EXHIBIT 10

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                           TROY FINANCIAL CORPORATION,

                         CHARLIE ACQUISITION CORPORATION

                                       AND

                         CATSKILL FINANCIAL CORPORATION

                                   DATED AS OF

                                  JUNE 7, 2000

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                                TABLE OF CONTENTS

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ARTICLE I THE MERGER...........................................................................................1
      1.1      The Merger......................................................................................1
      1.2      Effective Time..................................................................................1
      1.3      Effects of the Merger...........................................................................2
      1.4      Conversion of Catskill Common Stock.............................................................2
      1.5      Options.........................................................................................3
      1.6      Certificate of Incorporation....................................................................3
      1.7      By-Laws.........................................................................................3
      1.8      Directors and Officers..........................................................................3

ARTICLE II EXCHANGE PROCEDURES.................................................................................4
      2.1      Troy to Make Funds Available....................................................................4
      2.2      Exchange........................................................................................4

ARTICLE III REPRESENTATIONS AND WARRANTIES OF CATSKILL.........................................................5
      3.1      Corporate Organization..........................................................................5
      3.2      Capitalization..................................................................................6
      3.3      Authority; No Violation.........................................................................7
      3.4      Consents and Approvals..........................................................................8
      3.5      Loan Portfolio; Reports.........................................................................8
      3.6      Financial Statements; Exchange Act Filings; Books and Records...................................9
      3.7      Broker's Fees...................................................................................9
      3.8      Absence of Certain Changes or Events............................................................9
      3.9      Legal Proceedings..............................................................................10
      3.10     Taxes and Tax Returns..........................................................................10
      3.11     Employee Plans.................................................................................11
      3.12     Certain Contracts..............................................................................13
      3.13     Agreements with Regulatory Agencies............................................................13
      3.14     State Takeover Laws; Certificate of Incorporation..............................................13
      3.15     Environmental Matters..........................................................................14
      3.16     Reserves for Losses............................................................................14
      3.17     Properties and Assets..........................................................................15
      3.18     Insurance......................................................................................15
      3.19     Compliance with Applicable Laws................................................................16
      3.20     Loans..........................................................................................16
      3.21     Affiliates.....................................................................................17
      3.22     Ownership of Troy Common Stock.................................................................17
      3.23     Fairness Opinion...............................................................................17
      3.24     Catskill Information...........................................................................17
      3.25     Sale of Securities Portfolio...................................................................18

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TROY.............................................................18
      4.1      Corporate Organization.........................................................................18
      4.2      Authority; No Violation........................................................................18
      4.3      Regulatory Approvals...........................................................................19
      4.4      Troy Information...............................................................................20
      4.5      Adequate Resources.............................................................................20

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ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................................20
      5.1      Covenants of Catskill..........................................................................20
      5.2      Merger Covenants...............................................................................23
      5.3      Compliance with Antitrust Laws.................................................................23
      5.4      Securities Portfolio Sale......................................................................24

ARTICLE VI ADDITIONAL AGREEMENTS..............................................................................24
      6.1      Regulatory Matters.............................................................................24
      6.2      Access to Information..........................................................................25
      6.3      Shareholder Meeting............................................................................25
      6.4      Legal Conditions to Merger.....................................................................26
      6.5      Employees......................................................................................26
      6.6      Indemnification................................................................................27
      6.7      Subsequent Interim and Annual Financial Statements.............................................28
      6.8      Additional Agreements..........................................................................29
      6.9      Advice of Changes..............................................................................29
      6.10     Current Information............................................................................29
      6.11     Execution and Authorization of Bank Merger Agreement...........................................29
      6.12     Transaction Expenses of Catskill...............................................................29
      6.13     Further Actions of Catskill....................................................................30

ARTICLE VII CONDITIONS PRECEDENT..............................................................................30
      7.1      Conditions to Each Party's Obligation To Effect the Merger.....................................30
      7.2      Conditions to Obligations of Troy..............................................................31
      7.3      Conditions to Obligations of Catskill..........................................................32

ARTICLE VIII TERMINATION AND AMENDMENT........................................................................33
      8.1      Termination....................................................................................33
      8.2      Effect of Termination..........................................................................34
      8.3      Amendment......................................................................................34
      8.4      Extension; Waiver..............................................................................34

ARTICLE IX GENERAL PROVISIONS.................................................................................35
      9.1      Closing........................................................................................35
      9.2      Nonsurvival of Representations, Warranties and Agreements......................................35
      9.3      Expenses; Breakup Fee..........................................................................35
      9.4      Notices........................................................................................35
      9.5      Interpretation.................................................................................36
      9.6      Counterparts...................................................................................36
      9.7      Entire Agreement...............................................................................36
      9.8      Governing Law..................................................................................37
      9.9      Enforcement of Agreement.......................................................................37
      9.10     Severability...................................................................................37
      9.11     Publicity......................................................................................37
      9.12     Assignment; Limitation of Benefits.............................................................37
      9.13     Additional Definitions.........................................................................37

EXHIBITS
      A           Bank Plan of Merger
      B           Option Agreement
      C           Certificate of Merger
      D           Catskill Stockholder Agreement

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                          AGREEMENT AND PLAN OF MERGER

         This  AGREEMENT  AND PLAN OF  MERGER,  dated as of June 7,  2000  (this
"Agreement"),  is entered into by and among Troy Financial Corporation ("Troy"),
Charlie  Acquisition  Corporation,   a  Delaware  corporation  and  wholly-owned
subsidiary  of Troy  ("Merger  Sub"),  and  Catskill  Financial  Corporation,  a
Delaware corporation ("Catskill").

         WHEREAS,  the Boards of Directors of Troy, Merger Sub and Catskill have
determined  that it is in the best interests of their  respective  companies and
shareholders  to consummate the business  combination  transaction  provided for
herein in which Merger Sub will,  subject to the terms and  conditions set forth
herein,  merge (the "Merger")  with and into  Catskill,  with Catskill being the
Surviving  Corporation  (as defined) and becoming a wholly owned  subsidiary  of
Troy and  immediately  following  said Merger,  Troy intends that the  Surviving
Corporation will merge with and into Troy (the "Subsidiary Merger");

         WHEREAS,  prior to the  consummation  of the Merger,  Troy and Catskill
will  respectively  cause Troy Savings Bank ("Troy Bank"), a New  York-chartered
savings bank and  wholly-owned  subsidiary  of Troy,  and Catskill  Savings Bank
("Catskill  Bank"),  a federally  chartered stock savings bank and  wholly-owned
subsidiary of Catskill,  to enter into a merger agreement,  in the form attached
hereto as Exhibit A (the "Bank Merger Agreement"), providing for the merger (the
"Bank Merger") of Catskill Bank with and into Troy Bank, and it is intended that
the Bank Merger be consummated  immediately after consummation of the Merger and
the Subsidiary Merger;

         WHEREAS,  as a condition and inducement to Troy and Merger Sub to enter
into this  Agreement,  Catskill will enter into a stock option  agreement in the
form attached hereto as Exhibit B (the "Catskill Option Agreement"); and

         WHEREAS, the parties desire to make certain representations, warranties
and  agreements  in  connection  with the Merger and also to  prescribe  certain
conditions to the Merger;

         NOW,   THEREFORE,   in   consideration   of   the   mutual   covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:

                                    ARTICLE I
                                   THE MERGER

         1.1      THE MERGER.

         Subject to the terms and  conditions of this  Agreement,  in accordance
with the Delaware  General  Corporation Law (the "DGCL"),  at the Effective Time
(as defined in Section 1.2 hereof),  Merger Sub shall merge into Catskill,  with
Catskill  being the  surviving  corporation  (hereinafter  sometimes  called the
"Surviving  Corporation") in the Merger.  Upon  consummation of the Merger,  the
corporate  existence  of Merger Sub shall  cease and the  Surviving  Corporation
shall continue to exist as a Delaware corporation and a wholly-owned  subsidiary
of Troy.

         1.2      EFFECTIVE TIME.

         The Merger  shall  become  effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") in the form  attached as Exhibit C hereto  which shall be filed with
the  Secretary of State of the State of Delaware on the Closing  Date.  The term
"Effective Time" shall be the date and time when the Merger becomes effective on
the Closing Date, as set forth in the Certificate of Merger.

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         1.3      EFFECTS OF THE MERGER.

         At and after the Effective  Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the DGCL.

         1.4      CONVERSION OF CATSKILL COMMON STOCK.

                  (a) At the Effective Time, subject to Sections 1.4(b),  1.4(e)
and 2.2(c) hereof, each share of Catskill common stock, par value $.01 per share
("Catskill  Common  Stock") issued and  outstanding  prior to the Effective Time
(excluding shares held by stockholders who perfect their  dissenters'  rights of
appraisal  as  provided  in  Section  1.4(d)  hereof)  shall,  by virtue of this
Agreement and without any action on the part of the holder thereof, be converted
into the right to receive an amount (the "Merger Consideration") equal to $23.00
in cash (without interest),  subject to adjustment as provided in Section 1.4(e)
hereof.

                  (b) All of the shares of Catskill  Common Stock  exchanged for
the  Merger  Consideration  pursuant  to this  Article  I  shall  no  longer  be
outstanding and shall  automatically  be canceled and shall cease to exist,  and
each certificate (each a "Certificate")  previously representing any such shares
of Catskill  Common Stock shall  thereafter  represent  the right to receive the
Merger  Consideration  for  each  share  of  Common  Stock  represented  by such
Certificate.  Certificates  previously  representing  shares of Catskill  Common
Stock shall be exchanged  for cash upon the  surrender of such  Certificates  in
accordance with Section 2.2 hereof,  without any interest  thereon.  If prior to
the Effective Time Catskill  should split or combine its common stock,  or pay a
dividend  or  other   distribution  in  such  common  stock,   then  the  Merger
Consideration   shall  be   appropriately   adjusted  to  reflect   such  split,
combination, dividend or distribution.

                  (c) At the Effective Time, all shares of Catskill Common Stock
that are owned by Catskill as treasury  stock and all shares of Catskill  Common
Stock that are owned  directly or indirectly by Troy or Catskill or any of their
respective  Subsidiaries  (other  than  shares of  Catskill  Common  Stock  held
directly or  indirectly  in trust  accounts,  managed  accounts  and the like or
otherwise  held in a fiduciary  capacity  that are  beneficially  owned by third
parties  (any such shares,  and shares of Troy Common Stock which are  similarly
held,  whether held directly or indirectly by Troy or Catskill,  as the case may
be,  being  referred  to herein as "Trust  Account  Shares")  and other than any
shares  of  Catskill  Common  Stock  held by Troy or  Catskill  or any of  their
respective  Subsidiaries  in respect of a debt  previously  contracted (any such
shares of  Catskill  Common  Stock,  and shares of Troy  Common  Stock which are
similarly  held,  whether held directly or indirectly by Troy or Catskill  being
referred to herein as "DPC Shares"))  shall be canceled and shall cease to exist
and no cash or other consideration shall be delivered in exchange therefor.  All
shares  of  Troy  Common  Stock  that  are  owned  by  Catskill  or  any  of its
Subsidiaries  (other  than Trust  Account  Shares and DPC Shares)  shall  become
treasury stock of Troy.

                  (d) Any holder of shares of Catskill Common Stock who perfects
such holder's  dissenters'  rights in  accordance  with and as  contemplated  by
Section  262 of the DGCL shall be entitled  to receive  such  payments as may be
determined  pursuant to such  provision  of Law;  provided  that no such payment
shall be made to any  dissenting  stockholder  unless and until such  dissenting
stockholder  has complied  with the  applicable  provisions  of the DGCL. In the
event that after the Effective  Time a dissenting  stockholder of Catskill fails
to perfect or effectively  withdraws or loses such holder's  rights to appraisal
and of payment of such holder's shares of Catskill  Common Stock,  the Surviving
Corporation  shall issue and deliver the  consideration  to which such holder of
shares of Catskill  Common  Stock is entitled  under this  Section 1.4  (without
interest) upon surrender of such holder's Certificate or Certificates.

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                  (e) If the aggregate pre-tax net proceeds (such proceeds shall
be all cash proceeds,  net of direct sales expenses,  fees and  commissions,  as
recognized  under GAAP (as defined in Section 3.6 below) and  referred to herein
as the "Sale  Proceeds")  realized by Catskill in the Securities  Portfolio Sale
(as  defined in Section  3.25 below) are less than $73.2  million,  then the per
share  Merger  Consideration  shall  be  decreased  by an  amount  equal  to the
quotient,  the numerator of which is the after-tax (using  Catskill's  statutory
federal and New York state tax rates)  difference  between $73.2 million and the
Sale  Proceeds;  and the  denominator  of which is the sum of (x) the  number of
shares  of  Catskill  Common  Stock  outstanding  as of  such  date  and (y) the
equivalent  number  of  shares of  Catskill  Common  Stock  subject  to  options
outstanding,  calculated using the "Treasury Stock Method," as of such date. For
purposes of this Section 1.4(e), "Treasury Stock Method" assumes the exercise of
each  option,  warrant or other  right or  instrument  (each,  an  "instrument")
granted by Catskill to purchase shares of Catskill Common Stock and assumes that
the net proceeds  received upon the exercise of any such instrument will be used
to purchase shares of Catskill Common Stock at the fair market value on the date
of exercise.

         1.5      OPTIONS.

         At the  Effective  Time,  each  option  granted by Catskill to purchase
shares of Catskill Common Stock which is outstanding and unexercised immediately
prior thereto shall be converted automatically into a right to receive a payment
of cash from Troy in an amount  determined  as  provided  below  (and  otherwise
subject to the terms of the Catskill Financial Corporation 1996 Stock Option and
Incentive Plan (the "Catskill Stock Plan"):

                           The cash amount  payable  with  respect to the option
immediately after the Effective Time shall be equal to the product of the number
of shares of  Catskill  Common  Stock  subject to the option immediately  before
the  Effective   Time,  multiplied  by   the  difference  between (a) the Merger
Consideration,  minus (b) the exercise price per share of Catskill  Common Stock
under the option immediately before the Effective Time.

         1.6      CERTIFICATE OF INCORPORATION.

         At the Effective Time, the Certificate of  Incorporation of Merger Sub,
as in effect at the Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation.

         1.7      BY-LAWS.

         At the  Effective  Time,  the  By-Laws  of  Merger  Sub,  as in  effect
immediately  prior to the Effective Time,  shall be the By-Laws of the Surviving
Corporation.

         1.8      DIRECTORS AND OFFICERS.

         At the  Effective  Time,  the  directors  and  officers  of Merger  Sub
immediately  prior to the Effective  Time shall be the directors and officers of
the Surviving Corporation. As of the Effective Time, Troy shall amend its bylaws
to increase the size of its Board of Directors by one member and cause Troy Bank
to amend  its  bylaws to  increase  the size of its  Board of  Directors  by one
member,  and  thereupon  appoint  Wilbur J. Cross,  President,  Chief  Executive
Officer, and Chairman of the Board of Catskill, to serve as an additional member
(the "New Member") of the Boards of Directors of Troy and Troy Bank in the class
of directors whose term expires at the 2003 annual meeting of Troy stockholders;
provided, however, that if the Closing shall occur after the 2001 annual meeting
of Troy  stockholders,  then the New Member  shall be  appointed to serve on the
Boards of Directors of Troy and Troy Bank until the

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2004 annual meeting of Troy stockholders;  provided,  further, that neither Troy
nor Troy Bank shall have any  obligation  to appoint  the New Member to serve on
either  Troy's  or Troy  Bank's  Board if such  person  is not a member  in good
standing of the Catskill  Board of Directors  immediately  prior to closing.  In
addition,  immediately prior to the Effective Time,  subject to applicable rules
and regulations, Troy Bank shall create an advisory board (the "Advisory Board")
to be comprised  of the  individuals  identified  at Section 1.8 of the Catskill
Disclosure  Schedule  (defined  below) for a period to terminate no earlier than
two years after the  Effective  Time.  For service on the  Advisory  Board,  the
Advisory  Board  members  identified  at Section 1.8 of the Catskill  Disclosure
schedule  shall  be paid  an  annual  retainer  of  $10,000  per  year,  payable
quarterly, except that Wilbur J. Cross, as chairman of the Advisory Board, shall
be paid an annual retainer of $50,000 per year, payable quarterly,  and shall be
provided with an office.  Regular  meetings of the Advisory  Board shall be held
quarterly and at a place in the Catskill market area.

                                   ARTICLE II
                               EXCHANGE PROCEDURES

         2.1      TROY TO MAKE FUNDS AVAILABLE.

         At or prior to the Effective Time,  Troy shall deposit,  or shall cause
to be deposited,  with Troy's transfer agent, Registrar and Transfer Company, or
such other  bank,  trust  company  or  transfer  agent as Troy may  select  (the
"Exchange  Agent"),  for  the  benefit  of the  holders  of  Certificates,  cash
sufficient in the  aggregate for the Exchange  Agent to make full payment of the
Merger Consideration  pursuant to Section 1.4 (the "Exchange Fund"). There shall
be a written agreement between Troy and the Exchange Agent in which the Exchange
Agent  expressly  undertakes the obligation to pay the Merger  Consideration  as
provided herein.  Catskill shall have the right to review the agreement with the
Exchange Agent prior to being finalized.

         2.2      EXCHANGE.

                  (a) As soon as  practicable  after  the  Effective  Time,  the
Exchange  Agent  shall  mail  to each  holder  of  record  of a  Certificate  or
Certificates  a form letter of  transmittal  (which shall  specify that delivery
shall be effected,  and risk of loss and title to the  Certificates  shall pass,
only upon delivery of the  Certificates to the Exchange Agent) and  instructions
for use in effecting the surrender of the  Certificates  in exchange for payment
of the Merger  Consideration  pursuant to this  Agreement.  Upon  surrender of a
Certificate for exchange and  cancellation to the Exchange Agent,  together with
such letter of transmittal,  duly executed, the holder of such Certificate shall
be entitled to receive  promptly in exchange  therefor a check  representing the
amount of cash to which such holder shall have become  entitled  pursuant to the
provisions  of  Article I  hereof,  and the  Certificate  so  surrendered  shall
forthwith be canceled.  No interest  will accrue or be paid to the holder of any
outstanding shares of Catskill Common Stock.

                  (b) As of the Effective  Time,  there shall be no transfers on
the stock  transfer  books of Catskill of the shares of  Catskill  Common  Stock
which were issued and outstanding  immediately  prior to the Effective Time. If,
after the Effective Time,  Certificates  representing  such shares are presented
for transfer to the Exchange Agent, they shall be canceled and exchanged for the
Merger Consideration as provided in this Article II.

                  (c) Any portion of the Exchange Fund that remains unclaimed by
the shareholders of Catskill six months after the Effective Time may be returned
to Troy.  After such funds  have been  returned  to Troy,  any  shareholders  of
Catskill who have not theretofore complied with this Article II shall thereafter
look only to Troy for payment of the Merger Consideration deliverable in respect
of each share of Catskill  Common  Stock such  shareholder  holds as  determined
pursuant  to this

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Agreement,  in each case,  without any  interest  thereon.  Notwithstanding  the
foregoing,  none of Troy, Merger Sub, Catskill,  the Exchange Agent or any other
person shall be liable to any former  holder of shares of Catskill  Common Stock
for any amount properly  delivered to a public  official  pursuant to applicable
abandoned property, escheat or similar laws.

                  (d) In the event any Certificate  shall have been lost, stolen
or  destroyed,  upon the  making  of an  affidavit  of that  fact by the  person
claiming such  Certificate  to be lost,  stolen or destroyed and, if required by
Troy, the posting by such person of a bond in such amount as Troy may reasonably
direct as  indemnity  against any claim that may be made against it with respect
to such  Certificate,  the Exchange  Agent will issue in exchange for such lost,
stolen or destroyed  Certificate a check  representing the Merger  Consideration
deliverable in respect thereof pursuant to this Agreement.

                                   ARTICLE III
                   REPRESENTATIONS AND WARRANTIES OF CATSKILL

         Catskill hereby makes the following  representations  and warranties to
Troy and Merger  Sub as set forth in this  Article  III,  each of which is being
relied  upon by Troy and Merger Sub as a material  inducement  to enter into and
perform this Agreement.  All of the disclosure  schedules of Catskill referenced
below and  thereby  required  of  Catskill  pursuant  to this  Agreement,  which
disclosure  schedules  shall be  cross-referenced  to the specific  sections and
subsections of this Agreement and delivered herewith,  are referred to herein as
the "Catskill Disclosure Schedule."

         3.1      CORPORATE ORGANIZATION.

                  (a) Catskill is a corporation duly organized, validly existing
and in good standing  under the laws of the State of Delaware.  Catskill has the
corporate  power and authority to own or lease all of its  properties and assets
and to carry on its business as it is now being conducted,  and is duly licensed
or  qualified  to do  business in each  jurisdiction  in which the nature of any
business  conducted  by it or the  character  or location of any  properties  or
assets owned or leased by it makes such  licensing or  qualification  necessary.
Catskill is duly  registered  as a savings  and loan  holding  company  with the
Office of Thrift Supervision ("OTS") under the Home Owners' Loan Act, as amended
("HOLA").  The Certificate of Incorporation  and By-Laws of Catskill,  copies of
which are attached at Section 3.1(a) of the Catskill  Disclosure  Schedule,  are
true,  correct and complete copies of such documents as in effect as of the date
of this Agreement.  Catskill Bank and Catskill Financial Services, Inc. ("CFSI")
are the only  subsidiaries  of Catskill and Catskill  Bank,  respectively,  that
qualify as a "Significant  Subsidiary" as such term is defined in Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC").

                  (b) Catskill Bank is a federally  chartered stock savings bank
duly  organized and validly  existing and in good standing under the laws of the
United States.  The deposit accounts of Catskill Bank are insured by the Federal
Deposit Insurance  Corporation (the "FDIC") through the Bank Insurance Fund (the
"BIF") to the fullest extent  permitted by law, and all premiums and assessments
required in connection  therewith have been paid by Catskill Bank. Catskill Bank
has the corporate  power and authority to own or lease all of its properties and
assets and to carry on its  business  as it is now being  conducted  and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
any business  conducted by it or the character or the location of any properties
or assets owned or leased by it makes such licensing or qualification necessary.
The  Charter  and  By-Laws of  Catskill  Bank,  copies of which are  attached at
Section  3.1(b) of the  Catskill  Disclosure  Schedule,  are true,  correct  and
complete copies of such documents as in effect as of the date of this Agreement.

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                  (c) CFSI is a business  corporation  duly  organized,  validly
existing and in good standing under the corporate laws of the State of New York,
and is duly licensed as an insurance agent by the New York Insurance Department.
CFSI has the corporate power and authority to own or lease all of its properties
and assets and to carry on its  business  as it is now being  conducted,  and is
duly  licensed or  qualified  to do business in each  jurisdiction  in which the
nature of any material business  conducted by it or the character or location of
any material  properties or assets owned or leased by it makes such licensing or
qualification  necessary.  CFSI is not a "bank" as such term is  defined  in the
Bank Holding  Company Act of 1956,  as amended,  ("BHCA").  The  Certificate  of
Incorporation and Bylaws of CFSI, copies of which are attached at Section 3.1(c)
of the Catskill  Disclosure  Schedule,  are true, correct and complete copies of
such documents as in effect as of the date of this Agreement.

         3.2      CAPITALIZATION.

                  (a) The  authorized  capital stock of Catskill  consists of 15
million shares of Catskill Common Stock and 5 million shares of preferred stock,
par value  $.01 per  share  (the  "Catskill  Preferred  Stock").  As of the date
hereof,  there are (x)  3,737,519  shares of Catskill  Common  Stock  issued and
outstanding and 1,949,231 shares of Catskill Common Stock are held in Catskill's
treasury,  (y) no shares of Catskill  Common Stock  reserved  for issuance  upon
exercise of outstanding stock options or otherwise, except for 519,090 shares of
Catskill Common Stock reserved for issuance  pursuant to the Catskill Stock Plan
(of which  options for 384,748  shares are currently  outstanding);  (ii) 39,488
shares of  Catskill  Common  Stock  reserved  for  issuance  under the  Catskill
Management  Recognition  Plan; and (iii) 743,766 shares of Catskill Common Stock
reserved for issuance  upon exercise of the option to be issued to Troy pursuant
to the Option Agreement,  and (z) no shares of Catskill's Preferred Stock issued
or  outstanding,  held in  Catskill's  treasury or reserved  for  issuance  upon
exercise  of  outstanding  stock  options  or  otherwise.  All of the issued and
outstanding  shares of  Catskill  Common  Stock  have been duly  authorized  and
validly issued and are fully paid,  nonassessable and free of preemptive rights,
with no personal liability  attaching to the ownership  thereof.  Except for the
Option  Agreement,  the Catskill  Management  Recognition  Plan and the Catskill
Stock  Plan,  Catskill  does  not  have  and is  not  bound  by any  outstanding
subscriptions,  options,  warrants,  calls,  commitments  or  agreements  of any
character  calling for the purchase or issuance of any shares of Catskill Common
Stock or Catskill  Preferred  Stock or any other equity  security of Catskill or
any  securities  representing  the right to  purchase or  otherwise  receive any
shares of Catskill  Common Stock or any other equity  security of Catskill.  The
names of the  optionees,  the date of each  option to purchase  Catskill  Common
Stock granted,  the number of shares subject to each such option, the expiration
date of each  such  option,  and the  price at which  each  such  option  may be
exercised under the Catskill Stock Plan and the Catskill Management  Recognition
Plan  are set  forth  in  Sections  3.2(a)(i)  and  3.2(a)(ii)  of the  Catskill
Disclosure Schedule.  Except as set forth at Section 3.2(a)(iii) of the Catskill
Disclosure Schedule, since September 30, 1999 Catskill has not issued any shares
of its capital stock, including shares under the Catskill Management Recognition
Plan, or any securities  convertible  into or exercisable  for any shares of its
capital stock, other than pursuant to the exercise of director or employee stock
options granted under the Catskill Stock Plan.

                  (b) Section  3.2(b) of the Catskill  Disclosure  Schedule sets
forth a true,  correct and complete list of all direct or indirect  Subsidiaries
of  Catskill  as of the date of this  Agreement.  Except as set forth at Section
3.2(b)  of  the  Catskill  Disclosure  Schedule,   Catskill  owns,  directly  or
indirectly, all of the issued and outstanding shares of capital stock of each of
its  Subsidiaries,  free  and  clear of all  liens,  charges,  encumbrances  and
security  interests  whatsoever,  and all of such shares are duly authorized and
validly issued and are fully paid,  nonassessable and free of preemptive rights,
with no personal  liability  attaching  to the  ownership  thereof.  No Catskill
Subsidiary has or is bound by any outstanding subscriptions,  options, warrants,
calls,  commitments  or agreements of any character  calling for the purchase or
issuance  of any shares of capital  stock or any other  equity  security of such
Subsidiary  or any  securities  representing  the right to purchase or otherwise
receive  any  shares of  capital  stock or any  other  equity  security  of such
Subsidiary.

                                       6

<PAGE>

         3.3      AUTHORITY; NO VIOLATION.

                  (a) Each of Catskill and its  Subsidiaries  has full corporate
power and  authority  to  execute  and  deliver  this  Agreement  and the Option
Agreement and, subject to receipt of the required regulatory approvals specified
herein,  to consummate the  transactions  contemplated  hereby and thereby.  The
execution  and  delivery  of this  Agreement  and the Option  Agreement  and the
consummation of the transactions  contemplated hereby and thereby have been duly
and  validly  approved  by the  Board of  Directors  of  Catskill.  The Board of
Directors of Catskill  has directed  that this  Agreement  and the  transactions
contemplated  hereby be submitted to Catskill's  shareholders  for approval at a
special  meeting  of such  shareholders  and,  except for the  adoption  of this
Agreement by the requisite vote of Catskill's  shareholders,  no other corporate
proceedings on the part of Catskill  (except for matters  related to setting the
date,  time,  place and record date for the special  meeting)  are  necessary to
approve this Agreement or the Option Agreement or to consummate the transactions
contemplated  hereby  or  thereby.  This  Agreement  has  been,  and the  Option
Agreement  will be, duly and validly  executed  and  delivered  by Catskill  and
(assuming due  authorization,  execution and delivery by Troy of this  Agreement
and by  Troy  of  the  Option  Agreement)  will  constitute  valid  and  binding
obligations of Catskill,  enforceable  against Catskill in accordance with their
terms,  except as  enforcement  may be limited by general  principles  of equity
whether  applied  in a court  of law or a court  of  equity  and by  bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.

                  (b) Catskill  Bank has full  corporate  power and authority to
execute and deliver the Bank  Merger  Agreement  and,  subject to receipt of the
required  regulatory  approvals specified herein, to consummate the transactions
contemplated  thereby.  The execution and delivery of the Bank Merger  Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly  approved by the Board of Directors of Catskill  Bank and by Catskill as
the sole  shareholder  of Catskill Bank. No other  corporate  proceedings on the
part  of  Catskill  Bank  will  be  necessary  to  consummate  the  transactions
contemplated thereby. The Bank Merger Agreement,  upon execution and delivery by
Catskill Bank, will be duly and validly  executed and delivered by Catskill Bank
and will  (assuming  due  authorization,  execution  and  delivery by Troy Bank)
constitute a valid and binding obligation of Catskill Bank,  enforceable against
Catskill Bank in accordance with its terms, except as enforcement may be limited
by general  principles of equity whether applied in a court of law or a court of
equity and by  bankruptcy,  insolvency  and similar  laws  affecting  creditors'
rights and remedies generally.

                  (c) Neither the execution  and delivery of this  Agreement and
the Option  Agreement by Catskill or the Bank Merger Agreement by Catskill Bank,
nor the  consummation  by Catskill or Catskill  Bank, as the case may be, of the
transactions  contemplated  hereby or  thereby,  nor  compliance  by Catskill or
Catskill  Bank with any of the terms or provisions  hereof or thereof,  will (i)
violate any provision of the Certificate of Incorporation or By-Laws of Catskill
and each of its  Subsidiaries  or (ii)  assuming that the consents and approvals
referred  to in Section 3.4 hereof are duly  obtained,  (x) violate any Laws (as
defined in Section 9.13) applicable to Catskill and each of its Subsidiaries, or
any of their  respective  properties or assets,  or (y) violate,  conflict with,
result  in a  breach  of any  provision  of or the  loss of any  benefit  under,
constitute a default (or an event which,  with notice or lapse of time, or both,
would  constitute a default)  under,  result in the termination of or a right of
termination or cancellation  under,  accelerate the performance  required by, or
result in the creation of any lien, pledge,  security interest,  charge or other
encumbrance upon any of the respective properties or assets of Catskill and each
of its  Subsidiaries  under,  any of the terms,  conditions or provisions of any
note, bond, mortgage,  indenture,  deed of trust, license,  lease,  agreement or
other instrument or obligation to which Catskill and each of its Subsidiaries is
a party, or by which they or any of their respective properties or assets may be
bound or affected.

                                       7

<PAGE>

         3.4      CONSENTS AND APPROVALS.

                  (a)  Except  for (i) the  filing of  applications,  notices or
waiver  requests,  as applicable,  as to the Merger and the Bank Merger with the
Board of Governors of the Federal Reserve System ("FRB") under the BHCA, the OTS
under HOLA and the OTS regulations,  the FDIC under the Bank Merger Act, and the
New York State Banking Department  ("NYSBD"),  as well as any other applications
and  notices to state  officials  related to the Merger or the Bank  Merger (the
"State  Banking  Approvals"),  and approval of the  foregoing  applications  and
notices,  (ii) the filing of any required applications or notices with the NYSBD
and the FDIC as to the  subsidiaries of Catskill Bank which become  subsidiaries
of Troy Bank and approval of such  applications  and  notices,  (iii) the filing
with  the SEC of  proxy  materials  to be used in  soliciting  the  approval  of
Catskill's  shareholders at a special meeting to be held in connection with this
Agreement and the transactions contemplated hereby (the "Proxy Materials"), (iv)
the approval of this  Agreement by the  requisite  vote of the  shareholders  of
Catskill,  (v) the filing of the  Certificate  of Merger with the  Secretary  of
State of Delaware  pursuant to the DGCL,  (vi) the filings  required by the Bank
Merger  Agreement,  (vii)  such  consents,  approvals,  orders,  authorizations,
registrations,  declarations  and  filings as may be required  under  applicable
federal, foreign and state securities (or related) laws and, if applicable,  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  as  amended  (the "HSR
Act"), and the securities or antitrust laws of any foreign  country,  (viii) the
filing of  applications  or notices with the New York Insurance  Department with
respect to the acquisition of CFSI and approval of such  applications or notices
and (ix)  such  filings,  authorizations  or  approvals  as may be set  forth in
Section 3.4 of the Catskill Disclosure Schedule,  no consents or approvals of or
filings or registrations with any court,  administrative agency or commission or
other governmental authority or instrumentality (each a "Governmental  Entity"),
or with any third party are necessary in  connection  with (1) the execution and
delivery  by  Catskill  of this  Agreement  and the  Option  Agreement,  (2) the
consummation by Catskill of the Merger and the other  transactions  contemplated
hereby,  (3) the  execution  and  delivery by  Catskill  Bank of the Bank Merger
Agreement, (4) the consummation by Catskill of the Option Agreement, and (5) the
consummation  by  Catskill  Bank  of  the  Bank  Merger  and  the   transactions
contemplated  thereby,  except in each case,  for such  consents,  approvals  or
filings,  the failure of which to obtain will not have a Material Adverse Effect
on the ability of Troy to consummate the transactions contemplated hereby.

                  (b)  Catskill  hereby  represents  to  Troy  that  it  has  no
knowledge  of  any  reason  why  approval  or   effectiveness   of  any  of  the
applications,  notices  or  filings  referred  to in  Section  3.4(a)  cannot be
obtained or granted on a timely basis.

         3.5      LOAN PORTFOLIO; REPORTS.

                  (a)  Except as set  forth at  Section  3.5(a) of the  Catskill
Disclosure  Schedule,  as of  September  30,  1999 and  thereafter  through  and
including  the  date  of  this  Agreement,  none  of  Catskill,  nor  any of its
Subsidiaries is a party to any written or oral loan agreement, note or borrowing
arrangement  (including,   without  limitation,   leases,  credit  enhancements,
commitments,  guarantees and interest-bearing  assets) (collectively,  "Loans"),
with any director, officer or five percent or greater shareholder of Catskill or
any of its  Subsidiaries,  or any Affiliated Person (as defined in Section 9.13)
of the foregoing.

                  (b)  Catskill,  Catskill  Bank and CFSI have timely  filed all
reports, registrations and statements,  together with any amendments required to
be made with respect  thereto,  that they were required to file since  September
30,  1999  with (i) the OTS;  (ii) the FDIC,  (iii) the NYSBD  (iv) the New York
Insurance  Department and any other state banking commissions or any other state
regulatory authority (each a "State Regulator"),  (v) the SEC and (vi) any other
self-regulatory   organization  ("SRO")  (collectively  "Regulatory  Agencies").
Except for normal  examinations  conducted by a Regulatory Agency in the regular
course of the business of Catskill and its Subsidiaries, to Catskill's knowledge
no  Governmental  Entity is  conducting,  or has  conducted,  any  proceeding or
investigation  into  the  business  or  operations  of  Catskill  or  any of its
Subsidiaries since September 30, 1999.

                                       8

<PAGE>


         3.6      FINANCIAL STATEMENTS; EXCHANGE ACT FILINGS; BOOKS AND RECORDS.

         Catskill has  previously  delivered to Troy true,  correct and complete
copies  of  the  consolidated  statements  of  condition  of  Catskill  and  its
Subsidiaries  as of  September  30 for the  fiscal  years  1998 and 1999 and the
related consolidated  statements of income,  shareholders' equity and cash flows
for the fiscal years 1997 through  1999,  inclusive,  as reported in  Catskill's
Annual  Report on Form 10-K for the fiscal year ended  September  30, 1999 filed
with the SEC  under  the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act"),  in each case  accompanied  by the  audit  report of KPMG LLP,
independent  public  accountants  with  respect  to  Catskill,  and the  interim
financial  statements  of Catskill as of and for the six months  ended March 31,
2000 and 1999, as included in the Catskill quarterly report on Form 10-Q for the
period  ended March 31,  2000 as filed with the SEC.  The  financial  statements
referred to in this Section 3.6 (including the related notes,  where applicable)
fairly present,  and the financial  statements referred to in Section 6.7 hereof
will  fairly  present  (subject,  in the case of the  unaudited  statements,  to
recurring  audit  adjustments  normal in nature and amount),  the results of the
consolidated operations and consolidated financial condition of Catskill and its
Subsidiaries  for the respective  fiscal  periods or as of the respective  dates
therein set forth; each of such statements  (including the related notes,  where
applicable)  comply,  and the  financial  statements  referred to in Section 6.7
hereof  will  comply,  with  applicable  accounting  requirements  and  with the
published rules and regulations of the SEC with respect thereto and each of such
statements  (including the related notes,  where  applicable)  has been, and the
financial  statements  referred  to in Section  6.7 hereof  will be  prepared in
accordance with generally accepted accounting  principles  consistently  applied
during the periods involved  ("GAAP"),  except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited  statements,  as
permitted  by Form 10-Q.  Catskill's  Annual  Report on Form 10-K for the fiscal
year ended September 30, 1999 and all reports filed under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act since  September 30, 1999 comply in all material
respects with the appropriate  requirements  for such reports under the Exchange
Act,  and  Catskill has  previously  delivered  or made  available to Troy true,
correct and complete  copies of such reports.  The books and records of Catskill
and Catskill Bank have been, and are being,  maintained in all material respects
in  accordance  with  GAAP  and  any  other   applicable  legal  and  accounting
requirements.

         3.7      BROKER'S FEES.

         Neither  Catskill  nor  any  Catskill   Subsidiary  nor  any  of  their
respective  officers or directors  has employed any broker or finder or incurred
any liability for any broker's fees,  commissions or finder's fees in connection
with  any of the  transactions  contemplated  by this  Agreement  or the  Option
Agreement, except that Catskill has engaged, and will pay a fee or commission to
Ryan,  Beck & Co.  ("Ryan  Beck")  in  accordance  with  the  terms  of a letter
agreement between Ryan Beck and Catskill, dated March 23, 2000, a true, complete
and correct copy of which is attached at Section 3.7 of the Catskill  Disclosure
Schedule.

         3.8      ABSENCE OF CERTAIN CHANGES OR EVENTS.

                  (a)  Except  as set  forth  at  Section  3.8  of the  Catskill
Disclosure  Schedule,  or as disclosed in Catskill's  Annual Report on Form 10-K
for the fiscal year ended  September  30,  1999,  since  September  30, 1999 (i)
neither  Catskill  nor  any  of  its  Subsidiaries  has  incurred  any  material
liability,  except as contemplated by the Agreement or in the ordinary course of
their  business  consistent  with  their past  practices,  and (ii) no event has
occurred which has had, or is likely to have,  individually or in the aggregate,
a Material Adverse Effect (as defined in Section 9.13) on Catskill.

                                       9

<PAGE>

                  (b) Since  September  30, 1999  Catskill and its  Subsidiaries
have  carried on their  respective  businesses  in the ordinary and usual course
consistent with their past practices.

         3.9      LEGAL PROCEEDINGS.

                  (a)  Except  as set  forth  at  Section  3.9  of the  Catskill
Disclosure Schedule,  neither Catskill nor any of its Subsidiaries is a party to
any,  and there are no  pending or to the  knowledge  of  Catskill,  threatened,
legal,  administrative,  arbitration or other  proceedings,  claims,  actions or
governmental or regulatory  investigations of any nature against Catskill or any
of its  Subsidiaries  in  which,  to  the  knowledge  of  Catskill,  there  is a
reasonable probability of any material recovery against or other material effect
upon  Catskill or any of its  Subsidiaries  or which  challenge  the validity or
propriety of the  transactions  contemplated by this Agreement,  the Bank Merger
Agreement or the Option Agreement.

                  (b)  There  is no  injunction,  order,  judgment,  decree,  or
regulatory  restriction  imposed upon Catskill,  any of its  Subsidiaries or the
assets of Catskill or any of its Subsidiaries.

         3.10     TAXES AND TAX RETURNS.

                  (a) Each of Catskill and its  Subsidiaries  has duly filed all
Tax Returns  required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material  respects) and has duly paid
or made  provision on the financial  statements  referred to in Sections 3.6 and
6.7 hereof in accordance  with GAAP for the payment of all material  Taxes which
have been incurred or are due or claimed to be due from it by Taxing Authorities
on or prior to the date  hereof  other  than  Taxes  (a)  which  (x) are not yet
delinquent  or (y) are being  contested  in good  faith and set forth in Section
3.10 of the  Catskill  Disclosure  Schedule  and (b) which have not been finally
determined.  All  liability  with respect to the Tax Returns of Catskill and its
Subsidiaries  has been  satisfied  for all  years  to and  including  1998.  The
Internal  Revenue  Service  ("IRS") has not  notified  Catskill of, or otherwise
asserted,  that there are any material  deficiencies with respect to the federal
income Tax Returns of  Catskill.  There are no  material  disputes  pending,  or
claims  asserted  for,  Taxes  or  assessments  upon  Catskill  or  any  of  its
Subsidiaries, nor has Catskill or any of its Subsidiaries been requested to give
any currently  effective  waivers  extending the statutory  period of limitation
applicable  to any  federal  or state  income  Tax  Return  for any  period.  In
addition,  Tax Returns which are accurate and complete in all material  respects
have been filed by  Catskill  and its  Subsidiaries  for all  periods  for which
returns were due with  respect to income tax  withholding,  Social  Security and
unemployment  taxes  and the  amounts  shown on such Tax  Returns  to be due and
payable have been paid in full or adequate provision therefor in accordance with
GAAP has been  included by Catskill in the financial  statements  referred to in
Sections 3.6 and 6.7 hereto.  All Catskill Tax Returns have been examined by the
relevant Taxing  Authorities,  or closed without audit by applicable statutes of
limitations, and all deficiencies proposed as a result of such examinations have
been paid or settled,  for all periods  before and  including  the taxable  year
ended 1995.  Neither  Catskill nor any of its  Subsidiaries has consented to any
waiver or  extension  of any  statute of  limitations  with  respect to any Tax.
Neither Catskill nor any Catskill  Subsidiary has made an election under Section
341(f) of the Internal  Revenue Code of 1986,  as amended (the "Code" or "IRC").
Catskill has provided or made  available to Troy complete and correct  copies of
its Tax Returns and all material  correspondence and documents, if any, relating
directly or indirectly to taxes for each taxable year or other  relevant  period
as to  which  the  applicable  statute  of  limitations  has not run on the date
hereof.  For this  purpose,  "correspondence  and  documents"  include,  without
limitation,  amended  Tax  Returns,  claims for  refunds,  notices  from  Taxing
Authorities of proposed changes or adjustments to Taxes or Tax Returns, consents
to  assessment  or collection  of Taxes,  acceptances  of proposed  adjustments,
closing agreements, rulings and determination letters and requests therefor, and
all other written  communications to or from Taxing Authorities  relating to any
material Tax liability of Catskill or any Catskill Subsidiary. Catskill will not
be a  "foreign  person"  as that term is used in ss.  1.1445-2  of the  Treasury
Regulations

                                       10

<PAGE>

promulgated  under the IRC.  Catskill Bank is not a "United States real property
holding  corporation" within meaning of ss. 897 of the IRC and was not a "United
States  real  property  holding  corporation"  on any  "determination  date" (as
defined in ss. 1.897-2(c) of such Regulations) that occurred during any relevant
period.

                  (b)      For purposes of this Agreement:

                  "Tax" means any tax (including  any income tax,  capital gains
tax, payroll tax,  value-added tax, sales tax, property tax, gift tax, or estate
tax), levy, assessment,  tariff, duty (including any customs duty),  deficiency,
or other fee, and any related  charge or amount  (including  any fine,  penalty,
interest,  or addition to tax), imposed,  assessed, or collected by or under the
authority  of any  Taxing  Authority  or  payable  pursuant  to any  tax-sharing
agreement or any other  contract  relating to the sharing or payment of any such
tax, levy, assessment, tariff, duty, deficiency, or fee.

                  "Tax  Return"  means any  return  (including  any  information
return),  report,  statement,  schedule,  notice,  form,  or other  document  or
information  filed  with or  submitted  to,  or  required  to be  filed  with or
submitted  to,  any  Taxing  Authority  in  connection  with the  determination,
assessment,  collection,  or  payment  of any  Tax  or in  connection  with  the
administration,  implementation,  or enforcement of or compliance  with any law,
regulation or other legal requirement relating to any Tax.

                  "Taxing Authority" means any:

                           (i)   nation, state,  county,  city,  town,  village,
district, or other jurisdiction of any nature;

                           (ii)  federal, state, local,  municipal,  foreign, or
other government;

                           (iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department,  official, or
entity and any court or other tribunal);

                           (iv)  multi-national organization or body; or

                           (v)   body exercising, or entitled to  exercise,  any
administrative,  executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.

         3.11     EMPLOYEE PLANS.

                  (a) Section 3.11(a) of the Catskill  Disclosure  Schedule sets
forth a true and complete list of each employee benefit plan (within the meaning
of Section  3(3) of the Employee  Retirement  Income  Security  Act of 1974,  as
amended  ("ERISA")),  arrangement or agreement that is maintained or contributed
to as of the date of this Agreement,  or that has within the last six years been
maintained  or  contributed  to, by Catskill or any of its  Subsidiaries  or any
other entity which  together with Catskill  would be deemed a "single  employer"
within the meaning of Section 4001 of ERISA or Code Sections 414(b),  (c) or (m)
or under which Catskill or any such Subsidiary has any liability  (collectively,
the "Plans").

                  (b) Catskill  has  heretofore  delivered or made  available to
Troy true,  correct  and  complete  copies of each of the Plans and all  related
documents,  including but not limited to (i) the actuarial  report for such Plan
(if  applicable)  for  each  of the  last  five  years,  (ii)  the  most  recent
determination  letter  from the IRS (if  applicable)  for such  Plan,  (iii) the
current  summary plan  description  and any summaries of material  modification,
(iv) all annual reports (Form 5500 series) for each Plan filed for the preceding
five plan years,  (v) all  agreements  with  fiduciaries  and service

                                       11

<PAGE>

providers relating to the Plan, and (vi) all substantive correspondence relating
to any such Plan addressed to or received from the Internal Revenue Service, the
Department  of Labor,  the Pension  Benefit  Guaranty  Corporation  or any other
governmental agency.

                  (c)  Except as set forth at Section  3.11(c)  of the  Catskill
Disclosure Schedule, (i) Each of the Plans has been operated and administered in
all material  respects in compliance  with  applicable  Laws,  including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within  the  meaning of Section  401(a) of the Code is so  qualified,  any trust
created  pursuant  to any such  Plan is exempt  from  federal  income  tax under
Section  501(a) of the  Code,  each such  Plan has  received  from the  Internal
Revenue  Service a  favorable  determination  letter to such  effect  upon which
Catskill or a  Subsidiary  is  entitled to rely as to such  matters and which is
currently  applicable,  and neither  Catskill nor any Subsidiary is aware of any
circumstance  or event which would  jeopardize the  tax-qualified  status of any
such Plan or the tax-exempt  status of any related  trust,  or which would cause
the  imposition  of any  liability,  penalty or tax under ERISA or the Code with
respect to any Plan,  (iii) with  respect to each Plan which is subject to Title
IV of ERISA,  the present value of accrued  benefits under such Plan, based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such Plan's actuary with respect to such Plan, did not, as of
its latest  valuation date,  exceed the then current value of the assets of such
Plan  allocable  to such  accrued  benefits,  (iv) no  Plan  provides  benefits,
including,  without  limitation,  death  or  medical  benefits  (whether  or not
insured),  with  respect to  current  or former  employees  of  Catskill  or any
Catskill  Subsidiary  beyond their  retirement or other  termination of service,
other than (w)  coverage  mandated  by  applicable  Law,  (x) death  benefits or
retirement  benefits  under a Plan that is an "employee  pension  plan," as that
term is defined in Section  3(2) of ERISA,  (y) deferred  compensation  benefits
under a Plan that are  accrued as  liabilities  on the books of  Catskill or any
Catskill  Subsidiary,  or (z)  benefits  the full  cost of which is borne by the
current or former employee (or his beneficiary), (v) no liability under Title IV
of ERISA has been incurred by Catskill or any Catskill  Subsidiary  that has not
been satisfied in full, and no condition exists that presents a material risk of
Catskill or any Catskill Subsidiary  incurring a material liability  thereunder,
(vi) no Plan is a  "multiemployer  pension  plan,"  as such term is  defined  in
Section 3(37) of ERISA,  (vii) all  contributions  or other  amounts  payable by
Catskill or any Catskill  Subsidiary  as of the  Effective  Time with respect to
each Plan and all other  liabilities  of each such entity  with  respect to each
Plan,  in  respect  of  current or prior plan years have been paid or accrued in
accordance with generally accepted  accounting  practices and Section 412 of the
Code,  (viii)  neither  Catskill  nor any Catskill  Subsidiary  has engaged in a
transaction in connection with which Catskill or any Catskill  Subsidiary  could
be subject to either a civil penalty assessed  pursuant to Section 409 or 502(i)
of ERISA or a tax imposed  pursuant to Section 4975 or 4976 of the Code, (ix) to
the  knowledge  of Catskill,  there are no pending,  threatened  or  anticipated
claims (other than routine  claims for benefits) by, on behalf of or against any
of the  plans  or any  trusts  related  thereto,  and (x)  all  Plans  could  be
terminated as of the Effective Time without material  liability in excess of the
amount accrued with respect to such Plan in the financial statements referred to
in  Sections  3.6 and 6.8  hereto;  (xi) no Plan,  program,  agreement  or other
arrangement,  either  individually or collectively,  provides for any payment by
Catskill or any  Catskill  Subsidiary  that would not be  deductible  under Code
Sections 162(a)(1), 162(m) or 404 or that would constitute a "parachute payment"
within the meaning of Code Section 280G after giving effect to the  transactions
contemplated by this Agreement nor would the  transactions  contemplated by this
Agreement  accelerate the time of payment or vesting,  or increase the amount of
compensation due to any employee;  (xii) no "accumulated  funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not
waived,  and no "unfunded current  liability" as determined under Section 412(l)
of the Code exists with respect to any Plan; and (xiii) no Plan has  experienced
a "reportable  event" (as such term is defined in Section 4043(b) of ERISA) that
is not subject to an  administrative  or  statutory  waiver  from the  reporting
requirement;  (xiv) all  reports and  information  required to be filed with the
Department of Labor, IRS and Pension Benefit Guaranty Corporation or provided to
plan  participants and their  beneficiaries  with respect to each Plan have been
filed or provided,  as applicable,  and all annual reports  (including Form 5500
series)  of such Plans  were  certified  without  qualification  by each  Plan's
accountants  and actuaries;  and (xv) any bond required under ERISA with respect
to any Plan has been  obtained and is in full force and effect and no funds held
by or under the  control of Catskill  or any  Subsidiary  are plan assets of any
Plan.

                                       12

<PAGE>

         3.12     CERTAIN CONTRACTS.

                  (a)  Except  as set  forth  at  Section  3.12 of the  Catskill
Disclosure Schedule,  neither Catskill nor any of its Subsidiaries is a party to
or bound by any  contract,  arrangement  or  commitment  (i) with respect to the
employment of any directors,  officers,  employees or  consultants,  (ii) which,
upon the consummation of the transactions  contemplated by this Agreement or the
Bank  Merger  Agreement  will  (either  alone  or  upon  the  occurrence  of any
additional  acts or events)  result in any payment  (whether of severance pay or
otherwise)  becoming  due  from  Troy,  Catskill,  or  any of  their  respective
Subsidiaries  to  any  director,   officer  or  employee  thereof,  (iii)  which
materially  restricts  the conduct of any line of business by Catskill or any of
its  Subsidiaries,  (iv)  with or to a  labor  union  or  guild  (including  any
collective  bargaining  agreement)  or  (v)  except  as  set  forth  on  Section
3.12(a)(v)  of the Catskill  Disclosure  Schedule,  any of the benefits of which
will be increased,  or the vesting of the benefits of which will be  accelerated
by the occurrence of any of the transactions  contemplated by this Agreement, or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions  contemplated by this Agreement (including as to this clause
(v), any stock option plan,  stock  appreciation  rights plan,  restricted stock
plan or  stock  purchase  plan).  Except  as set  forth at  Section  3.12 of the
Catskill Disclosure Schedule,  there are no employment,  consulting and deferred
compensation agreements to which Catskill or any of its Subsidiaries is a party.
Section  3.12(a) of the Catskill  Disclosure  Schedule  sets forth a list of all
material contracts (as defined in Item 601(b)(10) of Regulation S-K) of Catskill
and its  Subsidiaries.  Each  contract,  arrangement  or  commitment of the type
described in this Section  3.12(a),  whether or not set forth in Section 3.12(a)
of the  Catskill  Disclosure  Schedule,  is  referred  to herein as a  "Catskill
Contract," and neither  Catskill nor any of its Subsidiaries has received notice
of, nor do any executive officers of such entities know of, any violation of any
Catskill Contract.

                  (b) (i) Each  Catskill  Contract  is valid and  binding and in
full force and effect,  (ii)  Catskill and each of its  Subsidiaries  has in all
material  respects  performed all obligations  required to be performed by it to
date under each Catskill Contract,  and (iii) no event or condition exists which
constitutes  or,  after  notice or lapse of time or both,  would  constitute,  a
material  default on the part of Catskill or any of its  Subsidiaries  under any
such Catskill Contract.

         3.13     AGREEMENTS WITH REGULATORY AGENCIES.

         None  of  Catskill,   CFSI,   or  Catskill   Bank  is  subject  to  any
cease-and-desist  or  other  order  issued  by,  or is a  party  to any  written
agreement, consent agreement or memorandum of understanding with, or has adopted
any board  resolutions  at the  request  of (each,  whether  or not set forth on
Section 3.13 of the Catskill Disclosure Schedule, a "Regulatory Agreement"), any
Governmental  Entity that  restricts  the conduct of its business or that in any
manner relates to its capital adequacy,  its credit policies,  its management or
its  business,  nor has  Catskill,  CFSI,  or Catskill  Bank been advised by any
Governmental  Entity that it is considering issuing or requesting any Regulatory
Agreement.

         3.14     STATE TAKEOVER LAWS; CERTIFICATE OF INCORPORATION.

         The Board of  Directors  of Catskill  has approved the offer of Troy to
enter into this Agreement,  the Bank Merger Agreement and the Option  Agreement,
and has  approved  Catskill  entering  into  this  Agreement,  the  Bank  Merger
Agreement and the Option Agreement,  and the transactions  contemplated thereby,
such that under applicable law and Catskill's  Certificate of Incorporation  the
only vote of Catskill  shareholders  necessary to  consummate  the  transactions
contemplated  hereby is the  approval of at least a majority of the  outstanding
shares of Catskill Common Stock entitled to vote.

                                       13

<PAGE>

         3.15     ENVIRONMENTAL MATTERS.

                  (a) Each of Catskill  and the  Subsidiaries  is in  compliance
with all applicable federal and state laws and regulations relating to pollution
or  protection  of the  environment  (including  without  limitation,  laws  and
regulations relating to emissions,  discharges, releases and threatened releases
of Hazardous  Materials (as hereinafter  defined),  or otherwise relating to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport or handling of Hazardous Materials;

                  (b) There is no suit, claim, action, proceeding, investigation
or notice  pending or, to the  knowledge  of Catskill,  CFSI and Catskill  Bank,
threatened  (or past or present  actions or events  that could form the basis of
any such suit, claim,  action,  proceeding,  investigation or notice),  in which
Catskill or any  Catskill  Subsidiary  has been or, with  respect to  threatened
suits, claims, actions, proceedings,  investigations or notices may be, named as
a  defendant  (x)  for  alleged   material   noncompliance   (including  by  any
predecessor),  with any environmental law, rule or regulation or (y) relating to
any material release or threatened release into the environment of any Hazardous
Material, occurring at or on a site owned, leased or operated by Catskill or any
Catskill Subsidiary,  or to the knowledge of Catskill,  relating to any material
release or threatened  release into the  environment of any Hazardous  Material,
occurring  at or on a site not owned,  leased or  operated  by  Catskill  or any
Catskill Subsidiary;

                  (c)  During  the  period  of   Catskill's   or  any   Catskill
Subsidiary's ownership or operation of any of its properties, there has not been
any material release of Hazardous  Materials in, on, under or affecting any such
property.

                  (d) To the  knowledge  of Catskill,  CFSI and  Catskill  Bank,
neither  Catskill nor any Catskill  Subsidiary has made or  participated  in any
loan to any  person  who is  subject  to any suit,  claim,  action,  proceeding,
investigation or notice, pending or threatened,  with respect to (i) any alleged
material   noncompliance  as  to  any  property  securing  such  loan  with  any
environmental  law, rule or  regulation,  or (ii) the release or the  threatened
release into the environment of any Hazardous  Material at a site owned,  leased
or operated by such person on any property securing such loan.

                  (e) For purposes of this  section  3.15,  the term  "Hazardous
Material"  means  any  hazardous  waste,   petroleum  product,   polychlorinated
biphenyl, chemical, pollutant, contaminant, pesticide, radioactive substance, or
other toxic material,  or other material or substance (in each such case,  other
than small quantities of such substances in retail  containers)  regulated under
any applicable  environmental or public health statute, law, ordinance,  rule or
regulation.

         3.16     RESERVES FOR LOSSES.

         All  reserves or other  allowances  for  possible  losses  reflected in
Catskill's most recent financial  statements referred to in Section 3.6 complied
with all Laws and are adequate  under GAAP.  None of Catskill,  CFSI or Catskill
Bank has been  notified by the FDIC,  the OTS, the NYSBD the New York  Insurance
Department or Catskill's independent auditor, in writing or otherwise, that such
reserves are inadequate or that the practices and policies of Catskill,  CFSI or
Catskill Bank in establishing such reserves and in accounting for delinquent and
classified  assets  generally  fail to  comply  with  applicable  accounting  or
regulatory  requirements,  or that the FDIC,  the OTS,  the NYSBD or  Catskill's
independent auditor believes such reserves to be inadequate or inconsistent with
the historical loss experience of Catskill,  CFSI or Catskill Bank. Catskill has
previously  furnished  Troy with a complete list of all extensions of credit and
other real estate owned ("OREO") that have been  classified by any bank or trust
examiner  (regulatory or internal) as other loans specially  mentioned,  special
mention,  substandard,  doubtful,  loss,  classified or criticized,  credit risk
assets,  concerned loans or words of similar  import.  Catskill agrees to update
such list no less frequently than monthly after the date of this

                                       14

<PAGE>

Agreement  until the earlier of the Closing Date or the date that this Agreement
is terminated in accordance with Section 8.1. All OREO held by Catskill, CFSI or
Catskill  Bank is being  carried  net of  reserves  at the  lower of cost or net
realizable value.

         3.17     PROPERTIES AND ASSETS.

         Section 3.17 of the  Catskill  Disclosure  Schedule  lists (i) all real
property owned by Catskill and each Catskill Subsidiary; (ii) each real property
lease,  sublease or  installment  purchase  arrangement to which Catskill or any
Catskill  Subsidiary is a party;  (iii) a  description  of each contract for the
purchase,  sale, or development of real estate to which Catskill or any Catskill
Subsidiary  is a party;  and  (iv)  all  items  of  Catskill's  or any  Catskill
Subsidiary's  tangible  personal  property  and  equipment  with a book value of
$25,000 or more or having any annual  lease  payment of $10,000 or more.  Except
for (a) items reflected in Catskill's  consolidated  financial  statements as of
September  30, 1999 referred to in Section 3.6 hereof,  (b)  exceptions to title
that do not interfere  materially with  Catskill's or any Catskill  Subsidiary's
use and enjoyment of owned or leased real property (other than OREO),  (c) liens
for current real estate  taxes not yet  delinquent,  or being  contested in good
faith,  properly  reserved  against (and  reflected on the financial  statements
referred to in Section 3.6 above),  and (d) items  listed in Section 3.17 of the
Catskill  Disclosure  Schedule,  Catskill and each Catskill Subsidiary have good
and, as to owned real  property,  marketable  and  insurable  title to all their
properties and assets,  free and clear of all liens,  claims,  charges and other
encumbrances.  Catskill and each Catskill Subsidiary, as lessees, have the right
under valid and subsisting leases to occupy, use and possess all property leased
by them, and neither  Catskill nor any Catskill  Subsidiary has  experienced any
material  uninsured  damage or destruction with respect to such properties since
September 30, 1999. All properties and assets used by Catskill and each Catskill
Subsidiary are in good operating  condition and repair suitable for the purposes
for which they are currently  utilized and comply in all material  respects with
all Laws  relating  thereto  now in effect  or  scheduled  to come into  effect.
Catskill and each Catskill Subsidiary enjoy peaceful and undisturbed  possession
under all leases for the use of all  property  under which they are the lessees,
and all leases to which Catskill or any Catskill Subsidiary is a party are valid
and binding  obligations in accordance with the terms thereof.  Neither Catskill
nor any  Catskill  Subsidiary  is in material  default  with respect to any such
lease, and there has occurred no default by Catskill or any Catskill  Subsidiary
or event  which with the lapse of time or the giving of notice,  or both,  would
constitute  a  material  default  under  any  such  lease.  There  are no  Laws,
conditions of record, or other impediments which interfere with the intended use
by Catskill or any Catskill Subsidiary of any of the property owned,  leased, or
occupied by them.

         3.18     INSURANCE.

         Section  3.18 of the  Catskill  Disclosure  Schedule  contains  a true,
correct and complete  list of all  insurance  policies and bonds  maintained  by
Catskill and any Catskill  Subsidiary,  including  the name of the insurer,  the
policy number, the type of policy and any applicable  deductibles,  and all such
insurance  policies and bonds (or other insurance  policies and bonds that have,
from time to time,  in respect of the nature of the risks  insured  against  and
amount of coverage provided,  been  substantially  similar in kind and amount to
that customarily  carried by parties  similarly  situated who own properties and
engage in businesses  substantially similar to that of Catskill and any Catskill
Subsidiary)  are in full force and effect and have been in full force and effect
since  their  respective  dates of  inception.  As of the date  hereof,  neither
Catskill nor any Catskill  Subsidiary has received any notice of cancellation or
amendment  of any such policy or bond or is in default  under any such policy or
bond,  no  coverage  thereunder  is  being  disputed  and  all  material  claims
thereunder have been filed in a timely fashion.  The existing  insurance carried
by Catskill and Catskill  Subsidiaries is and will continue to be, in respect of
the nature of the risks  insured  against and the amount of  coverage  provided,
sufficient  for  compliance by Catskill and the Catskill  Subsidiaries  with all
requirements  of Law and  agreements  to which  Catskill or any of the  Catskill
Subsidiaries  is  subject  or  is  party,  and  is,  to  Catskill's   knowledge,
substantially  similar in kind and amount to that customarily carried by parties
similarly  situated who

                                       15

<PAGE>

own  properties  and  engage  in  businesses  substantially  similar  to that of
Catskill and the Catskill Subsidiaries. True, correct and complete copies of all
such  policies and bonds  reflected  at Section 3.18 of the Catskill  Disclosure
Schedule, as in effect on the date hereof, have been delivered to Troy.

         3.19     COMPLIANCE WITH APPLICABLE LAWS.

         Each of  Catskill  and any  Catskill  Subsidiary  has  complied  in all
material  respects  with all Laws  applicable  to it or to the  operation of its
business.  Neither Catskill nor any Catskill  Subsidiary has received any notice
of any material alleged or threatened claim,  violation,  or liability under any
such Laws that has not heretofore been cured and for which there is no remaining
liability.

         3.20     LOANS.

         As of the date hereof:

                  (a) All loans owned by Catskill or any Catskill Subsidiary, or
in which  Catskill or any Catskill  Subsidiary  has an  interest,  comply in all
material respects with all Laws, including, but not limited to, applicable usury
statutes,  underwriting and recordkeeping  requirements and the Truth in Lending
Act, the Equal Credit Opportunity Act, and the Real Estate Settlement Procedures
Act, and other  applicable  consumer  protection  statutes  and the  regulations
thereunder.

                  (b) All loans owned by Catskill or any Catskill Subsidiary, or
in which Catskill or any Catskill Subsidiary has an interest,  have been made or
acquired by Catskill in accordance with board of director-approved loan policies
and all of such loans are  collectable,  except to the extent reserves have been
made against such loans in Catskill's consolidated financial statements at March
31, 2000  referred to in Section 3.6 hereof.  Each of Catskill and each Catskill
Subsidiary  holds mortgages  contained in its loan portfolio for its own benefit
to the extent of its interest  shown  therein;  such  mortgages  evidence  liens
having the priority  indicated  by the terms of such  mortgages,  including  the
associated loan documents,  subject,  as of the date of recordation or filing of
applicable  security  instruments,  only to such  exceptions as are discussed in
attorneys'  opinions  regarding  title or in  title  insurance  policies  in the
mortgage  files  relating  to the  loans  secured  by real  property  or are not
material as to the collectability of such loans; and all loans owned by Catskill
and each Catskill  Subsidiary are with full recourse to the borrowers (except as
set forth at Section 3.20(b) of the Catskill Disclosure  Schedule),  and each of
Catskill and any Catskill Subsidiary has taken no action which would result in a
waiver or negation of any rights or remedies  available  against the borrower or
guarantor,  if any, on any loan. All applicable  remedies  against all borrowers
and  guarantors  are  enforceable  except  as  may  be  limited  by  bankruptcy,
insolvency,  moratorium or other similar laws  affecting  creditors'  rights and
except as may be limited by the  exercise  of  judicial  discretion  in applying
principles  of equity.  Except as set forth at Section  3.20(b) of the  Catskill
Disclosure  Schedule,  all loans  purchased  or  originated  by  Catskill or any
Catskill Subsidiary and subsequently sold by Catskill or any Catskill Subsidiary
have been sold  without  recourse  to Catskill or any  Catskill  Subsidiary  and
without any liability under any yield maintenance or similar  obligation.  True,
correct and  complete  copies of loan  delinquency  reports as of April 30, 2000
prepared by Catskill and each Catskill  Subsidiary,  which  reports  include all
loans  delinquent or otherwise in default,  have been  furnished to Troy.  True,
correct and complete  copies of the  currently  effective  lending  policies and
practices of Catskill and each Catskill  Subsidiary  also have been furnished to
Troy.

                  (c) Except as set forth at Schedule  3.20(c) each  outstanding
loan participation sold by Catskill or any Catskill Subsidiary was sold with the
risk of non-payment of all or any portion of that  underlying  loan to be shared
by  each   participant   (including   Catskill  or  any   Catskill   Subsidiary)
proportionately  to the share of such  loan  represented  by such  participation
without any  recourse  of such other  lender or  participant  to Catskill or any
Catskill  Subsidiary  for  payment  or  repurchase  of the  amount  of such loan
represented by the  participation  or liability  under any yield  maintenance or

                                       16

<PAGE>

similar obligation. Catskill and any Catskill Subsidiary have properly fulfilled
in all material respects its contractual responsibilities and duties in any loan
in which it acts as the lead lender or servicer and has complied in all material
respects with its duties as required under applicable regulatory requirements.

                  (d) Catskill   and  each  Catskill  Subsidiary  have  properly
perfected or caused to be properly perfected all security  interests,  liens, or
other interests in any collateral securing any loans made by it.

                  (e) Section 3.20(e) of the Catskill  Disclosure  Schedule sets
forth a list of all  loans or  other  extensions  of  credit  to all  directors,
officers and employees, or any other person covered by Regulation O of the FRB.

         3.21     AFFILIATES.

         Each director, executive officer and other person who is an "affiliate"
(for  purposes of Rule 145 under the  Securities  Act of 1933,  as amended  (the
"Securities  Act"))  of  Catskill  is  listed at  Section  3.21 of the  Catskill
Disclosure  Schedule,  and  except as  indicated  thereon  each such  person has
delivered  to  Troy,  concurrently  with  the  execution  of this  Agreement,  a
stockholder agreement in the form of Exhibit D hereto (the "Catskill Stockholder
Agreement").  The  Catskill  Stockholder  Agreement  has been  duly and  validly
executed and delivered by each person that is a party thereto and,  assuming due
authorization, execution and delivery by Troy, constitutes the valid and binding
obligation of such person,  enforceable  against such person in accordance  with
their  terms,  except as  enforcement  may be limited by general  principles  of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.

         3.22     OWNERSHIP OF TROY COMMON STOCK.

         Except  as  set  forth  at  Section  3.22  of the  Catskill  Disclosure
Schedule,  neither  Catskill  nor any of its  directors,  executive  officers or
affiliates  (as used above in Section 3.21) (i)  beneficially  own,  directly or
indirectly,  or (ii) is a party to any agreement,  arrangement or  understanding
for the purpose of acquiring, holding, voting or disposing of, in each case, any
shares of  outstanding  capital  stock of Troy  (other  than  those  agreements,
arrangements or understandings specifically contemplated hereby).

         3.23     FAIRNESS OPINION.

         Catskill has received an opinion from Ryan Beck to the effect that,  in
its opinion,  the consideration to be paid to shareholders of Catskill hereunder
is fair to such  shareholders  from a  financial  point of view  (the  "Fairness
Opinion"),  and Ryan Beck has consented to the inclusion of the Fairness Opinion
in the Proxy Materials.

         3.24     CATSKILL INFORMATION.

         The information  relating to Catskill and its Subsidiaries  provided by
Catskill  herein and to be provided by  Catskill  to be  contained  in the Proxy
Materials do not and will not contain any untrue statement of a material fact or
omit to state a  material  fact  necessary  to make  the  statements  herein  or
therein,  in light of the  circumstances in which they are made, not misleading.
The Proxy Materials  (except for the portions thereof relating solely to Troy or
any of its  Subsidiaries,  as to  which  Catskill  makes  no  representation  or
warranty)  will  comply in all  material  respects  with the  provisions  of the
Exchange Act and the rules and regulations thereunder.

                                       17

<PAGE>

3.25     SALE OF SECURITIES PORTFOLIO.

         Catskill Bank has determined to sell the portfolio of securities listed
on Schedule 3.25 hereto (the "Securities Portfolio Sale").

                                   ARTICLE IV
                     REPRESENTATIONS AND WARRANTIES OF TROY

         Troy, on behalf of itself and its  wholly-owned  subsidiary,  Troy Bank
hereby makes the  following  representations  and  warranties to Catskill as set
forth in this  Article IV,  each of which is being  relied upon by Catskill as a
material inducement to enter into and perform this Agreement.

         4.1      CORPORATE ORGANIZATION.

                  (a) Troy is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Troy has the corporate
power and  authority  to own or lease all of its  properties  and  assets and to
carry on its  business  as it is now being  conducted,  and is duly  licensed or
qualified  to do  business  in each  jurisdiction  in which  the  nature  of the
business  conducted  by it or the  character or location of the  properties  and
assets owned or leased by it makes such  licensing or  qualification  necessary.
Troy  is  duly  registered  as a  bank  holding  company  under  the  BHCA.  The
Certificate  of  Incorporation  and  By-Laws  of  Troy,  copies  of  which  have
previously  been made  available  to  Catskill,  are true,  correct and complete
copies of such documents as in effect as of the date of this Agreement.

                  (b) Troy  Bank  is  a New  York-chartered  savings  bank  duly
organized and validly  existing and in good standing under the laws of the State
of New York. Troy Bank has the corporate power and authority to own or lease all
of its properties and assets and to carry on business as is now being conducted,
and is duly licensed or qualified to do business in each  jurisdiction  in which
the nature of the business  conducted by it or the  character or location of the
properties   and  assets  owned  or  leased  by  it  makes  such   licensing  or
qualification  necessary.  The Charter and By-Laws of Troy Bank, copies of which
have previously been made available to Catskill,  are true, correct and complete
copies of such documents as in effect as of the date of this Agreement.

         4.2      AUTHORITY; NO VIOLATION.

                  (a) Troy has full corporate power and authority to execute and
deliver  this  Agreement  and  the  Option   Agreement  and  to  consummate  the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement  and  the  Option  Agreement,  subject  to  receipt  of  the  required
regulatory  approvals specified herein, and the consummation of the transactions
contemplated  hereby  have  been  duly  and  validly  approved  by the  Board of
Directors  of  Troy.  No  other  corporate  proceedings  on the part of Troy are
necessary to approve this Agreement or the Option Agreement or to consummate the
transactions  contemplated  hereby or thereby.  This Agreement has been, and the
Option  Agreement  will be, duly and validly  executed and delivered by Troy and
(assuming due authorization, execution and delivery by Catskill) will constitute
valid and binding  obligations of Troy,  enforceable  against Troy in accordance
with their terms,  except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar law affecting creditors' rights and remedies generally.

                  (b) Troy  Bank has  full  corporate  power  and  authority  to
execute and deliver the Bank  Merger  Agreement  and,  subject to receipt of the
required  regulatory  approvals specified herein, to consummate the transactions
contemplated  thereby.  The execution and delivery of the Bank Merger  Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly  approved by the Board of Directors of Troy Bank and by Troy as the sole
shareholder  of Troy Bank.  All

                                       18

<PAGE>

corporate  proceedings  on the part of Troy Bank  necessary  to  consummate  the
transactions  contemplated  thereby have been taken. The Bank Merger  Agreement,
upon execution and delivery by Troy Bank, will be duly and validly  executed and
delivered  by Troy Bank and will  (assuming  due  authorization,  execution  and
delivery by Catskill  Bank)  constitute a valid and binding  obligation  of Troy
Bank,  enforceable  against Troy Bank in  accordance  with its terms,  except as
enforcement may be limited by general  principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.

                  (c) Neither the  execution  and delivery of this  Agreement or
the Option  Agreement by Troy or the Bank Merger Agreement by Troy Bank, nor the
consummation by Troy, of the transactions  contemplated  hereby or thereby,  nor
compliance  by Troy or Troy Bank with any of the terms or  provisions  hereof or
thereof,  will (i) violate any provision of the Certificate of  Incorporation or
Bylaws of Troy or the  Charter or  By-Laws of Troy Bank,  as the case may be, or
(ii)  assuming  that the consents and  approvals  referred to in Section 4.3 are
duly  obtained,  (x) violate any Laws  applicable  to Troy,  Troy Bank or any of
their respective properties or assets, or (y) violate,  conflict with, result in
a breach of any  provision  of or the loss of any benefit  under,  constitute  a
default  (or an event  which,  with  notice  or lapse  of time,  or both,  would
constitute  a  default)  under,  result  in the  termination  of or a  right  of
termination or cancellation  under,  accelerate the performance  required by, or
result in the creation of any lien, pledge,  security interest,  charge or other
encumbrance upon any of the respective properties or assets of Troy or Troy Bank
under any of the terms,  conditions or provisions of any note,  bond,  mortgage,
indenture,  deed of trust,  license,  lease,  agreement or other  instrument  or
obligation  to which  Troy or Troy Bank is a party,  or by which  they or any of
their respective properties or assets may be bound or affected.

         4.3      REGULATORY APPROVALS.

                  (a)  Except  for (i) the  filing of  applications,  notices or
waiver  requests,  as applicable,  as to the Merger and the Bank Merger with the
FRB under the BHCA, the OTS under HOLA and the OTS  regulations,  the FDIC under
the Bank Merger Act,  the NYSBD and approval of such  applications  and notices,
(ii) the filing of any required  applications  or notices with the NYSBD and the
FDIC as to the  subsidiaries of Catskill Bank which become  subsidiaries of Troy
Bank and  approval of such  applications  and notices,  (iii) the State  Banking
Approvals, (iv) the filing of the Proxy Materials with the SEC, (v) the approval
of this Agreement by the requisite vote of the  shareholders  of Catskill,  (vi)
the filing of the  Certificate of Merger with the Secretary of State of Delaware
pursuant to the DGCL, (vii) such consents,  approvals,  orders,  authorizations,
registrations,  declarations  and  filings as may be required  under  applicable
federal, foreign and state securities (or related) laws and, if applicable,  the
HSR Act, and the securities or antitrust laws of any foreign country, (viii) the
filing of  applications  or notices with the New York Insurance  Department with
respect to the acquisition of CFSI and approval of such  applications or notices
and (ix) the  filings  required  by the Bank  Merger  Agreement,  no consents or
approvals of or filings or registrations  with any  Governmental  Entity or with
any third party are necessary in connection  with (1) the execution and delivery
by Troy of this Agreement and the Option Agreement, (2) the consummation by Troy
of the Merger and the other transactions  contemplated hereby, (3) the execution
and delivery by Troy Bank of the Bank Merger Agreement, and (4) the consummation
by Troy  Bank of the  transactions  contemplated  by the Bank  Merger  Agreement
except for such  consents,  approvals  or filings the failure of which to obtain
will not have a material adverse effect on the ability of Catskill to consummate
the transactions contemplated thereby.

                  (b)  Troy  hereby  represents  to  Catskill  that  it  has  no
knowledge  of  any  reason  why  approval  or   effectiveness   of  any  of  the
applications,  notices  or  filings  referred  to in  Section  4.3(a)  cannot be
obtained or granted on a timely basis.

                                       19

<PAGE>

         4.4      TROY INFORMATION.

         The information relating to Troy and its Subsidiaries to be provided by
Troy to be  contained  in the  Proxy  Materials  will  not  contain  any  untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements  therein,  in light of the  circumstances in which they are made,
not misleading.  The Proxy Materials  (except for the portions  thereof relating
solely  to  Catskill  or any of its  Subsidiaries,  as to  which  Troy  makes no
representation  or  warranty)  will  comply in all  material  respects  with the
provisions of the  Securities  Act,  Exchange Act and the rules and  regulations
thereunder.

         4.5      ADEQUATE RESOURCES.

         As of the Closing Date,  Troy will have the funds available and will be
able to meet its  financial  obligations  under,  and to timely  consummate  the
transactions contemplated by, this Agreement.

                                    ARTICLE V
                    COVENANTS RELATING TO CONDUCT OF BUSINESS

         5.1      COVENANTS OF CATSKILL

         During the period from the date of this Agreement and continuing  until
the  Effective  Time,  except as  expressly  contemplated  or  permitted by this
Agreement,  the Bank Merger  Agreement or the Option Agreement or with the prior
written consent of Troy,  Catskill and each Catskill  Subsidiary  shall carry on
their  respective  businesses  in  the  ordinary  course  consistent  with  past
practices and consistent with prudent banking  practices.  Catskill will use its
best efforts to (x) preserve its business organization and that of each Catskill
Subsidiary intact, (y) keep available to itself and Troy the present services of
the  employees of Catskill  and each  Catskill  Subsidiary  and (z) preserve for
itself and Troy the  goodwill of the  customers  of Catskill  and each  Catskill
Subsidiary and others with whom business  relationships  exist. Without limiting
the  generality  of the  foregoing,  and  except  as set  forth in the  Catskill
Disclosure Schedule or as otherwise  contemplated by this Agreement or consented
to by Troy in writing,  Catskill  shall not,  and shall not permit any  Catskill
Subsidiary to:

                  (a)   declare  or  pay  any   dividends   on,  or  make  other
distributions in respect of, any of its capital stock (except for the payment of
regular  quarterly  cash dividends by Catskill not to exceed $.1325 per share on
the  Catskill   Common  Stock  with   declaration,   record  and  payment  dates
corresponding to the quarterly dividends paid by Catskill during its fiscal year
ended September 30, 1999 and except that any Catskill Subsidiary may declare and
pay dividends and distributions to Catskill);  provided,  however, that under no
circumstances shall Catskill declare, set aside or pay any dividends if it would
result in the holders of Catskill  Common  Stock  receiving  more than four cash
dividend payments in fiscal 2000;

                  (b)   (i)  split,  combine  or  reclassify  any  shares of its
capital  stock  or  issue,   authorize  or  propose  the  issuance  of any other
securities  in  respect  of,  in lieu of or in  substitution  for  shares of its
capital  stock  except  upon the  exercise or  fulfillment  of rights or options
issued or existing  pursuant to the Catskill Stock Plan in accordance with their
present  terms,  all to the extent  outstanding  and in existence on the date of
this Agreement, and except pursuant to the Option Agreement, or (ii) repurchase,
redeem or otherwise  acquire (except for the acquisition of Trust Account Shares
and DPC Shares, as such terms are defined in Section 1.4(c) hereof),  any shares
of the capital stock of Catskill or any Catskill  Subsidiary,  or any securities
convertible  into or exercisable for any shares of the capital stock of Catskill
or any Catskill Subsidiary;

                                       20

<PAGE>

                  (c) issue,  deliver  or sell,  or  authorize  or  propose  the
issuance, delivery or sale of, any shares of its capital stock or any securities
convertible  into or  exercisable  for,  or any  rights,  warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing,  other than (i) the  issuance of Catskill  Common  Stock  pursuant to
stock  options  or similar  rights to  acquire  Catskill  Common  Stock  granted
pursuant to the Catskill  Stock Plan and  outstanding  prior to the date of this
Agreement, in each case in accordance with their present terms and (ii) pursuant
to the Option Agreement;

                  (d) amend  its  Certificate of Incorporation, By-Laws or other
similar governing documents;

                  (e) directly or  indirectly,  and will  instruct its officers,
directors,  employees,  accountants,   consultants,  legal  counsel,  investment
bankers,   advisors,   agents   and   other   representatives,    (collectively,
"Representatives")  not  to,  directly  or  indirectly,   initiate,  solicit  or
encourage  (including by way of furnishing  information or assistance),  or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes,  or reasonably  may be expected to lead to, any Competing  Proposal
(as defined in Section 9.13 hereof),  or enter into or maintain  discussions  or
negotiate  with any person in furtherance of or relating to such inquiries or to
obtain a Competing Proposal,  or agree to or endorse any Competing Proposal,  or
authorize or permit any Representative of Catskill or any of its subsidiaries to
take any such action,  and  Catskill  shall use its  reasonable  best efforts to
cause the Representatives of Catskill and the Catskill  Subsidiaries not to take
any such action,  and Catskill shall promptly  notify Troy if any such inquiries
or proposals are made  regarding a Competing  Proposal,  and Catskill shall keep
Troy  informed,  on a  current  basis,  of the  status  and  terms  of any  such
proposals;  provided,  however,  that prior to such time as the  stockholders of
Catskill  shall have adopted and approved  this  Agreement  in  accordance  with
Delaware Law, nothing  contained in this Section 5.1(e) shall prohibit the Board
of  Directors  of Catskill  from (i), in  connection  with a Superior  Competing
Transaction (as defined in Section 9.13 hereof),  furnishing  information to, or
entering  into  discussions  or  negotiations  with,  any  person  that makes an
unsolicited  bona  fide  proposal  to  acquire  Catskill  pursuant  to a merger,
consolidation,   share   exchange,   business   combination   or  other  similar
transaction,  if, and only to the extent  that,  (A) the Board of  Directors  of
Catskill, after consultation with and based upon the advice of independent legal
counsel,  determines in good faith that such action is required for the Board of
Directors  of  Catskill  to comply  with its  fiduciary  duties to  stockholders
imposed  by  Delaware  Law,  (B) prior to  furnishing  such  information  to, or
entering into discussions or negotiations  with, such person,  Catskill provides
written  notice to Troy to the effect that it is furnishing  information  to, or
entering  into  discussions  or  negotiations  with,  such person,  (C) prior to
furnishing such information to such person,  Catskill  receives from such person
an executed  confidentiality  agreement with terms no less favorable to Catskill
than those  contained in the  Confidentiality  Agreement by and between Troy and
Catskill, dated as of March 27, 2000 (the Confidentiality  Agreement"),  and (D)
Catskill keeps Troy informed,  on a current basis,  of the status and details of
any  such  discussions  or  negotiations;  or (ii)  complying  with  Rule  14e-2
promulgated under the Exchange Act;

                  (f) make  capital  expenditures  aggregating   in   excess  of
$20,000;

                  (g) enter into any new line of business;

                  (h) acquire or agree to acquire,  by merging or  consolidating
with, or by  purchasing an equity  interest in or the assets of, or by any other
manner,  any  business or any  corporation,  partnership,  association  or other
business organization or division thereof or otherwise acquire any assets, other
than in connection  with  foreclosures,  settlements  in lieu of  foreclosure or
troubled  loan or debt  restructurings,  or in the  ordinary  course of business
consistent with prudent banking practices;

                                       21

<PAGE>

               (i) take  any  action  that  is  intended  or may  reasonably  be
expected to result in any of its  representations  and  warranties  set forth in
this  Agreement  being or  becoming  untrue or in any of the  conditions  to the
Merger set forth in Article VII not being  satisfied,  or in a violation  of any
provision of this Agreement or the Bank Merger Agreement, except, in every case,
as may be required by applicable law;

               (j) change its methods of  accounting  in effect at September 30,
1999 except as required by changes in GAAP or regulatory accounting principles;

               (k) (i) except as required by applicable law or this Agreement or
to maintain qualification pursuant to the Code, adopt, amend, renew or terminate
any Plan or any agreement,  arrangement,  plan or policy between Catskill or any
Catskill  Subsidiary  and one or more of its  current  or  former  directors  or
officers,  (ii)  increase  in any  manner  the  compensation  of  any  director,
executive  officer or other  employee  who is a party to a contract  relating to
employment or severance referenced in Section 3.12 of this Agreement, or pay any
benefit not required by any plan or agreement as in effect as of the date hereof
(including,   without   limitation,   the  granting  of  stock  options,   stock
appreciation  rights,  restricted  stock,  restricted stock units or performance
units or shares),  (iii) enter into,  modify or renew any  contract,  agreement,
commitment or arrangement  providing for the payment to any director,  executive
officer or  employee  who is a party to a contract  relating  to  employment  or
severance  referenced  in Section  3.12 of this  Agreement  of  compensation  or
benefits, (iv) enter into, modify or renew any contract,  agreement,  commitment
or  arrangement  providing for the payment to any employee who is not a director
or executive  officer or who is not a party to a contract relating to employment
or severance  referenced in Section 3.12 of this  Agreement of  compensation  or
benefits,  other than normal annual cash increases in pay,  consistent with past
practice and not exceeding 4% of such  employee's  base salary or wage, (v) hire
any new  employee  at an  annual  compensation  in excess  of  $24,000,  (v) pay
expenses of any  employees or directors  for  attending  conventions  or similar
meetings  which  conventions  or meetings are held after the date  hereof,  (vi)
promote to a rank of vice  president or more senior any  employee,  or (vii) pay
any retention or other bonuses to any employees;

               (l) except  for  short-term  borrowings  with a  maturity  of six
months  or  less  in the  ordinary  course  of  business  consistent  with  past
practices,  incur any  indebtedness  for  borrowed  money  (other  than  deposit
liabilities), assume, guarantee, endorse or otherwise as an accommodation become
responsible  for the obligations of any other  individual,  corporation or other
entity,  except for accepting,  negotiating and paying checks and payment orders
in the ordinary course of its banking business;

               (m) sell, purchase,  enter into a lease, relocate,  open or close
any banking or other office,  or file an  application  pertaining to such action
with any Governmental Entity;

               (n) make any  equity  investment  or  commitment  to make such an
investment in real estate or in any real estate development project,  other than
in connection with foreclosure,  settlements in lieu of foreclosure, or troubled
loan or debt  restructuring,  in the ordinary course of business consistent with
past banking practices;

               (o) make any new loans to,  modify the terms of any existing loan
to,  or  engage  in  any  other   transactions   (other  than  routine   banking
transactions)   with,  any  Affiliated   Person  of  Catskill  or  any  Catskill
Subsidiary;

               (p) incur deposit liabilities,  other than in the ordinary course
of business consistent with past practices,  including deposit pricing policies,
and which  would not  change  the risk  profile  of  Catskill  Bank based on its
existing deposit and lending policies;

                                       22

<PAGE>

               (q) purchase  any  loans or  sell,  purchase  or lease  any  real
property,  except for the sale of real  estate that is the subject of a casualty
loss or  condemnation  or the  sale of OREO  on a  basis  consistent  with  past
practices;

               (r) originate  (i) any loans except in  accordance  with existing
Catskill Bank lending  policies,  (ii)  residential  mortgage loans in excess of
$150,000,  (iii) 30 year residential  mortgage loans whose interest rate, terms,
appraisal,  and underwriting do not make them immediately  available for sale in
the secondary market,  (iv) unsecured  consumer loans in excess of $20,000,  (v)
commercial business loans in excess of $50,000 as to any loan or $100,000 in the
aggregate as to related loans or loans to related persons,  (vi) commercial real
estate first mortgage loans in excess of $150,000 as to any loans or $300,000 in
the  aggregate  as to  related  loans  or  loans  to  related  borrowers,  (vii)
modifications  and/or  extensions of any commercial  business or commercial real
estate  loans in the amounts set forth in (v) and (vi) above,  or (viii)  loans,
the outstanding principal balance of which, in the aggregate,  exceed the lesser
of (1) the cash flow received from  prepayment and  repayment,  sale or interest
and penalties paid on any other loans or (2) $1 million per month.

               (s) make any  investments  other  than in  [Federal  Funds and US
Treasuries]  that  have a  maturity  date  that does not  exceed  three  months;
provided,  however,  the maturity date shall not extend beyond  January 31, 2001
or, with  respect to  investments  made or  committed  to after the parties have
agreed on the  Closing  Date (as  defined in Section  9.1  hereof),  beyond such
Closing Date.

               (t) sell or purchase any mortgage loan servicing rights; or

               (u) agree or commit to do any of the  actions  set forth in (a) -
(t) above.

The consent of Troy to any action by Catskill or any Catskill Subsidiary that is
not permitted by any of the preceding paragraphs shall be evidenced by a writing
signed by the President or any Senior Vice President of Troy.

         5.2      MERGER COVENANTS.

         Notwithstanding  that  Catskill  believes that it has  established  all
reserves and taken all provisions for possible loan losses  required by GAAP and
applicable laws, rules and regulations,  Catskill  recognizes that Troy may have
adopted   different  loan,   accrual  and  reserve   policies   (including  loan
classifications  and levels of  reserves  for  possible  loan  losses).  In that
regard,  and in  general,  from  and  after  the date of this  Agreement  to the
Effective Time, Catskill and Troy shall consult and cooperate with each other in
order to formulate  the plan of  integration  for the Merger,  including,  among
other  things,  with  respect  to  conforming,  based  upon  such  consultation,
Catskill's  loan,  accrual and reserve policies to those policies of Troy to the
extent appropriate.

         5.3      COMPLIANCE WITH ANTITRUST LAWS.

         Each of Troy and  Catskill  shall use its  reasonable  best  efforts to
resolve  objections,  if any,  which may be asserted  with respect to the Merger
under antitrust laws, including, without limitation, the HSR Act. In the event a
suit is  threatened  or  instituted  challenging  the  Merger  as  violative  of
antitrust  laws, each of Troy and Catskill shall use its reasonable best efforts
to avoid the filing of, or resist or resolve such suit.  Troy and Catskill shall
use their reasonable best efforts to take such action as may be required: (a) by
the  Antitrust  Division  of the  Department  of  Justice or the  Federal  Trade
Commission in order to resolve such objections as either of them may have to the
Merger under  antitrust laws, or (b) by any federal or state court of the United
States,  in  any  suit  brought  by  a  private  party  or  governmental  entity
challenging  the Merger as violative of  antitrust  laws,  in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary

                                       23

<PAGE>

restraining  order,  or other  order  which  has the  effect of  preventing  the
consummation  of the Merger.  Reasonable  best efforts shall not include,  among
other  things and to the extent  Troy so  desires,  the  willingness  of Troy to
accept an order agreeing to the  divestiture,  or the holding  separate,  of any
assets of Troy or Catskill.

         5.4 SECURITIES PORTFOLIO SALE.

         Catskill  shall  complete  the  Securities  Portfolio  Sale  as soon as
practical  after the date  hereof,  but in no event later than 30 days after the
date of this Agreement.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

         6.1      REGULATORY MATTERS.

                  (a) Within 30  calendar  days from the date  hereof,  Catskill
shall prepare and file, subject to the review and consent of Troy, with the SEC,
Proxy  Materials for soliciting the approval of this Agreement and the Merger by
the  shareholders of Catskill.  Catskill will use its reasonable best efforts to
have the Proxy  Materials  approved for use by the SEC as soon as possible after
the filing.  The parties shall  cooperate in responding to and  considering  any
questions or comments from the SEC staff regarding the information  contained in
the Proxy Materials. If at any time after the Proxy Materials are filed with the
SEC, and prior to the Closing Date, any event relating to Catskill is discovered
by Catskill  which should be set forth in an amendment  of, or a supplement  to,
the Proxy Materials,  Catskill shall promptly cause an appropriate  amendment to
the  Proxy  Materials  to be  filed  with the SEC.  Upon  the  approval  of such
amendment, Catskill (if prior to the meeting of shareholders pursuant to Section
6.3 hereof) will take all necessary  action as promptly as practicable to permit
an appropriate  amendment or supplement to be  transmitted  to its  shareholders
entitled to vote at such meeting.  If at any time after the Proxy  Materials are
filed with the SEC, and prior to the Closing Date, any event relating to Troy is
discovered by Troy which should be set forth in an amendment of, or a supplement
to, the Proxy Materials, Troy shall promptly inform Catskill, and Catskill shall
promptly cause an appropriate  amendment to the Proxy Materials to be filed with
the SEC.  Upon the  approval of such  amendment,  each of Troy and  Catskill (if
prior to the meeting of  shareholders  pursuant to Section 6.3 hereof) will take
all  necessary  action as  promptly  as  practicable  to  permit an  appropriate
amendment or supplement to be transmitted to its  shareholders  entitled to vote
at such meeting.

                  (b) Troy will prepare and file all necessary documentation, to
effect  all  applications,  notices,  petitions  and  filings,  and to obtain as
promptly as practicable all permits,  consents,  approvals and authorizations of
all third parties and Governmental  Entities which are necessary or advisable to
consummate the transactions  contemplated by this Agreement  (including  without
limitation the Merger and the Bank Merger).  Catskill shall  cooperate with Troy
to effect  the  foregoing.  Catskill  and Troy shall have the right to review in
advance,  and to the extent  practicable each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information  relating to Catskill or Troy,  as the case may be, which appears in
any filing made with, or written materials  submitted to, any third party or any
Governmental  Entity in connection  with the  transactions  contemplated by this
Agreement;  provided,  however, that nothing contained herein shall be deemed to
provide  either  party with a right to review any  information  provided  to any
Governmental  Entity on a confidential basis in connection with the transactions
contemplated  hereby.  In exercising  the foregoing  right,  each of the parties
hereto shall act reasonably and as promptly as  practicable.  The parties hereto
agree that they will consult  with each other with  respect to the  obtaining of
all permits,  consents,  approvals and  authorizations  of all third parties and
Governmental  Entities  necessary or advisable to  consummate  the  transactions
contemplated  by this  Agreement and each party will keep the other  apprised of
the status of matters relating to contemplation of the transactions contemplated
herein.

                                       24

<PAGE>

                  (c)  Troy  shall,  upon  request,  furnish  Catskill  with all
information concerning Catskill and its directors, officers and shareholders and
such other matters as may be reasonably  necessary in connection  with the Proxy
Materials or any other  statement,  filing,  notice or application made by or on
behalf of Catskill to any  Governmental  Entity in connection with the Merger or
the other transactions contemplated by this Agreement.

                  (d) Troy and Catskill  shall  promptly  advise each other upon
receiving  any  communication  from any  Governmental  Entity  whose  consent or
approval is required for consummation of the  transactions  contemplated by this
Agreement  which  causes  such  party to  believe  that  there  is a  reasonable
likelihood  that any Requisite  Regulatory  Approval  (defined in Section 7.1(c)
hereof)  will not be obtained or that the receipt of any such  approval  will be
materially delayed.

         6.2      ACCESS TO INFORMATION.

                  (a) Upon  reasonable  notice and  subject to  applicable  Laws
relating to the exchange of information,  Catskill shall accord to the officers,
employees,  accountants,  counsel  and other  representatives  of Troy,  access,
during normal  business hours during the period prior to the Effective  Time, to
all its, CFSI's and Catskill Bank's properties,  books,  contracts,  commitments
and records and, during such period, Catskill shall make available to Troy (i) a
copy of each report,  schedule,  registration statement and other document filed
or received by it (including CFSI and Catskill Bank) during such period pursuant
to the requirements of federal  securities laws or federal or state banking laws
and (ii) all other information concerning its (including CFSI and Catskill Bank)
business,  properties and personnel as Troy may reasonably  request.  Troy shall
receive notice of all meetings of the Catskill,  CFSI and Catskill Bank Board of
Directors and any committees thereof,  and of any management  committees (in all
cases,  at least as timely as all Catskill,  CFSI and Catskill Bank, as the case
may be,  representatives to such meetings are required to be provided notice). A
representative of Troy shall be permitted to attend all meetings of the Board of
Directors (except for the portion of such meetings which relate to the Merger or
a Superior Competing Transaction  ("Confidential  Matters") of Catskill, CFSI or
Catskill  Bank, as the case may be) and such meetings of committees of the Board
of  Directors  and  management  of Catskill,  CFSI and Catskill  Bank which Troy
desires.  Troy  will  hold all such  information  in  confidence  to the  extent
required by, and in  accordance  with,  the  provisions  of the  Confidentiality
Agreement.

                  (b) No  investigation  by  either  of  the  parties  or  their
respective  representatives  shall affect the  representations and warranties of
the other set forth herein.

                  (c) Catskill  shall  provide  Troy   with  true,  correct  and
complete copies of all financial and other information  provided to directors of
Catskill,  CFSI and Catskill Bank in connection with meetings of their Boards of
Directors or committees thereof.

         6.3      SHAREHOLDER MEETING.

                  Catskill  shall take all steps  necessary  to duly call,  give
notice of, convene and hold a meeting of its  shareholders  within 35 days after
the Proxy  Materials  are  approved  for use for the  purpose of voting upon the
approval of this  Agreement and the Merger (the "Special  Meeting").  Management
and  the  Board  of  Directors  of  Catskill   shall   recommend  to  Catskill's
shareholders  approval  of  this  Agreement,   including  the  Merger,  and  the
transactions  contemplated  hereby,  together with any matters incident thereto,
and shall oppose any third party  proposal or other action that is  inconsistent
with this Agreement or the consummation of the transactions contemplated hereby;
provided,  however, that Catskill shall not be obligated to recommend or oppose,
as the  case may be,  if the  Board  of  Directors  of  Catskill  determines  in
accordance  with the terms of this Agreement to enter into a Superior  Competing
Transaction;  provided further,  however,  that notwithstanding  anything to the
contrary in the foregoing, Catskill shall hold its Special Meeting in accordance
with the time period specified in the first sentence of this Section 6.3.

                                       25

<PAGE>

         6.4      LEGAL CONDITIONS TO MERGER.

         Each of Troy and Catskill shall use their  reasonable  best efforts (a)
to take,  or cause to be taken,  all actions  necessary,  proper or advisable to
comply promptly with all legal  requirements  which may be imposed on such party
with respect to the Merger and,  subject to the  conditions set forth in Article
VII hereof,  to consummate the  transactions  contemplated by this Agreement and
(b) to obtain (and to  cooperate  with the other  party to obtain) any  consent,
authorization,  order or  approval  of, or any  exemption  by, any  Governmental
Entity and any other third party which is required to be obtained by Catskill or
Troy in connection  with the Merger and the other  transactions  contemplated by
this Agreement.

         6.5      EMPLOYEES.

                  (a) To the extent permissible under the applicable  provisions
of the Code and  ERISA,  for  purposes  of  crediting  periods  of  service  for
eligibility to  participate,  entitlement  to benefits and vesting,  but not for
pension benefit accrual  purposes,  under employee pension benefit plans (within
the  meaning of ERISA  Section  3(2)) and  employee  welfare  plans  (within the
meaning of ERISA  Section 3(1)  maintained  by Troy or Troy Bank,  as applicable
(other than Troy's Employee Stock Ownership Plan), individuals who are employees
of Catskill or any  Catskill  Subsidiary  at the  Effective  Time and who become
eligible to  participate  in such plans will be credited with periods of service
with Catskill or any Catskill Subsidiary (or with any predecessor to Catskill or
any  Catskill  Subsidiary,  to the  extent  such  service is  credited  for such
purposes  under the  corresponding  Plan) before the  Effective  Time as if such
service had been with Troy or Troy Bank, as applicable.

                  (b) If required by Troy in writing  delivered  to Catskill not
less than five business days before the Closing Date, Catskill and each Catskill
Subsidiary, as applicable, shall, on or before the day immediately preceding the
Closing  Date,  terminate  the Catskill Bank 401(k) Plan and any other Plan that
includes a  qualified  cash or deferred  arrangement  within the meaning of Code
Section 401(k)  (collectively,  the "401(k) Plans") and no further contributions
shall be made to any 401(k) Plan after such termination.  Catskill shall provide
to Troy (i) certified copies of resolutions adopted by the Board of Directors of
Catskill  or  such  Catskill   Subsidiary,   as  applicable,   authorizing  such
termination  and (ii) an  executed  amendment  to each  401(k)  Plan in form and
substance reasonably  satisfactory to Troy to conform the plan document for such
Plan with all applicable  requirements  of the Code and  regulations  thereunder
relating to the  tax-qualified  status of such Plan. Troy and Troy Bank will not
be obligated to make any matching or other employer  contributions to any 401(k)
Plan after the Merger.

                  (c) Promptly  following the Effective Time, as a result of the
transactions  contemplated  hereby,  the Catskill  Employee Stock Ownership Plan
(the "Catskill  ESOP") will be terminated and the  obligations of Troy or any of
its  Subsidiaries  shall be  limited to those  actions  which are  necessary  to
terminate  the  ESOP.  Troy  or  its  Subsidiaries,  as  applicable,  will  take
commercially  reasonable  actions consistent with the Catskill ESOP (i) to cause
the trustee of the Catskill ESOP to repay the  outstanding  balance of its stock
acquisition loan with the proceeds  received by the Catskill ESOP hereunder with
respect to unallocated shares of Catskill Common Stock and (ii) to terminate the
Catskill ESOP, subject to receipt of a favorable  determination  letter from the
IRS concerning the qualified status of the Catskill ESOP and the adoption of any
amendments  to the  Catskill  ESOP that may be necessary in order to obtain such
determination  letter. No employee of Catskill or any Catskill  Subsidiary shall
be eligible to become a  participant  in the Catskill  ESOP after the  Effective
Time.

                                       26

<PAGE>

                  (d) After the Effective  Time,  except to the extent that Troy
or its  Subsidiaries  continues  Plans in effect,  employees  of Catskill or its
Subsidiaries  who become  employed  by Troy or any of its  Subsidiaries  will be
eligible for employee benefits that Troy or such Subsidiary, as the case may be,
provides to its employees  generally and,  except as otherwise  required by this
Agreement,  on substantially  the same basis as is applicable to such employees,
provided  that  nothing in this  Agreement  shall  require  any  duplication  of
benefits.  Troy will or will cause Troy Bank to (i) give credit to  employees of
Catskill  and  its  Subsidiaries,  with  respect  to  the  satisfaction  of  the
limitations as to pre-existing  condition  exclusions,  evidence of insurability
requirements  and  waiting  periods  for  participation  and  coverage  that are
applicable  under the  employee  welfare  benefit  plans  (within the meaning of
Section  3(1) of ERISA) of Troy or Troy Bank,  equal to the credit that any such
employee had received as of the Effective Time towards the  satisfaction  of any
such  limitations  and waiting  periods under the  comparable  employee  welfare
benefit plans of Catskill or its Subsidiaries and to waive preexisting condition
limitations to the same extent waived under the corresponding Plan.

                  (e) After the Subsidiary Merger and the Bank Merger,  Troy and
each relevant Troy Subsidiary will honor, without modification,  and perform the
obligations  of Catskill  and  Catskill  Bank under,  the  contracts,  plans and
arrangements listed in Section 6.5(e) of the Catskill Disclosure Schedule.

                  (f) After the  Effective  Time,  Troy and each  relevant  Troy
Subsidiary  will  provide a  severance  benefit to each  full-time  employee  of
Catskill or any Catskill Subsidiary immediately before the Effective Time (other
than any such  employee  who is a party to any  written  agreement  relating  to
employment  or  severance   described  in  Section  3.12(a)  hereof)  and  whose
employment  is  terminated  involuntarily,  other than for  "Cause"  (as defined
below), by Troy or such Troy Subsidiary as of the Effective Time or within three
months  thereafter.  The severance benefit shall consist of continuation of such
employee's  base salary or wages for a period equal to (i) two weeks  multiplied
by (ii)  the  number  of full  years of  continuous  service  completed  by such
employee with Catskill or any Catskill Subsidiary,  up to a maximum of 26 weeks,
as if such employee had continued to be employed on a full-time basis by Troy or
such Troy Subsidiary during such period,  subject to applicable tax withholding.
For purposes of this Section 6.5(f),  "Cause" shall mean the employee's personal
dishonesty,  willful  misconduct,  breach of fiduciary duty  involving  personal
profit,  failure  to perform  stated  duties,  violation  of any law,  rule,  or
regulation  (other  than  traffic  violations  or  similar  offenses)  or  final
cease-and-desist order.

         6.6      INDEMNIFICATION.

                  (a) In the event of any  threatened or actual  claim,  action,
suit, proceeding or investigation, whether civil, criminal or administrative, in
which any person  who is now,  or has been at any time prior to the date of this
Agreement,  or who becomes prior to the Effective Time, a director or officer or
employee of Catskill  (the  "Indemnified  Parties")  is, or is threatened to be,
made a party  based in whole or in part on, or  arising  in whole or in part out
of, or  pertaining  to (i) the fact  that he is or was a  director,  officer  or
employee  of  Catskill  or any of their  respective  predecessors  or (ii)  this
Agreement or any of the transactions  contemplated  hereby,  whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and defend against and respond  thereto to the extent  permitted by
applicable law and the Certificate of Incorporation and Bylaws of Catskill as in
effect on the date hereof.  It is understood and agreed that after the Effective
Time,  Troy shall  indemnify  and hold  harmless,  as and to the fullest  extent
permitted by applicable law and the Certificate of  Incorporation  and Bylaws of
Troy as in effect on the date  hereof  (subject  to change as  required by law),
each such Indemnified Party against any losses,  claims,  damages,  liabilities,
costs, expenses (including reasonable attorney's fees and expenses in advance of
the final  disposition of any claim,  suit,  proceeding or investigation to each
Indemnified  Party to the fullest  extent  permitted  by law upon receipt of any
undertaking  required by applicable law),  judgments,  fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or  investigation,  and in the event of any such threatened or actual
claim,  action, suit,  proceeding or

                                       27

<PAGE>

investigation  (whether asserted or arising before or after the Effective Time),
the  Indemnified  Parties may retain counsel  reasonably  satisfactory  to Troy;
provided,  however,  that (1) Troy shall  have the right to assume  the  defense
thereof  and upon such  assumption  Troy shall not be liable to any  Indemnified
Party for any legal expenses of other counsel or any other expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof, except
that if Troy  elects not to assume such  defense or counsel for the  Indemnified
Parties reasonably  advises the Indemnified  Parties that there are issues which
raise  conflicts  of interest  between  Troy and the  Indemnified  Parties,  the
Indemnified Parties may retain counsel reasonably satisfactory to Troy, and Troy
shall pay the reasonable  fees and expenses of such counsel for the  Indemnified
Parties,  (2) Troy shall be obligated pursuant to this paragraph to pay for only
one firm of counsel for each Indemnified Party, (3) Troy shall not be liable for
any settlement  effected  without its prior written consent (which consent shall
not be  unreasonably  withheld or delayed),  and (4) Troy shall not be obligated
pursuant to this paragraph to the extent that a final judgment  determines  that
any such losses, claims, damages, liabilities, costs, expenses, judgments, fines
and amounts paid in settlement are as a result of the gross negligence,  willful
misconduct  or  malfeasance  of  the  Indemnified  Party.  Troy  shall  have  no
obligation  to advance  expenses  incurred in  connection  with a threatened  or
pending  action,  suit or  preceding  in  advance of final  disposition  of such
action,  suit or proceeding,  unless (i) Troy would be permitted to advance such
expenses pursuant to the DGCL and Troy's Certificate of Incorporation or Bylaws,
and (ii) Troy receives an  undertaking  by the  Indemnified  Party to repay such
amount if it is determined  that such party is not entitled to be indemnified by
Troy pursuant to the DGCL and Troy's Certificate of Incorporation or Bylaws. Any
Indemnified Party wishing to claim  indemnification under this Section 6.6, upon
learning of any such claim,  action,  suit,  proceeding or investigation,  shall
notify Troy thereof; provided,  however, that the failure to so notify shall not
affect the  obligations of Troy under this Section 6.6 except to the extent such
failure to notify  materially  prejudices Troy.  Troy's  obligations  under this
Section 6.6 continue in full force and effect for a period of six years from the
Effective Time; provided, however, that all rights to indemnification in respect
of any claim  asserted or made within such period shall continue until the final
disposition of such claim.  Troy shall require any successor to expressly assume
its obligations under this Section 6.6(a).

                  (b) Troy shall purchase for the benefit of the persons serving
as  executive  officers  and  directors  of  Catskill  immediately  prior to the
Effective  Time and who  are,  as of the  date of this  Agreement,  individually
covered by a directors'  and officers'  liability  insurance  policy,  a similar
directors'  and officers'  liability  insurance  coverage for at least two years
after the Effective  Time,  under either  Catskill's  policy in existence on the
date hereof, or under a policy of similar coverage and amounts  containing terms
and  conditions  which are generally not less  advantageous  than Troy's current
policy, and in either case, with respect to acts or omissions occurring prior to
the Effective Time which were committed by such executive officers and directors
in their capacity as such ("Tail Insurance"); provided however, that in no event
shall Troy be required to expend  pursuant to this Section  6.6(b) more than the
amount  equal to 150% of the  current  annual  amount  expended  by  Catskill to
maintain or procure  insurance  coverage pursuant hereto. In connection with the
foregoing,  Catskill  agrees to provide such insurer or substitute  insurer with
such  representations as such insurer may reasonably request with respect to the
reporting of any prior claims.

         6.7      SUBSEQUENT INTERIM AND ANNUAL FINANCIAL STATEMENTS.

         As soon as  reasonably  available,  but in no event  more  than 45 days
after the end of each fiscal quarter (other than the fourth fiscal  quarter,  as
to which the time period  shall be 90 days),  Catskill  will deliver to Troy its
Quarterly  Reports on Form 10-Q and Annual  Reports on Form 10-K,  as filed with
the SEC under the Exchange Act.  Catskill shall also deliver to Troy any Current
Reports on Form 8-K promptly after filing such reports with the SEC.

                                       28

<PAGE>

         6.8      ADDITIONAL AGREEMENTS.

         In case at any time  after the  Effective  Time any  further  action is
necessary or desirable to carry out the purposes of this  Agreement,  or to vest
the  Surviving  Corporation  or  the  Surviving  Bank  with  full  title  to all
properties,  assets, rights, approvals,  immunities and franchises of any of the
parties to the Merger,  or the constituent banks to the Bank Merger, as the case
may be, the proper  officers and  directors of each party to this  Agreement and
Troy's and Catskill's  Subsidiaries  shall take all such necessary action as may
be reasonably requested by Troy.

         6.9      ADVICE OF CHANGES.

         Troy and Catskill shall  promptly  advise the other party of any change
or event that,  individually  or in the  aggregate,  has or would be  reasonably
likely  to have a  Material  Adverse  Effect on it or to cause or  constitute  a
material breach of any of its representations, warranties or covenants contained
herein.  From time to time prior to the Effective Time, each party will promptly
supplement or amend its  disclosure  schedule  delivered in connection  with the
execution of this Agreement to reflect any matter which, if existing,  occurring
or known at the date of this Agreement, would have been required to be set forth
or  described in such  disclosure  schedule or which is necessary to correct any
information  in such  disclosure  schedule  which has been  rendered  inaccurate
thereby.  No supplement or amendment to such disclosure  schedule shall have any
effect for the purpose of determining  satisfaction  of the conditions set forth
in Sections  7.2(a) or 7.3(a)  hereof,  as the case may be, or the compliance by
Catskill with the covenants set forth in Section 5.1 hereof.

         6.10     CURRENT INFORMATION.

         During  the period  from the date of this  Agreement  to the  Effective
Time,  Catskill  will  cause one or more of its  designated  representatives  to
confer  on  a  regular  and  frequent   basis  (not  less  than   monthly)  with
representatives  of  Troy  and to  report  the  general  status  of the  ongoing
operations  of  Catskill.  Catskill  will  promptly  notify Troy of any material
change in the normal course of business or in the operation of the properties of
Catskill  and of any  governmental  complaints,  investigations  or hearings (or
communications indicating that the same may be contemplated), or the institution
or the  threat of  litigation  involving  Catskill,  and will  keep  Troy  fully
informed of such events.

         6.11     EXECUTION AND AUTHORIZATION OF BANK MERGER AGREEMENT.

                  Prior to the Effective  Time, (a) Troy and Catskill each shall
execute and  deliver  the  Certificate  of Merger  substantially  in the form at
Exhibit C, and (b) Troy and  Catskill  each shall  cause Troy Bank and  Catskill
Bank,  respectively,  to execute  and  deliver  the Bank  Merger  Agreement,  in
substantially the form at Exhibit A.

         6.12     TRANSACTION EXPENSES OF CATSKILL.

                  (a) For Troy's planning  purposes,  Catskill shall,  within 15
days  from  the  date  hereof,   provide  Troy  with  its  estimated  budget  of
transaction-related expenses reasonably anticipated to be payable by Catskill in
connection  with this  transaction,  including the fees and expenses of counsel,
accountants, investment bankers and other professionals. Catskill shall promptly
notify Troy if or when it determines that it will expect to exceed its budget.

                  (b) Promptly after the execution of this  Agreement,  Catskill
shall ask all of its attorneys  and other  professionals  to render  current and
correct invoices for all unbilled time and disbursements.  Catskill shall accrue
and/or  pay all of such  amounts  which  are  actually  due and owing as soon as
possible.

                                       29

<PAGE>

                  (c) Catskill  shall  advise Troy monthly of all  out-of-pocket
expenses which Catskill has incurred in connection with this transaction.

                  (d) Catskill, in reasonable consultation with Troy, shall make
all  arrangements  with  respect  to the  printing  and  mailing  of  the  Proxy
Materials.  Catskill shall, if Troy reasonably  deems  necessary,  also engage a
proxy solicitation firm to assist in the solicitation of proxies for its Special
Meeting. Catskill agrees to cooperate as to such matters.

         6.13     FURTHER ACTIONS OF CATSKILL.

         Upon the written  request of Troy,  Catskill  shall,  within 5 business
days of the date of such written  request,  demand payment of, or cause Catskill
Bank to demand payment of, any and all loans (to the extent  identified by Troy)
of  Catskill or Catskill  Bank,  as the case may be,  which loans are (or should
have been) set forth at Sections  3.5(a) or 3.20(e) of the  Catskill  Disclosure
Schedule,  and which loans are secured or  collateralized in any way by Catskill
Common Stock.

                                   ARTICLE VII
                              CONDITIONS PRECEDENT

         7.1      CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.

         The  respective  obligation of each party to effect the Merger shall be
subject to the  satisfaction  at or prior to the Effective Time of the following
conditions:

                  (A)   SHAREHOLDER APPROVALS.

                  This Agreement,  including the Certificate of Merger,  and the
Merger  shall have been  approved  and  adopted by the  affirmative  vote of the
holders of at least a majority  of the  outstanding  shares of  Catskill  Common
Stock entitled to vote thereon.

                  (B)   OTHER APPROVALS.

                  All   regulatory   approvals   required  to   consummate   the
transactions  contemplated  hereby shall have been  obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting  periods
being referred to herein as the "Requisite Regulatory Approvals").  No Requisite
Regulatory Approval shall contain a non-customary condition that Troy reasonably
determines  to be  burdensome  or  otherwise  alter  the  benefits  for which it
bargained in this Agreement.

                  (C)   PROXY MATERIALS.

                  The Proxy  Materials  shall  have  approved  for use under the
Exchange Act, and no stop order  suspending the approval of the Proxy  Materials
shall  have been  issued and no  proceedings  for that  purpose  shall have been
initiated or threatened by the SEC.

                  (D)   NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY.

                  No order,  injunction  or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other  transactions  (an  "Injunction")
contemplated  by this Agreement or the Certificate of Merger shall be in effect.
No  statute,  rule,  regulation,  order,  injunction  or decree  shall have been
enacted,  entered,  promulgated  or enforced by any  Governmental  Entity  which
prohibits, restricts or makes illegal consummation of the Merger.

                                       30

<PAGE>

         7.2      CONDITIONS TO OBLIGATIONS OF TROY.

         The  obligation  of Troy to effect  the  Merger is also  subject to the
satisfaction  or  waiver  by  Troy  at or  prior  to the  Effective  Time of the
following conditions:

                  (A)   REPRESENTATIONS AND WARRANTIES.

                  The  representations  and  warranties of Catskill set forth in
this Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such  representations and warranties
speak as of an earlier  date) as of the Closing Date as though made on and as of
the Closing Date.  Troy shall have  received a  certificate  signed on behalf of
Catskill  by each of the  President  and Chief  Executive  Officer and the Chief
Financial Officer of Catskill to the foregoing effect.

                  (B)   PERFORMANCE OF COVENANTS AND AGREEMENTS OF CATSKILL

                  Catskill  shall have  performed in all  material  respects all
covenants and agreements  required to be performed by it under this Agreement at
or prior to the Closing Date.  Troy shall have received a certificate  signed on
behalf of Catskill by each of the President and Chief Executive  Officer and the
Chief Financial Officer of Catskill to such effect.

                  (C)   CONSENTS UNDER AGREEMENTS.

                  (i)   The  consent,  approval  or waiver of each person (other
than the  Governmental  Entities  referred to in Section  7.1(b)  hereof)  whose
consent or approval  shall be required in order to permit the  succession by the
Surviving  Corporation  pursuant  to the  Merger  to any  obligation,  right  or
interest  of  Catskill  under  any loan or  credit  agreement,  note,  mortgage,
indenture,  lease,  license or other  agreement  or  instrument  shall have been
obtained except for those, the failure of which to obtain,  will not result in a
Material Adverse Effect on Catskill or the Surviving Corporation.

                  (ii)  The consent,  approval or waiver of each  person  (other
than the  Governmental  Entities  referred to in Section  7.1(b)  hereof)  whose
consent or approval  shall be required in order to permit the  succession by the
Surviving Bank pursuant to the Bank Merger to any obligation,  right or interest
of Catskill Bank under any loan or credit agreement, note, mortgage,  indenture,
lease,  license or other agreement or instrument shall have been obtained except
for those, the failure of which to obtain, will not result in a Material Adverse
Effect on Catskill Bank or the Surviving Bank.

                  (D)   NO PENDING GOVERNMENTAL ACTIONS.

                  No proceeding  initiated by any Governmental Entity seeking an
Injunction shall be pending.

                  (E)   NO MATERIAL ADVERSE CHANGE.

                  There  shall  have  been  no  changes,   other  than   changes
contemplated  by  this  Agreement,  in  the  business,   operations,   condition
(financial  or  otherwise),  assets or  liabilities  of Catskill or any Catskill
Subsidiary (regardless of whether or not such events or changes are inconsistent
with the  representations  and warranties given herein) that  individually or in
the aggregate has had or would have a Material Adverse Effect on Catskill.

                                       31

<PAGE>


                  (F)   ACCOUNTANT'S COMFORT LETTER.

                  Catskill  shall have caused to be delivered on the  respective
dates thereof to Troy "comfort letters" from KPMG L.L.P., Catskill's independent
public  accountants,  dated  the  date on  which  the  Proxy  Materials  or last
amendment  thereto  shall be approved for use, and dated the date of the Closing
(defined  in Section 9.1  hereof),  and  addressed  to Troy and  Catskill,  with
respect to Catskill's  financial  data presented in the Proxy  Materials,  which
letters shall be based upon Statements on Auditing Standards Nos. 72 and 76.

                  (G)   REPAYMENT OF LOANS.

                  Any and all loans of Catskill  and  Catskill  Bank as to which
Troy has  requested  that  Catskill or Catskill  Bank make demand for payment in
accordance with Section 6.13 above, shall have been paid in full, with no waiver
or negation of any rights or remedies available against the borrower thereunder.

         7.3      CONDITIONS TO OBLIGATIONS OF CATSKILL

         The  obligation of Catskill to effect the Merger is also subject to the
satisfaction  or waiver by  Catskill  at or prior to the  Effective  Time of the
following conditions:

                  (A)   REPRESENTATIONS AND WARRANTIES.

                  The  representations  and warranties of Troy set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such  representations  and warranties speak as of an earlier date)
as of the Closing  Date as though made on and as of the Closing  Date.  Catskill
shall  have  received  a  certificate  signed  on  behalf of Troy by each of the
President and the Chief Financial Officer of Troy to the foregoing effect.

                  (B)   PERFORMANCE OF COVENANTS AND AGREEMENTS OF TROY.

                  Troy  shall  have  performed  in  all  material  respects  all
covenants and agreements  required to be performed by it under this Agreement at
or prior to the Closing Date.  Catskill shall have received a certificate signed
on behalf of Troy by each of the  President and the Chief  Financial  Officer of
Troy to such effect.

                  (C)   CONSENTS UNDER AGREEMENTS.

                  The consent or  approval or waiver of each person  (other than
the  Governmental  Entities  referred  to in Section  7.1(b))  whose  consent or
approval  shall be required in  connection  with the  transactions  contemplated
hereby under any loan or credit agreement,  note,  mortgage,  indenture,  lease,
license  or  other  agreement  or  instrument  to  which  Troy is a party  or is
otherwise bound shall have been obtained.

                  (D)   NO PENDING GOVERNMENTAL ACTIONS.

                  No proceeding  initiated by any Governmental Entity seeking an
Injunction shall be pending.

                                       32

<PAGE>

                                  ARTICLE VIII
                            TERMINATION AND AMENDMENT

         8.1      TERMINATION.

         This  Agreement  may be  terminated  at any time prior to the Effective
Time,  whether before or after  approval of the matters  presented in connection
with the Merger by the shareholders of Catskill:

                  (a) by  mutual  consent  of Troy  and  Catskill  in a  written
instrument,  if the  Board of  Directors  of each so  determines  by a vote of a
majority of the members of its entire Board;

                  (b) by either  Troy or  Catskill  upon  written  notice to the
other party (i) 30 days after the date on which any request or application for a
Regulatory  Approval  shall  have been  denied or  withdrawn  at the  request or
recommendation  of the  Governmental  Entity  which must  grant such  Regulatory
Approval,  unless within the 30-day period  following  such denial or withdrawal
the  parties  agree to file,  and have  filed with the  applicable  Governmental
Entity, a petition for rehearing or an amended application,  provided,  however,
that no party shall have the right to terminate this Agreement  pursuant to this
Section 8.1(b), if such denial or request or recommendation for withdrawal shall
be due to the  failure  of the party  seeking to  terminate  this  Agreement  to
perform or observe the covenants and agreements of such party set forth herein;

                  (c) by either Troy or  Catskill  if the Merger  shall not have
been  consummated  on or before  January  31,  2001,  unless the  failure of the
Closing to occur by such date shall be due to the  failure of the party  seeking
to terminate  this  Agreement to perform or observe the covenants and agreements
of such party set forth herein;

                  (d) by either Troy or Catskill  (provided that the terminating
party is not in breach of its  obligations  under  Section  6.3  hereof)  if the
approval of the shareholders of Catskill hereto required for the consummation of
the Merger  shall not have been  obtained by reason of the failure to obtain the
required vote at a duly held meeting of  shareholders  or at any  adjournment or
postponement thereof;

                  (e) by either Troy or Catskill  (provided that the terminating
party is not then in breach of any representation,  warranty,  covenant or other
agreement  contained herein that,  individually or in the aggregate,  would give
the other party the right to terminate this  Agreement) if there shall have been
a breach of any of the representations or warranties set forth in this Agreement
on the  part  of  the  other  party,  if  such  breach,  individually  or in the
aggregate,  has  had or is  likely  to have a  Material  Adverse  Effect  on the
breaching  party,  and such  breach  shall  not have been  cured  within 30 days
following  receipt by the breaching  party of written notice of such breach from
the other party hereto or such breach,  by its nature,  cannot be cured prior to
the Closing;

                  (f) by either Troy or Catskill  (provided that the terminating
party is not then in breach of any representation,  warranty,  covenant or other
agreement  contained herein that,  individually or in the aggregate,  would give
the other party the right to terminate this  Agreement) if there shall have been
a  material  breach  of any of the  covenants  or  agreements  set forth in this
Agreement  on the part of the other  party,  and such breach shall not have been
cured within 30 days following  receipt by the breaching party of written notice
of such breach from the other party hereto or such breach, by its nature, cannot
be cured prior to the Closing;

                  (g) by Troy,  if the  management  of  Catskill or its Board of
Directors,  for any  reason,  (i)  fails to call and hold  within 35 days of the
approval  for  use of the  Proxy  Materials  a  special  meeting  of  Catskill's
shareholders  to  consider  and  approve  this  Agreement  and the  transactions
contemplated  hereby,  (ii) fails to recommend to  shareholders  the approval of
this Agreement and the transactions  contemplated  hereby, (iii) fails to oppose
any third party proposal that is inconsistent with the transactions contemplated
by this Agreement or (iv) violates Section 5.1(e) of this Agreement;

                                       33

<PAGE>

                  (h) by Troy if  Catskill  has  complied  with  Section  5.1(e)
above,  and has given  written  notice to Troy that Catskill has agreed to enter
into a Superior Competing Transaction;  provided, however, that such termination
under this Section 8.1(h) shall not be effective unless and until Catskill shall
have complied with the expense and breakup fee  provisions of Section 9.3 below,
and shall have  acknowledged  in the written notice to be provided in accordance
herewith that the Option granted  pursuant to the Option Agreement shall then be
exercisable in accordance with terms thereof.

                  (i) by Catskill in the event of a  Catastrophic  Market  Event
(as  defined  below) and that,  if the  Securities  Portfolio  Sale has not been
completed,  results in Catskill's inability to obtain Sale Proceeds in excess of
$73.2 million. For purposes of this subsection (i),  "Catastrophic Market Event"
shall  mean (i) a  decline  of more  than 10% in the Bond  Buyer 20 Index  and a
decline of more than 10% in the Merrill Lynch Corporate Bond Index, as quoted in
the Wall Street  Journal  from the level on the date hereof  until 30 days after
the date  hereof or (ii) if the values  for the Bond Buyer 20 Index and  Merrill
Lynch  Corporate  Bond Index are not published  for 3 consecutive  business days
because of financial market conditions in the United States.

         8.2      EFFECT OF TERMINATION.

         In the  event  of  termination  of this  Agreement  by  either  Troy or
Catskill  as provided in Section 8.1  hereof,  this  Agreement  shall  forthwith
become void and have no effect  except (i) the last  sentence of Section  6.2(a)
and  Sections  8.2,  9.2 and 9.3 hereof shall  survive any  termination  of this
Agreement,  and (ii) notwithstanding  anything to the contrary contained in this
Agreement,  no party  shall be  relieved or  released  from any  liabilities  or
damages  arising out of its willful or  intentional  breach of any  provision of
this Agreement.

         8.3      AMENDMENT.

         Subject to  compliance  with  applicable  law,  this  Agreement  may be
amended by the parties hereto, by action taken or authorized by their respective
Board  of  Directors,  at any  time  before  or after  approval  of the  matters
presented  in  connection  with the  Merger  by the  shareholders  of  Catskill;
provided,  however, that after any approval of the transactions  contemplated by
this Agreement by Catskill's  shareholders,  there may not be,  without  further
approval of such shareholders, any amendment of this Agreement which reduces the
amount or changes  the form of the  consideration  to be  delivered  to Catskill
shareholders  hereunder  other  than as  contemplated  by this  Agreement.  This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.

         8.4      EXTENSION; WAIVER.

         At any time prior to the Effective Time, the parties hereto,  by action
taken or authorized by their respective Boards of Directors,  may, to the extent
legally  allowed,  (a)  extend  the  time  for  the  performance  of  any of the
obligations  or  other  acts  of  the  other  parties  hereto,   (b)  waive  any
inaccuracies in the  representations  and warranties  contained herein or in any
document  delivered  pursuant  hereto,  and (c) waive compliance with any of the
agreements or conditions  contained herein. Any agreement on the part of a party
hereto to any such  extension  or waiver  shall be valid  only if set forth in a
written  instrument signed on behalf of such party, but such extension or waiver
or  failure  to  insist  on  strict  compliance  with an  obligation,  covenant,
agreement  or  condition  shall not  operate  as a waiver of, or  estoppel  with
respect to, any subsequent or other failure.

                                       34

<PAGE>

                                   ARTICLE IX
                               GENERAL PROVISIONS

         9.1      CLOSING.

         Subject to the terms and conditions of this  Agreement,  the closing of
the Merger (the "Closing") will take place at 10:00 a.m. at the offices of Hogan
& Hartson L.L.P., counsel to Troy, on a date and place specified by the Parties,
which  shall be no later than three  business  days  after the  satisfaction  or
waiver (subject to applicable law) of all conditions  precedent  specified under
Article VII hereof (other than those  conditions  that by their nature are to be
satisfied  at the  Closing,  but subject to the  fulfillment  or waiver of those
conditions),  or on such other date,  place and time as the parties may agree in
writing (the "Closing Date").

         9.2      NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

         None of the  representations,  warranties,  covenants and agreements in
this Agreement or in any instrument  delivered pursuant to this Agreement (other
than pursuant to the Option Agreement,  which shall terminate in accordance with
its terms) shall  survive the  Effective  Time,  except for those  covenants and
agreements  contained  herein and therein which by their terms apply in whole or
in part after the Effective Time.

         9.3      EXPENSES; BREAKUP FEE.

         All costs and expenses  incurred in connection  with this Agreement and
the transactions  contemplated  hereby shall be paid by the party incurring such
expense.  Except  as set forth  herein,  in the event  that  this  Agreement  is
terminated by either Troy or Catskill by reason of a material breach pursuant to
Sections 8.1(e) or (f) hereof or by Troy pursuant to Section 8.1(g) hereof, Troy
or Catskill,  as  applicable,  shall pay all  documented,  reasonable  costs and
expenses up to $500,000  incurred by the  terminating  party in connection  with
this Agreement and the transactions  contemplated hereby. In the event that this
Agreement  is  terminated  by Troy under  Section  8.1(d) by reason of  Catskill
shareholders  not  having  given any  required  approval,  or in the event  this
Agreement is terminated by Troy by reason of a willful  material breach pursuant
to Sections 8.1(e) or (f) hereof, Catskill shall pay all documented,  reasonable
costs and  expenses up to  $500,000  incurred  by Troy in  connection  with this
Agreement and the transactions  contemplated  hereby, plus a breakup fee of $1.5
million. In the event that this Agreement is terminated by Catskill by reason of
a willful material breach pursuant to Sections 8.1(e) or (f) hereof,  Troy shall
pay all  documented,  reasonable  costs and expenses up to $500,000  incurred by
Catskill in connection  with this  Agreement and the  transactions  contemplated
hereby,  plus a breakup fee of $2.5 million. In the event that this Agreement is
terminated by Troy under Section  8.1(h) by reason of Catskill  having agreed to
enter into an Superior Competing Transaction, Catskill shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by Troy in connection with
this Agreement and the transactions  contemplated  hereby, plus a breakup fee of
$1.5 million.

         9.4      NOTICES.

         All notices and other communications  hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail  (return  receipt  requested)  or  delivered  by an express  courier  (with
confirmation)  to the  parties  at the  following  addresses  (or at such  other
address for a party as shall be specified by like notice):

                  (a)      if to Troy, to:
                           Troy Financial Corporation
                           32 Second Street
                           Troy, NY  12180
                           Attn.:  Mr. Daniel J. Hogarty, Jr.

                                       35

<PAGE>

                           with a copy (which shall not constitute notice) to:

                           Hogan & Hartson L.L.P.
                           Columbia Square
                           555 Thirteenth Street, N.W.
                           Washington, DC  20004-1109
                           Attn.:  Stuart G. Stein, Esq.

                  and

                  (b)      if to Catskill, to:
                           Catskill Financial Corporation
                           341 Main Street
                           Catskill, NY  12414-1450
                           Attn.:  Mr. Wilbur J. Cross

                           with a copy (which shall not constitute notice) to:

                           Hinman, Howard & Kattell, LLP
                           700 Security Mutual Building
                           Binghamton, NY  13902-5250
                           Attn.:  Clifford S. Weber, Esq.

         9.5      INTERPRETATION.

         When a reference is made in this  Agreement  to  Sections,  Exhibits or
Schedules,  such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement  unless otherwise  indicated.  The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation  of this Agreement.  Whenever the words
"include",  "includes" or "including" are used in this Agreement,  they shall be
deemed to be followed by the words "without limitation".

         9.6      COUNTERPARTS.

         This Agreement may be executed in  counterparts,  all of which shall be
considered  one  and  the  same  agreement  and  shall  become   effective  when
counterparts  have been signed by each of the parties and delivered to the other
parties,   it  being  understood  that  all  parties  need  not  sign  the  same
counterpart.

         9.7      ENTIRE AGREEMENT.

         This Agreement (including the disclosure  schedules,  documents and the
instruments  referred to herein) constitutes the entire agreement and supersedes
all prior  agreements  and  understandings,  both  written  and oral,  among the
parties   with   respect  to  the  subject   matter   hereof,   other  than  the
Confidentiality  Agreement,  the Certificate of Merger, the Option Agreement and
the Catskill Stockholder Agreement.

                                       36

<PAGE>

         9.8      GOVERNING LAW.

         This Agreement  shall be governed and construed in accordance  with the
laws of the State of Delaware, without regard to any applicable conflicts of law
rules.

         9.9      ENFORCEMENT OF AGREEMENT.

         The parties  hereto  agree that  irreparable  damage would occur in the
event that the  provisions  of this  Agreement  were not performed in accordance
with its specific terms or were  otherwise  breached.  It is accordingly  agreed
that the parties shall be entitled to an injunction  or  injunctions  to prevent
breaches of this Agreement and to enforce  specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in  addition to any other  remedy to which they are  entitled at law or in
equity.

         9.10     SEVERABILITY.

         Any  term  or  provision  of  this   Agreement   which  is  invalid  or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or  unenforceability  without rendering invalid
or  unenforceable  the  remaining  terms and  provisions  of this  Agreement  or
affecting  the validity or  enforceability  of any of the terms or provisions of
this Agreement in any other jurisdiction.  If any provision of this Agreement is
so broad as to be  unenforceable,  the provision shall be interpreted to be only
so broad as is enforceable.

         9.11     PUBLICITY.

         Except as  otherwise  required by law or the rules of the Nasdaq  Stock
Market  National  Market System (or such other exchange on which the Troy Common
Stock may become listed),  so long as this Agreement is in effect,  neither Troy
nor Catskill shall, or shall permit any of Troy's or Catskill's Subsidiaries to,
issue or cause the publication of any press release or other public announcement
with  respect  to,  or  otherwise  make any  public  statement  concerning,  the
transactions  contemplated  by this Agreement,  the  Certificate of Merger,  the
Option Agreement or the Catskill  Stockholder  Agreement  without the consent of
the other party,  which consent  shall not be  unreasonably  withheld.  Troy and
Catskill shall cooperate to prepare a joint press release announcing the signing
of this Agreement and the transactions contemplated hereunder.

         9.12     ASSIGNMENT; LIMITATION OF BENEFITS.

         Neither this Agreement nor any of the rights,  interests or obligations
hereunder  shall be assigned by any of the parties hereto  (whether by operation
of law or  otherwise)  without the prior written  consent of the other  parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.  Except as otherwise  specifically  provided in Section 6.6 hereof,
this Agreement  (including the documents and instruments  referred to herein) is
not intended to confer upon any person other than the parties  hereto any rights
or remedies  hereunder,  and the covenants,  undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.

         9.13     ADDITIONAL DEFINITIONS.

         In addition to any other definitions  contained in this Agreement,  the
following words,  terms and phrases shall have the following  meanings when used
in this Agreement.

                                       37

<PAGE>

         "Affiliated   Person":   any   director,   officer  or  5%  or  greater
shareholder,  spouse  or  other  person  living  in the same  household  of such
director, officer or shareholder, or any company,  partnership or trust in which
any of the foregoing persons is an officer, 5% or greater  shareholder,  general
partner or 5% or greater trust beneficiary.

         "Competing  Proposal":  any of the following  involving Catskill or any
Catskill Subsidiary:  any inquiry, proposal or offer from any person relating to
any direct or indirect  acquisition or purchase by such person of Catskill,  any
Catskill  Subsidiary or any business line of Catskill  that  constitutes  15% or
more of the net revenues, net income or assets of Catskill and its subsidiaries,
taken as a whole,  or 15% or more of any class of equity  securities of Catskill
or  any of its  subsidiaries,  any  tender  offer  or  exchange  offer  that  if
consummated  would result in any person  beneficially  owning 15% or more of any
class of equity securities of Catskill or any of its  subsidiaries,  any merger,
consolidation, business combination, recapitalization,  liquidation, dissolution
or similar transaction involving Catskill or any of its subsidiaries, other than
the transactions contemplated by this Agreement.

         "Knowledge": with respect to any entity, refers to the actual knowledge
of such entity's  directors and officers in the ordinary  course of their duties
in such positions.

         "Laws": any and all statutes,  laws,  ordinances,  rules,  regulations,
orders, permits,  judgments,  injunctions,  decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.

         "Material  Adverse  Effect":  with respect to Troy or Catskill,  as the
case may be,  means a condition,  event,  change or  occurrence,  other than the
Securities  Portfolio Sale, that is reasonably likely to have a material adverse
effect  upon  (A)  the  financial  condition,  results  of  operations,   loans,
securities,  deposit accounts, business or properties of Troy or Catskill (other
than as a result of (i) changes in laws or  regulations  or accounting  rules of
general  applicability or interpretations  thereof, or (ii) decreases in capital
under Financial  Accounting Standards No. 115 attributable to general changes in
interest  rates),  or (B) the  ability  of  Troy  or  Catskill  to  perform  its
obligations  under,  and to consummate the  transactions  contemplated  by, this
Agreement,  the  Certificate of Merger and, in the case of Catskill,  the Option
Agreement, but shall not include Catskill's obligations under the Catskill Stock
Plan, the Catskill  Management  Recognition  Plan or any employment or severance
agreement set forth in Section 3.12 of the Catskill Disclosure Schedule.

         "Subsidiary":   with  respect  to  any  party  means  any  corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.

         "Superior  Competing  Transaction":  any  of  the  following  involving
Catskill  or any  Catskill  Subsidiary:  any  proposal  made by a third party to
acquire, directly or indirectly,  including pursuant to a tender offer, exchange
offer,   merger,   consolidation,   business   combination,    recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than 50% of the combined voting power of the shares
of Catskill Common Stock then outstanding or all or substantially all the assets
of  Catskill,  and  otherwise on terms which the Board of Directors of Catskill,
determines in its good faith judgment (based on the opinion of Ryan, Beck & Co.,
or another  financial  advisor of nationally  recognized  reputation) to be more
favorable to its stockholders  than the Merger and for which  financing,  to the
extent  required,  is then  committed or which if not  committed is, in the good
faith judgment of its Board of Directors,  reasonably  capable of being obtained
by such third party.

                            [SIGNATURES PAGE FOLLOWS]

                                       38

<PAGE>

         IN WITNESS  WHEREOF,  Troy,  Merger Sub and  Catskill  have caused this
Agreement to be executed and delivered by their  respective  officers  thereunto
duly authorized as of the date first above written.

                                         TROY FINANCIAL CORPORATION

ATTEST:

By:                                      By:
    -----------------------------------     ------------------------------------
    Name:  Kevin M. O'Bryan                 Name:  Daniel J. Hogarty, Jr.
    Title: Senior Vice President and        Title: Chairman, President and Chief
           Secretary                               Executive Officer

                                         CATSKILL FINANCIAL CORPORATION

ATTEST:

By:                                      By:
    -----------------------------------     ------------------------------------
    Name:                                   Name:  Wilbur J. Cross
    Title:                                  Title: Chairman, President and Chief
                                                   Executive Officer

                                         CHARLIE ACQUISITION CORPORATION

ATTEST:

By:                                      By:
    -----------------------------------     ------------------------------------
    Name:  Kevin M. O'Bryan                 Name:  Daniel J. Hogarty, Jr.
    Title: Secretary                        Title: President and Chief Executive
                                                   Officer


<PAGE>

                                                                       Exhibit A

                               BANK PLAN OF MERGER

                  This Bank Plan of Merger  (this  "Plan of Merger") is made and
entered into this __ day of _______,  2000 between The Troy Savings  Bank, a New
York-chartered savings bank ("Troy Bank") and Catskill Savings Bank, a federally
chartered stock savings bank ("Catskill Bank").

                                   WITNESSETH

                  WHEREAS,  Troy Financial  Corporation,  a Delaware corporation
("Troy"), Charlie Acquisition Corporation, a Delaware corporation ("Merger Sub")
and Catskill Financial Corporation,  a Delaware corporation  ("Catskill"),  have
entered  into an  Agreement  and Plan of  Merger,  dated as of June 7, 2000 (the
"Agreement");

                  WHEREAS, pursuant to the Agreement, Merger Sub will merge (the
"Merger") with and into Catskill,  with Catskill being the surviving corporation
(the "Surviving Corporation") and becoming a wholly owned subsidiary of Troy and
immediately following said Merger, the Surviving Corporation will merge with and
into Troy (the "Subsidiary Merger").

              WHEREAS,  immediately  following  the  Merger  and the  Subsidiary
Merger,  Catskill  Bank will merge with and into Troy Bank pursuant to this Plan
of Merger, with Troy Bank being the Surviving Bank (as defined); and

              WHEREAS,  Troy Bank has issued and has outstanding 1,000 shares of
common stock, par value $1.00 per share ("Troy Bank Common Stock"), and Catskill
Bank has issued and outstanding 5,686,750 shares of common stock, par value $.01
per share (the "Catskill Bank Common Stock").

              NOW,  THEREFORE,  in  consideration of the premises and the mutual
covenants and  agreements  contained  herein and in the  Agreement,  the parties
hereto do mutually agree, intending to be legally bound, as follows:

                                    ARTICLE 1
                                   DEFINITIONS

              Except as otherwise  provided  herein,  the capitalized  terms set
forth below shall have the following meanings:

         1.1  "BANK MERGER" shall mean the merger of Catskill Bank with and into
Troy Bank as provided in Section 2.1 of this Plan of Merger.

<PAGE>

         1.2  "EFFECTIVE  TIME" shall mean the date and time at which the merger
contemplated by this Plan of Merger becomes effective as provided in Section 2.2
hereof.

         1.3  "MERGING BANKS" shall mean, collectively, Catskill  Bank  and Troy
Bank.

         1.4  "NEW YORK SUPERINTENDENT" shall  mean  the Superintendent of Banks
of New York State.

         1.5  "SURVIVING BANK" shall refer to Troy Bank as the surviving bank in
the Bank Merger.

                                    ARTICLE 2
                            TERMS OF THE BANK MERGER

         2.1  THE BANK MERGER

              (a) Subject  to  the  terms  and  conditions  set  forth   in  the
Agreement,  and in  accordance  with the New York  Banking Law and the rules and
regulations  of the Banking  Board of New York State,  the Home Owner's Loan Act
and file regulations of the Office of Thrift  Supervision,  and the Federal Bank
Merger Act and the regulations of the Federal Deposit Insurance Corporation,  at
the  Effective  Time,  Catskill  Bank  shall be  merged  with and into Troy Bank
pursuant to and upon the terms set forth in this Plan of Merger. Troy Bank shall
continue as the Surviving Bank in the Bank Merger and the separate  existence of
Catskill Bank shall cease.

              (b) As a result of the Bank  Merger,  (i)  each  share  of  common
stock,  par value  $.01per  share,  of  Catskill  Bank  issued  and  outstanding
immediately  prior to the Effective Time shall be canceled,  and (ii) each share
of capital stock, par value $1.00 per share, of Troy Bank issued and outstanding
immediately  prior to the Effective Time shall remain issued and outstanding and
shall  constitute  the only shares of capital stock of the Surviving Bank issued
and outstanding immediately after the Effective Time.

              (c) On and  after  the Effective  Time, the Bank Merger shall have
the effects set forth in Section 602 of the New York Banking Law.

              (d) Without limiting the terms and  provisions  of  section 2.1(c)
above,  as  a  result  of  the  Bank Merger, the Surviving Bank shall assume and
succeed,  in  accordance  with  12 C.F.R.   Part  563b, to all of the rights and
obligations  of Catskill  Bank  relating to its  liquidation  account  which was
established  in connection  with the conversion of Catskill Bank from the mutual
to stock form of organization.

         2.2  EFFECTIVE TIME

              The  Bank  Merger  shall  become effective (the "Effective  Time")
at ____________ ____, 2000.

         2.3  NAME OF THE SURVIVING BANK

              The name of the Surviving Bank shall be "The Troy Savings Bank."

                                      -3-

<PAGE>

         2.4  CHARTER

              On and after the Effective Time, the  organization  certificate of
Troy Bank shall be the organization certificate of  the Surviving  Bank,  unless
and until amended in accordance with applicable law.

         2.5  BYLAWS

              On and  after the Effective Time, the bylaws of Troy Bank shall be
the  bylaws  of  the Surviving Bank, unless and until amended in accordance with
applicable law.

         2.6  DIRECTORS AND OFFICERS

              On and after the Effective Time, until changed in accordance  with
the organization  certificate and bylaws of the Surviving Bank, the directors of
the Surviving Bank shall be the directors of Troy Bank immediately  prior to the
Effective Time plus one additional  director,  Wilbur J .Cross. On and after the
Effective Time,  until changed in accordance with the  organization  certificate
and bylaws of the Surviving  Bank,  the officers of the Surviving  Bank shall be
the officers of Troy Bank immediately prior to the Effective Time.

         2.7  CORPORATE ACTION

              This  Plan  of  Merger  and the  consummation of the  transactions
contemplated hereby have been duly and validly adopted and approved by the Board
of Directors and the sole shareholder of each of the Merging Banks.

         2.8  OFFICES OF THE SAVINGS BANK

              Troy Bank, as the Surviving Bank, shall continue to maintain after
the Bank Merger its  principal and branch  offices and shall  maintain as branch
offices the home office and branch offices of Catskill Bank. The location of the
principal  office and other offices of the Surviving  Bank shall be as set forth
at Annex 1 hereto.

                                    ARTICLE 3
                                  MISCELLANEOUS

         3.1  SUCCESSORS

              This  Plan  of  Merger  shall be binding on the successors of Troy
Bank and Catskill Bank.

         3.2  COUNTERPARTS

              This Plan of Merger may be executed in two counterparts,  each  of
which shall be deemed an original, but which taken together shall constitute one
and the same document.


                                      -4-

<PAGE>


                  IN WITNESS  WHEREOF,  each of the parties has caused this Plan
of  Merger  to be duly  executed  on its  behalf by an  officer  thereunto  duly
authorized, all as of the day and year first above written.

                                        THE TROY SAVINGS BANK

ATTEST:

By:                                      By:
    -----------------------------------     ------------------------------------
    Name:  Kevin M. O'Bryan                 Name:  Daniel J. Hogarty, Jr.
    Title: Secretary                        Title: President and Chief Executive
                                                   Officer

                                         CATSKILL SAVINGS BANK

ATTEST:

By:                                      By:
    -----------------------------------     ------------------------------------
    Name:                                   Name:  Wilbur J. Cross
    Title:                                  Title: Chairman, President and
                                                   Chief Executive Officer



                                      -5-

<PAGE>

                                     ANNEX 1

                   OFFICES OF TROY BANK AFTER THE BANK MERGER

         At the  Effective  Time of the Bank  Merger,  Troy  Bank  will have the
following offices:

Location of Principal Office
----------------------------

Location of Branch Offices
--------------------------


<PAGE>

                                                                       Exhibit B

              CATSKILL FINANCIAL CORPORATION STOCK OPTION AGREEMENT

                       THE TRANSFER OF THE OPTION GRANTED
              BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.

               This  STOCK  OPTION  AGREEMENT,  dated as of June __,  2000 (this
"Agreement"), is entered into between Catskill Financial Corporation, a Delaware
corporation ("Issuer"),  and Troy Financial Corporation,  a Delaware corporation
("Grantee").

                                   WITNESSETH:

               WHEREAS,  Grantee,  Charlie Acquisition  Corporation,  a Delaware
corporation, and Issuer have entered into an Agreement and Plan of Merger, dated
as of even date with this  Agreement  (the  "Plan"),  which was  executed by the
parties thereto prior to the execution of this Agreement; and

               WHEREAS, as a condition and inducement to Grantee's entering into
the Plan and in consideration  therefor,  Issuer has agreed to grant Grantee the
Option (as defined below).

               NOW, THEREFORE,  in consideration of the foregoing and the mutual
covenants and  agreements  set forth herein and in the Plan,  the parties hereto
agree as follows:

         SECTION 1. Issuer hereby grants to Grantee an  irrevocable  option (the
"Option") to purchase, subject to the terms hereof, up to a number of fully paid
and  nonassessable  shares of common stock,  par value $0.01 per share of Issuer
("Issuer  Common Stock") equal to 19.9% of the total of the number of issued and
outstanding  shares of Issuer  Common Stock as of the first date that the Option
becomes exercisable, at a price per share equal to $19.00 (the "Option Price").

         SECTION 2. (a) Grantee may  exercise the Option,  in whole or part,  at
any time and from time to time  following the occurrence of a Purchase Event (as
defined below); provided,  however, that the Option shall terminate and be of no
further  force and effect  upon the  earliest to occur of the  following  events
(which are collectively referred to as an "Exercise Termination Event"):

                    (i)   The time immediately prior to the  Effective  Time (as
                  defined in the Plan);

                    (ii)  18 months  after the first  occurrence  of a  Purchase
                  Event;

                    (iii) 18 months after the  termination of the Plan following
                  the  occurrence  of a Preliminary  Purchase  Event (as defined
                  below);

                    (iv)  upon the valid termination of the Plan, if no Purchase
                  Event or Preliminary Purchase Event has occurred prior to such
                  termination,  by Issuer  pursuant to Sections 8.1(e) or 8.1(f)
                  of the Plan as a result of a breach by Grantee,  both  parties
                  pursuant  to Section  8.1(a) of the Plan,  or by either  party
                  pursuant to Sections 8.1(b) or 8.1(c) of the Plan;

                    (v)   18 months after the termination of the Plan, by either
                  party  pursuant  to  Section  8.1(d) of the Plan  based on the
                  required vote of Issuer's stockholders not being obtained at a
                  duly called meeting of the  stockholders of the Issuer,  if no
                  Purchase  Event or  Preliminary  Purchase  Event has  occurred
                  prior  to  the  meeting  of  Issuer's   stockholders  (or  any
                  adjournment or postponement thereof) held to vote on the Plan;
                  or

<PAGE>

                    (vi) 18 months after the termination of the Plan, by Grantee
                  pursuant to Sections 8.1(e) or 8.1(f) thereof as a result of a
                  breach by Issuer, or by Grantee pursuant to Sections 8.1(g) or
                  (h) of the Plan.

                  (b)    The term "Preliminary Purchase Event" shall mean any of
the following  events or transactions  occurring on or after the date hereof and
prior to an Exercise Termination Event:

                      (i)   Issuer  without  having  received  Grantee's   prior
         written  consent,  shall  have  entered  into any  letter  of intent or
         definitive  agreement  to  engage  in an  Acquisition  Transaction  (as
         defined below) with any person (as defined below) other than Grantee or
         any of its subsidiaries  (each a "Grantee  Subsidiary") or the Board of
         Directors of Issuer shall have  recommended  that the  stockholders  of
         Issuer approve or accept any  Acquisition  Transaction  with any Person
         (as the term "person" is defined in Sections  3(a)9 and 13(d)(3) of the
         Exchange  Act and the  rules and  regulations  thereunder)  other  than
         Grantee or any Grantee  Subsidiary.  For  purposes  of this  Agreement,
         "Acquisition  Transaction"  shall mean (x) a merger,  consolidation  or
         other business combination  involving Issuer, (y) a purchase,  lease or
         other  acquisition of all or substantially all of the assets of Issuer,
         (z) a  purchase  or  other  acquisition  (including  by way of  merger,
         consolidation, share exchange or otherwise) of Beneficial Ownership (as
         the term  "beneficial  ownership" is defined in Regulation  13d-3(a) of
         the Exchange Act) of securities  representing 20% or more of the voting
         power of Issuer;  provided,  however,  that  "Acquisition  Transaction"
         shall not include a transaction  entered into after the  termination of
         the Plan in which the Issuer is the surviving  entity, if in connection
         with such transaction,  no person acquires Beneficial  Ownership of 20%
         or more of the total voting power of the Issuer to be outstanding after
         giving effect to such  transaction  and in which the  aggregate  voting
         power of Issuer  acquired  by all persons is less than 33% of the total
         voting power of Issuer;

                      (ii)  Any  Person   (other  than   Grantee,   any  Grantee
         Subsidiary  or any current  affiliate  of Issuer)  shall have  acquired
         Beneficial Ownership of 20% or more of the outstanding shares of Issuer
         Common Stock;

                      (iii) (a) Any Person  (other  than  Grantee or any Grantee
         Subsidiary)  shall  have made a bona fide  proposal  to Issuer or, by a
         public  announcement  or written  communication  that is or becomes the
         subject of public  disclosure,  to Issuer's  stockholders  prior to the
         Catskill Stockholders' Meeting to engage in an Acquisition  Transaction
         (including, without limitation, any situation in which any Person other
         than Grantee or any Grantee  Subsidiary  shall have  commenced (as such
         term is defined in Rule 14d-2  promulgated  under the  Exchange  Act of
         1934,  as  amended  (the  "Exchange   Act"),  or  shall  have  filed  a
         registration  statement  under the  Securities  Act of 1933, as amended
         (the  "Securities  Act"),  with  respect to a tender  offer or exchange
         offer to purchase  any shares of Issuer  Common  Stock such that,  upon
         consummation of such offer, such person would have Beneficial Ownership
         of 20% or more of the then  outstanding  shares of Issuer  Common Stock
         (such an offer  being  referred  to herein  as a  "Tender  Offer" or an
         "Exchange  Offer",  respectively) and (b) the stockholders of Issuer do
         not  approve the  Merger,  as defined in the Plan,  at a meeting of the
         Issuer's stockholders;

                      (iv)  There shall  exist a willful or  intentional  breach
         under the Plan by Issuer  and such  breach  would  entitle  Grantee  to
         terminate the Plan; or

                                      -2-

<PAGE>

                      (v)   The meeting of the Issuer's stockholders  to be held
         for the purpose of voting on the Plan shall not have been held pursuant
         to the Plan or shall have been  canceled  prior to  termination  of the
         Plan, or for any reason  whatsoever  Issuer's Board of Directors  shall
         have  failed to  recommend,  or shall have  withdrawn  or modified in a
         manner  adverse to Grantee  the  recommendation  of  Issuer's  Board of
         Directors, that Issuer's stockholders approve the Plan, or if Issuer or
         Issuer's  Board of  Directors  fails to oppose any proposal of the type
         described  at  Section  2(b)(iii)(a)  above by any Person  (other  than
         Grantee or any Grantee Subsidiary).

                 (c)        The term  "Purchase  Event"  shall  mean  any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:

                      (i)   The acquisition by any Person (other than Grantee or
         any Grantee  Subsidiary) of Beneficial  Ownership (other than on behalf
         of the  Issuer) of 20% or more of the then  outstanding  Issuer  Common
         Stock;

                      (ii)  The  occurrence  of  a  Preliminary  Purchase  Event
         described in Section 2(b)(i); or

                      (iii) The  termination  of the Plan by Grantee pursuant to
         Section 8.1(h) thereof.

                 (d)        Issuer shall notify Grantee  promptly  in writing of
the  occurrence of any  Preliminary  Purchase  Event or Purchase  Event known to
Issuer; provided, however, that the giving of such notice by Issuer shall not be
a condition to the right of Grantee to exercise the Option.

                 (e)        In the event that Grantee is entitled  to and wishes
to exercise  the Option,  it shall send to Issuer a written  notice (the "Option
Notice," the date of which being  hereinafter  referred to as the "Notice Date")
specifying  (i) the  total  number of  shares  of  Issuer  Common  Stock it will
purchase  pursuant  to such  exercise  and (ii) the  time  (which  shall be on a
business day that is not less than three nor more than 10 business days from the
Notice  Date) on which the  closing  of such  purchase  shall  take  place  (the
"Closing  Date");  such  closing  to take place at the  principal  office of the
Issuer;  provided,  however,  that if prior  notification  to or approval of the
Board  of  Governors  of the  Federal  Reserve  System  ("FRB"),  Office  of the
Comptroller of the Currency ("OCC"),  the Office of Thrift Supervision  ("OTS"),
the New York State Banking  Department  ("NYSBD"),  the Federal Trade Commission
(the "FTC"),  the Antitrust Division of the Department of Justice ("DOJ") or any
other Governmental Authority is required in connection with such purchase (each,
a  "Notification"  or an  "Approval,"  as the case may be),  at  Grantee's  sole
expense,  (a) Grantee shall promptly file the required notice or application for
approval  ("Notice/Application"),  (b) Grantee shall  expeditiously  process the
Notice/Application  and (c) for the  purpose of  determining  the  Closing  Date
pursuant  to clause  (ii) of this  sentence,  the period of time that  otherwise
would  run from the  Notice  Date  shall  instead  run from the  later of (x) in
connection with any  Notification,  the date on which any required  notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such  approval  has been  obtained and any  requisite  waiting
period or periods shall have expired.  For purposes of Section 2(a) hereof,  any
exercise  of the  Option  shall be deemed to occur on the Notice  Date  relating
thereto.  Prior to the Closing Date,  Grantee shall have the right to revoke its
exercise of the Option by written notice to the Issuer given not less than three
business days prior to the Closing Date.

                 (f)        At  the  closing referred to in Section 2(e) hereof,
Grantee  shall pay to Issuer  the  aggregate  purchase  price for the  number of
shares of Issuer  Common  Stock  specified in the Option  Notice in  immediately
available  funds  by wire  transfer  to a bank  account  designated  by  Issuer;
provided,  however,  that failure or refusal of Issuer to designate  such a bank
account shall not preclude Grantee from exercising the Option.

                                      -3-

<PAGE>

                  (g)   At such closing, simultaneously  with  the  delivery  of
immediately  available  funds as provided in Section 2(f)  hereof,  Issuer shall
deliver to Grantee a  certificate  or  certificates  representing  the number of
shares of Issuer Common Stock  specified in the Option Notice and, if the Option
should be exercised in part only, a new Option  evidencing the rights of Grantee
thereof to purchase the balance of the shares of Issuer Common Stock purchasable
hereunder.

                  (h)   Certificates  for Issuer  Common  Stock  delivered  at a
closing hereunder shall be endorsed with a restrictive  legend  substantially as
follows:

                        THE   TRANSFER  OF  THE  SHARES  REPRESENTED   BY   THIS
                  CERTIFICATE  IS SUBJECT TO RESALE  RESTRICTIONS  ARISING UNDER
                  THE SECURITIES ACT OF 1933, AS AMENDED,  AND APPLICABLE  STATE
                  SECURITIES LAWS.

It is understood and agreed that the reference to the resale restrictions of the
Securities  Act in the above legend  shall be removed by delivery of  substitute
certificate(s)  without such reference if Grantee shall have delivered to Issuer
a copy of a letter from the staff of the Securities and Exchange Commission (the
"SEC") or Governmental  Authority  responsible for  administering any applicable
state securities laws or an opinion of counsel to the effect that such legend is
not required for purposes of the Securities Act or applicable  state  securities
laws.  In  addition  such  certificates  shall  bear any other  legend as may be
required by law.

                  (i)   Upon the giving by Grantee to Issuer of an Option Notice
and the tender of the applicable  purchase price in immediately  available funds
on the Closing  Date,  unless  prohibited by  applicable  law,  Grantee shall be
deemed to be the holder of record of the number of shares of Issuer Common Stock
specified in the Option Notice, notwithstanding that the stock transfer books of
Issuer  shall then be closed or that  certificates  representing  such shares of
Issuer  Common Stock shall not then  actually be  delivered  to Grantee.  Issuer
shall pay all expenses and other charges that may be payable in connection  with
the preparation,  issuance and delivery of stock certificates under this Section
2 in the name of Grantee.

        SECTION  3.     Issuer  agrees:   (i) that  it shall at all times  until
the  termination  of this Agreement have reserved for issuance upon the exercise
of the Option that number of  authorized  and reserved  shares of Issuer  Common
Stock equal to the maximum  number of shares of Issuer  Common Stock at any time
and from  time to time  issuable  hereunder,  all of  which  shares  will,  upon
issuance  pursuant  hereto,  be duly  authorized,  validly  issued,  fully paid,
non-assessable,  and delivered free and clear of all claims, liens, encumbrances
and security  interests and not subject to any preemptive  rights;  (ii) that it
will  not,  by  amendment  of  its  certificate  of   incorporation  or  through
reorganization,  consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the  covenants,  stipulations  or  conditions  to be  observed  or  performed
hereunder by Issuer;  (iii) promptly to take all  reasonable  action as may from
time to time be  requested  by Grantee,  at  Grantee's  expense  (including  (x)
complying  with  all  premerger  notification,   reporting  and  waiting  period
requirements  specified  in  15  U.S.C.  ss.  18a  and  regulations  promulgated
thereunder  and (y) in the event prior  approval  of or notice to the FRB,  OCC,
FTC,  DOJ or any  other  Governmental  Authority,  under  the  Hart-Scott-Rodino
Antitrust  Improvements  Act of 1976, as amended,  the Bank Holding Company Act,
the Change in Bank Control  Act, the Home Owners' Loan Act of 1933,  as amended,
or any other applicable federal or state law, is necessary before the Option may
be  exercised),  cooperating  with Grantee in  preparing  such  applications  or
notices and providing such information to each such Governmental Authority as it
may require in order to permit  Grantee to  exercise  the Option and Issuer duly
and effectively to issue shares of Issuer Common Stock pursuant hereto; and (iv)
to take all  action  provided  herein to protect  the rights of Grantee  against
dilution.

                                      -4-

<PAGE>

         SECTION 4. This  Agreement  (and   the   Option  granted   hereby)  are
exchangeable,  without expense, at the option of Grantee,  upon presentation and
surrender  of this  Agreement  at the  principal  office  of  Issuer,  for other
agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth  herein,  in the  aggregate the same number of shares of Issuer Common
Stock purchasable  hereunder.  The terms "Agreement" and "Option" as used herein
include any  agreements  and related  options for which this  Agreement (and the
Option  granted  hereby) may be  exchanged.  Upon  receipt by Issuer of evidence
reasonably  satisfactory to it of the loss, theft,  destruction or mutilation of
this  Agreement,  and (in the case of loss,  theft or destruction) of reasonably
satisfactory  indemnification,  and  upon  surrender  and  cancellation  of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.

         SECTION 5. The number of shares of Issuer Common Stock purchasable upon
the exercise of the Option shall be subject to  adjustment  from time to time as
follows:

              (a)   In  the  event of any change in the type or number of shares
of  Issuer  Common  Stock by  reason  of stock  dividends,  split-ups,  mergers,
recapitalizations,  combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional  shares (other than pursuant to the exercise of
the Option),  the type and number of shares of Issuer  Common Stock  purchasable
upon exercise hereof shall be appropriately  adjusted and proper provision shall
be made so that, in the event that any additional  shares of Issuer Common Stock
are to be issued or otherwise become  outstanding as a result of any such change
(other than  pursuant to an  exercise  of the  Option),  the number of shares of
Issuer  Common  Stock that remain  subject to the Option  shall be  increased or
decreased  (as  applicable)  so that,  after such issuance and together with the
shares of Issuer Common Stock  previously  issued  pursuant to the prior partial
exercise of the Option (as adjusted on account of any of the  foregoing  changes
in the Issuer Common Stock),  such number of shares shall equal the sum of 19.9%
of the  total of the  number  of  shares  of  Issuer  Common  Stock  issued  and
outstanding on the date the Option first becomes exercisable.

              (b)   Whenever   the   number  of shares  of Issuer  Common  Stock
purchasable  upon exercise hereof is adjusted as provided in this Section 5, the
Option  Price shall be adjusted by  multiplying  the Option Price by a fraction,
the  numerator of which shall be equal to the number of shares of Issuer  Common
Stock  purchasable prior to the adjustment and the denominator of which shall be
equal to the  number  of shares of Issuer  Common  Stock  purchasable  after the
adjustment.

         SECTION 6. (a)  Upon the  occurrence  of a Purchase  Event that  occurs
prior to an Exercise  Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any  subsequent  holder of the Option
(or part thereof) or of any of the shares of Issuer Common Stock issued pursuant
hereto),  promptly prepare, file and keep current a shelf registration statement
with the SEC,  under the  Securities Act covering any shares issued and issuable
pursuant to the Option and shall use its  reasonable  best efforts to cause such
registration statement to become effective,  and to remain current and effective
for a period not in excess of 180 days from the day such registration  statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer  Common  Stock  issued  upon total or partial  exercise  of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee.  Grantee shall have the right to demand two such  registrations,  which
demand right shall be  transferable  but in no event shall Issuer be required to
effect more than two  registrations in the aggregate  pursuant to this Option or
any  subdivision  hereof.  Grantee  shall  provide  all  information  reasonably
requested  by Issuer for

                                      -5-

<PAGE>

inclusion in any  registration  statement to be filed  hereunder.  In connection
with any such  registration  statement,  Issuer and Grantee  shall  provide each
other  with  representations,   warranties,  indemnities  and  other  agreements
customarily given in connection with such registration.  If requested by Grantee
in connection with such registration, Issuer and Grantee shall become a party to
any underwriting  agreement relating to the sale of such shares, but only to the
extent of  obligating  themselves  in  respect of  representations,  warranties,
indemnities  and other  agreements  customarily  included  in such  underwriting
agreements and reasonably  acceptable to Issuer.  Notwithstanding the foregoing,
if Grantee  revokes any  exercise  notice or fails to  exercise  any Option with
respect to any exercise notice pursuant to Section 2(e) hereof, Issuer shall not
be obligated to continue  any  registration  process with respect to the sale of
Option Shares issuable upon the exercise of such Option and Grantee shall not be
deemed to have demanded  registration  of Option Shares.  If Issuer  withdraws a
registration  statement  which has been  declared  effective  at the  request of
Grantee, or any subsequent holder, then such filing shall be deemed an effective
registration for all purposes hereunder. The Issuer will not be required to file
any such registration statement during any period of time (not to exceed 30 days
in the case of  clauses  (A) or (C) below or 45 days in the case of  clause  (B)
below) when (A) the Issuer is in possession of material  non-public  information
which it reasonably  believes  would be detrimental to be disclosed at such time
and such information would have to be disclosed if a registration statement were
filed at that time;  (B) the Issuer is required under the Securities Act and the
rules and regulations thereunder to include audited financial statements for any
period in such registration  statement and such financial statements are not yet
available  for  inclusion  in such  registration  statement;  or (C) the  Issuer
reasonably determines that such registration would interfere with any financing,
acquisition  or material  transaction  involving  the Issuer.  The  registration
rights set forth in this Section 6 are subject to the condition that the Grantee
or subsequent holder shall provide the Issuer with such information with respect
to the holder's  securities,  the plan for distribution  thereof, and such other
information  with  respect  to the  holder  that is  required  under  applicable
securities laws to enable the Issuer to include in a registration  statement all
material  facts  required  to  be  disclosed  with  respect  to  a  registration
thereunder,  including  the  identity  of the  holder and the  holder's  plan of
distribution.  The Grantee shall not be able to exercise its registration rights
hereunder if Grantee can rely on Rule 144  promulgated  under the Securities Act
to sell such number of shares of Issuer Common Stock that the Grantee  otherwise
would seek to register.

                  (b)  Concurrently   with  the  preparation  and  filing  of  a
registration  statement  under  Section 6(a) hereof,  Issuer shall also make all
filings  required to comply with state  securities laws in such number of states
as Grantee may reasonably request;  provided,  that Issuer shall not be required
to  qualify  to do  business  in, or  consent  to  service  of  process  in, any
jurisdiction by reason of this provision.

         SECTION 7.    (a)   Upon the occurrence of a Purchase Event that occurs
prior to an Exercise Termination Event, at the request (the date of such request
being the "Option Repurchase Request Date") of Grantee, Issuer shall repurchase,
subject to compliance  with  applicable  law and out of funds legally  available
therefor,  the Option from  Grantee at a price (the "Option  Repurchase  Price")
equal to the  amount by which (A) the  market/offer  price  (as  defined  below)
exceeds (B) the Option  Price,  multiplied by the number of shares for which the
Option  may then be  exercised.  The term  "market/offer  price"  shall mean the
highest  of (i) the price per  share of  Issuer  Common  Stock at which a tender
offer or exchange  offer  therefor has been made after the date hereof and on or
prior to the Option  Repurchase  Request Date (ii) the price per share of Issuer
Common Stock paid or to be paid by any third party pursuant to an agreement with
Issuer  (whether  by way of a merger,  consolidation  or  otherwise),  (iii) the
average of the 20 highest last sale prices for shares of Issuer  Common Stock as
reported within the 90-day period ending on the Option Repurchase  Request Date,
and (iv) in the event of a sale of all or substantially  all of Issuer's assets,
the sum of the price paid in such sale for such  assets and the  current  market
value of the remaining  assets of Issuer as

                                      -6-

<PAGE>


determined  by an  investment  banking firm  selected by Grantee and  reasonably
acceptable  to Issuer,  divided by the number of shares of Issuer  Common  Stock
outstanding at the time of such sale. In determining the market/offer price, the
value of  consideration  other  than cash  shall be the value  determined  by an
investment banking firm selected by Grantee and reasonably acceptable to Issuer.
The investment banking firm's  determination  shall be conclusive and binding on
all parties.

                  (b)  Grantee  may  exercise  its  right to  require  Issuer to
repurchase  the  Option  pursuant  to this  Section 7 by  surrendering  for such
purpose  to  Issuer,  at  its  principal  office,  a  copy  of  this  Agreement,
accompanied  by a written  notice or  notices  stating  that  Grantee  elects to
require  Issuer to repurchase  the Option in accordance  with the  provisions of
this Section 7. As promptly as practicable,  and in any event within 30 business
days after the surrender of the Option and the receipt of such notice or notices
relating  thereto,  Issuer shall deliver or cause to be delivered to Grantee the
Option Repurchase Price.

                  (c)  Issuer  hereby  undertakes  to use  its  reasonable  best
efforts to obtain all required  regulatory,  shareholder and legal approvals and
to file any required  notices as promptly as  practicable in order to accomplish
any repurchase  contemplated by this Section 7. Nonetheless,  to the extent that
Issuer is prohibited  under  applicable law or regulation from  repurchasing the
Option in full,  Issuer shall promptly so notify Grantee and thereafter  deliver
or cause to be  delivered,  from time to time,  to  Grantee  the  portion of the
Option Repurchase Price that it is no longer prohibited from delivering,  within
five  business  days after the date on which Issuer is no longer so  prohibited;
provided,  however,  that if Issuer at any time  after  delivery  of a notice of
repurchase  pursuant to Section 7(b) hereof is  prohibited as referred to above,
from  delivering  to Grantee the Option  Repurchase  Price in full,  Grantee may
revoke  its  notice  of  repurchase  of the  Option  either  in whole or in part
whereupon,  in the case of a  revocation  in part,  Issuer  shall  promptly  (i)
deliver to Grantee that portion of the Option  Purchase Price that Issuer is not
prohibited  from  delivering  after taking into account any such  revocation and
(ii) deliver, as appropriate,  to Grantee, a new Agreement  evidencing the right
of Grantee to purchase that number of shares of Issuer Common Stock equal to the
number of shares of Issuer  Common Stock  purchasable  immediately  prior to the
delivery of the notice of repurchase  less the number of shares of Issuer Common
Stock covered by the portion of the Option repurchased.

                  (d)  Issuer shall not enter into any agreement with any Person
(other than  Grantee or a Grantee  Subsidiary)  for an  Acquisition  Transaction
unless the other Person assumes all the  obligations of Issuer  pursuant to this
Section 7 in the event that Grantee elects,  in its sole discretion,  to require
such other Person to perform such obligations.

         SECTION 8.    Notwithstanding Sections 2 and 6 hereof,  if Grantee  has
given the notice  referred to in one or more of such  Sections,  the exercise of
the rights  specified in any such Section  shall be extended (a) if the exercise
of such rights requires obtaining  regulatory  approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory  approvals for
the exercise of such rights,  and (b) to the extent necessary to avoid liability
under  Section 16(b) of the Exchange Act by reason of such  exercise;  provided,
that in no event  shall any  closing  date occur  more than 12 months  after the
related  notice date,  and, if the closing date shall not have  occurred  within
such period due to the failure to obtain any required  approval by the FRB, OCC,
OTS, FTC, DOJ or any other  Governmental  Authority  despite the reasonable best
efforts of Grantee  and Issuer to obtain  such  approvals,  the  exercise of the
rights shall be deemed to have been  rescinded as of the related notice date. In
the event (a) Grantee receives official notice that an approval of the FRB, OCC,
FTC, DOJ or any other Governmental  Authority required for the purchase and sale
of the Option Shares will not be issued or granted or (b) a closing date has not
occurred  within 12 months  after the related  notice date due to the failure to
obtain any such  required  approval,  Grantee  shall be entitled to exercise the
Option in connection with the concurrent resale of the Option Shares pursuant to
a registration statement as provided in Section 6 hereof.

                                      -7-

<PAGE>

        SECTION 9.  Issuer hereby represents and warrants to Grantee as follows:

               (a)  Issuer  has  the requisite  corporate power and authority to
execute  and  deliver  this  Agreement  and  to  consummate   the   transactions
contemplated  hereby.  The  execution  and  delivery of this  Agreement  and the
consummation of the transactions  contemplated hereby have been duly approved by
the Board of Directors of Issuer and no other corporate  proceedings on the part
of Issuer are  necessary  to  authorize  this  Agreement  or to  consummate  the
transactions  so  contemplated.  This  Agreement  has  been  duly  executed  and
delivered  by,  and  constitutes  a valid and  binding  obligation  of,  Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental  Approval,  and except as enforceability  thereof may be limited by
applicable bankruptcy, insolvency, reorganization,  moratorium and other similar
laws  affecting  the  enforcement  of  creditors'  rights  generally and general
principles of equity.

               (b)  Issuer   has  taken  all   necessary   corporate  action  to
authorize and reserve and to permit it to issue,  and at all times from the date
hereof through the  termination  of this Agreement in accordance  with its terms
will have reserved for issuance upon the exercise of the Option,  that number of
shares of Issuer  Common  Stock equal to the maximum  number of shares of Issuer
Common Stock at any time and from time to time issuable hereunder,  and all such
shares, upon issuance pursuant hereto, will be duly authorized,  validly issued,
fully paid, non-assessable,  and will be delivered free and clear of all claims,
liens,  encumbrances  and security  interests and not subject to any  preemptive
rights.

        SECTION 10. (a)  Neither  of  the  parties  hereto may assign any of its
rights or delegate  any of its  obligations  under this  Agreement or the Option
created hereunder to any other Person without the express written consent of the
other  party,  except that  Grantee may assign this  Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this  Agreement  shall  also be deemed to refer to  Grantee's  permitted
assigns.

               (b)  Any  assignment  of  rights  of  Grantee  to  any  permitted
assignee of Grantee hereunder shall bear the restrictive legend at the beginning
thereof substantially as follows:

               THE TRANSFER OF THE OPTION REPRESENTED BY THIS ASSIGNMENT AND THE
        RELATED OPTION AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS ARISING UNDER
        THE  SECURITIES   ACT  OF  1933,   AS  AMENDED,  AND  APPLICABLE   STATE
        SECURITIES  LAWS AND TO  CERTAIN  PROVISIONS  OF  AN  AGREEMENT  BETWEEN
        CATSKILL  FINANCIAL CORPORATION AND TROY FINANCIAL CORPORATION ("TROY"),
        DATED AS  OF JUNE __, 2000.  A COPY OF SUCH  AGREEMENT IS ON FILE AT THE
        PRINCIPAL  OFFICE  OF  TROY,  AND  WILL  BE  PROVIDED  TO ANY  PERMITTED
        ASSIGNEE  OF THE OPTION WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST
        THEREFOR.

        SECTION 11. Each  of Grantee and Issuer will use its reasonable  efforts
to make  all  filings  with,  and to  obtain  consents  of,  all  third  parties
including,  if  applicable,  the  FRB,  OCC,  FTC,  DOJ and  other  Governmental
Authorities  necessary to the consummation of the  transactions  contemplated by
this Agreement.

        SECTION 12. The  parties  hereto  acknowledge  that damages  would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the  obligations  of the parties

                                      -8-

<PAGE>

hereto shall be enforceable  by either party hereto through  injunctive or other
equitable  relief.  Both parties  further agree to waive any requirement for the
securing or posting of any bond in  connection  with the  obtaining  of any such
equitable  relief  and that this  provision  is without  prejudice  to any other
rights  that the  parties  hereto  may  have for any  failure  to  perform  this
Agreement.

         SECTION 13. If any term,  provision,  covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory  agency of
competent  jurisdiction to be invalid,  void or unenforceable,  the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or  invalidated.  If for any reason such court or regulatory  agency  determines
that  Grantee  is not  permitted  to  acquire  or  Issuer  is not  permitted  to
repurchase  pursuant  to Section 7 hereof,  the full  number of shares of Issuer
Common Stock provided in Section 1 hereof (as adjusted pursuant  hereto),  it is
the express intention of Issuer to allow Grantee to acquire or to require Issuer
to  repurchase  such lesser number of shares as may be  permissible  without any
amendment or modification hereof.

         SECTION 14. All  notices,   requests,   claims,   demands   and   other
communications  hereunder shall be deemed to have been duly given when delivered
in the manner and at the  respective  addresses  of the parties set forth in the
Plan.

         SECTION 15. This  Agreement,  the rights and obligations of the parties
hereto,  and any claims or disputes  relating  thereto  shall be governed by and
construed  in  accordance  with  the  laws of the  State  of  Delaware  (but not
including the choice of law rules thereof).

         SECTION 16. This  Agreement  may be executed in  counterparts,  each of
which shall be deemed to be an original,  but all of which shall  constitute one
and the same  agreement  and shall be  effective  at the time of  execution  and
delivery.

         SECTION 17. Except as otherwise  expressly provided herein, each of the
parties  hereto shall bear and pay all costs and  expenses  incurred by it or on
its behalf in connection with the transactions contemplated hereunder.

         SECTION 18. Except  as otherwise  expressly  provided  herein or in the
Plan,  this  Agreement  contains the entire  agreement  between the parties with
respect to the  transactions  contemplated  hereunder and  supersedes  all prior
arrangements or understandings with respect thereof,  written or oral. The terms
and  conditions of this  Agreement  shall inure to the benefit of and be binding
upon the parties hereto and their respective  successors and permitted  assigns.
Nothing in this Agreement,  expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective  successors except as
assigns, any rights, remedies,  obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.

         SECTION 19. Capitalized  terms  used in this  Agreement and not defined
herein but defined in the Plan shall have the meanings assigned therein.

         SECTION 20. Nothing  contained  in  this  Agreement  shall be deemed to
authorize  or require  Issuer or Grantee to breach any  provision of the Plan or
any provision of law applicable to the Grantee or Issuer.

         SECTION 21. In the event that any selection or  determination  is to be
made  by  Grantee  or a  subsequent  holder  hereunder  and at the  time of such
selection  or  determination  there is more than one  Grantee or  holders,  such
selection shall be made by a majority in interest of such Grantees or holders.

                                      -9-

<PAGE>

         SECTION 22. In  the event of any  exercise  of the  option by  Grantee,
Issuer and such  Grantee  shall  execute  and deliver  all other  documents  and
instruments and take all other action that may be reasonably  necessary in order
to consummate the transactions provided for by such exercise.

         SECTION 23. Except to the extent Grantee exercises the Option,  Grantee
shall have no rights to vote or receive  dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.

                            [SIGNATURE PAGE FOLLOWS]





                                      -10-

<PAGE>


         IN  WITNESS  WHEREOF,  each  of the  parties  has  caused  this  Option
Agreement  to be  executed  and  delivered  on its  behalf  by their  respective
officers thereunto duly authorized, all as of the date first above written.

                                  CATSKILL FINANCIAL CORPORATION

                                  By:
                                      ------------------------------------------
                                  Name:  Wilbur J. Cross
                                  Title: Chairman, President and Chief Executive
                                         Officer

                                  TROY FINANCIAL CORPORATION

                                  By:
                                      ------------------------------------------
                                  Name:  Daniel J. Hogarty, Jr.
                                  Title: Chairman, President and Chief Executive
                                         Officer





                                      -11-

<PAGE>

                                                                       Exhibit C

                              CERTIFICATE OF MERGER

                         CHARLIE ACQUISITION CORPORATION

                                      INTO

                         CATSKILL FINANCIAL CORPORATION

         Pursuant to Title 8, Section 251 of the General  Corporation Law of the
State of Delaware,  Charlie Acquisition Corporation, a corporation organized and
existing  under  the law of the State of  Delaware  ("Acquisition  Corp."),  and
Catskill Financial  Corporation,  a corporation organized and existing under the
law of the State of Delaware  ("Catskill"),  do hereby  certify to the following
facts relating to the merger of Acquisition Corp. with and into Catskill:

         FIRST: The name and state of  incorporation of each constituent  entity
that is a party to the Merger is as follows:

                  Name                                   State of Incorporation
                  ----                                   ----------------------

         Charlie Acquisition Corporation                      Delaware

         Catskill Financial Corporation                       Delaware

         SECOND: An Agreement and Plan of Merger, dated as of June ___, 2000, by
and among Tom Financial Corporation,  Acquisition  Corporation and Catskill (the
"Agreement and Plan of Merger"), has been approved, adopted, certified, executed
and acknowledged by each of the constituent  corporations in accordance with the
requirements  of  Section  251 of the  General  Corporation  Law of the State of
Delaware.

         THIRD:  Pursuant to the  Agreement  and Plan of Merger,  the  surviving
corporation  of the Merger is Catskill.  Catskill  shall  continue its existence
under its present name pursuant to the provisions of the General Corporation Law
of the State of Delaware.

         FOURTH:  The Merger shall be effective as of ____________ __, 2000 (the
"Effective Time").

<PAGE>


         FIFTH:   At the Effective Time, the  certificate of  incorporation,  as
amended,  of Catskill  shall be amended to read in its  entirety as set forth in
Exhibit I hereto.

         SIXTH:   The executed  Agreement  and Plan of  Merger is on file at the
office of Catskill at the following address:

                                32 Second Street
                                Troy, NY 12180

         SEVENTH:  A copy of the  Agreement and Plan of Merger will be furnished
by Catskill,  on request and without cost, to any shareholder of any constituent
corporation.



<PAGE>



         IN WITNESS  WHEREOF,  Catskill has caused this Certificate of Merger to
be duly executed as of this ___ day of ___________, ____.


                                      CATSKILL FINANCIAL CORPORATION

                                      By:
                                         ---------------------------------------
                                      Name:
                                      Title:




<PAGE>


                                                                       EXHIBIT I

                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                         CATSKILL FINANCIAL CORPORATION

ARTICLE 1. NAME

           The name of this corporation is Catskill Financial  Corporation  (the
"CORPORATION").

ARTICLE 2. REGISTERED OFFICE AND AGENT

           The registered office of the  Corporation  shall be  located  at 1209
Orange Street,  Wilmington, DE 19801 in the County of New Castle. The registered
agent of the Corporation at such address shall be Corporation Trust Company.

ARTICLE 3. PURPOSE AND POWERS

           The purpose of the  Corporation  is to  engage in any  lawful  act or
activity for which  corporations may be organized under the General  Corporation
Law of the State of Delaware  (the  "DELAWARE  GENERAL  CORPORATION  LAW").  The
Corporation  shall  have all  power  necessary  or  convenient  to the  conduct,
promotion or attainment of such acts and activities.

ARTICLE 4. CAPITAL STOCK

      4.1. AUTHORIZED SHARES

           The  total  number  of  shares  of all  classes  of  stock  that  the
Corporation  Corporation shall have the authority to issue is 1,000. All of such
shares  shall be common  stock  having a par  value of $.01 per  share  ("Common
Stock").

      4.2. COMMON STOCK

           4.2.1. RELATIVE RIGHTS

           Each share of Common Stock shall have the same relative rights as and
be identical in all respects to all the other shares of Common Stock.

<PAGE>


           4.2.2. DIVIDENDS

           Dividends  may be paid or funds may be set aside for payment only out
of any  assets  legally  available  for the  payment of  dividends,  when and as
declared by the Board of Directors of the Corporation.

           4.2.3. DISSOLUTION, LIQUIDATION, WINDING UP

           In the event of any  dissolution,  liquidation,  or winding up of the
Corporation,  whether voluntary or involuntary,  the holders of the Common Stock
shall become  entitled to participate in the  distribution  of any assets of the
Corporation  remaining  after the  Corporation  shall have paid, or provided for
payment of, all debts and liabilities of the Corporation.

           4.2.4. VOTING RIGHTS

           Each holder of shares of Common Stock shall be entitled to attend all
special and annual  meetings of the  stockholders of the Corporation and to cast
one vote for each  outstanding  share of Common Stock so held upon any matter or
thing  (including,  without  limitation,  the election of one or more directors)
properly considered and acted upon by the stockholders.

ARTICLE 5. BOARD OF DIRECTORS

      5.1. NUMBER; ELECTION

           The number of  directors of the  Corporation  shall be such number as
from time to time shall be fixed by, or in the manner provided in, the bylaws of
the  Corporation.  Unless  and  except  to the  extent  that the  bylaws  of the
Corporation  shall  otherwise   require,   the  election  of  directors  of  the
Corporation need not be by written ballot.  Except as otherwise provided in this
Certificate of Incorporation, each director of the Corporation shall be entitled
to one vote per  director  on all  matters  voted or acted  upon by the Board of
Directors.

      5.2. MANAGEMENT OF BUSINESS AND AFFAIRS OF THE CORPORATION

           The  business and affairs of the  Corporation  shall be managed by or
under the direction of the Board of Directors.

      5.3. LIMITATION OF LIABILITY

           No director of the Corporation  shall be liable to the Corporation or
its  stockholders  for  monetary  damages  for  breach  of  fiduciary  duty as a
director,  provided  that  this  provision  shall  not  eliminate  or limit  the
liability of a director (a) for any breach of the director's  duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) under
Section 174 of the Delaware General  Corporation Law; or (d) for any transaction
from which the  director  derived an improper  personal  benefit.  Any repeal or
modification  of

<PAGE>

this ARTICLE 5.3 shall be  prospective  only and shall not adversely  affect any
right or protection of, or any limitation of the liability of, a director of the
Corporation  existing at, or arising out of facts or incidents  occurring  prior
to, the effective date of such repeal or modification.

ARTICLE 6.  COMPROMISE OR ARRANGEMENTS

            Whenever  a  compromise  or  arrangement  is  proposed  between  the
Corporation  and  its  creditors  or  any  class  of  them  and/or  between  the
Corporation  and its  stockholders  or any class of them, any court of equitable
jurisdiction  within the State of Delaware may, on the  application in a summary
way of the  Corporation  or of any  creditor  or  stockholder  thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the  application
of trustees in  dissolution  or of any receiver or receivers  appointed  for the
Corporation  under the provisions of Section 279 of Title 8 of the Delaware Code
order  a  meeting  of  the  creditors  or  class  of  creditors,  and/or  of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such  manner as the said court  directs.  If a majority in number
representing  three-fourths  in value of the  creditors  or class of  creditors,
and/or of the stockholders or class of stockholders of the  Corporation,  as the
case may be, agree to any compromise or arrangement and to any reorganization of
the  Corporation as a consequence of such  compromise or  arrangement,  the said
compromise or arrangement  and the said  reorganization  shall, if sanctioned by
the court to which the said  application  has been  made,  be binding on all the
creditors  or class of  creditors,  and/or on all the  stockholders  or class of
stockholders,  of  the  Corporation,  as  the  case  may  be,  and  also  on the
Corporation.

ARTICLE 7.  AMENDMENT OF BYLAWS

            In furtherance and not in limitation of the powers  conferred by the
Delaware  General  Corporation Law, the Board of Directors of the Corporation is
expressly  authorized and empowered to adopt, amend and repeal the bylaws of the
Corporation.

ARTICLE 8.  RESERVATION OF RIGHT TO AMEND CERTIFICATE OF INCORPORATION

            The  Corporation  reserves  the right at any time,  and from time to
time,  to amend,  alter,  change,  or repeal  any  provision  contained  in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or  inserted,  in the manner
now or hereafter prescribed by law; and all rights, preferences,  and privileges
of any nature conferred upon  stockholders,  directors,  or any other persons by
and  pursuant to this  Certificate  of  Incorporation  in its present form or as
hereafter amended are granted subject to the rights reserved in this ARTICLE 8.


<PAGE>

                                                                       Exhibit D

                         CATSKILL FINANCIAL CORPORATION

                              STOCKHOLDER AGREEMENT

            This  STOCKHOLDER  AGREEMENT,  dated as of June __, 2000, is entered
into by and among Troy Financial  Corporation,  a Delaware corporation ("Troy"),
and the stockholders of Catskill Financial  Corporation,  a Delaware corporation
("Catskill"),    identified   on   Schedule   I   hereto   (collectively,    the
"Stockholders"),  who are directors,  executive  officers or other affiliates of
Catskill  (for  purposes  of Rule 145  under  the  Securities  Act of  1933,  as
amended).

            WHEREAS,   Troy,  Charlie   Acquisition   Corporation,   a  Delaware
corporation  ("Merger Sub") and Catskill have entered into an Agreement and Plan
of Merger,  dated as of June __, 2000 (the  "Agreement"),  which is  conditioned
upon the execution of this  Stockholder  Agreement and which provides for, among
other  things,  the merger of Merger Sub with and into  Catskill,  with Catskill
being the surviving  corporation and becoming a wholly owned subsidiary of Troy,
in a cash transaction (the "Merger"); and

            WHEREAS,  in order to induce Troy to enter into and  consummate  the
Agreement, each of the Stockholders agrees to, among other things, vote in favor
of the  Agreement,  the Merger and the other  transactions  contemplated  by the
Agreement in his or her capacity as a stockholder of Catskill;

            NOW,  THEREFORE  in  consideration  of  the  premises,   the  mutual
covenants  and   agreements  set  forth  herein  and  other  good  and  valuable
consideration,  the  sufficiency  of which is hereby  acknowledged,  the parties
hereto agree as follows:

       1.   OWNERSHIP OF CATSKILL COMMON STOCK.  Each Stockholder represents and
warrants that the number of shares of Catskill common stock, par value $0.01 per
share ("Catskill Common Stock"),  set forth opposite such Stockholder's  name on
Schedule  I  hereto  is the total number of shares of Catskill Common Stock over
which such person has  "beneficial  ownership"  within the meaning of Rule 13d-3
under  the  Securities  Exchange  Act of  1934,  as  amended,  except  that  the
provisions of Rule  13d-3(d)(1)(i)  shall be considered  without any limit as to
time.

       2.   AGREEMENTS  OF  THE  STOCKHOLDERS.  Each  Stockholder  covenants and
agrees that:

            (a)  Such  Stockholder  shall,  at any  meeting  of the  holders  of
Catskill  Common Stock called for the purpose (or in connection  with any action
taken by  written  consent),  vote or cause to be voted all  shares of  Catskill
Common Stock with respect to which such  Stockholder has voting power (including
the power to vote or to  direct  the  voting  of)  whether  owned as of the date
hereof or hereafter  acquired (the "Shares") (i) in favor of the Agreement,  the
Merger and the other transactions contemplated by the Agreement and (ii) against
any plan or proposal  pursuant to which  Catskill is to be acquired by or merged
with, or pursuant to which Catskill proposes to sell all or substantially all of
its assets and liabilities  to, any person,  entity or group (other than Troy or
any  affiliate  thereof)  or any  other  action  that is  inconsistent  with the
Agreement or the transactions contemplated thereby.

            (b)  Stockholder  hereby  agrees  to timely  deliver  to Troy a duly
executed  proxy in the form  attached  hereto as Exhibit A (the  "Proxy"),  such
Proxy to cover all of the  Shares.  In the event that  Stockholder  is unable to
provide  any such Proxy in a timely  manner,  Stockholder  hereby

<PAGE>

grants Troy a power of  attorney  to execute  and deliver  such Proxy for and on
behalf of  Stockholder,  such power of  attorney,  which being  coupled  with an
interest,  shall survive any death,  disability,  bankruptcy,  or any other such
impediment  of  Stockholder.  Upon  execution of this  Stockholder  Agreement by
Stockholder,  Stockholder  hereby revokes any and all prior proxies or powers of
attorney  given by  Stockholder  with respect to the Shares and agrees not grant
any  subsequent  proxies or powers of attorney  with respect to the Shares until
the earlier of (i) such date and time as the Merger  shall  become  effective in
accordance  with the terms and  provisions  of the Agreement or (ii) the date of
termination of this Stockholder Agreement pursuant to Section 4 hereto.

            (c) Except as otherwise expressly permitted hereby, such Stockholder
shall not sell,  pledge,  transfer or otherwise  dispose of his or her shares of
Catskill Common Stock.

            (d) Such   Stockholder  shall  not  in  his  or  her  capacity  as a
stockholder of Catskill directly or indirectly encourage or solicit, initiate or
hold  discussions  or  negotiations  with,  or provide any  information  to, any
person, entity or group (other than Troy or an affiliate thereof) concerning any
merger, sale of all or substantially all of the assets or liabilities not in the
ordinary  course  of  business,  sale of  shares  of  capital  stock or  similar
transaction  involving Catskill or otherwise  inconsistent with the Agreement or
the  transactions   contemplated  thereby.  Nothing  herein  shall  impair  such
Stockholder's fiduciary obligations as a director of Catskill.

            (e) Stockholder  shall  use his or her best efforts to take or cause
to be taken  all  action,  and to do or cause to be done all  things  necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Merger contemplated by the Agreement.

     3.     SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge,  transfer or
otherwise  dispose of his or her shares of Catskill  Common  Stock only with the
prior written  consent of Troy and if the acquirer of such Catskill Common Stock
agrees in writing to be bound by this Stockholder Agreement.

     4.     TERMINATION.  The  parties  agree and intend  that this  Stockholder
Agreement  be a valid and  binding  agreement  enforceable  against  the parties
hereto  and that  damages  and  other  remedies  at law for the  breach  of this
Stockholder  Agreement  are  inadequate.   This  Stockholder  Agreement  may  be
terminated  at any time prior to the  consummation  of the Merger by the written
consent of the parties hereto and shall be automatically terminated in the event
that the  Agreement  is  terminated  in  accordance  with its  terms;  provided,
however,  that if the  holders of  Catskill  Common  Stock  fail to approve  the
Agreement  or  Catskill  fails to hold a  stockholders'  meeting  to vote on the
Agreement,  then (i) Section 2(a) clause (ii) hereof shall continue in effect as
to any plan or proposal  received by Catskill  from any person,  entity or group
(other  than Troy or any  affiliate  thereof)  prior to the  termination  of the
Agreement or within 240 days after such  termination  ("Plan or  Proposal")  and
(ii) Section 2(c) hereof shall continue in effect to preclude a sale (other than
pursuant to normal  brokers  transactions  on the Nasdaq Stock  Market),  pledge
(other  than to a bona  fide  financial  institution  or  recognized  securities
dealer),  transfer  or other  disposition  directly  or  indirectly  to any such
person,  entity or group in  connection  with any such Plan or Proposal,  except
upon consummation of such Plan or Proposal.

     5.     NOTICES.  Notices  may be provided to Troy and the  Stockholders  in
the manner  specified in the Agreement,  with all notices  to  the  Stockholders
being provided to them at the addresses set forth at Schedule I.

     6.     GOVERNING LAW. This Stockholder  Agreement  shall be governed by the
laws of the State of Delaware,  without giving  effect  to  the   principles  of
conflicts of laws thereof.

                                      -2-

<PAGE>

     7.     COUNTERPARTS.  This Stockholder  Agreement  may be  executed  in one
or more counterparts, all of which shall be considered one and the same and each
of which shall be deemed an original.

     8.     HEADINGS.  The Section  headings  contained herein are for reference
purposes only and shall not affect in any way the meaning  or  interpretation of
this Stockholder Agreement.

     9.     REGULATORY APPROVAL.  If any provision of this Stockholder Agreement
requires the approval of any  regulatory  authority in order to be  enforceable,
then such  provision  shall not be  effective  until such  approval is obtained;
provided, however, that the foregoing shall not affect the enforceability of any
other provision of this Stockholder Agreement.

                             SIGNATURE PAGE FOLLOWS





                                      -3-

<PAGE>



         IN WITNESS WHEREOF, Troy, by a duly authorized officer, and each of the
Stockholders have caused this Stockholder Agreement to be executed and delivered
as of the day and year first above written.

TROY FINANCIAL CORPORATION


By:
    -----------------------------------------------
    Daniel J. Hogarty, Jr.
    Chairman, President and Chief Executive Officer




STOCKHOLDERS:


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


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


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


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


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


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


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


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

<PAGE>


                                   SCHEDULE I

                                             Number of Shares of Catskill Common
Name and Address of Stockholder                   Stock Beneficially Owned
-------------------------------              -----------------------------------


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                                IRREVOCABLE PROXY

                                TO VOTE STOCK OF

                         CATSKILL FINANCIAL CORPORATION

                  The undersigned stockholder of Catskill Financial Corporation,
a Delaware  corporation  ("Catskill"),  hereby  irrevocably  (to the full extent
permitted by the Delaware  General  Corporation Law) appoints the members of the
Board  of  Directors  of Troy  Financial  Corporation,  a  Delaware  corporation
("Troy"),  and each of them,  or any  other  designee  of Troy,  as the sole and
exclusive  attorneys  and  proxies  of  the  undersigned,  with  full  power  of
substitution  and  resubstitution,  to vote and  exercise all voting and related
rights (to the full  extent  that the  undersigned  is  entitled  to do so) with
respect  to all of the  shares  of  capital  stock of  Catskill  that now are or
hereafter may be beneficially  owned by the  undersigned,  and any and all other
shares or  securities  of Catskill  issued or issuable in respect  thereof on or
after the date hereof (collectively,  the "Shares") in accordance with the terms
of this  Irrevocable  Proxy.  The Shares  beneficially  owned by the undersigned
stockholder of Catskill as of the date of this  Irrevocable  Proxy are listed on
the final page of this Irrevocable  Proxy. Upon the  undersigned's  execution of
this Irrevocable  Proxy, any and all prior proxies given by the undersigned with
respect to any Shares are hereby revoked and the undersigned agrees not to grant
any  subsequent  proxies with  respect to the Shares until after the  Expiration
Date (as defined below).

                  This Irrevocable  Proxy is irrevocable (to the extent provided
in  the  Delaware  General  Corporation  Law),  is  coupled  with  an  interest,
including, but not limited to that certain Agreement and Plan of Merger dated as
of even  date  herewith  by and  among  Troy,  Charlie  Acquisition  Corporation
("Merger Sub") and Catskill ("Merger Agreement") and is granted in consideration
of Troy  entering  into the Merger  Agreement  for the merger of Merger Sub into
Catskill,  with Catskill being the surviving  corporation  and becoming a wholly
owned  subsidiary of Troy (the "Merger").  As used herein,  the term "Expiration
Date"  shall  mean the  earlier to occur of (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger
Agreement, and (ii) the date of termination of the Merger Agreement.

                  The attorneys  and proxies  named above,  and each of them are
hereby  authorized  and empowered by the  undersigned,  at any time prior to the
Expiration  Date,  to act as the  undersigned's  attorney  and proxy to vote the
Shares,  and to exercise  all voting and other  rights of the  undersigned  with
respect to the Shares (including,  without limitation,  the power to execute and
deliver written consents  pursuant to the Delaware General  Corporation Law), at
every annual,  special or adjourned  meeting of the stockholders of Catskill and
in every written consent in lieu of such meeting:

                  in favor of approval and adoption of the Merger Agreement  and
                  of the transactions contemplated thereby.

                  The  attorneys  and proxies  named above may not exercise this
Irrevocable  Proxy on any other matter except as provided above. The undersigned
stockholder may vote the Shares on all other matters.

                  All  authority  herein  conferred  shall  survive the death or
incapacity of the undersigned  and any obligation of the  undersigned  hereunder
shall be  binding  upon the  heirs,  personal  representatives,  successors  and
assigns of the undersigned.

                                      -1-

<PAGE>


                  This  Irrevocable  Proxy  shall  terminate  on,  and  be of no
further force or effect after, the Expiration Date.



                            (SIGNATURE PAGE FOLLOWS)








                                      -2-

<PAGE>


                  This  Irrevocable   Proxy  is  coupled  with  an  interest  as
aforesaid and is irrevocable.

Dated:  June __, 2000


                                           -------------------------------------
                                           (Signature of Stockholder)




                                           -------------------------------------
                                           (Print Name of Stockholder)




                                           Shares beneficially owned:



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



                       SIGNATURE PAGE TO IRREVOCABLE PROXY






                                      -3-