UNION STATE BANK

                          KEY EMPLOYEES' SUPPLEMENTAL

                                 INVESTMENT PLAN


                                     Adopted Effective December 1, 1994
                                     Restated and Amended Effective July 1, 1997
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                                UNION STATE BANK

                   KEY EMPLOYEES' SUPPLEMENTAL INVESTMENT PLAN


      The Supplemental Employees' Investment Plan for Salaried Employees of
Union State Bank (the "Plan") was adopted effective December 1, 1994. The Plan
was established and maintained by Union State Bank solely for the purpose of
providing to a select group of highly compensated or management personnel who
participate in the U.S.B. Holding Co., Inc. Employee Stock Ownership Plan (with
401(k) Provisions) ("Qualified Plan") benefits attributable to (i) contribution
allocations which would otherwise be made under the Qualified Plan but for the
compensation limitation of Internal Revenue Code ("Code") Section 401(a)(17),
and (ii) contributions equal to amounts in excess of the limitations on annual
additions imposed by Code Section 415.

      Union State Bank desires to expand the purposes of the Plan to permit
certain key executive employees designated by its Board of Directors to defer
portions of their compensation, in order to continue to attract and retain
talented executives with a competitive compensation package. Accordingly, Union
State Bank has adopted the Plan for its key executive employees, and has
restated and amended the Plan to provide for such deferral of compensation
effective as of July 1, 1997.

      It is the intention of the parties that the arrangements contemplated by
the Plan be unfunded for tax purposes and for purposes of Title I of ERISA.

      Accordingly, Union State Bank hereby adopts, amends and restates the Plan
pursuant to the terms and provisions set forth below:


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                                    ARTICLE I

                                   DEFINITIONS

      Wherever used herein the following terms shall have the meanings
hereinafter set forth. Words in the masculine gender shall include the feminine
and the singular shall include the plural, and vice versa, unless qualified by
the context. Any headings used herein are included for ease of reference only,
and are not to be construed so as to alter the terms hereof.

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

      1.2 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any regulations relating thereto.

      1.3 "Company" means Union State Bank, a New York State banking
association, or, to the extent provided in Section 8.7 below, any successor
corporation or other entity resulting from a merger or consolidation into or
with the Company or a transfer or sale of substantially all of the assets of the
Company.

      1.4 "Deferred Compensation Account" means the account maintained by the
Company under the plan for a Participant that is credited with amounts
contributed under Section 3.1 and 3.3 of the Plan.

      1.5 "Matching Contribution" means the Matching Contribution made by the
Company for the benefit of a Participant under and in accordance with the terms
of Section 3.3 of the Plan in any Plan Year.

      1.6 "Optional Contribution" means the Optional Contribution made by the
Company for the benefit of a Participant under and in accordance with the terms
of Section 3.4 of the Plan in any Plan Year.

      1.7 "Participant" means a salaried employee of the Company to whom or with
respect to whom contributions may be made under the Plan.


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      1.8 "Plan" means the Key Employees' Supplemental Investment Plan.

      1.9 "Plan Year" means the calendar year. However, the first Plan Year was
the period commencing December 1, 1994, and ending December 31, 1994.

      1.10 "Qualified Plan" means the U.S.B. Holding Company, Inc. Employee
Stock Ownership Plan (with 401(k) Provisions), and each predecessor, successor,
or replacement plan.

      1.11 "Salary Reduction Agreement" means the written salary reduction
agreement entered into by a Participant with the Company pursuant to the Plan.

      1.12 "Salary Reduction Contribution" means the salary reduction
contribution made by the Company for the benefit of a Participant under and in
accordance with the terms of Section 3.1 of the Plan in any Plan Year.

                                   ARTICLE II

                                   ELIGIBILITY

      An employee who is one of a select group of highly compensated or
management personnel who is designated eligible to participate by the Board,
shall be eligible to participate in the Plan.

                                   ARTICLE III

                                  CONTRIBUTIONS

3.1 Salary Reduction Contributions. The Salary Reduction Contribution to be made
by the Company for the benefit of a Participant for any Plan Year shall be in an
amount equal to the difference between (a) and (b) below:

      (a)   Any portion of the Participant's gross compensation (salary, bonus,
            other cash compensation for services) for a Plan Year


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                                      Less

      (b)   The amount of the Qualified Plan Salary Reduction Contribution
            actually allocated to the Qualified Plan account of the Participant
            for the Plan Year.

      Salary Reduction Contributions made for the benefit of the Participant
shall be credited to the Deferred Compensation Account in the name of such
Participant within 30 days after the date such compensation would otherwise be
payable, but for the Salary Reduction Agreement.

      3.2 Salary Reduction Agreement. As a condition to the Company's obligation
to make a Salary Reduction Contribution for the benefit of a Participant
pursuant to Section 3.1, the Participant must execute a Salary Reduction
Agreement in the form attached hereto. The Agreement for any Plan Year shall be
made before the beginning of that Year and shall remain in full force and effect
for subsequent Plan Years unless revoked by a Participant by written instrument
delivered to the Company prior to the beginning of the Plan Year in which such
revocation is to be effective.

      3.3 Matching Contributions. The Matching Contribution made by the Company
for the benefit of a Participant for any Plan Year shall be in an amount equal
to the difference between (a) and (b) below:

      (a) The lesser of the matching contribution that would be allocated to
Participant at the matching rate specified in the Qualified Plan with respect to
the aggregate amount of Salary Reduction Contribution actually made by
Participant to the Qualified Plan and this Plan, or the Qualified Plan Company
Matching Contribution which would have been allocated to the Qualified Plan
account of the Participant for the Plan Year if the Participant had contributed
to the Qualified Plan the maximum percentage of his gross compensation provided
by the Qualified Plan, without giving effect to any reduction in the Qualified
Plan Salary Reduction Contribution required by the limitations imposed by Code
Sections 402(g) or 415 of the Code on the Qualified Plan.


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                                      Less

      (b)   The amount of the Qualified Plan Company Matching Contribution
            actually allocated to the Qualified Plan account of the Participant
            for the Plan Year.

      Company Matching Contributions made for the benefit of a Participant for
any Plan Year shall be credited to the Deferred Compensation Account maintained
under the Plan in the name of such participant at the same time as related
Salary Reduction Contributions are credited in accordance with Section 3.1 of
the Plan. Company Matching Contributions for each plan year shall become 100%
vested on the last day of each such plan year, provided that the Participant
remains an employee of the Company on such date; otherwise, all Company Matching
Contributions for such plan year shall be forfeited.

      3.4 Optional Contributions. The Optional Contribution made by the Company
for the benefit of a Participant for any Plan Year shall be an amount equal to
the difference between (a) and (b) below:

      (a)   The Qualified Plan Company Optional Contribution which would have
            been allocated to the Qualified Plan account of the Participant for
            the Plan Year, considering the full amount of the Participant's
            compensation, without giving effect to any reduction in the
            Qualified Plan Company Optional Contribution required by the
            limitations on compensation imposed on the Qualified Plan by Code
            Sections 401(a)(17) and/or 415

                                      Less

      (b)   The amount of the Qualified Plan Company Optional Contribution
            actually allocated to the Qualified Plan account of the Participant
            for the Plan Year.

                                   ARTICLE IV

                           INVESTMENT OF CONTRIBUTIONS

      Amounts credited hereunder to the Deferred Compensation Account of a
Participant shall be treated as if they were actually invested in the Qualified
Plan account of the Participant and


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credited with gains and losses at the same time and in the same manner as is
applicable to amounts invested in the Qualified Plan account of such
Participant. Alternatively, the Company may credit each Participant's Account
with amounts actually earned by the funding vehicles it may have selected to
cover its potential liability.

                                    ARTICLE V

                                  DISTRIBUTIONS

      All amounts credited to a Participant's Deferred Compensation Account,
including gains and losses credited in accordance with Article IV of the Plan,
shall be distributed, to or with respect to a Participant only upon termination
of the Participant's employment with the Company and all affiliates thereof for
any reason including death. All amounts distributable under the Plan shall be
distributed in the manner selected by Participant in his most recent Salary
Reduction Agreement containing a distribution election, or in the manner
selected by Participant on a Special Distribution Election Form furnished by the
Company and filed with the Company not less than twelve (12) months prior to
Participant's termination of employment with Company or any affiliate. If
termination occurs by reason of death, disability or involuntary termination
without "cause", such Form filed at any time before such event shall be valid.

      Distribution shall be made in cash, in kind, or in a combination of both;
provided, however that if assets are invested in stock of the Company or its
parent Company and liquidation thereof for a single cash distribution might be
disruptive, such stock may be sold and cash distributed in an orderly fashion.

      The Participant may, in the manner provided above, choose the following
alternative modes of distribution:

      1.    Distribution of a Participant's Deferred Compensation Account in a
            single distribution immediately within 30 days or at some later
            date; or


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      2.    Distribution of a Participant's Deferred Compensation Account in
            substantially equal annual installments over a period not exceeding
            fifteen (15) years (provided that such period does not exceed the
            life expectancy of the Participant); or

      3.    Any combination of the foregoing.

      If no such election is made, the distribution will be made in a single
distribution within 2 years of termination of employment. If no such elections
made on account of death, disability or retirement, the distribution will be
made in a single distribution within 1 year of termination of employment.

      If a Participant should die before distribution of the full amount of the
Deferred Compensation Account had been made to him, any remaining amounts shall
be distributed to his beneficiary in the same manner and to the same extent as
the Participant would have received distributions in accordance with the
foregoing.

                                   ARTICLE VI

                           ADMINISTRATION OF THE PLANS

      6.1 Administration by the Company. The Company shall be responsible for
the general operation and administration of the Plan and for carrying out the
provisions thereof.

      6.2 General Powers of Administration. The Company shall be entitled to
rely conclusively upon all tables, valuations, certificates, opinion and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan.

                                   ARTICLE VII

                            AMENDMENT OR TERMINATION

      7.1 Amendment or Termination. The Company intends the Plan to be permanent
but reserves the right to amend or terminate the Plan when, in the sole opinion
of the Company, such


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amendment or termination is advisable. Any such amendment or termination shall
be made pursuant to a resolution of the Board and shall be effective as of the
date of such resolution.

      7.2 Effect of Amendment or Termination. No amendment or termination of the
Plan shall directly or indirectly reduce the balance of the Deferred
Compensation Account held hereunder as of the effective date of such amendment
or termination. Upon termination of the Plan, distribution of amounts in the
Deferred Compensation Account shall be made to the Participant or his
beneficiary in the manner and at the time described in Article V of the Plan. No
additional credits of Salary Reduction or Matching Contributions shall be made
to the Deferred Compensation Account of a Participant after termination of the
Plan, but the Company shall continue to credit gains to the Deferred
Compensation Account pursuant to Article IV until the balance of the Deferred
Compensation Account has been fully distributed to the Participant or his
beneficiary.

                                   ARTICLE VII

                               GENERAL PROVISIONS

      8.1 Participant's Rights Unsecured. The Plan at all times shall be
entirely unfunded and no provision shall at any time be made with respect to
segregating any assets of the Company for payment of any distributions
hereunder; provided, however, that the Company in its sole discretion may
establish a reserve, segregate specific assets, or create a trust or other
vehicle, to hold assets for purposes of administering the Plan or for its own
financial purposes. The right of a Participant or his designated beneficiary to
receive a distribution hereunder shall be an unsecured claim against the general
assets of the Company, and neither the Participant nor a designated beneficiary
shall have any rights in or against any specific assets of the Company,
including any reserve, segregated assets, or trust assets that may be maintained
by the Company. All amounts credited to the Deferred Compensation Accounts of
Participants shall constitute general assets of the Company and may be disposed
of by the Company at such time and for such purposes as it may deem appropriate.


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      8.2 No Guarantee of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Company or any other person or entity that the
assets of the Company will be sufficient to pay any benefit hereunder.

      8 3 No Enlargement of Employee Rights. No Participant shall have any right
to receive a distribution of contributions made under the Plan except in
accordance with the terms of the Plan. Establishment of the Plan shall not be
construed to give any Participant the right to be retained in the service of the
Company.

      8.4 Spendthrift Provisions. No interest of any person or entity in, or
right to receive a distribution under, the Plan shall be subject in any manner
to sale, transfer, assignment, pledge, attachment, garnishment, anticipation, or
other alienation or encumbrance of any kind; nor may such interest or right to
receive a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance,
and claims in bankruptcy proceedings.

      8.5 Applicable Law. The Plan shall be construed and administered under the
laws of the State of New York.

      8.6 Incapacity of Recipient. If any person entitled to a distribution
under the Plan is deemed by the Company to be incapable of personally receiving
and giving a valid receipt for such payment, then, unless and until claim
therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Company may provide for such payment or any
part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.

      8.7 Corporate Successors. The Plan shall not be automatically terminated
by a transfer or sale of assets of the Company or by the merger or consolidation
of the Company into or with any other corporation or other entity, but the Plan
shall be continued after such sale, merger, or consolidation only if and to the
extent that the transferee, purchaser, or successor


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entity agrees to continue the Plan. In the event that the Plan is not continued
by the transferee, purchaser, or successor entity, then the Plan shall terminate
subject to the provisions of Section 7.2.

      8.8 Unclaimed Benefit. Each Participant shall keep the Company informed of
his current address and the current address of his designated beneficiary. The
Company shall not be obligated to search for the whereabouts of any person. If
the location of a Participant is not made known to the Company within three (3)
years after the date on which payment of the Participant's Deferred Compensation
Accounts may first be made, payment may be made as though the Participant had
died at the end of the three-year period. If, within one additional year after
such three-year period has elapsed, or, within three year after the actual death
of a Participant, the Company is unable to locate any designated beneficiary of
the Participant, then the Company shall have no further obligation to pay any
benefit hereunder to such Participant or designated beneficiary and such benefit
shall be irrevocably forfeited.

      8.9 Limitations on liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as
employee or agent of the Company shall be liable to any Participant, former
Participant or other person for any claim, loss, liability, or expense incurred
in connection with the Plan. However, the preceding sentence shall not apply to
liability for criminal acts or willful misconduct.

      IN WITNESS WHEREOF, the Company has formally adopted this restated and
amended Plan effective on July 1, 1997.


                                  UNION STATE BANK




                         By: /s/ Thomas E. Hales
                             --------------------------------------------------
                             Thomas E. Hales - Chairman, President and CEO


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                                UNION STATE BANK

                   KEY EMPLOYEES' SUPPLEMENTAL INVESTMENT PLAN

                                 AMENDMENT NO. 1

The Union State Bank Key Employees' Supplemental Investment Plan ("Plan") is
hereby amended effective September 1, 1998 as follows:

1.    New Section 1.13 is added to read as follows:

      "1.13 "USB Stock" means common stock of U.S.B. Holding Co., Inc."

2.    The last paragraph of Section 3.1 is amended in its entirety to read as
      follows:

      "Salary Reduction Contributions for the benefit of a Participant shall be
      credited to the Deferred Compensation Account maintained under the Plan in
      the name of the Participant on the date the compensation would otherwise
      have been payable, but for the Salary Reduction Agreement."

3.    The last paragraph of Section 3.3 is amended in its entirety to read as
      follows:

      "Company Matching Contributions for the benefit of a Participant for any
      Plan Year shall be credited to the Deferred Compensation Account
      maintained under the Plan in the name of the Participant on the last day
      of such Plan Year."

4.    A new last paragraph is added to Section 3.4 to read as follows:

      "Any Optional Contributions for the benefit of a Participant for any Plan
      Year shall be credited to the Deferred Compensation Account maintained
      under the Plan in the name of the Participant on the last day of such Plan
      Year."

5.    A new Section 3.5 is added to the Plan to read as follows:

      "3.5 Whole Share Price Limitation on Contributions Notwithstanding the
      provisions of above Sections 3.1, 3.2, 3.3 and 3.4, all contributions to
      this Plan shall be limited to amounts that will purchase whole shares of
      USB Stock at the market price paid for such shares on the date the
      contribution(s) are to be credited to Participants' Deferred Compensation
      Accounts. Any additional amounts that would be contributed to the Plan but
      for this Section shall (i) be returned to the Participant or to the
      Company, and shall not be credited to Participants' Plan accounts or
      applied to purchase fractional shares of USB Stock, or (ii) if diminimus,
      held for future purchase of Company Stock for the benefit of the
      Participant.

6.    Article IV is amended in its entirety to read as follows:


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                     "INVESTMENT OF CONTRIBUTIONS; DIVIDENDS

      4.1 Investment of Contributions Amounts credited hereunder to a
      Participant's Deferred Compensation Account shall be treated as if they
      were actually invested in USB Stock on the dates amounts are credited to
      the Deferred Compensation Account pursuant to Article III hereof. For
      purposes of reporting to Participants, each Deferred Compensation Account
      shall be credited with appreciation, depreciation, gains, and/or losses as
      if actually invested in USB Stock.

      If the Company elects to fund any of its liability hereunder through a
      trust or other funding mechanism, the Company shall do so only with shares
      of USB Stock, and shall acquire, issue or release from Treasury such
      shares of USB Stock on the dates amounts are credited to Participants'
      Deferred Compensation Accounts pursuant to Article III hereof.

      4.2 Application of Dividends If the Company elects to fund any of its
      liability hereunder through a trust or other funding mechanism, dividends
      paid on USB Stock held by such trust or other funding vehicle shall be
      paid to such trust or other funding vehicle and shall be applied on the
      date received to the purchase of additional shares of USB Stock. The Plan
      administrator and/or the trustee or other funding vehicle shall accept
      only such amounts of dividends as shall equal (on the date received) the
      purchase price of the maximum number of whole shares of USB Stock, at the
      market price (paid for such shares) on the date dividends are paid, that
      can be purchased without any excess cash or other property remaining in
      the Plan, trust or other vehicle. The Plan administrator shall apply any
      excess amounts as it deems appropriate, provided they do not become part
      of the Plan's assets at any time unless such amount is diminimus inasmuch
      as such dividend may be held to purchase Company Stock in the future for
      the benefit of the participant."

7.    The second paragraph of Article V is amended in its entirety to read as
      follows:

      "Distribution shall be made solely in shares of USB Stock."

8.    Section 8.1 is amended by deletion of the last sentence thereof.

9.    New Section 6.3 is added to the Plan to read as follows:

      "6.3 Financial Accounting The Company intends this Plan to qualify, under
      EITF Consensus dated July 23, 1998 relating to Issue 97-14 ("EITF 97-14"),
      for financial accounting, in the Company's financial statements, as a
      "Plan A" type program, under which USB Stock held by any trust or other
      funding mechanism utilized by the Company and the related deferred
      compensation obligation of the Company each shall be recorded in
      stockholders, Equity, in an amount equal to the original amounts of
      deferred compensation credited under the Plan without the need to adjust
      the USB Stock or the obligation to a market value level. To the extent
      this Plan must be interpreted at any time, it shall be interpreted to have
      the meaning which conforms to the requirements of EITF 97-14."


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      IN WITNESS WHEREOF, the Company has formally adopted Amendment No. 1 to
the Key Employees' Supplemental Investment Plan effective September 1, 1998.


                                  UNION STATE BANK


                         By: /s/ Thomas E. Hales
                             --------------------------------------------------
                             Thomas E. Hales - Chairman, President and CEO


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