Document:

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                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

          This sets forth the terms of the EMPLOYMENT AGREEMENT made and entered
into effective as of August 7,200O by and between THE SAVINGS BANK OF UTICA, a
New York State chartered mutual savings bank with offices located in Utica, New
York ("Employer"), and JOHN A. ZAWADZKI, an individual currently residing at 36
Stoneleigh Trail, Victor, New York ("Employee").

                                   WITNESSETH

          IN CONSIDERATION of the mutual premises, covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree to the following
employment terms.

     1.   Employment.
          ----------

          (a)   Term. Employer shall employ Employee, and Employee shall serve
                ----
as President and Chief Executive Officer of Employer, in accordance with the
terms and conditions of this Agreement, for a term commencing on August 7,200O
and ending on August 6,2003, subject to earlier termination as provided in this
Agreement. Following the initial three-year term, the Agreement shall continue
in force from year to year subject to termination on notice as provided in this
Agreement.

          (b)   Duties. On the terms and subject to the conditions set forth in
                ------
this Agreement, the Employer employs Employee to serve as the President and
Chief Executive Officer of Employer. Employee shall perform the regular duties
commensurate with his position, subject to the control and supervision of
Employer's Board of Trustees, as from time to time may be reasonably assigned to
Employee by Employer based upon his position. Employee shall devote Employee's
best efforts to the affairs of Employer, serve faithfully and to the best of
Employee's ability and devote all of Employee's working time and attention,
knowledge, experience, energy and skill to the business of Employer, except that
Employee may affiliate with professional associations, business and civic
organizations, provided that Employee's involvement in such activities does not
adversely affect the performance of his duties on behalf of Employer. Employee
shall also serve on Employer's Board of Trustees, and as an officer of
Employer's affiliates, if requested to do so by the Board of Trustees of
Employer.

     2.   Compensation and Benefits.
          -------------------------

          (a)   Base Salary. Employee shall initially be paid a base salary at
                -----------
an annualized rate of $270,000, payable in accordance with Employer's regular
payroll practices for its executive employees. On an annual basis, consistent
with Employer's regular review procedures, Employee's base salary shall be
reviewed and may be increased in the discretion of Employer's Board of Trustees.

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          (b)  Bonuses. If Employee remains employed through the payment date,
               -------
Employee shall be entitled to a bonus of $75,000 for his service in calendar
year 2000, which bonus shall be paid in 2001 on or before January 31, 2001.
Employer's Board of Trustees shall adopt a short term and long term incentive
compensation plan, bonus, or similar plan for the Employee. Upon termination of
Employee's employment at any time after December 31, 2000, other than a
termination for cause pursuant to subparagraph 4(e), Employee shall be entitled
to a pro rata portion (based on the number of days of active employment in the
applicable year) of the annual cash incentives or bonuses that are payable with
respect to the year during which the termination occurs.

          (c)  Benefit Plans. Employee shall be eligible to participate in any
               -------------
Employer maintained employee pension benefit plans (as that term is defined
under Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), group life insurance plans, medical plans, dental plans, long-term
disability plans, business travel insurance programs and other fringe benefit
plans or programs maintained by Employer for the benefit of its executive
employees. Employee's participation in any such benefit plans and programs shall
be based on, and subject to satisfaction of, the eligibility requirements and
other conditions of such plans and programs.

          (d)  Expenses. Upon submission to Employer of vouchers or other
               --------
required documentation, Employee shall be reimbursed for Employee's actual
out-of-pocket travel and other expenses reasonably incurred and paid by Employee
in connection with Employee's duties under this Agreement.

          (e)  Other Benefits. During the period of employment, Employee shall
               --------------
also be entitled to receive the following benefits:

               (i)   Paid vacation of at least 4 weeks during each calendar year
     (prorated for partial years) (with no carry over of unused vacation to a
     subsequent year) and any holidays that may be provided to all employees of
     Employer in accordance with Employer's holiday policy;

               (ii)  Reasonable sick leave;

               (iii) Reimbursement of membership fees incurred by Employee at
     the Fort Schuyler Club and at the Yahnundasis Country Club; and

               (iv)  The use of an Employer-owned automobile, the selection and
     replacement of which shall be subject to the approval of the Board of
     Trustees of Employer.

          (f)  Supplemental Long Term Disability. Employee currently has a
               ---------------------------------
portable long-term supplemental disability policy in the face value amount of
$25,000. Employer agrees to pay the premiums for continuation of that policy.

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          (g) Relocation Expenses. Employer shall reimburse Employee for
              -------------------
Employee's reasonable expenses incurred in relocating his primary residence from
Victor, New York to the Utica, New York area and purchasing a home, provided
Employee establishes his primary residence in the Utica, New York area on or
before November 1, 2000. For the year of the relocation (i.e., 2000), Employer
                                                         ----
shall reimburse Employee up to $750 for tax planning/preparation.

          (h) Deferred Compensation Plan. Employee may also, at his option,
              --------------------------
participate in a deferred compensation plan adopted by the Employer.

          (i) Stock Option Settlement. As partial consideration for Employee's
              -----------------------
agreement to accept employment with Employer, Employer shall pay to Employee a
total of $180,000 of additional compensation, representing income Employee
likely will forego due to the forfeiture of stock options previously granted to
Employee by his prior employer. Payment of the $180,000 of additional
compensation will be made in three equal installments of $60,000 (without
interest) on or about January 15th of 2001, 2002 and 2003. Notwithstanding any
other term or provision of this Agreement, payments of the additional
compensation described in this subparagraph (i) shall be made even if Employee's
employment pursuant to this Agreement ends prior to the stated payment dates.

          (j) Future Stock Options. In the event that the Bank undergoes
              --------------------
conversion from a mutual savings bank to corporate or other form, the parties
agree to discuss a stock option compensation plan for the Employee.

     3.   Supplemental Retirement Benefit. Employer agrees to provide Employee
          -------------------------------
with supplemental retirement benefits pursuant to an individually-designed,
nonqualified supplemental retirement arrangement, the terms of which shall be
set forth in a separate written agreement between Employer and Employee.
Employer and Employee agree to negotiate the terms of such separate agreement in
good faith so that the agreement can be signed by the parties no later than
April 1, 200l.

     4.   Termination. Prior to a "Change of Control" (as defined in
          -----------
subparagraph 5(c)), Employee's employment by Employer shall be subject to
termination as follows:

          (a) Expiration of the Term. Employee's employment with Employer shall
              ----------------------
not terminate, except as provided in the subparagraphs below.

          (b) Voluntary Termination. Employee may terminate this Agreement
              ---------------------
upon not less than 60 days prior written notice delivered to Employer, in which
event Employee shall be entitled only to the compensation and benefits Employee
has earned or accrued through the date of termination, plus any payments due
under paragraph 2(i) above.

          (c) Termination Upon Death. This Agreement shall terminate upon
              ----------------------
Employee's death. In the event this Agreement is terminated as a result of
Employee's death, Employer shall continue payments of Employee's Base Salary for
a period of 30 days following Employee's death to the beneficiary designated by
Employee on the "Beneficiary Designation

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Form" attached to this Agreement as Appendix A, and continue any payments due
under paragraph 2(i) above.

          (d) Termination Upon Disability. Employer may terminate this Agreement
              ---------------------------
upon Employee's disability. For purposes of this Agreement, Employee's
inability to perform Employee's duties hereunder by reason of physical or mental
illness or injury for a period of 26 consecutive weeks that follows Employee's
use of all available sick leave (the "Disability Period") shall constitute
disability. The determination of disability shall be made by a physician
selected by Employer. During the Disability Period, Employee shall be entitled
to 100% of Employee's Base Salary otherwise payable during that period, reduced
by any other Employer-provided benefits to which Employee may be entitled with
respect to the Disability Period on account of such disability (including, but
not limited to, benefits provided under any disability insurance policy or
program, worker's compensation law, or any other benefit program or
arrangement).

          (e) Termination for Cause. Employer may terminate Employee's
              ---------------------
employment for "cause" by written notice to Employee. For purposes of this
Agreement, a termination shall be for "cause" if the termination results from
any of the following events:

              (i)   Material breach of this Agreement;

              (ii)  Gross Misconduct as an executive or Trustee of Employer, or
     any subsidiary or affiliate of Employer for which Employee is performing
     services hereunder which consists of misappropriating any funds or property
     of any such company, or attempting to obtain any personal profit (x) from
     any transaction to which such company is a party or (y) from any
     transaction with any third party in which Employee has an interest which is
     adverse to the interest of any such company, unless, in either case,
     Employee shall have first obtained the written consent of the Board of
     Trustees of Employer;

              (iii) Unreasonable neglect or refusal to perform the duties
     assigned to Employee under or pursuant to this Agreement;

              (iv)  Conviction of a crime involving moral turpitude; or

              (v)   Adjudication as a bankrupt, which adjudication has not been
     contested in good faith, unless bankruptcy is caused directly by Employer's
     unexcused failure to perform its obligations under this Agreement.

Notwithstanding any other term or provision of this Agreement to the contrary,
if Employee's employment is terminated for cause, Employee shall forfeit all
rights to payments and benefits otherwise provided pursuant to this Agreement;
provided, however, that Base Salary shall be paid through the date of
termination, plus six months severance and payments described in subparagraph
2(i) shall be made as stated in subparagraph 2(i).

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          (f) Termination Without Cause. Employer may terminate Employee's
              -------------------------
employment for reasons other than "cause" (as defined in subparagraph 4(e)) upon
not less than 60 days prior written notice delivered to Employee, in which event
Employer shall pay to Employee, within 30 days of the date of termination, a
lump sum payment equivalent to the unpaid compensation and benefits that would
have been paid to or earned by Employee pursuant to this Agreement, if Employee
had remained employed under the terms of this Agreement for a period of 12
months following the date of termination. In addition, any unpaid portion of the
compensation described in subparagraph 2(i) shall be paid to Employee in a lump
sum within 30 days of the date of the termination.

          (g) Change of Control. If Employee's employment by Employer shall
              -----------------
cease for any reason other than "cause" (as defined in subparagraph 4(e)) within
24 months following a "Change of Control" (as defined in subparagraph 5(c)) that
occurs during the term of this Agreement, the provisions of paragraph 5 shall
apply.

          (h) Resignation as Trustee. Upon Employee's termination of employment
              ----------------------
for any reason, Employee agrees to resign as a member of Employer's Board of
Trustees, if Employee is a Trustee at the time of termination, and to resign
from any and all other offices and positions related to Employee's employment
with Employer and held by Employee at the time of termination.

     5.   Termination Following a Change of Control.
          -----------------------------------------

          (a) In the event of a "Termination" (as defined in subparagraph 5(d)
below) of Employee's employment within 24 months after a Change of Control (as
defined in subparagraph 5(c) below), the Employer shall, within 60 days of
termination, pay to Employee 2.99 times the average annual compensation paid to
Employee by Employer and included in Employee's gross income for income tax
purposes during the five full taxable years, or shorter period of employment,
that immediately precede the year during which the Change of Control occurs.
The parties also agree to discuss a stock option plan, where the form of the
Change of Control makes it appropriate to do so.

          (b) If any portion of the amounts paid to, or value received by,
Employee following a Change of Control (whether paid or received pursuant to
this paragraph 5 or otherwise) would constitute an "excess parachute payment"
within the meaning of Internal Revenue Code Sections 280G and 4999, then
payments to Employee shall be limited to the extent necessary to ensure that no
amount paid to Employee will constitute an "excess parachute payment" within the
meaning of Internal Revenue Code Sections 280G and 4999.

          (c) For purposes of subparagraph 5(a), a "Change of Control" shall be
deemed to have occurred if:

              (i) as a result of, or in connection with, any exchange offer,
     merger or other business combination (a "Transaction"), the persons who
     were Trustees of Employer before the Transaction shall cease to constitute
     a majority of the Board of Trustees of Employer or any successor to
     Employer;

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               (ii)   Employer is merged or consolidated with another entity
     and as a result of the merger or consolidation less than 70% of the
     outstanding voting rights of the surviving or resulting entity shall then
     be held in the aggregate by the former depositors of Employer, other than
     (A) affiliates of Employer, or (B) any party to the merger or
     consolidation; or

               (iii)  Employer transfers substantially all of its assets to
     another entity which is not controlled by Employer.

          (d)  For purposes of subparagraph 5(a), "Termination" shall mean

               (i)    termination by the Employer (or successor entity) of the
     employment of Employee for any reason other than death, Disability (as
     defined in subparagraph 4(d)) or termination for "cause" (as defined in
     subparagraph 4(e)), or

               (ii)   resignation by the Employee for the following reasons:
     (A) a significant change in the nature or scope of the Employee's authority
     from that prior to a Change of Control, (B) a reduction in the Employee's
     total compensation (including all earned bonuses and benefits) from that
     prior to that Change in Control, or (C) a change in the general location
     where the Employee is required to perform services from that prior to a
     Change of Control.

     6.   Covenants.
          ---------

          (a)  Confidentiality. Employee shall not, without the prior written
               ---------------
consent of Employer, disclose or use in any way, either during his employment by
Employer or thereafter, except as required in the course of his employment by
Employer, any confidential business or technical information or trade secret
acquired in the course of Employee's employment by Employer. Employee
acknowledges and agrees that it would be difficult to fully compensate Employer
for damages resulting from the breach or threatened breach of the foregoing
provision and, accordingly, that Employer shall be entitled to temporary
preliminary injunctions and permanent injunctions to enforce such provision.
This provision with respect to injunctive relief shall not, however, diminish
Employer's right to claim and recover damages. Employee covenants to use his
best efforts to prevent the publication or disclosure of any trade secret or any
confidential information concerning the business or finances of Employer or
Employer's affiliates, or any of its or their dealings, transactions or affairs
which may come to Employee's knowledge in the pursuance of his duties or
employment.

          (b)  No Competition. Employee's employment is subject to the
               --------------
condition that during the term of his employment hereunder and for a period of
24 months following the date his employment ceases for any reason except for a
termination by Employer without cause pursuant to subparagraph 4(f) (the "Date
of Termination"), Employee shall not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, director,
individual proprietor,

6

<PAGE>

lender, consultant or otherwise with, or have any financial interest in, or aid
or assist anyone else in the conduct of, any entity or business (a "Competitive
Operation") which competes in the banking industry or with any other business
conducted by Employer or by any group, affiliate, division or subsidiary of
Employer, in any area or market where such business is being conducted at the
Date of Termination. Employee shall keep Employer fully advised as to any
activity, interest, or investment Employee may have in any way related to the
banking industry. It is understood and agreed that, for the purposes of the
foregoing provisions of this paragraph, (i) no business shall be deemed to be a
business conducted by Employer or any group, division, affiliate or subsidiary
of Employer unless 5% or more of Employer's consolidated gross sales or
operating revenues is derived from, or 5% or more of Employer's consolidated
assets are devoted to, such business; (ii) no business conducted by any entity
by which Employee is employed or in which he is interested or with which he is
connected or associated shall be deemed competitive with any business conducted
by Employer or any group, division or subsidiary of Employer unless it is one
from which 2% or more of its consolidated gross sales or operating revenues is
derived, or to which 2% or more of its consolidated assets are devoted; and
(iii) no business which is conducted by Employer at the Date of Termination and
which subsequently is sold by Employer shall, after such sale, be deemed to be a
Competitive Operation within the meaning of this paragraph. Ownership of not
more than 1% of the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph.

          (c) Certain Affiliates of Employer. It is understood that Employee may
              ------------------------------
have access to technical knowledge, trade secrets and customer lists of
affiliates of Employer or companies which Employer may acquire in the future and
may serve as a member of the board of directors or as an officer or employee of
an affiliate of Employer. Employee covenants that he shall not, during the term
of his employment by Employer or for a period of 24 months thereafter, in any
way, directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director, individual proprietor, lender, consultant or
otherwise aid or assist anyone else in any business or operation which competes
with or engages in the business of such an affiliate.

          (d) Termination of Payments. Upon the breach by Employee of any
              -----------------------
covenant under this paragraph 6, Employer may terminate, offset and/or recover
from Employee immediately any and all benefits paid to Employee pursuant to this
Agreement, in addition to any and all other remedies available to Employer under
the law or in equity.

          (e) Modification. Although the parties consider the restrictions
              ------------
contained in this paragraph 6 reasonable as to protected business, duration, and
geographic area, in the event that any court of competent jurisdiction deems
them to be unreasonable, then such restrictions shall apply to the broadest
business, longest period, and largest geographic territory as may be considered
reasonable by such court, and this paragraph 6, as so amended, shall be
enforced.

          (f) Other Agreements. Employee represents and warrants that neither
              ----------------
Employee's employment with Employer nor Employee's performance of his
obligations hereunder will conflict with or violate Employee's obligations under
the terms of any agreement with a previous employer or other party including
agreements to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party.

7

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     7.   Withholding. Employer shall deduct and withhold from compensation and
          -----------
benefits provided under this Agreement all necessary income and employment taxes
and any other similar sums required by law to be withheld.

     8.   Rules, Regulations and Policies. Employee shall use his best efforts
          -------------------------------
to abide by and comply with all of the rules, regulations, and policies of
Employer, including without limitation Employer's policy of strict adherence to,
and compliance with, any and all requirements of the banking, securities, and
antitrust laws and regulations.

     9.   Return of Employer's Property. After Employee has received notice of
          -----------------------------
termination or at the end of his period of employment with Employer, whichever
first occurs, Employee shall immediately return to Employer all documents and
other property in his possession belonging to Employer.

     10.  Construction and Severability. The invalidity of any one or more
          -----------------------------
provisions of this Agreement or any part thereof, all of which are inserted
conditionally upon their being valid in law, shall not affect the validity of
any other provisions to this Agreement; and in the event that one or more
provisions contained herein shall be invalid, as determined by a court of
competent jurisdiction, this Agreement shall be construed as if such invalid
provisions had not been inserted.

     11.  Governing Law. This Agreement was executed and delivered in New York
          -------------
and shall be construed and governed in accordance with the laws of the State of
New York.

     12.  Assignability and Successors. This Agreement may not be assigned by
          ----------------------------
Employee or Employer, except that this Agreement shall be binding upon and shall
inure to the benefit of the successor of Employer through merger or corporate
reorganization.

     13.  Counterparts. This Agreement may be executed in counterparts (each of
          ------------
which need not be executed by each of the parties), which together shall
constitute one and the same instrument.

     14.  Jurisdiction and Venue. The jurisdiction of any proceeding between the
          ----------------------
parties arising out of, or with respect to, this Agreement shall be in a court
of competent jurisdiction in New York State, and venue shall be in Oneida
County. Each party shall be subject to the personal jurisdiction of the courts
of New York State.

     15.  Miscellaneous.
          -------------

          (a)  This Agreement constitutes the entire understanding and agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior understandings and agreements.

          (b)  This Agreement cannot be amended, modified, or supplemented in
any respect, except by a subsequent written agreement entered into by the
parties hereto.

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          (c) The services to be performed by Employee are special and unique;
it is agreed that any breach of this Agreement by Employee shall entitle
Employer (or any successor or assigns of Employer), in addition to any other
legal remedies available to it, to apply to any court of competent jurisdiction
to enjoin such breach.

          The foregoing is established by the following signatures of the
parties.

                                        THE SAVINGS BANK OF UTICA

                                        By: /s/ William Schrauth
                                           ------------------------------
                                        Its: Chairman
                                            -----------------------------
                                        Dated: Dec. 19, 2000
                                              ---------------------------

                                            /s/ John A. Zawadzki
                                        ---------------------------------
                                                John A. Zawadzki

                                        Dated: 12-19-00
                                              ---------------------------

9

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                                   APPENDIX A

                          BENEFICIARY DESIGNATION FORM
                          ----------------------------

        Pursuant to the Employment Agreement between The Savings Bank of Utica
and John A. Zawadzki, dated as of August 8, 2000 ("Agreement"), I, John A.
Zawadzki, hereby designate Saskia a Zawadzki, my wife, as the beneficiary of
amounts payable upon my death in accordance with subparagraph 4(c) of the
Agreement. My beneficiary's current address is 10 Water Beech Place, New
Hartford, NY.

Dated: 12-19, 2000                                       /s/ John A. Zawadzki
                                                        ------------------------
                                                             John A. Zawadzki

/s/ William Schrauth
------------------------------
       Witness<PAGE>
                                                                    Exhibit 10.2

                                     [LOGO]

                              EMPLOYMENT AGREEMENT

          This sets forth the terms of the EMPLOYMENT AGREEMENT made and entered
into effective as of December 11, 2000 by and between THE SAVINGS BANK OF UTICA,
a New York State chartered mutual savings bank with offices located in Utica,
New York ("Employer"), and STEVEN A. COVERT, an individual currently residing at
16 Stonebridge Road, New Hartford, NY 13413 ("Employee").

                                   WITNESSETH

          IN CONSIDERATION of the mutual premises, covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree to the following
employment terms.

     1.   Employment.
          ----------

          (a) Term. Employer shall employ Employee, and Employee shall serve as
              ----
Senior Vice President and Chief Financial Officer of Employer, in accordance
with the terms and conditions of this Agreement, for a term commencing on
December 11, 2000 and ending on December 10, 2003, subject to earlier
termination as provided in this Agreement. Following the initial three-year
term, the Agreement shall continue in force from year to year subject to
termination on notice as provided in this Agreement.

          (b) Duties. On the terms and subject to the conditions set forth in
              ------
this Agreement, the Employer employs Employee to serve as the Senior Vice
President and Chief Financial Officer of Employer. Employee shall perform the
regular duties commensurate with his position, subject to the control and
supervision of Employer's President and Chief Executive Officer, as from time to
time may be reasonably assigned to Employee. Employee shall devote Employee's
best efforts to the affairs of Employer, serve faithfully and to the best of
Employee's ability and devote all of Employee's working time and attention,
knowledge, experience, energy and skill to the business of Employer, except that
Employee may affiliate with professional associations, business and civic
organizations, provided that Employee's involvement in such activities does not
adversely affect the performance of his duties on behalf of Employer.

     2.   Compensation and Benefits.
          -------------------------

          (a) Base Salary. Employee shall initially be paid a base salary at an
              -----------
annualized rate of $150,000, payable in accordance with Employer's regular
payroll practices for its executive employees. On an annual basis, consistent
with Employer's regular review procedures, Employee's base salary shall be
reviewed and may be adjusted in the discretion of Employer's Board of Trustees.

<PAGE>

          (b) Bonuses. Employee shall be eligible to participate in Employer's
              -------
"Winshare" bonus program for calendar year 2001, and in any other bonus program
developed for Employer's senior executive employees. In the event that the Bank
implements stock incentive plans, including, but not limited to, a stock option
plan and/or restricted stock award plan, the Employee will receive awards
comparable to awards given executives of similar experience at similarly sized
institutions.

          (c) Benefit Plans. Employee shall be eligible to participate in any
              -------------
Employer maintained employee pension benefit plans (as that term is defined
under Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), group life insurance plans, medical plans, dental plans, long-term
disability plans, business travel insurance programs and other fringe benefit
plans or programs maintained by Employer for the benefit of its executive
employees. Employee's participation in any such benefit plans and programs shall
be based on, and subject to satisfaction of, the eligibility requirements and
other conditions of such plans and programs. If Employee's employment by
Employer shall cease for any reason other than voluntary termination
(subparagraph 3(b) or for "cause" (as defined in subparagraph 3 (e)), Employee
will receive continued group life, health, dental, accident and long term
disability insurance coverage for the remaining unexpired employment period,
equivalent to the coverage to which he would have been entitled under such plans
(as in effect on the date of his termination of employment, or, if his
termination of employment occurs after a Change of Control, on the date of such
Change of Control, whichever benefits are greater, if he had continued working
for the Bank during the remaining unexpired employment period at the highest
rate of salary achieved during the employment period, but taking into account
any coverage provided from any subsequent employer.

          (d) Expenses. Upon submission to Employer of vouchers or other
              --------
required documentation, Employee shall be reimbursed for Employee's actual
out-of-pocket travel and other expenses reasonably incurred and paid by Employee
in connection with Employee's duties under this Agreement.

          (e) Other Benefits. During the period of employment, Employee shall
              --------------
also be entitled to receive the following benefits:

              (i)   Paid vacation of at least 4 weeks during each calendar year
     (prorated for partial years) (with no carry over of unused vacation to a
     subsequent year) and any holidays that may be provided to all employees of
     Employer in accordance with Employer's holiday policy;

              (ii)  Reasonable sick leave; and

              (iii) Reimbursement of membership fees incurred by Employee at the
     Fort Schuyler Club and at the Yahnundasis Country Club.

          (f) Relocation Expenses. Employee shall reimburse Employee for
              -------------------
employee's reasonable expenses incurred in relocating his primary residence from
Cortland,

                                      -2-

<PAGE>

New York to the Utica, New York area, up to a maximum of $10,000, provided
Employee establishes his primary residence in the Utica, New York area on or
before February 15, 200 I.

     3.  Termination. Prior to a "Change of Control" (as defined in subparagraph
         -----------
4(c)), Employee's employment by Employer shall be subject to termination as
follows:

         (a)  Expiration of the Term. Employee's employment with Employer shall
              ----------------------
not terminate prior to the expiration of the established term, except as
provided in the subparagraphs below.

         (b)  Voluntary Termination. Employee may terminate this Agreement upon
              ---------------------
not less than 60 days prior written notice delivered to Employer, in which event
Employee shall be entitled only to the compensation and benefits Employee has
earned or accrued through the date of termination.

         (c)  Termination Upon Death. This Agreement shall terminate upon
              ----------------------
Employee's death. In the event this Agreement is terminated as a result of
Employee's death, Employer shall continue payments of Employee's Base Salary for
a period of 30 days following Employee's death to the beneficiary designated by
Employee on the "Beneficiary Designation Form" attached to this Agreement as
Appendix A.

         (d)  Termination Upon Disability. Employer may terminate this Agreement
              ---------------------------
upon Employee's disability. For purposes of this Agreement, Employee's inability
to perform Employee's duties hereunder by reason of physical or mental illness
or injury for a period of 26 consecutive weeks that follows Employee's use of
all available sick leave (the "Disability Period") shall constitute disability.
The determination of disability shall be made by a physician selected by
Employer. During the Disability Period, Employee shall be entitled to 100% of
Employee's Base Salary otherwise payable during that period, reduced by any
other Employer-provided benefits to which Employee may be entitled with respect
to the Disability Period on account of such disability (including, but not
limited to, benefits provided under any disability insurance policy or program,
worker's compensation law, or any other benefit program or arrangement).

         (e)  Termination for Cause. Employer may terminate Employee's
              ---------------------
employment for "cause" by written notice to Employee. For purposes of this
Agreement, a termination shall be for "cause" if the termination results from
any of the following events:

              (i)   Material breach of this Agreement;

              (ii)  Misconduct as an executive of Employer, or any subsidiary or
     affiliate of Employer for which Employee is performing services hereunder
     which consists of misappropriating any funds or property of any such
     company, or attempting to obtain any personal profit (x) from any
     transaction to which such company is a party or (y) from any transaction
     with any third party in which Employee has an interest which is adverse to
     the interest of any such company, unless, in either case, Employee shall
     have first obtained the written consent of the Board of Trustees of
     Employer;

                                      -3-

<PAGE>

               (iii) Unreasonable neglect or refusal to perform the duties
     assigned to Employee under or pursuant to this Agreement;

               (iv)  Conviction of a crime involving moral turpitude; or

               (v)   Adjudication as a bankrupt, which adjudication has not been
     contested in good faith, unless bankruptcy is caused directly by Employer's
     unexcused failure to perform its obligations under this Agreement.

Notwithstanding any other term or provision of this Agreement to the contrary,
if Employee's employment is terminated for cause, Employee shall forfeit all
rights to payments and benefits otherwise provided pursuant to this Agreement;
provided, however, that Base Salary shall be paid through the date of
termination.

          (f)  Termination Without Cause. Employer may terminate Employee's
               -------------------------
employment for reasons other than "cause" (as defined in subparagraph 3(e)) upon
not less than 60 days prior written notice delivered to Employee, in which event
Employer shall pay to Employee, within 30 days of the date of termination, a
lump sum payment equivalent to the unpaid base salary that would have been paid
to or earned by Employee pursuant to this Agreement, if Employee had remained
employed under the terms of this Agreement through the end of the then
established term of this Agreement, or for a period of 12 months following the
date of termination, whichever period is longer.

          (g)  Change of Control. If Employee's employment by Employer shall
               -----------------
cease for any reason other than "cause" (as defined in subparagraph 3(e)) within
24 months following a "Change of Control" (as defined in subparagraph 4(c)) that
occurs during the term of this Agreement, the provisions of paragraph 4 shall
apply.

          (h)  Resignation. Upon Employee's termination of employment for any
               -----------
reason, Employee agrees to resign from any and all offices and positions related
to Employee's employment with Employer and held by Employee at the time of
termination.

     4.   Termination Following a Change of Control.
          -----------------------------------------

          (a) In the event of a "Termination" (as defined in subparagraph 4(d)
below) of Employee's employment within 24 months after a Change of Control (as
defined in subparagraph 4(c) below), the Employer shall, within 60 days of
termination, pay to Employee 2.99 times the average annual compensation paid to
Employee by Employer and included in Employee's gross income for income tax
purposes during the five full calendar years, or shorter period of employment,
that immediately precede the year during which the Change of Control occurs.

          (b) If any portion of the amounts paid to, or value received by,
Employee following a Change of Control (whether paid or received pursuant to
this paragraph 4 or otherwise) would constitute an "excess parachute payment"
within the meaning of Internal

                                      -4-

<PAGE>

Revenue Code Sections 280G and 4999, then payments to Employee shall be limited
to the extent necessary to ensure that no amount paid to Employee will
constitute an "excess parachute payment" within the meaning of Internal Revenue
Code Sections 280G and 4999. The maximum payable under this Section 4. (b) is
calculated without considering any other compensation payable to the Employee,
including any benefits paid as a result of accelerated vesting of stock options
and restricted stock grants.

        (c)    For purposes of subparagraph 4(a), a "Change of Control" shall be
deemed to have occurred if:

               (i)    any "person" (as such term is used in sections 13(d) and
     14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act")),
     other than (i) a holding company to be formed in connections with the
     conversion of the Bank to the stock form of ownership; or (ii) a trustee or
     other fiduciary holding securities under an employee benefit plan
     maintained for the benefit of employees of the Bank, becomes the
     "beneficial owner" (as defined in Rule 13d-3 promulgated under the 1934
     Act), directly or indirectly, of securities issued by the Bank representing
     25% or more of the combined voting power of all of the Bank's then
     outstanding securities; or

               (ii)   the individuals who on the date this Agreement is made are
     members of the Board, together with their successors as defined below,
     cease for any reason to constitute a majority of the members of the Board;
     or

               (iii)  the shareholders of the Bank approve either:

                      (A)    a merger or consolidation of the Bank with any
          other corporation, other than a merger or consolidation following
          which both of the following conditions are satisfied;

                                    (I)   either, (a) the members of the Board
          of the Bank immediately prior to such merger or consolidation
          constitute at least a majority of the members of the governing body of
          the institution resulting from such merger or consolidation; or (b)
          the shareholders of the Bank own securities of the institution
          resulting from such merger or consolidation representing seventy
          percent or more of the combined voting power of all such securities
          then outstanding in substantially the same proportions as their
          ownership of voting securities of the Bank before such merger or
          consolidation; and

                                    (II)  the entity which results from such
          merger or consolidation expressly agrees in writing to assume and
          perform the Bank's obligations under this Agreement;

          or

                      (B)    a plan of complete liquidation of the Bank or an
          agreement for the sale or disposition by the Bank of all or
          substantially all of it's assets; and

                                       -5-

<PAGE>

                   (iv)   any event which would be described in sections (i),
          (ii) or (iii) if the term "Parent Corporation of the Bank" were
          substituted for the term "Bank" therein. Such event shall be deemed to
          be a Change in Control under the relevant provision of sections (i),
          (ii) or (iii).

          It is understood and agreed that more than one Change in Control may
          occur at the same or different times during the Employment Period and
          that the provisions of this Agreement shall apply with equal force and
          effect with respect to each such Change in Control.

              (d)  For purposes of subparagraph 4(a), "Termination" shall mean

                   (i)    termination by the Employer (or successor entity) of
          the employment of Employee for any reason other than death, Disability
          (as defined in subparagraph 3(d)) or termination for "cause" (as
          defined in subparagraph 3(e)), or

                   (ii)   resignation by the Employee for the following reasons:
          (A) a significant change in the nature or scope of the Employee's
          authority from that prior to a Change of Control, (B) a reduction in
          the Employee's total compensation (including all earned bonuses and
          benefits) from that prior to that Change in Control, or (C) a change
          in the location (greater than 50 miles from the city of Utica) where
          the Employee is required to perform services from that prior to a
          Change of Control.

          5.  Covenants.
              ---------

              (a)  Confidentiality. Employee shall not, without the prior
                   ---------------
written consent of Employer, disclose or use in any way, either during his
employment by Employer or thereafter, except as required in the course of his
employment by Employer, any confidential business or technical information or
trade secret acquired in the course of Employee's employment by Employer.
Employee acknowledges and agrees that it would be difficult to fully compensate
Employer for damages resulting from the breach or threatened breach of the
foregoing provision and, accordingly, that Employer shall be entitled to
temporary preliminary injunctions and permanent injunctions to enforce such
provision. This provision with respect to injunctive relief shall not, however,
diminish Employer's right to claim and recover damages. Employee covenants to
use his best efforts to prevent the publication or disclosure of any trade
secret or any confidential information concerning the business or finances of
Employer or Employer's affiliates, or any of its or their dealings, transactions
or affairs which may come to Employee's knowledge in the pursuance of his duties
or employment.

              (b)  No Competition. Employee's employment is subject to the
                   --------------
condition that during the term of his employment hereunder and for a period of
24 months following the date his employment ceases for any reason except for a
termination by Employer without cause pursuant to subparagraph 3(f) (the "Date
of Termination"), or due to change of control

                                       -6-

<PAGE>

(paragraph 4), Employee shall not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of, or
be connected as an officer, employee, partner, director, individual proprietor,
lender, consultant or otherwise with, or have any financial interest in, or aid
or assist anyone else in the conduct of, any entity or business (a "Competitive
Operation") which competes in the banking industry or with any other business
conducted by Employer or by any group, affiliate, division or subsidiary of
Employer, in any area or market where such business is being conducted at the
Date of Termination. Employee shall keep Employer fully advised as to any
activity, interest, or investment Employee may have in any way related to the
banking industry. It is understood and agreed that, for the purposes of the
foregoing provisions of this paragraph, (i) no business shall be deemed to be a
business conducted by Employer or any group, division, affiliate or subsidiary
of Employer unless 5% or more of Employer's consolidated gross sales or
operating revenues is derived from, or 5% or more of Employer's consolidated
assets are devoted to, such business; (ii) no business conducted by any entity
by which Employee is employed or in which he is interested or with which he is
connected or associated shall be deemed competitive with any business conducted
by Employer or any group, division or subsidiary of Employer unless it is one
from which 2% or more of its consolidated gross sales or operating revenues is
derived, or to which 2% or more of its consolidated assets are devoted; and
(iii) no business which is conducted by Employer at the Date of Termination and
which subsequently is sold by Employer shall, after such sale, be deemed to be a
Competitive Operation within the meaning of this paragraph. Ownership of not
more than 1% of the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph.

                   (c) Certain Affiliates of Employer. It is understood that
                       ------------------------------
Employee may have access to technical knowledge, trade secrets and customer
lists of affiliates of Employer or companies which Employer may acquire in the
future and may serve as a member of the board of directors or as an officer or
employee of an affiliate of Employer. Employee covenants that he shall not,
during the term of his employment by Employer or for a period of 24 months
thereafter, in any way, directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director, individual proprietor,
lender, consultant or otherwise aid or assist anyone else in any business or
operation which competes with or engages in the business of such an affiliate.

                   (d) Termination of Payments. Upon the breach by Employee of
                       -----------------------
any covenant under this paragraph 5, Employer may terminate, offset and/or
recover from Employee immediately any and all benefits paid to Employee pursuant
to this Agreement, in addition to any and all other remedies available to
Employer under the law or in equity.

                   (e) Modification. Although the parties consider the
                       ------------
restrictions contained in this paragraph 6 reasonable as to protected business,
duration, and geographic area, in the event that any court of competent
jurisdiction deems them to be unreasonable, then such restrictions shall apply
to the broadest business, longest period, and largest geographic territory as
may be considered reasonable by such court, and this paragraph 5, as so amended,
shall be enforced.

                   (f) Other Agreements. Employee represents and warrants that
                       ----------------
neither Employee's employment with Employer nor Employee's performance of his
obligations

                                       -7-

<PAGE>

hereunder will conflict with or violate Employee's obligations under the terms
of any agreement with a previous employer or other party including agreements to
refrain from competing, directly or indirectly, with the business of such
previous employer or any other party.

         6.   Withholding.  Employer shall deduct and withhold from compensation
              -----------
and benefits provided under this Agreement all necessary income and employment
taxes and any other similar sums required by law to be withheld.

         7.   Rules, Regulations and Policies. Employee shall use his best
              -------------------------------
efforts to abide by and comply with all of the rules, regulations, and policies
of Employer, including without limitation Employer's policy of strict adherence
to, and compliance with, any and all requirements of the banking, securities,
and antitrust laws and regulations.

         8.   Return of Employer's Property. After Employee has received notice
              -----------------------------
of termination or at the end of his period of employment with Employer,
whichever first occurs, Employee shall immediately return to Employer all
documents and other property in his possession belonging to Employer.

          9.  Construction and Severability. The invalidity of any one or more
              -----------------------------
provisions of this Agreement or any part thereof, all of which are inserted
conditionally upon their being valid in law, shall not affect the validity of
any other provisions to this Agreement; and in the event that one or more
provisions contained herein shall be invalid, as determined by a court of
competent jurisdiction, this Agreement shall be construed as if such invalid
provisions had not been inserted.

          10. Governing Law. This Agreement was executed and delivered in New
              -------------
York and shall be construed and governed in accordance with the laws of the
State of New York.

          11. Assignability and Successors. This Agreement may not be assigned
              ----------------------------
by Employee or Employer, except that this Agreement shall be binding upon and
shall inure to the benefit of the successor of Employer through merger or
corporate reorganization.

          12. Counterparts.  This Agreement may be executed in counterparts
              ------------
(each of which need not be executed by each of the parties), which together
shall constitute one and the same instrument.

          13. Jurisdiction and Venue. The jurisdiction of any proceeding between
              ----------------------
the parties arising out of, or with respect to, this Agreement shall be in a
court of competent jurisdiction in New York State, and venue shall be in Oneida
County. Each party shall be subject to the personal jurisdiction of the courts
of New York State.

          14. Indemnification and Insurance. During the Employment Term and for
              -----------------------------
a period of six years thereafter, the Bank shall cause the Employee to be
covered by and named as an insured under any policy or contract of insurance
obtained by it to insure it's trustees and officers against personal liability
for acts or omissions in connection with service as an officer or trustee of the
Bank or any subsidiary or affiliate thereof or service in other capacities at
the request of

                                      - 8 -

<PAGE>

the Bank. The coverage provided to the Employee pursuant to this section shall
be of the same scope and on the same terms and conditions as the coverage (if
any) provided to other officers or trustees of the Bank and any subsidiary or
affiliate thereof.

          (a) To the maximum extent permitted under applicable law, during the
Employment Term and for a period of 6 years thereafter, the Bank shall indemnify
the Employee against and hold him harmless from any costs, liabilities, losses
and exposures to the fullest extent and on the most favorable terms and
conditions that similar indemnification is offered to any trustee or officer of
the Bank or any subsidiary or affiliate thereof.

          (b) Indemnification and Insurance coverage will not be provided by
employer in the event of employee's voluntary termination (subparagraph 3 (b))
or for termination for cause (subparagraph 3 (e)).

     15.  Miscellaneous.
          -------------

          (a) This Agreement constitutes the entire understanding and Agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior understandings and agreements.

          (b) This Agreement cannot be amended, modified, or supplemented in any
respect, except by a subsequent written agreement entered into by the parties
hereto.

          (c) The services to be performed by Employee are special and unique;
it is agreed that any breach of this Agreement by Employee shall entitle
Employer (or any successor or assigns of Employer), in addition to any other
legal remedies available to it, to apply to any court of competent jurisdiction
to enjoin such breach.

                                       -9-

<PAGE>

The foregoing is established by the following signatures of the parties.

                                          THE SAVINGS BANK OF UTICA

                                          By:    /s/ John A. Zawadzki
                                             -----------------------------------
                                                 John A. Zawadzki

                                          Its:   President & CEO
                                              ----------------------------------

                                          Dated: 12/ll/00
                                                --------------------------------

                                                 /s/ Steven A. Covert
                                          --------------------------------------
                                                 Steven A. Covert

                                          Dated: 12/ll/O0
                                                --------------------------------

                                      -l0-

<PAGE>

                                   APPENDIX A

                          BENEFICIARY DESIGNATION FORM
                          ----------------------------

                        Pursuant to the Employment Agreement between The Savings
Bank of Utica and Steven A. Covert, dated as of December 11, 2000 ("Agreement"),
I, Steven A. Covert, hereby designate Janet M. Covert, my wife, as the
beneficiary of amounts payable upon my death in accordance with subparagraph
3(c) of the Agreement. My beneficiary's current address is 16 Stonebridge Road,
New Hartford, NY 13416.

Dated: December 11 ,2000                               /s/ Steven A. Covert
                                                   -----------------------------
                                                           Steven A. Covert

/s/ Cheryl Bannister
-----------------------------
       Witness

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