Document:

Exhibit 10.2

EMPLOYMENT AGREEMENT

          This Employment
Agreement (the “Agreement”) is made effective as of
___________________  (the “Effective Date”), by and between
Beacon Federal, a federally chartered savings association with its principal
office in East Syracuse, New York (the “Bank”) and Ross J. Prossner
(“Executive”).  

          WHEREAS,
Executive is serving as President and Chief Executive Officer of the Bank and
the Bank wishes to assure itself of the services of Executive as an officer of
the Bank for the period provided in this Agreement; and

          WHEREAS, in
order to induce Executive to remain in the employ of the Bank and to provide
further incentive for Executive to achieve the financial and performance
objectives of the Bank, the parties desire to enter into this
Agreement.

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

1.       POSITION AND RESPONSIBILITIES.

          
During the term of this Agreement, Executive shall serve as President and Chief
Executive Officer of the Bank.  Executive shall be responsible for the
overall management of the Bank, and shall be responsible for establishing the
business objectives, policies and strategic plan of the Bank, in conjunction
with the Board of Directors of the Bank (the “Board”). Executive also
shall be responsible for providing leadership and direction to all departments
or divisions of the Bank, and shall be the primary contact between the Board and
the staff.  As Chief Executive Officer, Executive shall directly report to
the Board.  Executive also shall be nominated as a member of the Board,
subject to election by members or shareholders of the Bank, as the case may be.
 Executive also agrees to serve, if elected, as an officer and director of
any affiliate of the Bank. 

2.       TERM AND DUTIES.

          (a)          Three
Year Contract; Annual Renewal. The term of Executive’s employment under
this Agreement shall commence as of the Effective Date and shall continue
thereafter for a period of three (3) years.  Commencing on the first
anniversary date of this Agreement (the “Anniversary Date”) and
continuing on each Anniversary Date thereafter, the term of this Agreement shall
renew for an additional year such that the remaining term of this Agreement is
always three (3) years, unless written notice of non-renewal (a
“Non-Renewal Notice”) is provided to Executive at least thirty (30)
days and not more than sixty (60) days prior to such Anniversary Date, in which
case the term of this Agreement shall become fixed and shall end three (3) years
following such Anniversary Date.  The disinterested members of the Board of
Directors (the “Board”) of the Bank will conduct a performance
evaluation and review of Executive annually for purposes of determining whether
to give notice not to extend the term of this Agreement, and the results thereof
shall be included in the minutes of the Board’s meeting.

          (b)          Termination
of Agreement.  Notwithstanding anything contained in this Agreement to
the contrary, either Executive or the Bank may terminate Executive’s
employment with the Bank at any time during the term of this Agreement, subject
to the terms and conditions of this Agreement.

          (c)          Continued
Employment Following Expiration of Term.  Nothing in this Agreement
shall mandate or prohibit a continuation of Executive’s employment
following the expiration of the term of this Agreement, upon such terms and
conditions as the Bank and Executive may mutually agree.

          (d)          Duties;
Membership on Other Boards.  During the term of this Agreement, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence approved by the Board, Executive shall devote
substantially all of his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder, including activities and services
related to the organization, operation and management of the Bank; provided,
however, that, with the prior approval of the Board, as evidenced by a
resolution of the Board, from time to time, Executive may serve, or continue to
serve, on the boards of directors of, and hold any other offices or positions
in, business companies or business organizations, which, in the Board’s
judgment, will not present any conflict of interest with the Bank, or
materially affect the performance of Executive’s duties pursuant to this
Agreement.  Executive shall provide the Board of Directors annually for its
approval a list of organizations for which the Executive acts as a director or
officer.

3.       COMPENSATION, BENEFITS AND REIMBURSEMENT.

          (a)          Base
Salary.  In consideration of Executive’s performance of the duties
set forth in Section 2, the Bank shall provide Executive the compensation
specified in this Agreement.  The Bank shall pay Executive a salary of
$___________ per year (“Base Salary”). The Base Salary shall be
payable biweekly, or with such other frequency as officers of the Bank are
generally paid. During the term of this Agreement, the Base Salary shall be
reviewed at least annually by the Board or by a committee designated by the
Board, and the Bank may increase, but not decrease (except for a decrease that
is generally applicable to all employees) Executive’s Base Salary. Any
increase in Base Salary shall become “Base Salary” for purposes of
this Agreement.

          (b)          Bonus
and Incentive Compensation.  Executive shall be entitled to incentive
compensation and bonuses as provided in any plan or arrangement of the Bank in
which Executive is eligible to participate.  Nothing paid to Executive
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which Executive is entitled under this Agreement.

          (c)          Employee
Benefits.  The Bank shall provide Executive with employee benefit
plans, arrangements and perquisites substantially equivalent to those in which
Executive was participating or from which he was deriving benefit immediately
prior to the commencement of the term of this Agreement, and the Bank shall not,
without Executive’s prior written consent, make any changes in such plans,
arrangements or perquisites that would adversely affect Executive’s rights
or benefits thereunder, except as to any changes that are applicable to all

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participating employees or as reasonably or customarily available.  Without
limiting the generality of the foregoing provisions of this Section 3(c),
Executive will be entitled to participate in or receive benefits under any
employee benefit plans including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident insurance plans, medical coverage or any other employee
benefit plan or arrangement made available by the Bank in the future to its
senior executives, including any stock benefit plans, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements.

          (d)          Paid
Time Off.  Executive shall be entitled to paid vacation time each year
during the term of this Agreement (measured on a fiscal or calendar year basis,
in accordance with the Bank’s usual practices), as well as sick leave,
holidays and other paid absences in accordance with the Bank’s policies and
procedures for senior executives.  Any unused paid time off during an
annual period shall be treated in accordance with the Bank’s personnel
policies as in effect from time to time.

          (e)          Expense
Reimbursements.  During the term of this Agreement, the Bank shall pay
or reimburse Executive for the full cost of the use of an automobile that is
mutually agreeable to the Bank and Executive.  The Bank shall also pay or
reimburse Executive for all reasonable travel, entertainment and other
reasonable expenses incurred by Executive during the course of performing his
obligations under this Agreement, including, without limitation, fees for
memberships in such clubs and organizations as Executive and the Board shall
mutually agree are necessary and appropriate in connection with the performance
of his duties under this Agreement, upon presentation to the Bank of an itemized
account of such expenses in such form as the Bank may reasonably
require.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

          (a)          Upon
the occurrence of an Event of Termination (as herein defined) during the term of
this Agreement, the provisions of this Section 4 shall apply; provided, however,
that benefits shall be provided either under Section 4 or Section 5 (related to
a Change in Control), but not both, such that to the extent the Executive has
received payments under one of those Sections, the Executive shall not receive
payments under the other of those Sections. As used in this Agreement, an
“Event of Termination’’ shall mean and include any one or more of
the following:

                         (i)          the
termination by the Bank of Executive’s full-time employment hereunder for
any reason other than a “Change in Control,” as defined in Section 5,
a termination for “Cause,” as defined in Section 8, a termination upon
“Retirement,” as defined in Section 7, or a termination for
disability, as set forth in Section 6; and 

                         (ii)         Executive’s resignation
from the Bank’s employ upon any of the following, unless consented to by
Executive:

                                       (A)          failure
to appoint Executive to the position set forth in Section 1, or a material
change in Executive’s function, duties, or responsibilities, which change
would cause Executive’s position to become one of lesser responsibility,
importance, or scope from the 

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position and responsibilities described in Section 1, to which Executive has not
agreed in writing (and any such material change shall be deemed a continuing
breach of this Agreement by the Bank);

                                       (B)          a
relocation of Executive’s principal place of employment to a location that
is more than 50 miles from the location of the Bank’s principal executive
offices as of the date of this Agreement; 

                                       (C)          a
material reduction in the benefits and perquisites, including Base Salary, to
Executive from those being provided as of the Effective Date (except for any
reduction that is part of a reduction in pay or benefits that is generally
applicable to officers or employees of the Bank); 

                                       (D)          a
liquidation or dissolution of the Bank; or

                                       (E)          a
material breach of this Agreement by the Bank.

Upon the occurrence of any event described in clause (ii) above, Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation upon not less than 30 days prior written notice given within a
reasonable period of time (not to exceed, except in case of a continuing breach,
90 days) after the event giving rise to the right to elect, which termination by
Executive shall be an Event of Termination.  No payments or benefits shall
be due to Executive under this Agreement upon the termination of
Executive’s employment except as provided in Section 4 or 5.

          (b)          Upon
the occurrence of an Event of Termination, the Bank shall pay Executive, or, in
the event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, as severance pay or liquidated damages, or both, a
lump sum in cash equal to three times the sum of (i) the highest annual rate of
Base Salary paid to Executive at any time under this Agreement, plus (ii) the
highest bonus paid to Executive with respect to the three completed fiscal years
prior to the Event of Termination.  Such payments shall not be reduced in
the event Executive obtains other employment following the Event of Termination.
Notwithstanding the foregoing, in the event Executive is a “Specified
Employee” (as defined herein), no payment shall be made to Executive prior
to the first day of the seventh month following the Event of Termination. 
“Specified Employee” shall be interpreted to comply with Section 409A
of the Internal Revenue Code and shall mean a key employee within the meaning of
Section 416(i) of the Internal Revenue Code (without regard to paragraph 5
thereof), but an individual shall be a “Specified Employee” only if
the Bank is a publicly traded institution or the subsidiary of a publicly traded
holding company.

          (c)          Upon
the occurrence of an Event of Termination, the Bank shall provide at the
Bank’s expense, life insurance coverage and non-taxable medical and dental
coverage substantially comparable, as reasonably or customarily available, to
the coverage maintained by the Bank for Executive prior to the Event of
Termination, except to the extent such coverage may be changed in its
application to all Bank employees.  Such coverage shall cease thirty-six
(36) months following the Event of Termination. The period for group health care
continuation 

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coverage rights under COBRA shall not begin until the expiration of such
thirty-six (36) month period.

5.       CHANGE IN CONTROL.

          (a)          Any
payment made to Executive pursuant to this Section 5 is in lieu of any payments
that may otherwise be owed to Executive pursuant to Section 4, such that
Executive shall either receive payments pursuant to Section 4 or pursuant to
Section 5, but not pursuant to both Sections.

          (b)          Except
for payments that are subject to Section 409A of the Internal Revenue Code, for
purposes of this Agreement, the term “Change in Control” shall mean
any of the following but shall not include a conversion of the Bank from mutual
to stock form:

                         (i)          a
change in control of a nature that would be required to be reported in response
to Item 5.01(a) 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,
as amended (the “Exchange Act”); or

                         (ii)        a
change in control of the Bank within the meaning of the Home Owners’ Loan
Act, as amended (“HOLA”), and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control;
or

                         (iii)       any
of the following events, upon which a Change in Control shall be deemed to have
occurred:

                                       (A)          any
“person” (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Bank’s holding company representing 25% or more of the combined
voting power of such outstanding securities, except for any securities purchased
by any employee stock ownership plan or trust established by the Bank;
or

                                       (B)          individuals
who constitute the Board on the Effective Date (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the Effective Date whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by stockholders of the
Bank or the Bank’s holding company was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
subsection (B), considered as though they were members of the Incumbent Board;
or 

                                       (C)          a
sale of all or substantially all the assets of the Bank or the Bank’s
holding company, or a plan of reorganization, merger, consolidation, or similar
transaction occurs in which the security holders of the Bank or the Bank’s
holding company immediately prior to the consummation of the transaction do not
own at least 50.1% of the securities of the surviving entity to be outstanding
upon consummation of the transaction; or

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                                       (D)          a
proxy statement is issued soliciting proxies from stockholders of the Bank or
the Bank’s holding company by someone other than the current management of
the Bank or the holding company of the Bank, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Bank or the Bank’s
holding company, or similar transaction with one or more corporations as a
result of which the outstanding shares of the class of securities then subject
to the plan are to be exchanged for or converted into cash or property or
securities not issued by the Bank or the Bank’s holding company; or

                                       (E)          a
tender offer is made for 25% or more of the voting securities of the Bank or the
Bank’s holding company, and stockholders owning beneficially or of record
25% or more of the outstanding securities of the Bank or the Bank’s holding
company have tendered or offered to sell their shares pursuant to such tender
offer and such tendered shares have been accepted by the tender
offeror.

          (c)          With
respect to any payments hereunder that are subject to Section 409A of the
Internal Revenue Code, “Change in Control” shall mean (i) a change in
the ownership of the Bank or the Bank’s holding company, (ii) a change in
the effective control of the Bank or the Bank’s holding company, or (iii) a
change in the ownership of a substantial portion of the assets of the Bank or
the Bank’s holding company, as described below:  

                         (i)          A
change in ownership occurs on the date that any one person, or more than one
person acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(v)(B)), acquires ownership of stock of the Bank or the
Bank’s holding company that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or total voting
power of the stock of the Bank or the Bank’s holding company. 

                         (ii)        A
change in the effective control of the Bank or the Bank’s holding company
occurs on the date that either (i) any one person, or more than one person
acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(vi)(B)) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons)
ownership of stock of the Bank or the Bank’s holding company possessing 35%
or more of the total voting power of the stock of the Bank or the Bank’s
holding company, or (ii) a majority of the members of the Bank’s or the
Bank’s holding company’s board of directors is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Bank’s or the Bank’s holding
company’s board of directors prior to the date of the appointment or
election, provided that this subsection 9(b)(2) is inapplicable where a majority
shareholder of the Bank or the Bank’s holding company is another
corporation.

                         (iii)        A
change in a substantial portion of the Bank’s or the Bank’s holding
company’s assets occurs on the date that any one person or more than one
person acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(vii)(C)) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons)
assets from the Bank or the Bank’s holding company that have a total gross
fair market value equal to or more than 40% of the total gross fair market value
of (i) all of the assets of the Bank or the Bank’s holding company, or (ii)
the value of the assets being disposed of, either of which is determined without
regard to any liabilities associated with such 

6

assets.  For all purposes of this subsection 5(c), the definition of Change
in Control shall be construed to be consistent with the requirements of Proposed
Treasury Regulations section 1.409A-3(g)(5), except to the extent that such
proposed regulations are superseded by subsequent guidance.  

          (d)          Upon
the occurrence of a Change in Control, Executive, or, in the event of his death
following a Change in Control, his beneficiary or beneficiaries, or his estate,
as the case may be, shall receive as severance pay or liquidated damages, or
both, a lump sum cash payment equal to three times the sum of (i)
Executive’s highest annual rate of Base Salary paid to Executive at any
time under this Agreement, plus (ii) the highest bonus paid to Executive with
respect to the three completed fiscal years prior to the Change in
Control.  

          (e)          Upon
the termination of Executive’s employment (other than for Cause) following
a Change in Control, the Bank shall provide at the Bank’s expense, life
insurance coverage and non-taxable medical and dental coverage substantially
comparable, as reasonably or customarily available, to the coverage maintained
by the Bank for Executive prior to his termination, except to the extent such
coverage may be changed in its application to all Bank employees.  Such
coverage shall cease thirty-six (36) months following the termination of
Executive’s employment.  The period for group health care continuation
coverage rights under COBRA shall not begin until the expiration of such
thirty-six (36) month period.

          (f)          Notwithstanding
the preceding paragraphs of this Section 5, in the event that the aggregate
payments or benefits to be made or afforded to Executive in the event of a
Change in Control would be deemed to include an “excess parachute
payment” under Section 280G of the Internal Revenue Code or any successor
thereto, then at the election of Executive, (i) such payments or benefits shall
be payable or provided to Executive over the minimum period necessary to reduce
the present value of such payments or benefits to an amount that is one dollar
($1.00) less than three times Executive’s “base amount” under
such Section 280G, or (ii) the payments or benefits to be provided under this
Section 5 shall be reduced to the extent necessary to avoid treatment as an
excess parachute payment, with the allocation of the reduction among such payments and benefits to be determined by Executive.

6.       TERMINATION FOR DISABILITY OR
DEATH.

          (a)          Termination
of Executive’s employment based on “Disability” shall be
construed to comply with Section 409A of the Internal Revenue Code and shall be
deemed to have occurred if: (i) Executive is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death, or last for a continuous
period of not less than 12 months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death, or last
for a 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 the Bank’s
holding company; or (iii) Executive is determined to be totally disabled by the
Social Security Administration. The provisions of Sections 6(b) and (c) shall
apply upon the termination of the Executive’s employment based on
Disability.

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          (b)          Executive
shall be entitled to receive benefits under any short- or long-term disability
plan maintained by the Bank.  To the extent such benefits are less than
Executive’s Base Salary, the Bank shall pay Executive an amount equal to
the difference between such disability plan benefits and the amount of
Executive’s Base Salary for the longer of (i) the remaining term of this
Agreement, or (ii) one year following the termination of his employment due to
Disability.  

          (c)          The
Bank shall cause to be continued life insurance coverage and non-taxable medical
and dental coverage substantially comparable, as reasonable or customarily
available, to the coverage maintained by the Bank for Executive prior to the
termination of his employment based on Disability, except to the extent such
coverage may be changed in its application to all Bank employees or not
available on an individual basis to an employee terminated based on
Disability.  This coverage shall cease upon the earlier of (i) the date
Executive returns to the full-time employment of the Bank; (ii) Executive’s
full-time employment by another employer; (iii) Executive attaining the age of
65; or (iv) Executive’s death.

          (d)          In
the event of Executive’s death during the term of this Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid Executive’s Base Salary at the rate in effect at
the time of Executive’s death for a period of one (1) year from the date of
Executive’s death, and the Bank shall continue to provide non-taxable
medical, dental and other insurance benefits normally provided for
Executive’s family (in accordance with its customary co-pay percentages)
for one (1) year after Executive’s death.  Such payments are in
addition to any other life insurance benefits that Executive’s
beneficiaries may be entitled to receive under any employee benefit plan
maintained by the Bank for the benefit of Executive.

7.       TERMINATION UPON
RETIREMENT.

          Termination of Executive’s employment based on “Retirement” shall
mean termination of Executive’s employment at any time after Executive
reaches age 65 or in accordance with any retirement policy established by the
Board with Executive’s consent with respect to him.  Upon termination
of Executive based on Retirement, no amounts or benefits shall be due Executive
under this Agreement, and Executive shall be entitled to all benefits under any
retirement plan of the Bank and other plans to which Executive is a
party.

8.       TERMINATION FOR CAUSE.

          (a)          The
Bank may terminate Executive’s employment at any time, but any termination
other than termination for “Cause,” as defined herein, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement.  Executive shall have no right to receive compensation or other
benefits for any period after termination for “Cause.” 
Termination for “Cause” shall mean termination because of
Executive’s personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, material breach of the Bank’s
Code of Ethics, material violation of the Sarbanes-Oxley requirements for
officers of public companies, if applicable, that in the reasonable opinion of
the Board will likely cause substantial financial harm or substantial injury to
the reputation of the Bank of any holding company of the Bank, willfully
engaging in actions that in the reasonable opinion of the Board 

8

will likely cause substantial financial harm or substantial injury to the
business reputation of the Bank, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than routine traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement.

          (b)          For
purposes of this Section 8, no act or failure to act, on the part of Executive,
shall be considered “willful” unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that
Executive’s action or omission was in the best interests of the Bank. 
Any act, or failure to act, based upon the direction of the Board or based upon
the advice of counsel for the Bank shall be conclusively presumed to be done, or
omitted to be done, by Executive in good faith and in the best interests of the
Bank. 

9.       RESIGNATION FROM BOARDS OF
DIRECTORS

          In the event of
Executive’s termination of employment for any reason, Executive’s
service as a director of the Bank, any holding company of the Bank, and any
affiliate of the Bank or holding company shall immediately terminate.  This
Section 9 shall constitute a resignation notice for such purposes.

10.      NOTICE.

          (a)          Any
purported termination by the Bank for Cause shall be communicated by Notice of
Termination to Executive.  If, within thirty (30) days after any Notice of
Termination for Cause is given, Executive notifies the Bank that a dispute
exists concerning the termination, the parties shall promptly proceed to
arbitration, as provided in Section 20.  Notwithstanding the pendency of
any such dispute, the Bank shall discontinue paying Executive’s
compensation until the dispute is finally resolved in accordance with this
Agreement.  If it is determined that Executive is entitled to compensation
and benefits under Section 4 or 5, the payment of such compensation and benefits
by the Bank shall commence immediately following the date of resolution by
arbitration, with interest due Executive on the cash amount that would have been
paid pending arbitration (at the prime rate as published in The Wall Street
Journal from time to time).

          (b)          Any
other purported termination by the Bank or by Executive shall be communicated by
a “Notice of Termination” (as defined in Section 10(c)) to the other
party.  If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the parties shall promptly
proceed to arbitration as provided in Section 20.  Notwithstanding the
pendency of any such dispute, the Bank shall continue to pay Executive his Base
Salary, and other compensation and benefits in effect when the notice giving
rise to the dispute was given (except as to termination of Executive for Cause);
provided, however, that such payments and benefits shall not continue beyond the
date that is 36 months from the date the Notice of Termination is given. 
In the event the voluntary termination by Executive of his employment is
disputed by the Bank, and if it is determined in arbitration that Executive is
not entitled to termination benefits pursuant to this Agreement, he shall return
all cash payments made to him pending resolution by arbitration, with interest
thereon at the prime rate as published in The Wall Street Journal from
time to time, if it is determined in arbitration that Executive’s voluntary

9

termination of employment was not taken in good faith and not in the reasonable
belief that grounds existed for his voluntary termination.  If it is
determined that Executive is entitled to receive severance benefits under this
Agreement, then any continuation of Base Salary and other compensation and
benefits made to Executive under this Section 10 shall offset the amount of any
severance benefits that are due to Executive under this Agreement.

          (c)          For
purposes of this Agreement, a “Notice of Termination” shall mean a
written notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated. 

11.      POST-TERMINATION
OBLIGATIONS.

          (a)          Executive
hereby covenants and agrees that, for a period of one year following his
termination of employment with the Bank, he shall not, without the written
consent of the Bank, either directly or indirectly:

                         (i)          solicit,
offer employment to, or take any other action intended (or that a reasonable
person acting in like circumstances would expect) to have the effect of causing
any officer or employee of the Bank or of any holding company of the Bank, or
any of their respective subsidiaries or affiliates, to terminate his or her
employment and accept employment or become affiliated with, or provide services
for compensation in any capacity whatsoever to, any business whatsoever that
competes with the business of the Bank or of any holding company of the Bank, or
any of their direct or indirect subsidiaries or affiliates or has headquarters
or offices within 50 miles of the locations in which the Bank of any holding
company of the Bank has business operations or has filed an application for
regulatory approval to establish an office;

                         (ii)        become
an officer, employee, consultant, director, independent contractor, agent, sole
proprietor, joint venturer, greater than 5% equity owner or stockholder, partner
or trustee of any savings bank, savings and loan association, savings and loan
holding company, credit union, bank or bank holding company, insurance company
or agency, any mortgage or loan broker or any other entity competing with the
Bank or its affiliates in the same geographic locations where the Bank or its
affiliates has material business interests; provided, however, that this
restriction shall not apply if Executive’s employment is terminated
following a Change in Control; or

                         (iii)       solicit,
provide any information, advice or recommendation or take any other action
intended (or that a reasonable person acting in like circumstances would expect)
to have the effect of causing any customer of the Bank to terminate an existing
business or commercial relationship with the Bank.

          (b)          Executive
shall, upon reasonable notice, furnish such information and assistance to the
Bank as may reasonably be required by the Bank, in connection with any
litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party; provided, however, that Executive shall not be required to
provide information or assistance with respect to any litigation between the
Executive and the Bank or any of its subsidiaries or affiliates.

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          (c)          All
payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with this Section 11.  The parties hereto,
recognizing that irreparable injury will result to the Bank, its business and
property in the event of Executive’s breach of this Section 11, agree that,
in the event of any such breach by Executive, the Bank will be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive and all persons acting for or with
Executive. Executive represents and admits that Executive’s experience and
capabilities are such that Executive can obtain employment in a business engaged
in other lines and/or of a different nature than the Bank, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood.  Nothing herein will be construed as prohibiting the
Bank or any holding company of the Bank from pursuing any other remedies
available to them for such breach or threatened breach, including the recovery
of damages from Executive.

12.      SOURCE OF PAYMENTS.

          All payments provided in this Agreement shall be timely paid in cash or check
from the general funds of the Bank. Any holding company established by the Bank
may accede to this Agreement but only for the purposed of guaranteeing payment
and provision of all amounts and benefits due hereunder to Executive.

13.      EFFECT ON PRIOR AGREEMENTS AND
EXISTING BENEFITS PLANS.

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

14.      NO ATTACHMENT; BINDING ON SUCCESSORS.

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

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

15.      MODIFICATION AND WAIVER.

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

          (b)          No
term or condition of this Agreement shall be deemed to have been waived, nor
shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel.  No such written waiver 

11

shall be deemed a continuing waiver unless specifically stated therein, and each
such waiver shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future as to any
act other than that specifically waived.

16.      REQUIRED PROVISIONS.

          (a)          The
Bank may terminate Executive’s employment at any time, but any termination
by the Board other than termination for Cause shall not prejudice
Executive’s right to compensation or other benefits under this
Agreement.  Executive shall have no right to receive compensation or other
benefits for any period after termination for Cause. 

          (b)          If
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC
§1818(g)(1)] of the Federal Deposit Insurance Act, the Bank’s
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings.  If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay Executive all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations which were
suspended.

          (c)          If
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) [12
USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal
Deposit Insurance Act, all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

          (d)          If
the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)]
of the Federal Deposit Insurance Act, all obligations of the Bank under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the contracting parties.

          (e)          All
obligations under this Agreement shall be terminated, except to the extent
determined that continuation of the contract is necessary for the continued
operation of the Bank, (i) by the Director of the OTS or his or her designee, at
the time the FDIC enters into an agreement to provide assistance to or on behalf
of the Bank under the authority contained in Section 13(c) [12 USC
§1823(c)] of the Federal Deposit Insurance Act; or (ii) by the
Director or his or her designee at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested,
however, shall not be affected by such action.

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

12

17.     SEVERABILITY.

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

18.     HEADINGS FOR REFERENCE ONLY.

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

19.     GOVERNING LAW.

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

20.     ARBITRATION.

          Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by binding arbitration, as an alternative to civil litigation and
without any trial by jury to resolve such claims, conducted by a panel of three
arbitrators sitting in a location selected by Executive within fifty (50) miles
from the main office of the Bank, in accordance with the rules of the American
Arbitration Association’s National Rules for the Resolution of Employment
Disputes (“National Rules”) then in effect.  One arbitrator shall
be selected by Executive, one arbitrator shall be selected by the Bank and the
third arbitrator shall be selected by the arbitrators selected by the
parties.  If the arbitrators are unable to agree within fifteen (15) days
upon a third arbitrator, the arbitrator shall be appointed for them from a panel
of arbitrators selected in accordance with the National Rules.  Judgment
may be entered on the arbitrator’s award in any court having jurisdiction.

 
21.     INDEMNIFICATION.

          (a)          Executive
shall be provided with coverage under a standard directors’ and
officers’ liability insurance policy, and shall be indemnified for the term
of this Agreement and for a period of six years thereafter to the fullest extent
permitted under applicable law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank or any affiliate (whether or not he continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys’ fees and the cost of reasonable settlements (such
settlements must be approved by the Board), provided, however, Executive shall
not be indemnified or reimbursed for legal expenses or liabilities incurred in
connection with an action, suit or proceeding arising from any illegal or
fraudulent act committed by Executive.  Any such indemnification shall be
made consistent with Section 545.121 of the OTS Regulations and Section 18(k) of
the Federal Deposit Insurance Act, 12 U.S.C. §1828(K), and the regulations
issued thereunder in 12 C.F.R. Part 359.

13

          (b)          Any
indemnification by the Bank shall be subject to compliance with any applicable
regulations of the OTS. 

22.     NOTICE.  

          For the purposes of
this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth below:

	
  
 
  	
  
To the Bank:
  	
  
Beacon   Federal
  
	
  
 
  	
  
 
  	
  
6311 Court   Street Road
  
	
  
 
  	
  
 
  	
  
East   Syracuse, NY 13057
  
	
  
 
  	
  
 
  	
  
Telephone:   (315) 433-0111
  
	
   
  	
  
 
  	
  
Fax: (315)   431-9514
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
To   Executive:
  	
  
 
  

14

SIGNATURES

          IN WITNESS
WHEREOF, the Bank has caused this Agreement to be executed by its duly
authorized representatives, and Executive has signed this Agreement, on the date
first above written.  

	
  
 
  	
  
 
  	
  
BEACON FEDERAL
  
	  
	  
	  
	  

	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  
 
  	
  
 By:
  	
  
 
  
	
  

  	
  
 
  	
   
  	
  

  
	
  
Date
  	
  
 
  	
  
 
  	
  
Chairman of   the Board
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
EXECUTIVE:
  
	
   
  	
   
  	
   
  	
   
  
	
   
  	
   
  	
   
  	
   
  
	
  

  	
   
  	
  

  
	
  Date
  	
   
  	
  Ross J.   Prossner
  

15Exhibit 10.3

          EMPLOYMENT
AGREEMENT

          This Employment
Agreement (the “Agreement”) is made effective as of
___________________  (the “Effective Date”), by and between
Beacon Federal, a federally chartered savings association with its principal
office in East Syracuse, New York (the “Bank”) and James D. Lapsley
(“Executive”).  

          WHEREAS,
Executive is serving as Chief Financial Officer of the Bank and the Bank wishes
to assure itself of the services of Executive as Chief Financial Officer of the
Bank through June 30, 2008; and

          WHEREAS, in
order to induce Executive to remain in the employ of the Bank and to provide
further incentive for Executive to achieve the financial and performance
objectives of the Bank, the parties desire to enter into this
Agreement.

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

1.       POSITION AND
RESPONSIBILITIES.

          Through June 30,
2008, Executive shall serve as Chief Financial Officer of the Bank. 
Executive shall be responsible for managing the overall financial affairs of the
Bank and serving as the Bank’s principal financial
officer.  Executive shall directly report to the Chief
Executive Officer.  

2.       TERM AND DUTIES.

          (a)          Term.
The term of Executive’s employment under this Agreement shall commence as
of the Effective Date and shall expire on June 30, 2008.

          (b)          Termination
of Agreement.  Notwithstanding anything contained in this Agreement to
the contrary, either Executive or the Bank may terminate Executive’s
employment with the Bank at any time during the term of this Agreement, subject
to the terms and conditions of this Agreement.

          (c)          Continued
Employment Following Expiration of Term.  Nothing in this Agreement
shall mandate or prohibit a continuation of Executive’s employment
following the expiration of the term of this Agreement, upon such terms and
conditions as the Bank and Executive may mutually agree.

          (d)          Duties;
Membership on Other Boards.  During the term of this Agreement, except
for periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence approved by the Board, Executive shall devote
substantially all of his business time, attention, skill, and efforts to the
faithful performance of his duties hereunder; provided, however, that, with the
prior approval of the Chief Executive Officer,  Executive may serve, or
continue to serve, on the boards of directors of, and hold any other offices or
positions in, business companies or business organizations, which, in the Chief
Executive Officer’s judgment, 

will not present any conflict of interest with the Bank, or materially affect
the performance of Executive’s duties pursuant to this Agreement. 
Executive shall provide the Chief Executive Officer annually for his approval a
list of organizations for which the Executive acts as a director or
officer.

3.       COMPENSATION, BENEFITS AND
REIMBURSEMENT.

          (a)          Base
Salary.  In consideration of Executive’s performance of the duties
set forth in Section 2, the Bank shall provide Executive the compensation
specified in this Agreement.  The Bank shall pay Executive a salary of
$___________ per year (“Base Salary”). The Base Salary shall be
payable biweekly, or with such other frequency as officers of the Bank are
generally paid. During the term of this Agreement, the Base Salary shall be
reviewed at least annually by the Chief Executive Officer, and the Bank may
increase, but not decrease (except for a decrease that is generally applicable
to all employees) Executive’s Base Salary. Any increase in Base Salary
shall become “Base Salary” for purposes of this Agreement.

          (b)          Bonus
and Incentive Compensation.  Executive shall be entitled to incentive
compensation and bonuses as provided in any plan or arrangement of the Bank in
which Executive is eligible to participate.  Nothing paid to Executive
under any such plan or arrangement will be deemed to be in lieu of other
compensation to which Executive is entitled under this Agreement.

          (c)          Employee
Benefits.  The Bank shall provide Executive with employee benefit
plans, arrangements and perquisites substantially equivalent to those in which
Executive was participating or from which he was deriving benefit immediately
prior to the commencement of the term of this Agreement, and the Bank shall not,
without Executive’s prior written consent, make any changes in such plans,
arrangements or perquisites that would adversely affect Executive’s rights
or benefits thereunder, except as to any changes that are applicable to all
participating employees or as reasonably or customarily available.  Without
limiting the generality of the foregoing provisions of this Section 3(c),
Executive will be entitled to participate in or receive benefits under any
employee benefit plans including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident insurance plans, medical coverage or any other employee
benefit plan or arrangement made available by the Bank in the future to its
senior executives, including any stock benefit plans, subject to and on a basis
consistent with the terms, conditions and overall administration of such plans
and arrangements.

          (d)          Paid
Time Off.  Executive shall be entitled to paid vacation time each year
during the term of this Agreement (measured on a fiscal or calendar year basis,
in accordance with the Bank’s usual practices), as well as sick leave,
holidays and other paid absences in accordance with the Bank’s policies and
procedures for senior executives.  Any unused paid time off during an
annual period shall be treated in accordance with the Bank’s personnel
policies as in effect from time to time.

          (e)          Expense
Reimbursements.  During the term of this Agreement, the Bank shall pay
Executive $650 per month for the full cost of the use of an automobile that is
mutually agreeable to the Bank and Executive.  During the term of this
Agreement, the Bank shall pay or reimburse 

2

Executive for all reasonable travel, entertainment and other reasonable expenses
incurred by Executive during the course of performing his obligations under this
Agreement, including, without limitation, fees for memberships in such clubs and
organizations as Executive and the Chief Executive Officer shall mutually agree
are necessary and appropriate in connection with the performance of his duties
under this Agreement, upon presentation to the Bank of an itemized account of
such expenses in such form as the Bank may reasonably require.

4.       PAYMENTS TO EXECUTIVE UPON AN
EVENT OF TERMINATION.

          (a)          Upon
the occurrence of an Event of Termination (as herein defined) during the term of
this Agreement, the provisions of this Section 4 shall apply; provided, however,
that benefits shall be provided either under Section 4 or Section 5 (related to
a Change in Control), but not both, such that to the extent the Executive has
received payments under one of those Sections, the Executive shall not receive
payments under the other of those Sections. As used in this Agreement, an
“Event of Termination’’ shall mean and include any one or more of
the following:

                         (i)          the
termination by the Bank of Executive’s full-time employment hereunder for
any reason other than a “Change in Control,” as defined in Section 5,
a termination for “Cause,” as defined in Section 8, a termination upon
“Retirement,” as defined in Section 7, or a termination for
disability, as set forth in Section 6; and 

                         (ii)        Executive’s
resignation from the Bank’s employ upon any of the following, unless
consented to by Executive:

                                      (A)          failure
to appoint Executive to the position set forth in Section 1, or a material
change in Executive’s function, duties, or responsibilities, which change
would cause Executive’s position to become one of lesser responsibility,
importance, or scope from the position and responsibilities described in Section
1, to which Executive has not agreed in writing (and any such material change
shall be deemed a continuing breach of this Agreement by the Bank);

                                      (B)          a
relocation of Executive’s principal place of employment to a location that
is more than 50 miles from the location of the Bank’s principal executive
offices as of the date of this Agreement; 

                                      (C)          a
material reduction in the benefits and perquisites, including Base Salary, to
Executive from those being provided as of the Effective Date (except for any
reduction that is part of a reduction in pay or benefits that is generally
applicable to officers or employees of the Bank); 

                                      (D)          a
liquidation or dissolution of the Bank; or

                                      (E)          a
material breach of this Agreement by the Bank.

Upon the occurrence of any event described in clause (ii) above, Executive shall
have the right to elect to terminate his employment under this Agreement by
resignation upon not less than 30 days prior written notice given within a
reasonable period of time (not to exceed, except in case 

3

of a continuing breach, 90 days) after the event giving rise to the right to
elect, which termination by Executive shall be an Event of Termination.  No
payments or benefits shall be due to Executive under this Agreement upon the
termination of Executive’s employment except as provided in Section 4 or
5.
 

          (b)          Upon
the occurrence of an Event of Termination, the Bank shall pay Executive, or, in
the event of his subsequent death, his beneficiary or beneficiaries, or his
estate, as the case may be, as severance pay or liquidated damages, or both, a
lump sum in cash equal to two times the sum of (i) the highest annual rate of
Base Salary paid to Executive at any time under this Agreement, plus (ii) the
highest bonus paid to Executive with respect to the two completed fiscal years
prior to the Event of Termination.  Such payments shall not be reduced in
the event Executive obtains other employment following the Event of Termination.
Notwithstanding the foregoing, in the event Executive is a “Specified
Employee” (as defined herein), no payment shall be made to Executive prior
to the first day of the seventh month following the Event of Termination. 
“Specified Employee” shall be interpreted to comply with Section 409A
of the Internal Revenue Code and shall mean a key employee within the meaning of
Section 416(i) of the Internal Revenue Code (without regard to paragraph 5
thereof), but an individual shall be a “Specified Employee” only if
the Bank is a publicly traded institution or the subsidiary of a publicly traded
holding company.

          (c)          Upon
the occurrence of an Event of Termination, the Bank shall provide at the
Bank’s expense, life insurance coverage and non-taxable medical and dental
coverage substantially comparable, as reasonably or customarily available, to
the coverage maintained by the Bank for Executive prior to the Event of
Termination, except to the extent such coverage may be changed in its
application to all Bank employees.  Such coverage shall cease twenty-four
(24) months following the Event of Termination.  The period for group
health care continuation coverage rights under COBRA shall not begin until the
expiration of such twenty-four (24) month period.

5.       CHANGE IN CONTROL.

          (a)          Any
payment made to Executive pursuant to this Section 5 is in lieu of any payments
that may otherwise be owed to Executive pursuant to Section 4, such that
Executive shall either receive payments pursuant to Section 4 or pursuant to
Section 5, but not pursuant to both Sections.

          (b)          Except
for payments that are subject to Section 409A of the Internal Revenue Code, for
purposes of this Agreement, the term “Change in Control” shall mean,
any of the following but shall not include a conversion of the Bank from mutual
to stock form:

                         (i)          a
change in control of a nature that would be required to be reported in response
to Item 5.01(a) 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,
as amended (the “Exchange Act”); or

4

                         (ii)         a
change in control of the Bank within the meaning of the Home Owners’ Loan
Act, as amended (“HOLA”), and applicable rules and regulations
promulgated thereunder, as in effect at the time of the Change in Control;
or

                         (iii)        any
of the following events, upon which a Change in Control shall be deemed to have
occurred:

                                       (A)           any
“person” (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank
or the Bank’s holding company representing 25% or more of the combined
voting power of such outstanding securities, except for any securities purchased
by any employee stock ownership plan or trust established by the Bank;
or

                                       (B)           individuals
who constitute the Board on the Effective Date (the “Incumbent Board”)
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the Effective Date whose election
was approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by stockholders of the
Bank or the Bank’s holding company was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
subsection (B), considered as though they were members of the Incumbent Board;
or 

                                       (C)           a
sale of all or substantially all the assets of the Bank or the Bank’s
holding company, or a plan of reorganization, merger, consolidation, or similar
transaction occurs in which the security holders of the Bank or the Bank’s
holding company immediately prior to the consummation of the transaction do not
own at least 50.1% of the securities of the surviving entity to be outstanding
upon consummation of the transaction; or

                                       (D)           a
proxy statement is issued soliciting proxies from stockholders of the Bank or
the Bank’s holding company by someone other than the current management of
the Bank or the holding company of the Bank, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Bank or the Bank’s
holding company, or similar transaction with one or more corporations as a
result of which the outstanding shares of the class of securities then subject
to the plan are to be exchanged for or converted into cash or property or
securities not issued by the Bank or the Bank’s holding company; or

                                        (E)          a
tender offer is made for 25% or more of the voting securities of the Bank or the
Bank’s holding company, and stockholders owning beneficially or of record
25% or more of the outstanding securities of the Bank or the Bank’s holding
company have tendered or offered to sell their shares pursuant to such tender
offer and such tendered shares have been accepted by the tender
offeror.

          (c)          With
respect to any payments hereunder that are subject to Section 409A of the
Internal Revenue Code, “Change in Control” shall mean (i) a change in
the ownership of the Bank or the Bank’s holding company, (ii) a change in
the effective control of the Bank or the 

5

Bank’s holding company, or (iii) a change in the ownership of a substantial
portion of the assets of the Bank or the Bank’s holding company, as
described below:  

                         (i)          A
change in ownership occurs on the date that any one person, or more than one
person acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(v)(B)), acquires ownership of stock of the Bank or the
Bank’s holding company that, together with stock held by such person or
group, constitutes more than 50% of the total fair market value or total voting
power of the stock of the Bank or the Bank’s holding company. 

                         (ii)         A
change in the effective control of the Bank or the Bank’s holding company
occurs on the date that either (i) any one person, or more than one person
acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(vi)(B)) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons)
ownership of stock of the Bank or the Bank’s holding company possessing 35%
or more of the total voting power of the stock of the Bank or the Bank’s
holding company, or (ii) a majority of the members of the Bank’s or the
Bank’s holding company’s board of directors is replaced during any
12-month period by directors whose appointment or election is not endorsed by a
majority of the members of the Bank’s or the Bank’s holding
company’s board of directors prior to the date of the appointment or
election, provided that this subsection 9(b)(2) is inapplicable where a majority
shareholder of the Bank or the Bank’s holding company is another
corporation.

                         (iii)       A
change in a substantial portion of the Bank’s or the Bank’s holding
company’s assets occurs on the date that any one person or more than one
person acting as a group (as defined in Proposed Treasury Regulations section
1.409A-3(g)(5)(vii)(C)) acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons)
assets from the Bank or the Bank’s holding company that have a total gross
fair market value equal to or more than 40% of the total gross fair market value
of (i) all of the assets of the Bank or the Bank’s holding company, or (ii)
the value of the assets being disposed of, either of which is determined without
regard to any liabilities associated with such assets. For all purposes of
this subsection 5(c), the definition of Change in Control shall be construed to
be consistent with the requirements of Proposed Treasury Regulations section
1.409A-3(g)(5), except to the extent that such proposed regulations are
superseded by subsequent guidance.  

          (d)          Upon
the occurrence of a Change in Control, Executive, or, in the event of his death
following a Change in Control, his beneficiary or beneficiaries, or his estate,
as the case may be, shall receive as severance pay or liquidated damages, or
both, a lump sum cash payment equal to two times the sum of (i) Executive’s
highest annual rate of Base Salary paid to Executive at any time under this
Agreement, plus (ii) the highest bonus paid to Executive with respect to the two
completed fiscal years prior to the Change in Control.  
 

          (e)          Upon
the termination of Executive’s employment (other than for Cause) following
a Change in Control, the Bank shall provide at the Bank’s expense, life
insurance coverage and non-taxable medical and dental coverage substantially
comparable, as reasonably or customarily available, to the coverage maintained
by the Bank for Executive prior to his termination, except to the extent such
coverage may be changed in its application to all Bank 

6

employees.  Such coverage shall cease twenty-four (24) months following the
termination of Executive’s employment. The period for group health care
continuation coverage rights under COBRA shall not begin until the expiration of
such twenty-four (24) month period.

          (f)          Notwithstanding
the preceding paragraphs of this Section 5, in the event that the aggregate
payments or benefits to be made or afforded to Executive in the event of a
Change in Control would be deemed to include an “excess parachute
payment” under Section 280G of the Internal Revenue Code or any successor
thereto, then at the election of Executive, (i) such payments or benefits shall
be payable or provided to Executive over the minimum period necessary to reduce
the present value of such payments or benefits to an amount that is one dollar
($1.00) less than three times Executive’s “base amount” under
such Section 280G, or (ii) the payments or benefits to be provided under this
Section 5 shall be reduced to the extent necessary to avoid treatment as an
excess parachute payment, with the allocation of the reduction among such
payments and benefits to be determined by Executive.

6.       TERMINATION FOR DISABILITY OR
DEATH.

          (a)          Termination
of Executive’s employment based on “Disability” shall be
construed to comply with Section 409A of the Internal Revenue Code and shall be
deemed to have occurred if: (i) Executive is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death, or last for a continuous
period of not less than 12 months; (ii) by reason of any medically determinable
physical or mental impairment that can be expected to result in death, or last
for a 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 the Bank’s
holding company; or (iii) Executive is determined to be totally disabled by the
Social Security Administration. The provisions of Sections 6(b) and (c) shall
apply upon the termination of the Executive’s employment based on
Disability.

          (b)          Executive
shall be entitled to receive benefits under any short- or long-term disability
plan maintained by the Bank.  To the extent such benefits are less than
Executive’s Base Salary, the Bank shall pay Executive an amount equal to
the difference between such disability plan benefits and the amount of
Executive’s Base Salary for the longer of (i) the remaining term of this
Agreement, or (ii) one year following the termination of his employment due to
Disability.  

          (c)          The
Bank shall cause to be continued life insurance coverage and non-taxable medical
and dental coverage substantially comparable, as reasonable or customarily
available, to the coverage maintained by the Bank for Executive prior to the
termination of his employment based on Disability, except to the extent such
coverage may be changed in its application to all Bank employees or not
available on an individual basis to an employee terminated based on
Disability.  This coverage shall cease upon the earlier of (i) the date
Executive returns to the full-time employment of the Bank; (ii) Executive’s
full-time employment by another employer; (iii) Executive attaining the age of
65; or (iv) Executive’s death.

          (d)          In
the event of Executive’s death during the term of this Agreement, his
estate, legal representatives or named beneficiaries (as directed by Executive
in writing) shall be paid 

7

Executive’s Base Salary at the rate in effect at the time of
Executive’s death for a period of one (1) year from the date of
Executive’s death, and the Bank shall continue to provide non-taxable
medical, dental and other insurance benefits normally provided for
Executive’s family (in accordance with its customary co-pay percentages)
for one (1) year after Executive’s death.  Such payments are in
addition to any other life insurance benefits that Executive’s
beneficiaries may be entitled to receive under any employee benefit plan
maintained by the Bank for the benefit of Executive.

7.       TERMINATION UPON RETIREMENT.

          Termination of
Executive’s employment based on “Retirement” shall mean
termination of Executive’s employment at any time after Executive reaches
age 65 or in accordance with any retirement policy established by the Board with
Executive’s consent with respect to him.  Upon termination of
Executive based on Retirement, no amounts or benefits shall be due Executive
under this Agreement, and Executive shall be entitled to all benefits under any
retirement plan of the Bank and other plans to which Executive is a
party.

8.       TERMINATION FOR
CAUSE.

          (a)          The
Bank may terminate Executive’s employment at any time, but any termination
other than termination for “Cause,” as defined herein, shall not
prejudice Executive’s right to compensation or other benefits under this
Agreement.  Executive shall have no right to receive compensation or other
benefits for any period after termination for “Cause.” 
Termination for “Cause” shall mean termination because of
Executive’s personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, material breach of the Bank’s
Code of Ethics, material violation of the Sarbanes-Oxley requirements for
officers of public companies, if applicable, that in the reasonable opinion of
the Chief Executive Officer will likely cause substantial financial harm or
substantial injury to the reputation of the Bank of any holding company of the
Bank, willfully engaging in actions that in the reasonable opinion of the Chief
Executive Officer will likely cause substantial financial harm or substantial
injury to the business reputation of the Bank, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
routine traffic violations or similar offenses) or final cease-and-desist order,
or material breach of any provision of this Agreement.

          (b)          For
purposes of this Section 8, no act or failure to act, on the part of Executive,
shall be considered “willful” unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that
Executive’s action or omission was in the best interests of the Bank. 
Any act, or failure to act, based upon the direction of the Chief Executive
Officer or based upon the advice of counsel for the Bank shall be conclusively
presumed to be done, or omitted to be done, by Executive in good faith and in
the best interests of the Bank. 

9.      RESIGNATION FROM BOARDS OF DIRECTORS

          In
the event of Executive’s termination of employment for any reason,
Executive’s service (if any) as a director of the Bank, any holding company
of the Bank, and any affiliate of the Bank or holding company shall immediately
terminate.  This Section 9 shall constitute a resignation notice for such
purposes.

8

10.     NOTICE.

          (a)          Any
purported termination by the Bank for Cause shall be communicated by Notice of
Termination to Executive.  If, within thirty (30) days after any Notice of
Termination for Cause is given, Executive notifies the Bank that a dispute
exists concerning the termination, the parties shall promptly proceed to
arbitration, as provided in Section 20.  Notwithstanding the pendency of
any such dispute, the Bank shall discontinue paying Executive’s
compensation until the dispute is finally resolved in accordance with this
Agreement.  If it is determined that Executive is entitled to compensation
and benefits under Section 4 or 5, the payment of such compensation and benefits
by the Bank shall commence immediately following the date of resolution by
arbitration, with interest due Executive on the cash amount that would have been
paid pending arbitration (at the prime rate as published in The Wall Street
Journal from time to time).

          (b)          Any
other purported termination by the Bank or by Executive shall be communicated by
a “Notice of Termination” (as defined in Section 10(c)) to the other
party.  If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the parties shall promptly
proceed to arbitration as provided in Section 20.  Notwithstanding the
pendency of any such dispute, the Bank shall continue to pay Executive his Base
Salary, and other compensation and benefits in effect when the notice giving
rise to the dispute was given (except as to termination of Executive for Cause);
provided, however, that such payments and benefits shall not continue beyond the
date that is 24 months from the date the Notice of Termination is given. 
In the event the voluntary termination by Executive of his employment is
disputed by the Bank, and if it is determined in arbitration that Executive is
not entitled to termination benefits pursuant to this Agreement, he shall return
all cash payments made to him pending resolution by arbitration, with interest
thereon at the prime rate as published in The Wall Street Journal from
time to time, if it is determined in arbitration that Executive’s voluntary
termination of employment was not taken in good faith and not in the reasonable
belief that grounds existed for his voluntary termination.  If it is
determined that Executive is entitled to receive severance benefits under this
Agreement, then any continuation of Base Salary and other compensation and
benefits made to Executive under this Section 10 shall offset the amount of any
severance benefits that are due to Executive under this Agreement.

          (c)          For
purposes of this Agreement, a “Notice of Termination” shall mean a
written notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provision so indicated. 

11.     POST-TERMINATION OBLIGATIONS.

          (a)          Executive
hereby covenants and agrees that, for a period of one year following his
termination of employment with the Bank, he shall not, without the written
consent of the Bank, either directly or indirectly:

                         (i)          solicit,
offer employment to, or take any other action intended (or that a 

9

reasonable person acting in like circumstances would expect) to have the effect
of causing any officer or employee of the Bank or of any holding company of the
Bank, or any of their respective subsidiaries or affiliates, to terminate his or
her employment and accept employment or become affiliated with, or provide
services for compensation in any capacity whatsoever to, any business whatsoever
that competes with the business of the Bank or of any holding company of the
Bank, or any of their direct or indirect subsidiaries or affiliates or has
headquarters or offices within 50 miles of the locations in which the Bank of
any holding company of the Bank has business operations or has filed an
application for regulatory approval to establish an office;

                         (ii)        become
an officer, employee, consultant, director, independent contractor, agent, sole
proprietor, joint venturer, greater than 5% equity owner or stockholder, partner
or trustee of any savings bank, savings and loan association, savings and loan
holding company, credit union, bank or bank holding company, insurance company
or agency, any mortgage or loan broker or any other entity competing with the
Bank or its affiliates in the same geographic locations where the Bank or its
affiliates has material business interests; provided, however, that this
restriction shall not apply if Executive’s employment is terminated
following a Change in Control; or

                         (iii)       solicit,
provide any information, advice or recommendation or take any other action
intended (or that a reasonable person acting in like circumstances would expect)
to have the effect of causing any customer of the Bank to terminate an existing
business or commercial relationship with the Bank.

          (b)          Executive
shall, upon reasonable notice, furnish such information and assistance to the
Bank as may reasonably be required by the Bank, in connection with any
litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party; provided, however, that Executive shall not be required to
provide information or assistance with respect to any litigation between the
Executive and the Bank or any of its subsidiaries or affiliates.

          (c)          All
payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with this Section 11.  The parties hereto,
recognizing that irreparable injury will result to the Bank, its business and
property in the event of Executive’s breach of this Section 11, agree that,
in the event of any such breach by Executive, the Bank will be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive and all persons acting for or with
Executive. Executive represents and admits that Executive’s experience and
capabilities are such that Executive can obtain employment in a business engaged
in other lines and/or of a different nature than the Bank, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood.  Nothing herein will be construed as prohibiting the
Bank or any holding company of the Bank from pursuing any other remedies
available to them for such breach or threatened breach, including the recovery
of damages from Executive.

12.     SOURCE OF PAYMENTS.

          All payments
provided in this Agreement shall be timely paid in cash or check from the
general funds of the Bank. Any holding company established by the Bank may
accede to this 

10

Agreement but only for the purposed of guaranteeing payment and provision of all
amounts and benefits due hereunder to Executive.

13.     EFFECT ON PRIOR AGREEMENTS AND EXISTING
BENEFITS PLANS.

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

14.      NO ATTACHMENT; BINDING ON SUCCESSORS.

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

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

15.     MODIFICATION AND WAIVER.

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

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

16.     REQUIRED PROVISIONS.

          (a)          The
Bank may terminate Executive’s employment at any time, but any termination
by the Board other than termination for Cause shall not prejudice
Executive’s right to compensation or other benefits under this
Agreement.  Executive shall have no right to receive compensation or other
benefits for any period after termination for Cause. 

          (b)          If
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the Bank’s affairs by a notice served under
Section 8(e)(3) [12 USC §1818(e)(3)] or 8(g)(1) [12 USC
§1818(g)(1)] of the Federal Deposit Insurance Act, the Bank’s
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings.  If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay Executive all or part of the
compensation withheld while its contract 

11

obligations were suspended and (ii) reinstate (in whole or in part) any of its
obligations which were suspended.

          (c)          If
Executive is removed and/or permanently prohibited from participating in the
conduct of the Bank’s affairs by an order issued under Section 8(e)(4) [12
USC §1818(e)(4)] or 8(g)(1) [12 USC §1818(g)(1)] of the Federal
Deposit Insurance Act, all obligations of the Bank under this Agreement shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

          (d)          If
the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)]
of the Federal Deposit Insurance Act, all obligations of the Bank under this
Agreement shall terminate as of the date of default, but this paragraph shall
not affect any vested rights of the contracting parties.

          (e)          All
obligations under this Agreement shall be terminated, except to the extent
determined that continuation of the contract is necessary for the continued
operation of the Bank, (i) by the Director of the OTS or his or her designee, at
the time the FDIC enters into an agreement to provide assistance to or on behalf
of the Bank under the authority contained in Section 13(c) [12 USC
§1823(c)] of the Federal Deposit Insurance Act; or (ii) by the
Director or his or her designee at the time the Director or his or her designee
approves a supervisory merger to resolve problems related to operation of the
Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested,
however, shall not be affected by such action.

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

17.     SEVERABILITY.

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

18.     HEADINGS FOR REFERENCE ONLY.

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

19.     GOVERNING LAW.

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

12

20.     ARBITRATION.

          Any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by binding arbitration, as an alternative to civil litigation and
without any trial by jury to resolve such claims, conducted by a panel of three
arbitrators sitting in a location selected by Executive within fifty (50) miles
from the main office of the Bank, in accordance with the rules of the American
Arbitration Association’s National Rules for the Resolution of Employment
Disputes (“National Rules”) then in effect.  One arbitrator shall
be selected by Executive, one arbitrator shall be selected by the Bank and the
third arbitrator shall be selected by the arbitrators selected by the
parties.  If the arbitrators are unable to agree within fifteen (15) days
upon a third arbitrator, the arbitrator shall be appointed for them from a panel
of arbitrators selected in accordance with the National Rules.  Judgment
may be entered on the arbitrator’s award in any court having jurisdiction.

21.     INDEMNIFICATION.

          (a)          Executive
shall be provided with coverage under a standard directors’ and
officers’ liability insurance policy, and shall be indemnified for the term
of this Agreement and for a period of six years thereafter to the fullest extent
permitted under applicable law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Bank or any affiliate (whether or not he continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys’ fees and the cost of reasonable settlements (such
settlements must be approved by the Chief Executive Officer), provided, however,
Executive shall not be indemnified or reimbursed for legal expenses or
liabilities incurred in connection with an action, suit or proceeding arising
from any illegal or fraudulent act committed by Executive.  Any such
indemnification shall be made consistent with Section 545.121 of the OTS
Regulations and Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C.
§1828(K), and the regulations issued thereunder in 12 C.F.R. Part
359.

          (b)          Any
indemnification by the Bank shall be subject to compliance with any applicable
regulations of the OTS. 
 
22.          NOTICE.  

          For the purposes of
this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by certified or registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth below:

	
  
 
  	
  
To the Bank:
  	
  
Beacon   Federal
  
	
  
 
  	
  
 
  	
  
6311 Court   Street Road
  
	
  
 
  	
  
 
  	
  
East   Syracuse, NY 13057
  
	
  
 
  	
  
 
  	
  
Telephone:   (315) 433-0111
  
	
  
 
  	
  
 
  	
  
Fax: (315)   431-9514
  

13

	
   
  	
  
To   Executive:
  	
  
 
  

14

SIGNATURES

          IN WITNESS
WHEREOF, the Bank has caused this Agreement to be executed by its duly
authorized representatives, and Executive has signed this Agreement, on the date
first above written.  

	
  
 
  	
  
 
  	
  
BEACON FEDERAL
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
   
  	
  
 
  	
  
By:
  	
  
 
  
	
  

  	
  
 
  	
  
 
  	
  

  
	
  
Date
  	
  
 
  	
  
 
  	
  
Chairman of   the Board
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
EXECUTIVE:
  
	
   
  	
   
  	
   
  	
   
  
	
   
  	
   
  	
   
  	
   
  
	
  

  	
   
  	
  

  
	
  Date
  	
   
  	
  James D.   Lapsley
  

15

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