Document:

exh10-11.htm

    AMENDED
AND RESTATED

    SECOND
EXECUTIVE SUPPLEMENTAL RETIREMENT

    INCOME
AGREEMENT

    FOR
THOMAS SCHNEIDER

     

    PATHFINDER
BANK

     

    Amended
and Restated Effective January 1, 2005

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    Financial
Institution Consulting Corporation

    700
Colonial Road, Suite 260

    Memphis,
Tennessee 38117

    WATS:
1-800-873-0089

    FAX:
(901) 684-7411

    (901)
684-7400

     

    

     

    

     

    

     

    AMENDED
AND RESTATED SECOND EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT FOR
THOMAS SCHNEIDER

     

    This
Amended and Restated Executive Supplemental Retirement Income Agreement (the
“Agreement”) updates and revises the Restated Executive Supplemental Retirement
Income Agreement (the “Original Agreement”) for Thomas Schneider (the
“Executive”), which was originally effective as of September 1,
1998.  The Bank has herein amended and restated the Agreement with the
intention that the Agreement shall at all times satisfy Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) and the regulations
thereunder.  Any reference herein to the “Holding Company” shall mean
Pathfinder Bancorp, Inc. and any reference herein to the “Mutual Holding
Company” shall mean Pathfinder Bancorp, M.H.C.

     

    WITNESSETH:

     

    WHEREAS, the Executive is
employed by the Bank; and

     

    WHEREAS, the Bank and
Executive entered into the Second Executive Supplemental Retirement Income
Agreement for Thomas Schneider (the “Original Agreement”) on the 1st day of
September, 1998; and

     

    WHEREAS, Section 409A of the
Internal Revenue Code (the “Code”), effective January 1, 2005, requires deferred
compensation arrangements, including those set forth in deferred compensation
arrangements, 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 in April of 2007 necessitate changes to
the Original Agreement; and

     

    WHEREAS, the Bank believes it
is in the best interests of the Bank to amend and restate the Original Agreement
in order to reinforce and reward Executive for his service and dedication to the
continued success of the Bank and incorporate the changes required by the new
tax laws; and

     

    WHEREAS, the parties hereto
desire to set forth the terms of the amended and restated Agreement and the
continuing employment relationship of the Bank and Executive.

     

    

     

    NOW, THEREFORE, in
consideration of the premises and of the mutual promises herein contained, the
Bank and the Executive agree as follows:

     

    SECTION
I

     

    DEFINITIONS

     

    When used
herein, the following words and phrases shall have the meanings below unless the
context clearly indicates otherwise:

     

    
      	
              1.1  

            	
              “Accrued
      Benefit Account” shall be represented by the bookkeeping entries required
      to record the Executive’s (i) Phantom Contributions plus (ii) accrued
      interest, equal to the Interest Factor, earned to-date on such amounts.
      However, neither the existence of such bookkeeping entries nor the Accrued
      Benefit Account itself shall be deemed to create either a trust of any
      kind, or a fiduciary relationship between the Bank and the Executive or
      any Beneficiary.

            

    

     

    
      	
              1.2  

            	
              “Act”
      means the Employee Retirement Income Security Act of 1974, as amended from
      time to time.

            

    

     

    
      	
              1.3  

            	
              “Administrator”
      means the Bank.

            

    

     

    
      	
              1.4  

            	
              “Bank”
      means PATHFINDER BANK and any successor
thereto.

            

    

     

    
      	
              1.5  

            	
              “Beneficiary”
      means the person or persons (and their heirs) designated as Beneficiary in
      Exhibit B of this Agreement to whom the deceased Executive’s benefits are
      payable. If no Beneficiary is so designated, then the Executive’s Spouse,
      if living, will be deemed the Beneficiary. If the Executive’s Spouse is
      not living, than the Children of the Executive will be deemed the
      Beneficiaries and will take on a per stirpes basis. If there are no
      Children, then the Estate of the Executive will be deemed the
      Beneficiary.

            

    

     

    
      	
              1.6  

            	
              “Benefit
      Age” means the Executive’s sixty-second (62nd) birthday. Notwithstanding
      the above, the Executive may, in his sole discretion, elect to Separate
      from Service on or after the Executive’s sixty-second (62nd) birthday and,
      in such event, the Executive’s age on such date shall constitute his
      “Benefit Age”; provided, however, that in the event of a Change in
      Control, followed within thirty-six (36) months by the Executive’s
      voluntary Separation from Service on or after his sixty-second birthday
      for one of the reasons set forth in Section 2.1(b)(2)(ii) below, the
      Executive’s termination shall not be considered a retirement for purposes
      of lowering the Executive’s Benefit
Age.

            

    

     

    
      	
              1.7  

            	
              “Benefit
      Eligibility Date” means the date on which the Executive is entitled to
      receive any benefit(s) pursuant to Section(s) III or V of this
      Agreement.  It shall be the first day of the month following the
      month in which the Executive attains his Benefit
  Age.

            

    

     

    
      	
              1.8  

            	
              “Board
      of Directors” means the board of directors of the
  Bank.

            

    

     

    
      	
              1.9  

            	
              “Cause”
      means personal dishonesty, willful misconduct, willful malfeasance, breach
      of fiduciary duty involving personal profit, intentional failure to
      perform stated duties, willful violation of any law, role, regulation
      (other than traffic violations or similar offenses), or final
      cease-and-desist order, material breach of any provision of this
      Agreement, or gross negligence in matters of material importance to the
      Bank.

            

    

     

    
      	
              1.10  

            	
              “Change
      in Control” shall mean and include the following with respect to the
      Mutual Holding Company, the Bank, or the Holding
  Company:

            

    

     

    
      	
              (i)  

            	
              a
      reorganization, merger, merger conversion, consolidation or sale of all or
      substantially all of the assets of the Bank, the Mutual Holding Company or
      the Holding Company, or a similar transaction in which the Bank, the
      Mutual Holding Company or the Holding Company is not the resulting entity;
      or

            

    

     

    
      	
              (ii)  

            	
              individuals
      who constitute the board of directors of the Bank, the Mutual Holding
      Company or the Holding Company 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
      was approved by the Holding Company’s nominating committee which is
      comprised of members of the Incumbent Board, shall be, for purposes of
      this clause (ii) considered as though he were a member of the Incumbent
      Board.

            

    

     

    Notwithstanding
the foregoing, a “Change in Control” of the Bank or the Holding Company shall
not be deemed to have occurred if the Mutual Holding Company ceases to own at
least 51% of all outstanding shares of stock of the Holding Company in
connection with a liquidation of the Mutual Holding Company into the Holding
Company or a conversion of the Mutual Holding Company from mutual to stock
form.

     

    In
addition, “Change in Control” shall mean and include the following with respect
to the Bank or the Holding Company in the event that the Mutual Holding Company
converts to stock form or in the event that the Holding Company issues shares of
its common stock to stockholders other than the Mutual Holding
Company:

     

    
      	
               
      

            	
              (1)

            	
              a
      change in control of a nature that 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 (hereinafter the “Exchange Act”);
  or

            

    

     

    
      	
               
      

            	
              (2)

            	
              an
      acquisition of “control” as defined in 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”),
      as determined by the Board of Directors of the Bank or the Holding
      Company; or

            

    

     

    
      	
               
      

            	
              (3)

            	
              at
      such time as:

            

    

     

    
      	
               
      

            	
              (i)

            	
              any
      “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange
      Act) or “group acting in concert” is or becomes the “beneficial owner” (as
      defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
      securities of the Bank representing Twenty Percent (20%) or more of the
      combined voting power of the Bank’s or Holding Company’s outstanding
      securities ordinarily having the right to vote at the elections of
      directors, except for any stock purchased by the Bank’s Employee Stock
      Ownership Plan and/or the trust under such plan;
  or

            

    

     

    
      	
               
      

            	
              (ii)

            	
              a
      proxy statement is issued soliciting proxies from the stockholders of the
      Holding Company by someone other than the current management of the
      Holding Company, seeking stockholder approval of a plan of reorganization,
      merger, or consolidation of the Holding Company with one or more
      corporations as a result of which the outstanding shares of the class of
      the Holding Company’s securities are exchanged for or converted into cash
      or property or securities not issued by the Holding
    Company.

            

    

     

    The term
“person” includes an individual, a group acting in concert, a corporation, a
partnership, an association, a joint venture, a pool, a joint stock company, a
trust, an unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities. The term “acquire” means obtaining ownership, control, power to vote
or sole power of disposition of stock, directly or indirectly or through one or
more transactions or subsidiaries, through purchase, assignment, transfer,
exchange, succession or other means, including (1) an increase in percentage
ownership resulting from a redemption, repurchase, reverse stock split or a
similar transaction involving other securities of the same class; and (2) the
acquisition of stock by a group of persons and/or companies acting in concert
which shall be deemed to occur upon the formation of such group, provided that
an investment advisor shall not be deemed to acquire the voting stock of its
advisee if the advisor (a) votes the stock only upon instruction from the
beneficial owner and (b) does not provide the beneficial owner with advice
concerning the voting of such stock. The term “security” includes
nontransferable subscription rights issued pursuant to a plan of conversion, as
well as a “security,” as defined in 15 U.S.C. §78c(2)(1); and the term “acting
in concert” means (1) knowing participation in a joint activity or
interdependent conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (2) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangement,
whether written or otherwise. Further, acting in concert with any person or
company shall also be deemed to be acting in concert with any person or company
that is acting in concert with such other person or company.

     

    Notwithstanding
the above definitions, the boards of directors of the Bank or the Holding
Company, in their absolute discretion, may make a finding that a Change in
Control of the Bank or the Holding Company has taken place without the
occurrence of any or all of the events enumerated above.

     

    
      	
              1.11  

            	
              “Children”
      means the Executive’s children, both natural and adopted, then living at
      the time payments are due the Children under this
    Agreement.

            

    

     

    
      	
              1.12  

            	
              “Code”
      means the Internal Revenue Code of 1986, as amended from time to
      time.

            

    

     

    
      	
              1.13  

            	
              “Contribution(s)”
      means those annual contributions which the Bank is required to make to the
      Retirement Income Trust Fund on behalf of the Executive in accordance with
      Subsection 2.1(a) and in the amounts set forth in Exhibit A of the
      Agreement.

            

    

     

    
      	
              1.14  

            	
              “Disability
      Benefit” means the benefit payable to the Executive following a
      determination, in accordance with Section 6, that he is no longer able,
      properly and satisfactorily, to perform his duties at the
      Bank.

            

    

     

    
      	
              1.15  

            	
              “Effective
      Date” of this restated Agreement shall be January 1,
  2005.

            

    

     

    
      	
              1.16  

            	
              “Estate”
      means the estate of the Executive.

            

    

     

    
      	
              1.17  

            	
              “Interest
      Factor” means monthly compounding, discounting or annuitizing, as
      applicable, at a rate set forth in Exhibit
A.

            

    

     

    
      	
              1.18  

            	
              “Payout
      Period” means the time frame during which certain benefits payable
      hereunder shall be distributed. Payments shall be made in equal monthly
      installments commencing on the first day of the month following the
      occurrence of the event which triggers distribution and continuing for
      one-hundred and eighty (180) months. Should the Executive make a Timely
      Election to receive a lump sum benefit payment, the Executive’s Payout
      Period shall be deemed to be one (1)
month.

            

    

     

    
      	
              1.19  

            	
              “Phantom
      Contributions” means those annual Contributions which the Bank is no
      longer required to make on behalf of the Executive to the Retirement
      Income Trust Fund. Rather, once the Executive has exercised the withdrawal
      rights provided for in Subsection 2.2, the Bank shall be required to
      record the annual amounts set forth in Exhibit A of the Agreement in the
      Executive’s Accrued Benefit Account, pursuant to Subsection
      2.1.

            

    

     

    
      	
              1.20  

            	
              “Plan
      Year” shall mean the calendar year.

            

    

     

    
      	
              1.21  

            	
              “Retirement
      Age” means the Executive’s sixty-second (62nd) birthday provided, however,
      that the Executive’s actual Separation from Service from full-time
      employment may occur on or after the Executive attains age sixty-two (62)
      or at any later date mutually agreed upon by the
  parties.

            

    

     

    
      	
              1.22  

            	
              “Retirement
      Income Trust Fund” means the trust fund account established by the
      Executive and into which annual Contributions will be made by the Bank on
      behalf of the Executive pursuant to Subsection 2.1. The contractual rights
      of the Bank and the Executive with respect to the Retirement Income Trust
      Fund shall be outlined in a separate writing to be known as the Thomas
      Schneider Grantor Trust agreement.

            

    

     

    
      	
              1.23  

            	
              “Separation
      from Service” means Executive’s retirement or other termination of
      employment with the Bank within the meaning of Code Section
      409A.  No Separation from Service shall be deemed to occur due
      to military leave, sick leave or other bona fide leave of absence if the
      period of such leave does not exceed six months or, if longer, so long as
      Executive’s right to reemployment is provided by law or
      contract.  If the leave exceeds six months and Executive’s right
      to reemployment is not provided by law or by contract, then Executive
      shall have a Separation from Service on the first date immediately
      following such six-month period.

            

    

     

    Whether a Separation from Service has
occurred is determined based on whether thefacts and circumstances indicate that
the Bank and the Executive reasonablyanticipated reasonably anticipate that the
level of bona fide services the 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.

     

    
      	
              1.24  

            	
               “Spouse”
      means the individual to whom the Executive is legally married at the time
      of the Executive’s death.

            

    

     

    
      	
              1.25  

            	
              “Supplemental
      Retirement Income Benefit” means an annual amount (before taking into
      account federal and state income taxes), payable in monthly installments
      throughout the Payout Period. Such benefit is projected pursuant to the
      Agreement for the purpose of determining the Contributions to be made to
      the Retirement Income Trust Fund (or Phantom Contributions to be recorded
      in the Accrued Benefit Account). The annual Contributions and Phantom
      Contributions have been actuarially determined, using the assumptions set
      forth in Exhibit A, in order to fund for the projected Supplemental
      Retirement Income Benefit. The Supplemental Retirement Income Benefit for
      which Contributions (or Phantom Contributions) are being made (or
      recorded) is set forth in Exhibit
A.

            

    

     

    
      	
              1.26  

            	
              “Timely
      Election” means the Executive has made an election to change the form of
      his benefit payment(s) on or before December 31, 2008 by filing with the
      Administrator a Notice of Election to Change Form of Payment (Exhibit C of
      this Agreement). In the case of benefits payable from the Accrued Benefit
      Account, a Timely Election shall be made by filing with the Bank a
      Transition Year Election Form (Exhibit D of this Agreement), provided that
      such election is made on or before December 31, 2008.  In the
      case of benefits payable from the Retirement Income Trust Fund, such
      election may be made at any time.

            

    

     

    SECTION
II

     

    BENEFITS-GENERALLY

     

    
      	
              2.1  

            	
              (a)           Retirement Income
      Trust Fund and Accrued Benefit Account.  The Executive
      shall establish the Thomas Schneider Grantor Trust into which the Bank
      shall be required to make annual Contributions on the Executive’s behalf,
      pursuant to Exhibit A and this Section II of the Agreement. A trustee
      shall be selected by the Executive. The trustee shall maintain an account,
      separate and distinct from the Executive’s personal contributions, which
      account shall constitute the Retirement Income Trust Fund. The trustee
      shall be charged with the responsibility of investing all contributed
      funds. Distributions from the Retirement Income Trust Fund of the Thomas
      Schneider Grantor Trust may be made by the trustee to the Executive, for
      purposes of payment of any income or employment taxes due and owing on
      Contributions by the Bank to the Retirement Income Trust Fund, if any, and
      on any taxable earnings associated with such Contributions which the
      Executive shall be required to pay from year to year, under applicable
      law, prior to actual receipt of any benefit payments from the Retirement
      Income Trust Fund.  If the Executive exercises his withdrawal
      rights pursuant to Subsection 2.2, the Bank’s obligation to make
      Contributions to the Retirement Income Trust Fund shall cease and the
      Bank’s obligation to record Phantom Contributions in the Accrued Benefit
      Account shall immediately continence pursuant to Exhibit A and this
      Section II of the Agreement.  To the extent this Agreement is
      inconsistent with the Thomas Schneider Grantor Trust Agreement, the Thomas
      Schneider Grantor Trust Agreement shall supersede this
      Agreement.

            

    

     

    The
annual Contributions (or Phantom Contributions) required to be made by the Bank
to the Retirement Income Trust Fund (or recorded by the Bank in the Accrued
Benefit Account) have been actuarially determined and are set forth in Exhibit A
which is attached hereto and incorporated herein by reference. Contributions
shall be made by the Bank to the Retirement Income Trust Fund (i) within
seventy-five (75) days of establishment of such trust, and (ii) within the first
thirty (30) days of the beginning of each subsequent Plan Year, unless this
Section expressly provides otherwise. Phantom Contributions, if any, shall be
recorded in the Accrued Benefit Account within the first thirty (30) days of the
beginning of each applicable Plan Year, unless this Section expressly provides
otherwise. Phantom Contributions shall accrue interest at a rate equal to the
Interest Factor, during the Payout Period, until the balance of the Accrued
Benefit Account has been fully distributed. Interest on any Phantom Contribution
shall not commence until such Payout Period commences.

     

    The
Administrator shall review the schedule of annual Contributions (or Phantom
Contributions) provided for in Exhibit A (i) within thirty (30) days prior to
the close of each Plan Year and (ii) if the Executive is employed by the Bank
until attaining Retirement Age, on or immediately before attainment of such
Retirement Age. Such review shall consist of an evaluation of the accuracy of
all assumptions used to establish the schedule of Contributions (or Phantom
Contributions).  Provided that (i) the Executive has not exercised his
withdrawal rights pursuant to Subsection 2.2 and (ii) the investments contained
in the Retirement Income Trust Fund have been deemed reasonable by the Bank, the
Administrator shall prospectively amend or supplement the schedule of
Contributions provided for in Exhibit A should the Administrator determine
during any such review that an increase in or supplement to the schedule of
Contributions is necessary in order to adequately fund the Retirement Income
Trust Fund so as to provide an annual benefit (or to provide the lump sum
equivalent of such benefit, as applicable) equal to the Supplemental Retirement
Income Benefit, on an after-tax basis, commencing at Benefit Age and payable for
the duration of the Payout Period.

     

    (b)           Withdrawal Rights Not
Exercised.

     

    (1)           Contributions Made
Annually

     

    If the
Executive does not exercise any withdrawal rights pursuant to Subsection 2.2,
the annual Contributions to the Retirement Income Trust Fund shall continue each
year, unless this Subsection 2.1(b) specifically states otherwise, until the
earlier of (i) the last Plan Year that Contributions are required pursuant to
Exhibit A, or (ii) the Plan Year of the Executive’s termination of
employment.

     

    (2)           Termination Following a
Change in Control

     

    If the
Executive does not exercise his withdrawal rights pursuant to Subsection 2.2 and
a Change in Control occurs at the Bank, followed within thirty-six (36) months
by either (i) the Executive’s involuntary termination of employment, or (ii)
Executive’s voluntary termination of employment after: (A) a material change in
the Executive’s function, duties, or responsibilities, which change would cause
the Executive’s position to become one of lesser responsibility, importance, or
scope from the position the Executive held at the time of the Change in Control,
(B) a relocation of the Executive’s principal place of employment by more than
thirty (30) miles from its location prior to the Change in Control, or (C) a
material reduction in the benefits and perquisites to the Executive from those
being provided-at the time of the Change in Control, the Contribution set forth
on Schedule A shall continue to be required of the Bank. The Bank shall be
required to make an immediate lump sum contribution to the Retirement Income
Trust Fund equal to (i) the full Contribution required for the Plan Year in
which such termination occurs, if not yet made, plus (ii) the present value
(computed using a discount rate equal to the Interest Factor) of all remaining
Contributions to the Retirement Income Trust Fund; provided, however, in no
event shall the Contribution be less than an amount which is sufficient to
provide the Executive with after-tax benefits (assuming a constant tax rate
equal to the rate in effect as of the date of Executive’s termination) beginning
at his Benefit Age, equal in amount to that benefit which would have been
payable to the Executive if no secular trust had been implemented and the
benefit obligation had been accrued under APB Opinion No. 12, as amended by FAS
106.

     

    (3)           Termination For
Cause

     

    If the
Executive does not exercise his withdrawal rights pursuant to Subsection 2.2,
and is terminated for Cause pursuant to Subsection 5.2, no further
Contribution(s) to the Retirement Income Trust Fund shall be required of the
Bank, and if not yet made, no Contribution shall be required for the Plan Year
in which such termination for Cause occurs.

     

    (4)           Involuntary Termination of
Employment

     

    If the
Executive does not exercise his withdrawal rights pursuant to Subsection 2.2,
and the Executive’s employment with the Bank is involuntarily terminated for any
reason, including a termination due. to disability of the Executive but
excluding termination for Cause, or termination following a Change in Control
within twenty-four (24) months of such Change in Control, within thirty (30)
days of such involuntary termination of employment, the Bank shall be required
to make an immediate lump sum Contribution to the Executive’s Retirement Income
Trust Fund in an amount equal to the: (i) the full Contribution required for the
Plan Year in which such involuntary termination occurs, if not yet made, plus
(ii) the present value (computed using a discount rate equal to the Interest
Factor) of all remaining Contributions to the Retirement Income Trust Fund;
provided however, that, if necessary, an amount shall be contributed to the
Retirement Income Trust Fund which is sufficient to provide the Executive with
after tax benefits (assuming a constant tax rate equal to the rate in effect as
of the date of the Executive’s termination) beginning at his Benefit Age, equal
in amount to that benefit which would have been payable to the Executive if no
secular trust had been implemented and the benefit obligation had been accrued
under APB Opinion No. 12, as amended by FAS 106.

     

    (5)           Death During
Employment

     

    If the
Executive does not exercise any withdrawal rights pursuant to Subsection 2.2,
and dies while employed by the Bank, and if, following the Executive’s death,
the assets of the Retirement Income Trust Fund are insufficient to provide the
Supplemental Retirement Income Benefit to which the Executive is entitled, the
Bank shall be required to make a Contribution to the Retirement Income Trust
Fund equal to the sum of the remaining Contributions set forth on Exhibit A,
after taking into consideration any payments under any life insurance policies
that may have been obtained on the Executive’s life by the Retirement Income
Trust Fund. Such final contribution shall be payable in a lump sum to the
Retirement Income Trust Fund within thirty (30) days of the Executive’s
death.

     

    (c)           Withdrawal Rights
Exercised.

     

    (1)           Phantom Contributions Made
Annually

     

    If the
Executive exercises his withdrawal rights pursuant to Subsection 2.2, no further
Contributions to the Retirement Income Trust Fund shall be required of the Bank.
Thereafter, Phantom Contributions shall be recorded annually in the Executives
Accrued Benefit Account within thirty (30) days of the beginning of each Plan
Year, commencing with the first Plan Year following the Plan Year in which the
Executive exercises his withdrawal rights. Such Phantom Contributions shall
continue to be recorded annually, unless this Subsection 2.1(c) specifically
states otherwise, until the earlier of (i) the last Plan Year that Phantom
Contributions are required pursuant to Exhibit A, or (ii) the Plan Year of the
Executive’s termination of employment.

     

    (2)           Termination Following a
Change in Control

     

    If the
Executive exercises his withdrawal rights pursuant to Subsection 2.2, Phantom
Contributions shall commence in the Plan Year following the Plan Year in which
the Executive first exercises his withdrawal rights. If a Change in Control
occurs at the Bank, and within thirty-six (36) months of such Change in Control,
the Executive’s employment is either (i) involuntarily terminated, or (ii)
voluntarily terminated by the Executive after: (A) a material change in the
Executive’s function, duties, or responsibilities, which change would cause the
Executive’s position to become one of lesser responsibility, importance, or
scope from the position the Executive held at the time of the Change in Control,
(B) a relocation of the Executive’s principal place of employment by more than
thirty (30) miles from its location prior to the Change in Control, or (C) a
material reduction in the benefits and perquisites to the Executive from those
being provided at the time of the Change in Control, the Phantom Contribution
set forth below shall be required of the Bank. The Bank shall be required to
record a lump sum Phantom Contribution in the Accrued Benefit Account within ten
(10) days of the Executive’s termination of employment. The amount of such final
Phantom Contribution shall be actuarially determined based on the Phantom
Contribution required, at such time, in order to provide a benefit via this
Agreement equivalent to the Supplemental Retirement Income Benefit, on an
after-tax basis, commencing on the Executive’s Benefit Eligibility Date and
continuing for the duration of the Payout Period. (Such actuarial determination
shall reflect the fact that amounts shall be payable from both the Accrued
Benefit Account as well as the Retirement Income Trust Fund and shall also
reflect the amount and timing of any withdrawal(s) made by the Executive from
the Retirement Income Trust Fund pursuant to Subsection 2.2.)

     

    (3)           Termination For
Cause

     

    If the
Executive is terminated for Cause pursuant to Subsection 5.2, the entire balance
of the Executive’s Accrued Benefit Account at the time of such termination,
which shall include any Phantom Contributions which have been recorded plus
interest accrued on such Phantom Contributions, shall be forfeited.

     

    (4)           Involuntary Termination of
Employment

     

    If the
Executive exercises his withdrawal rights pursuant to Subsection 2.2, and the
Executive’s employment with the Bank is involuntarily terminated for any reason
including termination due to disability of the Executive, but excluding
termination for Cause, or termination following a Change in Control, within
thirty (30) days of such involuntary termination of employment, the Bank shall
be required to record a final Phantom Contribution in an amount equal to: (i)
the full Phantom Contribution required for the Plan Year in which such
involuntary termination occurs, if not yet made, plus (ii) the present value
(computed using a discount rate equal to the Interest Factor) of all remaining
Phantom Contributions.

     

    (5)           Death During
Employment

     

    If the
Executive exercises his withdrawal rights pursuant to Subsection 2.2, and dies
while employed by the Bank, Phantom Contributions included on Exhibit A shall be
required of the Bank. Such Phantom Contributions shall commence in the Plan Year
following the Plan Year in which the Executive exercises his withdrawal rights
and shall continue through the Plan Year in which the Executive dies. The Bank
shall also be required to record a final Phantom Contribution within thirty (30)
days of the Executive’s death. The amount of such final Phantom Contribution
shall be actuarially determined based on the Phantom Contribution required at
such time (if any), in order to provide a benefit via this Agreement equivalent
to the Supplemental Retirement Income Benefit commencing within thirty (30) days
of the date the Administrator receives notice of the Executive’s death and
continuing for the duration of the Payout Period. (Such actuarial determination
shall reflect the fact that amounts shall be payable from the Accrued Benefit
Account as well as the Retirement Income Trust Fund and shall also reflect the
amount and timing of any withdrawal(s) made by the Executive pursuant to
Subsection 2.2).

     

    
      	
              2.2  

            	
              Withdrawals From
      Retirement Income Trust
Fund.

            

    

     

    Exercise
of withdrawal rights by the Executive pursuant to the Thomas Schneider Grantor
Trust agreement shall terminate the Bank’s obligation to make any further
Contributions to the Retirement Income Trust Fund, and the Bank’s obligation to
record Phantom Contributions pursuant to Subsection 2.1(c) shall commence. For
purposes of this Subsection 2.2, “exercise of withdrawal rights” shall mean
those withdrawal rights to which the Executive is entitled under Article III of
the Thomas Schneider Grantor Trust Agreement and shall exclude any distributions
made by the trustee of the Retirement Income Trust Fund to the Executive for
purposes of payment of income taxes in accordance with Subsection 2.1 of this
Agreement and the tax reimbursement formula contained in the trust document, or
other trust expenses properly payable from the Thomas Schneider Grantor Trust
pursuant to the provisions of the trust document.

     

    
      	
              2.3  

            	
              Benefits Payable From
      Retirement Income Trust
Fund.

            

    

     

    Notwithstanding
anything else to the contrary in this Agreement, in the event that the trustee
of the Retirement Income Trust Fund purchases a life insurance policy with the
Contributions to and, if applicable, earnings of the Trust, and such lift
insurance policy is intended to continue in force beyond the Payout Period for
the disability or retirement benefits payable from the Retirement Income Trust
Fund pursuant to this Agreement, then the trustee shall have discretion to
determine the portion of the cash value of such policy available for purposes of
annuitizing the Retirement Income Trust Fund (it being understood that for
purposes of this Section 2.3, “annuitizing” does not mean surrender of such
policy and annuitizing of the cash value received upon such surrender) to
provide the disability or retirement benefits payable under this Agreement,
after taking into consideration the amounts reasonably believed to be required
in order to maintain the cash value of such policy to continue such policy in
effect until the death of the Executive and payment of death benefits
thereunder.

     

    

     

    

     

    SECTION
III

     

    RETIREMENT
BENEFIT

     

    
      	
              3.1  

            	
              (a)           Normal form of
      payment.

            

    

     

    If (i)
the Executive is employed with the Bank until reaching his Retirement Age, and
(ii) the Executive has not made a Timely Election to receive a lump sum benefit,
this Subsection 3.1(a) shall be controlling with respect to retirement
benefits.

     

    The
Retirement Income Trust Fund, measured as of the Executive’s Benefit Age, shall
be annuitized (using the Interest Factor) into monthly installments and shall be
payable for the Payout Period. Such benefit payments shall commence on the
Executive’s Benefit Eligibility Date. Should Retirement Income Trust Fund assets
actually earn a rate of return, following the date such balance is annuitized,
which is less than the rate of return used to annuitize the Retirement Income
Trust Fund, no additional contributions to the Retirement Income Trust Fund
shall be required by the Bank in order to fund the final benefit payment(s) and
make up for any shortage attributable to the less-than-expected rate of return.
Should Retirement Income Trust Fund assets actually earn a rate of return,
following the date such balance is annuitized, which is greater than the rate of
return used to annuitize the Retirement Income Trust Fund, the final benefit
payment to the Executive (or his Beneficiary) shall distribute the excess
amounts attributable to the greater-than expected rate of return. The Executive
may at anytime during the Payout Period request to receive the unpaid balance of
his Retirement Income Trust Fund in a lump sum payment. If such a lump sum
payment is requested by the Executive, payment of the balance of the Retirement
Income Trust Fund in such lump sum form shall be made only if the Executive
gives notice to both the Administrator and trustee in writing. Such lump sum
payment shall be payable within thirty (30) days of such notice. In the event
the Executive dies at any time after attaining his Benefit Age, but prior to
commencement or completion of all monthly payments due and owing hereunder, (i)
the trustee of the Retirement Income Trust Fund shall pay to the Executive’s
Beneficiary the monthly installments (or a continuation of such monthly
installments if they have already commenced) for the balance of months remaining
in the Payout Period, or (ii) the Executive’s Beneficiary may request to receive
the unpaid balance of the Executive’s Retirement Income Trust Fund in a lump sum
payment. If a lump sum payment is requested by the Beneficiary, payment of the
balance of the Retirement Income Trust Fund in such lump sum form shall be made
only if the Executive’s Beneficiary notifies both the Administrator and trustee
in writing of such election within ninety (90) days of the Executive’s death.
Such lump sum payment shall be payable within thirty (30) days of such
notice.

     

    The
Executive’s Accrued Benefit Account (if applicable), measured as of the
Executive’s Benefit Age, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period.  Such
benefit payments shall commence on the Executive’s Benefit Eligibility
Date.  Notwithstanding the foregoing, in the event the 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, any
payments of the Executive’s Accrued Benefit Account to which Executive is
entitled for the first six months following Separation from Service shall be
held and shall be paid to the Executive on the first day of the seventh month
following the Executive’s Benefit Age.  In the event the Executive
dies at any time after attaining his Benefit Age, but prior to commencement or
completion of all the payments due and owing hereunder, (i) the Bank shall pay
to the Executive’s Beneficiary the same monthly installments (or a continuation
of such monthly installments if they have already commenced) for the balance of
months remaining in the Payout Period.

     

    (b)           Alternative payout
option.

     

    If (i)
the Executive is employed with the Bank until reaching his Retirement Age, and
(ii) the Executive has made a Timely Election to receive a lump sum benefit,
this Subsection 3.1(b) shall be controlling with respect to retirement
benefits.

     

    The
balance of the Retirement Income Trust Fund, measured as of the Executive’s
Benefit Age, shall be paid to the Executive in a lump sum on his Benefit
Eligibility Date. In the event the Executive dies after becoming eligible for
such payment (upon attainment of his Benefit Age), but before the actual payment
is made, his Beneficiary shall be entitled to receive the lump sum benefit in
accordance with this Subsection 3.1(b) within thirty (30) days of the date the
Administrator receives notice of the Executive’s death.

     

    The
balance of the Executive’s Accrued Benefit Account (if applicable), measured as
of the Executive’s Benefit Age, shall be paid to the Executive in a lump sum on
his Benefit Eligibility Date.  Notwithstanding the foregoing, in the
event Executive is a Specified Employee (within the meaning of Treasury
Regulations §1.409A-1(i)), and to the extent necessary to avoid penalties under
Code Section 409A, such payment of the balance of the Executive’s Accrued
Benefit Account shall be made to the Executive on the first day of the seventh
month following the Executive’s Benefit Age.  In the event the
Executive dies after becoming eligible for such payment (upon attainment of his
Benefit Age), but before the actual payment is made, his Beneficiary shall be
entitled to receive the lump sum benefit in accordance with this Subsection
3.1(b) within thirty (30) days of the date the Administrator receives notice of
the Executive’s death.

     

    
      	
              3.2  

            	
              Additional Death
      Benefit - Burial Expense. In addition to the above-described
      benefits, upon the Executive’s death, the Executive’s Beneficiary shall be
      entitled to receive a one-time lump sum death benefit in the amount of Ten
      Thousand Dollars ($10,000.00). This benefit shall be provided specifically
      for the purpose of providing payment for burial and/or funeral expenses of
      the Executive. Such benefit shall be payable within thirty (30) days of
      the Executive’s death. The Executive’s Beneficiary shall not be entitled
      to such benefit if the Executive is removed for Cause prior to
      death.  Notwithstanding anything in this Section 3.2 to the
      contrary, if the Executive is also a participant in any other Trustee
      Deferred Compensation Agreement or an Executive Deferred Compensation
      Agreement under which an additional $10,000 death benefit for burial
      expenses is being paid, no additional death benefit shall be paid under
      this Section 3.2.

            

    

     

    

    

    

    

    

    

    

    SECTION
IV

     

    PRE-RETIREMENT DEATH
BENEFIT

     

    
      	
              4.1  

            	
              (a)           Normal form of
      payment.

            

    

     

    If (i)
the Executive dies while employed by the Bank, and (ii) the Executive has not
made a Timely Election to receive a lump sum benefit, this Subsection 4.1(a)
shall be controlling with respect to pre-retirement death benefits.

     

    The
balance of the Executive’s Retirement Income Trust Fund, measured as of the
later of (i) the Executive’s death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be annuitized (using
the Interest Factor) into monthly installments and shall be payable for the
Payout Period. Such benefits shall commence within thirty (30) days of the date
of the Executive’s death. Should Retirement Income Trust Fund assets actually
earn a rate of return, following the date such balance is annuitized, which is
less than the rate of return used to annuitize the Retirement income Trust Fund,
no additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and make up
for any shortage attributable to the less-than-expected rate of return. Should
Retirement Income Trust Fund assets actually earn a rate of return, following
the date such balance is annuitized, which is greater than the rate of return
used to annuitize the Retirement Income Trust Fund, the final benefit payment to
the Executive’s Beneficiary shall distribute the excess amounts attributable to
the greater-than-expected rate of return. The Executive’s Beneficiary may
request to receive the unpaid balance of the Executive’s Retirement Income Trust
Fund in a lump sum payment.  If a lump sum payment is requested by the
Beneficiary, payment of the balance of the Retirement Income Trust Fund in such
lump sum form shall be made only if the Executive’s Beneficiary notifies both
the Administrator and trustee in writing of such election within ninety (90)
days of the Executive’s death.  Such lump sum payment shall be made
within thirty (30) days of such notice.

     

    The
Executive’s Accrued Benefit Account (if applicable), measured as of the later of
(i) the Executive’s death or (ii) the date any final lump sum Phantom
Contribution is recorded in the Accrued Benefit Account pursuant to Subsection
2.1(c), shall be annuitized (using the Interest Factor) into monthly
installments and shall be payable to the Executive’s Beneficiary for the Payout
Period. Such benefit payments shall commence within thirty (30) days of the date
the Executive’s death, or if later, within thirty (30) days after any final lump
sum Phantom Contribution is recorded in the Accrued Benefit Account in
accordance with Subsection 2.1(c), provided that payment commences within two
and one-half months immediately following the taxable year of the Executive’s
death.

     

    (b)           Alternative payout
option.

     

    If (i)
the Executive dies while employed by the Bank, and (ii) the Executive has made a
Timely Election to receive a lump sum benefit, this Subsection 4.1(b) shall be
controlling with respect to pre-retirement death benefits.

     

    The
balance of the Executive’s Retirement Income Trust Fund, measured as of the
later of (i) the Executive’s death, or (ii) the date any final lump sum
Contribution is made pursuant to Subsection 2.1(b), shall be paid to the
Executive’s Beneficiary in a lump sum within thirty (30) days of the date of the
Executive’s death.

     

    The
balance of the Executive’s Accrued Benefit Account (if applicable), measured as
of the later of (i) the Executive’s death, or (ii) the date any final Phantom
Contribution is recorded pursuant to Subsection 2.1(c), shall be paid to the
Executive’s Beneficiary in a lump sum within thirty (30) days of the date of the
Executive’s death.

     

    SECTION
V

     

    BENEFIT(S) IN THE EVENT OF
TERMINATION OF SERVICE

     

    PRIOR TO RETIREMENT
AGE

     

    
      	
              5.1  

            	
              Voluntary or
      Involuntary Termination of Service Other Than for
      Cause.  In the event the Executive’s service with the
      Bank is voluntarily or involuntarily terminated prior to Retirement Age,
      for any reason including a Change in Control, but excluding (i) any
      disability related termination for which the Board of Directors has
      approved early payment of benefits pursuant to Subsection 6.1, (ii) the
      Executive’s pre-retirement death, which shall be covered in Section IV, or
      (iii) termination for Cause, which shall be covered in Subsection 5.2, the
      Executive (or his Beneficiary) shall be entitled to receive benefits in
      accordance with this Subsection 5.1. Payments of benefits pursuant to this
      Subsection 5.1 shall be made in accordance with Subsection 5.1 (a) or 5.1
      (b) below, as applicable.

            

    

     

    (a)           Normal form of
payment.

     

    (1)           Executive Lives Until
Benefit Age

     

    If (i)
after such termination, the Executive lives until attaining his Benefit Age, and
(ii) the Executive has not made a Timely Election to receive a lump sum benefit,
this Subsection 5.1(a)(1) shall be controlling with respect to retirement
benefits.

     

    The
Retirement Income Trust Fund, measured as of the Executive’s Benefit Age, shall
be annuitized (using the Interest Factor) into monthly installments and shall be
payable for the Payout Period. Such payments shall commence on the Executive’s
Benefit Eligibility Date. Should Retirement Income Trust Fund assets actually
earn a rate of return, following the date such balance is annuitized, which is
less than the rate of return used to annuitize the Retirement Income Trust Fund,
no additional contributions to the Retirement Income Trust Fund shall be
required by the Bank in order to fund the final benefit payment(s) and make up
for any shortage attributable to the less-than-expected rate of return. Should
Retirement Income Trust Fund assets actually earn a rate of return, following
the date such balance is annuitized, which is greater than the rate of return
used to annuitize the Retirement Income Trust Fund, the final benefit payment to
the Executive (or his Beneficiary) shall distribute the excess amounts
attributable to the greater-than-expected rate of return. The Executive may at
anytime during the Payout Period request to receive the unpaid balance of his
Retirement Income Trust Fund in a lump sum payment. If such a lump sum payment
is requested by the Executive, payment of the balance of the Retirement Income
Trust Fund in such lump sum form shall be made only if the Executive gives
notice to both the Administrator and trustee in writing. Such lump sum payment
shall be payable within thirty (30) days of such notice. In the event the
Executive dies at any time after attaining his Benefit Age, but prior to
commencement or completion of all monthly payments due and owing hereunder, (i)
the trustee of the Retirement Income Trust Fund shall pay to the Executive’s
Beneficiary the monthly installments (or a continuation of the monthly
installments if they have already commenced) for the balance of months remaining
in the Payout Period, or (ii) the Executive’s Beneficiary may request to receive
the unpaid balance of the Executive’s Retirement Income Trust Fund in a lump sum
payment. If a lump sum payment is requested by the Beneficiary, payment of the
balance of the Retirement Income Trust Fund in such lump sum form shall be made
only if the Executive’s Beneficiary notifies both the Administrator and trustee
in writing of such election within ninety (90) days of the Executive’s death.
Such lump sum payment shall be made within thirty (30) days of such
notice.

     

    The
Executive’s Accrued Benefit Account (if applicable), measured as of the
Executive’s Benefit Age, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period. Such benefit
payments shall commence on the Executive’s Benefit Eligibility Date. In the
event the Executive dies at any time after attaining his Benefit Age, but prior
to commencement or completion of all the payments due and owing hereunder, (i)
the Bank shall pay to the Executive’s Beneficiary the same monthly installments
(or a continuation of such monthly installments if they have already commenced)
for the balance of months remaining in the Payout Period.

     

    (2)           Executive Dies Prior to
Benefit Age

     

    If (i)
after such termination, the Executive dies prior to attaining his Benefit Age,
and (ii) the Executive has not made a Timely Election to receive a lump sum
benefit, this Subsection 5.1(a)(2) shall be controlling with respect to
retirement benefits.  The Retirement Income Trust Fund, measured as of
the date of the Executive’s death, shall be annuitized (using the Interest
Factor) into monthly installments and shall be payable for the Payout
Period.  Such payments shall commence within thirty (30)
days  of the Executive’s death.  Should Retirement Income
Trust Fund assets actually earn a rate of return, following the date such
balance is annuitized, which is less than the rate of return used to annuitize
the Retirement Income Trust Fund, no additional contributions to the Retirement
Income Trust Fund shall be required by the Bank in order to fund the final
benefit payment(s) and make up for any shortage attributable to the
less-than-expected rate of return. Should Retirement Income Trust Fund assets
actually earn a rate of return, following the date such balance is annuitized,
which is greater than the rate of return used to annuitize the Retirement Income
Trust Fund, the final benefit payment to the Executive’s Beneficiary shall
distribute the excess amounts attributable to the greater than-expected rate of
return. The Executive’s Beneficiary may request to receive the unpaid balance of
the Executive’s Retirement Income Trust Fund in the form of a lump sum payment.
If a lump sum payment is requested by the Beneficiary, payment of the balance of
the Retirement Income Trust Fund in such lump sum form shall be made only if the
Executive’s Beneficiary notifies both the Administrator and trustee in writing
of such election within ninety (90) days of the Executive’s death. Such lump sum
payment shall be made within thirty (30) days of such notice.

     

    The
Executive’s Accrued Benefit Account (if applicable), measured as of the date of
the Executive’s death, shall be annuitized (using the Interest Factor) into
monthly installments and shall be payable for the Payout Period.  Such
payments shall commence within thirty (30) days of the Executive’s
death.

     

    (b)           Alternative Payout
Option.

     

    If (i)
after such termination, the Executive lives until attaining his Benefit Age, and
(ii) the Executive has made a Timely Election to receive a lump sum benefit,
this Subsection 5.1(b)(1) shall be controlling with respect to retirement
benefits.

     

    The
balance of the Retirement Income Trust Fund, measured as of the Executive’s
Benefit Age, shall be paid to the Executive in a lump sum on his Benefit
Eligibility Date. In the event the Executive dies after becoming eligible for
such payment (upon attainment of his Benefit Age), but before the actual payment
is made, his Beneficiary shall be entitled to receive the lump sum benefit in
accordance with this Subsection 5.1(b)(1) within thirty (30) days of the date of
the Executive’s death.

     

    The
balance of the Executive’s Accrued Benefit Account (if applicable), measured as
of the Executive’s Benefit Age, shall be paid to the Executive in a lump sum on
his Benefit Eligibility Date.  In the event the Executive dies after
becoming eligible for such payment (upon attainment of his Benefit Age), but
before the actual payment is made, his Beneficiary shall be entitled to receive
the lump sum benefit in accordance with this Subsection 5.1(b)(1) within thirty
(30) days of the date of the Executive’s death.

     

    (2)           Executive Dies Prior to
Benefit Age

     

    If (i)
after such termination, the Executive dies prior to attaining his Benefit Age,
and (ii) the Executive has made a Timely Election to receive a lump sum benefit,
this Subsection 5.1(b)(2) shall be controlling with respect to pre-retirement
death benefits.

     

    The
balance of the Retirement Income Trust Fund, measured as of the date of the
Executive’s death, shall be paid to the Executive’s Beneficiary within thirty
(30) days of the date of the Executive’s death.

     

    The
balance of the Executive’s Accrued Benefit Account (if applicable), measured as
of the date of the Executive’s death, shall be paid to the Executive’s
Beneficiary within thirty (30) days of the Executive’s death.

     

    
      	
              5.2  

            	
              Termination For
      Cause.

            

    

     

    If the
Executive is terminated for Cause, all benefits under this Agreement, other than
those which can be paid from previous Contributions to the Retirement Income
Trust Fund (and earnings on such Contributions), shall be
forfeited.  Furthermore, no further Contributions (or Phantom
Contributions, as applicable) shall be required of the Bank for the year in
which such termination for Cause occurs (if not yet made). The Executive shall
be entitled to receive a benefit in accordance with this Subsection
5.2.  The balance of the Executive’s Retirement Income Trust Fund
shall be paid to the Executive in a lump sum on his Benefit Eligibility
Date.  In the event the Executive dies prior to his Benefit
Eligibility Date, his Beneficiary shall be entitled to receive the balance of
the Executive’s Retirement Income Trust.

     

    

     

    

     

    SECTION
VI

     

    DISABILITY
BENEFIT

     

    If the
Executive’s service is terminated prior to Retirement Age due to a disability
which meets the criteria set forth below, the Executive will receive the
Disability Benefit in lieu of the retirement benefit(s) available pursuant to
Section 5.1 (which is (are) not available prior to the Executive’s Benefit
Eligibility Date).

     

    In any
instance in which (i) the 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 Bank; or (iii) the Executive
is determined to be totally disabled by the Social Security Administration., the
Executive shall be entitled to the following lump sum benefit(s). The lump sum
benefit(s) to which the Executive is entitled shall include: (i) the balance of
the Retirement Income Trust Fund, plus (ii) the balance of the Accrued Benefit
Account (if applicable). The benefit(s) shall be paid within thirty (30) days
following the date of the Executive is determined to be disabled. In the event
the Executive dies after becoming eligible for such payment(s) but before the
actual payment(s) is (are) made, his Beneficiary shall be entitled to receive
the benefit(s) provided for in this Section 6 within thirty (30) days of the
date the Administrator receives notice of the Executive’s death.

     

    SECTION
VII

     

    BENEFICIARY
DESIGNATION

     

    The
Executive shall make an initial designation of primary and secondary
Beneficiaries upon execution of this Agreement and shall have the right to
change such designation, at any subsequent time, by submitting to (i) the
Administrator, and (ii) the trustee of the Retirement Income Trust Fund, in
substantially the form attached as Exhibit B to this Agreement, a written
designation of primary and secondary Beneficiaries. Any Beneficiary designation
made subsequent to execution of this Agreement shall become effective only when
receipt thereof is acknowledged in writing by the Administrator.

     

    SECTION
VIII

     

    NON-COMPETITION

     

    
      	
              8.1  

            	
              Non-Competition During
      Employment.

            

    

     

    In
consideration of the agreements of the Bank contained herein and of the payments
to be made by the Bank pursuant hereto, the Executive hereby agrees that, for as
long as he remains employed by the Bank, he will devote substantially all of his
time, skill, diligence and attention to the business of the Bank, and will not
actively engage, either directly or indirectly, in any business or other
activity which is, or may be deemed to be, in any way competitive with or
adverse to the best interests of the business of the Bank, unless the Executive
has the prior express written consent of the Bank.

     

    
      	
              8.2  

            	
              Breach of
      Non-Competition Clause.

            

    

     

    (a)           Continued Employment
Following Breach.

     

    In the
event (i) any material breach by the Executive of the agreements and covenants
described in Subsection 8.1 occurs, and (ii) the Executive continues employment
at the Bank following such breach, all further Contributions to the Retirement
Income Trust Fund (or Phantom Contributions recorded in the Accrued Benefit
Account) shall immediately cease, and all benefits under this Agreement, other
than those which can be paid from previous Contributions to the Retirement
Income Trust Fund (and earnings on such Contributions), shall be forfeited. The
Executive (or his Beneficiary) shall be entitled to receive a benefit from the
Retirement Income Trust Fund in accordance with Subpart (1) or (2) below, as
applicable.

     

    (1)           Executive Lives Until
Benefit Age

     

    If,
following such breach, the Executive lives until attaining his Benefit Age, he
shall be entitled to receive a benefit from the Retirement Income Trust Fund in
accordance with this Subsection 8.2(a)(1).  The balance of the
Retirement Income Trust Fund, measured as of the Executive’s Benefit Age, shall
be paid to the Executive in a lump sum on his Benefit Eligibility
Date.  In the event the Executive dies after attaining his Benefit Age
but before actual payment is made, his Beneficiary shall be entitled to receive
the lump sum benefit in accordance with this Subsection 8.2(a)(l) within thirty
(30) days of the date of the Executive’s death.

     

    (2)           Executive Dies Prior to
Benefit Age.

     

    If,
following such breach, the Executive dies prior to attaining his Benefit Age,
his Beneficiary shall be entitled to receive a benefit from the Retirement
Income Trust Fund in accordance with this Subsection 8.2 (a)(2). The balance of
the Retirement Income Trust Fund, measured as of the date of the Executive’s
death, shall be paid to the Executive’s Beneficiary in a lump sum within thirty
(30) days of the date of the Executive’s death.

     

    (b)           Termination of Employment
Following Breach.

     

    In the
event (i) any material breach by the Executive of the agreements and covenants
described in Subsection 8.1 occurs, and (ii) the Executive’s employment with the
Bank is terminated due to such breach, such termination shall be deemed to be
for Cause and the benefits payable to the Executive shall be paid in accordance
with Subsection 5.2 of this Agreement.

     

    
      	
              8.3  

            	
              Non-Competition
      Following Employment.

            

    

     

    Executive
further understands and agrees that, following Executive’s termination of
employment, the Bank’s obligation, if any, to make payments to the Executive
from the Accrued Benefit Account shall be conditioned on the Executive’s
forbearance from actively engaging, either directly or indirectly in any
business or other activity which is, or may be deemed to be, in any way
competitive with or adverse to the best interests of the Bank, unless the
Executive has the prior written consent of the Bank. In the event of the
Executive’s breach of the covenants and agreements contained herein, further
payments to the Executive from the Accrued Benefit Account, if any, shall cease
and Executive’s rights to amounts credited to the Accrued Benefit Account shall
be forfeited.

     

    SECTION
IX

     

    EXECUTIVE’S RIGHT TO
ASSETS

     

    The
rights of the Executive, any Beneficiary, or any other person claiming through
the Executive under this Agreement, shall be solely those of an unsecured
general creditor of the Bank. The Executive, the Beneficiary, or any other
person claiming through the Executive, shall only have the right to receive from
the Bank those payments or amounts so specified under this Agreement. The
Executive agrees that he, his Beneficiary, or any other person claiming through
him shall have no rights or interests whatsoever in any asset of the Bank,
including any insurance policies or contracts which the Bank may possess or
obtain to informally fund this Agreement. Any asset used or acquired by the Bank
in connection with the liabilities it has assumed under this Agreement shall not
be deemed to be held under any trust for the benefit of the Executive or his
Beneficiaries, unless such asset is contained in the rabbi trust described in
Section XII of this Agreement. Any such asset shall be and remain, a general,
unpledged asset of the Bank in the event of the Bank’s insolvency.

     

    SECTION
X

     

    RESTRICTIONS UPON
FUNDING

     

    The Bank
shall have no obligation to set aside, earmark or entrust any fund or money with
which to pay its obligations under this Agreement, other than those
Contributions required to be made to the Retirement Income Trust Fund. The
Executive, his Beneficiaries or any successor in interest to him shall be and
remain simply a general unsecured creditor of the Bank in the same manner as any
other creditor having a general claim for matured and unpaid compensation. The
Bank reserves the absolute right in its sole discretion to either purchase
assets to meet its obligations undertaken by this Agreement or to refrain from
the same and to determine the extent, nature, and method of such asset
purchases. Should the Bank decide to purchase assets such as life insurance,
mutual funds, disability policies or annuities, the Bank reserves the absolute
right, in its sole discretion, to replace such assets from time to time or to
terminate its investment in such assets at any time, in whole or in part. At no
time shall the Executive be deemed to have any lien, right, title or interest in
or to any specific investment or to any assets of the Bank. If the Bank elects
to invest in a life insurance, disability or annuity policy upon the life of the
Executive, then the Executive shall assist the Bank by freely submitting to a
physical examination and by supplying such additional information necessary to
obtain such insurance or annuities.

     

    SECTION
XI

     

    ACT
PROVISIONS

     

    
      	
              11.1  

            	
              Named Fiduciary and
      Administrator. The Bank, as Administrator, shall be the Named
      Fiduciary of this Agreement. As Administrator, the Bank shall be
      responsible for the management, control and administration of the
      Agreement as established herein. The Administrator may delegate to others
      certain aspects of the management and operational responsibilities of the
      Agreement, including the employment of advisors and the delegation of
      ministerial duties to qualified
individuals.

            

    

     

    
      	
              11.2  

            	
              Claims Procedure and
      Arbitration. In the event that benefits under this Agreement are
      not paid to the Executive (or to his Beneficiary in the case of the
      Executive’s death) and such claimants feel they are entitled to receive
      such benefits, then a written claim must be made to the Administrator
      within sixty (60) days from the date payments are refused. The
      Administrator shall review the written claim and, if the claim is denied,
      in whole or in part, it shall provide in writing, within ninety (90) days
      of receipt of such claim, its specific reasons for such denial, reference
      to the provisions of this Agreement upon which the denial is based, and
      any additional material or information necessary to perfect the claim.
      Such writing by the Administrator shall further indicate the additional
      steps which must be undertaken by claimants if an additional review of the
      claim denial is desired.

            

    

     

    If
claimants desire a second review, they shall notify the Administrator in writing
within sixty (60) days of the first claim denial. Claimants may review this
Agreement or any documents relating thereto and submit any issues and comments,
in writing, they may feel appropriate. In its sole discretion, the Administrator
shall then review the second claim and provide a written decision within sixty
(60) days of receipt of such claim. This decision shall state the specific
reasons for the decision and shall include reference to specific provisions of
this Agreement upon which the decision is based.

     

    If
claimants continue to dispute the benefit denial based upon completed
performance of this Plan and the Joinder Agreement or the meaning and effect of
the terms and conditions thereof, then claimants may submit the dispute to
mediation, administered by the American Arbitration Association (“AAA”) (or a
mediator selected by the parties) in accordance with the AAA’s Commercial
Mediation Rules. If mediation is not successful in resolving the dispute, it
shall be settled by arbitration administered by the AAA under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.

     

    SECTION
XII

     

    MISCELLANEOUS

     

    
      	
              12.1  

            	
              No Effect on
      Employment Rights. Nothing contained herein will confer upon the
      Executive the right to be retained in the service of the Bank nor limit
      the right of the Bank to discharge or otherwise deal with the Executive
      without regard to the existence of the
  Agreement.

            

    

     

    
      	
              12.2  

            	
              State Law. The
      Agreement is established under, and will be construed according to, the
      laws of the state of New York, to the extent such laws are not preempted
      by the Act and valid regulations published
  thereunder.

            

    

     

    
      	
              12.3  

            	
              Severability.
      In the event that any of the provisions of this Agreement or portion
      thereof, are held to be inoperative or invalid by any court of competent
      jurisdiction, then: (1) insofar as is reasonable, effect will be given to
      the intent manifested in the provisions held invalid or inoperative, and
      (2) the validity and enforceability of the remaining provisions will not
      be affected thereby.

            

    

     

    
      	
              12.4  

            	
              Incapacity of
      Recipient. In the event the Executive is declared incompetent and a
      conservator or other person legally charged with the care of his person or
      Estate is appointed, any benefits under the Agreement to which such
      Executive is entitled shall be paid to such conservator or other person
      legally charged with the care of his person or
  Estate.

            

    

     

    
      	
              12.5  

            	
              Unclaimed
      Benefit. The Executive shall keep the Bank informed of his current
      address and the current address of his Beneficiaries. The Bank shall not
      be obligated to search for the whereabouts of any person. If the location
      of the Executive is not made known to the Bank as of the date upon which
      any payment of any benefits from the Accrued Benefit Account may first be
      made, the Bank shall delay payment of the Executive’s benefit payment(s)
      until the location of the Executive is made known to the Bank; however,
      the Bank shall only be obligated to hold such benefit payment(s) for the
      Executive until the expiration of thirty-six (36) months. Upon expiration
      of the thirty-six (36) month period, the Bank may discharge its obligation
      by payment to the Executive’s Beneficiary. If the location of the
      Executive’s Beneficiary is not made known to the Bank by the end of an
      additional two (2) month period following expiration of the thirty-six
      (36) month period, the Bank may discharge its obligation by payment to the
      Executive’s Estate. If there is no Estate in existence at such time or if
      such fact cannot be determined by the Bank, the Executive and his
      Beneficiary(ies) shall thereupon forfeit any rights to the balance, if
      any, of the Executive’s Accrued Benefit Account provided for such
      Executive and/or Beneficiary under this
  Agreement.

            

    

     

    
      	
              12.6  

            	
              Limitations on
      Liability. Notwithstanding any of the preceding provisions of the
      Agreement, no individual acting as an employee or agent of the Bank, or as
      a member of the Board of Directors shall be personally liable to the
      Executive or any other person for any claim, loss, liability or expense
      incurred in connection with the
Agreement.

            

    

     

    
      	
              12.7  

            	
              Gender.
      Whenever in this Agreement words are used in the masculine or neuter
      gender, they shall be read and construed as in the masculine, feminine or
      neuter gender, whenever they should so
apply.

            

    

     

    
      	
              12.8  

            	
              Effect on Other
      Corporate Benefit Agreements. Nothing contained in this Agreement
      shall affect the right of the Executive to participate in or be covered by
      any qualified or non-qualified pension, profit sharing, group, bonus or
      other supplemental compensation or fringe benefit agreement constituting a
      part of the Bank’s existing or future compensation
    structure.

            

    

     

    
      	
              12.9  

            	
              Suicide.
      Notwithstanding anything to the contrary in this Agreement, if the
      Executive’s death results from suicide, whether sane or insane, within
      twenty-six (26) months after September 1, 1998, all further Contributions
      to the Retirement Income Trust Fund (or Phantom Contributions recorded in
      the Accrued Benefit Account) shall thereupon cease, and no Contribution
      (or Phantom Contribution) shall be made by the Bank to the Retirement
      Income Trust Fund (or recorded in the Accrued Benefit Account) in the year
      such death resulting from suicide occurs (if not yet made). All benefits
      other than those available from previous Contributions to the Retirement
      Income Trust Fund under this Agreement shall be forfeited, and this
      Agreement shall become null and void. The balance of the Retirement Income
      Trust Fund, measured as of the Executive’s date of death, shall be paid to
      the Beneficiary within thirty (30) days of the date the Administrator
      receives notice of the Executive’s
death.

            

    

     

    
      	
              12.10  

            	
              Inurement. This
      Agreement shall be binding upon and shall inure to the benefit of the
      Bank, its successors and assigns, and the Executive, his successors,
      heirs, executors, administrators, and
  Beneficiaries.

            

    

     

    
      	
              12.11  

            	
              Headings.
      Headings and sub-headings in this Agreement are inserted for reference and
      convenience only and shall not be deemed a part of this
      Agreement.

            

    

     

    
      	
              12.12  

            	
              Establishment of a
      Rabbi Trust. The Bank shall establish a rabbi trust into which the
      Bank shall contribute assets which shall be held therein, subject to the
      claims of the Bank’s creditors in the event of the Bank’s “Insolvency” (as
      defined in such rabbi trust agreement), until the contributed assets are
      paid to the Executive and/or his Beneficiary in such manner and at such
      times as specified in this Agreement. It is the intention of the Bank that
      the contribution or contributions to the rabbi trust shall provide the
      Bank with a source of funds to assist it in meeting the liabilities of
      this Agreement.

            

    

     

    
      	
              12.13  

            	
              Source of
      Payments. All payments provided in this Agreement shall be timely
      paid in cash or check from the general funds of the Bank or the assets of
      the rabbi trust, to the extent made from the Accrued Benefit
      Account.

            

    

     

    
      	
              12.14  

            	
              Tax Withholding and
      Code Section 409A Taxes With Respect to the Accrued Benefit
      Account.  Any distribution under this Agreement from the
      Executive’s Accrued Benefit Account shall be reduced by the amount of any
      taxes required to be withheld from such distribution.  This
      Agreement shall permit the acceleration of the time or schedule of a
      payment to pay employment related taxes as permitted under Treasury
      Regulation Section 1.409A-3(j) or to pay any taxes that may become due at
      any time that the arrangement fails to meet the requirements of Code
      Section 409A and the regulations and other guidance promulgated
      thereunder.  In the latter case, such payments shall not exceed
      the amount required to be included in income as the result of the failure
      to comply with the requirements of Code Section
  409A.

            

    

     

    
      	
              12.15  

            	
              Acceleration of
      Payments from the Accrued Benefit Account. Except as specifically
      permitted herein or in other sections of this Agreement, no acceleration
      of the time or schedule of any payment may be made hereunder from the
      Executive’s Accrued Benefit Account.  Notwithstanding the
      foregoing, payments may be accelerated hereunder by the Bank, in
      accordance with the provisions of Treasury Regulation Section
      1.409A-3(j)(4) and any subsequent guidance issued by the United States
      Treasury Department.  Accordingly, payments may be accelerated,
      in accordance with requirements and conditions of the Treasury Regulations
      (or subsequent guidance) in the following circumstances: (i) as a result
      of certain domestic relations orders; (ii) in compliance with ethics
      agreements with the Federal government; (iii) in compliance with ethics
      laws or conflicts of interest laws; (iv) in limited cash-outs (but not in
      excess of the limit under Code Section 402(g)(1)(B)); (v) in the case of
      certain distributions to avoid a non-allocation year under Code Section
      409(p); (vi) to apply certain offsets in satisfaction of a debt of the
      Executive to the Bank; (vii) in satisfaction of certain bona fide disputes
      between the Executive and the Bank; or (viii) for any other purpose set
      forth in the Treasury Regulations and subsequent
  guidance.

            

    

     

    

    

    

    

    

    SECTION
XIII

     

    AMENDMENT/PLAN
TERMINATION

     

    
      	
              13.1  

            	
              Amendment or Plan
      Termination. This Agreement shall not be amended, modified or
      terminated at any time, in whole or part, without the mutual written
      consent of the Executive and the Bank, and such mutual consent shall be
      required even if the Executive is no longer employed by the Bank. No
      amendment, modification or termination of the Agreement by the Bank shall
      directly or indirectly deprive the Executive of all or any portion of the
      Executive’s Retirement Income Trust Fund (and Accrued Benefit Account, if
      applicable) as of the effective date of the resolution amending or
      terminating the Agreement.

            

    

     

    
      	
              13.2  

            	
              Executive’s Right to
      Payment Following Plan Termination. In the event of a termination
      of the Agreement, with respect to the Executive’s Retirement Income Trust
      Fund, the Executive shall be entitled to the balance, if any, of his
      Retirement Income Trust Fund.  However, if such termination is
      done in anticipation of or pursuant to a “Change in Control,” such
      balance(s) shall include the final Contribution made (or recorded)
      pursuant to Subsection 2.1(b)(2) (or 2.1(c)(2)).  Payment of the
      balance(s) of the Executive’s Retirement Income Trust Fund shall not be
      dependent upon his continuation of employment with the Bank following the
      termination date of the Agreement. Payment of the balance(s) of the
      Executive’s Retirement Income Trust Fund shall be made in a lump sum
      within thirty (30) days of the date of termination of the
      Agreement.  Notwithstanding the foregoing, in the event of a
      termination of the Agreement, with respect to the Executive’s Accrued
      Benefit Account (if applicable), the Agreement shall cease to operate and
      the Bank shall pay out to the Executive the balance or his Accrued Benefit
      Account only upon the following circumstances and
    conditions:

            

    

     

    
      	
               
      

            	
              (a)

            	
              The
      Bank may terminate the Agreement within 12 months of a corporate
      dissolution taxed under Code Section 331, or with approval of a bankruptcy
      court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts
      deferred under the Agreement are included in the Executive’s gross income
      in the latest of (i) the calendar year in which the Agreement terminates;
      (ii) the calendar year in which the amount is no longer subject to a
      substantial risk of forfeiture; or (iii) the first calendar year in which
      the payment is administratively
practicable.

            

    

     

    
      	
               
      

            	
              (b)

            	
              The
      Bank may terminate the Agreement within the 30 days preceding a Change in
      Control (but not following a Change in Control), provided that the
      Agreement shall only be treated as terminated if all substantially similar
      arrangements sponsored by the Bank are terminated so that the Executive
      and all executives under substantially similar arrangements are required
      to receive all amounts of compensation deferred under the terminated
      arrangements within 12 months of the date of the termination of the
      arrangements.  For these purposes, “Change in Control” shall be
      defined in accordance with the Treasury Regulations under Code Section
      409A.

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Bank may terminate the Agreement provided that: (i) the termination and
      liquidation does not occur proximate to a downturn in the financial health
      of the Bank; (ii) all arrangements sponsored by the Bank that would be
      aggregated with this Agreement under Treasury Regulations Section
      1.409A-1(c) if the Executive covered by this Agreement was also covered by
      any of those other arrangements are also terminated; (iii) no payments
      other than payments that would be payable under the terms of the
      arrangement if the termination had not occurred are made within 12 months
      of the termination of the arrangement; (iv) all payments are made within
      24 months of the termination of the arrangements; and (v) the Bank does
      not adopt a new arrangement that would be aggregated with any terminated
      arrangement under Treasury Regulations Section 1.409A-1(c) if the
      Executive participated in both arrangements, at any time within three
      years following the date of termination of the
  arrangement.

            

    

     

    SECTION
XIV

     

    EXECUTION

     

    
      	
              14.1  

            	
              This
      Agreement and the Thomas Schneider Grantor Trust Agreement set forth the
      entire understanding of the parties hereto with respect to the
      transactions contemplated hereby, and any previous agreements or
      understandings between the parties hereto regarding the subject matter
      hereof are merged into and superseded by this Agreement and the Thomas
      Schneider Grantor Trust Agreement.

            

    

     

    
      	
              14.2  

            	
              This
      Agreement shall be executed in triplicate, each copy of which, when so
      executed and delivered, shall be an original, but all three copies shall
      together constitute one and the same
instrument.

            

    

     

    [Remainder
of page intentionally left blank]

     

    IN WITNESS WHEREOF, the Bank
and the Executive have caused this Agreement to be executed on the day and date
first above written.

     

    
      	
              :

            	 
      	
              PATHFINDER
      BANK:

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              
                /s/
      Thomas W. Schneider

              

            
	 
      	 
      	 
      
	
              
                12/23/08

              

            	 
      	
              
                President
      & CEO

              

            
	
              DATE

            	 
      	
              (Title)

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              :

            	 
      	
              EXECUTIVE:

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              
                12/23/08

              

            	 
      	
              
                /s/
      Thomas W. Schneider

              

            
	
              DATE

            	 
      	
              Thomas
      Schneider

            

    

    

    

    

    

    

    CONDITIONS,
ASSUMPTIONS,

    AND

    SCHEDULE
OF CONTRIBUTIONS AND PHANTOM CONTRIBUTIONS

     

    
      	
              1.

            	
              Interest
      Factor - for purposes of

            

    

     

    
      	
               
      

            	
              a.

            	
              the
      Accrued Benefit Account - shall be six percent
      (6%) per annum, compounded
monthly.

            

    

     

    
      	
               
      

            	
              b.

            	
              the
      Retirement Income Trust Fund - for purposes of annuitizing the balance of
      the Retirement Income Trust Fund over the Payout Period, the trustee of
      the Thomas Schneider Grantor Trust shall exercise discretion in selecting
      the appropriate rate given the nature of the investments contained in the
      Retirement Income Trust Fund and the expected return associated with the
      investments. For these purposes, if the trustee of the Retirement Income
      Trust Fund has purchased a life insurance policy, the trustee shall have
      the discretion to determine the portion of the cash value of such policy
      available for purposes of annuitizing the Retirement Income Trust Fund, in
      accordance with Section 2.3 of the
Agreement.

            

    

     

    
      	
              2.

            	
              The
      amount of the annual Contributions (or Phantom Contributions) to the
      Retirement Income Trust Fund (or Accrued Benefit Account) has been based
      on the annual incremental accounting accruals which would be required of
      the Bank through the earlier of the Executive’s death or Retirement Age,
      (i) pursuant to APB Opinion No. 12, as amended by FAS 106 and (ii)
      assuming a discount rate equal to six percent
      (6%) per annum, in order to provide the unfunded, non-qualified
      Supplemental Retirement Income
Benefit.

            

    

     

    
      	
              3.

            	
              Supplemental
      Retirement Income Benefit means an actuarially determined annual amount
      equal to Seventy
      One Thousand One Hundred Forty-nine Dollars ($71,149) at age 62 if paid
      entirely from the Accrued Benefit Account or Forty Four Thousand Four
      Hundred Eighty-nine Dollars ($44,489) at age 62 if paid from the
      Retirement Income Trust Fund.

            

    

     

    The
Supplemental Retirement Income Benefit:

     

    
      	
              ·  

            	
              the
      definition of Supplemental Retirement Income Benefit has been incorporated
      into the Agreement for the sole purpose of actuarially establishing the
      amount of annual Contributions (or Phantom Contributions) to the
      Retirement Income Trust Fund (or Accrued Benefit Account). The amount of
      any actual retirement, pre-retirement or disability benefit payable
      pursuant to the Agreement will be a function of (i) the amount and timing
      of Contributions (or Phantom Contributions) to the Retirement Income Trust
      Fund (or Accrued Benefit Account) and (u) the actual investment experience
      of such Contributions (or the monthly compounding rate of Phantom
      Contributions).

            

    

     

    
      	
              4.

            	
              Schedule
      of Annual Gross Contributions/Phantom
  Contributions

            

    

     

    
      	
              Plan Year

            	
              Amount

            
	 
      	 
      
	
              1998

            	
               17,623

            
	
              1999

            	
               8,264

            
	
              2000

            	
               9,217

            
	
              2001

            	
               10,255

            
	
              2002

            	
               11,387

            
	
              2003

            	
               12,619

            
	
              2004

            	
               13,960

            
	
              2005

            	
               15,418

            
	
              2006

            	
               17,003

            
	
              2007

            	
               18,724

            
	
              2008

            	
               20,594

            
	
              2009

            	
               22,623

            
	
              2010

            	
               24,823

            
	
              2011

            	
               27,209

            
	
              2012

            	
               29,796

            
	
              2013

            	
               32,597

            
	
              2014

            	
               36,631

            
	
              2015

            	
               38,915

            
	
              2016

            	
               42,469

            
	
              2017

            	
               46,312

            
	
              2018

            	
               50,469

            
	
              2019

            	
               54,962

            
	
              2020

            	
               59,817

            
	
              2021

            	
               65,063

            
	
              2022

            	
               61,064

            

    

    

     

    AMENDED
AND RESTATED

     

    SECOND
EXECUTIVE SUPPLEMENTAL RETIREMENT

     

    INCOME
AGREEMENT

     

    BENEFICIARY
DESIGNATION

     

    The
Executive, under the teams of the Executive Supplemental Retirement Income
Agreement executed by the Bank, dated the 1st day of January 2005, hereby
designates the following Beneficiary(ies) to receive any guaranteed payments or
death benefits under such Agreement, following his death:

     

    PRIMARY
BENEFICIARY:  Joy Ann Schneider

     

    SECONDARY
BENEFICIARY:  Thomas J. Schneider, Matthew R. Schneider, James A.
Schneider, per stirpes

     

    This
Beneficiary Designation hereby revokes any prior Beneficiary Designation which
may have been in effect.

     

    Such
Beneficiary Designation is revocable.

     

    DATE:
December 23, 2008

     

    
      	 
      	 
      
	 
      	 
      
	
              
                /s/
      Edward
      Mervine                        
      

              

            	
              
                /s/
      Thomas W. Schneider

              

            
	
              (WITNESS)

            	
              EXECUTIVE

            
	 
      	 
      
	 
      	 
      
	
              
                /s/
      Tonya Crisafulli

              

            	 
      
	
              (WITNESS)

            	 
      

    

    AMENDED
AND RESTATED

     

    SECOND
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT

     

    NOTICE
OF ELECTION TO CHANGE FORM OF PAYMENT

     

    TO:           Bank

     

    Attention:

     

    I hereby
give notice of my election to change the form of payment of my Supplemental
Retirement Income Benefit from my Retirement Income Trust Fund, as specified
below.  I understand
that such notice, in order to be effective, must be submitted in accordance with
the time requirements described in my Executive Supplemental Retirement
Agreement.  I understand that this form is not applicable to my
Accrued Benefit Account.

     

    
      	
               
      

            	
              ‪⁪

            	
              I
      hereby elect to change the form of payment of my benefits from monthly
      installments throughout my Payout Period to a lump sum benefit
      payment.

            

    

     

    
      	
               
      

            	
              ‪⁪

            	
              I
      hereby elect to change the form of payment of my benefits from a lump sum
      benefit payment to monthly installments throughout my Payout
      Period.  Such election hereby revokes my previous notice of
      election to receive a lump sum form of benefit
  payments.

            

    

     

    
      	 
      	 
      
	 
      	 
      
	 
      
	
              Executive

            
	 
      	 
      
	 
      	 
      
	 
      
	
              Date

            
	 
      	 
      
	 
      	 
      
	
              Acknowledged

            
	
              By:

            	 
      
	 
      	 
      
	 
      	 
      
	
              Title:

            	 
      
	 
      	 
      
	
              Date:

            	
              ________________________________________

            
	 
      

    

    AMENDED
AND RESTATED

     

    SECOND
EXECUTIVE SUPPLEMENTAL RETIREMENT INCOME AGREEMENT

     

    TRANSITION
YEAR ELECTION FORM

     

    

     

    Instructions:  you
have a limited period of time to use this Transition Year Election Form to elect
to change the form of payment of your Supplemental Retirement Income Benefit
from your Accrued Benefit Account, as specified below.

    

    Due
to IRS rules, you must complete this form no later than December
31, 2008.  If you elect to change the form of payment of your
Supplemental Retirement Income Benefit from your Accrued Benefit Account, you
may not use
this election form to change the form of payment with respect to benefits that
are scheduled to be paid to you in 2008, or otherwise to cause your benefits to
be paid  to you in 2008.

    

    
      	
               
      

            	
              ⁪

            	
              I
      hereby elect to change the form of payment of my benefits from my Accrued
      Benefit Account from monthly installments throughout my Payout Period to a
      lump sum benefit payment.

            

    

     

    
      	
               
      

            	
              ‪⁪

            	
              I
      hereby elect to change the form of payment of my benefits from my Accrued
      Benefit Account from a lump sum benefit payment to monthly installments
      throughout my Payout Period.  Such election hereby revokes my
      previous notice of election to receive a lump sum form of benefit
      payments.

            

    

     

    
      	 
      	 
      
	 
      	 
      
	 
      
	
              Executive

            
	 
      	 
      
	 
      	 
      
	 
      
	
              Date

            
	 
      	 
      
	 
      	 
      
	
              Acknowledged

            
	
              By:

            	 
      
	 
      	 
      
	 
      	 
      
	
              Title:

            	 
      
	 
      	 
      
	 
      	 
      
	
              
                Date:   ________________________________________Exhibit 4.11

 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW,
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW
OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

WARRANT TO PURCHASE STOCK

 

Company:
 ARYx Therapeutics, Inc., a Delaware
corporation

Number
of Shares:  8547, subject to adjustment

Class of
Stock:  Common Stock, $0.001 par value per
share

Warrant
Price:  The average closing price of the
stock from the 10 trading days prior to the date of closing

Issue
Date: December 31, 2008.

Expiration
Date:  On the 5th anniversary date from the date
of issuance.

Credit Facility: This Warrant is issued in
connection with that certain Loan and Security Agreement of even date herewith
between Oxford Finance Corporation, and the Company.

 

THIS
WARRANT CERTIFIES THAT, for good and valuable consideration, OXFORD FINANCE
CORPORATION (together with any successor or permitted assignee or transferee of
this Warrant or of any shares issued upon exercise hereof, “Holder”) is
entitled to purchase the number of fully paid and nonassessable shares (the
“Shares”) of the above-stated class of stock (the “Class”) of the above-named
company (the “Company”) at the above-stated Warrant Price, all as set forth
above and as adjusted pursuant to Article 2 of this Warrant, subject to
the provisions and upon the terms and conditions set forth in this Warrant.

 

ARTICLE
1. EXERCISE.

 

1.1           Method of Exercise.   Holder
may exercise this Warrant, in whole or in part and from time to time, by
delivering the original of this Warrant together with a duly executed Notice of
Exercise in substantially the form attached as Appendix 1 to the principal
office of the Company. Unless Holder is exercising the conversion right set
forth in Article 1.2, Holder shall also deliver to the Company a check,
wire transfer (to an account designated by the Company), or other form of
payment acceptable to the Company for the aggregate Warrant Price for the
Shares being purchased.

 

1.2           Conversion Right.   In
lieu of exercising this Warrant as specified in Article 1.1, Holder may
from time to time convert this Warrant, in whole or in part, into a number of Shares
determined by dividing (a) the aggregate fair market value of the Shares
or other securities otherwise issuable upon exercise of this Warrant minus the

 

 

aggregate
Warrant Price of such Shares by (b) the fair market value of one Share.
The fair market value of the Shares shall be determined pursuant to
Article 1.3.

 

1.3           Fair Market Value.   If the Company’s common stock is traded in a public
market, the fair market value of a Share shall be the closing price of a share
of common stock reported for the business day immediately before Holder
delivers this Warrant together with its Notice of Exercise to the Company. If
the Company’s common stock is not traded in
a public market, the Board of Directors of the Company shall determine
fair market value in its reasonable good faith judgment.

 

1.4           Delivery of Certificate and New Warrant.   Promptly after Holder exercises or converts
this Warrant and, if applicable, the Company receives payment of the aggregate
Warrant Price, and in all events within five (5) days thereafter, the
Company shall deliver to Holder certificates for the Shares acquired and, if
this Warrant has not been fully exercised or converted and has not expired, a
new Warrant representing the Shares not so acquired.

 

1.5           Replacement of Warrants or Stock Certificates.   On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any stock certificate evidencing Shares issued upon any
exercise or conversion hereof, and, in the case of loss, theft or destruction,
on delivery of an indemnity agreement reasonably satisfactory in form and
amount to the Company, or, in the case of mutilation, on surrender and
cancellation of this Warrant or such stock certificate, the Company shall execute
and deliver, in lieu of this Warrant or such stock certificate, a new warrant
or stock certificate of like tenor.

 

1.6           Treatment of Warrant Upon Acquisition of
Company.

 

1.6.1
“Acquisition”.   For the purpose of this Warrant,
“Acquisition” means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, merger or sale of outstanding capital stock of the Company where
the holders of the Company’s securities before the transaction beneficially own
less than a majority of the outstanding voting securities of the surviving
entity after the transaction.

 

1.6.2
Treatment of Warrant
at Acquisition.

 

A)           Upon the written request of the Company,
Holder agrees that, in the event of an Acquisition in which the sole
consideration is cash, either (a) Holder shall exercise its conversion or
purchase right under this Warrant and such exercise will be deemed effective
immediately prior to the consummation of such Acquisition or (b) if Holder
elects not to exercise the Warrant, this Warrant will expire upon the
consummation of such Acquisition. The Company shall provide the Holder with
written notice of its request relating to the foregoing (together with such
reasonable information as the Holder may request in connection with such
contemplated Acquisition giving rise to such notice), which is to be delivered
to Holder not less than ten (10) days prior to the closing of the proposed
Acquisition.

 

B)            Upon the written request of the Company,
Holder agrees that, in the event of an Acquisition that is an “arms length”
sale of all or substantially all of the Company’s assets (and only its assets)
to a third party that is not an Affiliate (as defined below) of

 

2

 

the
Company (a “True Asset Sale”), either (a) Holder shall exercise its
conversion or purchase right under this Warrant and such exercise will be
deemed effective immediately prior to the consummation of such Acquisition or
(b) if Holder elects not to exercise the Warrant, this Warrant will
continue until the Expiration Date if the Company continues as a going concern
following the closing of any such True Asset Sale. The Company shall provide
the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in
connection with such contemplated Acquisition giving rise to such notice),
which is to be delivered to Holder not less than ten (10) days prior to
the closing of the proposed Acquisition.

 

C)            Upon the closing of any Acquisition other
than those particularly described in subsections (A) and (B) above,
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price and/or number of
Shares shall be adjusted accordingly.

 

As
used in this Article 1.6, “Affiliate” shall
mean any person or entity that owns or controls directly or indirectly ten
percent (10%) or more of the stock of Company, any person or entity that
controls or is controlled by or is under common control with such persons or
entities, and each of such person’s or entity’s officers, directors, joint
venturers or partners, as applicable.

 

ARTICLE
2. ADJUSTMENTS TO THE
SHARES.

 

2.1           Stock Dividends, Splits, Etc.   If the Company declares or pays a dividend on
the outstanding shares of the Class payable in common stock or other
securities, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend occurred. If the Company subdivides the outstanding
shares of the Class by reclassification or otherwise into a greater number
of shares, the number of Shares purchasable hereunder shall be proportionately
increased and the Warrant Price shall be proportionately decreased. If the
outstanding shares of the Class are combined or consolidated, by
reclassification or otherwise, into a lesser number of shares, the Warrant
Price shall be proportionately increased and the number of Shares shall be
proportionately decreased.

 

2.2           Reclassification, Exchange, Combinations or
Substitution.   Upon any reclassification, exchange,
substitution, or other event that results in a change of the number and/or
class of the securities issuable upon exercise or conversion of this Warrant,
Holder shall be entitled to receive, upon exercise or conversion of this
Warrant, the number and kind of securities and property that Holder would have
received for the Shares if this Warrant had been exercised immediately before
such reclassification, exchange, substitution, or other event. The Company or
its successor shall promptly issue to Holder an amendment to this Warrant setting
forth the number and kind of such new securities or other property issuable
upon exercise or conversion of this Warrant as a result of such
reclassification, exchange, substitution or other event that results in a
change of the number and/or class of securities issuable upon exercise or
conversion of

 

3

 

this
Warrant. The amendment to this Warrant shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon
exercise of the new Warrant. The provisions of this Article 2.2 shall
similarly apply to successive reclassifications, exchanges, substitutions, or
other events.

 

2.3           [Intentionally Omitted].

 

2.4           No Impairment.   The Company shall not, by amendment of its
Amended and Restated Certificate of Incorporation (the “Restated Certificate”)
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue, or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this
Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder’s rights under this Article against impairment.

 

2.5           Fractional Shares.   No fractional Share shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share
interest arises upon any exercise or conversion of the Warrant, the Company
shall eliminate such fractional share interest by paying Holder the amount
computed by multiplying the fractional interest by the fair market value of a
full Share.

 

2.6           Certificate as to Adjustments.   Upon each adjustment of the Warrant Price,
Class and/or number of Shares, the Company shall promptly notify Holder in
writing, and, at the Company’s expense, promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price, Class and number of Shares in effect upon the date thereof
and the series of adjustments leading to such Warrant Price, Class and
number of Shares.

 

ARTICLE
3. REPRESENTATIONS AND
COVENANTS OF THE COMPANY.

 

3.1           Representations and Warranties.   The Company represents and warrants to, and
agrees with, the Holder as follows:

 

(a)           All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant have been duly and validly reserved for issuance
upon exercise of this Warrant and shall, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or under
applicable federal and state securities laws.

 

(b)           The rights, privileges and restrictions granted to or imposed upon the
holders of the Shares are as set forth in Restated Certificate.

 

(c)           The execution and delivery of this Warrant does not, and the issuance
of Shares upon exercise of this Warrant in accordance with the terms

 

4

 

hereof
will not, violate the Restated Certificate or the Company’s Amended and
Restated Bylaws; does not and will not violate any law, governmental
rule or regulation, judgment or order applicable to the Company; and does
not and will not conflict with or violate any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument to which the
Company is a party or by which it is bound or require the consent or approval
of, the giving of notice to, the registration or filing with or the taking of
any action in respect of or by any federal, state or local government authority
or agency or other person, except for the filing of notices pursuant to federal
and state securities laws, which filings will be effected by the time required
thereby.

 

(d)              There are no actions, suits, audits,
investigations or proceedings pending or, to the knowledge of the Company,
threatened against the Company in any court or before any governmental
commission, board or authority which, if adversely determined, could have a
material adverse effect on the ability of the Company to perform its
obligations under this Warrant.

 

(e)               The number of shares of common stock of the
Company outstanding on the Issue Date, on a fully diluted basis (assuming the
conversion of all outstanding convertible securities and the exercises of all
outstanding options and warrants) does not exceed 32,987,482 shares.

 

3.2           Notice of Certain Events.   If
the Company proposes at any time (a) to declare any dividend or
distribution upon the outstanding shares of the same class and series as the
Shares, whether in cash, property, stock, or other securities and whether or
not a regular cash dividend; (b) to offer for subscription or sale pro
rata to the holders of the outstanding shares of the same class and series as
the Shares any additional shares of any class or series of the Company’s stock;
(c) to effect any reclassification, reorganization or recapitalization of
any of its stock; or (d) to effect an Acquisition or to liquidate,
dissolve or wind up; then, in connection with each such event, the Company
shall give Holder written notice thereof at the same time and in the same
manner as the Company gives written notice thereof to the holders of the
outstanding shares of the Class.

 

3.3           [Intentionally Omitted].

 

3.4           No Shareholder Rights.   Except as provided in this
Warrant, Holder will not have any rights as a shareholder of the Company until
the exercise of this Warrant. Notwithstanding the foregoing, the Company will
transmit to Holder such information, documents and reports as are generally
distributed to the holders of Common Stock concurrently with the distribution
thereof to such stockholders, including without limitation the notices the
Company must distribution pursuant to Article 3.2 above.

 

ARTICLE
4. REPRESENTATIONS,
WARRANTIES OF THE HOLDER.   The
Holder represents and warrants to the Company as follows:

 

4.1           Purchase for Own Account.   This Warrant and the
securities to be acquired upon exercise of this Warrant by Holder will be
acquired for investment for Holder’s account, not as a nominee or agent, and
not with a view to the public resale or distribution within the meaning of the
Act. Holder also represents that it has not been formed for the specific
purpose of acquiring this Warrant or the Shares.

 

5

 

4.2           Disclosure of Information.   Holder has received or has had full access to
all the information it considers necessary or appropriate to make an informed
investment decision with respect to the acquisition of this Warrant and its
underlying securities. Holder further has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of this Warrant and its underlying securities and to obtain additional
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to Holder or to which Holder has access.

 

4.3           Investment Experience.   Holder understands that the purchase of this
Warrant and its underlying securities involves substantial risk. Holder has
experience as an investor in securities of companies in the development stage
and acknowledges that Holder can bear the economic risk of such Holder’s investment
in this Warrant and its underlying securities and has such knowledge and
experience in financial or business matters that Holder is capable of
evaluating the merits and risks of its investment in this Warrant and its
underlying securities and/or has a preexisting personal or business
relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables Holder to be aware of
the character, business acumen and financial circumstances of such persons.

 

4.4
          Accredited Investor Status.   Holder is an “accredited investor” within the
meaning of Regulation D promulgated under the Act.

 

4.5           The Act.   Holder
understands that this Warrant and the Shares issuable upon exercise or
conversion hereof have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the Holder’s investment intent as expressed herein.
Holder understands that this Warrant and the Shares issued upon any exercise or
conversion hereof must be held indefinitely unless subsequently registered
under the Act and qualified under applicable state securities laws, or unless
exemption from such registration and qualification are otherwise available.

 

ARTICLE
5. MISCELLANEOUS.

 

5.1           Term:   This
Warrant is exercisable in whole or in part at any time and from time to time on
or before the Expiration Date.

 

5.2           Legends.   This
Warrant and the Shares shall be imprinted with a legend in substantially the
following form:

 

THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE
COMPANY TO OXFORD FINANCE CORPORATION DATED AS OF DECEMBER
                ,
2008, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAW OR, IN THE OPINION

 

6

 

OF
LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT
FROM REGISTRATION.

 

5.3           Compliance with Securities Laws on Transfer.   This Warrant and the Shares issuable upon
exercise of this Warrant may not be transferred or assigned in whole or in part
without compliance with applicable federal and state securities laws by the
transferor and the transferee (including, without limitation, the delivery of
investment representation letters and legal opinions reasonably satisfactory to
the Company, as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is to any
affiliate of Holder, provided that any such transferee is an “accredited
investor” as defined in Regulation D promulgated under the Act.

 

5.4             Transfer Procedure.   Subject to the provisions of Article 5.3
and upon providing the Company with written notice, Holder may transfer all or
part of this Warrant or the Shares issuable upon exercise of this Warrant to
any transferee, provided, however, in connection with any such transfer, Holder
will give the Company notice of the portion of the Warrant being transferred
with the name, address and taxpayer identification number of the transferee and
Holder will surrender this Warrant to the Company for reissuance to the
transferee(s) (and Holder if applicable).

 

5.5           Notices.   All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid (or on the first business day after transmission by facsimile),
such address as may have been furnished to the Company or Holder, as the case
may be, in writing by the Company or such Holder from time to time. All notices
to Holder shall be addressed as follows until the Company receives notice of a
change of address in connection with a transfer or otherwise:

 

Oxford
Finance Corporation

Attn:
General Counsel

133
North Fairfax Street

Alexandria,
VA 22314

Facsimile:
703-519-5225

 

Notice
to the Company shall be addressed as follows until Holder receives notice of a
change in address:

 

ARYx
Therapeutics, Inc.

6300
Dumbarton Circle

Fremont,
CA 94555

Telephone:
510-585-2200

Facsimile:
510-585-2202

 

5.6           Waiver.   This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought.

 

7

 

5.7           Attorney’s Fees.   In
the event of any dispute between the parties concerning the terms and provisions
of this Warrant, the party prevailing in such dispute shall be entitled to
collect from the other party all costs incurred in such dispute, including
reasonable attorneys’ fees.

 

5.8           Automatic Conversion upon Expiration.   In
the event that, upon the Expiration Date, the fair market value of one Share
(or other security issuable upon the exercise hereof) as determined in
accordance with Article 1.3 above is greater than the Warrant Price in
effect on such date, then this Warrant shall automatically be deemed on and as
of such date to be converted pursuant to Article 1.2 above as to all
Shares (or such other securities) for which it shall not previously have been
exercised or converted, and the Company shall promptly deliver a certificate representing
the Shares (or such other securities) issued upon such conversion to Holder.

 

5.9           Counterparts.   This Warrant may be
executed in counterparts, all of which together shall constitute one and the
same agreement.

 

5.10
        Governing Law.   This
Warrant shall be governed by and construed in accordance with the laws of the
State of California, without giving effect to its principles regarding
conflicts of law.

 

5.11
        Binding Effect on Successors.   Subject
to the provisions of Article 1.6 hereof, this Warrant shall be binding
upon any entity succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company’s assets, and all obligations of the
Company relating to the Shares issuable upon the exercise or conversion of this
Warrant shall survive the exercise or conversion of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of Holder.

 

5.12
        Severability.   The
invalidity or unenforceability of any provision of this Warrant in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction, or affect any other provision of this Warrant, which
shall remain in full force and effect.

 

[signature page follows]

 

8

 

“COMPANY”

 

ARYx
THERAPEUTICS, INC.

 

 

	
  By: 

  	
  /s/ JOHN VARIAN

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: 

  	
  JOHN VARIAN

  	
   

  
	
   

  	
  (Print)

  	
   

  
	
  Title: 

  	
  COO

  	
   

  
						

 

“HOLDER”

 

OXFORD FINANCE CORPORATION

 

	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name: 

  	
   

  	
   

  
	
   

  	
  (Print)

  	
   

  
	
  Title: 

  	
   

  	
   

  
					

 

 

Signature Page to Warrant

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.             Holder elects to
purchase                 shares
of the
Common/Series          Preferred
[strike one] Stock of                     pursuant
to the terms of the attached Warrant, and tenders payment of the purchase price
of the shares in full.

 

[or]

 

1.             Holder elects to convert the attached Warrant
into Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised for
                                          
of the Shares covered by the Warrant.

 

[Strike
paragraph that does not apply.]

 

2.             Please issue a certificate or certificates
representing the Shares in the name specified below:

 

	
   

  	
   

  	
   

  
	
   

  	
  Holders Name

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

  	
   

  

 

3.             By its execution below and for the benefit of
the Company, Holder hereby restates each of the representations and warranties
in Article 4 of the Warrant as of the date hereof.

 

	
   

  	
  HOLDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date):

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