Document:

EXHIBIT 4.2

                            PALOMAR ENTERPRISES, INC.
       NON-EMPLOYEE DIRECTORS AND CONSULTANTS RETAINER STOCK PLAN FOR THE
                                 YEAR 2003 NO. 2

     1. INTRODUCTION. This Plan shall be known as the "Palomar Enterprises, Inc.
Non-Employee Directors and Consultants Retainer Stock Plan for the Year 2003 No.
2", and is hereinafter  referred to as the "Plan." The purposes of this Plan are
to enable Palomar  Enterprises,  Inc., a Nevada corporation (the "Company"),  to
promote the  interests of the Company and its  stockholders  by  attracting  and
retaining  non-employee  Directors and  Consultants  capable of  furthering  the
future  success of the Company and by aligning  their  economic  interests  more
closely with those of the Company's  stockholders,  by paying their  retainer or
fees in the form of shares of the Company's  common stock,  par value $0.001 per
share (the "Common Stock").

     2.  DEFINITIONS.  The  following  terms shall have the  meanings  set forth
below:

     "Board" means the Board of Directors of the Company.

     "Change of Control" has the meaning set forth in Paragraph 12(d) hereof.

     "Code" means the Internal  Revenue Code of 1986, as amended,  and the rules
and regulations  thereunder.  References to any provision of the Code or rule or
regulation  thereunder  shall be deemed to  include  any  amended  or  successor
provision, rule or regulation.

         "Committee"  means the committee  that  administers  this Plan, as more
fully defined in Paragraph 13 hereof.

     "Common Stock" has the meaning set forth in Paragraph 1 hereof.

     "Company" has the meaning set forth in Paragraph 1 hereof.

     "Deferral Election" has the meaning set forth in Paragraph 6 hereof.

     "Deferred  Stock  Account"  means a bookkeeping  account  maintained by the
Company for a Participant  representing the Participant's interest in the shares
credited to such Deferred Stock Account pursuant to Paragraph 7 hereof.

     "Delivery Date" has the meaning set forth in Paragraph 6 hereof.

     "Director" means an individual who is a member of the Board of Directors of
the Company.

     "Dividend  Equivalent" for a given dividend or other  distribution  means a
number of shares of the  Common  Stock  having a Fair  Market  Value,  as of the
record date for such dividend or distribution, equal to the amount of cash, plus
the Fair  Market  Value on the date of  distribution  of any  property,  that is
distributed  with  respect to one share of the  Common  Stock  pursuant  to such
dividend  or  distribution;  such  Fair  Market  Value to be  determined  by the
Committee in good faith.

     "Effective Date" has the meaning set forth in Paragraph 3 hereof.

     "Exchange Act" has the meaning set forth in Paragraph 13(b) hereof.

     "Fair Market Value" means the mean between the highest and lowest  reported
sales prices of the Common Stock on the New York Stock  Exchange  Composite Tape
or, if not listed on such exchange, on any other national securities exchange on
which the Common  Stock is listed or on The Nasdaq Stock  Market,  or, if not so
listed on any other  national  securities  exchange or The Nasdaq Stock  Market,
then the  average  of the bid price of the  Common  Stock  during  the last five

                                       1
<PAGE>
trading days on the OTC Bulletin  Board  immediately  preceding the last trading
day  prior to the date with  respect  to which  the Fair  Market  Value is to be
determined.  If the  Common  Stock is not then  publicly  traded,  then the Fair
Market  Value of the Common  Stock  shall be the book value of the  Company  per
share as determined on the last day of March,  June,  September,  or December in
any year  closest  to the date  when the  determination  is to be made.  For the
purpose of determining book value  hereunder,  book value shall be determined by
adding as of the  applicable  date called for herein the capital,  surplus,  and
undivided  profits  of the  Company,  and after  having  deducted  any  reserves
theretofore  established;  the sum of these items shall be divided by the number
of shares of the Common Stock outstanding as of said date, and the quotient thus
obtained shall represent the book value of each share of the Common Stock of the
Company.

     "Participant" has the meaning set forth in Paragraph 4 hereof.

     "Payment  Time"  means  the time  when a Stock  Retainer  is  payable  to a
Participant  pursuant to Paragraph 5 hereof (without regard to the effect of any
Deferral Election).

     "Stock Retainer" has the meaning set forth in Paragraph 5 hereof.

     "Third Anniversary" has the meaning set forth in Paragraph 6 hereof.

     3. EFFECTIVE DATE OF THE PLAN. This Plan was adopted by the Board effective
August 1, 2003 (the "Effective Date").

     4.  ELIGIBILITY.  Each  individual  who is a Director or  Consultant on the
Effective  Date and  each  individual  who  becomes  a  Director  or  Consultant
thereafter   during  the  term  of  this  Plan,  shall  be  a  participant  (the
"Participant")  in this Plan, in each case during such period as such individual
remains a Director or Consultant and is not an employee of the Company or any of
its  subsidiaries.  Each credit of shares of the Common  Stock  pursuant to this
Plan shall be evidenced by a written agreement duly executed and delivered by or
on behalf of the Company and a Participant,  if such an agreement is required by
the Company to assure compliance with all applicable laws and regulations.

     5.  GRANTS OF  SHARES.  Commencing  on the  Effective  Date,  the amount of
compensation for service to directors or consultants  shall be payable in shares
of the Common Stock (the "Stock  Retainer")  pursuant to this Plan at the deemed
issuance  price of the Fair Market  Value of the Common Stock on the date of the
issuance of such  shares.  As used herein,  "Fair  Market  Value" means the mean
between the highest and lowest  reported sales prices of the Common Stock on the
New York Stock Exchange  Composite  Tape or, if not listed on such exchange,  on
any other national securities exchange on which the Common Stock is listed or on
The Nasdaq Stock Market,  or, if not so listed on any other national  securities
exchange or The Nasdaq  Stock  Market,  then the average of the bid price of the
Common  Stock  during  the last  five  trading  days on the OTC  Bulletin  Board
immediately  preceding  the last  trading day prior to the date with  respect to
which the Fair Market Value is to be determined. If the Common Stock is not then
publicly  traded,  then the Fair Market  Value of the Common  Stock shall be the
book  value of the  Company  per share as  determined  on the last day of March,
June,  September,  or  December  in any  year  closest  to  the  date  when  the
determination  is  to be  made.  For  the  purpose  of  determining  book  value
hereunder,  book value shall be determined by adding as of the  applicable  date
called for herein the capital,  surplus,  and undivided  profits of the Company,
and after having deducted any reserves theretofore established; the sum of these
items shall be divided by the number of shares of the Common  Stock  outstanding
as of said date, and the quotient thus obtained  shall  represent the book value
of each share of the Common Stock of the Company.

     6. DEFERRAL  OPTION.  From and after the Effective  Date, a Participant may
make an election (a "Deferral Election") on an annual basis to defer delivery of
the Stock Retainer specifying which one of the following ways the Stock Retainer
is to be delivered (a) on the date which is three years after the Effective Date
for which it was originally payable (the "Third  Anniversary"),  (b) on the date
upon which the Participant  ceases to be a Director or Consultant for any reason
(the "Departure  Date") or (c) in five equal annual  installments  commencing on
the Departure  Date (the "Third  Anniversary"  and  "Departure  Date" each being
referred to herein as a "Delivery Date"). Such Deferral Election shall remain in
effect for each  Subsequent  Year unless  changed,  provided  that, any Deferral

                                       2
<PAGE>
Election  with  respect to a  particular  Year may not be changed  less than six
months prior to the beginning of such Year, and provided,  further, that no more
than one Deferral Election or change thereof may be made in any Year.

     Any Deferral Election and any change or revocation thereof shall be made by
delivering  written  notice  thereof to the  Committee  no later than six months
prior to the beginning of the Year in which it is to be effected; provided that,
with respect to the Year beginning on the Effective Date, any Deferral  Election
or  revocation  thereof must be delivered no later than the close of business on
the 30th day after the Effective Date.

     7. DEFERRED  STOCK  ACCOUNTS.  The Company shall  maintain a Deferred Stock
Account  for each  Participant  who makes a Deferral  Election to which shall be
credited,  as of the applicable Payment Time, the number of shares of the Common
Stock  payable  pursuant to the Stock  Retainer to which the  Deferral  Election
relates.  So long as any amounts in such  Deferred  Stock  Account have not been
delivered to the  Participant  under  Paragraph 8 hereof,  each  Deferred  Stock
Account  shall be credited as of the payment date for any dividend paid or other
distribution  made with respect to the Common Stock,  with a number of shares of
the Common  Stock equal to (a) the number of shares of the Common Stock shown in
such Deferred Stock Account on the record date for such dividend or distribution
multiplied by (b) the Dividend Equivalent for such dividend or distribution.

     8. DELIVERY OF SHARES.

     (a) The  shares  of the  Common  Stock in a  Participant's  Deferred  Stock
Account  with respect to any Stock  Retainer  for which a Deferral  Election has
been made (together with dividends  attributable to such shares credited to such
Deferred Stock  Account) shall be delivered in accordance  with this Paragraph 8
as soon as practicable  after the applicable  Delivery Date. Except with respect
to a Deferral  Election  pursuant to Paragraph 6(c) hereof,  or other  agreement
between the parties,  such shares shall be delivered at one time; provided that,
if the number of shares so delivered  includes a fractional  share,  such number
shall be rounded to the nearest whole number of shares.  If the  Participant has
in effect a Deferral  Election  pursuant to  Paragraph  6(c)  hereof,  then such
shares  shall be  delivered in five equal  annual  installments  (together  with
dividends  attributable to such shares credited to such Deferred Stock Account),
with the first such installment  being delivered on the first anniversary of the
Delivery  Date;  provided  that,  if in order  to  equalize  such  installments,
fractional  shares  would  have to be  delivered,  such  installments  shall  be
adjusted by rounding to the nearest  whole  share.  If any such shares are to be
delivered  after the Participant  has died or become legally  incompetent,  they
shall be delivered to the  Participant's  estate or legal guardian,  as the case
may be, in accordance with the foregoing; provided that, if the Participant dies
with a Deferral  Election  pursuant  to  Paragraph  6(c)  hereof in effect,  the
Committee shall deliver all remaining  undelivered  shares to the  Participant's
estate immediately.  References to a Participant in this Plan shall be deemed to
refer to the Participant's estate or legal guardian, where appropriate.

     (b) The Company may, but shall not be required to,  create a grantor  trust
or utilize an existing  grantor trust (in either case,  "Trust") to assist it in
accumulating  the shares of the Common Stock  needed to fulfill its  obligations
under this Paragraph 8. However,  Participants shall have no beneficial or other
interest in the Trust and the assets  thereof,  and their rights under this Plan
shall be as general  creditors of the Company,  unaffected  by the  existence or
nonexistence  of the  Trust,  except  that  deliveries  of  Stock  Retainers  to
Participants  from the  Trust  shall,  to the  extent  thereof,  be  treated  as
satisfying the Company's obligations under this Paragraph 8.

     9. SHARE CERTIFICATES; VOTING AND OTHER RIGHTS. The certificates for shares
delivered to a Participant  pursuant to Paragraph 8 above shall be issued in the
name of the  Participant,  and from and  after  the  date of such  issuance  the
Participant shall be entitled to all rights of a stockholder with respect to the
Common Stock for all such shares issued in his name, including the right to vote
the  shares,   and  the  Participant  shall  receive  all  dividends  and  other
distributions paid or made with respect thereto.

     10. GENERAL RESTRICTIONS.

     (a)  Notwithstanding  any other  provision of this Plan or agreements  made
pursuant  thereto,  the  Company  shall not be  required to issue or deliver any
certificate or certificates for shares of the Common Stock under this Plan prior
to fulfillment of all of the following conditions:

                                       3
<PAGE>
          (i) Listing or approval for listing upon  official  notice of issuance
of such shares on the New York Stock  Exchange,  Inc., or such other  securities
exchange as may at the time be a market for the Common Stock;

          (ii) Any registration or other  qualification of such shares under any
state or federal law or  regulation,  or the  maintaining  in effect of any such
registration or other  qualification  which the Committee shall, upon the advice
of counsel, deem necessary or advisable; and

          (iii) Obtaining any other consent,  approval, or permit from any state
or federal  governmental  agency which the Committee shall,  after receiving the
advice of counsel, determine to be necessary or advisable.

     (b) Nothing  contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements for the Participants.

     11. SHARES AVAILABLE.  Subject to Paragraph 12 below, the maximum number of
shares of the Common Stock which may in the aggregate be paid as Stock Retainers
pursuant to this Plan is 28,000,000.  Shares of the Common Stock issueable under
this Plan may be taken from  treasury  shares of the Company or purchased on the
open market.

     12. ADJUSTMENTS; CHANGE OF CONTROL.

     (a) In the event  that there is, at any time  after the Board  adopts  this
Plan, any change in corporate capitalization, such as a stock split, combination
of shares,  exchange  of shares,  warrants or rights  offering  to purchase  the
Common  Stock at a price  below  its Fair  Market  Value,  reclassification,  or
recapitalization, or a corporate transaction, such as any merger, consolidation,
separation,  including  a  spin-off,  stock  dividend,  or  other  extraordinary
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization  comes within the definition of such term in Section 368
of the Code) or any partial or complete  liquidation of the Company (each of the
foregoing a  "Transaction"),  in each case other than any such Transaction which
constitutes  a Change of Control  (as defined  below),  (i) the  Deferred  Stock
Accounts  shall be credited with the amount and kind of shares or other property
which would have been received by a holder of the number of shares of the Common
Stock held in such  Deferred  Stock  Account had such shares of the Common Stock
been  outstanding  as of the  effectiveness  of any such  Transaction,  (ii) the
number and kind of shares or other property  subject to this Plan shall likewise
be appropriately  adjusted to reflect the effectiveness of any such Transaction,
and (iii) the Committee shall appropriately adjust any other relevant provisions
of this Plan and any such  modification  by the  Committee  shall be binding and
conclusive on all persons.

     (b) If the  shares of the  Common  Stock  credited  to the  Deferred  Stock
Accounts  are  converted  pursuant  to  Paragraph  12(a)  into  another  form of
property,  references  in this Plan to the Common  Stock shall be deemed,  where
appropriate,  to  refer  to  such  other  form  of  property,  with  such  other
modifications as may be required for this Plan to operate in accordance with its
purposes.  Without  limiting the  generality  of the  foregoing,  references  to
delivery of certificates for shares of the Common Stock shall be deemed to refer
to delivery of cash and the incidents of ownership of any other property held in
the Deferred Stock Accounts.

     (c) In lieu of the adjustment contemplated by Paragraph 12(a), in the event
of a Change of Control,  the following  shall occur on the date of the Change of
Control (i) the shares of the Common Stock held in each  Participant's  Deferred
Stock Account shall be deemed to be issued and  outstanding  as of the Change of
Control;  (ii) the Company shall forthwith deliver to each Participant who has a
Deferred  Stock  Account  all of the  shares  of the  Common  Stock or any other
property held in such Participant's  Deferred Stock Account; and (iii) this Plan
shall be terminated.

     (d) For  purposes  of this Plan,  Change of  Control  shall mean any of the
following events:

          (i) The  acquisition  by any  individual,  entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities  Exchange Act of 1934,
as amended (the "Exchange  Act")) (a "Person") of beneficial  ownership  (within

                                       4
<PAGE>
the meaning of Rule 13d-3  promulgated  under the Exchange Act) of 20 percent or
more of  either  (1) the then  outstanding  shares  of the  Common  Stock of the
Company (the  "Outstanding  Company Common  Stock"),  or (2) the combined voting
power of then  outstanding  voting  securities  of the Company  entitled to vote
generally  in  the  election  of  directors  (the  "Outstanding  Company  Voting
Securities");  provided,  however,  that the  following  acquisitions  shall not
constitute  a Change of Control (A) any  acquisition  directly  from the Company
(excluding an  acquisition  by virtue of the exercise of a conversion  privilege
unless the security  being so converted  was itself  acquired  directly from the
Company),  (B)  any  acquisition  by the  Company,  (C) any  acquisition  by any
employee  benefit plan (or related trust) sponsored or maintained by the Company
or any  corporation  controlled  by the  Company or (D) any  acquisition  by any
corporation pursuant to a reorganization, merger or consolidation, if, following
such  reorganization,  merger or  consolidation,  the  conditions  described  in
clauses  (A),  (B) and  (C) of  paragraph  (iii)  of this  Paragraph  12(d)  are
satisfied; or

          (ii) Individuals  who, as of the date hereof,  constitute the Board of
the Company (as of the date hereof,  "Incumbent  Board") cease for any reason to
constitute  at  least a  majority  of the  Board;  provided,  however,  that any
individual becoming a director subsequent to the date hereof whose election,  or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such  terms are used in Rule  14a-11 of  Regulation  14A  promulgated  under the
Exchange Act) or other actual or threatened  solicitation of proxies or consents
by or on behalf of a Person other than the Board; or

          (iii) Approval by the stockholders of the Company of a reorganization,
merger,  binding  share  exchange  or  consolidation,   unless,  following  such
reorganization, merger, binding share exchange or consolidation (1) more than 60
percent  of,  respectively,  then  outstanding  shares  of  common  stock of the
corporation resulting from such reorganization,  merger,  binding share exchange
or  consolidation  and the  combined  voting  power of then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all of the  individuals  and  entities  who were  the  beneficial
owners,  respectively,  of the Outstanding  Company Common Stock and Outstanding
Company Voting  Securities  immediately  prior to such  reorganization,  merger,
binding share exchange or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, binding share
exchange  or  consolidation,   of  the  Outstanding  Company  Common  Stock  and
Outstanding  Company  Voting  Securities,  as the  case  may be,  (2) no  Person
(excluding  the  Company,  any employee  benefit plan (or related  trust) of the
Company or such corporation resulting from such reorganization,  merger, binding
share exchange or consolidation and any Person beneficially owning,  immediately
prior to such reorganization,  merger,  binding share exchange or consolidation,
directly or  indirectly,  20 percent or more of the  Outstanding  Company Common
Stock or Outstanding Company Voting Securities, as the case may be) beneficially
owns,  directly  or  indirectly,  20  percent  or more  of,  respectively,  then
outstanding  shares  of  common  stock of the  corporation  resulting  from such
reorganization,  merger, binding share exchange or consolidation or the combined
voting power of then outstanding voting securities of such corporation  entitled
to vote  generally in the election of directors,  and (3) at least a majority of
the members of the board of directors  of the  corporation  resulting  from such
reorganization,  merger, binding share exchange or consolidation were members of
the  Incumbent  Board  at the time of the  execution  of the  initial  agreement
providing  for  such   reorganization,   merger,   binding  share   exchange  or
consolidation; or

          (iv)  Approval  by the  stockholders  of the Company of (1) a complete
liquidation or dissolution of the Company,  or (2) the sale or other disposition
of all or  substantially  all of the  assets  of the  Company,  other  than to a
corporation, with respect to which following such sale or other disposition, (A)
more than 60 percent of,  respectively,  then outstanding shares of common stock
of such  corporation  and the combined voting power of then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors  is  then  beneficially  owned,  directly  or  indirectly,  by  all or
substantially  all of the  individuals  and  entities  who were  the  beneficial
owners,  respectively,  of the Outstanding  Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership,  immediately prior to such
sale  or  other  disposition,  of  the  Outstanding  Company  Common  Stock  and
Outstanding  Company  Voting  Securities,  as the  case  may be,  (B) no  Person
(excluding  the Company and any employee  benefit plan (or related trust) of the
Company or such  corporation  and any Person  beneficially  owning,  immediately
prior to such sale or other disposition,  directly or indirectly,  20 percent or
more of the  Outstanding  Company  Common Stock or  Outstanding  Company  Voting
Securities,  as the case may be) beneficially owns,  directly or indirectly,  20
percent or more of,  respectively,  then  outstanding  shares of common stock of

                                       5
<PAGE>
such  corporation  and the  combined  voting  power of then  outstanding  voting
securities  of such  corporation  entitled to vote  generally in the election of
directors,  and (3) at least a majority of the members of the board of directors
of such  corporation  were  members  of the  Incumbent  Board at the time of the
execution  of the initial  agreement or action of the Board  providing  for such
sale or other disposition of assets of the Company.

     13. ADMINISTRATION; AMENDMENT AND TERMINATION.

     (a) This  Plan  shall be  administered  by a  committee  consisting  of two
members who shall be the current  directors  of the Company or senior  executive
officers or other directors who are not Participants as may be designated by the
Chief Executive  Officer (the  "Committee"),  which shall have full authority to
construe and  interpret  this Plan,  to  establish,  amend and rescind rules and
regulations  relating  to this Plan,  and to take all such  actions and make all
such  determinations  in connection  with this Plan as it may deem  necessary or
desirable.

     (b) The Board may from time to time  make  such  amendments  to this  Plan,
including to preserve or come within any exemption from liability  under Section
16(b) of the Exchange Act, as it may deem proper and in the best interest of the
Company without further approval of the Company's  stockholders,  provided that,
to the extent  required under Nevada law or to qualify  transactions  under this
Plan for  exemption  under Rule 16b-3  promulgated  under the  Exchange  Act, no
amendment  to this  Plan  shall  be  adopted  without  further  approval  of the
Company's  stockholders  and,  provided,  further,  that  if and  to the  extent
required for this Plan to comply with Rule 16b-3  promulgated under the Exchange
Act,  no  amendment  to this Plan  shall be made more than once in any six month
period that would change the amount, price or timing of the grants of the Common
Stock  hereunder  other than to comport with  changes in the Code,  the Employee
Retirement  Income  Security  Act  of  1974,  as  amended,  or  the  regulations
thereunder.  The  Board  may  terminate  this  Plan  at any  time by a vote of a
majority of the members thereof.

     14. MISCELLANEOUS.

     (a)  Nothing in this Plan shall be deemed to create any  obligation  on the
part of the Board to nominate  any  Director  for  reelection  by the  Company's
stockholders or to limit the rights of the stockholders to remove any Director.

     (b) The Company  shall have the right to require,  prior to the issuance or
delivery  of any  shares of the  Common  Stock  pursuant  to this  Plan,  that a
Participant make arrangements  satisfactory to the Committee for the withholding
of any taxes  required by law to be  withheld  with  respect to the  issuance or
delivery of such shares,  including,  without limitation,  by the withholding of
shares that would otherwise be so issued or delivered,  by withholding  from any
other payment due to the Participant, or by a cash payment to the Company by the
Participant.

     14.1  GOVERNING  LAW. The Plan and all actions  taken  thereunder  shall be
governed by and construed in accordance with the laws of the State of Nevada.

     14.2 INFORMATION TO SHAREHOLDERS.  The Company shall furnish to each of its
stockholders financial statements of the Company at least annually.

     IN WITNESS WHEREOF,  this Plan has been executed  effective as of August 1,
2003.

                                      PALOMAR ENTERPRISES, INC.

                                      By /s/ Steven Bonenberger
                                         ----------------------------------
                                         Steven Bonenberger, President

                                       6Exhibit 10.15  

EMPLOYMENT AGREEMENT  

                This
sets forth the EMPLOYMENT AGREEMENT made and entered into as of April 29, 2003 (the
“Effective Date”) by and among (i) Alliance Financial Corporation, a New
York corporation and registered bank holding company (“Corporation”), and
Alliance Bank, N.A. (“Bank”), which is a wholly-owned subsidiary of the
Corporation (collectively, the Corporation and Bank are hereafter referred to as
“Employer”), having an office in Syracuse and in Cortland and Oneida, New York,
and (ii) JACK H. WEBB, an individual currently residing at 5216 Duane Drive,
Fayetteville, New York (“Employee”). This Agreement supersedes the
Employment Agreement between the parties dated as of May 1, 2000 which provided for a term
ending December 31, 2003.  

WITNESSETH  

                IN
CONSIDERATION of the mutual premises, covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to the following employment terms.  

        1.     
Employment.   

                (a)     
Term. Employer shall employ Employee, and Employee shall serve as an executive
officer of Employer, in accordance with the terms and conditions of this Agreement, for a
term commencing on the Effective Date and ending on July 31, 2006 subject to earlier
termination as provided in this Agreement. Not later than six months prior to the
expiration of this Agreement, the parties agree to commence discussions regarding a
renewal of this Agreement. If the parties cannot reach agreement regarding the terms for
continued employment, this Agreement shall automatically renew for a 12 month period on
the same terms in effect at that time unless either party provides written notice of
intent not to renew at least 60 days prior to the expiration of this Agreement.   

                (b)     
Duties. On the terms and subject to the conditions set forth herein, the Employer
employs the Employee to serve as the President and Chief Executive Officer of the
Corporation and of the Bank. The Employee shall perform the regular duties commensurate
with his position, subject to the control and supervision of Employer’s Boards of
Directors, as from time to time may be reasonably assigned to Employee by Employer based
upon his position. Employee shall devote Employee’s best efforts to the affairs of
Employer, serve faithfully and to the best of Employee’s ability and devote all of
Employee’s working time and attention, knowledge, experience, energy and skill to the
business of Employer, except that Employee may affiliate with professional associations,
business and civic organizations, provided that Employee’s involvement in such activities
does not adversely affect the performance of his duties on behalf of Employer. Employee
shall continue to serve as a director on the Board of Directors of the Corporation and
the Bank subject to the regular and legally required procedures for renomination and
election by shareholders of the Corporation. Employee shall also serve on the Board of
Directors of, or as an officer of Employer’s affiliates, if requested to do so by the
Boards of Directors of Employer.   

-29-  

	

        2.     Compensation
and Benefits.   

                (a)     Employer.
Whenever in this Agreement Employee is entitled to compensation, benefits or other
remuneration from Employer, the term Employer shall mean the Corporation or the Bank.
Employee shall not be entitled to duplicate compensation, benefits or other remuneration
from the Corporation and the Bank.   

                (b)     Base
Salary. The Employee shall initially be paid a base salary at an annualized rate of
$300,000 (“Base Salary”), which shall be the effective base salary rate as of January 1,
2003. On an annual basis, consistent with Employer’s regular review procedures, the
Employee’s base salary shall be reviewed and may be adjusted in the discretion of the
Corporation’s Board of Directors provided that it shall not be decreased below the Base
Salary amount. Employee’s Base Salary shall be paid in accordance with Employer’s
regular payroll practices for executive employees.   

                (c)     Bonuses.
Employee shall be entitled to participate in the short term and long term incentive
compensation plans, bonus, or similar plans maintained from time to time by the Employer
for its senior executive officers upon terms which may be separate and distinct from
other senior management. Upon termination of Employee’s employment, other than a
termination for cause pursuant to subparagraph 5(d), 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 cash bonuses that are payable with respect to the year during which
the termination occurs.   

                (d)     Benefit
Plans. Employee shall be eligible to participate in any Employer maintained employee
pension benefit plans (as that term is defined under Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended), group life insurance plans, medical
plans, dental plans, long-term disability plans, business travel insurance programs and
other fringe benefit plans or programs maintained by Employer for the benefit of its
executive employees. Employee’s participation in any such benefit plans and programs
shall be based on, and subject to satisfaction of, the eligibility requirements and other
conditions of such plans and programs.   

                (e)     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 under this Agreement.   

-30-  

	

                (f)     Other
Benefits. During the period of employment, Employee shall also be entitled to receive
the following benefits:   

	  	                (i)     Paid
vacation of at least 4 weeks during each calendar year (prorated for partial
         years) (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)     Reimbursement
of membership fees incurred by Employee at the Century Club of          Syracuse and at a
country club of Employee’s choice;  

	  	                (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 Board of Directors
of Employer; and  

	  	                (v)     Reimbursement
of the purchase price of a cellular telephone and all          Employer-related business
charges incurred in connection with the use of such telephone.  

	

                (g)     Equity
Based Compensation. Employee shall be eligible to participate in the Corporation’s 1998
Long Term Compensation Plan or similar equity based programs maintained by Employer for
the benefit of its executive employees. Employee’s participation in such benefit plans
and programs shall be based on and subject to the eligibility requirements and other
terms and conditions of such plans and programs.   

        3.     Supplemental
Retirement Benefit. Supplemental retirement benefits shall be provided pursuant to a
separate agreement between Employee and Employer.   

        4.     Termination.
Prior to a “Change of Control” (as defined in subparagraph 5(c)), Employee’s employment
by Employer shall be subject to termination as follows:   

                (a)     Expiration
of the Term. Except as provided in subparagraph 16(d), this Agreement and Employee’s
employment with Employer shall terminate automatically at the expiration of this
Agreement, unless the parties enter into a written agreement extending Employee’s
employment.   

                (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 shall continue payments
of Employee’s then current Base Salary for a period of 60 days following Employee’s death
to the beneficiary designated by Employee on the “Beneficiary Designation Form” attached
to this Agreement as Appendix A.   

-31-  

	

                (c)     Termination
Upon Disability. Employer may terminate this Agreement upon Employee’s disability. For
purposes 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 (i) 26 consecutive
weeks that follows Employee’s use of all available sick leave or (ii) a total of 30 weeks
in any given calendar year (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, or if Employer shall disagree with the findings of the physicians, 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 and conclusive on Employee and Employer. During the Disability Period, Employee
shall be entitled to 100% of Employee’s then current Base Salary otherwise payable during
that period, reduced by any other Employer-provided benefits to which Employee may be
entitled with respect to the Disability Period on account of such disability (including,
but not limited to, benefits provided under any disability insurance policy or program,
worker’s compensation law, or any other benefit program or arrangement).   

                (d)     Termination
for Cause. Subject to satisfaction of the notice and correction provisions of this
subparagraph (d), Employer may terminate Employee’s employment 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)     Misconduct
as an executive or director of Employer, or any subsidiary or affiliate          of
Employer for which Employee is performing services hereunder which consists of
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 30 days following Employee’s receipt of written
notice to          Employee of such neglect or refusal;  

	  	                (iv)     Conviction
of a crime involving moral turpitude;  

	  	                (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; or  

	

-32-  

	  	                (vi)     Failure
to follow the reasonable and documented instructions of the Board of          Directors
of Employer, provided that the instructions do not require Employee to engage in unlawful
conduct.  

	

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.  

                (e)     Termination
Without Cause. Employer may terminate Employee’s employment for reasons other than
“cause” (as defined in subparagraph 4(d)) upon not less than 60 days prior written notice
delivered to Employee, in which event Employer shall be obligated to pay to Employee
amounts equivalent to the unpaid compensation and benefits that would have been paid to
or earned by Employee pursuant to this Agreement, if Employee had remained employed under
the terms of this Agreement until the expiration of this Agreement. At the option of
Employer such amounts may paid in a lump sum payment following the termination date.
This subparagraph (e) shall not require an acceleration or duplication of payments to be
made pursuant to paragraph 3, or benefits to be provided pursuant to paragraph 5,
following Employee’s termination of employment.   

                (f)     Change
of Control. If Employee’s employment by Employer shall cease for any reason other than
“cause” (as defined in subparagraph 4(d)) within 24 months following a “Change of
Control” (as defined in subparagraph 5(c)) that occurs during the term of this Agreement,
the provisions of paragraphs 5 shall apply.   

                (g)     Resignation
as Director. Upon Employee’s termination of employment for any reason, Employee agrees
to resign as a member of Employer’s Board of Directors, if Employee is a director at the
time of termination, and to resign from any and all other offices and positions related
to Employee’s employment with Employer and held by Employee at the time of termination.   

        5.     Termination
Following a Change of Control.   

                (a)     In
the event of a “Termination” (as defined in paragraph 5(d) below) of Employee’s
employment in anticipation of, or within 24 months after, a Change of Control (as defined
in paragraph 5(c) below), the Employer shall:  

	  	                (i)     Within
60 days of termination, pay to Employee 2.99 times the average annual
         compensation paid to Employee by Employer and included in Employee’s gross
income for income tax purposes          during the five full taxable years, or shorter
period of employment, that immediately precede the year during          which the Change
of Control occurs;  

	

-33-  

	  	                (ii)     Provide
Employee with fringe benefits, or the cash equivalent of such benefits,
         identical to those described in paragraph 2 for a period of 24 months following
Employee’s termination of          employment; and  

	  	                (iii)     Treat
as immediately vested and exercisable all forms of equity-based compensation,
         including unexpired stock options, previously granted to Employee that are not
otherwise vested or          exercisable or that have not been exercised.  

	

                (b)     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 5 or otherwise) constitutes
an “excess parachute payment” within the meaning of Internal Revenue Code Sections 280G
and 4999, then payments to Employee pursuant to this Agreement shall be limited or
modified to the extent necessary to eliminate the application of Internal Revenue Code
Sections 280G and 4999.  The amount of any payment required by this subparagraph (b)
shall be calculated by the Employer’s independent auditors, assuming Employee is subject
to federal, state and local income taxes at the highest marginal rate.  

                (c)     For
purposes of paragraph 5(a), 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 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.  

	

-34-  

	

                (d)     For
purposes of paragraph 5(a), “Termination” shall mean  

	 	
(i)     termination
by the Employer (or successor entity) of the employment of
                           Employee for any reason other than death, Disability (as
defined in paragraph 4(c)                            or termination for “cause” (as
defined in paragraph 4(d)), or  

	 	
(ii)     resignation
by the Employee for the following reasons:  (A) a significant
                           change in the nature or scope of the Employee’s authority from
that prior to a                            Change of Control, (B) a reduction in the
Employee’s total compensation (including                            all earned bonuses
and benefits) from that prior to that Change in Control, or (C)
                           a change in the general location where the Employee is
required to perform                            services from that prior to a  Change of
Control.  

	

        6.     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 any of its or their dealings,
transactions or affairs which may come to Employee’s knowledge in the pursuance of his
duties or employment.   

                (b)     No
Competition. Employee’s employment is subject to the condition that during the term of
his employment hereunder and for a period of 24 months following the date his employment
ceases for any reason except for a termination by Employer without cause pursuant to
paragraph 4(e) (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 1% of the voting stock of any publicly held corporation shall not constitute a
violation of this paragraph.   

-35-  

	

                Notwithstanding
the restrictive covenants set forth in paragraph 6(b), in the event this Agreement is not
renewed upon its expiration as set forth in paragraph 1(a) following the good faith
negotiations of the parties, then in that situation only, the period of noncompetition
shall continue for six months following the Date of Termination (instead of for two
years).  In this event of non-renewal, the Employer at its sole option may extend that
period of noncompetition for an additional six-month period (for a total of 12 months
following the Date of Termination) upon electing to pay an amount to Employee equal to
six months of his final base salary amount.  If Employer elects to extend the
noncompetition period for the additional six month period it will advise Employee in
writing with 30 days of the Date of Termination and the payment equivalent to six months’ base
salary shall be paid to Employee in six equal monthly installments commencing within six
months following the Date of Termination.  

                (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 24 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
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 any covenant under this paragraph 6,
Employer may terminate, offset and/or recover from Employee immediately any and all
benefits paid to Employee pursuant to this Agreement, in addition to any and all other
remedies available to Employer under the law or in equity.   

                (e)     Modification.
Although the parties consider the restrictions contained in this paragraph 6 reasonable
as to protected business, duration, and geographic area, in the event that any court of
competent jurisdiction deems them to be unreasonable, then such restrictions shall apply
to the broadest business, longest period, and largest geographic territory as may be
considered reasonable by such court, and this paragraph 6, as so amended, shall be
enforced.   

-36-  

	

                (f)     Other
Agreements. Employee represents and warrants that neither Employee’s employment with the
Corporation nor Employee’s performance of his obligations hereunder will conflict with or
violate Employee’s obligations under the terms of any agreement with a previous employer
or other party including agreements to refrain from competing, directly or indirectly,
with the business of such previous employer or any other party.   

        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.     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
its offices in Syracuse, New York (with a copy to the Chair of the Compensation Committee
of Board of Directors) or at such other addresses as either Employee or Employer may, by
similar notice, designate.   

        9.     Rules,
Regulations and Policies. Employee shall use his best efforts to abide by and comply
with all of the rules, regulations, and policies of Employer, 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.   

        10.     Return
of Employer’s Property. After Employee has received notice of termination or at the end
of the Period of Employment, whichever first occurs, Employee shall immediately return to
Employer all documents and other property in his possession belonging to Employer.   

        11.     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 to this Agreement; and in the event
that one or more provisions contained herein shall be invalid, as determined by a court
of competent jurisdiction, this Agreement shall be construed as if such invalid
provisions had not been inserted.   

        12.     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.   

        13.     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.   

        14.     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.   

        15.     Jurisdiction
and Venue. 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 New York
State, and venue shall be in Onondaga County. Each party shall be subject to the
personal jurisdiction of the courts of New York State.   

-37-  

	

        16.     Miscellaneous.   

	  	        (a)     This
Agreement constitutes the entire understanding and agreement between the parties with
         respect to the subject matter hereof and shall supersede all prior
understandings and agreements.  

	  	        (b)     This
Agreement cannot be amended, modified, or supplemented in any respect, except by a
         subsequent written agreement entered into by the parties hereto.  

	  	        (c)     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.  

	  	        (d)     The
provisions of paragraphs 4, 5 and 6 hereof shall survive the termination or expiration
         of this Agreement.  

	

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

	 	 	ALLIANCE FINANCIAL CORPORATION

By: /s/Donald H. Dew
       ——————————————

Its: Director
        

	 	 	ALLIANCE BANK, N.A.

By: /s/Donald H. Dew
       ——————————————

Its: Director
        

	 	 	/s/Jack H. Webb

—————————————

Jack H. Webb 

	

-38-  

	

APPENDIX A  

BENEFICIARY
DESIGNATION FORM   

                Pursuant
to the Employment Agreement between (i) Alliance Financial Corporation and Alliance Bank,
N.A., and (ii) Jack H. Webb, dated as of May 1, 2003 (“Agreement”), I, Jack H.
Webb, hereby designate Linda L. Webb, my wife, as the beneficiary of amounts payable upon
my death in accordance with paragraph 4(c) of the Agreement. My beneficiary’s
current address is 5216 Duane Drive, Fayetteville, New York.   

	Dated:  _________________ 2003

——————————————

          Witness 	 	——————————————

          Jack H. Webb 

	

-39-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]