Exhibit 10.1

THIRD AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

This AGREEMENT is made as of this _25th__ day of January, 2006, by and between
PARTNERS trust financial group, inc., a Delaware corporation ("Partners Trust"
or the "Employer"), and JOHN A. ZAWADZKI, an individual residing in New
Hartford, New York (the "Executive").

WHEREAS, the Executive is serving as President and Chief Executive Officer of
Partners Trust and Partners Trust Bank, a federally chartered stock savings bank
wholly owned by Partners Trust (the "Bank");

WHEREAS, the Executive and Partners Trust have previously entered into a Second
Amended and Restated Employment Agreement dated as of April 29, 2004 (the "Prior
Agreement"), which the parties intend to be replaced and superceded by this
Agreement; and

WHEREAS, the Board of Directors of Partners Trust have approved and authorized
Partners Trust to amend and restate this Agreement to set forth the terms and
conditions for the employment relationship of the Executive with the Employer:

NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:

1. Employment.

(a) Term. The initial term of employment under this Agreement shall be for the
period commencing on the date hereof and ending on March 31, 2009 (the "Initial
Term"). Subject to annual review and approval by the Board of Directors of the
Employer, this Agreement may be extended by written notice from the Employer to
the Executive for an additional consecutive 12-month period (the "Extended
Term") no later than March 31, 2007 and every subsequent March 31 thereafter,
unless the Executive has given contrary written notice to the Employer at least
90 days before any such renewal date. The Initial Term and all such Extended
Terms are collectively referred to herein as the "Employment Term."

(b) Duties. The Executive is employed as President and Chief Executive Officer
of Partners Trust during the Employment Term. As the President and Chief
Executive Officer of Partners Trust, the Executive shall render executive,
policy and other management services to Partners Trust of the type customarily
performed by persons serving in a similar chief executive officer capacity and
Partners Trust shall cause the Bank to appoint Executive to also serve as
President and Chief Executive Officer of the Bank. As Chief Executive Officer of
the Employer and the Bank, the Executive shall be responsible for implementing
the policies of the Board of Directors of the Employer and the Board of
Directors of the Bank, and shall report only to such respective Boards, as
applicable. The Executive shall also perform such duties as the Board of
Directors of the Employer may from time to time reasonably direct. During the
Employment Term, there shall be no material decrease in the duties and
responsibilities of the Executive otherwise than as provided herein, unless the
parties otherwise agree in writing; provided, that if the Executive temporarily
assumes some or all of the duties and responsibilities of another key executive
of the Employer due to such key executive's death, disability or termination of
employment, the reassignment of such duties and responsibilities back to the key
executive or his or her replacement shall not constitute a material decrease in
the duties and responsibilities of the Executive. During the Employment Term,
the Executive shall not be required to relocate, without his consent, his place
of employment to a location more than 65 miles away from the Employer's Utica,
New York headquarters location to perform his duties hereunder, except for
reasonably required travel by the Executive on the business of the Employer or
the Bank. The Executive is encouraged to affiliate with professional
associations, business and civic organizations in support of his role as
President and Chief Executive Officer, provided that Executive's involvement in
such activities does not adversely affect the performance of his duties on
behalf of the Employer or the Bank.

2. Compensation and Benefits.

(a) Base Salary. The Executive shall initially be paid a base salary at an
annualized rate of $400,000 (as may be adjusted from time to time in accordance
with this Agreement, "Base Salary"), payable in accordance with the Employer's
regular payroll practices for its executive employees. On an annual basis, prior
to June 30 of each year during the Employment Term, the Executive's Base Salary
shall be reviewed by the Board of Directors of the Employer and may be increased
in the discretion of the Board of Directors of the Employer. In reviewing the
Executive's Base Salary, the Board of Directors of the Employer shall consider
the Executive's performance, scope of responsibility, and such other matters as
the Board of Directors of the Employer deems appropriate. The Base Salary of the
Executive shall not be decreased at any time during the Employment Term from the
amount then in effect, unless the Executive otherwise agrees in writing. The
Executive shall not be entitled to receive fees for serving as a director of the
Employer or any of its subsidiaries or for serving as a member of any committee
of the Boards of Directors of the Employer or any of its subsidiaries.

(b) Bonuses and Incentive Compensation. The Executive shall be eligible to
participate in an equitable manner with all other executive employees of the
Employer and the Employer shall cause the Bank to allow the Executive to
participate in an equitable manner with all other executive employees of the
Bank in any bonus or other incentive programs as may be authorized, declared and
paid by either the Board of Directors of the Employer or the Board of Directors
of the Bank. No other compensation provided for in this Agreement shall be
deemed a substitute for the Executive's right to participate in such bonuses and
incentive programs when and as declared by the Board of Directors of the
Employer or the Board of Directors of the Bank. This provision shall not
preclude the grant of any other bonus to the Executive as determined by the
Board of Directors of the Employer or the Board of Directors of the Bank.

(c) Benefit Plans. The Executive shall be eligible to participate in any
employee pension benefit plans (as that term is defined under Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended), group life
insurance plans, medical plans, dental plans, long-term disability plans,
business travel insurance programs and other fringe benefit plans or programs
maintained by the Employer for the benefit of its executive employees and the
Employer shall cause the Bank to make the Executive eligible to participate in
such plans or programs as maintained by the Bank for the benefit of its
executive employees. The Executive's participation in any such benefit plans and
programs shall be based on, and subject to satisfaction of, the eligibility
requirements and other conditions of such plans and programs. If the Executive's
employment by the Employer shall cease for any reason other than by voluntary
termination (as described in Section 3(b) below) or for "Cause" (defined in
Section 3(e) below), the Executive shall receive continued group life, health,
dental, accident and long term disability insurance coverage for the remaining
Employment Term, equivalent to the coverage to which he would have been entitled
under such plans (as in effect on the date of his termination of employment, or,
if his termination of employment occurs after a "Change of Control" (defined in
Section 4(c) below), on the date of such Change of Control, whichever benefits
are greater, if he had continued working for the Employer during the remaining
Employment Term at the highest rate of salary achieved during the Employment
Term, but taking into account any coverage provided from any subsequent
employer.

(d) Expenses. The Executive is expected and is authorized to incur reasonable
expenses in the performance of his duties hereunder, including the costs of
business entertainment, travel, and attendance at conventions and meetings. The
Employer shall reimburse the Executive for all such expenses promptly upon
periodic presentation by the Executive of an itemized account of such expenses.

(e) Other Benefits. During the period of employment, the Executive shall also be
entitled to receive the following benefits:

(i) Paid vacation of at least four weeks during each calendar year (prorated for
partial years) (with no carry over of unused vacation to a subsequent year) and
any holidays that may be provided to substantially all employees of the Employer
and the Bank in accordance with the Employer's and the Bank's holiday policy;

(ii) Reasonable sick leave consistent with the Employer's and the Bank's policy
in that regard for other executive officers; and

(iii) Reimbursement of fees or dues (but not personal expenses) for up to three
club memberships of the Executive at dining or country clubs as may be
beneficial to the Executive's roles with the Employer and the Bank. The choice
of clubs shall be subject to review and disapproval by the Board of Directors of
the Employer at any time.

(iv) Use of an Employer- or Bank-owned vehicle of type and age commensurate with
the Executive's duties and role with the Employer.

3. Termination.

Prior to a Change of Control, the Executive's employment by the Employer shall
be subject to termination as follows:

(a) Expiration of the Employment Term. The Executive's employment with the
Employer shall not terminate prior to the expiration of the established term,
except as provided below in Section 3.

(b) Voluntary Termination. The Executive may terminate this Agreement upon not
less than 60 days prior written notice delivered to the Employer, in which event
the Executive shall be entitled only to the compensation and benefits the
Executive has earned or accrued through the effective date of the voluntary
termination.

(c) Termination Upon Death. This Agreement shall terminate upon the Executive's
death. In the event this Agreement is terminated as a result of the Executive's
death, the Employer shall continue payments of the Executive's Base Salary which
should have otherwise been due for a period of 90 days following the Executive's
death to the Executive's estate.

(d) Termination Upon Disability. The Employer may terminate this Agreement upon
the Executive's disability. For purposes of this Agreement, the Executive's
inability to perform the Executive's duties hereunder by reason of physical or
mental illness or injury for a period of 26 consecutive weeks that follows the
Executive's use of all available sick leave (the "Disability Period") shall
constitute disability. The determination of disability shall be made by a
physician selected by the Employer. During the Disability Period, the Executive
shall be entitled to 100% of the Executive's Base Salary otherwise payable
during that period, reduced by any other Employer- or Bank-provided benefits to
which the Executive may be entitled with respect to the Disability Period which
benefits are specifically payable solely on account of such disability
(including, but not limited to, benefits provided under any disability insurance
policy or program, worker's compensation law, or any other benefit program or
arrangement).

(e) Termination for Cause. The Employer may terminate the Executive's employment
for Cause by written notice to the Executive. For purposes of this Agreement,
"Cause" shall mean the Executive's (1) personal dishonesty, incompetence,
willful misconduct; (2) breach of fiduciary duty involving personal profit,
intentional failure to perform material stated duties; (3) willful violation of
any law, rule, or regulation (other than traffic violations or similar
offenses); (4) being a specific subject of a final cease and desist order from,
written agreement with, or other order or supervisory direction from, any
federal or state regulatory authority; or (5) conduct tending to bring either
the Employer or the Bank into substantial public disgrace or disrepute. In
determining incompetence, the acts or omissions shall be measured against
standards generally prevailing in the financial institutions industry; provided,
it shall be the burden of the Employer to prove the alleged acts and omissions
and the prevailing nature of the standards the Employer shall have alleged are
violated by such acts and/or omissions.

Notwithstanding any other term or provision of this Agreement to the contrary,
if the Executive's employment is terminated for Cause, the Executive shall
forfeit all rights to payments and benefits otherwise provided pursuant to this
Agreement; provided, however, that Base Salary shall be paid through the date of
termination.

(f) Termination Without Cause. The Employer may terminate the Executive's
employment for reasons other than Cause upon not less than 60 days prior written
notice delivered to the Executive, in which event the Employer shall pay to the
Executive, within 30 days of the date of termination, a lump sum payment equal
to the unpaid Base Salary that would have been paid to or earned by the
Executive pursuant to this Agreement, if the Executive had remained employed
under the terms of this Agreement through the end of the Employment Term, or for
a period of 12 months following the date of termination, whichever period is
longer. If the Executive terminates his employment with the Employer during the
Employment Term for "Good Reason" (defined in Section 4(d) below), other than
following a Change of Control, such termination shall be deemed to have been a
termination by the Employer of the Executive's employment without cause.

(g) Change of Control. If the Executive's employment by the Employer shall cease
for any reason other than Cause within six months prior to, or 24 months
following, a Change of Control that occurs during the Employment Term, the
provisions of paragraph 4 below shall apply.

(h) Resignation. Effective upon the Executive's termination of employment for
any reason, the Executive hereby resigns from any and all offices and positions
related to the Executive's employment with the Employer and any subsidiaries or
affiliates thereof, and held by the Executive at the time of termination.

(i) Regulatory Limits. Notwithstanding any other provision in this Agreement,
(i) the Employer may terminate or suspend this Agreement and the employment of
the Executive hereunder, as if such termination were for Cause under Section
3(e) hereof, to the extent required by the applicable Federal or state related
to banking, deposit insurance or bank or savings institution holding companies
or by regulations or orders issued by the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or any other state or federal banking
regulatory agency having jurisdiction over Partners Trust or the Bank and (ii)
no payment shall be required to be made to or for the benefit of the Executive
under this Agreement to the extent such payment is prohibited by applicable law,
regulation or order issued by a banking agency or a court of competent
jurisdiction; provided, that it shall be the Employer's burden to prove that any
such action was so required.

4. Termination Following a Change of Control.

(a) In the event the Employer terminates the Executive's employment, or the
Executive terminates employment with Good Reason, in either case within six
months prior to, or 24 months after, a Change of Control, the Employer shall,
within 60 days of termination, pay to the Executive a lump sum cash payment
equal to 2.99 times the average annual compensation paid to the Executive by
Employer and included in the Executive's gross income for income tax purposes
during the five full calendar years, or shorter period of employment, that
immediately precede the year during which the Change of Control occurs.

(b) Except as set forth below, in the event it shall be determined that any
payment or distribution by or for the account of the Employer to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
4) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, collectively, the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of the Excise Tax and all other taxes (including, without limitation,
income taxes) that are imposed upon the Gross-Up Payment, the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 4(b), if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive a net after-tax benefit of at least $50,000 (taking
into account both income taxes and any Excise Tax) as compared to the net
after-tax proceeds to the Executive resulting from an elimination of the
Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount
(the "Reduced Amount") such that the receipt of Payments would not give rise to
any Excise Tax, then no Gross-Up Payment shall be made to the Executive, the
Payments, in the aggregate, made to the Executive shall not exceed the Reduced
Amount, and the Executive shall have the right, in the Executive's sole
discretion, to designate those payments or benefits that should be reduced or
eliminated to satisfy such requirement.

(c) For purposes of this Agreement, a "Change of Control" shall mean:

(1) 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 of 1934, 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 Partners Trust
(including, for purposes of this definition of Change of Control, any company
into which Partners Trust may merge as part of the reorganization of Partners
Trust, MHC and its affiliates to a converted stock entity) (the "Outstanding
Company Common Stock"), or (ii) the combined voting power of the then
outstanding voting securities of Partners Trust entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from Partners Trust or Partners Trust, MHC, (ii) any acquisition by
Partners Trust or Partners Trust, MHC, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by Partners Trust or
Partners Trust, MHC, the Bank or any other corporation controlled by Partners
Trust or Partners Trust, MHC, (iv) the reorganization of Partners Trust, MHC to
a converted stock entity, or (v) any acquisition by any corporation pursuant to
a transaction that complies with clauses (i), (ii) and (iii) of subsection (3)
of this Section 4(c); or

(2) Individuals who, as of the date hereof, constitute the Board of Directors of
Partners Trust (the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board of Directors (the "Partners Trust Board");
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by Partners Trust'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 Partners Trust Board; or

(3) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of Partners Trust (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 50% 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 Partners Trust or all or
substantially all of Partners Trust'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 corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of Partners Trust, the Bank, such
corporation resulting from such Business Combination or a corporation controlled
by any of them) 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

(4) Approval by the shareholders of Partners Trust of a complete liquidation or
dissolution of Partners Trust without the establishment of a successor
corporation.

(d) "Good Reason" shall mean

(1) the assignment to the Executive by the Employer or the Bank of duties
materially inconsistent with the Executive's position, duties, responsibilities,
and status with the Employer, a material adverse change in the Executive's
titles or offices, any removal of the Executive from or any failure to reelect
the Executive to any of such positions, except in connection with the
termination of his employment for Cause, or any action that would have a
material adverse effect on the physical conditions in which the Executive
performs his employment duties; provided, however, that the temporary assignment
of some or all of the duties normally performed by another key executive due to
the key executive's death, disability or termination of employment shall not
constitute an assignment to the Executive by the Employer or the Bank of duties
materially inconsistent with the Executive's position, duties, responsibilities,
and status with the Employer;

(2) a reduction by the Employer in the Executive's Base Salary as in effect on
the date hereof or as the same may be increased from time to time during the
Employment Term;

(3) the taking of any action by the Employer or the Bank that would materially
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any employee benefit plan on a basis different than
other executives of the Employer generally or deprive the Executive of any
material fringe benefit enjoyed by the Executive;

(4) any requirement that the Executive relocate to any place more than 65 miles
away from the Bank's Utica, New York location, or outside the State of New York,
to perform his duties hereunder, except for reasonably required travel by the
Executive on the business of the Employer or the Bank;

(5) any other action or inaction that constitutes a material breach by the
Employer of this Agreement;

(6) any failure by the Employer to obtain the assumption of this Agreement by
any acquirors, successors or assigns of the Employer; or

(7) any failure by the Employer to have renewed this Agreement pursuant to
Section 1 hereof such that the remaining Employment Term shall at any time be
less than two years.

(e) All determinations required to be made under this Section 4, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by KPMG LLP or such other certified public accounting firm as may
be designated by the Executive and shall be reasonably acceptable to the
Employer (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Employer and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Employer. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting a change in the ownership or effective control (as defined for
purposes of Section 280G of the Code) of the Employer, the Executive shall
appoint another nationally recognized accounting firm which is reasonably
acceptable to the Employer to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Employer.
Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by
the Employer to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Employer and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that additional Gross-Up
Payments shall be required to be made to compensate the Executive for amounts of
Excise Tax later determined to be due, consistent with the calculations required
to be made hereunder (an "Underpayment"). In the event that the Employer exhaust
their remedies pursuant to Section 4(d) and the Executive is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Employer to or for the benefit of the Executive.

(f) The Executive shall notify the Employer in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Employer of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive is informed
in writing of such claim and shall apprise the Employer of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Employer (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Employer notifies the Executive in writing prior to the expiration of
such period that they desire to contest such claim, the Executive shall:

(i) give the Employer any information reasonably requested by the Employer
relating to such claim,

(ii) take such action in connection with contesting such claim as the Employer
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Employer,

(iii) cooperate with the Employer in good faith in order effectively to contest
such claim, and

(iv) permit the Employer to participate in any proceedings relating to such
claim; provided, however, that the Employer shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.

Without limiting the foregoing provisions of this Section 4, the Employer shall
control all proceedings taken in connection with such contest and, at their sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at their sole option, either direct the Executive to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Employer shall determine; provided, however, that if
the Employer direct the Executive to pay such claim and sue for a refund, the
Employer shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that the Executive shall not be required to consent to any extension of the
statute of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
unless such extension is limited solely to such contested amount. Furthermore,
the Employer's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an amount advanced by the Employer
pursuant to Section 4, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the Employer's complying
with the material requirements of Section 4) promptly pay to the Employer the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Employer pursuant to Section 4, a determination is made that the
Executive shall not be entitled to any refund with respect to such claim and the
Employer do not notify the Executive in writing of their intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.

5. Covenants.

(a) Confidentiality. The Executive shall not, without the prior written consent
of the Employer, disclose or use in any way, either during the Employment Term
or thereafter, except as required in the course of his employment by Employer,
any confidential business or technical information or trade secret acquired in
the course of the Executive's employment by the Employer. The Executive
acknowledges and agrees that it would be difficult to fully compensate the
Employer for damages resulting from the breach or threatened breach of the
foregoing provision and, accordingly, that the Employer shall be entitled to
temporary preliminary injunctions and permanent injunctions to enforce such
provision. This provision with respect to injunctive relief shall not, however,
diminish the Employer's right to claim and recover damages. The Executive
covenants to use his best efforts to prevent the publication or disclosure of
any trade secret or any confidential information concerning the business or
finances of Employer or Employer's affiliates, or any of their dealings,
transactions or affairs which may come to the Executive's knowledge in the
pursuance of his duties or employment.

(b) No Competition. The Executive's employment is subject to the condition that
during the term of his employment hereunder and for a period of 24 months
following the date his employment ceases for any reason except within six months
prior to, or 24 months following, a Change of Control (described in Section 4),
the Executive shall not, directly or indirectly, own, manage, operate, control
or participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director, individual proprietor,
lender, consultant or otherwise with, or have any financial interest in, or aid
or assist anyone else in the conduct of, any entity or business (a "Competitive
Operation") which competes in the banking industry or with any other business
conducted by the Employer or by any group, affiliate, division or subsidiary of
the Employer, in any area or market where such business is being conducted at
the Date of Termination. The Executive shall keep the Employer fully advised as
to any activity, interest, or investment the Executive may have in any way
related to the banking industry. It is understood and agreed that, for the
purposes of the foregoing provisions of this paragraph, (i) no business shall be
deemed to be a business conducted by an Employer or any group, division,
affiliate or subsidiary of an Employer unless 5% or more of such Employer's
consolidated gross sales or operating revenues is derived from, or 5% or more of
such Employer's consolidated assets are devoted to, such business; (ii) no
business conducted by any entity by which the Executive is employed or in which
he is interested or with which he is connected or associated shall be deemed
competitive with any business conducted by an Employer or any group, division or
subsidiary of such Employer unless it is one from which 2% or more of its
consolidated gross sales or operating revenues is derived, or to which 2% or
more of its consolidated assets are devoted; and (iii) no business which is
conducted by Employer at the Date of Termination and which subsequently is sold
by the Employer shall, after such sale, be deemed to be a Competitive Operation
within the meaning of this paragraph. Ownership of not more than 1% of the
voting stock of any entity shall not constitute a violation of this subsection.

(c) Non-Solicitation. At all times while the Executive is employed by the
Employer and for a one (1) year period after the termination of the Executive's
employment with the Employer for any reason, the Executive shall not, directly
or indirectly, for himself or for any other person, firm, corporation,
partnership, association or other entity: (i) employ or attempt to employ or
enter into any contractual arrangement with any employee or former employee of
the Employer or the Bank, unless such employee or former employee has not been
employed by the Employer or the Bank for a period in excess of six (6) months;
or (ii) call on, solicit or accept any business from any of the actual or
targeted prospective customers of the Employer or the Bank on behalf of any
person or entity in connection with any business in competition with the
business of the Employer or the Bank.

(d) Termination of Payments. Upon the breach by the Executive of any covenant
under this Section 5, the Employer may terminate, offset and/or recover from the
Executive immediately any and all benefits paid to the Executive pursuant to
this Agreement, in addition to any and all other remedies available to the
Employer under the law or in equity.

(e) Modification. Although the parties consider the restrictions contained in
this Section 5 reasonable as to protected business, duration, and geographic
area, in the event that any court of competent jurisdiction deems them to be
unreasonable, then such restrictions shall apply to the broadest business,
longest period, and largest geographic territory as may be considered reasonable
by such court, and this Section 5, as so amended, shall be enforced.

(f) Other Agreements. The Executive represents and warrants that neither the
Executive's employment with the Employer nor the Executive's performance of his
obligations hereunder will conflict with or violate the Executive's obligations
under the terms of any agreement with a previous employer or other party
including agreements to refrain from competing, directly or indirectly, with the
business of such previous employer or any other party.

6. Withholding.

The Employer shall deduct and withhold from compensation and benefits provided
under this Agreement all necessary income and employment taxes and any other
similar sums required by law to be withheld.

7. Rules, Regulations and Policies.

The Executive shall use his best efforts to abide by and comply with all of the
rules, regulations, and policies of the Employer, including without limitation
the Employer's policy of strict adherence to, and compliance with, any and all
requirements of the banking, securities, and antitrust laws and regulations.

8. Return of Employer's Property.

After the Executive has received notice of termination or at the end of his
period of employment with Employer, whichever first occurs, the Executive shall
immediately return to Employer all documents and other property in his
possession belonging to Employer.

9. Construction and Severability.

The invalidity of any one or more provisions of this Agreement or any part
thereof, all of which are inserted conditionally upon their being valid in law,
shall not affect the validity of any other provisions to this Agreement; and in
the event that one or more provisions contained herein shall be invalid, as
determined by a court of competent jurisdiction, this Agreement shall be
construed as if such invalid provisions had not been inserted.

10. Governing Law.

This Agreement shall be governed by the laws of the United States, where
applicable, and otherwise by the laws of the State of New York other than the
choice of law rules thereof.

11. Assignability and Successors.

This Agreement may not be assigned by the Executive or the Employer, except that
this Agreement shall be binding upon and shall inure to the benefit of the
successor of the Employer through merger or corporate reorganization including
the successor to Partners Trust resulting from the reorganization of Partners
Trust, MHC to a stock entity.

12. Counterparts.

This Agreement may be executed in counterparts (each of which need not be
executed by each of the parties), which together shall constitute one and the
same instrument.

13. Jurisdiction and Venue.

The jurisdiction of any proceeding between the parties arising out of, or with
respect to, this Agreement shall be in a court of competent jurisdiction in New
York State, and venue shall be in Oneida County. Each party shall be subject to
the personal jurisdiction of the courts of New York State.

14. Indemnification and Insurance.

During the Employment Term and for a period of six years thereafter, the
Employer shall cause the Executive to be covered by and named as an insured
under any policy or contract of insurance obtained to insure directors and
officers against personal liability for acts or omissions in connection with
service as a director or officer of Partners Trust or the Bank or any subsidiary
or affiliate thereof or service in other capacities at the request of the
Employer. The coverage provided to the Executive pursuant to this section 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 Employer or the Bank.

To the maximum extent permitted under applicable law, during the Employment Term
and for a period of 6 years thereafter, the Employer 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 trustee or officer of the
Employer or any subsidiary or affiliate thereof.

15. Miscellaneous.

This Agreement constitutes the entire understanding and Agreement between the
parties with respect to the subject matter hereof and shall supersede all prior
understandings and agreements.

This Agreement cannot be amended, modified, or supplemented in any respect,
except by a subsequent written agreement entered into by the parties hereto.

The services to be performed by the Executive are special and unique; it is
agreed that any breach of this Agreement by the Executive shall entitle the
Employer (or any successors or assigns of the Employer), in addition to any
other legal remedies available to them, to apply to any court of competent
jurisdiction to enjoin such breach.

* * *

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement, or
caused this Agreement to be duly executed on their behalf, as of the date and
year first above written.

Attest:

/s/Robert W. Allen

PARTNERS TRUST FINANCIAL GROUP, INC.

/s/William C. Craine

/s/John A. Zawadzki

John A. Zawadzki

Executive