<PAGE>   1
                                                                  Page 71 of 141






                                  EXHIBIT 10-16
                                  -------------

                              EMPLOYMENT AGREEMENT
                              --------------------


         This EMPLOYMENT AGREEMENT made as of December 15, 2000 (the "EFFECTIVE
DATE"), by and between GENESEE CORPORATION, a New York corporation (the
"COMPANY"), and STEVEN M. MORSE (the "EXECUTIVE").

                    P R E L I M I N A R Y  S T A T E M E N T :

         WHEREAS, the Company and the Executive desire to enter into this
Agreement to establish the terms and conditions of Company's continued
employment of the Executive;

                              P R O V I S I O N S :

         NOW, THEREFORE, in consideration of the premises and the terms
hereafter set forth, the parties agree as follows:

         1. EMPLOYMENT. The Company agrees to employ the Executive in the status
described in Section 2, and the Executive agrees to accept such employment, upon
the terms and conditions hereafter set forth.

         2. TERM. The term of the Executive's employment under this Agreement
shall commence on the Effective Date and shall expire on of the first
anniversary of the Effective Date (subject to prior termination pursuant to
Section 8); provided, that such term shall be automatically renewed for further
periods of one year after each anniversary of the Effective Date each unless
either party shall give the other notice of non-renewal not less than ninety
(90) days prior to the expiration of the initial term or any one year renewal
term. The entire period during which the Executive shall be employed by the
Company pursuant to the terms of hereof is referred to as the "TERM OF
EMPLOYMENT."

         3. EMPLOYMENT SERVICES. At all times during the Term of Employment, the
Executive shall serve in the capacity of the Company's Vice President and
Treasurer, reporting to the President of the Company. In such capacity, the
Executive shall perform such duties and responsibilities commensurate with his
position, subject to the supervision of the President of the Company or his
designee. The Executive agrees to devote his best efforts to promote the
business and affairs of the Company and to perform on a full-time basis the
duties assigned to him from time to time in accordance with the terms hereof.

         4. LOCATION. Except with his consent, the Executive shall not be
required to perform duties that require his principal office or his residence to
be maintained outside the Rochester, New York area. However, the Executive shall
make himself available for reasonable business travel required by his position.




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         5. COMPENSATION.

            (a) During the Term of Employment, the Company shall pay the
Executive for all services rendered hereunder by the Executive in any capacity a
fixed salary at the rate of $85,000 per year (the "BASE SALARY"). The
Executive's salary shall be payable in accordance with the Company's customary
payroll practices. During the Term of Employment, the Executive's Base Salary
shall be reviewed at least annually commencing in December 2001 in accordance
with the Company's customary procedures and practices regarding executives. Any
increases in the Base Salary shall be at the sole and absolute discretion of the
Management Continuity Committee of the Company's Board of Directors (the "MCC").
In no event shall the Executive's Base Salary be reduced below $85,000 annually.

            (b) In recognition of the Executive's significant efforts during the
sale by the Company's wholly-owned subsidiary of substantially all of its
brewing business assets to High Falls Brewing Company, LLC ("HIGH FALLS"), the
Executive acknowledges that the Company has paid to the Executive a one-time
bonus of $10,000, which was fully earned and non-refundable upon payment
thereof.

            (c) During the Term of Employment, the Executive shall have the
opportunity to earn a bonus of up to 25% of his Base Salary during each complete
fiscal year of the Company. The Company's President or the MCC, in his or its
sole discretion, if any, shall determine the exact amount of the bonus. The
payment of any bonus awarded to the Executive shall be made within ninety (90)
days after the end of the fiscal year for which the bonus is awarded.

            (d) If the Term of Employment has not been previously terminated
pursuant to Section 8 and is not renewed pursuant to Section 2, then following
the expiration of the Term of Employment, the Company shall promptly thereafter
pay to Executive a lump-sum amount equal to the Base Salary in effect on the
Executive's last day of employment, provided that the Executive first executes
and unconditionally delivers to the Company a full and complete release of any
and all claims that the Executive may have against the Company and any of its
subsidiaries or affiliates and any of their respective officers, directors or
representatives arising out of or related to his employment with the Company or
any such related parties (other than for indemnification or advancement of
expenses in any litigation in Executive's capacity as an officer of the Company
which may be provided for under any of the Company's constituent documents or
any indemnification agreements) and which shall otherwise be satisfactory to the
Company in all respects (the "RELEASE").

            (e) In order to provide a source of retirement income to the
Executive, during the Term of Employment and until the Company establishes for
the benefit of the Executive a qualified retirement or pension plan, the
Executive shall earn on a pro rated daily basis an amount equal to 16.67% per
annum of the Executive's gross income reported (or reportable) on the W-2 Wage
Statement issued (or to be issued) by the Company to the Executive for the Term
of Employment (the "RETIREMENT PAYMENT"). The accrued Retirement Payment for
each fiscal year shall be due within ninety (90) days after the end of such
fiscal year, or on the Date of Termination (as defined below), whichever occurs
earlier.



<PAGE>   3
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            (f) Simultaneously with the execution and delivery hereof, the
Company and the Executive shall execute and deliver the Stock Appreciation
Rights Agreement in the form of EXHIBIT A annexed hereto, pursuant to which the
Company shall grant to the Executive stock appreciation rights based on the
value of 5,289 shares of the Company's Class B common stock on the terms and
conditions set forth therein.

            (g) All payments to be made pursuant to Section 5(a) through 5(f)
shall be subject to all federal, state and local payroll, withholding and other
tax requirements.

            6. EXPENSES. The Company will pay or reimburse the Executive for any
expenses reasonably incurred by him in furtherance of his performance hereunder,
including expenses for professional licensing fees, dues for professional
membership organizations, continuing education expenses, entertainment, travel,
meals, hotel accommodations and the like, provided that such expenses are
properly documented and accounted for in accordance with such rules and policies
relating thereto as the Company may from time to time adopt.

         7. EXECUTIVE BENEFITS.

            (a) During the Term of Employment, the Executive and, as applicable,
the Executive's family, shall be entitled to receive or be compensated for
obtaining health, medical, life and disability benefits that are the
substantially comparable to those benefits and programs sponsored by the Company
immediately prior to the Effective Date and in which the Executive participated
as of such time. The Company and the Executive anticipate that Executive will
participate in the plans and programs sponsored by High Falls and that the
Company will be responsible for the premiums and other costs and expenses that
High Falls may incur due to Executive's participation in such plans and
programs.

            (b) During the Term of Employment, the Executive shall be entitled
to vacation not be less four (4) weeks per year, or such greater time as may be
approved by the MCC (prorated in any fiscal year during which the Executive is
employed under this Agreement for less than the entire year in accordance with
the number of days in such fiscal year during which he is so employed). In the
event that full vacation is not taken in any fiscal year due to the work
commitments of the Executive, the Executive may elect to accumulate such
vacation and carry it over to the following fiscal year, or receive payment (at
Executive's pro rated Base Salary). Upon any termination or resignation, the
Company shall pay the Executive the value of any accrued or accumulated unused
vacation time. The Executive, in his reasonable discretion and with the consent
of the Company's President, shall determine the time and intervals of his
vacation. The Executive shall also be entitled to all paid holidays given by the
Company to its senior executive officers.

            (c) During the Term of Employment, the Executive shall be entitled
to be reimbursed for tax return preparation fees up to a maximum of $1,000 per
tax year.

         8. TERMINATION.

            (a) TERMINATION FOR CAUSE. The Company may terminate the Term of
Employment for Cause (as defined below) at any time on notice to the Executive,
and thereby terminate all rights and obligations of the parties hereto as of the
date of such notice other than the Executive's obligations under Section 11. For
purposes of this Agreement, "CAUSE" shall mean (i) gross neglect, refusal or
inability by the Executive to substantially perform his duties under this
Agreement (other than any such failure resulting from the Executive's incapacity
due to Disability (as defined below)), after a demand for substantial
performance is delivered to the Executive by the President stating the manner in
which the Company believes the Executive has not substantially performed his
duties, and the Executive shall have failed to resume substantial performance of
such duties within ten (10) days of receiving such demand, (ii) the engaging by
the Executive in criminal conduct (including embezzlement and criminal fraud),
(iii) the commission by the Executive of a felony, (iv) any misappropriation of
funds or material damage to the property or businesses of the Company or any of
its affiliates by the Executive or (v) the material breach of Section 11 of this
Agreement by the Executive.

            (b) TERMINATION UPON DISABILITY. If, during the Term of Employment,
the Executive shall become incapable of fulfilling his obligations hereunder
because of injury or physical or mental illness (a "DISABILITY"), and such
incapacity shall exist for a period of three (3) consecutive months or such
shorter periods

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aggregating more than three (3) months during any twelve (12) consecutive months
during the Term of Employment, the Company may, upon at least ninety (90) days'
prior notice to the Executive, terminate the Term of Employment. An independent
physician selected by the Company shall determine the Disability of the
Executive.

            (c) TERMINATION BY DEATH. If the Executive dies during the term of
this Agreement, the Term of Employment and all rights and obligations of the
parties hereunder shall terminate immediately upon such death.

            (d) TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE, DEATH OR
DISABILITY. The Company may terminate the Term of Employment other than pursuant
to Section 8(a), 8(b) or 8(c) at any time upon sixty (60) days advance notice to
the Executive.

            (e) TERMINATION BY THE EXECUTIVE. The Executive may terminate this
Agreement at any time upon sixty (60) days advance written notice to the
Company.

         9. CERTAIN PROVISIONS RELATING TO TERMINATION.

            (a) NOTICE OF TERMINATION. Any termination of the Executive's
employment by the Company or by the Executive which is effected by notice shall
be communicated by written Notice of Termination to the other party. For
purposes of this Agreement, a "NOTICE OF TERMINATION" shall mean a written
notice which shall indicate the provision in this Agreement relied upon to
terminate the Term of Employment.

            (b) DATE OF TERMINATION. "DATE OF TERMINATION" shall mean (i) if the
Executive's employment is terminated by his death, the date of his death, (ii)
if the Executive's employment is terminated for Disability, ninety (90) days
after Notice of Termination is given, (iii) if the Executive's employment is
terminated by the Company for Cause or without Cause, the date specified in the
Notice of Termination after the expiration of any cure periods, if
applicable,(iv) if the Executive's employment is terminated as a result of his
voluntary termination, the date set forth in the Executive's Notice of
Termination (but not beyond the then expiration date of the Term of Employment),
and (v) if the Executive's employment is terminated for any other reason, the
date on which a Notice of Termination is given after the expiration of any cure
periods. Notwithstanding anything to the contrary in this Agreement, the Term of
Employment shall terminate upon the Date of Termination.

         10. COMPENSATION UPON TERMINATION OF TERM OF EMPLOYMENT

            (a) TERMINATION WITHOUT CAUSE. In the event the Term of Employment
is terminated other than pursuant to Section 8(a), 8(b), 8(c) or 8(e), then the
Company shall, as liquidated damages, pay to the Executive in a lump-sum
promptly after the Date of Termination the following: (i) a lump-sum amount
equal to the Base Salary in effect on the last day of employment (subject to the
Company's receipt of a Release), (ii) the Base Salary due for what would have
been the remaining Term of Employment as of the Date of Termination (assuming no
renewal) (the "TERMINATED TERM OF EMPLOYMENT"), (iii) the value of the unused
vacation accrued as of the Date of Termination, (iv) an amount that the MCC
determines, in its sole discretion, is appropriate to compensate the Executive
for the bonus opportunity he had for the current year through the Date of
Termination for which no bonus has previously been paid and (v) the other
payments described in Section 10(d). In addition, in the event of such a
termination, subject to the last sentence of this Section 10(a), the Executive
shall be entitled to continue receiving the benefits provided in Section 7(a)
for up to twelve (12) months following the Date of Termination. Upon payment of
the foregoing, the Executive shall have no further right to receive any other
compensation or other benefits after such termination. The Executive shall not
be required to mitigate the amount of any payments provided for in this Section
10(a) by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 10(a) be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by any retirement benefits. The Executive shall cease receiving any
of the Section 7(a) benefits provided for hereunder, however, on the first date
on which the Executive is eligible to receive the same type of benefit from a
new employer or entity for whom he is acting as an independent contractor. The
Executive shall cease receiving one type of Section 7(a) benefit, but not
another if he does not receive such other benefit in his new position.

<PAGE>   5
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            (b) TERMINATION DUE TO CAUSE OR DEATH. In the event that the Term of
Employment terminates pursuant to Sections 8(a), 8(c) or 8(e), then the
Company's obligations to make payments to, and provide benefits for, the
Executive under Sections 5, 6 and 7 shall immediately cease as of the Date of
Termination.

            (c) COMPENSATION UPON TERMINATION DUE TO DISABILITY. In the event
the Executive is terminated pursuant to Section 8(b), then the Executive shall
continue (a) to be paid his Base Salary at the rate in effect at the time Notice
of Termination is given pursuant to Section 8(b) (less any disability payments
otherwise payable by or pursuant to plans provided by the Company); and (b) to
receive the other benefits provided for in Section 7(a), in each case, until the
earlier of twenty-seven (27) weeks after the Date of Termination or the date on
which the Term of Employment would have expired had it not been renewed
(assuming that no notice would be given to renew the Term of Employment).

            (d) EFFECT OF TERMINATION PAYMENTS. The payments and benefits (if
any) required to be provided to the Executive under this Section 10 shall be in
complete satisfaction of any claims that the Executive may have as a result of
termination of the Executive's employment; provided, however the termination of
this Agreement pursuant to Section 8 shall not terminate or limit the right of
the Executive (or his beneficiaries) to receive amounts of Base Salary,
unreimbursed expenses, additional compensation or benefits, if any, accrued but
unpaid or vested as of the Date of Termination, including the Retirement
Payment.

         11. OTHER DUTIES OF EXECUTIVE DURING AND AFTER TERM OF EMPLOYMENT.

            (a) COOPERATION IN LITIGATION. Both during and after the Term of
Employment, the Executive shall, upon reasonable notice, furnish such
information as may be in his possession to, and cooperate with, the Company as
may reasonably be requested by the Company in connection with any litigation in
which the Company or any of its subsidiaries and affiliates is or may become a
party (except for any litigation in which the Company and any of its affiliates
and subsidiaries, on the one hand, and the Executive, on the other hand, have
one or more claims against one another), provided that after the Term of
Employment the Company agrees to pay and be responsible for all of the
Executive's reasonable and documented out-of-pocket expenses incurred in
connection therewith.

            (b) CERTAIN ACTIVITIES DURING EMPLOYMENT. Except with the prior
written consent of the President, the Executive will not during the Term of
Employment undertake or engage in any other employment, occupation or business
enterprise other than one in which he is an inactive investor. This provision
shall not be deemed to preclude (i) the Executive from serving on the board of
directors of a reasonable number of other corporations upon the advance notice
to the President, or (ii) membership in professional societies or trade
associations or lecturing or the acceptance of honorary positions, in all cases,
that are incidental to his employment by the Company and which are not adverse
or antagonistic to the Company or its business prospects, whether financial or
otherwise. The Executive will also not acquire, assume or participate in,
directly or indirectly, any position, investment or interest adverse or
antagonistic to the Company or its business or prospects, whether financial or
otherwise, or take any action towards any of the foregoing. Further, during the
Term of Employment, except on behalf of the Company or its subsidiaries, the
Executive will not, directly or indirectly, whether as an officer, director,
employee, stockholder, partner, proprietor, associate, representative or
otherwise, become or be interested in any other person, corporation, firm,
partnership or other entity whatsoever which directly competes with the Company,
in any part of the world, in any line of business engaged in (or which the
Company has made plans to be engaged in) by the Company; provided, however, that
anything above to the contrary notwithstanding, Executive may own, as an
inactive investor, securities of any competitor corporation, so long as his
holdings in any one such corporation shall not in the aggregate constitute more
than 1% of the voting stock of such corporation.

            (c) UNAUTHORIZED DISCLOSURE. During the Term of Employment and for a
two (2) year period thereafter, the Executive shall not, without the written
consent of the Company's Board of Directors or a person authorized thereby,
disclose to any person, other than an employee of the Company (or its
subsidiaries) or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by the Executive of his duties as
an employee of the Company, any confidential information obtained by him while
in the employ of the Company with respect to any of the Company's customers,
suppliers, creditors, lenders or investment bankers; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of unauthorized disclosure by the Executive)
or any information of a type not otherwise

<PAGE>   6
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considered confidential by persons engaged in the same business or a business
similar to that conducted by the Company.

            (d) NON-SOLICITATION OF EMPLOYEES. During the Term of Employment and
for a period of two (2) years thereafter, the Executive shall not, directly or
indirectly, without the written consent of the Company's Board of Directors or a
person authorized thereby, for himself or for any other person, firm,
corporation, partnership, association or other entity, attempt to employ or
enter into any contractual arrangement with any employee or former employee of
the Company, unless such employee or former employee has not been employed by
the Company for a period in excess of six (6) months.

            (e) BOOKS AND RECORDS. All books, records, accounts and similar
repositories of confidential information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination or expiration of this Agreement or upon request at any
time by the Company's Board of Directors or President.

            (f) INJUNCTION. The Company and the Executive acknowledge that a
breach by the Executive of any of the agreements contained in this Section 11
may cause irreparable harm or damage to the Company, or its subsidiaries, the
monetary amount of which may be virtually impossible to ascertain. As a result,
the Executive and the Company agree that the Company and any of its subsidiaries
shall be entitled to an injunction issued by any court of competent jurisdiction
enjoining and restraining any and all violations of such agreements by the
Executive or his associates, affiliates, partners or agents, and that such right
to an injunction shall be cumulative and in addition to whatever other remedies
the Company may possess.

         12. BINDING EFFECT; AMENDMENTS. This Agreement will bind and inure to
the benefit of the heirs, personal representatives, successors and assigns of
the parties and may be modified and varied only in writing signed by the parties
hereto.

         13. NOTICES. All notices hereunder shall be given in writing by
personal delivery or by recognized overnight courier (such as Federal Express)
addressed to the President of the Company at its principal place of business and
to the Executive at his residence address as then listed in the Company records.

         14. CONSOLIDATION, MERGER, OR SALE OF ASSETS. Nothing in this Agreement
shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation
which assumes this Agreement and all obligations and undertakings of the Company
hereunder. The Company shall promptly provide the Executive with a copy of any
such assumption instrument. Unless the Executive agrees to the contrary, any
such assumption shall not relieve the Company of its obligations hereunder Upon
such consolidation, merger or transfer of assets and such assumption, the term
"Company" as used herein shall mean such other corporation and this Agreement
shall continue in full force and effect and the Company shall be jointly and
severally liable for such other corporation's obligations.

         15. GOVERNING LAW. This Agreement and the interpretation and
performance thereof shall be governed by and interpreted in accordance with the
laws of the State of New York without giving effect to its principles of
conflict of laws.

         16. SEVERABILITY. In case any one or more of the provisions or part of
a provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
invalidity, illegality or unenforceability shall be deemed not to affect any
other jurisdiction or any other provision or part of a provision of this
Agreement, but this Agreement shall be reformed and construed in such
jurisdiction as if such provision or part of a provision held to be invalid or
illegal or unenforceable had never been contained herein and such provision or
part reformed so that it would be valid, legal and enforceable in such
jurisdiction to the maximum extent possible.

         17. ENTIRE AGREEMENT. This Agreement, together with the other
agreements referred to herein, sets forth the entire agreement between the
parties with respect to the employment and compensation of the Executive by

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the Company and supersedes all prior agreements, negotiations and
communications, written or oral, with respect thereto, including, but not
limited to, letters or Board or MCC minutes approving any such terms at any
time.

         18. BINDING AND ENFORCEABLE AGREEMENT. The Company represents and
warrants to the Executive that it has all requisite power and authority to
execute, deliver, and perform this Agreement and all necessary corporate
proceedings of the Company and has been duly taken to authorize the execution,
delivery, and performance of this Agreement by it and that this Agreement
constitutes its binding obligation enforceable in accordance with its terms.

                                       ***

                             SIGNATURE PAGE FOLLOWS


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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                        GENESEE CORPORATION

                                        By:   /s/ Stephen B. Ashley
                                              ---------------------
                                        Name: Stephen B. Ashley
                                        Title:   President


                                        /s/Steven M. Morse
                                        ------------------
                                        Steven M. Morse



                                LIST OF EXHIBITS

               Exhibit A        -        Stock Appreciation Rights Agreement



<PAGE>   9
                                                                  Page 79 of 141



                                    EXHIBIT A
                       STOCK APPRECIATION RIGHTS AGREEMENT
                       -----------------------------------



         This STOCK APPRECIATION RIGHTS AGREEMENT dated as of December 15, 2000
(the "EFFECTIVE DATE") between GENESEE CORPORATION, a New York corporation (the
"COMPANY"), and STEVEN M. MORSE, an Executive of the Company (the "EXECUTIVE").

                   P R E L I M I N A R Y  S T A T E M E N T :

         WHEREAS, the Company and the Executive have entered into a certain
Employment Agreement dated as of December 15, 2000 (the "EMPLOYMENT AGREEMENT"),
pursuant to which the Company agreed to award the Executive stock appreciation
rights providing him with an opportunity to recognize value for appreciation in
the value of the Company's Class B common stock on the terms and conditions set
forth herein;

                              P R O V I S I O N S :

         NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the parties hereto agree as follows:

         1. STOCK APPRECIATION RIGHT AWARD. Subject to the terms and conditions
hereafter set forth (including adjustments pursuant to Sections 6 and 7), the
Company hereby grants to the Executive 5,289 stock appreciation right units (the
"SAR UNITS").

         2. BASE PRICE. Subject to adjustments pursuant to Sections 6 and 7, the
base price-per-SAR Unit is $25.31 (the "BASE PRICE").

         3. TERM AND EXPIRATION DATE. This Agreement and the SAR Units granted
hereby shall expire and terminate upon the earlier to occur of (a) the first
anniversary after the termination of the Executive's employment with the Company
for Cause (as defined in the Employment Agreement) or due to the Executive's
resignation, (b) the date on which the Company distributes its final liquidating
dividend to its shareholders, or (c) 5:00 p.m. on December 15, 2011 (the
"EXPIRATION DATE").

         4. EXERCISE TERMS AND PROCEDURES.

            (a) The SAR Units may be exercised any time between the Effective
Date and the Expiration Date. During such period, the SAR Units may be exercised
on any date (each an "EXERCISE DATE") as to all or part to the extent then
exercisable. The partial exercise of the SAR Units shall not cause the
expiration, termination or cancellation of the remaining portion thereof.

            (b) The SAR Units shall be exercised only by delivering a notice of
such exercise to the Company's President, no less than one business day in
advance of the effective date of the proposed exercise. Such notice shall
specify the number of SAR Units that are being exercised and the effective date
of the proposed exercise. The Executive may withdraw such notice at any time
prior to the close of business on the business day immediately preceding the
effective date of the proposed exercise. The SAR Units may be exercised only
once with respect to each SAR Unit.

         5. PAYMENT UPON EXERCISE OF STOCK APPRECIATION RIGHT.

<PAGE>   10
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            (a) Upon the exercise of a SAR Unit, the Executive shall receive an
amount ("SAR PAYMENT AMOUNT") equal to the product of (i) the excess of (A) the
Fair Market Value of one share of the Company's Class B common stock (the
"STOCK") on the Exercise Date over (B) the Base Price, multiplied by (ii) the
number of SAR Units exercised. The Company shall endeavor to pay the SAR Payment
Amount in cash, without interest, within thirty (30) days after the Exercise
Date with respect thereto.

            (b) As used herein, "FAIR MARKET VALUE" shall mean, with respect to
a share of Stock on any given date, the average of the high and low sale prices
of the Stock on a national exchange during the five (5) trading days immediately
preceding the Exercise Date with respect to which the Fair Market Value is being
determined.

         6. PAYMENTS IN CONNECTION WITH DIVIDENDS. In the event that after the
Effective Date the Company makes any dividend distribution upon or with respect
to its Stock (other than a regular quarterly or annual dividend) ("LIQUIDATING
DISTRIBUTION"), then the Base Price shall be reduced to the extent of the amount
thereof is paid with respect to each outstanding share of Stock. After the Base
Price has been reduced to zero, then for the balance of the Liquidating
Distribution that reduced the Base Price to zero and for each Liquidating
Distribution thereafter declared and paid, the Executive shall receive an amount
equal to the amount which would be distributed to him if he held one share of
Stock for each SAR Unit not previously exercised as of or prior to the record
date for such Liquidating Distribution.

         7. CHANGES IN STOCK, ETC. In the event of any stock dividend, stock
split, reverse stock split, recapitalization, exchange of shares or similar
change in capitalization affecting the outstanding Stock, the Management
Continuity Committee of the Board of Directors (the "MCC") shall make
adjustments in the (i) number of SAR Units and the rights with respect thereto
and/or (ii) the Base Price, in the manner and to the extent the MCC believes in
good faith is fair and equitable under the circumstances. In the event of any
merger or consolidation, the MCC may make such substitution or adjustment in the
number of SAR Units and in the Base Price as it may determine in good faith are
fair and equitable under the circumstances, or accelerate, amend or terminate
the terms applicable to the SAR Units upon such terms and conditions as it shall
provide. Notwithstanding the foregoing, in the event that all or any portion of
the SAR Units are terminated and not replaced with a similar award, the MCC
shall deliver to the Executive such payment or other consideration as the MCC
deems in good faith to be fair and equitable under the circumstances.

         8 WITHHOLDING TAXES. All payments under this Agreement shall be net of
an amount sufficient to satisfy all federal, state and local payroll,
withholding and other tax requirements.



<PAGE>   11
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         9. NATURE OF PAYMENTS.

            (a) Any and all payments hereunder shall be paid in consideration of
services performed for the Company or its Subsidiaries or for their benefit by
the Executive.

            (b) All such payments shall constitute a special incentive payment
to the Executive and shall not, unless otherwise determined by the MCC or unless
otherwise expressly provided in any applicable plan document or agreement, be
taken into account in computing the amount of salary or regular compensation of
the Executive for the purposes of determining any other benefits to which the
Executive may be entitled.

         10. OTHER PAYMENTS OR AWARDS. Nothing contained in this Agreement shall
be deemed in any way to limit or restrict the Company, any Subsidiary thereof or
the MCC from making any award or payment to the Executive under any other plan,
agreement, arrangement or understanding, whether now existing or thereafter in
effect, nor shall anything contained in this Agreement create a right of the
Executive to receive any other type of award or compensation.

         11. RIGHT TO TERMINATE EMPLOYMENT. Nothing in this Agreement shall
confer upon the Executive the right to continue in the employment of the Company
or any of its Subsidiaries or affect any right which the Company or any of its
Subsidiaries may have to terminate the employment of the Executive.

         12. NON-TRANSFERABILITY. No rights granted to the Executive under this
Agreement shall be assignable or transferable by the Executive, except by will
or by the laws of descent and distribution. During the life of the Executive,
all rights granted to the Executive under this Agreement shall be exercisable
only by the Executive or by the Executive's guardian or legal representative.

         13. ADMINISTRATION.

            (a) The MCC shall have and exercise all of the power and authority,
among other things, (i) to construe, interpret and implement this Agreement, and
(ii) to take all determinations necessary or advisable in administering this
Agreement. The Executive hereby acknowledges that all decisions, determination
and interpretations made in good faith by the MCC in respect of this Agreement
and the SAR Units shall be final and conclusive and binding on the parties.

            (b) No member of the MCC shall be liable for any action or
determination made in good faith with respect to this Agreement and the SAR
Units.

         14. NO RIGHTS AS A STOCKHOLDER. The parties agree and acknowledge that
this Agreement does not confer upon the Executive as the holder of the SAR Units
any right or interest as a shareholder of the Company, and that no fiduciary
duties are owed by the Company or its directors, officers and shareholders in
respect of this Agreement or the SAR Units. The Executive further agrees and
acknowledges that the Company is not, and shall not be, restricted or limited in
any manner from engaging in any transactions that may have dilutive effects,
entering into or modifying any financing agreements that restrict or limit
payments of dividends, reorganizations or recapitalizations, or otherwise taking
any actions that may affect the SAR Units granted hereunder.

         15. NOTICES. All notices hereunder shall be given in writing by
personal delivery or by recognized overnight courier (such as Federal Express)
addressed to the President of the Company at its principal place of business and
to the Executive at his residence address as then listed in the Company records.

         16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors and assigns of the
Company and, to the extent set forth in Section 12 hereof, to the heirs and
personal representatives of the Executive.


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                                                                  Page 82 of 141


         17.  INTEGRATION. This Agreement together with the Employment
Agreement contains the entire understanding of the parties with respect to its
subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to its subject matter, and may only be amended with a writing
signed by both parties.

         18. NEW YORK LAW. This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York.

                                       ***
                             SIGNATURE PAGE FOLLOWS



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                                                                  Page 83 of 141




         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.

                                       GENESEE CORPORATION

                                       By       /s/ Stephen B. Ashley
                                                ---------------------
                                       Name:    Stephen B. Ashley
                                       Title:   President

                                        /s/ Steven M. Morse
                                       ------------------------------
                                       Steven M. Morse