Document:

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                                                                     EXHIBIT 4.1

                         DUKE ENERGY FIELD SERVICES, LLC

                                       TO

                            THE CHASE MANHATTAN BANK

                                    TRUSTEE

                                   ----------

                          THIRD SUPPLEMENTAL INDENTURE

                          DATED AS OF NOVEMBER 9, 2001

                                   ----------

                                  $300,000,000

                                   5.75% NOTES
                                    DUE 2006

                                   ----------

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                                TABLE OF CONTENTS

<Table>
<S>                                                                       <C>
ARTICLE 1 ESTABLISHMENT OF SERIES...........................................1

    SECTION 101.  ESTABLISHMENT.............................................1

ARTICLE 2 5.75% NOTES DUE 2006..............................................2

    SECTION 201.  ESTABLISHMENT.............................................2
    SECTION 202.  DEFINITIONS...............................................2
    SECTION 203.  PAYMENT OF PRINCIPAL AND INTEREST.........................2
    SECTION 204.  DENOMINATIONS.............................................3
    SECTION 205.  GLOBAL SECURITIES.........................................3
    SECTION 206.  REDEMPTION AT THE OPTION OF THE COMPANY...................4
    SECTION 207.  PAYING AGENTS.............................................5

ARTICLE 3 MISCELLANEOUS PROVISIONS..........................................5

    SECTION 301.  RECITALS BY COMPANY.......................................5
    SECTION 302.  RATIFICATION AND INCORPORATION OF ORIGINAL INDENTURE......5
    SECTION 303.  EXECUTED IN COUNTERPARTS..................................6
</Table>

                                       i
<PAGE>

THIS THIRD SUPPLEMENTAL INDENTURE is made as of the 9th day of November, 2001,
by and between DUKE ENERGY FIELD SERVICES, LLC, a Delaware limited liability
company, having its principal office at 370 17th Street, Suite 900, Denver,
Colorado 80202 (the "Company"), and THE CHASE MANHATTAN BANK, a New York banking
corporation, as trustee (herein called the "Trustee").

                                   WITNESSETH:

WHEREAS, the Company has heretofore entered into an Indenture, dated as of
August 16, 2000 (the "Original Indenture") with The Chase Manhattan Bank, as
Trustee;

WHEREAS, the Original Indenture is incorporated herein by this reference and the
Original Indenture, as amended and supplemented to the date hereof, including by
this Third Supplemental Indenture, is herein called the "Indenture";

WHEREAS, under the Indenture, a new series of Securities may at any time be
established in accordance with the provisions of the Indenture and the form and
terms of such series may be established by a supplemental indenture executed by
the Company and the Trustee;

WHEREAS, the Company proposes to create under the Indenture a new series of
Securities;

WHEREAS, additional Securities of other series hereafter established, except as
may be limited in the Indenture as at the time supplemented and modified, may be
issued from time to time pursuant to the Indenture as at the time supplemented
and modified; and

WHEREAS, all conditions necessary to authorize the execution and delivery of
this Third Supplemental Indenture and to make it a valid and binding obligation
of the Company have been done or preformed.

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

                                   ARTICLE 1

                            ESTABLISHMENT OF SERIES

Section 101. Establishment. There is hereby established a new series of
Securities to be issued under the Indenture, to be designated as the Company's
5.75% Notes due 2006 (the "2006 Notes"). The 2006 Notes shall have the form and
terms specified in Article 2 hereof.

<PAGE>

                                   ARTICLE 2

                              5.75% NOTES DUE 2006

Section 201. Establishment. There are to be authenticated and delivered
$300,000,000 principal amount of 2006 Notes, and no further 2006 Notes shall be
authenticated and delivered except as provided by Section 304, 305, 306, 906 or
1106 of the Original Indenture. The 2006 Notes shall be issued in fully
registered form without coupons. The 2006 Notes shall be substantially in the
form set out in Exhibit A hereto.

Each 2006 Note shall be dated the date of authentication thereof and shall bear
interest from the date of original issuance thereof or from the most recent
Interest Payment Date to which interest has been paid or duly provided for.

Section 202. Definitions. The following defined terms used herein with respect
to the 2006 Notes shall, unless the context otherwise requires, have the
meanings specified below. Capitalized terms used herein for which no definition
is provided herein shall have the meanings set forth in the Original Indenture.

"Interest Payment Dates" means May 15 and November 15, commencing May 15, 2002.

"Original Issue Date" means November 9, 2001.

"Regular Record Date" means, with respect to each Interest Payment Date, the
close of business on the 15th calendar day prior to such Interest Payment Date.

"Stated Maturity" means November 15, 2006.

Section 203. Payment of Principal and Interest. The principal of the 2006 Notes
shall be due at Stated Maturity, unless earlier redeemed. The unpaid amount of
the 2006 Notes shall bear interest at the rate of 5.75% per annum until paid or
duly provided for, such interest to accrue from the Original Issue Date or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for. Interest shall be paid semi-annually in arrears on each Interest
Payment Date to the Person or Persons in whose name the 2006 Notes are
registered on the Regular Record Date for such Interest Payment Date; provided
that interest payable at the Stated Maturity of principal or on a Redemption
Date as provided herein shall be paid to the Person to whom principal is
payable. Any such interest that is not so punctually paid or duly provided for
shall forthwith cease to be payable to the Holders on such Regular Record Date
and may either be paid to the Person or Persons in whose name the 2006 Notes are
registered at the close of business on a Special Record Date for the payment of
such defaulted interest to be fixed by the Trustee ("Special Record Date"),
notice whereof shall be given to Holders of the 2006 Notes not less than ten
(10) days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange,
if any, on which the 2006 Notes may be listed, and upon such notice as may be
required by any such exchange, all as more fully provided in the Original
Indenture.

                                       2
<PAGE>

Payments of interest on the 2006 Notes shall include interest accrued to but
excluding the respective Interest Payment Dates. Interest payments for the 2006
Notes shall be computed and paid on the basis of a 360-day year of twelve 30-day
months. In the event that any date on which interest is payable on the 2006
Notes is not a Business Day, then payment of the interest payable on such date
shall be made on the next succeeding day that is a Business day (and without any
interest or payment in respect of any such delay) with the same force and effect
as if made on the date the payment was originally payable. "Business Day" means
a day other than (i) a Saturday or a Sunday, (ii) a day on which banking
institutions in the Place of Payment are authorized or obligated by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office is closed for business.

Payment of principal of, premium, if any, and interest on the 2006 Notes shall
be made in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts. Payments of
principal of, premium, if any, and interest on the 2006 Notes represented by a
Global Security shall be made by wire transfer of immediately available funds to
the Holder of such Global Security; provided that, in the case of payments of
principal and premium, if any, such Global Security is first surrendered to a
Paying Agent. If any of the 2006 Notes are no longer represented by a Global
Security, (i) payments of principal, premium, if any, and interest due at the
Stated Maturity or earlier redemption of such 2006 Notes shall be made at the
office of any Paying Agent upon surrender of such 2006 Notes to such Paying
Agent and (ii) payments of interest shall be made, at the option of the Company,
subject to such surrender where applicable, (A) by check mailed to the address
of the Person entitled thereto as such address shall appear in the Security
Register or (B) by wire transfer at such place and to such account at a banking
institution in the United States as may be designated in writing to the Trustee
at least sixteen (16) days prior to the date for payment by the Person entitled
thereto.

Section 204. Denominations. The 2006 Notes shall be issued in denominations of
$1,000 or any integral multiple thereof.

Section 205. Global Securities. The 2006 Notes shall initially be issued in the
form of one or more Global Securities registered in the name of the Depositary
(which initially shall be The Depository Trust Company) or its nominee. Except
under the limited circumstances described below, the 2006 Notes represented by
such Global Security or Global Securities shall not be exchangeable for, and
shall not otherwise be issuable as, 2006 Notes in definitive form. The Global
Securities described above may not be transferred except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or to a successor Depositary or its nominee.

A Global Security shall be exchangeable for 2006 Notes registered in the names
of Persons other than the Depositary or its nominee only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as a Depositary
for such Global Security and no successor Depositary shall have been appointed
by the Company within 90 days of receipt by the Company of such notification, or
if at any time the Depositary

                                       3
<PAGE>

ceases to be a clearing agency registered under the Exchange Act at a time when
the Depositary is required to be so registered to act as such Depositary and no
successor Depositary shall have been appointed by the Company within 90 days
after it becomes aware of such cessation, or (ii) the Company in its sole
discretion determines that such Global Security shall be so exchangeable. Any
Global Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for 2006 Notes registered in such names as the Depositary shall
direct.

Section 206. Redemption at the Option of the Company. The 2006 Notes shall be
redeemable, in whole or in part at any time, at the option of the Company on any
date (a "Redemption Date"), at a Redemption Price equal to the greater of (i)
100% of the principal amount of the 2006 Notes to be redeemed and (ii) the sum
of the present values of the principal amount of the 2006 Notes to be redeemed
and the remaining scheduled payments of interest thereon (exclusive of interest
accrued to the Redemption Date) from the Redemption Date to the respective
scheduled payment dates discounted from their respective scheduled payment dates
to the Redemption Date on a semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate (as hereinafter defined) plus 30
basis points, plus, in either case, accrued and unpaid interest on the principal
amount being redeemed to such Redemption Date.

"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the term between the
Redemption Date and the Stated Maturity (the "Remaining Life") that would be
utilized, at the time of selection, and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity with the Remaining Life.

"Comparable Treasury Price" means, with respect to any Redemption Date, the
average of two Reference Treasury Dealer Quotations for such Redemption Date.

"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.

"Reference Treasury Dealer" means each of Banc of America Securities LLC and
Merrill Lynch Government Securities Inc., and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in The City of New York (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.

"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., The City
of New York time, on the third Business Day preceding such Redemption Date.

"Treasury Rate" means, with respect to any Redemption Date, (1) the yield, under
the heading which represents the average for the immediately preceding week,
appearing in the most recently published statistical release designated "H.15
(519)" or any successor

                                       4
<PAGE>

publication which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption "Treasury
Constant Maturities," for the maturity corresponding to the Comparable Treasury
Issue (if no maturity is within three months before or after the Stated
Maturity, yields for the two published maturities most closely corresponding to
the Comparable Treasury Issue shall be determined, and the Treasury Rate shall
be interpolated or extrapolated from such yields on a straight-line basis,
rounding to the nearest month) or (2) if such release (or any successor release)
is not published during the week preceding the calculation date or does not
contain such yields, the rate per year equal to the semiannual equivalent yield
to maturity of the Comparable Treasury Issue, calculated using a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for the Redemption Date. The Treasury
Rate will be calculated on the third Business Day preceding the Redemption Date.

Notwithstanding Section 1104 of the Original Indenture, the notice of redemption
with respect to the foregoing redemption need not set forth the Redemption Price
but only the manner of calculation thereof.

The Company shall notify the Trustee of the Redemption Price with respect to the
foregoing redemption promptly after the calculation thereof. The Trustee shall
not be responsible for calculating said Redemption Price.

If less than all of the 2006 Notes are to be redeemed, the Trustee shall select
the 2006 Notes or portions of 2006 Notes to be redeemed by such method as the
Trustee shall deem fair and appropriate. The Trustee may select for redemption
2006 Notes and portions of 2006 Notes in amounts of whole multiples of $1,000.

The 2006 Notes shall not have a sinking fund.

Section 207. Paying Agents. The Trustee shall initially serve as the principal
Paying Agent with respect to the 2006 Notes, and the principal Place of Payment
shall initially be the office of The Chase Manhattan Bank at 55 Water Street,
New York, New York 10041.

                                   ARTICLE 3

                            MISCELLANEOUS PROVISIONS

Section 301. Recitals by Company. The recitals in this Third Supplemental
Indenture are made by the Company only and not by the Trustee, and all of the
provisions contained in the Original Indenture in respect of the rights,
privileges, immunities, powers and duties of the Trustee shall be applicable in
respect of the 2006 Notes and this Third Supplemental Indenture as fully and
with like effect as if set forth herein in full.

Section 302. Ratification and Incorporation of Original Indenture. As
supplemented hereby, the Original Indenture is in all respects ratified and
confirmed, and the Original Indenture and this Third Supplemental Indenture
shall be read, taken and construed as one and the same instrument.

                                       5
<PAGE>

Section 303. Executed in Counterparts. This Third Supplemental Indenture may be
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.

                                       6
<PAGE>

IN WITNESS WHEREOF, each party hereto has caused this instrument to be signed in
its name and behalf by its duly authorized officers, all as of the day and year
first above written.

                                   DUKE ENERGY FIELD SERVICES, LLC

                                   By: /s/ JOHN E. JACKSON
                                       -----------------------------------------
                                       John E. Jackson
                                       Vice President and
                                       Chief Financial Officer

                                   THE CHASE MANHATTAN BANK,
                                   as Trustee

                                   By: /s/ NATALIA RODRIGUEZ
                                       -----------------------------------------
                                       Natalia Rodriguez
                                       Authorized Officer

                                       7
<PAGE>

                                    EXHIBIT A

                                     FORM OF
                                   5.75% NOTE
                                    DUE 2006

No.                                                        CUSIP No. 26439X AE 3

                         DUKE ENERGY FIELD SERVICES, LLC
                                   5.75% NOTE
                                    DUE 2006

Principal Amount:

Regular Record Date: close of business on the 15th calendar day prior to the
relevant Interest Payment Date

Original Issue Date: November 9, 2001

Stated Maturity:  November 15, 2006

Interest Payment Dates: May 15 and November 15, commencing May 15, 2002

Interest Rate: 5.75% per annum

Authorized Denomination: $1,000 or any integral multiple thereof

Duke Energy Field Services, LLC, a limited liability company duly organized and
existing under the laws of the state of Delaware (the "Company," which term
includes any successor company under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to                        ,
or registered assigns, the principal sum of                             DOLLARS
($             ) on the Stated Maturity shown above and to pay interest thereon
from the Original Issue Date shown above, or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, semi-annually
in arrears on each Interest Payment Date as specified above, commencing on May
15, 2002, and on the Stated Maturity at the rate per annum shown above (the
"Interest Rate") until the principal hereof is paid or made available for
payment, provided that principal and premium, and any such installment of
interest, which is overdue shall bear interest at the same rate per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date (other
than an Interest Payment Date that is the Stated Maturity or a Redemption Date)
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date as specified above next preceding such
Interest Payment Date; provided that any interest payable at Stated Maturity or
on a Redemption Date will be paid to the Person to whom principal is payable.
Except as otherwise provided in the Indenture, any such interest not so
punctually paid or duly provided for

                                       A-1
<PAGE>

will forthwith cease to be payable to the Holder on such Regular Record Date and
may either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Security not less
than 10 days prior to such Special Record Date, or be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange, if any, on which the Securities of this series shall be listed, and
upon such notice as may be required by any such exchange, all as more fully
provided in the Indenture.

Payments of interest on this Security will include interest accrued to but
excluding the respective Interest Payment Dates. Interest payments for this
Security shall be computed and paid on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on this
Security is not a Business Day, then payment of the interest payable on such
date will be made on the next succeeding day that is a Business Day (and without
any interest or payment in respect of any such delay) with the same force and
effect as if made on the date the payment was originally payable. "Business Day"
means a day other than (i) a Saturday or a Sunday, (ii) a day on which banking
institutions in the place of payment are authorized or obligated by law or
executive order to remain closed or (iii) a day on which the Corporate Trust
Office is closed for business.

Payment of principal of, premium, if any, and interest on the Securities of this
series shall be made in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts.
Payments of principal of, premium, if any, and interest on Securities of this
series represented by a Global Security shall be made by wire transfer of
immediately available funds to the Holder of such Global Security; provided
that, in the case of payments of principal and premium, if any, such Global
Security is first surrendered to the Paying Agent. If any of the Securities of
this series are no longer represented by a Global Security, (i) payments of
principal, premium, if any, and interest due at the Stated Maturity or earlier
redemption of such Securities shall be made at the office of the Paying Agent,
which is initially at 55 Water Street, New York, New York 10041, upon surrender
of such Securities to the Paying Agent, and (ii) payments of interest shall be
made, at the option of the Company, subject to such surrender where applicable,
(A) by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (B) by wire transfer at such
place and to such account at a banking institution in the United States as may
be designated in writing to the Trustee at least sixteen (16) days prior to the
date for payment by the Person entitled thereto.

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON
THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE
SAME EFFECT AS IF SET FORTH AT THIS PLACE.

                                      A-2
<PAGE>

Unless the certificate of authentication hereon has been executed by the Trustee
by manual signature, this Security shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.

                                      A-3
<PAGE>

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Dated:

                                       Duke Energy Field Services, LLC

                                       By:
                                          ---------------------------

                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.

                                       The Chase Manhattan Bank,
                                           as Trustee

                                       By:
                                          ----------------------------
                                          Authorized Officer

                                      A-4
<PAGE>

                           (REVERSE SIDE OF SECURITY)

This Security is one of a duly authorized issue of Securities of the Company
(the "Securities"), issued and issuable in one or more series under an
Indenture, dated as of August 16, 2000, as supplemented (the "Indenture"),
between the Company and The Chase Manhattan Bank, as Trustee (the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitation of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities issued
thereunder and of the terms upon which said Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated as
the 5.75% Notes due 2006 (the "2006 Notes"), limited in aggregate principal
amount of $300,000,000. Capitalized terms used herein for which no definitions
are provided herein shall have the meanings set forth in the Indenture.

The 2006 Notes shall be redeemable, in whole or in part at any time, at the
option of the Company on any date (a "Redemption Date"), at a Redemption Price
equal to the greater of (i) 100% of the principal amount of the 2006 Notes to be
redeemed and (ii) the sum of the present values of the principal amount of the
2006 Notes to be redeemed and the remaining scheduled payments of interest
thereon (exclusive of interest accrued to the Redemption Date) from the
Redemption Date to the respective scheduled payment dates discounted from their
respective scheduled payment dates to the Redemption Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate (as hereinafter defined) plus 30 basis points, plus, in either case,
accrued and unpaid interest on the principal amount being redeemed to such
Redemption Date.

"Comparable Treasury Issue" means the United States Treasury security selected
by the Quotation Agent as having a maturity comparable to the term between the
Redemption Date and the Stated Maturity (the "Remaining Life") that would be
utilized, at the time of selection, and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity with the Remaining Life.

"Comparable Treasury Price" means, with respect to any Redemption Date, the
average of two Reference Treasury Dealer Quotations for such Redemption Date.

"Quotation Agent" means the Reference Treasury Dealer appointed by the Company.

"Reference Treasury Dealer" means each of Banc of America Securities LLC and
Merrill Lynch Government Securities Inc., and their respective successors;
provided, however, that if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in The City of New York (a "Primary Treasury
Dealer"), the Company shall substitute therefor another Primary Treasury Dealer.

"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any Redemption Date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., The City
of New York time, on the third Business Day preceding such Redemption Date.

                                       A-5
<PAGE>

"Treasury Rate" means, with respect to any Redemption Date, (1) the yield, under
the heading which represents the average for the immediately preceding week,
appearing in the most recently published statistical release designated "H.15
(519)" or any successor publication which is published weekly by the Board of
Governors of the Federal Reserve System and which establishes yields on actively
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months before or after
the Stated Maturity, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined, and the
Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding to the nearest month) or (2) if such release (or
any successor release) is not published during the week preceding the
calculation date or does not contain such yields, the rate per year equal to the
semiannual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price for
the Redemption Date. The Treasury Rate will be calculated on the third Business
Day preceding the Redemption Date.

The Trustee shall initially serve as the principal Paying Agent with respect to
the Securities of this series, and the principal Place of Payment shall
initially be at the office of The Chase Manhattan Bank at 55 Water Street, New
York, New York 10041.

Notice of any redemption by the Company will be mailed at least 30 days but not
more than 60 days before any Redemption Date to each Holder of the 2006 Notes to
be redeemed. If less than all the 2006 Notes are to be redeemed at the option of
the Company, the Trustee shall select, in such manner as it shall deem fair and
appropriate, the 2006 Notes to be redeemed in whole or in part. The Trustee may
select for redemption the 2006 Notes and portions of the 2006 Notes in amounts
of whole multiples of $1,000.

If an Event of Default with respect to the Securities of this series shall occur
and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner, with the effect and subject to the
conditions provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of all series affected
under the Indenture at any time by the Company and the Trustee with the consent
of the Holders of not less than a majority in principal amount of the
Outstanding Securities of all series affected thereby (voting as one class). The
Indenture contains provisions permitting the Holders of not less than a majority
in principal amount of the Outstanding Securities of all series with respect to
which a default under the Indenture shall have occurred and be continuing
(voting as one class), on behalf of the Holders of the Securities of all such
series, to waive, with certain exceptions, such default under the Indenture and
its consequences. The Indenture also

                                       A-6
<PAGE>

permits the Holders of not less than a majority in principal amount of the
Securities of each series at the time Outstanding, on behalf of the Holders of
all Securities of such series, to waive compliance by the Company with certain
provisions of the Indenture affecting such series. Any such consent or waiver by
the Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of
this Security shall not have the right to institute any proceeding with respect
to the Indenture or for the appointment of a receiver or trustee or for any
other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than a majority in principal
amount of the Securities of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not have received from the Holders of a majority in principal
amount of Securities of this series at the time Outstanding a direction
inconsistent with such request and shall have failed to institute any such
proceeding for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.

No reference herein to the Indenture and no provision of this Security or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of and interest on this Security at the
times, place and rate, and in the coin or currency, herein prescribed.

The Indenture contains provisions for defeasance at any time of the entire
indebtedness of the Securities of this series or of any Securities of this
series and for covenant defeasance at any time of certain covenants in the
Indenture upon compliance with certain conditions set forth in the Indenture.

Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to the limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same upon surrender of
the Security or Securities to be exchanged at the office or agency of the
Company.

                                       A-7
<PAGE>

As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at any office or
agency of the Company for such purpose, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar and duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series,
of authorized denominations and of like tenor and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum efficient to cover any
tax or other governmental charge payable in connection therewith.

This Security shall be governed by, and construed in accordance with, the laws
of the State of New York.

                                      A-8
<PAGE>

                                  ABBREVIATIONS

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common         UNIF GIFT MIN ACT - ___ Custodian _______
                                                         (Cust)          (Minor)

TEN ENT - as tenants by the entireties                   under Uniform Gifts to
                                                         Minors Act ____________
                                                                      (State)

JT TEN - as joint tenants with rights
         of survivorship and not as
         tenants in common

Additional abbreviations may also be used though not on the above list.

--------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s) and transfer(s) unto
                                                                       ---------

--------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
ASSIGNEE, AND INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE.

--------------------------------------------------------------------------------
the within Security and all rights thereunder, hereby irrevocably constituting
 and appointing agent to transfer said Security on the books of the Company,
 with full power of substitution in the premises.

Dated:
      --------------------------     -------------------------------------------

                                     -------------------------------------------
                                     NOTICE: The signature to this assignment
                                     must correspond with the name as written
                                     upon the face of the within instrument in
                                     every particular without alteration or
                                     enlargement, or any change whatever.

                                      A-9<PAGE>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

         AGREEMENT, made as of the 22nd day of October, 2001, is entered into by
and among BSB Bancorp, Inc., a Delaware corporation (the "Corporation"), BSB
Bank & Trust Company, a New York chartered bank and trust company (the "Bank")
and Howard W. Sharp (the "Executive"). The Corporation and the Bank are
collectively referred to as the "Employers."

         WHEREAS, the Employers and the Executive have entered into an
Employment Agreement dated as of November 10, 2000, as amended (the "Prior
Agreement");

         WHEREAS, the Employers and the Executive desire to enter into this
Agreement to supercede and replace the Prior Agreement and to provide for the
employment of the Executive on the terms and conditions set forth herein;

         WHEREAS, for the purpose of effecting the same, the Boards of Directors
of the Employers (the "Boards") have approved this Employment Agreement and
authorized its execution and delivery on the Employers' behalf to the Executive;
and

         WHEREAS, the parties desire to enter into this Agreement, setting forth
the terms and conditions for the employment relationship of the Executive with
the Employers.

         NOW, THEREFORE, it is AGREED as follows:

         1. Employment. The Executive shall be employed as the President and
            ----------
Chief Executive Officer of the Employers and shall serve in such capacity during
the Employment Term (as defined in Section 5 below). The Executive agrees that,
during the Employment Term and in his capacity as President and Chief Executive
Officer or any other title(s) or position(s) to which the Executive may be
elected during the Employment Term, he will devote his full business time and
energy to the business, affairs and interests of the Employers and serve them
diligently and to the best of his ability. The duties and responsibilities to be
performed by the Executive shall be those appropriate to President and Chief
Executive Officer of the Employers as in effect currently, and from time to time
hereafter specified by the Employers' by-laws or as otherwise specified by the
Boards. In addition, following his election to the Boards, the Executive will
serve as a director and as a member of any committee of either of the Boards to
which he is elected, without additional compensation.

         2. Salary and Bonus.
            ----------------

            (a) The Employers agree to pay the Executive during the Employment
Term a salary at an annual rate not less than $356,000. The Executive's salary
shall be increased in the sole and absolute discretion of the Board or
committees thereof duly authorized by the Board to so act.

            (b) The salary of the Executive shall not be decreased at any time
during the Employment Term from the amount then in effect, unless the Executive
otherwise agrees in writing. Participation in deferred compensation,
discretionary bonus, retirement and other employee benefit plans and in fringe
benefits, other than salary reduction programs in which the Executive elects to
participate, shall not reduce the salary payable to the Executive under this
Section 2. The salary under this Section 2 shall be payable to the Executive not
less frequently than monthly.

         3. Business and Relocation Expenses.
            --------------------------------

            (a) During the Employment Term, the Employers shall reimburse the
Executive for reasonable and customary business expenses, including the
reasonable costs of business entertainment and travel, in accordance with the
policies of the Employers, in connection with the performance of his duties
hereunder, promptly

                                       20

<PAGE>

PART II OTHER INFORMATION

upon periodic presentation by the Executive of an itemized account of such
expenses and reasonable substantiation, in accordance with the Employers'
policies concerning reimbursement of business expenses.

           (b)     During the Employment Term, the Bank shall pay or reimburse
the Executive for membership dues at the Binghamton Country Club and the
Binghamton City Club, both located in the Binghamton, New York area, to be used
for business entertainment by the Executive.

       4.  Participation in Retirement and Employee Benefit Plans; Fringe
           --------------------------------------------------------------
Benefits; Stock Option. During the Employment Term, the Executive shall be
----------------------
eligible to participate in all incentive, bonus, management recognition, equity
compensation, retirement, deferred compensation, fringe benefit or welfare
benefit plans of the Employers that are applicable to executive employees of the
Employers generally, including plans providing for stock options, restricted
stock, employee stock purchases, pension or retirement income, retirement
savings, employee stock ownership, deferred compensation and medical,
prescription drug, dental, disability, employee life, group life, accidental
death and travel accident insurance that the Employers may adopt or maintain for
the benefit of executive employees of the Employers during the Employment Term,
in accordance with the terms of such plans.

       5.  Term.   The term of employment under this Agreement shall commence on
           ----
the date of this Agreement and shall end on October 22, 2004 (the "Initial
Term"). This Agreement shall be automatically renewed for an additional
consecutive 12-month period (the "Extended Term") as of October 22, 2002 and
every anniversary of October 22 thereafter, unless contrary written notice to
each of the other parties has been given either by the Executive or by both of
the Employers at least six months before any such renewal date. Such Initial
Term and all such Extended Terms are collectively referred to herein as the
"Employment Term".

       6.  Standards. The Executive shall perform his duties and
           ---------
responsibilities under this Agreement in accordance with such reasonable
standards as may be established from time to time by the Board and communicated
in writing to the Executive. The reasonableness of such standards shall be
measured against standards for executive performance generally prevailing in the
financial institutions industry.

       7.  Voluntary Absences; Vacations. The Executive shall be entitled,
           -----------------------------
without loss of pay, to absent himself voluntarily for reasonable periods of
time from the performance of his duties and responsibilities under this
Agreement. All such voluntary absences shall count as paid vacation time, unless
the Board otherwise approves. The Executive shall be entitled to paid vacation
days totaling 20 business days per year. The timing of paid vacations shall be
scheduled in a reasonable manner by the Executive.

       8.  Termination of Employment.
           -------------------------

           (a)      (i)      Subject to the other provisions of this Agreement,
the Employers may terminate the Executive's employment at any time.

                    (ii)     The Executive shall have no right to receive
compensation or other benefits for any period after he voluntarily terminates of
his employment without "Good Reason" (as defined below) or the Employers
involuntarily terminate his employment for "Cause" (as defined below).

                    (iii)    The parties acknowledge and agree that damages that
will result to the Executive for involuntary termination without Cause or
termination by the Executive with "Good Reason" (as defined below) shall be
extremely difficult or impossible to establish or prove, and agree that, subject
to Section 11 of this Agreement, the Employers shall be obligated, following
such termination, to:

                             (A)     except as provided in (B) below, continue
to pay to the Executive (subject to applicable payroll or other taxes required
to be withheld) compensation in accordance with Section 2(a) hereof for the
remaining term of this Agreement; or

                             (B)     if such involuntary termination without
Cause is effected at the request or direction of an acquiring party in
connection with a "Change in Control" (as defined below), or if such involuntary
termination without Cause or termination by the Executive for Good Reason occurs
during the 12-month period

                                       21

<PAGE>

PART II OTHER INFORMATION

following a Change in Control, pay the Executive on or before the last day of
the Executive's employment with the Employers a lump sum cash amount (subject to
applicable payroll or other taxes required to be withheld) equal to 2.99 times
the average annual cash compensation paid by the Employers to the Executive
during the five calendar years (or such lesser period during which the Executive
was employed by the Employers) preceding the calendar year in which the Change
in Control occurs, such average amount to be determined in accordance with the
provisions of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") and proposed or final regulations thereunder (but disregarding any
non-cash compensation paid to the Executive during such period).

         The amounts payable hereunder shall not be reduced by the Executive's
earnings from other employment or self-employment after termination of his
employment with the Employers. The Executive agrees that, except for such other
payments and benefits to which the Executive may be entitled as expressly
provided by the terms of this Agreement, the payments provided for under this
Section 8(a)(iii) shall constitute liquidated damages and shall be in complete
satisfaction of the Employers' obligations under this Agreement.

               (iv) In addition to the liquidated damages above described that
are payable to the Executive, subject to Section 11 of this Agreement, in the
event of any such termination without Cause or termination with Good Reason,
during the period in which payments are required to be made under Section
8(a)(iii)(A) above, or for three years in the case of a termination described in
Section 8(a)(iii)(B) above, or such longer period as may be provided by the
terms of the appropriate plan, the Employers shall continue in effect all
medical, prescription drug, dental, disability, employee life, group life and
accidental death insurance and other employee welfare plans for the benefit of
the Executive and, if applicable, the Executive's family, which would have been
provided to them in accordance with Section 4 of this Agreement if the
Executive's employment had not been terminated; provided, however, that if the
Executive is eligible to receive medical, prescription drug or dental benefits
under an employee benefits plan sponsored by a subsequent employer, the medical
prescription drug and dental benefits described herein shall be secondary to
those provided under such other plan during such applicable period of
eligibility.

               (v) Subject to Section 11 of this Agreement, in the event of any
such termination without Cause or termination with Good Reason, if upon the date
of termination of the Executive's employment the Executive holds any options
with respect to stock of Corporation, all such options will immediately become
exercisable upon such date and will be exercisable for not less than three
months thereafter. To the extent such acceleration of vesting or exercisability
of such options is not permissible under the terms of any plan pursuant to which
the options were granted, Employers will pay to the Executive, in a lump sum,
within three month after termination of employment, an amount equal to the
excess, if any, of the aggregate fair market value of all stock of Corporation
subject to such options, determined on the date of termination of employment,
over the aggregate option price of such stock, and the Executive will surrender
all such options unexercised. For the purposes of this Agreement, in the event
that such stock is listed on an established national or regional stock exchange,
is admitted to quotation on the Nasdaq Stock Market, or is publicly traded in an
established securities market, in determining the fair market value of the
stock, Employers shall use the average of the closing prices of such stock on
such exchange or in such market (the highest such closing price if there is more
than one such exchange or market) on the five trading dates immediately before
the date of termination (or, if there is no such closing price, then the Board
shall use the mean between the highest bid and lowest asked prices or between
the high and low prices on such date), or, if no sale of the Stock has been made
on one or more of such dates, on the next preceding day on which any such sale
shall have been made.

               (vi) For purposes of this Agreement:

               "Cause" shall mean the Executive's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, willful 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 of the Federal Deposit Insurance Corporation ("FDIC") or a material breach
of any provisions of this Agreement. For purposes of this paragraph, no act, or
failure to act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Employers;
provided that any act or omission to act on the Executive's behalf in reliance
upon an opinion of counsel satisfactory to the Employers shall not be deemed to
be willful.

                                       22

<PAGE>

PART II OTHER INFORMATION

               "Good Reason" shall mean:

                        (1)     the assignment to the Executive by the Employers
of duties materially inconsistent with the Executive's position, duties,
responsibilities, and status as President and Chief Executive Officer of the
Employers, a material adverse change in the Executive's titles or offices, any
removal of the Executive from or any failure to reelect the Executive to any of
such officer positions, except in connection with the termination of his
employment for Cause, or any action that would have a material adverse effect on
the physical conditions in which or location at which the Executive performs his
employment duties;

                        (2)     a reduction by the Employers in the Executive's
salary under Section 2(a) without the Executive's consent; or

                        (3)     any other action or inaction that constitutes a
material breach by the Employers or
either of them of this Agreement.

               "Change in Control" shall mean a change of control of the
Corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or such item thereof
which may hereafter pertain to the same subject; provided that, and
notwithstanding the foregoing, a Change in Control shall be deemed to have
occurred if (i) any "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of Corporation representing 25% or more of the
combined voting power of Corporation's then outstanding securities unless,
immediately after such transaction, persons who were stockholders of the
Corporation immediately before such transaction own at least 75% of the capital
stock or other equity interests of such person, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Boards cease for any reason to constitute at least a majority thereof unless
the election of each Director, who was not a Director at the beginning of such
period, was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of the period, (iii)
Corporation shall cease to be a publicly owned corporation, or (iv) any merger
or consolidation of Corporation with or into another entity shall occur as a
result of which the stockholders of Corporation do not retain or acquire 75% or
more of the capital stock of the resulting entity.

        (b)    The Executive shall have no right to terminate his
employment under this Agreement before the end of the Employment Term, unless
(i) such termination is approved by the Boards or (ii) such termination is with
"Good Reason" as defined above.

        (c)    During the Employment Term and following termination of the
Executive's employment with the Employers, the Employers shall be entitled, in
addition to their other legal remedies, to enjoin the employment of the
Executive with any significant competitor of the Employers (or either of them)
for a period of one year or the then remaining Employment Term plus six months,
whichever is less. The term "significant competitor" shall mean any commercial
bank, savings bank, savings and loan association, mortgage banking company or a
holding company affiliate of any of the foregoing which, at the date of its
employment of the Executive, has an office out of which the Executive would be
primarily based that is located within 100 miles of the Bank's office located at
58-68 Exchange Street, Binghamton, New York. If any court or other tribunal
having jurisdiction to determine the validity or enforceability of this
paragraph determines that, strictly applied, it would be invalid or
unenforceable, the

                                       23

<PAGE>

definition of "significant competitor" and the time provisions used shall be
deemed modified to the extent necessary (but only to that extent) so that the
restrictions in that subsection, as modified, will be valid and enforceable.

               (d)   In the event the employment of the Executive is terminated
by the Employers without Cause or by the Executive for Good Reason under Section
8(a) hereof and the Employers fail to make timely payment of the amounts then
owed to the Executive under this Agreement, the Executive shall be entitled to
reimbursement for all reasonable costs, including attorneys' fees, incurred by
the Executive in taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent above
the prime rate (defined as the base rate on corporate loans at large U.S. money
center commercial banks as published by The Wall Street Journal), compounded
monthly, for the period from the date of employment termination until payment is
made to the Executive. Such reimbursement and interest shall be in addition to
all amounts to which the Executive is otherwise entitled to under this
Agreement.

               (e)   In the event of the Executive's death during the Employment
Term, his estate shall be entitled to receive any unpaid salary or other
compensation owing to the Executive. This Agreement shall thereupon terminate,
except that any vested rights of the Executive shall then be exercised by his
estate.

               (f)   In the event the Executive becomes disabled during the
Employment Term under circumstances that would entitle him to benefits under the
Employers' long-term disability plan and, as a result of such disability, he is
unable to perform his duties hereunder for an uninterrupted period of more than
six months, the Employers may terminate the Executive's employment without
liability under Section 8(a) hereof and this Agreement shall thereupon
terminate. Any such termination shall not affect the Executive's rights to
benefits pursuant to any applicable long-term disability plan of the Employers.

               (g)   Notwithstanding any other provision in this Agreement, (i)
the Employers may terminate or suspend this Agreement and the employment of the
Executive hereunder, as if such termination were for Cause under Section 8(a)
hereof, to the extent required by the applicable laws of the State of New York
related to banking, by applicable federal law relating to deposit insurance or
bank holding companies or by regulations or orders issued by the New York State
Banking Department, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation or other state or federal banking
regulatory agency having jurisdiction over the Corporation or the Bank and (ii)
no payment shall be required to be made to or for the benefit of the Executive
under this Agreement to the extent such payment is prohibited by applicable law,
regulation or order issued by a banking agency or a court of competent
jurisdiction; provided, that it shall be the Employers' burden to prove that any
such action was so required.

          10.  Confidential Information.
               ------------------------

               (a)   The Executive acknowledges that the information,
observations and data obtained by the Executive concerning the business and
affairs of the Employers during the course of the Executive's employment are the
property of the Employers, including information concerning acquisition
opportunities in or reasonably related to the business or industry of the
Employers of which the Executive becomes aware during such period. Therefore,
the Executive agrees that he will not at any time (whether during or after the
Employment Term) disclose to any unauthorized person or, directly or indirectly,
use for the Executive's own account, any of such information, observations or
data without the consent of the Boards, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a direct or indirect result of the Executive's unauthorized
acts or omissions to act or the unauthorized acts or omissions to act of other
employees of the Employers. The Executive agrees to deliver to the Bank at the
termination of the Executive's employment, or at any other time the Bank may
request in writing (whether during or after the Employment Term), all memoranda,
notes, plans, records, reports and other documents, regardless of the format or
media (and copies thereof), relating to the business of the Employers and their
predecessors (including, without limitation, all acquisition prospects, lists
and contact information) which the Executive may then possess or have under the
Executive's control.

               (b)  The Executive acknowledges that the restrictions contained
in this Section 10 hereof are reasonable and necessary, in view of the nature of
the Employers' business, in order to protect the legitimate interests of the
Employers, and that any violation thereof would result in irreparable injury to
the Employers. Therefore, the Executive agrees that in the event of a breach or
threatened breach by the Executive of the provisions of Section 10(a) hereof,
the Employers shall be entitled to obtain from any court of competent
jurisdiction, preliminary or permanent injunctive relief restraining the
Executive from disclosing or using any such confidential information. Nothing
herein shall be construed as prohibiting the Employers from pursuing any other
remedies available to them for such breach or threatened breach, including,
without limitation, recovery of damages from the Executive.

                                       24

<PAGE>

               11.  Section 280G Gross-Up Payment.
                    -----------------------------

                    (a)   Anything in this Agreement to the contrary
notwithstanding and except as set forth below in this Section 11(a), in the
event it shall be determined that any payment or distribution by the Employers,
or any other member of the affiliated group (as determined for purposes of
Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") of which any Employer is a member, to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 11) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 11(a), if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Executive, after taking into account the Payments and the Gross-Up
Payment, would not receive a net after-tax benefit of at least $10,000 (taking
into account both income taxes and any Excise Tax) as compared to the net
after-tax proceeds to the Executive resulting from an elimination of the
Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount
(the "Reduced Amount") such that the receipt of Payments would not give rise to
any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the
Payments, in the aggregate, shall be reduced to the Reduced Amount.

                    (b)   Subject to the provisions of Section 11(c), all
determinations required to be made under this Section 11, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by PricewaterhouseCoopers LLP or such other certified public accounting firm
reasonably acceptable to the Employers as may be designated in writing by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Employers and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Employers. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm reasonably acceptable to the Employers to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Employers. Any Gross-Up Payment, as determined
pursuant to this Section 11, shall be paid by the Employers to the Executive
within five business days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Employers and
the Executive. As a result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that the initial Gross-Up Payments made by the
Employers will be inadequate and that additional Gross-Up Payments by the
Employers should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Employers
exhaust their remedies pursuant to Section 11(c) and the Executive thereafter
are required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Employers to or for the benefit of
the Executive.

                    (c)   The Executive shall notify the Employers in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Employers of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive
receives written notice of such claim and shall apprise the Employers of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of 30 days
following the date on which the Executive gives such notice to the Employers (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employers notify the Executive in writing prior to
the expiration of such period that they desire to contest such claim, the
Executive shall:

                          (i)   give the Employers any information reasonably
requested by the Employers relating to such claim,

                                        25

<PAGE>

                          (ii)   take such action in connection with contesting
such claim as the Employers shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney selected by the Employers and reasonably acceptable
to the Executive,

                          (iii)  cooperate with the Employers in good faith in
order effectively to contest such claim, and

                          (iv)   permit the Employers to participate in any
proceedings relating to such claim; provided, however, that the Employers shall
bear and pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.

                    Without limitation on the foregoing provisions of this
Section 11(c), the Employers shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Employers shall
determine; provided, however, that if the Employers direct the Executive to pay
such claim and sue for a refund, the Employers shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Employers' control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

                    (d)   If, after the receipt by the Executive of an amount
advanced by the Employers pursuant to Section 11(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Employers' continued compliance with the requirements of this
Section 11) promptly pay to the Employers the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Employers
pursuant to Section 11(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the Employers do not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination (or if any such
contest shall be finally determined in a manner adverse to such refund being
allowed), then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent thereof, the
amount of the Gross-Up Payment required to be paid.

          12.       Miscellaneous.
                    -------------

                    (a)   No Assignment. This Agreement is personal to each of
                          -------------
the parties hereto. No party may assign or delegate any of his or its rights or
obligations hereunder without first obtaining the written consent of the other
party hereto. However, in the event of the death of the Executive, all of his
rights to receive payments hereunder shall become rights of his estate as
provided in Section 8(e) hereof.

                    (b)   Entire Agreement, Other Contracts. This Agreement
                          ---------------------------------
constitutes the entire agreement between any of the parties respecting the
employment of the Executive, there being no representations, warranties or
commitments except as set forth herein. The Prior Agreement is hereby replaced
and superceded and shall be of no further force or effect after the date hereof.
The Executive shall not, during the Employment Term, have any other paid
employment other than with a subsidiary or affiliate of the Employers, except
with the prior written approval of the Boards.

                                       26

<PAGE>

               (c)   Amendments or Additions; Action by Boards. No amendments or
                     -----------------------------------------
additions to this Agreement shall be binding unless in writing and signed by all
parties hereto. The prior approval by the Boards shall be required in order for
the Employers to authorize any amendments or additions to this Agreement or to
give any consents or waivers of provisions of this Agreement, or to terminate
the Executive's employment with or without Cause under Section 8(a) hereof.

               (d)   Section Headings. The section 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.

               (e)   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.

               (f)   Governing Law. This Agreement shall be governed by the laws
                     -------------
of the United States, where applicable, and otherwise by the laws of the State
of New York other than the choice of law rules thereof to the extent such rules
would require that the laws of another jurisdiction apply.

               (g)   Notice. All notices, demands, requests, or other
                     ------
communications which may be or are required to be given, served, or sent by any
party to any other party pursuant to this Agreement shall be in writing and
shall be hand delivered, sent by overnight courier or mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by telegram, telecopy or telex, addressed as follows:

                                 BSB BANCORP, INC.
                                 58-68 Exchange Street
                                 Binghamton, New York 13902
                                 Attention: Chairman of the Board of Directors

or if to the Executive:          Howard W. Sharp
                                 5 Riverside Towers
                                 Apt. 1106
                                 Binghamton, New York 13905

Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.

               (h)   Counterparts. This Agreement may be executed in several
                     ------------
counterparts, for the convenience of the parties, but shall constitute one and
the same instrument.

               (i)   Express Agreement of Successor Required. The Employers will
                     ---------------------------------------
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Corporation or the Bank to expressly agree to honor this Agreement
without modification and to perform the respective obligations of the Employers
hereunder.

                                        27

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, or caused this Agreement to be duly executed on their behalf, as of
the date and year first above written.

Attest:                                  BSB BANK & TRUST COMPANY

Mary I. Hoskins                          By  /s/ Larry G. Denniston
--------------------------                   -----------------------------------
                                             SVP and Corporate Secretary
                                             -----------------------------------

Attest:                                  BSB BANCORP, INC.

Mary I. Hoskins                          By  /s/ Larry G. Denniston
--------------------------                   -----------------------------------
                                             SVP and Corporate Secretary
                                             -----------------------------------

                                         /s/ Howard W. Sharp
                                         ---------------------------------------
                                         Howard W. Sharp
                                         Executive

                                       28

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