Document:

Exhibit 10.11

                             FIRST AMENDMENT TO THE
                              GRANGE NATIONAL BANK
                              AMENDED AND RESTATED
                  SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

      This First Amendment to the Grange National Bank Amended and Restated
Supplemental Executive Retirement Agreement is entered into as of March 26,2003
by and between GRANGE NATIONAL BANK, a nationally-chartered commercial bank
located in Laceyville, Pennsylvania (the "Company"), and THOMAS A. McCULLOUGH
(the "Executive").

      On January 17,2003, the Company and the Executive entered into an Amended
and Restated Supplemental Retirement Agreement (the "Agreement"). The parties
now desire to amend the Agreement as set forth herein.

      The parties hereto, intending to be legally bound hereby, agree as
follows:

      1. Section 2.5 of the Agreement is amended by adding the following
sentence at the end of the Section:

      Notwithstanding any other provisions to the contrary in this Section 2.5,
      the Company shall not pay the Change of Control Benefit but shall instead
      pay the Early Retirement Benefit in the amounts and at the times provided
      in Section 2.3 hereof if (a) the payment of the Change of Control Benefit
      would cause the amount of any other payments that the Executive otherwise
      has the right to receive from the Company to be reduced as a result of
      such other payments and the Change of Control Benefit being limited to the
      largest amount as will result in no portion of them being subject to
      excise tax imposed under Section 4999 of the Code, or (b) the payment of
      the Change of Control Benefit would cause the sum of (i) any other
      payments that the Executive has the right to receive from the Company and
      (ii) the Change in Control Benefits to be a "parachute payment," as
      defined by Section 280G of the Code.

      2. All other terms and conditions of the Agreement remain in full force
and effect.

      IN WITNESS WHEREOF, the Company and the Executive have caused this First
Amendment to be duly executed as of the date first above written.

EXECUTIVE                               GRANGE NATIONAL BANK

/s/ Thomas A. McCullough                By: /s/ Sally A. Steele, Secretary
------------------------------              ---------------------------------
Thomas A. McCullough                          Sally A. Steele
                                                       As its Secretary

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               (C) 2002 Clark/Bardes Consulting-Banking Practice

This document is provided to assist your legal counsel in documenting your
specific arrangement. The laws of the various states may differ considerably,
and this specimen is for general information only. It is not a form to be
signed, nor is it to be construed as legal advice. Failure to accurately
document your arrangement could result in significant losses, whether from
claims of those participating in the arrangement, from the heirs and
beneficiaries of Executives, or from regulatory agencies such as the Internal
Revenue Service, the Department of Labor, or bank examiners. License is hereby
granted to your legal counsel to use these materials in documenting solely your
arrangement.

                              GRANGE NATIONAL BANK
                              AMENDED AND RESTATED
                  SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

<PAGE>

                              GRANGE NATIONAL BANK
                              AMENDED AND RESTATED
                  SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

      This Agreement is entered into this January 17, 2003, by and between
GRANGE NATIONAL BANK, a nationally-chartered commercial bank located in
Laceyville, Pennsylvania (the "Company"), and THOMAS A. MCCULLOUGH (the
"Executive").

      On January 1, 1996, the Company and the Executive entered into an
Executive Supplemental Income Agreement (the "Prior Agreement"). Pursuant to its
powers to amend the Prior Agreement, the Company hereby amends and restates the
Prior Agreement in its entirety.

      The purpose of this Agreement is to provide specified benefits to the
Executive, a member of a select group of management or highly compensated
employees who contribute materially to the continued growth, development and
future business success of the Company. This Agreement shall be unfunded for tax
purposes and for purposes of Title I of ERISA.

                                   ARTICLE 1
                                  DEFINITIONS

      The following words and phrases shall have the following meanings, unless
the context requires otherwise:

1.1   "Accrual Balance" means the liability accrued on the books of the Company
      for the Company's obligation for the Normal Retirement Benefit, using
      generally accepted accounting principles.

1.2   "Beneficiary" means each designated person, or the estate of the
      Executive, entitled to benefits, if any, upon the death of the Executive
      determined pursuant to Article 3.

1.3   "Beneficiary Designation Form" means the form established from time to
      time by the Plan Administrator that the Executive completes, signs and
      returns to the Plan Administrator to designate one or more Beneficiaries.

1.4   "Board" means the Board of Directors of the Company as from time to time
      constituted.

1.5   "Change of Control" means

      (a) A change in the ownership of the capital stock of the Company or the
      Corporation, whereby another corporation, person, or group acting in
      concert

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      (hereinafter this Agreement shall collectively refer to any combination of
      these three [another corporation, person, or group acting in concert] as a
      "Person") as described in Section 14(d)(2) of the Securities Exchange Act
      of 1934, as amended (the "Exchange Act"), acquires, directly or
      indirectly, beneficial ownership (within the meaning of Rule 13d-3
      promulgated under the Exchange Act) of a number of shares of capital stock
      of the Company or the Corporation which constitutes fifty percent (50%) or
      more of the combined voting power of the Company's or the Corporation's
      then outstanding capital stock then entitled to vote generally in the
      election of directors; or

      (b) The persons who were members of the Board of Directors of the Company
      or the Corporation's immediately prior to a tender offer, exchange offer,
      contested election or any combination of the foregoing, cease to
      constitute a majority of the Board of Directors; or

      (c) The adoption by the Board of Directors of the Company or the
      Corporation of a merger, consolidation or reorganization plan involving
      the Company or the Corporation in which the Company or the Corporation is
      not the surviving entity, or a sale of all or substantially all of the
      assets of the Company or the Corporation. For purposes of this Agreement,
      a sale of all or substantially all of the assets of the Company or the
      Corporation shall be deemed to occur if any Person acquires (or during the
      12-month period ending on the date of the most recent acquisition by such
      Person, has acquired) gross assets of the Company or the Corporation that
      have an aggregate fair market value equal to fifty percent (50%) or more
      of the fair market value of all of the respective gross assets of the
      Company or the Corporation immediately prior to such acquisition or
      acquisitions; or

      (d) A tender offer or exchange offer is made by any Person which results
      in such Person beneficially owning (within the meaning of Rule 13d-3
      promulgated under the Exchange Act) either fifty percent (50%) or more of
      the Company's or the Corporation's outstanding shares of Common Stock or
      shares of capital stock having fifty percent (50%) or more the combined
      voting power of the Company's or the Corporation's then outstanding
      capital stock (other than an offer made by the Company or the
      Corporation), and sufficient shares are acquired under the offer to cause
      such person to own fifty percent (50%) or more of the voting power; or

      (e) Any other transactions or series of related transactions occurring
      which have substantially the same effect as the transactions specified in
      any of the preceding clauses of this Section I.5.

      Notwithstanding the above, certain transfers are permitted within Section
      318 of the Code and such transfers shall not be deemed a Change of
      Control under this Section 1.5.

1.6   "Code" means the Internal Revenue Code of 1986, as mended.

<PAGE>

1.7   "Compensation" means the annual compensation, including bonuses,
      commissions, overtime, relocation expenses, incentive payments,
      non-monetary awards, and including automobile allowances paid to the
      Executive for employment services rendered to the Company, before
      reduction for compensation deferred pursuant to all qualified,
      non-qualified and Code ss. 125 plans of the Company.

1.8   "Corporation" means Grange National Banc Corp., a Pennsylvania
      corporation.

1.9   "Disability" means a condition whereby the Executive, because of a
      physical or mental sickness, accident or injury, is or will be unable to
      perform the duties of the Executive's customary position of employment
      with the Company or any other employer. The Board, in its sole discretion,
      shall determine whether the Executive is disabled and may require the
      Executive to submit to a physical examination in order to determine
      disability.

1.10  "Disability Benefit" means the benefit as set forth in Section 2.4.

1.12  "Early Retirement Benefit" means the benefit as set forth in Section 2.3.

1.13  "Effective Date" means 1/1/96.

1.14  "Final Compensation" means the average of the Executive's Compensation for
      his or last five calendar years of employment (including the annualized
      compensation for the calendar year in which the event that entitled the
      Executive to a distribution of benefits under this Agreement occurred).

1.15  "Normal Retirement Age" means the Executive's sixty-second (62nd)birthday.

1.16  `Normal Retirement Benefit" means the benefit as set forth in Section 2.2,

1.17  "Normal Retirement Date" means the later of the Normal Retirement Age or
      Termination of Employment.

1.18  "Pension Benefit" means the balance in the Executive's 401(k) (as of the
      date any benefits are being determined) attributed to all Company
      contributions, plus the return on those contributions, amortized over a
      two hundred forty (240) month period with interest calculated on the
      unpaid balance at an annual rate of eight ' percent (8%), compounded
      monthly.

1.19  "Plan Administrator" means the plan administrator described in Article 5.

1.20  "Plan Year" means the twelve (12) month period from January 1 to December
      3I.

1.21  "Termination for Cause" means termination of the Executive's employment
      for: (a) gross negligence or gross neglect of duties; (b) commission of a
      felony or of a gross misdemeanor involving moral turpitude; or (c) actions
      inimical to the

<PAGE>

      interests of the Company, including but not limited to fraud, disloyalty,
      dishonesty or willful violation of any law or significant Company policy
      committed in connection with the Executive's employment and resulting in a
      material adverse effect on the Company.

1.22  "Termination of Employment" means the date on which the Executive (i)
      retires, resigns or ceases to be an employee; (ii) dies while in the
      active employ of the Company; or (iii) departs from the service of the
      Company for any reason; provided, that the Executive will not be deemed to
      have terminated the Executive's employment solely by reason of a leave of
      absence duly approved by the Company.

1.23  "Years of Service" means the twelve consecutive month period beginning on
      the Executive's date of hire and any twelve (12) month anniversary
      thereof, during the entirety of which time the Executive is an employee of
      the Company. The Plan Administrator in its discretion may also grant
      additional Years of Service in such circumstances where it deems such
      additional service appropriate.

                                   ARTICLE 2
                         RETIREMENT AND DEATH BENEFITS

2.1   Agreement Benefits. The Executive's benefits under this Agreement shall be
      limited to those described in this Article 2, and shall be subject to any
      conditions and limitations set forth in Article 4 and contained elsewhere
      in this Agreement.

2.2   Normal Retirement Benefit. Upon the Normal Retirement Date, the Company
      shall pay to the Executive an annual Normal Retirement Benefit equal to
      eighty- five percent (85%) of the Executive's Final Compensation reduced
      by the (a) Pension Benefit, and (b) fifty percent (50%) of the Social
      Security benefit that would be receivable by the Executive calculated as
      if the Executive's Normal Retirement Age were also his normal retirement
      age or age at which unreduced Social Security benefits were available
      under the Social Security law (regardless of whether any Social Security
      benefits are actually payable currently on the Executive's Normal
      Retirement Date). The Company shall pay the Normal Retirement Benefit to
      the Executive in twelve (12) equal monthly installments commencing as of
      the first day of the month following the Executive's Normal Retirement
      Date and payable during the Executive's lifetime on or around the first
      day of each successive month thereafter until the Executive has received
      one hundred eighty (180) installments. Upon making all of such
      installments, the Company's obligation to provide such payments will
      cease. No further benefit under this Agreement is to be provided.

2.3   Earls Retirement Benefit Upon the Executive's Termination of Employment
      before the Normal Retirement Date, the Company shall pay to the Executive
      an annual Early Retirement Benefit, determined by amortizing the Accrual
      Balance over one hundred eighty (180) equal monthly installments at an
      annual rate of

<PAGE>

      interest equal to the Prime Rate as published in the Wall Street Journal
      on the last business day immediately preceding the Executive's Termination
      of Employment. The Company shall pay the Early Retirement Benefit to the
      Executive commencing as of the first day of the month following the
      Executive's Termination of Employment and payable during the Executive's
      lifetime on or around the first day of each successive month thereafter
      until the Executive has received one hundred eighty (180) installments.
      Upon making all of such installments, the Company's obligation to provide
      such payments will cease. No further benefit under this Agreement is to be
      provided.

2.4   Disability Benefit. Upon Termination of Employment due to Disability prior
      to Normal Retirement Age, the Company shall pay to the Executive an annual
      Disability Benefit, determined by amortizing the Accrual Balance over one
      hundred eighty (180) equal monthly installments at an annual rate of
      interest equal to the Prime Rate as published in the Wall Street Journal
      on the last business day immediately preceding the Executive's Termination
      of Employment. The Company shall pay the Disability Benefit to the
      Executive commencing as of the first day of the month following the
      Executive's Termination of Employment and payable during the Executive's
      lifetime on or around the first day of each successive month thereafter
      until the Executive has received one hundred eighty (180) installments.
      Upon making all of such installments, the Company's obligation to provide
      such payments will cease. No further benefit under this Agreement is to be
      provided.

2.5   Chance of Control Benefit. Following a Change of Control, upon the
      Executive's Termination of Employment for reasons other than death,
      Disability or attaining Normal Retirement Age, the Company shall pay to
      the Executive an annual Change of Control Benefit equal to eighty-five
      percent (85%)of the Executive's Final Compensation reduced by the (a)
      Pension Benefit, and (b) fifty percent (50%) of the Social Security
      benefit that would be receivable by the Executive calculated as if the
      Executive's age at Termination of Employment were also his normal
      retirement age or age at which unreduced Social Security benefits were
      available under the Social Security law (regardless of whether any Social
      Security benefits are actually payable currently on the Executive's Normal
      Retirement Date). The Company shall pay the Change of Control Benefit to
      the Executive in twelve (12) equal monthly installments commencing as of
      the first day of the month following the Executive's Termination of
      Employment and payable during the Executive's lifetime on or around the
      first day of each successive month thereafter until the Executive has
      received one hundred eighty (180) installments. Upon making all of such
      installments, the Company's obligation to provide such payments will
      cease. No further benefit under this Agreement is to be provided.

2.6   Pre-Retirement Death Benefit. If the Executive dies while in the active
      employ by the Company, the Company shall pay to the Beneficiary the
      following benefits:

                  Year 1:         100% of Compensation
                  Years 2-5:       75% of Compensation
                  Years 6-15:      50% of Compensation

<PAGE>

      The Company shall pay the Pre-Retirement Death Benefit to the Beneficiary
      in twelve (12) monthly installments commencing as of the first day of the
      month following the Executive's death and on or around the first day of
      each successive month thereafter until the Executive's beneficiary has
      received one hundred eighty (180) installments. Upon making all of such
      installments, the Company's obligation to provide such payments will
      cease. No further benefit under this Agreement is to be provided.

2.7   Post-Commencement Death Benefit. If the Executive dies after any benefit
      payments have commenced under this Article but before receiving all such
      payments, the Company shall pay to the Beneficiary the remaining benefits
      at the same time, for such duration and in the same amounts they would
      have been paid to the Executive had the Executive survived.

2.8   Post-Retirement, Commencement Death Benefit. If the Executive is entitled
      to a benefit under this Article, but dies prior to the commencement of
      said benefit payments, the Company shall pay the same benefit payments to
      the Beneficiary that the Executive was entitled to prior to death except
      that the benefit payments shall commence on the first day of the month
      following the date of the Executive's death.

2.9   Withholding and Payroll Taxes. The Company shall withhold from any and all
      benefits made under this Article 2, all federal, state and local income
      taxes, employment and other taxes required to be withheld by the Company
      in connection with the benefits hereunder, in amounts to be determined in
      the sole discretion of the Company.

                                   ARTICLE 3
                                 BENEFICIARIES

3.1   Beneficiary. The Executive shall have the right, at any time, to designate
      a Beneficiary(ies) to receive any benefits payable under this Agreement to
      a beneficiary upon the death of the Executive. The Beneficiary designated
      under this Agreement may be the same as or different from the Beneficiary
      designation under any other plan of the Company in which the Executive
      participates.

3.2   Beneficiary Designation; Change. The Executive shall designate a
      Beneficiary by completing and signing the Beneficiary Designation Form,
      and delivering it to the Plan Administrator or its designated agent. The
      Executive's beneficiary designation shall be deemed automatically revoked
      if the beneficiary predeceases the Executive or if the Executive names a
      spouse as beneficiary and the marriage is subsequently dissolved. The
      Executive shall have the right to change a Beneficiary by completing,
      signing and otherwise complying with the terms of the

<PAGE>

      Beneficiary Designation Form and the Plan Administrator's rules and
      procedures, as in effect from time to time. Upon the acceptance by the
      Plan Administrator of a new Beneficiary Designation Form, all Beneficiary
      designations previously filed shall be cancelled. The Plan Administrator
      shall be entitled to rely on the last Beneficiary Designation Form filed
      by the Executive and accepted by the Plan Administrator prior to the
      Executive's death.

3.3   Acknowledgement. No designation or change in designation of a Beneficiary
      shall be effective until received, accepted and acknowledged in writing by
      the Plan Administrator or its designated agent.

3.4   No Beneficiary Designation. If the Executive dies without a valid
      beneficiary designation, or if all designated Beneficiaries predecease the
      Executive, then the Executive's spouse shall be the designated
      Beneficiary. If the Executive has no surviving spouse, the benefits shall
      be made to the personal representative of the Executive's estate.

3.5   Facility of Payment. If the Plan Administrator determines in its
      discretion that a benefit is to be paid to a minor, to a person declared
      incompetent, or to a person incapable of handling the disposition of that
      person's property, the Plan Administrator may direct payment of such
      benefit to the guardian, legal representative or person having the care or
      custody of such minor, incompetent person or incapable person. The Plan
      Administrator may require proof of incompetence, minority or guardianship
      as it may deem appropriate prior to distribution of the benefit. Any
      payment of a benefit shall be a payment for the account of the Executive
      and the Executive's Beneficiary, as the case may be, and shall be a
      complete discharge of any liability under the Agreement for such payment
      amount.

                                   ARTICLE 4
                        GENERAL LIMITATIONS ON BENEFITS

4.1   Termination for Cause. If there is a Termination for Cause by the Company
      of the Executive, the Executive shall cease participation hereunder as of
      the date of such termination and no benefits shall be paid to the
      Executive or the Executive's Beneficiary.

4.2   Requirement of Non-Competition. The Company shall not pay to the Executive
      any benefit under this Agreement if, during the term that benefits
      payments are being made, the Executive, without the prior written consent
      of the Board engages in, becomes interested in, directly or indirectly, as
      a sole proprietor, as a partner in a partnership, or as a substantial
      shareholder in a corporation, or becomes associated with, in the capacity
      of employee, director, officer, principal, agent, trustee or in any other
      capacity whatsoever, any enterprise conducted within twenty-five (25)
      miles of any office of the Company existing as of the date of the
      Executive's Termination of Employment, which

<PAGE>

      enterprise is, or may deemed to be, competitive with any business carried
      on by the Company as of the date of the Executive's Termination of
      Employment. This section shall not apply following a Change of Control.

4.3   Services. Payment of the Early Retirement Benefit or Normal Retirement
      Benefit is conditioned upon the Executive, while receiving payments under
      this Agreement, rendering such reasonable business consulting and advisory
      services to the Company as requested by the Board. Such services shall not
      require the Executive to be active in the Company's day-to-day activities,
      and the Executive shall be compensated for such services in an amount to
      be then agreed upon, and shall be reimbursed for all expenses incurred in
      performing such services.

4.4   Executive's Suicide or Misstatement. The Company shall not pay any benefit
      under this Agreement if the Executive commits suicide within two years of
      the Effective Date of this Agreement. In addition, the Company shall not
      pay any benefit under this Agreement if the Executive has made any
      material misstatement of fact on any application for insurance or any
      benefits provided by the Company to the Executive.

                                   ARTICLE 5
                          ADMINISTRATION OF AGREEMENT

5.1   Plan Administrator Duties. This Agreement shall be administered by a Plan
      Administrator which shall consist of the Board, or such committee as the
      Board shall appoint. The Executive may be a member of the Plan
      Administrator. The Plan Administrator shall also have the discretion and
      authority to (i) make, amend, interpret and enforce all appropriate rules
      and regulations for the administration of this Agreement and (ii) decide
      or resolve any and all questions including interpretations of this
      Agreement, as may arise in connection with the Agreement.

5.2   Agents. In the administration of this Agreement, the Plan Administrator
      may employ agents and delegate to them such administrative duties as it
      sees fit, (including acting through a duly appointed representative), and
      may from time to time consult with counsel who may be counsel to the
      Company.

5.3   Binding Effect of Decisions. The decision or action of the Plan
      Administrator with respect to any question arising out of or in connection
      with the administration, interpretation and application of the Agreement
      and the rules and regulations promulgated hereunder shall be final and
      conclusive and binding upon all persons having any interest in the
      Agreement.

5.4   Indemnity of Plan Administrator. The Company shall indemnify and hold
      harmless the members of the Plan Administrator against any and all claims,
      losses, damages, expenses or liabilities arising from any action or
      failure to act with respect to this Agreement, except in the case of
      willful misconduct by the

<PAGE>

      Plan Administrator or any of its members.

5.5   Company Information. To enable the Plan Administrator to perform its
      functions, the Company shall supply full and timely information to the
      Plan Administrator on all matters relating to the compensation of the
      Executive, the date and circumstances of the retirement, Disability, death
      or Termination of Employment of the Executive, and such other pertinent
      information as the Plan Administrator may reasonably require.

                                   ARTICLE 6
                          CLAIMS AND REVIEW PROCEDURE

6.1   For all claims other than Disability benefits:

      6.l.1 Claims Procedure. Any individual ("Claimant") who has not received
            benefits under this Agreement that he or she believes should be paid
            shall make a claim for such benefits as follows:

            6.1.1.1     Initiation - Written Claim. The Claimant initiates a
                        claim by submitting to the Company a written claim for
                        the benefits.

            6.1.1.2     Timing of Company Response. The Company shall respond to
                        such Claimant within 90 days after receiving the claim.
                        If the Company determines that special circumstances
                        require additional time for processing the claim, the
                        Company can extend the response period by an additional
                        90 days by notifying the Claimant in writing, prior to
                        the end of the initial 90-day period, that an additional
                        period is required. The notice of extension must set
                        forth the special circumstances and the date by which
                        the Company expects to render its decision.

            6.1.1.3     Notice of Decision. If the Company denies part or all of
                        the claim, the Company shall notify the Claimant in
                        writing of such denial. The Company shall write the
                        notification in a manner calculated to be understood by
                        the Claimant. The notification shall set forth

                        (a)   The specific reasons for the denial,

                        (b)   A reference to the specific provisions of this
                              Agreement on which the denial is based,

                        (c)   A description of any additional information or
                              material necessary for the Claimant to perfect the
                              claim and an explanation of why it is needed,

                        (d)   An explanation of this Agreement's review
                              procedures and the time limits applicable to such
                              procedures, and

                        (e)   A statement of the Claimant's right to bring a
                              civil action under ERISA Section 502(a) following
                              an adverse benefit determination on review.

<PAGE>

      6.1.2 Review Procedure. If the Company denies part or all of the claim,
            the Claimant shall have the opportunity for a full and fair review
            by the Company of the denial, as follows:

            6.1.2.4     Initiation - Written Request. To initiate the review,
                        the Claimant, within 60 days after receiving the
                        Company's notice of denial, must file with the Company a
                        written request for review.

            6.1.2.5     Additional Submissions - Information Access. The
                        Claimant shall then have the opportunity to submit
                        written comments, documents, records and other
                        information relating to the claim. The Company shall
                        also provide the Claimant, upon request and free of
                        charge, reasonable access to, and copies of, all
                        documents, records and other information relevant (as
                        defined in applicable ERISA regulations) to the
                        Claimant's claim for benefits.

            6.1.2.6     Considerations on Review. In considering the review, the
                        Company shall take into account all materials and
                        information the Claimant submits relating to the claim,
                        without regard to whether such information was submitted
                        or considered in the initial benefit determination.

            6.1.2.7     Timing of Company Response. The Company shall respond in
                        writing to such Claimant within 60 days after receiving
                        the request for review. If the Company determines that
                        special circumstances require additional time for
                        processing the claim, the Company can extend the
                        response period by an additional 60 days by notifying
                        the Claimant in writing, prior to the end of the initial
                        60-day period, that an additional period is required.
                        The notice of extension must set forth the special
                        circumstances and the date by which the Company expects
                        to render its decision.

            6.1.2.8     Notice of Decision. The Company shall notify the
                        Claimant in writing of its decision on review. The
                        Company shall write the notification in a manner
                        calculated to be understood by the Claimant. The
                        notification shall set forth:

                        (a)   The specific reasons for the denial,

                        (b)   A reference to the specific provisions of this
                              Agreement on which the denial is based,

                        (c)   A statement that the Claimant is entitled to
                              receive, upon request and free of charge,
                              reasonable access to, and copies of, all
                              documents, records and other information relevant
                              (as defined in applicable ERISA regulations) to
                              the Claimant's claim for benefits, and

                        (d)   A statement of the Claimant's right to bring a
                              civil action under ERISA Section 502(a).

6.2   For Disability claims:

<PAGE>

      6.2.1 Claims Procedures. Any individual ("Claimant") who has not received
            benefits under this Agreement that he or she believes should be paid
            shall make a claim for such benefits as follows:

            6.2.1.2     Initiation - Written Claim. The Claimant initiates a
                        claim by submitting to the Company a written claim for
                        the benefits.

            6.2.1.3     Timing of Company Response. The Company shall notify the
                        Claimant in writing or electronically of any adverse
                        determination as set out in this Section.

            6.2.1.4     Notice of Decision. If the Company denies part or all of
                        the claim, the Company shall notify the Claimant in
                        writing of such denial. The Company shall write the
                        notification in a manner calculated to be understood by
                        the Claimant. The notification shall set forth:

                        (a)   The specific reasons for the denial,

                        (b)   A reference to the specific provisions of this
                              Agreement on which the denial is based,

                        (c)   (c) A description of any additional information or
                              material necessary for the Claimant to perfect the
                              claim and an explanation of why it is needed,

                        (d)   An explanation of the Agreement's review
                              procedures and the time limits applicable to such
                              procedures,

                        (e)   A statement of the Claimant's right to bring a
                              civil action under ERISA Section 502(a) following
                              an adverse benefit determination on review,

                        (f)   [See ss.2560.503-l(g)(v) Any internal rule,
                              guideline, protocol, or other similar criterion
                              relied upon in making the adverse determination,
                              or a statement that such a rule, guideline,
                              protocol, or other similar criterion was relied
                              upon in making the adverse determination and that
                              the Claimant can request and receive free of
                              charge a copy of such rule, guideline, protocol or
                              other criterion from the Company, and

                        (g)   If the adverse benefit determination is based on a
                              medical necessity or experimental treatment or
                              similar exclusion or limit, either an explanation
                              of the scientific or clinical judgment for the
                              determination, applying the terns of this
                              Agreement to the Claimant's medical circumstances,
                              or a statement that such explanation will be
                              provided free of charge upon request.

           6.2.1.5      Timing of Notice of Denial/Extensions. The Company shall
                        notify the Claimant of denial of benefits in writing or
                        electronically not later than 45 days after receipt of
                        the claim by the Company. The Company may elect to
                        extend notification by two 30-day periods subject to the
                        following requirements:

<PAGE>

                        (a)   For the first 30-day extension, the Company shall
                              notify the Claimant (1) of the necessity of the
                              extension and the factors beyond the Company's
                              control requiring an extension; (2) prior to the
                              end of the initial 45-day period; and (3) of the
                              date by which the Company expects to render a
                              decision.

                        (b)   If the Company determines that a second 30-day
                              extension is necessary based on factors beyond the
                              Company's control, the Company shall follow the
                              same procedure in (a> above, with the exception
                              that the notification must be provided to the
                              Claimant before the end of the first 30-day
                              extension period.

                        (c)   For any extension provided under this section, the
                              Notice of Extension shall specifically explain the
                              standards upon which entitlement to a benefit is
                              based, the unresolved issues that prevent a
                              decision on the claim, and the additional
                              information needed to resolve those issues. The
                              Claimant shall be afforded 45 days within which to
                              provide the specified information.

      6.2.2 Review Procedures - Denial of Benefits. If the Company denies part
            or all of the claim, the Claimant shall have the opportunity for a
            full and fair review by the Company of the denial, as follows:

            6.2.2.1     Initiation of Appeal. Within 180 days following notice
                        of denial of benefits, the Claimant shall initiate an
                        appeal by submitting a written notice of appeal to
                        Company.

            6.2.2.2     Submissions on Appeal - Information Access. The Claimant
                        shall be allowed to provide written comments, documents,
                        records, and other information relating to the claim for
                        benefits. The Company shall provide to the Claimant,
                        upon request and free of charge, reasonable access to,
                        and copies of, all documents, records, and other
                        information relevant (as defined in applicable ERISA
                        regulations) to the Claimant's claim for benefits.

            6.2.2.3     Additional Company Responsibilities on Appeal. On
                        appeal, the Company shall:

                        (a)   [See ss.2560.503-1(h)(3)(i)-(v)] Take into account
                              all materials and information the Claimant submits
                              relating to the claim, without regard to whether
                              such information was submitted or considered in
                              the initial benefit determination;

                        (b)   Provide for a review that does not afford
                              deference to the initial adverse benefit
                              determination and that is conducted by an
                              appropriate named fiduciary of the Company who is
                              neither the individual who made the adverse
                              benefit determination that is the subject of the
                              appeal, nor the

<PAGE>

                              subordinate of such individual;

                        (c)   In deciding an appeal of any adverse benefit
                              determination that is based in whole or in part on
                              a medical judgment, including determinations with
                              regard to whether a particular treatment, drug, or
                              other item is experimental, investigational, or
                              not medically necessary or appropriate, consult
                              with a health care professional who has
                              appropriate training and experience in the field
                              of medicine involved in the medical judgment;

                        (d)   Identify medical or vocational experts whose
                              advise was obtained on behalf of the Company in
                              connection with a Claimant's adverse benefit
                              determination, without regard to whether the
                              advice was relied upon in making the benefit
                              determination; and

                        (e)   Ensure that the health care professional engaged
                              for purposes of a consultation under subsection
                              (c) above shall be an individual who was neither
                              an individual who was consulted in connection with
                              the adverse benefit determination that is the
                              subject of the appeal, nor the subordinate of any
                              such individual.

            6.2.2.4     Timing of Notification of Benefit Denial - Appeal
                        Denial. The Company shall notify the Claimant not later
                        than 45 days after receipt of the Claimant's request for
                        review by the Company, unless the Company determines
                        that special circumstances require an extension of time
                        for processing the claim. If the Company determines that
                        an extension is required, written notice of such shall
                        be furnished to the Claimant prior to the termination of
                        the initial 45-day period, and such extension shall not
                        exceed 45 days. The Company shall indicate the special
                        circumstances requiring an extension of time and the
                        date by which the Company expects to render the
                        determination on review.

            6.2.2.5     Content of Notification of Benefit Denial. The Company
                        shall provide the Claimant with a notice calculated to
                        be understood by the Claimant, which shall contain:

                        (a)   The specific reason or reasons for the adverse
                              determination;

                        (b)   Reference to the specific plan provisions on which
                              the benefit determination is based;

                        (c)   A statement that the Claimant is entitled to
                              receive, upon request and free of charge,
                              reasonable access to, and copies of all documents,
                              records, and other relevant information (as
                              defined in applicable ERISA regulations);

                        (d)   A statement of the Claimant's right to bring an
                              action under ERISA Section 502(a);

<PAGE>

                        (e)   [See ss.2560.503-1(j)(5)] Any internal rule,
                              guideline, protocol, or other similar criterion
                              relied upon in making the adverse determination,
                              or a statement that such a rule, guideline,
                              protocol, or other similar criterion was relied
                              upon in making the adverse determination and that
                              the Claimant can request and receive free of
                              charge a copy of such rule, guideline, protocol
                              or other criterion from the Company;

                        (f)   If the adverse benefit determination is based on a
                              medical necessity or experimental treatment or
                              similar exclusion or limit, either an explanation
                              of the scientific or clinical judgment for the
                              determination, applying the terms of this
                              Agreement to the Claimant's medical circumstances,
                              or a statement that such explanation will be
                              provided free of charge upon request; and

                        (g)   The following statement: "You and your Company may
                              have other voluntary alternative dispute
                              resolution options such as mediation. One way to
                              find out what may be available is to contact your
                              local U.S. Department of Labor Office and your
                              state insurance regulatory agency."

                                   ARTICLE 7
                   AMENDMENT AND TERMINATION OF THE AGREEMENT

7.1   Amendment and Termination. Subject to Article 4, prior to the commencement
      of benefit payments under this Agreement, the Company reserves the right
      to amend or terminate this Agreement at any time by the action of the
      Board.

                                   ARTICLE 8
                                 MISCELLANEOUS

8.1   Unsecured General Creditor. The Executive and the Executive's
      Beneficiaries, successors and assigns shall have no legal or equitable
      rights, interests or claims in any property or assets of the Company. Any
      and all of the Company's assets shall be, and remain, the general,
      unpledged unrestricted assets of the Company. The Company's obligation
      under the Agreement shall be merely that of an unfunded and unsecured
      promise to pay money in the future.

8.2   Not a Contract of Employment. The terms and conditions of this Agreement
      shall not be deemed to constitute a contract of employment between the
      Company and the Executive. Such employment is hereby acknowledged to be an
      "at will" employment relationship that can be terminated at any time for
      any reason, with or without cause, unless expressly provided in a written
      employment agreement. Nothing in this Agreement shall be deemed to give a
      Executive the right to be retained in the service of the Company or to
      interfere with the right of the Company to discipline or discharge the
      Executive at any time.

<PAGE>

8.3   Participation in Other Plans. Nothing herein contained shall be construed
      to alter, abridge, or in any manner affect the rights and privileges of
      the Executive to participate in and be covered by any pension, profit
      sharing, group insurance, bonus or similar employee plans which the
      Company may now or hereafter maintain.

8.4   Alienability. Neither the Executive nor any Beneficiary under this
      Agreement shall have any power or right to transfer, assign, anticipate,
      hypothecate, mortgage, commute, modify, or otherwise encumber in advance
      any of the benefits payable hereunder, nor shall any of said benefits be
      subject to seizure for the payment of any debts, judgments, alimony, or
      separate maintenance owed by the Executive or the Executive's Beneficiary
      or any of them, to be transferable by operation of law in the event of
      bankruptcy, insolvency, or otherwise. In the event the Executive or any
      Beneficiary attempts assignment, commutation, hypothecation, transfer, or
      disposal of the benefit hereunder, the Company's liabilities shall
      forthwith cease and terminate.

8.5   Successors. The provisions of this Agreement shall bind and inure to the
      benefit of the Company and its successors and assigns and the Executive
      and the Executive's Beneficiary.

8.6   Reorganization. The Company shall not merge or consolidate into or with
      another corporation, or reorganize, or sell substantially all of its
      assets to another corporation, firm, or person unless and until such
      succeeding or continuing corporation, firm, or person agrees to assume and
      discharge the obligations of the Company under this Agreement. Upon the
      occurrence of such event, the term "Company" as used in this Agreement
      shall be deemed to refer to such succeeding or continuing company, firm,
      or person.

8.7   Interpretation. Wherever the fulfillment of the intent and purpose of this
      Agreement requires, and the context will permit, the use of the masculine
      gender includes the feminine and use of the singular includes the plural.

8.8   Alternative Action. In the event it shall become impossible for the
      Company or the Plan Administrator to perform any act required by this
      Agreement, the Company or Plan Administrator may in its discretion perform
      such alternative act as most nearly carries out the intent and purpose of
      this Agreement and is in the best interests of the Company.

8.9   Applicable Law. Subject to ERISA, the provisions of this Agreement shall
      be construed and interpreted in accordance with the laws of the state of
      Pennsylvania, without regard to its conflict of law principles.

8.10  Headings. Article and section headings are for convenient reference only
      and shall not control or affect the meaning or construction of any of its
      provisions.

<PAGE>

8.11  Furnishing Information. The Executive or the Executive's Beneficiary will
      cooperate with the Plan Administrator by furnishing any and all
      information requested by the Plan Administrator and take such other
      actions as may be requested in order to facilitate the administration of
      the Agreement and the payments of benefits hereunder, including but not
      limited to taking such physical examinations as the Plan Administrator may
      deem necessary.

8.12  Validity. In case any provision of this Agreement shall be illegal or
      invalid for any reason, said illegality or invalidity shall not affect the
      remaining parts hereof, but this Agreement shall be construed and enforced
      as if such illegal and invalid provision has never been inserted herein.

8.13  Notice. Any notice or filing required or permitted to be given to the Plan
      Administrator under this Agreement shall be sufficient if in writing and
      hand- delivered, or sent by registered or certified mail, to the address
      below:

                                198 E. TIOGA ST.
                                TUNKHANNOCK PA.
                                           18657

      Such notice shall be deemed given as of the date of delivery or, if
      delivery is made by mail, as of the date shown on the postmark or the
      receipt for registration or certification.

      Any notice or filing required or permitted to be given to the Executive
      under this Agreement shall be sufficient if in writing and hand-delivered,
      or sent by mail, to the last known address of the Executive.

8.14  Signed Copies. This Agreement may be executed in any number of
      counterparts, each of which shall be deemed to be an original, and such
      counterparts taken together shall constitute one (1) and the same
      instrument.

      IN WITNESS WHEREOF, the Company and the Executive have caused this
Agreement to be duly executed as of the Effective Date above.

EXECUTIVE                               GRANGE NATIONAL BANK

/s/ Thomas A. McCullough                By:
------------------------------             /s/ Sally A. Steele
                                           ---------------------------------

Thomas A. McCullough                            As its Secretary
------------------------

BENEFICIARY DESIGNATION FORM

<PAGE>

I designate the following as beneficiary of benefits under this Agreement
payable following my death:

Primary:
         Helen T. McCullough
        ------------------------------------------------------------------------

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

Contingent:
         Thomas A. McCullough, Jr., Matthew H. McCullough, Mark M. McCullough,
        ------------------------------------------------------------------------

      John P. McCullough, Luke M. McCullough   each 20%
--------------------------------------------------------------------------------

Note: To name a trust as beneficiary, please provide the name of the trustee(s)
      and the exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new
written designation with the Plan Administrator. I further understand that the
designations will be automatically revoked if the beneficiary predeceases me,
or, if I have named my spouse as beneficiary and our marriage is subsequently
dissolved.

Signature /s/ Thomas A. McCullough
          ------------------------
            Thomas A. McCullough

Date January 17, 2003

Acknowledged by the Plan Administrator this 11 day of February, 2003

By /s/ [Illegible]
   -------------------------------

Title ____________________________Exhibit 10.12

                    EMPLOYMENT AND NON-COMPETITION AGREEMENT

      THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT is made and entered into
this 3rd day of April, 2000 by and among David Elias ("Employee"), Elias Asset
Management, Inc., a Delaware corporation (the "Company"), and Community Bank,
National Association, a national banking association ("CBNA").

                              W I T N E S S E T H:

      WHEREAS, the Employee is party to a Stock Purchase Agreement (the
"Purchase Agreement") dated as of January 28, 2000, among the Employee, the
Company, and CBNA, pursuant to which CBNA has agreed to acquire from Employee
all of the outstanding capital stock of the Company. All initially capitalized
terms which are used but not otherwise defined herein shall have the meanings
specified in the Purchase Agreement;

      WHEREAS, the Employee is the sole shareholder and a director, officer and
employee of the Company, and, as a result, the Employee has developed valuable
relations with the Company's clients, vendors, and others with which the Company
has business relations and has learned and developed valuable and proprietary
information relating to its business and operations;

      WHEREAS, the Employee will continue as an officer and director of the
Company, and to oversee the direction of the operation of the Company, following
the acquisition by CBNA; and

      WHEREAS, in order to protect CBNA's interest in the Company, CBNA's
obligation to consummate the transactions contemplated by the Purchase Agreement
is conditioned upon the Employee entering into this Agreement and agreeing to
the covenants contained herein; and

<PAGE>

      WHEREAS, the Employee, in order to obtain the balance of the purchase
price for the sale of the Company to CBNA, must be provided with necessary
assurances that he would be given appropriate autonomy in directing the
operations of the Company to the extent that such direction is in the shared
interests of the Employee and CBNA to maximize the revenues and earnings of the
Company.

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

      1. Employment and Duties. On the terms and subject to the conditions set
forth herein, the Company hereby employs the Employee to serve as the President,
Chief Executive Officer and Chief Investment Officer of the Company. The
Employee shall report to Michael A. Patton, Regional President/Trust Officer of
CBNA or, in his absence, Sanford A. Belden, President and Chief Executive
Officer of CBNA. The Employee shall perform the regular duties of his position
and such other incidental and customary duties commensurate with his position,
as well as any other duties consistent with his position, duties and
responsibilities prior to the date of this Agreement, as from time to time
reasonably assigned to the Employee by the Board of Directors of the Company,
and have the requisite power and authority to fulfill his obligations which are
consistent with his general authority, power, duties and responsibilities prior
to the date of this Agreement. Additionally, Employee shall be requested to
serve on the Board of Directors of the Company throughout his employment tenure.

      Consistent with his responsibilities prior to the date of the Agreement,
Employee's duties shall include the oversight of overall direction of the
Company, including serving as the Chief

                                     - 2 -
<PAGE>

Investment Officer and lead sales person for Company; the promotion and
retention of client relationships; the training, selection and education of
staff; administrative duties consistent with his position; and serving as lead
person for business development and consideration of future acquisitions by the
Company. The Employee shall perform his duties to the best of his abilities and
devote his full working time and attention (except for reasonable activities
with professional and civic organizations consistent with his position and past
practice) to the business and affairs of the Company, and act in good faith in
the Company's best interests but consistent with his objective of receiving the
portion of the Purchase Price for the Shares that has been withheld pursuant to
the Purchase Agreement. The Company shall maintain its principal office in the
Amherst-Williamsville, New York area, and in no event will the Employee be
required to relocate from that area without his consent, provided, that the
Company may move its principal office in the greater Buffalo, New York area if
there is a substantial business reason to do so.

      2. Base Salary. The Employee shall receive a base salary of $300,000 per
year, payable by the Company in accordance with its usual payroll policies for
the term of this Agreement. The amount of base salary will be reviewed annually
to determine any appropriate increases but will not be decreased during the term
of this Agreement (as adjusted, the "Base Salary").

      3. Incentive Compensation. The Employee shall be entitled to receive
incentive compensation in accordance with the following provisions:

            (a) Annual Incentive Bonus. The Employee shall be entitled to an
annual incentive bonus during his employment under this Agreement based on a
percentage of the Company's "Annual Adjusted Net Income" calculated as follows:

                                     - 3 -
<PAGE>

                  (i) For each fiscal calendar year including and following the
Closing Date, the Company shall budget and allocate an amount equal to 40% of
the "Gross Revenues of the Company" (defined below), which amount shall be
available for distribution to the Company's parent ("CBNA Revenue Portion");

                  (ii) Upon the completion and delivery by independent auditors
of Community Bank System, Inc., a Delaware corporation and the parent bank
holding company of CBNA ("CBSI"), of the annual audited consolidated financial
statements of CBSI and its subsidiaries (the "Audited Financial Statements") but
no later than April 5th of each fiscal calendar year, Employee shall be entitled
to an annual incentive bonus equal to the following percentages of the Company's
"Annual Adjusted Net Income" (defined below):

      "Annual Adjusted Net Income"          Employee          CBNA (Parent)
      ----------------------------          --------          -------------

             First $500,000                   100%                None

             Above $500,000                    60%                 40%

      Employee shall be deemed to have earned such bonuses, if at all, on the
first day of the calendar fiscal year (or the first day immediately succeeding
the applicable Interim Period) after the calendar fiscal year (or the Interim
Period) to which each such bonus relates.

      If at any time during the term of this Agreement, there shall occur a
substantial change in the business of the Company (including without limitation,
as a result of any material corporate restructuring of the Company) as compared
to the business conducted by it during the five-year period immediately
preceding the Closing Date, which change as a whole Employee reasonably believes
would materially and adversely affect the ability of the Employee to earn all or
any

                                     - 4 -
<PAGE>

portion of the annual incentive bonuses, then CBNA and Employee shall negotiate
in good faith for the determination of whether adjustments to the calculation of
Annual Adjusted Net Income and the percentages in the table above to equitably
account for any such change in the business of the Company are warranted and, if
so, the amount of such adjustments, provided that no such adjustments, as a
whole, shall adversely affect the ability of Employee to earn annual incentive
bonuses in any material respects. In the event that the Company and Employee
cannot agree on whether such an adjustment is warranted or on the amount of such
adjustment within sixty (60) days of the consummation of such a substantial
change, the dispute shall be submitted to a mutually acceptable nationally
recognized independent accounting firm (other than a firm then used by the
Company or Employee or their respective affiliates, unless otherwise agreed to
by the parties) (the "Firm"). The parties shall instruct the Firm to determine,
no later than sixty (60) days after submission, whether appropriate adjustments
to the calculation of Annual Adjusted Net Income and the percentages in the
table above are warranted and, if so, the amount of such adjustments, to
equitably account for such change in the business of the Company. The
determination of the Firm shall be binding upon the parties. The Employee and
the Company shall each pay one-half of the fees and expenses of the Firm
incurred in connection with such determination.

      In addition, in the event that, as a result of any such change in the
business of the Company, the Company proposes to modify the duties and
responsibilities of the Employee such that the Employee is reasonably expected
to devote substantially more working time in his performance of such duties and
responsibilities as compared to those before such modification, then the Company
and Employee shall negotiate in good faith with respect to such modification

                                     - 5 -
<PAGE>

(and the Company shall not so modify except with the consent of the Employee)
and, to the extent that Employee's duties and responsibilities hereunder are
substantially modified, for adjustments to the Base Salary under this Agreement
to properly compensate the Employee for such modification.

                  (iii) "Annual Adjusted Net Income" for purposes on this
Agreement shall mean the Company's net income as determined consistent with its
past practice in connection with the preparation of its financial statements
(subject to the change in the Company's accounting methods to the accrual basis
and the related adjustments) in accordance with generally accepted accounting
principles ("GAAP") consistently applied, but with the following adjustments
being made:

                        (1) A deduction shall be made in an amount equal to CBNA
Revenue Portion (defined in Section 3(a)(i)) for the applicable fiscal year in
calculating the Annual Adjusted Net Income;

                        (2) No deduction will be made in the calculation of the
net income (i) with respect to the amortization of goodwill or other intangible
assets (if any) arising from, or costs incurred by the Company in connection
with, the acquisition of the Company by CBNA, (ii) for income taxes applicable
to the Company's operations, or (iii) for the accrual or payment of any annual
incentive bonuses payable to Employee, or grant by CBSI of options or stock to
Employee;

                        (3) No expense will be charged in the calculation of net
income with respect to premiums for key-man life and disability insurance
policies;

                                     - 6 -
<PAGE>

                        (4) Only an amount equal to the incremental increase in
policy premiums resulting from the extension of coverage under CBSI's D&O and
professional liability insurance policies to directors, officers, and employees
of the Company but in no event more than $5,500 per annum will be charged to the
Company's net income during the first two years of this Agreement (thereafter,
any increase in such amount shall be based solely upon loss experience and the
growth of the business of the Company); and

                        (5) No deduction shall be made for any inter-company
charge made by CBNA (or any of its affiliates) to the Company, to the extent
that such charge exceeds the arm's-length charge for the same or similar goods
or services.

                  (iv) "Gross Revenues of the Company" for purposes of this
Agreement shall mean all revenues of the Company as determined in accordance
with GAAP consistently applied, recognizing the need for transitional
adjustments to be made by the parties in the first year in order to cause the
accounting of the Company to conform to the requirements of GAAP. In determining
Gross Revenues of the Company, reimbursement for closed accounts and fees paid
in fee sharing arrangements shall be excluded.

                  (v) Unless partially or fully deferred by Employee pursuant to
Section 3(b) below, the annual incentive bonus determined above shall be paid to
Employee no later than April 5th of the calendar year following the applicable
calendar year of determination. (For example, the Annual Incentive Bonus for
calendar year 2000 shall be paid no later than April 5, 2001.)

                  (vi) Notwithstanding anything to the contrary in this Section,
the amount of the annual incentive bonus, if any, with respect to (A) the period
between the Closing

                                     - 7 -
<PAGE>

Date and the end of the calendar year in which the Closing takes place, or (B)
except as otherwise expressly provided in this Agreement, any period during the
term of this Agreement where the remaining term shall be less than a full
calendar year (each period described in clause (A) or (B), an "Interim Period"),
shall be determined by adjusting on a consistent basis all of the figures and
parameters used in the calculation set forth in this Section, as well as the
amount of annual incentive bonuses, on a pro rata basis, based upon the number
of days in the Interim Period in question and 365 days per calendar year (366
days if any Interim Period shall occur in calendar year 2000 or 2004).

            (b) Deferral of Payments. At the option of Employee, he may elect to
defer receipt of all or part of the annual incentive bonus determined in Section
3(a) by filing with Employer a written election to defer receipt of the bonus,
provided that the written deferral election is received by the Company prior to
the applicable year during which the bonus will be earned. (For example, to
defer receipt of annual incentive bonus payable with respect to calendar year
2001, Employee must file a written deferral election with Employer prior to
January 1, 2001.) Amounts deferred pursuant to this subsection may be invested
in such vehicles and upon such terms as are generally available to senior
management officers of CBNA or CBSI through its Deferred Compensation Plan for
Executives.

            (c) Incentive Stock Options and Awards. The Employee shall
participate in CBSI's 1994 Long-Term Incentive Compensation Program ("Program"),
as amended or replaced from time-to-time and as administered by the Personnel
Committee. Awards shall be made in such amounts and under such terms and
conditions as determined solely by the Personnel Committee pursuant to the terms
of the Program, and awards ordinarily will reflect Employee's

                                     - 8 -
<PAGE>

Base Salary in effect at the time of the award. Employee shall be eligible to
receive stock options and other incentive compensation awards starting in
January, 2001 consistent with the current administration of the Program.

      4. Fringe Benefits.

            (a) Benefit Plans The Employee shall be entitled to participate in
all standard employee benefit plans offered to full-time management employees of
CBNA and CBSI. The Employee's eligibility for and participation in such plans
shall be governed by and subject to the terms and conditions of the official
plan documents of each plan except that for all purposes of this Agreement and
for eligibility, vesting and benefit accruals under CBSI's and CBNA's employee
benefit and welfare plans, Employee shall be given past service credit for
previous service with the Company.

            (b) Expenses. The Company shall reimburse the Employee for
reasonable business expenses incurred by the Employee in the performance of his
duties hereunder upon submission of expense statements or vouchers and such
other reasonable supporting information as may be required. Reimbursed expenses
may be reviewed by the Company's Board of Directors on a quarterly basis.

            (c) Other Benefits. During the term of this Agreement, Employee
shall also be entitled to receive the following benefits:

                  (i) Paid vacation of four weeks during each calendar year
(with no carry over of unused vacation to a subsequent year) and any public
holidays provided to employees of the Company in accordance with its holiday
policy;

                  (ii) Reasonable sick leave;

                                     - 9 -
<PAGE>

                  (iii) Reimbursement of membership fees incurred by Employee at
clubs to which Employee currently belongs, consisting of the Buffalo Club, Union
Club of Cleveland (non-resident member fees only), Canterbury Golf Club
(non-resident member fees only) and the Country Club of Buffalo;

                  (iv) The use of a Company owned or leased automobile similar
to his current vehicle, with the selection of a comparable replacement being
subject to the consent of the President and CEO of CBSI; and

                  (v) The rights to continue health coverage for the Employee
and his spouse under the health insurance plan in effect prior to the date
hereof, namely Traditional Blue Cross / Blue Shield.

      5. Term and Termination.

            (a) The Employee's employment under the terms set forth shall
commence on the date hereof and shall continue for a period of five (5) years;
provided, however, that the Employee's employment shall terminate earlier upon
the occurrence of (i) the Employee's death; (ii) the Employee's Disability (as
defined below); (iii) the Company's termination of the Employee's employment for
Cause (as defined below); (iv) the Company's termination of the Employee's
employment without Cause, (v) the Employee's voluntary termination of his
employment for any reason upon thirty (30) days' prior written notice to the
Company; or (vi) Employee's termination for Good Reason (as defined below).

            (b) For purposes of this Agreement:

                  (i) "Cause" means (A) the Employee's material breach of any
material provision of this Agreement; (B) the Employee's fraud, dishonesty,
theft or embezzlement

                                     - 10 -
<PAGE>

involving any material injury to the Company, including without limitation, its
reputation; (C) the Employee's willful and knowing misconduct in performing his
duties hereunder that results or could result in material harm to the Company;
(D) the Employee's refusal to perform or substantial neglect of any duties
hereunder; (E) the Employee's violation of any reasonable written directions of
the Company's Board of Directors consistent with the terms of this Agreement;
(F) knowing participation (whether before or after execution of this Agreement)
in a violation of the Investment Advisers Act of 1940, as amended, or the rules
and regulations thereunder, which results in material injury to the Company,
including without limitation, its reputation, and/or (G) the Employee's
indictment, conviction, guilty plea or plea of nolo contenders of a crime
punishable as (1) a felony or misdemeanor involving conversion,
misappropriation, larceny, theft, embezzlement or (2) any other felony which
could reasonably be expected to cause a material injury to the Company
(including without limitation, its reputation), in case of either clause (1) or
(2), regardless of whether such crime involves the Company; provided, however,
that the Company shall not be entitled to terminate the Employee for Cause under
clauses (A), (C), (D) or (E) above unless it has provided the Employee with
written notice specifying the nature of the activity or omission constituting
Cause and the Employee has failed to commence, within 15 days after receipt of
such notice, his good faith, reasonable effort to cure the same, or has failed
to complete the cure within 60 days after receipt of such notice; it being
understood that, with respect for any specific circumstance or fact constituting
a reason for termination for Cause, the Company shall only be obligated to
provide notice and an opportunity to cure only one time under this Agreement;
and

                                     - 11 -
<PAGE>

                  (ii) "Disability" means (A) being declared physically or
mentally disabled by either a disability insurance carrier which provides
disability insurance for the Employee or by a licensed physician who has
examined or is treating the Employee, and such disability continues for a total
of 180 days in any 12-month period, and subject to any statutory duty to
reasonably accommodate Employee's disability; or (B) the Employee being, for any
physical or mental reason, unable to maintain full-time active participation in
the Company's business for a total of 180 days in any 12-month period; provided,
however, that nothing in this Agreement shall require, result in or permit
termination by reason of Disability in violation of applicable law, including,
without limitation, the Americans with Disabilities Act and any statutory duty
to reasonably accommodate Employee's disability.

                  (iii) "Good Reason" means resignation by the Employee based on
the occurrence of one of the following events, in each case without the consent
of Employee, with respect to which event Employee gave written notice of the
existence of facts or circumstances forming the basis thereof, and the Company
shall have failed to begin its good faith, reasonable efforts to cure the same
within 15 days of receipt of the notice or failed to complete the cure within 60
days of the receipt of the notice:

                  (A) a material change in the nature or scope of Employee's
authority or responsibility (as compared to his authority or responsibility
prior to such change) or removal from the Company's Board of Directors, or

                  (B) a reduction in Employee's total compensation (including
Base Salary, incentive bonus, and benefits) which Employee is entitled to under
the term of this Agreement, or

                                     - 12 -
<PAGE>

                  (C) a change in the general location where employee is
required to perform services, unless the location of the Company's principal
offices is moved pursuant to Section 1, in which case the general location where
Employee shall perform his duties and responsibilities under this Agreement
shall be at the new location of such principal offices, or

                  (D) any material breach of this Agreement by the Company, or

                  (E) the relocation of the Company's principal office from
Amherst-Williamsville, New York, except as permitted by Section 1; or

                  (F) any diminution in the title of Employee, or

                  (G) if Employee does not report directly to either Messrs.
Belden or Patton, or neither of such persons hold executive positions with CBSI,
CBNA or their respective successors, except as a result of the death of Messrs.
Belden or Patton.

            (c) If Employee's employment is terminated pursuant to Section
5(a)(i), (ii), (iii) or (v), the Employee shall be paid hereunder only for the
period up to the date of such termination (the "Termination Date") as well as
compensation, including incentive bonuses, that is vested, accrued or earned and
not previously paid and/or as provided in the benefit plans referred to in
Section 4 above.

            (d) If Employee's employment is terminated by the Company without
Cause pursuant to Section 5(a)(iv) or if Employee terminates his employment with
the Company for Good Reason pursuant to Section 5(a)(vi), the Company shall, at
its sole option, either (1) pay Employee severance pay equal to the Base Salary
and Estimated Incentive Bonuses (as defined below) that Employee would have
otherwise received during the remaining term of this Agreement (the "Severance
Period"), which severance shall be paid commencing with the date of

                                     - 13 -
<PAGE>

termination at the times and in the amounts such Base Salary and annual
incentive bonuses would have been paid in accordance with the Company's normal
payroll practices or pursuant to this Agreement, or (2) the Company shall
unconditionally release Employee from the obligations under Section 7(a) of this
Agreement. As used in this Agreement, "Estimated Incentive Bonus" means the
average annual incentive bonuses per annum paid by the Company to Employee in
respect of the previously completed fiscal calendar year(s) or, if none, an
amount provided in Section 6(a)(ii). Notwithstanding anything to the contrary,
in the event that Employee shall breach Section 7 hereof, in addition to any
other remedies the Company may have, all of the Company's obligations to make
payments pursuant to this Section 5(d) shall cease and Employee's rights thereto
shall immediately terminate and shall be forfeited in all respects. Payment made
in accordance with this Section 5(d) shall operate to fully discharge and
release the Company and its affiliates and agents from any further liability or
obligation with respect to Employee's employment and termination of employment.
The payment of amounts under this Section 5(d) shall be conditioned upon the
delivery by the Employee to the Company of a release in form and substance
reasonably satisfactory to the Company.

      6. Change of Control.

            (a) In the event that Employee's employment with the Company is
terminated during the term of this Agreement for Good Reason by Employee or
without Cause by the Company, in each case within 2 years following a "Change of
Control" (defined in Section 6(c) below), then, subject to the limitation in
Section 6(b) below, the Company shall:

                  (i) Pay the Employee an amount equal to 2.9 times his Base
      Salary in effect at the time of the Employee's termination under this
      Section 6(a);

                                     - 14 -
<PAGE>

                  (ii) Pay the Employee an amount equal to 2.9 times the average
      annual incentive bonus earned by Employee pursuant to Section 3(a) during
      the term of this Agreement prior to Employee's termination under this
      Section 6(a) (any annual incentive bonus earned with respect to an Interim
      Period shall be annualized on a per diem basis for the purposes of this
      Section 6(a)(ii)); provided, however, that if such termination occurs
      prior to July 1, 2002, the average annual incentive bonus shall be deemed
      to be THREE HUNDRED THOUSAND DOLLARS ($300,000) per annum;

                  (iii) Provide Employee with benefits, or cash equivalent of
      such benefits, which were being provided to Employee for a period of 2
      years following Employee's termination under this Section 6(a); and

                  (iv) Fully vest, and treat as immediately exercisable, all
      unexpired stock options in CBSI common stock that are not otherwise
      exercisable or that have not been exercised.

      Amounts payable under this Section 6(a) shall be paid to Employee in a
lump sum (subject to any applicable payroll or other taxes required to be
withheld) as soon as practicable following his termination.

            (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 Section 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

                                     - 15 -
<PAGE>

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 Section, then
payment amounts shall be limited to the extent necessary to avoid application of
Internal Revenue Code Section 280G.

            (c) For purposes of this Section, a "Change of Control" shall be
deemed to have occurred if:

                  (i) Any person, including a group as determined in accordance
with 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
CBSI representing 30% or more of the combined voting power of CBSI'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 CBSI before the Transaction shall cease to
constitute a majority of the Board of Directors of CBSI or any successor to
CBSI;

                  (iii) CBSI 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 CBSI (other than affiliates
within the meaning of the Exchange Act, or any party to the merger or
consolidation);

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

                                     - 16 -
<PAGE>

                  (v) CBSI transfers substantially all of its assets to another
corporation that is not controlled by CBSI; or

                  (vi) The control or ownership of a majority of the stock or
substantial portion of the assets or business of the Company is transferred to
an entity which is not controlled by or under common control of CBSI.

            (d) The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
The Change of Control payments provided for in this Section shall be in lieu of
any and all other severance benefits which Employee might be entitled to under
any severance policy applicable to employees of the Company in general.

            (e) The non-compete provisions of Section 7(a) shall not be
applicable if Employee's employment with the Company is terminated by Employee
for Good Reason or by the Company without Cause, in each case within 2 years of
a Change of Control under Section 6(a).

      7. Non-Competition and Non-Solicitation.

            (a) Non-Compete. The Employee agrees that during the term of this
Agreement and (1) for a period of 12 months following the date of termination of
his employment under this Agreement (the "Date of Termination") for any reason
(other than for Good Reason, whether or not there was a Change of Control within
2 years thereof, or without Cause), (2) if Employee was terminated by the
Company without Cause or if Employee terminated his employment hereunder for
Good Reason, and in each case the Company elected to make payments under Section
5(d), then for a period equal to the duration of the Severance Period, or

                                     - 17 -
<PAGE>

(3) if the parties do not renew this Agreement, and the Employee ceases to be
employed by the Company, then for so long as the Company is making severance
payments under Section 12, the Employee shall not, directly or indirectly, own,
manage, operate, control or participate in the ownership (except for an equity
interest of less than 5% in a publicly traded entity, provided that he is not a
director or officer thereof), 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 business conducted by the Company in any area
or market where such business is being conducted on the Date of Termination,
unless authorized in writing by the Board of Directors of CBNA; provided,
however, if termination of his employment for any reason occurs after the fifth
anniversary of the date of this Agreement, the covenant shall expire, unless
otherwise expressly provided herein. If requested from time to time by the Board
of Directors of the CBNA and to the extent reasonably necessary or desirable to
determine the violation of this Section 7 by Employee, Employee shall inform the
Board with respect to any activity, interest, or investment that he is aware of
in a Competitive Operation within the banking or investment industry in
reasonable detail. The parties agree that public speaking, writing and
communications regarding investments and economic activities do not constitute
per se a Competitive Operation, so long as Seller is not providing management,
investment or advisory services to any other Person (as such term is defined in
the Purchase Agreement) (other than tax-exempt not-for-profit organizations)
which conducts any business similar to the business then conducted by the
Company, without regard to the area or market in which such business is being
conducted by such Person.

                                     - 18 -
<PAGE>

            (b) Non-Soflicitation. The Employee shall not directly or indirectly
(i) hire any employee of the Company, CBNA, or CBSI (or any affiliated entity of
CBNA or CBSI), or induce or attempt to induce any such employee to leave the
employ of his or her employer, or in any way interfere with the relationship
between the Company, CBNA or CBSI, or affiliate of CBNA or CBSI and any employee
thereof; or (ii) induce or attempt to induce any client, customer, supplier,
licensee, licensor, distributor or other entity with a business relation with
the Company to cease doing business with the Company or in any way interfere
with the relationship between any such customer, supplier, licensee ,
distributor or business relation and the Company (including, without imitation,
making any negative statements or communications about the Company) or, for a
period of two (2) years after the termination of Employee's employment hereunder
for any reason, directly or indirectly, conduct business in a Competitive
Operation with any client or customer of the Company or any other prospective
client or customer specifically and individually solicited by the Company (or
its employees or agents) at any time during the one-year period immediately
preceding the date of termination. For purposes of this Section 7(b)(i),
Employee's spouse shall not be deemed an employee of the Company.

            (c) In the event of (i) a material breach by the Company of its
obligations under this Agreement provided that the Employee has not materially
breached this Agreement, and (ii) the Company's material breach is not cured
within 30 days after the Company receives written notice from the Employee of
such material breach (provided that if such material breach relates to the
payment of compensation, the Company shall have only 3 days after its receipt of
written notice from Employee to cure such breach), in each case after giving
effect to any cure

                                     - 19 -
<PAGE>

period afforded to the Company with respect to such breached obligation under
this Agreement, the Employee, in addition to all other remedies available to
him, shall be relieved of his obligations under Section 7(a) with respect to any
portion of the non-competition period, provided that any issue raised by the
Company as to whether a material breach under this Section has occurred has been
the subject of a final adjudication by expedited arbitration, pursuant to the
rules of the American Arbitration Association for commercial arbitration.

            (d) The Employee acknowledges that the restrictions set forth in
Section 7 are reasonable in scope and essential to the preservation of the
operations and proprietary interests of the Company.

            (e) Nothing contained in this Agreement shall in any event limit the
duration and enforceability of the non-competition provisions of the Purchase
Agreement, which provisions were critical to the Company's determination to
enter into the Purchase Agreement and to consummate the transactions
contemplated by the Purchase Agreement.

      8. Revision. If, at the time of enforcement of this Agreement, a court
shall hold that the duration, scope, geographic area or other restrictions
stated herein are unreasonable under circumstances then existing, the parties
agree that the maximum duration, scope, geographic area or other restrictions
deemed reasonable under such circumstances by such court shall be substituted
for the stated duration, scope, geographic area or other restrictions. If the
court shall hold that such a provision is wholly unenforceable, then such
provision shall be severed from this Agreement, and the Agreement shall be
enforced as if such provision never existed.

      9. Remedies. The Employee recognizes and agrees that in the event of a
breach of Section 7 of this Agreement, money damages would be inadequate and the
Company would have

                                     - 20 -
<PAGE>

no adequate remedy at law. Accordingly, the Employee agrees that the Company
shall have the right, in addition to any other rights and remedies existing in
its favor, to enforce its rights and the Employee's obligations under this
Agreement not only by an action or actions for damages, but also by an action or
actions for specific performance, injunctive and/or other equitable relief, in
either case without posting a bond or other security, in order to enforce or
prevent any violations of Section 7 of this Agreement.

      10. Key Man Life Insurance. CBNA has heretofore obtained key man life
insurance coverage on the life of Employee, subject to the consummation of the
transaction contemplated by the Purchase Agreement. Employee shall cooperate and
take all necessary and appropriate actions to maintain such coverage during the
term of this Agreement. The premiums for such insurance shall be borne by CBNA
and not included as an expense of the Company in the calculation of "Annual
Adjusted Net Income" as set forth in Section 3(a)(iii).

      11. Rules, Regulations and Policies. The Employee shall abide by and
comply with all reasonable rules, regulations and policies of the Company
applicable to executives, including without limitation compliance with all laws
and regulations to the extent the same are consistent with the terms of this
Agreement.

      12. Renewal. Beginning no later than six months prior to the expiration of
this Agreement, the parties shall commence good faith negotiations, to be
completed by the expiration of this Agreement, for the Employee's continued
employment by the Company. If Employee and Company cannot agree on the terms of
Employee's continued employment by the expiration of this Agreement, and
Employee ceases to be employed by Company, Employee shall be entitled to be paid
as severance compensation and as additional consideration for the non-compete

                                     - 21 -
<PAGE>

provisions set forth in Section 7 (the sufficiency of which is hereby
acknowledged), one year of Base Salary based on the last full year of employment
payable in equal installments in accordance with the Company's regular payroll
practice over the year following termination of employment. In such event, the
Employee shall also be entitled to receive an amount equal to one year of the
Estimated Incentive Bonus, which amount shall be payable in a lump sum as soon
as practicable after the termination of employment. If Employee's employment by
Company is not continued after expiration of this Agreement as a result of
Employee's decision not to accept a "bona fide offer" from Company, or Employee
provides written notice of a lack of interest in extending the term of this
Agreement, the Company shall not be obligated to continue to pay Employee's Base
Salary as severance compensation. A "bona fide" offer from the Company shall be
defined as a one year agreement with renewal option under substantially the same
terms and substantially the same total compensation as provided for under the
final year of this Agreement. Payments of Base Salary as severance compensation
pursuant to this Section shall be reduced dollar for dollar to the extent
Employee receives wages or self-employed income during the severance
compensation period. For any period during which Employee's Base Salary is
continued as severance compensation, Employee shall be eligible to continue to
participate in Company's group-term life insurance plan and group health benefit
plan as if Employee were an active, full-time employee of the Company.
Employee's right to "COBRA" continuation coverage under Company's group health
benefit plan shall commence as of the end of the period during which Base Salary
is continued as severance compensation.

                                     - 22 -
<PAGE>

      13. Miscellaneous.

            (a) Assignment; Binding Agreement. This Agreement is personal to
each of the parties hereto, and neither party may assign or delegate any of its
rights or obligations hereunder without the prior written consent of the other
party, except that the Agreement shall be binding upon both parties and inure to
the benefit of the Company's successor through a merger or corporate
reorganization. Subject to the foregoing, this Agreement shall be binding upon
the parties hereto and their respective heirs, administrators, legal
representatives, successors, and assigns.

            (b) Waiver. No delay or omission in the exercise of any right, power
or remedy hereunder shall impair any such right, power or remedy or be construed
to be a waiver or any default or any acquiescence therein.

            (c) Entire Agreement; Amendment. This instrument and the
non-competition provisions set forth in the Purchase Agreement contain the
entire agreement of the parties with regard to the subject matter hereof, and
this Agreement may not be amended except by an agreement in writing signed by
the parties hereto.

            (d) Notices and Other Communications. All notices or other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally (including delivery by courier service),
transmitted by telecopy, or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:

                  (i) If to the Company or CBNA, notice shall be provided to the
President and CEO of CBNA at:

                                     - 23 -
<PAGE>

                        Community Bank, NA

                        5790 Widewaters Parkway
                        Dewitt, New York 13214
                        Telephone:  (315) 445-2282
                        Facsimile:  (315) 495-2997
                        Attention:  Sanford A. Belden, President and CEO

                        with a copy to:

                        Bond, Schoeneck & King, LLP
                        One Lincoln Center
                        Syracuse, New York 13202
                        Attention:  George J. Getman, Esq.
                        Telephone:  (315) 422-0121
                        Facsimile   (315) 422-3598

                  (ii)  If to the Employee, to:

                        Mr. David Elias
                        31 Halston Parkway
                        E. Amherst, New York 14051
                        Telephone: (716) 688-4491
                        Facsimile: same as above (call first)

                        with a copy to:

                        Phillips, Lytle, Hitchcock, Blaine & Huber LLP
                        3400 HSBC Center
                        Buffalo, New York 14203
                        Attention: Frederick G. Attea, Esq.
                        Telephone: (716) 847-8400
                        Facsimile: (716) 852-6100

or to such other address as the party to whom notice is to be given may have
previously furnished to the other party in writing in accordance herewith.
Notice shall be deemed given on the date received (or if receipt thereof is
refused, on the date of such refusal).

            (e) Return of Property. Upon termination of this Agreement, Employee
shall forthwith return to Employer all documents and other property of any
nature belonging to the Company.

                                     - 24 -
<PAGE>

            (f) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to its
conflict of law rules.

            (g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same agreement.

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

                                        EMPLOYEE:

                                        ______________________________________
                                        David Elias

                                        COMMUNITY BANK, NA

                                        By: __________________________________
                                        Name: Sanford A. Belden
                                        Title: President and CEO

                                        ELIAS ASSET MANAGEMENT INC.

                                        By: __________________________________
                                        Name: David Elias
                                        Title: President and Chief Investment
                                               Officer

                                     - 25 -

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