Exhibit 10.9

SEPARATION AGREEMENT

WHEREAS, First Niagara Financial Group, Inc. (the “Company”), a Delaware
corporation having its executive offices at 6950 South Transit Road, Lockport,
New York, and Paul J. Kolkmeyer (“PJK”), an individual residing at 6960 Lockwood
Court, Lockport, New York, are parties to a Restated Employment Agreement dated
as of December 1, 2003 (the “Employment Agreement”); and

WHEREAS, under the terms of the Employment Agreement, PJK has been employed as
President and Chief Executive Officer of the Company; and

WHEREAS, the Employment Agreement provides for certain payments and benefits to
PJK in the event of the termination of his employment by the Company without
Cause; and

WHEREAS, the Company desires to discontinue its employment relationship with PJK
pursuant to Sections 7(b) and 8(a) of the Employment Agreement; and

WHEREAS, the parties wish to amend the Employment Agreement by means of this
Separation Agreement and to set forth their agreement as to the payment and
benefits to be provided to PJK under the Employment Agreement and as to the
other matters set forth herein.

NOW THEREFORE, intending to be legally bound, and in consideration of the mutual
covenants and agreements set forth herein, the Company and PJK agree as follows:

1. PJK’s employment with the Company, First Niagara Bank (the “Bank”), and all
affiliates of the Company and the Bank, shall discontinue and cease effective
upon execution of this Agreement.

2. The payments and benefits due PJK under the Employment Agreement are governed
by Section 7(b) and 8(a) of the Employment Agreement and this Agreement, and
this Agreement constitutes satisfactory notice under Sections 7 and 21 of the
Employment Agreement.

3. Effective upon execution of this Agreement, (a) PJK resigns as a director of
the Company, the Bank and all affiliates of the Company and the Bank, and this
Agreement constitutes his written resignation for this purpose, which
resignation is hereby accepted on behalf of all such entities effective upon
execution of this Agreement; and (b) PJK resigns as a fiduciary and
administrator from all employee benefit plans maintained by the Company, the
Bank and any affiliate, including, but not limited, to, tax-qualified retirement
plans, health and welfare plans and stock plans.

4. In accordance with Section 8(a) of the Employment Agreement, and subject to
Section 15 of this Agreement regarding the requirements of Section 409A of the
Internal Revenue Code (the “Code”), PJK shall receive the following payments and
benefits:

--------------------------------------------------------------------------------

(a) In satisfaction of the obligation of the Company under Section 8(a)(i) and
(ii) of the Employment Agreement, a lump sum cash payment equal to $1,882,000.72
(one million eight hundred eighty two thousand dollars and seventy two cents)
payable on December 8, 2006.

(b) PJK shall continue to receive the health, medical and life insurance
coverages in effect immediately prior to the date of this Agreement (except to
the extent such coverage is modified in its application to all employees), which
coverages shall continue through December 31, and for 36 months thereafter,
subject to Section 15 of this Agreement. PJK’s participation in the Company’s
health care coverage is convertible upon expiration of this period of coverage
as provided under applicable law (COBRA).

(c) PJK will receive a lump sum cash payment of $40,000 on December 8, 2006
representing his accrued but unused vacation for 2007, in satisfaction of
Section 8(a)(iii) of the Employment Agreement.

(d) PJK will receive a lump sum cash payment of $40,000 on December 8, 2006
representing base salary through the 30-day period following the date hereof.

5. Awards of stock options and shares of restricted stock that vest within 30
days of the date of this Agreement shall vest as of the date hereof and shall be
exercisable (as to options) in accordance with the terms of the option plan and
award agreements. Under the option plans under which PJK holds outstanding
exercisable options, including the options referenced in the preceding sentence,
PJK shall have three months from the date of this Agreement to exercise or
forfeit the options. The Company hereby extends the period for the exercise of
his outstanding options until December 31, 2007, unless such extension will
disqualify the incentive treatment of outstanding incentive options, in which
event the period for exercising will not be extended.

6. Subject to Section 15 of this Agreement regarding the requirements of Section
409A of the Internal Revenue Code, PJK shall receive a lump sum cash payment of
$250,000 in settlement of any bonus payments that PJK may be entitled to with
respect to the year ending December 31, 2006.

7. PJK may continue the use of the automobile currently being provided to him by
the Company through the end of the current lease term (March 31, 2007), provided
that all costs of such use, other than lease payments, are the responsibility of
PJK. The interest rate and other terms applicable to the mortgage loan extended
by the Bank to PJK shall continue as if PJK remains an employee of the Company
and the Bank.

8. The Company acknowledges and agrees that under Section 11 of the Employment
Agreement, Executive is not required to mitigate any amount paid or benefits
provided to him hereunder. The Company shall pay or reimburse PJK for all
reasonable travel, entertainment and other business expenses incurred or paid by
him through the date hereof upon presentation of supporting documentation as the
Company may reasonably request.

9. PJK agrees that he continues to be bound by and in accordance with the terms
of Sections 12 and 13 of the Employment Agreement and the Company acknowledges
that the

2

--------------------------------------------------------------------------------

restrictions set forth in Section 13(i) and (ii) do not apply. Notwithstanding
the foregoing, the restrictions set forth in Section 13(iv) or (v) shall
terminate at the end of the nine months following the date of this Agreement and
shall only apply to the individual and knowing conduct of PJK.

10. The Company agrees to reimburse PJK for up to $10,000 of legal fees incurred
in connection with the negotiation of this Agreement, upon the provision of
itemized billings.

11. PJK agrees that the payments and provisions of benefits in accordance with
the terms of this Agreement are in full satisfaction of any and all obligations
of the Company under Section 8 the Employment Agreement. Payments hereunder are
subject to applicable withholding taxes.

12. The Company and PJK agree and acknowledge that PJK’s rights under the
Company’s deferred compensation plan and its tax-qualified pension and other
plans (such as the 401(k) plan, the employee stock ownership plan, and the
defined benefit pension plan) are governed by the terms of such plans and shall
not be affected by this Agreement.

13. PJK acknowledges that the consideration referred to in this Agreement is
above and beyond the consideration he would be entitled to receive upon
separation from the Company.

14. PJK shall make no public statement which is intended or would reasonably be
expected to damage or otherwise materially diminish the reputation of the
Company, its affiliates or their officers or directors. The Company and its
affiliates and their officers and directors shall make no public statement which
is intended or would reasonably be expected to damage or otherwise materially
diminish PJK’s reputation. The parties agree that the press release attached as
Exhibit 1 hereto shall be issued to describe the matters covered by this
Agreement and that this Agreement may be submitted with and described in
periodic reports and other documents required to be filed by the Company with
the Securities and Exchange Commission (“SEC”) under the federal securities laws
and regulations. The parties agree that nothing herein shall preclude either
party or any other person referenced herein from fulfilling any duty or
obligation that he, she or it may have at law, from responding to any subpoena
or official inquiry from any court or government agency, including providing
truthful testimony, documents subpoenaed or requested or otherwise cooperating
in good faith with any proceeding or investigation, or from taking any
reasonable actions to enforce such party’s rights under this Agreement in
accordance with the dispute provision specified in Section 19 hereof.

15. Notwithstanding anything in this Agreement to the contrary, this Agreement
shall be interpreted and applied in a manner that is consistent with Code
Section 409A and any guidance issued by the United States Treasury Department
thereunder. This means that, the payments under Sections 4(a), (c), (d), 6 and
17 of this Agreement shall be made on the date that is six months and one day
hereafter. Such payments shall include interest from the date hereof at an
annual rate of 5.0%. With respect to insurance benefits and other welfare
benefits described in Section 4(b) above, PJK shall bear the full cost of such
benefits for six months following the date hereof, and the Company shall pay PJK
a single lump sum cash payment six months and one day hereafter in an amount
equal to the amount paid by him with respect to such insurance and other

3

--------------------------------------------------------------------------------

welfare benefits, with interest on such amount at the rate of 5% per annum.
Thereafter, the Company shall continue to provide such insurance and other
welfare benefits to PJK for a thirtymonth period. PJK and the Company agree that
any provision in the Employment Agreement, this Agreement or any other agreement
or plan of the Company providing for the deferral of compensation within the
meaning ofCode Section 409A (collectively, the “Agreements”) that constitutes a
violation of Code Section 409A will be deemed amended and will be administered
in such manner as to comply with Code Section 409A while producing a result as
close as practicable to the original intent of the parties as expressed in the
Agreements (unless the parties agree that their amendment of the Agreements to
comply with Code Section 409A will produce a different result). A provision in
the Agreements constitutes a violation of Code Section 409A if the
administration of the Agreements in accordance with such provision would cause
any amount to become includable in the gross income of PJK under the rules of
Code Section 409A. PJK and the Company further agree that the Agreements will be
amended no later than December 31, 2007 to reflect the actual manner of its
administration in compliance with Code Section 409A.

16. Except as otherwise provided in Section 7 of this Agreement as to PJK’s
continued use of the Company automobile, promptly following the execution of
this Agreement, PJK shall return to the Bank and/or the Company all of the
property which belongs to the Bank and/or the Company, including, but not
limited to, computers, keys, cell phones, credit cards and other tangible
property, as well as all original or copies of records, notes, reports,
proposals, lists, correspondence, materials or other documents. The Company
shall deliver to PJK all records, property and material or documents in its
possession that belong to PJK.

17. In exchange for the lump sum cash payment to PJK of $75,000 (payable in
accordance with Section 15), PJK shall execute the Release Agreement attached to
this Agreement as Exhibit 2. Such payment shall not be due PJK in the event he
revokes the Release Agreement as provided therein.

18. PJK hereby waives notice of a December 8 meeting of the Board of Directors,
at which meeting the only action taken is with respect to the matters set forth
in this Agreement.

19. Any controversy or claim arising out of or relating to this Agreement, or a
breach of it, must be settled by final and binding arbitration administered by
the American Arbitration Association under its National Rules for the Resolution
of Employment Disputes, and judgment upon the award rendered by the arbitrators
may be entered by any court having jurisdiction over it. The arbitration must
take place in Buffalo, New York, and must be conducted before three arbitrators.

20. Except as provided herein and except for Sections 20 through 23 of the
Employment Agreement, which are incorporated herein, this Agreement amends and
supersedes the Employment Agreement.

4

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
indicated below.

FIRST NIAGARA FINANCIAL GROUP, INC.         By: /s/ Robert G. Weber  

--------------------------------------------------------------------------------

 

Robert G. Weber
Chairman of the Board

       

Paul J. Kolkmeyer

  /s/ Paul J. Kolkmeyer

--------------------------------------------------------------------------------

Executed: December 8, 2006.

5