<PAGE>

                                                                  EXHIBIT 10(b)


                              EMPLOYMENT AGREEMENT





                                 BY AND BETWEEN





                            U.S.B. HOLDING CO., INC.
                                UNION STATE BANK




                                       AND




                                RAYMOND J. CROTTY






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

                           Made and Entered Into As of

                                November 16, 1998

                           As Amended November 8, 2000

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


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                              EMPLOYMENT AGREEMENT



         This Employment Agreement ("Agreement") is made and entered into as of
November 16, 1998 by and between U.S.B. HOLDING CO., INC., a publicly held
business corporation organized and operating under the laws of the State of
Delaware (the "Company") and Union State Bank (the "Bank"), both having an
office at 100 Dutch Hill Road, Orangeburg, New York 10962 and RAYMOND J. CROTTY,
an individual residing at 11 Dickens Street, Stony Point, New York 10980 ("Mr.
Crotty").

                                   WITNESSETH:

         WHEREAS, Mr. Crotty currently serves the Company and the Bank in the
capacity of Senior Executive Vice President, Chief Credit Officer and Assistant
Secretary; and

         WHEREAS, the Company and the Bank desire to assure for themselves the
continued availability of Mr. Crotty's services and the ability of Mr. Crotty to
perform such services; and

         WHEREAS, Mr. Crotty is willing to continue to serve the Company and the
Bank on the terms and conditions hereinafter set forth;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions hereinafter set forth, the Company and the Bank and
Mr. Crotty hereby agree as follows:

         SECTION 1. EMPLOYMENT

         The Company and the Bank agree to continue to employ Mr. Crotty in the
capacities stated above, and Mr. Crotty hereby agrees to such continued
employment, during the period and upon the terms and conditions set forth in
this Agreement.

         SECTION 2. EMPLOYMENT PERIOD; REMAINING UNEXPIRED EMPLOYMENT PERIOD

         (a) The terms and conditions of this Agreement shall be and remain in
effect during the period of employment established under this Section 2
("Employment Period"). The Employment Period shall be for al term of three years
beginning on the date of this Agreement and ending on the third anniversary date
of this Agreement (an "Anniversary Date"), plus such extensions, if any, as are
provided for in this Agreement or otherwise agreed to by the Boards of Directors
of the Company and the Bank (collectively, the "Boards").

         (b) Nothing in this Agreement shall be deemed to prohibit the Company
and/or the Bank at any time from terminating Mr. Crotty's employment during the
Employment Period with or without notice for any reason; provided, however, that
the relative rights and obligations of the Company and the Bank and Mr. Crotty
in the event of any such termination shall be determined under this Agreement.





                                  PAGE 1 OF 15
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         SECTION 3. DUTIES

         Mr. Crotty shall serve as Senior Executive Vice President, Chief Credit
Officer and Assistant Secretary of the Company and the Bank, having such power,
authority and responsibility and performing such duties as are prescribed by or
under the By-Laws of the Company or the Bank and as are customarily associated
with such position. Mr. Crotty shall devote his full business time and attention
(other than during weekends, holidays, approved vacation periods, and periods of
illness or approved leaves of absence) to the business and affairs of the
Company and the Bank and shall use his best efforts to advance the interests of
the Company and the Bank.

         SECTION 4. CASH COMPENSATION

         In consideration for the services to be rendered by Mr. Crotty
hereunder, the Company and the Bank shall together pay to him a salary at an
initial annual rate of ONE HUNDRED SIXTY THOUSAND DOLLARS ($160,000), payable in
approximately equal installments in accordance with the Company's and Bank's
customary payroll practices for senior officers. On each Anniversary Date
occurring during the Employment Period, Mr. Crotty's annual rate of salary shall
be reviewed and increased as determined by the Chairman of the Board, President
and Chief Executive Officer of the Company and/or the Bank. In addition to
salary, Mr. Crotty may receive other cash compensation from the Company or the
Bank for services hereunder at such times, in such amounts and on such terms and
conditions as determined by the Chairman of the Board, President and Chief
Executive Officer of the Company and/or the Bank from time to time.

         The Company and the Bank agree to pay to Mr. Crotty a minimum annual
bonus of 1.0 percent, or a percent as otherwise provided on mutual agreement
between the parties, to be computed based upon the net profits realized by the
consolidated earnings of the Company and the Bank and their affiliates in
accordance with the Executive Compensation Plan which has been adopted by the
Board.

         Mr. Crotty shall be granted stock options by the Company of no less
than 36,300 shares each year during the term of this Agreement under the
Company's Employee Stock Option Plans as may be established by the Company, such
stock options to be adjusted for stock dividends and stock splits after the date
of this Agreement by the Company during the term of this Agreement. Upon the
exercise of options with existing owned stock, additional options to purchase
stock will be issued to Mr. Crotty in an amount equivalent to such Company stock
utilized in the exercise. In addition, if Mr. Crotty sells existing owned stock
or stock acquired as a result of such exercise of options to pay income taxes as
a result of the exercise of options or sells stock acquired upon exercise of
options ("cashless exercise"), Mr. Crotty shall be awarded new options to
purchase Company stock equivalent to the number of shares of Company stock sold
under the circumstances described in this sentence.

         The foregoing salary shall be in addition to the monthly Board fees
presently paid to Mr. Crotty or as hereafter provided by the Boards or any Board
of Directors of an affiliate of the Company or the Bank.

         Mr. Crotty, at his option, shall be allowed to defer any portion of his
cash compensation in accordance with any plan approved by the Company or the
Bank.


                                  PAGE 2 OF 15
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         SECTION 5. INSURANCE

         If Mr. Crotty should become disabled during the term of this Agreement,
the Company and the Bank will compensate Mr. Crotty for the difference between
any disability insurance, the premiums for which are paid by the Company and the
Bank, and Mr. Crotty's full salary for the balance of the term of this Agreement
and thereafter for a period of six months after the termination of this
Agreement. Full fringe benefits will continue through the earlier of (i) the
balance of the term of this Agreement or (ii) the period of Mr. Crotty's
disability.

         In accordance with the foregoing, the Company and/or the Bank will
maintain and pay the premiums for the following life insurance policy on the
life of Mr. Crotty: Universal Life Policy No. 001224102 of Security Mutual Life
Insurance Company in the amount of $1,000,000. The beneficiaries under the
foregoing policy of insurance shall be designated by Mr. Crotty.

         SECTION 6. EMPLOYEE BENEFIT PLANS AND PROGRAMS

         During the Employment Period, Mr. Crotty shall be treated as an
employee of the Company and the Bank and shall be entitled to participate in and
receive benefits under any and all qualified or non-qualified retirement,
pension, savings, profit-sharing or stock bonus plans, any and all group life,
health (including hospitalization, medical and major medical), dental, accident
and long-term disability insurance plans, and any other employee benefit and
compensation plans (including but not limited to, any incentive compensation
plans or programs, stock option and appreciation rights plans and restricted
stock plans) as may from time to time be maintained by, or cover employees of,
the Company or the Bank, in accordance with the terms and conditions of such
employee benefit plans and programs and compensation plans and programs which
are consistent with the Company's and the Bank's customary practices.

         SECTION 7. INDEMNIFICATION AND INSURANCE

         (a) During the Employment Period and for a period of six (6) years
thereafter, the Company or the Bank shall cause Mr. Crotty to be covered by and
named as an insured under any policy or contract of insurance obtained by it to
insure its directors and officers against personal liability for acts or
omissions in connection with service as an officer or director of the Company or
the Bank or service in other capacities at the request of the Company or the
Bank. The coverage provided to Mr. Crotty pursuant to this Section 7 shall be of
the same scope and on the same terms and conditions as the coverage (if any)
provided to other officers or directors of the Company and the Bank.

         (b) To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company and
the Bank shall indemnify Mr. Crotty against and hold him harmless from any
costs, liabilities, losses and expenses to the fullest extent and on the most
favorable terms and conditions that similar indemnification is offered to any
director or officer of the Company, the Bank or any subsidiary or affiliate
thereof.





                                  PAGE 3 OF 15
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         SECTION 8. OUTSIDE ACTIVITIES

         Mr. Crotty may serve as a member of a board of directors of such
business, community and charitable organizations as he may disclose to and as
may be approved by the Chairman of the Board, President and Chief Executive
Officer of the Company and/or the Bank, which approval shall not be unreasonably
withheld; provided, however, that such service shall not materially interfere
with the performance of his duties under this Agreement. Mr. Crotty may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company and/or Bank and generally
applicable to all similarly situated executives. Mr. Crotty may also serve as an
officer or director of any subsidiary of the Company or the Bank. If Mr. Crotty
is discharged or suspended, or is subject to any regulatory prohibition or
restriction with respect to participation in the affairs of the Company or the
Bank, he shall continue to perform services for the Company and the Bank in
accordance with this Agreement but shall not directly or indirectly provide
services to or participate in the affairs of the Company and the Bank in a
manner inconsistent with the terms of such discharge or suspension or any
applicable regulatory order.

         SECTION 9. WORKING FACILITIES AND EXPENSES

         Mr. Crotty's principal place of employment shall be at the Company's
and the Bank's executive offices at the address first above written, or at such
other location at which the Company or the Bank shall maintain its principal
executive offices, or at such other location as the Company and the Bank and Mr.
Crotty may mutually agree upon. The Company or the Bank shall provide Mr. Crotty
at his principal place of employment with a private office, secretarial
services, an automobile, and other support services and facilities suitable to
his position with the Company and the Bank and necessary or appropriate in
connection with the performance of his assigned duties under this Agreement. The
Company or the Bank shall provide to Mr. Crotty for his exclusive use an
automobile owned or leased by the Company or the Bank appropriate to his
position, to be used in the performance of his duties hereunder, including
commuting to and from his personal residence. The Company or the Bank shall
reimburse Mr. Crotty for his ordinary and necessary business expenses,
including, without limitation, all expenses associated with his business use of
the aforementioned automobile, fees for memberships in such clubs and
organizations as Mr. Crotty and the Company or the Bank shall mutually agree are
necessary and appropriate for business purposes, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case upon presentation to the Company or the Bank
of an itemized account of such expenses in such form as the Company or the Bank
may reasonably require.

         The Company and the Bank shall specifically pay the annual membership
fees of one Country Club membership for Mr. Crotty.

         SECTION 10. VACATION

         Mr. Crotty shall be entitled annually to vacation time of five (5)
weeks in total and two (2) personal days, or any additional vacation and
personal time agreed to by the parties or permitted by Company or Bank policy.



                                  PAGE 4 OF 15
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         SECTION 11. TERMINATION OF EMPLOYMENT WITH SEVERANCE BENEFITS

         (a) Mr. Crotty shall be entitled to the severance benefits described
herein in the event that his employment with the Company or the Bank terminates
during the Employment Period under any of the following circumstances:

         (i) Mr. Crotty's voluntary resignation from employment with the Company
         and the Bank within ninety (90) days following:

                  (A) the failure of the Boards to appoint or re-appoint or
         elect or re-elect Mr. Crotty to the office of Senior Executive Vice
         President, Chief Credit Officer and Assistant Secretary (or a more
         senior office) of the Company and the Bank;

                  (B) the failure of the stockholders of the Company or the Bank
         to elect or re-elect Mr. Crotty as a director of the Boards or the
         failure of the Boards (or the nominating committee thereof) to nominate
         Mr. Crotty for such election or re-election;

                  (C) the expiration of a thirty (30) day period following the
         date on which Mr. Crotty gives written notice to the Company and/or the
         Bank of its material failure, whether by amendment of the Company's or
         the Bank's Organization Certificate or By-laws, action of the Boards or
         the Company's or the Bank's stockholders or otherwise, to vest in Mr.
         Crotty the functions, duties, or responsibilities prescribed in Section
         3 of this Agreement, unless, during such thirty (30) day period, the
         Company and/or the Bank cures such failure in a manner determined by
         Mr. Crotty and the Boards to be satisfactory; or

                  (D) the expiration of a thirty (30) day period following the
         date on which Mr. Crotty gives written notice to the Company and/or the
         Bank of its material breach of any term, condition or covenant
         contained in this Agreement (including, without limitation any
         reduction of Mr. Crotty's rate of base salary in effect from time to
         time and any change in the terms and conditions of any compensation or
         benefit program in which Mr. Crotty participates which, either
         individually or together with other changes, has a material adverse
         effect on the aggregate value of his total compensation package),
         unless, during such thirty (30) day period, the Company and/or the Bank
         cures such failure in a manner determined by Mr. Crotty and the Boards
         to be satisfactory; or

         (ii)     Mr. Crotty's death; or

         (iii) subject to the provisions of Section 12, the termination of Mr.
         Crotty's employment with the Company or the Bank for any other reason
         not described in Section 11(a).

         (b) Upon the termination of Mr. Crotty's employment with the Company
and/or the Bank under circumstances described in Section 11(a) of this
Agreement, the Company or the Bank shall pay and provide to Mr. Crotty (or, in
the event of his death, to his estate):

         (i) his earned but unpaid compensation (including, without limitation,
         all items which constitute wages under Section 190.1 of the New York
         Labor Law and the payment of which is not otherwise provided for under
         this Section 11(b)) as of the date of the termination of




                                  PAGE 5 OF 15
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         his employment with the Company and the Bank, such payment to be made
         at the time and in the manner prescribed by law applicable to the
         payment of wages but in no event later than thirty (30) days after
         termination of employment;

         (ii) the benefits, if any, to which he is entitled as a former employee
         under the employee benefit plans and programs and compensation plans
         and programs maintained for the benefit of the Company's and the Bank's
         officers and employees;

         (iii) continued group life, health (including hospitalization, medical
         and major medical and the insurance provided under Section 5), dental,
         accident and long term disability insurance benefits, in addition to
         that provided pursuant to Section 11(b)(ii), and after taking into
         account the coverage provided by any subsequent employer, if and to the
         extent necessary to provide for Mr. Crotty, for the Remaining Unexpired
         Employment Period, coverage equivalent to the coverage to which he
         would have been entitled under such plans (as in effect on the date of
         his termination of employment, or, if his termination of employment
         occurs after a Change of Control, on the date of such Change of
         Control, whichever benefits are greater), if he had continued working
         for the Company and the Bank during the Remaining Unexpired Employment
         Period at the highest annual rate of compensation achieved during that
         portion of the Employment Period which is prior to Mr. Crotty's
         termination of employment with the Company or the Bank;

         (iv) within thirty (30) days following his termination of employment
         with the Company and/or the Bank, a lump sum payment, in an amount
         equal to the present value of the salary that Mr. Crotty would have
         earned if he had continued working for the Company and the Bank for one
         year at the highest annual rate of salary achieved during that portion
         of the Employment Period which is prior to Mr. Crotty's termination of
         employment with the Company and the Bank, where such present value is
         to be determined using a discount rate equal to the applicable
         short-term federal rate prescribed under Section 1274(d) of the
         Internal Revenue Code of 1986 ("Code"), compounded using the
         compounding period corresponding to the Company's and the Bank's
         regular payroll periods for its officers, such lump sum to be paid in
         lieu of all other payments of salary provided for under this Agreement
         in respect of the period following any such termination. At the option
         of Mr. Crotty, such payments may be made in equal monthly installments
         over a period of not less than three years, nor more than five years,
         in which case such payments will not be discounted;

         (v) within thirty (30) days following his termination of employment
         with the Company and/or the Bank, a lump sum payment in an amount equal
         to the present value of the additional employer contributions to which
         he would have been entitled under any and all qualified and
         non-qualified defined contribution plans maintained by, or covering
         employees of, the Company and the Bank, if he were 100% vested
         thereunder and had continued working for the Company and the Bank,
         during the Remaining Unexpired Employment Period at the highest annual
         rate of compensation achieved during that portion of the Employment
         Period which is prior to Mr. Crotty's termination of employment with
         the Company or the Bank, and making the maximum amount of employee
         contributions, if any, required under such plan or plans, such present
         value to be determined on the basis of a discount rate, compounded
         using the compounding period that corresponds to the frequency



                                  PAGE 6 OF 15
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         with which employer contributions are made to the relevant plan, equal
         to the applicable PBGC Rate. At the option of Mr. Crotty, such payments
         may be made in equal monthly installments over a period of not less
         than three, nor more than five years, in which case such payments will
         not be discounted;

         (vi) the payment that would have been made to Mr. Crotty under any cash
         bonus or long-term or short-term cash incentive compensation plan
         maintained by, or covering employees of, the Company or the Bank, if he
         had continued working for the Company or the Bank during the Remaining
         Unexpired Employment Period and had earned the maximum bonus or
         incentive award in each calendar year that ends during the Remaining
         Unexpired Employment Period, such payments to be equal to the product
         of:

                  (A) the maximum percentage rate at which an award was ever
         available to Mr. Crotty under such incentive compensation plan,
         multiplied by

                  (B) net income of the Company for the most recent fiscal year
         which is prior to Mr. Crotty's termination of employment with the
         Company;

         such payments to be made in a lump sum payment in an amount equal to
         the present value of such payments as if made in accordance with
         Company's and/or Bank's Executive Bonus Plan, where such present value
         is to be determined using a discount rate equal to the applicable
         short-term federal rate prescribed under Section 1274(d) of the Code,
         within thirty (30) days following Mr. Crotty's termination of
         employment. At the option of Mr. Crotty, such payments may be made in
         equal monthly installments over a period of not less than three, nor
         more than five years, in which case such payments will not be
         discounted;

         (vii) at the election of the Company and the Bank made within thirty
         (30) days following his termination of employment with the Company and
         the Bank, upon the surrender of stock options or stock appreciation
         rights issued to Mr. Crotty under any stock option and appreciation
         rights plan or program maintained by, or covering employees of, the
         Company and the Bank, a lump sum payment in an amount equal to the
         product of:

                  (A) the excess of (i) the fair market value of a share of
         stock of the same class as the stock subject to the option or
         appreciation right, determined as of the date of termination of
         employment, over (ii) the exercise price per share for such option or
         appreciation right, as specified in or under the relevant plan or
         program; multiplied by

                  (B) the number of shares with respect to which options or
         appreciation rights are being surrendered.

         For purposes of this Section 11(b)(vii) and for purposes of determining
         Mr. Crotty's right following his termination of employment with the
         Company or the Bank to exercise any options or appreciation rights not
         surrendered pursuant hereto, Mr. Crotty shall be deemed fully vested in
         all options and appreciation rights under any stock option or
         appreciation rights plan or program maintained by, or covering
         employees of, the Company or Bank, even if he is not vested under such
         plan or program, and shall have a period of three months from the date
         of termination of employment to exercise such stock options or
         appreciation rights.





                                  PAGE 7 OF 15
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         (viii) at the election of the Company or the Bank made within thirty
         (30) days following Mr. Crotty's termination of employment with the
         Company and the Bank, upon the surrender of any shares awarded to Mr.
         Crotty under any restricted stock plan maintained by, or covering
         employees of, the Company and the Bank, a lump sum payment in an amount
         equal to the product of:

                  (A) the fair market value of a share of stock of the same
         class of stock granted under such plan, determined as of the date of
         Mr. Crotty termination of employment; multiplied by

                  (B) the number of shares which are being surrendered.

         For purposes of this Section 11(b)(viii) and for purposes of
         determining Mr. Crotty's right following his termination of employment
         with the Company and the Bank to any stock not surrendered pursuant
         hereto, Mr. Crotty shall be deemed fully vested in all shares awarded
         under any restricted stock plan maintained by, or covering employees
         of, the Company and the Bank, even if he is not vested under such plan;

         (ix) the title to the car then currently provided to Mr. Crotty shall
         be transferred to Mr. Crotty.

The Company and the Bank and Mr. Crotty hereby stipulate that the damages which
may be incurred by Mr. Crotty following any such termination of employment are
not capable of accurate measurement as of the date first above written and that
the payments and benefits contemplated by this Section 11(b) constitute
reasonable damages under the circumstances and shall be payable without any
requirement of proof of actual damage and without regard to Mr. Crotty's
efforts, if any, to mitigate damages. The Company and the Bank and Mr. Crotty
further agree that the Company and the Bank may condition the payments and
benefits (if any) due under Sections 11(b)(iii), (iv), (v), (vi), and (vii) on
the receipt of Mr. Crotty's resignation from any and all positions which he
holds as an officer, director or committee member with respect to the Company,
the Bank or any subsidiary or affiliate of either of them.

         SECTION 12. TERMINATION WITHOUT ADDITIONAL COMPANY/BANK LIABILITY

         (a) In the event that Mr. Crotty employment with the Company and the
Bank shall terminate during the Employment Period on account of:

         (i) the discharge of Mr. Crotty for "cause," which, for purposes of
         this Agreement shall mean: (A) Mr. Crotty intentionally engages in
         dishonest conduct in connection with his performance of services for
         the Company or the Bank resulting in his conviction of a felony; (B)
         Mr. Crotty is convicted of, or pleads guilty or NOLO CONTENDERE to, a
         felony or any crime involving moral turpitude; (C) Mr. Crotty willfully
         fails or refuses to perform his duties under this Agreement and fails
         to cure such breach within sixty (60) days following written notice
         thereof from the Company or the Bank; (D) Mr. Crotty breaches his
         fiduciary duties to the Company or the Bank for personal profit; or (E)
         Mr. Crotty's willful breach or violation of any law, rule or regulation
         (other than traffic violations or similar offenses), or final cease and
         desist order in connection with his performance of services for the
         Company



                                  PAGE 8 OF 15
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          or the Bank;

         (ii) Mr. Crotty's voluntary resignation from employment with the
         Company and the Bank for reasons other than those specified in Section
         11(a); or

         (iii) a determination that Mr. Crotty is eligible for long-term
         disability benefits under the Company's or Bank's long-term disability
         insurance program or, if there is no such program, under the federal
         Social Security Act;

then the Company and the Bank shall have no further obligations under this
Agreement, other than the payment to Mr Crotty (or, in the event of his death,
to his estate) of his earned but unpaid salary as of the date of the termination
of his employment, and the provision of such other benefits, if any (including
but not limited to the benefits contemplated by Sections 5 and 7), to which he
is entitled as a former employee under the employee benefit plans and programs,
compensation plans and programs, and indemnification and insurance plans and
programs maintained by, or covering employees of, the Company or the Bank.

         (b) For purposes of Section 12(a)(i)(A) or (B), no act or failure to
act, on the part of Mr. Crotty, shall be considered "willful" unless it is done,
or omitted to be done, by Mr. Crotty in bad faith or without reasonable belief
that Mr. Crotty's action or omission was in the best interests of the Company or
the Bank. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Boards or based upon the written advice of
counsel for the Company or the Bank shall be conclusively presumed to be done,
or omitted to be done, by Mr. Crotty in good faith and in the best interests of
the Company or the Bank. The cessation of employment by Mr. Crotty shall not be
deemed to be for "cause" within the meaning of Section 12(a)(i) unless and until
there shall have been delivered to Mr. Crotty a copy of a resolution duly
adopted by the affirmative vote of three-fourths of the non-employee members of
the Boards at a meeting of the Boards called and held for such purpose (after
reasonable notice is provided to Mr. Crotty and Mr. Crotty is given an
opportunity, together with counsel, to be heard before the Boards), finding
that, in the good faith opinion of the Boards, Mr. Crotty is guilty of the
conduct described in Section 12(a)(i) above, and specifying the particulars
thereof in detail.

         SECTION 13. TERMINATION UPON OR FOLLOWING A CHANGE OF CONTROL

         (a) A change of control of the Company or the Bank ("Change of
Control") shall be deemed to have occurred upon the happening of any of the
following events:

         (i) approval by the stockholders of the Company or the Bank of a
         transaction that would result in the reorganization, merger or
         consolidation of the Company or the Bank, respectively, with one or
         more other persons, other than a transaction following which:

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



                                  PAGE 9 OF 15
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                  (B) at least 51% of the securities entitled to vote generally
         in the election of directors of the entity resulting from such
         transaction are beneficially owned (within the meaning of Rule 13d-3
         promulgated under the Exchange Act) in substantially the same relative
         proportions by persons who, immediately prior to such transaction,
         beneficially owned (within the meaning of Rule 13d-3 promulgated under
         the Exchange Act) at least 51% of the securities entitled to vote
         generally in the election of directors of the Company or the Bank;

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

         (iii) a complete liquidation or dissolution of the Company or the Bank,
         or approval by the stockholders of the Company or the Bank of a plan
         for such liquidation or dissolution;

         (iv) the occurrence of any event if, immediately following such event,
         at least 50% of the members of the board of directors of the Company or
         the Bank do not belong to any of the following groups:

                  (A) individuals who were members of the board of directors of
         the Company or the Bank on the date of this Agreement; or

                  (B) individuals who first became members of the board of
         directors of the Company or the Bank after the date of this Agreement
         either:

                           (I) upon election to serve as a member of the board
                  of directors of the Company or the Bank by affirmative vote of
                  three-quarters of the members of such board, in office at the
                  time of such first election; or

                           (II) upon election by the stockholders to serve as a
                  member of the board of directors of the Company or the Bank,
                  but only if nominated for election by affirmative vote of
                  three-quarters of the members of the board of directors of the
                  Company or the Bank, or of a nominating committee thereof, in
                  office at the time of such first nomination;

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

In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or a subsidiary of
either of them, or by any employee benefit plan maintained




                                 PAGE 10 OF 15
<PAGE>

by any of them. For purposes of this Section 13(a), the term "person" shall have
the meaning assigned to it under Sections 13(d)(3) or 14(d)(2) of the Exchange
Act.

         (b) In the event of a Change of Control, Mr. Crotty shall be entitled
to the payments and benefits contemplated by Section 11(b), provided, however,
that with respect to any such benefits or payments to be made thereunder, the
benefits or payments contemplated by Section 11(b) will be calculated as if the
remaining Unexpired Employment Period and the salary multiple in Section
11(b)(iv) are each equal to three years in the event of his termination of
employment with the Company or the Bank under any of the circumstances described
in Section 11(a) of this Agreement or under any of the following circumstances:

         (i) resignation, voluntary or otherwise, by Mr. Crotty at any time
         during the Employment Period following his demotion, loss of title,
         office or significant authority or responsibility, or following any
         reduction in any element of his package of compensation and benefits;

         (ii) resignation, voluntary or otherwise, by Mr. Crotty at any time
         during the Employment Period following any relocation of his principal
         place of employment or any change in working conditions at such
         principal place of employment which Mr. Crotty, in his reasonable
         discretion, determines to be embarrassing, derogatory or otherwise
         adverse;

         (iii) resignation, voluntary or otherwise, by Mr. Crotty at any time
         during the Employment Period following the failure of any successor to
         the Company or the Bank in the Change of Control to include Mr. Crotty
         in any compensation or benefit program maintained by it or covering any
         of its executive officers, unless Mr. Crotty is already covered by a
         substantially similar plan of the Company which is at least as
         favorable to him; or

         (iv) resignation, voluntary or otherwise, for any other reason
         whatsoever following the effective date of the Change of Control.

         SECTION 14. TAX INDEMNIFICATION

         (a) If Mr. Crotty's employment terminates under circumstances entitling
him (or in the event of his death, his estate) to the payments or benefits under
Section 11(b), the Company or the Bank shall pay to Mr. Crotty (or in the event
of his death, his estate) an additional amount intended to indemnify him against
the financial effects of the excise tax imposed on excess parachute payments
under section 280G and 4999 of the Code (the "Tax Indemnity Payment"). The Tax
Indemnity Payment shall be determined under the following formula:

                  X =                     E X P
                      -------------------------------------------------------
                      1 - [(FI x (1 - SLI)) + SLI + E + M]

                  where

                  E= the rate at which the excise tax is assessed under Section
                     4999 of the Code;

                  P = the amount with respect to which such excise tax is
                      assessed, determined without regard to this Section 14;




                                 PAGE 11 OF 15
<PAGE>


                  FI =  the highest marginal rate of income tax applicable to
                        Mr. Crotty under the Code for the taxable year in
                        question;

                  SLI = the sum of the highest marginal rates of income tax
                        applicable to Mr. Crotty under all applicable state
                        and local laws for the taxable year in question; and

                  M =   the highest marginal rate of Medicare tax applicable to
                        Mr. Crotty under the Code for the taxable year in
                        question.

Such computation shall be made at the expense of the Company or the Bank by an
attorney or a firm of independent certified public accountants selected by Mr.
Crotty and reasonably satisfactory to the Company (the "Tax Advisor") and shall
be based on the following assumptions: (i) that a change in ownership, a change
in effective ownership or control, or a change in the ownership of a substantial
portion of the assets, of the Bank or the Company has occurred within the
meaning of section 280G of the Code (a "280G Change of Control"); (ii) that all
direct or indirect payments made to or benefits conferred upon Mr. Crotty on
account of his termination of employment are "parachute payments" within the
meaning of section 280G of the Code; and (iii) that no portion of such payments
is reasonable compensation for services rendered prior to Mr. Crotty's
termination of employment.

         (b) With respect to any payment that is presumed to be a parachute
payment for purposes of section 280G of the Code, the Tax Indemnity Payment
shall be made to Mr. Crotty on the earlier of the date the Company, the Bank or
any direct or indirect subsidiary or affiliate of the Company or the Bank is
required to withhold such tax or the date the tax is required to be paid by Mr.
Crotty, unless, prior to such date, the Company or the Bank delivers to Mr.
Crotty the written opinion, in form and substance reasonably satisfactory to
him, of the Tax Advisor or of an attorney or firm of independent certified
public accountants selected by the Company or the Bank and reasonably
satisfactory to Mr. Crotty, to the effect that Mr. Crotty has a reasonable basis
on which to conclude that (i) no 280G Change in Control has occurred, or (ii)
all or part of the payment or benefit in question is not a parachute payment for
purposes of section 280G of the Code, or (iii) all or a part of such payment or
benefit constitutes reasonable compensation for services rendered prior to the
280G Change of Control, or (iv) for some other reason which shall be set forth
in detail in such letter, no excise tax is due under section 4999 of the Code
with respect to such payment or benefit (the "Opinion Letter"). If the Company
or the Bank delivers an Opinion Letter, the Tax Advisor shall recompute, and the
Company or the Bank shall make, the Tax Indemnity Payment in reliance on the
information contained in the Opinion Letter.

         (c) In the event that Mr. Crotty's liability for the excise tax under
section 4999 of the Code for a taxable year is subsequently determined to be
different than the amount with respect to which the Tax Indemnity Payment is
made, Mr. Crotty or the Company or the Bank, as the case may be, shall pay to
the other party at the time that the amount of such excise tax is finally
determined, an appropriate amount, plus interest, such that the payment made
under section 16(b), when increased by the amount of the payment made by the
Company or the Bank under this section 16(c) or decreased by the amount of the
payment made by Mr. Crotty under this section 16(c), equals the amount that
should have properly been paid to Mr. Crotty under section 16(a). The interest
paid to the Company under this section 16(c) shall be determined at the rate
provided under section 1274(b)(2)(B) of the Code. The payment made to Mr. Crotty
shall include such amount of interest




                                 PAGE 12 OF 15
<PAGE>


as is necessary to satisfy any interest assessment made by the Internal Revenue
Service and an additional amount equal to any monetary penalties assessed by the
Internal Revenue Service on account of an underpayment of the excise tax. To
confirm that the proper amount, if any, was paid to Mr. Crotty under this
section 16, Mr. Crotty shall furnish to the Company or the Bank a copy of each
tax return which reflects a liability for an excise tax, at least 20 days before
the date on which such return is required to be filed with the Internal Revenue
Service. Nothing in this Agreement shall give the Company or the Bank any right
to control or otherwise participate in any action, suit or proceeding to which
Mr. Crotty is a party as a result of positions taken on his federal income tax
return with respect to his liability for excise taxes under section 4999 of the
Code.

         SECTION 15. CONFIDENTIALITY

         Unless he obtains the prior written consent of the Company or the Bank,
Mr. Crotty shall keep confidential and shall refrain from using for the benefit
of himself, or any person or entity other than the Company or the Bank or any
entity which is a subsidiary of the Company or the Bank or of which the Company
is a subsidiary, any material document or information obtained from the Company
or the Bank, or from its parent or subsidiaries, in the course of his employment
with any of them concerning their properties, operations or business (unless
such document or information is readily ascertainable from public or published
information or trade sources or has otherwise been made available to the public
through no fault of his own) until the same ceases to be material (or becomes so
ascertainable or available); provided, however, that nothing in this Section 15
shall prevent Mr. Crotty, with or without the Company's or Bank's consent, from
participating in or disclosing documents or information in connection with any
judicial or administrative investigation, inquiry or proceeding to the extent
that such participation or disclosure is required under applicable law.

         SECTION 16. NO EFFECT ON EMPLOYEE BENEFIT PLANS OR PROGRAMS

         The termination of Mr. Crotty's employment during the term of this
Agreement or thereafter, whether by the Company or the Bank or by Mr. Crotty,
shall have no effect on the rights and obligations of the parties hereto under
the Company's or Bank's qualified or non-qualified retirement, pension, savings,
thrift, profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or the Bank from time to time.

         SECTION 17. SUCCESSORS AND ASSIGNS

         This Agreement will inure to the benefit of and be binding upon Mr.
Crotty, his legal representatives and testate or intestate distributees, and the
Company and the Bank, and its successors and assigns, including any successor by
merger or consolidation or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the assets and business of the
Company or the Bank may be sold or otherwise transferred. Failure of the Company
and the Bank to obtain from any successor its express written assumption of the
Company's and the Bank's obligations hereunder at least sixty (60) days in
advance of the scheduled effective date of any such succession shall be deemed a
material breach of this Agreement.





                                 PAGE 13 OF 15
<PAGE>


         SECTION 18. NOTICES

         Any communication required or permitted to be given under this
Agreement, including any notice, direction, designation, consent, instruction
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is delivered personally, or five (5) days after mailing if
mailed, postage prepaid, by registered or certified mail, return receipt
requested, addressed to such party at the address listed below or at such other
address as one such party may by written notice specify to the other party:

         If to Mr. Crotty:

                  Mr. Raymond J. Crotty
                  11 Dickens Street
                  Stony Point, New York 10980

         If to the Company or the Bank:

                  U.S.B. Holding Co., Inc.
                  Union State Bank
                  100 Dutch Hill Road
                  Orangeburg, New York 10962
                  Attention: Corporate Secretary

         SECTION 19. SEVERABILITY

         A determination that any provision of this Agreement is invalid or
unenforceable shall not affect the validity or enforceability of any other
provision hereof.

         SECTION 20. WAIVER

         Failure to insist upon strict compliance with any of the terms,
covenants or conditions hereof shall not be deemed a waiver of such term,
covenant, or condition. A waiver of any provision of this Agreement must be made
in writing, designated as a waiver, and signed by the party against whom its
enforcement is sought. Any waiver or relinquishment of any right or power
hereunder at any one or more times shall not be deemed a waiver or
relinquishment of such right or power at any other time or times.

         SECTION 21. COUNTERPARTS

         This Agreement may be executed in two (2) or more counterparts, each of
which shall be deemed an original, and all of which shall constitute one and the
same Agreement.

         SECTION 22. GOVERNING LAW

         This Agreement shall be governed by and construed and enforced in
accordance with the federal laws of the United States and, to the extent that
federal law is inapplicable, in accordance with the laws of the State of New
York applicable to contracts entered into and to be performed entirely within
the State of New York.

         SECTION 23. HEADINGS AND CONSTRUCTION




                                 PAGE 14 OF 15
<PAGE>



         The headings of sections in this Agreement are for the convenience of
reference only and are not intended to qualify the meaning of any section. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise stated.

         SECTION 24. ENTIRE AGREEMENT; MODIFICATIONS

         This instrument contains the entire agreement of the parties relating
to the subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.

         SECTION 25. NON-DUPLICATION

         In the event that Mr. Crotty performs services for the Company, the
Bank or an other direct or indirect subsidiary of the Company or the Bank, any
compensation or benefits provided to Mr. Crotty by such other employer shall be
applied to offset the obligations of the Company and the Bank hereunder, it
being intended that this Agreement set forth the aggregate compensation and
benefits payable to Mr. Crotty for all services to the Company, the Bank, and
all of its direct or indirect subsidiaries.

         IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement
to be executed by their duly authorized officers and Mr. Crotty has hereunto set
his hand, all as of the day and year first above written.


                                      /S/ RAYMOND J. CROTTY
                                      -------------------------------
                                          RAYMOND J. CROTTY


ATTEST:                               U.S.B. HOLDING CO., INC.



By /S/ MICHAEL H. FURY                 By    /S/ THOMAS E. HALES
---------------------------                ----------------------------------
            Secretary                  Name: Thomas E. Hales
                                       Title: Chairman of the Board, President
                                              and Chief Executive Officer

                                       UNION STATE BANK


By /S/ MICHAEL H. FURY                 By   /S/ THOMAS E. HALES
---------------------------                ----------------------------------
            Secretary                  Name: Thomas E. Hales
                                       Title: Chairman of the Board, President
                                              and Chief Executive Officer