Exhibit 10.3

 

ALLIANCE FINANCIAL CORPORATION

 

RESTRICTED STOCK AGREEMENT

 

This sets forth the terms of the RESTRICTED STOCK AGREEMENT (“Agreement”),
entered into as of the 5th day of May, 2006 by and between ALLIANCE FINANCIAL
CORPORATION (“Company”) and J. Daniel Mohr, an employee of the Company or one of
its subsidiaries (“Grantee”).

 

TERMS

 

1.          Definition of Terms. For purposes of this Agreement, all defined
terms, as indicated by the capitalization of the first letter of such term,
shall have the meanings specified in the Alliance Financial Corporation 1998
Long Term Incentive Compensation Plan (“Plan”) to the extent not specified in
this Agreement.

 

2.          Restricted Stock Grant. Pursuant to the Plan and subject to the
terms and conditions of the Plan and this Agreement, the Company hereby grants
to the Grantee, and the Grantee accepts, 2,500 shares of Common Stock of the
Company (“Restricted Stock”).

 

3.          Restrictions. The shares of Restricted Stock are awarded to the
Grantee on the condition that the Grantee remain in the employment of the
Company or its subsidiaries during the Forfeiture Periods described below.

 

a.            Except to the extent that the Forfeiture Period expires sooner
pursuant to paragraph 3(b), the Forfeiture Period for all of the shares of
Restricted Stock awarded pursuant to this Agreement shall expire on the seventh
anniversary of the date of this Agreement. If the foregoing date occurs on a
date that is not a normal business day of the Company, the date shall be deemed
to occur on the next ensuing normal business day of the Company.

 

b.            Notwithstanding the provisions of paragraph 3(a), the Forfeiture
Period for 1,250 shares of Restricted Stock awarded pursuant to this Agreement
shall expire on the date described in (i) or (ii) below, if the applicable date
occurs prior to the seventh anniversary of the date of this Agreement:

 

i.             if, for a period of at least fifteen consecutive trading days
between the date of this Agreement and the third anniversary of the date of this
Agreement, unrestricted shares of common stock of the Company have had a closing
traded price on an established public market that equals at least 160 percent of
the closing traded price of unrestricted shares of common stock of the Company
on the date of this Agreement, then the Forfeiture Period described in this
paragraph 3(b) shall expire on the first date on or after the third anniversary
of the date of this Agreement on which unrestricted shares of common stock of
the Company are traded on an established public market at a price that

 

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is at least equal to the closing traded price of unrestricted shares of common
stock of the Company on the date of this Agreement; or

 

ii.            if later than the third anniversary of the date of this
Agreement, the fifteen consecutive trading date on which unrestricted shares of
common stock of the Company have had a closing traded price on an established
public market that equals at least 160 percent of the closing traded price of
unrestricted shares of common stock of the Company on the date of this
Agreement.

 

For purposes of this paragraph 3(b), only unrestricted shares of common stock of
the Company that are traded by individuals and entities unrelated to the
Company, its subsidiaries and its affiliates, and that are of the same type and
class as the shares of Common Stock granted pursuant to this Agreement, shall be
taken into account in determining if and when the applicable Forfeiture Period
has expired. Subject to the other terms of this Agreement, if the Forfeiture
Period for the shares of Restricted Stock described in this paragraph 3(b) does
not expire prior to the seventh anniversary of this Agreement pursuant to this
paragraph 3(b), then such Forfeiture Period shall expire on the seventh
anniversary of this Agreement as provided in paragraph 3(a).

 

c.            During the Forfeiture Period, the shares of Restricted Stock may
not be sold, exchanged, transferred, pledged, hypothecated, or otherwise
disposed of, and the Grantee agrees not to sell, exchange, transfer, pledge or
otherwise dispose of any of such shares, or attempt to do so, during the
Forfeiture Period.

 

4.          Termination. Except as provided in paragraphs 4(a), (b), (c) and (d)
below, if the Grantee’s employment with the Company (or its subsidiaries)
terminates prior to the expiration of the applicable Forfeiture Period, the
Grantee shall, on the date employment terminates, forfeit and surrender to the
Company the number of shares of Restricted Stock with respect to which the
applicable Forfeiture Period is in effect on the date employment terminates.

 

a.            If the Grantee dies, or terminates employment with the Company (or
its subsidiaries) because of disability, before the expiration of a Forfeiture
Period, the applicable Forfeiture Period on the Restricted Stock granted
pursuant to this Agreement shall expire on the date of death, or on the date
that employment terminates because of disability, provided such date is not less
than four years subsequent to the date of this Agreement. If the date of death
or disability is within four years of the date of this Agreement, the Board of
Directors, in its sole discretion, may waive the Forfeiture Period as to any or
all of the Restricted Stock.

 

b.            If the Grantee’s employment with the Company (or its subsidiaries)
terminates prior to the expiration of an applicable Forfeiture Period as a
result of the Grantee’s planned retirement in good standing, as determined by
the Board of Directors in its sole discretion, the applicable Forfeiture Period
on the Restricted Stock granted pursuant to this Agreement shall expire on the
date of such approved planned retirement.

 

c.             If the Grantee’s employment with the Company (or its
subsidiaries), or the successor of the Company (or its subsidiaries), terminates
prior to the expiration of an applicable

 

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Forfeiture Period as a result of a termination of the Grantee’s employment for
“Good Reason” within 12 months after a “Change of Control” of the Company, the
applicable Forfeiture Period on the Restricted Stock granted pursuant to this
Agreement shall expire on the date of such termination. For purposes of this
paragraph 4(c), “Good reason” and “Change of Control” shall have the meanings
below.

 

i.             “Good Reason” shall mean a termination that is the direct result
of an involuntary and material change in the Grantee’s title, duties,
responsibilities and/or total compensation and benefits from the Company (or its
subsidiaries), or the successor of the Company (or its subsidiaries).

 

 

ii.

A “Change of Control” shall be deemed to have occurred if:

 

A.           any “person,” including a “group” as determined in accordance with
the Section 13(d)(3) of the Securities Exchange Act of 1934 (“Exchange Act”), is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 30 percent or more of the combined voting power of the
Company’s then outstanding securities;

 

B.           as a result of, or in connection with, any tender offer or exchange
offer, merger or other business combination (a “Transaction”), the persons who
were directors of the Company before the Transaction shall cease to constitute a
majority of the Board of Directors or the board of directors of any successor to
the Company;

 

C.           the Company is merged or consolidated with another corporation and
as a result of the merger or consolidation less than 70 percent of the
outstanding voting securities of the surviving or resulting corporation shall
then be owned in the aggregate by the former stockholders of the Company, other
than (A) affiliates within the meaning of the Exchange Act, or (B) any party to
the merger or consolidation;

 

D.           a tender offer or exchange offer is made and consummated for the
ownership of securities of the Company representing 30 percent or more of the
combined voting power of the Company’s then outstanding voting securities; or

 

E.           the Company transfers substantially all of its assets to another
entity that is not owned or controlled by the Company.

 

d.            Notwithstanding the forgoing, the Board of Directors shall have
the authority at any time to accelerate the time at which any or all or the
restrictions set forth in this Agreement with respect to any or all shares of
the Restricted Stock granted pursuant to under this Agreement shall expire.

 

 

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5.           Escrow. The certificate(s) of Restricted Stock granted to the
Grantee shall be retained in escrow by the Company (or its designee) until the
expiration of the applicable Forfeiture Period, at which time(s) certificate(s)
without any restrictive legend affixed thereto shall be delivered by the Company
(or its designee) to the Grantee. If shares of Restricted Stock are forfeited,
the applicable certificate(s) of Restricted Stock shall be canceled of record.

 

6.          Incidents of Ownership. During the Forfeiture Period, the Grantee
shall have all the rights of a shareholder with respect to shares of Restricted
Stock, including the right to vote such shares at any meeting of shareholders of
Common Stock and the right to receive all dividends paid with respect to such
shares, subject, however, to the restrictions set forth in this Agreement.

 

7.          Internal Revenue Code Section 83(b) Election. The Grantee agrees, as
a term and condition of receiving and accepting shares of Restricted Stock
pursuant to this Agreement, not to make an election under Section 83(b) of the
Internal Revenue Code of 1986, as amended, with respect to such shares of
Restricted Stock. If the Grantee or his legal representative makes such an
election without the consent of the Company, all shares of Restricted Stock held
by the Grantee or his legal representative at the time shall be forfeited and
canceled of record.

 

8.            Adjustments. In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation,
rights offering, or any other change in the corporate structure or shares of the
Company, the Board of Directors may make such adjustment equitably required in
the number and kind of shares of Restricted Stock issued pursuant to this
Agreement. Such adjustment shall be final and binding on the Company and the
Grantee.

 

9.           No Right To Continued Employment. This Agreement shall not confer
upon the Grantee any right to continued employment with the Company (or its
subsidiaries) nor shall it interfere, in any way, with the right of the Company
to modify the Grantee’s compensation, duties, and responsibilities, or the
Company’s authority to terminate the Grantee’s employment.

 

10.        Withholding. The Company shall have the right to deduct any sums that
federal, state or local tax laws require to be withheld upon the grant of
Restricted Stock or upon the expiration of a Forfeiture Period. In the
alternative, the Grantee may pay to the Company for deposit with the appropriate
taxing authority, any amounts that federal, state or local tax laws require to
be withheld upon the grant of Restricted Stock or upon the expiration of a
Forfeiture Period.

 

11.        Notices. All notices and communications under this Agreement shall be
in writing and shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the residence of the Grantee and to
the principal office of the Company, or such other address as may be designated
by the Company or the Grantee. Notice shall be deemed given upon personal
delivery or upon receipt.

 

 

 

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12.        Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the successors and assigns of the Company, and the
heirs, successors and permitted assigns of the Grantee.

 

13.        Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York. The Grantee agrees to accept as binding,
conclusive and final all decisions and interpretations of the Board of Directors
with respect to any questions that may arise under the Plan and this Agreement.

 

14.        Acknowledgments by Grantee. The Grantee acknowledges that the Grantee
has been advised, and that the Grantee understands, that:

 

a.            This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933;

 

b.            the grant of Restricted Stock pursuant to this Agreement may be
subject to, or may become subject to, applicable reporting, disclosure and
holding period restrictions imposed by Rule 144 under the Securities Act of 1933
and Section 16 of the Securities Exchange Act of 1934 (“Section 16”); and

 

c.            shares could be subject to Section 16(a) reporting requirements as
well as the short swing trading prohibition contained in Section 16(b) which
precludes any profit taking with respect to any stock transactions which occur
within any six-month period.

 

The Company has caused this Restricted Stock Agreement to be executed by its
duly authorized officer, and the Grantee has executed this Agreement, both as of
the day and year first written above.

 

This Agreement has been signed by the Company and Grantee on May 3, 2006.

 

ALLIANCE FINANCIAL CORPORATION

 

 

By: /s/ Jack H. Webb

 

Jack H. Webb

Title: Chairman, President and CEO

 

GRANTEE

 

/s/J. Daniel Mohr

 

J. Daniel Mohr

 

 

 

 

 

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