Document:

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NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO

AUSTRALIA, CANADA OR JAPAN

24 March 2003

CELLTECH GROUP PLC (“CELLTECH”)

CASH OFFER FOR OXFORD GLYCOSCIENCES PLC (“OGS”)

Celltech notes the announcements this morning by OGS and CAT and confirms that
it has purchased approximately 10.5% of the issued share capital of OGS at a
price of 182 pence.

Celltech also notes that a holding of more than 10% of the shares to which an
offer relates would be sufficient to prevent the compulsory acquisition
provisions within the Companies Act from being implemented. This would be
relevant in the event of a competing bid for OGS implemented by way of an offer
under the City Code. However, Celltech further notes that approval of a scheme
of arrangement, as in the case of the CAT/OGS merger proposal, would require
the statutory majorities to be obtained. As a result the shares currently held
by Celltech would not prevent the CAT/OGS merger proposal from proceeding
should a majority in number of OGS shareholders present and 75% of votes cast
at the OGS Court Meeting be in favour of the scheme.

Based on the closing price of a CAT Share on 21 March 2003, being the last
business day prior to this announcement, the implied value of OGS under the all
paper CAT merger offer, is £85.7 million or 153.9 pence per OGS share. In
comparison, the value of Celltech’s all cash offer is £101.4 million or 182
pence per OGS Share representing an additional 28.1 pence over the implied
value of an OGS Share under the CAT merger offer.

The first closing date for Celltech’s offer for OGS is 31 March 2003.

Enquiries:

For further information contact:

	 	 	 
	Celltech Group plc	 	
Telephone: +44 (0)1753 534 655
	Dr Peter Fellner, Chief Executive	 	 
	Peter Allen, Chief Financial Officer	 	 
	Richard Bungay, Director of Corporate Communications	 	 
	 	 	 
	JPMorgan	 	
Telephone: +44 (0)20 7742 4000
	Bernard Taylor, Vice Chairman	 	 
	Julian Oakley, Managing Director	 	 
	 	 	 
	Brunswick London	 	
Telephone: +44 (0)20 7404 5959
	Jon Coles	 	 
	Fiona Fong	 	 
	 	 	 
	Brunswick New York	 	
Telephone: +1 212 333 3810
	Cindy Leggett-Flynn	 	 

Celltech Group plc 208 Bath Road Slough Berks SL1 3WE United Kingdom

Tel: +44 01753 534655 Fax +44 01753 447590 E/mail: www.celltechgroup.com

 

 

Terms defined in the Offer Document have the same meaning when used in this
announcement.

Celltech and JPMorgan, acting on its behalf outside the United States, are
offering to purchase all of the issued and to be issued ordinary shares of 5
pence each in OGS (including those represented by OGS ADSs) at a price of 182
pence per OGS Share.

This announcement does not constitute an offer or invitation to purchase any
securities or a solicitation of an offer to buy any securities, pursuant to
the Offer or otherwise. The Offer is being made solely by the Offer Document
and the Acceptance Forms accompanying the Offer Document, which contain the
full terms and conditions of the Offer, including details of how the Offer may
be accepted. Celltech filed with the SEC a Tender Offer Statement on Schedule
TO containing the Offer Document and other related information on 3 March
2003. Free copies of those documents are available on the SEC’s website at
www.sec.gov. The Offer Document and the Acceptance Forms accompanying the
Offer Document have been made available to all OGS Securityholders at no
charge to them. OGS Securityholders are advised to read the Offer Document
and the accompanying Acceptance Forms which have been sent to them because
they contain important information. OGS Securityholders in the United States
are also advised to read the Tender Offer Statement because it contains
important information.

Unless otherwise determined by Celltech and permitted by applicable law and
regulation, the Offer (including the Loan Note Alternative) is not being made,
directly or indirectly, in or into, or by use of the mails of, or by any other
means or instrumentality (including, without limitation, telephonically or
electronically) of interstate or foreign commerce of, or of any facility of a
national securities exchange of Canada, nor is it being made in or into
Australia or Japan and the Offer is not capable of acceptance by any such use,
means, instrumentality or facilities or from within Australia, Canada or
Japan. Accordingly, unless otherwise determined by Celltech and permitted by
applicable law and regulation, neither copies of this announcement nor any
other documents relating to the Offer have been, or may be, mailed or
otherwise forwarded, distributed or sent in or into Australia, Canada or Japan
and persons receiving such documents (including custodians, nominees and
trustees) must not distribute or send them in, into or from such
jurisdictions.

The Loan Notes to be issued pursuant to the Loan Note Alternative available
under the Offer have not been, and will not be, listed on any stock exchange
and have not been and will not be registered under the US Securities Act or
under any relevant securities laws of any state or other jurisdiction of the
United States, or under the relevant securities laws of Australia, Canada or
Japan or any other jurisdiction. Accordingly, unless an exemption under such
relevant laws is available, Loan Notes may not be offered, sold, re-sold or
delivered, directly or indirectly, in, into or from the United States,
Australia, Canada or Japan or any other jurisdiction in which an offer of Loan
Notes would constitute a violation of relevant laws or require registration of
the Loan Notes, or to or for the account or benefit of any US Person or
resident of Australia, Canada or Japan or any other such jurisdiction.

THE OFFER WILL REMAIN OPEN FOR ACCEPTANCE DURING THE INITIAL OFFER PERIOD. THE
INITIAL OFFER PERIOD FOR ACCEPTANCES AND WITHDRAWALS WILL EXPIRE AT 3:00 P.M.
(LONDON TIME), 10:00 A.M. (NEW YORK CITY TIME), ON 31 MARCH 2003, UNLESS
EXTENDED TO A LATER CLOSING DATE. AT THE CONCLUSION OF THE INITIAL OFFER
PERIOD, IF ALL CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE
PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF
AT LEAST 14 CALENDAR DAYS. OGS SECURITYHOLDERS WILL HAVE THE RIGHT TO WITHDRAW
THEIR ACCEPTANCES OF THE OFFER FROM THE DATE OF THIS ANNOUNCEMENT UNTIL THE
SPECIFIED TIME ON THE LAST DAY OF THE INITIAL OFFER PERIOD, BUT NOT DURING THE
SUBSEQUENT OFFER PERIOD.

The Offer is conditional upon, among other things, valid acceptances being
received (and not, where permitted, being withdrawn) by 3:00 p.m. (London
time), 10:00 a.m. (New York City time) on 31 March 2003, or such later time(s)
and/or date(s) as Celltech may, subject to the City Code and in accordance with
the Exchange Act, decide in respect of not less than 90 percent (or such lesser
percentage as Celltech may decide) of the OGS Shares (including OGS Shares
represented by OGS ADSs) to which the Offer relates, provided that this
condition will not be satisfied unless Celltech shall have acquired, or agreed
to acquire, pursuant to the Offer or otherwise, OGS Shares (including OGS
Shares represented by OGS ADSs) carrying in aggregate more than 50 per cent of
the voting rights normally exercisable at a general meeting of OGS, including
for this purpose (to the extent, if any, required by the Panel) any voting
rights attaching to any OGS Shares (including OGS Shares represented by OGS
ADSs) that are unconditionally allotted or issued before the Offer becomes or
is declared unconditional as to acceptances pursuant to the exercise of any
outstanding subscription or conversion rights or otherwise.

Celltech reserves the right (but will not be obliged, other than as may be
required by the City Code or the Exchange Act) at any time or from time to time
to extend the Offer and, in such event, any decision to extend the Offer will
be publicly announced by 8:00 a.m. (London time) in the United Kingdom and 8:00
a.m. (New York City time) in the United States on the day (other than a
Saturday or Sunday) following the day on which the Offer was due to expire and
which banks are generally open in London for normal business. Except with the
consent of the Panel, the Initial Offer Period for acceptances
and withdrawals may not extend beyond 1:00 p.m. (London time), 8:00 a.m. (New
York City time), on 30 April 2003.

2

 

The Directors of Celltech accept responsibility for the information contained
in this announcement, and, to the best of their knowledge and belief (having
taken all reasonable care to ensure such is the case), the information
contained in this announcement is in accordance with the facts and does not
omit anything likely to affect the import of such information.

J.P. Morgan plc, which is regulated in the United Kingdom by the Financial
Services Authority, is acting for Celltech and for no one else in connection
with the Offer and will not be responsible to anyone other than Celltech for
providing the protections afforded to customers of JPMorgan or for providing
advice in relation to the Offer, the contents of the Offer Document or any
transaction or arrangement referred to therein.

The Panel wishes to draw the attention of member firms of NASDAQ to certain UK
dealing disclosure requirements during the offer period. The offer period (in
accordance with the City Code, which is published and administered by the
Panel) commences at the time when an announcement is made of a proposed or
possible offer, with or without terms. OGS has equity securities traded on the
London Stock Exchange and NASDAQ.

The above disclosure requirements are set out in more detail in Rule 8 of the
City Code. In particular, Rule 8 requires public disclosure of dealings during
the offer period by persons who own or control, or who would as a result of
any transaction own or control, one per cent. or more of any class of relevant
securities of the offeree company. Relevant securities include OGS Shares, OGS
ADSs and instruments convertible into OGS Shares or OGS ADSs. This requirement
will apply until the first closing date or, if this is later, the date when
the Offer becomes or is declared unconditional or lapses.

Disclosure should be made on an appropriate form by no later than 12 noon
(London time), 7 a.m. (New York City time) on the business day following the
date of the dealing transaction. These disclosures should be published through
a Regulatory Information Service.

The Panel requests that member firms advise those of their clients who wish to
deal in the relevant securities of OGS, whether in the United States or in the
United Kingdom, that they may be affected by these requirements. If there is
any doubt as to their application the Panel should be consulted (telephone
number: +44 (0) 20 7382 9026, fax number: +44 (0) 20 7638 1554).

This announcement has been approved by J.P.Morgan plc for the purpose of
section 21 of the Financial Services and Markets Act 2000 only.

END

3Exhibit 10.1

                              EMPLOYMENT AGREEMENT

      This sets forth the terms of the Employment Agreement made effective as of
April 1, 2002 between (i) COMMUNITY BANK SYSTEM, INC., a Delaware corporation
and registered bank holding company, and COMMUNITY BANK, N.A., a national
banking association, both having offices located in Dewitt, New York
(collectively, the "Employer"), and (ii) SANFORD A. BELDEN, an individual
currently residing at 9 Lynacres Boulevard, Fayetteville, New York ("Employee").
This Agreement supersedes the amended and restated Employment Agreement between
the parties dated as of October 31, 1999, which provided for employment for a
term ending on December 31, 2002. This Agreement is effective as of April 1,
2002.

                               W I T N E S S E T H

      IN CONSIDERATION of the promises and mutual agreements and covenants
contained herein, and other good and valuable consideration, the parties agree
as follows:

      1.    Employment.

            (a) Term. Employer shall continue to employ Employee, and Employee
shall continue to serve, as Director, President and Chief Executive Officer of
Employer for a sixty-nine month term commencing on April 1, 2002 and ending on
December 31, 2007 ("Period of Employment"), subject to termination as provided
in paragraph 3 hereof.

                                       1
<PAGE>

            (b) Salary. During the period of April 1, 2002 through December 31,
2002, Employer shall pay Employee base salary at the annual rate in effect for
Employee on March 31, 2002 ("Base Salary"). Employee's Base Salary for calendar
years after 2002 shall be increased at the same rate as the rate applied by the
Employer in its merit pool for salary increases to be paid for the applicable
calendar year. 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 compensation opportunities pursuant to the terms of the Management
Incentive Plan which has been approved by the Board of Directors of Employer to
cover Employee and other key personnel of Employer. Upon termination of
Employee's employment pursuant to subparagraph 3(a), 3(b), 3(c), 3(g) 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. Employee shall have full
responsibility, subject to the control of Employer's Board of Directors, for the
supervision of all aspects of Employer's business and operations, and the
discharge of such other duties and responsibilities to Employer as may from time
to time be reasonably assigned to Employee by Employer's Board of Directors.
Employee shall report to the Board of Directors of Employer. 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,

                                       2
<PAGE>

knowledge, experience, energy and skill to the business of Employer, except that
Employee may affiliate with professional associations, business and civic
organizations. Employee shall serve on the Board of Directors of, or as an
officer of Employer's affiliates, without additional compensation if requested
to do so by the Board of Directors of Employer. Employee shall receive only the
compensation and other benefits described in this Agreement for Employee's
duties as a Director of Employer.

      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 Employee'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 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. 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 issued by Employer
and held by Employee that are not exercisable or that have not been exercised,
so as to permit the Beneficiary to purchase the balance of Community Bank
System, Inc. ("CBSI") Stock not yet purchased pursuant to said options until the
end of the full exercise period provided in the

                                       3
<PAGE>

original grant of the option right, determined without regard to Employee's
death or termination of employment.

            (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 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, worker's compensation law, or
any other benefit program or arrangement). Upon termination pursuant to this
disability provision, Employee shall be free to dispose of any restricted stock
granted to Employee. Additionally, Employer shall treat as immediately
exercisable all unexpired stock options issued by Employer and held by Employee
that are not exercisable or that have not been exercised, so as to permit the
Employee to purchase the balance of CBSI Stock not yet purchased pursuant to
said options until the end of the full exercise period provided in the original
grant of the option right, determined without regard to Employee's disability or
termination of employment.

                                       4
<PAGE>

            (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;

                  (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

                                       5
<PAGE>

                  (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.

            (e) Termination For Reasons Other Than Cause. In the event Employer
terminates Employee prior to December 31, 2007 for reasons other than cause,
Employee shall be entitled to a severance benefit 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, payable in
equal monthly or semi-monthly installments over the 12-month period following
Employee's termination, or (ii) amounts of Base Salary and expected Management
Incentive Plan payments that otherwise would have been payable through the
balance of the unexpired term of this Agreement, payable in monthly or
semi-monthly installments through the balance of the unexpired term of this
Agreement. In addition, Employer shall: (iii) permit Employee to dispose of any
restricted stock granted to Employee; (iv) 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 Employee to purchase the balance of CBSI
Stock not yet purchased pursuant to said options until the end of the full
exercise period provided in the original grant of the option right determined
without regard to Employee's termination of employment; (v) fully fund the
grantor trust created pursuant to paragraph 1(i) of the separate "Supplemental
Retirement Plan Agreement" between Employee and Employer, as amended, for

                                       6
<PAGE>

benefits payable pursuant to that separate agreement; and (vi) cover Employee
and his eligible dependents under all Employer benefit plans and programs
available to Employer's retired employees.

            Notwithstanding the foregoing, if Employer terminates Employee prior
to December 31, 2007 for reasons other than cause and under circumstances that
entitle Employee to payments and benefits under paragraph 6 of this Agreement
(regarding "Change of Control"), then amounts payable under clauses (i) or (ii)
of this paragraph 3(e) shall be reduced by payments made to Employee under
paragraphs 6(a)(i) and (ii).

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

            (g) Voluntary Early Retirement by Employee. Employee may terminate
employment with Employer voluntarily by providing Employer with written notice
of Employee's early retirement at least six months prior to the date of
retirement. In the event of Employee's retirement pursuant to this paragraph
3(g), Employer shall:

                  (i) Continue the payment of Employee's Base Salary through the
date of retirement;

                  (ii) Pay Employee a pro rata portion (based on Employee's
complete months of active employment in the year of retirement) of all incentive
compensation and bonuses that are payable with respect to the year of
retirement;

                                       7
<PAGE>

                  (iii) Permit Employee to dispose of any restricted stock
granted to Employee;

                  (iv) 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 Employee to purchase the balance of CBSI Stock not
yet purchased pursuant to said options until the end of the full exercise period
provided in the original grant of the option right, determined without regard to
Employee's termination of employment;

                  (v) Fully fund the grantor trust created pursuant to paragraph
1(i) of the separate "Supplemental Retirement Plan Agreement" between Employee
and Employer, as amended, for benefits payable pursuant to that separate
agreement; and

                  (vi) Cover Employee and his eligible dependents under all
Employer benefit plans and programs available to Employer's retired employees.

            If and to the extent requested to do so by the Board of Directors of
CBSI, Employee shall resign as a member of Employer's Board of Directors, and as
a member of any other Employer board or committee, as of the date of Employee's
retirement.

      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 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

                                       8
<PAGE>

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 Personnel Committee of Employer's Board of Directors 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 4 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 Century
Club and the Onondaga Country Club, subject to nondeductible tax treatment by
Employer or a reimbursement to Employee for taxes owed by Employee in connection
with such benefit;

                                       9
<PAGE>

                  (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; and

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

            (d) Supplemental Retirement Benefits. The terms and conditions for
the payment of Supplemental Retirement Benefits are set forth in a separate
written agreement between the parties dated April 1, 2002.

      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 common stock of CBSI. Such review may be conducted
pursuant to the terms of the Community Bank System, Inc. 1994 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 for "good
reason" (as defined in paragraph 6(c) below), but not including Employee's
termination for "cause" (as described in paragraph 3(d)) or Employee's voluntary
termination without "good reason," within 2 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

                                       10
<PAGE>

consulting fee rate equal to the total of 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 prior 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 this paragraph
6(a)(ii) are deemed taxable benefits, Employer shall reimburse Employee for
taxes owed by Employee on the benefits and tax reimbursement;

                  (iii) Treat as immediately exercisable all unexpired stock
options issued by Employer and held by Employee that are not otherwise
exercisable or that have not been exercised (so as to permit Employee to
purchase the balance of CBSI Stock not yet purchased pursuant to said options
until the end of the full exercise period provided in the original grant of the
option right, determined without regard to Employee's termination of employment)
and permit Employee to dispose of any restricted stock granted to Employee; and

                  (iv) Pay to Employee the difference between the total purchase
price paid by Employee for the home owned by him in the Syracuse area and the
proceeds of the sale of such home by Employee following the termination of his
employment not later than December 31, 2007 if he elects to move outside of the
metropolitan Syracuse area and he establishes to the satisfaction of the Board
of Directors of Employer that he is unable despite reasonable efforts to sell
the home within one year from the termination of his employment for a sum equal
to the purchase price, or, in lieu thereof, Employer will purchase the home for
a sum equal to the price Employee paid for it.

                                       11
<PAGE>

                  (v) Subject to Employer's right to make the single lump sum
payment described in paragraph 6(a)(vi) 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" within the meaning of Internal Revenue Code Section
280G, then the parties shall negotiate a 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 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)(vi), the amount of any payment shall be increased to the extent
necessary to hold Employee harmless from all income and excise tax liability
attributable to such payment.

                  (vi) 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 (except for the benefit set
forth in paragraph 6(a)(iv) which shall continue pursuant to its terms) 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 all income and excise tax liability attributable to such single lump sum
payment.

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

                                       12
<PAGE>

                  (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.

            (c) For purposes of this paragraph 6, "good reason" shall mean
action taken by Employer that results in :

                  (i) An involuntary and material adverse change in Employee's
title, duties, responsibilities, or total remuneration;

                                       13
<PAGE>

                  (ii) An involuntary and material relocation of the office from
which Employee is expected to perform his duties; or

                  (iii) An involuntary and material adverse change in the
general working conditions (including travel requirements and clerical support)
applicable to Employee.

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

                                       14
<PAGE>

            (b) No Competition. Employee's employment is subject to the
condition that during the term of his employment hereunder and for the period
specified in Paragraph 8(c) below, 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 the states of New York and
Pennsylvania. 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

                                       15
<PAGE>

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) Non-Competition Period. If Employee's employment with Employer
shall cease for any reason during the Period of Employment as defined in
Paragraph 1(a) of this Agreement, the "non-competition period" shall begin on
the date the final payment is made pursuant to the terms of this Agreement and
shall end on the earlier of (i) the date that is 18 months after the date the
final payment is made pursuant to the terms of this Agreement, or (ii) December
31, 2007.

            (d) 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 the period specified in
8(c) above, 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.

            (e) Termination of Payments. Upon the breach by Employee of any
covenant under this paragraph 8, Employer may offset and/or recover from
Employee immediately any and all amounts paid to Employee under this Agreement
in addition to any and all other remedies available to Employer under the law or
in equity.

                                       16
<PAGE>

      9. 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.

      10. Rules, Regulations and Policies. Employee shall 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.

      11. No Prior Restrictions. Employee affirms and represents that Employee
is under no obligations 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.

      12. 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 promptly return to Employer all documents and other property in his
possession belonging to Employer.

      13. 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, the court shall have authority to modify such provision
in a manner that most closely reflects the intent of the parties and is valid.

                                       17
<PAGE>

      14. 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.

      15. 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.

      16. Miscellaneous. 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, including the amended
and restated Employment Agreement made effective as of October 31, 1999. 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 and 8 hereof shall survive the termination of this
Agreement.

      17. 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.

      18. 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 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. If Employee is the

                                       18
<PAGE>

prevailing party in a proceeding to collect payments due pursuant to this
Agreement, 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:
                                                  ----------------------------

                                               Its:
                                                   ---------------------------

                                               COMMUNITY BANK, N.A.

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

                                               Its:
                                                   ---------------------------

                                               -------------------------------
                                                       SANFORD A. BELDEN

                                       19
<PAGE>

                                   APPENDIX A

                          BENEFICIARY DESIGNATION FORM

      Pursuant to the Employment Agreement between (i) Community Bank System,
Inc. and Community Bank, N.A., and (ii) Sanford A. Belden, dated as of April 1,
2002 ("Agreement"), I, Sanford A. Belden, hereby designate Elizabeth G. Belden,
my wife, as the beneficiary of amounts payable upon my death in accordance with
paragraph 3(b) of the Agreement. My beneficiary's current address is 9 Lynacres
Boulevard, Fayetteville, New York. Contingent Beneficiary: The Sanford and
Elizabeth Belden Survivorship Trust, current address: M&T Bank and Grace B.
Ghezzi, CPA.

Dated:                                               ---------------------------
      --------------------                                 Sanford A. Belden

--------------------------
         Witness

                                       20

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