EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this 17th day of December, 1997 (the "Commencement Date"), by and between SFS
Bancorp,  Inc., a Delaware corporation having an office at 251-263 State Street,
Schenectady,  New York 12301 (which,  together with any successor  thereto which
executes  and  delivers the  assumption  agreement  provided for in Section 9(a)
hereof or which  otherwise  becomes bound by all of the terms and  provisions of
this  Agreement  by  operation  of  law,  is  hereinafter  referred  to  as  the
"Company"), and Joseph H. Giaquinto (the "Executive").

         WHEREAS, the Executive is currently serving as Chairman,  President and
Chief  Executive  Officer  of the  Company  and  Chairman,  President  and Chief
Executive Officer of the Company's wholly-owned subsidiary,  Schenectady Federal
Savings Bank (the "Bank"); and

         WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations,  the possibility of a
change in control of the  Company may exist and that such  possibility,  and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders; and

         WHEREAS,  the Board believes it is in the best interests of the Company
to enter into this Agreement with the Executive in order to assure continuity of
management  of the  Company  and the Bank and to  reinforce  and  encourage  the
continued attention and dedication of the Executive to the Executive's  assigned
duties without distraction in the face of potentially  disruptive  circumstances
arising from the  possibility  of a change in control of the Company  and/or the
Bank, although no such change is now contemplated; and

         WHEREAS,  the Board has approved and  authorized  the execution of this
Agreement with the Executive;

         NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein, it is AGREED as follows:

         1.  Certain Definitions.

         (a) The term "Change in Control"  means (i) any  "person," as such term
is used in Sections 13(d) and 14(d) of the  Securities  Exchange Act of 1934, as
amended  (the  "Exchange  Act")  (other  than  the  Company,   any  Consolidated
Subsidiaries  (as  hereinafter  defined),  any person (as  hereinabove  defined)
acting on behalf of the Company as  underwriter  pursuant to an offering  who is
temporarily holding securities in connection with such offering,  any trustee or
other  fiduciary  holding  securities  under  an  employee  benefit  plan of the
Company, or any corporation owned,  directly or indirectly,  by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company),  is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act),  directly or  indirectly,  of securities of the Company
representing  25% or more of the  combined  voting power of the  Company's  then
outstanding  securities;  (ii)  individuals  who are members of the Board on the
Commencement Date (the "Incumbent  Board") cease for any reason to constitute at
least  a  majority  thereof,  provided  that  any  person  becoming  a  director
subsequent to the Commencement  Date whose election was approved by a vote of at
least  three-quarters  of the directors  comprising the Incumbent Board or whose
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nomination  for  election  by the  Company's  stockholders  was  approved by the
nominating  committee  serving under an Incumbent  Board,  shall be considered a
member of the Incumbent  Board;  (iii) the stockholders of the Company approve a
merger or  consolidation of the Company with any other  corporation,  other than
(1) a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining  outstanding  or by being  converted  into  voting  securities  of the
surviving  entity)  more than 50% of the  combined  voting  power of the  voting
securities of the Company or such surviving entity outstanding immediately after
such  merger or  consolidation  or (2) a merger  or  consolidation  effected  to
implement a recapitalization of the Company (or similar transaction) in which no
person (as  hereinabove  defined)  acquires more than 25% of the combined voting
power of the Company's then outstanding securities;  or (iv) the stockholders of
the  Company  approve  a plan  of  complete  liquidation  of the  Company  or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets (or any transaction having a similar effect).

                  (b) The term "Consolidated  Subsidiaries" means any subsidiary
or  subsidiaries of the Company that are part of the  consolidated  group of the
Company for federal income tax reporting.

                  (c)  The  term  "Date  of   Termination"   means  (i)  if  the
Executive's employment is terminated for Disability (as hereinafter defined), 30
days after Notice of Termination is given (provided that the Executive shall not
have  returned to the  full-time  performance  of his duties  during such 30-day
period),  and (ii) if the  Executive's  employment is  terminated  for Cause (as
hereinafter  defined) or Good Reason (as  hereinafter  defined) or for any other
reason  (other than death or  Disability),  the date  specified in the Notice of
Termination  (which,  in the case of a  termination  for Cause shall not be less
than 30 days from the date such Notice of Termination is given,  and in the case
of a termination for Good Reason shall not be less than 15 nor more than 60 days
from the date such Notice of Termination is given);  provided,  however, that if
within 15 days after any Notice of Termination is given, or, if later,  prior to
the Date of  Termination  (as determined  without  regard to this proviso),  the
party  receiving  such  Notice of  Termination  notifies  the other party that a
dispute exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally  determined,  whether by mutual written
agreement  of  the  parties,  by a  binding  arbitration  award,  or by a  final
judgment,  order or decree of a court of  competent  jurisdiction  (which is not
appealable  or with respect to which the time for appeal  therefrom  has expired
and no appeal  has been  perfected);  and  provided,  further,  that the Date of
Termination  shall be  extended  by a notice of dispute  only if such  notice is
given in good faith and the party giving such notice  pursues the  resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute,  the Company will continue to pay the Executive  the  Executive's  full
Company Salary (as hereinafter defined) in effect when the notice giving rise to
the dispute was given and continue the Executive as a participant in all benefit
and  fringe  benefit  plans (as  provided  in  Section  5  hereof)  in which the
Executive  was  participating  when the notice  giving  rise to the  dispute was
given,  until the dispute is finally  resolved in  accordance  with this Section
1(c).
<PAGE>
                  (d) The term "Good Reason" means the  occurrence,  without the
Executive's express written consent, of a material diminution of or interference
with the Executive's duties,  responsibilities  or benefits,  including (without
limitation) any of the following  circumstances  unless such  circumstances  are
fully corrected prior to the Date of Termination given in respect thereof:

                  (i) a requirement  that the Executive be based at any location
not within ten miles of Schenectady, New York, or that he substantially increase
his  travel  on  Company  or Bank  business;  (ii) a  material  demotion  of the
Executive;  (iii) a material  reduction  in the number or seniority of personnel
reporting to the Executive or a material  reduction in the frequency with which,
or in the nature of the  matters  with  respect to which such  personnel  are to
report to the  Executive,  other  than as part of a  Company-wide  or  Bank-wide
reduction  in staff;  (iv) a reduction in the  Executive's  salary or a material
adverse change in the Executive's perquisites,  benefits, contingent benefits or
vacation,  other than as part of an overall program  applied  uniformly and with
equitable  effect to all members of the senior  management of the Company or the
Bank; (v) a material and extended  increase in the required hours of work or the
workload  of the  Executive;  (vi) the  failure  of the  Board  to elect  him as
Chairman  (during any time when he is serving as a director)  or  President  and
Chief  Executive  Officer of the Company or any action by the Board removing him
from any of such  offices,  or the failure of the board of directors of the Bank
(or any successor of the Bank) to elect him as Chairman (during any time when he
is serving as a director) or President and Chief  Executive  Officer of the Bank
or any action by such board (or board of a successor  of the Bank)  removing him
from such  offices;  (vii) the failure of the  Company to obtain a  satisfactory
agreement from any successor to assume the  obligations  and  liabilities  under
this Agreement,  as contemplated in Section 9(a) hereof; or (viii) any purported
termination of the  Executive's  employment  that is not effected  pursuant to a
Notice of Termination  satisfying the  requirements of Section 8 hereof (and, if
applicable,   the   requirements  of  Section  1(e)  hereof),   which  purported
termination shall not be effective for purposes of this Agreement.

         The Executive's right to terminate  employment pursuant to this Section
1(d) shall not be  affected  by the  Executive's  incapacity  due to physical or
mental  illness.  The  Executive's  continued  employment  shall not  constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.

         (e) The terms  "Termination  for Cause" and "Terminated For Cause" mean
termination  of the  employment of the Executive  with either the Company or the
Bank, as the case may be, because of the Executive's (i) intentional  misconduct
and/or gross negligence that has a material adverse affect on the Company or the
Bank, monetarily or otherwise,  or (ii) material breach of any provision of this
Agreement.  No act or  failure  to act by  the  Executive  shall  be  considered
intentional  unless the Executive acted or failed to act with an absence of good
faith and without a  reasonable  belief that his action or failure to act was in
the best interest of the Company.  Notwithstanding the foregoing,  the Executive
shall not be deemed to have been  Terminated  for Cause  unless and until  there
shall have been delivered to the Executive a copy of a resolution,  duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting  of the Board duly  called  and held for such  purpose
(after  reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's  counsel,  to be heard before the Board),  stating
that in the good faith opinion of the Board the Executive has engaged in conduct
described in the preceding  sentence and specifying the  particulars  thereof in
detail.
<PAGE>
         2.  Term.  The term of this  Agreement  shall be a period of four years
commencing on the Commencement Date, subject to earlier  termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary  thereafter,  the term of this  Agreement  shall be  extended  for a
period of one year in addition to the  then-remaining  term,  provided  that the
Company has not given notice to the  Executive in writing at least 90 days prior
to such  anniversary  that  the term of this  Agreement  shall  not be  extended
further,   and  provided   further  that  the  Executive  has  not  received  an
unsatisfactory  performance review by either the Board or the Board of Directors
of the Bank.

         3. Employment. The Executive is employed as the Chairman, President and
Chief  Executive  Officer of the Company and the Bank.  As such,  the  Executive
shall render administrative and management services as are customarily performed
by persons situated in similar executive  capacities,  and shall have such other
powers  and  duties  as the  Board  or the  Board of  Directors  of the Bank may
prescribe  from time to time.  The Executive  shall also render  services to any
Consolidated  Subsidiary  as  requested  by the Company or the Bank from time to
time consistent with his executive position. The Executive shall devote his best
efforts and  reasonable  time and  attention  to the business and affairs of the
Company and the Bank to the extent  necessary to discharge his  responsibilities
hereunder.  The  Executive  may  serve on  corporate  or  charitable  boards  or
committees and manage  personal  investments,  so long as such activities do not
interfere materially with the performance of his responsibilities hereunder.

         4.  Cash Compensation.

                  (a) Salary. The Company agrees to pay the Executive during the
term of this Agreement a base salary,  the  annualized  amount of which shall be
not less than the annualized  aggregate  amount of the  Executive's  base salary
from the Company and any Consolidated Subsidiaries in effect at the Commencement
Date or as subsequently  increased (the "Company Salary").  While employed,  any
amounts  of  salary   actually  paid  to  the  Executive  by  any   Consolidated
Subsidiaries shall reduce the amount to be paid by the Company to the Executive.
The Company  Salary shall be paid no less  frequently  than monthly and shall be
subject to customary  tax  withholding.  The amount of the  Executive's  Company
Salary shall be increased (but shall not  thereafter be decreased)  from time to
time in accordance with the amounts of salary approved by the Board or the board
of  directors of any of the  Consolidated  Subsidiaries  after the  Commencement
Date.

                  (b) Bonuses. The Executive shall be entitled to participate in
an equitable manner with all other executive  officers of the Company and/or the
Bank in all  performance-based and discretionary bonuses authorized by the Board
for  executive  officers of the Company or by the Board of Directors of the Bank
for executive officers 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 when and as declared by the Board of Directors.
<PAGE>
                  (c) Expenses. During the term of his employment hereunder, the
Executive shall be entitled to receive prompt  reimbursement  for all reasonable
expenses  incurred by the Executive in performing  services under this Agreement
in  accordance  with the policies and  procedures  applicable  to the  executive
officers of the Company and the Bank.

         5.  Benefits.

                  (a)  Participation  in Benefit Plans.  The Executive  shall be
entitled to participate, to the same extent as executive officers of the Company
and/or the Bank generally,  in all plans of the Company and/or the Bank relating
to pension, retirement, savings, group or other life insurance, hospitalization,
medical and dental  coverage,  cash  bonuses,  and other  retirement or employee
benefits or combinations  thereof. In addition,  the Executive shall be entitled
to be considered  for benefits  under all of the stock and stock option  related
plans in which the  Company's or the Bank's  executive  officers  generally  are
eligible or become  eligible to  participate.  Nothing herein shall preclude the
Company  from  providing  other  benefits  to the  Executive  independent  of or
separate  from those  provided to other  executive  officers  or its  executives
generally.  Upon any separation of service of the Executive from the Company and
the Bank (other  than a  "Termination  for Cause" as defined in Section  1(e) of
this Agreement),  the Company will thereafter  provide (through the Consolidated
Subsidiaries  or otherwise)  the  Executive and his spouse for their  respective
lifetimes,  at the sole cost and expense of the Company,  with  continued  group
life insurance,  hospitalization,  medical, dental, prescription drug, and other
health benefits coverage,  at least equivalent to the coverage being provided by
the Company and/or the Bank to the Executive and his spouse on the  Commencement
Date  (the  "Post-Separation  Health  Benefits").   The  Post-Separation  Health
Benefits  shall be  deemed  for all  purposes  of this  Agreement  to be  vested
contractual  rights of the  Executive  and the  obligation  of the Company  with
respect thereto shall survive any  termination of this  Agreement.  In the event
the Company reasonably  determines that the provision of Post-Separation  Health
Benefits to the Executive or his surviving  spouse as provided in this Agreement
could result in the Company or the Bank violating the Employee Retirement Income
Security Act of 1974, as amended,  or any other  applicable  law or  regulation,
then the Company may in lieu thereof make a monthly  payment to the Executive or
his  surviving  spouse  in an  amount  equal to the sum of (i) the  actual  cost
incurred by the Executive or his surviving spouse for comparable  health benefit
coverage  plus  (ii) a tax  gross-up  amount  to  enable  the  Executive  or his
surviving  spouse to  receive  the  amount  set forth in  Section  5(a)(i) on an
after-tax basis.

                  (b)  Fringe  Benefits.  The  Executive  shall be  eligible  to
participate in, and receive  benefits  under,  any other fringe benefit plans or
perquisites which are or may become generally  available to the Company's or the
Bank's  executive  officers,   including,   but  not  limited  to,  supplemental
retirement,  incentive  compensation,  supplemental  medical  or life  insurance
plans,  company cars, club dues, physical  examinations,  financial planning and
tax preparation services.

         6.  Vacations;  Leave.  The Executive  shall be entitled to annual paid
vacation in accordance with the policies  established by the Board and the board
of  directors  of the Bank for  executive  officers,  in no event less than four
weeks per year,  and to voluntary  leaves of absence,  with or without pay, from
time to time at such times and upon such  conditions  as the Board may determine
in its discretion.  In the event that the Executive is employed hereunder during
a calendar  year for less than all of that year,  he shall be  entitled  in that
<PAGE>
year to a number of paid  vacation  days which shall be  prorated in  accordance
with the number of days on which he is so employed in that year.  The  Executive
shall be entitled  to all paid  holidays  given by the Company to its  executive
officers.

         7.  Termination of Employment.

                  (a) Death.  In the event of the death of the  Executive  while
employed  under this Agreement and prior to any  termination of employment,  (i)
the Company shall pay to the Executive's estate, or such person as the Executive
may have  previously  designated  in writing,  the Company  Salary which was not
previously  paid to the  Executive  plus the Company  Salary which he would have
earned if he had continued to be employed under this Agreement through the 180th
day after the date on which the Executive  died, at the time such payments would
have been due; and (ii) the Company shall pay to the Executive's estate, or such
person as the Executive may have previously  designated in writing,  the amounts
of all benefits or awards which, pursuant to the terms of any applicable plan or
plans,  were earned with respect to the fiscal year in which the Executive  died
and which the Executive  would have been entitled to receive if he had continued
to be employed,  and the amount of any bonus or incentive  compensation for such
fiscal year which the  Executive  would have been  entitled to receive if he had
continued to be employed, pro-rated in accordance with the portion of the fiscal
year served prior to his death; provided that such amounts shall be payable when
and as ordinarily payable under the applicable plans. The death of the Executive
shall  not  reduce  or  alter  the   obligation   of  the   Company  to  provide
Post-Separation Health Benefits to his surviving spouse.

                  (b) Disability.  If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from the
full-time performance of his duties hereunder for 130 consecutive business days,
and within 30 days after a written  Notice of  Termination  is given,  shall not
have returned to the performance of his duties  hereunder on a full-time  basis,
the Company may terminate the Executive's employment hereunder for "Disability."
In the event the Executive is terminated for  Disability,  (i) the Company shall
pay to the Executive  the Company  Salary which was not  previously  paid to the
Executive plus the Company Salary which he would have earned if he had continued
to be employed under this Agreement through the term of the Agreement  remaining
at the time the Notice of Termination  for Disability is given, at the time such
payments would have been due, less the amount of disability  insurance  payments
received during such period by the Executive on account of insurance  maintained
by the Company or any of its  Consolidated  Subsidiaries  for the benefit of the
Executive;  and (ii) the Company  shall pay to the  Executive the amounts of all
benefits or awards which, pursuant to the terms of any applicable plan or plans,
were  earned  with  respect  to the  fiscal  year in  which  the  Executive  was
terminated due to Disability and which the Executive would have been entitled to
receive  if he had  continued  to be  employed,  and the  amount of any bonus or
incentive  compensation for such fiscal year which the Executive would have been
entitled to receive if he had continued to be employed,  pro-rated in accordance
with the  portion of the fiscal  year  served  prior to his  termination  due to
Disability; provided, that, such amounts shall be payable when and as ordinarily
payable  under the  applicable  plans.  The  termination  of the  Executive  for
Disability  shall not reduce or alter the  obligation  of the Company to provide
Post-Separation Health Benefits to the Executive and his spouse.

                  (c) Cause. In the event of Termination for Cause,  the Company
shall pay to the Executive his Company Salary through the Date of Termination at
the rate in  effect  at the time the  Notice  of  Termination  is given  and the
Company shall have no further obligation to the Executive under this Agreement.
<PAGE>
                  (d) Involuntary Termination. In the event that (i) the Company
terminates the Executive's  employment  without the Executive's  written consent
other than  pursuant to Section  7(a),  7(b) or 7(c)  hereof,  or the  Executive
terminates  his  employment  for Good Reason,  and (ii) the Executive  offers to
continue to provide services as contemplated by this Agreement and such offer is
declined  ("Involuntary  Termination"),  then,  subject to Section  7(e) of this
Agreement,  the  Company  shall,  during  the  lesser  period  of  the  Date  of
Termination  through  the  remaining  term  of this  Agreement  or  three  years
following the Date of  Termination,  as liquidated  damages pay to the Executive
monthly  one-twelfth  of the Company  Salary at the annual rate in effect at the
time the Notice of  Termination  is given and  one-twelfth of the average annual
amount of cash bonus and cash incentive compensation of the Executive,  based on
the average  amounts of such  compensation  earned by the  Executive for the two
full fiscal years preceding the Date of Termination.  In addition, the Executive
shall be entitled to the Post-Separation Health Benefits.

                  (e) Reduction of the Company's Obligations Under Section 7(d).
In the event that the Executive becomes entitled to liquidated  damages pursuant
to Section  7(d),  the  Company's  obligation  thereunder  with  respect to cash
damages shall be reduced by the amount of the Executive's income, if any, earned
from  providing   services  other  than  to  the  Company  or  the  Consolidated
Subsidiaries  during the period of the lesser of the Date of Termination through
the  remaining  term of this  Agreement  or three  years  following  the Date of
Termination.

                  (f)  Voluntary  Termination.  The  Executive may terminate his
employment  voluntarily  at any time by a notice  pursuant  to Section 8 of this
Agreement. In the event that the Executive voluntarily terminates his employment
other than for Good Reason ("Voluntary  Termination"),  the Company shall pay to
the Executive his Company  Salary through the Date of Termination at the rate in
effect at the time the Notice of Termination is given, at the time such payments
are due, and the Company shall have no further obligation to the Executive under
this Agreement other than for Post-Separation Health Benefits.

                  (g) Change in  Control.  In the event that the  Company  shall
terminate the Executive's  employment  other than pursuant to Section 7(a), 7(b)
or 7(c) hereof, or the Executive shall terminate his employment for Good Reason,
within the 24 months following a Change in Control,  in addition to any payments
and benefits to which the Executive is entitled  under Section 7(d) hereof,  the
Company  shall (i) pay the  Executive  his  Company  Salary  through the Date of
Termination  at the rate in effect  at the time the  Notice  of  Termination  is
given,  at the time such  payments are due;  plus (ii) pay to the Executive in a
lump sum in cash,  within 25 days after the later of the date of such  Change in
Control or the Date of  Termination,  an amount equal to 299% of the Executive's
"base amount" as determined  under Section 280G of the Internal  Revenue Code of
1986, as amended (the "Code"),  less the aggregate present value of the payments
or  benefits,  if any,  in the  nature of  compensation  for the  benefit of the
Executive,  arising  under  any  other  plans or  arrangements  (i.e.,  not this
Agreement)  between the Company or any of the Consolidated  Subsidiaries and the
Executive,  which  are  contingent  upon a  Change  in  Control.  The  Company's
obligation  under this  Section 7 shall not be reduced by any amounts paid under
the  Restated   Executive   Supplemental   Retirement   Plan  and   Compensation
Continuation  Agreement,  dated March 23, 1988, by and between the Executive and
the Bank.
<PAGE>
         While  it is not  contemplated  that the  Executive  will  receive  any
amounts or benefits  that will  constitute  "excess  parachute  payments"  under
Section 280G of the Code, in the event that any payments or benefits provided or
to be provided to the Executive pursuant to this Agreement,  in combination with
payments or benefits, if any, from other plans or arrangements maintained by the
Company or any of the Consolidated  Subsidiaries,  constitute  "excess parachute
payments"  under  Section  280G of the Code that are subject to excise tax under
Section  4999 of the Code,  the Company  shall pay to the  Executive  in cash an
additional  amount  equal to the amount of the Gross Up Payment (as  hereinafter
defined).  The "Gross Up Payment"  shall be the amount needed to ensure that the
amount of such payments and the value of such benefits received by the Executive
(net of such excise tax and any  federal,  state and local tax on the  Company's
payment  to him  attributable  to such  excise  tax)  equals  the amount of such
payments and value of such  benefits as he would  receive in the absence of such
excise tax and any federal,  state and local tax on the Company's payment to him
attributable  to such  excise tax.  The  Company  shall pay the Gross Up Payment
within 30 days after the Date of  Termination.  For purposes of determining  the
amount of the Gross Up Payment,  the value of any non-cash benefits and deferred
payments or benefits shall be determined by the Company's  independent  auditors
in accordance with the principles of Section  280G(d)(3) and (4) of the Code. In
the event that, after the Gross Up Payment is made, the amount of the excise tax
is determined to be less than the amount  calculated in the determination of the
actual Gross Up Payment made by the Company,  the  Executive  shall repay to the
Company,  at the time that such reduction in the amount of excise tax is finally
determined,  the portion of the Gross Up Payment attributable to such reduction,
plus  interest on the amount of such  repayment at the  applicable  federal rate
under Section 1274 of the Code from the date of the Gross Up Payment to the date
of the  repayment.  The amount of the  reduction  of the Gross Up Payment  shall
reflect any subsequent  reduction in excise taxes resulting from such repayment.
In the event that,  after the Gross Up Payment is made, the amount of the excise
tax is  determined  to exceed  the amount  anticipated  at the time the Gross Up
Payment  was made,  the  Company  shall  pay to the  Executive,  in  immediately
available  funds,  at the time that  such  additional  amount  of excise  tax is
finally determined,  an additional payment ("Additional Gross Up Payment") equal
to such additional  amount of excise tax and any federal,  state and local taxes
thereon,  plus all interest and  penalties,  if any, owed by the Executive  with
respect to such  additional  amount of excise and other tax.  The Company  shall
have  the  right  to  challenge,  on the  Executive's  behalf,  any  excise  tax
assessment  against  him as to which the  Executive  is entitled to (or would be
entitled  if such  assessment  is  finally  determined  to be proper) a Gross Up
Payment or  Additional  Gross Up Payment,  provided  that all costs and expenses
incurred in such a challenge shall be borne by the Company and the Company shall
indemnify the Executive and hold him harmless,  on an after-tax basis,  from any
excise or other tax  (including  interest and  penalties  with respect  thereto)
imposed as a result of such payment of costs and expenses by the Company.

            (h) Other Payments.  The Company's  obligation  under this Section 7
shall  not  be  reduced  by  any  amounts  paid  under  the  Restated  Executive
Supplemental  Retirement Plan and  Compensation  Continuation  Agreement,  dated
March 23, 1988, by and between the Executive and the Bank.

         8. Notice of Termination. In the event that the Company or the Bank, or
both,  desire to terminate the  employment  of the Executive  during the term of
this  Agreement,  the Company and/or the Bank (as the case may be) shall deliver
to  the  Executive  a  written  notice  of  termination,  stating  whether  such
termination  constitutes  Termination for  Disability,  Termination for Cause or
Involuntary  Termination,  setting  forth in  reasonable  detail  the  facts and
<PAGE>
circumstances  that are the basis for the  termination,  and specifying the date
upon  which  employment  shall  terminate,  which date shall be at least 30 days
after  the date  upon  which  the  notice  is  delivered,  except in the case of
Termination for Cause. In the event that the Executive  determines in good faith
that he has experienced an Involuntary  Termination of his employment,  he shall
send a written notice to the Company stating the  circumstances  that constitute
such  Involuntary  Termination and the date upon which his employment shall have
ceased due to such  Involuntary  Termination.  In the event  that the  Executive
desires to effect a Voluntary Termination,  he shall deliver a written notice to
the Company, stating the date upon which employment shall terminate,  which date
shall be at least 30 days  after the date upon  which the  notice is  delivered,
unless the parties agree to a date sooner.

         9.  No Assignments.

                  (a) This Agreement is personal to each of the parties  hereto,
and  neither  party may  assign or  delegate  any of its  rights or  obligations
hereunder  without  first  obtaining  the  written  consent of the other  party;
provided,  however,  that the  Company  shall  require any  successor  or assign
(whether direct or indirect, by purchase,  merger,  consolidation,  operation of
law or otherwise) to all or  substantially  all of the business and/or assets of
the Company,  by an assumption  agreement in form and substance  satisfactory to
the  Executive,  to expressly  assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform
it if no such  succession or assignment had taken place.  Failure of the Company
to obtain such an assumption  agreement prior to the  effectiveness  of any such
succession or assignment  shall be a breach of this  Agreement and shall entitle
the Executive to  compensation  and benefits from the Company in the same amount
and on the same terms that he would be entitled to  hereunder  if he  terminated
his  employment  for Good  Reason,  in addition to any  payments and benefits to
which the  Executive is entitled  under  Section  7(g)  hereof.  For purposes of
implementing  the  provisions of this Section  9(a),  the date on which any such
succession becomes effective shall be deemed the Date of Termination.

                  (b) This  Agreement and all rights of the Executive  hereunder
shall inure to the benefit of and be enforceable by the Executive's personal and
legal   representatives,    executors,   administrators,    successors,   heirs,
distributees, devisees and legatees. In the event of the death of the Executive,
unless otherwise provided herein, all amounts payable hereunder shall be paid to
the  Executive's  devisee,  legatee,  or other  designee or, if there be no such
designee, to the Executive's estate.


         10. Notices. For the purposes of this Agreement,  all notices and other
communications  to any party  hereto  shall be in writing and shall be deemed to
have been duly given when  delivered or sent by certified  mail,  return receipt
requested, postage prepaid, addressed as follows:

          If to the Executive:       Joseph H. Giaquinto, Chairman of the Board,
                                     President and Chief Executive Officer
                                     SFS Bancorp, Inc.
                                     251-263 State Street
                                     Schenectady, New York  12301

          If to the Company:         SFS Bancorp, Inc.
                                     251-263 State Street
                                     Schenectady, New York  12301
                                     Attention:  Corporate Secretary
<PAGE>
or to such  other  address  as such  party  may have  furnished  to the other in
writing in accordance herewith,  except that a notice of change of address shall
be effective only upon receipt.

         11.  Amendments.  No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.

         12.  Headings.  The headings used in this Agreement are included solely
for  convenience  and shall  not  affect,  or be used in  connection  with,  the
interpretation of this Agreement.

         13.  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

         14.  Governing Law. This Agreement shall be governed by the laws of the
State of Delaware.

         15.  Arbitration.  Any  dispute  or  controversy  arising  under  or in
connection  with  this  Agreement  shall  be  settled   exclusively  by  binding
arbitration,  conducted  before  a panel  of  three  arbitrators  in a  location
selected by the Executive within 100 miles of such Executive's job location with
the  Company,  in  accordance  with  the  rules  of  the  American   Arbitration
Association  then in effect;  provided,  however,  that the  Executive  shall be
entitled to seek  specific  performance  of his rights under Section 1(c) during
the pendency of any dispute or controversy  arising under or in connection  with
this Agreement.  Judgment may be entered on the arbitrator's  award in any court
having jurisdiction.

         16.  Reimbursement  of Expenses.  In the event any dispute  shall arise
between  the  Executive  and  the  Company  or  the  Bank  as to  the  terms  or
interpretation of this Agreement,  including this Section 16, whether instituted
by formal legal  proceedings  or  otherwise,  including  any action taken by the
Executive to enforce the terms of this  Section 16 or in  defending  against any
action  taken by the  Company  or the Bank,  the  Company  shall  reimburse  the
Executive  for all costs  and  expenses  incurred  by the  Executive,  including
reasonable  attorney's fees, arising from such dispute,  proceedings or actions,
unless a court of  competent  jurisdiction  renders  a final  and  nonappealable
judgment against the Executive as to the matter in dispute. Reimbursement of the
Executive's  expenses shall be paid within ten days of the Executive  furnishing
to the Company written  evidence,  which may be in the form, among other things,
of a  canceled  check or  receipt,  of any  costs or  expenses  incurred  by the
Executive.
<PAGE>

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year first above written.

         THIS AGREEMENT  CONTAINS A BINDING  ARBITRATION  PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.


Attest:                                 SFS BANCORP, INC.

---------------------                   ---------------------------
Secretary                               By:
                                        Its:

                                        EXECUTIVE

                                        ----------------------------
                                        Joseph H. Giaquinto, individually