UNION STATE CAPITAL TRUST I

                                   $20,000,000
                            9.58% Capital Securities
                     (Liquidation Amount $1,000 per Capital
                       Security) fully and unconditionally
                        guaranteed, as described herein,
                                       by
                           U.S.B. Holding by Co., Inc.

                               PURCHASE AGREEMENT

                                                              New York, New York
                                                                January 31, 1997

Keefe, Bruyette & Woods, Inc.
Two World Trade Center, 85th Floor
New York, New York  10048

Ladies and Gentlemen:

            Union State Capital Trust I (the "Trust"), a statutory business
trust organized under the Business Trust Act (the "Business Trust Act") of the
State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. (Section
3801 et seq.)), and U.S.B. Holding Co., Inc., a Delaware corporation (the
"Company"), as depositor of the Trust and as guarantor, propose to issue and
sell to Keefe, Bruyette & Woods, Inc. (the "Initial Purchaser") 20,000 of the
Trust's 9.58% Capital Securities, liquidation amount $1,000 per Capital Security
(the "Capital Securities" and, together with the Guarantee (as defined), the
"Securities"). The Capital Securities will represent undivided beneficial
ownership interests in the assets of the Trust, will be guaranteed by the
Company as to the payment of distributions, and as to payments on liquidation or
redemption, to the extent set forth in a guarantee agreement (the "Guarantee")
dated as of February 5, 1997 between the Company and The Chase Manhattan Bank, a
New York banking corporation validly existing under the laws of the State of New
York, as trustee (the "Guarantee Trustee"). The Capital Securities are to be
issued pursuant to the Amended and Restated Declaration of Trust (the
"Declaration") dated as of February 5, 1997 among Thomas E. Hales, Michael H.
Fury, Raymond J. Crotty and Steven T. Sabatini (each an "Administrative Trustee"
and, collectively, the "Administrative Trustees"), The Chase Manhattan Bank, as
property trustee (the "Property Trustee"), Chase Manhattan Bank Delaware, a
Delaware banking
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corporation, as Delaware trustee (the "Delaware Trustee") and the Company, as
depositor. The proceeds of the sale by the Trust of the Capital Securities and
its Common Securities, liquidation amount $1,000 per Common Security (the
"Common Securities"), are to be invested in the 9.58% Junior Subordinated Debt
securities (the "Debt Securities") of the Company having an aggregate principal
amount equal to the aggregate liquidation amount of the Capital Securities and
the Common Securities, to be issued pursuant to a Junior Subordinated Indenture,
as supplemented from time to time (the "Indenture"), dated as of February 5,
1997 between the Company and The Chase Manhattan Bank, as Trustee (the
"Indenture Trustee"). Holders (including subsequent transferees) of the
Securities will have the registration rights set forth in the Registration
Agreement (the "Registration Agreement") to be entered into among the Company,
the Trust and the Initial Purchaser.

            The sale of the Securities to the Initial Purchaser will be made
without registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Trust and
the Company that you will offer and sell the Securities purchased by you
hereunder in accordance with Section 4 hereof as soon as you deem advisable.

            In connection with the sale of the Securities, the Company and the
Trust have prepared a final offering memorandum, dated January 31, 1997
(including any and all exhibits thereto and the documents incorporated by
reference therein, the "Final Memorandum"). The Final Memorandum sets forth
certain information concerning the Company, the Trust and the Securities. The
Company hereby confirms that it has authorized the use of the Final Memorandum,
and any amendment or supplement thereto, in connection with the offer and sale
of the Securities by the Initial Purchaser. Unless stated to the contrary, all
references herein to the Final Memorandum are to the Final Memorandum dated the
date hereof and are not meant to include any amendment or supplement thereto.

            1. Representations and Warranties. Each of the Company and the
Trust, jointly and severally, represents and warrants to the Initial Purchaser
as of the date hereof and as of the Closing Date (as defined below), as set
forth below in this Section 1.

            (a) The Final Memorandum, at the date hereof, does not, and at the
      Closing Date will not (and any amendment or supplement thereto, at the
      date thereof and at the Closing Date, will not), contain any untrue


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<PAGE>

      statement of a material fact or omit to state any material fact necessary
      to make the statements therein, in the light of the circumstances under
      which they were made, not misleading; provided, however, that no
      representation or warranty is made by the Company or the Trust as to the
      information contained in or omitted from the Final Memorandum, or any
      amendment or supplement thereto, in reliance upon and in conformity with
      information furnished in writing to the Company or the Trust by or on
      behalf of the Initial Purchaser specifically for inclusion therein (all
      such information contemplated by this proviso shall be collectively
      referred to herein as the "Initial Purchaser Information").

            (b) The documents incorporated or deemed to be incorporated by
      reference in the Final Memorandum at the time they were or hereafter are
      filed with the Securities and Exchange Commission (the "Commission")
      complied and will comply in all material respects with the requirements of
      the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
      the rules and regulations of the Commission thereunder, and, when read
      together with the other information in the Final Memorandum, at the date
      of the Final Memorandum and at the Closing Date, do not and will not
      include an untrue statement of a material fact or omit to state a 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.

            (c) Deloitte & Touche LLP are independent certified public
      accountants with respect to the Company under Rule 101 of the AICPA's
      "Code of Professional Conduct," and its interpretation and rulings.

            (d) The historical financial statements, together with the related
      schedules and notes, included or incorporated by reference in the Final
      Memorandum present fairly the consolidated financial position of the
      Company and its consolidated subsidiaries, at the dates indicated and the
      statement of income, changes in stockholders, equity and cash flows of the
      Company and its consolidated subsidiaries, for the periods specified; said
      financial statements have been prepared in conformity with generally
      accepted accounting principles ("GAAP") in the United States applied on a
      consistent basis throughout the periods involved, except as disclosed in
      the notes to such financial statements; the supporting schedules, if any,
      included or incorporated by reference in the Final Memorandum present
      fairly the financial condition and results of opera-


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<PAGE>

      tions of the Company and its subsidiaries as of and for the periods
      indicated therein; and the summary financial data included or incorporated
      by reference in the Final Memorandum are accurately extracted and derived
      from the financial statements included or incorporated by reference in the
      Final Memorandum.

            (e) Since December 31, 1996, except as otherwise stated in the Final
      Memorandum or contemplated thereby, there has not been (A) any material
      adverse change, in the financial condition, earnings or business affairs
      of the Trust, or the Company and its subsidiaries, considered as one
      enterprise, whether or not arising in the ordinary course of business (a
      "Material Adverse Effect"), (B) any transaction entered into by the Trust,
      the Company or any of its subsidiaries, other than in the ordinary course
      of business, that is material to the Trust, or the Company and its
      subsidiaries, considered as one enterprise, or (C) any dividend or
      distribution of any kind declared, paid or made by the Company on any
      class of its capital stock, other than regular quarterly dividends on the
      Company's common stock and dividends declared, paid or made in accordance
      with the terms of any series of the Company's preferred stock.

            (f) Neither the Company nor the Trust, nor any of their Affiliates
      (as defined in Rule 501(b) of Regulation D under the Securities Act
      ("Regulation D")), nor any person acting on its or their behalf has,
      directly or indirectly, made offers or sales of any security, or solicited
      offers to buy any security, under circumstances that would require the
      registration of the Securities under the Securities Act.

            (g) Neither the Company nor the Trust, nor any of their Affiliates,
      nor any person acting on its or their behalf has engaged or will engage in
      any form of general solicitation or general advertising (within the
      meaning of Regulation D) in connection with any offer or sale of the
      Securities in the United States.

            (h) The Securities satisfy the eligibility requirements of Rule
      144A(d)(3) under the Securities Act.

            (i) The Company will assist the Initial Purchaser in obtaining by
      the Closing Date notification from the National Association of Securities
      Dealers, Inc. Private Offerings, Resales and Trading through Automated
      Linkages ("PORTAL") Market that the Capital Securities have been
      designated PORTAL-eligible securities in


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<PAGE>

      accordance with the rules and regulations of the National Association of
      Securities Dealers, Inc.

            (j) Neither the Company nor the Trust is an "investment company"
      within the meaning of the Investment Company Act of 1940, as amended
      (together with the rules and regulations thereunder, the "Investment
      Company Act"), and after giving effect to the offer and sale of the
      Capital Securities and the application of the proceeds thereof as
      described in the Final Memorandum, neither will be an "investment company"
      or a company "controlled" by an investment company within the meaning of
      the Investment Company Act.

            (k) The Company is subject to and in compliance in all material
      respects with the reporting requirements of Section 15 and Section 1S(d)
      of the Exchange Act.

            (1) Neither the Company nor the Trust has paid or agreed to pay to
      any person any compensation for soliciting another to purchase any of the
      Securities (except as contemplated by this Agreement).

            (m) The information provided by the Company pursuant to Section 5(h)
      hereof will not, at the date thereof, contain any untrue statement of a
      material fact or omit to state any material fact necessary to make the
      statements therein, in the light of the circumstances under which they
      were made, not misleading.

            (n) The Trust has been duly created and is validly existing in good
      standing as a business trust under the Business Trust Act with the power
      and authority to own property and to conduct its business as described in
      the Final Memorandum and to enter into and perform its obligations under
      this Agreement, the Indenture, the Declaration, the Securities and the
      Registration Agreement (collectively, the "Operative Documents"). The
      Trust is duly qualified to transact business as a foreign entity and is in
      good standing in each jurisdiction in which such qualification is
      necessary, except where the failure to so qualify or be in good standing
      would not have a material adverse effect on the Trust. The Trust is not a
      party to or otherwise bound by any agreement other than those described in
      the Final Memorandum.

            (o) The Declaration has been duly authorized by the Company and, on
      the Closing Date, will have been duly executed and delivered by the
      Company and the Administrative Trustees, and, assuming due authoriza-


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<PAGE>

      tion, execution and delivery by the Delaware Trustee and the Property
      Trustee, be a valid and binding obligation of the Company and the
      Administrative Trustees, enforceable against them in accordance with its
      terms, subject to applicable bankruptcy, moratorium, insolvency,
      fraudulent conveyance and similar laws affecting creditors, rights
      generally and to general principles of equity and a covenant of good faith
      and fair dealing ("Bankruptcy and Equity") and except that the
      indemnification provisions may be limited by federal or state securities
      laws or the public policy underlying such laws ("Public Policy"). Each of
      the Administrative Trustees of the Trust is an employee of the Company and
      has been duly authorized by the Company to execute and deliver the
      Declaration.

            (p) Each of the Guarantee and the Indenture has been duly authorized
      by the Company and, on the Closing Date will have been duly executed and
      delivered by the Company, and, assuming due authorization, execution and
      delivery by the Guarantee Trustee, in the case of the Guarantee and by the
      Indenture Trustee, in the case of the Indenture, will be a valid and
      binding obligation of the Company enforceable against it in accordance
      with its terms, subject to Bankruptcy and Equity.

            (q) The Capital Securities and the Common Securities have been duly
      authorized by the Declaration and, when issued and delivered against
      payment therefor on the Closing Date to the Initial Purchaser, in the case
      of the Capital Securities, and to the Company, in the case of the Common
      Securities, will be validly issued fully paid and nonassessable undivided
      beneficial interests in the assets of the Trust. The issuance of neither
      the Capital Securities nor the Common Securities is subject to preemptive
      or other similar rights. On the Closing Date, all of the issued and
      outstanding Common Securities of the Trust will be directly owned by the
      Company free and clear of any pledge, security interest, claim, lien or
      other encumbrance.

            (r) The Debt Securities have been duly authorized by the Company
      and, at the Closing Date, will have been duly executed and delivered to
      the Indenture Trustee for authentication in accordance with the Indenture,
      and, when authenticated in the manner provided for in the Indenture and
      delivered against payment therefor as described in the Final Memorandum,
      will constitute valid and binding obligations of the Company entitled to
      the benefits of the Indenture enforceable against the Company in
      accordance with their terms, subject to Bankruptcy and Equity.


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<PAGE>

            (s) This Agreement has been duly authorized, executed and delivered
      by the Company and the Trust. The Registration Agreement has been duly
      authorized by the Trust and, at the Closing Date, will have been duly
      executed and delivered by the Company and the Trust and will constitute a
      valid and binding agreement of the Company and the Trust, enforceable
      against the Company and the Trust in accordance with its terms subject to
      Bankruptcy and Equity and Public Policy.

            (t) The Operative Documents will, on the Closing Date, conform in
      all material respects to the descriptions thereof contained in the Final
      Memorandum.

            (u) The Trust is not in violation of the certificate of trust filed
      with the State of Delaware (the "Trust Certificate") or the Declaration or
      any provision of the Business Trust Act. The execution, delivery and
      performance by the Company and the Trust of the Operative Documents to
      which it is a party, and the consummation of the transactions contemplated
      herein or therein, will not conflict with or constitute a breach of, or a
      default under, or result in the creation or imposition of any lien, charge
      or other encumbrance upon any property or assets of the Trust, the Company
      or any of the Company's subsidiaries pursuant to any contract, indenture,
      mortgage, loan agreement, note lease or other instrument to which the
      Trust, the Company or any of its subsidiaries is a party or by which any
      of them may be bound, or to which any of the property or assets of any of
      them is subject, except for a conflict, breach, default, lien, charge or
      encumbrance which could not reasonably be expected to have a Material
      Adverse Effect or a material adverse effect on the consummation of the
      transactions contemplated herein or therein, nor will such action result
      in a violation of the Declaration or the Business Trust Act.

            (v) There is no action, suit, proceeding, inquiry or investigation
      before or brought by any court or governmental agency or body, domestic or
      foreign, now pending, or, to the knowledge of the Company, threatened,
      against or affecting the Trust or the Company or any of its subsidiaries,
      which is required to be disclosed in the Final Memorandum (other than as
      disclosed therein), or which in the reasonable judgment of the Trust or
      the Company might result in a Material Adverse Effect, or which in the
      reasonable judgment of the Company might materially and adversely affect
      the properties or assets thereof or the consummation of the transactions
      contemplated by the Operative Documents or the performance by the Trust or
      the Company of their


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<PAGE>

      respective obligations hereunder or thereunder; the aggregate of all
      pending legal or governmental proceedings to which the Trust or the
      Company or any subsidiary is a party or of which any of their respective
      property or assets is the subject which are not described in the Final
      Memorandum, including ordinary routine litigation incidental to the
      business, are, in the reasonable judgment of the Company, not likely to
      result in a Material Adverse Effect.

            (w) No filing with, or authorization, approval, consent, license,
      order, registration, qualification or decree of, any court or governmental
      authority or agency, other than those that have been made or obtained, is
      necessary or required for the performance by the Company or the Trust of
      their obligations hereunder.

            (x) The Company is a duly organized and validly existing corporation
      in good standing under the laws of the State of Delaware and is duly
      registered as a bank holding company under the Bank Holding Company Act of
      1956, as amended, and has the corporate power and authority to own its
      properties and conduct its business as described in the Final Memorandum
      and the documents incorporated by reference therein; Union State Bank (the
      "Bank") is a duly organized and validly existing New York State chartered
      commercial bank and continues to hold a valid certificate to do business
      as such and has full power and authority to conduct its business as such;
      U.S.B. Reality Corp. ("USB Realty") is a duly organized and validly
      existing corporation in good standing under the laws of the State of New
      York and has the corporate power and authority to own its properties and
      conduct its business as such; and, except as set forth in the Final
      Memorandum, each of the Company, the Bank and USB Realty is in all
      material respects in compliance with all laws, rules, regulations,
      directives and published interpretations issued or administered by, all
      conditions imposed in writing by and all agreements entered into with, any
      bank regulatory agency, authority or body having jurisdiction over the
      Company, the Bank or USB Realty or any of their respective assets,
      operations or businesses; each of the Company, the Bank and USB Realty
      holds all material licenses, certificates and permits from governmental
      authorities necessary for the conduct of its business as described in the
      Final Memorandum; and other than the Bank and USB Realty, there is no
      direct or indirect significant subsidiary of the Company, as that term is
      defined in Rule 1-02(w) of Regulation S-X, and there are no other
      subsidiaries of the Company


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<PAGE>

      which individually, or in the aggregate, own or lease property or conduct
      business which is material to the properties or business of the Company
      and its subsidiaries taken as a whole.

            (y) The Bank and USB Realty are duly authorized, and the Company is
      duly qualified as a foreign corporation, to do business and each is in
      good standing in all jurisdictions in which the nature of its business or
      the character or location of its assets require such authorization or
      qualification and in which the failure to be so authorized or to qualify,
      as the case may be, could reasonably be expected to, in the aggregate,
      have a Material Adverse Effect; all of the issued and outstanding capital
      stock of each of the Bank and USB Realty has been duly authorized and
      validly issued and is fully paid and non-assessable; all of the issued and
      outstanding shares of capital stock of the Bank, and all of the issued and
      outstanding shares of common stock of USB Realty, are owned by the Company
      free and clear of any security interest, mortgage, pledge, lien,
      encumbrance or claim.

            (z) Any certificate signed by any trustee of the Trust or any duly
      authorized officer of the Company or any material subsidiary and delivered
      to you or to counsel for the Initial Purchaser in connection with the
      Closing shall be deemed a representation and warranty by the Trust or the
      Company, as the case may be, to the Initial Purchaser as to the matters
      covered thereby.

            2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
and the Trust agree that the Trust will sell to the Initial Purchaser, and the
Initial Purchaser agrees to purchase from the Trust, at a purchase price of
$1,000 per Capital Security, plus accrued distributions, if any, from February
5, 1997 to the Closing Date, 20,000 Capital Securities.

            As compensation to the Initial Purchaser for its commitment
hereunder and in view of the fact that the proceeds of the sale of the
Securities will be used to purchase Debt Securities of the Company, the Company
hereby agrees to pay at the Closing Time to the Initial Purchaser in immediately
available funds $35.00 per Security to be delivered by the Trust hereunder at
the Closing Time.

            3. Delivery and Payment. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City time, on February 5, 1997, which date
and time may be post-


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<PAGE>

poned by agreement among the Initial Purchaser, the Trust and the Company (such
date and time of delivery and payment for the Securities being herein called the
"Closing Date"). Delivery of the Securities shall be made to the Initial
Purchaser against payment by the Initial Purchaser of the purchase price thereof
to or upon the order of the Trust by wire transfer drawn and payable in same day
funds or such other manner of payment as may be agreed by the Company, the Trust
and the Initial Purchaser. Delivery of the Securities shall be made at such
location as the Initial Purchaser shall reasonably designate at least one
business day in advance of the Closing Date and payment for the Securities shall
be made at the office of Skadden, Arps, Slate, Meagher & Flom LLP ("Counsel to
the Initial Purchaser"), 919 Third Avenue, New York, New York, or paid to such
bank account as is specified by the Company. Certificates for the Capital
Securities shall be registered in such names and in such denominations as the
Initial Purchaser may request not less than three full business days in advance
of the Closing Date.

            The Company agrees to have the Capital Securities available for
inspection, checking and packaging by the Initial Purchaser in New York, New
York, not later than 10:00 A.M. on the business day prior to the Closing Date.

            4. Offering of Securities. The Initial Purchaser represents and
warrants to and agrees with the Company and the Trust that:

            (a) It has not offered or sold, and will not offer or sell, any
      Securities except (i) to those it reasonably believes to be qualified
      institutional buyers (as defined in Rule 144A under the Securities Act)
      and to whom notice has been given that such sale is being made in reliance
      on Rule 144A, or (ii) to other institutional "accredited investors" (as
      defined in Rule 501(a)(1),(2), (3) or (7) of Regulation D) who provide to
      it and to the Company a letter in the form of Exhibit A hereto.

            (b) Neither it nor any person acting on its behalf has made or will
      make offers or sales of the Securities in the United States by means of
      any form of general solicitation or general advertising (within the
      meaning of Regulation D) in the United States.

            5.    Agreements.  Each of the Company  and the Trust  agrees with
the Initial Purchaser that:

            (a) The Company, as promptly as possible, will furnish to the
      Initial Purchaser, without charge,


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<PAGE>

      during the period referred to in paragraph (c) below, as many copies of
      the Final Memorandum and any amendments and supplements thereto as it may
      reasonably request. The Company will pay the expenses of printing or other
      production of all documents relating to the offering, purchase, sale and
      delivery of the Securities.

            (b) The Company will not amend or supplement the Final Memorandum,
      other than by filing documents under the Exchange Act which are
      incorporated by reference therein, without the prior written consent of
      the Initial Purchaser; provided, however, that prior to the completion of
      the distribution of the Securities by the Initial Purchaser (as determined
      by the Initial Purchaser and communicated to the Company), the Company
      will not file any document under the Exchange Act which is incorporated by
      reference in the Final Memorandum unless, prior to such proposed filing,
      the Company has furnished the Initial Purchaser with a copy of such
      document for its review and the Initial Purchaser has not reasonably
      objected to the filing of such document. The Company will promptly advise
      the Initial Purchaser when any document filed under the Exchange Act which
      is incorporated by reference in the Final Memorandum shall have been filed
      with the Commission.

            (c) If at any time prior to the completion of the distribution of
      the Securities by the Initial Purchaser (as determined by the Initial
      Purchaser), any event occurs as a result of which the Final Memorandum, as
      then amended or supplemented, would include any untrue statement of a
      material fact or omit to state any material fact necessary to make the
      statements therein, in the light of the circumstances under which they
      were made, not misleading, or if it should be necessary to amend or
      supplement the Final Memorandum to comply with applicable law, the Company
      will promptly notify the Initial Purchaser of the same and, subject to the
      requirements of paragraph (b) of this Section 5, will prepare and provide
      to the Initial Purchaser pursuant to paragraph (a) of this Section 5 an
      amendment or supplement which will correct such statement or omission or
      effect such compliance.

            (d) The Company and the Trust will arrange for the qualification of
      the Securities for sale by the Initial Purchaser under the laws of such
      jurisdictions in the United States as the Initial Purchaser may reasonably
      designate and will maintain such qualifications in effect so long as
      required for the sale of the Securities. The Company will promptly advise
      the


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<PAGE>

      Initial Purchaser of the receipt by the Company of any notification with
      respect to the suspension of the qualification of the Capital Securities
      for sale in any Jurisdiction or the initiation or threatening of any
      proceeding for such purpose.

            (e) From and after the date hereof until the third anniversary of
      the date hereof, the Company and the Trust will not, and will not permit
      any of its "affiliates" (as defined in Rule 144A) to, resell any
      Securities which constitute "restricted securities under Rule 144 that
      have been reacquired by any of them.

            (f) Neither the Company, nor any of its Affiliates, nor any person
      acting on its or their behalf will, directly or indirectly, make offers or
      sales of any security, or solicit offers to buy any security, under
      circumstances that would require the registration of the Securities under
      the Securities Act.

            (g) Neither the Company, nor any of its Affiliates, nor any person
      acting on its or their behalf will engage in any form of general
      solicitation or general advertising (within the meaning of Regulation D)
      in connection with any offer or sale of the Securities in the United
      States.

            (h) So long as any of the Securities are "restricted securities"
      within the meaning of Rule 144(a)(3) under the Securities Act, the Company
      will, during any period in which it is not subject to and in compliance
      with Section 13 or 15(d) of the Exchange Act, provide to each holder of
      such restricted securities and to each prospective purchaser (as
      designated by such holder) of such restricted securities, upon the request
      of such holder or prospective purchaser, any information required to be
      provided by Rule 144A(d)(4) under the Securities Act.

            (i) Each of the Company and the Trust will cooperate with the
      Initial Purchaser and use its respective best efforts to permit the
      Securities to be eligible for clearance and settlement through The
      Depository Trust Company.

            (j) In connection with any disposition of Securities pursuant to a
      transaction made in compliance with paragraph 1 of Exhibit A, the Company
      will reissue certificates evidencing such Securities without a restrictive
      legend (provided, if requested, that the legal opinion referred to therein
      so permits).


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<PAGE>

            (k) During the period of three years after the last date of original
      issuance of the Securities, neither the Company nor the Trust will be or
      become an "investment company" under the Investment Company Act.

            (l) Prior to August 4, 1997, neither the Trust nor the Company will,
      without the prior written consent of the Initial Purchaser, directly or
      indirectly, issue, sell, offer or agree to sell, grant any option for the
      sale of, or otherwise dispose of, or enter into an agreement to sell
      Capital Securities, any security convertible into exchangeable or
      exercisable for Capital Securities or the Debt Securities or any of the
      debt securities substantially similar (including provisions with respect
      to the deferral of interest) to the Debt Securities or any equity security
      substantially similar to the Capital Securities (except for the Securities
      issued pursuant to this Agreement).

            6. Conditions to the Obligations of the Initial Purchaser. The
obligations of the Initial Purchaser to purchase the Securities shall be subject
to the accuracy of the representations and warranties on the part of the Company
and the Trust contained herein at the date and time that this Agreement is
executed and delivered by the parties hereto (the "Execution Time"), and the
Closing Date, to the accuracy of the statements of the Company and the Trust
made in any certificates pursuant to the provisions hereof, to the performance
by the Company and the Trust of their respective obligations hereunder in all
material respects and to the following additional conditions:

            (a) The Company and the Trust shall have furnished to the Initial
      Purchaser the opinion of Cadwalader, Wickersham & Taft, counsel to the
      Company and the Trust, dated the Closing Date, to the effect that:

                  (i) the Company is a duly organized and validly existing
            corporation in good standing under the laws of the State of Delaware
            and is duly registered as a bank holding company under the Bank
            Holding Company Act of 1956, as amended, and has the corporate power
            and authority to own its properties and conduct its business as
            described in the Final Memorandum; the Bank is a duly organized and
            validly existing New York State chartered commercial bank and
            continues to hold a valid certificate to do business as such and has
            full power and authority to conduct its business as such; USB Realty
            is a duly organized and validly existing corporation in good
            standing under the


                                       13
<PAGE>

            laws of the State of New York and has the corporate power and
            authority to own its properties and conduct its business as such;
            each of the Company, the Bank and USD Realty holds all material
            licenses, certificates and permits from governmental authorities
            necessary for the conduct of its business as described in the Final
            Memorandum; and other than the Bank and USB Realty, there is no
            significant subsidiary of the Company, as that term is defined in
            Rule 1-02(w) of Regulation S-X, and there are no other subsidiaries
            of the Company which individually, or in the aggregate, own or lease
            property or conduct business which is material to the properties or
            business of the Company and its subsidiaries taken as a whole;

                  (ii) the Bank and USB Realty are duly authorized, and the
            Company is duly qualified as a foreign corporation, to do business
            and are in good standing in all jurisdictions in which such
            authorization or qualification is required and in which the failure
            to be so authorized or to qualify, as the case may be, could
            reasonably be expected to, in the aggregate, have any material
            adverse effect upon the business, condition or properties of the
            Company and its subsidiaries taken as a whole;

                  (iii) all the outstanding shares of capital stock of the Bank
            and USB Realty have been duly and validly authorized and issued and
            are fully paid and nonassessable; and all the outstanding shares of
            capital stock of the Bank and all of the outstanding shares of
            common stock of USB Realty are owned by the Company either directly
            or through wholly-owned subsidiaries free and clear of any perfected
            security interest and, to the knowledge of such counsel, after due
            inquiry, any other security interests, claims, liens or
            encumbrances;

                  (iv) the Company's authorized equity capitalization is as set
            forth in the Final Memorandum and the Securities, the Debt
            Securities and the Common Securities conform to the description
            thereof contained in the Final Memorandum; the holders of the
            outstanding shares of capital stock of the Company are not entitled
            to any preemptive or other rights to subscribe for the Securities,
            the Debt Securities or the Common Securities pursuant to Delaware
            law or the Company's charter, and to the knowledge of such counsel
            after due


                                       14
<PAGE>

            inquiry, such counsel is not aware of the existence of such rights
            pursuant to any agreement;

                  (v) to the knowledge of such counsel, after due inquiry, (A)
            there is no pending or threatened action, suit or proceeding before
            any court or governmental agency, authority or body or any
            arbitrator involving the Company, the Trust or the Bank of a
            character required to be disclosed in the Final Memorandum which is
            not so disclosed; and (B) there is no franchise, contract or other
            document of a character required to be described in the Final
            Memorandum, which is not so described;

                  (vi) this Agreement has been duly authorized, executed and
            delivered by the Company;

                  (vii) the Registration Agreement has been duly authorized,
            executed and delivered by the Company, and constitutes a legal,
            valid and binding instrument enforceable against the Company and the
            Trust in accordance with its terms (subject, as to the enforcement
            of remedies, to applicable bankruptcy, reorganization, insolvency,
            moratorium or other laws affecting creditors, rights generally from
            time to time in effect and except that the indemnification
            provisions may be limited by federal or state securities laws or the
            public policy underlying such laws);

                  (viii) the Indenture has been duly authorized, executed and
            delivered, and constitutes a legal, valid and binding instrument
            enforceable against the Company in accordance with its terms
            (subject, as to the enforcement of remedies, to applicable
            bankruptcy, reorganization, insolvency, moratorium or other laws
            affecting creditors, rights generally from time to time in effect);
            the Debt Securities have been duly and validly authorized and, when
            executed and authenticated in accordance with the provisions of the
            Indenture and delivered to and paid for by the Trust, will
            constitute legal, valid and binding obligations of the Company
            entitled to the benefits of the Indenture;

                  (ix) the Guarantee has been duly authorized, executed and
            delivered, and constitutes a legal, valid and binding instrument
            enforceable against the Company in accordance with its terms
            (subject, as to the enforcement of remedies, to applicable


                                       15
<PAGE>

            bankruptcy, reorganization, insolvency, moratorium or other laws
            affecting creditors, rights generally from time to time in effect);

                  (x) all of the issued and outstanding Common Securities will
            be owned directly by the Company free and clear of any security
            interest, claims, liens or encumbrances;

                  (xi) no consent, approval, authorization or order of any court
            or governmental agency or body is required for the consummation by
            the Company or the Trust of the transactions contemplated by this
            Agreement, the Registration Agreement, the Declaration, the
            Indenture and the Guarantee, except such as may be required under
            the blue sky or securities laws of any jurisdiction in connection
            with the purchase and sale of the Securities by the Initial
            Purchaser and such other approvals (specified in such opinion) as
            have been obtained, and except in connection with the registration
            of the Securities and the Debt Securities;

                  (xii) neither the issue and sale of the Securities or the Debt
            Securities, the execution and delivery of the Declaration, the
            Indenture, the Guarantee or the Registration Agreement, the
            consummation of any other of the transactions herein or therein
            contemplated nor the fulfillment of the terms hereof or thereof will
            conflict with, result in a breach or violation of, or constitute a
            default under or violate (A) any of the terms, conditions or
            provisions of the charter or by-laws of the Company, the Bank or USB
            Realty or the Declaration, (B) to the knowledge of such counsel,
            after due inquiry, any of the terms, conditions or provisions of any
            material document, agreement or other instrument to which the
            Company, the Bank or USB Realty or the Trust is a party or by which
            any of them or their property is bound, (C) any law or regulation
            normally applicable to transactions of this type or, to the
            knowledge of such counsel after due inquiry, any judgment, order,
            decree or ruling applicable to the Company, the Bank, USB Realty or
            the Trust of any court, regulatory body, administrative agency,
            governmental body or arbitrator having jurisdiction over the
            Company, the Bank, USB Realty or the Trust;

                  (xiii) assuming the accuracy of the representations and
            warranties and compliance with the agreements contained herein, no
            registration of


                                       16
<PAGE>

            the Securities or the Debt Securities under the Securities Act is
            required, and no qualification of the Declaration, the Indenture or
            the Guarantee under the Trust Indenture Act of 1939, as amended, is
            necessary, for the offer and sale by the Initial Purchaser of the
            Securities in the manner contemplated by this Agreement;

                  (xiv) neither the Company nor the Trust is an "investment
            company" within the meaning of the Investment Company Act, and after
            giving effect to the offer and sale of the Securities and the
            application of the proceeds thereof as described in the Final
            Memorandum, neither will be an "investment company" as defined in
            the Investment Company Act;

                  (xv) the Securities, the Common Securities, the Debt
            Securities and each of the Guarantee, the Registration Agreement,
            the Indenture and the Declaration conform in all material respects
            to the descriptions thereof contained in the Final Memorandum; and

                  (xvi) the statements of legal matters, documents or
            proceedings, and legal conclusions, if any, set forth in the Final
            Memorandum under the headings "Exchange Offer; Registration Rights",
            "Description of Capital Securities", "Description of Junior
            Subordinated Debt Securities", "Relationship Among the Capital
            Securities, the Junior Subordinated Debt Securities and the
            Guarantee" and "Description of the Guarantee" fairly present the
            information called for and fairly summarize the matters referred to
            therein.

                  (xvii) the Trust is and will be classified as a grantor trust
            for federal income tax purposes and not as a partnership or an
            association taxable as a corporation;

                  (xviii) the Debt Securities will be classified as indebtedness
            of the Company for United States federal income tax purposes;

                  (xix) the statements made under the heading "Certain Federal
            Income Considerations" in the Final Memorandum, in so far as such
            statements purport to summarize certain federal income tax laws of
            the United States, constitute a fair and accurate summary of the
            principal United States


                                       17
<PAGE>

            federal income tax consequences of an investment in the Securities;

                  (xx) the Trust has been duly created and is validly existing
            in good standing as a business trust under the Delaware Business
            Trust Act, and all filings required under the Delaware Business
            Trust Act with respect to the creation and valid existence of the
            trust as a business trust have been made;

                  (xxi) this Agreement and the Registration Agreement have been
            duly executed and delivered by the Trust;

                  (xxii) the Declaration constitutes a valid and binding
            obligation of the Company, and is enforceable against the Company in
            accordance with its terms, subject to Bankruptcy and Equity and
            Public Policy;

                  (xxiii) under the Delaware Business Trust Act and the
            Declaration, the Trust has the trust power and authority (i) to
            execute and deliver, and to perform its obligations under, this
            Agreement and the Registration Agreement, and (ii) to issue and
            perform its obligations under the Capital Securities and the Common
            Securities;

                  (xxiv) under the Delaware Business Trust Act and the
            Declaration, the execution and delivery by the Trust of this
            Agreement and the Registration Agreement, and the performance by the
            Trust of its obligations thereunder, have been duly authorized by
            all necessary trust action on the part of the Trust;

                  (xxv) the Capital Securities have been duly authorized by the
            Declaration and, when authenticated and paid for, will be duly and
            validly issued and fully paid and nonassessable undivided beneficial
            interests in the assets of the Trust, entitled to the benefits of
            the Declaration; the holders, as beneficial owners of the Trust,
            subject to Bankruptcy and Equity and Public Policy;

                  (xxvi) the holders of the Capital Securities will be entitled
            to the same limitation of personal liability extended to
            stockholders of private corporations for profit organized under the
            General Corporation Law of the State of Delaware; pro-


                                       18
<PAGE>

            vided, however, that the holders may be obligated, pursuant to the
            Declaration, (A) to provide indemnity and/or security in connection
            with and pay taxes or governmental charges arising from transfers or
            exchanges of Securities certificates and the issuance of replacement
            Securities certificates, and (B) to provide security or indemnity in
            connection with requests of or directions to the Property Trustee to
            exercise its rights and powers under the Declaration;

                  (xxvii) under the Delaware Business Trust Act and the
            Declaration, the issuance of the Capital Securities and the Common
            Securities is not subject to preemptive rights;

                  (xxviii) the Common Securities have been duly authorized by
            the Declaration and, when authenticated and paid for, will be duly
            and validly issued and fully paid undivided beneficial interests in
            the assets of the Trust, entitled to the benefits of the
            Declaration; and

                  (xxix) the (a) purchase of the Debt Securities by the Trust
            and, (b) the distribution of the Debt Securities by the Trust in the
            circumstances contemplated by the Declaration, and (c) the
            performance by the Trust of this Agreement and the Registration
            Agreement and the consummation of the transactions contemplated
            thereunder, will not conflict with or result in a breach or
            violation of any of the terms or provisions of the certificate of
            the Trust or the Declaration or any statute, order, rule or
            regulation of the State of Delaware or any governmental agency or
            body of the State of Delaware having jurisdiction over the Trust or
            any of its properties.

            Such counsel shall also state that, in the course of preparation by
the Company of the Final Memorandum, such counsel has participated in
conferences with officers and other representatives of the Company and the
Trust, representatives of the independent public accountants for the Company and
the Trust, representatives of the Initial Purchaser and representatives of
counsel for the Initial Purchaser, at which conferences such counsel made
inquiries of such officers, representatives and accountants and discussed the
contents of the Final Memorandum and related matters and, although such counsel
has not independently verified and is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Final Memorandum (other than as


                                       19
<PAGE>

expressly set forth in such counsel's opinion), no facts have come to the
attention of such counsel which would lead such counsel to believe that the
Final Memorandum (other than the financial or statistical information contained
therein or omitted therefrom as to which such counsel need not express an
opinion), as of its date or on the Closing Date, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

            In rendering such opinion, such counsel may rely, as to matters of
fact, to the extent they deem proper, on certificates of responsible officers of
the Company, the Trust and public officials.

            All references in this Section 6(a) to the Final Memorandum shall be
deemed to include any amendment or supplement thereto at the Closing Date.

            (b) The Chase Manhattan Bank shall have furnished to the Initial
      Purchaser the opinion of Pryor, Cashman, Sherman & Flynn, special counsel
      to The Chase Manhattan Bank, dated the Closing Date, to the effect that:

                  (i) The Chase Manhattan Bank has been duly incorporated and is
            validly existing as a banking corporation in good standing under the
            laws of the State of New York;

                  (ii) each of the Declaration, the Indenture and the Guarantee
            has been duly authorized, executed and delivered by the Property
            Trustee, the Indenture Trustee and the Guarantee Trustee,
            respectively, and constitutes a legal, valid and binding instrument
            enforceable against the Property Trustee, the Indenture Trustee and
            the Guarantee Trustee in accordance with its respective terms
            (subject, as to the enforcement of remedies, to applicable
            bankruptcy, reorganization, insolvency, moratorium or other laws
            affecting creditors, rights generally from time to time in effect);

                  (iii) no consent, approval, authorization or order of any
            federal or New York State banking authority is required for the
            consummation of the transactions contemplated by the Declaration,
            the Indenture or the Guarantee by the Property Trustee, the
            Indenture Trustee or the Guarantee Trustee, respectively; and


                                       20
<PAGE>

                  (iv) neither the execution and delivery of the Declaration,
            the Indenture or the Guarantee, the consummation of any other of the
            transactions herein or therein contemplated nor the fulfillment of
            the terms hereof or thereof will conflict with, result in a breach
            or violation of, or constitute a default under any law or the
            charter or by-laws of The Chase Manhattan Bank or the terms of any
            indenture or other agreement or instrument known to such counsel and
            to which The Chase Manhattan Bank is a party or bound or any
            judgment, order or decree known to such counsel to be applicable to
            The Chase Manhattan Bank of any court, regulatory body,
            administrative agency, governmental body or arbitrator having
            jurisdiction over The Chase Manhattan Bank.

            (c) Chase Manhattan Bank Delaware shall have furnished to the
      Initial Purchaser the opinion of Pryor, Cashman, Sherman & Flynn, special
      counsel to Chase Manhattan Bank Delaware, dated the Closing Date, to the
      effect that Chase Manhattan Bank Delaware has been duly incorporated and
      is validly existing as a banking corporation in good standing under the
      laws of the State of Delaware; and has full corporate power and authority
      to act as trustee of a statutory business trust under the laws of the
      State of Delaware.

            (d) The Initial Purchaser shall have received from Skadden, Arps,
      Slate, Meagher & Flom LLP, special counsel to the Initial Purchaser, such
      opinion or opinions, dated the Closing Date, with respect to the issuance
      and sale of the Securities, the Final Memorandum (as amended or
      supplemented at the Closing Date) and other related matters as the Initial
      Purchaser may reasonably require, and the Company and the Trust shall have
      furnished to such counsel such documents as they may request for the
      purpose of enabling them to pass upon such matters.

            (e) The Company shall have furnished to the Initial Purchaser a
      certificate of the Company, signed by the Chairman of the Board and
      President and the principal financial or accounting officer of the
      Company, dated the Closing Date, to the effect that the signers of such
      certificate have carefully examined the Final Memorandum, any amendment or
      supplement to the Final Memorandum and this Agreement and that:

                  (i) the representations and warranties of the Company and the
            Trust in this Agreement are true and correct in all material
            respects on and


                                       21
<PAGE>

            as of the Closing Date with the same effect as if made on the
            Closing Date, and the Company and the Trust have complied with all
            the agreements and satisfied all the conditions on its part to be
            performed or satisfied hereunder at or prior to the Closing Date;
            and

                  (ii) since the date of the most recent financial statements
            included in the Final Memorandum, there has been no material adverse
            change in the financial condition, earnings, business or properties
            of the Company and its subsidiaries, whether or not arising from
            transactions in the ordinary course of business, except as set forth
            in the Final Memorandum (exclusive of any amendment or supplement
            thereto).

            (f) At the Closing Date, Deloitte & Touche LLP shall have furnished
      to the Initial Purchaser a letter or letters, dated as of the Closing
      Date, in form and substance satisfactory to the Initial Purchaser,
      containing statements and information of the type ordinarily included in
      accountants' "comfort letters" to initial purchasers with respect to the
      financial statements and certain financial information contained in the
      Final Memorandum.

            (g) Subsequent to the Execution Time or, if earlier, the dates as of
      which information is given in the Final Memorandum, there shall not have
      been (i) any change or decrease specified in the letter or letters
      referred to in paragraph (f) of this Section 6 or (ii) any change, or any
      development involving a prospective change, in or affecting the business
      or properties of the Company and its subsidiaries the effect of which, in
      any case referred to in clause (i) or (ii) above, is, in the judgment of
      the Initial Purchaser, so material and adverse as to make it impractical
      or inadvisable to market the Capital Securities as contemplated by the
      Final Memorandum.

            (h) Prior to the Closing Date, the Company and the Trust shall have
      furnished to the Initial Purchaser such further information, certificates
      and documents as the Initial Purchaser may reasonably request.

            (i) The Registration Agreement shall have been duly executed and
      delivered by the Company and the Trust, and each of the Declaration,
      Indenture and Guarantee shall have been duly executed and delivered by
      each of the parties thereto.


                                       22
<PAGE>

            If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Initial Purchaser and Counsel to the Initial Purchaser,
this Agreement and all obligations of the Initial Purchaser hereunder may be
canceled at, or at any time prior to, the Closing Date by the Initial Purchaser.
Notice of such cancellation shall be given to the Company in writing or by
telephone or telegraph confirmed in writing.

            The documents required to be delivered by this Section 6 will be
delivered at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third
Avenue, New York, New York, on the Closing Date.

            7. Reimbursement of Expenses. If the sale of the Securities provided
for herein is not consummated because any condition to the obligations of the
Initial Purchaser set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 9 hereof or because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a default by the
Initial Purchaser, the Company will reimburse the Initial Purchaser upon demand
for all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities.

            8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, the directors, officers,
employees and agents of the Initial Purchaser and each person who controls the
Initial Purchaser within the meaning of either the Securities Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which any of them may become subject under the Securities Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Final
Memorandum or any information provided by the Company to any holder or
prospective purchaser of Securities pursuant to Section 5 hereof, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under


                                       23
<PAGE>

      which they were made, not misleading, and agrees to reimburse each such
      indemnified party, as incurred, for any legal or other expenses reasonably
      incurred by them in connection with investigating or defending any such
      loss, claim, damage, liability or action; provided, however, that the
      Company will not be liable in any such case to the extent that any such
      loss, claim, damage or liability arises out of or is based upon any such
      untrue statement or alleged untrue statement or omission or alleged
      omission made in the Final Memorandum, or in any amendment thereof or
      supplement thereto, in reliance upon and in conformity with written
      information furnished to the Company or the Trust by or on behalf of the
      Initial Purchaser specifically for inclusion therein (which the parties
      hereto understand consists only of the Initial Purchaser Information).
      This indemnity agreement will be in addition to any liability which the
      Company may otherwise have.

            (b) The Initial Purchaser agrees to indemnify and hold harmless each
      of the Company and the Trust, their respective directors, officers or
      trustees, as the case may be, and each person who controls the Company or
      the Trust, as the case may be, within the meaning of either the Securities
      Act or the Exchange Act, to the same extent as the foregoing indemnity
      from the Company to the Initial Purchaser, but only with reference to
      written information relating to the Initial Purchaser furnished to the
      Company or the Trust by or on behalf of the Initial Purchaser specifically
      for inclusion in the Final Memorandum (or in any amendment or supplement
      thereto). This indemnity agreement will be in addition to any liability
      which the Initial Purchaser may otherwise have. The Company acknowledges
      that the Initial Purchaser Information constitutes the only information
      furnished in writing by or on behalf of the Initial Purchaser for
      inclusion in the Final Memorandum (or in any amendment or supplement
      thereto).

            (c) Promptly after receipt by an indemnified party under this
      Section 8 of notice of the commencement of any action, such indemnified
      party will, if a claim in respect thereof is to be made against the
      indemnifying party under this Section 8, notify the indemnifying party in
      writing of the commencement thereof; but the failure so to notify the
      indemnifying party (i) will not relieve it from liability under paragraph
      (a) or (b) above unless and to the extent it did not otherwise learn of
      such action and such failure results in the forfeiture by the indemnifying
      party of substantial rights and defenses and (ii) will not, in any event,
      relieve the indemnifying party from any obligations to any indemnified
      party other than the indemnification obligation provided in paragraph (a)
      or (b) above. The indemnifying party shall be entitled to appoint counsel
      of


                                       24
<PAGE>

      the indemnifying party's choice at the indemnifying party's expense to
      represent the indemnified party in any action for which indemnification is
      sought (in which case the indemnifying party shall not thereafter be
      responsible for the fees and expenses of any separate counsel retained by
      the indemnified party or parties except as set forth below); provided,
      however, that such counsel shall be satisfactory to the indemnified party.
      Notwithstanding the indemnifying party's election to appoint counsel to
      represent the indemnified party in an action, the indemnified party shall
      have the right to employ one separate counsel (and, in addition, one local
      counsel in any relevant jurisdiction for an indemnified party), and the
      indemnifying party shall bear the reasonable fees, costs and expenses of
      such separate counsel if (i) the use of counsel chosen by the indemnifying
      party to represent the indemnified party would present such counsel with a
      conflict of interest, (ii) the actual or potential defendants in, or
      targets of, any such action include both the indemnified party and the
      indemnifying party and the indemnified party shall have reasonably
      concluded that there may be legal defenses available to it and/or other
      indemnified parties which are different from or additional to those
      available to the indemnifying party, (iii) the indemnifying party shall
      not have employed counsel satisfactory to the indemnified party to
      represent the indemnified party within a reasonable time after notice of
      the institution of such action or (iv) the indemnifying party shall
      authorize the indemnified party to employ separate counsel at the expense
      of the indemnifying party. An indemnifying party will not, without the
      prior written consent of the indemnified parties, settle or compromise or
      consent to the entry of any judgment with respect to any pending or
      threatened claim, action, suit or proceeding in respect of which
      indemnification or contribution may be sought hereunder (whether or not
      the indemnified parties are actual or potential parties to such claim or
      action) unless such settlement, compromise or consent includes an
      unconditional release of each indemnified party from all liability arising
      out of such claim, action, suit or proceeding.

            (d) In the event that the indemnity provided in paragraph (a) or (b)
      of this Section 8 is unavailable to or insufficient to hold harmless an
      indemnified party for any reason, the Company and the Initial Purchaser
      agree to contribute to the aggregate losses, claims, damages and
      liabilities (including legal or other expenses reasonably incurred in
      connection with investigating or defending same) (collectively "Losses")
      to which the Company, the Trust and the Initial Purchaser may be subject
      in such proportion as is appropriate to reflect the relative benefits
      received by the Trust, the Company and by the Initial Purchaser from the
      offering of the Securities. If the allocation provided by


                                       25
<PAGE>

      the immediately preceding sentence is unavailable for any reason, the
      Company and the Initial Purchaser shall contribute in such proportion as
      is appropriate to reflect not only such relative benefits but also the
      relative fault of the Company and of the Initial Purchaser in connection
      with the statements or omissions which resulted in such Losses as well as
      any other relevant equitable considerations. Benefits received by the
      Company shall be deemed to be equal to the total net proceeds from the
      offering of the Securities (before deducting expenses), and benefits
      received by the Initial Purchaser shall be deemed to be equal to the
      compensation received by or credited to the Initial Purchaser in
      connection with its purchase of the Securities hereunder. Relative fault
      shall be determined by reference to whether any alleged untrue statement
      or omission relates to information provided by the Company or the Trust,
      on the one hand, or the Initial Purchaser, on the other. The Company, the
      Trust and the Initial Purchaser agree that it would not be just and
      equitable if contribution were determined by pro rata allocation or any
      other method of allocation which does not take account of the equitable
      considerations referred to above. Notwithstanding the provisions of this
      paragraph (d), no person guilty of fraudulent misrepresentation (within
      the meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any person who was not guilty of such fraudulent
      misrepresentation. For purposes of this Section 8, each person who
      controls the Initial Purchaser within the meaning of either the Securities
      Act or the Exchange Act and each director, officer, employee and agent of
      the Initial Purchaser shall have the same rights to contribution as the
      Initial Purchaser, and each person who controls the Company or the Trust
      within the meaning of either the Securities Act or the Exchange Act and
      each officer and director of the Company or trustee of the Trust shall
      have the same rights to contribution as the Company, subject in each case
      to the applicable terms and conditions of this paragraph (d).

            9. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Initial Purchaser, by notice given to the Company
prior to delivery of and payment for the Securities, (i) if there has been,
since the time of execution of this Agreement or since the respective dates as
of which information is given in the Final Memorandum, any material adverse
change in the financial condition, the earnings or the business affairs of the
Trust or the Company and its subsidiaries, considered as one enterprise, whether
or not arising in the ordinary course of business, (ii) trading generally on the
American Stock Exchange or the New York Stock Exchange or in the Nasdaq National
Market has been suspended or limited, or minimum or maximum prices for trading
have been fixed, or maximum


                                       26
<PAGE>

ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any governmental authority, (iii) a banking moratorium shall have been
declared either by Federal or New York State authorities or (iv) if there has
occurred any material adverse change in the financial markets in the United
States, or there shall have occurred any outbreak or escalaion of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the reasonable judgment of the Initial Purchaser, impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum.

            10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or the Trust or their respective officers or Trustees and of the Initial
Purchaser set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Initial Purchaser or the Company or the Trust or any of the officers, directors,
trustees or controlling persons referred to in Section 8 hereof, and will
survive delivery of and payment for the Securities. The provisions of Sections 7
and 8 hereof shall survive the termination or cancellation of this Agreement.

            11.   Notices.  All  communications  hereunder  will be in writing
and effective only on receipt, and, if sent to the Initial Purchaser,  will be
mailed,  delivered or  telegraphed  and confirmed to Keefe,  Bruyette & Woods,
Inc., at Two World Trade Center - 85th Floor,  New York,  New York 10048;  or,
if sent to the Company or the Trust, will be mailed,  delivered or telegraphed
and  confirmed  to it at 100 Dutch  Hill  Road,  Orangeburg,  New York  10962,
Attention: Steven T. Sabatini, Executive Vice President.

            12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, trustees and controlling persons referred to in Section 8
hereof, and, except as expressly set forth in Section 5(h) hereof, no other
person will have any right or obligation hereunder.

            13.   Applicable  Law.  This  Agreement  will be  governed  by and
construed in accordance with the laws of the State of New York.


                                       27
<PAGE>

            14. Business Day. For purposes of this Agreement, "business day"
means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on
which banking institutions in The City of New York, New York, are authorized or
obligated by law, executive order or regulation to close.

            15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.


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<PAGE>

            If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this Agreement and your acceptance shall represent a binding agreement between
the Trust, the Company and the Initial Purchaser.

                                          Very truly yours,

                                          UNION STATE CAPITAL TRUST I

                                          By: /s/ [ILLEGIBLE]
                                              -----------------------------
                                              Name:
                                              Title:

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

                                          By: /s/ [ILLEGIBLE]
                                              -----------------------------
                                              Name:
                                              Title:

The foregoing Agreement is hereby confirmed and accepted as of the date first
above written:

      KEEFE, BRUYETTE & WOODS, INC.

      By: /s/ Joseph A. Lenihan
          ---------------------------------
          Name:  Joseph A. Lenihan
          Title: Senior Vice President


                                       29
<PAGE>

                                                                       EXHIBIT A

                          Form of Investment Letter for
                       Institutional Accredited Investors

                                                                January __, 1997

U.S.B. Holding Co., Inc.
100 Dutch Hill Road
Orangeburg, New York 10962

Keefe, Bruyette & Woods, Inc.
Two World Trade Center, 85th Floor
New York, New York 10048

Dear Sirs:

            In connection with our proposed purchase of ____________% Capital
Securities (together with the Guarantee (as defined) the "Securities") of Union
State Capital Trust I, a Delaware statutory business trust (the "Trust") and a
guarantee agreement (the "Guarantee") dated as of January 1, 1997, between
U.S.B. Holding Co., Inc. (the "Company") and The Chase Manhattan Bank, we
confirm that:

            1. We understand that the Securities, and the Junior Subordinated
      Debentures due 2027 (the "Debentures") of the Company have not been
      registered under the Securities Act of 1933, as amended (the "Securities
      Act"), and may not be sold except as permitted in the following sentence.
      We understand and agree, on our own behalf and on behalf of any accounts
      for which we are acting as hereinafter stated, (x) that such Securities
      are being offered only in a transaction not involving any public offering
      within the meaning of the Securities Act, and (y) that if we should
      resell, pledge or otherwise transfer such Securities or Debentures within
      three years after the last date of the original issuance of the Securities
      or, if later, within three months after we cease to be an affiliate
      (within the meaning of Rule 144 under the Securities Act) of the Company,
      such Securities and Debentures may be resold, pledged or transferred only
      (i) to the Company, (ii) so long as the Securities and Debentures are
      eligible for resale pursuant to Rule 144A under the Securities Act ("Rule
      144A"), to a person whom we reasonably believe is a "qualified
      institutional buyer"


                                       1
<PAGE>

      (as defined in Rule 144A) ("Qualified Institutional Buyer") that purchases
      for its own account or for the account of a Qualified Institutional Buyer
      to whom notice is given that the resale, pledge or transfer is being made
      in reliance on Rule 144A (as indicated by the box checked by the
      transferor on the Certificate of Transfer on the reverse of the
      certificates if such securities are not in book-entry form), (iii)
      pursuant to an exemption from registration under the Securities Act
      provided by Rule 144 (if applicable) under the Securities Act, or (iv)
      pursuant to an effective registration statement under the Securities Act,
      in each case in accordance with any applicable securities laws of any
      state of the United States, and we will notify any purchaser of the
      Securities or Debentures from us of the above resale restriction, if then
      applicable. We further understand that, in connection with any transfer of
      the Securities or Debentures by us, the Company and the Property Trustee
      (or, in the case of the Debentures, the Indenture Trustee) may request,
      and, if so requested we will furnish, such certificates, legal opinions
      and other information as they may reasonably require to confirm that any
      such transfer complies with the foregoing restrictions.

            2. We are able to fend for ourselves in the transactions
      contemplated by the offering memorandum, we have such knowledge and
      experience in financial and business matters as to be capable of
      evaluating the merits and risks of our investment in the Securities or the
      Debentures and we and any accounts for which we are acting are each able
      to bear the economic risk of our or its investment and can afford the
      complete loss of such investment.

            3. We understand that the minimum aggregate stated liquidation
      amount of Securities that may be purchased by an institutional "accredited
      investor" is $100,000.

            4. We understand that the Company and Keefe, Bruyette & Woods, Inc.
      (the "Initial Purchaser") and others will rely upon the truth and accuracy
      of the foregoing acknowledgments, representations and agreements, and we
      will agree that if any of the acknowledgments, representations and
      warranties deemed to have been made by us by our purchase of the
      Securities, for our own account or for one or more accounts as to each of
      which we exercise sole investment discretion, are no longer accurate, we
      shall promptly notify the Company and the Initial Purchaser.


                                       2
<PAGE>

            5. We are acquiring the Securities purchased by us for investment
      purposes, and not for distribution, for our own account or for one or more
      accounts as to each of which we exercise sole investment discretion and we
      are or such account is an institution which is an "accredited investor"
      (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act).

            6. You are entitled to rely upon this letter and you are irrevocably
      authorized to produce this letter or a copy hereof to any interested party
      in any administrative or legal proceeding or official inquiry with respect
      to the matters covered hereby.


                                    Very truly yours,


                                    ________________________________
                                    (Name of purchaser)


                                    By: ____________________________
                                        Name:
                                        Title:
                                        Date:


                                       3