EMPLOYMENT
AGREEMENT
THIS AGREEMENT is
dated as of October 6, 2005 (“Effective Date”)
between ALLIANCE FINANCIAL CORPORATION (“Corporation”),
ALLIANCE BANK,N.A. (“Bank”) (collectively
“Alliance”) having a principal place of business at
120 Madison Street, Syracuse, New York 13202, and JOHN H.
WATT, JR., residing at 42 Monroe Avenue, Pittsford, New York 14534,
the (“Executive”).
The Corporation
and the Executive desire to set forth the terms upon which the
Executive will continue to be employed by the Corporation and the
Bank after the expiration on October 6, 2005 of the
Executive’s existing Employment Agreement dated
January 21, 2004.
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(a)
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“Cause” means a finding by the Board
of Directors of the Corporation (the “Board of Directors)
that any of the following conditions exist: (i) the
Executive’s willful and continued failure to substantially
perform his duties under this Agreement (other than as a result of
Disability) that is not or cannot be cured within 30 days of
Alliance giving Executive notice of the failure to perform. In the
case of termination of the Executive within 6 months after a Change
in Control, no act or failure to act will be deemed
“willful” unless effected by the Executive not in good
faith and without a reasonable belief that his action or failure to
act was in or not opposed to the best interests to Alliance or its
successor; (ii) a willful act or omission by the Executive
constituting dishonesty, fraud, or other malfeasance, and any act
or omission by the Executive constituting immoral conduct, which is
injurious to the financial condition or business of Alliance;
(iii) the Executive’s indictment for a felony offense
under the laws of the United States or any state; or
(iv) breach by the Executive of the restrictive covenant in
Section 6(a) hereof.
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(b)
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“Change in Control”
means:
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(i)
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any acquisition or series of acquisitions by any
Person other than the Corporation, any of its affiliates, any
executive benefit plan of the Corporation or its affiliates or any
Person holding common shares of the Corporation for or pursuant to
the terms of such an executive benefit plan, that
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(a)
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results in that Person becoming the beneficial
owner (as defined in Rule 13d-3 under the Securities Act of 1934,
as amended (the “Exchange Act”)), directly or
indirectly, of securities of the Corporation representing 30% or
more of either the then outstanding shares of common stock of the
Corporation (“Outstanding Corporation Common Stock”) or
the combined voting power of the Corporation’s then
outstanding securities entitled to then vote in the election of the
Corporation’s directors (“Outstanding Corporation
Voting Securities”) except that any such acquisition of
Outstanding Corporation Voting Securities will not constitute a
Change in Control while that Person does not exercise voting power
of its Outstanding Corporation Voting Stock or otherwise exercise
control with respect to any matter concerning or affecting the
Corporation, or Outstanding
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Corporation
Voting Securities, and promptly sells, transfers, assigns or
otherwise disposes of that number of shares of Outstanding
Corporation Common Stock necessary to reduce its beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of the
Outstanding Corporation Common Stock to below 30%;
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(b)
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would be required to be reported in response to
Item 5.01 of the Current Report on Form 8-K, pursuant to
Section 13 or 15(d) of the Exchange Act.
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(ii)
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At any time when, during any period not longer
than 24 consecutive months, individuals who at the beginning of the
period constitute the Board of Directors cease to constitute a
majority of the board, unless the election or nomination for the
election by the Corporation’s shareholders of each new board
member was approved by a vote of at least 2/3 of the board members
still in office who were board members at the beginning of that
period (including, for these purposes, new members whose election
or nomination was so approved);
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(iii)
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approval by the shareholders of the Corporation
of:
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(a)
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a dissolution or liquidation of the
Corporation,
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(b)
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a sale of substantially all of the assets or
earning power of the Corporation o an unrelated party,
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(c)
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an agreement to merge or consolidate or
otherwise reorganize, with or into one or more unrelated Persons,
as a result of which less than 75% of the outstanding securities of
the surviving or resulting entity are or will be owned by the
shareholders of the Corporation immediately before such merger,
consolidation or reorganization,
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(iv)
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a tender offer is made for 30% or more of the
Outstanding Corporation Voting Securities and shareholders owning
beneficially or of record more than 30% or more of the Outstanding
Corporation Voting Securities have tendered or offered to sell
their shares pursuant to that tender offer, at the time those
shares have been accepted by the tender offer; provided, however,
that
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(v)
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a Change in Control will not be deemed to have
occurred under any of the preceding subparagraphs if the action
(agreement, acquisition or other) is approved by a majority of the
Board of Directors, the Corporation is the resulting entity, and at
least 51% of the ownership of voting control of the Corporation
remains unchanged from the ownership immediately prior to such
action.
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Long term disability as defined in
Alliance’s long term disability policy covering the Executive
or if not so defined in such a plan than by a determination by a
qualified independent physician selected by the Executive and
Alliance which such determination shall be deemed to be final. In
the event of Disability the Executive will cease to be employed on
the last day of the month in which the Executive’s disability
is determined in writing.
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(d)
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“Good Reason” means any of the
following circumstances:
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(i)
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A significant reduction in the scope of the
Executive’s duties.
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(ii)
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Removal from, or failure to re-elect the
Executive to the position of Executive Vice President of
Alliance’s ultimate parent entity.
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(iii)
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A material breach of this Agreement by Alliance
that is not or cannot be cured within 30 days of the Executive
giving notice of the breach.
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(iv)
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A Constructive Termination occurs within twelve
months subsequent to the occurrence of a Change of
Control.
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(v)
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The Executive no longer reports directly to the
Chief Executive Officer of the Corporation or its
successor
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(e)
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“Person” has the meaning given to
that term in Sections 13 (d) and 14(d) of the Exchange Act, but
excluding any Person described in and satisfying the conditions of
Rule 13 d-1(b)(1) of Section 13.
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(f)
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“Constructive Termination” shall
mean Termination of Executive’s employment by the Executive
subsequent to the occurrence of: (A) a significant change in
the nature or scope of the Executive’s authority (such as a
change in his status or authority as an officer of the ultimate
parent corporation in a corporate group) from that prior to a
Change of Control, (B) any reduction in the Executive’s total
compensation (including bonuses and benefits) from that prior to a
Change or Control, or (C) a change in the general location where
the Executive is required to perform services from that prior to a
Change of Control.
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2.
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Alliance employs the Executive, and the
Executive accepts employment upon the terms and conditions of this
Agreement as Executive Vice President of the Corporation and of the
Bank, in full charge of the operation of the businesses assigned to
the Executive from time to time and including without limitation as
of the date hereof the Bank’s commercial, trust and
investment management and leasing businesses. In addition the
Executive will engage in certain strategic planning duties on
behalf of the Corporation. The foregoing employment is subject to
the provisions of the by-laws of Alliance in respect of the duties
assigned from time to time by the Boards of Directors, and also
subject at all times to the control of the Boards of Directors.
Subject to the yearly election by the Board of Directors in the
exercise of their judgment and consistent with other provisions of
this Agreement, the Executive will continue to be elected to the
position of Executive Vice President of both the Corporation and
the Bank. The Executive will perform and discharge those
responsibilities which are commensurate with his position. The
Executive agrees to perform his duties and discharge his
responsibilities in a
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