ACQUISITION AGREEMENT

BY AND AMONG

A.R. SCHMEIDLER & CO., INC.

ARNOLD R. SCHMEIDLER

AND

ALBERT J. SCHMEIDLER

AS SELLERS

AND

HUDSON VALLEY HOLDING CORP.

AND

HUDSON VALLEY BANK

AS BUYER

JUNE 29, 2004

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TABLE OF CONTENTS

SECTION 1. DEFINITION 1 SECTION 2. PURCHASE 8

2.1 Purchase and Sale 8 2.2 Consideration 8 2.3 Adjustment of Initial Payment;
Estimate 12 2.4 Closing Statement; Final Adjustment of Initial Payment 13 2.5
Closing 14 2.6 Deliveries at the Closing 14

SECTION 3 REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND THE COMPANY 15

3.1 Organization and Good Standing of the Company 15 3.2 Subsidiaries 15 3.3
Capitalization; Title to Shares 15 3.4 Authority, Approvals and Consents 14 3.5
Financial Statements 16 3.6 Absence of Change 16 3.7 Taxes 16 3.8 Property 19
3.9 Contracts 20 3.10 Company Reports 20 3.11 Litigation; Regulatory Action 21
3.12 ERISA and Employees 22 3.13 Compliance with Laws 23 3.14 Representations
and Warranties Regarding the Investment Advisory Business 23 3.15 Investment
Intent of Sellers 26 3.16 Derivatives 26 3.17 Intellectual Property Rights 26
3.18 Brokers 27 3.19 Environmental Matters 27 3.20 Insurance 27 3.21 Labor
Relations 28 3.22 Advertising 28 3.23 Anti-Money Laundering 28 3.24 Bank
Accounts 28 3.25 No Material Misstatements or Omissions 28

SECTION 4 REPRESENTATIONS AND WARRANTIES REGARDING BUYER 28

4.1 Organization and Good Standing of Hudson Valley and Buyer 28 4.2 Power;
Authorization; Consents 28 4.3 SEC Filings; Financial Statements 29 4.4 Brokers
30 4.5 Investment Intent of Buyer 30 4.6 No Material Misstatements or Omissions
30

SECTION 5 COVENANTS 30

5.1 Advisory Contracts Consents, Broker-Dealer Change in Control and Banking
Approvals 30 5.2 Compliance With Securities Law 31 5.3 Tax Matters 31 5.4 Access
34 5.5 Announcements 34 5.6 Consents, Cooperation 34 5.7 Notification of Certain
Matters 35 5.8 Further Assurances 35 5.9 Retention of Books and Records 35 5.10
Stock Options 35 5.11 Conduct of Business Prior to the Closing 35 5.12
Non-competition; Non-solicitation 37 5.13 Right of First Refusal; Registration
39 5.14 Employment of the Company's Employees 41 5.15 Post-Closing Governance
Matters 42 5.16 Buyer Referrals 43 5.17 Hudson Valley Guarantee 43

SECTION 6 CONDITIONS TO THE OBLIGATIONS OF BUYER 43

6.1 Representations and Warranties; Covenants 43 6.2 Opinion of Sellers' Counsel
43 6.3 Arnold R. Schmeidler Employment Agreement 44 6.4 Regulatory Approvals 44
6.5 Absence of Litigation 44 6.6 Consents 44 6.7 Investment Contracts 44 6.8
Investment Adviser Registration 45 6.9 Key Man Life Insurance 45 6.10 Net
Capital 45 6.11 Sellers' Fees 45 6.12 By-Laws 45 6.13 Certificates 45

SECTION 7 CONDITIONS TO THE OBLIGATIONS OF THE SELLERS 45

7.1 Representations and Warranties; Covenants 45 7.2 Opinion of Buyer's Counsel
46 7.3 Schmeidler Employment Agreement 46 7.4 Regulatory Approvals 46 7.5
Absence of Litigation 46 7.6 Investment Contracts 46 7.7 Certificates 46

SECTION 8 TERMINATION 46

8.1 Termination 46 8.2 Effect of Termination 47

SECTION 9 SURVIVAL AND INDEMNIFICATION 47

9.1 Survival 47 9.2 Seller's Indemnification 47 9.3 Buyer's Indemnification 48
9.4 Claims by Third Parties 49 9.5 Buyer's Right to Set-Off 50

SECTION 10 MISCELLANEOUS 50

10.1 Headings 50 10.2 Stockholders' Representative 50 10.3 Authority 50 10.4
Limitation on Liability 50 10.5 Notices 51 10.6 Assignment 52 10.7 Entire
Agreement 52 10.8 Amendment; Waiver 52 10.9 Counterparts 52 10.10 Governing Law
52 10.11 Expenses 53 10.12 Severability 53 10.13 Consent to Jurisdiction 53
10.14 Third Person Beneficiaries 53 10.15 Representations and Warranties:
Disclosure Schedule 53 10.16 United States Dollars 53 10.17 No Agreement until
Signed by all Parties 53

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ACQUISITION AGREEMENT

        THIS AGREEMENT dated this 29th day of June, 2004, is by and among Arnold
R. Schmeidler and Albert J. Schmeidler (each a “Seller”, and collectively, the
“Sellers”), A.R. Schmeidler & Co., Inc., a New York corporation (the “Company”),
Hudson Valley Bank, a New York state-chartered bank (“Buyer”), and Hudson Valley
Holding Corp., a New York corporation and registered bank holding company of
Buyer (“Hudson Valley”).

        WHEREAS, Buyer desires to purchase and Sellers desire to sell all issued
and outstanding shares of capital stock of the Company, on the terms and
conditions hereinafter set forth.

        NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

SECTION 1.   DEFINITIONS

        In this Agreement (including the recitals), except as expressly provided
or as the context otherwise requires:

        “Affiliate” means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person will be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.

        “Agreement” means this agreement including all recitals, exhibits and
the Disclosure Schedule relating hereto.

        “Arbiter” means KPMG LLP, or such other firm of certified public
accountants as may be selected by the agreement of the Buyer and the
Stockholders’ Representative.

        “Business Day” means any day which is not a Saturday, Sunday or any
other day on which banks in the State of New York are authorized or required by
law to close.

      “Change in Control of Hudson Valley” means

(a)   the acquisition by any individual, entity, or group, within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act (any such individual, entity or
group being referred to herein as an “Acquiring Person”), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either (i) the then outstanding shares of common stock of
Hudson Valley (the “Outstanding Hudson Valley Stock”) or (ii) the combined
voting power of the then outstanding voting securities of Hudson Valley entitled
to vote generally in the election of directors (the “Outstanding Hudson Valley
Voting Securities”); provided, however, that for purposes of this subsection
(a), the following acquisitions of stock shall not result in a Change in
Control: (i) any acquisition directly from Hudson Valley, (ii) any acquisition
by Hudson Valley, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Hudson Valley or any corporation controlled by
Hudson Valley, or (iv) any acquisition by any corporation pursuant to a
transaction that complies with clauses (i), (ii), and (iii) of paragraph (c)
below; or

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(b)   individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election, by Hudson Valley’s
shareholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or

(c)   consummation of a reorganization, merger, or consolidation or sale or
other disposition of all or substantially all of the assets of Hudson Valley (a
“Business Combination”), in each case, unless following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Hudson Valley
Common Stock and Outstanding Hudson Valley Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination, including, without limitation, a
corporation that as a result of such transaction owns Hudson Valley or all or
substantially all of Hudson Valley’s assets either directly or through one or
more subsidiaries (any such corporation being referred to herein as a “Resulting
Corporation”), in substantially the same proportions as their ownership of the
Outstanding Hudson Valley Common Stock and Outstanding Hudson Valley Voting
Securities, as the case may be, immediately prior to such Business Combination,
(ii) no Acquiring Person (excluding any employee benefit plan (or related trust)
of Hudson Valley or a Resulting Corporation) beneficially owns, directly or
indirectly, 50% or more of, respectively, the outstanding shares of common stock
of the Resulting Corporation or the combined voting power of the then
outstanding voting securities of such Resulting Corporation, except to the
extent that such ownership existed prior to the Business Combination, and (iii)
at least a majority of the members of the board of directors of the Resulting
Corporation were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or

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(d)   approval by the shareholders of Hudson Valley of a complete liquidation or
dissolution of Hudson Valley; or

(e)   both William Griffin (Chairman) and James Landy (Chief Executive Officer)
are replaced in their respective current roles as both directors of Hudson
Valley and Chairman and Chief Executive Officer, respectively, for reasons other
than death, disability or retirement.

        “Change in Control of the Company” means

(a)   the acquisition by an Acquiring Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of
either (i) the then outstanding shares of common stock of the Company (the
“Outstanding Company Stock”) or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this subsection (a), the following acquisitions of
stock shall not result in a Change in Control: (i) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by Hudson
Valley or any corporation controlled by Hudson Valley, or (ii) any acquisition
by any corporation pursuant to a transaction that complies with clauses (i) and
(ii) of paragraph (b) below; or

(b)   consummation of a reorganization, merger, or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
“Company Business Combination”), in each case, unless following such Company
Business Combination, (i) Hudson Valley beneficially owns, directly or
indirectly, more than 50% of, respectively, the outstanding shares of common
stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of
the corporation resulting from such Company Business Combination, including,
without limitation, a corporation that as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries (any such corporation being referred to herein
as a “Resulting Company”), and (ii) at least a majority of the members of the
board of directors of the Resulting Company were members of the board of
directors of the Company at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Company Business Combination;
or

(c)   approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.

         “Change in Control” means either a Change in Control of Hudson Valley
or a Change in Control of the Company.

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        “Client Run Rate Revenues” means as of any given date for a specific
Client the assets under management for such Client multiplied by the effective
fee rate for such Client as set forth in its Client Investment Contract or
Contracts.

        “Closing” means the closing of the purchase and sale of the Shares
pursuant to this Agreement.

        “Closing Date” means the date on which the Closing occurs as determined
by Section 2.5 of this Agreement.

        “Code” means the Internal Revenue Service Code of 1986, as amended.

        “Common Stock” means the common stock, par value $0.01 per share, of the
Company.

        “Company Agreement” means any mortgage, indenture, note, agreement,
contract, lease, license, franchise, obligation, instrument or other commitment,
arrangement or understanding of any kind (whether oral or in writing) to which
the Company is a party or by which the Company or any of its property may be
bound or affected.

        “Company Intellectual Property Rights” means, collectively, all of the
Intellectual Property Rights used by the Company.

        “Disclosure Schedule” means the Company’s disclosure schedule relating
to this Agreement. Each reference to a “Schedule” means a particular portion of
the Disclosure Schedule.

        “Environmental Laws” means any applicable federal, state, local or other
law, statute, ordinance rule, regulation, environmental permit, judgment, order
decree, license or other binding requirement of, or binding agreement with, any
Regulatory Agency, now or hereafter in effect and, in each case, as amended from
time to time, relating to or governing the presence, Release, or threatened
Release of hazardous material, the protection of natural resources, health,
safety or the environment, or the management, manufacture, use, processing,
sale, generation, handling, labeling, distribution, transportation, treatment,
storage, disposal, remediation, disclosure, or notice of the presence, Release
or threatened Release of hazardous material including, without limitation, (a)
the Clean Air Act, 42 U.S.C. §7401 et seq., as amended, (b) the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq.,
as amended, (c) the Emergency Planning and community Right-to-Know Act, 42
U.S.C. §11001 et seq., as amended, (d) the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. §136 et seq., (e) the Federal Water Pollution Control
Act, 33 U.S.C. §1251 et seq., as amended, (f) the Hazardous Material
Transportation Act, 49 U.S.C. §1801 et seq., as amended, (g) the Low-Level
Radioactive Waste Policy Act, 42 U.S.C. §2021b et seq., as amended, (h) the
Occupational Safety and Health Act, 29 U.S.C. §651 et seq., as amended, (i) the
Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., as amended, (j)
the Safe Drinking Water Act, 42 U.S.C. §300f et seq., as amended, (k) the Toxic
Substance Control Act, 15 U.S.C. §2601 et seq., as amended, and (l) the
substantive equivalent of any of the foregoing in any state or foreign
jurisdiction.

        “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.

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        “Exchange Act” means the Securities Exchange Act of 1934, as amended.

        “GAAP” shall mean accounting principles generally accepted in the United
States of America.

        “Governmental Authority” means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or judicial or arbitral body or
instrumentality.

        “Hudson Valley Common Stock” means the common stock, par value $0.20 per
share, of Hudson Valley.

        “Insider” means, with respect to any Person, any officer, director or
Affiliate of such Person.

        “Investment Advisers Act” means the Investment Advisers Act of 1940, as
amended.

        “Investment Contracts” means the contracts between the Company and the
Company’s clients relating to the provision by the Company of investment
advisory services.

        “Investment Company” means each investment company registered under the
Investment Company Act.

        “Investment Company Act” means the Investment Company Act of 1940, as
amended.

        “Intellectual Property Rights” means all patents, patent applications,
patent rights, trademarks, trademark registrations, trademark applications,
service marks, service mark applications, business marks, trade names, brand
names, all other names and slogans embodying business goodwill, copyright
registrations, copyright rights (including those in computer programs, software,
including all source code and object code, development documentation,
programming tools, drawings, specifications and data) trade secrets and all
other registered rights now existing and hereafter created, including
proprietary and confidential information, and any rights under licenses to any
of the foregoing, whether or not subject to statutory registration or
protection.

        “Knowledge of the Company”, or words of similar import, means knowledge
of Arnold R. Schmeidler, Albert J. Schmeidler, and, with respect to each Client
account handled by John Wyman, John Wyman.

        “Legal Requirements” means all statutes, ordinances, codes, rules,
regulations, standards, judgments, decrees, writs, rulings, injunctions, orders
and other requirements of governmental, administrative or judicial entities that
are applicable to the Company and any of its property.

        “Lien” means any encumbrance, charge, right or other security interest.

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        “Losses” means, in respect of Buyer or Sellers, any and all damages,
losses, liabilities, claims and reasonable expenses of defense thereof
(including, without limitation, fees and disbursements of counsel), Liens or
other obligations of any nature whatsoever.

        “Material Adverse Effect” means any material adverse change or effect to
the business, operations, assets, financial condition, properties or results of
operations of the Company.

        “Material Agreement” means each Company Agreement that is material to
the business, operations, assets or financial condition of the Company,
including, without regard to materiality, each of the following Company
Agreements:

(a)   any mortgage, indenture, note, installment obligation or other instrument,
agreement or arrangement for or relating to borrowing of money by the Company;

(b)   any guaranty, direct or indirect, by the Company of any obligation for
borrowed money, excluding endorsements made for collection in the ordinary
course of business;

(c)   any obligation to sell or to register the sale of any of the Shares or
other securities of the Company;

(d)   any obligation to make payments, contingent or otherwise, arising out of
the prior acquisition of the business of other persons;

(e)   any lease or similar arrangement for the use by the Company of personal
property involving payments in excess of $25,000 per annum;

(f)   any Company Agreement to which any Insider is a party;

(g)   any Company Agreement providing for aggregate payments in excess of
$25,000 per annum after the Closing that is not terminable by the Company on
less than 30 days’ notice without penalty;

(h)   any Company Agreement containing non-competition covenants binding on the
Company or any Insider of the Company;

(i)   any partnership, joint venture or similar agreement to which the Company
is a party; and

(j)   any employment contracts, arrangements, commitments or understandings of
any kind with any officer, director, employee or consultant of the Company which
may not be terminated by the Company without penalty upon not more than 30 days’
notice, pursuant to which payments may be required to be made following the
Closing.

        “NASD” means the National Association of Securities Dealers, Inc.

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        “Person” means and includes an individual, corporation, partnership
(limited or general), joint venture, association, trust, any other
unincorporated organization or entity and a governmental entity or any
department or agency thereto.

        “Quarter” means each of the three-month quarters ending on March 31,
June 30, September 30, and December 31 during any calendar year.

        “Release” shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing into
the outdoor environment.

        “Run Rate Revenues” means as of any given date the sum of all Clients’
Run Rate Revenues, excluding the Client Run Rate Revenues of each Client that
has notified the Company that it intends to terminate its Investment Contract
with the Company.

        “Run Rate Revenues at Closing” means the Company’s Run Rate Revenues at
the close of business on the third Business Day immediately preceding the
Closing Date. For purposes of calculating Run Rate Revenues at Closing (i) the
assets under management of a Client that was also a Client on the date hereof
shall be deemed to be equal to the assets under management on the date hereof as
specified on Schedule 1.1 plus any additions or contributions minus any
withdrawals since the date hereof, and (ii) the assets under management of a
Person who becomes a Client after the date hereof shall be deemed to be equal to
the initial amount of assets under management plus any additions or
contributions and minus any withdrawals since such Person became a new Client,
it being the intention of the parties that the assets under management shall not
be adjusted for fluctuations in market value.

        “Run Rate Revenues at Signing” means the Company’s Run Rate Revenues as
of the close of business on the second Business Day prior to the date hereof as
set forth on Schedule 1.1.

        “SEC” means the United States Securities and Exchange Commission.

        “Securities Act” means the Securities Act of 1933, as amended.

        “Shares” means all issued and outstanding shares of the Company’s Common
Stock.

        “Schmeidler Employment Agreement” means the agreement to be entered into
between Arnold R. Schmeidler and the Company in substantially the form attached
hereto as Exhibit C.

        “Side Letter” means the letter dated as of the date hereof from Buyer to
the Company and the Sellers addressing the Company’s net capital requirements.

        “Stockholders’ Equity” means the stockholders’ equity of the Company as
of the Closing Date prepared in accordance with GAAP on a basis consistent with
the preparation of the Company Financial Statements. Notwithstanding the
foregoing, Stockholders’ Equity as of the Closing Date shall be determined after
accruing (i) all of the expenses incurred by the Sellers (and payable by the
Company) or the Company in connection with the sale of the Company, (ii) all
Taxes incurred by the Company through the Closing Date whether or not then
payable, and (iii) all Taxes incurred in connection with the election of the
Company pursuant to Section 338(h)(10) of the Code.

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        “Stockholders’ Representative” shall mean Arnold R. Schmeidler, who
represents all Stockholders and the Company pursuant to a limited power of
attorney executed by Albert J. Schmeidler, a copy of which is attached hereto as
Exhibit A.

        “Subsidiary” means with respect to any Person (the “Owner”), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation’s or other Person’s board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred), are held by the Owner or one or more of its
Subsidiaries.

        “Tax” or “Taxes” means all taxes, charges, fees, levies or other
assessments, and all estimated payments thereof, including but not limited to
income, excise, property, sales, use, value added, environmental, franchise,
payroll, transfer, gross receipts, withholding, social security, UBT and
unemployment taxes, imposed by any federal, state, county or local government,
any subdivision or agency thereof, including, but not limited to, the City of
New York, and any interest, penalty and expense relating to such taxes, charges,
fees, levies or other assessments.

        “Tax Returns” means all federal, state and local Tax returns, reports
and declarations which are due and required to be filed by any applicable Tax
law.

SECTION 2.   PURCHASE

        2.1.        Purchase and Sale.   Upon the terms and subject to the
conditions set forth in this Agreement, Sellers agree to sell to Buyer, and
Buyer agrees to purchase from Sellers, all of Sellers’ right, title and interest
in and to the Shares.

        2.2.        Consideration.

        (a)        At the Closing Buyer will pay to the Sellers in accordance
with Schedule 2.2(a) an aggregate amount equal to $7,764,000, subject to
adjustment pursuant to Section 2.3 and Section 6.7(b) (the “Initial Payment”).
Schedule 2.2(a) sets forth the number of shares and percentage ownership of the
Common Stock of the Company by each Seller.

        (b)        (i) Following the Closing, Buyer shall pay Sellers five (5)
annual earn out payments (each, an “Earn Out” and in the aggregate, the “Earn
Outs”). Earn Outs are payable with respect to each of the first five 12-month
periods beginning on the first day of the calendar month immediately following
the Closing (each, an “Earn-Out Year”) and are payable on the date (the “Payment
Date”) which is not more than five (5) business days after the date of delivery
of the certificate of the Buyer’s Chief Financial Officer as provided in Section
2.2(b)(vii) (the “Certificate Date”). Each Earn-Out Year’s “Earn Out” will equal
in the aggregate 80% of the Company’s Pre-Tax Earnings (as hereinafter defined).
The Earn Out will be paid to the Sellers by wire transfer of immediately
available funds and in the same percentage to each Seller as the Initial Payment
and, except as provided in Section 9.5, shall be paid to the Sellers without
setoff and regardless of the death or disability of any Seller, and regardless
of whether any or all of the Sellers remain employed with Buyer for such
Earn-Out Year. Notwithstanding anything in this Agreement to the contrary, if
any receivables of the Company, including all balance sheet amounts included
under “Receivables from Brokers”, outstanding on the Closing Date remain
outstanding ninety (90) days after the Closing, then the Earn Out for the first
Earn-Out Year shall be reduced by such outstanding amount.

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             (ii)        After the end of the first Earn-Out Year when the sum
of the Company’s Pre-Tax Earnings for that Earn-Out Year and all preceding
Earn-Out Years is $9,100,000 or greater, but no sooner than the first day of the
second Earn-Out Year unless an event described in Section 2.2(c)(i) occurs prior
to that time, Buyer shall issue and deliver such number of shares of Hudson
Valley Common Stock to the Sellers as set forth on Schedule 2.2(b)(ii). After
the end of each subsequent Earn-Out Year through the fifth Earn-Out Year, Buyer
shall issue and deliver such number of additional shares of Hudson Valley Common
Stock to Sellers as set forth on Schedule 2.2(b)(ii), up to a maximum of 25,000
shares. If, following the determination of the Earn Out after the fifth Earn-Out
Year, the aggregate Pre-Tax Earnings of the Company for all Earn-Out Years are
less than $9,100,000, Buyer shall have no obligation whatsoever to deliver any
shares of Hudson Valley Common Stock to the Sellers under this Section
2.2(b)(ii). For purposes of calculating Pre-Tax Earnings under this Section
2.2(b)(ii) for any Earn-Out Year, the parties shall use the definition of
Pre-Tax Earnings contained in Section 2.2(b)(vi). Any shares of Hudson Valley
Common Stock delivered to the Sellers pursuant to this Section 2.2(b)(ii) are
hereinafter referred to as “Incentive Shares”. Hudson Valley shall issue all
Incentive Shares to Sellers not later than sixty (60) days after the Certificate
Date.

             (iii)        Unless previously issued pursuant to Section
2.2(c)(ii), if, as of the date which is two calendar years after the last day of
the fifth Earn-Out Year, Arnold R. Schmeidler has not violated any terms of
Section 5.12 hereof, Hudson Valley shall be obligated to deliver 5,000 shares
(the “Competition Shares”) of Hudson Valley Common Stock to the Sellers. If
Buyer becomes aware of an action that is a violation of Section 5.12 hereof and
will be the basis for not delivering the Competition Shares, Buyer shall notify
Arnold R. Schmeidler promptly after becoming aware of such action, and, to the
extent the cure of such a violation is possible and effective, Arnold R.
Schmeidler shall have fifteen (15) days to cure such violation.

             (iv)        The Incentive Shares and the Competition Shares
(together, the “Additional Consideration Shares”) shall be issued by Hudson
Valley to the Sellers in the same percentage to each Seller as the Initial
Payment. Such shares shall not be registered under the Securities Act or under
any state blue sky law and will be subject to restrictions thereunder, unless
otherwise provided in this Agreement. Hudson Valley agrees that under existing
Rule 144 of the SEC, such shares may be sold without restriction after two years
from the Closing Date, so long as the Sellers are not affiliates of Hudson
Valley.

             (v)        In the event of any change in the number of outstanding
shares of Hudson Valley Common Stock by reason of any stock dividend or split,
recapitalization, merger, consolidation, spin-off, reorganization, combination
or exchange of shares, any distribution to shareholders other than a cash
dividend, or other similar corporate change, the number of Additional
Consideration Shares issuable to the Sellers hereunder shall be increased or
decreased, as appropriate, in proportion to such increase or decrease in
outstanding shares of Hudson Valley Common Stock and the Sellers shall be
entitled to receive in connection with the issuance of any Additional
Consideration Shares the distribution of dividends (other than cash) and any
other securities issued in connection with a corporate change that they would
have received had they been stockholders of Hudson Valley at the time of such
dividend or change. Hudson Valley agrees to contribute to Buyer the Hudson
Valley Common Stock to be paid hereunder.

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             (vi)        “Pre-Tax Earnings” means, with respect to the Company,
“Income Before Provision for Income Taxes,” calculated in accordance with GAAP
on a basis consistent with the preparation of the Company Financial Statements
for periods prior to Closing. For the avoidance of doubt, Pre-Tax Earnings shall
be determined after giving effect to, among other things, payment of salaries,
Incentive Compensation and Additional Bonuses (as such terms are defined in
Section 5.14(c)) of all employees of the Company, but shall exclude:

(A)   any overhead allocations charged to the Company by Buyer or any of Buyer’s
Affiliates not agreed to by the Stockholders’ Representative;

(B)   any purchase accounting adjustments necessitated by Buyer or Hudson Valley
in connection with this Agreement;

(C)   the cost of the key man life insurance contemplated by Section 6.9;

(D)   any other indirect charge to the Company from Buyer or Hudson Valley,
including, but not limited to, indirect charges relating to sales and marketing,
administration, finance and human resources, provided, however, that if any such
indirect charge replaces an existing expense on the Company (as of the Closing
Date), the indirect charge will be included in the Pre-Tax Earnings Calculation,
but not in an amount greater than the existing expense, adjusted yearly for
normal increases or decreases;

(E)   the cost of the issuance and exercise of options to purchase shares of
Hudson Valley Common Stock granted to the Employees of the Company named on
Schedule 5.10(a) pursuant to Section 5.10;

(F)   fifty (50) percent of the physical plant start-up costs of the Company’s
future office to be located in Yonkers, New York, with any improvements thereto
to be approved by Arnold R. Schmeidler, excluding any Company employee costs,
which shall be the expense of the Company and amortized over five years;

(G)   the costs for personnel to perform any technology integration integrating
the Company’s technology with Buyer’s technology; and

(H)   any other expense that Buyer and the Stockholders’ Representative agree in
writing to exclude.

        If the Company is required to use any of Buyer’s or Hudson Valley’s
central resources after the Closing Date and such resources or services can be
obtained by the Company at a lower expense from a third-party provider, then
upon evidence presented by the Stockholders’ Representative reasonably
satisfactory to Buyer, the lower expense shall apply for the purpose of
calculating the Company’s Pre-Tax Earnings for that period. During the first
five Earn-Out Years, the Company shall pay to Buyer 15% of all investment
advisory and/or investment management fees (the “Referral Fee”) received by the
Company from any Person who becomes a Client of the Company through a referral
from Buyer or any Affiliate of Buyer; provided, however, that at the end of the
first Earn-Out Year, Buyer and the Sellers shall review the Referral Fee and
make any adjustments upon which Buyer and Arnold R. Schmeidler may mutually
agree in writing are appropriate.

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             (vii)        For a period of 60 days after the end of the Earn-Out
Year to which an Earn Out relates, Buyer and the Stockholders’ Representative
will cooperate to determine the amount of any Earn Out. If the parties agree to
the amount of the Earn-Out, Buyer shall pay such Earn Out to the Sellers within
five (5) Business Days after such agreement, and prior to or contemporaneously
with making any Earn Out payment required hereunder, Buyer will deliver to each
Seller a certificate of Buyer’s Chief Financial Officer setting forth the
calculations by which Buyer and the Stockholders’ Representative derived the
amount of the payment due to each Seller and certifying their accuracy. If the
parties cannot agree to the amount of the Earn Out within the 60-day period
referred to above, then not later than five Business Days after the expiration
of such 60-day period, Buyer shall pay the Earn Out that it has determined is
due to the Sellers, and contemporaneously therewith, Buyer shall deliver to each
Seller a certificate of Buyer’s Chief Financial Officer setting forth the
calculations by which Buyer derived the amount of the payment due to each Seller
and certifying their accuracy. If the Stockholders’ Representative disagrees
with the calculation of the Earn Out, he shall give notice thereof within thirty
(30) days after the Certificate Date to Buyer together with the Stockholders’
Representative’s calculation of the amount of the Earn Out, and Buyer and the
Stockholders’ Representative shall negotiate in good faith to resolve such
dispute. If they cannot resolve such dispute within 30 days after the date on
which Sellers’ Representative shall have given such notice, either party may
submit the dispute to the Arbiter for resolution. Judgment on the award rendered
by the Arbiter may be entered in any court having jurisdiction thereof. Each
party shall bear their own expenses and the cost of the Arbiter shall be split
evenly between the Sellers and Buyer.

(c)   Change-in Control or Termination Without Cause or Resignation for Good
Reason-Effect on Payments.

             (i)        In the event that (x) a Change in Control occurs or (y)
Arnold R. Schmeidler is terminated “Without Cause” or resigns for “Good Reason”
(both as defined in the Schmeidler Employment Agreement), (i) all 25,000
Incentive Shares shall be issued by Hudson Valley as soon as practicable to the
Sellers (but not later than forty-five (45) days after an event described in
this Section 2.2(c)(i) occurs) without regard to the aggregate Pre-Tax Earnings
of the Company or the passage of time and (ii) the Earn Outs shall continue to
be paid by Buyer to the Sellers; provided, however, that the minimum Earn Out
paid to Sellers by Buyer for any Earn-Out Year after an event described in this
Section 2.2(c)(i) occurs shall be equal to the highest Earn Out paid to the
Sellers during any prior Earn-Out Year (the “Minimum Earn Out Payment”). In the
event that the Minimum Earn Out Payment for an Earn-Out Year following an event
described in this Section 2.2(c)(i) is less than the Earn Out determined in
accordance with Section 2.2(b) hereof, the Sellers shall receive the Earn Out
for that Earn-Out Year rather than the Minimum Earn Out Payment. If an event
described in this Section 2.2(c)(i) occurs during the first Earn-Out Year, then
the Pre-Tax Earnings of the Company shall be presumed to be $1,314,000 and the
Minimum Earn Out Payment shall be equal to $1,051,000 for the first Earn-Out
Year.

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             (ii)        In the event of both (x) a Change in Control and (y)
Arnold R. Schmeidler is terminated “Without Cause” or resigns for “Good Reason”
(both as defined in the Schmeidler Employment Agreement), all 5,000 Competition
Shares shall be issued by Hudson Valley as soon as practicable to the Sellers
(but not later than forty-five (45) days after the occurrence of both a Change
in Control and the termination of Arnold R. Schmeidler “Without Cause” or he
resigns for “Good Reason” (both as defined in the Schmeidler Employment
Agreement), without regard to the terms of the Schmeidler Employment Agreement
or the passage of time.

        (d)        Rejected Acquisition — Effect on Payments. In the event that
Buyer purchases another investment adviser or hires a group of persons who
register with the SEC as an investment adviser (an “Acquisition”), Buyer will
seek the approval of Arnold R. Schmeidler. In the event that Arnold R.
Schmeidler does not approve of the Acquisition (a “Rejected Acquisition”), Buyer
may proceed with the Rejected Acquisition; provided, however, that following the
consummation of the Rejected Acquisition, (i) the Earn Out paid to the Sellers
by Buyer for any Earn-Out Year following the Rejected Acquisition shall be equal
to the Minimum Earn-Out Payment, and (ii) 12,500 of the Incentive Shares shall
be issued by Hudson Valley as soon as practicable to the Sellers (but not later
than forty-five (45) days after the consummation of the Rejected Acquisition);
provided, however, that in such an event, the Sellers shall be entitled only to
the Minimum Earn-Out Payment (and no higher amount that Sellers would otherwise
have been entitled to receive for any subsequent Earn-Out Year under Section
2.2(b)(i)) and shall forfeit all rights to the remaining 12,500 Incentive
Shares, notwithstanding Section 2.2(b)(ii) or any other rights the Sellers may
have under this Agreement. If a Rejected Acquisition occurs during the first
Earn-Out Year, then the Pre-Tax Earnings of the Company shall be presumed to be
$1,314,000 and the Acquisition Earn Out Payment shall be equal to $1,051,000 for
the first Earn-Out Year. Notwithstanding anything in this Section 2.2(d), Buyer
shall not merge the Company with or into any Person nor shall the Company
acquire the stock or assets of any Person other than in the ordinary course of
business without the express written consent of Arnold R. Schmeidler.

        2.3.        Adjustment of Initial Payment; Estimate.

        (a)        The Initial Payment shall be adjusted as follows:

             (i)        if Stockholders’ Equity on the Closing Date is equal to
or greater than $200,000 and the cash and cash equivalents of the Company are
equal to or greater than $150,000 on the Closing Date, then the Initial Payment
shall be increased by an amount equal to the difference between $200,000 and the
Stockholders’ Equity on the Closing Date;

             (ii)        if Stockholders’ Equity on the Closing Date is equal to
or greater than $200,000 on the Closing Date, but the cash and cash equivalents
of the Company on the Closing Date are less than $150,000, then the Initial
Payment shall be (A) increased by the amount, if any, by which (x) difference
between $200,000 and the Stockholders’ Equity on the Closing Date, exceeds (y)
the difference between $150,000 and the cash and cash equivalents of the Company
on the Closing Date, or (B) reduced by the amount, if any, by which (x) the
difference between $150,000 and the cash and cash equivalents of the Company on
the Closing Date, exceeds (y) difference between $200,000 and the Stockholders’
Equity on the Closing Date; and

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             (iii)        if the Stockholders’ Equity on the Closing Date is
less than $200,000, then the Initial Payment shall be reduced by the difference
between $200,000 and the Stockholders’ Equity on the Closing Date.

        (b)        Five Business Days prior to the Closing, the Sellers shall
deliver to Buyer the then current balance sheet of the Company and the Sellers’
reasonable, good faith estimate (the “Estimate”) of the Stockholders’ Equity and
the cash and cash equivalents of the Company as of the Closing. If the Estimate
indicates that the Initial Payment should be increased pursuant to clauses (i)
or (ii) of Section 2.3(a), then Buyer shall pay to the Sellers at the Closing
the Initial Payment as so increased; and if the Estimate indicates that the
Initial Payment should be reduced pursuant to clauses (ii) or (iii) of Section
2.3(a), then Buyer shall pay to the Sellers at the Closing the Initial Payment
as so reduced (the Initial Payment, as so adjusted, being referred to herein as
the “Estimated Adjusted Initial Payment”).

        (c)        For the purposes of this Agreement, cash and cash equivalents
of the Company as of the Closing Date shall include all balance sheet amounts
included under “Receivables from Brokers” that the Company has customarily
treated as cash equivalents.

      2.4.        Closing Statement; Final Adjustment of Initial Payment.

        (a)        Within 60 days after Closing, Buyer shall deliver to the
Stockholders’ Representative a statement (the “Closing Statement”) setting forth
the balance sheet of the Company and the Stockholders’ Equity as of the Closing
Date, together with a calculation of the final adjustment, if any, to the
Initial Payment in accordance with Section 2.3(a). If the Stockholders’
Representative objects to the information set forth therein, the Stockholders’
Representative shall, within 30 days after delivery of the Closing Statement,
deliver a written notice (the “Disputed Items Notice”) to Buyer specifying in
detail the basis for such objection and setting forth the Stockholders’
Representative’s computation of the items in dispute (each, a “Disputed Item”).
Buyer and the Stockholders’ Representative shall promptly attempt to resolve the
Disputed Items and agree upon a final Closing Statement.

        (b)        If the Sellers and Buyer shall be unable to resolve the
Disputed Item(s) in the Disputed Items Notice within 15 days after delivery
thereof, the Arbiter shall resolve the Disputed Item(s) and determine the
Stockholders’ Equity as of the Closing (the “Final Determination”); provided,
however, the Arbiter shall only determine those items set forth in the Disputed
Items Notice. The Final Determination shall be rendered by the Arbiter to the
Sellers and Buyer within 60 days after expiration of the 15-day time frame set
forth in this Section 2.3(c). The Final Determination shall be final and binding
on the parties hereto (except for manifest error) and may not be disputed by
Sellers or Buyer in any forum or by any means and shall hereinafter be referred
to as the “Final Closing Statement.”

        (c)        If Stockholders’ Representative shall not have delivered a
Disputed Items Notice to Buyer within 30 days after delivery of the Closing
Statement, the Sellers shall be deemed to have accepted by written notice to
Buyer the Closing Statement; such Closing Statement shall be conclusively
presumed to be true and correct in all respects, except for manifest error, and
shall be binding upon the parties hereto and may not be disputed by any party in
any forum or by any means, and shall hereinafter be referred to as the “Final
Closing Statement.”

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        (d)        If the Initial Payment as adjusted pursuant to the Final
Closing Statement (the “Final Adjusted Initial Payment”) exceeds the Estimated
Adjusted Initial Payment, then within ten (10) Business Days after the Final
Closing Statement is determined, Buyer shall pay to the Sellers the amount of
such excess. If the Estimated Adjusted Initial Payment exceeds the Final
Adjusted Initial Payment, then within ten (10) Business Days after the Final
Closing Statement is determined, the Sellers shall pay to Buyer the amount of
such excess.

        (e)        Notwithstanding the final determination of the Stockholders’
Equity and the Final Closing Statement, Sellers shall remain obligated to
indemnify Buyer in accordance with Section 9 hereof and the fact that Buyer may
have agreed to the final Stockholders Equity shall not prevent Buyer from
receiving the benefit of such indemnification in accordance therewith. However,
any liabilities accrued on the balance sheet included in the Final Closing
Statement will not constitute a breach of any of the Sellers’ and the Company’s
representations and warranties in this Agreement, and will not give Buyer the
right to indemnification hereunder, but only to the extent that Buyer’s Losses
with respect to any such breach do not exceed the amount accrued on the balance
sheet included in the Final Closing Statement.

        2.5.        Closing.  Subject to the conditions set forth in Sections 6
and 7 of this Agreement, the Closing will take place at the offices of Pitney
Hardin LLP, New York, New York, on the last Business Day of the month (or such
other date as the parties shall agree to) in which all conditions to the
obligations of Buyer and Sellers under Sections 6 and 7 of this Agreement, other
than those requiring Closing Deliveries, have been satisfied.

        2.6.        Deliveries at the Closing.  Subject to the provisions of
Sections 6 and 7 hereof, at the Closing:

        (a)        Sellers agree to deliver to Buyer:

             (i)        certificates representing the Shares duly endorsed for
transfer to Buyer; and

             (ii)        all opinions, certificates and other instruments and
documents contemplated under Section 6 to be delivered by Sellers at or prior to
the Closing.

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        (b)        Buyer agrees to deliver to Sellers:

             (i)        the Initial Payment by wire transfer of immediately
available funds to such accounts as the Sellers may specify in writing to Buyer,
and

             (ii)        all opinions, certificates and other instruments and
documents contemplated under Section 7 to be delivered by Buyer or the Company
at or prior to the Closing.

SECTION 3.  REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND THE COMPANY

        Sellers hereby jointly and severally represent and warrant to Buyer as
follows:

        3.1.        Organization and Good Standing of the Company.   The Company
is duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of New York, and has the corporate power and
authority to own, lease and operate the property used in its business and to
carry on its business as now being conducted. The Company is registered to do
business in all jurisdictions in which the character of the properties owned or
held under lease by it makes qualification necessary, except where the failure
to so register would not result in a Material Adverse Effect. Schedule 3.1
contains true and complete copies of the Certificate of Incorporation and all
amendments thereto of the Company to the date hereof and the By-Laws of the
Company as in effect on the date hereof. The minute books and stock transfer
ledgers of the Company have been made available to Buyer prior to the execution
of this Agreement and accurately reflect the actions of the Company and all
record transfers prior to the execution of this Agreement in the capital stock
of the Company and the originals thereof will be delivered to the Company at
Closing.

        3.2.        Subsidiaries.   The Company does not have any Subsidiaries.

        3.3.        Capitalization; Title to Shares.   The authorized capital
stock of the Company consists of 100,000 shares of Common Stock of which 20,000
shares are issued and outstanding. All of such issued and outstanding shares of
Common Stock are owned by the Sellers as set forth in Schedule 2.2(a). All of
the Shares have been duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in Schedule 3.3, there is no security,
option, warrant, right, call, subscription agreement, commitment or
understanding of any nature whatsoever to which any of the Sellers or the
Company is a party, that directly or indirectly (i) calls for the issuance,
sale, pledge or other disposition of any shares of capital stock of the Company
or any securities convertible into, or other rights to acquire, any shares of
capital stock of the Company, (ii) obligates Sellers or the Company to grant,
offer or enter into any of the foregoing or (iii) relates to the voting or
control of such capital stock, securities or rights. Sellers have good and
marketable title to the Shares, free and clear of any Liens.

        3.4.        Authority, Approvals and Consents.   This Agreement has been
duly executed and delivered by the Company and the Sellers and constitutes a
valid and binding obligation of the Company and each Seller, enforceable against
the Company and each Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
or by the principles governing the availability of equitable remedies. The
Company has full right, power and authority to execute, deliver and perform this
Agreement, and all proper actions of the officers, directors and shareholders of
the Company authorizing and adopting the execution, delivery and performance
hereof have been taken. Except as otherwise set forth in Schedule 3.4, the
execution, delivery and performance of this Agreement by Sellers and the
consummation of the transactions contemplated hereby do not and will not:

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        (a)        contravene any provisions of the Certificate of Incorporation
or By-Laws of the Company;

        (b)        (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination in
respect of, any material contract, agreement, commitment, understanding or
arrangement of any kind to which Sellers or the Company is a party or to which
any of the Sellers or the Company’s property is subject;

        (c)        violate or conflict with any Legal Requirements applicable to
Sellers or to the Company; or

        (d)        except for filings with the NASD and as contemplated by
Section 5, require any authorization, consent, order, permit or approval of, or
notice to, or filing, registration or qualification with, any governmental,
administrative or judicial authority by the Company.

        3.5.        Financial Statements.

        (a)        Schedule 3.5(a) includes true, complete and correct copies of
the Company’s audited balance sheets (the “Audited Balance Sheets”) as of
December 31, 2003 (the “Balance Sheet Date”) and December 31, 2002, and the
related audited income statements and schedules of retained earnings and
statements of cash flows for the years ended December 31, 2003 and 2002
(collectively, the “Company Financial Statements”). The Company Financial
Statements have been prepared in accordance with GAAP consistently applied. The
Audited Balance Sheets present fairly the financial condition of the Company as
of the dates indicated thereon, and each of the income statements, schedules of
retained earnings and statements of cash flows included in the Company Financial
Statements presents fairly the results of the operations of the Company for the
periods indicated thereon. Since the Balance Sheet Date, there have been no
material changes in the Company’s accounting policies.

        (b)        Except as and to the extent reflected, disclosed or reserved
against in the audited balance sheet of the Company as of the Balance Sheet Date
included in the Company Financial Statements (the “2003 Balance Sheet”)
(including the notes thereto) or listed on Schedule 3.5(b), to the Knowledge of
the Sellers, as of the Balance Sheet Date the Company did not have any
obligation or liability, whether absolute, accrued, contingent or otherwise.

        3.6         Absence of Change.

        (a)        Except as set out in Schedule 3.6(a), since the date of the
most recent of the Company Financial Statements, there has been no change in the
financial position or results of operations of the Company that would result in
a Material Adverse Effect.

        (b)        Except as set forth in Schedule 3.6(b), since February 11,
2004, the Company has not undertaken any of the activities listed in Section
5.11(i) through (xi).

        3.7.        Taxes.  

        (a)        Except as set forth on Schedule 3.7(a):

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             (i)        all Tax Returns for all periods which end prior to or
which include the date hereof that are or were required to be filed prior to the
date hereof by or on behalf of the Company have been or shall be filed on a
timely basis in accordance with the applicable laws of each Governmental
Authority;

             (ii)        all such Tax Returns that have been filed were, when
filed, and continue to be, true, correct and complete in all material respects;

             (iii)        the Company has paid, or made adequate provision in
its financial statements for the payment of all Taxes that have or may become
due and payable by the Company for all periods which end prior to or which
include the date hereof, including all Taxes reflected on the Tax Returns
referred to in this Section 3.7, or in any assessment, proposed assessment or
notice, either formal or informal, received by the Company;

             (iv)        the Company currently is not the beneficiary of any
extension of time within which to file any Tax Return;

             (v)        the Company has received no claim by a Governmental
Authority in a jurisdiction where the Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction;

             (vi)        all Taxes that the Company was or is required by Legal
Requirements to withhold or collect, have been duly withheld or collected and,
to the extent required, have been paid to the appropriate Governmental
Authorities;

             (vii)        except for Liens for current Taxes not yet due, there
are no Liens with respect to Taxes upon any of the assets of the Company;

             (viii)        there are not pending or, to the Knowledge of the
Company, threatened actions or proceedings for the assessment or collection of
Taxes against the Company;

             (ix)        the Company has not received from any Governmental
Authority: (i) any notice indicating an intent to open an audit or other review;
(ii) request for information related to Tax matters; or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any Governmental Authority against the Company;

             (x)        the Company has not waived any statute of limitations in
respect of Taxes or has agreed to any extension of time with respect to a Tax
assessment on deficiency

             (xi)        the Company is not a party to any agreement or
arrangement that would result, separately or in the aggregate, in the actual or
deemed payment by the Company of (i) any “excess parachute payments” with the
meaning of §280G of the Code (or any corresponding provision of state, local or
foreign Tax law), and (ii) any amount that will not be fully deductible as a
result of Section 162(m) of the Code (or any corresponding state, local, or
foreign Tax law);

             (xii)        the Company has no liability for any Taxes of any
Person (other than the Company) under Regulations §1.1502-6 (or similar
provisions of state, local, or foreign law) as a transferee or successor of
another party or by contract or otherwise;

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             (xiii)        the Company has maintained such records in respect to
each transaction, event and item (including as required to support otherwise
allowable deductions and losses) as are required under applicable Tax law;

             (xiv)        the Company has not made any election under §341(f) of
the Code (or any corresponding provision of state, local or foreign income Tax
law);

             (xv)        the Company is not a party to or bound by any Tax
allocation or Tax sharing agreement and has no current or potential contractual
obligation to indemnify any other person with respect to Taxes;

             (xvi)        none of the assets that the Company is or shall be
required to treat as being owned by another person pursuant to the provisions of
§168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately before the enactment of the Tax Reform Act of 1986, or is
“tax-exempt property” within the meaning of §168(h)(1) of the Code;

             (xvii)        the unpaid Taxes of the Company: (A) did not as of
the most recent fiscal quarter end exceed the reserve for Tax liabilities
(rather than the reserve for deferred Taxes to reflect timing differences
between book and Tax income) on the books of the Company at that time, and (B)
as adjusted for the passage of time through the Closing Date will not exceed the
reserve for Tax liabilities (rather than the reserve for deferred Taxes to
reflect timing differences between book and Tax income) on the books and records
of such entity as of the Closing Date determined in accordance with the prior
practices and customs of the Company in filing Tax Returns;

             (xviii)        the Company uses the accrual method of accounting
for Tax accounting purposes;

             (xix)        the Company is not a United States real property
holding corporation within the meaning of Code §897(c)(2) during the applicable
period specified in Code §897(c)(1)(A)(ii); and

             (xx)        to the Knowledge of the Company, there are no proposed
reassessments of any property owned by the Company or other proposals that are
reasonably likely to increase the amount of any Tax to which the Company would
be subject.

        (b)        The Company is and has been a validly electing S Corporation
for federal income Tax purposes, within the meaning of Section 1361 and 1362 of
the Code, at all times since January 1, 1987. The election to be treated as an S
Corporation is valid, and there is no claim or proceeding pending, or the
Knowledge of the Company, threatened, challenging the validity of such election
before any Regulatory Agency or otherwise.

        (c)        The Company is and has been a validly existing S Corporation
for state income Tax purposes in each state in which the Company is required to
file Tax Returns since January 1, 1987, and none of the Company, the Sellers,
or, to the Knowledge of the Company, any Governmental Authority within which the
Company is required to file Tax Returns has taken a position which is
inconsistent with such treatment.

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        (d)        The Company shall not be liable for any Tax under Section
1374 of the Code in connection with the deemed sale of the Company’s assets
caused by the Section 338(h)(10) Election. The Company has not, in the past ten
(10) years, (A) acquired assets from another corporation in a transaction in
which the Company’s Tax basis for the acquired assets was determined, in whole
or in part, by reference to the Tax basis of the acquired assets in the hands of
the transferor or (B) acquired the stock of any corporation that is a qualified
subchapter S subsidiary.

        3.8.        Property.  

        (a)        Schedule 3.8(a) identifies all real property leased or
subleased to the Company (the “Leased Real Property”). Schedule 3.8(a) contains
true, correct and complete executed copies of the leases and subleases listed on
Schedule 3.8(a) (collectively, the “Leases”). With respect to the Leased Real
Property and each of the Leases:

             (i)        such Lease is legal, valid, binding, enforceable, and in
full force and effect;

             (ii)        neither the Company, nor to the Knowledge of the
Company, any other party to such Lease is in breach or default, and to the
Knowledge of the Company, no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration of such Lease;

             (iii)        neither the Company, nor to the Knowledge of the
Company, any other party to such Lease has repudiated any provision thereof;

             (iv)        there are no disputes, oral agreements, or forbearance
programs in effect as to such Lease;

             (v)        in the case of each Lease which is a sublease, the
representations and warranties set forth in clauses 3.8(a)(i) through (iv) are
true and correct with respect to the underlying lease;

             (vi)        the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold created pursuant to such Lease; and

             (vii)        none of the Leases has been modified in any respect,
except to the extent that such modifications are in writing and have been
delivered or made available to Purchaser.

        (b)        Schedule 3.8(b) lists each item of personal property having a
value in excess of $10,000 owned by the Company as of February 29, 2004. Except
as set forth in Schedule 3.8(b) or disposed of in the ordinary course of
business, the Company has good, valid and marketable title to all personal
property reflected on the audited consolidated financial statements of the
Company for the year ended December 31, 2003 or acquired by it after the date
thereof, and such personal property is held free and clear of:

             (i)        all leases, licenses and other rights to occupy or use
such property; and

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             (ii)        all Liens.

        (c)        The Company does not own nor has it ever owned any real
estate.

        3.9.        Contracts.

        (a)        Schedule 3.9(a) contains copies of all written Material
Agreements and descriptions of all oral Material Agreements. Schedule 3.9(a)
contains: (i) all Material Agreements to which any Insider or, to the Knowledge
of the Company, any Affiliate of the Company is a party and (ii) a true and
complete description of all transactions between the Company or any employee
benefit plan in which any Employee of the Company participates, on the one hand,
and any Insider or, to the knowledge of the Company, any Affiliate of the
Company, on the other hand.

        (b)        Except as set forth in Schedule 3.9(b), neither the Company
nor, to the Knowledge of the Company, any other party to any of the Material
Agreements, is in breach of or default under any Material Agreement. The
consummation of the transactions contemplated hereby will not (after notice or
lapse of time or both) conflict with, result in a breach of any provision of,
constitute a default under, result in the modification or cancellation of, give
rise to any right of termination in respect of, any Material Agreement.

        3.10.        Company Reports.

        (a)        Except as set forth on Schedule 3.10(a), the Company has in
all material respects timely filed all reports, registrations, statements, and
other filings, together with any amendments required to be made with respect
thereto, that were required to be filed since December 31, 2001 with any
federal, state or local governmental or regulatory agency or authority (a
“Regulatory Agency”), including, without limitation, the SEC or NASD (all such
reports and statements, including the financial statements, exhibits and
schedules thereto, being collectively referred to herein as the “Company
Reports”) and has paid all fees and assessments payable in connection therewith.
As of their respective dates, except as and to the extent amended or modified on
a subsequent date prior to the date of this Agreement, each of the Company
Reports complied in all material respects with the statutes, rules, regulations
or orders enforced or promulgated by the Regulatory Agency (including the SEC or
NASD) with which they were filed and did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

        (b)        The Company and each of its stockholders, directors, officers
and employees that or who is required to be registered as an investment adviser,
broker-dealer, registered representative or sales person with the SEC, the
securities commission or any other commission of any state or any state or
federal securities self-regulatory body is duly registered as such and such
registration is in full force and effect.

        (c)        There are no proceedings pending or, to the Company’s
Knowledge, threatened, that are reasonably likely to result in the revocation,
cancellation or suspension, or any adverse modification, of any permit, license,
certificate of authority, order or approval referred to in Section 3.10(a) and
the execution and delivery of this Agreement will not, except as set forth in
Schedule 3.10(c), result in any such revocation, cancellation, suspension, or
any adverse modification, of any permit, license, certificate of authority,
order or approval referred to in Schedule 3.10(a).

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        (d)        Neither the Company nor, to the Knowledge of the Company, any
stockholders, directors, officer, or employee thereof, is a party or subject to
any order, judgment or decree (other than exemptive orders) relating to its
business with or by any federal, state, local or foreign regulatory authority.

        3.11.        Litigation; Regulatory Action.

        (a)        Except as set forth on Schedule 3.11(a), no complaint, claim,
litigation, proceeding or controversy, including, without limitation, censure or
acceptance, waiver and consent proceedings before the NASD (“Litigation”) before
any court, arbitrator, mediator or Regulatory Agency is pending against the
Company and, to the Company’s Knowledge, no such Litigation has been threatened.

        (b)        Except as set forth on Schedule 3.11(b), neither the Company
nor, to the Company’s Knowledge, any of its Employees is a party to or is
subject to any order, decree, letter of caution, consent decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment letter
or similar submission to, any Regulatory Agency charged with the supervision or
regulation of broker-dealers (including, without limitation, the SEC and NASD),
or the supervision or regulation of the Company. The Company has not received
any notice (whether or not in writing) from any Regulatory Agency: (i) that the
Company has or may have violated any of the statutes, rules, regulations, or
ordinances which such Regulatory Agency enforces, or has otherwise engaged in
any unlawful business practice, (ii) threatening to revoke any license,
franchise, permit, or governmental authorization, (iii) requiring the Company
(including any of the Company’s Employees, directors or controlling persons) to
enter into an order, agreement, or memorandum of understanding (or requiring the
board of directors thereof to adopt any resolution or policy), (iv) restricting
or disqualifying the activities of the Company or (v) in any manner relating to
its capital adequacy, its management or its business.

        (c)        Set forth on Schedule 3.11(c) is a true and complete list, as
of the date hereof, of all Litigation affecting the Company, its assets or its
officers, directors or, to the Company’s Knowledge, Employees pending, or to the
Knowledge of the Company threatened, arising out of any state of facts relating
to the sale of securities or investment advice by the Company, or any Employees
thereof (including, without limitation, equity or debt securities, municipal
securities, mutual funds, insurance contracts, annuities, partnership and
limited partnership interests, or interests in real estate.

        (d)        Set forth on Schedule 3.11(d) is a true and complete list of
all pending or, to the Knowledge of the Company, threatened complaints or
arbitrations affecting the Company, its assets or its officers, directors or, to
the Company’s Knowledge, Employees.

        (e)        Except as disclosed in Schedule 3.11(e), there have been no
examinations of the Company by any Regulatory Agency and no Regulatory Agency
has initiated any proceeding or, to the Knowledge of the Company, investigation
into the business or operations of the Company or any Company Subsidiary since
December 31, 2000. Except as set forth on Schedule 3.11(e), there is no
unresolved violation, criticism, or exception by any Regulatory Agency with
respect to any report or statement relating to any examinations of the Company.

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        (f)        No officer, director or associated person has been required
to amend his or her NASD Form U-4 to provide a “yes” answer to any question
concerning any civil or criminal proceeding or investigation, regulatory
proceeding, customer complaint, or investigation or the possibility thereof.

        3.12.        ERISA and Employees.  Except as identified on Schedule
3.12:

        (a)        with respect to all current employees (including those on
lay-off, disability or leave of absence), former employees, and retired
employees of the Company (the “Employees”), the Company neither maintains nor
contributes to any (i) employee welfare benefit plans (as defined in Section
3(1) of ERISA) (“Employee Welfare Plans”), or (ii) any plan, policy or
arrangement which provides nonqualified deferred compensation, bonus or
retirement benefits, severance or “change of control” (as set forth in Code
Section 280G) benefits, or life, disability accident, vacation, tuition
reimbursement or other material fringe benefits (“Other Plans”);

        (b)        the Company does not maintain, contribute to, or participate
in any defined benefit plan or defined contribution plan which are employee
pension benefit plans (as defined in Section 3(2) of ERISA) (“Employee Pension
Plans”);

        (c)        the Company does not contribute to or participate in any
multiemployer plan (as defined in Section 3(37) of ERISA) (a “Multiemployer
Plan”);

        (d)        the Company does not maintain or have any obligation to
contribute to or provide any post-retirement health, accident or life insurance
benefits to any Employee, other than limited medical benefits required to be
provided under Code Section 4980B;

        (e)        all Plans (and all related trusts and insurance contracts)
comply in form and in operation in all material respects with the applicable
requirements of ERISA and the Code;

        (f)        all required reports and descriptions (including all Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) with respect to all Plans have been properly filed with the
appropriate Regulatory Agency or distributed to participants, and the Company
has complied substantially with the requirements of Code Section 4980B;

        (g)        with respect to each Plan, all contributions, premiums or
payments which are due on or before the Closing Date have been paid to such
Plan;

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        (h)        the Company has not incurred any liability to the Pension
Benefit Guaranty Corporation (the “PBGC”), the United States Internal Revenue
Service, any multiemployer plan or otherwise with respect to any employee
pension benefit plan or with respect to any employee pension benefit plan
currently or previously maintained by members of the controlled group of
companies (as defined in Sections 414(b) and (c) of the Code) that includes the
Company (the “Controlled Group”) that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any member of
the Controlled Group of incurring such a liability (other than liability for
premiums due the PBGC) which could reasonably be expected to have any adverse
effect on Buyer or the Company after the Closing;

        (i)        Schedule 3.12(i) contains true and complete copies of each of
the Employee Pension Plans of the Company, and (A) Summary Plan Descriptions,
(B) the two most recent Form 5500 Annual Reports, and (C) IRS determination
letters, for each of such Employee Pension Plans;

        (j)        Except as disclosed in Schedule 3.12(j), neither the
execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) entitle any current or former employee
of the Company to, or accelerate vesting in connection with, severance pay,
unemployment compensation, golden parachute, change of control or any similar
type of payment or right, or (ii) accelerate the time of payment, accelerate the
vesting, or increase the amount, of any compensation or benefits due to any
current employee or former employee under any Employee Pension Plan or Employee
Welfare Plan or otherwise; and

        (k)        Schedule 3.12(k) sets forth a list of all employees of the
Company and their current compensation. Except for the other Plans listed on
Schedule 3.12, the Company has no employee contract or non-terminable (whether
with or without penalty) employment arrangements with any person. To the
Knowledge of the Company and the Sellers, none of the persons listed on Schedule
3.12(k) is subject to a confidentiality, non-disclosure, non-solicitation or
non-competition agreement with any person or entity other than the Company. To
the Knowledge of the Company, none of the Persons listed on Schedule 3.12(k) is
in breach of any such employment arrangement, or any fiduciary duty of such
Person to the Company and no such Person has given notice to the Company or a
Seller of any intention to terminate such Person’s employment with the Company,
either before or after the Effective Date. The Company has not committed any
unfair labor practices or received notice of a claim of unfair labor practices
against it or any of its directors, officers, employees, agents or partners.

        3.13.        Compliance with Laws.

        (a)        Except as set forth in Schedule 3.13(a), the Company and its
officers and employees: (a) in the conduct of its business, are in compliance in
all material respects with all applicable federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such businesses, and the rules
of all Regulatory Agencies applicable thereto, including those laws and
regulations described in SEC Release Nos. IA-2204 and IA-2209; (b) have all
permits, licenses, authorizations, orders and approvals of, and have made all
filings, applications and registrations with all Regulatory Agencies that are
required in order to permit them to own and operate the Company’s businesses as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect and, to the Company’s
Knowledge, no suspension or cancellation of any of them is threatened or
reasonably likely; and all such filings, applications and registrations are
current; and (c) are not aware of any pending or threatened investigation,
review or disciplinary proceedings by any Regulatory Agency against the Company,
or any officer, director or employee thereof.

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        (b)        The Company and each of its employees which are or who are
required to be registered as a broker/dealer, a registered representative, or a
sales person with the NASD, SEC or the securities commission of any state, or
foreign jurisdiction or any Regulatory Agency are duly registered as such and in
good standing and such registrations are in full force and effect. All federal,
state and foreign registration requirements have been complied with and such
registrations as currently filed, and all periodic reports required to be filed
with respect thereto, are accurate and complete in all material respects.

        3.14.         Representations and Warranties Regarding the Investment
Advisory Business.

        (a)        Investment Contracts and Clients.

             (i)        Each written Investment Contract and any subsequent
renewal thereof (A) has been duly authorized, executed and delivered by the
Company and is maintained with all other Client records by the Company; (B) to
the Knowledge of the Company, has been duly authorized, executed and delivered
by each party thereto other than the Company; (C) assuming such Investment
Contracts (and any subsequent renewals thereof) constitute valid and binding
obligations of the other party thereto, is a valid and binding agreement of the
Company, enforceable in accordance with its terms (subject to bankruptcy,
insolvency, moratorium, fraudulent transfer and similar laws affecting
creditors’ rights generally and to general equity principles); (D) each of the
Company and, to the Knowledge of the Company, the Client is in compliance with
the terms of each Investment Contract to which it is a party, and no event has
occurred or condition exists that constitutes or with notice or the passage of
time would constitute a default thereunder. Except as set forth on Schedule
3.14(a), none of the Investment Contracts, or any other arrangements or
understandings relating to rendering of investment advisory or management
services, contains any undertaking by the Company to collect flat fees or to
waive or reimburse any or all fees thereunder. As used in this Agreement, the
term “Client” means any client to which the Company provides investment
management services, investment advisory services, financial planning services,
or ancillary administration or consulting services on the date hereof. Schedule
3.14(a)(i) sets forth a true and correct list and valuation of the Investment
Contracts covering assets under management of the Company as of the close of
business on the date immediately preceding the date hereof.

             (ii)        The accounts of each Client that are subject to ERISA
have been managed by the Company such that the Company, in the exercise of such
management, is in compliance with the applicable requirements of ERISA and all
prohibited transaction class exemptions issued pursuant thereto, and
consummation of the transactions contemplated hereby will not result in a
violation of such ERISA requirements.

        (b)        Regulatory Compliance of the Company. Except as set forth in
Schedule 3.14(b):

             (i)        The Company is and has been since July 12, 1971, duly
registered as an Investment Adviser under the Investment Advisers Act. The
Company is registered as an investment adviser in the states referenced in its
current Form ADV (such states constituting all jurisdictions where such
registration is required in order to conduct its business), and is in compliance
in all material respects with all federal and state laws requiring registration,
licensing or qualification as an investment adviser. Each such federal and state
registration is in full force and effect. Schedule 3.14(b)(i) contains a true
and complete copy of the Company’s Form ADV, as amended to date, filed with the
SEC; copies of any state registration forms, likewise as amended to date; and
copies of any current reports required to be kept by the Company pursuant to the
Investment Advisers Act and rules promulgated thereunder, and required pursuant
to applicable state statutes. The information contained in such forms and
reports was true and complete at the time of filing in all material respects.
The Company has filed all amendments required to be filed to its Form ADV and
state registration forms under federal and state law. Schedule 3.14(b)(i) (or
the Form ADV contained therein) identifies the examination and/or certification
qualifications of each of the Company’s adviser representatives.

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             (ii)        Copies of all deficiency letters and inspection reports
or similar documents furnished to the Company by the SEC or any self-regulatory
organization since January 1, 2000, and the Company’s response thereto, if any,
are listed on Schedule 3.14(b)(ii) and have been provided to Buyer. Except as
listed in Schedule 3.14(b)(ii), the Company has not been notified by the SEC or
any state regulatory authority or any self-regulatory organization that any
inspection since January 1, 1998 has revealed any deficiency in any such
entity’s record-keeping or compliance with the Investment Advisers Act, the
Exchange Act, the Securities Act, the Investment Company Act or applicable state
statutes.

             (iii)        The Company does not act as investment adviser or
sub-adviser to any investment company registered under the Investment Company
Act. Neither the Company nor any Seller or any other “affiliated person” of the
Company, as such term is defined in the Investment Company Act, receives or is
entitled to receive any compensation, directly or indirectly, (A) from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of any Investment Company, or (B) from any Investment
Company or its security holders for other than bona fide investment advisory or
other services.

             (iv)        During the 24 months preceding the date hereof, the
Company has not received any written investor complaints.

             (v)        The Company has adopted a formal code of ethics and a
written policy regarding insider trading which complies with Section 204A of the
Investment Advisers Act. Schedule 3.14(b)(v) contains the policies of the
Company with respect to avoiding conflicts of interest. To the Knowledge of the
Company, there have been no violations or allegations of violations as of the
date hereof of such policies that have occurred or been made.

             (vi)        Neither the Company nor, to the knowledge of the
Company, any Person “associated” (as defined under the Investment Advisers Act)
with the Company, has for the period beginning five years prior to the date
hereof and ending on the date hereof been convicted of any crime or is or has
been subject to any disqualification that would be a basis for denial,
suspension or revocation of registration of an investment adviser under Section
203(e) of the Investment Advisers Act or disclosure under Rule 206(4)-4
thereunder or denial, suspension or revocation of registration of a
broker-dealer under Section 15 of the Exchange Act, or for disqualification as
an investment adviser for any investment company pursuant to the Investment
Company Act pursuant to Section 9(a) of the Investment Company Act, and to the
Company’s knowledge there is no basis for, or proceeding or investigation that
is reasonably likely to become the basis for, any such disqualification, denial,
suspension or revocation.

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             (vii)        There are no sub-advisors for any Client.

        3.15.         Investment Intent of Sellers.

        (a)        Any Additional Consideration Shares acquired by the Sellers
are being acquired for investment purposes only for each of the Seller’s own
account, and not with a view to or in connection with any distribution thereof.

        (b)        Each Seller is an “accredited investor” as such term is
defined in Rule 501(a) of Regulation D under the Securities Act and has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in Hudson Valley Common Stock.

        (c)        Each Seller acknowledges that he has been furnished by Hudson
Valley during the course of this transaction with all information regarding
Hudson Valley which he had requested or desired to know; that all documents
which could be reasonably provided have been made available for inspection and
review; that he has been afforded the opportunity to ask questions of and
receive answers from duly authorized officers or other representatives of Hudson
Valley concerning the terms and conditions of the offering, and any additional
information which had been requested.

        (d)        Each Seller represents that no representations or warranties
have been made to him by Buyer, Hudson Valley, or any agent, employee or
affiliate of Hudson Valley (other than those made in this Agreement) and in
entering into this transaction, he is not relying on any information, other than
that contained in the SEC public filings by Hudson Valley, this Agreement
(including all Exhibits and Schedules) and the results of any independent
investigation by him.

        (e)        Each Seller acknowledges that (i) any Incentive Shares or
Competition Shares issued to the Sellers by Hudson Valley will not be registered
by Hudson Valley under the Securities Act or any state securities laws, and
shall be issued by Hudson Valley in a private placement in accordance with
Section 4(2) of the Securities Act, and Rule 506 promulgated thereunder, (ii) he
may not offer, sell or transfer any Additional Consideration Shares unless an
exemption from registration is available in the opinion of Hudson Valley’s
counsel, and (iii) Hudson Valley will be required to file SEC Form D and a Form
99 with the Investment Protection Bureau of the State of New York in accordance
with the blue sky laws of New York and the Sellers hereby consent to such
filings.

        3.16.        Derivatives.  The Company has not entered into any
exchange-traded or over-the-counter swap, forward future, option, cap, floor or
collar financial contracts or any other similar arrangements (“Derivatives
Contracts”).

        3.17.        Intellectual Property Rights.   Schedule 3.17 sets forth
all the Company Intellectual Property Rights, including, without limitation all
software and computer programs owned by or used by the Company in connection
with its business, except for licenses of Intellectual Property Rights that do
not have an annual license fee of more than $100 or a single license fee of more
than $1,000. The Company possesses rights to use all trade secrets and other
rights. Except as set forth on Schedule 3.17:

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(a)   The Company either has all right, title and interest in, or has by license
or otherwise, a valid and binding right to use, all Company Intellectual
Property Rights as currently used by the Company without conflict, infringement
or misappropriation of any rights of any other person or entity;

(b)   All registrations with and applications to governmental or regulatory
authorities in respect of Company Intellectual Property Rights and disclosed on
Schedule 3.17 are valid and in full force and effect;

(c)   There are no restrictions on the direct or indirect transfer of any
license, or any interest therein, in respect of Company Intellectual Property
Rights except as disclosed in Schedule 3.17 and the transactions contemplated by
this Agreement will not cause the Company to incur any additional expense under
any such license;

(d)   The Company is not in default (or with the giving of notice or lapse of
time or both, would be in default) in any material respect under any license to
use the Company Intellectual Property Rights disclosed in Schedule 3.17;

(e)   To the Knowledge of the Company, the conduct by the Company of its
business does not infringe on any Intellectual Property Rights of any other
Person; and

(f)   No claim is pending or has been made to such effect that has not been
resolved.

        3.18.        Brokers.  Except for fees and expenses payable by the
Sellers or the Company to Putnam Lovell NBF Securities, Inc. (“Putnam Lovell”),
none of the Sellers nor the Company has incurred or will incur any broker’s,
finder’s or similar fee, commission or expense, in each case in connection with
the transactions contemplated by this Agreement, it being understood that the
Company will also pay the fees and expenses of its attorneys, accountants and
other professional advisors in connection with the transactions contemplated by
this Agreement if accrued prior to Closing for the purpose of calculating
Stockholders’ Equity. Schedule 3.18 contains such agreement with Putnam Lovell
regarding the payment of broker’s fees.

        3.19.        Environmental Matters.   The Company has no Knowledge of
any citation, directive, inquiry, notice, order, summons, warning or other
communication that relates to any violation or failure to comply with any
Environmental Law with respect to the Company’s Leased Property. The Company is,
and at all times has been, in full compliance with, and has not been and is not
in violation of or liable under, any Environmental Law, except where any such
failure to comply or violation or liability would not, individually or
collectively with other similar failures, violations or liabilities, have a
Material Adverse Effect.

        3.20.        Insurance.  Schedule 3.20 contains a true and complete list
of all insurance policies currently in effect that insure the business,
operations or Employees of the Company or affect or relate to the ownership, use
or operation of any of the assets and properties of the Company and that have
been issued to the Company for the benefit of the Company. The insurance
coverage provided by any of the policies described above will not terminate or
lapse by reason of the transactions contemplated by this Agreement. Each policy
referred to above is valid and binding and in full force and effect, no premiums
due thereunder have not been paid and neither the Company nor any Subsidiary has
received any notice of cancellation or termination in respect of any such policy
or is in default thereunder in any material respect.

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        3.21.        Labor Relations.   No Employee of the Company is presently
a member of a collective bargaining unit and, there are no threatened or
contemplated attempts to organize for collective bargaining purposes any of the
Employees of the Company.

        3.22.        Advertising.  All Company advertising, including without
limitation, the Company’s website, has been reviewed and/or approved in
accordance with applicable law by the appropriate Regulatory Agency, including,
without limitation, the NASD.

        3.23.        Anti-Money Laundering.   The Company is in compliance with
the USA PATRIOT Act, the International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001, and the rules and regulations thereunder,
the Anti-Money Laundering regulations of the NASD, and any other federal or
state anti-money laundering law or regulation applicable to the Company.

        3.24.        Bank Accounts.   Set forth on Schedule 3.24 is the name and
location of each bank and money market fund in which the Company has an account
or accounts or safe deposit boxes, the name and number of each account or box,
the names of persons authorized to draw thereon or having access thereto, and
the balance of each account and the contents of each box as of the date hereof
(or such other date indicated on Schedule 3.24).

        3.25.   No Material Misstatements or Omissions.   To the Knowledge of
the Sellers, the representations and warranties of the Company and the Sellers
in this Agreement (including, without limitation, the Disclosure Schedule) do
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein not materially
misleading.

SECTION 4.  REPRESENTATIONS AND WARRANTIES REGARDING BUYER

        Except as disclosed in this Agreement, Hudson Valley and Buyer hereby
jointly and severally represent and warrant to the Sellers as follows:

        4.1.        Organization and Good Standing of Hudson Valley and Buyer.  
Each of Hudson Valley and Buyer is duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of New York, and has
the corporate power and authority to own, lease and operate the property used in
its business and to carry on its business as now being conducted. Each of Hudson
Valley and Buyer is registered to do business in all jurisdictions in which the
character of the properties owned or held under lease by it makes qualification
necessary, except where the failure to so qualify would not result in a Material
Adverse Effect.

        4.2.        Power; Authorization; Consents.   Each of Hudson Valley and
Buyer has the corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and approved by the
board of directors of each of Hudson Valley and Buyer, and, except as set forth
on Schedule 4.2, no other proceedings on the part of Hudson Valley and Buyer are
necessary to authorize and approve this Agreement or any of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of Hudson Valley and Buyer and constitutes a valid and binding obligation of
each of Hudson Valley and Buyer, enforceable against of each of Hudson Valley
and Buyer in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors’ rights generally or by the principles governing the
availability of equitable remedies. The execution, delivery and performance of
this Agreement by Buyer and the consummation of the transactions contemplated
hereby do not and will not:

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        (a)        contravene any provisions of the Certificate of Incorporation
or By-Laws of either Hudson Valley or Buyer;

        (b)        (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination in
respect of, any material contract, agreement, commitment, understanding or
arrangement of any kind to which Hudson Valley or Buyer is a party or to which
Hudson Valley’s or Buyer’s property is subject;

        (c)        violate or conflict with any Legal Requirements applicable to
Hudson Valley or to Buyer; or

        (d)        except for filings with the State of New York Banking
Department (“NYBD”) and the Federal Deposit Insurance Corporation (“FDIC”),
require any authorization, consent, order, permit or approval of, or notice to,
or filing, registration or qualification with, any governmental, administrative
or judicial authority.

        4.3.         SEC Filings; Financial Statements.

        (a)        Hudson Valley has filed all forms, reports and documents
required to be filed with the SEC and has made available to the Sellers copies
of (i) its Annual Report on Form 10-K for the fiscal year ended December 31,
2003, (ii) all other reports or registration statements filed by Hudson Valley
with the SEC since December 31, 2003, (iii) all proxy statements relating to
Hudson Valley’s meetings of stockholders (whether annual or special) since
December 31, 2003, and (iv) all amendments and supplements to all such reports
and registration statements filed by Hudson Valley with the SEC pursuant to the
requirements of the Securities Act or the Exchange Act ((i)-(iv) collectively,
the “Hudson Valley SEC Reports”). Except as disclosed in Schedule 4.3, the
Hudson Valley SEC Reports (i) were prepared as to form in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and (ii) did not at the time they were filed (or if amended
or superseded by a subsequent filing, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Hudson Valley’s Subsidiaries is required to file any forms,
reports or other documents with the SEC.

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        (b)        Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Hudson Valley SEC Reports
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto), and each
fairly presents in all material respects the consolidated financial position of
Hudson Valley and its Subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows and stockholders equity
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments.

        4.4.        Brokers.   Except for fees and expenses payable by Buyer to
MG Advisors, Inc., Buyer has not employed any broker or finder or has incurred
or will incur any broker’s, finder’s or similar fees, commissions or expenses,
in each case in connection with the transactions contemplated by this Agreement.

        4.5.        Investment Intent of Buyer.   Buyer is acquiring the Shares
delivered pursuant to this Agreement for investment purposes for its own
account, and not with the view to or in connection with any distribution
thereof.

        4.6.        No Material Misstatements or Omissions.   The
representatives and warranties of Buyer in this Agreement (including, without
limitation, the Disclosure Schedule) do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein not materially misleading.

SECTION 5.   COVENANTS

        5.1.        Advisory Contracts Consents, Broker-Dealer Change in Control
and Banking Approvals.

        (a)        Investment Contracts Consent. The Company, in conjunction
with Buyer, shall promptly cause all of the Clients under the Company’s
Investment Contracts to be informed of the transactions contemplated by this
Agreement in a form reviewed and approved by Buyer and shall, in compliance with
the Investment Advisers Act, give each such Client an opportunity to consent to
the assignment of its Investment Contract in writing. The Company shall use its
commercially reasonable efforts to obtain the affirmative written consent to
assignment of their Investment Contracts to the Company prior to Closing on
terms at least as favorable to the Company as the terms of such Investment
Contracts on the date hereof from the Company’s ten largest clients measured by
Client Run Rate Revenue as of the date hereof (excluding El Paso Natural Gas
Retirement Trust 1230). The Company shall not be required to obtain the
affirmative written consent to such assignment from any other Client, but
consistent with applicable SEC no-action letters, each such other Client shall
be deemed to have consented to the assignment of its Investment Contract if (i)
it has not notified the Company prior to the Closing Date that it does not
consent to such assignment or that it intends to terminate its Investment
Contract, (ii) it receives one written notice asking for consent, and (iii) at
least 30 days have elapsed since the mailing of a second Client Notice (30 days
after the first notice) stating that a failure to respond will be deemed
consent. Between the date hereof and the Closing Date or the earlier termination
of this Agreement, the Company shall promptly (and no later than three Business
Days after receipt of notice by the Company) report to the Buyer any withdrawal
of assets under management or the termination, closure or contemplated
termination or closure of any Client account.

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        (b)        NASD Approval. Immediately after the date hereof, the Sellers
shall file, after review and approval by Buyer, an application with the NASD
pursuant to NASD Rule 1017 for approval of the purchase of the Shares by Buyer
and shall use its commercially reasonable efforts to obtain such approval prior
to Closing. The Sellers shall provide Buyer and its counsel with copies of all
correspondence between the Sellers and the NASD regarding NASD approval of
Buyer’s purchase of the Shares.

        (c)        NYBD and FDIC Approvals. Immediately after the date hereof,
Buyer shall file, after review and approval by the Sellers, applications with
the NYBD and the FDIC for approval of the purchase of the Shares by Buyer and
shall use its commercially reasonable efforts to obtain such approval prior to
Closing. Buyer shall provide Sellers and their counsel with copies of all
correspondence between Buyer and the NYBD and the FDIC regarding the approval of
Buyer’s purchase of the Shares.

        5.2.        Compliance With Securities Law.

        (a)        Within thirty (30) days after the Closing, the Company shall
prepare and file with the SEC a Form ADV for the Company. Prior to the Closing,
the Company shall cooperate fully with Buyer and any Person designated by Buyer
in furnishing information needed to prepare such Form ADV.

        (b)        Buyer or the Company (after the Closing) shall file, and (to
the extent such filings are prepared or made prior to Closing), the Company
shall cooperate fully with Buyer and any Person designated by Buyer in preparing
and filing, all such other forms and other documents required to be filed or
delivered under applicable federal and state laws, and regulations promulgated
thereunder, relating to or regulating the activities of investment advisers,
including without limitation the Investment Advisers Act, the Exchange Act and
the Securities Act, as a result of the consummation of the transactions
contemplated by this Agreement.

        5.3.        Tax Matters.

        (a)        The following provisions shall govern the allocation of
responsibility as between Buyer, the Company and the Sellers, for certain tax
matters following the Closing Date:

             (i)        The Company shall cause Lipsky, Goodkin & Co., P.C. (the
“Company’s Accountant”) to prepare, at the Sellers’ expense and in accordance
with the directions of the Stockholders’ Representative, and shall file or cause
to be filed, within the time and in the manner provided by law, all Tax Returns
of the Company for all periods ending on or before the Closing Date that are
filed after the Closing Date, and all such Tax Returns shall, to the Knowledge
of the Sellers, be true, correct and complete in all material respects when
filed. To the extent permitted by applicable law, the Sellers shall include any
income, gain, loss, deduction or other tax items for such periods on their Tax
Returns in a manner consistent with the Schedule K-1‘s prepared at the direction
of the Stockholders’ Representative for such periods. Notwithstanding the
foregoing provisions of this Section 5.3(a)(i), if Deloitte & Touche LLP (the
“Buyer’s Accountant”) believes that there is not a reasonable basis for any
position that the Stockholders’ Representative directs be taken in connection
with any Tax Return referred to in the first sentence of this section, the
Company’s Accountant, the Buyer’s Accountant, the Buyer and the Stockholder’s
Representative shall confer with respect to the matter and if they are unable to
resolve their differences the matter shall be referred to the Arbiter and the
decision of the Arbiter shall be final and binding.

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             (ii)        Buyer and the Company, on the one hand and Sellers, on
the other hand shall: (A) cooperate fully, as reasonably requested, in
connection with the preparation and filing of Tax Returns pursuant to this
Section 5.3 and any audit, litigation or other proceeding with respect to Taxes;
(B) make available to the other, as reasonably requested, all information,
records or documents with respect to Tax matters pertinent to the Company for
all periods ending prior to or including the Closing Date; and (C) preserve
information, records or documents relating to Tax matters pertinent to the
Company that are in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof. The Buyer, or
the Company, shall notify the Stockholders’ Representative of any audit by any
Regulatory Agency which may result in an assessment for which Sellers may be
liable under this Agreement and shall not consent to any such actual or proposed
assessment without the prior written consent of the Stockholders’
Representative, which shall not be unreasonably withheld.

             (iii)        The Sellers and Buyer agree that Buyer’s purchase of
the Shares is controlled by Section 1362(e)(6)(D) of the Code and Treasury
Regulation 1.1362-3(b)(3) wherein the 2004 calendar tax year of the Company will
be treated as two taxable years for income Tax purposes with the first taxable
year ending as of the Closing Date. The books of the Company shall be closed as
of the Closing Date and items of income, loss, deduction or credit shall be
determined for the two short taxable years in the manner in which the Company
regularly computes its books pursuant to Section 446(a) of the Code. The
Stockholders’ Representative and the Company shall file income Tax Returns for
the 2004 calendar tax year in a manner consistent with the foregoing.

        (b)        The Company shall, prior to the Closing, maintain its status
as an S Corporation for federal income tax purposes and, with respect to those
states for which the Company has filed Tax Returns which recognize S corporation
status for state income tax purposes, state income tax purposes. The Company and
the Sellers will not revoke the Company’s election to be taxed as an S
corporation within the meaning of Sections 1361 and 1362 of the Code. The
Company and the Sellers will not take or allow any action to be taken (other
than the transactions contemplated by this Agreement) that would result in the
termination of the Company’s status as a validly electing S corporation within
the meaning of Sections 1361 and 1362 of the Code.

        (c)        The parties agree as follows with respect to Section
338(h)(10) of the Code:

             (i)        The Company and the Sellers will join with Buyer in
making a timely election under Section 338(h)(10) of the Code (and any
corresponding election permitted under state or local tax law) with respect to
the transactions contemplated hereby (the “Section 338(h)(10) Elections”). At
the Closing, the Sellers shall deliver to Buyer Internal Revenue Service
Form 8023 and any other state or local forms required for the Section 338(h)(10)
Elections (collectively, the “Section 338 Forms”), each of the Section 338 Forms
having been signed by each of the Sellers. Each of the Section 338 Forms shall
to the extent possible be completed at or prior to the Closing. To the extent
that any item on a form has not been so completed, the parties shall agree at
the Closing on the manner in which the item is to be determined, and the Buyer’s
Accountants shall make that determination and complete the form; provided that
the Company’s Accountants shall prepare the purchase price allocation to be used
in completing the form in a manner consistent with paragraph (ii) below. The
Sellers shall at any time and from time to time after the Closing cooperate with
Buyer in connection with the Section 338(h)(10) Elections, including the signing
by them of any forms that Buyer may reasonably request in order to accomplish
the Section 338(h)(10) Elections. The Sellers will include any income, gain,
loss, deduction, or other tax item resulting from the Section 338(h)(10)
Elections on their Tax Returns to the extent required by applicable federal or
state law. Buyer shall be responsible for the preparation and filing of the
Section 338 Forms.

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             (ii)        Buyer and the Company agree that the purchase price
payable in accordance with Section 2 hereof and the liabilities of Company (plus
other relevant items) (the “Allocable Amount”) will be allocated to the
categories of assets of the Company for all purposes (including Tax and
financial accounting) as shown on the Allocation Schedule attached hereto (which
reflect the assets and liabilities of the Company as of December 31, 2003), as
adjusted to reflect: (i) adjustments to the Purchase Price made pursuant to this
Agreement; (ii) changes in the amount of the Company’s liabilities from December
31, 2003 through the Closing Date; (iii) changes in the amounts of the Company’s
assets from December 31, 2003 through the Closing Date; and (iv) other
adjustments reasonably agreed to among the parties; provided, however that the
Allocable Amount shall be allocated among classes or categories of assets as
provided by the Code and the related Treasury Regulations. The relative fair
market values of the assets within each category and the amount allocated to the
particular assets within each category shall be determined by the Company in a
manner consistent with any requirements of the Code. Buyer, the Company and the
Sellers will prepare a Form 8883 consistent with the principles discussed herein
and attach such Form 8883 to their respective Tax Returns (including amended
returns and claims for refund).

        (d)        Buyer and the Sellers agree as follows with respect to the
allocation of income Tax liabilities:

        Notwithstanding anything to the contrary contained in this Agreement,
except as otherwise provided in Section 9 or this Section 5.3(d), the Company
and the Buyer shall have no obligation to pay or make any provision for the
payment of, by indemnification or otherwise, and Sellers shall be responsible
for all, Taxes of the Company for periods ending before the Closing Date,
including, but not limited to: (i) any Taxes resulting from the change in the
accounting method of the Company after the Closing Date, (ii) Taxes resulting
from the Section 338(h)(10) Election, or (iii) any Taxes payable to the City of
New York as a result of the consummation of the transaction contemplated by this
Agreement, and the Sellers will be liable directly to the applicable Regulatory
Authorities for all such Taxes.

        (e)        All Tax sharing agreements or similar agreements with respect
to or involving the Company shall be terminated as of the Closing Date and,
after the Closing Date, the Company shall not be bound thereby or have any
liability thereunder.

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        (f)        After the Closing Date, Buyer shall permit the Sellers and
their representatives reasonable access to such books and records of the Company
as may be necessary for the purpose of confirming and reviewing the Closing
Balance Sheet, for the purpose of preparing the Company’s final Tax Return for
the period up to and including the Closing Date.

        5.4 Access.   The Company will, and the Sellers will cause the Company
to, during normal business hours and upon reasonable notice to the Stockholders’
Representative, (i) provide to Buyer and its representatives full access to the
premises, property, files, books, records, documents, and other information of
or concerning the Company, (ii) furnish to Buyer and its representatives
financial, technical and operating data and other information pertaining to the
business and property of the Company, (iii) make available for inspection and
copying by Buyer copies of any documents relating to the foregoing and (iv)
permit Buyer and its representatives to conduct reasonable interviews of the
employees and auditors of the Company; provided, however, that any such
investigation will be conducted in such a manner as not to interfere
unreasonably with the operation of the business of the Company.

        5.5.        Announcements.   Prior to the Closing, any announcement by
any party hereto to its customers with respect to the transactions contemplated
hereby shall be made with the review and approval of, and in joint communication
with, the other parties hereto. Prior to the Closing, no party hereto will issue
any press release or otherwise directly or indirectly make any public statement
or furnish any statement with respect to the transactions contemplated hereby
without the prior consent of the other parties hereto, except as may be required
by law. The Sellers and the Company acknowledge that Hudson Valley will be
obligated to disclose this Agreement on a Form 8-K filed with the SEC.

        5.6.        Consents; Cooperation.   (a) Subject to the terms and
conditions hereof, the Sellers, Hudson Valley, and Buyer will use their
reasonable efforts:

             (i)        to obtain prior to the earlier of the date required (if
so required) or the Closing Date, all authorizations, consents, orders, permits
or approvals of, or notices to, or filings, registrations or qualifications
with, any governmental, administrative or judicial authority or any other Person
that are required on their respective parts, for the consummation of the
transactions contemplated by this Agreement, including, without limitation, the
NYBD, the FDIC, and the NASD;

              (ii)        to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceeding, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby;

             (iii)        to furnish to each other such information and
assistance as may reasonably be requested in connection with the foregoing; and

             (iv)        to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.

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        (b)        To the extent that the rights of the Company under any
contract may not be assigned without the consent or approval of another party
thereto, the Company as soon as practicable shall use all reasonable efforts to
obtain any such consent, and Buyer shall cooperate with the Company in
connection therewith.

        5.7.        Notification of Certain Matters.   Between the date hereof
and the Closing, the Sellers, on the one hand, and Hudson Valley and Buyer, on
the other hand, will give prompt notice in writing to the other of: (i) any
information known to Sellers or Buyer that indicates that any representation or
warranty of the Sellers or Buyer, as the case may be, contained herein will not
be true and correct in any material respect as of the Closing and (ii) the
occurrence of any event known to the Sellers, Hudson Valley or Buyer which will
result, or has a reasonable prospect of resulting, in the failure to satisfy a
condition specified in Section 6 or 7 hereof. The delivery of any notice by a
party pursuant to this Section 5.7 shall not, without the express written
consent of the other party be deemed (A) to modify or correct the
representations or warranties of the party delivering such notice, (B) modify
the conditions set forth in Section 6 or 7, or (C) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

        5.8.        Further Assurances.   Any time after the Closing, the
Sellers, Hudson Valley and Buyer will, and Hudson Valley and Buyer will cause
the Company to promptly execute, acknowledge and deliver any other assurances or
documents reasonably requested by Hudson Valley, Buyer or Sellers, as the case
may be, to satisfy or in connection with its obligations hereunder.

        5.9.        Retention of Books and Records.   For a period of three
years after the Closing Date, Buyer will cause the Company to retain all books,
records and other documents pertaining to the Company in existence on the
Closing Date and to make the same available after the Closing Date for
examination and copying by Sellers or their representatives, at such Seller’s
expense, upon reasonable notice. No such books, records or documents will be
destroyed by Buyer or the Company without first advising Sellers in writing and
providing Sellers a reasonable opportunity to obtain possession or make copies
thereof at such Seller’s expense.

        5.10.        Stock Options.   On or before the Closing, Hudson Valley
shall grant to each Employee of the Company named on Schedule 5.10(a) who is
employed with the Company as of the Closing Date, options to purchase shares of
Hudson Valley Common Stock in such amounts and on such terms as are set forth on
Schedule 5.10(b). Such grants will be made by the Hudson Valley Compensation
Committee effective as of the Closing Date. All such stock options will be (i)
granted as incentive stock options, pursuant to the Hudson Valley Holding Corp.
2002 Stock Option Plan (the “Plan”), (ii) subject to the terms of the Plan and
the related grant agreement under the Plan, including the requirement that each
employee receiving options sign a copy of the Plan and execute the stock
restriction agreement signed by all optionees under the Plan, and (iii) vest in
accordance with Schedule 5.10(b).

        5.11.        Conduct of Business Prior to the Closing.   From the date
hereof to the Closing Date or earlier termination of this Agreement, the Sellers
shall cause the business of the Company to be conducted in the ordinary course
of business consistent with past practices and shall cause the Company to use
its commercially reasonable efforts to preserve its current business
organization and existing business relationships. In addition, Sellers shall not
cause or permit the Company to do any of the following without the prior written
consent of Buyer:

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(i)   issue, sell or distribute any shares in the Company or issue or contract
to issue options or rights to subscribe for shares in the Company or pay any
dividend or make any distribution on its Common Stock if the dividend or
distribution would result in the Company’s Stockholders’ Equity as of the
Closing Date to be less than $200,000 or the Company’s cash and cash equivalents
to be less than $150,000, it being understood that the Company intends to make
distributions of certain property to the Sellers prior to the Closing Date;

(ii)   amend its Certificate of Incorporation or By-laws;

(iii)   make or grant any increase in compensation or in severance or
termination pay to, any officer, executive officer, employee, director, agent or
consultant, or enter into any employment agreement with any executive officer or
other individual, except as may be required under employment, collective
bargaining or termination agreements in effect on the date hereof or, solely
with respect to employees other than officers, executive officers and directors,
in the ordinary course of business, provided, however, that the Company may pay
bonuses to its employees with respect to the period from January 1, 2004 to the
Closing Date without the consent of Buyer;

(iv)   acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire, other
than in the ordinary course of business, any assets which are material,
individually or in the aggregate, to the Company;

(v)   sell, pledge, mortgage, assign, lease, give a security interest in or
otherwise encumber or dispose of, or agree to do any of the foregoing with
respect to, any of its assets, except in the ordinary course of business;

(vi)   enter into, or authorize any agent to enter into, discussions (A)
relating to the merger or consolidation of the Company with or into any Person
or (B) relating to the sale of all or substantially all of the assets of the
Company;

(vii)   except in the ordinary course of business, including with respect to the
purchase and sale of portfolio holdings and the entering into Investment
Contracts, enter into or amend any other commitment, contractual obligation or
transaction which calls for aggregate payments in excess of $10,000 and which
does not expire or is not terminable without cost or penalty at Company’s option
within a 90 day period;

(viii)   terminate or amend any contract, agreement, license or instrument to
which Seller is a party or from which it benefits, except in the ordinary course
of business;

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(ix)   take any action which would make any of the representations or warranties
of the Sellers contained in this Agreement untrue or incorrect in any material
respect or would make it impossible to satisfy any of the conditions contained
in Section 6; or

(x)   lengthen the period for payment of the Company’s accounts payable.

        5.12         Non-competition; Non-solicitation

        (a)        In addition to other terms defined in this Agreement, the
following terms when used herein shall have the following meanings:

         (i)        “Competition” means the participation, directly or
indirectly, in the business of a Broker or Dealer or an Investment Adviser.

         (ii)        “Directly or indirectly” means as an individual, partner,
shareholder, director, officer, principal, agent, employee, consultant, adviser,
registered representative, associated person or in any other relationship or
capacity.

         (iii)        “Broker” means a person engaged in the business of
effecting transactions in securities for the account of others and includes
brokers or dealers who are registered with the SEC and those who are not
registered.

         (iv)        “Dealer” means any person who engages either for all or
part of his time directly or indirectly in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person.

         (v)        “Investment Adviser” means a person who falls within the
definition of investment adviser under the Investment Advisers Act, but for this
purpose includes banks and broker-dealers otherwise excluded from the
definition.

         (vi)        “Restricted Territory” means the United States of America.

         (vii)        “Securities” means any security as defined under the
Securities Act, and includes but is not limited to, debt securities, government
securities, municipal securities and equity securities.

         (viii)        “Hudson Valley”, solely for purposes of this Section
5.12, means Hudson Valley Holding Corp. or any direct or indirect Subsidiary of
Hudson Valley, including, but not limited to, the Company.

        (b)        Each Seller shall not, for a period beginning on the date
hereof and ending on the date which is two calendar years after the last day of
the fifth Earn-Out Year (such period being referred to herein as the
“Competition Period”), directly or indirectly, without the prior written consent
of Hudson Valley, engage in any Competition in any Restricted Territory;
provided, however, that such Seller may, without violating this covenant, own as
a passive investment not in excess of 2% of the outstanding capital stock of a
corporation which engages in Competition if such capital stock is a security
which is actively traded on an established national securities exchange or is
listed on NASDAQ; and further provided, that in the event that both (x) a Change
in Control shall have occurred and (y) Arnold R. Schmeidler is terminated
“Without Cause” or resigns for “Good Reason” (both as defined in the Schmeidler
Employment Agreement), the restrictions of this Section 5.12(b) shall
immediately terminate, but all other provisions of the Section 5.12 shall
continue in full force and effect.

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        (c)        Each Seller shall not, directly or indirectly, without the
prior written consent of Hudson Valley, for himself or on behalf of any other
Person, hire or retain any person known by such Seller to be employed by Hudson
Valley at that time or to have been employed by Hudson Valley within the prior
six months (any such Person, a “Hudson Valley Employee”), or solicit or induce
or attempt to solicit or induce any Hudson Valley Employee to leave his or her
employment with Hudson Valley at any time during the Competition Period.
Notwithstanding the foregoing, Hudson Valley shall consider in good faith any
request by a Seller to waive the prohibition against hiring or soliciting Hudson
Valley Employees with respect to any Hudson Valley Employee whose employment has
been terminated by Hudson Valley, and such waiver shall not be unreasonably
withheld.

        (d)        Each Seller shall not, directly or indirectly, for himself or
on behalf of any other Person, solicit, divert, take away or attempt to take
away any of the customers of Hudson Valley or the business of any such customers
or in any way interfere with, disrupt or attempt to disrupt any then-existing
relationships between Hudson Valley and any of its customers with whom they
shall deal, at any time during the Competition Period, provided, however, that
each Seller may, without violating the covenant, subject to the Investment
Advisers Act and the rules and regulations promulgated thereunder, trade
securities in his own portfolio and provide investment advice to his family
members free of charge.

        (e)        Each Seller shall not during the term of this Agreement or at
any time thereafter (except with respect to information which becomes generally
known in the industry through no fault of such Seller, is part of public
knowledge or literature or is lawfully received by such Seller from a third
party) use or disclose to any Person whatsoever any confidential or proprietary
information of Hudson Valley which he may have acquired heretofore or may
hereafter acquire relating to the business of the Company or the business of
Hudson Valley, including but not limited to, information relating to the
business, accounts, financial dealings, transactions, trade secrets, intangible
property, customer lists, plans and proposals of the Company or Hudson Valley,
whether or not marked or otherwise identified as confidential or secret except
as authorized by Hudson Valley or the Company or ordered by a court of competent
jurisdiction.

        (f)        Each Seller acknowledges that, in view of the nature of the
business objectives of Hudson Valley in acquiring the Company and the
consideration paid to such Seller therefor as a stockholder of the Company under
the terms of this Agreement, the restrictions contained in paragraphs (b)
through (e) hereof are reasonably necessary to protect the legitimate business
interests of Hudson Valley and the Company and that any violation of such
restrictions will result in irreparable injury to Hudson Valley and the Company
for which damages will not be an adequate remedy. Each Seller therefore
acknowledges that, if any such restrictions are violated, Hudson Valley and the
Company shall be entitled to preliminary and injunctive relief (without the
requirement of posting a bond).

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        (g)        The rights and remedies of Hudson Valley and the Company
hereunder are not exclusive of, or limited by, or in limitation of, any other
rights or remedies which they may have, whether at law, in equity, by contract
or otherwise, all of which shall be cumulative.

        (h)        Should any provision of this Agreement or part thereof be
held under any circumstances in any jurisdiction to be invalid or unenforceable
for any reason, including, without limitation, because of its geographic or
business scope or duration, such provision shall be construed in such a way as
to make it valid and enforceable to the maximum extent possible. Any invalidity
or unenforceability of any provision in this Agreement shall not affect the
validity or enforceability of any other provision or other part of such
provision of this Agreement or any other agreement or instruments.

        (i)        The rights of Hudson Valley hereunder may be waived only by a
writing signed by an officer of Hudson Valley, pursuant to authorization granted
by resolution of the board of directors of Buyer, expressly setting forth the
rights so waived and the matters as to which they are so waived, and any such
waiver shall be limited to the matters expressly set forth in such writing. No
failure or delay of Hudson Valley or the Company in enforcing any of its rights
hereunder at any time shall constitute or evidence any waiver of such rights.

        5.13         Right of First Refusal; Registration.

        (a)        In the event that at any time, or from time to time, after
acquiring any Additional Consideration Shares, Arnold R. Schmeidler proposes to
sell in a bona fide sale any Additional Consideration Shares (the “Offered
Shares”) to any Person, he shall provide Hudson Valley with at least 10 days’
prior written notice of such sale (the “Sale Notice”), setting forth the terms,
the price, the buyer and the conditions of the sale.

        (b)        Within ten (10) days after receipt of the Sale Notice by
Hudson Valley, Hudson Valley, by action of its board of directors or its
designated committee, may elect to purchase all, but not less than all, of such
Offered Shares, or may elect to designate a person, including an officer,
director or employee of Hudson Valley, to purchase all but not less than all of
such Offered Shares. The purchase price of any Offered Shares purchased under
this Section 5.13 shall be on terms and conditions at least as favorable to
Arnold R. Schmeidler as those set forth in the Sale Notice. If all of the
Offered Shares of Arnold R. Schmeidler offered under the Sale Notice are not
purchased by Hudson Valley or its designee, then all restrictions imposed upon
the Offered Shares shall terminate and Arnold R. Schmeidler shall be free to
sell the Offered Shares to the prospective purchaser at the price and terms set
forth in the Sale Notice, at any time within twenty (20) days thereafter;
provided, however, that at the end of the twenty (20) day period, all
restrictions on any unsold Offered Shares and all remaining Additional
Consideration Shares shall again be applicable in the same manner and under the
same terms as set forth in this Section 5.13. Such right of first refusal shall
not apply to any transfer of any Additional Consideration Shares to a charity or
family member or by will or the laws of descent, provided, however, that any
transferee of any Additional Consideration Shares shall be bound by this right
of first refusal, and no transfer of any Additional Consideration Shares shall
be valid unless the transferee agrees to be bound by the terms of this Section
5.13.

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        (c)        The Additional Consideration Shares shall not be registered
under the Securities Act or under any state blue sky law and will be subject to
restrictions thereunder; provided, however, that should any Additional
Consideration Shares be required to be delivered by Buyer to the Sellers prior
to the first day of the second Earn-Out Year, then any such Additional
Consideration Shares shall either be registered for sale, or registered for
resale, by Hudson Valley in a Registration Statement on Form S-1, S-2 or S-8
(the “Registration Statement”). Hudson Valley agrees that under existing Rule
144 of the SEC, the Additional Consideration Shares may be sold without
restriction after two years from the Closing Date, so long as the Sellers are
not affiliates of Hudson Valley. If the Incentive and Competition Shares are
registered for resale rather than registered for delivery to the Sellers:

             (i)        Each Seller agrees to furnish to Hudson Valley in
writing such information regarding the Seller and his proposed distribution of
the Incentive and Competition Shares as Hudson Valley may from time to time
reasonably request in connection with the preparation of the Registration
Statement or the registration or qualification of the Incentive and Competition
Shares under state securities or blue sky laws; and

             (ii)        Each Seller agrees to, subject to the limitations set
forth in Section 9, indemnify and hold harmless Hudson Valley, each director of
Hudson Valley, each officer of Hudson Valley who signed the Registration
Statement and each other Person, if any, who controls Hudson Valley within the
meaning of Section 15 of the Securities Act, against and in respect of any and
all Losses which are incurred by Hudson Valley by reason of (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement or any amendment thereto or a prospectus contained in
the Registration Statement or any amendment or supplement thereto in reliance
upon and in conformity with written information furnished to Hudson Valley by
the Seller with respect to the Seller for use therein or (ii) trades made by the
Seller after receiving notice from Hudson Valley to suspend sales as a result of
the occurrence of any Suspension Event (as defined below) or (iii) trades made
by the Seller in violation of the prospectus delivery requirements of Section
5(b) of the Securities Act. A “Suspension Event” shall exist at such times as
circumstances exist that Hudson Valley determines in good faith on advice of
counsel, make it impractical or inadvisable for Hudson Valley to file, amend or
supplement the Registration Statement or such filings or to cause the
Registration Statement or such filings to become effective or to remain
effective or for the sale of Incentive or Competition Shares to occur under the
Registration Statement (such circumstances to include, without limitation, (i)
pending negotiations relating to, or consummation of, a significant acquisition,
corporate reorganization, material proposed financing, the offer or sale of
securities, or other similar transaction involving Hudson Valley, or (ii) the
occurrence of some other event (X) where any of the foregoing would require
disclosure under applicable securities laws of material information in the
Registration Statement (or any other document incorporated into the Registration
Statement by reference) or such state securities filings and (Y) as to which
Hudson Valley has a bona fide business purpose for preserving confidentiality or
which renders Hudson Valley unable to comply with SEC requirements).

        (d)        Unless otherwise registered as provided in Section 5.13(c),
all Additional Consideration Shares shall bear a legend as follows:

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  THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE PLACEMENT
TRANSACTION AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF BY THE HOLDER UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE IN THE OPINION OF HUDSON VALLEY HOLDING CORP.‘S
COUNSEL.

        (e)        In addition to the legend described in Section 5.13(d), all
Additional Consideration Shares issued to Arnold R. Schmeidler shall bear a
legend as follows:

  THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN ACCORDANCE WITH THE TERMS OF SECTION 5.13 OF AN
ACQUISITION AGREEMENT DATED JUNE 29, 2004, AMONG THE REGISTERED HOLDER HEREOF
AND HUDSON VALLEY HOLDING CORP., A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF HUDSON VALLEY HOLDING CORP.

        5.14         Employment of the Company’s Employees.

        (a)        Buyer expects to continue employment on and after the Closing
Date of all employees of the Company who were such immediately prior to the
Closing Date (each a “Continued Employee” and collectively the “Continued
Employees”). Nothing contained herein shall be construed to modify the “at will”
employee status of those of the Company’s employees who are immediately prior to
the Closing “at will” employees.

        (b)        Before the Closing, Buyer and the Sellers will decide whether
to continue the welfare plans of the Company, or to have such Continued
Employees become covered under a welfare plan of Hudson Valley. Following the
Closing, Buyer will decide, in accordance with legal considerations, whether to
continue the ERISA plans of the Company or to have such Continued Employees
become covered under an ERISA plan of Hudson Valley. No prior existing condition
limitation shall be imposed with respect to any medical coverage plan as a
result of the consummation of the transactions contemplated by this Agreement
and the Continued Employees shall get credit for any deductibles already paid
under existing plans for the year in which the Closing occurs. Further service
by Continued Employees with the Company shall be taken into account for purpose
of vesting and eligibility under Hudson Valley’s ERISA and welfare plans.

        (c)        The Company shall establish at the beginning of each Earn-Out
Year an annual estimated bonus pool equal to 20% of the Company’s estimated
Pre-Tax Earnings for such Earn-Out Year, before giving effect to any incentive
compensation paid to Company employees, including commissions paid with respect
to the initiation of new Client accounts, discretionary bonuses, employee profit
participation plan contributions and any other incentive compensation payments,
during such Earn-Out Year (such incentive compensation being referred to herein
as “Incentive Compensation”). If, at the end of any Earn-Out Year, 20% of the
actual Pre-Tax Earnings before giving effect to Incentive Compensation paid
during such Earn-Out Year (the “Bonus Pool”) exceeds the amount of the Incentive
Compensation paid during such Earn-Out Year, the Company shall pay the balance
of such Bonus Pool to the Company’s employees as additional bonuses (the
“Additional Bonuses”). The allocation of the Bonus Pool, excluding any
Additional Bonuses, to employees and the timing of any payments to be made from
such Bonus Pool shall be made at the discretion of Arnold R. Schmeidler; the
allocation of the Additional Bonuses to employees and the timing of any
Additional Bonus payments shall be made at the discretion of Arnold R.
Schmeidler with the prior approval of the Board of Directors of the Company (the
“Board”) consistent with past Company practices, it being understood that Arnold
R. Schmeidler shall himself not participate in the Bonus Pool or receive any
Additional Bonus.

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        5.15         Post-Closing Governance Matters.

        Following the Closing:

        (a)        Buyer expects that the business and operation of the Company
will continue in a similar fashion by the same officers and employees as
currently operating the business and Buyer does not expect to intrude on the
Company’s method of management. In particular, Hudson Valley and Buyer
acknowledge and agree that after the Closing the Company shall continue to
manage the accounts of employees of the Company and their family members, of the
Company’s profit sharing plan, and of the 401(k) plans of its employees either
at a reduced fee or without fee as is the current practice until such time as
those accounts are terminated. Buyer presently does not contemplate any
eliminations of staff as a result of the acquisition of the Company and expects
that the present compensation levels and policies of the Company will be
maintained. The Buyer intends that Arnold R. Schmeidler will be primarily
responsible for making decisions relating to the Company’s investment philosophy
and strategy and day-to-day management of the business, both in a style and
manner of operation consistent with past practice, to Buyer’s and the Company’s
mutual best interests. Business strategy will be set by the Board. Buyer retains
the right to set the Company’s future direction and to make future
determinations to protect or to enhance its substantial investment in the
Company. If Arnold R. Schmeidler disagrees with a business decision of the
Board, he shall provide the Board with written notice of such objection. At the
next meeting of the Board following such notice from Arnold R. Schmeidler, the
Board shall have the opportunity to resolve such disagreement with Arnold R.
Schmeidler. If the Board and Arnold R. Schmeidler are unable to resolve such
disagreement, or Buyer, without the consent of Arnold R. Schmeidler, breaches
this Section 5.15 in any material respect, the Sellers shall be entitled to
elect on written notice to Buyer, within thirty (30) days of such disagreement,
to receive (i) the Minimum Earn-Out Payment as provided in Section 2.2(d) and
(ii) the issuance of 12,500 of the Incentive Shares as if a Rejected Acquisition
had occurred, both subject to all of the terms and conditions of Section 2.2(d),
including forfeiture of (x) any rights to the remaining 12,500 Incentive Shares
and (y) receipt of the Earn-Out determined in accordance with Section 2.2(d).

        (b)        Buyer expects that the members of the Board will include, but
not be limited to, Arnold R. Schmeidler, John Wyman, and William E. Griffin.
William E. Griffin shall serve as Chairman of the Board, and Buyer shall
appoint, in its sole discretion, certain members of the Board of Directors of
Buyer or other non-employees of Buyer to serve as members of the Board in such
numbers as to be determined by Buyer. Buyer may of course make further changes
as it sees fit but agrees to maintain Arnold R. Schmeidler and one other person
of his choosing on the Board as long as Arnold R. Schmeidler is employed by the
Company.

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        (c)        After the Closing, Arnold R. Schmeidler will serve as
President and Chief Executive Officer of the Company in accordance with the
terms of the Schmeidler Employment Agreement. Arnold R. Schmeidler shall have
such powers and duties as are set forth on Exhibit E attached hereto; provided,
however, that following the Closing, any assets owned by the Company shall be
managed by Buyer, expressly excluding any Client assets. In the event of the
death or Permanent Disability of Arnold R. Schmeidler, the Board will name his
successor in its sole discretion. Based on health and business issues at that
time, it is anticipated that John Wyman shall assume the role of Chief Executive
Officer of the Company. Any rights which Arnold R. Schmeidler has to approve an
Acquisition or take any other action shall not survive his death or Permanent
Disability.

        (d)        After the Closing, so long as Arnold R. Schmeidler remains
employed by the Company pursuant to the Schmeidler Employment Agreement, Buyer
shall not change the name of the Company from “A.R. Schmeidler & Co., Inc.” to
any other name without the prior written consent of Arnold R. Schmeidler;
provided, however, that nothing in this Section 5.15(d) shall prevent Buyer from
referring to the Company as a subsidiary of Buyer in any literature,
advertising, or any other publications or materials.

        5.16.        Buyer Referrals.  Not later than six months after the
Closing, Buyer shall transfer to the Company the accounts set forth on Schedule
5.16, and such accounts shall be subject to the Referral Fee.

        5.17.        Hudson Valley Guarantee.  Hudson Valley guarantees the
payment of any and all obligations of Buyer and the Company (after the Closing)
arising to the Sellers under this Agreement or to Arnold R. Schmeidler under the
Schmeidler Employment Agreement as if Hudson Valley were directly obligated
thereon, but only to the extent that Buyer fails to perform hereunder or
thereunder.

SECTION 6.   CONDITIONS TO THE OBLIGATIONS OF BUYER

        The obligations of Buyer required to be performed by it at the Closing
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by Buyer:

        6.1.        Representations and Warranties; Covenants.   The
representations and warranties of the Company and the Sellers contained in
Section 3 of this Agreement will be true and correct as of the Closing (except
for those that are made as of a certain time, which shall be true and correct as
of such time), except for changes contemplated by this Agreement and failures to
be true and correct that do not result in a Material Adverse Effect. Each
obligation of Sellers required by this Agreement to be performed by them at or
prior to the Closing will have been duly performed and complied with in all
material respects at the Closing. At the Closing, Buyer will have received
certificates, dated the Closing Date and duly executed by each of the Sellers,
to the effect that the conditions set forth in the preceding sentences have been
satisfied.

        6.2.        Opinion of Sellers’ Counsel.   Buyer will have been
furnished with the opinion of Snow Becker Krauss P.C., dated the Closing Date,
addressed to Buyer in form of Exhibit B hereto. In rendering such opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by Sellers and officers of the Company and by government officials and
upon such other documents and data, including opinions of local counsel, as such
counsel deem appropriate as a basis for such opinion.

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        6.3.        Arnold R. Schmeidler Employment Agreement.   Arnold R.
Schmeidler shall have entered into the Schmeidler Employment Agreement.

        6.4.        Regulatory Approvals.  The transactions contemplated by this
Agreement shall have been approved by the NYBD, the FDIC, the NASD and by any
other Regulatory Agency, the approval of which is required to permit
consummation thereof (except such approvals which Section 5.2 contemplates will
be obtained after Closing) without the imposition of any condition, requirement
or commitment which is reasonably likely to deprive Buyer of the anticipated
benefits of the acquisition of the Company; and all waiting periods arising
under any applicable law shall have duly lapsed or been terminated.

        6.5.        Absence of Litigation.   No action or proceeding shall have
been instituted or threatened on or before the Closing Date before any
Regulatory Agency pertaining to the transactions contemplated by this Agreement,
the result of which is reasonably likely to prevent or make illegal the
consummation of such transactions or which would be reasonably likely to have a
Material Adverse Effect on the Company. Neither Buyer nor the Company shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which either enjoins or prohibits the consummation of any of the
transactions contemplated by this Agreement.

        6.6.        Consents.   The Company shall have obtained written consent
to the assignment of each Material Agreement set forth on Schedule 6.6 that may
not be assigned without the consent or approval of another party thereto,
including the lease dated May 21, 1990, as amended, between the Company, as
tenant, and Fifth Avenue & 46th Street Associates, as landlord, for a portion of
the ninth floor at 555 Fifth Avenue, New York, New York.

        6.7.        Investment Contracts.

        (a)        All Investment Contracts to which the Company is a party as
of the Closing Date shall be in writing, shall reflect the current fee
arrangements between the Company and the Client, and shall provide for the
receipt of compensation by the Company.

        (b)        The Run Rate Revenues at Closing shall be not less than 85%
of the Run Rate Revenues at Signing. If the Run Rate Revenues at Closing are
less than 95% of the Run Rate Revenues at Signing, the Initial Payment shall be
reduced by $100,000 for each one percent that the Run Rate Revenues at Closing
are below 95%. For example, if the Run Rate Revenues at Closing are 90%, the
Initial Payment would be reduced by $500,000. For purposes of determining the
percentage or Run Rate Revenues under this Section 6.7(b), any fraction of a
percent shall be rounded up or down to the nearest whole percent, with .5% being
rounded up. Notwithstanding the actual relationship between El Paso Natural Gas
Master Retirement Trust 1230 and the Company as of the date hereof or as of the
Closing, the Run Rate Revenues of El Paso Natural Gas Master Retirement Trust
1230 as of June 1, 2004 shall be included in the calculation of Run Rate
Revenues at Signing and shall not be included in the calculation of Run Rate
Revenues at Closing.

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        (c)        The Company shall have obtained the affirmative written
consent to assignment of their Investment Contracts prior to Closing on terms at
least as favorable to the Company as the terms of such Investment Contracts on
the date hereof from the Company’s ten largest clients measured by Client Run
Rate Revenue as of the date hereof, excluding El Paso Natural Gas Master
Retirement Trust 1230.

        6.8.        Investment Adviser Registration.   The Company shall
continue to be registered as an Investment Adviser under the Investment Advisers
Act.

        6.9.        Key Man Life Insurance.   The Company shall have purchased
key man life insurance on the lives of each of Arnold R. Schmeidler and John
Wyman in such amounts and on such terms as are reasonably satisfactory to Buyer.

        6.10.      Net Capital.   The Company will meet any net capital
requirement imposed by the rules of the SEC at the end of the month during which
the Closing occurs. Should the Company not be able to meet such net capital
requirements, the Company shall ask Buyer to contribute an amount of funds
sufficient to meet such net capital requirements, such contribution to be given
by Buyer in accordance with the terms of the Side Letter.

        6.11.      Sellers’ Fees.   Sellers and the Company will have furnished
Buyer with letters from each of Putnam Lovell, the Company’s accountant, Snow
Becker Krauss P.C., and any other Person who provided the Company with
professional services in connection with the sale of the Shares to Buyer
(collectively, the “Service Providers”) stating that all fees due from the
Company to each of the Service Providers have been paid in full or are, as of
the Closing, owed only from the Sellers individually and not from the Company.

        6.12.      By-Laws.   The Company shall have amended its By-Laws to
provide that the number of directors on the Company’s board of directors shall
be not less than five (5) and not more than fifteen (15).

        6.13.      Certificates.   Sellers and the Company will have furnished
Buyer with such certificates of their respective officers and others as Buyer
may reasonably request to evidence satisfaction of the conditions set forth in
this Section 6, such certificates to be made without personal liability of such
officer or other person signing such certificate.

SECTION 7.   CONDITIONS TO THE OBLIGATIONS OF THE SELLERS

        The obligations of the Sellers to be performed by them at the Closing
are subject to the satisfaction, at or prior to the Closing, of each of the
following conditions, each of which may be waived by the Sellers:

        7.1.        Representations and Warranties; Covenants.   The
representations and warranties of Hudson Valley and Buyer contained in this
Agreement will be true and correct as of the Closing (except for those made as
of a certain date, which shall be true and correct as of such date), except for
changes contemplated by this Agreement and failures to be true and correct that
do not result in a Material Adverse Effect. Each obligation of Hudson Valley and
Buyer required by this Agreement to be performed by it at or prior to the
Closing will have been duly performed in all material respects at or prior to
the Closing. At the Closing, Sellers will have received a certificate, dated the
Closing Date and duly executed by an executive officer of Hudson Valley and
Buyer (without personal liability to such officer) to the effect that the
conditions set forth in the preceding sentences have been satisfied.

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        7.2.        Opinion of Buyer’s Counsel.   The Sellers and the Company
will have been furnished with the opinion of Pitney Hardin LLP, dated the
Closing Date, addressed to the Sellers and the Company in form of Exhibit D
hereto. In rendering such opinion, such counsel may rely as to factual matters
upon certificates or other documents furnished by officers of the Buyer and by
government officials and upon such other documents and data, including opinions
of local counsel, as such counsel deem appropriate as a basis for such opinion.

        7.3.        Schmeidler Employment Agreement.   The Company shall have
entered into the Schmeidler Employment Agreement.

        7.4.        Regulatory Approvals.   The transactions contemplated by
this Agreement shall have been approved by the NYBD, the FDIC, the NASD and by
any other Regulatory Agency, the approval of which is required to permit
consummation thereof without the imposition of any condition, requirement or
commitment which is reasonably likely to have a Material Adverse Effect on the
Company or Buyer; and all waiting periods arising under any applicable law shall
have duly lapsed or been terminated.

        7.5.        Absence of Litigation.   No action or proceeding shall have
been instituted or threatened on or before the Closing Date before any
Regulatory Agency pertaining to the transactions contemplated by this Agreement,
the result of which is reasonably likely to prevent or make illegal the
consummation of such transactions. Neither Buyer nor the Company shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which either enjoins or prohibits the consummation of any of the
transactions contemplated by this Agreement.

        7.6        Investment Contracts.   The Run Rate Revenues at Closing
shall be not less than 85% of the Run Rate Revenues at Signing.

        7.7.        Certificates.   Buyer will have furnished Sellers with such
certificates of its officers and others as Seller may reasonably request to
evidence satisfaction of the conditions set forth in this Section 7.

SECTION 8.   TERMINATION

8.1.   Termination.   This Agreement may be terminated at any time prior to the
Closing:

(a)   by mutual consent of Hudson Valley, Buyer and the Sellers;

(b)   by Hudson Valley and Buyer, on or after the date 120 days from the date
hereof, if any condition contained in Section 6 (other than those requiring a
Closing Delivery), has not been satisfied or waived; by Sellers, on or after the
date 120 days from the date hereof, if any condition contained in Section 7
(other than those requiring a Closing Delivery), has not been satisfied or
waived;

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(c)   by Hudson Valley and Buyer or the Sellers, if any court of competent
jurisdiction or other governmental body has issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action has become final and non-appealable;

(d)   by Hudson Valley and Buyer, if any condition contained in Section 6 shall
become incapable of fulfillment through no fault of Hudson Valley or Buyer; or

(e)   by the Sellers, if any condition contained in Section 7 shall become
incapable of fulfillment through no fault of the Sellers.

        If Hudson Valley, Buyer or the Sellers terminate this Agreement pursuant
to the provisions hereof, such termination will be effected by written notice to
the other party specifying the provision hereof pursuant to which such
termination is made.

        8.2.        Effect of Termination.

        (a)        Upon termination of this Agreement pursuant to Section 8.1
hereof, except as provided in clause (b) below:

             (i)        this Agreement will forthwith become null and void;

             (ii)         such termination will be the sole remedy with respect
to any breach of any representation or warranty contained in or made pursuant to
this Agreement, and

             (iii)         no party hereto or any of their respective officers,
directors, employees, agents, consultants, stockholders or principals will have
any liability or obligation hereunder or with respect hereto.

        (b)        The provisions of clause (a) above notwithstanding, no party
will be relieved of liability for any knowing breach (for this purpose knowledge
shall be tested as of the date hereof only) of any representation or warranty
contained herein or any breach of any covenant or agreement contained herein.

SECTION 9.   SURVIVAL AND INDEMNIFICATION

        9.1.        Survival.   Notwithstanding any otherwise applicable statute
of limitations, no claim, lawsuit, or other proceeding arising out of or related
to the breach of any representation or warranty of the parties contained herein
may be made after March 31, 2006 except for those representations and warranties
contained in Section 3.3, 3.7, 3.11, 3.17 or 3.23 which shall survive for a
period of six years from the Closing Date.

        9.2.        Seller’s Indemnification.

        (a)        Sellers, jointly and severally, subject to the limitations
set forth in this Section 9, will indemnify Buyer against and in respect of any
and all Losses which are incurred by Buyer by reason of (i) the breach of any
representation or warranty made by the Company or Sellers in Section 3 of this
Agreement, (ii) any breach of a covenant made by the Company or Sellers in this
Agreement, provided, however, that the Company shall have no obligation to
indemnify Buyer for the breach of any covenant by the Company or Sellers which
occurs between the date hereof and Closing as long as the Company or Sellers
provides Buyer with written notice of such a breach prior to Closing (it being
the intention of the parties hereto that Buyer’s sole remedy in the event of
such a breach shall be the right to refuse to proceed with the Closing), (iii)
any liability of the Company prior to Closing which is not reflected on Company
Financial Statements or Schedule 3.6(a), or (iv) a final and nonappealable
determination by an appropriate taxing or judicial authority that the Company
did not qualify as an S corporation for federal income tax purposes for any
period ending prior to the Closing for which the Company filed its federal
income tax return as an S corporation, or that the Company did not qualify as an
S corporation with respect to any state for any period ending prior to the
Closing for which the Company filed its income tax return for the state as an S
corporation, or (v) any liability for Taxes to the City of New York arising
prior to Closing or as a result of the transactions contemplated by this
Agreement, or (vi) any failure by the Company or the Sellers to pay in full all
fees owed to the Service Providers.

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        (b)        Notwithstanding anything to the contrary in this Agreement
(but subject to the last sentence of this Section 9.2(b)), the aggregate
liability of Sellers pursuant to Section 9.2(a) will not exceed the sum of (x)
$1,500,000 plus (y) 20% of the total amount of Earn Outs paid to Sellers.
Notwithstanding the above, the limitations of this Section 9.2(b) shall not
apply to a breach of the Company’s or the Sellers’ representations and
warranties contained in Section 3.3, 3.7, 3.11, 3.17 or 3.23, or any other
indemnification obligation of the Sellers under Section 9.2(a)(iv), (v) or (vi),
for which the aggregate liability of Sellers under this Section 9.2 shall in no
event exceed the aggregate consideration payable to the Sellers in cash pursuant
to Section 2 hereof.

        (c)        Buyer may make no claim for indemnification pursuant to
Section 9.2(a), (A) unless notice of such claim describing the basic facts or
events, the existence or occurrence of which constitute or have resulted in the
alleged breach of a representation or warranty has been given to the
Stockholders’ Representative during the survival period set forth in Section
9.1, or if none is established, for six years from the Closing Date; and (B)
until such claims for which Losses are otherwise recoverable hereunder by Buyer
are in excess of the aggregate of $10,000 (without taking into account any
single claim of $1,000 or less) after which Buyer will be entitled to make any
such claim for amounts in excess of such threshold; provided that the
limitations set forth in this clause (c) shall not apply to losses incurred by
reason of a breach of the Company’s or Sellers’ representations and warranties
contained in Section 3.3, 3.7 and 3.11 or 3.23 or for a claim of indemnification
made under Section 9.2(a)(iv), (v) or (vi).

        9.3.        Buyer’s Indemnification.

        (a)        Buyer, subject to the limitations set forth in this Section
9, will indemnify the Sellers against and in respect of any and all Losses,
other than Losses to the extent recoverable by Sellers under any applicable
insurance policy and net of the present value of any tax benefit to Sellers as a
result of such Losses, which may be incurred by reason of (i) the breach of any
representation or warranty made by Buyer in Section 4 hereof or (ii) any breach
of any covenant made by Buyer in this Agreement.

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        (b)        Notwithstanding anything to the contrary in this Agreement,
the aggregate liability of Buyer pursuant to this Section 9.3(a) will not exceed
all unpaid amounts due to the Sellers from Buyer pursuant to Section 2.2.

        (c)        No claim for indemnification may be made by Sellers pursuant
to Section 9.3(a)(i), (A) unless notice of such claim (describing the basic
facts or events, the existence or occurrence of which constitute or have
resulted in the alleged breach of a representation or warranty or a covenant
made in this Agreement) has been given to the Buyer during the survival period
set forth in Section 9.1, and (B) until such claims for which Losses are
otherwise recoverable hereunder by Seller are in excess of the aggregate of
$10,000 (without taking into account any single claim of $1,000 or less) after
which such Seller will be entitled to make any such claim for amounts in excess
of such threshold.

        9.4.        Claims by Third Parties.   If a party to this Agreement
seeks indemnity hereunder with respect to a claim by a third party:

                 Promptly after the receipt by any party hereto of notice of a
third party claim or the commencement of a third party action, suit or
proceeding subject to indemnification hereunder (a “Third Party Claim”), such
party (the “Indemnified Party”) will, if a claim in respect thereto is to be
made against any party obligated to provide indemnification hereunder (the
“Indemnifying Party”), give the Indemnifying Party reasonable written notice of
the Third Party Claim. The failure to provide such notice will not relieve the
Indemnifying Party of any of its or his obligations, or impair the right of the
Indemnified Party to indemnification unless, and only to the extent that, such
failure materially prejudices the Indemnifying Party’s opportunity to defend or
compromise the Third Party Claim. The Indemnifying Party will have the right, at
its or his option, to defend at its or his own expense and by its or his own
counsel any Third Party Claim, provided that (i) the Indemnifying Party
acknowledges in writing (at the time the Indemnifying Party elects to assume
such defense) its or his obligation under this Section 9.4 to indemnify the
Indemnified Party with respect to such Third Party Claim, (ii) such counsel is
reasonably satisfactory to the Indemnified Party, (iii) the Indemnified Party is
kept fully informed of all developments, and is furnished with copies of all
documents and papers, related thereto and is given the right to participate in
the defense and investigation thereof as provided below, and (iv) such counsel
proceeds with diligence and in good faith with respect thereto. If an
Indemnifying Party will undertake to defend a Third Party Claim, the
Indemnifying Party shall notify the Indemnified Party of its or his intention to
do so promptly (and in any event no later than 30 days) after receipt of notice
of the Third Party Claim, and the Indemnified Party shall cooperate in good
faith with the Indemnifying Party and its counsel in the defense of such Third
Party Claim. Notwithstanding the foregoing, the Indemnified Party will have the
right to participate in the defense and investigation of any Third Party Claim
with its own counsel at its or his own expense, except that the Indemnifying
Party will bear the expense of such separate counsel if (A) in the written
opinion of counsel to the Indemnified Party reasonably acceptable to the
Indemnifying Party, use of counsel of the Indemnifying Party’s choice would be
expected to give rise to a conflict of interest which consent could not be
waived, (B) there are or may be legal defenses available to the Indemnified
Party that are different from or additional to those available to the
Indemnifying Party, (C) the Indemnifying Party will not have employed counsel to
represent the Indemnified Party within a reasonable time after notice of the
Third Party Claim is given to the Indemnifying Party or notice that the
Indemnifying Party intends to assume the defense of the Third Party Claim is
given to the Indemnified Party or (D) the Indemnifying Party will authorize the
Indemnified Party to employ separate counsel at the expense of the Indemnifying
Party. The Indemnifying Party will not settle any Third Party Claim without the
prior written consent of the Indemnified Party, which will not be unreasonably
withheld; provided, however, that an Indemnified Party will not be required to
consent to any settlement involving the imposition of equitable remedies.

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        9.5.        Buyer’s Right to Set-Off.   If at any time the amount of any
Losses to which Buyer is entitled to indemnification under this Section 9
exceeds the sum of (x) $1,500,000 plus (y) 20% of the total amount of Earn Outs
theretofore paid to Sellers, or any Losses are incurred by Buyer in connection
with the indemnification obligations of the Sellers under Section 9.2(a)(vi),
then Buyer shall have the right to set off against and deduct from the amount of
each subsequent Earn Out paid to Sellers, an amount up to 20% of each such
subsequent Earn Out until such Losses are paid in full.

SECTION 10.   MISCELLANEOUS

        10.1.        Headings.  The section headings herein are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. References to
Sections, unless otherwise indicated, are references to Sections of this
Agreement.

        10.2.        Stockholders’ Representative.   The Sellers hereby appoint
Arnold R. Schmeidler as the Stockholders’ Representative to represent the
Sellers with respect to the negotiation of this Agreement and to take all acts
necessary to effect its closing and implementation. In the event he shall at any
time be unable to, or shall notify Sellers that he is unwilling to, continue to
perform the duties of the Stockholders’ Representative, Albert J. Schmeidler
shall succeed as Stockholders’ Representative. The Stockholders’ Representative
may also be changed by the Sellers at any time and from time to time upon
written notice to Buyer signed by Sellers. Buyer shall have the right to rely on
any such notice without any duty of inquiry as to whether the new Stockholders’
Representative was duly appointed by the Sellers.

        10.3.        Authority.   A decision, act, consent or instruction of the
Stockholders’ Representative shall constitute a decision of all Sellers and
shall be final and binding upon each such Seller, and Buyer may rely upon any
decision, act, consent or instruction of the Stockholders’ Representative as
being the decision, act, consent or instruction of every Seller. Buyer is hereby
relieved from any liability to any Person for any acts done by Buyer in
accordance with such decision, act, consent or instruction of the Stockholders’
Representative, except for liability arising out of fraud, gross negligence or
bad faith under this Agreement.

        10.4.        Limitation on Liability.   In dealing with this Agreement
and in exercising or failing to exercise all or any of the powers conferred upon
the Stockholders’ Representative hereunder, (i) the Stockholders’ Representative
shall not assume any, and shall incur no, responsibility to any Seller by reason
of any error in judgment or other act or omission performed or omitted in
connection with this Agreement, excepting only responsibility for any act or
failure to act which represents gross negligence or willful misconduct, and (ii)
the Stockholders’ Representative shall be entitled to rely on the advice of
counsel, public accountants or other independent experts experienced in the
matter at issue, and any error in judgment or other act or omission of the
Stockholders’ Representative pursuant to such advice shall not subject the
Stockholders’ Representative to liability to any Seller. The Sellers shall
severally indemnify the Stockholders’ Representative and hold him harmless
against any loss, liability or expense incurred without gross negligence or bad
faith on his part and arising out of or in connection with the acceptance or
administration of his duties hereunder. All of the indemnities, immunities and
powers granted to the Stockholders’ Representative under this Agreement shall
survive the termination of this Agreement.

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        10.5.        Notices.   All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly received (i) on the
date given if delivered personally or by telegram, telex or telecopy or (ii) on
the date received if mailed by registered or certified mail (return receipt
requested), to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

                                    If to Sellers:     
                                    555 Fifth Avenue
                                    New York, NY 10017
                                    Attention: Arnold R. Schmeidler
                                    Facsimile: 212-687-1392   
                                    With a copy to:   
                                    Snow Becker Krauss P.C
                                    605 Third Avenue
                                    New York, NY  10158
                                    Attention: Eric Honick, Esq
                                    Facsimile: 212-949-7052   
                                    If to Buyer or Hudson Valley:   
                                    Hudson Valley Bank
                                    21 Scarsdale Road
                                    Yonkers, NY 10707
                                    Attention: James J. Landy
                                    Facsimile: 914-961-7378   
                                    With a copy to:   
                                    Pitney Hardin LLP
                                    7 Times Square
                                    New York, NY  10036-7311  
                                    Attention: Ronald H. Janis, Esq
                                    Facsimile:  212-682-3485     
                                    and   
                                    Griffin, Coogan & Veneruso, P.C
                                    51 Pondfield Road
                                    Bronxville, NY  10708
                                    Attention: James P. Blose
                                    Facsimile: 914-961-1476

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        Either party may by notice to the other change its address for notice
and will so change its address for notice whenever its existing address for
notice ceases to be adequate for delivery both by hand and by facsimile.

        10.6.        Assignment.   This Agreement and all provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that no party to
this Agreement may assign this Agreement or any right, interest, or obligation
hereunder without the written consent of all other parties to this Agreement.

        10.7.        Entire Agreement.   This Agreement (including the
Disclosure Schedule and Exhibits hereto, and the Schmeidler Employment
Agreement) embody the entire agreement and understanding of the parties with
respect to the transactions contemplated hereby and thereby and supersede all
prior written or oral commitments, arrangements or understandings with respect
thereto. There is no restriction, agreement, promise, warranty, covenant or
undertaking with respect to the transactions contemplated hereby and thereby
other than those expressly set forth herein or therein.

        10.8.        Amendment; Waiver.

        (a)        This Agreement may only be amended or modified in writing
signed by Buyer and the Stockholders’ Representative.

        (b)        Buyer or the Stockholders’ Representative, on behalf of the
Sellers, by an instrument in writing, may waive compliance with any term or
provision of this Agreement on the part of such other party or parties hereto.
The waiver by any party hereto of a breach of any term or provision of this
Agreement will not be construed as a waiver of any subsequent breach.

        10.9.        Counterparts.   This Agreement may be executed in two or
more counterparts, all of which will be considered one and the same agreement
and each of which will be deemed an original.

        10.10.        Governing Law.   This agreement will be governed by the
laws of the State of New York (regardless of the laws that might be applicable
under principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect and performance.

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        10.11.         Expenses.   Each party will bear its own expenses in
connection with this Agreement.

        10.12.        Severability.   If any one or more of the provisions of
this Agreement is held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement will
not be affected thereby, and the Sellers and Buyer will use their reasonable
efforts to substitute one or more valid, legal and enforceable provisions which
insofar as practicable implement the purposes and intent hereof. To the extent
permitted by applicable law, each party waives any provision of law which
renders any provision of this Agreement invalid. illegal or unenforceable in any
respect.

        10.13.        Consent to Jurisdiction.   Buyer and the Sellers hereby
submit to the exclusive jurisdiction of the courts of the State of New York in
respect of the interpretation and enforcement of the provisions of this
Agreement and any related agreement and hereby waive, and agree not to assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement and any related agreement, that they are not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in such courts or that this Agreement may not be enforced in or
by such courts or that their property is exempt or immune from execution, that
the suit, action or proceeding is brought in inconvenient forum, or that the
venue of the suit, action or proceeding is improper. Service of process with
respect thereto may be made upon Buyer or the Sellers by mailing a copy thereof
by registered or certified mail, postage prepaid, to such party at its address
as provided in Section 10.5 hereof.

        10.14.        Third Person Beneficiaries.   This Agreement is not
intended to confer upon any other Person other than the parties hereto, any
rights or remedies hereunder.

        10.15.        Representations and Warranties: Disclosure Schedule.  
Neither the specification of any dollar amount in the representations and
warranties set forth in Section 3 nor the indemnification provisions of Section
9 nor the inclusion of any items in the Disclosure Schedule to this Agreement
will be deemed to constitute an admission by Sellers or Buyer, or otherwise
imply, that any such amounts or the items so included are material for the
purposes of this Agreement. All documents or information disclosed in any
section of the Disclosure Schedule to this Agreement are intended to be
disclosed for all purposes under this Agreement and will also be deemed to be
incorporated by reference in each of the other sections of the Disclosure
Schedule to this Agreement to which they may be relevant.

        10.16.        United States Dollars.   All dollar amounts referred to
herein will be in lawful currency of the United States of America.

        10.17.        No Agreement until Signed by all Parties.   Nothing in
this document will constitute an offer capable of acceptance or an agreement of
any kind until this document is executed and delivered by each of the parties.

(SIGNATURE PAGE FOLLOWS)

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

A.R. SCHMEIDLER & CO., INC.

By:  ARNOLD R. SCHMEIDLER
——————————————
Name:    Arnold R. Schmeidler
Title:      President

ARNOLD R. SCHMEIDLER
——————————————
ARNOLD R. SCHMEIDLER

ALBERT J. SCHMEIDLER
——————————————
ALBERT J. SCHMEIDLER

HUDSON VALLEY BANK

By:  WILLIAM E. GRIFFIN
——————————————
Name:    William E. Griffin
Title:      Chairman

HUDSON VALLEY HOLDING CORP.

By:  WILLIAM E. GRIFFIN
——————————————
Name:    William E. Griffin
Title:      Chairman

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EXHIBIT A

POWER OF ATTORNEY

        I, Albert J. Schmeidler, residing at _______________________________,
having full power to delegate my authority, do hereby irrevocably mandate,
delegate to, appoint and authorize Arnold R. Schmeidler (the “Stockholders’
Representative”) to act for and in my name and stead and on my behalf with
respect to all of my interests (including, shareholdings, loans and otherwise)
in A.R Schmeidler & Co., Inc. (the “Company”) and, without limitation, to enter
into, execute and sign in my name and on my behalf any and all agreements,
deeds, resolutions, share certificates, contracts, waivers, instruments and
documents and to receive any notices of meeting(s) of shareholders and represent
me and act in my name and on my behalf at any such meeting(s) which may be
necessary or expedient in connection with all aspects relating to my said
interests in the Company. Such power of attorney shall include transfers of my
shares in the Company at such price (and such form of consideration) and to such
persons, including without limitation Hudson Valley Bank any affiliate of Hudson
Valley Bank, as the Stockholders’ Representative may deem necessary, as
evidenced conclusively by the taking of such acts and the execution of any
documentation in connection therewith.

        The duration of this Power of Attorney shall be for five years from the
date hereof (the “Termination Date”), subject to the last paragraph hereof.

        I hereby ratify, confirm, accept and make my own, all actions,
executions, votes and undertakings made on my behalf or in my name with regard
to my interests in the Company by the Stockholders’ Representative.

        To the extent necessary or desirable, I hereby agree to ratify and
confirm all that the Stockholders’ Representative may lawfully do or cause to be
done in virtue hereof after the date hereof.

        I hereby agree to indemnify the Stockholders’ Representative and any
agent employed by the Stockholders’ Representative for, and hold the same
harmless against, any loss, liability or expense incurred without fraud, bad
faith or wilful misconduct on the part of the Stockholders’ Representative
arising out of, or in connection with, the performance or exercise of the
Stockholders’ Representative’s obligations and rights in connection with this
Power of Attorney.

        I hereby authorize the Company, its shareholders, officers, directors,
counsel and advisers, and Hudson Valley Bank, to rely on this power of attorney
for all purposes.

        This Power of Attorney shall be coupled with an interest and shall
survive the death of the undersigned if such death occurs prior to the
Termination Date.

        IN WITNESS WHEREOF, I have signed as of the ___ day of ________________,
2004 in the City of New York, New York.

——————————————

——————————————
Witness

——————————————
Witness  

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EXHIBIT B

        Form of opinion to be given by counsel for the Sellers and the Company:

        (a)        The Company is duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New York, and has
the corporate power and authority to own, lease and operate the property used in
its business and to carry on its business as now being conducted.

        (b)        The authorized capital stock of the Company consists of
100,000 shares of Common Stock, par value $0.01 per share. All of the Shares
have been duly authorized and validly issued, and are fully paid and
nonassessable. The Sellers are the sole record owners of the Shares. Assuming
that Buyer has purchased the Shares for value in good faith and without notice
of any adverse claims, Buyer will acquire all of the rights of the Sellers in
the Shares, free and clear of any adverse claim of which we have Knowledge.

        (c)        The Agreement has been duly executed and delivered by the
Company and the Sellers and constitutes a valid and binding obligation of the
Company and each Seller, enforceable against the Company and each Seller in
accordance with its terms, except as such enforceability may be limited or
affected by (i) bankruptcy, insolvency, reorganization, moratorium, liquidation,
fraudulent transfer, fraudulent conveyance and other similar laws (including,
without limitation, court decisions) now or hereafter in effect and affecting
the rights and remedies of creditors generally or providing for the relief of
debtors, (ii) the refusal of a particular court to grant equitable remedies,
including, without limitation, specific performance and injunctive relief, and
(iii) general principles of equity (regardless of whether such remedies are
sought in a proceeding in equity or at law). The Company has corporate power and
authority to execute, deliver and perform the Agreement, and all required
actions of the officers, directors and shareholders of the Company authorizing
and adopting the execution, delivery and performance thereof by the Company have
been taken. The execution, delivery and performance of the Agreement by the
Sellers and the Company do not and will not:

             (i)        contravene any provisions of the Certificate of
Incorporation or By-Laws of the Company;

             (ii)        (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination in
respect of, any agreement listed on Schedule I attached hereto;

             (iii)        violate any law, rule or regulation applicable to the
Sellers or to the Company or any order, writ, judgment or decree known to us to
which the Company or the Sellers are subject; or

             (iv)        require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority which has not already been
given or obtained or those which the Bank or Hudson Valley is required to
obtain.

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EXHIBIT C

ARNOLD R. SCHMEIDLER EMPLOYMENT AGREEMENT

        THIS AGREEMENT, dated as of _______, 2004, is by and between A.R.
Schmeidler & Co., Inc., a New York corporation with offices at 555 Fifth Avenue,
New York, New York 10017 (the “Company”), Arnold R. Schmeidler, an individual
residing at __________________ (“Schmeidler”), and Hudson Valley Bank, a New
York state-chartered bank located at 21 Scarsdale Road, Yonkers , New York 10707
(the “Bank”).

        This Agreement is entered into in connection with the Acquisition
Agreement dated as of June __, 2004 (the “Acquisition Agreement”) by and among
Schmeidler, Albert J. Schmeidler, the Company, the Bank, and Hudson Valley
Holding Corp., a New York corporation and registered bank holding company of the
Bank (“HVB”). As used herein, the term “Hudson Valley” means HVB, or any direct
or indirect subsidiary of HVB, including, but not limited to, the Company.

        Schmeidler currently is, and has been since the Company’s inception, the
Company’s President and Chief Executive Officer. In consideration of
Schmeidler’s continued service as President and Chief Executive Officer and the
compensation that will be paid to Schmeidler by the Company with respect to such
employment, Schmeidler and the Company agree as follows:

1)     Term of Employment.   This Agreement shall be effective as of the date
hereof and, subject to earlier termination as specified herein, shall continue
for a term of 5 years (the “Initial Term”). Thereafter, the Agreement shall
continue on a month-to-month basis until terminated by Schmeidler or the
Company.

2)     Position and Duties.   During the Term of this Agreement, the Company
shall employ Arnold R. Schmeidler and Arnold R. Schmeidler agrees to serve as
the President and Chief Executive Officer of the Company. Arnold R. Schmeidler
shall have such powers and duties as are set forth on Schedule A attached
hereto; provided, however, that following the Closing, any assets owned by the
Company shall be managed by Buyer, expressly excluding any assets of clients of
the Company. In addition, Schmeidler shall serve as a member of the Board of
Directors of the Company (the “Board”) during the Term. During the Term,
Schmeidler shall devote all of his business time, attention, skill and efforts
exclusively to the business and affairs of the Company. Notwithstanding the
foregoing, Schmeidler may engage in charitable, educational, religious, civic
and similar types of activities, speaking engagements, membership on the board
of directors of other organizations, and similar activities to the extent that
such activities do not inhibit the performance of his duties hereunder or
conflict in any material way with the business of the Company or HVB.

3)     Compensation.   For all services rendered by Schmeidler in any capacity
required hereunder during the Term, including, without limitation, services as
an executive officer or director of the Company or any of its subsidiaries,
Schmeidler shall be compensated as follows:

        (a)        The Company shall pay Schmeidler a fixed salary at a rate per
annum equal to $190,000 (“Base Salary”).

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        (b)        The Company shall provide Schmeidler with the same benefits,
other than bonuses or incentive compensation, he currently receives from the
Company as set forth on Schedule B attached hereto (the “Benefits”). The Company
shall not reduce or change the Benefits unless such reduction or change is (i)
consented to by Schmeidler or (ii) required by law.

4)     Termination of Employment.  

        (a)        The Company shall have the right, upon delivery of written
notice to Schmeidler, to terminate Schmeidler’s employment hereunder (i)
pursuant to a Termination for Cause, (ii) upon Schmeidler’s Permanent
Disability, or (iii) pursuant to a Without Cause termination.

        (b)        Schmeidler shall have the right, upon delivery of written
notice to the Company 90 days in advance of the proposed termination date, to
terminate his employment hereunder in his sole discretion.

        (c)        Schmeidler’s employment hereunder shall terminate
automatically without action by either party hereto upon Schmeidler’s death.

        (d)        A termination “Without Cause” means a termination of
Schmeidler’s employment by the Company other than due to Permanent Disability or
retirement and other than a Termination for Cause.

        (e)        “Termination for Cause” means a termination of Schmeidler’s
employment by the Company because Schmeidler has (i) failed to perform the
duties assigned to him hereunder or imposed upon him by applicable law, and such
failure to perform constitutes self-dealing, willful misconduct, gross
negligence or recklessness, (ii) committed an act of dishonesty materially
detrimental to the business of the Company in the performance of his duties
hereunder or engaged in conduct materially detrimental to the business of the
Company, (iii) been convicted of a felony involving moral turpitude, (iv) failed
to perform his duties hereunder in any material respect, which breach or failure
Schmeidler shall fail to remedy within 30 days after written demand from the
Company, or (v) engaged in any material employment act or practice, including
but not limited to sexual harassment, forbidden by the Company in its employment
manual as revised from time to time.

        (f)        “Good Reason” shall mean any of the following actions or
events, if taken without Schmeidler’s express written consent and taken after at
least one warning in writing from Schmeidler to the Company and Hudson Valley
identifying specifically any such matter and offering a reasonable opportunity
to cure such matter: (i) a reduction by the Company in Schmeidler’s annual
salary not agreed to by Schmeidler, (ii) moving the office of the Company out of
Manhattan to any location other than a location that is within 25 miles of Grand
Central Station and located in Westchester County, New York or is located in
Fairfield County, Connecticut, (iii) the failure by the Company to continue in
effect any material benefit plan to which Schmeidler may be entitled, or the
taking of any action by the Company which would materially and adversely affect
Schmeidler’s participation in, or materially reduce Schmeidler’s benefits under,
any such benefit plan, (iv) a material breach of this Agreement by the Company,
including a material change in Schmeidler’s duties and responsibilities set
forth on Schedule A, or (v) deprive Schmeidler of any material fringe benefits
enjoyed by Schmeidler and listed on Schedule B attached hereto.

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        (g)        “Permanent Disability” means permanently disabled so as to
qualify for full benefits under the Company’s then-existing disability insurance
policy. If the Company does not maintain any such policy on the date of
termination, “Permanent Disability” shall mean the inability of Schmeidler to
work for a period of four full calendar months during any eight consecutive
calendar months due to illness or injury of a physical or mental nature,
supported by the completion by Schmeidler’s attending physician of a medical
certification form outlining the disability and treatment.

5)     Termination Compensation.

        (a)        If Schmeidler resigns without Good Reason prior to the end of
the Initial Term, Schmeidler shall pay to the Bank on the date of his
resignation (the “Termination Payment”) a sum equal to: (i) five (5) times the
average of his annual salary during the Initial Term (the “Average Salary”) if
he resigns during the first or second year of the Initial Term; (ii) four (4)
times the Average Salary if he resigns during the third or fourth year of the
Initial Term; or (iii) three (3) times the Average Salary if he resigns during
the fifth year of the Initial Term. The Termination Payment shall be paid by
Schmeidler to the Company in (w) cash, (x) shares of the common stock of HVB
(measured by the market value of the common stock of HVB as of the effective
date of the resignation), (y) a combination thereof, or (z) any other form
acceptable to the Company in its sole discretion. In the event of the Permanent
Disability or death of Schmeidler, or in the event of a Change in Control (as
defined in the Acquisition Agreement), no Termination Payment shall be due to
the Bank.

        (b)        If the Company terminates Schmeidler Without Cause, the
Company shall (i) pay to Schmeidler an amount equal to the Base Salary that
would have been paid to Schmeidler for the remainder of the Initial Term, and
(ii) continue to provide Schmeidler with health, hospital, and life insurance
benefits for the remainder of the Initial Term.

        (c)        If the Company terminates Schmeidler for Cause, or due to his
death or Permanent Disability, or Schmeidler resigns for Good Reason, the
Company shall have no obligations under this Agreement whatsoever to Schmeidler
following such an event, including the payment of compensation or provision of
benefits.

6)     Non-Competition; Non-Solicitation.

        (a)        Schmeidler acknowledges that he will be aware of and/or
servicing (i) client accounts already existing at the Company and (ii) client
accounts that may be purchased from other investment advisory or securities
brokerage firms in the future. In view of Schmeidler’s knowledge of the clients
and accounts and other proprietary information relating to the business of the
Company and its affiliates and which Schmeidler has heretofore obtained and is
expected to obtain during his employment with the Company, Schmeidler agrees
that he shall not:

             (i)        for a period (the “Competition Period”) beginning on the
date hereof and ending on the date which is two calendar years after the
termination of his employment with the Company (for any reason whatsoever),
directly or indirectly, without the prior written consent of Hudson Valley,
engage in any Competition in any Restricted Territory; provided, however, that
Schmeidler may, without violating this covenant, own as a passive investment not
in excess of 2% of the outstanding capital stock of a corporation which engages
in Competition if such capital stock is a security which is actively traded on
an established national securities exchange or is listed on NASDAQ;

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             (ii)        at any time during the Competition Period, directly or
indirectly, without the prior written consent of Hudson Valley, for himself or
on behalf of any other Person, hire or retain any person known by Schmeidler to
be employed by Hudson Valley at that time or to have been employed by Hudson
Valley within the prior six months (any such Person, a “Hudson Valley
Employee”), or solicit or induce or attempt to solicit or induce any Hudson
Valley Employee to leave his or her employment with Hudson Valley.
Notwithstanding the foregoing, Hudson Valley shall consider in good faith any
request by Schmeidler to waive the prohibition against hiring or soliciting
Hudson Valley Employees with respect to any Hudson Valley Employee whose
employment has been terminated by Hudson Valley, and such waiver shall not be
unreasonably withheld;

             (iii)        during the Competition Period, directly or indirectly,
for himself or on behalf of any other Person, solicit, divert, take away or
attempt to take away any of the customers of Hudson Valley or the business of
any such customers or in any way interfere with, disrupt or attempt to disrupt
any then-existing relationships between Hudson Valley and any of its customers
with whom they shall deal, at any time; provided, however, that Schmeidler may,
without violating this covenant, subject to the Investment Advisers Act of 1940,
as amended, and the rules and regulations promulgated thereunder, trade
securities in his own portfolio and provide investment advice to his family
members free of charge; or

             (iv)        during the Competition Period or at any time thereafter
(except with respect to information which becomes generally known in the
industry through no fault of Schmeidler, is part of public knowledge or
literature or is lawfully received by Schmeidler from a third party) use or
disclose to any Person whatsoever any confidential or proprietary information of
Hudson Valley which he may have acquired heretofore or may hereafter acquire
relating to the businesses of Hudson Valley, including but not limited to,
information relating to the business, accounts, financial dealings,
transactions, trade secrets, intangible property, customer lists, plans and
proposals of the Company or Hudson Valley, whether or not marked or otherwise
identified as confidential or secret except as authorized by Hudson Valley or
ordered by a court of competent jurisdiction.

        (b)        In the event (i) there is a Change in Control (as defined in
the Acquisition Agreement) and (ii) Schmeidler is terminated by the Company
Without Cause or resigns for Good Reason, the restrictions of Section 4(a)(i)
shall immediately terminate; provided, however, that all other provisions of
this Agreement shall remain in full force and effect, including Sections
4(a)(ii) through (iv).

        (c)        In addition to other terms defined in this Agreement, the
following terms when used in this Section 4 shall have the following meanings:

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             (i)        “Competition” means the participation, directly or
indirectly, in the business of a Broker or Dealer or an Investment Adviser.

             (ii)        “Directly or indirectly” means as an individual,
partner, shareholder, director, officer, principal, agent, employee, consultant,
adviser, registered representative, associated person or in any other
relationship or capacity.

             (iii)        “Broker” means a person engaged in the business of
effecting transactions in securities for the account of others and includes
brokers or dealers who are registered with the SEC and those who are not
registered.

             (iv)        “Dealer” means any person who engages either for all or
part of his time directly or indirectly in the business of offering, buying,
selling, or otherwise dealing or trading in securities issued by another Person.

             (v)        “Investment Adviser” means a person who falls within the
definition of investment adviser under the Investment Advisers Act of 1940, as
amended, but for this purpose includes banks and broker-dealers otherwise
excluded from the definition.

             (vi)        “Restricted Territory” means the United States of
America.

        (d)        Injunctive Relief.   Since a breach of the provisions of
Section 4 may not adequately be compensated by money damages, the Company shall
be entitled, in addition to any other right and remedy available to it, to an
injunction restraining such breach or a threatened breach, and in either case no
bond or other security shall be required in connection therewith, and Schmeidler
hereby consents to the issuance of such injunction.

7)     Consultative Duties Regarding Possible Expansion.

        (a)        Hudson Valley shall include Schmeidler in analyzing and
evaluating the opportunity to acquire another investment adviser or hire a group
of individuals who register with the SEC as an investment adviser (an
“Acquisition”), including participation in the due diligence phase of any such
acquisition or hiring.

        (b)        Prior to an Acquisition, Hudson Valley agrees to thoroughly
discuss and address the following items with Schmeidler:

             (i)        the organization structure of the acquired entity (the
“New Entity”) following the Acquisition as it relates to the Company (e.g.,
whether the New Entity will be separate from the Company or a division of the
Company);

             (ii)        financial treatment of the possible shift of clients
from the Company to the New Entity, and vice versa;

             (iii)        the manner by which new business referral efforts may
change (e.g. if the New Entity is a growth or specialized growth, such as
technology, financial, biotechnology, etc. manager as opposed to the value
orientation style of the Company); and

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             (iv)        any appropriate personnel adjustments which may be
required as a result of the Acquisition (e.g., if Schmeidler should run both the
Company and the New Entity rather than only the day to day operations of the
Company).

8)     Governing Law.   The validity and interpretation of this Agreement shall
be construed in accordance with and be governed by the laws of the State of New
York (without reference to its choice of law principles).

9)     Severability.   Should any provision of this Agreement or part thereof be
held under any circumstances in any jurisdiction to be invalid or unenforceable
for any reason, including, without limitation, because of its geographic or
business scope or duration, such provision shall be construed in such a way as
to make it valid and enforceable to the maximum extent possible. Any invalidity
or unenforceability of any provision in this Agreement shall not affect the
validity or enforceability of any other provision or other part of such
provision of this Agreement or any other agreement or instruments.

10)     Successors and Assigns.   This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of the Company. No purported
assignment by Schmeidler shall be valid.

11)     Consent to Jurisdiction.   The Company, Schmeidler, and the Bank hereby
submit to the exclusive jurisdiction of the courts of the State of New York in
respect of the interpretation and enforcement of the provisions of this
Agreement and any related agreement and hereby waive, and agree not to assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement of this Agreement and any related agreement, that they are not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in such courts or that this Agreement may not be enforced in or
by such courts or that their property is exempt or immune from execution, that
the suit, action or proceeding is brought in inconvenient forum, or that the
venue of the suit, action or proceeding is improper. Service of process with
respect thereto may be made upon the Company, the Bank by mailing a copy thereof
by registered or certified mail, postage prepaid, to such party at its address
as provided in the first paragraph of this Agreement.

12)     Costs of Litigation.   In the event that any litigation arises with
respect to the interpretation and enforcement of the provisions of this
Agreement, the non-prevailing party shall reimburse the prevailing party for all
of its (or his) reasonable attorneys’ fees and costs incurred by the prevailing
party in the litigation.

13)     Entire Agreement.   This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior oral
and written agreements and understandings and all contemporaneous written
agreements and understandings between the parties with respect to such subject
matter. This Agreement may not be changed, amended or superceded except in a
writing signed by Schmeidler and the Bank.

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14)     Acknowledgement. SCHMEIDLER SPECIFICALLY ACKNOWLEDGES THAT: SCHMEIDLER
HAS READ AND UNDERSTANDS ALL OF THE TERMS OF THIS AGREEMENT; IN EXECUTING THIS
AGREEMENT, SCHMEIDLER DOES NOT RELY ON ANY INDUCEMENTS, AGREEMENTS, PROMISES OR
REPRESENTATIONS OF COMPANY OR ANY AGENT OF COMPANY OTHER THAN THE TERMS AND
CONDITIONS SPECIFICALLY SET FORTH IN THIS AGREEMENT; SCHMEIDLER HAS HAD AN
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL WITH RESPECT TO THE EXECUTION OF
THIS AGREEMENT; AND THAT SCHMEIDLER HAS MADE SUCH INVESTIGATION OF THE FACTS
PERTAINING TO THIS AGREEMENT AND OF ALL THE MATTERS PERTAINING HERETO AS
SCHMEIDLER DEEMS NECESSARY.

(SIGNATURE PAGE FOLLOWS)

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

A.R. SCHMEIDLER & CO., INC.

By:  
——————————————
Name:    
Title:             

——————————————
Arnold R. Schmeidler

HUDSON VALLEY BANK

By:  
——————————————
Name:    
Title:       

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EXHIBIT D

Form of opinion to be given by counsel for Buyer and Hudson Valley:

        (a)        The Bank is duly incorporated and is validly existing as a
banking corporation in good standing under the laws of the State of New York.
Hudson is duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of New York.

        (b)        Each of the Bank and Hudson have the corporate power and
authority to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby and all required actions of the officers,
directors and shareholders of each of the Bank and Hudson authorizing and
adopting the execution, delivery and performance hereof by each of the Bank and
Hudson have been taken. The Agreement has been duly executed and delivered by
each of the Bank and Hudson and constitutes a valid and binding obligation of
each of the Bank and Hudson, enforceable against each of the Bank and Hudson in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors’ rights generally or by the principles governing the availability of
equitable remedies. The execution, delivery and performance of the Agreement by
each of the Bank and Hudson and the consummation of the transactions
contemplated thereby do not and will not:

             (i)        contravene any provisions of the certificate of
incorporation or by-laws of either the Bank or Hudson; or

              (ii)        (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of termination in
respect of, any contract or agreement to which the Bank or Hudson is a party of
which we have Knowledge;

              (iii)        violate any law, rules or regulation applicable to
either the Bank or Hudson or any order, writ, judgment or decree known to us to
which either the Bank or Hudson is subject; or

             (iv)        require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority which has not already been
given or obtained or those which the Company is required to obtain.

        (c)        In connection with the sale of any Additional Consideration
Shares by the Sellers, (i) the holding period under Rule 144(d) under the
Securities Act for any Additional Consideration Shares will commence on the
Closing Date pursuant to Rule 144(d)(3)(iii), (ii) provided that the
requirements of Rule 144 and Section 5.13 of the Agreement shall have been
satisfied, the Sellers will be entitled to sell any Additional Consideration
Shares acquired by them prior to the second anniversary of the Closing Date at
any time after the first anniversary of the Closing Date; and (iii) provided
that the requirements of Section 5.13 the Agreement shall have been satisfied,
the Sellers will have the right to sell all of the Additional Consideration
Shares without restriction on the later of the date of issuance of such
Additional Consideration Shares or the second anniversary of the Closing Date.

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EXHIBIT E

ARNOLD R. SCHMEIDLER JOB DESCRIPTION

General

  The President and Chief Executive Officer will have such powers and duties as
are customary for a president and chief executive officer of an investment
adviser/broker-dealer corporation, including general and active supervision over
and management of the business and affairs of the Company and over its several
officers, agents, and employees, in the ordinary course of the Company’s
business. The President and Chief Executive Officer will be a member of the
Board of Directors and will report directly to the Board and shall see that all
orders and resolutions of the Board are carried into effect. The Company’s Chief
Operating Officer and Chief Financial Officer will report directly to the
President and Chief Executive Officer. The President and Chief Executive Officer
will have the following specific powers and duties:

Research and Portfolio Management

1.   Study primary and secondary research material, including government,
International Monetary Fund and various trade publications.

2.   Research and macroeconomic analysis – help produce the Company’s outlook.

    a)                Chair investment meetings.

    b)                Meet and interact with investment strategists, economists
and analysts.

3.   Manage investment portfolios.

4.   Work with the Company’s investment managers.

5.   Make client and prospect presentations.

6.   Occasionally travel to the West Coast and other areas to visit the
Company’s clients and companies on which the Company is doing research. Meet
with company presidents, chairmen, and chief financial officers.

7.   Attend industry seminars and company presentations and host company
presentations and conference calls at the Company’s office.

8.   Participate in conference calls during earnings report season with the
other firm investment managers.

9.   Work with managers and the trading department on order executions.

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Internal Operations

1.   Ultimate responsibility for staff, which includes the hiring and firing of
all employees, reviewing all trading activity, all correspondence, compensation
levels, and periodic staff performance reviews.

2.   Monitor all income and expenses and work with the Company’s Treasurer in
overseeing operations.

3.   Participate in all contract negotiations.

4.   Participate in all reviews with regulators.

5.   Work with accountants, auditors and attorneys on financial, regulatory and
legal compliance matters.

Additional Supervisory Practices and Procedures

1.   As the officer responsible for supervising the activities of all registered
representatives and advisory account managers, review and initial all
correspondence to clients and prospective clients.

2.   Review all new account information and approve account forms in writing.

3.   As required, together with the Chief Financial Officer, conduct an annual
compliance meeting with all registered representatives and advisory account
managers. Because of the Company’s relatively small size, meet frequently to
communicate regulatory developments, firm policies, and similar information to
the registered representatives and managers.

4.   Review and initial Buy/Sell blotters on a daily basis. Continuously review
the status of all client accounts.

5.   Prior to the hiring of any registered personnel, contact previous employers
to ascertain and confirm the character and reputation of the prospective
employee.

Insider Trading

1.   Together with the Chief Financial Officer, familiarize every officer,
director and employee with insider trading concepts. Together with the Chief
Financial Officer, address and respond to any questions regarding the Company’s
insider trading policies and procedures.

2.   Together with the Chief Financial Officer, address and respond to any
report by a Company employee that specific information is material and
non-public and to any questions whether information is material and non-public.

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Interaction with Board

1.   Day to day operations of the Company will be controlled by the Chief
Executive Officer with regular updates on the operational results and condition
of the Company delivered to the Board. Any changes in the strategic direction of
the Company will be decided by the Board.

2.   Promotions or bonus arrangements for the senior officers of the Company,
other than previously established incentive compensation plans, will be decided
by the Chief Executive Officer and be subject to Board approval. The senior
officers are considered to be the group of officers receiving material amounts
of stock options at closing (Wyman, Kandel, Albert Schmeidler, Andrew
Schmeidler, Kahn, and Crupi).

3.   Financial commitments of the Company are to be under the Chief Executive
Officer’s purview but any commitments extending beyond the Earn-Out time period
(e.g., a 10 year lease commitment or other type of long term contract, such as
processing or market related) is subject to Board approval.

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