Document:

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                                                                    Exhibit 10.4
                                                                    ------------

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

                  This sets forth the Employment Agreement made effective as of
_______________, 2001 between (i) COMMUNITY BANK SYSTEM, INC., a Delaware
corporation and registered bank holding company, and COMMUNITY BANK, N.A. (the
"Bank"), a national banking association, both having offices located in
___________ (collectively, the "Employer"), and (ii) JOSEPH R. SOLFANELLI, an
individual currently residing in ________________, Pennsylvania ("Employee").

                                  WITNESSETH
                                  ----------

                  WHEREAS, pursuant to an Agreement and Plan of Merger between
Community Bank System, Inc. (the "Corporation") and First Liberty Bank Corp.
(the "Seller"), dated November 29, 2000 (the "Agreement and Plan of Merger"),
the Corporation and the Seller have agreed to a merger (the "Merger") of the
Seller with the Corporation effective as of the closing date specified in the
Agreement and Plan of Merger (the "Closing Date") and a merger of First Liberty
Bank & Trust, a wholly-owned subsidiary of the Seller ("First Liberty Bank"),
with the Bank; and

                  WHEREAS, the Employee is presently a party to an amended and
restated employment agreement dated October 25, 2000 (the "First Liberty
Employment Agreement") with First Liberty Bank; and

                  WHEREAS, in connection with the Merger, the Employee would be
entitled to resign and receive the benefits and payments provided for under
Section 6 of the First Liberty Employment Agreement; and

                  WHEREAS, the Employer wishes to employ the Employee to secure
for itself the services of the Employee for a period following the Closing Date;
and

                  WHEREAS, the Employee is willing to defer receipt of the
benefits and payments provided for under Section 6 of the First Liberty
Employment Agreement and accept employment with the Employer on the terms and
conditions hereinafter set forth.
<PAGE>

                  NOW, THEREFORE, the parties hereto agree as follows:

                  1.    Employment.
                        ----------

                        (a) Term. Employer shall continue to employ Employee,
                            ----
and Employee shall continue to serve for a term commencing on the Closing Date
and ending on the day immediately preceding the third anniversary date of the
Closing Date ("Period of Employment"), subject to termination as provided in
Paragraph 3 hereof.

                        (b) Salary. During the Period of Employment, Employer
                            ------
shall pay Employee base salary at an annual rate of One Hundred Fifty Thousand
Dollars ($150,000) ("Base Salary"). Employer agrees to review the performance of
the Employee on a periodic basis, and may increase the Base Salary provided
above, upon approval of the Board of Directors of the Employer. Any increase in
the Base Salary granted shall become part of the Base Salary, and shall remain
in effect throughout the term of this Agreement. Employee's Base Salary is
payable in accordance with Employer's regular payroll practices for executive
employees.

                        (c) Incentive Compensation. Employee shall be entitled
                            ----------------------
to annual incentive awards pursuant to the terms of the Management Incentive
Plan which has been approved by the Board of Directors of Employer to cover key
personnel of Employer. Upon termination of Employee's employment pursuant to
subparagraph 3(a), 3(b), 3(c) or 6, Employee shall be entitled to a pro rata
portion (based on Employee's complete months of active employment in the
applicable year) of the annual incentive award that is payable with respect to
the year during which the termination occurs or, in the case of a termination
upon Employee's disability pursuant to subparagraph 3(c), the date the
Disability Period began.

                  2.    Duties During the Period of Employment. Employer shall
                        --------------------------------------
employ Employee, and Employee shall serve in such executive and managerial
capacities and shall have such responsibilities, duties and authority as may,
from time to time, be assigned to Employee by and under the authority or
delegated authority of the Board of Directors of the Employer. Employee shall be
employed as and shall have the title of Executive Vice President and Chief Legal
Officer of the division of the Bank operating in the market areas in
Pennsylvania previously served by First Liberty Bank. In addition, Employee
agrees to render such services and perform such other duties for and on behalf
of any subsidiary or affiliated entity of the Employee as may be requested from
time to time by the Board of Directors of the Employer. In

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his employment, Employee agrees to discharge his duties to the best of his
abilities and to devote his full time and attention to the business and affairs
of the Employer at its offices of business. Employee shall not be required to
relocate the principal place of performance of his duties under this Agreement
beyond a radius of fifty (50) miles from Scranton, Pennsylvania.

                   3.   Termination. Employee's employment by Employer shall be
                        -----------
subject to termination as follows:

                        (a) Expiration of the Term. This Agreement shall
                            ----------------------
terminate automatically at the expiration of the Period of Employment unless the
parties enter into a written agreement extending Employer's employment, except
for the continuing obligations of the parties as specified hereunder.

                        (b) Termination Upon Death. This Agreement shall
                            ----------------------
terminate upon Employee's death. In the event this Agreement is terminated as a
result of Employee's death, Employer (i) shall continue payments of Employee's
Base Salary for a period of 90 days following Employee's death to the
beneficiary designated by Employee on the "Beneficiary Designation Form"
attached to this Agreement as Appendix A and (ii) shall pay to such designated
beneficiary within thirty (30) days of such termination the severance amount
provided for in paragraph 9. Employee's beneficiary shall be free to dispose of
any restricted stock previously granted to Employee by Employer. Additionally,
Employer shall treat as immediately exercisable all unexpired stock options held
by Employee that are not exercisable or that have not been exercised, so as to
permit the Beneficiary to purchase the balance of Corporation capital stock not
yet purchased pursuant to said options until the end of the exercise period
provided in the original grant of the option right.

                        (c) Termination Upon Disability. Employer may terminate
                            ---------------------------
this Agreement upon Employee's disability. For the purpose of this Agreement,
Employee's inability to perform Employee's duties hereunder by reason of
physical or mental illness or injury for a period of 26 successive weeks (the
"Disability Period") shall constitute disability. The determination of
disability shall be made by a physician selected by Employer and a physician
selected by Employee; provided, however, that if the two physicians so selected
shall disagree, the determination of disability shall be submitted to
arbitration in accordance with the rules of the American Arbitration Association
and the decision of the arbitrator shall be binding

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and conclusive on Employee and Employer. During the Disability Period, Employee
shall be entitled to 100% of Employee's Base Salary otherwise payable during
that period, reduced by any other benefits to which Employee may be entitled for
the Disability Period on account of such disability (including, but not limited
to, benefits provided under any disability insurance policy or program, workers'
compensation law, or any other benefit program or arrangement). Upon termination
pursuant to this disability provision, (i) Employer shall pay to Employee within
thirty (30) days of such termination the severance amount provided for in
paragraph 9 and (ii) Employee shall be free to dispose of any restricted stock
granted to Employee. Additionally, Employer shall treat as immediately
exercisable all unexpired stock options held by Employee that are not
exercisable or that have not been exercised, so as to permit the Employee to
purchase the balance of Corporation's capital stock not yet purchased pursuant
to said options until the end of the exercise period provided in the original
grant of the option right.

                        (d) Termination for Cause. Employer may terminate
                            ---------------------
Employee's employment immediately for "cause" by written notice to Employee. For
purposes of this Agreement, a termination shall be for "cause" if the
termination results from any of the following events:

                           (i)   Material breach of this Agreement;

                           (ii)  Documented misconduct as an executive or
     director of Employer, or any subsidiary or affiliate of Employer for which
     Employee is performing services hereunder including, but not limited to,
     misappropriating any funds or property of any such company, or attempting
     to obtain any personal profit (x) from any transaction to which such
     company is a party or (y) from any transaction with any third party in
     which Employee has an interest which is adverse to the interest of any such
     company, unless, in either case, Employee shall have first obtained the
     written consent of the Board of Directors of Employer;

                           (iii) Unreasonable neglect or refusal to perform the
     duties assigned to Employee under or pursuant to this Agreement, unless
     cured within 60 days;

                           (iv)  Conviction of a crime involving moral
     turpitude;

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<PAGE>

                           (v)   Adjudication as a bankrupt, which adjudication
     has not been contested in good faith, unless bankruptcy is caused directly
     by Employer's unexcused failure to perform its obligations under this
     Agreement;

                           (vi)  Documented failure to follow the reasonable,
     written instructions of the Board of Directors of Employer, provided that
     the instructions do not require Employee to engage in unlawful conduct; or

                           (vii) Any documented violation of the rules or
     regulations of the Office of the Comptroller of the Currency or of any
     other regulatory agency.

Notwithstanding any other term or provision of this Agreement to the contrary,
if Employee's employment is terminated for cause, Employee shall forfeit all
rights to payments and benefits otherwise provided pursuant to this Agreement;
provided, however, that Base Salary shall be paid through the date of
termination; and further provided, however, that Employer shall in all events
pay to Employee within thirty (30) days of such termination the severance amount
provided for in paragraph 9 and provide to Employee the other benefits provided
in paragraph 9.

                        (e) Termination For Reasons Other Than Cause. In the
                            ----------------------------------------
     event Employer terminates Employee prior to the end of the Period of
     Employment for reasons other than cause, Employee shall be entitled to
     severance equal to the greater of (i) the sum of the annual Base Salary in
     effect at the time of termination and the most recent payment to Employee
     under the Management Incentive Plan, or (ii) amounts payable through the
     balance of the unexpired term of this Agreement.

                        (f) Employer shall have the right of first refusal to
     purchase from Employee or Employee's estate, shares of Corporation capital
     stock acquired pursuant to the exercise of stock options after date of
     termination, in the event Employee or Employee's estate elects to dispose
     of or transfer such acquired shares. Such right of first refusal shall
     expire ten years from the date of termination.

                  4.    Fringe Benefits.
                        ---------------

                        (a) Benefit Plans. During the Period of Employment,
                            -------------
Employee shall be eligible to participate in any employee pension benefit plans
(as that term is defined under

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Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended), Employer-paid group life insurance plans, medical plans, dental plans,
long-term disability plans, business travel insurance programs and other fringe
benefit programs maintained by Employer for the benefit of its executive
employees. Participation in any of Employer's benefit plans and programs shall
be based on, and subject to satisfaction of, the eligibility requirements and
other conditions of such plans and programs. Employer may require Employee to
submit to an annual physical, to be performed by a physician of his own
choosing. Employee shall be reimbursed for related expenses not covered by
Employer's health insurance plan, or any other plan in which Employee is
enrolled. Employee shall not be eligible to participate in Employer's Severance
Pay Plan maintained for other employees not covered by employment agreements.

                        (b) Expenses. Upon submission to Employer of vouchers or
                            --------
other required documentation, Employee shall be reimbursed for Employee's actual
out-of-pocket travel and other expenses reasonably incurred and paid by Employee
in connection with employee's duties hereunder. Reimbursable expenses must be
submitted to the President and CEO of Employer for review on a quarterly basis.

                        (c) Other Benefits. During the Period of Employment,
                            --------------
Employee also shall be entitled to receive the following benefits:

                            (i)   Paid vacation of four weeks during each
     calendar year (with no carry over of unused vacation to a subsequent year)
     and any holidays that may be provided to all employees of Employer in
     accordance with Employer's holiday policy;

                            (ii)  Reasonable sick leave;

                            (iii) Employer paid membership for Employee at the
     Glen Oak or Glen Maura Country Club, subject to nondeductible tax treatment
     by Employer or a reimbursement to Employee for taxes owed by Employee in
     connection with such benefit; and

                            (iv)  The use of an Employer-owned automobile of
     Employee's choice, the purchase and replacement of which shall be subject
     to the approval of the Personnel Committee of the Board of Directors of
     Employer.

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<PAGE>

                  5.    Stock Options. Employer shall cause the Personnel
                        -------------
Committee of the Board of Directors of Employer to review whether Employee
should be granted options to purchase shares of comon stock of Corporation. Such
review may be conducted pursuant to the terms of the Corporation's 1996 Long-
Term Incentive Compensation program or independently, as the Personnel Committee
shall determine. Reviews shall be conducted no less frequently than annually.

                  6.    Change of Control.
                        -----------------

                        (a) If Employee's employment with Employer (as an
employee) shall cease for any reason, including Employee's voluntary termination
but not including Employee's termination for "cause" (as described in paragraph
3(d)), within two years following a Change of Control that occurs during the
Period of Employment, Employer shall:

                            (i)   Retain the services of Employee, on an
     independent contractor basis, as a consultant to Employer for a period of
     no less than 36 months at an annual consulting fee rate equal to Employee's
     Base Salary in effect at the time of Employee's termination, plus an amount
     equal to the Management Incentive paid to the Employee in the year previous
     to the Change of Control;

                            (ii)  Provide Employee with fringe benefits, or the
     cash equivalent of such benefits, identical to those described in paragraph
     4(a) for the period during which Employee is retained as a consultant
     pursuant to (i) above. To the extent the benefits provided to Employee in
     6(a)(ii) above are deemed taxable benefits, Employer shall reimburse
     Employee for taxes owed by Employee on the benefits and tax reimbursement;
     and

                            (iii) Treat as immediately exercisable all unexpired
     stock options described in paragraph 5 that are not otherwise exercisable
     or that have not been exercised and permit Employee to dispose of any
     restricted stock granted to Employee.

                            (iv)  Subject to Employer's right to make the single
     lump sum payment described in paragraph 6(a)(v) below, if any portion of
     the amounts paid to, or value received by, Employee following a Change of
     Control (whether paid or received pursuant to this paragraph 6 or
     otherwise) constitutes an "excess parachute payment"

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<PAGE>

     within the meaning of Internal Revenue Code Section 280G, then the parties
     shall negotiate over the restructuring of payment dates and/or methods (but
     not payment amounts) to minimize or eliminate the application of Internal
     Revenue Code Section 280G. If an agreement between Employer and Employee to
     restructure payments cannot be reached within 60 days of the date the first
     payment is due under this paragraph 6, then payments shall be made without
     restructuring. Subject to paragraph 6(a)(v), Employee shall be responsible
     for all taxes and penalties payable by Employee as a result of Employee's
     receipt of an "excess parachute payment."

                           (v) Notwithstanding the foregoing of this paragraph
     6(a), the Board of Directors of Employer may elect, in its sole discretion,
     to pay all benefits due Employee pursuant to this paragraph 6 in a single
     lump sum payment within 90 days following a Change of Control and
     Employee's termination of employment with Employer. In the event a single
     lump sum payment is made pursuant to the foregoing sentence, the amount of
     the payment shall be increased to the extent necessary to hold Employee
     harmless from any tax liability attributable to such single lump sum
     payment.

                        (b) As provided in paragraph 6(a) above, Employee may
voluntarily terminate his employment with Employer within two years following a
Change of Control, and receive all of the payments specified in 6(a) above. In
the event of such a voluntary termination, the payments specified in paragraph
6(a)(i) shall be reduced by any non-Employer related wages or self-employment
income derived (or, in the case of a single lump sum payment, reasonably
expected to be derived) by Employee during the consulting period.

                        (c) For purposes of paragraph 6(a) "Change of Control"
shall be deemed to have occurred if:

                            (i)  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 Employer representing 30% or more of the
     combined voting power of Employer's then outstanding securities;

                            (ii) as a result of, or in connection with, any
     tender offer or exchange offer, merger or other business combination (a
     "Transaction"), the persons who

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     were directors of Employer before the Transaction shall cease to constitute
     a majority of the Board of Directors of Employer or any successor to
     Employer;

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

                           (iv)  a tender offer or exchange offer is made and
     consummated for the ownership of securities of Employer representing 30% or
     more of the combined voting power of Employer's then outstanding voting
     securities; or

                           (v)   Employer transfers substantially all of its
     assets to another corporation which is not controlled by Employer.

                  7.    Withholding. Employer shall deduct and withhold from
                        -----------
compensation and benefits provided under this Agreement all necessary income and
employment taxes and any other similar sums required by law to be withheld.

                  8.    Covenants.
                        ---------

                        (a) Confidentiality. Employee shall not, without the
                            ---------------
prior written consent of Employer, disclose or use in any way, either during his
employment by Employer or thereafter, except as required in the course of his
employment by Employer, any confidential business or technical information or
trade secret acquired in the course of Employee's employment by Employer.
Employee acknowledges and agrees that it would be difficult to fully compensate
Employer for damages resulting from the breach or threatened breach of the
foregoing provision and, accordingly, that Employer shall be entitled to
temporary preliminary injunctions and permanent injunctions to enforce such
provision. This provision with respect to injunctive relief shall not, however,
diminish Employer's right to claim and recover damages. Employee covenants to
use his best efforts to prevent the publication or disclosure of any trade
secret or any confidential information concerning the business or finances of
Employer or Employer's affiliates, or an of its or their dealings, transactions
or affairs which may come to Employee's knowledge in the pursuance of his duties
or employment.

                                       9
<PAGE>

                       (b) No Competition. Employee's employment is subject to
                           --------------
the condition that during the term of his employment hereunder and for a period
of 12 months following the date of termination of his employment (the "Date of
Termination"), Employee shall not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of, or
be connected as an officer, employee, partner, director, individual proprietor,
lender, consultant or otherwise with, or have any financial interest in, or aid
or assist anyone else in the conduct of, any entity or business (a "Competitive
Operation") which competes in the banking industry or with any other business
conducted by Employer or by any group, affiliate, division or subsidiary of
Employer, in any area or market where such business is being conducted at the
Date of Termination. Employee shall keep Employer fully advised as to any
activity, interest, or investment Employee may have in any way related to the
banking industry. It is understood and agreed that, for the purposes of the
foregoing provisions of this paragraph, (i) no business shall be deemed to be a
business conducted by Employer or any group, division, affiliate or subsidiary
of Employer unless 5% or more of Employer's consolidated gross sales or
operating revenues is derived from, or 5% or more of Employer's consolidated
assets are devoted to such business; (ii) no business conducted by any entity by
which Employee is employed or in which he is interested or with which he is
connected or associated shall be deemed competitive with any business conducted
by Employer or any group, division or subsidiary of Employer unless it is one
from which 2% or more of its consolidated gross sales or operating revenues is
derived, or to which 2% or more of its consolidated assets are devoted; and
(iii) no business which is conducted by Employer at the Date of Termination and
which subsequently is sold by Employer shall, after such sale, be deemed to be a
Competitive Operation within the meaning of this paragraph. Ownership of not
more than 5% of the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph.

                       (c) Certain Affiliates of Employer. It is understood that
                           ------------------------------
Employee may have access to technical knowledge, trade secrets and customer
lists of affiliates of Employer or companies which Employer's parent may acquire
in the future and may serve as a member of the Board of Directors or as an
officer or employee of an affiliate of Employer. Employee covenants that he
shall not, during the term of his employment by Employer or for a period of 12
months thereafter, in any way, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of, or
be connected as an

                                      10
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officer, employee, partner, director, individual proprietor, lender, consultant
or otherwise aid or assist anyone else in any business or operation which
competes with or engages in the business of such an affiliate.

                       (d) Termination of Payments. Upon the breach by Employee
                           -----------------------
of the confidentiality or nonsolicitation covenants under this paragraph 8,
Employer may offset and/or recover from Employee immediately any and all
severance benefits paid to Employee under paragraph 3(e) or 9 hereof in addition
to any and all other remedies available to Employer under the law or in equity.

                       (e) The no competition provisions of paragraphs 8(b) and
8(c) shall not apply if Employee's employment ceases within the two year period
following a Change of Control within the meaning of paragraph 6 or if the
Employee's employment terminates with or without cause. Notwithstanding the
foregoing, in the event that the Employee's employment terminates with or
without cause (other than within two years following a Change of Control), for a
period of twenty-four (24) months following such termination, Employee shall
not, directly or indirectly:

                           (i)  solicit the sale of, or sell, any financial
     services or products, including but not limited to, any financial services
     or products similar to those offered by Employer or its affiliates, to any
     person, firm corporation, or enterprise who or which were customers or
     clients of Employer or its affiliates during the period of the Employee's
     employment; provided, however, that the foregoing restrictions shall not
     apply to (1) advertising, solicitations or marketing campaigns or other
     efforts undertaken by a subsequent employer of Employee not primarily
     directed to, or targeted at, such customers or clients, and (2) responses
     to unsolicited inquiries of such customers or clients; and

                           (ii) solicit, offer employment to, or take any action
     intended or which would reasonably be expected to have the effect of
     causing any employee of Employer or any of its affiliates to terminate such
     employment or accept employment or become affiliated with, or provide
     services for compensation in any capacity whatsoever to, any entity that
     directly or indirectly competes with Employer or any affiliates in any
     market area in which any of them is still active,

                                      11
<PAGE>

                  9.    First Liberty Employment Agreement Severance Benefits.
                        -----------------------------------------------------

                        (a) The Employer acknowledges that the Employee would be
entitled to certain severance payments and continuation of benefits under
Section 6 of the First Liberty Employment Agreement as a result of the Merger,
which payments and benefits the Employee has agreed to defer in connection with
the Merger and the execution of this Agreement. The Employer also acknowledges
and agrees that, in the event that the Employee's employment terminates at any
time and for any reason, including a termination for cause, (i) the Employer
shall pay as severance to the Employee, or his designated beneficiary, an amount
equal to the Employee's Base Salary in effect on the Closing Date multiplied by
two (2), such payment to be made to the Employee in a lump-sum within fifteen
(15) days after the date of termination and (ii) for a period of two (2) years
following the date of termination the Employee shall receive a continuation of
all life, disability, medical insurance and other normal benefits in effect at
any time during the two (2) years prior to his termination of employment, or if
the Employer cannot provide such benefits because the Employee is no longer an
employee, a dollar amount equal to the cost to the Employee of obtaining such
benefits (or substantially similar benefits). In the event that the payment and
benefits to be provided to the Employee, or his designated beneficiary, under
this paragraph 9 are duplicative of any payments and benefits to be provided to
the Employee under any other paragraph of this Agreement (including without
limitation, paragraph 3 or 6), such other payment shall be reduced and such
other benefits shall be eliminated to the extent, and only to the extent, of
such duplication. By way of an example, in the event that Employee's employment
hereunder shall terminate following the occurrence of a Change of Control and
Employee shall elect to receive payments and benefits under paragraph 6 of this
Agreement, then Employee (or his designated beneficiary) shall not be entitled
to receive any payments or benefits under this paragraph 9 in connection with
such termination.

                        (b) The Employee shall not be required to mitigate the
amount of any payment or benefit provided for in this paragraph 9 by seeking
employment or otherwise. Except as otherwise provided in the penultimate
sentence of paragraph 9(a) above, no amounts or benefits payable or to be
provided to the Employee under this paragraph 9 shall be reduced by or offset
against any other amounts paid or payable to, or received or to be received, by
the Employee from any source, including, without limitation, another employer.

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<PAGE>

                  10.  Notices. Any notice which may be given hereunder shall be
                       -------
sufficient if in writing and mailed by certified mail, return receipt requested,
to Employee at his residence and to Employer at 5790 Widewaters Parkway, Dewitt,
New York 13214 or at such other addresses as either Employee or Employer may, by
similar notice, designate.

                  11.   Rules, Regulations and Policies. Employee shall abide by
                        -------------------------------
and comply in all material respects with all of the rules, regulations, and
policies of Employer of which he has actual knowledge or he reasonably should
have known, including without limitation, Employer's policy of strict adherence
to, and compliance with, any and all requirements of the banking, securities,
and antitrust laws and regulations.

                  12.   No Prior Restrictions. Employee affirms and represents
                        ---------------------
that Employee is under no obligation to any former employer or other third party
which is in any way inconsistent with, or which imposes any restriction upon,
the employment of Employee by Employer, or Employee's undertakings under this
Agreement.

                  13.   Return of Employer's Property. After Employee has
                        -----------------------------
received notice of termination or at the end of the term hereof, whichever first
occurs, Employee shall forthwith return to Employer all documents and other
property in his possession belonging to Employer.

                  14.   Construction and Severability. The invalidity of any one
                        -----------------------------
or more provisions of this Agreement or any part thereof, all of which are
inserted conditionally upon their being valid in law, shall not affect the
validity of any other provisions contained herein shall be invalid, as
determined by a court of competent jurisdiction, this instrument shall be
construed as if such invalid provisions had not been inserted.

                  15.   Governing Law. This Agreement was executed and delivered
                        -------------
in New York and shall be construed and governed in accordance with the laws of
the State of New York.

                  16.   Assignability and Successors. This Agreement may not be
                        ----------------------------
assigned by Employee or Employer, except that this Agreement shall be binding
upon and shall inure to the benefit of the successor of Employer through merger
or corporate reorganization.

                  17.   Miscellaneous. This Agreement constitutes the entire
                        -------------
understanding and agreement between the parties with respect to the subject
matter hereof and shall supersede all

                                      13
<PAGE>

prior understanding and agreements, including the First Liberty Employment
Agreement. This Agreement cannot be amended, modified, or supplemented in any
respect, except by a subsequent written agreement entered into by the parties
hereto. The services to be performed by Employee are special and unique; it is
agreed that any breach of this Agreement by Employee shall entitle Employer (or
any successor or assigns of Employer), in addition to any other legal remedies
available to it, to apply to any court of competent jurisdiction to enjoin such
breach. The provisions of paragraphs 6, 8, 9, 10 and 13 hereof shall survive the
termination of this Agreement.

                  18.   Counterparts. This Agreement may be executed in
                        ------------
counterparts (each of which need not be executed by each of the parties), which
together shall constitute one and the same instrument.

                  19.   Jurisdiction, Venue and Fees. The jurisdiction of any
                        ----------------------------
proceeding between the parties arising out of, or with respect to, this
Agreement shall be in a court of competent jurisdiction in the Commonwealth of
Pennsylvania. If Employee is a party in a proceeding to collect payments due
pursuant to this Agreement and prevails in collecting payments due in the
proceeding or settlement of the proceeding, Employer shall reimburse Employee
for reasonable attorneys' fees incurred by Employee in connection with such
proceeding.

                  The foregoing is established by the following signatures of
the parties.

                                 COMMUNITY BANK SYSTEM, INC.

                                 By:
                                    --------------------------------------------

                                 Attest:
                                        ----------------------------------------

                                 COMMUNITY BANK, N.A.

                                 By:
                                    --------------------------------------------

                                 Attest:
                                        ----------------------------------------

                                                                          (SEAL)
                                  ----------------------------------------
                                                  ("Employee")

                                      14<PAGE>

                                                              Exhibit 10.5
                                                              ------------

                              CONSULTING AGREEMENT
                              --------------------

                  THIS CONSULTING AGREEMENT ("Agreement") is made and entered
into as of the ___ day of ______________, 2001 by and between COMMUNITY BANK,
N.A., a national banking association having its executive offices at
_________________________ ("Bank") and WILLIAM M. DAVIS, residing at
___________________________ ("Consultant").

                              W I T N E S S E T H:
                              - - - - - - - - - -

                  WHEREAS, pursuant to an Agreement and Plan of Merger between
Community Bank System, Inc. (the "Corporation") and First Liberty Bank Corp.,
(the "Seller"), dated November 29, 2000 (the "Agreement and Plan of Merger"),
the Corporation and the Seller have agreed to a merger of the Seller with the
Corporation effective as of the closing date specified in the Agreement and Plan
of Merger (the "Closing Date), and a merger of First Liberty Bank & Trust, a
wholly-owned subsidiary of the Seller ("First Liberty Bank"), with the Bank; and

                  WHEREAS, the Consultant is an executive of the Seller and
First Liberty Bank and is familiar with their business, operations and
properties and has extensive banking experience in the market areas served by
First Liberty Bank; and

                  WHEREAS, Consultant is presently a party to an amended and
restated employment agreement with First Liberty Bank, dated October 25, 2000
(the "First Liberty Employment Agreement"); and

                  WHEREAS, in connection with the merger of First Liberty Bank
with and into the Bank as contemplated by the Agreement and Plan of Merger, the
consultant will receive the benefits and payments provided for under Section 6
of the First Liberty Employment Agreement, and will cease to be an executive
officer of Seller and First Liberty Bank; and

                  WHEREAS, for purposes of facilitating a smooth transition in
ownership and control and an effective consolidation of the operations of First
Liberty Bank with those of the Bank and the promotion of the Bank in the market
areas served by First Liberty Bank, the Bank
<PAGE>

wishes to secure for itself the services of the Consultant for a period
following the Closing Date; and

                  WHEREAS, the Consultant is willing to make his services
available to the Bank on the terms and conditions hereinafter set forth;

                  NOW, THEREFORE, the Bank and the Consultant hereby agree as
follows:

                  Section 1.  Engagement, Period of Engagement.
                              --------------------------------

                  The Bank offers to engage the Consultant, and the Consultant
hereby accepts such engagement, to provide services to the Bank as a consultant
for a period of three (3) years beginning on the Closing Date and ending on the
day immediately preceding the third anniversary of the Closing Date ("Period of
Engagement").

                  Section 2.  Extent of Services
                              ------------------

                  During the Period of Engagement, the Consultant shall hold
himself available to perform such services in connection with the ownership,
maintenance and operation of the businesses acquired by the Bank pursuant to the
Agreement and Plan of Merger and the other businesses of the Bank and its
affiliates as the Bank may reasonably request. The services which may be
required of the Consultant hereunder may include, but are not limited to,
assisting the Bank in the conversion of the First Liberty Bank's data processing
system to the Bank's data processing system; assisting in the conversion of'
branch offices to branch offices of the Bank; assisting in the integration of
First Liberty Bank's employees with those of the Bank; preserving the franchise
of First Liberty Bank by promoting the Bank and its products and services in
communities previously served by First Liberty Bank; promoting the recognition
and acceptance of the Bank as the successor of First Liberty Bank among First
Liberty Bank's customers; and advising and assisting the Bank with acquisition
opportunities in communities previously served by First Liberty Bank. Such
services may be called upon for not less than forty (40), and not more than
sixty (60), hours per month during the Period of Engagement. The Bank may, in
its sole and absolute discretion, engage other employees or independent
contractors to perform any or all of the services for which the Consultant is
available under the terms of this Agreement. Subject to the provisions of
Section 5 and Section 6, the Consultant may perform services, as an

                                       2
<PAGE>

employee or independent contractor, other than for the Bank; provided, however,
that the Consultant also performs the services required of him hereunder.

     Section 3.  Compensation.
                 ------------

     (a) In consideration for the availability of the Consultant's services
hereunder, as well as for any services to be provided hereunder, the Bank shall
pay to the Consultant a retainer at the annual rate of ONE HUNDRED THOUSAND
DOLLARS ($100,000.00), payable in advance in equal monthly installments, the
first such installment to be paid on the Closing Date and each succeeding
installment to be paid on the first business day of each succeeding calendar
month until a total of thirty-six (36) such payments have been made; provided,
however, that no payment shall be made for any month after the month in which
this Agreement terminates as provided in Section 7. Such retainer shall
constitute the sole and exclusive compensation to which the Consultant is or may
become entitled hereunder. Without limiting the generality of the foregoing, the
Consultant shall have no right by virtue of his performance of services pursuant
to this Agreement to participate in, or to receive benefits under, any of the
following plans, programs or arrangements which may be maintained by, or which
may be available for individuals providing services to, the Corporation or the
Bank: any qualified or non-qualified deferred compensation or retirement plan;
any life, health (including hospitalization, medical and major medical),
accident, or disability plan, whether provided through insurance contracts or
otherwise; any stock option, appreciation right, phantom stock or restricted
stock plan or any other equity participation plan; any bonus, incentive, or
other cash compensation program; and any vacation, sick leave, severance pay,
holiday or other fringe benefit program of any name or nature whatsoever.
Consultant expressly waives any right to participate in, or receive benefits
under, all such plans, programs or arrangements. Nothing in this Section 3,
however, shall be deemed to limit or reduce in any manner any of the payments or
benefits due to the Consultant under Section 6 of the First Liberty Employment
Agreement.

     (b) If the Bank shall fail (other than through inadvertence or clerical
error) to pay to the Consultant any monthly payment hereunder on or before the
fifteenth (15th) day of the month for which such payment is due, after ten (10)
days following written notice of such failure is given to the Bank, the
Consultant shall be entitled, upon giving written notice to the Bank, to a
lump-sum payment equal to the aggregate of all payments remaining to be paid for
the remainder of the Period of Engagement in satisfaction of its obligations
under this Section 3 and as advance

                                       3
<PAGE>

payment against the Consultant's availability for, and performance of, services
for the remaining Period of Engagement, subject to Section 3(a). The Consultant
shall be relieved of any duty to hold himself available for services hereunder
until such payment is made, but thereafter shall be bound by Section 2 hereof
until the expiration of the Period of Engagement.

     Section 4.   Expenses.
                  --------

     (a) The Bank shall provide the Consultant with office facilities and
secretarial and other support services at a location within fifteen (15) miles
of Scranton, Pennsylvania at which the Bank maintains an office, to the extent
required for him to perform the consulting services contemplated herein.

     (b) If, in connection with the performance of service hereunder at the
request of the Bank, the Consultant incurs out-of-pocket costs for reasonable
expenses of a type for which the senior executive officers of the Bank would be
reimbursed by the Bank, he shall be entitled to reimbursement therefor by the
Bank in accordance with the standards and procedures in effect from time to time
for expense reimbursements to the Bank's senior executive officers.

     Section 5.  Confidentiality; Nonsolicitation.
                 --------------------------------

     (a) During the Period of Engagement and for a period of thirty-six (36)
months thereafter, the Consultant, except as previously authorized by the Bank
in writing, shall keep confidential and shall refrain from using or disclosing
for the benefit of any person or entity other than the Corporation or the Bank
any document or information obtained in the course of performing services under
the First Liberty Employment Agreement or under this Agreement. The preceding
sentence shall not apply to the use or disclosure of any such document or
information: (i) on or following the date on which such information or document
is first readily ascertainable from public or published information or trade
sources; or (ii) in connection with any judicial or administrative
investigation, inquiry or proceeding to the extent compelled pursuant to
applicable law and as to which, unless expressly prohibited by applicable law,
the Consultant has given advance notice to the Bank.

     (b) The Consultant acknowledges that during the course of his performance
of service for the Bank he may develop or otherwise acquire papers, files or
other records involving or relating to confidential or secret plans, design
information of any kind, devices, material,

                                       4
<PAGE>

research, new product development, customers or customer lists. All such papers,
files and other records shall be the exclusive property of the Bank and shall,
together with any and all copies thereof, be returned to the Bank upon the
earliest to occur of the termination of this Agreement, the expiration of the
Period of Engagement, and a request by the Bank for the return thereof.

     (c) The Consultant hereby covenants and agrees that, during the Period of
Engagement and for a period of thirty-six (36) months thereafter, he shall not,
without the written consent of the Bank, either directly or indirectly:

         (i)  solicit, offer employment to, or take any other action intended,
  or that a reasonable person acting in like circumstances would expect, to have
  the effect of causing any officer or employee of the Bank or any affiliate to
  terminate his or her employment or accept employment or become affiliated
  with, or provide services for compensation in any capacity whatsoever to, any
  entity that directly or indirectly competes with the Bank in any market area
  in which it is then active; or

         (ii) provide any information, advice or recommendation to any officer
  or employee of any entity engaged or to be engaged directly or indirectly in
  the same or competing business with the Bank in any market area in which it is
  then active that is intended, or that a reasonable person acting in like
  circumstances would expect, to have the effect of causing any officer or
  employee of the Bank or any affiliate to terminate his or her employment or
  accept employment or become affiliated with, or provide services for
  compensation in any capacity whatsoever to, such competing entity.

Nothing in this Section 5(c) shall prevent the Consultant from providing
employment references to third parties in response to inquiries not initiated by
him.

     (d) The duties and obligations imposed on the Consultant under this Section
5 are intended to be in addition to, and not in limitation or exclusion of, any
duties and obligations which the Consultant may owe to the Bank under applicable
law. This Section 5 shall be construed and enforced so as to give effect to this
intent.

                                       5
<PAGE>

     Section 6.   Non-Competition.
                  ---------------

     The Consultant agrees that, during the Period of Engagement and for a
period of thirty-six (36) months thereafter, the Consultant shall not, directly
or indirectly, anywhere within the State of New York or the Commonwealth of
Pennsylvania, engage in a business (as principal, partner, director, officer,
agent, employee, consultant, owner, independent contractor or otherwise, with or
without compensation) or hold a financial interest in any organization engaged
in the business of banking (commercial or thrift) or which is otherwise engaged
in competition with Bank or its subsidiaries or affiliates. The foregoing
restriction shall not be construed to prohibit the ownership by the Consultant
of less than five percent (5%) of any class of securities of any corporation
which is engaged in any of the foregoing businesses having a class of securities
registered pursuant to the Securities Exchange Act of 1934, as amended, provided
that such ownership represents a passive investment and that neither the
Consultant or any group of persons including the Consultant in any way, either
directly or indirectly, manages or exercises control of any such corporation,
guarantees any of its financial obligations, otherwise takes part in its
business (other than exercising his rights as a shareholder) or seeks to do any
of the foregoing.

     Section 7.   Termination of Agreement.
                  ------------------------

     This Agreement shall terminate immediately upon the occurrence of any of
the following events: (a) the Consultant's breach of his obligations under
Sections 2, 5, or 6 hereof; (b) the Consultant's death or disability resulting
in his inability to perform his obligations under Section 2 hereof; (c) the
Consultant's election to terminate the Period of Engagement upon thirty (30)
days advance written notice to the Bank; or (d) the Consultant's conviction of a
felony or a determination by an arbitrator in a proceeding contemplated by
Section 18 that the Consultant has been convicted of other illegal conduct
resulting in substantial injury to the Bank or its businesses or reputation.
Following the termination of this Agreement, neither the Bank nor the Consultant
shall have any further obligations hereunder, except for their respective
obligations, if any, under Sections 4, 5, 6, and 8.

                                       6
<PAGE>

     Section 8.   No Employment Relationship Created.
                  ----------------------------------

     The relationship between the Bank and the Consultant shall be that of
client and independent contractor. The Bank shall not assume, and specifically
disclaims, any obligations of an employer to an employee which may exist under
applicable law. The Consultant shall not have any of the rights of an employee
with respect to the Bank, and specifically waives any and all such rights. The
Consultant hereby agrees to take any and all such actions as the Bank may
reasonably request in order to establish that no employment relationship exists
between the parties (except for any such actions as would result in the
termination of this Agreement, and provided that the Consultant shall be
reimbursed for reasonable out-of-pocket expenses incurred by him in connection
therewith). The Consultant shall be treated as an independent contractor for all
purposes of federal, state and local income taxes and payroll taxes.

     Section 9.   Right to Specific Performance.
                  -----------------------------

     The Consultant hereby agrees that any breach of his covenants and
agreements under Sections 5 and 6 will cause irreparable injury to the
Corporation for which the Corporation has no adequate remedy at law. Therefore,
the Consultant agrees that each and every covenant and agreement set forth in
Sections 5 and 6 shall, in addition to and not by way of limitation of any other
remedy which may be available, be specifically enforceable against him by any
party entitled to enforcement thereof in a proceeding described in Section 18
hereof.

     Section 10.  Successors and Assigns.
                  ----------------------

     This Agreement will inure to the benefit of and be binding upon the
Consultant, his legal representatives and testate or intestate distributees, and
the Bank, and their respective successors and assigns, including, in the case of
the Bank, any successor by merger or consolidation or a statutory receiver or
any other person or firm or corporation to which all or substantially all of the
respective assets and business of the Bank may be sold or otherwise transferred.
Notwithstanding the foregoing, the availability of the personal services of the
Consultant is an integral part of this Agreement. The Consultant's duty of
performance hereunder shall not be subject to assignment.

                                       7
<PAGE>

     Section 11.  Notices.
                  -------

     Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one such
party may by written notice specify to the other party:

     If to the Consultant:

             William M. Davis

             ------------------------

             ------------------------

     If to the Bank:

             Community Bank

             ------------------------

             ------------------------

     Section 12.  Severability.
                  ------------

     A determination that any provision of this Agreement, in whole or in part,
is invalid or unenforceable shall not affect the validity or enforceability of
any other provision hereof or of any part of the provision in question not
determined to be unenforceable.

     Section 13.  Waiver.
                  ------

     Failure to insist upon strict compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant, or
condition. A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
or more times shall not be deemed a waiver or relinquishment of such right or
power at any other time or times.

                                       8
<PAGE>

     Section 14.  Counterparts.
                  ------------

     This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.

     Section 15.  Governing Law.
                  -------------

     This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York without giving effect to the
conflict of law principles of such laws.

     Section 16.  Headings and Construction.
                  -------------------------

     The headings of sections in this Agreement are for convenience of reference
only and are not intended to qualify the meaning of any section. Any reference
to a section number shall refer to a section of this Agreement, unless otherwise
stated.

     Section 17.  Entire Agreement; Modifications.
                  -------------------------------

     This instrument contains the entire agreement of the parties relating to
the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof, including the First Liberty Employment Agreement, except that this
Agreement shall have no effect on the obligations of the Corporation and the
Bank for the payment and benefits to be provided to the Consultant under Section
6 of the First Liberty Employment Agreement. No modifications of this Agreement
shall be valid unless made in writing and signed by the parties hereto.

     Section 18.  Dispute Resolution.
                  ------------------

     Any controversy or claim arising out of or relating to this Agreement, or
the breach hereof, shall be settled by arbitration in accordance with the
Commercial Rules of the American Arbitration Association and judgment upon the
award rendered by the arbitral tribunal may be entered in any court having
jurisdiction thereof. The arbitration shall be held in Scranton, Pennsylvania,
or at such other place as may be selected by mutual agreement. The arbitration
shall be conducted before a panel of three neutral arbitrators. Within fifteen
(15) days after the commencement of the arbitration, each party shall select one
person to act as arbitrator,

                                       9
<PAGE>

and the two selected shall select a third arbitrator within ten (10) days after
their appointment; if the arbitrators selected by the parties hereto are unable
or fail to agree upon the third arbitrator, the third arbitrator shall be
selected by the President of the American Arbitration Association or his
designee. Either party may, without inconsistency with this Agreement, seek from
a court any interim or provisional relief that may be necessary to protect the
rights or property of that party pending the arbitral tribunal's determination
of the merits of the controversy. Neither party nor the arbitrators may disclose
the existence, content, or results of any arbitration hereunder without the
prior written consent of both parties. The prevailing party shall be entitled to
an award of reasonable attorneys' fees.

     Section 19.  Indemnification.
                  ---------------

     The Bank shall indemnify the Consultant and his heirs, successors and
assigns from and against any and all losses, claims, damages and liabilities to
which the Consultant may become subject under applicable federal or state law,
or otherwise, related to or arising out of the Consultant's performance of
services hereunder. The Bank will not be liable under the foregoing
indemnification provision to the extent that any loss, claim, damage or
liability relates to a claim that the Consultant's performance of his duties
hereunder is a breach of any duty which he owes or is purported to owe to any
other party or results from the Consultant's bad faith, willful misconduct or
negligence or a breach of this Agreement. In the case any action is brought
against the Consultant with respect to which indemnity may be sought against the
Bank under this Agreement, the Consultant shall promptly notify the Bank in
writing and the Bank shall have the right to assume the defense thereof,
including the employment of counsel and the payment of all fees and expenses.

     IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and
the Consultant has hereunto set his hand all as of the day and year first above
written.

                                      10
<PAGE>

                                         ------------------------------
                                         William M. Davis

                                         COMMUNITY BANK, N.A.
ATTEST:

                                         By:
                                            ---------------------------

                                         Title:
                                               ------------------------

By:
   ---------------------------
         Secretary

                                      11

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