EMPLOYEE STOCK OWNERSHIP PLAN

                                       0F

                           TAPPAN ZEE FINANCIAL, INC.

                                      AND

                               CERTAIN AFFILIATES

                            Adopted on July 25, 1995
                           Effective October 5, 1995
                      Incorporating Amendment Nos. 1 and 2
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                               TABLE 0F CONTENTS

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                                    ARTICLE I

                                   DEFINITIONS

Section 1.1  Account .........................................................1
Section 1.2  Affiliated Employer .............................................1
Section 1.3  Allocation Compensation .........................................1
Section 1.4  Board ...........................................................2
Section 1.5  Beneficiary .....................................................2
Section 1.6  Break in Service ................................................2
Section 1.7  Change in Control ...............................................2
Section 1.8  Code ............................................................2
Section 1.9  Committee .......................................................2
Section 1.10 Designated Beneficiary ..........................................2
Section 1.11 Disability ......................................................3
Section 1.12 Domestic Relations Order ........................................3
Section 1.13 Effective Date ..................................................3
Section 1.14 Eligible Employee ...............................................4
Section 1.15 Eligible Participant ............................................4
Section 1.16 Employee ........................................................4
Section 1.17 Employer ........................................................4
Section 1.18 Employment Commencement .........................................4
Section 1.19 ERISA ...........................................................4
Section 1.20 ESOP Contribution ...............................................4
Section 1.21 Fair Market Value ...............................................4
Section 1.22 Family Member ...................................................5
Section 1.23 Financed Share ..................................................5
Section 1.24 Five Percent Owner ..............................................5
Section 1.25 Forfeitures .....................................................5
Section 1.26 Former Participant ..............................................5
Section 1.27 General Investment Account ......................................5
Section 1.28 Highly Compensated Employee .....................................5
Section 1.29 Hour of Service .................................................7
Section 1.30 Investment Account ..............................................7
Section 1.31 Investment Fund .................................................7
Section 1.32 Loan Repayment Account ..........................................7
Section 1.33 Loan Repayment Contribution .....................................7
Section 1.34 Maternity or Paternity Leave ....................................7
Section 1.35 Military Service ................................................8
Section 1.36 Named Fiduciary .................................................8
Section 1.37 Officer .........................................................8
Section 1.38 Participant .....................................................8
Section 1.39 Period of Service ...............................................8


                                      (i)
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Section 1.40 Period of Severance .............................................8
Section 1.41 Plan ............................................................8
Section 1.42 Plan Administrator ..............................................9
Section 1.43 Plan Year .......................................................9
Section 1.44 Qualified Domestic Relations Order ..............................9
Section 1.45 Qualified Military Service ......................................9
Section 1.46 Qualified Participant ...........................................9
Section 1.47 Retirement ......................................................9
Section 1.48 Retroactive Contribution ........................................9
Section 1.49 Share ...........................................................9
Section 1.50 Share Acquisition Loan ..........................................9
Section 1.51 Share Investment Account ........................................9
Section 1.52 Tender Offer ....................................................9
Section 1.53 Total Compensation .............................................10
Section 1.54 Trust ..........................................................11
Section 1.55 Trust Agreement ................................................11
Section 1.56 Trust Fund .....................................................11
Section 1.57 Trustee ........................................................11
Section 1.58 Valuation Date .................................................11

                                   ARTICLE II

                                 PARTICIPATION

Section 2.1  Eligibility for Participation ..................................11
Section 2.2  Commencement of Participation ..................................12
Section 2.3  Termination of Participation ...................................12
Section 2.4  Adjustments to Period of Service ...............................12

                                  ARTICLE III

                               SPECIAL PROVISIONS

Section 3.1  Military Service ...............................................13
Section 3.2  Maternity or Paternity Leave ...................................13
Section 3.3  Leave of Absence ...............................................14


                                      (ii)
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                                   ARTICLE IV

                  CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED

Section 4.1  Contributions by Participants Not Permitted ....................14

                                   ARTICLE V

                         CONTRIBUTIONS BY THE EMPLOYER

Section 5.1  In General .....................................................15
Section 5.2  Loan Repayment Contributions ...................................15
Section 5.3  ESOP Contributions .............................................15
Section 5.4  Retroactive Contributions ......................................16
Section 5.5  Time and Manner of Payment .....................................16

                                   ARTICLE VI

                            SHARE ACQUISITION LOANS

Section 6.1  In General .....................................................17
Section 6.2  Collateral; Liability for Repayment ............................17
Section 6.3  Loan Repayment Account .........................................18
Section 6.4  Release of Financed Shares .....................................19
Section 6.5  Restrictions on Financed Shares ................................20

                                  ARTICLE VII

                          ALLOCATION 0F CONTRIBUTIONS

Section 7.1  Allocation Among Eligible Participants .........................20
Section 7.2  Allocation of Released Shares or Other Property ................20
Section 7.3  Allocation of ESOP Contributions ...............................20
Section 7.4  No Allocation After Termination of Participation ...............21


                                     (iii)
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                                  ARTICLE VIII

                           LIMITATIONS ON ALLOCATIONS

Section 8.1  Optional Limitations on Allocations 0f ESOP Contributions ......21
Section 8.2  General Limitations on Contributions ...........................21

                                   ARTICLE IX

                                    VESTING

Section 9.1  Vesting ........................................................25
Section 9.2  Vesting on Death, Disability, Retirement or Change in Control ..25
Section 9.3  Forfeitures on Termination of Employment .......................26
Section 9.4  Amounts Credited Upon Re-Employment ............................26
Section 9.5  Allocation 0f Forfeitures ......................................26
Section 9.6  Accelerated Vesting Upon Change in Control .....................26

                                   ARTICLE X

                                 THE TRUST FUND

Section 10.1 The Trust Fund .................................................28
Section 10.2 Investments ....................................................29
Section 10.3 Diversification of Investments .................................30
Section 10.4 Use of Commingled Trust Funds ..................................31
Section 10.5 Management and Control of Assets ...............................31

                                   ARTICLE XI

                    VALUATION 0F INTERESTS IN THE TRUST FUND

Section 11.1 Establishment of Investment Accounts ...........................31
Section 11.2 Share Investment Accounts ......................................31
Section 11.3 General Investment Accounts ....................................32
Section 11.4 Valuation of Investment Accounts ...............................32
Section 11.5 Annual Statements ..............................................33


                                      (iv)
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                                  ARTICLE XII

                                     SHARES

Section 12.1 Specific Allocation of Shares ..................................33
Section 12.2 Dividends ......................................................33
Section 12.3 Voting Rights ..................................................34
Section 12.4 Tender Offers ..................................................36

                                  ARTICLE XIII

                              PAYMENT 0F BENEFITS

Section 13.1 In General .....................................................38
Section 13.2 Designation of Beneficiaries ...................................38
Section 13.3 Distributions to Participants and Former Participants ..........39
Section 13.4 Manner of Payment ..............................................42
Section 13.5 Put Options ....................................................43
Section 13.6 Right of First Refusal .........................................43
Section 13.7 Minimum Required Distributions .................................44
Section 13.8 Direct Rollover of Eligible Rollover Distributions .............46
Section 13.9 Valuation of Shares Upon Settlement to a Participant ...........47

                                  ARTICLE XIV

                                 ADMINISTRATION

Section 14.1 Named Fiduciaries ..............................................47
Section 14.2 Plan Administrator .............................................48
Section 14.3 Committee Responsibilities .....................................49
Section 14.4 Claims Procedure ...............................................50
Section 14.5 Claims Review Procedure ........................................51
Section 14.8 Allocation of Fiduciary Responsibilities and Employment 
                   of Advisors ..............................................51
Section 14.9 Other Administrative Provisions ................................52


                                      (v)
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                                   ARTICLE XV

                  AMENDMENT, TERMINATION AND TAX QUALIFICATION

Section 15.1 Amendment and Termination by Tappan Zee Financial, Inc. 
                  (Before September 1, 1998) and U.S.B. Holding Co., 
                  Inc. (After August 3l, 1998) ..............................53
Section 15.2 Amendment or Termination Other Than by Tappan Zee Financial,
                  Inc. (Before September 1, 1998) and U.S.B. Holding 
                  Co., Inc. (After August 31, 1998). ........................53
Section 15.3 Conformity to Internal Revenue Code ............................53
Section 15.4 Contingent Nature of Contributions .............................54

                                  ARTICLE XVI

                     SPECIAL RULES FOR TOP HEAVY PLAN YEARS

Section 16.1 In General .....................................................55
Section 16.2 Definition of Top Heavy Plan ...................................55
Section 16.3 Determination Date .............................................56
Section 16.4 Cumulative Accrued Benefits ....................................56
Section 16.5 Key Employees ..................................................57
Section 16.6 Required Aggregation Group .....................................58
Section 16.7 Permissible Aggregation Group ..................................58
Section 16.8 Special Requirements During Ton Heavy Plan Years ...............58

                                  ARTICLE XVII

                            MISCELLANEOUS PROVISIONS

Section 17.1 Governing Law ..................................................59
Section 17.2 No Right to Continued Employment ...............................59
Section 17.3 Construction of Language .......................................59
Section 17.4 Headings .......................................................59
Section 17.5 Merger with Other Plans ........................................60
Section 17.6 Non-alienation of Benefits .....................................60
Section 17.7 Procedures Involving Domestic Relations Orders .................61
Section 17.8 Leased Employees ...............................................61
Section 17.9 Status as an Employee Stock Ownership Plan .....................62


                                      (vi)
<PAGE>

                         EMPLOYEE STOCK OWNERSHIP PLAN

                                       OF

                           TAPPAN ZEE FINANCIAL, INC.

                                      AND

                               CERTAIN AFFILIATES

                                    ARTICLE I

                                   DEFINITIONS

            The following definitions shall apply for the purposes of the Plan,
unless a different meaning is clearly indicated by the context:

            Section 1.1 Account means an account established for each
Participant to which is allocated such Participant's share, if any, of all
Financed Shares and other property that are released from the Loan Repayment
Account in accordance with section 6.4, together with his share, if any, of any
ESOP Contributions that may be made by the Employer.

            Section 1.2 Affiliated Employer means any corporation which is a
member of a controlled group of corporations (as defined in section 414(b) of
the Code) that includes the Employer; any trade or business (whether or not
incorporated) that is under common control (as defined in section 414(c) of the
Code) with the Employer; any organization (whether or not incorporated) that is
a member of an affiliated service group (as defined in section 414(m) of the
Code) that includes the Employer; any leasing organization (as defined in
section 414(n) of the Code) to the extent that any of its employees are required
pursuant to section 414(n) of the Code to be treated as employees of the
Employer; and any other entity that is required to be aggregated with the
Employer pursuant to regulations under section 414(o) of the Code.

            Section 1.3 Allocation Compensation during any period means the
compensation taken into account in determining the allocation of benefits and
contributions among Participants and consists of the aggregate compensation
received by an Employee from the Employer with respect to such period as
reported to the Internal Revenue Service as wages for such period pursuant to
section 6041(a) of the Code, plus the amount by which such Employee's
compensation with respect to such period has been reduced pursuant to a
compensation reduction agreement under the terms of any of the following plans
which may be maintained by the Employer:

            (a) a qualified cash or deferred arrangement described in section
401(k) of the Code;
<PAGE>
                                       -2-


            (b) a salary reduction simplified employee pension plan described in
section 408(k) of the Code;

            (c) a tax deferred annuity plan described in section 403(b) of the
Code; or

            (d) a cafeteria plan described in section 125 of the Code.

In no event, however, shall an Employee's Allocation Compensation for any
calendar year include any compensation in excess of $150,000. The $150,000
limitation set forth in the preceding sentence shall be indexed in accordance
with regulations prescribed under section 401(a)(17) of the Code. If there are
less than twelve (12) months in the Plan Year, the $150,000 limitation (as
adjusted) shall be prorated by multiplying such limitation by a fraction, the
numerator of which is the number of months in the Plan Year and the denominator
of which is twelve (12). For purposes of applying the foregoing limitations in
Plan Years beginning before January 1, 1997 to any person who is a Five Percent
Owner or who is one of the ten Highly Compensated Employees with the highest
Total Compensation (determined prior to the application of this sentence), any
Allocation Compensation paid to the spouse of such person or to any lineal
descendant of such person who has not attained age 19 on or before the last day
of such calendar year shall be deemed to have been paid to such person.

            Section 1.4 Board means the Board of Directors of Tappan Zee
Financial, Inc. through the close of business on August 31, 1998 and the Board
of Directors of U.S.B. Holding Co., Inc. thereafter.

            Section 1.5 Beneficiary means the person or persons designated by a
Participant or Former Participant or other person entitled to a benefit under
the Plan, or otherwise determined to be entitled to a benefit under the Plan. If
more than one person is designated, each shall have an equal share unless the
person making the designation directed otherwise. The word "person" includes an
individual, a trust, an estate or any other person that is permitted to be named
as a Beneficiary.

            Section 1.6 Break in Service means a Period of Severance of at least
365 consecutive days.

            Section 1.7 Change in Control means an event described in section
9.6(b).

            Section 1.8 Code means the Internal Revenue Code of 1986 (including
the corresponding provisions of any succeeding law).

            Section 1.9 Committee means the Compensation Committee described in
section 14.3.

            Section 1.10 Designated Beneficiary means a natural person
designated by a Participant or Former Participant as a Beneficiary and shall not
include any Beneficiary designated by a person other than a Participant or
Former Participant or any Beneficiary other than a natural
<PAGE>
                                       -3-


person. If a natural person is the beneficiary of a trust which a Participant or
Former Participant has named as his Beneficiary, such natural person shall be
treated as a Designated Beneficiary if: (a) the trust is a valid trust under
applicable state law (or would be a valid trust except for the fact that it does
not have a corpus); (b) the trust is irrevocable or will, by its terms, become
irrevocable upon the death of the Participant or Former Participant; (c) the
beneficiaries of the trust who are beneficiaries with respect to the trust's
interest as a Beneficiary are identifiable from the terms of the trust
instrument; and (d) the following information is furnished to the Committee:

            (i) by the Participant or Former Participant, if any distributions
      are required to be made pursuant to section 13.3 prior to the death of the
      Participant or Former Participant, either: (A) a copy of the trust
      instrument, together with a written undertaking by the Participant or
      Former Participant to furnish to the Committee a copy of any subsequent
      amendment within a reasonable time after such amendment is made; or (B)(I)
      a list of ah of the beneficiaries of the trust (including contingent and
      remainderman beneficiaries with a description of the conditions on their
      entitlement); (II) a certification of the Participant or Former
      Participant to the effect that, to the best of his knowledge, such list is
      correct and complete and that the conditions of section 1.10(a), (b) and
      (c) are satisfied; (III) a written undertaking to provide a new
      certification to the extent that an amendment changes any information
      previously certified; and (IV) a written undertaking to furnish a copy of
      the trust instrument to the Committee on demand; and

            (ii) by the trustee of the trust within nine months after the death
      of the Participant or Former Participant, if any distributions are
      required to be made pursuant to section 13.3 after the death of the
      Participant or Former Participant, either: (A) a copy of the actual trust
      instrument for the trust; or (B)(I) a final list of all of the
      beneficiaries of the trust (including contingent and remainderman
      beneficiaries with a description of the conditions on their entitlement)
      as of the date of death; (II) a certification of the trustee to the effect
      that, to the best of his knowledge, such list is correct and complete and
      that the conditions of section 1.10(a), (b) and (c) are satisfied; and
      (III) a written undertaking to furnish a copy of the trust instrument to
      the Committee on demand.

            Section 1.11 Disability means a condition of total incapacity,
mental or physical, for further performance of duty with the Employer, which the
Plan Administrator shall have determined, on the basis of competent medical
evidence, is likely to be permanent.

            Section 1.12 Domestic Relations Order means a judgment, decree or
order (including the approval of a property settlement) that is made pursuant to
a state domestic relations or community property law and relates to the
provision of child support, alimony payments, or marital property rights to a
spouse, child or other dependent of a Participant or Former Participant.

            Section 1.13 Effective Date means October 5, 1995.
<PAGE>
                                       -4-


            Section 1.14 Eligible Employee means an Employee who is eligible for
participation in the Plan in accordance with Article II.

            Section 1.15 Eligible Participant means, for any Plan Year, an
Employee who is a Participant on the last day of such Plan Year and an Employee
who was a Participant during all or any part of such Plan Year.

            Section 1.16 Employee means any person, including an officer, who is
employed by the Employer.

            Section 1.17 Employer means (a) through the close of business on
August 31, 1998, Tappan Zee Financial, Inc., and any successor thereto and any
Affiliated Employer which, with the prior written approval of the Board of
Directors of Tappan Zee Financial, Inc. and subject to such terms and conditions
as may be imposed by the Board of Directors of Tappan Zee Financial, Inc., shall
adopt this Plan; and (b) thereafter, U.S.B. Holding Co., Inc., and any successor
thereto and any Affiliated Employer which, with the prior written approval of
the Board of Directors of U.S.B. Holding Co., Inc. and subject to such terms and
conditions as may be imposed by the Board of Directors of U.S.B. Holding Co.,
Inc., shall adopt this Plan

            Section 1.18 Employment Commencement Date means the date on which a
person first performs an Hour of Service, except that if an Employee separates
from service with the Employer, incurs a Break in Service and subsequently
returns to service with the Employer, his Employment Commencement Date shall be
the date on which he first performs an Hour of Service following the Break in
Service.

            Section 1.19 ERISA means the Employee Retirement Income Security Act
of 1974, as amended from time to time (including the corresponding provisions of
any succeeding law).

            Section 1.20 ESOP Contribution means Shares or amounts of money
contributed to the Plan by the Employer in accordance with section 5.3.

            Section 1.21 Fair Market Value on any date means:

            (a) with respect to a Share:

                  (i) the final quoted sale price on the date in question (or,
            if there is no reported sale on such date, on the last preceding
            date on which any reported sale occurred) as reported in the
            principal consolidated reporting system with respect to securities
            listed or admitted to trading on the principal United States
            securities exchange on which like Shares are listed or admitted to
            trading; or

                  (ii) if like Shares are not listed or admitted to trading on
            and such exchange, the closing bid quotation with respect to a Share
            on such
<PAGE>
                                       -5-


            date on the National Association of Securities Dealers Automated
            Quotation System, or, if no such quotation is provided, on another
            similar system, selected by the Committee, then in use; or

                  (iii) if sections 1.21(a)(i) and (ii) are not applicable, the
            fair market value of a Share as determined by an appraiser
            independent of the Employer and experienced and expert in the field
            of corporate appraisal.

            (b) with respect to property other than Shares, the fair market
      value determined in the manner determined by the Trustee.

            Section 1.22 Family Member means, with respect to and person, such
person's spouse and lineal ascendants or descendants and the spouses of such
lineal ascendants or descendants.

            Section 1.23 Financed Share means: (a) a Share that has been
purchased with the proceeds of a Share Acquisition Loan, but has been allocated
to the Lean Repayment Account in accordance with section 6.3 and that has not
been released in accordance with section 6.4; or (b) a Share that constitutes a
dividend paid with respect to a Share described in section 1.23(a), that has
been allocated to the Loan Repayment Account in accordance with section 6.3 and
that has not been released in accordance with section 6.4.

            Section 1.24 Five Percent Owner means, for and Plan Year, a person
who, during such Plan Year, owned (or was considered as owning for purposes of
section 318 of the Code): (a) more than 5% of the value of all classes of
outstanding stock of the Employer; or (b) stock possessing more than 5% of the
combined voting power of all classes of outstanding stock of the Employer.

            Section 1.25 Forfeitures means the amounts forfeited by Participants
and Former Participants on termination of employment prior to full vesting,
pursuant to section 9.3, less amounts credited because of re-employment,
pursuant to section 9.4.

            Section 1.26 Former Participant means a Participant whose
participation in the Plan has terminated pursuant to section 2.3.

            Section 1.27 General Investment Account means an Investment Account
established and maintained in accordance with Article XI.

            Section 1.28 Highly Compensated Employee means, for any Plan Year,
an Employee who:

            (a) for Plan Years beginning before January 1, 1997, any Employee or
      person employed by an Affiliated Employer who:
<PAGE>
                                       -6-


                  (i) at and time during such Plan Year or the immediately
            preceding Plan Year was a Five Percent Owner; or

                  (ii) is a member of the group consisting of the 100 Employees
            and persons employed by and Affiliated Employer who received the
            greatest Total Compensation for such Plan Year and during such Plan
            Year:

                        (A) received Total Compensation for such Plan Year in
                  excess of $75,000 (or such higher amount as may be permitted
                  under section 414(q) of the Code); or

                        (B) received Total Compensation for such Plan Year that
                  was in excess of both (I) $50,000 (or such higher amount as
                  may be permitted under section 414(q) of the Code) and (II)
                  the Total Compensation for such Plan Year of at least 80% of
                  the Employees and persons employed by and Affiliated Employer
                  for such Plan Year; or

                        (C) was an Officer of the Employer or and Affiliated
                  Employer and received Total Compensation for such Plan Year in
                  excess of 50% of the amount in effect under section
                  415(b)(1)(A) of the Code for such Plan Year; or

                  (iii) during the immediately preceding Plan Year:

                        (A) received Total Compensation for such Plan Year in
                  excess of $75,000 (or such higher amount as may be permitted
                  under section 414(q) of the Code); or

                        (B) received Total Compensation for such Plan Year that
                  was in excess of both (I) $50,000 (or such higher amount as
                  may be permitted under section 414(q) of the Code) and (II)
                  the Total Compensation for such Plan Year of at least 80% of
                  the Employees and persons employed by an Affiliated Employer
                  for such Plan Year; or

                        (C) was an Officer of the Employer or any Affiliated
                  Employer and received Total Compensation for such Plan Year in
                  excess of 50% of the amount in effect under section
                  415(b)(1)(A) of the Code for such Plan Year; or

            (b) for Plan Years beginning after December 31, 1996, any Employee
      or person employed by an Affiliated Employer who:
<PAGE>
                                       -7-


                  (i) was a Five Percent Owner at and time during such Plan Year
            or and prior Plan Year; or

                  (ii) received Total Compensation during the immediately
            preceding Plan Year (A) in excess of $80,000 (or such other amount
            as may be prescribed by the Secretary of the Treasury pursuant to
            section 401(a)(17) of the Code); and (B) if elected by the Committee
            in such form and manner as the Secretary of the Treasury may
            prescribe, in excess of the Total Compensation received for such
            preceding Plan Year by at least 80% of the Employees and persons
            employed by Affiliated Employers.

The determination of who is a Highly Compensated Employee will be made in
accordance with section 414(q) of the Code and the regulations thereunder. In
Plan Years beginning before January 1, 1997 for purposes of applying and
provisions of the Plan applicable to Highly Compensated Employees, and person
who is a Family Member of a Five Percent Owner or one of the ten Highly
Compensated Employees with the highest Total Compensation for a Plan Year shall
not be treated as a separate person for such Plan Year, and any Total
Compensation or Allocation Compensation paid to such person for such Plan Year,
as well as his share of allocations of contributions or Shares under this Plan,
shall be attributed to the Five Percent Owner or Highly Compensated Employee
and, in such case, the provisions of the Plan shall apply to each person based
on the ratio of his Total Compensation or Allocation Compensation to the sum of
the Total Compensation or Allocation Compensation of all persons treated as one
person with him.

            Section 1.29 Hour of Service means each hour for which a person is
paid, or entitled to payment, for the performance of duties for the Employer or
any Affiliated Employer.

            Section 1.30 Investment Account means either a General Investment
Account or a Share Investment Account.

            Section 1.31 Investment Fund means and one of the tree or more funds
as may be established from time to time by the Committee which, together with
any and all Shares and other investments held under the Plan, constitute the
Trust Fund.

            Section 1.32 Loan Repayment Account means an account established and
maintained in accordance with section 6.3.

            Section 1.33 Loan Repayment Contribution means amounts of money
contributed to the Plan by the Employer in accordance with section 5.2.

            Section 1.34 Maternity or Paternity Leave means a person's absence
from work for the Employer and all Affiliated Employers: (a) by reason of the
pregnancy of such person; (b) by reason of the birth of a child of such person;
(c) by reason of the placement of a child with the person in connection with the
adoption of such child by such person; or (d) for purposes of caring for a child
of such person immediately following the birth of the child or the placement of
the child with such person.
<PAGE>
                                       -8-


            Section 1.35 Military Service means service in the armed forces of
the United States, including but not limited to Qualified Military Service. It
may also include, if and to the extent that the Board so provides and if all
Participants and Former Participants in like circumstances are similarly
treated, special service for the government of the United States and other
public service.

            Section 1.36 Named Fiduciary means any person, committee,
corporation or organization as described in section 14.1.

            Section 1.37 Officer means an employee who is an administrative
executive in regular and continued service with the Employer or any Affiliated
Employer; provided, however, that at no time shall more than the lesser of (a)
50 employees or (b) the greater of: (i) 3 employees or (ii) 10% of all employees
be treated as Officers. The determination of whether an employee is to be
considered an Officer shall be made in accordance with section 416(i) of the
Code.

            Section 1.38 Participant means any person who has satisfied the
eligibility requirements set fort in section 2.1, who has become a Participant
in accordance with section 2.2, and whose participation has not terminated under
section 2.3.

            Section 1.39 Period of Service means a period of consecutive days
commencing on a person's Employment Commencement Date and ending on the date a
Period of Severance begins, with any adjustments required under section 2.4.
Whenever used in the Plan, a Period of Service "of year(s)" means the quotient
of the Period of Service divided by 365, any and fractional part of a year shall
for such purposes be disregarded.

            Section 1.40 Period of Severance means a period of consecutive days
commencing with the earlier of:

            (a) the date on which a person terminates service with the Employer
      and all Affiliated Employers by reason of resignation, retirement,
      discharge or death; or

            (b) the first anniversary of the date on which a person terminates
      service with the Employer and all Affiliated Employers for and other
      reason including layoff, disability, leave of absence or any other
      cessation of service not otherwise included as service under the Plan;

and ending on the first date following such separation from service on which
such person performs an Hour of Service.

            Section 1.41 Plan means the Employee Stock Ownership Plan of Tappan
Zee Financial, Inc. and Certain Affiliates as amended from time to time. The
Plan may be referred to as the "Employee Stock Ownership Plan of Tappan Zee
Financial, Inc. and Certain Affiliates."
<PAGE>
                                       -9-


            Section 1.42 Plan Administrator means any person, committee,
corporation or organization designated in section 14.2, or appointed pursuant to
section 14.2, to perform the responsibilities of that office.

            Section 1.43 Plan Year means the period commencing on the Effective
Date and ending on December 31, 1995 and each calendar year thereafter.

            Section 1.44 Qualified Domestic Relations Order means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Participant or Former Participant and of each person given rights
under such Domestic Relations Order, (ii) the amount or percentages of the
Participant's or Former Participant's benefits under this Plan to be paid to
each person covered by such Domestic Relations Order, (iii) the number of
payments or the period to which such Domestic Relations Order applies, and (iv)
the name of this Plan; and (b) does not require the payment of a benefit in a
form or amount that is (i) not otherwise provided for under the Plan, or (ii)
inconsistent with a previous Qualified Domestic Relations Order.

            Section 1.45 Qualified Military Service means with respect to any
person on any date, and service in the uniformed services of the United States
(as defined in chapter 43 of Title 38 of the United States Code) completed prior
to such date, but only if, on such date, such person is entitled to
re-employment rights with respect to the Employer or and Affiliated Employer on
account of such service.

            Section 1.46 Qualified Participant means a Participant who has
attained age 55 and who has been a Participant in the Plan for at least 10
years.

            Section 1.47 Retirement means: (a) any termination of participation
in the Plan at or after attainment of age 65; and (b) and retirement under an
applicable qualified defined benefit plan of the Employer as in effect from time
to time with entitlement to a normal or early retirement allowance.

            Section 1.48 Retroactive Contribution means a contribution made on a
retroactive basis in respect of a period of Qualified Military Service in
accordance with sections 5.3.

            Section 1.49 Share means a share of and class of stock issued by the
Employer or any Affiliated Employer; provided that such share is a "qualifying
employer security" within the meaning section 409(1) of the Code and section
407(d)(5) of ERISA.

            Section 1.50 Share Acquisition Loan means a loan obtained by the
Trustee in accordance with Article VI.

            Section 1.51 Share Investment Account means an Investment Account
established and maintained in accordance with Article XI.

            Section 1.52 Tender Offer means a tender offer made to holders of
and one or more classes of Shares generally, or and other offer, made to holders
of and one or more classes
<PAGE>
                                      -10-


of Shares generally, to purchase, exchange, redeem or otherwise transfer Shares,
whether for cash or other consideration.

            Section 1.53 Total Compensation during and period means an
employee's aggregate total compensation paid by the Employer and any Affiliated
Employer with respect to such period, including earned income, wages, salaries,
fees for professional services actually rendered in the course of employment
with the Employer any and Affiliated Employer (including, but not limited to,
commissions paid to salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips and bonuses) but
excluding the following:

            (a) contributions by the Employer and any Affiliated Employer (i)
      under a deferred compensation plan to the extent not included in the
      employee's gross income for the taxable year in which contributed, or (ii)
      under a simplified employee pension to the extent the contributions are
      excludable under section 402(h) of the Code (in calendar years beginning
      after December 31, 1986) or deductible under section 219(b)(2) of the Code
      (in calendar years beginning before January 1, 1987), or (iii) for the
      purchase of an annuity contract under section 403(b) of the Code (whether
      or not made under a salary reduction agreement or excludable from gross
      income);

            (b) distributions from a deferred compensation plan, whether or not
      includible in the employee's gross income; and

            (c) other amounts that qualify for special tax benefits under the
      Code, such as premiums for group life insurance to the extent not
      includible as gross income.

In addition, for purposes of applying the provisions of section 8.2 to
Limitations Years beginning on or after December 31, 1997 and for purposes of
identifying those employees who are Highly Compensated Employees, each
employee's Total Compensation shall include any amounts by which the employee's
compensation paid by the Employer or and Affiliated Employer has been reduced
pursuant to a compensation reduction agreement under the terms of and qualified
cash or deferred arrangement described in section 401(k) of the Code, and salary
reduction simplified employee pension plan described in section 408(k) of the
Code, and tax deferred annuity plan described in section 403(b) of the Code, or
and cafeteria plan described in section 125 of the Code. In no event, however,
shall an employee's Total Compensation for (i) and calendar year beginning after
December 31, 1988 and before January 1, 1994, include and compensation in excess
of $200,000 (or such higher amount as may be permitted under section 401(a)(17)
of the Code) and (ii) for and calendar year beginning after January 1, 1994,
include any compensation in excess of $150,000 (or such higher amount as may be
permitted under section 401(a)(17) of the Code). For purposes of applying the
foregoing limitations in and Plan Year beginning before January 1, 1997 to any
person who is a Five Percent Owner or who is one of the ten Highly Compensated
Employees with the highest Total Compensation (determined prior to the
application of this sentence), and Total Compensation paid to the spouse of such
person or to and lineal descendant of such person
<PAGE>
                                      -11-


who has not attained age 19 on or before the last day of such calendar year,
shall be deemed to have been paid to such person.

            Section 1.54 Trust means the legal relationship created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The Trust
may be referred to as the "Employee Stock Ownership Plan Trust of Tappan Zee
Financial, Inc. and Certain Affiliates."

            Section 1.55 Trust Agreement means the agreement between Tappan Zee
Financial, Inc. and the Trustee therein named or its successors pursuant to
which the Trust Fund shall be held in trust.

            Section 1.56 Trust Fund means the corpus (consisting of
contributions paid over to the Trustee, and investments thereof), and all
earnings, appreciations or additions thereof and thereto, held by the Trustee
under the Trust Agreement in accordance with the Plan, less and depreciation
thereof and any payments made therefrom pursuant to the Plan.

            Section 1.57 Trustee means the Trustee of the Trust Fund from time
to time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee appointed in
accordance with the terms of the Trust Agreement.

            Section 1.58 Valuation Date means the last business day of March,
June, September and December.

                                   ARTICLE II

                                  PARTICIPATION

            Section 2.1 Eligibility for Participation.

            (a) Only Eligible Employees may be or become Participants in the
Plan. An Employee shall be an Eligible Employee if he is a common-law employee
of an Employer and is not excluded under section 2.1(b).

            (b) An Employee is not an Eligible Employee if he:

            (i) is an Employee who has waived and claim to participation in the
      Plan; or

            (ii) is an Employee or in a unit of Employees covered by a
      collective bargaining agreement with the Employer where retirement
      benefits were the subject of good faith bargaining, unless such agreement
      expressly provides that Employees such as he be covered under the Plan: or
<PAGE>
                                      -12-


            (iii) is a "leased employee" as defined in section 17.8(a); or

            (iv) was not an employee of Tappan Zee Financial, Inc. or Tarrytowns
      Bank, FSB on August 31, 1998 and was not a Participant at any time during
      the period beginning January 1, 1998 and ending August 31, 1998.

            Section 2.2 Commencement of Participation.

            Every Employee who is an Eligible Employee on the Effective Date
shall automatically become a Participant on the Effective Date. An Employee who
becomes an Eligible Employee after the Effective Date shall automatically become
a Participant on the first day of the month following the month in which he
becomes an Eligible Employee.

            Section 2.3 Termination 0f Participation.

            Participation in the Plan shall cease, and a Participant shall
become a Former Participant, upon termination of employment with the Employer,
death, Disability or Retirement, failure to return to work upon the expiration
of a leave of absence granted by the Employer pursuant to section 3.3 or
becoming an Employee who is excluded under section 2.1(b).

            Section 2.4 Adjustments to Period of Service.

            (a) The Period of Service of an Employee shall include any period
during which the Employee is separated from the service of the Employer and all
Affiliated Employers if such period is less than 365 consecutive days measured
from the date on which such Employee terminates service and ending with the
first date following such termination for which the Employer is credited with an
Hour of Service.

            (b) The Period of Service of an Employee who returns to the service
of the Employer and all Affiliated Employers following a separation from service
shall commence with the first date following such separation from service for
which the Employer is credited with an Hour of Service, and he shall be given
credit for any Period of Service prior to such separation, except that if such
separation includes a Break in Service, such credit shall not be given until he
completes a Period of Service of one year following such Break in Service.

            (c) The Period of Service of an Employee who is absent on Maternity
or Paternity Leave shall exclude any period of such absence that occurs after
the first anniversary of the commencement of such absence.

            (d) An Employee's Period of Service shall also be adjusted to the
extent required by the Family and Medical Leave Act or any regulations
promulgated thereunder.
<PAGE>
                                      -13-


                                   ARTICLE III

                               SPECIAL PROVISIONS

            Section 3.1 Military Service.

            In the case of a termination of employment of any Employee to enter
directly into Military Service, the entire period of his absence shall be
treated, for purposes of vesting and eligibility for participation (but not,
except as required by law, for purposes of eligibility to share in allocations
of contributions in accordance with Article VII), as if he had worked for the
Employer during the period of his absence. In the event of the re-employment of
such person by the Employer within a period of not more than six months:

            (a) after he becomes entitled to release or discharge, if he has
      entered into the uniformed services of the United States;

            (b) release from hospitalization continuing after discharge from the
      uniformed services of the United States for a period of not more than one
      year; or

            (c) after such service terminates, if he has entered into other
      service defined as Military Service;

such period, also, shall be deemed to be Military Service.

            Section 3.2 Maternity or Paternity Leave.

            (a) Subject to section 3.2(b), in the event of an Employee's absence
from work in the service of the Employer and all Affiliated Employers for a
period:

            (i) that commences on or after October 1, 1985;

            (ii) for which the person is not paid or entitled to payment by the
      Employer or and Affiliated Employer;

            (iii) that constitutes Maternity or Paternity Leave; and

            (iv) that exceeds one year;

then solely for purposes of determining when a Break in Service has occurred or
when a Period of Severance of five years has occurred for purposes of section
9.4, the period of such an absence commencing on the first anniversary of such
absence and ending on the second anniversary of the
<PAGE>
                                      -14-


commencement of such absence (or, if earlier, on the last day of such absence)
shall not be treated as a Period of Severance.

            (b) Notwithstanding anything in the Plan to the contrary, this
section 3.2 shall not apply unless the person furnishes to the Plan
Administrator such information as the Plan Administrator may reasonably require
in order to establish: (i) that the person's absence is one described in section
3.2(a); and (ii) the number of working days during such absence.

            Section 3.3 Leave of Absence.

            In the event of temporary absence from work in the service of the
Employer and all Affiliated Employers for and period of two years or less for
which a Participant shall have been granted a leave of absence by the Employer,
the entire period of his absence shall be treated for purposes of vesting and
eligibility for participation (but not for purposes of eligibility to share in
the allocation of contributions in accordance with Article VII), as if he had
worked for the Employer during the period of his absence. Absence from work for
a period greater than, or failure to return to work upon the expiration of, the
period of leave of absence granted by the Employer shall terminate participation
in the Plan as of the date on which such period ended. In granting leaves of
absence for purposes of the Plan, all Employees in like circumstances shall be
similarly treated.

                                   ARTICLE IV

                   CONTRIBUTIONS BY PARTICIPANTS NOT PERMITTED

            Section 4.1 Contributions by Participants Not Permitted.

            Participants shall not be required, nor shall they be permitted, to
make contributions to the Plan.
<PAGE>
                                      -15-


                                    ARTICLE V

                          CONTRIBUTIONS BY THE EMPLOYER

            Section 5.1 In General.

            Subject to the limitations of Article VIII, for each Plan Year, the
Employer shall contribute to the Plan the amount, if any, determined by the
Board, but in no event less than the amount described in section 5.2(a). The
amount contributed for any Plan Year shall be treated as a Loan Repayment
Contribution, an ESOP Contribution, or a combination thereof, in accordance with
the provisions of this Article V.

            Section 5.2 Loan Repayment Contributions.

            For each Plan Year, a portion of the Employer's contributions, if
any, to the Plan for such Plan Year equal to the sum of:

            (a) the minimum amount required to be added to the Loan Repayment
      Account in order to provide adequate funds for the payment of the
      principal and interest then required to be repaid under the terms of any
      outstanding Share Acquisition Loan obtained by the Trustee; plus

            (b) the additional amount, if any, designated by the Committee to be
      applied to the prepayment of principal or interest under the terms of any
      outstanding Share Acquisition Loan obtained by the Trustee;

shall be treated as a Loan Repayment Contribution for such Plan Year. A Loan
Repayment Contribution for a Plan Year shall be allocated to the Loan Repayment
Account and shall be applied by the Trustee, in the manner directed by the
Committee, to the payment of accrued interest and to the reduction of the
principal balance of and Share Acquisition Loan obtained by the Trustee that is
outstanding on the date on which the Loan Repayment Contribution is made. To the
extent that a Loan Repayment Contribution for a Plan Year results in a release
of Financed Shares in accordance with section 6.4, such Shares shall be
allocated among the Accounts of Eligible Participants for such Plan Year in
accordance with section 7.2.

            Section 5.3 ESOP Contributions.

            In the event that the amount of the Employer's contributions to the
Plan for a Plan Year exceeds the amount of the Loan Repayment Contributions for
such Plan Year, such excess shall be treated as an ESOP Contribution and shall
be allocated among the Accounts of the Eligible Participants for such Plan Year
in accordance with section 7.3.
<PAGE>
                                      -16-


            Section 5.4 Retroactive Contributions.

            The Employer shall make a Retroactive Contribution in respect of any
individual who is re-employed by the Employer after December 12, 1994 following
the completion of a period of Qualified Military Service. Such Retroactive
Contribution shall be made in the following manner for each Plan Year that
includes the period of Qualified Military Service:

            (a) An allocation percentage shall be computed by dividing (i) the
      sum of the Fair Market Value of all Financed Shares allocated to Eligible
      Participants for such Plan Year plus the dollar amount of all ESOP
      Contributions made in cash for such Plan Year plus the Fair Market Value
      of all ESOP Contributions made in Shares for such Plan Year, divided by
      (ii) the aggregate amount of Allocation Compensation used in the
      allocation for such Plan Year. Fair Market Value for such purposes shall
      be determined as of the last day of the Plan Year.

            (b) A notional allocation shall be determined by multiplying (A) the
      percentage determined under section 5.4(a) by (B) the Allocation
      Compensation which the individual would have had for the calendar year
      ending during such Plan Year if he had remained in the service of the
      Employer in the same capacity and earning Allocation Compensation and
      Total Compensation at the annual rates in effect immediately prior to the
      commencement of the Qualified Military Leave (or, if such rates are not
      reasonably certain, at an annual rate equal to the actual Allocation
      Compensation and Total Compensation, respectively, paid to him for the
      12-month period immediately preceding the Qualified Military Service).

            (c) An actual Retroactive Contribution for the Plan Year shall be
      determined by computing the excess of (A) the notional allocation
      determined under section 5.4(b) over (B) the sum of the dollar amount of
      any ESOP Contribution in cash, the Fair Market Value of any ESOP
      Contribution in Shares and the Fair Market Value of any Financed Shares
      actually allocated to such individual for such Plan Year.

            Section 5.5 Time and Manner of Payment.

            (a) Payment of contributions made pursuant to this Article V shall
      be made:

            (i) in cash, in the case of a Loan Repayment Contribution; and

            (ii) in cash, in Shares or in a combination of cash and Shares, in
      the case of an ESOP Contribution or a Retroactive Contribution.

            (b) Contributions made pursuant to this Article V for a Plan Year
shall be paid to the Trust Fund on or before the due date (including and
extensions thereof) of the Employer's federal income tax return for its taxable
year during which such Plan Year ends. All such
<PAGE>
                                      -17-


contributions shall be allocated to the Accounts of the Eligible Participants,
in the case of an ESOP Contribution, to the Account of the Participant for whom
it is made in the case of a Retroactive Contribution, and to the Loan Repayment
Account, in the case of a Loan Repayment Contribution, as soon as is practicable
following the payment thereof to the Trust Fund.

                                   ARTICLE VI

                             SHARE ACQUISITION LOANS

            Section 6.1 In General.

            The Committee may, with the prior approval of the Board, direct the
Trustee to obtain a Share Acquisition Loan on behalf of the Plan, the proceeds
of which shall be applied on the earliest practicable date:

            (a) to purchase Shares; or

            (b) to make payments of principal or interest, or a combination of
      principal and interest, with respect to such Share Acquisition Loan; or

            (c) to make payments of principal and interest, or a combination of
      principal and interest, with respect to a previously obtained Share
      Acquisition Loan that is then outstanding.

And such Share Acquisition Loan shall be obtained on such terms and conditions
as the Committee may approve; provided, however, that such terms and conditions
shall provide for the payment of interest at no more than a reasonable rate and
shall permit such Share Acquisition Loan to satisfy the requirements of section
4975(d)(3) of the Code and section 408(b)(3) of ERISA.

            Section 6.2 Collateral; Liability for Repayment.

            (a) The Committee may direct the Trustee to pledge, at the time a
Share Acquisition Loan is obtained, the following assets of the Plan as
collateral for such Share Acquisition Loan:

            (i) any Shares purchased with the proceeds of such Share Acquisition
      Loan and any earnings attributable thereto;

            (ii) any Financed Shares then pledged as collateral for a prior
      Share Acquisition Loan which is repaid with the proceeds of such Share
      Acquisition Loan and any earnings attributable thereto; and
<PAGE>
                                      -18-


            (iii) pending the application thereof to purchase Shares or repay a
      prior Share Acquisition Loan, the proceeds of such Share Acquisition Loan
      and any earnings attributable thereto.

Except as specifically provided in this section 6.2(a), no assets of the Plan
shall be pledged as collateral for the repayment of any Share Acquisition Loan.

            (b) No person entitled to payment under a Share Acquisition Loan
shall have any right to the assets of the Plan except for:

            (i) Financed Shares that have been pledged as collateral for such
      Share Acquisition Loan pursuant to section 6.2(a);

            (ii) Loan Repayment Contributions made pursuant to section 5.2; and

            (iii) earnings attributable to Financed Shares described in section
      6.2(b)(i) and to Loan Repayment Contributions described in section
      6.2(b)(ii).

Except in the event of a default or a refinancing pursuant to which an existing
Share Acquisition Loan is repaid, the aggregate amount of all payments of
principal and interest made by the Trustee with respect to all Share Acquisition
Loans obtained on behalf of the Plan shall at no time exceed the aggregate
amount of all Loan Repayment Contributions theretofore made plus the aggregate
amount of all earnings (other than dividends paid in the form of Shares)
attributable to Financed Shares and to such Loan Repayment Contributions.

            (c) Any Share Acquisition Loan shall be without recourse against the
Plan and Trust.

            Section 6.3 Loan Repayment Account.

            In the event that one or more Share Acquisition Loans shall be
obtained, a Loan Repayment Account shall be established under the Plan. The Loan
Repayment Account shall be credited with all Shares acquired with the proceeds
of a Share Acquisition Loan, all Loan Repayment Contributions and all earnings
(including dividends paid in the form of Shares) or appreciation attributable to
such Shares and Loan Repayment Contributions. The Loan Repayment Account shall
be charged with all payments of principal and interest made by the Trustee with
respect to any Share Acquisition Loan, all Shares released in accordance with
section 6.4 and all losses, depreciation or expenses attributable to Shares or
to other property credited thereto. The Financed Shares, as well as and earnings
thereon, shall be allocated to such Loan Repayment Account and shall be
accounted for separately from all other amounts contributed under the Plan.
<PAGE>
                                      -19-


            Section 6.4 Release of Financed Shares.

            As of the last day of each Plan Year during which a Share
Acquisition Loan is outstanding, a portion of the Financed Shares purchased with
the proceeds of such Share Acquisition Loan and allocated to the Loan Repayment
Account shall be released. The number of Financed Shares released in any such
Plan Year shall be equal to the amount determined according to one of the
following methods:

            (a) by computing the product of: (i) the number of Financed Shares
      purchased with the proceeds of such Share Acquisition Loan and allocated
      to the Loan Repayment Account immediately before the release is effected;
      multiplied by (ii) a fraction, the numerator of which is the aggregate
      amount of the principal and interest payments (other than payments made
      upon the refinancing of a Share Acquisition Loan as contemplated by
      section 6.1(c)) made with respect to such Share Acquisition Loan during
      such Plan Year, and the denominator of which is the aggregate amount of
      all principal and interest remaining to be paid with respect to such Share
      Acquisition Loan as of the first day of such Plan Year; or

            (b) by computing the product of: (i) the number of Financed Shares
      purchased with the proceeds of such Share Acquisition Loan and allocated
      to the Loan Repayment Account immediately before the release is effected;
      multiplied by (ii) a fraction, the numerator of which is the aggregate
      amount of the principal payments (other than payments made upon the
      refinancing of a Share Acquisition Loan as contemplated by section 6.1(c))
      made with respect to such Share Acquisition Loan during such Plan Year,
      and the denominator of which is the aggregate amount of all of principal
      remaining to be paid with respect to such Share Acquisition Loan as of the
      first day of such Plan Year; provided, however, that the method described
      in this section 6.4(b) may be used only if the Share Acquisition Loan does
      not extend for a period in excess of 10 years after the date of
      origination and only to the extent that principal payments on such Share
      Acquisition Loan are made at least as rapidly as under a ban of like
      principal amount with a like interest rate and term requiring level
      amortization of principal and interest.

The method to be used shall be specified in the documents governing the Share
Acquisition Loan or, if not specified therein, prescribed by the Committee, in
its discretion. In the event that property other than, or in addition to,
Financed Shares shall be held in the Loan Repayment Account and pledged as
collateral for a Share Acquisition Loan, then the property to be released
pursuant to this section 6.4 shall be property having a Fair Market Value
determined by applying the method to be used to the Fair Market Value of all
property pledged as collateral for such Share Acquisition Loan; provided,
however, that no property other than Financed Shares shall be released pursuant
to this section 6.4 unless all Financed Shares have previously been released.
<PAGE>
                                      -20-


            Section 6.5 Restrictions on Financed Shares.

            Except to the extent required under and applicable law, rule or
regulation, no Shares purchased with the proceeds of a Share Acquisition Loan
shall be subject to a put, call or other option, or to any buy-sell or similar
arrangement, while held by the Trustee or when distributed from the Plan. The
provisions of this section 6.5 shall continue to apply in the event that this
Plan shall cease to be an employee stock ownership plan, within the meaning of
section 4975(e)(7) of the Code.

                                   ARTICLE VII

                           ALLOCATION 0F CONTRIBUTIONS

            Section 7.1 Allocation Among Eligible Participants.

            Subject to the limitations of Article VIII, ESOP Contributions for a
Plan Year made in accordance with section 5.3 and Financed Shares and other
property that are released from the Loan Repayment Account for a Plan Year in
accordance with section 6.4 shall be allocated among the Eligible Participants
for such Plan Year, in the manner provided in this Article VII.

            Section 7.2 Allocation of Released Shares or Other Property.

            Subject to the limitations of Article VIII, in the event that
Financed Shares or other property are released from the Loan Repayment Account
for a Plan Year in accordance with section 6.4, such released Shares or other
property shall be allocated among the Accounts of the Eligible Participants for
the Plan Year in the proportion that each such Eligible Participant's
Allocation Compensation for the portion of the Plan Year during which he was a
Participant bears to the aggregate Allocation Compensation of all Eligible
Participants for the portion of the Plan Year during which they were
Participants.

            Section 7.3 Allocation of ESOP Contributions.

            Subject to the limitations of Article VIII, in the event that the
Employer makes an ESOP Contribution for a Plan Year, such ESOP Contribution
shall be allocated among the Accounts of the Eligible Participants for such Plan
Year in the proportion that each such Eligible Participant's Allocation
Compensation for the portion of the Plan Year during which he was a Participant
bears to the aggregate Allocation Compensation of all Eligible Participants for
the portion of such Plan Year during which they were Eligible Participants.
<PAGE>
                                      -21-


            Section 7.4 No Allocation After Termination of Participation.

            No amount of the Employer's contributions for a Plan Year, nor any
Financed Shares or other property released during a Plan Year, shall be
allocated to the account of any person who is not an Eligible Participant for
such Plan Year, even if such person was a Participant during part of such Plan
Year.

                                  ARTICLE VIII

                           LIMITATIONS ON ALLOCATIONS

            Section 8.1 Optional Limitations on Allocations of ESOP
Contributions.

            If, for any Plan Year, the application of sections 7.2 and 7.3 would
result in more than one-third of the number of Shares or of the amount of money
or property to be allocated thereunder being allocated to the Accounts of
Eligible Participants for such Plan Year who are also Highly Compensated
Employees for such Plan Year, then the Committee may, but shall not be required
to, direct that this section 8.1 shall apply in lieu of sections 7.2 and 7.3. If
the Committee gives such a direction, then the Committee shall impose a maximum
dollar limitation on the amount of Allocation Compensation that may be taken
into account for each Eligible Participant. The dollar limitation which shall be
imposed shall be the limitation which produces the result that the aggregate
Allocation Compensation taken into account for Eligible Participants who are
Highly Compensated Employees, constitutes exactly one-third of the aggregate
Allocation Compensation taken into account for all Eligible Participants. In
determining whether more than one-third of the number of Shares or of the amount
of money or property to be allocated under the Plan for a Plan Year beginning
before January 1, 1997 would be allocated to the Highly Compensated Employees,
any allocation to be made to the Account of a Family Member of a Highly
Compensated Employee who is either a Five Percent Owner or one of the ten Highly
Compensated Employees with the highest Total Compensation, shall be treated as
an allocation to such Highly Compensated Employee.

            Section 8.2 General Limitations on Contributions.

            (a) No amount shall be allocated to a Participant's Account under
this Plan for any Limitation Year, to the extent that such an allocation would
result in an Annual Addition of an amount greater than the lesser of (i) $30,000
(or such other amount as is permissible under section 415(c)(1)(A) of the Code,
or (ii) 25% of the Participant's Total Compensation for such Limitation Year.

            (b) In the case of a Participant who may be entitled to benefits
under any qualified defined benefit plan (whether or not terminated) now in
effect or ever maintained by the
<PAGE>
                                      -22-


Employer, such Participant's Annual Additions under this Plan shall, in addition
to the limitations provided under section 8.2(a), be further limited 50 that the
sum of the Participant's Defined Contribution Plan Fraction plus his Defined
Benefit Plan Fraction does not exceed 1.0 for any Limitation Year beginning
prior to January 1, 2000; provided, however, that for any Limitation Year ending
prior to January 1, 1983, the sum of this Defined Contribution Plan Fraction
plus his Defined Benefit Plan Fraction shall not exceed 1.4; and provided
further, that this limitation shall only apply if and to the extent that the
benefits under the Employer's Retirement Plan are not limited so that such sum
is not exceeded.

            (c) For purposes of this section 8.2, the following special
definitions shall apply:

            (i) Annual Addition means the sum of the following amounts allocated
      on behalf of a Participant for a Limitation Year:

                  (A) all contributions by the Employer (including contributions
            made under a salary reduction agreement pursuant to sections 401(k),
            408(k) or 403(b) of the Code) under and qualified defined
            contribution plan (other than this Plan) maintained by the Employer,
            as well as the Participant's allocable share, if any, of any
            forfeitures under such plans; plus

                  (B) (1) for Limitation Years that began prior to January 1,
            1987, the lesser of (1) 50% of the Participant's voluntary
            nondeductible contributions to all qualified defined contribution
            plans maintained by the Employer, or (2) the amount by which the
            Participant's nondeductible voluntary contributions to such plans
            exceeds 6% of his Total Compensation; and (II) for Limitation Years
            that begin after December 31, 1986, all of the Participant's
            voluntary nondeductible contributions to such plans; plus

                  (C) all ESOP Contributions under this Plan; plus

                  (D) except as hereinafter provided in this section 8.2(c)(i),
            a portion of the Employer's Loan Repayment Contributions to the Plan
            for such Limitation Year which bears the same proportion to the
            total amount of the Employer's Loan Repayment Contributions for the
            Limitation Year that the number of Shares (or the Fair Market Value
            of property other than Shares) allocated to the Participant's
            Account pursuant to section 7.2 or 8.1, whichever is applicable,
            bears to the aggregate number of Shares (or Fair Market Value of
            property other than Shares) so allocated to all Participants for
            such Limitation Year.

      Notwithstanding section 8.2(c)(i)(D), if, for any Limitation Year, the
      aggregate amount of ESOP Contributions allocated to the Accounts of the
      individuals who are Highly Compensated Employees for such Limitation Year,
      when added to such Highly Compensated Employees' allocable share of any
      Loan Repayment
<PAGE>
                                      -23-


      Contributions for such Limitation Year, does not exceed one-third of the
      total of all ESOP Contributions and Loan Repayment Contributions for such
      Limitation Year, then that portion, if any, of the Loan Repayment
      Contributions for such Limitation Year that is applied to the payment of
      interest on a Share Acquisition Loan shall not be included as an Annual
      Addition. In determining whether more than one-third of the number of
      Shares or of the amount of money or property to be allocated under the
      Plan for a Plan Year beginning before January 1, 1997 would be allocated
      to the Highly Compensated Employees, any allocation to be made to the
      Account of a Family Member of a Highly Compensated Employee who is either
      a Five Percent Owner or one of the ten Highly Compensated Employees with
      the highest Total Compensation, shall be treated as an allocation to such
      Highly Compensated Employee.

            (ii) Employer means Tappan Zee Financial, Inc. (before September 1,
      1998) and U.S.B. Holding Co., Inc. (after August 31, 1998), and all
      members of a controlled group of corporations, as defined in section
      414(b) of the Code, as modified by section 415(h) of the Code, all
      commonly controlled trades or businesses, as defined in section 414(c) of
      the Code, as modified by section 415(h) of the Code, all affiliated
      service groups, as defined in section 414(m) of the Code, of which Tappan
      Zee Financial, Inc. (before September 1, 1998) and U.S.B. Holding Co.,
      Inc. (after August 31, 1998), is a member, as well as any leasing
      organization, as defined in section 17.8, that employs any person who is
      considered an employee under section 17.8 and any other entity that is
      required to be aggregated with the Employer pursuant to regulations under
      section 414(o) of the Code.

            (iii) Defined Benefit Plan Fraction means, for and Participant for
      any Limitation Year, a fraction, the numerator of which is the Projected
      Annual Benefit (determined as of the end of such Limitation Year) of the
      Participant under and qualified defined benefit plans (whether or not
      terminated) maintained by the Employer for the current and all prior
      Limitation Years, and the denominator of which is as follows: (A) for
      Limitation Years ending prior to January 1, 1983, the lesser of (1) the
      dollar limitation in effect under section 415(b)(1) (A) of the Code for
      such Limitation Year, or (II) the amount which may be taken into account
      under section 415(b)(1)(B) of the Code with respect to such Participant
      for such Limitation Year; and (B) in all other cases, the lesser of (I)
      (except as provided in section 16.8(b) for a Top Heavy Plan Year) the
      product of 1.25 multiplied by the dollar limitation in effect under
      section 415(b)(1)(A) of the Code for such Limitation Year, or (II) the
      product of 1.4 multiplied by the amount which may be taken into account
      under section 415(b)(1)(B) of the Code with respect to such Participant
      for such Limitation Year.

            (iv) Defined Contribution Plan Fraction means, for any Participant
      for any Limitation Year, a fraction (A) the numerator of which is the sum
      of such
<PAGE>
                                      -24-


      Participant's Annual Additions (determined as of the end of such
      Limitation Year) under this Plan and any other qualified defined
      contribution plans (whether or not terminated) maintained by the Employer
      for the current and all prior Limitation Years, and (B) the denominator of
      which is as follows: (I) for Limitation Years ending prior to January 1,
      1983, the sum of the lesser of the following amounts for such Limitation
      Year and for each prior Limitation Year during which such Participant was
      employed by the Employer: (1) the Maximum Permissible Amount for such
      Limitation Year (without regard to section 415(c)(6) of the Code), or (2)
      the amount which may be taken into account under section 415(c)(1)(B) of
      the Code with respect to such Participant for such Limitation Year; and
      (II) in all other cases, the sum of the lesser of the following amounts
      for such Limitation Year and for each prior Limitation during which such
      Participant was employed by the Employer: (1) (except as provided in
      section 16.8(b) for a Top Heavy Plan Year) the product of 1.25 multiplied
      by the Maximum Permissible Amount for such Limitation Year (determined
      without regard to section 415(c)(6) of the Code), or (2) the product of
      1.4 multiplied by the amount which may be taken into account under section
      415(c)(l)(B) of the Code (or section 415(c)(7) of the Code, if applicable)
      with respect to such Participant for such Limitation Year; provided,
      however, that the Plan Administrator may, at his election, adopt the
      transition rule set forth in section 415(e)(6) of the Code in making the
      computation set forth in this section 8.2(c)(iv). If the sum of a
      Participant's Defined Benefit Plan Fraction and Defined Contribution Plan
      Fraction exceeded 1.0 as of September 30, 1983, then such Participant's
      Defined Contribution Plan Fraction shall be determined under regulations
      to be prescribed by the Secretary of the Treasury so that the sum of the
      fractions does not exceed 1.0.

            (v) Limitation Year means the Plan Year; provided, however, that if
      the Employer changes the Limitation Year, the new Limitation Year shall
      begin on a date within the Limitation Year in which the amendment is made.

            (vi) Maximum Permissible Amount means (A) $25,000 (or such higher
      amount as may be permitted under section 415(d) of the Code because of
      cost of living increases) for Limitation Years beginning prior to January
      1, 1983, and (B) the greater of (I) $30,000, or (II) 25% of the dollar
      limitation in effect under section 415(b)(1)(A) of the Code for Limitation
      Years beginning on or after January 1, 1983.

            (vii) Projected Annual Benefit means a Participant's annual
      retirement benefit (adjusted to the actuarial equivalent of a straight
      life annuity if expressed in a form other than a straight life or
      qualified joint and survivor annuity) under and qualified defined benefit
      plan maintained by the Employer, whether or not terminated, assuming that
      the Participant will continue employment until the later of current age or
      normal retirement age under such plan, and that the Participant's Total
      Compensation for the Limitation Year and all other relevant factors used
      to
<PAGE>
                                      -25-


      determine benefits under such plan will remain constant for all future
      Limitation Years.

            (d) When a Participant's Annual Addition to this Plan must be
reduced to satisfy the limitations of section 8.2(a) or (b), such reduction
shall be applied first to ESOP Contributions; and second, if necessary, to
Shares allocated as a result of a Loan Repayment Contribution which are included
as an Annual Addition. The amount by which and Participant's Annual Addition to
this Plan is reduced shall be allocated in accordance with Articles V and VII as
a contribution by the Employer in the next succeeding Limitation Year.

            (e) Prior to determining a Participant's actual Total Compensation
for a Limitation Year, the Employer may determine the limitations under this
section 8.2 for a Participant on the basis of a reasonable estimation of the
Participant's Total Compensation for the Limitation Year that is uniformly
determined for all Participants who are similarly situated. As soon as it is
administratively feasible after the end of the Limitation Year, the limitations
of this section 8.2 shall be determined on the basis of the Participant's actual
Total Compensation for the Limitation Year.

                                   ARTICLE IX

                                     VESTING

            Section 9.1 Vesting.

            Subject to the provisions of section 9.6(a), the balance credited to
each Employee's Account shall become vested in accordance with the following
schedule:

                  Period of Service      Vested 
                       In Years        Percentage 
                  -----------------    ----------

                  0 but less than 1       10% 
                  1 but less than 2       20% 
                  2 but less than 3       40% 
                  3 but less than 4       60% 
                  4 but less than 5       80% 
                  5 or more              100%

            Section 9.2 Vesting on Death, Disability, Retirement or Change in
Control.

            And previously unvested portion of the remainder of the balance
credited to the Account of a Participant or of a person who is a Former
Participant solely because he is excluded
<PAGE>
                                      -26-


from participation under section 2.1(b) shall become fully vested in him
immediately upon attainment of age 65, or, if earlier, upon the termination of
his participation by reason of death, Disability, Retirement or upon the
occurrence of a Change in Control of the Employer.

            Section 9.3 Forfeitures on Termination of Employment.

            Upon the termination of employment of a Participant or Former
Participant for any reason other than death, Disability, Retirement, that
portion of the balance credited to his Account which is not vested at the date
of such termination shall be forfeited as of the last Valuation Date for the
Plan Year in which such termination of employment occurs. The proceeds of such
forfeitures, less amounts, if any, required to be credited because of
re-employment pursuant to section 9.4, shall be treated as Forfeitures and shall
be disposed of as provided in section 9.5.

            Section 9.4 Amounts Credited Upon Re-Employment.

            If an Employee forfeited any amount of the balance credited to his
Account upon his termination of employment with the Employer, and is re-employed
prior to the occurrence of a Period of Severance of five years, then:

            (i) an amount equal to the Fair Market Value of the Shares
      forfeited, determined as of the date of forfeiture; and

            (ii) the amount credited to his General Investment Account that was
      forfeited, determined as of the date of forfeiture;

shall be credited back to his Account from the proceeds of forfeitures which are
redeemed pursuant to section 9.3 during the Plan Year in which he is
re-employed, unless such proceeds are insufficient, in which case the Employer
shall make an additional contribution in the amount of such deficiency.

            Section 9.5 Allocation of Forfeitures.

            And Forfeitures that occur during a Plan Year shall be used to
reduce the contributions required of the Employer under the Plan and shall be
treated as Loan Repayment Contributions and ESOP Contributions in the
proportions designated by the Committee in accordance with Article V.

            Section 9.6 Accelerated Vesting Upon Change in Control.

            (a) The balance credited to each Participant's Account shall become
100% vested upon the occurrence of a Change in Control of the Employer.
<PAGE>
                                      -27-


            (b) A Change in Control of the Employer shall be deemed to have
occurred upon the happening of any of the following events:

            (i) approval by the stockholders of Tappan Zee Financial, Inc. of a
      transaction that would result in the reorganization, merger or
      consolidation of Tappan Zee Financial, Inc. with one or more other
      persons, other than transaction following which:

                  (A) at least 51% of the equity ownership interests of the
            entity resulting from such transaction are beneficially owned
            (within the meaning of Rule 13d-3 promulgated under the Securities
            Exchange Act of 1934 "Exchange Act") in substantially the same
            relative proportions by persons who, immediately prior to such
            transaction, beneficially owned (within the meaning of Rule 13d-3
            promulgated under the Exchange Act) at least 51% of the outstanding
            equity ownership interests in Tappan Zee Financial, Inc.; and

                  (B) at least 51% of the securities entitled to vote generally
            in the election of directors of the entity resulting from such
            transaction are beneficially owned (within the meaning of Rule 13d-3
            promulgated under the Exchange Act) in substantially the same
            relative proportions by persons who, immediately prior to such
            transaction, beneficially owned (within the meaning of Rule 13d-3
            promulgated under the Exchange Act) at least 51% of the securities
            entitled to vote generally in the election of directors of Tappan
            Zee Financial, Inc.

            (ii) the acquisition of all or substantially all of the assets of
      Tappan Zee Financial, Inc. or beneficial ownership (within the meaning of
      Rule 13d-3 promulgated under the Exchange Act) of 20% or more of the
      outstanding securities of Tappan Zee Financial, Inc. entitled to vote
      generally in the election of directors by any person or by any persons
      acting in concert, or approval by the stockholders of Tappan Zee
      Financial, Inc. of any transaction which would result in such an
      acquisition;

            (iii) a complete liquidation or dissolution of Tappan Zee Financial,
      Inc., or approval by its stockholders of a plan for such liquidation or
      dissolution;

            (iv) the occurrence of and event if, immediately following such
      event, at least 50% of the members of the Board of Tappan Zee Financial,
      Inc. do not belong to any of the following groups;

                  (A) individuals who were members of the Board of Tappan Zee
            Financial, Inc. on the Effective Date of this Plan; or
<PAGE>
                                      -28-


                  (B) individuals who first became members of the Board of
            Tappan Zee Financial, Inc. after the Effective Date of this Plan
            either:

                        (I) upon election to serve as a member of such Board by
                  affirmative vote of three-quarters of the members of such
                  Board, or of a nominating committee thereof, in office at the
                  time of such first election; or

                        (II) upon election by the stockholders of Tappan Zee
                  Financial, Inc. to serve as a member of the Board of Tappan
                  Zee Financial, Inc., but only if nominated for election by
                  affirmative vote of three-quarters of the members of the
                  Board, or of a nominating committee thereof, in office at the
                  time of such first nomination;

            provided, however, that such individual's election or nomination did
            not result from an actual or threatened election contest (within the
            meaning of Rule 14a-11 of Regulation 14A promulgated under the
            Exchange Act) or other actual or threatened solicitation of proxies
            or consents (within the meaning of Rule 14a-11 of Regulation 14A
            promulgated under the Exchange Act) other than by or on behalf of
            the Board of Tappan Zee Financial, Inc.; or

            (v) any event which would be described in section 9.6(b)(i), (ii),
      (iii) or (iv) if the name of Tarrytowns Bank, FSB were substituted for the
      name "Tappan Zee Financial, Inc." therein.

In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of Tappan Zee Financial, Inc.,
an Affiliated Employer, or a subsidiary of either of them, by Tappan Zee
Financial, Inc., an Affiliated Employer, or a subsidiary of either of them, or
by and employee benefit plan maintained by any of them. For purposes of this
section 9.6(b), the term "person" shall have the meaning assigned to it under
sections 13(d)(3) or 14(d)(2) of the Exchange Act.

                                    ARTICLE X

                                 THE TRUST FUND

            Section 10.1 The Trust Fund.

            The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall vest such powers
in the Trustee as to invest-
<PAGE>

                                      -29-


ment, control and disbursement of the Trust Fund, and such other provisions not
inconsistent with the Plan, including provision for the appointment of one or
more "investment managers" within the meaning of section 3(38) of ERISA to
manage and control (including acquiring and disposing of) all or any of the
assets of the Trust Fund, as the Board may from time to time authorize. Except
as required by ERISA, no bond or other security shall be required of any Trustee
at any time in office.

            Section 10.2 Investments.

            (a) Except to the extent provided to the contrary in section 10.3,
the Trust Fund shall be invested in:

            (i) Shares;

            (ii) units of interest in such Investment Funds as may be
      established from time to time by the Committee; and

            (iii) such other investments as may be permitted under the Trust
      Agreement;

in such proportions as shall be determined by the Committee or, if so provided
under the Trust Agreement, as directed by one or more investment managers or by
the Trustee, in its discretion; provided, however, that the investments of the
Trust Fund shall consist primarily of Shares. Notwithstanding the immediately
preceding sentence, the Trustee may temporarily invest the Trust Fund in
short-term obligations of, or guaranteed by, the United States Government or an
agency thereof, or may retain uninvested, or sell investments to provide,
amounts of cash required for purposes of the Plan.

            (b) Initially, the value of each unit in each Investment Fund shall
be $1, and one unit in any such Investment Fund shall be credited to each
Participant or Former Participant, or the Beneficiary of a deceased Participant
or Former Participant, for each $1 applicable to the purchase for him of units
in such Investment Fund. Thereafter, the Plan Administrator shall determine the
value of units in each such Investment Fund as of each Valuation Date by
dividing the fair market value of all property in each such Investment Fund as
of such Valuation Date (after deducting any expenses or other amounts then
properly chargeable against the particular Investment Fund) by the number of
units then outstanding in each such Investment Fund, and making such other
adjustments as shall be necessary to properly reflect transactions occurring
subsequent to the immediately preceding Valuation Date. For the purposes of this
Article X, fractions of units computed to three decimal places, as well as whole
units, in any of the Investment Funds may be redeemed or purchased for the
credit of Employees, Participants or Former Participants or their Beneficiaries.
<PAGE>
                                      -30-

            Section 10.3 Diversification of Investments.

            (a) Notwithstanding section 10.2, each Qualified Participant may:

            (i) during the first 90 days of each of the first four Plan Years to
      begin after the Plan Year in which he first becomes a Qualified
      Participant, elect that such percentage of the balance credited to his
      Account as he may specify, but in no event more than 25% of the balance
      credited to his Account, be invested in one or more of the Investment
      Funds; and

            (ii) during the first 90 days of the fifth Plan Year to begin after
      the Plan Year in which he first becomes a Qualified Participant or of any
      Plan Year thereafter, elect that such percentage of the balance credited
      to his Account as he may specify, but in no event more than 50% of the
      balance credited to his Account, be invested in one or more of the
      Investment Funds.

For purposes of an election under this section 10.3, the balance credited to a
Participant's Account shall be the balance credited to his Account determined as
of the last Valuation Date to occur in the Plan Year immediately preceding the
Plan Year in which such election is made.

            (b) An election made under section 10.3(a) shall be made in writing,
in the form and manner prescribed by the Plan Administrator, and shall be filed
with the Plan Administrator during the election period specified in section
10.3(a). As soon as is practicable following the end of the election period
during which such election is made, the Plan Administrator shall take such
actions as are necessary to cause the specified percentage of the balance
credited to the Account of the Qualified Participant making the election to be
invested in the specified Investment Funds. Any investments made pursuant to
this section 10.3 shall be specifically allocated to the General Investment
Account of the Qualified Participant for whom they are made.

            (c) An election made under section 10.3(a) may be changed or revoked
at any time during the election period described in section 10.3(a) during which
it is initially made, during any subsequent election period described in section
10.3(a) or, upon at least 15 days' advance written notice given in the form and
manner prescribed by the Plan Administrator, as of the first day of any calendar
quarter of any Plan Year that begins after the Participant first becomes a
Qualified Participant. In no event, however, shall any election under this
section 10.3 result in more than 25% of the balance credited to the
Participant's Account being invested at the direction of the Participant, if
such election is made during a Plan Year to which section l0.3(a)(i) applies, or
result in more than 50% of the balance credited to the Participant's Account
being invested at the direction of the Participant, if such election is made
during the Plan Year to which section 10.3(a)(ii) applies or thereafter.
<PAGE>
                                      -31-


            Section 10.4 Use of Commingled Trust Funds.

            Subject to the provisions of the Trust Agreement, amounts held in
the Trust Fund may be invested in:

            (a) any commingled or group trust fund described in section 401(a)
      of the Code and exempt under section 501(a) of the Code; or

            (b) any common trust fund exempt under section 584 of the Code
      maintained exclusively for the collective investment of the assets of
      trusts that are exempt under section 501(a) of the Code;

provided that the trustee of such commingled, group or common trust fund is a
bank or trust company.

            Section 10.5 Management and Control of Assets.

            All assets of the Plan shall be held by the Trustee in trust for the
exclusive benefit of Participants, Former Participants and their Beneficiaries.
No part of the corpus or income of the Trust Fund shall be used for, or diverted
to, purposes other than for the exclusive benefit of Participants, Former
Participants and their Beneficiaries, and for defraying reasonable
administrative expenses of the Plan and Trust Fund. No person shall have any
interest in or right to any part of the earnings of the Trust Fund, or any
rights in, to or under the Trust Fund or any part of its assets, except to the
extent expressly provided in the Plan.

                                   ARTICLE XI

                    VALUATION OF INTERESTS IN THE TRUST FUND

            Section 11.1 Establishment of Investment Accounts.

            The Plan Administrator shall establish, or cause to be established,
for each person for whom an Account is maintained a Share Investment Account and
a General Investment Account. Such Share Investment Accounts and General
Investment Accounts shall be maintained in accordance with this Article XI.

            Section 11.2 Share Investment Accounts.

            The Share Investment Account established for a person in accordance
with section 11.1 shall be credited with: (a) all Shares allocated to such
person's Account; (b) all Shares pur-
<PAGE>
                                      -32-


chased with amounts of money or property allocated to such person's Account; (c)
all dividends paid in the form of Shares with respect to Shares credited to his
Account; and (d) all Shares purchased with amounts credited to such person's
General Investment Account. Such Share Investment Account shall be charged with
all Shares that are sold or exchanged to acquire other investments or to provide
cash and with all Shares that are distributed in kind.

            Section 11.3 General Investment Accounts.

            The General Investment Account that is established for a person in
accordance with section 11.1 shall be credited with: (a) all amounts, other than
Shares, allocated to such person's Account; (b) all dividends paid in a form
other than Shares with respect to Shares credited to such person's Share
Investment Account; (c) the proceeds of any sale of Shares credited to such
person's Share Investment Account; and (d) any earnings attributable to amounts
credited to such person's General Investment Account. Such General Investment
Account shall be charged with all amounts credited thereto that are applied to
the purchase of Shares, any losses or depreciation attributable to amounts
credited thereto, any expenses allocable thereto and any distributions of
amounts credited thereto.

            Section 11.4 Valuation of Investment Accounts.

            (a) The Plan Administrator shall determine, or cause to be
determined, the aggregate value of each person's Share Investment Account as of
each Valuation Date by multiplying the number of Shares credited to such Share
Investment Account on such Valuation Date by the Fair Market Value of a Share on
such Valuation Date.

            (b) The Plan Administrator shall determine, or cause to be
determined, the aggregate value of each person's General Investment Account as
of each Valuation Date as follows:

            (i) To the extent that all or a portion of such person's General
      Investment Account is invested in one or more of the Investment Funds, the
      Plan Administrator shall multiply the number of units in each Investment
      Fund credited to such person as of the immediately preceding Valuation
      Date by the value of a unit in such Investment Fund as of the current
      Valuation Date.

            (ii) To the extent that all or a portion of such person's General
      Investment Account is invested in investments other than the Investment
      Funds, the Plan Administrator shall adjust the balance in such manner as
      it shall deem appropriate to reflect earnings, losses, expenses, benefit
      payments and other transactions properly chargeable to such Account.
<PAGE>
                                      -33-


            Section 11.5 Annual Statements.

            There shall be furnished, by mail or otherwise, at least once in
each Plan Year to each person who would then be entitled to receive all or part
of the balance credited to any Account if the Plan were then terminated, a
statement of his interest in the Plan as of such date as shall be selected by
the Plan Administrator, which statement shall be deemed to have been accepted as
correct and be binding on such person unless the Plan Administrator receives
written notice to the contrary within 30 days after the statement is mailed or
furnished to such person.

                                   ARTICLE XII

                                     SHARES

            Section 12.1 Specific Allocation of Shares.

            All Shares purchased under the Plan shall be specifically allocated
to the Share Investment Accounts of Participants, Former Participants and their
Beneficiaries in accordance with section 11.2, with the exception of Financed
Shares, which shall be allocated to the Loan Repayment Account.

            Section 12.2 Dividends.

            (a) Dividends paid with respect to Shares held under the Plan shall
be credited to the Loan Repayment Account, if paid with respect to Financed
Shares. Such dividends shall be: (i) applied to the payment of principal and
accrued interest with respect to any Share Acquisition Loan, if paid in cash; or
(ii) held in the Loan Repayment Account as Financed Shares for release in
accordance with section 6.4, if paid in the form of Shares.

            (b) Dividends paid with respect to Shares allocated to a person's
Share Investment Account shall be credited to such person's Share Investment
Account. Cash dividends credited to a person's General Investment Account shall
be, at the direction of the Board, either: (i) held in such General Investment
Account and invested in accordance with sections 10.2 and 11.2; (ii) distributed
immediately to such person; (iii) distributed to such person within 90 days of
the close of the Plan Year in which such dividends were paid; or (iv) used to
make payments of principal or interest on a Share Acquisition Loan; provided,
however, that the Fair Market Value of Financed Shares released from the Loan
Repayment Account equals or exceeds the amount of the dividend.
<PAGE>
                                      -34-


            Section 12.3 Voting Rights.

            (a) Each person shall direct the manner in which all voting rights
appurtenant to Shares allocated to his Share Investment Account will be
exercised, provided that such Shares were allocated to his Share Investment
Account as of the applicable record date. Such person shall, for such purpose,
be deemed a "named fiduciary" within the meaning of section 402(a)(2) of ERISA.
Such a direction shall be given by completing and filing with the inspector of
elections, the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the date of
the meeting of holders of Shares at which such voting rights will be exercised,
a written direction in the form and manner prescribed by the Committee. The
inspector of elections, the Trustee or such other person designated by the
Committee shall tabulate the directions given on a strictly confidential basis,
and shall provide the Committee with only the final results of the tabulation.
The final results of the tabulation shall be followed by the Committee in
directing the Trustee as to the manner in which such voting rights shall be
exercised. The Plan Administrator shall make a reasonable effort to furnish, or
cause to be furnished, to each person for whom a Share Investment Account is
maintained all annual reports, proxy materials and other information known by
the Plan Administrator to have been furnished by the issuer of the Shares, or by
any solicitor of proxies, to the holders of Shares.

            (b) To the extent that any person shall fail to give instructions
with respect to the exercise of voting rights appurtenant to Shares allocated to
his Share Investment Account:

            (i) the Trustee shall, with respect to each matter to be voted upon:
      (A) cast a number of affirmative votes equal to the product of (I) the
      number of allocated Shares for which no written instructions have been
      given, multiplied by (II) a fraction, the numerator of which is the number
      of allocated Shares for which affirmative votes will be cast in accordance
      with written instructions given as provided in section 12.3(a) and the
      denominator of which is the aggregate number of affirmative and negative
      votes which will be cast in accordance with written instructions given as
      aforesaid, and (B) cast a number of negative votes equal to the excess (if
      any) of (I) the number of allocated Shares for which no written
      instructions have been given over (II) the number of affirmative votes
      being cast with respect to such allocated Shares pursuant to section
      12.3(b)(i)(A); or

            (ii) if the Trustee shall determine that it may not, consistent with
      its fiduciary duties, vote the allocated Shares for which no written
      instructions have been given in the manner described in section
      12.3(b)(i), it shall vote such Shares in such manner as it, in its
      discretion, may determine to be in the best interests of the persons to
      whose Share Investment Accounts such Shares have been allocated.

            (c) (i) The voting rights appurtenant to Financed Shares shall be
exercised as follows with respect to each matter as to which holders of Shares
may vote:

            (A) a number of votes equal to the product of (I) the total number
      of votes appurtenant to Financed Shares allocated to the Loan Repayment
      Account on
<PAGE>
                                      -35-


      the applicable record date; multiplied by (II) a fraction, the numerator
      of which is the total number of affirmative votes cast by Participants,
      Former Participants and the Beneficiaries of deceased Former Participants
      with respect to such matter pursuant to section 12.3(a) and the
      denominator of which is the total number of affirmative and negative votes
      cast by Participants, Former Participants and the Beneficiaries of
      deceased Former Participants, shall be cast in the affirmative; and

            (B) a number of votes equal to the excess of (I) the total number of
      votes appurtenant to Financed Shares allocated to the Loan Repayment
      Account on the applicable record date, over (II) the number of affirmative
      votes cast pursuant to section 12.3(c)(i)(A) shall be cast in the
      negative.

To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(i) shall be applied separately with respect to each class
of Shares.

            (ii) If voting rights are to be exercised with respect to Financed
Shares as provided in section 12.3(c)(i)(A) and (B) at a time when there are no
Shares allocated to the Share Investment Accounts of Participants, Former
Participants and the Beneficiaries of deceased Former Participants, then the
voting rights appurtenant to Financed Shares shall be exercised as follows with
respect to each matter as to which holders of Shares may vote:

            (A) Each person who is a Participant on the applicable record date
      and who was a Participant on the last day of the Plan Year ending on or
      immediately prior to such record date will be granted a number of votes
      equal to the quotient, rounded to the nearest integral number, of (I) such
      Participant's Allocation Compensation for the Plan Year ending on or
      immediately prior to such record date (or for the portion of such Plan
      Year during which he was a Participant); divided by (II) $1,000.00; and

            (B) a number of votes equal to the product of (I) the total number
      of Financed Shares allocated to the Loan Repayment Account on the
      applicable record date; multiplied by (II) a fraction, the numerator of
      which is the total number of votes that are cast in the affirmative with
      respect to such matter pursuant to section 12.3(c)(ii)(A) and the
      denominator of which is the total number of votes that are cast either in
      the affirmative or in the negative with respect to such matter pursuant to
      section 12.3(c)(ii)(A), shall be cast in the affirmative; and

            (C) a number of votes equal to the excess of (I) the total number of
      Financed Shares allocated to the Loan Repayment Account on the applicable
      record date, over (II) the number of affirmative votes cast with respect
      to such matter pursuant to section 12.3(c)(ii)(B), shall be cast in the
      negative.

To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.3(c)(ii) shall be applied separately with respect to each class
of Shares.
<PAGE>
                                      -36-


            Section 12.4 Tender Offers.

            (a) Each person shall direct whether Shares allocated to his Share
Investment Account will be delivered in response to any Tender Offer. Such
person shall, for such purpose, be deemed a "named fiduciary" within the meaning
of section 402(a)(2) of ERISA. Such a direction shall be given by completing and
filing with the Trustee or such other person who shall be independent of the
Employer as the Committee shall designate, at least 10 days prior to the latest
date for exercising a right to deliver Shares pursuant to such Tender Offer, a
written direction in the form and manner prescribed by the Committee. The
Trustee or other person designated by the Committee shall tabulate the
directions given on a strictly confidential basis, and shall provide the
Committee with only the final results of the tabulation. The final results of
the tabulation shall be followed by the Committee in directing the number of
Shares to be delivered. The Plan Administrator shall make a reasonable effort to
furnish, or cause to be furnished, to each person for whom a Share Investment
Account is maintained, all information known by the Plan Administrator to have
been furnished by the issuer or by or on behalf of any person making such Tender
Offer, to the holders of Shares in connection with such Tender Offer.

            (b) To the extent that any person shall fail to give instructions
with respect to Shares allocated to his Share Investment Account:

            (i) the Trustee shall (A) tender or otherwise offer for purchase,
      exchange or redemption a number of such Shares equal to the product of (I)
      the number of allocated Shares for which no written instructions have been
      given, multiplied by (II) a fraction, the numerator of which is the number
      of allocated Shares tendered or otherwise offered for purchase, exchange
      or redemption in accordance with written instructions given as provided in
      section 12.4(a) and the denominator of which is the aggregate number of
      allocated Shares for which written instructions have been given as
      aforesaid, and (B) withhold a number of Shares equal to the excess (if
      any) of (I) the number of allocated Shares for which no written
      instructions have been given over (II) the number of Shares being tendered
      or otherwise offered pursuant to section 12.4(b)(i)(A); or

            (ii) if the Trustee shall determine that it may not, consistent with
      its fiduciary duties, exercise the tender or other rights appurtenant to
      allocated Shares for which no written instructions have been given in the
      manner described in section 12.4(b)(i), it shall tender, or otherwise
      offer, or withhold such Shares in such manner as it, in its discretion,
      may determine to be in the best interests of the persons to whose Share
      Investment Accounts such Shares have been allocated.

            (c) In the case of any Tender Offer, any Financed Shares held in the
Loan Repayment Account shall be dealt with as follows:

            (i) If such Tender Offer occurs at a time when there are no Shares
      allocated to the Share Investment Accounts of Participants, Former
      Participants and
<PAGE>
                                      -37-


      the Beneficiaries of deceased Former Participants, then the disposition of
      the Financed Shares shall be determined as follows:

                  (A) each person who is a Participant on the applicable record
            date and who was a Participant on the last day of the Plan Year
            ending on or immediately prior to such record date will be granted a
            number of tender rights equal to the quotient, rounded to the
            nearest integral number, of (I) such Participant's Allocation
            Compensation for the Plan Year ending on or immediately prior to
            such record date (or for the portion of such Plan Year during which
            he was a Participant), divided by (II) $1,000.00; and

                  (B) on the last day for delivering Shares or otherwise
            responding to such Tender Offer, a number of Shares equal to the
            product of (I) the total number of Financed Shares allocated to the
            Loan Repayment Account on the last day of the effective period of
            such Tender Offer; multiplied by (II) a fraction, the numerator of
            which is the total number of tender rights exercised in favor of the
            delivery of Shares in response to the Tender Offer pursuant to
            section 12.4(c)(i)(A) and the denominator of which is the total
            number of tender rights that are exercisable in response to the
            Tender Offer pursuant to section 12.4(c)(i)(A), shall be delivered
            in response to the Tender Offer; and

                  (C) a number of Shares equal to the excess of (I) the total
            number of Financed Shares allocated to the Loan Repayment Account on
            the last day of the effective period of such Tender Offer; over (II)
            the number of Shares to be delivered in response to the Tender Offer
            pursuant to section 12.4(c)(i)(B), shall be withheld from delivery.

            (ii) If such Tender Offer occurs at a time when the voting rights
      appurtenant to such Financed Shares are to be exercised in accordance with
      section 12.3(c)(i), then:

                  (A) on the last day for delivering Shares or otherwise
            responding to such Tender Offer, a number of Financed Shares equal
            to the product of (I) the total number of Financed Shares allocated
            to the Loan Repayment Account on the last day of the effective
            period of such Tender Offer; multiplied by (II) a fraction, the
            numerator of which is the total number of Shares delivered from the
            Share Investment Accounts of Participants, Former Participants and
            the Beneficiaries of deceased Former Participants in response to
            such Tender Offer pursuant to section 12.4(a), and the denominator
            of which is the total number of Shares allocated to the Share
            Investment Accounts of Participants, Former Participants and
            Beneficiaries of deceased Former Participants immediately prior to
            the last day for delivering Shares or otherwise responding to such
            Tender Offer, shall be delivered; and
<PAGE>
                                      -38-


                  (B) a number of Financed Shares equal to the excess of (I) the
            total number of Financed Shares allocated to the Loan Repayment
            Account on the last day for delivering Shares or otherwise
            responding to such Tender Offer; over (II) the number of Financed
            Shares to be delivered pursuant to section 12.4(c)(ii)(A), shall be
            withheld from delivery.

To the extent that the Financed Shares consist of more than one class of Shares,
this section 12.4(c) shall be applied separately with respect to each class of
Shares.

                                  ARTICLE XIII

                               PAYMENT OF BENEFITS

            Section 13.1 In General.

            The balance credited to a Participant's or Former Participant's
Account under the Plan shall be paid only at the times, to the extent, in the
manner and to the persons provided in this Article XIII.

            Section 13.2 Designation of Beneficiaries.

            (a) Subject to section 13.2(b), any person entitled to a benefit
under the Plan may designate a Beneficiary to receive any amount to which he is
entitled that remains undistributed on the date of his death. Such person shall
designate his Beneficiary (and may change or revoke any such designation) in
writing in the form and manner prescribed by the Plan Administrator. Such
designation, and any change or revocation thereof, shall be effective only if
received by the Plan Administrator prior to such person's death and shall become
irrevocable upon such person's death.

            (b) A Participant or Former Participant who is married shall
automatically be deemed to have designated his spouse as his Beneficiary,
unless, prior to the time such designation would, under section 13.2(a), become
irrevocable:

            (i) the Participant or Former Participant designates an additional
      or a different Beneficiary in accordance with this section 13.2; and

            (ii) (A) the spouse of such Participant or Former Participant
      consents to such designation in a writing that acknowledges the effect of
      such consent and is witnessed by a Plan representative or a notary public;
      or (B) the spouse of such Participant or Former Participant has previously
      consented to such designation by signing a written waiver of any right to
      consent to any designation made by the
<PAGE>
                                      -39-


      Participant or Former Participant, and such waiver acknowledged the effect
      of the waiver and was witnessed by a Plan representative or a notary
      public; or (C) it is established to the satisfaction of a Plan
      representative that the consent required under section 13.2(b)(ii)(A) may
      not be obtained because such spouse cannot be located or because of other
      circumstances permitted under regulations issued by the Secretary of the
      Treasury.

            (c) In the event that a Beneficiary entitled to payments hereunder
shall die after the death of the person who designated him but prior to
receiving payment of his entire interest in the Account of the person who
designated him, then such Beneficiary's interest in the Account of such person,
or any unpaid balance thereof, shall be paid as provided in section 13.3 to the
Beneficiary who has been designated by the deceased Beneficiary, or if there is
none, to the executor or administrator of the estate of such deceased
Beneficiary, or if no such executor or administrator is appointed within such
time as the Plan Administrator, in his sole discretion, shall deem reasonable,
to such one or more of the spouse and descendants and blood relatives of such
deceased Beneficiary as the Plan Administrator may select. If a person entitled
to a benefit under the Plan and any of the Beneficiaries designated by him shall
die in such circumstances that there shall be substantial doubt as to which of
them shall have been the first to die, for all purposes of the Plan, the person
who made the Beneficiary designation shall be deemed to have survived such
Beneficiary.

            (d) If no Beneficiary survives the person entitled to the benefit
under the Plan or if no Beneficiary has been designated by such person, such
benefit shall be paid to the executor or administrator of the estate of such
person, or if no such executor or administrator is appointed within such time as
the Plan Administrator, in his sole discretion, shall deem reasonable, to such
one or more of the spouse and descendants and blood relatives of such deceased
person as the Plan Administrator may select.

            Section 13.3 Distributions to Participants and Former Participants.

            (a)(i) The vested portion of the balance credited to a Participant's
or a Former Participant's Account shall be distributed to him commencing as of
the last Valuation Date to occur in the Plan Year in which the Participant or
Former Participant terminates employment with the Employer or attains age 65,
whichever is later, unless the Participant or Former Participant elects
otherwise pursuant to section 13.3(a)(ii), and the payment, or first in a series
of payments, is actually made within sixty (60) days following such Valuation
Date; provided, however, that required minimum distributions shall be made
earlier in accordance with section 13.7; and provided, further, that if
termination of employment occurs prior to January 1, 1998 and the total vested
balance credited to his Account at termination of employment is $3,500 or less,
or if termination of employment occurs after December 31, 1998 and the total
vested balance credited to his Account at termination of employment is $5,000
(or such higher amount as may be prescribed by law) or less, his entire vested
interest in his Account shall be paid to him in a single lump sum as soon as
practicable after termination of employment.
<PAGE>
                                      -40-


            (ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment with the Employer
terminates, elect that his vested interest in his Account be paid commencing as
of any earlier or later Valuation Date after his termination of employment, but
in no event later than the last Valuation Date to occur in the calendar year in
which the Participant or Former Participant attains age 70 1/2, in which case
the payment, or first in a series of payments, shall be made within three months
following such Valuation Date.

            (b)(i) Subject to section 13.3(b)(ii), the vested portion of the
balance credited to the Account of a Participant or Former Participant will be
paid to him, commencing as of the Valuation Date determined under section
13.3(a), in substantially equal annual installments over a fixed period equal to
the greater of:

            (A) five years; or

            (B) if the vested portion of the balance credited to the Account of
      the Participant or Former Participant, determined as of the Valuation Date
      determined under section 13.3(a), is greater than $500,000 (or such larger
      amount as may be prescribed by the Secretary of the Treasury pursuant to
      section 409(o) of the Code), the sum of five years plus the lesser of (I)
      five additional years, or (II) one additional year for each $100,000 (or
      fraction thereof) by which the vested portion of the balance credited to
      the Participant's or Former Participant's Account exceeds $500,000 (or
      such larger amount as may be prescribed by the Secretary of the Treasury
      pursuant to section 409(o) of the Code).

            (ii) A Participant or Former Participant may, upon request on a form
provided by the Plan Administrator and filed with the Plan Administrator not
later than 15 days prior to the date on which his employment terminates, elect
that the vested portion of the balance credited to his Account be paid,
commencing as of the Valuation Date determined under section 13.3(a):

            (A) in substantially equal annual installments over a fixed period
      not to exceed the lesser of (I) 10 years, or (II) the life expectancy of
      the Participant or Former Participant, or, if his Beneficiary is a natural
      person, the joint life and last survivor expectancy of the Participant or
      Former Participant and his Beneficiary; or

            (B) subject to section 13.4, in a lump sum payment.

            (c) If any person entitled to a benefit under the Plan dies before
his entire benefit has been distributed to him, then the remainder of such
benefit shall be paid to the Beneficiary designated by him under section 13.2
either:

            (i) in a lump sum distribution as of the Valuation Date next
      following the date of his death, and the amount thereof shall be based
      upon the vested portion of the balance credited to his Account as of such
      Valuation Date; or
<PAGE>
                                      -41-


            (ii) if, prior to the death of the Participant or Former Participant
      whose vested Account is being distributed, an election pursuant to section
      13.3(b)(ii)(B) is in effect for him, in a lump sum distribution as of the
      Valuation Date specified in such election, or, if earlier, as of the
      latest Valuation Date that would permit payment to be made within five
      years after the Participant's or Former Participant's death, and the
      amount thereof shall be based upon the vested portion of the balance
      credited to his Account as of such Valuation Date; or

            (iii) if, prior to the death of the Participant or Former
      Participant whose vested Account is being distributed, an election
      pursuant to section 13.3(b)(ii)(A) is in effect for him:

                  (A) over the period and at the times set forth in such
            election, if distribution has begun prior to the Participant's or
            Former Participant's death; or

                  (B) commencing at the time set forth in such election and over
            the period set forth in such election (or, if less, over a period
            equal to the life expectancy of the Beneficiary of the deceased
            Participant or Former Participant), if the deceased Participant's or
            Former Participant's spouse is his Beneficiary and distribution has
            not begun prior to the deceased Participant's or Former
            Participant's death; or

                  (C) commencing on the date specified in such election (or, if
            earlier, the last Valuation Date that will permit payment to begin
            within one year after the deceased Participant's or Former
            Participant's death) and over the period set forth in such election
            (or, if less, over a period equal to the life expectancy of the
            Beneficiary of the deceased Participant or Former Participant), if
            the deceased Participant's or Former Participant's Beneficiary is a
            natural person other than his spouse and distribution has not begun
            prior to the deceased Participant's or Former Participant's death;

      and the amount thereof shall be based upon the vested portion of the
      balance credited to his Account as of the Valuation Dates as of which
      payments are determined; or

            (iv) upon written application of the Beneficiary made in such form
      and manner as the Plan Administrator may prescribe, at another time or in
      another manner permitted under section 13.3(a) or (b), subject to the
      following limitations:

                  (A)(I) If such Beneficiary is a Designated Beneficiary other
            than the spouse of the deceased Participant or Former Participant
            whose vested Account is being distributed, a distribution that
            commences within one year after such deceased Participant's or
            Former Participant's death shall be
<PAGE>
                                      -42-


            made over a fixed period that does not exceed the life expectancy of
            such Designated Beneficiary when distribution commences.

                  (II) If such Designated Beneficiary is the spouse of the
            deceased Participant or Former Participant whose vested Account is
            being distributed, a distribution that commences no later than the
            later of: (1) the date on which the deceased Participant or Former
            Participant would have attained age 70 1/2 had he lived; or (2) the
            first anniversary of the death of such deceased Participant or
            Former Participant; shall be made over a fixed period that does not
            exceed the life expectancy of such Designated Beneficiary when
            distribution commences.

                  (III) In all other cases where the spouse of the deceased
            Participant or Former Participant whose vested Account is being
            distributed is not the Beneficiary, payment must be completed within
            five years after the death of such deceased Participant or Former
            Participant.

                  (B) In cases where distribution has commenced prior to the
            death of the deceased Participant or Former Participant whose vested
            Account is being distributed, distribution must be completed as
            least as rapidly as under the method in effect prior to such
            deceased Participant's or Former Participant's death.

            Section 13.4 Manner of Payment.

            (a) Subject to section 13.4(b), payments of distributions made
pursuant to section 13.3 or section 13.7 shall be paid, in accordance with the
written direction of the person requesting the payment, in whole Shares, in
cash, or in a combination of cash and whole Shares. Such written direction shall
be given in such form and manner as the Plan Administrator may prescribe. If no
such direction is given, then payment shall be made in the maximum number of
whole Shares that may be acquired with the amount of the payment, plus, if
necessary, an amount of money equal to any remaining amount of the payment that
is less than the Fair Market Value of a whole Share.

            (b) No distribution of a lump sum payment shall be made in cash to
the extent that the making of such distribution, when combined with all other
distributions to be made in cash as of the same Valuation Date, would require
the sale of Shares constituting 1% or more of all outstanding Shares; provided,
however, that this section 13.4(b) shall not apply to or in respect of a
Participant or Former Participant:

            (i) following such Participant's or Former Participant's termination
      of employment with the Employer on account of his Retirement or
      Disability; or
<PAGE>
                                      -43-


            (ii) following such Participant's or Former Participant's 65th
      birthday; or

            (iii) following the death of such Participant or Former Participant.

            Section 13.5 Put Options.

            (a) Except as provided otherwise in section 13.5(b), each
Participant or Former Participant to whom Shares are distributed under the Plan,
each Beneficiary of a deceased Participant or Former Participant, including the
estate of a deceased Participant or Former Participant, to whom Shares are
distributed under the Plan, and each person to whom such a Participant, Former
Participant or Beneficiary gives Shares that have been distributed under the
Plan shall have the right to require the Employer to purchase from him all or
any portion of such Shares. A person shall exercise such right by delivering to
the Employer a written notice, in such form and manner as the Employer may by
written notice to such person prescribe, setting forth the number of Shares to
be purchased by the Employer, the number of the stock certificate evidencing
such person's ownership of such Shares, and the effective date of purchase. Such
notice shall be given, and the effective date of the purchase specified therein
shall be, no later than the last day of the fifteenth calendar month to begin
after the date on which the Shares to be purchased by the Employer were
distributed from the Plan. As soon as practicable following its receipt of such
notice, the Employer shall take such actions as are necessary to purchase the
Shares specified in such notice at a price per Share equal to the Fair Market
Value of a Share determined as of the effective date of the purchase.

            (b) The Employer shall have no obligation to purchase any Share (i)
pursuant to a notice given, or on an effective date of purchase, after the last
day of the fifteenth calendar month to begin after the date on which such Share
was distributed from the Plan; (ii) following the earliest date on which Shares
are publicly traded on an established market; or (iii) if the Employer is a
"bank" within the meaning of section 581 of the Code and is prohibited by law
from redeeming or purchasing its own securities.

            Section 13.6 Right of First Refusal.

            (a) For any period during which Shares are not publicly traded on
any established market, no person who owns Shares that were distributed from the
Plan, other than a person to whom such Shares were sold in compliance with this
section 13.6, shall sell such Shares to any person other than the Employer
without first offering to sell such Shares to the Employer (or person designated
by the Employer) in accordance with this section 13.6.

            (b) In the event that a person to whom this section 13.6 applies
shall receive and desire to accept from a person other than the Employer a bona
fide offer to purchase Shares to which this section 13.6 applies, he shall
furnish to the Employer a written notice which shall:
<PAGE>
                                      -44-


            (i) include a copy of such offer to purchase;

            (ii) offer to sell to the Employer the Shares subject to such offer
      to purchase at a price per Share that is equal to the greater of:

                  (A) the price per Share specified in such offer to purchase;
            or

                  (B) the Fair Market Value of a Share as of the date of
            purchase;

      and otherwise upon the same terms and conditions as those specified in
      such offer to purchase; and

            (iii) include an indication of his intention to accept such offer to
      purchase if the Employer does not accept his offer to sell.

            (c) The Employer shall have the right to purchase the Shares covered
by the offer to sell contained in a notice given pursuant to section 13.6(b), on
the terms and conditions specified in such notice, by written notice given to
the party making the offer to sell not later than the fourteenth day after the
notice described in section 13.6(b) is given. If the Employer does not give such
a notice during the prescribed fourteen day period, then the person owning such
Shares may accept the offer to purchase described in the notice.

            Section 13.7 Minimum Required Distributions.

      (a) Required minimum distributions of a Participant's or Former
Participant's Account shall commence no later than:

            (i) if the Participant or Former Participant attained age 70 1/2
      prior to January 1, 1988 and was not a Five Percent Owner at any time
      during the Plan Year ending in the calendar year in which he attained age
      70 1/2, during any of the four preceding Plan Years or during any
      subsequent years, the later of (A) the calendar year in which he attains
      or attained age 70 1/2 or (B) the calendar year in which he terminates
      employment with the Employer; or

            (ii) if the Participant or Former Participant attained age 70 1/2
      prior to January 1, 1988 and is or was a Five Percent Owner at any time
      during the Plan Year ending in the calendar year in which he attained age
      70 1/2, or during any of the four preceding Plan Years or during any
      subsequent years, the later of (A) the calendar year in which he attains
      age 70 1/2 or (B) the calendar year in which he first becomes a Five
      Percent Owner; or

            (iii) if the Participant or Former Participant attains age 70 1/2
      after December 31, 1987 and before January 1, 1997, in all other cases,
      the calendar year in which the Participant or Former Participant attains
      age 70 1/2; or
<PAGE>
                                      -45-


            (iv) if the Participant or Former Participant attains age 70 1/2
      after December 31, 1998 and was not a Five Percent Owner at any time
      during the Plan Year ending in the calendar year in which he attained age
      70 1/2, during any of the four preceding Plan Years or during any
      subsequent years, the later of (A) the calendar year in which he attains
      or attained age 70 1/2 or (B) the calendar year in which he terminates
      employment with the Employer and all Affiliated Employers; or

            (v) if the Participant or Former Participant attains age 70 1/2
      after December 31, 1998 and is or was a Five Percent Owner at any time
      during the Plan Year ending in the calendar year in which he attained age
      70 1/2, during any of the four preceding Plan Years or during any
      subsequent years, the later of (A) the calendar year in which he attains
      age 70 1/2 or (B) the calendar year in which he first becomes a Five
      Percent Owner;

provided, however, that any Participant who is employed by an Employer after
December 31, 1996 may elect not to receive, or to discontinue receiving, such
required minimum distributions until April 1 of the year following the year in
which such Participant terminates employment or is or becomes a Five Percent
Owner, whichever is earlier.

            (b) The required minimum distributions contemplated by section
13.7(a) shall be made as follows:

            (i) The minimum required distribution to be made for the calendar
      year for which the first minimum distribution is required shall be no
      later than April 1st of the immediately following calendar year and shall
      be equal to the quotient obtained by dividing (A) the vested balance
      credited to the Participant's or Former Participant's Account as of the
      last Valuation Date to occur in the calendar year immediately preceding
      the calendar year in which the first minimum distribution is required
      (adjusted to account for any additions thereto or subtractions therefrom
      after such Valuation Date but on or before December 31st of such calendar
      year); by (B) the Participant's or Former Participant's life expectancy
      (or, if his Beneficiary is a natural person, the joint life and last
      survivor expectancy of him and his Beneficiary); and

            (ii) the minimum required distribution to be made for each calendar
      year following the calendar year for which the first minimum distribution
      is required shall be made no later than December 31st of the calendar year
      for which the distribution is required and shall be equal to the quotient
      obtained by dividing (A) the vested balance credited to the Participant's
      or Former Participant's Account as of the last Valuation Date to occur in
      the calendar year prior to the calendar year for which the distribution is
      required (adjusted to account for any additions thereto or subtractions
      therefrom after such Valuation Date but on or before December 31st of such
      calendar year and, in the case of the distribution for the calendar year
      immediately following the calendar year for which the first minimum
      distribution
<PAGE>
                                      -46-


      is required, reduced by any distribution for the prior calendar year that
      is made in the current calendar year); by (B) the Participant's or Former
      Participant's life expectancy (or, if his Beneficiary is a Designated
      Beneficiary, the joint life and last survivor expectancy of him and his
      Beneficiary).

For purposes of this section 13.7, the life expectancy of a Participant or
Former Participant (or the joint life and last survivor expectancy of a
Participant or Former Participant and his Designated Beneficiary) for the
calendar year in which the Participant or Former Participant attains age 70 1/2
shall be determined on the basis of Tables V and VI, as applicable, of section
1.72-9 of the Income Tax Regulations as of the Participant's or Former
Participant's and Beneficiary's birthday in such year. Such life expectancy or
joint life and last survivor expectancy for any subsequent year shall be equal
to the excess of (1) the life expectancy or joint life and last survivor
expectancy for the year in which the Participant or Former Participant attains
age 70 1/2, over (2) the number of whole years that have elapsed since the
Participant or Former Participant attained age 70 1/2.

            (c) Payment of the distributions required to be made to a
Participant or Former Participant under this section 13.7 shall be made in
accordance with section 13.4.

            Section 13.8 Direct Rollover of Eligible Rollover Distributions.

            (a) A Distributee may elect, at the time and in the manner
prescribed by the Plan Administer, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.

            (b) The following rules shall apply with respect to Direct Rollovers
made pursuant to this section 13.8:

            (i) A Participant may only elect to make a Direct Rollover of an
      Eligible Rollover Distribution if such Eligible Rollover Distribution
      (when combined with other Eligible Rollover Distributions made or to be
      made in the same calendar year) is reasonably expected to be at least
      $200;

            (ii) If a Participant elects a Direct Rollover of a portion of an
      Eligible Rollover Distribution, that portion must be equal to at least
      $500; and

            (iii) A Participant may not divide his or her Eligible Rollover
      Distribution into separate distributions to be transferred to two or more
      Eligible Retirement Plans.

            (c) For purposes of this section 13.8 and any other applicable
section of the Plan, the following definitions shall have the following
meanings:

            (i) "Direct Rollover" means a payment by the Plan to the Eligible
      Retirement Plan specified by the Distributee.
<PAGE>
                                      -47-


            (ii) "Distributee" means an Employee or former Employee. In
      addition, the Employee's or former Employee's surviving spouse and the
      Employee's spouse or former spouse who is the alternate payee under a
      Qualified Domestic Relations Order are considered Distributees with regard
      to the interest of the spouse or former spouse.

            (iii) "Eligible Retirement Plan" means an individual retirement
      account described in section 408(a) of the Code, an individual retirement
      annuity described in section 408(b) or the Code, an annuity plan described
      in section 403(a) of the Code, or a qualified trust described in section
      401(a) of the Code that accepts the Distributee's Eligible Rollover
      Distribution. However, in the case of an Eligible Rollover Distribution to
      the current or former spouse who is the alternative payee under a
      Qualified Domestic Relations Order or to a surviving spouse, an Eligible
      Retirement Plan is an individual retirement account or individual
      retirement annuity.

            (iv) "Eligible Rollover Distribution" means any distribution of all
      or any portion of the balance to the credit of the Distributee, except
      that an Eligible Rollover Distribution does not include: any distribution
      that is one of a series of substantially equal periodic payments (not less
      frequently than annually) made for the life (or life expectancy) of the
      Distributee or the joint lives (or joint life expectancies) of the
      Distributee's designated Beneficiary, or for a specified period of ten
      (10) years or more; any distribution to the extent such distribution is
      required under section 401(a)(9) of the Code; and the portion of any
      distribution that is not includible in gross income (determined without
      regard to the exclusion for net unrealized appreciation with respect to
      employer securities).

            Section 13.9 Valuation of Shares Upon Settlement to a Participant.

            Notwithstanding any contrary provision in this Article XIII, in the
event that all or a portion of a payment of a distribution to a Participant is
to be made in cash, such Participant shall only be entitled to receive the
proceeds of the Shares allocated to his Account that are sold in connection with
such distribution and which are valued as of the date of such sale.

                                   ARTICLE XIV

                                 ADMINISTRATION

            Section 14.1 Named Fiduciaries.
<PAGE>
                                      -48-


            The term "Named Fiduciary" shall mean (but only to the extent of the
responsibilities of each of them) the Plan Administrator, the Committee, the
Board and the Trustee. This Article XIV is intended to allocate to each Named
Fiduciary the responsibility for the prudent execution of the functions assigned
to him or it, and none of such responsibilities or any other responsibility
shall be shared by two or more of such Named Fiduciaries. Whenever one Named
Fiduciary is required by the Plan or Trust Agreement to follow the directions of
another Named Fiduciary, the two Named Fiduciaries shall not be deemed to have
been assigned a shared responsibility, but the responsibility of the Named
Fiduciary giving the directions shall be deemed his sole responsibility, and the
responsibility of the Named Fiduciary receiving those directions shall be to
follow them insofar as such instructions are on their face proper under
applicable law.

            Section 14.2 Plan Administrator.

            There shall be a Plan Administrator, who shall be the Senior Human
Resources Officer of the Employer, or such Employee or officer as may be
designated by the Committee, as hereinafter provided, and who shall, subject to
the responsibilities of the Committee and the Board, have the responsibility for
the day-to-day control, management, operation and administration of the Plan
(except trust duties). The Plan Administrator shall have the following
responsibilities:

            (a) To maintain records necessary or appropriate for the
      administration of the Plan;

            (b) To give and receive such instructions, notices, information,
      materials, reports and certifications to the Trustee as may be necessary
      or appropriate in the administration of the Plan;

            (c) To prescribe forms and make rules and regulations consistent
      with the terms of the Plan and with the interpretations and other actions
      of the Committee;

            (d) To require such proof of age or evidence of good health of an
      Employee, Participant or Former Participant or the spouse of either, or of
      a Beneficiary as may be necessary or appropriate in the administration of
      the Plan;

            (e) To prepare and file, distribute or furnish all reports, plan
      descriptions, and other information concerning the Plan, including,
      without limitation, filings with the Secretary of Labor and communications
      with Participants, Former Participants and other persons, as shall be
      required of the Plan Administrator under ERISA;

            (f) To determine any question arising in connection with the Plan,
      and the Plan Administrator's decision or action in respect thereof shall
      be final and conclusive and binding upon the Employer, the Trustee,
      Participants, Former
<PAGE>
                                      -49-


      Participants, Beneficiaries and any other person having an interest under
      the Plan; provided, however, that any question relating to inconsistency
      or omission in the Plan, or interpretation of the provisions of the Plan,
      shall be referred to the Committee by the Plan Administrator and the
      decision of the Committee in respect thereof shall be final;

            (g) Subject to the provisions of section 14.5, to review and dispose
      of claims under the Plan filed pursuant to section 14.4;

            (h) If the Plan Administrator shall determine that by reason of
      illness, senility, insanity, or for any other reason, it is undesirable to
      make any payment to a Participant, Former Participant, Beneficiary or any
      other person entitled thereto, to direct the application of any amount so
      payable to the use or benefit of such person in any manner that he may
      deem advisable or to direct in his discretion the withholding of any
      payment under the Plan due to any person under legal disability until a
      representative competent to receive such payment in his behalf shall be
      appointed pursuant to law;

            (i) To discharge such other responsibilities or follow such
      directions as may be assigned or given by the Committee or the Board; and

            (j) To perform any duty or take any action which is allocated to the
      Plan Administrator under the Plan.

The Plan Administrator shall have the power and authority necessary or
appropriate to carry out his responsibilities. The Plan Administrator may resign
only by giving at least 30 days' prior written notice of resignation to the
Committee, and such resignation shall be effective on the date specified in such
notice.

            Section 14.3 Committee Responsibilities.

            The Committee shall, subject to the responsibilities of the Board,
have the following responsibilities:

            (a) To review the performance of the Plan Administrator;

            (b) To hear and decide appeals, pursuant to the claims procedure
      contained in section 14.5 of the Plan, taken from the decisions of the
      Plan Administrator;

            (c) To hear and decide questions, including interpretation of the
      Plan, as may be referred to the Committee by the Plan Administrator;
<PAGE>
                                      -50-


            (d) To review the performance of the Trustee and such investment
      managers as may be appointed in or pursuant to the Trust Agreement in
      investing, managing and controlling the assets of the Plan;

            (e) To the extent required by ERISA, to establish a funding policy
      and method consistent with the objectives of the Plan and the requirements
      of ERISA, and to review such policy and method at least annually;

            (f) To report and make recommendations to the Board regarding
      changes in the Plan, including changes in the operation and management of
      the Plan and removal and replacement of the Trustee and such investment
      managers as may be appointed in or pursuant to the Trust Agreement;

            (g) To designate an Alternate Plan Administrator to serve in the
      event that the Plan Administrator is absent or otherwise unable to
      discharge his responsibilities;

            (h) To remove and replace the Plan Administrator or Alternate, or
      both of them, and to fill a vacancy in either office;

            (i) To the extent provided under and subject to the provisions of
      the Trust Agreement, to appoint "investment managers" as defined in
      section 3(38) of ERISA to manage and control (including acquiring and
      disposing of) all or any of the assets of the Plan;

            (j) With the prior approval of the Board, to direct the Trustee to
      obtain one or more Share Acquisition Loans;

            (k) To develop and provide procedures and forms necessary to enable
      Participants to give voting and tendering directions on a confidential
      basis;

            (l) To discharge such other responsibilities or follow such
      directions as may be assigned or given by the Board; and

            (m) To perform any duty or take any action which is allocated to the
      Committee under the Plan.

The Committee shall have the power and authority necessary or appropriate to
carry out its responsibilities.

            Section 14.4 Claims Procedure.

            Any claim relating to benefits under the Plan shall be filed with
the Plan Administrator on a form prescribed by him. If a claim is denied in
whole or in part, the Plan
<PAGE>
                                      -51-


Administrator shall give the claimant written notice of such denial, which
notice shall specifically set forth:

            (a) The reasons for the denial;

            (b) The pertinent Plan provisions on which the denial was based;

            (c) Any additional material or information necessary for the
      claimant to perfect his claim and an explanation of why such material or
      information is needed; and

            (d) An explanation of the Plan's procedure for review of the denial
      of the claim.

In the event that the claim is not granted and notice of denial of a claim is
not furnished by the 30th day after such claim was filed, the claim shall be
deemed to have been denied on that day for the purpose of permitting the
claimant to request review of the claim.

            Section 14.5 Claims Review Procedure.

            Any person whose claim filed pursuant to section 14.4 has been
denied in whole or in part by the Plan Administrator may request review of the
claim by the Committee, upon a form prescribed by the Plan Administrator. The
claimant shall file such form (including a statement of his position) with the
Committee no later than 60 days after the mailing or delivery of the written
notice of denial provided for in section 14.4, or, if such notice is not
provided, within 60 days after such claim is deemed denied pursuant to section
14.4. The claimant shall be permitted to review pertinent documents. A decision
shall be rendered by the Committee and communicated to the claimant not later
than 30 days after receipt of the claimant's written request for review.
However, if the Committee finds it necessary, due to special circumstances (for
example, the need to hold a hearing), to extend this period and so notifies the
claimant in writing, the decision shall be rendered as soon as practicable, but
in no event later than 120 days after the claimant's request for review. The
Committee's decision shall be in writing and shall specifically set forth:

            (a) The reasons for the decision; and

            (b) The pertinent Plan provisions on which the decision is based.

Any such decision of the Committee shall be binding upon the claimant and the
Employer, and the Plan Administrator shall take appropriate action to carry out
such decision.

            Section 14.8 Allocation of Fiduciary Responsibilities and Employment
                         of Advisors.
<PAGE>
                                      -52-


            Any Named Fiduciary may:

            (a) Allocate any of his or its responsibilities (other than trustee
      responsibilities) under the Plan to such other person or persons as he or
      it may designate, provided that such allocation and designation shall be
      in writing and filed with the Plan Administrator;

            (b) Employ one or more persons to render advice to him or it with
      regard to any of his or its responsibilities under the Plan; and

            (c) Consult with counsel, who may be counsel to the Employer.

            Section 14.9 Other Administrative Provisions.

            (a) Any person whose claim has been denied in whole or in part must
exhaust the administrative review procedures provided in section 14.5 prior to
initiating any claim for judicial review.

            (b) No bond or other security shall be required of a member of the
Committee, the Plan Administrator, or any officer or Employee of the Employer to
whom fiduciary responsibilities are allocated by a Named Fiduciary, except as
may be required by ERISA.

            (c) Subject to any limitation on the application of this section
14.9(c) pursuant to ERISA, neither the Plan Administrator, nor a member of the
Committee, nor any officer or Employee of the Employer to whom fiduciary
responsibilities are allocated by a Named Fiduciary, shall be liable for any act
of omission or commission by himself or by another person, except for his own
individual willful and intentional malfeasance.

            (d) The Plan Administrator or the Committee may, except with respect
to actions under section 14.5, shorten, extend or waive the time (but not beyond
60 days) required by the Plan for filing any notice or other form with the Plan
Administrator or the Committee, or taking any other action under the Plan.

            (e) The Plan Administrator or the Committee may direct that the
costs of services provided pursuant to section 14.6, and such other reasonable
expenses as may be incurred in the administration of the Plan, shall be paid out
of the funds of the Plan unless the Employer shall pay them.

            (f) Any person, group of persons, committee, corporation or
organization may serve in more than one fiduciary capacity with respect to the
Plan.

            (g) Any action taken or omitted by any fiduciary with respect to the
Plan, including any decision, interpretation, claim denial or review on appeal,
shall be conclusive and binding on all interested parties and shall be subject
to judicial modification or reversal only to the
<PAGE>
                                      -53-


extent it is determined by a court of competent jurisdiction that such action or
omission was arbitrary and capricious and contrary to the terms of the Plan.

                                   ARTICLE XV

                  AMENDMENT, TERMINATION AND TAX QUALIFICATION

            Section 15.1 Amendment and Termination by Tappan Zee Financial, Inc.
                         (Before September 1, 1998) and U.S.B. Holding Co., Inc.
                         (After August 31, 1998).

            The Employer expects to continue the Plan indefinitely, but
specifically reserves the right, in its sole discretion, at any time, by
appropriate action of the Board, to amend, in whole or in part, any or all of
the provisions of the Plan and to terminate the Plan at any time. Subject to the
provisions of section 15.2, no such amendment or termination shall permit any
part of the Trust Fund to be used for or diverted to purposes other than for the
exclusive benefit of Participants, Former Participants, Beneficiaries or other
persons entitled to benefits, and no such amendment or termination shall reduce
the accrued benefit of any Participant, Former Participant, Beneficiary or other
person who may be entitled to benefits, without his consent. In the event of a
termination or partial termination of the Plan, or in the event of a complete
discontinuance of the Employer's contributions to the Plan, the Accounts of each
affected person shall forthwith become nonforfeitable and shall be payable in
accordance with the provisions of Article XIII.

            Section 15.2 Amendment or Termination Other Than by Tappan Zee
                         Financial, Inc. (Before September 1, 1998) and U.S.B. 
                         Holding Co., Inc. (After August 31, 1998).

            In the event that a corporation or trade or business other than
Tappan Zee Financial, Inc. (before September 1, 1998) and U.S.B. Holding Co.,
Inc. (after August 31, 1998) shall adopt this Plan, such corporation or trade or
business shall, by adopting the Plan, empower Tappan Zee Financial, Inc.(before
September 1, 1998) and U.S.B. Holding Co., Inc. (after August 31, 1998) to amend
or terminate the Plan, insofar as it shall cover employees of such corporation
or trade or business, upon the terms and conditions set forth in section 15.1;
provided, however, that any such corporation or trade or business may, by action
of its board of directors or other governing body, amend or terminate the Plan,
insofar as it shall cover employees of such corporation or trade or business, at
different times and in a different manner. In the event of any such amendment or
termination by action of the board of directors or other governing body of such
a corporation or trade or business, a separate plan shall be deemed to have been
established for the employees of such corporation or trade or business, and the
assets of such plan shall be segregated from the
<PAGE>
                                      -54-


assets of this Plan at the earliest practicable date and shall be dealt with in
accordance with the documents governing such separate plan.

            Section 15.3 Conformity to Internal Revenue Code.

            The Employer has established the Plan with the intent that the Plan
and Trust will at all times be qualified under section 401(a) and exempt under
section 501(a) of the Code and with the intent that contributions under the Plan
will be allowed as deductions in computing the net income of the Employer for
federal income tax purposes, and the provisions of the Plan and Trust Agreement
shall be construed to effectuate such intentions. Accordingly, notwithstanding
anything to the contrary hereinbefore provided, the Plan and the Trust Agreement
may be amended at any time without prior notice to Participants, Former
Participants, Beneficiaries or any other persons entitled to benefits, if such
amendment is deemed by the Board to be necessary or appropriate to effectuate
such intent.

            Section 15.4 Contingent Nature of Contributions.

            (a) All ESOP Contributions to the Plan are conditioned upon the
issuance by the Internal Revenue Service of a determination that the Plan and
Trust are qualified under section 401(a) of the Code and exempt under section
501(a) of the Code. If the Employer applies to the Internal Revenue Service for
such a determination within 90 days after the date on which it files its federal
income tax return for its taxable year that includes the last day of the Plan
Year in which the Plan is adopted, and if the Internal Revenue Service issues a
determination that the Plan and Trust are not so qualified or exempt, all ESOP
Contributions made by the Employer prior to the date of receipt of such a
determination may, at the election of the Employer, be returned to the Employer
within one year after the date of such determination.

            (b) All ESOP Contributions and Loan Repayment Contributions to the
Plan are made upon the condition that such ESOP Contributions and Loan Repayment
Contributions will be allowed as a deduction in computing the net income of the
Employer for federal income tax purposes. To the extent that any such deduction
is disallowed, the amount disallowed may, at the election of the Employer, be
returned to the Employer within one year after the deduction is disallowed.

            (c) Any contribution to the Plan made by the Employer as a result of
a mistake of fact may, at the election of the Employer, be returned to the
Employer within one year after such contribution is made.
<PAGE>
                                      -55-


                                   ARTICLE XVI

                     SPECIAL RULES FOR TOP HEAVY PLAN YEARS

            Section 16.1 In General.

            As of the Determination Date for each Plan Year, the Plan
Administrator shall determine whether the Plan is a Top Heavy Plan in accordance
with the provisions of this Article XVI. If, as of such Determination Date, the
Plan is a Top Heavy Plan, then the Plan Year immediately following such
Determination Date shall be a Top Heavy Plan Year and the special provisions of
this Article XVI shall be in effect; provided, however, that if, as of the
Determination Date for the Plan Year in which the Effective Date occurs, the
Plan is a Top Heavy Plan, such Plan Year shall be a Top Heavy Plan Year, and the
provisions of this Article XVI shall be given retroactive effect for such Plan
Year.

            Section 16.2 Definition of Top Heavy Plan.

            (a) Subject to section 16.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) it is not a member of a Required Aggregation Group,
and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key Employees
exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees
(excluding former Key Employees), former Employees (excluding former Key
Employees and other former Employees who have not performed any services for the
Employer or any Affiliated Employer during the immediately preceding five Plan
Years), and their Beneficiaries.

            (b) Subject to section 16.2(c), the Plan is a Top Heavy Plan if, as
of a Determination Date: (i) the Plan is a member of a Required Aggregation
Group, and (ii)(A) the sum of the Cumulative Accrued Benefits of all Key
Employees under all plans that are members of the Required Aggregation Group
exceeds 60% of (B) the sum of the Cumulative Accrued Benefits of all Employees
(excluding former Key Employees), former Employees (excluding former Key
Employees and other former Employees who have not performed any services for the
Employer or any Affiliated Employer during the immediately preceding five Plan
Years), and their Beneficiaries under all plans that are members of the Required
Aggregation Group.

            (c) Notwithstanding sections 16.2(a) and 16.2(b), the Plan is not a
Top Heavy Plan if, as of a Determination Date: (i) the Plan is a member of a
Permissible Aggregation Group, and (ii)(A) the sum of the Cumulative Accrued
Benefits of all Key Employees under all plans that are members of the
Permissible Aggregation Group does not exceed 60% of (B) the sum of the
Cumulative Accrued Benefits of all Employees (excluding former Key Employees),
former Employees (excluding former Key Employees and other former Employees who
have not performed any services for the Employer or any Affiliated Employer
during the immediately preceding five Plan Years), and their Beneficiaries under
all plans that are members of the Permissible Aggregation Group.
<PAGE>
                                      -56-


            Section 16.3 Determination Date.

            The Determination Date for the Plan Year in which the Effective Date
occurs shall be the last day of such Plan Year, and the Determination Date for
each Plan Year beginning after the Plan Year in which the Effective Date occurs
shall be the last day of the preceding Plan Year. The Determination Date for any
other qualified plan maintained by the Employer for a plan year shall be the
last day of the preceding plan year of each such plan, except that in the case
of the first plan year of such plan, it shall be the last day of such first plan
year.

            Section 16.4 Cumulative Accrued Benefits.

            (a) An individual's Cumulative Accrued Benefits under this Plan as
of a Determination Date are equal to the sum of:

            (i)   the balance credited to such individual's Account under this
                  Plan as of the most recent Valuation Date preceding the
                  Determination Date;

            (ii)  the amount of any ESOP Contributions or Loan Repayment
                  Contributions made after such Valuation Date but on or before
                  the Determination Date; and

            (iii) the amount of any distributions of such individual's
                  Cumulative Accrued Benefits under the Plan during the five
                  year period ending on the Determination Date.

For purposes of this section 16.4(a), the computation of an individual's
Cumulative Accrued Benefits, and the extent to which distributions, rollovers
and transfers are taken into account, will be made in accordance with section
416 of the Code and the regulations thereunder.

            (b) For purposes of this Plan, the term "Cumulative Accrued
Benefits" with respect to any other qualified plan, shall mean the cumulative
accrued benefits determined for purposes of section 416 of the Code under the
provisions of such plans.

            (c) For purposes of determining the top heavy status of a Required
Aggregation Group or a Permissible Aggregation Group, the Cumulative Accrued
Benefits under this Plan and the Cumulative Accrued Benefits under any other
plan shall be determined as of the Determination Date that falls within the same
calendar year as the Determination Dates for all other members of such Required
Aggregation Group or Permissible Aggregation Group.
<PAGE>
                                      -57-


            Section 16.5 Key Employees.

            (a) For purposes of the Plan, the term Key Employee means any
employee or former employee of the Employer or any Affiliated Employer who is at
any time during the current Plan Year or was at any time during the immediately
preceding four Plan Years:

            (i)   a Five Percent Owner;

            (ii)  a person who would be described in section 1.23 if the number
                  "1%" were substituted for the number "5%" in section 1.23 and
                  who has an annual Total Compensation from the Employer and any
                  Affiliated Employer of more than $150,000;

            (iii) an Officer of the Employer or any Affiliated Employer who has
                  an annual Total Compensation greater than 50% of the amount in
                  effect under section 415(b)(1)(A) of the Code for any such
                  Plan Year; or

            (iv)  one of the ten persons owning the largest interests in the
                  Employer and having an annual Total Compensation from the
                  Employer or any Affiliated Employer in excess of the dollar
                  limitation in effect under section 415(c)(1)(A) of the Code
                  for such Plan Year.

            (b)   For purposes of section 16.5(a):

            (i)   for purposes of section 16.5(a)(iii), in the event the
                  Employer or any Affiliated Employer has more officers than are
                  considered Officers, the term Key Employee shall mean those
                  officers, up to the maximum number, with the highest annual
                  compensation in any one of the five consecutive Plan Years
                  ending on the Determination Date; and

            (ii)  for purposes of section 16.5(a)(iv), if two or more persons
                  have equal ownership interests in the Employer, each such
                  person shall be considered as having a larger ownership
                  interest than any such person with a lower annual compensation
                  from the Employer or any Affiliated Employer.

            (c) For purposes of section 16.5(a): (i) a person's compensation
from Affiliated Employers shall be aggregated, but his ownership interests in
Affiliated Employers shall not be aggregated; (ii) an employee shall only be
deemed to be an officer if he has the power and responsibility of a person who
is an officer within the meaning of section 416 of the Code; and (iii) the term
Key Employee shall also include the Beneficiary of a deceased Key Employee.
<PAGE>
                                      -58-


            Section 16.6 Required Aggregation Group.

            For purposes of this Article XVI, a Required Aggregation Group shall
consist of (a) this Plan; (b) any other qualified plans maintained by the
Employer and any Affiliated Employers that cover Key Employees; and (c) any
other qualified plans that are required to be aggregated for purposes of
satisfying the requirements of sections 401(a)(4) or 410(b) of the Code.

            Section 16.7 Permissible Aggregation Group.

            For purposes of this Article XVI, a Permissible Aggregation Group
shall consist of (a) the Required Aggregation Group and (b) any other qualified
plans maintained by the Employer and any Affiliated Employers; provided,
however, that the Permissible Aggregation Group must satisfy the requirements of
sections 401(a)(4) and 410(b) of the Code.

            Section 16.8 Special Requirements During Top Heavy Plan Years.

            (a) Notwithstanding any other provision of the Plan to the contrary,
for each Top Heavy Plan Year, in the case of a Participant (other than a Key
Employee) on the last day of such Top Heavy Plan Year who is not also a
participant in another qualified plan which satisfies the minimum contribution
and benefit requirements of section 416 of the Code with respect to such
Participant, the sum of the ESOP Contributions and Loan Repayment Contributions
made with respect to such Participant, when expressed as a percentage of his
Total Compensation for such Top Heavy Plan Year, shall not be less than 3% of
such Participant's Total Compensation for such Top Heavy Plan Year or, if less,
the highest combined rate, expressed as a percentage of Total Compensation at
which ESOP Contributions and Loan Repayment Contributions were made on behalf of
a Key Employee for such Top Heavy Plan Year. The Employer shall make an
additional contribution to the Account of each Participant to the extent
necessary to satisfy the foregoing requirement.

            (b) For any Top Heavy Plan Year beginning before January 1, 2000,
the number "1.0" shall be substituted for the number "1.25" in sections
8.2(c)(iii) and 8.2(c)(iv), except that:

            (i) this section 16.8(b) shall not apply to any individual for a Top
      Heavy Plan Year that is not a Super Top Heavy Plan Year if the
      requirements of section 16.8(a) would be satisfied for such Super Top
      Heavy Plan Year if the number "4%" were substituted for the number 3% in
      section 16.8(a); and

            (ii) this section 16.8(b) shall not apply to an individual for a Top
      Heavy Plan Year if, during such Top Heavy Plan Year, there are no ESOP
      Contributions or Loan Repayment Contributions allocated to such individual
      under this Plan, there are no contributions under any other qualified
      defined contribution plan main-
<PAGE>
                                      -59-


      tained by the Employer, and there are no accruals for such individual
      under any qualified defined benefit plan maintained by the Employer.

For purposes of this section 16.8(b), the term Super Top Heavy Plan Year means a
Top Heavy Plan Year in which the Plan would meet the definitional requirements
of sections 16.2(a) or 16.2(b) if the term "90%" were substituted for the term
"60%" in sections 16.2(a), 16.2(b) and 16.2(c).

                                  ARTICLE XVII

                            MISCELLANEOUS PROVISIONS

            Section 17.1 Governing Law.

            The Plan shall be construed, administered and enforced according to
the laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.

            Section 17.2 No Right to Continued Employment.

            Neither the establishment of the Plan, nor any provisions of the
Plan or of the Trust Agreement establishing the Trust Fund nor any action of the
Plan Administrator, the Committee or the Trustee, shall be held or construed to
confer upon any Employee any right to a continuation of employment by the
Employer. The Employer reserves the right to dismiss any Employee or otherwise
deal with any Employee to the same extent as though the Plan had not been
adopted.

            Section 17.3 Construction of Language.

            Wherever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine and the neuter. Any reference to an Article or section number shall
refer to an Article or section of the Plan, unless otherwise indicated.

            Section 17.4 Headings.

            The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
<PAGE>
                                      -60-


            Section 17.5 Merger with Other Plans.

            The Plan shall not be merged or consolidated with, nor transfer its
assets or liabilities to, any other plan unless each Participant, Former
Participant, Beneficiary and other person entitled to benefits, would (if that
plan then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.

            Section 17.6 Non-alienation of Benefits.

            (a) Except as provided in section 17.6(b) and (c), the right to
receive a benefit under the Plan shall not be subject in any manner to
anticipation, alienation or assignment, nor shall such right be liable for or
subject to debts, contracts, liabilities or torts. Should any Participant,
Former Participant or other person attempt to anticipate, alienate or assign his
interest in or right to a benefit, or should any person claiming against him
seek to subject such interest or right to legal or equitable process, all the
interest or right of such Participant or Former Participant or other person
entitled to benefits in the Plan shall cease, and in that event such interest or
right shall be held or applied, at the direction of the Plan Administrator, for
or to the benefit of such Participant or Former Participant, or other person or
his spouse, children or other dependents in such manner and in such proportions
as the Plan Administrator may deem proper.

            (b) This section 17.6 shall not prohibit the Plan Administrator from
recognizing a Domestic Relations Order that is determined to be a Qualified
Domestic Relations Order in accordance with section 17.7.

            (c) Notwithstanding anything in the Plan to the contrary, a
Participant's, Former Participant's or Beneficiary's Accounts under the Plan may
be offset by any amount such Participant, Former Participant or Beneficiary is
required or ordered to pay to the Plan if:

            (i) the order or requirement to pay arises: (A) under a judgment
      issued on or after August 5, 1997 of conviction for a crime involving the
      Plan; (B) under a civil judgment (including a consent order or decree)
      entered by a court on or after August 5, 1997 in an action brought in
      connection with a violation (or alleged violation) of part 4 of subtitle B
      of title I of ERISA; or (C) pursuant to a settlement agreement entered
      into on or after August 5, 1997 between the Participant, Former
      Participant or Beneficiary and one or both of the United States Department
      of Labor and the Pension Benefit Guaranty Corporation in connection with a
      violation (or alleged violation) of part 4 of subtitle B of title I of
      ERISA by a fiduciary or any other person; and

            (ii) the judgment, order, decree or settlement agreement expressly
      provides for the offset of all or part of the amount ordered or required
      to be paid
<PAGE>
                                      -61-


      to the Plan against the Participant's, For Participant's or Beneficiary's
      benefits under the Plan.

            Section 17.7 Procedures Involving Domestic Relations Orders.

            Upon receiving a Domestic Relations Order, the Plan Administrator
shall segregate in a separate account or in an escrow account or separately
account for the amounts payable to any person pursuant to such Domestic
Relations Order, pending a determination whether such Domestic Relations Order
constitutes a Qualified Domestic Relations Order, and shall give notice of the
receipt of the Domestic Relations Order to the Participant or Former Participant
and each other person affected thereby. If, within 18 months after receipt of
such Domestic Relations Order, the Plan Administrator, a court of competent
jurisdiction or another appropriate authority determines that such Domestic
Relations Order constitutes a Qualified Domestic Relations Order, the Plan
Administrator shall direct the Trustee to pay the segregated amounts (plus any
interest thereon) to the person or persons entitled thereto under the Qualified
Domestic Relations Order. If it is determined that the Domestic Relations Order
is not a Qualified Domestic Relations Order or if no determination is made
within the prescribed 18-month period, the segregated amounts shall be
distributed as though the Domestic Relations Order had not been received, and
any later determination that such Domestic Relations Order constitutes a
Qualified Domestic Relations Order shall be applied only with respect to
benefits that remain undistributed on the date of such determination. The Plan
Administrator shall be authorized to establish such reasonable administrative
procedures as he deems necessary or appropriate to administer this section 17.7.
This section 17.7 shall be construed and administered so as to comply with the
requirements of section 401(a)(13) of the Code.

            Section 17.8 Leased Employees.

            (a) Subject to section 17.8%, a leased employee shall be treated as
an Employee for purposes of the Plan. For purposes of this section 17.8, the
term "leased employee" means any person (i) who would not, but for the
application of this section 17.8, be an Employee and (ii) who pursuant to an
agreement between the Employer and any other person ("leasing organization") has
performed for the Employer (or for the Employer and related persons determined
in accordance with section 414(n)(6) of the Code), on a substantially full-time
basis for a period of at least one year; (i) prior to January 1, 1997, services
of a type historically performed by employees in the business field of the
Employer; and (ii) after December 31, 1996, services under the primary direction
or control of the Employer.

            (b) For purposes of the Plan:

            (i) contributions or benefits provided to the leased employee by the
      leasing organization which are attributable to services performed for the
      Employer shall be treated as provided by the Employer; and
<PAGE>
                                      -62-


            (ii) section 17.8(a) shall not apply to a leased employee if:

                  (A) the number of leased employees performing services for the
            Employer does not exceed 20% of the number of the Employer's
            Employees who are not Highly Compensated Employees; and

                  (B) such leased employee is covered by a money purchase
            pension plan providing (I) a nonintegrated contribution rate of at
            least 10% of the leased employee's compensation; (II) immediate
            participation; (III) full and immediate vesting; and (IV) coverage
            for all of the employees of the leasing organization (other than
            employees who perform substantially all of their services for the
            leasing organization).

            Section 17.9 Status as an Employee Stock Ownership Plan.

            It is intended that the Plan constitute an "employee stock ownership
plan," as defined in section 4975(e)(7) of the Code and section 407(d)(6) of
ERISA. The Plan shall be construed and administered to give effect to such
intent.
<PAGE>

================================================================================

           EMPLOYEE STOCK OWNERSHIP PLAN OF TAPPAN ZEE FINANCIAL, INC.

                             NOTICE TO ALL EMPLOYEES

                               General Information
                                                                              
1. Employer's Name:                       U.S.B. Holding Co., Inc.,        
                                          successor by merger to Tappan    
                                          Zee Financial, Inc.              
                                                                           
2. Employer's Address:                    100 Dutch Hill Road, Orangeburg, 
                                          NY 10962                         
                                                                           
3. Employer's Federal Tax ID Number:      U.S.B. Holding Co., Inc.: 36-3197969
                                          Tappan Zee Financial, Inc.: 13-3840352
                                                                           
4. Address of IRS Key District Director:  Internal Revenue Service
                                          P.O. Box 192,           
                                          Covington, KY 41012-0192         
                                                                           
5. Name of Plan:                          Employee Stock Ownership Plan of 
                                          Tappan Zee Financial, Inc.       
                                                                           
6. Plan Number:                           002                              
                                                                           
7. Eligible Employees:                    Employees of Tappan Zee          
                                          Financial, Inc. prior to August  
                                          31, 1998                         
                                                                           
8. Name of Plan Administrator:            Mr. Harry G. Murphy              
                                                                           
9. Address of Plan Administrator:         100 Dutch Hill Road,           
                                          Orangeburg, NY 10962             
                                          Attention: Tappan Zee ESOP Plan  
                                          Administrator                    
                                                                              
                            Qualified Status of Plan

      An application is to be made to the Internal Revenue Service for a
determination of the qualification of the Plan identified above, as amended. The
application will be filed on March 8, 1999 with the Key District Director,
Internal Revenue Service, at the address listed above, for an advance
determination as to whether the Plan, as amended meets the qualification
requirements of section 401(a) of the Internal Revenue Code of 1986 ("Code").
The Internal Revenue Service has previously issued a determination with respect
to the qualification of this Plan.

                          Rights of Interested Parties

      Right to Comment. You have the right to submit to the Key District
Director, Internal Revenue Service, at the address listed above, either
individually or jointly with other interested parties, your comments as to
whether the Plan meets the qualification requirements of the Code. You may
instead, individually or jointly with other interested parties, request the
Department of Labor to submit, on your behalf, comments to the Key District
Director regarding the qualified status of the Plan. If the Department of Labor
declines to comment on all or some of the matters you raise, you may,
individually, or jointly if your request of the Department of Labor was made
jointly, submit your comments on these matters directly to the Key District
Director.

      Conditions for Comments by the Department of Labor. The Department of
Labor may not comment on behalf of interested parties unless requested to do so
by the lesser of 10 employees or 10% of the employees who qualify as interested
parties. The number of persons needed for the Department of Labor to comment
with respect to the Plan is 2. If you request the Department of Labor to
comment, your request must be in writing and specify: the information listed at
items 1, 2, 3, 5 and 6 in the General Information section of this Notice; the
matters upon which comments are requested; and the number of persons needed for
the Department of Labor to comment. A request of the Department of Labor to
comment would be addressed as follows: Deputy Assistant Secretary, Pension and
Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution
Avenue, N.W., Washington, D.C. 20210, Attention: 3001 Comment Request.

      Deadline for Submitting Comments. Comments submitted by you to the IRS Key
District Director must be in writing and must be received by him by April 22,
1999. However, if there are matters that you request the Department of Labor to
comment upon on your behalf and the Department of Labor declines to comment, you
may submit comments on these matters to the Key District Director to be received
by him within 15 days after the date on which the Department of Labor notifies
you that it will not comment on a particular matter, or by April 22, 1999,
whichever is later, but in no event later than May 7, 1999. A request of the
Department of Labor to comment on your behalf must be received by it by March
23, 1999, if you wish to preserve your right to comment on a matter upon which
the Department of Labor declines to comment, or by April 2, 1999, if you wish to
waive that right.

                             Additional Information

      Detailed instructions regarding the requirements for notification of
interested parties may be found in sections 17 and 18 of Revenue Procedure 99-6.
Additional information concerning the Plan (including an updated copy of the
Plan and related trust, the application for determination and any additional
documents that have been submitted to the IRS, and copies of section 17 of the
Revenue Procedure 99-6) is available at the Plan Administrator's office, at the
address listed above, during normal working hours, for inspection and copying.
(There may be a nominal charge for copying and/or mailing).

       THIS NOTICE IS REQUIRED BY LAW; IT REQUIRES NO ACTION ON YOUR PART.

February 26, 1999
================================================================================