exh10-6.htm


    PATHFINDER
BANCORP, INC.

    PATHFINDER
BANK

     

    EMPLOYMENT
AGREEMENT

     

    This
Agreement is made effective as of the 23rd day of
December 2008, by and between Pathfinder Bank (the “Bank”), a New York chartered
stock savings bank, with its principal administrative office at 214 West First
Street, Oswego, New York 13126-2547, jointly with Pathfinder Bancorp, Inc, the
sole stockholder of the Bank, and Edward A. Mervine (the “Executive”). Any
reference to “Company” herein shall mean Pathfinder Bancorp, Inc. or any
successor thereto. Any reference to “Employer” herein shall mean both the Bank
and the Company or any successors thereto.

     

    WHEREAS, the Executive and
Employer entered into an employment agreement dated on the February 9, 2004 (the
“Original Agreement”), pursuant to which the Executive was employed as
Vice-President and General Counsel of the Employer; and

    


    WHEREAS, Section 409A of the
Internal Revenue Code (the “Code”), effective January 1, 2005, requires deferred
compensation arrangements, including those set forth in employment agreements,
to comply with its provisions and restrictions and limitations on payments of
deferred compensation; and

    


    WHEREAS, Code Section 409A and
the final regulations issued thereunder necessitate changes to the Original
Agreement; and

    


    WHEREAS, Executive has agreed
to such changes; and

    


    WHEREAS, the parties hereto
desire to set forth the terms of the revised Agreement and the continuing
employment relationship of the Employer and Executive.

     

    NOW, THEREFORE, in
consideration of the mutual covenants herein contained, and upon the other terms
and conditions hereinafter provided, the parties hereby agree as
follows:

     

    
      	
               
      

            	
              1.POSITION
      AND RESPONSIBILITIES

            


    

     

    During
the period of his employment hereunder, Executive agrees to serve as Senior
Vice-President and General Counsel of the Bank and as Vice-President and General
Counsel of the Company. During said period, Executive also agrees to serve, if
elected, as an officer and director of the Bank, the Company and of any
subsidiary or affiliate of the Employer. Failure to reelect Executive as Senior
Vice-President and General Counsel of the Bank and the Company without the
consent of the Executive during the term of this Agreement shall constitute a
breach of this Agreement.

     

    
      	
               
      

            	
              2.TERMS
      AND DUTIES

            


    

     

    (a)           The
period of Executive’s employment under this Agreement shall begin as of the date
first above written and shall continue for a period of thirty-six (36) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement, and continuing at each anniversary date thereafter, the Agreement
shall renew for an additional year such that the remaining term shall be three
(3) years unless written notice is provided to Executive, at least ten (10) days
and not more than thirty (30) days prior to any such anniversary date, that his
employment shall cease at the end of thirty-six (36) months following such
anniversary date. Prior to each notice period for non-renewal, the disinterested
members of the Board of Directors of the Bank (“Board”) will conduct a
comprehensive performance evaluation and review of the Executive for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board’s meeting,

     

    (b)           During
the period of his employment hereunder, except for periods of absence occasioned
by illness, reasonable vacation periods, and reasonable leaves of absence,
Executive shall devote substantially all his business time, attention, skill,
and efforts to the faithful performance of his duties hereunder including
activities and services related to the legal needs of the Employer, provided
however that Executive hold any offices or positions in, companies or
organizations, which, in such Board’s judgment, will not present any conflict of
interest with the Bank, or materially affect the performance of Executive’s
duties pursuant to this Agreement. Moreover, the Executive may continue to
practice law independently of his employment provided (1) said practice does not
routinely require in excess of 10 hours per week of the executive’s time and (2)
does not present a conflict of interest to the Bank unless said conflict is
waived by the Bank or Employer.

     

    
      	
               
      

            	
              3.COMPENSATION
      AND REIMBURSEMENT

            


    

     

    (a)           The
compensation specified under this Agreement shall constitute the salary and
benefits paid for the duties described in Section 2(b). The Bank shall pay
Executive as compensation a salary of not less than $137,000 per year (“Base
Salary”).  Such Base Salary shall be payable biweekly. During the
period of this Agreement, Executive’s Base Salary shall be reviewed at least
annually.  Such review shall be conducted by a Committee designated by
the Board, and the Board may increase Executive’s Base Salary.  In
addition to the Base Salary provided in this Section 3(a), the Bank shall
provide Executive at no cost to Executive with all such other benefits as are
provided uniformly to permanent full-time employees of the Bank.

     

    (b)           The
Bank will provide Executive with employee benefit plans, arrangements and
perquisites substantially equivalent to those in which Executive was
participating or otherwise deriving benefit from immediately prior to the
beginning of the term of this Agreement, and the Bank will not, without
Executive’s prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive’s rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to and on a basis consistent with the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan of the Bank in which Executive is eligible to participate. Nothing paid
to the Executive under any such plan or arrangement will be deemed to be in lieu
of other compensation to which the Executive is entitled under this
Agreement.

     

    (c)           In
addition to the Base Salary provided for by paragraph (a) of this Section 3, the
Employer shall pay or reimburse Executive for all reasonable travel and other
reasonable expenses incurred by Executive performing his obligations under this
Agreement and may provide such additional compensation in such form and such
amounts as the Board may from time to time determine.

     

    (d)           Compensation
and reimbursement to be paid pursuant to paragraphs (a), (b) and (c) of this
Section 3 shall be paid by the Bank and the Company, respectively, on a pro rata
basis based upon the amount of service the Executive devotes to the Bank and
Company, respectively.

     

    4.           PAYMENTS
TO EXECUTIVE UPON AN EVENT OF TERMINATION

     

    (a)           The
provisions of this Section shall apply upon the occurrence of an Event of
Termination (as herein defined) during the Executive’s term of employment under
this Agreement. As used in this Agreement, an “Event of Termination” shall mean
and include any one or more of the following:

     

    (i) the
termination by the Bank or the Company of Executive’s full-time employment
hereunder for any reason other than:

     

    (A)           Disability
or Retirement as defined in Section 6 below,

     

    (B)           a
Change in Control, as defined in Section 5(a) hereof, or

     

    (C)           Termination
for Cause as defined in Section 7 hereof; or

     

    (ii)  Executive’s
resignation from the Bank’s or the Company’s employ, upon any:

     

    
      	
               
      

            	
              (A)

            	
              failure
      to elect or reelect or to appoint or reappoint Executive as Vice-President
      and General Counsel,

            


    

     

    
      	
               
      

            	
              (B)

            	
              material
      change in Executive’s function, duties, or responsibilities, which change
      would cause Executive’s position to become one of lesser responsibility,
      importance, or scope from the position and attributes thereof described in
      Section 1, above,

            


    

     

    
      	
               
      

            	
              (C)

            	
              a
      relocation of Executive’s principal place of employment by more than 30
      miles from its location at the effective date of this Agreement, or a
      material reduction in the benefits and perquisites to the Executive from
      those being provided as of the effective date of this
      Agreement,

            


    

     

    
      	
               
      

            	
              (D)

            	
              liquidation
      or dissolution of the Bank or Company other than liquidations or
      dissolutions that are caused by reorganizations that do not affect the
      status of Executive, or

            


    

     

    (E)           breach
of this Agreement by the Bank.

     

     Upon
the occurrence of any event described in clauses (ii)(A), (B). (C), (D), or (E),
above, Executive shall have the right to elect to terminate his employment under
this Agreement by resignation upon thirty (30) days prior written notice given
within a reasonable period of time not to exceed ninety (90) days after the
initial event giving rise to said right to elect. Notwithstanding the preceding
sentence, in the event of a continuing breach of this Agreement by the Employer,
the Executive, after giving due notice within the prescribed time frame of an
initial event specified above, shall not waive any of his rights solely under
this Agreement and this Section 4 by virtue of the fact that Executive has
submitted his resignation but has remained in the employment of the Employer and
is engaged in good faith discussions to resolve any occurrence of an event
described in clauses (A), (B), (C), (D), and (E) above.  The Bank
shall have at least thirty (30) days to remedy any condition set forth in clause
(ii)(A) through (E), provided, however, that the Employer shall be entitled to
waive such period and make an immediate payment hereunder.

     

    (b)           Upon
the occurrence of an Event of Termination, on the Date of Termination, as
defined in Section 8, the Employer shall pay Executive, or, in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to three
(3) times the sum of (i) Base Salary and (ii) the highest rate of bonus awarded
to the Executive during the prior three years, provided, however, that if the
Employer is not in compliance with its minimum capital requirements or if such
payments would cause the Employer’s capital to be reduced below its minimum
capital requirements, such payments shall be deferred until such time as the
Employer is in capital compliance.  All amounts payable to Executive
shall be paid in a lump sum within thirty (30) days following the Date of
Termination, or if Executive is a Specified Employee (within the meaning of
Treasury Regulations §1.409A-1(i)), then to the extent necessary to avoid
penalties under Code Section 409A, such payment will be made on the first
business day of the seventh month following the Date of Termination. Such
payments shall not be reduced in the event the Executive obtains other
employment following termination of employment.

     

    (c)           Notwithstanding
the provisions of Sections 4(a) and (b), and in the event that there has not
been a Change in Control as defined in Section 5(a) nor an Event of Termination,
as defined in Section 4(a), upon the voluntary termination by the Executive upon
giving sixty days notice to the Employer (which itself shall not be deemed to
constitute an “Event of Termination” as defined), the Employer, at the
discretion of the Board of Directors, shall pay Executive, or in the event of
his subsequent death, his beneficiary or beneficiaries, or his estate, as the
case may be, a severance payment in an amount to be determined by the Board of
Directors at the time of such voluntary termination by the
Executive.  Such severance payment shall not exceed three (3) times
the average of the three preceding years’ Base Salary, including bonuses and any
other cash compensation paid to the Executive during such years, and the amount
of any benefits received pursuant to any employee benefit plans, on behalf of
the Executive, maintained by the Employer during such years; provided, however,
that if the Employer is not in compliance with its minimum capital requirements
or if such payments would cause the Employer’s capital to be reduced below its
minimum capital requirements, such payments shall be deferred until such time as
the Employer is in capital compliance, and provided further, that in no event
shall total severance compensation from all sources exceed three times the
Executive’s Base Salary for the immediately preceding year.  All
amounts payable to Executive shall be paid in a lump sum within thirty (30) days
following the Date of Termination, or if Executive is a Specified Employee
(within the meaning of Treasury Regulations §1.409A-1(i)), then to the extent
necessary to avoid penalties under Code Section 409A, such payment will be made
on the first business day of the seventh month following the Date of
Termination.  Such payments shall not be reduced in the event the
Executive obtains other employment following termination of
employment.

     

    (d)           Upon
the occurrence of an Event of Termination, the Employer will cause to be
continued life insurance and non-taxable medical and dental coverage
substantially identical to the coverage maintained by the Employer for Executive
prior to his termination, provided that such benefits shall not be provided in
the event they should constitute an unsafe or unsound banking practice relating
to executive compensation and employment contracts pursuant to applicable
regulations, as is now or hereafter in effect. Such coverage shall cease upon
the expiration of the remaining term of this Agreement.

     

    (e)           Upon
the occurrence of an Event of Termination, Executive shall become fully vested
in and entitled to all benefits granted to him pursuant to any stock option plan
of the Bank or Company.

     

    (f)           Upon
the occurrence of an Event of Termination, Executive shall become fully vested
in and entitled to all benefits granted to him pursuant to any nonqualified
deferred compensation plan of the Bank or Company applicable to him, if
any.

     

    (g)           Upon
the occurrence of an Event of Termination, the Executive shall become fully
vested in and entitled to all benefits awarded to him under the Bank’s or the
Company’s recognition and retention plan or any restricted stock plan in
effect.

     

    (h)           For
purposes of Section 4, Event of Termination and voluntary termination of
employment shall be construed to require a “Separation from Service” as defined
in Code Section 409A and the Treasury Regulations promulgated thereunder,
provided, however, that the Bank and Executive reasonably anticipate that the
level of bona fide services Executive would perform after termination would
permanently decrease to a level that is less than 50% of the average level of
bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period.

     

    
      	
               
      

            	
              5.CHANGE
      IN CONTROL

            


    

     

    (a)           No
benefit shall be payable under this Section 5 unless there shall have been a
Change in Control of the Bank or Company. For purposes of this Agreement, a
“Change in Control” of the Bank or Company shall mean a change in control of a
nature that (i) would be required to be reported in response to Item 5.01 of the
current report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or (ii)
results in a Change in Control of the Bank or the Company within the meaning of
the Home Owners Loan Act, as amended, and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control
(collectively, the “HOLA”): or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (a) any “person” (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) 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 Company’s outstanding securities except for any
securities purchased by the Employer’s employee stock ownership plan or trust;
or (b) individuals who constitute the Company’s Board of Directors on the date
hereof (the “Incumbent Board”) cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company’s stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations or financial institutions, and as a result such
proxy solicitation a plan of reorganization, merger consolidation or similar
transaction involving the Company is approved by the requisite vote of the
Company’s stockholders; or (e) a tender offer is made for 25% or more of the
voting securities of the Company and the shareholders owning beneficially or of
record 25% or more of the outstanding securities of the Company have tendered or
offered to sell their shares pursuant to such tender offer and such tendered
shares have been accepted by the tender offeror. Notwithstanding anything to the
contrary herein, a “Change in Control” of the Bank or the Company shall not be
deemed to have occurred in the event of a conversion of Pathfinder Bancorp, MHC
to stock holding company form.

     

    (b)           If
any of the events described in Section 5(a) hereof constituting a Change in
Control have occurred, Executive shall be entitled to the benefits provided in
paragraphs (c), (d), (e), (f), (g) and (h) of this Section 5 upon his subsequent
termination of employment at any time during the term of this Agreement,
regardless of whether such termination results from (i) his resignation or (ii)
his dismissal upon the Change in Control.

     

    (c)           Upon
the occurrence of a Change in Control followed by the Executive’s termination of
employment, the Employer shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to the greater of the
payments due for the remaining term of the Agreement or 2.99 times the average
of the five preceding years’ Base Salary, including bonuses and any other cash
compensation paid to the Executive during such years, and the amount of any
contributions made to any employee benefit plans, on behalf of the Executive,
maintained by the Employer during such years, (hereinafter referred to as
“Payment”).  Such Payment shall be payable to Executive in a lump sum
within thirty (30) days following the Date of Termination, or if Executive is a
Specified Employee (within the meaning of Treasury Regulations §1.409A-1(i)),
then to the extent necessary to avoid penalties under Code Section 409A, such
Payment will be made on the first business day of the seventh month following
the Date of Termination.

     

    (d)           Upon
the occurrence of a Change in Control followed by the Executive’s termination of
employment, the Employer will cause to be continued life insurance and
non-taxable medical and dental coverage substantially identical to the coverage
maintained by the Employer for Executive prior to his severance. Such coverage
and payments shall cease upon the expiration of thirty-six (36)
months.

     

    (e)           Upon
the occurrence of a Change in Control, Executive shall become fully vested in
and entitled to all benefits granted to him pursuant to any stock option plan of
the Bank or Company.

     

    (f)           Upon
the occurrence of a Change in Control, Executive shall become fully vested in
and entitled to all benefits granted to him pursuant to any non-qualified
deferred compensation plan of the Bank or Company, applicable to him, if
any.

     

    (g)           Upon
the occurrence of a Change in Control, the Executive shall become fully vested
in and entitled to all benefits awarded to him under the Bank’s or the Company’s
Recognition and Retention Plan or any restricted stock plan in
effect.

     

    (h)           Notwithstanding
the preceding paragraphs of this Section 5, in the event that:

     

    
      	
               
      

            	
              (i)

            	
              the
      aggregate payments or benefits to be made or afforded to Executive under
      said paragraphs (the “Termination Benefits”) would be deemed to include an
      “excess parachute payment” under Section 280G of the Internal Revenue Code
      or any successor thereto, and

            


    

     

    
      	
               
      

            	
              (ii)

            	
              if
      such Termination Benefits were reduced to an amount (the “Non-Triggering
      Amount”), the value of which is one dollar ($1.00) less than an amount
      equal to the total amount of payments permissible under Section 280G of
      the Internal Revenue Code or any successor thereto, then the Termination
      Benefits to be paid to Executive shall be so reduced so as to be a
      Non-Triggering Amount.

            


    

     

    (i)           Notwithstanding
the foregoing, there will be no reduction in the Payment otherwise payable to
Executive during any period during which Executive is incapable of performing
his duties hereunder by reason of temporary disability.

     

    (j)           Any
payments made to Executive by the Bank pursuant to this Agreement or otherwise,
are subject to and conditioned upon their compliance with 12 U.S.C. § 1818(k)
and any applicable regulations promulgated thereunder.

     

    (k)           The
Executive shall not be entitled to immediately receive Payment pursuant to this
Section 5 if the Employer is not in compliance with its minimum capital
requirements or if such Payment would cause the Employer’s capital to be reduced
below its minimum capital requirements. In such event, Payment shall be deferred
until such times as the Employer is in capital compliance and provided further,
that in such event the Payment shall not exceed three times the Executive’s Base
Salary for the immediately preceding year.

     

    (l)           For
purposes of Section 5, termination of employment shall be construed to require a
“Separation from Service” as defined in Code Section 409A and the Treasury
Regulations promulgated thereunder, provided, however, that the Bank and
Executive reasonably anticipate that the level of bona fide services Executive
would perform after termination would permanently decrease to a level that is
less than 50% of the average level of bona fide services performed (whether as
an employee or an independent contractor) over the immediately preceding
36-month period.

     

    


     

    
      	
               
      

            	
              6.TERMINATION
      UPON RETIREMENT, DISABILITY, OR
DEATH

            


    

     

    (a)           Termination
by the Employer of the Executive based on “Retirement” shall mean termination in
accordance with the Employer’s retirement policy or in accordance with any
retirement arrangement established with Executive’s consent with respect to him.
Upon termination of Executive upon Retirement, no amounts or benefits shall be
due to Executive under this Agreement, and Executive shall be entitled to all
benefits for which he is eligible under any retirement plan of the Employer and
other plans to which Executive is a party.

     

    (b)           “Disability”
or “Disabled” shall be construed to comply with Code Section 409A and shall be
deemed to have occurred if: (i) Executive is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death, or last for a continuous
period of not less than 12 months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death, or last
for continuous period of not less than 12 months, Executive is receiving income
replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Employer; or (iii) Executive
is determined to be totally disabled by the Social Security
Administration.  In the event the Executive is determined to be
“Disabled,” the Employer may terminate this Agreement, provided that the
Employer shall continue to be obligated to pay the Executive his Base Salary for
one year and provided further that any amounts actually paid to Executive
pursuant to any disability insurance or other similar such program which the
Employer has provided or may provide on behalf of its employees or pursuant to
any workman’s or social security disability program shall not reduce the
compensation to be paid to the Executive pursuant to this
paragraph.  Any payments required hereunder shall be payable in
monthly installments and shall commence within thirty (30) days from the date
Executive is determined to be Disabled.

     

    (c)           In
the event of Executive’s death during the term of the Agreement, his estate,
legal representatives or named beneficiaries (as directed by Executive in
writing) shall be paid Executive’s Base Salary as defined in Paragraph 3(a) at
the rate in effect at the time Executive’s death in accordance with regular
payroll practices for the remaining term of the Agreement, and the Employer will
continue to provide   medical, dental, and other benefits normally provided
for an Executive’s family for such remaining term.

     

    
      	
               
      

            	
              7.TERMINATION
      FOR CAUSE

            


    

     

    The term
“Termination for Cause” shall mean termination because of the Executive’s
personal dishonesty, incompetence, willful misconduct, any breach of fiduciary
duty involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic violations
or similar offenses) or final cease-and-desist order, or material breach of any
provision of this Agreement. In determining incompetence, the acts or omissions
shall be measured against standards generally prevailing in the savings
institutions industry. For purposes of this paragraph, no act or failure to act
on the part of Executive shall be considered “willful” unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that the Executive’s action or omission was in the best interest of the
Employer. Notwithstanding the foregoing, Executive shall not be deemed to have
been Terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Boards of Directors of the Company and the
Bank at a meeting of said Boards called and held for that purpose (after
reasonable notice to Executive and an opportunity for him, together with
counsel, to be heard before the Boards) finding that in the good faith opinion
of the Boards, Executive was guilty of conduct justifying Termination for Cause
and specifying the particulars thereof in detail. The Executive shall not have
the right to receive compensation or other benefits for any period after
Termination for Cause. Any unexercised stock options granted to Executive under
any stock option plan of the Bank, the Company or any subsidiary or affiliate
thereof, shall become null and void effective upon Executive’s receipt of Notice
of Termination for Cause pursuant to Section 8 hereof, and shall not be
exercisable by Executive at any time subsequent to such Termination for
Cause.

     

    
      	
              8.

            	
              NOTICE

            


    

     

    (a)           Any
purported termination by the Employer or by Executive shall be communicated by
Notice of Termination to the other party hereto. For purposes of this Agreement,
a “Notice of Termination” shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so
indicated.

     

    (b)           “Date
of Termination” shall mean the date specified in the Notice of Termination
(which, in the case of a Termination for Cause, shall not be less than thirty
(30) days from the date such Notice of Termination is given).

     

    (c)           If,
within thirty (30) days after any Notice of Termination is given, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, except upon the occurrence of a Change in
Control and voluntary termination by the Executive in which case the Date of
Termination shall be the date specified in the Notice, the Date of Termination
shall be the date on which the dispute is finally determined, either 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 (the time for
appeal having expired and no appeal having 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 Employer will continue to pay Executive his
full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue Executive as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is finally
resolved in accordance with this Agreement, provided such dispute is resolved
within nine months after the Date of Termination specified in the Notice or
Termination; notwithstanding the foregoing no compensation or benefits shall be
paid to Executive in the event the Executive is Terminated for Cause. In the
event that such Termination for Cause is found to have been wrongful or such
dispute is otherwise decided in Executive’s favor, the Executive shall be
entitled to receive all compensation and benefits which accrued for up to a
period of nine months after the Termination of Cause.  If such dispute
is not resolved within such nine-month period, the Employer shall not be
obligated, upon final resolution of such dispute, to pay Executive compensation
and other payments accruing more than nine months from the Date of the
Termination specified in the Notice of Termination.  Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.

     

    
      	
              9.

            	
              POST-TERMINATION
      OBLIGATIONS

            


    

     

    (a)           All
payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with paragraph (b) of this Section 9 during the term of
this Agreement and for one (1) full year after the expiration or termination
hereof.

     

    (b)           Executive
shall, upon reasonable notice, furnish such information and assistance to the
Bank as may be reasonably be required by the Bank in connection with any
litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.

     

    


     

    


     

    
      	
               
      10

            	
              NON-COMPETITION

            


    

     

    (a)           Upon
any termination of Executive’s employment hereunder pursuant to Section 4(c)
hereof, Executive agrees not to compete with the Bank and/or the Company for a
period of one (1) year following such termination in any city, town or county in
which the Bank and/or the Company has an office or has filed an application for
regulatory approval to establish an office, determined as of the effective date
of such termination, except as agreed to pursuant to a resolution duly adopted
by the Board.  Executive agrees that during such period and within
said cities, towns and counties, Executive shall not work for or advise, consult
or otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business activities of
the Bank and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the Bank and/or the Company, its business and property in
the event of Executive’s breach of this Subsection 10(a) agree that in the event
of any such breach by Executive, the Bank and/or the Company will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive’s partners, agents,
servants, employers, employees and all persons acting for or with
Executive.  Nothing herein will be construed as prohibiting the Bank
and/or the Company from pursuing any other remedies available to the Bank and/or
the Company for such breach or threatened breach, including the recovery of
damages from Executive.

     

    (b)           Executive
recognizes and acknowledges that the knowledge of the business activities and
plans for business activities of the Employer and affiliates thereof, as it may
exist from time to time, is a valuable, special and unique asset of the business
of the Employer. Executive will not, during or after the term of his employment,
disclose any knowledge of the past, present, planned or considered business
activities of the Employer or affiliates thereof to any person, firm,
corporation, or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, Executive may disclose any knowledge of banking,
financial and/or economic principles, concepts or ideas which are not solely and
exclusively derived from the business plans and activities of the Employer, and
Executive may disclose any information regarding the Bank or the Company which
is otherwise publicly available. In the event of a breach or threatened breach
by the Executive of the Provisions of this Section 10, the Employer will be
entitled to an injunction restraining Executive from disclosing, in whole or in
part, the knowledge of the past, present, planned or considered business
activities of the Employer or affiliates thereof, or from rendering any services
to any person, firm, corporation, other entity to whom such knowledge, in whole
or in part, has been disclosed or is threatened to be disclosed. Nothing herein
will he construed as prohibiting the Employer from pursuing any other remedies
available to the Bank for such breach or threatened breach, including the
recovery of damages from Executive.

     

    
      	
               
      11.

            	
              SOURCE
      OF PAYMENTS

            


    

     

    All
payments provided in this Agreement shall be timely paid in cash or check from
the general funds of the Bank. The Company, however, guarantees payment and
provision of all amounts and benefits due hereunder to Executive and, if such
amounts and benefits due from the Bank are not timely paid or provided by the
Bank, such amounts and benefits shall be paid or provided by the
Company.

     

    
      	
               
      12.

            	
              EFFECT
      ON PRIOR AGREEMENTS AND EXISTING BENEFITS
PLANS

            


    

     

    (a)           This
Agreement contains the entire understanding between the parties hereto and
supersedes any prior employment agreement between the Employer or any
predecessor of the Employer and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.

     

    (b)           In
the event that the provisions of this Agreement are in conflict with the
provisions of the Bank’s or the Company’s stock option plan, nonqualified
deferred compensation plan, or recognition and retention plan (or any such
restricted stock plan in effect) in which Executive participates, this Agreement
shall govern; provided further, however, that this Agreement shall not supercede
provisions that specifically received prior approval by vote of shareholders of
the Company.

     

    
      	
               13.

            	
              NO
      ATTACHMENT

            


    

     

    (a)           Except
as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
charge, pledge, or hypothecation, or to execution, attachment, levy, or similar
process or assignment by operation of law, and any attempt, voluntary or
involuntary, to affect any such action shall he null, void, and of no
effect.

     

    (b)           This
Agreement shall be binding upon, and inure to the benefit of, Executive and the
Employer and their respective successors and assigns.

     

    


     

    
      	
               
      

            	
              14.        
      MODIFICATION AND WAIVER

            


    

     

    (a)           This
Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.

     

    (b)           No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel.  No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

     

    
      	
               
      15.

            	
              REQUIRED
      PROVISIONS

            


    

     

    (a)           The
Employer may terminate the Executive’s employment at any time, but any
termination by the Employer, other than Termination for Cause, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement.  Executive shall not have the right to receive compensation
or other benefits for any period after Termination for Cause as defined in
Section 7 hereinabove.

     

    (b)           If
the Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Employer’s affairs by a notice served under
Section 8(e)(3) (12 U.S.C. §1818(e)(3)) or 8(g) (12 U.S.C. §1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, or if the Executive is suspended from the
practice of law the Employer’s obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, or if the Executive’s suspension to
practice is reversed, the Employer may in its discretion (i) pay the Executive
all or part of the compensation withheld while their Agreement obligations were
suspended and (ii) reinstate (in whole or in part) any of the obligations which
were suspended.

     

    (c)           If
the Executive is removed and/or permanently prohibited from participating in the
conduct of the Employer’s affairs by an order issued under Section 8(c) (12
U.S.C. § 1818(e)) or 8(g) (12 U.S.C. § 1818(g)) of the Federal Deposit Insurance
Act, as amended by the Financial Institutions Reform Recovery and Enforcement
Act of 1989, or if the Executive is disbarred from the practice of law, all
obligations of the Employer under this Agreement shall terminate as of the
effective date of the order, but vested rights of the contracting parties shall
not be affected.

     

    (d)           If
the Employer is in default as defined in Section 3(x) (12 U.S.C. § 1813(x)(1))
of the Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989, all obligations of the Employer
under this Agreement shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting
parties.

     

    (e)           All
obligations of the Employer under this Agreement shall be terminated, except to
the extent determined that continuation of the Agreement is necessary for the
continued operation of the institution, (i) by the Federal Deposit Insurance
Corporation (“FDIC”), at the time FDIC enters into an agreement to provide
assistance to or on behalf of the Employer under the authority contained in
Section 13(c) (12) U.S.C. §1823(e)) of the Federal Deposit Insurance Act, as
amended by the Financial Institutions Reform, Recovery and Enforcement Act of
1989; or (ii) when the Employer is determined by the FDIC to be in an unsafe or
unsound condition. Any rights of the parties that have already vested, however,
shall not be affected by such action.

     

    (f)           Notwithstanding
anything herein contained to the contrary, any payments to Executive by the
Bank, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit
Insurance Act, 12 U.S.C. § 1828(k), and the regulations promulgated thereunder
in 12 C.F.R. Part 359.

     

    
      	
               16. 

            	
              SEVERABILITY

            


    

     

    If, for
any reason, any provision of this Agreement, or any part of any provision, is
held invalid, such invalidity shall not affect any other provision of this
Agreement or any part of such provision not held so invalid, and each such other
provision and part thereof shall to the full extent consistent with law continue
in full force and effect.

     

    
      	
              17.

            	
              HEADINGS
      FOR REFERENCE ONLY

            


    

     

    The
headings of sections and paragraphs herein are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.

     

    
      	
               18. 

            	
              GOVERNING
      LAW

            


    

     

    This
Agreement shall be governed by the laws of the State of New York, but only to
the extent not superseded by federal law.

     

    
      	
               19.

            	
              ARBITRATION

            


    

     

    Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

     

    


     

     

    
      	
              20.  

            	
              PAYMENT
      OF LEGAL FEES

            


    

     

    All
reasonable legal fees paid or incurred by Executive pursuant to any dispute or
question of interpretation relating to this Agreement shall be paid or
reimbursed by the Employer, provided that the dispute or interpretation has been
settled by Executive and the Employer or resolved in the Executive’s favor, and
that such reimbursement shall occur no later than two and one-half months after
the calendar year in which the dispute is settled or resolved in Executive’s
favor.

    


    


    
      	
               
      21.

            	
              INDEMNIFICATION

            


    

     

    The
Employer shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors’ and officers’
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under federal law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been an officer
of the Employer (whether or not he continues to be an officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys’ fees and
the cost of reasonable settlements (such settlements must be approved by the
Boards of Directors of the Employer). If such action, suit or proceeding is
brought against Executive in his capacity as an officer of the Employer,
however, such indemnification shall not extend to matters as to which Executive
is finally adjudged to be liable for willful misconduct in the performance of
his duties. No Indemnification shall be paid that would violate 12 U.S.C.
§1828(k) or any regulations promulgated thereunder.

     

    
      	
               22. 

            	
              SUCCESSOR
      TO THE EMPLOYER

            


    

     

    The
Employer shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or otherwise, to all, or substantially all, the
business or assets of the Bank or the Company, expressly and unconditionally to
assume and agree to perform the Employer’s obligations under this Agreement, in
the same manner and to the same extent that the Employer would be required to
perform if no such succession or assignment had taken place.

     

    SIGNATURES

     

    IN
WITNESS WHEREOF, the Employer has caused this Agreement to be executed and its
seal to be affixed hereunto by its duly authorized officer, and Executive has
signed this Agreement on the day and date first above written.

     

    
      	 
      	 
      	
              PATHFINDER
      BANK

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              
                12/23/08

              

            	 
      	
              
                /s/
      Thomas W. Schneider

              

            
	
              Date

            	 
      	
              Thomas
      W. Schneider

              President
      and CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              PATHFINDER
      BANCORP, INC.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              
                12/23/08

              

            	 
      	
              
                /s/
      Thomas W. Schneider

              

            
	
              Date

            	 
      	
              Thomas
      W. Schneider

              President
      and CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	
              EXECUTIVE

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              
                12/23/08

              

            	
              By:

            	
              
                /s/
      Edward A. Mervine

              

            
	
              Date

            	 
      	
              Edward
      A. Mervine