December  31, 2008

Terry R. Goodemote
Glens Falls National Bank and Trust Company

Dear Terry:

(a)

We hereby agree with you that if within six (6) months after a Change in Control
of Arrow Financial Corporation (“Arrow”), you incur a Termination of Employment
(i) at our election (or that of the successor company) or one of its Affiliates
or (ii) by your election after (A) you are not offered a position with Arrow (or
the successor company) or one of its Affiliates  at a base salary at least equal
to your base salary immediately prior to the Change in Control (your "Base
Salary"), or (B) you are offered a position with Arrow (or the successor
company) or one of its Affiliates which requires you to relocate more than 50
miles, then you will be entitled to receive a cash payment equal to two years’
Base Salary.   Subject to paragraphs (c) and (d) below, such cash payment will
be paid over a two year period in equal installments in accordance with Arrow’s
regular payroll practice, commencing on the first payroll period beginning after
the date of your Termination of Employment.

(b)

You will also be entitled to continuing coverage for two years after your
Termination of Employment, under our group medical, dental and term life
insurance, including any cost-sharing arrangements.  

(c)

Notwithstanding anything to the contrary in the Agreement, if you are a
“Specified Employee,” you may not receive a payment of nonqualified deferred
compensation, as defined in Section 409A of the Internal Revenue Code and the
regulations thereunder, until at least six (6) months after your Termination of
Employment.  Any payment of nonqualified deferred compensation otherwise due in
such six (6) month period shall be suspended and become payable at the end of
such six (6) month period.

(d)

In the case of an unforeseeable emergency, as defined in Internal Revenue Code
Section 409A, the Board of Directors of Arrow, upon written request, shall
permit the immediate distribution of all or any portion of the amounts payable
to you, to the extent permitted under Internal Revenue Code Section 409A and the
regulations thereunder.

(e)

The terms “Change in Control,” “Termination of Employment,” “Specified
Employee,” and “Affiliate” are defined on Exhibit A attached to this letter.

(f)

To receive the above benefits, you must remain continuously employed by Arrow
Financial Corporation or one of its Affiliates until the closing date of the
Change in Control.  However, if you are offered a continuing position but at a
reduced salary or which requires you to relocate more than 50 miles, and you
elect to accept that offer, you still may collect the benefits hereunder if you
incur a Termination of Employment within six (6) months after the Change in
Control.

(g)

This letter agreement will continue until December 31, 2009 or your earlier
Termination of Employment.

Please indicate your acceptance of this proposal by signing below on the
enclosed copy, and return the copy to me.  Upon my receipt of your executed
copy, this letter will constitute a binding agreement between us, governed by
New York law.

Sincerely,

ACCEPTED AND AGREED TO as of this 31st day of December, 2008.

__/s/ Terry R. Goodemote__

(Signature of Officer)

EXHIBIT A

CHANGE IN CONTROL

A “Change in Control” of Arrow Financial Corporation (“Arrow”) shall mean:
(i) the acquisition by one person, or more than one person acting as a group, of
ownership of stock of Arrow 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 Arrow; (ii) the acquisition by one person, or more
than one person acting as a group, of ownership of stock of Arrow that, together
with stock of Arrow 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 Arrow; (iii) a majority of the members
of the Board of Directors of Arrow 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 of Directors of Arrow 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 Arrow 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 Arrow immediately before such acquisition
or acquisitions.

Persons will not be considered to be acting as a group solely because they
purchase or own stock of the same corporation at the same time, or as a result
of the same public offering.  However, persons will be considered to be acting
as a group if they are owners of a corporation that enters into a merger,
consolidation, purchase or acquisition of stock, or similar business transaction
with Arrow.

This definition of Change in Control shall be interpreted in accordance with,
and in a manner that will bring the definition into compliance with, the
regulations under Section 409A of the Code.

TERMINATION OF EMPLOYMENT AND AFFILIATE

A “Termination of Employment” means separation from service with Arrow and its
Affiliates (generally 50% common control with the Employer), as the term
“separation from service” is defined in IRS regulations under Section 409A of
the Internal Revenue Code (generally, a decrease in the performance of services
to no more than 20% of the average for the preceding 36-month period, and
disregarding leave of absences up to six months where there is a reasonable
expectation the employee will return).  For purposes of this definition, the
term “Affiliates” means any corporation or other business entity that from time
to time is, along with Arrow, a member of a controlled group of businesses, as
defined in sections 414(b) and 414(c) of the Code, provided that the language
“at least 50 percent” shall be used instead of “at least 80 percent” each place
it appears in such test.  A corporation or other business entity is an Affiliate
only while a member of such group.

SPECIFIED EMPLOYEE

A “Specified Employee” means a “specified employee” as defined in Treasury
Regulation §1.409A-1(i) (generally 5% shareholders, 1% shareholders earning
compensation greater than $150,000, and officers earning more than $150,000 (for
2008, indexed for inflation)).