<PAGE>

EXHIBIT 10.3

                        Supplementary Retention Agreement

This Supplementary Retention Agreement ("Agreement") is made and entered into as
of July 9, 1997 by and among GSB Financial Corporation, a corporation organized
and existing under the laws of the State of Delaware and having its executive
offices at One South Church Street, Goshen, New York 10924 (the "Company"); and
Stephen W. Dederick, an individual residing at 946 Oregon Trail, Pine Bush, New
York 12566 ("Officer").

         Whereas, by Retention Agreement dated as of July 9, 1997, Goshen
Savings Bank, a savings bank organized and operating under the federal laws of
the United States and having its executive offices at One South Church Street,
Goshen, New York 10924 (the "Bank") agreed with Officer to provide Officer with
certain assurances regarding continued employment in the event of a change in
control of the Bank or of the Company; and

         Whereas, the Company will become, upon the conversion of the Bank from
the mutual to the stock form of ownership, the holding company of the Bank
owning all the issued and outstanding shares of stock of the Bank; and

         Whereas, the Board of Directors of the Company has determined that it
would be in the best interests of the Company to guaranty the assurances given
by the Bank to Officer in order to secure for the Bank and itself the continued
availability of Officer's services;

         Now, Therefore, in consideration of the promises set forth in said
Retention Agreement, the Company and Officer hereby agree as follows:

Section 1. The Guaranty

         The Company hereby guarantees each and every obligation of the Bank to
Officer pursuant to said Retention Agreement. Such guaranty shall be effective
as, when and if the Bank fails to make any payment due under the Retention
Agreement.

Section 2. Successors and Assigns.

         This Agreement will inure to the benefit of and be binding upon
Officer, his or her legal representatives and testate or intestate distributees,
and the Company its successors and assigns, including any successor by merger or
consolidation or a statutory receiver or any other person or firm or corporation
to which all or substantially all of the assets and business of the Company may
be sold or otherwise transferred.

Section 3. Notices.

         Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days 


<PAGE>

after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as one such party may by written notice specify to the
other party:

         If to Officer:

         Stephen W. Dederick
         946 Oregon Trail
         Pine Bush, New York 12566

         If to the Company:

         GSB Financial Corporation
         One South Church Street
         Goshen, New York  10924
         Attention: President

Section 4. Enforcement Costs and Attorneys' Fees.

         The Company shall pay to or on behalf of the Officer all reasonable
costs, including legal fees, incurred by him in connection with or arising out
of the Officer's consultation with legal counsel or in connection with or
arising out of any action, suit or proceeding in which the Officer may be
involved, as a result of the Officer's efforts, in good faith, to defend or
enforce the terms of this Agreement, provided that the Officer shall have
substantially prevailed on the merits pursuant to a judgment, decree or order of
a court of competent jurisdiction or of an arbitrator in an arbitration
proceeding, or in a settlement; provided, further, that this section 4 shall not
obligate the Company to pay costs and legal fees on behalf of the Officer under
this Agreement in excess of reasonable attorneys fees. For purposes of this
Agreement, any settlement agreement which provides for payment of any amounts in
settlement of the Company's obligations hereunder shall be conclusive evidence
of the Officer's entitlement to payments under this section, and any such
payments shall be in addition to amounts payable pursuant to such settlement
agreement, unless such settlement agreement expressly provides otherwise.

Section 5. Severability.

         A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforce ability of any other
provision hereof.

Section 6. Waiver.

         Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.



<PAGE>


Section 7. Counterparts.

         This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.

Section 8. Governing Law.

         This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States, and in the absence of
controlling federal law, the laws of the State of New York, without reference to
conflicts of law principles.

Section 9. Headings and Construction.

         The headings of sections in this Agreement are for convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.

Section 10. Entire Agreement; Modifications.

         This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.

Section 11. No Effect on Employment at Will Relationship.

         The Company and Officer acknowledge and confirm that nothing contained
in this agreement or in the Retention Agreement between Officer and the Bank
shall change the employment relationship between the Bank and Officer to
anything other than employment at will, except for the express assurances,
protections and other provisions contained in the Retention Agreement and this
Agreement, which provisions shall be deemed to supersede the employment at will
relationship.

Dated: July 9, 1997

                                      /s/ Stephen W. Dederick
                                      -----------------------------------
                                      Stephen W. Dederick, Officer


                                      GSB Financial Corporation


                                      By: /s/ Clifford E. Kelsey, Jr.
                                          ---------------------------------
                                          Clifford E. Kelsey, Jr., President