Exhibit 10.1

                              EMPLOYMENT AGREEMENT

      This Employment Agreement (the "Agreement") is made and entered into as of
the 1st day of May , 2001, between Bath National Bank ("Employer"), a bank
chartered under the laws of New York having its principal office at 44 Liberty
Street, Bath, New York 14810 and Douglas L. McCabe ("Executive"), an individual
residing at 48 Lake Street, Hammondsport, New York 14840.

WHEREAS, Employer wishes to employ Executive in an executive capacity, as its
President, and Executive wishes to accept such employment on the terms and
conditions set forth herein;

      NOW, THEREFORE, in consideration of the mutual promises, benefits and
covenants herein contained, Employer and Executive hereby agree as follows:

      1. Effective Date; Term.

      1.1 Effective Date. This Agreement shall be effective commencing on the
date hereof (the "Effective Date").

      1.2 Initial Term. Employer employs Executive, and Executive accepts such
employment, for a three (3) year period commencing on the Effective Date (the
"Initial Term").

      1.3 Renewal Term. This Agreement will automatically renew for successive
three year terms (each a "Renewal Term") upon the expiration of the Initial Term
or a subsequent Renewal Term unless either party provides written notice to the
other at least ninety (90) days before the end of the Initial Term or Renewal
Term that such party does not intend to renew this Agreement upon the expiration
thereof.

      1.4 Termination. This Agreement may be terminated prior to the expiration
of the Initial Term or any Renewal Term as provided in Sections 4.1 and 4.4 of
this Agreement (see Early Retired Employee).

      2. Scope of Employment.

      2.1 Position and Duties. During the term of this Agreement, Employer shall
employ Executive to serve as the President of Employer. In such capacity,
Executive shall perform such executive, administrative and operational duties as
may be assigned to Executive from time to time by the Board of Directors of
Employer.

      2.2 Exclusive Efforts. Executive agrees to serve Employer faithfully and
to the best of Executive's ability and to devote Executive's entire business
time, attention and efforts to the interests and business of Employer, its
subsidiaries and their affiliates.

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      2.3 Compliance with Laws. Executive agrees at all times to strictly adhere
to and perform all his duties in accordance with applicable laws, rules and
regulations and the written policies and procedures of Employer in effect from
time to time.

      3. Compensation, Benefits and Expenses.

      3.1 Base Salary. Except as otherwise provided in this Agreement, during
the period from the Effective Date through December 31, 2001 (the "First Year")
Employer shall pay to Executive a base salary at a rate of $150,000 per year
(the "Base Salary"). The Base Salary may be increased, in the sole discretion of
Employer, during the remainder of the terms of this Agreement, but may not be
decreased. Employer shall pay the Base Salary to Executive in equal installments
pursuant to Employer's standard payroll policies and Executive's salary shall be
subject to such withholding or deductions as may be mutually agreed between
Employer and Executive or required by law.

      3.2 Bonus. In addition to the salary set forth in Section 3.1, Executive
may receive bonuses as follows:

      3.2.1 If the Employer meets or exceeds its budget for revenue and profit
      for each fiscal year, the Executive shall be eligible for a bonus which
      shall be determined by the Compensation Committee of the Board of
      Directors of Employer.

      3.2.3 The bonus earned by Executive each year during the term of this
      Agreement, if any, shall be paid to Executive in a lump sum promptly after
      the Employer's audited annual financial results are publicly disclosed.

      3.2.4 Employer does not guarantee that any bonus will be awarded or paid
      to Executive. Payment of any bonus shall be subject to such withholding or
      deductions as may be mutually agreed between Employer and Executive or
      required by law.

      3.3 Incentive Stock Plan Benefits. During the period of his employment,
Executive shall be entitled to receive grants of options under any incentive
stock plan operated by Financial Institutions, Inc. ("FII") for its employees
and those of its subsidiaries, in such amounts as may be determined by the
appropriate or the Board of Directors of Employer, or by the FII Board of
Directors or the FII Compensation Committee.

      3.4 Fringe Benefits. During the period of his employment, Executive shall
be entitled to participate in FII's plans for the welfare and benefit of its
employees to the extent Executive satisfies the requirements provided in such
health plans, including health standards, and other qualifications for
participation. In the event Executive becomes a "Retired Early Employee" as
defined in subparagraph 4.4.1, or is terminated for reasons other than those set
forth in subparagraphs 4.1.3, 4.1.4, 4.1.6 or 4.1.7 health insurance and dental
benefits will be continued as if Executive continued to remain an employee for
the remainder of the Initial Term or Renewal Term then in effect, or until
Executive obtains a position offering comparable benefits, whichever occurs
first.

      3.5 Vacation and Holidays. During the term of this Agreement, Executive
shall accrue paid vacation in accordance with Employer's policies of four (4)
weeks per calendar year. Executive shall be entitled to take accrued vacation
days and paid holidays in accordance with

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Employer's policies applicable to its employees generally. Executive may not
carry forward vacation days from year to year.

      3.6 Expenses. During the term of this Agreement, Employer authorizes
Executive to incur reasonable and necessary out-of-pocket business expenses in
the course of performing his duties and rendering services hereunder in
accordance with Employer's policies with respect thereto, and Employer shall
reimburse Executive for all such expenses, provided (i) such expenses and the
purpose for which they were incurred, are in accordance with Employer's
policies, and (ii) Executive timely submits to Employer expense reports and
substantiation of the expenses in accordance with Employer's policies.

      3.7 Country Club Dues and Automobile Expenses. During the term of this
Agreement, Employer shall reimburse Executive for monthly membership dues at a
country club of Executive's choosing, and shall provide Executive with use of a
suitable automobile.

      4. Termination of Employment.

      4.1 Events of Termination. Executive's Employment by Employer shall
terminate at the expiration of the Initial Term or any Renewal Term provided
timely notice is given as provided in Section 1.3 and shall terminate prior to
the expiration of the then current term, if any of the following occur:

      4.1.1 the death of Executive;

      4.1.2 the date on which Executive is (i) determined to be "permanently
            disabled" as defined under the disability insurance policy covering
            Executive, or (ii) if Executive is not covered by any such
            disability policy, Executive is determined to be "totally disabled"
            by the Board of Directors of Employer based upon the advice of a
            board certified physician reasonably acceptable to Employer and
            Executive or his legal representative, which may include a
            determination that Executive is or may be unable, because of
            physical or mental illness or incapacity or otherwise, to fulfill
            his duties under this Agreement for six consecutive months

      4.1.3 the commission by Executive of, [or the determination by the Board
            of Directors that there is a reasonable basis to believe that the
            Executive has committed, (i) a criminal offense involving the
            violation of state or federal law], (ii) a breach of fiduciary duty,
            (iii) a material act of dishonesty, fraud or misrepresentation, or
            (iv) any act of moral turpitude which the Board of Directors
            determines has or may be reasonably expected to have a material
            detrimental impact on Employer's business or operations, or which
            may prevent, because of its demonstrated or demonstrable effect on
            employees, regulatory agencies or customers, Executive from
            effectively performing his executive and other duties under this
            Agreement;

      4.1.4 Executive neglects to satisfactorily perform the duties which
            Executive is required to perform under this Agreement or performs
            such duties other than in good faith, as determined by the Board of
            Directors. The Board will provide a written notice to the Executive,
            specifying the unsatisfactory performance and suggest what must be
            done to improve and maintain such performance. The written notice
            will also specify the time period (considered probationary period)
            given the Executive to correct such conduct.

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      4.1.5 the termination of Executive's employment by Employer during the
            term of this Agreement for any reason without cause other than
            pursuant to Sections 4.1.1, 4.1.2, 4.1.3 or 4.1.4;

      4.1.6 Executive's resignation or retirement; or

      4.1.7 the mutual consent to such termination in writing by Executive and
            Employer.

      4.2 Time of Termination. Executive's employment with Employer shall
terminate immediately upon Executive's death, upon written notice of termination
from Employer or Executive upon the occurrence of an event specified in Sections
4.1.2, 4.1.3, 4.1.5 or 4.1.6, upon the expiration of the cure period specified
in Section 4.1.4, on the date specified in the agreement terminating Executive's
employment pursuant to Section 4.1.7, or upon expiration of the Initial Term or
a Renewal Term if timely notice is given pursuant to Section 1.3 (as applicable,
the "Termination Date"). Employer's and Employee's obligations under this
Agreement shall terminate upon such termination of employment without any
further action by the parties except to the extent specifically provided herein.

      4.3 Effect of Termination of Employment. Following the Termination Date:

      4.3.1 Executive shall return all property of Employer as provided in
      Section 6 of this Agreement;

      4.3.2 Executive's salary shall cease to accrue;

      4.3.3 Subject to Section 4.4, the Board of Directors shall determine an
      appropriate bonus to pay to Executive as his bonus or other incentive
      compensation for the period through the Termination Date computed
      consistently with the manner in which Executive's bonus or incentive
      compensation would have been determined for such period if Executive's
      employment had not terminated;

      4.3.4 Executive's participation in FII's benefit plans shall cease except
      as required by law, the terms of the plan(s) or as provided in
      subparagraph 3.4 of this Agreement;

      4.3.5 Executive shall cease to accrue vacation days and shall be paid for
      unused vacation time accrued in accordance with Employer's policies
      applicable to employees generally; and

      4.3.6 Executive shall submit any claims for reimbursement of business
      expenses incurred in accordance with Section 3.5 within the time period
      required under Employer's policies generally or Employer will not be
      obligated to reimburse such expenses.

      4.3.7 In the case of an Early Termination, the Employer shall have no
      further liability to Executive hereunder, except as explicitly stated in
      this Agreement, other than for earned but unpaid compensation and those
      benefits (accrued but unpaid) to which Executive is entitled under this
      Agreement through the Termination Date, including termination in the cases
      listed in Section 3.4, continued fringe benefits as provided in such
      Section 3.4.

      Upon Termination of Employment, for any reason, all split dollar insurance
      policies in effect on the Executive's life will terminate. The Executive
      shall have the right, under

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      the terms of the split dollar agreement, to purchase the policies by
      paying to the Corporation an amount as defined in Article 7.1 of the Split
      Dollar Agreement.

      4.3.8 If, during the term of this Agreement, the Executive is terminated
      for reasons other than those set forth in subparagraphs 4.1.1, 4.1.2,
      4.1.3, 4.1.4, 4.1.6 or 4.1.7, Employer shall, during the one year period
      after the Termination Date, make equal monthly payments or a single lump
      sum payment to the Executive (which shall not be deemed base annual salary
      payments) in an amount such that the present value of all such payments,
      determined as of the Termination Date, equals the sum of (a) the Base
      Salary Amount, and (b) the annual incentive compensation paid by Employer
      to Executive for the most recent tax year ending before Termination Date
      occurred. It shall be at the discretion of the Compensation Committee, as
      to whether the payment is made as a single lump sum payment or equal
      monthly payments.

      4.4. Change of Control and Change of Authority

      4.4.1 Retired Early Employee. If a Change of Control and Change of
      Authority, as such terms are defined in subparagraph 4.4.7 below, occurs
      during the term of the Executive's employment under this Employment
      Agreement, either the Executive, on the one hand, or Employer, on the
      other, may elect by written notice, given to the other party or parties,
      at any time within twelve (12) months after such Change of Control and
      Change of Authority, to terminate the employment of the Executive by
      Employer, whereupon the Executive will become a "Retired Early Employee,"
      and will be entitled to receive such payments as are provided hereafter in
      this Section 4.4. Such election and the termination of the Executive's
      employment shall become effective on the first day of the second calendar
      month commencing after delivery of the notice or on such earlier date as
      the Executive in his sole discretion may specify (the "Effective Date").

      4.4.2 Cash Payments. If the Executive should become a Retired Early
      Employee hereunder, Employer shall, during the period commencing on the
      Effective Date and ending two years thereafter (the "Pay-Out Period"),
      make equal monthly payments or a single lump sum payment to the Executive
      (which shall not be deemed base annual salary payments) in an amount such
      that the present value of all such payments, determined as of the
      Effective Date, equals the sum of two times the Base Salary Amount, as
      such term is defined in subparagraph 4.4.7 below, plus [the sum] of the
      annual incentive compensation paid by Employer to Executive, as determined
      over the most recent two (2) tax years ending before the date on which the
      Change of Control and Change of Authority occurred. The Executive shall
      request the method of payment, however, it shall be at the discretion of
      the Compensation Committee, as to whether the payment is made as a single
      lump sum payment or equal monthly payments. The payment(s) provided for in
      subparagraph 4.3.8 do not apply to Retired Early Employees who receive
      cash payment(s) pursuant to this subparagraph.

      If at any time during the Pay-Out Period the Compensation Committee of the
      Board in its sole discretion shall determine, upon application of the
      Retired Early Employee supported by substantial evidence, that the Retired
      Early Employee is then under a severe financial hardship resulting from
      (i) a sudden and unexpected illness or accident of the Retired Early
      Employee or any of his dependents (as defined in section 152(a) of the
      Internal Revenue Code), (ii) loss of the Retired Early Employee's property
      due to casualty, or (iii) other similar extraordinary and unforeseeable
      circumstance arising as a

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      result of events beyond the control of the Retired Early Employee,
      Employer shall make available to the Retired Early Employee, in one (1)
      lump sum, an amount up to but not greater than the present value of all
      monthly payments remaining to be paid to him in the Pay-Out Period,
      calculated as of the date of such determination by the Compensation
      Committee of the Board, for the purpose of relieving such severe financial
      hardship to the extent the same has not been or may not be relieved by
      (xi) reimbursement or compensation by insurance or otherwise, (xii)
      liquidation of the Retired Early Employee's assets (to the extent such
      liquidation would not itself cause severe financial hardship), or (xiii)
      distributions from other benefit plans. If (a) the lump sum amount thus
      made available is less than (b) the present value of all such remaining
      monthly payments, Employer shall continue to pay to the Retired Early
      Employee monthly payments for the duration of the Pay-Out Period, but from
      such date forward such monthly payments will be in a reduced amount such
      that the present value of all such reduced payments will equal the
      difference between (b) and (a), above. The Retired Early Employee may
      elect to waive any or all payments due him under this subparagraph.

      4.4.3 Acceleration of Stock Options. All options and other rights that
      Executive may hold to purchase or otherwise acquire Common Stock of FII
      shall immediately become exercisable in full for the total number of
      shares that are or might become purchasable thereunder, in each case
      without further condition or limitation except the giving of notice of
      exercise and the payment of the purchase price thereunder (but without
      amendment of the plan under which they were issued). At his discretion,
      Executive may elect to surrender to Employer his rights in any such
      options and rights held by him and, upon that surrender, Employer shall
      pay him an amount in cash equal to the aggregate spread between the
      exercise prices of all those options and rights and the value of the
      Common Stock purchasable thereunder (or of any other security into which
      the Common Stock has been exchanged or converted) as of the date of the
      termination of employment, the value to be determined by the reported last
      sale price of the Common Stock or that other security (or the mean between
      the reported last bid and asked prices) on that date on NASDAQ (or, if it
      is not NASDAQ, on whatever may then be the principal exchange or quotation
      system on which the Employer's Common Stock or that other security is
      traded at that time).

      4.4.4 Life Insurance Policies. Employer shall repay any policy loans
      previously taken on the Employer's insurance policies on Executive's life
      (provided that the directors of Employer were given written notice
      promptly after the making of any such loans which were made while
      Executive was the president and chief executive officer of Employer), and
      then shall transfer to Executive any and all of its right, title, and
      interest in and to all Employer life insurance policies on Executive's
      life (and upon that transfer, Executive shall be deemed to have released
      Employer from any and all obligations it then owes to him to maintain and
      pay premiums on those policies, all other provisions of any agreements
      under which those policies were agreed to be maintained, however, to
      remain in effect).

      Upon termination of employment, all split dollar policies in effect on the
      Executive's life will terminate. The Executive shall have the right, under
      the terms of the split dollar agreement, to purchase the policies by
      paying to the Corporation an amount as defined in Article 7.1 of the Split
      Dollar Agreement.

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      4.4.5 Death of Retired Early Employee. If the Retired Early Employee dies
      before receiving all monthly payments payable to him under subparagraph
      4.4(b), above, Employer shall pay to the Retired Early Employee's estate,
      one (1) lump sum payment in an amount equal to the present value of all
      such remaining unpaid monthly payments, determined as of the date of death
      of the Retired Early Employee.

      4.4.6 Indemnification of Executive. In the event a Change of Control and
      Change of Authority occurs, Employer shall indemnify Executive for all
      reasonable legal fees and expenses subsequently incurred by Executive
      through legal counsel approved in advance by Employer [(which approval
      shall not be unreasonably withheld)] in seeking to obtain or enforce any
      right or benefit provided under this Employment Agreement, including but
      not limited to the rights and benefits provided under this Section 4.4 and
      whether or not Executive has become a Retired Early Employee hereunder,
      provided, however, that such right to indemnification will not apply if
      and to the extent that a court of competent jurisdiction shall determine
      that any such fees and expenses have been incurred as a result of
      Executive's bad faith or willful misconduct[or if such a court dismisses
      the action seeking to enforce the right or benefit for failure to state a
      claim.] Indemnification payments payable hereunder by Employer shall be
      made not later than thirty (30) days after a request for payment has been
      received from Executive with such evidence of indemnifiable fees and
      expenses as Employer may reasonably request.

      4.4.7 Definitions.

            (i) The "Base Salary Amount" for purpose of this Paragraph 4.4 shall
      equal the annual compensation payable by Employer to Executive and
      includable by Executive in gross income for the most recent year ending
      before the date on which the Change of Control and Change of Authority
      occurred.

            (ii) A "Change of Control" shall be deemed to have occurred if

                        (A) any individual corporation (other than FII),
                  partnership, trust, association, pool, syndicate, or any other
                  entity or any group of persons acting in concert becomes the
                  beneficial owner, as that concept is defined in Rule 13d-3
                  promulgated by the Securities and Exchange Commission under
                  the Securities Exchange Act of 1934, as the result of any one
                  or more securities transactions (including gifts and stock
                  repurchases but excluding transactions described in
                  subdivision (B), following), of securities of FII possessing
                  twenty percent (20%) or more of the voting power for the
                  election of directors of such entity,

                        (B) there shall be consummated any consolidation, merger
                  or stock-for-stock exchange involving FII or the securities of
                  FII in which the holders of voting securities of FII
                  immediately prior to such consummation own, as a group,
                  immediately after such consummation, voting securities of FII
                  (or, if FII does not survive such transaction voting
                  securities of the corporation surviving such transaction)
                  having less than fifty percent (50%) of the total voting power
                  in an election of directors of FII (or such other surviving
                  corporation), excluding securities received by any members of
                  such group which represent disproportionate percentage
                  increases in their shareholdings vis-a-vis the other members
                  of such group,

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                        (C) "approved directors" shall constitute less than a
                  majority of the entire Board of Directors, with "approved
                  directors" defined to mean the members of the Board of
                  Directors of Employer as of the date of this Agreement and any
                  subsequently elected members who shall be nominated or
                  approved by a majority of the approved directors on the Board
                  prior to such election, or

                        (D) there shall be consummated any sale, lease, exchange
                  or other transfer (in one transaction or a series of related
                  transactions, excluding any transaction described in
                  subdivision (B), above), of all, or substantially all, of the
                  assets of FII to a party which is not controlled by or under
                  common control with FII.

            (iii) A "Change of Authority" shall be deemed to have occurred if
      upon the occurrence of a Change in Control, Executive, without his/her
      written consent, is required by Employer to accept any demotion, loss of
      title, or office, reduction in his annual compensation or benefits, or
      relocation of his principal place of employment by more than 25 miles from
      its location immediately prior to the Change in Control; provided,
      however, that Executive may consent in writing to any such demotion, loss,
      reduction or relocation.

      5. Confidentiality; Inventions.

      5.1 Confidential Information. Executive has and will have access to and
participate in the development of or be acquainted with confidential or
proprietary information and trade secrets related to the business of Employer,
its subsidiaries and any affiliates (collectively, the "Companies"), including
but not limited to (i) business plans, software programs, operating plans,
marketing plans, financial reports, operating data, budgets, wage and salary
rates, pricing strategies and information, terms of agreements with suppliers or
customers and others, customer lists, reports, correspondence, tapes, disks,
tangible property and specifications owned by or used in the Companies'
businesses; (ii) operating strengths and weaknesses of the Companies' officers,
directors, employees, agents, suppliers and customers, and/or (iii) information
pertaining to future developments such as, but not limited to, research and
development, software development or enhancement, future marketing plans or
ideas, and plans or ideas for new services or products, (iv) all information
which is learned or developed by Executive in the course and performance of his
duties under this Employment Agreement, including without limitation, reports,
information and data relating to the Employer's acquisition strategies, and (v)
other tangible and intangible property which is used in the business and
operations of the Companies but not made publicly available (i) through (v) are,
collectively, (the "Confidential Information").

      5.2 Treatment of Confidential Information; Confidentiality Agreements.
Executive shall not, directly or indirectly, disclose, use or make known for his
or another's benefit any Confidential Information of the Companies or use such
Confidential Information in any way except in the best interests of the
Companies in the performance of Executive's duties under this Agreement. In
addition, to the extent that Employer has entered into a confidentiality
agreement with any other person or entity Executive agrees to comply with the
terms of such confidentiality agreement and to be subject to the restrictions
and limitations imposed by such confidentiality agreements as if he was a party
thereto.

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      5.3 Inventions. Executive shall promptly disclose both orally and in
writing to Employer all discoveries, ideas, software, developments, discoveries,
designs, improvements, innovations and inventions (collectively referred to
herein as "Inventions"), whether patentable or not, either relating to the
existing or contemplated business, products, services, plans, processes, or
procedures of Employer, or suggested by or resulting from Executive's work at
Employer, or resulting wholly or in part from the use of Employer's time,
material, facilities or ideas, which Executive made or conceived or may make or
conceive, whether or not during working hours, alone or with others, at any time
during the term of this Agreement or within one year thereafter, and Executive
agrees that all such inventions shall be the exclusive property of the Employer.

      5.4 Assignment of Inventions. Executive hereby assigns to Employer all his
rights and interests in and to all such inventions and all patents, copyrights,
trademarks or other types of intellectual property protection which may be
obtained on them, in this and all foreign countries. At Employer's expense, but
without charge to it, Executive agrees to execute, acknowledge and deliver to
Employer any specific assignments to any such inventions or other relevant
documents and to take any such further action as may be considered necessary by
Employer at any time to obtain or defend letters patent in any and all
countries, to obtain documents relating to registration, ownership or transfer
of copyrights, to vest title in such inventions in Employer or its assigns, or
to obtain for Employer any other legal protection for such inventions.

      5.5 Survival of Obligations. The obligations of Executive under this
Section 5 shall survive the termination of Executive's employment and the
expiration or termination of this Agreement.

      6. Return of Employer's Property. Immediately upon the Termination Date,
Executive shall deliver to Employer all copies of data, information and
knowledge, including, without limitation, all notes, reference materials,
sketches, diagrams, reproductions, memoranda, documentation and records
incorporating or reflecting any Confidential Information, documents,
correspondence, notebooks, reports, computer programs, names of full-time and
part-time employees and consultants, and all other materials and copies thereof
(including computer disks and other electronic media) relating in any way to the
business of Employer in any way obtained by Executive during the period of his
employment with Employer, along with any automobile provided by Employer for
Executive's use (the "Employer's Property"). The Employer's Property shall
belong exclusively to the Employer and shall be delivered to the Employer
immediately upon termination of Executive's employment with the Employer, for
whatever reason said termination occurs. The obligations of Executive under this
Section 6 shall survive the termination of Executive's employment and the
expiration or termination of this Agreement.

      7. Non-competition and Non-solicitation.

      7.1 Non-competition. During the term of this Agreement and during the
period for which Executive is entitled to receive compensation after the
termination of this Agreement pursuant to subparagraphs 4.3.8 or 4.4.2,
regardless of whether such compensation is paid in a lump sum rather than
monthly payments, Employee shall not engage, anywhere within New York State,
whether directly or indirectly, as principal, owner, officer, director, agent,
employee, consultant or partner, in the management of a bank holding company,
commercial bank, savings bank, credit union or any other financial services
provider that competes with FII, its subsidiaries or its products or programs
("Restricted Activities"), provided that the foregoing shall not restrict
Executive from engaging in any Restricted Activities which Employer directs
Executive to undertake or which Employer otherwise expressly authorizes. The
foregoing shall not restrict

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Executive from owning less than 1% of the outstanding capital stock of any
company which engages in Restricted Activities, provided that Executive is not
otherwise involved with such company as an officer, director, agent, employee or
consultant

      7.2 Scope and Breach of Non-Competition. Subject to Executive's continuing
compliance with the provisions of Section 7.1, Executive may be a principal,
owner, officer, director, agent, consultant or partner, of any corporation,
partnership or other entity. The foregoing provisions of Section 7.1 shall not
be held invalid because of the scope of the territory covered, the actions
restricted thereby, or the period of time such covenant is operative. In the
event of a breach or threatened breach by the Executive of Section 7.1, Employer
shall be entitled to a temporary restraining order and an injunction restraining
Executive from the commission of such breach. Nothing herein shall be construed
as prohibiting Employer from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.

      7.3 Non-solicitation. During the term of this Agreement and for a two (2)
year period following the Termination Date, Executive shall not, directly or
indirectly, without the written consent of Employer: (i) recruit or solicit for
employment any employee of Employer or FII or encourage any such employee to
leave their employment with Employer or FII, or (ii) solicit, induce or
influence any customer, supplier, lessor or any other person or entity which has
a business relationship with Employer or FII to discontinue or reduce the extent
of such relationship with Employer or FII.

      7.4 In the event that the Executive breaches any of the provisions of
paragraphs 7.1,7.2, or 7.3, the cash payments provided for by subparagraphs
4.3.8 or 4.4.2 shall cease immediately. Executive shall have no further
entitlement to receive cash payments pursuant to subparagraphs 4.3.8 or 4.4.2
and Employer shall have no further liability for such payments after the date of
Executive's breach.

      7.5 The Executive and the Employer believe that the restrictions and
covenants in this section are reasonable and enforceable under the
circumstances. However, if any one or more of the provisions in this section
shall, for any, reason be held to be excessively broad as to time, duration,
geographic scope, activity, or subject, it shall be construed by limiting and
reducing it so as to be enforceable to the extent compatible with law and with
the Executive's and the Employer's intentions as stated herein.

      7.6 Survival of Obligations. The obligations of Executive and Employer
under this Section 7 shall survive the termination of Executive's employment and
the expiration or termination of this Agreement.

      8. Miscellaneous.

      8.1 Remedies. Each of the parties hereto shall have all rights and
remedies set forth in this Agreement. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law or any other agreement
or contract to which such person is a party. Each party shall be entitled to
enforce such rights specifically (without the requirement of posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Without limiting
the generality of

<PAGE>

the foregoing, Executive specifically agrees that any breach or threatened
breach of Sections 5, 6 or 7 would cause irreparable injury to Employer, that
money damages would not provide an adequate remedy to Employer, and that
Employer shall accordingly have the right and remedy (i) to obtain an injunction
prohibiting Executive from violating or threatening to violate such provisions,
(ii) to have such provisions specifically enforced by any court of competent
jurisdiction, and (iii) to require Executive to account for and pay over to
Employer all compensation, profits, monies, accruals, increments or other
benefits derived or received by Executive as the result of any transactions
constituting a breach of such provisions.

      8.2 Entire Agreement; Amendments and Waivers. This Agreement (including
the schedule hereto) represents the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by a
written instrument making specific reference to this Agreement signed by the
party against whom enforcement of any such amendment, supplement, modification
or waiver is sought. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach. No
failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.

      8.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without reference to its
principles of conflicts of law.

      8.4 Notices. All notices, demands, solicitations of consent or approval,
and other communications hereunder shall be in writing and shall be delivered
personally, mailed, sent by telefax or sent by recognized commercial courier
(e.g., Federal Express). If delivered personally, such notice shall be deemed to
be given when delivered to the intended recipient. If delivered by mail, such
notice shall be deemed to be given five (5) days after having been deposited in
the United States mail so addressed, with postage thereon prepaid. If delivered
by telefax, such notice shall be deemed given when transmission of the notice is
complete to the telefax number of the other party. If delivered by recognized
commercial carrier, such notice shall be deemed given one (1) day after having
been delivered to a recognized commercial carrier for overnight delivery. All
such notices shall be addressed to the address set forth in the preamble to this
Agreement or to such other address which such party shall have given to the
other party for such purpose by notice hereunder.

      8.5 Captions. The headings used in this Agreement are intended for
reference purposes only and shall not control or affect in any manner the
meaning or interpretation of any of the provisions of is Agreement.

      8.6 Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted. All
provisions of this Agreement shall be enforced to the full extent permitted by
law.

      8.7 Interpretation. The parties acknowledge and agree that: (i) each party
and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have

<PAGE>

contributed to its revision; (ii) the rule of construction to the effect that
any ambiguities are resolved against the drafting party shall not be employed in
the interpretation of this Agreement; and (iii) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto, regardless of
which party was generally responsible for the preparation of this Agreement.

      8.8 Counterparts. This Agreement may be executed in any number of copies,
each of which shall be deemed an original, and all of which together will be
deemed one and the same instrument.

      8.9 Successors and Assigns. All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind, and inure to
the benefit of the respective successors and permitted assigns of the parties
hereto whether so expressed or not. Neither party shall transfer or assign this
Agreement or any of their rights or obligations hereunder, whether by operation
of law or otherwise, without the prior written consent of the other party
hereto. Any attempted transfer or assignment of this Agreement or any rights or
obligations hereunder in violation of this provision shall be void ab initio.

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

                                     Bath National Bank


                                     By:  /s/ PETER G. HUMPHREY
                                         -----------------------
                                              Peter G. Humphrey
                                                  President & CEO
                                           Financial Institutions, Inc.


                                     BY:  /s/ DOUGLAS L. McCABE
                                         -----------------------
                                              Douglas L. McCabe
                                               President & CEO