriction for Restricted Stock Units, the units shall no longer be forfeitable by the holder thereof but may be subject to restrictions on transfer prior to the delivery of the shares subject thereto, if and to the extent specified by the Administrator upon grant. The shares subject to vested Restricted Stock Units shall be issued by the Company to and in the name of the Participant or the beneficiaries of the Participant on the delivery date or dates specified in the Award, and on such date or dates stock certificates representing such shares shall be delivered to such Participant or beneficiaries, unless the shares are issued in electronic form or book-entry credit. The shares, when issued, may be subject to withholding of a portion of such shares as payment of withholding and other taxes in accordance with Section 15.

(c)

Except as otherwise provided below, the minimum Period of Restriction for Restricted Stock or Restricted Stock Units shall be three (3) years from the Date of Grant of the Award, provided that the Administrator may grant Awards of Restricted Stock or Restricted Stock Units having Periods of Restriction of less than three (3) years for an aggregate number of shares not exceeding five percent (5%) of the maximum number of shares authorized for issuance under Section 5 of the Plan. The Administrator may provide upon grant of an Award of Restricted Stock or Restricted Stock Units that different numbers or portions of the shares subject to the Award shall have different Periods of Restriction. The Administrator also may provide at any time that the Period of Restriction for an Award of Restricted Stock or Restricted Stock Units is or will be foreshortened, and the removal of the restrictions on such Award accordingly shall be accelerated, upon the occurrence of such extraordinary event or events as the Administrator may specify, including the death, Disability or Retirement of the Participant, or a Change of Control, or any other nonrecurring significant event affecting the Company, the Participant or the Plan, and provided further that, in appropriate circumstances, the Administrator may determine after the death of a Participant holding Restricted Stock or Restricted Stock Units at the date of death that the Period of Restriction for such Awards will be deemed to have expired, and that such Awards will be deemed to have vested, immediately prior to the Participant's death. The Administrator also may establish, upon grant of an Award of Restricted Stock or Restricted Stock Units, that some or all of the shares subject thereto shall be subject to additional restrictions upon transfer or sale by the Participant (although not subject to forfeiture) after completion of the Period of Restriction (i.e., after vesting of the Award).

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(d)

Unless the Administrator shall provide otherwise upon grant, any Participant receiving an Award of Restricted Stock or Restricted Stock Units under the Plan shall be entitled to receive, with respect to the shares of Stock subject to such Award, all cash dividends and distributions (or payments in cash equivalent to such dividends or distributions) as may be declared and paid by the Company on shares of Stock from and after the Date of Grant and throughout the Period of Restriction provided the Participant is employed on the dividend payment date, and no Participant shall be required to return or repay to the Company any such dividends or distributions or equivalent cash payments in the event of subsequent forfeiture by the Participant of such Award.

(e)

Unless the Administrator shall provide otherwise upon grant, any Participant receiving an Award of Restricted Stock under the Plan shall be entitled to vote all shares subject to such Award from and after the Date of Grant and throughout the Period of Restriction. No voting rights will attach to any Award of Restricted Stock Units or the shares subject thereto, unless and until delivery of such shares to the Participant or the beneficiaries of the Participant.

(f)

Pending expiration of the Period of Restriction for an Award of Restricted Stock, all shares subject to such Award shall be held in certificated or book entry form by the Company or its stock transfer agent, in such name and subject to such procedures as the Company deems reasonable. Upon expiration of the Period of Restriction for any such Award, stock certificates representing the shares subject thereto shall be delivered to the Participant or to the beneficiaries of the Participant, unless the shares are issued in book-entry form.

(a)

Awards authorized under the Plan include Performance Awards, which may consist of Performance Units or Performance Shares. The Administrator will have complete discretion in determining the number of Performance Awards, if any, that may be granted to an eligible Participant, whether such Awards, if granted, will be Performance Units or Performance Shares, and the terms and conditions applicable to each such Performance Award. The right of any holder of an Award ultimately to receive payment of some or all of the benefits specified under the Award will depend upon (i) the satisfaction of certain pre-established Company or individual performance goals (the “Performance Goals”) over a certain period of time (the “Performance Period”), each as further discussed in paragraph (d) below, and (ii) the holder's continuing employment or service with the Company, as further discussed in paragraph (e), below. Performance Awards, if ultimately determined to be payable, shall be payable in the form of cash or shares of Stock, as provided in paragraphs (b) and (c), below.

(b)

Any Award of Performance Units granted under the Plan will have an initial dollar value ascribed to each Performance Unit subject thereto, which dollar value will be established by the Administrator on or before the Date of Grant. To the extent that such Award is ultimately determined to be payable to the holder thereof, each Performance Unit (or fraction thereof) thus payable will have the same dollar value as the dollar value per Performance Unit originally established, without interest. Payment of the dollar amount thus determined to be payable to the holder shall be made on or as soon as practicable after the date of such determination. Payments may be in the form of cash, shares of Stock (valued at the Fair Market Value of the Stock on the date of determination), or some combination thereof, as established in each case by the Administrator upon grant of the Award, or, if the Administrator shall so provide upon grant, as the holder of the Award may designate, by written election made on or prior to the date of determination of payment.

(c)

Any Award of Performance Shares granted under the Plan will relate to a specific number of shares of Stock. To the extent such Award is ultimately determined to be payable to the holder thereof, the value of amount thus payable will be either (i) the aggregate dollar value of the number of Performance Shares payable to the holder, based on the Fair Market Value of the Stock on the date of such determination, or (ii) the product of (A) the number of Performance Shares payable to the holder, multiplied by (B) the difference between the Fair Market Value of the Stock on the date of such determination and the Fair Market Value of the Stock on the Date of Grant (i.e., the “spread”). Payment of the dollar amount thus determined to be payable to the holder shall be made on or as soon as practicable after the date of such determination. Payments may be in the form of cash, shares of Stock (valued at the Fair Market Value of the Stock on the date of determination), or some combination thereof, as established in each case by the Administrator upon grant of the Award, or, if the Administrator shall so provide upon grant, as the holder may designate by written election made on or prior to the date of determination.

(d)

In connection with the grant of each Performance Award, the Administrator will set performance objectives in its sole discretion which, depending on the extent to which they are met, will determine that portion of the Performance Award, if any, that ultimately will be payable to the holder of the Award. Such performance objectives must relate to a period of at least twelve consecutive months and must be established, in writing, not later than 90 days after the commencement of the period.

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(e)

In order to be entitled to receive payment of a Performance Award, in addition to the predetermined Performance Goals having been met, the holder of the Award must continue in the employment or service of the Company and its Subsidiaries for a specified period of time established in connection with the grant (the “Service Period”), which generally will not be less than the Performance Period but may extend beyond the Performance Period. The Award will not be deemed to be vested until expiration of the Service Period and if the holder's employment or service with the Company and its Subsidiaries terminates before expiration of the Service Period the Award will be forfeited. Notwithstanding the foregoing, the Administrator may determine, in connection with any grant of a Performance Award, that in the event the employment or service of the holder with the Company or its Subsidiaries should terminate before expiration of the Service Period, the vesting of such Award may be accelerated at the discretion of the Administrator, at such time, and payment of an amount thereunder to the holder may be permitted, if under the particular circumstances of such early termination the Administrator determines that such acceleration is justified, as being in the best interests of the Company and its shareholders, provided that, any such acceleration that results in a vesting date for the holder that precedes the expiration date of the Performance Period as originally established shall require simultaneous adjustment of the original Performance Period (to a reasonable shorter Performance Period ending on or before the holder's termination date) and a simultaneous and appropriate adjustment of the Performance Goals (to reflect Company and individual performance over such shorter Performance Period comparable to the Company and individual performance embraced in the original Performance Goals), and payment of amounts, if any, to the holder under the Award, under accelerated vesting, shall be made if and only if, and only to the extent that, such adjusted Performance Goals shall have been satisfied over the adjusted Performance Period.

(f)	After the grant of a Performance Award, the Administrator, in its sole discretion, may alter, reduce or, in exceptional circumstances, waive any Performance Goals for such Performance Award, where such is deemed to be in the best interests of the Company and its shareholders.

(g)

The holder of a Performance Award shall not have the right to vote or to receive any dividends or distributions with respect to any shares of Stock underlying the Award until some or all the Shares subject thereto or payable as a result thereof are issued and paid to the holder. To the extent that any Participant holds any rights by virtue of a Performance Award, such rights shall be no greater than the rights of an unsecured general creditor of the Company. Payment of a performance award may be subject to withholding and other taxes.

(a)

If the Company shall at any time change the number of issued shares of Stock without new consideration to the Company, as, for example, in connection with stock dividends, stock splits, certain recapitalizations or mergers, or similar transactions, the total number of shares reserved for issuance under the Plan and reserved for issuance on the books of the Company relating to the Plan shall be adjusted and the number of shares (and, in the case of Options, the Exercise Price) covered by each outstanding Award shall be adjusted, so that the aggregate consideration payable to the Company upon exercise of such Award, if any, and the value of each such Award to the holder thereof shall remain the same as prior to such change. Awards may also contain provisions for their continuation or for other equitable adjustments after changes in the Stock resulting from any business combination transaction, such as a merger of the Company into any other entity or the sale of all or substantially all of the assets of the Company to any other entity, or any issuance of stock rights or warrants by the Company, or any similar occurrence.

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(b)	Notwithstanding any other provision of this Plan, and without affecting the number of shares reserved for issuance hereunder, the Board may authorize the issuance or assumption of benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization, upon such terms and conditions as it may deem appropriate.

(a)	Except as otherwise provided in this Section 14, any Award granted under the Plan to a Participant shall not be transferable by the Participant during the life of the Participant, and upon the death of the Participant, the rights of the Participant under the Award, if not then extinguished, shall pass as provided under Section 14(c) below.

(b)

Notwithstanding the provisions of Section 14(a) and subject to any restrictions or prohibitions under applicable law and other restrictions and conditions as may be established from time to time by the Administrator, the Administrator may determine that any Award or portion thereof granted under the Plan to a Participant may be transferred by the Participant prior to the vesting thereof or, if an Option, prior to the exercise thereof, or, if Restricted Stock Units or a Performance Award, prior to delivery of the shares subject thereto or the payment thereof, under such terms and conditions and to such person or persons ("Permitted Transferees") as it deems appropriate and in the best interest of the Company. The Administrator may specify the procedures applicable to any such permitted transfer, including placing restrictions and limitations on transferred Awards that are not applicable to Awards not transferred, and requiring Permitted Transferees to enter into Award Agreements reflecting such restrictions and limitations.

(c)

In the event of the death of a Participant or a Permitted Transferee holding an unexercised Option, exercise of the Option may be made only by the executor or administrator of the estate of the holder or the person or persons to whom the deceased holder's rights under the Option shall pass pursuant to an effective beneficiary designation as provided in Section 19(a), by will or similar instrument, or by the laws of descent and distribution, and such exercise may be made only to the extent that the deceased holder was entitled to exercise such Option at the date of death.

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(a)	Naming of Beneficiaries: In connection with an Award, the Participant receiving such Award may name one or more beneficiaries to receive the Award and benefits thereunder, to the extent permissible pursuant to the various provisions of the Plan, in the event of the death of the Participant.

(b)	Successors: All obligations of the Company in connection with the Plan and Awards issued hereunder shall be binding on any successor to the Company.

(c)	Governing Law: The provisions of the Plan and all Award Agreements under the Plan shall be construed in accordance with, and governed by, the laws of the State of New York without reference to applicable conflict of laws provisions, except insofar as such provisions may be expressly made subject to the laws of any other state or federal law.

(d)

Compliance with Section 409A of the Code: If any Award under this Plan would be considered “deferred compensation” as defined under Section 409A of the Code, the Board reserves the absolute right (including the right to delegate such right) to unilaterally amend the Plan or the Award Agreement, without the consent of the Participant, to avoid the application of, or to maintain compliance with, Section 409A. Any amendment by the Board or its designee to the Plan or an Award Agreement pursuant to this Section 19(d) shall maintain, to the extent practicable, the original intent of the applicable provision without violating Section 409A. A Participant's acceptance of any Award under the Plan constitutes acknowledgment and consent to such rights of the Board or its designee, without further consideration or action. Any discretionary authority retained by the Board or the Committee pursuant to the terms of this Plan or pursuant to an Award Agreement shall not be applicable to an Award which is determined to constitute such “deferred compensation,” if such discretionary authority would contravene Section 409A.

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(a)	Nonqualified: The Plan is not subject to the Employee Retirement Income Security Act of 1974 and is not qualified under Section 401 of the Internal Revenue Code of 1986, as amended.

(b)

Applicable Law; Successors: The Plan shall be governed by and interpreted in accordance with the laws of the State of New York. The Plan, if not previously terminated, shall be assumed by and be binding upon successors to the business and affairs of the Company, including successors by merger or by purchase of all or a majority of the Company's assets, with such adjustments to be made by the Board in connection with any such succession as may be appropriate under the circumstances.

(c)	Shareholder Approval; Effective Date: The Plan, in order to become and remain effective, must be approved by the shareholders of the Company if and to the extent required under applicable law and regulation. If required, the Plan shall immediately take effect once approved by the shareholders of the Company.

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