EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT  ("Agreement") is made and entered into as of
this 1st day of April,  1998,  by and between  Catskill  Savings  Bank,  a stock
savings bank  organized  and  operating  under the laws of the United States and
having  its  executive  office  at 341 Main  Street,  Catskill,  New York  12414
(hereinafter  referred to as the  "Bank"),  and Wilbur J. Cross,  residing at 45
Prospect Avenue, Catskill, New York 12414.

         WHEREAS,  Mr.  Cross  is  currently  serving  as  President  and  Chief
Executive Officer of the Bank pursuant to an Employment Agreement dated April 1,
1996;

         WHEREAS,  certain  deficiencies  have  been  identified  in  such  1996
Employment Agreement which the parties agree are inequitable; and

         WHEREAS,  the Board of Directors of the Bank (the "Board")  believes it
is in the best interests of the Bank to enter into this Agreement with Mr. Cross
in order to correct such  deficiencies,  assure  continuity  and  reinforce  and
encourage  the continued  attention and  dedication of Mr. Cross to his assigned
duties without distraction; and

         WHEREAS,  the Board has approved and  authorized  the execution of this
Agreement and Mr. Cross is agreeable thereto.

         NOW,   THEREFORE,   in   consideration  of  the  mutual  covenants  and
obligations  of the  parties  hereto  hereinafter  set  forth,  it is  agreed as
follows:

<PAGE>

         1.  DEFINITIONS.

         (a) The term "Change in Control"  means:  (1) an event of a nature that
(i)  results  in a  change  in  control  of the  Bank or of  Catskill  Financial
Corporation,  the Delaware  corporation  which owns all of the Bank's stock (the
"Holding Company"),  within the meaning of the Home Owners' Loan Act of 1993 and
12 C. F. R. Part 574 as in effect on the date hereof;  or (ii) would be required
to be reported  in  response to Item 1 of the current  report on Form 8-K, as in
effect on the date  hereof,  pursuant  to Section 13 or 15(d) of the  Securities
Exchange Act of 1934 (the "Exchange  Act");  (2) any person (as the term is used
in Sections  13(d) and 14(d) of the Exchange  Act) is or becomes the  beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly of securities of the Bank or the Holding Company  representing 25% or
more of the Bank's or the Holding  Company's then  outstanding  securities;  (3)
individuals who are members of the board of directors of the Bank or the Holding
Company on the date hereof (each the "Incumbent  Board") cease,  for any reason,
to constitute at least a majority  thereof,  provided that any person becoming a
director  subsequent to the date hereof whose election was approved by a vote of
at least  three-quarters  of the directors  comprising the Incumbent  Board,  or
whose nomination for election by the Holding Company's stockholders was approved
by  the  nominating  committee  serving  under  an  Incumbent  Board,  shall  be
considered a member of the Incumbent  Board;  or (4) a  reorganization,  merger,
consolidation, sale of all or substantially all of the assets of the Bank or the
Holding  Company  or a  similar  transaction  in which  the Bank or the  Holding
Company is not the  resulting  entity.  The term  "Change in Control"  shall not
include an

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<PAGE>

acquisition of securities by: (1) the trustee of an employee benefit plan of the
Bank or the Holding Company; (2) a corporation owned, directly or indirectly, by
the stockholders of the Holding Company in substantially the same proportions as
their ownership of stock of the Holding Company;  or (3) Mr. Cross, or any group
otherwise constituting a person in which Mr. Cross is a member.

         (b) The term "Commencement Date" means April 1, 1998.

         (c) The term "Date of Termination"  means the date upon which Mr. Cross
ceases to serve as President and Chief Executive Officer of the Bank.

         (d)  The  term  "Voluntary   Termination"   means  termination  of  the
employment by Mr. Cross by resignation upon 90 days written notice but shall not
include resignation following a Change in Control (see subparagraph 1(e) below),
or  material  breach  of  this  Agreement  (see   subparagraph  1(e)  below)  or
disability.

         (e) The  term  "Involuntarily  Termination"  means  termination  of the
employment  of Mr.  Cross by the Bank for any reason  other  than those  reasons
which  constitute   Termination  for  Cause  (see   subparagraph   1(f),(below).
Involuntarily  Termination  shall also include  termination of the employment by
Mr. Cross as a result of his resignation, upon 30 days written notice, following
a Change in  Control or  material  breach of this  Agreement  such as a material
diminution or  interference  with his duties,  responsibilities  and benefits as
President  and  Chief  Executive  Officer  of  the  Bank,   including   (without
limitation) any of the following  actions unless  consented to in writing by Mr.
Cross:  (1) a change in the  principal  workplace of Mr. Cross to a location (i)
outside of a 30 mile radius from the 341 Main Street, Catskill, New York or (ii)
other

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<PAGE>

than the Bank's executive  office;  (2) a material  demotion of Mr. Cross; (3) a
material reduction in the number or seniority of other Bank personnel  reporting
to Mr. Cross or a material  reduction in the number or frequency with which,  or
in the nature of the matters with respect to which, such personnel are to report
to Mr. Cross, other than as part of a Bank- or Holding Company-wide reduction in
staff;  (4) a  material  adverse  change  in  Mr.  Cross'  salary,  perquisites,
benefits,  contingent  benefits  or  vacation,  other than as part of an overall
program applied uniformly and with equitable effect to all members of the senior
management of the Bank or the Holding Company; (5) a material permanent increase
in the required  hours of work or the workload of Mr. Cross;  and (6) a material
reduction  in the support  services  and  facilities  available  to Mr. Cross in
connection with his performance of his duties and responsibilities.

         (f)  The  term   "Termination  for  Cause"  means  termination  of  the
employment  of Mr.  Cross  because  of his  personal  dishonesty,  incompetence,
willful  misconduct,  breach of a  fiduciary  duty  involving  personal  profit,
intentional  failure to perform  stated  duties,  willful  violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist  order,  or material breach of any provision of this Agreement.
Mr. Cross shall not be deemed to have been Terminated for Cause unless and until
there shall have been  delivered to him a copy of a resolution,  duly adopted by
the affirmative vote of not less than a majority of the entire membership of the
Board at a  meeting  of the  Board  called  and held  for  such  purpose  (after
reasonable  notice to Mr. Cross and an  opportunity  for him,  together with his
counsel, to be heard before the Board),  stating that, in the good faith opinion
of the Board,  Mr. Cross has 

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<PAGE>

engaged in conduct  described in this  subparagraph  1(f),  and  specifying  the
particulars thereof in detail.

         2. TERM.  The term of this  Agreement  shall be a period of three years
commencing on the Commencement Date, subject to earlier  termination as provided
herein. Beginning on the first anniversary of the Commencement Date, and on each
anniversary  thereafter,  the term of this  Agreement  shall be  extended  for a
period of one year in addition to the then-remaining term, provided that (1) the
Bank has not given notice in writing to Mr. Cross at least 90 days prior to such
anniversary that the term of this Agreement shall not be extended  further;  and
(2) prior to such  anniversary,  the  Board of the Bank  explicitly  reviews  ad
approves the extension.  Reference  herein to the term of this  Agreement  shall
refer to both such initial term and such extended terms.

         3. EMPLOYMENT.

         (a) Mr. Cross is employed as President and Chief Executive  Officer the
Bank and, except to the extent allowed under  subparagraph  3(b),  below,  shall
devote his full  business  time and attention to the business and affairs of the
Bank  and the  Holding  Company  and use  his  best  efforts  to  advance  their
interests.  He shall render such  administrative and management  services as are
customarily performed by persons situated in similar executive  capacities,  and
shall have such other  powers and duties,  not  inconsistent  with his title and
office,  as the Board may prescribe from time to time. Mr. Cross shall have such
authority as is necessary or  appropriate  to carry out his assigned  duties and
shall report directly to the Board.

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<PAGE>

         (b) Mr. Cross may engage in personal business and investment activities
for his own  account  and serve as a member of the  board of  directors  of such
business, community and charitable organizations as he may disclose, in advance,
to the Board from time to time so long as such  activities  and  services do not
materially  interfere with the performance of his duties under this Agreement or
involve  entities  which  either  compete  with  the  Bank or may be  reasonably
expected to  negatively  impact on the Bank's  standing  and  reputation  in the
community it serves.

         4. COMPENSATION.

         (a) SALARY.  The Bank agrees to pay Mr.  Cross  during the term of this
Agreement,  not less  frequently  than monthly,  the salary  established  by the
Board,  which shall be at least equal to Mr.  Cross'  salary in effect as of the
Commencement  Date.  The amount of Mr.  Cross'  salary  shall be reviewed by the
Board, at least annually  beginning not later than the first  anniversary of the
Commencement  Date.  Adjustments in salary or other compensation shall not limit
or reduce any other  obligation  of the Bank under this  Agreement.  Mr.  Cross'
salary in effect from time to time during the term of this  Agreement  shall not
thereafter be reduced.  At each anniversary of the commencement date following a
Change in Control,  Mr. Cross' salary shall be increased at least by multiplying
it by the  greater  of: (1) the  quotient  of (i) the U.S.  Department  of Labor
Consumer  Price  Index  for all  Urban  Consumers  (N.Y.-Northeastern  N.J.) for
January of the then current calendar year divided by (ii) the U.S. Department of
Labor Consumer Price Index for all Urban Consumers  (N.Y.-Northeastern N.J.) for
January of the immediately  preceding calendar year; and (2) the quotient of (i)
the average  annual rate of salary,  determined as of the first  business day of
such  calendar  year, of the officers of the Bank (other than Mr. Cross) who are

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<PAGE>

assistant  vice president or more senior  officers,  divided by (ii) the average
annual  rate  of  salary,  determined  as of  the  first  business  day  of  the
immediately preceding calendar year, of the officers of the Bank (other than Mr.
Cross) who are assistant vice presidents or more senior officers.

         (b) Discretionary  Bonuses.  Mr. Cross shall be entitled to participate
in an  equitable  manner with all other  executive  officers of the Bank in such
discretionary  bonuses  as are  authorized  and  declared  by the  Board  to its
executive employees.  No other compensation provided for in this Agreement shall
be deemed to substitute for Mr. Cross' right to participate in such bonuses when
and as declared by the Board.

         (c)   Expenses.   Mr.  Cross  shall  be  entitled  to  receive   prompt
reimbursement for all reasonable expenses incurred by him in performing services
under this Agreement in accordance  with the policies and procedures  applicable
to executive  officers of the Bank,  provided that he accounts for such expenses
as required under such policies and procedures.

         5.   BENEFITS.

         (a)  PARTICIPATION  IN RETIREMENT AND EMPLOYEE BENEFIT PLANS. Mr. Cross
shall be  entitled to  participate  in all plans  relating  to pension,  thrift,
profit-sharing,   group  life  and  disability  insurance,  medical  and  dental
coverage,  education, cash bonuses, and other retirement or employee benefits or
combinations thereof, in which the Bank's executive officers participate.

                                       7
<PAGE>

         (b) Fringe Benefits. Mr. Cross shall be eligible to participate in, and
receive  benefits  under,  any  fringe  benefit  plans  which are or may  become
applicable to the Bank's executive officers.

         6.  VACATIONS,  LEAVE.  Mr.  Cross  shall be  entitled  to annual  paid
vacation in accordance with the policies  established by the Board for executive
officers and to voluntary  leaves of absence,  with or without pay, from time to
time,  at such times and upon such  conditions as the Board may determine in its
discretion.

         7.   TERMINATION OF EMPLOYMENT.

         (a)  INVOLUNTARY  TERMINATION.  The  Board  may  terminate  Mr.  Cross'
employment at any time. In the event of  Involuntary  Termination  other than in
connection with a Change in Control,  the Bank shall,  during  remaining term of
this  Agreement,  (1)  pay to Mr.  Cross,  his  salary  at the  rate  in  effect
immediately prior to the Date of Termination, payable in such manner and at such
times as such salary  would have been payable  under  Section 4 if Mr. Cross had
continued to be employed by the Bank, (2) provide to Mr. Cross substantially the
same life, health and disability  insurance  benefits as the Bank maintained for
its executive officers  immediately prior to the Date of Termination  reduced by
the amount of any such insurance  benefits provided to Mr. Cross by a subsequent
employer,  and (3) provide to Mr. Cross such other benefits, if any, to which he
and his family and  dependents  would have been entitled as a former  officer or
the family or  dependents of a former  officer under the employee  benefit plans
and programs  maintained  for the benefit of the Bank's  officers in  accordance
with the terms of such plans and  programs  in effect  immediately  prior to the
Date of Termination.

                                       8
<PAGE>

         (b) TERMINATION  FOR CAUSE. In the event of Termination for Cause,  the
Bank  shall (1) pay Mr.  Cross  his  salary  and  benefits  through  the Date of
Termination,  (2) pay him for  unused  vacation  days,  and (3) have no  further
obligations to him under this Agreement.

         (c) VOLUNTARY  TERMINATION.  Mr. Cross'  employment  may be voluntarily
terminated  by him at any time by  resignation.  In the event of such  Voluntary
Termination,  the Bank shall be obligated to (1) pay to Mr. Cross his salary and
benefits through the Date of Termination,  (2) pay him for unused vacation days,
and (3) have no further obligations to him under this Agreement.

         (d)  CHANGE IN  CONTROL.  In the event of  Involuntary  Termination  in
connection  with or within 12 months after a Change in Control,  the Bank shall,
subject to paragraph 8 of this  Agreement,  (1) pay to Mr. Cross an amount equal
to 299% of his "base amount" as defined in 26 U.S.C.  Section 28OG which payment
shall be made in the three equal  installments,  the first  within 10 days after
the Date of Termination,  the second on the fifth business day of January of the
next succeeding calendar year and the third on the fifth business day of January
of the second  succeeding  calendar  year,  (2) provide to Mr.  Cross during the
remaining  term of this  Agreement  substantially  the  same  life,  health  and
disability  insurance benefits as the Bank maintained for its executive officers
immediately prior to the Date of Termination,  and (3) provide to Mr. Cross such
other  benefits,  if any, to which he and his family and  dependents  would have
been  entitled  as a former  officer  or the  family or  dependents  of a former
officer under the employee benefit plans and programs maintained for the benefit

                                        9
<PAGE>

of the Bank's  officers in accordance  with the terms of such plans and programs
in effect immediately prior to the Date of Termination.

         (e)  DEATH;  DISABILITY.  In the  event of the  death of the Mr.  Cross
during  the term of this  Agreement,  within 60 days  following  such  death his
estate,  or such  person(s)  as he may  have  designated  in  writing,  shall be
entitled  to  receive  from  the  Bank a death  benefit,  payable  through  life
insurance  or  otherwise,  which is equal to two times Mr.  Cross' then  current
salary.  If Mr.  Cross  becomes  disabled as defined in the Bank's then  current
disability  plan, if any, or if he is otherwise unable to serve as President and
Chief Executive Officer, this Agreement shall continue in full force and effect,
except  that the salary  paid to Mr.  Cross  shall be reduced by any  disability
insurance  payments made to him on policies of insurance  maintained by the Bank
at its expense.  In  addition,  in the event of the death or  disability  of Mr.
Cross during the term of this Agreement, Mr. Cross and his family and dependents
(in the event of  disability)  and his  family and  dependents  (in the event of
death) shall be provided  with such benefits as they would have been entitled as
a former  officer  or the family or  dependents  of a former  officer  under the
employee  benefit  plans and programs  maintained  for the benefit of the Bank's
officers  in  accordance  with the terms of such  plans and  programs  in effect
immediately prior to the death or disability.

         (f)  TEMPORARY  SUSPENSION  OR  PROHIBITION.  If Mr. Cross is suspended
and/or  temporarily  prohibited from  participating in the conduct of the Bank's
affairs by a notice  served  under  Section  8(e)(3)  or (g)(1) of the FDIA,  12
U.S.C.  Section  1818(e)(3)  and  (g)(1),  the  Bank's  obligations  under  this
Agreement, other than those which have vested,

                                       10
<PAGE>

shall be  suspended  as of the date of  service,  unless  stayed by  appropriate
proceedings.  If the  charges in the notice are  dismissed,  the Bank may in its
discretion (1) pay Mr. Cross all or part of the compensation  withheld while its
obligations under this Agreement were suspended and (2) reinstate in whole or in
part any of its obligations which were suspended.

         (g) PERMANENT SUSPENSION OR PROHIBITION. If Mr. Cross is removed and/or
permanently  prohibited from  participating in the conduct of the Bank's affairs
by an order  issued  under  Section  8(e)(4)  or (g)(1)  of the FDIA,  12 U.S.C.
Section  1818(e)(4) and (g)(1), all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order,  but vested rights of the
contracting parties shall not be affected.

         (h)  DEFAULT  OF THE BANK.  If the Bank is in  default  (as  defined in
Section  3(x)(1) of the  FDIA),  all  obligations  under  this  Agreement  shall
terminate  as of the date of default,  but this  provision  shall not affect any
vested rights of the contracting parties.

         (i)  TERMINATION BY REGULATORS.  All  obligations  under this Agreement
shall be terminated,  except to the extent  determined that continuation of this
Agreement is necessary for the  continued  operation of the Bank by the Director
of the Office of Thrift Supervision (the "Director") or his or her designee,  at
the time: (1) the Federal Deposit Insurance Corporation enters into an agreement
to provide assistance to or on behalf of the Bank under the authority  contained
in  Section  13(c)  of the  FDIA;  or (2) the  Director  or his or her  designee
approves a supervisory  merger to resolve  problems  related to operation of the
Bank; or (3) the Director or his or her designee determines the Bank to be in an

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<PAGE>

unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by any such action.

         8. CERTAIN REDUCTION OF PAYMENTS BY THE BANK. Notwithstanding any other
provision of this Agreement, if payments under this Agreement, together with any
other  payments  received or to be received by Mr.  Cross in  connection  with a
Change in Control  would  cause any amount to be  nondeductible  by the Bank for
federal income tax purposes  pursuant to 26 U.S.C.  Section 28OG,  then benefits
under  this  Agreement  shall be  reduced  (not  less than  zero) to the  extent
necessary so as to maximize  payments to Mr. Cross without causing any amount to
become  nondeductible  by the Bank. Mr. Cross shall  determine the allocation of
such reduction among payments to him.

         9. NO  MITIGATION.  Mr.  Cross shall not be  required  to mitigate  the
amount of any salary or other payment or benefit  provided for in this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation  earned by
Mr. Cross as the result of  employment  by another  employer  unless  explicitly
stated  herein,  by  retirement  benefits  after  the  Date  of  Termination  or
otherwise.

         10.  ATTORNEYS  FEES.  In the  event  the Bank  exercises  its right of
Termination for Cause, but it is determined by a court of competent jurisdiction
or by an  arbitrator  pursuant to Paragraph 17 that cause did not exist for such
termination,  or if it is determined by a court or arbitrator  that the Bank has
failed  to meet any of its  obligations  or  abide  by any of the  terms of this
Agreement,  Mr.  Cross  shall be entitled to  reimbursement  for all  reasonable
costs,  including  attorneys' fees,  incurred in challenging such termination or

                                       12
<PAGE>

enforcing such obligations or terms. Such reimbursement  shall be in addition to
all rights to which Mr. Cross is otherwise entitled under this Agreement.

         11. NO ASSIGNMENTS.

         (a) This  Agreement  is  personal to each of the  parties  hereto,  and
neither party may assign or delegate any of its rights or obligations  hereunder
without  first  obtaining  the  written  consent of the other  party;  provided,
however,  that the Bank shall require any successor or assign (whether direct or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of the business  and/or  assets of the Bank, by an assumption
agreement in form and substance  satisfactory to Mr. Cross, to expressly  assume
and agree to perform  this  Agreement  in the same manner and to the same extent
that  the  Bank  would  be  required  to  perform  it if no such  succession  or
assignment  had taken  place.  Failure of the Bank to obtain such an  assumption
agreement prior to the  effectiveness of any such succession or assignment shall
be a breach of this Agreement and shall entitle Mr. Cross to  compensation  from
the Bank in the same amount and on the same terms as the  compensation  pursuant
to Paragraph 7(d) hereof.  For purposes of  implementing  the provisions of this
Paragraph 11(a), the date on which any such succession  becomes  effective shall
be deemed the Date of Termination.

         (b) This Agreement and all rights of Mr. Cross hereunder shall inure to
the benefit of and be  enforceable  by his personal  and legal  representatives,
executors,   administrators,   successors,  heirs,  distributees,  devisees  and
legatees.  If the Mr. Cross should die while any amounts  would still be payable
to him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to

                                       13
<PAGE>

his devisee,  legatee or other designee or if there is no such designee,  to his
estate.

         12. NOTICE.  For the purposes of this Agreement,  notices and all other
communications  provided for in the  Agreement  shall be in writing and shall be
deemed to have been duly given when  personally  delivered  or sent by certified
mail, return receipt requested, postage prepaid, if to the Bank at its executive
office,  to the attention of the Board with a copy to the Secretary of the Bank,
or, if to Mr. Cross, to his home at the address stated above, unless notice of a
change of address has been given pursuant hereto.

         13.  AMENDMENTS.  No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties, except as herein otherwise
provided.

         14.  HEADINGS.  The headings used in this Agreement are included solely
for  convenience  and shall  not  affect,  or be used in  connection  with,  the
interpretation of this Agreement.

         15.  SEVERABILITY.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

         16. WAIVER.  Failure,  by either party, to insist on strict  compliance
with any of the terms or conditions  hereof shall not be deemed a waiver of such
term or condition.

         17.  GOVERNING LAW. This Agreement shall be governed by the laws of the
United States to the extent applicable and otherwise by the laws of the State of
New York.

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<PAGE>

         18.  ARBITRATION.  Any  dispute  or  controversy  arising  under  or in
connection  with this Agreement  shall be settled  exclusively by arbitration in
Albany,  New York in  accordance  with the  rules  of the  American  Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court having jurisdiction.

         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
day and year first above written.

Attest:                                              CATSKILL SAVINGS BANK



/s/ David L. Guldenstern                             By: /s/ Allan Oren
------------------------------                       ---------------------------
    VP/Secretary                                             DIRECTOR


WITNESS:



/s/ David L. Guldenstern                             /s/ Wilbur J. Cross
------------------------------                       ---------------------------
    VP/Secretary                                         WILBUR J. CROSS
                                                         Chairman/President/CEO


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