Exhibit 10.1

 

AGREEMENT AND PLAN OF MERGER

 

By and Among

 

EMCLAIRE FINANCIAL CORP,

 

THE FARMERS NATIONAL BANK OF EMLENTON

 

And

 

UNITED-AMERICAN SAVINGS BANK

 

Dated as of December 30, 2015

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE 1 CERTAIN DEFINITIONS 1 Section 1.01 Definitions 1       ARTICLE 2 THE
MERGER AND RELATED MATTERS 7 Section 2.01 Effects of Merger; Surviving Entities
7 Section 2.02 Effect on Outstanding Shares of Interim Common Stock 8 Section
2.03 Closing; Effective Time 8 Section 2.04 Conversion of UA Bank Common Stock;
Merger Consideration 8 Section 2.05 Dissenting Shares 8 Section 2.06 Treatment
of UA Bank Options and Restricted Stock Awards 9 Section 2.07 Procedures for
Exchange of UA Bank Common Stock 9       ARTICLE 3 REPRESENTATIONS AND
WARRANTIES OF UA BANK 11 Section 3.01 Organization 11 Section 3.02
Capitalization 12 Section 3.03 Authority; No Violation 12 Section 3.04 Consents
13 Section 3.05 Financial Statements 13 Section 3.06 Taxes 15 Section 3.07 No
Material Adverse Effect 15 Section 3.08 Material Contracts; Leases; Defaults 15
Section 3.09 Ownership of Property; Insurance Coverage 16 Section 3.10 Legal
Proceedings 17 Section 3.11 Compliance with Applicable Law 17 Section 3.12
Employee Benefit Plans 18 Section 3.13 Brokers, Finders and Financial Advisors
20 Section 3.14 Environmental Matters 20 Section 3.15 Loan Portfolio and
Investment Securities 21 Section 3.16 Other Documents 22 Section 3.17 Related
Party Transactions 22 Section 3.18 Required Vote 22 Section 3.19 Registration
Obligations 23 Section 3.20 Risk Management Instruments 22 Section 3.21 Fairness
Opinion 23 Section 3.22 Trust Accounts 23 Section 3.23 Intellectual Property 23
Section 3.24 Labor Matters 24 Section 3.25 No Other Representations or
Warranties 24       ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF EMCLAIRE 24
Section 4.01 Organization 24 Section 4.02 Capitalization 25 Section 4.03
Authority; No Violation 25 Section 4.04 Consolidated Financial Statements 26
Section 4.05 No Material Adverse Effect 27

 

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Section 4.06 Consents 27 Section 4.07 Availability of Funds 28 Section 4.08
Compliance with Applicable Law 28 Section 4.09 Legal Proceedings 28 Section 4.10
No Other Representations or Warranties; Access to Information 29 Section 4.11
Pro Forma Capitalization 29       ARTICLE 5 COVENANTS OF UA BANK 29 Section 5.01
Conduct of Business 29 Section 5.02 Current Information 33 Section 5.03 Access
to Properties and Records 33 Section 5.04 Financial and Other Statements 34
Section 5.05 Maintenance of Insurance 34 Section 5.06 Disclosure Supplements 35
Section 5.07 Consents and Approvals of Third Parties 35 Section 5.08 All
Reasonable Efforts 35 Section 5.09 Failure to Fulfill Conditions 35 Section 5.10
Shareholder Litigation 35 Section 5.11   Reserved 35 Section 5.12   No
Solicitation 36 Section 5.13.   Shareholders’ Meeting 38       ARTICLE 6
COVENANTS OF EMCLAIRE 38 Section 6.01 Conduct of Business 38 Section 6.02
Current Information 38 Section 6.03 Financial and Other Statements 39 Section
6.04 Disclosure Supplements 39 Section 6.05 Consents and Approvals of Third
Parties 39 Section 6.06 Best Efforts 39 Section 6.07 Failure to Fulfill
Conditions 39 Section 6.08 Employee and Director Benefits 39 Section 6.09
Directors and Officers Indemnification and Insurance 42       ARTICLE 7
REGULATORY AND OTHER MATTERS 43 Section 7.01 Regulatory Approvals 43      
ARTICLE 8 CLOSING CONDITIONS 44 Section 8.01 Conditions to Each Party’s
Obligations under this Agreement 44 Section 8.02 Conditions to the Obligations
of Emclaire and Interim under this Agreement 44 Section 8.03 Conditions to the
Obligations of UA Bank under this Agreement 45       ARTICLE 9 THE CLOSING 45
Section 9.01 Time and Place 45 Section 9.02 Deliveries at the Pre-Closing and
the Closing 46       ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER 46 Section
10.01 Termination 46 Section 10.02 Effect of Termination 47 Section 10.03
Amendment, Extension and Waiver 48

 

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ARTICLE 11 MISCELLANEOUS 48 Section 11.01 Confidentiality 48 Section 11.02
Public Announcements 49 Section 11.03 Survival 49 Section 11.04 Notices 49
Section 11.05 Parties in Interest 50 Section 11.06 Complete Agreement 50 Section
11.07 Counterparts 51 Section 11.08 Severability 51 Section 11.09 Governing Law
51 Section 11.10 Interpretation 51 Section 11.11 Specific Performance;
Jurisdiction. 51 Section 11.12 Titles and Headings 52 Section 11.13 Waiver of
Jury Trial 52 Section 11.14 Expenses 52 Section 11.15 No Presumption Against
Drafting Party 52

 

Exhibit A Form of Voting Agreement Exhibit B Form of Merger Agreement

 

iii 

 

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of December 30,
2015, is by and among (i) Emclaire Financial Corp, a Pennsylvania corporation
(“Emclaire”), (ii) The Farmers National Bank of Emlenton (“Farmers National”), a
national banking association and wholly owned subsidiary of Emclaire, and (iii)
United-American Savings Bank, a Pennsylvania chartered savings bank (“UA Bank”).

 

RECITALS

 

1.          Emclaire owns all of the issued outstanding capital stock of Farmers
National. In order to consummate the transactions contemplated by this
Agreement, Emclaire and Farmers National will establish a new interim national
bank (“Interim”) as a wholly owned subsidiary of Farmers National.

 

2.          The Board of Directors of Emclaire, Farmers National and UA Bank
each deem it advisable and in its best interests of their respective
shareholders for (i) Interim to merge with and into UA Bank, with UA Bank as the
surviving institution, and in connection therewith each outstanding share of UA
Bank common stock will be cancelled in exchange for the right to receive the
cash payment specified herein; and (ii) immediately thereafter, UA Bank will
merge with and into Farmers National, with Farmers National as the surviving
entity, all pursuant to the terms, conditions and procedures set forth in this
Agreement and the exhibits hereto.

 

3.          As a condition to the willingness of Emclaire and Farmers National
to enter into this Agreement, each of the directors and executive officers of UA
Bank has entered into a Voting and Non-Solicitation Agreement, substantially in
the form of Exhibit A hereto, dated as of the date hereof (the “Voting
Agreements”), pursuant to which each such director and executive officer has
agreed, among other things, to vote all shares of common stock of UA Bank owned
by such person in favor of the approval of this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth in
the Voting Agreements.

 

4.          The parties desire to provide for certain undertakings, conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement.

 

5.          In consideration of the premises and of the mutual representations,
warranties and covenants herein contained and intending to be legally bound
hereby, the parties hereby agree as follows:

 

ARTICLE 1
CERTAIN DEFINITIONS

 

Section 1.01         Definitions.

 

Except as otherwise provided herein, as used in this Agreement, the following
terms shall have the indicated meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

 

“Acquisition Proposal” has the meaning given to that term in Section 5.12(a) of
this Agreement.

 

“Affiliate” means, with respect to any Person, any Person who directly, or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such Person and, without limiting the generality
of the foregoing, includes any executive officer or director of such Person and
any Affiliate of such executive officer or director.

 

 1

 

 

“Agreement” has the meaning set forth in the Preamble.

 

“Applications” means the applications to be filed with the appropriate
Regulatory Authorities requesting approval or non-objection of the transactions
described in this Agreement.

 

“Bank Merger Act” means the provisions of Section 18(c) of the Federal Deposit
Insurance Act.

 

“Banking Code” means the Pennsylvania Banking Code of 1965.

 

“BHCA” means the Bank Holding Company Act of 1956, as amended.

 

“Burdensome Condition” has the meaning given to that term in Section 7.01 of
this Agreement.

 

“Call Reports” means UA Bank’s Consolidated Reports of Condition and Income
(FFIEC Form 041) or any successor form of the Federal Financial Institutions
Examination Council.

 

“Certificate” means certificates evidencing shares of UA Bank Common Stock held
by its shareholders.

 

“Closing” has the meaning given to that term in Section 2.03 of this Agreement.

 

“Closing Date” has the meaning given to that term in Section 2.03 of this
Agreement.

 

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

 

“Confidentiality Agreement” has the meaning given to that term in Section
5.12(b) of this Agreement.

 

“Continuing Employee” has he meaning given that term in Section 6.08 of this
Agreement.

 

“Department” shall mean the Pennsylvania Department of Banking and Securities.

 

“Dissenting Shares” shall have the meaning set forth in Section 2.05.

 

“Dissenting Shareholder” shall have the meaning set forth in Section 2.05.

 

“Dodd-Frank Act” means the Dodd-Frank Wall Street Reform and Consumer Protection
Act.

 

“Effective Time” has the meaning given to that term in Section 2.03 of this
Agreement.

 

“Emclaire” has the meaning set forth in the Preamble.

 

“Emclaire Subsidiary” means a Subsidiary of Emclaire.

 

“Emclaire Regulatory Agreement” has the meaning given to that term in Section
4.06(b) of this Agreement.

 

“Emclaire Disclosure Schedules” means the Disclosure Schedules delivered by
Emclaire to UA Bank pursuant to Article 4 of this Agreement.

 

 2

 

 

“Environmental Laws” means any applicable Federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any Governmental
Entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface soil, plant and
animal life or any other natural resource), and/or (2) the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Materials of Environmental Concern.
The term Environmental Laws includes without limitation (a) the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
§9601, et seq; the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
§6901, et seq; the Clean Air Act, as amended, 42 U.S.C. §7401, et seq; the
Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251, et seq; the
Toxic Substances Control Act, as amended, 15 U.S.C. §2601, et seq; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. §11001, et seq; the Safe
Drinking Water Act, 42 U.S.C. §300f, et seq; and all comparable state and local
laws, and (b) any common law (including without limitation common law that may
impose strict liability) that may impose liability or obligations for injuries
or damages due to the presence of or exposure to any Materials of Environmental
Concern.

 

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

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated from time to time thereunder.

 

“Exchange Agent” means the bank or trust company or other agent designated by
Emclaire, and reasonably acceptable to UA Bank, that shall act as agent for
Emclaire and Farmers National in connection with the exchange procedures for
converting Certificates into the Merger Consideration.

 

“Exchange Fund” has the meaning given to that term in Section 2.07 of this
Agreement.

 

“Excluded Shares” has the meaning given to that term in Section 2.04(a) of this
Agreement.

 

“Farmers National” has the meaning set forth in the Preamble.

 

“FDIA” means the Federal Deposit Insurance Act, as amended.

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

“FHLB” means the Federal Home Loan Bank of Pittsburgh.

 

“First Merger” means the merger of Interim with and into UA Bank, with UA Bank
as the surviving institution.

 

“FRB” means the Board of Governors of the Federal Reserve System, and, where
appropriate, the Federal Reserve Bank of Cleveland.

 

“GAAP” means accounting principles generally accepted in the United States of
America as in effect at the relevant date and consistently applied.

 

“Governmental Entity” means any Federal or state court, administrative agency or
commission or other governmental authority or instrumentality.

 

“HIPAA” has the meaning given to that term in Section 3.12(b) of this Agreement.

 

“Interim” has the meaning set forth in the Recitals.

 

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“IRS” means the Internal Revenue Service of the United States.

 

“Knowledge” means those facts that are known, with respect to UA Bank, those
persons set forth on UA Bank Disclosure Schedule 1.01(a), and with respect to
Emclaire, those persons set forth on Emclaire Disclosure Schedule 1.01(a), and
with respect to both parties includes any facts, matters or circumstances set
forth in any written notice from any Regulatory Authority or Governmental Entity
or any other written notice received by that Person.

 

“Material Adverse Effect” means, with respect to Emclaire or UA Bank,
respectively, any effect that (i) is material and adverse to the financial
condition, results of operations or business of Emclaire and the Emclaire
Subsidiaries taken as a whole, or UA Bank, respectively, or (ii) does or would
materially impair the ability of Emclaire, on the one hand, or UA Bank, on the
other hand, to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the transactions
contemplated by this Agreement; provided that none of the following (or the
impact thereof) shall be taken into account: (a) changes in laws and regulations
affecting banks or thrift institutions or their holding companies generally, or
interpretations thereof by Governmental Entities, (b) changes in GAAP or
regulatory accounting principles generally applicable to financial institutions
and their holding companies, (c) changes attributable to or resulting from
changes in general economic conditions, including changes in the prevailing
level of interest rates, credit availability and liquidity, (d) actions and
omissions of a party hereto (or any of a party’s Subsidiaries) taken with the
prior written consent of the other party, (e) the announcement of this Agreement
and the transactions contemplated hereby, and compliance with this Agreement on
the business, financial condition or results of operations of the parties and
their respective Subsidiaries, including the expenses incurred by the parties
hereto in consummating the transactions contemplated by this Agreement, (f) any
legal actions asserted or other actions initiated by any holder of shares of UA
Bank Common Stock or holder of the capital stock of Emclaire arising out of or
related to this Agreement, and (g) changes in national or international
political or social conditions including the engagement by the United States in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or the occurrence of any military or terrorist attack upon or within the
United States, or any of its territories, possessions or diplomatic or consular
offices or upon any military installation, equipment or personnel of the United
States; except, with respect to clauses (a), (b), (c) and (g), hereof, to the
extent that UA Bank or Emclaire and its Subsidiaries, taken as a whole, as the
case may be, are disproportionately adversely affected by such effect as
compared to similarly situated community banks or their holding companies
located in the United States.

 

“Material Contracts” shall have the meaning given that term in Section 3.08(c)
of this Agreement.

 

“Materials of Environmental Concern” means pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products, and any other hazardous or
toxic materials regulated under Environmental Laws.

 

“Merger Agreement” means the Agreement of Merger substantially in the form of
Exhibit B hereto.

 

“Merger Consideration” has the meaning given to that term in Section 2.04(b) of
this Agreement.

 

“Mergers” means collectively the First Merger and the Second Merger.

 

“Notice of Superior Proposal” has the meaning given to that term in Section
5.12(e) of this Agreement.

 

“OCC” means the Office of the Comptroller of the Currency of the U.S. Department
of the Treasury.

 

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“Option Consideration” has the meaning given to that term in Section 2.06 of
this Agreement.

 

“Other Real Estate Owned” and “OREO” mean real estate or loans secured by real
estate that are classified or would be classified, under bank regulatory
accounting principles, as: “loans to facilitate”; “other real estate owned”;
“in-substance foreclosure”; “in-substance repossession”; foreclosed real estate;
and real estate acquired for debts previously contracted.

 

“Participation Facility” means any facility in which UA Bank participates in the
management of such facility, whether as lender in control of the facility, owner
or operator.

 

“PBCL” means the Pennsylvania Business Corporation Law.

 

“Pension Plan” has the meaning given to that term in Section 3.12(b) of this
Agreement.

 

“Person” means any individual, corporation (profit or not-for-profit), general
or limited partnership, joint venture, limited liability company, estate
association, trust association, or jurisdiction, Government Entity “group” (as
that term is defined under the Exchange Act) or any other entity of any kind of
nature.

 

“Pre-Closing” has the meaning given to that term in Section 9.01 of this
Agreement.

 

“Proxy Statement” has the meaning given to that term in Section 5.13 of this
Agreement

 

“Regulatory Approvals” means the approvals of the Regulatory Authorities that
are necessary in connection with the consummation of the First Merger and the
Second Merger and the related transactions contemplated by this Agreement.

 

“Regulatory Authority” or “Regulatory Authorities” means any agency or
department of any Federal or state government having supervisory jurisdiction
over the parties or the transactions contemplated by this Agreement, including
without limitation the OCC, the FRB, the FDIC and the Department.

 

“Right” means any warrant, option, right, convertible security or other capital
stock equivalent that obligates an entity to issue its securities.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Second Merger” means the merger of UA Bank, as the surviving institution of the
First Merger, with and into Farmers National, with Farmers National as the
surviving entity, which Second Merger shall immediately follow the First Merger.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated from time to time thereunder.

 

“Subsidiary” means, with respect to any Person, any other Person of which at
least a majority of the securities or other equity interests having by their
terms ordinary voting power to elect more than 50% of the board of directors or
other persons performing similar functions are owned or controlled, directly or
indirectly, by such Person and/or by one or more of its Subsidiaries.

 

“Superior Proposal” has the meaning given to that term in Section 5.12(b) of
this Agreement.

 

“Termination Date” means October 31, 2016.

 

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“Termination Fee” has the meaning given to that term in Section 10.02(b)(iii) of
this Agreement.

 

“Treasury Stock” has the meaning given to that term in Section 2.04(a) of this
Agreement.

 

“UA Bank” has the meaning set forth in the Preamble.

 

“UA Bank Common Stock” means the common stock of UA Bank described in Section
3.02(a).

 

“UA Bank Compensation and Benefit Plans” has the meaning given to that term in
Section 3.12(a) of this Agreement.

 

“UA Bank Director Plan” means the UA Bank Directors Change in Control Severance
Plan.

 

“UA Bank Disclosure Schedules” means the Disclosure Schedules delivered by UA
Bank to Emclaire pursuant to Article 3 of this Agreement.

 

“UA Bank ERISA Affiliate” has the meaning given to that term in Section 3.12(c)
of this Agreement.

 

“UA Bank ESOP” means the employee stock ownership plan maintained by UA Bank.

 

“UA Bank Financial Statements” means (i) the balance sheets (including related
notes and schedules, if any) of UA Bank as of December 31, 2014 and 2013 and the
related statements of income, comprehensive income (loss), changes in
stockholders equity and cash flows (including related notes and schedules, if
any) for each of the years ended December 31, 2014 and 2013 as audited and made
available to shareholders of UA Bank, and (ii) the balance sheets of UA Bank
(including related notes and schedules, if any) and related statements of
income, comprehensive income, changes in stockholders equity and cash flows
(including related notes and schedules, if any), with respect to any year ending
subsequent to December 31, 2014.

 

“UA Bank Options” has the meaning given to that term in Section 2.06 of this
Agreement.

 

“UA Bank Option Plan” means the UA Bank 2011 Stock Option Plan.

 

“UA Bank 401(k) Plan” has the meaning given to that term in Section 6.08(e) of
this Agreement.

 

“UA Bank Preferred Stock” shall mean each authorized share of serial preferred
stock of UA Bank.

 

“UA Bank Recommendation” has the meaning given to that term in Section 5.13 of
this Agreement.

 

“UA Bank Regulatory Agreement” has the meaning given to that term in Section
3.11(c) of this Agreement.

 

“UA Bank Regulatory Reports” means the Call Reports of UA Bank and accompanying
schedules, as filed with the Federal Financial Institutions Examination Council,
for each calendar quarter beginning with the quarter ended December 31, 2014,
through the Closing Date.

 

“UA Bank Representatives” has the meaning given to that term in Section 5.12(a)
of this Agreement.

 

“UA Bank Restricted Stock Plan” means the 2011 Stock Bonus Plan and Trust
Agreement of UA Bank.

 

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“UA Bank Shareholders” has the meaning given to that term in Section 2.04(b) of
this Agreement.

 

“UA Bank Shareholder Approval” has the meaning given to that term in Section
3.03(a) of this Agreement.

 

“UA Bank Shareholders Meeting” has the meaning given to that term in Section
5.13(a) of this Agreement.

 

“UA Bank Subsequent Determination” has the meaning given to that term in Section
5.12(e) of this Agreement.

 

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools to Intercept and Obstruct Terrorism Act of 2001.

 

“Voting Agreements” has the meaning given to that term in the Recitals.

 

ARTICLE 2
THE MERGER AND RELATED MATTERS

 

Section 2.01         Effects of Merger; Surviving Entities.

 

The Mergers will be effected as follows:

 

(a)          The First Merger. Interim shall merge with and into UA Bank, with
UA Bank as the surviving institution in the Merger. The separate existence of
Interim shall cease, and all of the property (real, personal and mixed), rights,
powers and duties and obligations of Interim shall be transferred to and assumed
by UA Bank as the surviving entity in the First Merger, without further act or
deed, all in accordance with the Banking Code, the Bank Merger Act and the
regulations of the OCC. The Articles of Incorporation and Bylaws of UA Bank as
in effect immediately prior to the Effective Time shall be the Articles of
Incorporation and Bylaws of the surviving entity, until thereafter amended as
provided therein and by applicable law. The directors and officers of Interim
immediately prior to the Effective Time shall be the initial directors and
officers of the surviving entity, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the surviving entity. The directors of
UA Bank immediately prior to the Effective Time shall submit their resignations,
to be effective as of the Effective Time. The First Merger shall be carried out
in accordance with the terms of this Agreement and the Merger Agreement
substantially in the form of Exhibit B hereto.

 

(b)          The Second Merger. Immediately following the First Merger, UA Bank
will merge with and into Farmers National, with Farmers National as the
surviving entity. The separate existence of UA Bank shall cease, and all of the
property (real, personal and mixed), rights, powers and duties and obligations
of UA Bank shall be transferred to and assumed by Farmers National as the
surviving institution in the Second Merger, without further act or deed, all in
accordance with the National Bank Consolidation and Merger Act. The Articles of
Association and Bylaws of Farmers National as in effect immediately prior to the
effective time of the Second Merger shall be the Articles of Association and
Bylaws of the surviving entity, until thereafter amended as provided therein and
by applicable law. The directors and officers of Farmers National immediately
prior to the effective time of the Second Merger shall be the initial directors
and officers of the surviving entity, each to hold office in accordance with the
Articles of Association and Bylaws of the surviving entity.

 

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Section 2.02         Effect on Outstanding Shares of Interim Common Stock.

 

At and after the Effective Time, and as a result of the First Merger, each share
of Interim common stock issued and outstanding immediately prior to the
Effective Time shall be converted into one share of UA Bank Common Stock.

 

Section 2.03         Closing; Effective Time.

 

The closing (“Closing”) shall occur upon no less than two business days’ notice
by Emclaire to UA Bank and no later than the close of business on the tenth
business day following, the satisfaction or (to the extent permitted by
applicable law) waiver of the conditions set forth in Article VIII (other than
those conditions that by their terms are to be satisfied at the Closing, but
subject to the satisfaction or (to the extent permitted by applicable law)
waiver of those conditions), or such other date that may be agreed to in writing
by the parties. The First Merger shall be effected by the filing of articles of
merger (the “Articles of Merger”) with the Pennsylvania Department of State on
the date of closing (the “Closing Date”), in accordance with Section 1606 of the
Banking Code. The “Effective Time” means the date and time upon which the
Articles of Merger are filed with the Pennsylvania Department of State, or such
later date and time as may be specified in the Articles of Merger or as
specified by the Department.

 

Section 2.04         Conversion of UA Bank Common Stock; Merger Consideration.

 

At the Effective Time, by virtue of the Merger and without any action on the
part of Emclaire, Farmers National, Interim or UA Bank or the holders of any of
the shares of UA Bank Common Stock, the First Merger shall be effected in
accordance with the following terms:

 

(a)          All shares of UA Bank Common Stock held in the treasury of UA Bank
(“Treasury Stock”) and each share of UA Bank Common Stock owned by Emclaire or
its Affiliates immediately prior to the Effective Time (other than shares held
in a fiduciary capacity or in connection with debts previously contracted)
(“Excluded Shares”) shall, at the Effective Time, cease to exist, and the
certificates for such shares shall be canceled as promptly as practicable
thereafter, and no payment or distribution shall be made in consideration
therefore.

 

(b)          Each share of UA Bank Common Stock issued and outstanding
immediately prior to the Effective Time (other than Excluded Shares and
Dissenting Shares) held by the shareholders of UA Bank (“UA Bank Shareholders”)
shall become and be converted into, as provided in and subject to the terms set
forth in this Agreement, the right to receive a cash payment equal to $42.67
(the “Merger Consideration”).

 

(c)          After the Effective Time, shares of UA Bank Common Stock issued and
outstanding immediately prior to the Effective Time shall be no longer
outstanding and shall automatically be canceled and shall cease to exist, and,
except as to Excluded Shares and Dissenting Shares, shares held by UA Bank
Shareholders shall thereafter by operation of this section represent the right
to receive the Merger Consideration.

 

Section 2.05         Dissenting Shares.

 

Notwithstanding anything in this Agreement to the contrary, shares of UA Bank
Common Stock issued and outstanding immediately prior to the Effective Time and
held by a shareholder who has perfected his right to dissent under applicable
provisions of the Banking Code and the PBCL (“Dissenting Shares”) shall not be
converted into a right to receive the Merger Consideration, unless such
shareholder withdraws or otherwise loses his, her or its right to appraisal.
From and after the Effective Time, a shareholder who has properly exercised such
appraisal rights shall not have any rights of a shareholder of UA Bank or the
Surviving Corporation with respect to such share of UA Bank Common Stock, except
those provided under applicable provisions of the Banking Code and the PBCL (any
shareholder duly making such demand being hereinafter called a “Dissenting
Shareholder”). A Dissenting Shareholder shall be entitled to receive payment of
the appraised value of such share of UA Bank Common Stock held by him in
accordance with the applicable provisions of the Banking Code and the PBCL,
unless, after the Effective Time, such shareholder fails to perfect or withdraws
or loses his right to appraisal, in which case such shares of UA Bank Common
Stock shall be converted into and represent only the right to receive the Merger
Consideration, without interest thereon, upon surrender of the Certificates,
pursuant to Section 2.07. Emclaire shall have the right to participate in all
discussions, negotiations and proceedings with respect to any such demands for
appraisal. UA Bank shall not, except with the prior written consent of Emclaire,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for appraisal, or waive any failure to timely deliver a written
demand for appraisal or the taking of any other action by such Dissenting
Shareholder as may be necessary to perfect appraisal rights under the Banking
Code and the PBCL.

 

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Section 2.06         Treatment of UA Bank Options and Restricted Stock Awards.

 

(a)          Holders of all outstanding and unexercised options to acquire
shares of UA Bank Common Stock (“UA Bank Options”) under the UA Bank Option
Plan, whether or not vested, as of the Effective Time will be entitled to
receive a cash payment from UA Bank equal to the product of (i) the number of
shares of UA Bank Common Stock subject to such UA Bank Option at the Effective
Time and (ii) the amount by which $42.67 exceeds the exercise price per share of
such UA Bank Option (the “Option Consideration”). The Option Consideration shall
be treated as compensation and shall be payable net of any applicable federal
and state income and employment withholding taxes. In the event that the
exercise price of a UA Bank Option is greater than or equal to $42.67, then the
holders thereof shall not be entitled to receive the Option Consideration, and
at the Effective Time such UA Bank Option shall be canceled without any payment
made in exchange therefor. Subject to the foregoing, the UA Bank Option Plan,
including all underlying award agreements, and all UA Bank Options issued
thereunder, shall terminate at the Effective Time. Prior to the Effective Time,
UA Bank shall take all actions as necessary to give effect to the provisions of
this Section 2.06, including, without limitation, taking such actions as are
necessary or required under Section 8.1(b) of the UA Bank Option Plan.

 

(b)          At the Effective Time each outstanding and unvested award
previously granted under the UA Bank Restricted Stock Plan shall, in accordance
with the terms of such plan, be deemed to be 100% earned and non-forfeitable
(with the holder thereof paying any applicable federal and state income and
employment withholding taxes), and the holder thereof shall be entitled to
receive the Merger Consideration for the shares represented thereby in
accordance with the terms of this Agreement.

 

Section 2.07 Procedures for Exchange of UA Bank Common Stock.

 

(a)          At least one business day prior to the Effective Time, Farmers
National shall deposit, or shall cause to be deposited, with the Exchange Agent
for the benefit of the UA Bank Shareholders, for exchange in accordance with
this Article 2, an aggregate amount of cash equal to the aggregate amount of the
Merger Consideration payable pursuant to Section 2.04 (such cash being
hereinafter referred to as the “Exchange Fund”).

 

(b)          Emclaire shall cause the Exchange Agent, within five (5) business
days after the Effective Time, to mail to each holder of a Certificate or
Certificates, a form letter of transmittal for return to the Exchange Agent and
instructions for use in effecting the surrender of the Certificates for the
Merger Consideration into which the UA Bank Common Stock represented by such
Certificates shall have been converted as a result of the Merger. The letter of
transmittal (which shall contain no representations or warranties other than as
to ownership) shall be prepared by Emclaire prior to the Effective Time and
shall be subject to the approval of UA Bank (which shall not be unreasonably
withheld, conditioned or delayed) and specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent. Upon proper surrender of a Certificate
for exchange and cancellation to the Exchange Agent, together with a properly
completed letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor, as applicable, a check
representing the aggregate amount of Merger Consideration which such former
holder has the right to receive in respect of the Certificate(s) surrendered
pursuant to the provisions of this Section 2.07, and the Certificate(s) so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the Merger Consideration.

 

 9

 

 

(c)          The holder of a Certificate that prior to the Merger represented
issued and outstanding UA Bank Common Stock shall have no rights, after the
Effective Time, with respect to such UA Bank Common Stock except to surrender
the Certificate(s) in exchange for the Merger Consideration (or to perfect
his/her rights as a Dissenting Shareholder) as provided in this Agreement. After
the surrender of a Certificate in accordance with this Section 2.07, the record
holder thereof (other than as to Excluded Shares) shall be entitled to receive,
without any interest thereon, the Merger Consideration that has become payable
with respect to shares of UA Bank Common Stock represented by such Certificate.

 

(d)          If the Person surrendering a Certificate and signing the
accompanying letter of transmittal is not the record holder thereof, then it
shall be a condition of the payment of the Merger Consideration that: (i) such
Certificate is properly endorsed to such Person or is accompanied by appropriate
stock powers, in either case signed exactly as the name of the record holder
appears on such Certificate, and is otherwise in proper form for transfer, or is
accompanied by appropriate evidence of the authority of the Person surrendering
such Certificate and signing the letter of transmittal to do so on behalf of the
record holder; and (ii) the Person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
payment to a Person other than the registered holder of the Certificate
surrendered, or required for any other reason, or shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.

 

(e)          From and after the Effective Time, there shall be no transfers on
the stock transfer books of UA Bank of shares of UA Bank Common Stock that were
issued and outstanding immediately prior to the Effective Time other than to
settle transfers of UA Bank Common Stock that occurred prior to the Effective
Time. If, after the Effective Time, Certificates representing such shares
(except as to Excluded Shares and Dissenting Shares) are presented for transfer
to the Exchange Agent, they shall be exchanged for the Merger Consideration and
canceled as provided in this Article 2.

 

(f)          At any time following the twelve (12) month period after the
Effective Time, Farmers National shall be entitled to require the Exchange Agent
to deliver to it any portion of the Exchange Fund which had been made available
to the Exchange Agent and not disbursed to holders of Certificates (including,
without limitation, all interest and other income received by the Exchange Agent
in respect of all funds made available to it), and thereafter such holders shall
be entitled to look to Farmers National (subject to abandoned property, escheat
and other similar laws) with respect to any Merger Consideration that may be
payable upon due surrender of the Certificates held by them. Notwithstanding the
foregoing, neither Emclaire or Farmers National nor the Exchange Agent shall be
liable to any holder of a Certificate for any Merger Consideration delivered in
respect of such Certificate to a public official pursuant to applicable
abandoned property, escheat or other similar law.

 

(g)          In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if reasonably required by
Farmers National, the posting by such person of a bond in such amount as Farmers
National may reasonably direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof.

 

 10

 

 

(h)          Farmers National or the Exchange Agent will be entitled to deduct
and withhold from the consideration otherwise payable pursuant to this Agreement
or the transactions contemplated hereby to any holder of UA Bank Common Stock
such amounts as Farmers National (or any Affiliate thereof) or the Exchange
Agent are required to deduct and withhold with respect to the making of such
payment under the Code, or any applicable provision of U.S. federal, state,
local or non-U.S. tax law. To the extent that such amounts are properly withheld
by Farmers National or the Exchange Agent, and represent tax liabilities of the
holder of UA Bank Common Stock, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of UA Bank Common
Stock in respect of whom such deduction and withholding were made by Farmers
National or the Exchange Agent.

 

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF UA BANK

 

UA Bank represents and warrants to Emclaire that the statements contained in
this Article 3 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article 3), except as set forth in the UA Bank Disclosure
Schedules delivered to Emclaire on the date hereof, and except as to any
representation or warranty which relates to a specific date. UA Bank has made a
good faith effort to ensure that the disclosure on each schedule of the UA Bank
Disclosure Schedules corresponds to the section reference herein. However, for
purposes of the UA Bank Disclosure Schedules, any item disclosed on any schedule
therein is deemed to be fully disclosed with respect to all schedules under
which such item may be relevant and to the extent that it is reasonably clear on
the face of such schedule that such item applies to such other schedule.

 

Section 3.01         Organization.

 

(a)          UA Bank is a savings bank organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania. Except as set forth
in UA Bank Disclosure Schedule 3.01(a), UA Bank does not possess, directly or
indirectly, any 10% or greater equity interest in any corporate entity, except
for equity interests held in its investment portfolio, equity interests held by
UA Bank in a fiduciary capacity, and equity interests held in connection with
its lending activities, including its ownership of stock in the FHLB. UA Bank
has the full corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing would not have a Material Adverse Effect
on UA Bank. The deposits of UA Bank are insured by the FDIC to the fullest
extent permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due by UA Bank.

 

(b)          UA Bank is a member in good standing of the FHLB and owns the
requisite amount of stock therein.

 

(c)          The minute books of UA Bank have been made available to Emclaire
and accurately record, in all material respects, all material corporate actions
of its shareholders and board of directors (including committees) through the
date of this Agreement.

 

 11

 

 

(d)          Prior to the date of this Agreement, UA Bank has made available to
Emclaire true and correct copies of the articles of incorporation and bylaws of
UA Bank.

 

(e)          UA Bank has no Subsidiaries.

 

Section 3.02         Capitalization.

 

(a)          The authorized capital stock of UA Bank consists of 10,000,000
shares of common stock, par value $0.01 per share (“UA Bank Common Stock”), and
5,000,000 shares of serial preferred stock (“UA Bank Preferred Stock”). There
are 309,547 shares of UA Bank Common Stock outstanding, validly issued, fully
paid and nonassessable and free of preemptive rights. There are no shares of UA
Bank Preferred Stock outstanding. There are no shares of UA Bank Common Stock
held by UA Bank as treasury stock. Other than outstanding UA Bank Options, UA
Bank does not have and is not bound by any Right of any character relating to
the purchase, sale, issuance or voting of, or right to receive dividends or
other distributions on, any shares of UA Bank Common Stock, or any other
security of UA Bank, or any securities representing the right to vote, purchase
or otherwise receive any shares of UA Bank Common Stock or any other security of
UA Bank.

 

(b)          There are 29,764 shares of UA Bank Common Stock reserved for
issuance under the UA Bank Option Plan (including 29,760 shares of UA Bank
Common Stock that are subject to outstanding UA Bank Options). UA Bank
Disclosure Schedule 3.12(j) sets forth a complete and accurate list of all
outstanding UA Bank Options, including the names of the optionees, dates of
grant, exercise prices, dates of vesting, dates of termination, number of shares
of UA Bank Common Stock subject to each grant and whether stock appreciation,
limited or other similar rights were granted in connection under the UA Bank
Option Plan.

 

Section 3.03         Authority; No Violation.

 

(a)          UA Bank has full corporate power and authority to execute and
deliver this Agreement, and, subject to the adoption and approval of this
Agreement by the holders of two-thirds of the votes entitled to be cast by
holders of issued and outstanding UA Bank Common Stock at a meeting of
shareholders called for that purpose (“UA Bank Shareholder Approval”) and
receipt of the Regulatory Approvals and compliance with the conditions contained
therein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by UA Bank and the completion by UA Bank of the
transactions contemplated hereby have been duly and validly approved by the
requisite vote of Board of Directors of UA Bank, and, except for the UA Bank
Shareholder Approval, no other proceeding on the part of UA Bank is necessary to
complete the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by UA Bank and, subject to the UA Bank
Shareholder Approval and the receipt of the required Regulatory Approvals,
constitutes the valid and binding obligation of UA Bank, enforceable against UA
Bank in accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors’ rights generally, the conservatorship and
receivership provisions of the FDIA, and subject, as to enforceability, to
general principles of equity.

 

(b)          Subject to the receipt of the Regulatory Approvals and the
compliance with any conditions contained therein and the UA Bank Shareholder
Approval,

 

    (A)         the execution and delivery of this Agreement by UA Bank,

 

    (B)         the consummation of the transactions contemplated hereby, and

 

    (C)         compliance by UA Bank with any of the terms or provisions
hereof,

 

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will not: (i) conflict with or result in a material breach of any provision of
the articles of incorporation, charters, bylaws, or any other governing
documents of UA Bank; (ii) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to UA Bank or
any of the properties or assets of UA Bank; or (iii) violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
result in the termination of, accelerate the performance required by, or result
in a right of termination or acceleration or the creation of any lien, security
interest, charge or other encumbrance upon any of the properties or assets of UA
Bank under any of the terms, conditions or provisions of any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
investment or obligation to which UA Bank is a party, or by which it or any of
its properties or assets may be bound or affected, except in the case of Section
3.03(b)(ii) or 3.03(b)(iii), for violations which, individually or in the
aggregate, would not have a Material Adverse Effect on UA Bank.

 

(c)          The UA Bank Shareholder Approval is the only vote of holders of any
class of UA Bank’s capital stock necessary to adopt and approve this Agreement
and the transactions contemplated hereby (other than the Second Merger).

 

(d)          The board of directors of UA Bank, by resolution duly adopted by
unanimous vote of the entire board of directors at a meeting duly called and
held, has (i) determined that this Agreement, the First Merger and the other
transactions contemplated hereby are fair to and in the best interests of UA
Bank and its shareholders and declared the First Merger to be advisable, and
(ii) recommended that the shareholders of UA Bank approve this Agreement and
directed that such matter be submitted for consideration by the UA Bank
Shareholders at the UA Bank Shareholders Meeting to the extent required.

 

Section 3.04         Consents.

 

Except as set forth in UA Bank Disclosure Schedule 3.04 and for (a) filings with
the Regulatory Authorities, the receipt of the Regulatory Approvals, and
compliance with any conditions contained therein, (b) the filing of the Articles
of Merger with the Pennsylvania Department of State, and such other filings as
may be required for the First Merger and (c) the receipt of the UA Bank
Shareholder Approval, no consents, waivers or approvals of, or filings or
registrations with, any other third parties are necessary, in connection with
(x) the execution and delivery of this Agreement by UA Bank, and (y) the
completion of the First Merger by UA Bank or any other transactions contemplated
hereby, other than any consent, waiver, approval, or filing the failure of which
to obtain, individually or in the aggregate, would have not a Material Adverse
Effect on UA Bank. As of the date hereof, to the Knowledge of UA Bank, no fact
or circumstance exists, including any possible other transaction pending or
under consideration by UA Bank or any of its Affiliates, that (a) would
reasonably be expected to prevent or delay, in any material respect, (i) any
filings with or approvals or waivers required from the FRB, the OCC, the FDIC
and the Department or (ii) any other required Regulatory Approval or (b) would
cause a Regulatory Authority or Governmental Entity to seek to prohibit or
materially delay consummation of the transactions contemplated hereby or impose
a condition or conditions that, individually or in the aggregate, would have a
Material Adverse Effect on, or would materially and adversely affect the
business, operations, financial condition, property or assets of the combined
enterprise of the parties hereto.

 

Section 3.05         Financial Statements.

 

(a)          The UA Bank Financial Statements with respect to periods ending
prior to the date of this Agreement (i) are true, accurate and complete in all
material respects, (ii) have been prepared in accordance with GAAP and
regulatory accounting principles consistently applied, except as may be
otherwise indicated in the notes thereto, and (iii) fairly present in all
material respects the financial condition of UA Bank as of the respective dates
set forth therein and the results of operations, shareholders’ equity and cash
flows of UA Bank for the respective periods set forth therein. The UA Bank
Financial Statements to be prepared after the date of this Agreement and prior
to the Closing (A) will be true, accurate and complete in all material respects,
(B) will have been prepared in accordance with GAAP and regulatory accounting
principles consistently applied, except as may be otherwise indicated in the
notes thereto, and (C) will fairly present in all material respects the
financial condition of UA Bank as of the respective dates set forth therein and
the results of operations shareholders’ equity and cash flows of UA Bank for the
respective periods set forth therein. The UA Bank Call Reports with respect to
periods ending after December 31, 2012 and through the date of this Agreement
have been prepared and filed in conformity with the requirements of applicable
Regulatory Authorities and were correct and complete in all material respects
when filed (or when filed as amended, if applicable). The UA Bank Call Reports
to be prepared for periods ending after the date of this Agreement and filed
prior to the Closing will be prepared and filed in conformity with the
requirements of applicable Regulatory Authorities and will be correct and
complete in all material respects when filed.

 

 13

 

 

(b)          The books and records of UA Bank have been, and are being,
maintained in all material respects in accordance with GAAP and all other
applicable legal and accounting requirements and reflect only actual
transactions.

 

(c)          UA Bank has timely filed all reports, forms, schedules,
registrations, statements and other documents, together with any amendments
required to be made with respect thereto, that it was required to file since
December 31, 2012 with any Governmental Entity and has paid all fees and
assessments due and payable in connection therewith.  All such documents were
complete and accurate in all material respects and in compliance in all material
respects with the requirements of all applicable laws.

 

(d)          The records, systems, controls, data and information of UA Bank are
recorded, stored, maintained and operated under means (including any electronic,
mechanical or photographic process, whether computerized or not) that are under
the exclusive ownership and direct control of it or its accountants (including
all means of access thereto and therefrom), except for any non-exclusive
ownership and non-direct control that would not reasonably be expected to have a
material adverse effect on the system of internal accounting controls described
in the following sentence.  UA Bank has devised and maintained a system of
internal accounting controls sufficient to provide reasonable assurances (i)
that the assets of UA Bank are properly recorded and (ii) regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP. No reportable conditions or
material weaknesses (each as defined in AU 325 of the AICPA Professional
Standards) have been discovered in connection with the audits of the UA Bank
Financial Statements by UA Bank’s certified public accountants.

 

(e)          UA Bank has no Knowledge of (i) any significant deficiency or
material weakness in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect in any material
respect its ability to record, process, summarize and report financial
information or (ii) any fraud, whether or not material, that involves management
or other employees who have a significant role in its internal controls over
financial reporting.

 

(f)          Since December 31, 2014, (i) neither UA Bank nor, to its Knowledge,
any of its directors, officers, employees, auditors, accountants or
representatives has received or otherwise had or obtained knowledge of any
material complaint, allegation, assertion or claim, whether written or oral,
regarding its accounting or auditing practices, procedures, methodologies or
methods or its internal accounting controls, including any material complaint,
allegation, assertion or claim that it has engaged in questionable accounting or
auditing practices, and (ii) no attorney representing it, whether or not
employed by it, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by it or any of its
officers, directors, employees or agents to its board of directors or any
committee thereof or to any of its directors or officers.  

 

 14

 

 

(g)          Since December 31, 2014, UA Bank has not incurred any material
liability other than in the ordinary course of business consistent with past
practice that would be required to be reflected in, or reserved against or
disclosed on, a balance sheet prepared in accordance with GAAP.

 

Section 3.06         Taxes.

 

UA Bank has filed all material federal, state and local tax returns required to
be filed by it on or prior to the Closing Date, taking into account any
extensions (all such returns, to the Knowledge of UA Bank, being accurate and
correct in all material respects) and has paid or made provisions for the
payment of all material federal, state and local income taxes shown thereon
which have been incurred by or are due on or prior to the date hereof other than
taxes or other charges which (a) are not delinquent, (b) are being contested in
good faith, or (c) have not yet been fully determined. As of the date of this
Agreement, UA Bank has not received written notice of, and to Knowledge of UA
Bank there is no audit examination, deficiency assessment, tax investigation or
refund litigation with respect to any taxes of UA Bank, and no written claim has
been made by any authority in a jurisdiction where UA Bank does not file tax
returns that UA Bank is subject to taxation in that jurisdiction. UA Bank has
not executed an extension or waiver of any statute of limitations on the
assessment or collection of any material tax due that is currently in effect. UA
Bank has withheld and paid all material taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party, and UA Bank has complied
with all material applicable information reporting requirements under Part III,
Subchapter A of Chapter 61 of the Code and similar applicable state and local
information reporting requirements. Since December 31, 2014, through and
including the date of this Agreement, UA Bank has not made any material election
for federal or state income tax purposes.

 

Section 3.07         No Material Adverse Effect.

 

UA Bank has not suffered any Material Adverse Effect since December 31, 2014 and
no event has occurred or circumstance arisen since that date which, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
UA Bank.

 

Section 3.08         Material Contracts; Leases; Defaults.

 

(a)          Except as set forth in UA Bank Disclosure Schedule 3.08(a), UA Bank
is not a party to or subject to: (i) any agreement which by its terms limits the
payment of dividends by UA Bank; (ii) any instrument evidencing or related to
indebtedness for borrowed money whether directly or indirectly, by way of
purchase money obligation, conditional sale, lease purchase, guaranty or
otherwise, in respect of which UA Bank is an obligor to any person, which
instrument evidences or relates to such indebtedness other than deposits,
repurchase agreements, FHLB advances, bankers’ acceptances, and “treasury tax
and loan” accounts and transactions in “federal funds” in each case established
in the ordinary course of business consistent with past practice, or which
contains financial covenants or other restrictions (other than those relating to
the payment of principal and interest when due) which would be applicable on or
after the Closing Date to Emclaire or any Emclaire Subsidiary; (iii) any other
agreement, written or oral, that obligates UA Bank for the payment of more than
$10,000 annually or for the payment of more than $25,000 over its remaining
term, which is not terminable without cause on 60 days’ or less notice without
penalty or payment (other than agreements for commercially available
“off-the-shelf” software), or (iv) any agreement (other than this Agreement),
contract, arrangement, commitment or understanding (whether written or oral)
that restricts or limits in any material way the conduct of business by UA Bank
(it being understood that any non-compete or similar provision shall be deemed
material, but any limitation on the scope of any license granted under any such
agreement shall not be deemed material).

 

 15

 

 

(b)          Each real estate lease that requires the consent of the lessor or
its agent resulting from the Mergers by virtue of the terms of any such lease is
listed in UA Bank Disclosure Schedule 3.08(b). Subject to any consents that may
be required as a result of the transactions contemplated by this Agreement, to
its Knowledge, UA Bank is not in default in any material respect under any
material contract, agreement, commitment, arrangement, lease, insurance policy
or other instrument to which it is a party, by which its assets, business, or
operations may be bound or affected, or under which it or its assets, business,
or operations receive benefits, and there has not occurred any event that, with
the lapse of time or the giving of notice or both, would constitute such a
default.

 

(c)          True and correct copies of agreements, contracts, arrangements and
instruments referred to in Section 3.08(a) and (b) (“Material Contracts”) have
been made available to Emclaire on or before the date hereof, and are in full
force and effect on the date hereof and UA Bank (and, to the Knowledge of UA
Bank, any other party to any such contract, arrangement or instrument) has not
materially breached any provision of, and is not in default in any respect under
any term of, any Material Contract. Except as listed on UA Bank Disclosure
Schedule 3.08(c), no party to any Material Contract will have the right to
terminate any or all of the provisions of any such Material Contract as a result
of the execution of, and the consummation of the transactions contemplated by,
this Agreement.

 

(d)          Except as set forth in UA Bank Disclosure Schedule 3.08(d), since
December 31, 2014, through and including the date of this Agreement, UA Bank has
not (i) made any material change in the credit policies or procedures of UA
Bank, the effect of which was or is to make any such policy or procedure less
restrictive in any material respect, (ii) made any material acquisition or
disposition of any assets or properties, or entered into any contract for any
such acquisition or disposition, other than loans and loan commitments in the
ordinary course of business consistent with past practice; (iii) entered into
any lease of real or personal property requiring annual payments in excess of
$10,000, other than in connection with foreclosed property or in the ordinary
course of business consistent with past practice, or (iv) changed any accounting
methods, principles or practices of UA Bank affecting its assets, liabilities or
businesses, including any reserving, renewal or residual method, practice or
policy.

 

Section 3.09         Ownership of Property; Insurance Coverage.

 

(a)          UA Bank has good and, as to real property, marketable title to all
material assets and properties owned by UA Bank in the conduct of its
businesses, whether such assets and properties are real or personal, tangible or
intangible, including assets and property reflected in the balance sheets
contained in the UA Bank Regulatory Reports and in the UA Bank Financial
Statements or acquired subsequent thereto (except to the extent that such assets
and properties have been disposed of in the ordinary course of business, since
the date of such balance sheets), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items which secure liabilities
for public or statutory obligations including but not limited to, real estate
taxes, assessments and other governmental levies, fees or charge or any discount
with, borrowing from or other obligations to the FHLB or inter-bank credit
facilities, (ii) statutory liens for amounts not yet delinquent or which are
being contested in good faith, (iii) non-monetary liens affecting real property
which do not adversely affect the value or use of such real property, (iv)
mechanics liens and similar liens for labor, materials, services or supplies
provided for such property incurred in the ordinary course of business for
amounts not yet delinquent or which are being contested in good faith and (v)
those described and reflected in the UA Bank Financial Statements.

 

(b)          With respect to all material agreements pursuant to which UA Bank
has purchased securities subject to an agreement to resell, if any, UA Bank has
a lien or security interest (which to UA Bank’s Knowledge is a valid, perfected
first lien) in the securities or other collateral securing the repurchase
agreement, and the value of such collateral equals or exceeds the amount of the
debt secured thereby.

 

 16

 

 

(c)          UA Bank currently maintains insurance considered by it to be
reasonable in all material respects for its operations. UA Bank has not received
notice from any insurance carrier during the past five years that (i) such
insurance will be canceled or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs (other than with respect to health or
disability insurance) with respect to such policies of insurance will be
substantially increased. There is presently no material claim pending under such
policies of insurance and no notice has been given by UA Bank under such
policies (other than with respect to health or disability insurance). All such
insurance is valid and enforceable and in full force and effect, and within the
last three years UA Bank has received each type of insurance coverage for which
it has applied and during such periods has not been denied indemnification for
any material claim submitted under any of its insurance policies. UA Bank
Disclosure Schedule 3.09(c) identifies all material policies of insurance
maintained by UA Bank as well as the other matters required to be disclosed
under this Section.

 

Section 3.10         Legal Proceedings.

 

Except as set forth in UA Bank Disclosure Schedule 3.10, UA Bank is not a party
to any, and there is no pending or, to the Knowledge of UA Bank, threatened
legal, administrative, arbitration or other proceeding, claim (whether asserted
or unasserted), action or governmental investigation or inquiry of any nature
(i) against UA Bank, (ii) to which UA Bank’s assets are or may be subject, (iii)
challenging the validity or propriety of any of the transactions contemplated by
this Agreement, or (iv) which could adversely affect the ability of UA Bank to
perform under this Agreement, except for any proceeding, claim, action,
investigation or inquiry which, if adversely determined, individually or in the
aggregate, would not be reasonably expected to have a Material Adverse Effect on
UA Bank.

 

Section 3.11         Compliance with Applicable Law.

 

(a)          To UA Bank’s Knowledge, UA Bank is in compliance in all material
respects with all applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees applicable to it,
its properties, assets and deposits, its business, and its conduct of business
and its relationship with its employees, including, without limitation, the USA
PATRIOT Act, the Equal Credit Opportunity Act, the Fair Housing Act, the
Community Reinvestment Act of 1977, the Home Mortgage Disclosure Act, the Bank
Secrecy Act and all other applicable fair lending laws and other laws relating
to discriminatory business practices and, except as described in UA Bank
Disclosure Schedule 3.11(a), UA Bank has not received any written notice to the
contrary. The Board of Directors of UA Bank has adopted and UA Bank has
implemented an anti-money laundering program that meets the requirements of
Sections 352 and 326 of the USA PATRIOT Act and the regulations thereunder and
has received no written notice from any Governmental Entity or Regulatory
Authority that such program (i) does not contain adequate and appropriate
customer identification verification procedures; or (ii) has been deemed
ineffective.

 

(b)          UA Bank has all material permits, licenses, authorizations, orders
and approvals of, and has made all filings, applications and registrations with,
all Governmental Entities and Regulatory Authorities that are required in order
to permit it to own or lease its properties and to conduct its business as
presently conducted except where the failure to hold such permits, licensees,
authorizations, orders or approvals, or the failure to make such filings,
applications or registrations would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on UA Bank; all such
permits, licenses, certificates of authority, orders and approvals are in full
force and effect in all material respects and, to the Knowledge of UA Bank, no
suspension or cancellation of any such permit, license, certificate, order or
approval is threatened or will result from the consummation of the transactions
contemplated by this Agreement, subject to obtaining Regulatory Approvals.

 

 17

 

 

(c)          There is no unresolved violation, criticism, or exception by any
Regulatory Authority with respect to any report or statement relating to any
examinations, inspections or investigations of UA Bank. For the period beginning
January 1, 2012, UA Bank has not received any written notification or, to UA
Bank’s Knowledge, any other communication from any Regulatory Authority (i)
asserting that UA Bank is not in material compliance with any of the statutes,
regulations or ordinances which such Regulatory Authority enforces; (ii)
threatening to revoke any license, franchise, permit or governmental
authorization which is material to UA Bank; (iii) requiring, or threatening to
require, UA Bank, or indicating that UA Bank may be required, to enter into a
cease and desist order, agreement or memorandum of understanding or any other
agreement with any federal or state governmental agency or authority which is
charged with the supervision or regulation of banks or engages in the insurance
of bank deposits restricting or limiting, or purporting to restrict or limit, in
any material respect the operations of UA Bank, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of UA Bank, including without limitation any restriction on the
payment of dividends (any such notice, communication, memorandum, agreement or
order described in this sentence is hereinafter referred to as a “UA Bank
Regulatory Agreement”). UA Bank has not consented to or entered into any UA Bank
Regulatory Agreement that is currently in effect or that was in effect since
January 1, 2012. The most recent regulatory rating given to UA Bank as to
compliance with the Community Reinvestment Act (“CRA”) is satisfactory or
better.

 

Section 3.12         Employee Benefit Plans.

 

(a)          UA Bank Disclosure Schedule 3.12(a) includes a list of all existing
bonus, incentive, deferred compensation, supplemental executive retirement
plans, pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock option, stock
appreciation, phantom stock, severance, welfare benefit plans (including paid
time off policies and other material benefit policies and procedures), fringe
benefit plans, employment, consulting, settlement and change in control
agreements and all other material benefit practices, policies and arrangements
maintained by UA Bank in which any employee or former employee, consultant or
former consultant or director or former director participates or to which any
such employee, consultant or director is a party or is otherwise entitled to
receive benefits (the “UA Bank Compensation and Benefit Plans”). UA Bank has no
commitment to create any additional UA Bank Compensation and Benefit Plan or,
except as may be required by the terms of this Agreement, to materially modify,
change or renew any existing UA Bank Compensation and Benefit Plan (any
modification or change that increases the cost of such plans would be deemed
material), except as required to maintain the qualified status thereof. UA Bank
has made available to Emclaire true and correct copies of the UA Bank
Compensation and Benefit Plans.

 

(b)          Each UA Bank Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the Age
Discrimination in Employment Act, COBRA, the Health Insurance Portability and
Accountability Act (“HIPAA”) and all regulations or rules promulgated
thereunder, and all material filings, disclosures and notices required by ERISA,
the Code, the Age Discrimination in Employment Act, COBRA and HIPAA and each
other applicable law have been timely made or any interest, fines, penalties or
other impositions for late filings have been paid in full. Each UA Bank
Compensation and Benefit Plan which is an “employee pension benefit plan” within
the meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended to
be qualified under Section 401(a) of the Code has received a favorable
determination letter or a prototype plan or volume submitter plan advisory
opinion letter from the IRS, and UA Bank is not aware of any circumstance which
is reasonably likely to result in revocation of any such letter. There is no
material pending or, to the Knowledge of UA Bank, threatened action, suit or
claim relating to any of the UA Bank Compensation and Benefit Plans (other than
routine claims for benefits). UA Bank has not engaged in a transaction, or
omitted to take any action, with respect to any UA Bank Compensation and Benefit
Plan that would reasonably be expected to subject UA Bank to a material unpaid
tax or penalty imposed by either Section 4975 of the Code or Section 502 of
ERISA.

 

 18

 

 

(c)          Neither UA Bank nor any entity which is considered one employer
with UA Bank under Section 4001(b)(1) of ERISA or Section 414 of the Code (a “UA
Bank ERISA Affiliate”) currently maintains or has ever maintained a UA Bank
Compensation and Benefit Plan which is subject to Title IV of ERISA (“UA Bank
Pension Plan”). Neither UA Bank nor any UA Bank ERISA Affiliate has contributed
to any “multiemployer plan,” as defined in Section 3(37) of ERISA.

 

(d)          All material contributions required to be made under the terms of
any UA Bank Compensation and Benefit Plan have been timely made, and all
anticipated material contributions and funding obligations are accrued on UA
Bank’s consolidated financial statements to the extent required by GAAP. UA Bank
has expensed and accrued as a liability the present value of material future
benefits under each applicable UA Bank Compensation and Benefit Plan for
financial reporting purposes as required by GAAP.

 

(e)          UA Bank has no obligation to provide retiree health, life
insurance, or disability insurance, or any retiree death benefit under any UA
Bank Compensation and Benefit Plan, other than benefits mandated by Section
4980B of the Code. There has been no communication to employees by UA Bank that
would reasonably be expected to promise or guarantee such employees retiree
health, life insurance, or disability insurance, or any retiree death benefits.

 

(f)          UA Bank does not maintain any UA Bank Compensation and Benefit Plan
covering employees who are not United States residents.

 

(g)          With respect to each UA Bank Compensation and Benefit Plan, if
applicable, UA Bank has provided or made available to Emclaire copies of the:
(i) trust instruments and insurance contracts; (ii) three most recent IRS Forms
5500; (iii) three most recent actuarial reports and financial statements; (iv)
most recent summary plan description; (v) most recent determination letter
issued by the IRS; (vi) any Form 5310 or Form 5330 filed with the IRS within the
last three years; and (vii) most recent nondiscrimination tests performed under
ERISA and the Code (including 401(k) and 401(m) tests).

 

(h)          Except as provided in UA Bank Disclosure Schedule 3.12(h), the
consummation of the Mergers will not, directly or indirectly (including, without
limitation, as a result of any termination of employment or service at any time
prior to or following the Effective Time) (i) entitle any employee, consultant
or director to any payment or benefit (including severance pay, change in
control benefit, or similar compensation) or any increase in compensation, (ii)
entitle any employee or independent contractor to terminate any plan, agreement
or arrangement without cause or good reason and continue to accrue future
benefits thereunder, or result in the vesting or acceleration of any benefits
under any UA Bank Compensation and Benefit Plan, (iii) result in any material
increase in benefits payable under any UA Bank Compensation and Benefit Plan, or
(iv) entitle any current or former employee, director or independent contractor
of UA Bank to any actual or deemed payment (or benefit) which could constitute a
“parachute payment” (as such term is defined in Section 280G of the Code).

 

(i)          All deferred compensation plans, programs or arrangements, within
the meaning of Section 409A of the Code, have (i) been operated in all material
respects in good faith compliance with Section 409A of the Code and IRS Notice
2005-01 and (ii) since January 1, 2009 (or such later date permitted under
applicable guidance), been in documentary compliance in all material respects
with Section 409A of the Code and IRS regulations and guidance thereunder. All
UA Bank Options were granted at no less than “fair market value” for purposes of
Section 409A of the Code.

 

 19

 

 

(j)          Except as set forth on UA Bank Disclosure Schedule 3.12(j), there
are no warrants, stock options, stock appreciation or similar rights, earned
dividends or dividend equivalents, or shares of restricted stock, or other
equity compensation awards outstanding under any of the UA Bank Compensation and
Benefit Plans or otherwise as of the date hereof, and none will be granted,
awarded, or credited after the date hereof.

 

(k)          UA Bank Disclosure Schedule 3.12(k) sets forth, as of the payroll
date immediately preceding the date of this Agreement, a list of the full names
of all officers and employees of UA Bank, their title and rate of salary, and
their date of hire.

 

(l)          Since December 31, 2014, through and including the date of this
Agreement, except as disclosed in the UA Bank Disclosure Schedule 3.12(l), UA
Bank has not, except for (i) normal increases for non-executive officer
employees made in the ordinary course of business consistent with past practice,
or (ii) as required by applicable law, increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to any
executive officer, employee, or director from the amount thereof in effect as of
December 31, 2014 (which amounts have been previously made available to
Emclaire), granted any severance or termination pay, entered into any contract
to make or grant any severance or termination pay (except as required under the
terms of agreements or severance plans listed on UA Bank Disclosure Schedule
3.12(a), as in effect as of the date hereof), or paid any bonus other than the
customary year-end bonuses in amounts consistent with past practice.

 

(m)          UA Bank Disclosure Schedule 3.12(m) sets forth the current base
salary and 2014 and 2013 bonus amounts for each of the individuals listed on UA
Bank Disclosure Schedule 3.12(m) who are parties to the change in control
agreements set forth in UA Bank Disclosure Schedule 3.12(a). UA Bank Disclosure
Schedule 3.12(m) also describes and quantifies in reasonable detail, for each
person who has a change in control agreement and for each participant in the UA
Bank Director Plan, the aggregate dollar value of each amount that would be paid
or payable to such person under such agreement or plan in the event of a change
in control or termination of service in connection with or following a change in
control (assuming a termination of service and a change in control date of June
30, 2016), as well as the aggregate dollar value of any other benefit with
respect to such person that would be accelerated, enhanced or paid in connection
with a change in control or termination in connection with a change in control,
and in each case, the basis for such determination.

 

Section 3.13         Brokers, Finders and Financial Advisors.

 

Neither UA Bank nor any of its employees or agents has employed any broker,
finder or financial advisor in connection with the transactions contemplated by
this Agreement, or incurred any liability or commitment for any fees or
commissions to any such person in connection with the transactions contemplated
by this Agreement except for the retention of Raymond James & Associates, Inc.
(“Raymond James”) by UA Bank and the fees payable pursuant thereto. A true and
correct copy of the engagement agreement with Raymond James, setting forth the
fees payable to it for its services rendered to UA Bank in connection with the
Mergers and transactions contemplated by this Agreement, is attached to UA Bank
Disclosure Schedule 3.13.

 

Section 3.14         Environmental Matters.

 

With respect to UA Bank:

 

(a)          To the Knowledge of UA Bank, neither the conduct nor operation of
its business nor any condition of any property currently or previously owned or
operated by it (including Participation Facilities and Other Real Estate Owned)
results or resulted in a violation of any Environmental Laws that has imposed a
material liability (including a material remediation obligation) upon UA Bank.
To the Knowledge of UA Bank, no condition has existed or event has occurred with
respect to it or any such property that, with notice or the passage of time, or
both, is reasonably likely to result in any material liability to UA Bank by
reason of any Environmental Laws. During the past five years, UA Bank has not
received any written notice from any Person or Governmental Entity that UA Bank
or the operation or condition of any property ever owned or operated (including
Participation Facilities), by it is currently in violation of or otherwise are
alleged to have liability under any Environmental Laws or relating to Materials
of Environmental Concern (including, but not limited to, responsibility (or
potential responsibility) for the cleanup or other remediation of any Materials
of Environmental Concern at, on, beneath, or originating from any such property)
for which a material liability is reasonably likely to be imposed upon UA Bank;

 

 20

 

 

(b)          There is no suit, action, executive or administrative order,
directive, or proceeding pending or, to the Knowledge of UA Bank threatened,
before any court, governmental agency or other forum against UA Bank (i) for
alleged noncompliance (including by any predecessor) with, or liability under,
any Environmental Law or (ii) relating to the presence of or release (defined
herein) into the environment of any Materials of Environmental Concern (as
defined herein), on a site owned, leased or operated by UA Bank (including
Participation Facilities and Other Real Estate Owned); and

 

(c)          To the Knowledge of UA Bank, (i) there are no underground storage
tanks on, in or under any property owned or operated by UA Bank (including
Participation Facilities and Other Real Estate Owned), and (ii) no underground
storage tank has been closed or removed from any property owned or operated by
UA Bank (including Participation Facilities and Other Real Estate Owned) except
in compliance with Environmental Laws in all material respects.

 

Section 3.15         Loan Portfolio and Investment Securities.

 

(a)          The allowance for loan losses reflected in UA Bank’s audited
consolidated balance sheet at December 31, 2014 was, and the allowance for loan
losses shown on the unaudited balance sheet for quarterly periods ending after
December 31, 2014 was or will be, adequate in all material respects, as of the
date thereof, under GAAP.

 

(b)          UA Bank Disclosure Schedule 3.15(b) sets forth a listing, as of
September 30, 2015, by account, of: (i) all loans (including loan
participations) of UA Bank that have been accelerated during the past twelve
months by reason of a default or adverse developments in the condition of the
borrower or other events or circumstances affecting the credit of the borrower;
(ii) all loan commitments or lines of credit of UA Bank which have been
terminated by UA Bank during the past twelve months by reason of a default or
adverse developments in the condition of the borrower or other events or
circumstances affecting the credit of the borrower; (iii) each borrower,
customer or other party which has notified UA Bank during three years preceding
the date of this Agreement, or has asserted against UA Bank, in each case in
writing, any “lender liability” or similar claim,; (iv) all loans, (A) that are
contractually past due 90 days or more in the payment of principal and/or
interest, (B) that are on non-accrual status, (C) that are classified as
“substandard,” “doubtful,” “loss,” “classified,” “criticized,” “watch list” or
“special mention” (or words of similar import) by UA Bank, or any applicable
Regulatory Authority, (D) to the Knowledge of UA Bank, as to which a reasonable
doubt exists as to the timely future collectability of principal and/or
interest, whether or not interest is still accruing or the loans are less than
90 days past due, (E) where a specific reserve allocation exists in connection
therewith or (F) that are required to be accounted for as a troubled debt
restructuring in accordance with Statement of Financial Accounting Standards No.
15; and (v) all assets classified by UA Bank as real estate acquired through
foreclosure or in lieu of foreclosure, including in-substance foreclosures, and
all other assets currently held that were acquired through foreclosure or in
lieu of foreclosure.

 

 21

 

 

(c)          Except for any individual loans with a principal outstanding
balance of less than $25,000, all loans receivable (including discounts) and
accrued interest entered on the books of UA Bank arose out of bona fide
arm’s-length transactions, were made for good and valuable consideration in the
ordinary course of UA Bank’s business, and, to the extent secured, have been
secured by valid liens and security interests by UA Bank. Except for individual
loans with a principal outstanding balance of less than $25,000 or except as
shown on UA Bank Disclosure Schedule 3.15(c), UA Bank has not received written
notice that any of the loans, discounts and the accrued interest reflected on
the books of UA Bank are subject to any defense, set-off or counterclaim
(including, without limitation, those afforded by usury or truth-in-lending
laws), except as may be provided by bankruptcy, insolvency or similar laws
affecting creditors’ rights generally or by general principles of equity.

 

(d)          The notes and other evidences of indebtedness evidencing the loans
described above, and all pledges, mortgages, deeds of trust and other collateral
documents or security instruments relating thereto are, in all material
respects, valid, true and genuine, and what they purport to be.

 

(e)          UA Bank has good and marketable title to all securities owned by
it, free and clear of all Liens, except to the extent such securities are
pledged in the ordinary course of business to secure obligations of UA Bank.
Such securities are valued on the books of UA Bank in accordance with GAAP in
all material respects. UA Bank employs investment, securities, risk management
and other policies, practices and procedures which UA Bank believes are prudent
and reasonable.

 

Section 3.16          Other Documents.

 

UA Bank has made available to Emclaire copies of (i) its annual reports to
shareholders for the years ended December 31, 2014, 2013 and 2012, and (ii)
proxy materials used or for use in connection with its meetings of shareholders
held in 2015, 2014 and 2013.

 

Section 3.17         Related Party Transactions.

 

Except as set forth in UA Bank Disclosure Schedule 3.17, UA Bank is not a party
to any transaction (including any loan or other credit accommodation) with any
executive officer, director or Affiliate of UA Bank. All such transactions (a)
were made in the ordinary course of business, (b) were made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other Persons, and (c) did not involve
substantially more than the normal risk of collectability or present other
unfavorable features (as such terms are used under Item 404 of SEC Regulation
S-K promulgated under the Securities Act and the Exchange Act). No such loan or
credit accommodation to any such entity is presently in default or, during the
three year period prior to the date of this Agreement, has been in default or
has been restructured, modified or extended. UA Bank has not been notified that
principal and interest with respect to any such loan or other credit
accommodation will not be paid when due or that the loan grade classification
accorded such loan or credit accommodation by UA Bank is inappropriate.

 

Section 3.18          Required Vote.

 

The affirmative vote of a two-thirds of the votes entitled to be cast at a
meeting of the holders of UA Bank Common Stock is required to approve this
Agreement and the First Merger under UA Bank’s articles of incorporation and the
Banking Code.

 

 22

 

 

Section 3.19         Registration Obligations.

 

UA Bank is not under any obligation, contingent or otherwise, which will survive
the Effective Time by reason of any agreement to register any transaction
involving any of its securities under the Securities Act.

 

Section 3.20         Risk Management Instruments.

 

All interest rate swaps, caps, floors, option agreements, futures and forward
contracts and other similar risk management arrangements, whether entered into
for UA Bank’s own account or its customers (all of which are set forth in UA
Bank Disclosure Schedule 3.20), were in all material respects entered into in
compliance with all applicable laws, rules, regulations and regulatory policies,
and to the Knowledge of UA Bank, with counterparties believed to be financially
responsible at the time; and to UA Bank’s Knowledge, each of them constitutes
the valid and legally binding obligation of UA Bank, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors’ rights
or by general equity principles), and is in full force and effect. Neither UA
Bank nor, to the Knowledge of UA Bank, any other party thereto, is in breach of
any of its obligations under any such agreement or arrangement in any material
respect.

 

Section 3.21         Fairness Opinion.

 

UA Bank has received a written opinion from Raymond James to the effect that,
subject to the terms, conditions and qualifications set forth therein, as of the
date thereof, the Merger Consideration to be received by the shareholders of UA
Bank pursuant to this Agreement is fair to such shareholders from a financial
point of view. Such opinion has not been amended or rescinded as of the date of
this Agreement.

 

Section 3.22         Trust Accounts.

 

UA Bank has, in all material respects, properly administered all accounts for
which it acts as a fiduciary, including but not limited to accounts for which it
serves as trustee, agent, custodian, personal representative, guardian,
conservator or investment advisor, in accordance with the terms of the governing
documents and applicable laws and regulations. Neither UA Bank nor, to the
Knowledge of UA Bank, any of its directors, officers or employees, committed any
breach of trust with respect to any such fiduciary account.

 

Section 3.23         Intellectual Property.

 

UA Bank owns or possesses valid and binding licenses and other rights (subject
to expirations in accordance with their terms) to use all patents, copyrights,
trade secrets, trade names, service marks and trademarks, which are material to
the conduct of its business as currently conducted, each without payment, except
for all license agreements under which license fees or other payments are due in
the ordinary course of UA Bank’s business, and UA Bank has not received any
notice of conflict with respect thereto that asserts the rights of others. UA
Bank has performed all the material obligations required to be performed, and is
not in default in any respect, under any contract, agreement, arrangement or
commitment relating to any of the foregoing. To the Knowledge of UA Bank, the
conduct of the business of UA Bank as currently conducted or proposed to be
conducted does not, in any material respect, infringe upon, dilute,
misappropriate or otherwise violate any intellectual property owned or
controlled by any third party.

 

 23

 

 

Section 3.24         Labor Matters.

 

There is no labor or collective bargaining agreement to which UA Bank is a
party. To the Knowledge of UA Bank, there is no union organizing effort pending
or, to the Knowledge of UA Bank, threatened against UA Bank. Since December 31,
2014, there has been no labor strike, labor dispute (other than routine employee
grievances that are not related to union employees), work slowdown, stoppage or
lockout pending or, to the Knowledge of UA Bank, threatened against UA Bank.
There is no unfair labor practice or labor arbitration proceeding pending or, to
the Knowledge of UA Bank, threatened against UA Bank (other than routine
employee grievances that are not related to union employees). UA Bank is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and are not engaged in any unfair labor practice.

 

Section 3.25         No Other Representations or Warranties.

 

Except as and to the limited extent expressly set forth in this Article 3, none
of UA Bank, or any of its representatives or any other Person is making or has
made, and none of them shall have liability in respect of, any written or oral
representation or warranty, express or implied, at law, in equity or otherwise,
with respect to UA Bank or otherwise, and whether express or implied at law, in
equity or otherwise, in respect of this Agreement, the Mergers or the
transactions contemplated hereby, or in respect of any other matter whatsoever.

 

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EMCLAIRE

 

Emclaire represents and warrants to UA Bank that the statements contained in
this Article 4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Article 4), except as set forth in the Emclaire Disclosure
Schedules delivered by Emclaire to UA Bank on the date hereof. Emclaire has made
a good faith effort to ensure that the disclosure on each schedule of the
Emclaire Disclosure Schedules corresponds to the section referenced herein.
However, for purposes of the Emclaire Disclosure Schedules, any item disclosed
on any schedule therein is deemed to be fully disclosed with respect to all
schedules under which such item may be relevant as and to the extent that it is
reasonably clear on the face of such schedule that such item applies to such
other schedule.

 

Section 4.01         Organization.

 

(a)          Emclaire is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, and is duly
registered as a bank holding company under the BHCA, and has elected to be
designated a financial holding company. Emclaire has full corporate power and
authority to carry on its business as now conducted and is duly licensed or
qualified to do business in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so licensed
or qualified would not have a Material Adverse Effect on Emclaire.

 

(b)          Farmers National is duly organized, validly existing and in good
standing as a national banking association under the laws of the United States.
The deposits of Farmers National are insured by the FDIC to the fullest extent
permitted by law, and all premiums and assessments required to be paid in
connection therewith have been paid when due. Farmers National is a member in
good standing of the FRB and FHLB and owns the requisite amount of FRB stock and
FHLB stock.

 

 24

 

 

(c)          Interim will be at the Effective Time an interim national banking
association under the laws of the United States. Interim will not engage in any
business other than in connection with the transactions contemplated by this
Agreement and the Merger Agreement referred to in Section 2.01(a), and Interim
will have no material obligations or liabilities other than its obligations
hereunder and thereunder.

 

(d)          Prior to the date of this Agreement, Emclaire has made available to
UA Bank true and correct copies of the articles of incorporation, articles of
association and bylaws of Emclaire and Farmers National.

 

Section 4.02         Capitalization.

 

(a)          Emclaire owns, directly or indirectly, all of the issued and
outstanding shares of capital stock or other equity interests of Farmers
National, free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares or equity interests are duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights. As of the date of this Agreement, Farmers National neither
has nor is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character with any party calling for the
purchase or issuance of any shares of capital stock or any other equity interest
of Farmers National or any securities representing the right to purchase or
otherwise receive any shares of capital stock or any other equity interest of
Farmers National.

 

(b)          Farmers National will own, directly or indirectly, all of the
issued and outstanding shares of capital stock or other equity interests of
Interim, free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares or equity interests will be duly
authorized and validly issued and will be fully paid, nonassessable and free of
preemptive rights. Interim will not at any time be bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements (other than
this Agreement and the transactions contemplated hereby) of any character with
any party calling for the purchase or issuance of any shares of capital stock or
any other equity interest of Interim or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any other equity
interest of Interim.

 

Section 4.03         Authority; No Violation.

 

(a)          Each of Emclaire and Farmers National has full corporate power and
authority to execute and deliver this Agreement, and subject to receipt of
Regulatory Approvals and UA Bank Shareholder Approval, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Emclaire and Farmers National and the completion by Emclaire and Farmers
National of the transactions contemplated hereby have been duly and validly
approved by the requisite vote of the Boards of Directors of Emclaire and
Farmers National and by Emclaire as the sole shareholder of Farmers National,
and, no other proceeding on the part of Emclaire or Farmers National is
necessary to complete the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Emclaire and Farmers National
and, subject to the UA Bank Shareholder Approval and the receipt of Regulatory
Approvals, constitutes the valid and binding obligation of Emclaire and Farmers
National, enforceable against Emclaire and Farmers National in accordance with
its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally, and as to Farmers National, the
conservatorship or receivership provisions of the FDIA, and subject, as to
enforceability, to general principles of equity. No vote or consent of the
holders of any class or series of capital stock of Emclaire is necessary to
approve this Agreement or the Mergers or the other transactions contemplated
hereby. The vote or consent of Emclaire as the sole shareholder of Interim
(which shall have occurred prior to the Effective Time) is the only vote or
consent of the holders of any class or series of capital stock of Interim
necessary to approve the First Merger.

 

 25

 

 

(b)          Prior to the Effective Time, Interim will have full corporate power
and authority to execute and deliver the Merger Agreement and to consummate the
transactions contemplated thereby in accordance with the terms thereof. Prior to
the Effective Time, the execution and delivery of the Merger Agreement by
Interim and the consummation of the transactions contemplated thereby will have
been duly and validly approved by the Board of Directors of Interim and by
Farmers Bank as the sole stockholder of Interim, and no other corporate
proceedings on the part of Interim are necessary to consummate the transactions
so contemplated. The Merger Agreement, upon its execution and delivery by
Interim, will constitute a valid and binding obligation of Interim, enforceable
against it in accordance with and subject to its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and subject, as to enforceability,
to general principles of equity.

 

(c)          Subject to the receipt of the Regulatory Approvals and the
compliance with all conditions contained therein,

 

(A)  the execution and delivery of this Agreement by Emclaire and Farmers
National and of the Merger Agreement by Interim,

 

(B)  the consummation of the transactions contemplated hereby and thereby, and

 

(C)  compliance by Emclaire, Farmers National and Interim with all of the terms
or provisions hereof and thereof,

 

will not: (i) conflict with or result in a material breach of any provision of
the articles of incorporation, articles of association, charters or bylaws, or
any other governing document, of any of Emclaire or any Emclaire Subsidiary;
(ii) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to Emclaire or any Emclaire Subsidiary,
including but not limited to Interim, or any of the properties or assets of
Emclaire or any Emclaire Subsidiary; or (iii) violate, conflict with, result in
a breach of any provision of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in a right
of termination or acceleration or the creation of any lien, security interest,
charge or other encumbrance upon any of the properties or assets of Emclaire or
any Emclaire Subsidiary under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other investment or obligation to which any Emclaire or any
Emclaire Subsidiary is a party, or by which they or any of their respective
properties or assets may be bound or affected, except in the case of Section
4.03(b)(ii) and 4.03(b)(iii), for violations which, individually or in the
aggregate, would not have a Material Adverse Effect on Emclaire.

 

Section 4.04         Consolidated Financial Statements.

 

(a)          The Emclaire Consolidated Financial Statements with respect to
periods ending prior to the date of this Agreement (i) are true, accurate and
complete in all material respects, (ii) have been prepared in accordance with
GAAP and regulatory accounting principles consistently applied, except as may be
otherwise indicated in the notes thereto, and (iii) fairly present in all
material respects the financial condition of Emclaire as of the respective dates
set forth therein and the results of operations, shareholders’ equity and cash
flows of Emclaire for the respective periods set forth therein.

 

(b)          The books and records of Emclaire and its Subsidiaries have been,
and are being, maintained in all material respects in accordance with GAAP and
all other applicable legal and accounting requirements and reflect only actual
transactions.

 

 26

 

 

(c)          Emclaire has devised and maintained a system of internal accounting
controls sufficient to provide reasonable assurances (i) that the assets of
Emclaire and its Subsidiaries are properly recorded and (ii) regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP. No reportable conditions or
material weaknesses (each as defined in AU 325 of the AICPA Professional
Standards) have been discovered in connection with the audits of the Emclaire
Consolidated Financial Statements by Emclaire’s certified public accountants.

 

(d)          Emclaire has no Knowledge of (i) any significant deficiency or
material weakness in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect in any material
respect its ability to record, process, summarize and report financial
information or (ii) any fraud, whether or not material, that involves management
or other employees who have a significant role in its internal controls over
financial reporting.

 

(e)          Since December 31, 2014, (i) neither Emclaire nor, to its
Knowledge, any of its directors, officers, employees, auditors, accountants or
representatives has received or otherwise had or obtained knowledge of any
material complaint, allegation, assertion or claim, whether written or oral,
regarding its accounting or auditing practices, procedures, methodologies or
methods or its internal accounting controls, including any material complaint,
allegation, assertion or claim that it has engaged in questionable accounting or
auditing practices, and (ii) no attorney representing it, whether or not
employed by it, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by it or any of its
officers, directors, employees or agents to its board of directors or any
committee thereof or to any of its directors or officers. 

 

(f)          Since December 31, 2014, Emclaire has not incurred any material
liability other than in the ordinary course of business consistent with past
practice that would be required to be reflected in, or reserved against or
disclosed on, a balance sheet prepared in accordance with GAAP.

 

Section 4.05         No Material Adverse Effect.

 

Emclaire has not suffered any Material Adverse Effect since December 31, 2014
and no event has occurred or circumstance arisen since that date which, in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect on
Emclaire.

 

Section 4.06         Consents.

 

Except for (a) filings with the Regulatory Authorities set forth on Emclaire
Disclosure Schedule 4.06, the receipt of the Regulatory Approvals, and
compliance with all conditions contained therein, (b) the filing of the Articles
of Merger with the Pennsylvania Department of State, and such other filings as
may be required for the First Merger, and (c) the receipt of the UA Bank
Shareholder Approval, no consent, waiver or approval of, or filing or
registration with, any other third party is necessary, in connection with (x)
the execution and delivery of this Agreement by Emclaire and Farmers National,
and (y) the completion of the First Merger by Emclaire and Interim, or any other
transactions contemplated hereby, other than any consent, waiver, approval or,
filing the failure of which to obtain, individually or in the aggregate would
not have a Material Adverse Effect on Emclaire. As of the date hereof, to the
Knowledge of Emclaire, no fact or circumstance exists, including any possible
other transaction pending or under consideration by Emclaire or any of its
Affiliates, that (a) would reasonably be expected to prevent or delay, in any
material respect, (i) any filing with or approval or waiver required from the
FRB, the OCC, the FDIC and the Department or (ii) other required Regulatory
Approval or (b) would cause a Regulatory Authority or Governmental Entity to
seek to prohibit or materially delay consummation of the transactions
contemplated hereby or impose a condition or conditions that, individually or in
the aggregate, would have a Material Adverse Effect on, or would materially and
adversely affect the business, operations, financial condition, property or
assets of the combined enterprise of the parties.

 

 27

 

 

Section 4.07         Availability of Funds.

 

Farmers National now has and will have available to it at the Effective Time,
sufficient funds to pay the aggregate Merger Consideration and to pay all other
amounts payable pursuant to this Agreement and to effect the transactions
contemplated hereby.

 

Section 4.08         Compliance with Applicable Law.

 

(a)          To Emclaire’s Knowledge, each of Emclaire and each Emclaire
Subsidiary is in compliance in all material respects with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable to it, its properties, assets and
deposits, its business, and its conduct of business and its relationship with
its employees, including, without limitation, the USA PATRIOT Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act of
1977, the Home Mortgage Disclosure Act, the Bank Secrecy Act and all other
applicable fair lending laws and other laws relating to discriminatory business
practices and neither Emclaire nor any Emclaire Subsidiary has received any
written notice to the contrary. The Board of Directors of Farmers National has
adopted and Farmers National has implemented an anti-money laundering program
that meets the requirements of Sections 352 and 326 of the USA PATRIOT Act and
the regulations thereunder and has received no written notice from any
Governmental Entity or Regulatory Authority that such program (i) does not
contain adequate and appropriate customer identification verification
procedures; or (ii) has been deemed ineffective.

 

(b)          For the period beginning January 1, 2013, neither Emclaire nor any
Emclaire Subsidiary has received any written notification or, to Emclaire’s
Knowledge, any other communication from any Regulatory Authority (i) asserting
that Emclaire or any Emclaire Subsidiary is not in material compliance with any
of the statutes, regulations or ordinances which such Regulatory Authority
enforces; (ii) threatening to revoke any license, franchise, permit or
governmental authorization which is material to Emclaire or any Emclaire
Subsidiary; (iii) requiring, or threatening to require, Emclaire or any Emclaire
Subsidiary, or indicating that Emclaire or any Emclaire Subsidiary may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement with any federal or state governmental
agency or authority which is charged with the supervision or regulation of banks
or engages in the insurance of bank deposits restricting or limiting, or
purporting to restrict or limit, in any material respect the operations of
Emclaire or any Emclaire Subsidiary, including without limitation any
restriction on the payment of dividends; or (iv) directing, restricting or
limiting, or purporting to direct, restrict or limit, in any manner the
operations of Emclaire or any Emclaire Subsidiary, including without limitation
any restriction on the payment of dividends (any such notice, communication,
memorandum, agreement or order described in this sentence is hereinafter
referred to as an “Emclaire Regulatory Agreement”). Neither Emclaire nor any
Emclaire Subsidiary has consented to or entered into any Emclaire Regulatory
Agreement that is currently in effect or that was in effect since December 31,
2013. The most recent regulatory rating given to Farmers National as to
compliance with the CRA is satisfactory or better.

 

Section 4.09         Legal Proceedings.

 

Neither Emclaire nor any Emclaire Subsidiary is a party to any, and there is no
pending or, to the Knowledge of Emclaire, threatened legal, administrative,
arbitration or other proceeding, claim (whether asserted or unasserted), action
or governmental investigation or inquiry of any nature (i) against Emclaire or
any Emclaire Subsidiary, (ii) to which Emclaire or any of Emclaire Subsidiary’s
assets is or may be subject, or (iii) which could adversely affect the ability
of Emclaire to perform under this Agreement, except for any proceeding, claim,
action, investigation or inquiry which, if adversely determined, individually or
in the aggregate, would not be reasonably expected to have a Material Adverse
Effect on Emclaire.

 

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Section 4.10         No Other Representations or Warranties; Access to
Information.

 

Except as expressly set forth in this Agreement, none of Emclaire, any Emclaire
Subsidiaries, their respective representatives or any other Person is making or
has made, and none of them shall have liability in respect of, any written or
oral representation or warranty, express or implied, at law, in equity or
otherwise, with respect to Emclaire or any Emclaire Subsidiaries or otherwise,
and whether express or implied at law, in equity or otherwise, in respect of
this Agreement or the transactions contemplated hereby, or in respect of any
other matter whatsoever.

 

Section 4.11         Pro Forma Capitalization.

 

Upon consummation of the transactions contemplated hereby, Farmers National will
be deemed “well capitalized” under the regulations of the OCC.

 

ARTICLE 5
COVENANTS OF UA BANK

 

Section 5.01         Conduct of Business.

 

(a)          Affirmative Covenants. During the period from the date of this
Agreement to the Effective Time, except with the written consent of Emclaire,
which consent will not be unreasonably withheld, conditioned or delayed, UA Bank
will: operate its business, only in the usual, regular and ordinary course of
business; use reasonable efforts to preserve intact its business organization
and assets and maintain its rights and franchises; and voluntarily take no
action which would, or would be reasonably likely to, (i) materially adversely
affect the ability of the parties to obtain any Regulatory Approval or other
approval of Governmental Entities required for the transactions contemplated
hereby or materially increase the period of time necessary to obtain such
approvals, or (ii) materially adversely affect its ability to perform its
covenants and agreements under this Agreement.

 

(b)          Negative Covenants. Except as required by law, rule or regulation,
or as necessary to comply with the requirements of a Regulatory Authority that
are generally applicable to banking institutions, UA Bank agrees that from the
date of this Agreement to the Effective Time, except as otherwise specifically
permitted or required by this Agreement, or as set forth in UA Bank Disclosure
Schedule 5.01(b), or as consented to by Emclaire in writing (which consent shall
not be unreasonably withheld, conditioned or delayed), it will not:

 

(i)          change or waive any provision of its Articles of Incorporation, or
Bylaws, or appoint a new director to its board of directors (except as to the
appointment of a new director, as necessary to maintain any minimum number of
directors pursuant to a regulatory requirement or its articles of incorporation
or bylaws);

 

(ii)         change the number of authorized or issued shares of its capital
stock, issue shares of UA Bank Common Stock, including shares that are held as
“treasury shares” as of the date of this Agreement (other than upon the exercise
of any UA Bank Options outstanding as of the date of this Agreement), or issue
or grant any Right or agreement of any character relating to its authorized or
issued capital stock or securities convertible into shares of such stock, make
any grant or award under any equity compensation plan or arrangement, or split,
combine or reclassify shares of its capital stock, or declare, set aside or pay
any dividend or other distribution in respect of capital stock (other than the
previously declared cash dividend on the UA Bank Common Stock for calendar year
2015 in the amount of $0.33 per share), or redeem or otherwise acquire any
shares of its capital stock other than a security interest or as a result of the
enforcement of a security interest;

 

 29

 

 

(iii)        enter into, amend in any material respect or terminate any material
contract or agreement (including without limitation any settlement agreement
with respect to litigation other than pursuant to any payment, discharge,
settlement or compromise permitted pursuant to Section 5.01(b)(xx)), or waive,
release, grant or transfer material rights of value except in the ordinary
course of business;

 

(iv)         make application for the opening or closing of any, or open or
close any, branch or automated banking facility;

 

(v)          except as set forth on UA Bank Disclosure Schedule 5.01(b)(v),
grant or agree to pay any bonus, severance or termination to, or enter into,
renew or amend any employment agreement, severance agreement and/or supplemental
executive agreement with, or increase in any manner the compensation or fringe
benefits of, any of its directors, officers or employees, except as may be
required by law or pursuant to commitments existing on the date hereof under the
UA Bank Compensation and Benefits Plans set forth on UA Bank Disclosure Schedule
3.12(a). UA Bank shall not hire or promote any employee to a rank having a title
of vice president or other more senior rank or hire any new employee at an
annual rate of compensation in excess of $35,000, except that UA Bank may hire
at-will, non-officer employees to fill vacancies that may from time to time
arise in the ordinary course of business;

 

(vi)         enter into or, except as may be required by law, materially modify
any pension, retirement, stock option, stock purchase, stock appreciation right,
stock grant, savings, profit sharing, deferred compensation, supplemental
retirement, consulting, bonus, group insurance (excluding the renewal of UA
Bank’s health insurance policy in the normal course) or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or employees; or
make any contributions to any defined contribution plan not in the ordinary
course of business consistent with past practice;

 

(vii)        merge or consolidate UA Bank with any other corporation; sell or
lease all or any substantial portion of the assets or business of UA Bank; make
any acquisition of all or any substantial portion of the business or assets of
any other person, firm, association, corporation or business organization other
than in connection with foreclosures, settlements in lieu of foreclosure,
troubled loan or debt restructuring, or the collection of any loan or credit
arrangement between UA Bank and any other person; enter into a purchase and
assumption transaction with respect to deposits and liabilities; voluntarily
revoke or surrender any certificate of authority to maintain, or file an
application for the relocation of, any existing branch office, or file an
application for a certificate of authority to establish a new branch office;

 

(viii)      sell or otherwise dispose of the capital stock of UA Bank or sell or
otherwise dispose of any material asset of UA Bank other than in the ordinary
course of business consistent with past practice; except for transactions with
the FHLB, subject any material asset of UA Bank to a lien, pledge, security
interest or other encumbrance other than in the ordinary course of business
consistent with past practice; incur any material indebtedness for borrowed
money (or guarantee any indebtedness for borrowed money), except in the ordinary
course of business consistent with past practice;

 

 30

 

 

(ix)         materially change any method, practice or principle of accounting,
except as may be required from time to time by GAAP (without regard to any
optional early adoption date) or any Regulatory Authority responsible for
regulating UA Bank;

 

(x)          except for foreclosure and collection matters, waive, release,
grant or transfer material rights of value or modify or change in any material
respect any existing material agreement or indebtedness to which UA Bank is a
party, other than in the ordinary course of business, consistent with past
practice;

 

(xi)         purchase any equity securities, or purchase any securities other
than securities issued by a U.S. government and U.S. government agency with
final maturities of less than one (1) year;

 

(xii)        except for commitments issued prior to the date of this Agreement
which have not yet expired and which have been disclosed on the UA Bank
Disclosure Schedule 5.01(b)(xii), and the renewal of existing lines of credit,
make any new loan or other credit facility commitment (including without
limitation, lines of credit and letters of credit) in an amount in excess of
$200,000 for a commercial loan, or in excess of $417,000 for a non-conforming
residential loan. In addition, the prior approval of Emclaire is required with
respect to the following: (i) any new loan or credit facility commitment in an
amount of $100,000 or greater to any borrower or group of affiliated borrowers
whose credit exposure with UA Bank, in the aggregate, exceeds $500,000 prior
thereto or as a result thereof; (ii) any new loan or credit facility commitment
in excess of $417,000 with respect to a non-conforming residential mortgage loan
or $150,000 with respect to a home equity line of credit, in either case to any
person residing, or any property located, outside of the Commonwealth of
Pennsylvania; (iii) any new unsecured loan in excess of $25,000; and (iv) any
new loan or loan commitment to any director or executive officer (it being
understood and agreed that Emclaire will use its reasonable best efforts to
respond within five business days to a request by UA Bank for Emclaire’s written
consent to extend credit in amounts exceeding the thresholds described herein);

 

(xiii)       enter into, renew, extend or modify any transaction (other than a
deposit transaction) with any Affiliate;

 

(xiv)      enter into any futures contract, option, interest rate cap, interest
rate floor, interest rate exchange agreement or other agreement or take any
other action for purposes of hedging the exposure of its interest-earning assets
and interest-bearing liabilities to changes in market rates of interest;

 

(xv)       make any material change in policies in existence on the date of this
Agreement with regard to: the extension of credit, or the establishment of
reserves with respect to the possible loss thereon or the charge off of losses
incurred thereon; investments; asset/liability management; deposit pricing or
gathering; or other material banking policies except as may be required by
changes in applicable laws, regulations or GAAP or by a Regulatory Authority;

 

(xvi)      except for the execution of this Agreement, and the transactions
contemplated herein, take any action that would give rise to an acceleration of
the right to payment to any individual under any UA Bank Compensation and
Benefit Plan;

 

(xvii)     make any capital expenditure in excess of $5,000 individually or
$15,000 in the aggregate, other than expenditures necessary to maintain existing
assets in good repair;

 

 31

 

 

(xviii)    purchase or otherwise acquire any material asset or incur any
material liability other than in the ordinary course of business consistent with
past practices and policies;

 

(xix)       undertake or enter into any lease, contract or other commitment for
its account, other than in the ordinary course of business, involving a payment
by UA Bank of more than $5,000 annually, or containing any financial commitment
in excess of $15,000 in the aggregate and extending beyond 24 months from the
date hereof;

 

(xx)        except with respect to foreclosures or other collection actions
(which are set forth in UA Bank Disclosure Schedule 5.02(b)(xx)), pay,
discharge, settle or compromise any claim, action, litigation, arbitration or
proceeding, other than any such payment (except to the extent paid or reimbursed
by insurance), discharge, settlement or compromise in the ordinary course of
business consistent with past practice that involves solely money damages in the
amount not in excess of $10,000 individually or, for each fiscal quarter,
$25,000 in the aggregate, and that does not create negative precedent for other
pending or potential claims, actions, litigation, arbitration or proceedings, or
waive or release any material rights or claims, or agree to consent to the
issuance of any injunction, decree, order or judgment restricting or otherwise
affecting its business or operations, it being understood and agreed that
Emclaire will use its reasonable best efforts to respond within five business
days to a request by UA Bank for Emclaire’s written consent to pay, discharge,
settle or compromise a claim in amounts exceeding the thresholds described
herein;

 

(xxi)       foreclose upon or take a deed or title to any commercial real estate
without first conducting a Phase I environmental assessment of the property or
foreclose upon any commercial real estate if such environmental assessment
indicates the presence of a Materials of Environmental Concern it being
understood that non-owner occupied one- to four-family residential properties
shall not be treated as commercial properties for purposes of this subparagraph;

 

(xxii)      purchase or sell any mortgage loan servicing rights other than in
the ordinary course of business consistent with past practice;

 

(xxiii)     sell any participation interest in any loan other than in the
ordinary course of business consistent with past practice or sell Other Real
Estate Owned (other than sales that generate a net book loss of not more than
$10,000 for any particular property) it being understood and agreed that
Emclaire will use its reasonable best efforts to respond within five business
days to a request by UA Bank for Emclaire’s written consent to sell Other Real
Estate Owned for a loss exceeding the threshold described herein;

 

(xxiv)    issue any broadly distributed communication of a general nature to
employees (including general communications relating to benefits and
compensation) without prior consultation with Emclaire and, to the extent
relating to post-Closing employment, benefit or compensation information without
the prior consent of Emclaire (which shall not be unreasonably withheld) or
issue any broadly distributed communication of a general nature to customers
without the prior approval of Emclaire (which shall not be unreasonably
withheld), except as required by law or for communications in the ordinary
course of business consistent with past practice that do not relate to the
Mergers or other transactions contemplated hereby;

 

(xxv)     take any voluntary action that is intended or is reasonably likely to
result in any of the representations and warranties of UA Bank set forth in this
Agreement becoming untrue as of any date after the date hereof or in any of any
of the conditions to the Mergers not being satisfied; or

 

 32

 

 

(xxvi)    agree to do any of the foregoing.

 

Section 5.02      Current Information.

 

(a)          During the period from the date of this Agreement to the Effective
Time, UA Bank will cause one or more of its representatives (as designated by UA
Bank’s chief executive officer from time to time) to confer with representatives
of Emclaire and report the general status of its ongoing operations at such
times as Emclaire may reasonably request. UA Bank will promptly notify Emclaire
of any material change in the ordinary course of its business or in the
operation of its properties and, to the extent permitted by applicable law, of
any governmental complaint, investigation or hearing (or communications
indicating that the same may be contemplated), or the institution or the threat
of material litigation involving UA Bank.

 

(b)          UA Bank and Emclaire shall meet on a regular basis to discuss and
plan for the conversion of UA Bank’s data processing and related electronic
informational systems to those used by Farmers National, which planning shall
include, but not be limited to, discussion of the possible termination by UA
Bank of third-party service provider arrangements effective at the Effective
Time or at a date thereafter, non-renewal of personal property leases and
software licenses used by UA Bank in connection with its systems operations,
retention of outside consultants and additional employees to assist with the
conversion, and outsourcing, as appropriate, of proprietary or self-provided
system services, it being understood that UA Bank shall not be obligated to take
any such action prior to the Effective Time and, unless UA Bank otherwise
agrees, no conversion shall take place prior to the Effective Time. In the event
that UA Bank takes, at the request of Emclaire, any action relative to third
parties to facilitate the conversion that results in the imposition of any
termination fees or charges, Emclaire shall indemnify UA Bank for all such fees
and charges, and the costs of reversing the conversion process, if the Merger is
not consummated for any reason other than a breach of this Agreement by UA Bank.

 

(c)          On a monthly basis, UA Bank shall provide Emclaire a written list
of nonperforming assets as of the prior month end (the term “nonperforming
assets,” for purposes of this subsection, means (i) loans that are “troubled
debt restructuring” as defined in Financial Accounting Standards Board
Accounting Standards Codification 310-40, “Troubled Debt Restructuring by
Creditors,” as updated by Accounting Standards Update 2011-02”, (ii) loans on
nonaccrual, (iii) OREO, (iv) all loans ninety (90) days or more past due as of
the end of such month and (iv) and impaired loans. On a monthly basis, UA Bank
shall provide Emclaire with a schedule of all loan approvals, which schedule
shall indicate the loan amount, loan type and other material features of the
loan.

 

(d)          To the extent permitted by law, UA Bank shall promptly inform
Emclaire upon receiving notice of each legal, administrative, arbitration or
other proceeding, demand, notice, audit or investigation (by any federal, state
or local commission, agency or board) relating to the alleged liability of UA
Bank or any UA Bank Subsidiary under any labor or employment law.

 

Section 5.03      Access to Properties and Records.

 

(a)          Subject to Section 11.01 hereof, UA Bank shall permit Emclaire
reasonable access during normal business hours upon reasonable notice to its
properties, and shall disclose and make available to Emclaire during normal
business hours all of its books, papers and records relating to the assets,
properties, operations, obligations and liabilities, including, but not limited
to, all books of account (including the general ledger), tax records, minute
books of directors’ (other than minutes that discuss any of the transactions
contemplated by this Agreement or any other subject matter UA Bank reasonably
determines should be treated as confidential) and shareholders’ meetings,
organizational documents, Bylaws, material contracts and agreements, filings
with any regulatory authority, litigation files, plans affecting employees, and
all other business activities or prospects in which Emclaire may have a
reasonable interest; provided, however, that UA Bank shall not be required to
take any action that would provide access to or to disclose information where
such access or disclosure would violate applicable law or violate or prejudice
the rights or business interests or confidences of any customer or other person
or would result in the waiver by it of the privilege protecting communications
between it and any of its counsel. UA Bank shall provide and shall request its
auditors to provide Emclaire (subject to Emclaire entering into a hold harmless
letter with such auditors in a form acceptable to such auditors) with such
historical financial information regarding it (and related audit reports and
consents) as Emclaire may reasonably request. Emclaire shall use commercially
reasonable efforts to minimize any interference with UA Bank’s regular business
operations during any such access to UA Bank’s property, books and records.

 

 33

 

 

(b)          Notwithstanding anything to the contrary contained in this Section
5.03, in no event shall Emclaire have access to any information that, based on
advice of UA Bank’s counsel, would (a) reasonably be expected to waive any
material legal privilege (b) result in the disclosure of any trade secrets of
third parties or (c) violate any obligation of UA Bank with respect to
confidentiality so long as, with respect to confidentiality, to the extent
specifically requested by Emclaire, UA Bank has made commercially reasonable
efforts to obtain a waiver regarding the possible disclosure from the third
party to whom it owes an obligation of confidentiality. All requests made
pursuant to this Section 5.03 shall be directed to an executive officer of UA
Bank or such Person or Persons as may be designated by UA Bank. All information
received pursuant to this Section 5.03 shall be governed by the terms of the
Confidentiality Agreement.

 

Section 5.04      Financial and Other Statements.

 

(a)          Promptly upon receipt thereof, UA Bank will furnish to Emclaire
copies of each annual, interim or special audit of the books of UA Bank made by
its independent auditors and copies of all internal control reports submitted to
UA Bank by such auditors in connection with each annual, interim or special
audit of the books of UA Bank made by such auditors.

 

(b)          UA Bank will furnish to Emclaire copies of all documents,
statements and reports as it shall send to its shareholders, the FDIC, the
Department, or any other Regulatory Authority, except as legally prohibited
thereby. Within 28 days after the end of each month, UA Bank will deliver to
Emclaire a list and description of loans originated by UA Bank since the prior
month end.

 

(c)          UA Bank will advise Emclaire promptly of the receipt of any
examination report of any Regulatory Authority with respect to the condition or
activities of UA Bank except as legally prohibited thereby.

 

(d)          With reasonable promptness, UA Bank will furnish to Emclaire such
additional financial data that UA Bank possesses and as Emclaire may reasonably
request, including without limitation, detailed monthly financial statements and
loan reports.

 

Section 5.05      Maintenance of Insurance.

 

UA Bank shall use all commercially reasonable efforts to maintain insurance in
such amounts as are reasonable to cover such risks as are customary in relation
to the character and location of their properties and the nature of their
businesses.

 

 34

 

 

Section 5.06      Disclosure Supplements.

 

From time to time prior to the Effective Time, UA Bank will promptly supplement
or amend the UA Bank Disclosure Schedules delivered in connection herewith with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such UA Bank Disclosure Schedules or which is necessary to correct
any information in such UA Bank Disclosure Schedules which has been rendered
materially inaccurate thereby. No supplement or amendment to such UA Bank
Disclosure Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article 8. Emclaire agrees that UA
Bank will be deemed to have complied with Section 5.06 so long as all matters
that are required pursuant to the first sentence of this Section 5.06 to be
included in a supplement or amendment of the UA Bank Disclosure Schedules and
are not so included would not cause the failure of the condition set forth in
Section 8.02(a) to be satisfied.

 

Section 5.07      Consents and Approvals of Third Parties.

 

UA Bank shall use all commercially reasonable efforts to obtain as soon as
practicable all consents and approvals necessary or desirable for the
consummation of the transactions contemplated by this Agreement.

 

Section 5.08      All Reasonable Efforts.

 

Subject to the terms and conditions herein provided, UA Bank agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.

 

Section 5.09      Failure to Fulfill Conditions.

 

In the event that UA Bank determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify Emclaire.

 

Section 5.10      Shareholder Litigation.

 

UA Bank shall give Emclaire prompt notice of any shareholder litigation against
UA Bank and/or its directors or affiliates relating to the transactions
contemplated by this Agreement and shall give Emclaire the opportunity to
participate at its own expense in the defense or settlement of any such
litigation. In addition, no such settlement shall be agreed to without
Emclaire’s prior written consent (such consent not to be unreasonably withheld
or delayed).

 

Section 5.11      Reserved.

 

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Section 5.12      No Solicitation.

 

(a)          UA Bank shall not, and shall cause its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants,
consultants, affiliates and other agents (collectively, the “UA Bank
Representatives”) not to, directly or indirectly, (i) initiate, solicit, induce
or knowingly encourage, or take any action to facilitate the making of, any
inquiry, offer or proposal which constitutes, or could reasonably be expected to
lead to, an Acquisition Proposal; (ii) participate in discussions or
negotiations regarding any Acquisition Proposal or furnish, or otherwise afford
access, to any Person (other than Emclaire) any information or data with respect
to UA Bank or otherwise relating to an Acquisition Proposal; (iii) release any
Person from, waive any provision of, or fail to enforce any confidentiality
agreement or standstill agreement to which UA Bank is a party; or (iv) enter
into any agreement, agreement in principle or letter of intent with respect to
any Acquisition Proposal or approve or resolve to approve any Acquisition
Proposal or any agreement, agreement in principle or letter of intent relating
to an Acquisition Proposal; provided, however, that nothing herein shall prevent
the UA Bank Board of Directors from complying with any applicable requirements
under federal or state law. Any violation of the foregoing restrictions by UA
Bank or any Representative, whether or not such Representative is so authorized
and whether or not such Representative is purporting to act on behalf of UA Bank
or otherwise, shall be deemed to be a breach of this Agreement by UA Bank. UA
Bank shall, and shall cause each of UA Bank Representatives to, immediately
cease and cause to be terminated any and all existing discussions, negotiations,
and communications with any Persons with respect to any existing or potential
Acquisition Proposal.

 

For purposes of this Agreement, “Acquisition Proposal” shall mean any inquiry,
offer or proposal (other than an inquiry, offer or proposal from Emclaire),
whether or not in writing, contemplating, relating to, or that could reasonably
be expected to lead to, an Acquisition Transaction. For purposes of this
Agreement, “Acquisition Transaction” shall mean (A) any transaction or series of
transactions involving any merger, consolidation, recapitalization, share
exchange, liquidation, dissolution or similar transaction involving UA Bank;
(B) any transaction pursuant to which any third party or group acquires or would
acquire (whether through sale, lease or other disposition), directly or
indirectly, assets of UA Bank representing, in the aggregate, twenty-five
percent (25%) or more of the assets of UA Bank; (C) any issuance, sale or other
disposition of (including by way of merger, consolidation, share exchange or any
similar transaction) securities (or options, rights or warrants to purchase or
securities convertible into, such securities) representing twenty-five percent
(25%) or more of the votes attached to the outstanding securities of UA Bank;
(D) any tender offer or exchange offer that, if consummated, would result in any
third party or group beneficially owning twenty-five percent (25%) or more of
any class of equity securities of UA Bank; or (E) any transaction which is
similar in form, substance or purpose to any of the foregoing transactions, or
any combination of the foregoing.

 

(b)          Notwithstanding Section 5.12(a), UA Bank may take any of the
actions described in clause (ii) or (iv) of Section 5.12(a) only if, (i) UA Bank
has received a bona fide unsolicited written Acquisition Proposal, prior to the
UA Bank Shareholders Meeting, that did not result from a breach of this
Section 5.12; (ii) the UA Bank Board determines in good faith, after
consultation with and having considered the advice of its outside legal counsel
and its independent financial advisor, that such Acquisition Proposal
constitutes or is reasonably likely to lead to a Superior Proposal; (iii) UA
Bank has provided Emclaire with at least two (2) Business Day’s prior notice of
such determination; and (iv) prior to furnishing or affording access to any
information or data with respect to UA Bank or otherwise relating to an
Acquisition Proposal, UA Bank receives from such Person a confidentiality
agreement with terms no less favorable to UA Bank than those contained in the
letter agreement, dated October 14, 2015, between Raymond James, for itself and
as a representative on behalf of UA Bank, and Emclaire (the “Confidentiality
Agreement”). UA Bank shall promptly provide to Emclaire any non-public
information regarding UA Bank provided to any other Person that was not
previously provided to Emclaire, such additional information to be provided no
later than the date of provision of such information to such other party.

 

 36

 

 

For purposes of this Agreement, “Superior Proposal” shall mean any bona fide
written proposal (on its most recently amended or modified terms, if amended or
modified) made by a third party to enter into an Acquisition Transaction on
terms that the UA Bank Board determines in its good faith judgment, after
consultation with and having considered the advice of outside legal counsel and
a financial advisor (i) would, if consummated, result in the acquisition of all,
but not less than all, of the issued and outstanding shares of UA Bank Common
Stock or all, or substantially all, of the assets of UA Bank; (ii) would result
in a transaction that (A) involves consideration to the holders of the shares of
UA Bank Common Stock that is more favorable, from a financial point of view,
than the consideration to be paid to the UA Bank Shareholders pursuant to this
Agreement, considering, among other things, the nature of the consideration
being offered and any material regulatory approval or other risk associated with
the timing of the proposed transaction beyond or in addition to those
specifically contemplated hereby, and which proposal is not conditioned upon
obtaining additional financing and (B) is, in light of the other terms of such
proposal, more favorable to the UA Bank Shareholders than the First Merger and
the transactions contemplated by this Agreement; and (iii) is reasonably likely
to be completed on the terms proposed, in each case taking into account all
legal, financial, regulatory and other aspects of the proposal.

 

(c)          UA Bank shall promptly (and in any event within twenty-four
(24) hours) notify Emclaire in writing if any proposal or offer is received by,
any information is requested from, or any negotiation or discussion is sought to
be initiated or continued with, UA Bank or any UA Bank Representative, in each
case in connection with any Acquisition Proposal, and such notice shall indicate
the name of the Person initiating such discussions or negotiations or making
such proposal, offer or information request and the material terms and
conditions of any proposals or offers (and, in the case of written materials
relating to such proposal, offer, information request, negotiations or
discussion, providing copies of such materials (including e-mails or other
electronic communications). UA Bank agrees that it shall keep Emclaire informed,
on a current basis, of the status and terms of any such proposal, offer,
information request, negotiation or discussion (including any amendment or
modification to such proposal, offer or request).

 

(d)          Subject to Section 5.12(e), neither the UA Bank Board nor any
committee thereof shall (i) withdraw, qualify or modify, or propose to withdraw,
qualify or modify, in a manner adverse to Emclaire in connection with the
transactions contemplated by this Agreement (including the First Merger), the UA
Bank Recommendation (as defined in Section 5.13), or make any statement, filing
or release, in connection with UA Bank Shareholders Meeting or otherwise,
inconsistent with the UA Bank Recommendation (it being understood that taking a
neutral position or no position with respect to an Acquisition Proposal shall be
considered an adverse modification of the UA Bank Recommendation); (ii) approve
or recommend, or publicly propose to approve or recommend, any Acquisition
Proposal; or (iii) enter into (or cause UA Bank to enter into) any letter of
intent, agreement in principle, acquisition agreement or other agreement
(A) related to any Acquisition Transaction (other than a confidentiality
agreement entered into in accordance with the provisions of Section 5.12(b)) or
(B) requiring UA Bank to abandon, terminate or fail to consummate the Merger or
any other transaction contemplated by this Agreement.

 

(e)          Notwithstanding Section 5.12(d), prior to the date of UA Bank
Shareholders Meeting, the UA Bank Board may approve or recommend to the
shareholders of UA Bank a Superior Proposal and withdraw, qualify or modify the
UA Bank Recommendation in connection therewith (a “UA Bank Subsequent
Determination”) after the second (2nd) Business Day following Emclaire’s receipt
of a notice (the “Notice of Superior Proposal”) from UA Bank advising Emclaire
that the UA Bank Board has decided that a bona fide unsolicited written
Acquisition Proposal that it received (that did not result from a breach of this
Section 5.12) constitutes a Superior Proposal (it being understood that UA Bank
shall be required to deliver a new Notice of Superior Proposal in respect of any
revised Superior Proposal from such third party or its affiliates that UA Bank
proposes to accept and the subsequent notice period shall be two (2) business
days) if, but only if, (i) the UA Bank Board of Directors has reasonably
determined in good faith, after consultation with and having considered the
advice of outside legal counsel and a financial advisor, that the failure to
take such actions would be reasonably likely to violate its fiduciary duties to
UA Bank’s shareholders under applicable law, and (ii) at the end of such two (2)
Business Day Period (as the case may be), after taking into account any such
adjusted, modified or amended terms as may have been committed to in writing by
Emclaire since its receipt of such Notice of Superior Proposal (provided,
however, that Emclaire shall not have any obligation to propose any adjustment,
modification or amendment to the terms and conditions of this Agreement), UA
Bank Board of Directors has again in good faith made the determination (A) in
clause (i) of this Section 5.12(e) and (B) that such Acquisition Proposal
constitutes a Superior Proposal.

 

 37

 

 

(f)          Nothing contained in this Section 5.12 shall prohibit UA Bank or
the UA Bank Board of Directors from complying with UA Bank’s obligations
required under Rules 14d-9 (as if such rule were applicable to UA Bank) and
14e-2(a) promulgated under the Exchange Act; provided, however, that any such
disclosure relating to an Acquisition Proposal shall be deemed a change in UA
Bank Recommendation unless UA Bank Board reaffirms UA Bank Recommendation in
such disclosure.

 

Section 5.13.          Shareholders’ Meeting.

 

UA Bank will submit to its shareholders this Agreement and all other matters
required to be approved or adopted by shareholders in order to carry out the
intentions of this Agreement. In furtherance of that obligation, UA Bank will
take, in accordance with applicable law and its articles of incorporation and
bylaws, all action necessary to call, give notice of, convene and hold a special
meeting of its shareholders (the “UA Bank Shareholders Meeting”) as promptly as
practicable following execution of this Agreement for the sole purpose of
considering and voting on approval and adoption of this Agreement and the
transactions provided for in this Agreement. UA Bank shall use its reasonable
best efforts to disseminate the Proxy Statement in connection with the UA Bank
Shareholders Meeting within 60 days from the date hereof. UA Bank agrees that
its obligations pursuant to this Section 5.13 shall not be affected by the
commencement, public proposal, public disclosure or communication to UA Bank of
any Acquisition Proposal or by any Change of Recommendation (as defined below).
Subject to Section 5.12(e), UA Bank shall, (i) through UA Bank’s Board of
Directors, recommend to its shareholders approval and adoption of this Agreement
(the “UA Bank Recommendation”), (ii) include such recommendation in the proxy
statement for such UA Bank Shareholders Meeting and (iii) use commercially
reasonable efforts to obtain from the UA Bank Shareholders a vote approving and
adopting this Agreement. For the purposes of holding the UA Bank Shareholders
Meeting, UA Bank shall draft and prepare a proxy statement satisfying all
applicable requirements of applicable laws (the “Proxy Statement”). UA Bank
shall provide Emclaire with appropriate opportunity to review and comment on its
Proxy Statement, and shall incorporate all appropriate comments thereto.

 

ARTICLE 6
COVENANTS OF EMCLAIRE

 

Section 6.01         Conduct of Business.

 

During the period from the date of this Agreement to the Effective Time, except
with the written consent of UA Bank, which consent will not be unreasonably
withheld, Emclaire will, and it will cause each Emclaire Subsidiary to use
reasonable efforts to preserve intact its business organization and assets and
maintain its rights and franchises; and voluntarily take no action which would,
or would be reasonably likely to, (i) materially adversely affect the ability of
the parties to obtain any Regulatory Approval or other approval of Governmental
Entities required for the transactions contemplated hereby or materially
increase the period of time necessary to obtain such approvals, or (ii)
materially adversely affect its ability to perform its covenants and agreements
under this Agreement.

 

Section 6.02         Current Information.

 

During the period from the date of this Agreement to the Effective Time,
Emclaire will cause one or more of its representatives to confer with
representatives of UA Bank and report the general status of matters relating to
the completion of the transactions contemplated hereby, at such times as UA Bank
may reasonably request. Emclaire will promptly notify UA Bank, to the extent
permitted by applicable law, of all governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), which
might adversely affect the ability of the parties to obtain the Regulatory
Approvals or materially increase the period of time necessary to obtain such
approvals; or the institution of material litigation involving Emclaire and any
Emclaire Subsidiary.

 

 38

 

 

Section 6.03         Financial and Other Statements.

 

Emclaire will furnish to UA Bank copies of all documents, statements and reports
as it files with any Regulatory Authority with respect to the Mergers.

 

Section 6.04         Disclosure Supplements.

 

From time to time prior to the Effective Time, Emclaire will promptly supplement
or amend the Emclaire Disclosure Schedules delivered in connection herewith with
respect to any material matter hereafter arising which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such Emclaire Disclosure Schedules or which is necessary to
correct any information in such Emclaire Disclosure Schedules which has been
rendered inaccurate thereby. No supplement or amendment to such Emclaire
Disclosure Schedules shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Article VIII. UA Bank agrees that
Emclaire will be deemed to have complied with Section 6.04 so long as all
matters that are required pursuant to the first sentence of this Section 6.04 to
be included in a supplement or amendment of the Emclaire Disclosure Schedules
and are not so included would not cause the failure of the condition set forth
in Section 8.03(a) to be satisfied.

 

Section 6.05         Consents and Approvals of Third Parties.

 

Emclaire shall use best efforts to obtain as soon as practicable all consents
and approvals, necessary or desirable for the consummation of the transactions
contemplated by this Agreement. In furtherance thereof, provided that Emclaire
receives all information requested in writing from UA Bank concerning UA Bank
and each UA Bank Subsidiary, Emclaire shall use its reasonable best efforts to
file all applications required to obtain each Regulatory Approval within 45 days
from the date hereof.

 

Section 6.06         Best Efforts.

 

Subject to the terms and conditions herein provided, Emclaire agrees to use all
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.

 

Section 6.07         Failure to Fulfill Conditions.

 

In the event that Emclaire determines that a condition to its obligation to
complete the Merger cannot be fulfilled and that it will not waive that
condition, it will promptly notify UA Bank.

 

Section 6.08         Employee and Director Benefits.

 

(a)          Prior to the Effective Time, Emclaire shall take all reasonable
action so that employees of UA Bank who become employees of Emclaire or an
Emclaire Subsidiary (“Continuing Employees”) shall be eligible to participate,
effective as soon as each Emclaire employee benefit plan permits (but not sooner
than is administratively practicable following the Effective Time), in each of
Emclaire’s employee benefit plans in which similarly situated employees of
Emclaire or an Emclaire Subsidiary participate; provided, however, that, in the
case of all benefits to be provided to the Continuing Employees, until the first
anniversary of the Effective Time, Emclaire may instead provide such employees
with participation in the employee benefit plans of UA Bank in which they
participated immediately prior to the Effective Time, provided that the result
is the provision of benefits to each Continuing Employee that are substantially
similar in the aggregate to the benefits provided to similarly-situated
employees of Emclaire and its Subsidiaries (it being understood that inclusion
of Continuing Employees in Emclaire’s employee benefit plans may occur at
different times with respect to different plans). This Agreement shall not be
construed to limit the ability of Emclaire or any Emclaire Subsidiary to
terminate the employment of any employee or to amend or terminate any employee
benefit plans in accordance with their respective terms and conditions after the
Effective Time.

 

 39

 

 

(b)          With respect to each Emclaire employee benefit plan for which
length of service is taken into account for any purpose, service with UA Bank
(or predecessor employers to the extent UA Bank provides past service credit)
shall be treated as service with Emclaire and its Subsidiaries for purposes of
determining eligibility to participate, vesting, and entitlement to benefits,
including for severance benefits and vacation entitlement (but not for accrual
of defined benefit pension benefits); provided, however, that such prior service
shall not be recognized to the extent that such recognition would result in a
duplication of benefits. Such prior service credit also shall apply for purposes
of satisfying any waiting periods, evidence of insurability requirements, or the
application of any preexisting condition limitations, if permitted by the
Emclaire employee benefit plan. In the event of a termination or consolidation
of any group medical plan sponsored by UA Bank, at or following the Effective
Time, any employee of UA Bank that is not a Continuing Employee and any
“qualified beneficiaries” (within the meaning of Section 4980B(g) of the Code)
of such individuals shall be entitled to continuation coverage under the group
medical plan(s) sponsored or maintained by Emclaire at the expense of such
terminated employees and qualified beneficiaries, except as otherwise provided.

 

(c)          Each employee of UA Bank immediately prior to the Effective Time
(other than any employee who is party to an employment agreement, severance
agreement or change in control agreement or covered by any other severance plan)
and whose employment is terminated as of the Effective Time or whose employment
continues with Emclaire or any Emclaire Subsidiary as of the Effective Time and
whose employment thereafter is terminated involuntarily other than for “cause,”
during the one-year period following the Effective Time shall be entitled to
receive a lump sum severance payment from Emclaire equal in amount to two weeks’
base pay (with such amount to be calculated based upon such employee’s base pay
as of the Effective Time or, if higher, the base pay as of the date of
termination) for each full year such employee was employed by UA Bank, provided
such terminated employee had at least one year of credited service and subject
to a minimum of four weeks’ severance and a maximum of 26 weeks’ severance, and,
provided further, that such terminated employee enters into a release of claims
against Emclaire and the Emclaire Subsidiaries. For purposes of this Section
6.08(c), “cause” shall mean termination because of the employee’s personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties or willful
violation of any law, rule or regulation (other than traffic violations or
similar violations), “base pay” shall mean an employee’s annual salary or annual
compensation computed on an hourly basis, excluding bonuses, commissions,
perquisites, benefits or similar payments, and “year of credited service” shall
mean each full 12-month period of service from the date of hire. UA Bank shall
take all necessary action to cause its Employee Change in Control Severance Plan
to be terminated effective no later than the day immediately prior to the
Effective Time. UA Bank shall provide Emclaire and its counsel with a draft of
each resolution, employee communication or other document relating to the
termination of the UA Bank Employee Change in Control Severance Plan at least
five business days before such document is adopted or distributed, and no such
document shall be adopted or distributed without Emclaire’s approval (not to be
unreasonably withheld, conditioned or delayed). Prior to the Closing Date, UA
Bank shall provide Emclaire with the final documentation evidencing that the
actions contemplated herein have been effectuated.

 

 40

 

 

(d)          UA Bank shall take all actions necessary to terminate the UA Bank
ESOP, effective no later than the day immediately prior to the Effective Time.
The accounts of all participants and beneficiaries in the UA Bank ESOP as of the
Effective Time shall become fully vested upon termination of the UA Bank ESOP.
The Merger Consideration received with respect to the unallocated UA Bank Common
Stock held by the UA Bank ESOP shall first be used to repay all then outstanding
indebtedness under the outstanding loan to the ESOP. Following the Effective
Time, any remaining cash held in the ESOP suspense account after repayment of
the outstanding ESOP loan shall be allocated in accordance with the terms of the
UA Bank ESOP. As soon as practicable after the date hereof, counsel for Emclaire
shall prepare and UA Bank shall file or cause to be filed all necessary
documents to be filed with the IRS for a determination letter for termination of
the UA Bank ESOP, effective immediately prior to the Effective Time, and UA Bank
shall file or cause to be filed such documents with the IRS following review by
it and its counsel. The parties shall use their respective reasonable best
efforts to obtain such favorable determination letter. As soon as practicable
following the later of the Effective Time or the receipt of a favorable
determination letter from the IRS regarding the qualified status of the UA Bank
ESOP upon its termination, the account balances in the UA Bank ESOP shall be
either distributed to participants and beneficiaries or rolled over to an
eligible tax-qualified retirement plan or individual retirement account as a
participant or beneficiary may direct; provided however, that nothing contained
herein shall delay the distribution or transfer of account balances in the UA
Bank ESOP in the ordinary course for reasons other than the termination of such
plan. Emclaire agrees to permit Continuing Employees to rollover their account
balances in the UA Bank ESOP to Emclaire’s 401(k) Plan provided they are still
employed by Emclaire or an Emclaire Subsidiary at the time of such rollover. UA
Bank shall, or shall direct the fiduciaries of the UA Bank ESOP to (to the
extent permitted by law), provide Emclaire and its counsel with a draft of each
resolution, amendment, participant communication or other document relating to
the termination of the UA Bank ESOP or the voting of shares of UA Bank Common
Stock in the UA Bank ESOP at the UA Bank shareholder meeting held in accordance
with Section 5.13 above at least five business days before such document is
adopted, filed or distributed, and no such document shall be adopted, filed or
distributed without Emclaire’s approval (not to be unreasonably withheld,
conditioned or delayed). Prior to the Closing Date, UA Bank shall provide
Emclaire with the final documentation evidencing that the actions contemplated
herein have been effectuated. Notwithstanding anything herein to the contrary,
UA Bank shall continue to accrue and make contributions to the ESOP trust from
the date of this Agreement through the termination date of the UA Bank ESOP in
an amount not to exceed the aggregate dollar amount of the monthly loan payments
which become due in the ordinary course on the outstanding loan to the ESOP
prior to the termination of the ESOP.

 

(e)          UA Bank shall take all necessary action to cause its 401(k) and
Profit Sharing Plan (the “UA Bank 401(k) Plan”) to be terminated effective no
later than the day immediately prior to the Effective Time (“Termination Date”).
The accounts of all participants and beneficiaries in the UA Bank 401(k) Plan
shall become fully vested as of the Termination Date. As soon as practicable
after the Termination Date, the account balances in the UA Bank 401(k) Plan
shall be distributed as a participant or beneficiary may direct, consistent with
applicable laws and regulations. Any Continuing Employee who elects to
participate in Emclaire’s 401(k) Plan and who remains employed by Emclaire or
any Emclaire Subsidiary at the time his or her account balance in the UA Bank
401(k) Plan is distributed may elect to have such account balance rolled over
into Emclaire’s 401(k) Plan. UA Bank shall, or shall direct the fiduciaries of
the UA Bank 401(k) Plan to (to the extent permitted by law), provide Emclaire
and its counsel with a draft of each resolution, amendment, participant
communication or other document relating to the termination of the UA Bank
401(k) Plan at least five business days before such document is adopted or
distributed, and no such document shall be adopted or distributed without
Emclaire’s approval (not to be unreasonably withheld, conditioned or delayed).
Prior to the Closing Date, UA Bank shall provide Emclaire with the final
documentation evidencing that the actions contemplated herein have been
effectuated.

 

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(f)          Emclaire agrees to honor the management change in control severance
agreements with Tom P. Smith, Benjamin A. Contrucci and Donna M. Ansbach,
provided that the form of release to be executed by such executives pursuant to
such agreements shall be in a form reasonably acceptable to Emclaire and
provided that if any of the insurance benefits cannot be continued in-kind,
Emclaire shall make a cash payment in lieu of such insurance benefits based on
the amount of insurance premiums being paid as the date of termination of
employment. In addition, Emclaire shall honor the terms of the UA Bank Director
Plan set forth on UA Bank Disclosure Schedules 3.12(a) and 3.12(m).

 

(g)          Emclaire and UA Bank have agreed that it is advisable to pay
retention bonuses to selected employees of UA Bank who become Continuing
Employees and remain employees through a specified date, which retention bonuses
shall not exceed $20,000 in the aggregate.

 

(h)          As of the Closing Date, Emclaire shall form a Pittsburgh Advisory
Board comprised of three current members of the Board of Directors of UA Bank
selected by Emclaire. The Pittsburgh Advisory Board shall be maintained for a
period of not less than two years from the Effective Date. The Pittsburgh
Advisory Board will assist management and the Board of Directors of Emclaire
with business development efforts in the Pittsburgh market area after the
Closing. Each member of the Pittsburgh Advisory Board will be paid a quarterly
fee of $3,000 as a member of the Pittsburgh Advisory Board.

 

(i)          To the extent requested by Emclaire prior to the Closing Date, UA
Bank shall cooperate in good faith with Emclaire to amend, freeze, terminate or
modify any UA Bank Compensation and Benefit Plan not covered by subsections (c),
(d) and (e) of this Section 6.08 in accordance with the terms of such plan or
agreement and applicable law, to be effective as of the Effective Time (or at
such different time mutually agreed to by the parties), except that the winding
up of any such plan or agreement may be completed following the Closing Date. UA
Bank shall provide Emclaire with a copy of the resolutions, plan amendments,
notices and other documents prepared to effectuate the actions contemplated by
this Section 6.08(i), as applicable, and give Emclaire a reasonable opportunity
to comment on such documents (which comments shall be considered in good faith
by UA Bank), and prior to the Closing Date, UA Bank shall provide Emclaire with
the final documentation evidencing that the actions contemplated herein have
been effectuated.

 

Section 6.09         Directors and Officers Indemnification and Insurance.

 

(a)                      Emclaire shall indemnify, defend and hold harmless each
person who is now, or who has been at any time before the date hereof or who
becomes before the Effective Time, an officer or director of UA Bank (the
“Indemnified Parties”) against all losses, claims, damages, costs, expenses
(including attorney’s fees), liabilities or judgments or amounts that are paid
in settlement (which settlement shall require the prior written consent of
Emclaire, which consent shall not be unreasonably withheld) of or in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, or administrative (each a “Claim”), in which an Indemnified Party is,
or is threatened to be made, a party or witness in whole or in part or arising
in whole or in part out of the fact that such person is or was a director,
officer or employee of UA Bank if such Claim pertains to any matter of fact
arising, existing or occurring at or before the Effective Time (including,
without limitation, the Mergers and the other transactions contemplated hereby),
regardless of whether such Claim is asserted or claimed before, or after, the
Effective Time, to the fullest extent as would have been permitted by UA Bank
under Pennsylvania law and under UA Bank’s Articles of Incorporation and Bylaws.
Emclaire shall pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the fullest extent as would
have been permitted by UA Bank under Pennsylvania law and under UA Bank’s
Articles of Incorporation and Bylaws, upon receipt of an undertaking to repay
such advance payments if he shall be adjudicated or determined to be not
entitled to indemnification in the manner set forth below. Any Indemnified Party
wishing to claim indemnification under this Section 6.09 upon learning of any
Claim, shall notify Emclaire (but the failure so to notify Emclaire shall not
relieve it from any liability which it may have under this Section 6.09, except
to the extent such failure materially prejudices Emclaire) and shall deliver to
Emclaire the undertaking referred to in the previous sentence.

 

 42

 

 

(b)          In the event that either Emclaire or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving bank or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of Emclaire shall assume the obligations set forth in
this Section 6.09.

 

(c)          Emclaire shall maintain, or shall cause Farmers National to
maintain, in effect for up to six years following the Effective Time, the
current directors’ and officers’ liability insurance policies covering the
officers and directors of UA Bank (provided, that Emclaire may substitute
therefore policies of at least the same coverage containing terms and conditions
which are not materially less favorable to the officers and directors of UA
Bank) with respect to matters occurring at or prior to the Effective Time;
provided, however, that in no event shall Emclaire be required to expend
pursuant to this Section 6.09 an aggregate amount to exceed $35,000 with respect
to such insurance (the “Maximum Amount”); provided, further, that if the amount
of the aggregate premium necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, Emclaire shall maintain the most
advantageous policies of directors’ and officers’ insurance obtainable for a
premium equal to the Maximum Amount. In connection with the foregoing, UA Bank
agrees in order for Emclaire to fulfill its agreement to provide directors and
officers liability insurance policies for up to six years to provide such
insurer or substitute insurer with such reasonable and customary representations
as such insurer may request with respect to the reporting of any prior claims.

 

(d)          The obligations of Emclaire provided under this Section 6.09 are
intended to be enforceable against Emclaire directly by the Indemnified Parties
and shall be binding on all respective successors and permitted assigns of
Emclaire.

 

ARTICLE 7
REGULATORY AND OTHER MATTERS

 

Section 7.01         Regulatory Approvals.

 

The parties will cooperate with each other and use best efforts to promptly
prepare all necessary documentation, to effect all necessary filings and to
obtain all necessary permits, consents, waivers, approvals and authorizations
of, the Regulatory Authorities and any other governmental bodies necessary to
consummate the transactions contemplated by this Agreement and Emclaire will
make and cause Farmers National to make, all necessary filings in respect of the
required Regulatory Approvals as promptly as practicable after the date hereof;
provided, however, that in no event shall Emclaire or Farmers National be
required to agree to any prohibition, limitation, or other requirement that
would (a) prohibit or materially limit the ownership or operation by Emclaire or
Farmers National of all or any material portion of the business or assets of UA
Bank, (b) compel Emclaire or Farmers National to dispose of or hold separate all
or any material portion of the business or assets of UA Bank, or (c) otherwise
materially impair the value of UA Bank to Emclaire and Farmers National (any
such requirement alone, or more than one such requirement together, a
“Burdensome Condition”). The parties will furnish each other and each other’s
counsel with all information concerning themselves, their respective
Subsidiaries, directors, officers and shareholders and such other matters as may
be necessary or advisable in connection with any application, petition or any
other statement or application made to any Regulatory Authority or Governmental
Entity in connection with the Mergers, and the other transactions contemplated
by this Agreement. UA Bank shall have the right to review, and to consult with
Emclaire and Farmers National on, the information which appears in any filing
made in connection with the transactions contemplated by this Agreement with any
Regulatory Authority or any Governmental Entity. Emclaire shall give UA Bank and
its counsel the opportunity to review, and to consult with Emclaire and Farmers
National on, each filing prior to its being filed with a Regulatory Authority
and shall give UA Bank and its counsel the opportunity to review all regulatory
filings, amendments and supplements to such filings and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, a Regulatory Authority.

 

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ARTICLE 8
CLOSING CONDITIONS

 

Section 8.01         Conditions to Each Party’s Obligations under this
Agreement.

 

The respective obligations of each of the parties under this Agreement shall be
subject to the fulfillment at or, to the extent permitted by law, waiver by all
parties prior to the Closing Date of the following conditions:

 

(a)          UA Bank Shareholder Approval. The UA Bank Shareholder Approval
shall have been obtained.

 

(b)          Injunctions. None of the parties hereto shall be subject to any
order, decree or injunction of a court or agency of competent jurisdiction that
enjoins or prohibits the consummation of the transactions contemplated by this
Agreement and no statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any Governmental Entity or
Regulatory Authority, that enjoins or prohibits the consummation of the
transactions contemplated by this Agreement.

 

(c)          Regulatory Approvals. All Regulatory Approvals required to
consummate the transactions contemplated by this Agreement shall have been
obtained and shall remain in full force and effect and all waiting periods
relating to such approvals shall have expired; all other necessary approvals,
authorizations and consents of all Governmental Entities required to consummate
the transactions contemplated by this Agreement, the failure of which to obtain
would reasonably be expected to have a Material Adverse Effect with respect to
Emclaire or UA Bank, shall have been obtained and shall remain in full force and
effect and all waiting periods relating to such approvals, authorizations or
consents shall have expired.

 

Section 8.02         Conditions to the Obligations of Emclaire and Interim under
this Agreement.

 

The obligations of Emclaire and Interim under this Agreement shall be further
subject to the satisfaction or waiver by Emclaire and Interim of the conditions
set forth in this Section 8.02 at or prior to the Closing Date:

 

(a)          Representations and Warranties. Each of the representations and
warranties of UA Bank set forth in this Agreement that are qualified as to
materiality shall be true and correct, and each of the representations and
warranties of UA Bank that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and upon the
Effective Time with the same effect as though all such representations and
warranties had been made on the Effective Time (except to the extent such
representations and warranties speak as of an earlier date); and UA Bank shall
have delivered to Emclaire a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer and UA Bank as of the Effective
Time.

 

 44

 

 

(b)          Agreements and Covenants. UA Bank shall have performed in all
material respects all obligations and complied in all material respects with all
agreements or covenants to be performed or complied with by it, in each case
under this Agreement, at or prior to the Closing Date, and Emclaire shall have
received a certificate signed on behalf of UA Bank by the Chief Executive
Officer and Chief Financial Officer of UA Bank to such effect dated as of the
Closing Date.

 

(c)          Limitation on Dissenters’ Rights As of the Closing Date, the
holders of no more than 10.0% of UA Bank Common Stock that is issued and
outstanding shall have taken the actions required by the Banking Code and the
PBCL to qualify their UA Bank Common Stock as Dissenting Shares.

 

(d)          Regulatory Approvals. None of the Regulatory Approvals necessary to
consummate the First Merger or the Second Merger and the transactions
contemplated by this Agreement shall include a Burdensome Condition.

 

(e)          Third Party Consents. The consent or approval of each person (other
than the Regulatory Approvals) whose consent or approval shall be required to
consummate the transactions contemplated by this Agreement shall have been
received, except for those for which failure to obtain such consent or approval
would not, individually or in the aggregate, have a Material Adverse Effect on
Emclaire (after giving effect to the consummation of the transactions
contemplated hereby).

 

Section 8.03         Conditions to the Obligations of UA Bank under this
Agreement.

 

The obligations of UA Bank under this Agreement shall be further subject to the
satisfaction of the conditions set forth in Section 8.03 at or prior to the
Closing Date:

 

(a)          Representations and Warranties. Each of the representations and
warranties of Emclaire set forth in this Agreement that are qualified as to
materiality shall be true and correct, and each of the representations and
warranties of Emclaire that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and upon
the Effective Time with the same effect as though all such representations and
warranties had been made on the Effective Time (except to the extent such
representations and warranties speak as of an earlier date); and Emclaire shall
have delivered to UA Bank a certificate to such effect signed by the Chief
Executive Officer and Chief Financial Officer and Emclaire as of the Effective
Time.

 

(b)          Agreements and Covenants. Emclaire and Interim shall have performed
in all material respects all obligations and complied in all material respects
with all agreements or covenants to be performed or complied with by it, in each
case under this Agreement, at or prior to the Closing Date, and UA Bank shall
have received a certificate signed on behalf of Emclaire by the Chief Executive
Officer and Chief Financial Officer to such effect dated as of the Closing Date.

 

(c)          Payment of Merger Consideration. Emclaire shall have delivered the
aggregate Merger Consideration to the Exchange Agent one business day prior to
the Closing Date and the Exchange Agent shall provide UA Bank with a certificate
evidencing such delivery.

 

ARTICLE 9
THE CLOSING

 

Section 9.01         Time and Place.

 

Subject to the provisions of Articles 9 and 10 hereof, the Closing of the
transactions contemplated hereby shall take place by mail or electronic
delivery, or, at the option of Emclaire, at the offices of Silver, Freedman,
Taff & Tiernan LLP, 3299 K Street, N.W., Suite 100, Washington, D.C. at 10:00
a.m., or at such other place or time upon which Emclaire and UA Bank mutually
agree. A pre-closing of the transactions contemplated hereby (the “Pre-Closing”)
shall take place on the day prior to the Closing Date.

 

 45

 

 

Section 9.02         Deliveries at the Pre-Closing and the Closing.

 

At the Pre-Closing there shall be delivered to Emclaire and UA Bank the
certificates, and other documents and instruments required to be delivered at
the Closing under Article 8 hereof. One business day prior to the Closing,
Emclaire shall have delivered the Merger Consideration as set forth under
Section 8.03 hereof.

 

ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER

 

Section 10.01         Termination.

 

This Agreement may be terminated at any time prior to the Closing Date, whether
before or after approval of the Merger by the shareholders of UA Bank:

 

(a)          by the mutual written agreement of Emclaire and UA Bank;

 

(b)         by the Board of Directors of either Emclaire or UA Bank (provided,
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a breach of any of the representations or warranties set forth in this Agreement
on the part of the other party that would, alone or together with all other such
breaches, entitle the terminating party not to consummate the transactions
contemplated hereby under Section 8.02(a) or Section 8.03(a), as applicable,
which breach by its nature cannot be cured prior to the Termination Date or
shall not have been cured within 30 days after written notice of such breach by
the terminating party to the other party;

 

(c)          by the Board of Directors of either Emclaire or UA Bank (provided,
that the terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have been
a failure to perform or comply with any of the covenants or agreements set forth
in this Agreement on the part of the other party that would, alone or together
with all other such breaches, entitle the terminating party not to consummate
the transactions contemplated hereby under Section 8.02(a) or Section 8.03(a),
as applicable, which failure by its nature cannot be cured prior to the
Termination Date or shall not have been cured within 30 days after written
notice of such failure by the terminating party to the other party;

 

(d)          by the Board of Directors of either Emclaire or UA Bank if the
Closing shall not have occurred by the Termination Date, or such later date as
shall have been agreed to in writing by Emclaire and UA Bank; provided, that no
party may terminate this Agreement pursuant to this Section 10.01(d) if the
failure of the Closing to have occurred on or before said date was due to such
party’s material breach of any representation, warranty, covenant or other
agreement contained in this Agreement;

 

(e)          by the Board of Directors of either Emclaire or UA Bank if (i) any
Regulatory Authority has denied a requisite Regulatory Approval and such denial
has become final and nonappealable, provided that the party seeking to terminate
this Agreement pursuant to this Section 10.01(e)(i) shall have used its
reasonable best efforts to contest, appeal and change such denial, or (ii) any
court of competent jurisdiction or other governmental authority shall have
issued an order, decree, ruling or taken any other action restraining, enjoining
or otherwise prohibiting any of the Mergers and such order, decree, ruling or
other action shall have become final and nonappealable;

 

 46

 

 

(f)          by the Board of Directors of either Emclaire or UA Bank, if the
shareholders of UA Bank shall have voted at the UA Bank Shareholders Meeting on
the transactions contemplated by this Agreement and such vote shall not have
been sufficient to approve such transactions;

 

(g)          by the Board of Directors of Emclaire, (i) if UA Bank shall have
materially breached its obligations under Section 5.12 or 5.13 of this Agreement
or (ii) if the UA Bank Board of Directors does not publicly recommend in the
proxy statement for the UA Bank Shareholders Meeting that the UA Bank
Shareholders approve and adopt this Agreement or if, after making the UA Bank
Recommendation in the proxy statement for the UA Bank Shareholders Meeting, the
UA Bank Board of Directors makes a UA Bank Subsequent Determination;

 

(h)          By the Board of Directors of Emclaire if UA Bank has received a
Superior Proposal, and in accordance with Section 5.12 of this Agreement, the
Board of Directors of UA Bank has entered into an acquisition agreement with
respect to the Superior Proposal, terminated this Agreement, or made a UA Bank
Subsequent Determination in a manner adverse to Emclaire; or

 

(i)           By the Board of Directors of UA Bank, and subject to UA Bank’s
compliance with Section 10.02(b), if UA Bank has received a Superior Proposal,
and in accordance with Section 5.12 of this Agreement, the Board of Directors of
UA Bank has accepted such Superior Proposal.

 

Section 10.02         Effect of Termination.

 

(a)          In the event of termination of this Agreement pursuant to any
provision of Section 10.01, this Agreement shall forthwith become void and have
no further force, except that the provisions of Section 10.02 (including with
respect to Section 10.02(b)(ii), any other provision of this Agreement relevant
to the applicable willful breach), 11.01, 11.02, 11.04, 11.05, 11.06, 11.09,
11.10, 11.11, 11.14 and any other Section which, by its terms, relates to
post-termination rights or obligations, shall survive such termination of this
Agreement and remain in full force and effect.

 

(b)          If this Agreement is terminated, expenses and damages of the
parties hereto shall be determined as follows:

 

(i)          Except as provided below, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid in accordance with Section 11.14.

 

(ii)          In the event of a termination of this Agreement because of a
willful breach of any representation, warranty, covenant or agreement contained
in this Agreement, the breaching party shall remain liable for any and all
damages, costs and expenses, including all reasonable attorneys’ fees, sustained
or incurred by the non-breaching party as a result thereof or in connection
therewith or with respect to the enforcement of its rights hereunder.

 

(iii)        As a condition of Emclaire’s willingness, and in order to induce
Emclaire, to enter into this Agreement, and to reimburse Emclaire for incurring
the costs and expenses related to entering into this Agreement and consummating
the transactions contemplated by this Agreement, UA Bank hereby agrees to pay
Emclaire, and Emclaire shall be entitled to payment of a fee of $600,000 (the
“Termination Fee”). The Termination Fee shall be paid within three (3) business
days after written demand for payment is made by Emclaire, following the
occurrence of any of the events set forth below:

 

 47

 

 

(A)         The termination of this Agreement by UA Bank pursuant to Section
10.01(i) or by Emclaire pursuant to Section 10.01(h); or

 

(B)         The entering into a definitive agreement by UA Bank relating to an
Acquisition Proposal or the consummation of an Acquisition Proposal involving UA
Bank within twelve (12) months after the occurrence of any of the following: (i)
the termination of the Agreement by Emclaire pursuant to Section 10.01(b) or
10.01(c) because of, in either case, a willful breach by UA Bank; or (ii) the
failure of the shareholders of UA Bank to approve this Agreement after the
public disclosure of an Acquisition Proposal; or

 

(C)         The termination of this Agreement by Emclaire pursuant to Section
10.01(g).

 

(iv)        The right to receive payment of the Termination Fee under
Section 10.02(b)(iii) will constitute the sole and exclusive remedy of Emclaire
against UA Bank and its officers and directors with respect to a termination
under Section 10.02(b)(iii)(A), (B) or (C).

 

(v)         Emclaire shall be reimbursed by UA Bank for all fees, costs and
other expenses incurred by Emclaire in connection with enforcing its right to
the Termination Fee.

 

(vi)        Nothing herein shall entitle Emclaire to be paid more than one
Termination Fee.

 

Section 10.03       Amendment, Extension and Waiver.

 

Subject to applicable law, at any time prior to the Effective Time (whether
before or after approval thereof by the shareholders of UA Bank), the parties
hereto by action of their respective Boards of Directors, may (a) amend this
Agreement, (b) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (c) waive any inaccuracy in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of this
Agreement and the transactions contemplated hereby by the shareholders of UA
Bank, there may not be, without re-obtaining the UA Bank Shareholder Approval,
any amendment of this Agreement which reduces the amount, value or changes the
form of consideration to be delivered to UA Bank’s shareholders pursuant to this
Agreement. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any agreement on the part of a
party hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.

 

ARTICLE 11
MISCELLANEOUS

 

Section 11.01         Confidentiality.

 

Each party shall, and shall cause its representatives, advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other party concerning its and its Subsidiaries’ businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other party.

 

 48

 

 

Section 11.02         Public Announcements.

 

Emclaire and UA Bank shall cooperate with each other in the development and
distribution of all news releases and other public disclosures with respect to
this Agreement, and except as may be otherwise required by law, neither UA Bank
nor Emclaire shall issue any news release, or other public announcement or
communication with respect to this Agreement unless such news release, public
announcement or communication has been mutually agreed upon by the parties
hereto. Notwithstanding the foregoing, a party may, without the prior consent of
the other party (but after prior consultation with the other party), issue such
press release or public disclosure as may upon the advice of counsel be required
by law or the rules and regulations of the applicable exchange, as the case may
be.

 

Section 11.03         Survival.

 

All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on and be
terminated and extinguished at the Effective Time, except for those covenants
and agreements contained herein which by their terms apply in whole or in part
after the Effective Time.

 

Section 11.04         Notices.

 

All notices and other communications hereunder shall be in writing and shall be
deemed duly given (a) on the date of delivery if delivered personally, or if by
facsimile or email, upon written confirmation of receipt by facsimile, (b) on
the first business day following the date of dispatch if delivered utilizing a
next-day service by a recognized next-day courier or (c) on the earlier of
confirmed receipt or the fifth Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered to the addresses set forth
below, or pursuant to such other instructions as may be designated in writing by
the party to receive such notice:

 

 49

 

 

(a) If to Emclaire, Farmers National or Interim to:

 

William C. Marsh

Chairman, President and Chief Executive Officer

Emclaire Financial Corp

612 Main Street

Emlenton, Pennsylvania 16373

Fax: (724) 867-1007

 

with a copy to:

 

Silver, Freedman, Taff & Tiernan LLP

3299 K Street, N.W., Suite 100

Washington, D.C. 20007

ATTN:   Raymond A. Tiernan, Esq.

Hugh T. Wilkinson, Esq.

Fax:        (202) 337-5502

 

(b) If to UA Bank to:

 

Tom P. Smith

President

United-American Savings Bank

1812 East Carson Street

Pittsburgh, Pennsylvania 15203

Fax:         (412) 431-1007

 

with a copy to:

 

Jones Walker LLP

1227 25th Street, N.W., Suite 200W

Washington, D.C. 20037

ATTN:    James C. Stewart, Esq.

Fax:         (202) 434-4661

 

or such other address as shall be furnished in writing by any party.

 

Section 11.05         Parties in Interest.

 

This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other party. Except for the provisions of Article 2 and Sections
6.09 and this 11.05, following the Effective Time, nothing in this Agreement,
express or implied, is intended to confer upon any person, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

 

Section 11.06         Complete Agreement.

 

This Agreement, including the Exhibits and Disclosure Schedules hereto and the
documents and other writings referred to herein or therein or delivered pursuant
hereto, and the Confidentiality Agreement contains the entire agreement and
understanding of the parties with respect to its subject matter. There is no
restriction, agreement, promise, warranty, covenant or undertakings between the
parties other than as expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties, both
written and oral, with respect to its subject matter.

 

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Section 11.07         Counterparts.

 

This Agreement may be executed in one or more counterparts all of which shall be
considered one and the same agreement and each of which shall be deemed an
original. A facsimile copy or electronic transmission of a signature page shall
be deemed to be an original signature page.

 

Section 11.08         Severability.

 

In the event that any one or more provisions of this Agreement shall for any
reason be held invalid, illegal or unenforceable in any respect, by any court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provisions of this Agreement and the parties shall use
their reasonable efforts to substitute a valid, legal and enforceable provision
which, insofar as practical, implements the purposes and intents of this
Agreement.

 

Section 11.09         Governing Law.

 

This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania, without giving effect to its principles of conflicts of laws,
except to the extent that federal law applies.

 

Section 11.10         Interpretation.

 

When a reference is made in this Agreement to Sections or Exhibits, such
reference shall be to a Section of or Exhibit to this Agreement unless otherwise
indicated. The recitals hereto constitute an integral part of this Agreement.
References to Sections include subsections, which are part of the related
Section. The table of contents, index and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.

 

Section 11.11         Specific Performance; Jurisdiction.

 

The parties hereto agree that irreparable damage would occur in the event that
the provisions contained in this Agreement were not performed in accordance with
its specific terms or was otherwise breached. It is accordingly agreed that each
of the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in the United States District Court for the Western District of
Pennsylvania or in any state court in the Commonwealth of Pennsylvania, this
being in addition to any other remedy to which it is entitled at law or in
equity. In addition, each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of the United States District Court for the Western
District of Pennsylvania or of any state court located in the Commonwealth of
Pennsylvania in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other United States District Court for the Western District of
Pennsylvania or a state court located in the Commonwealth of Pennsylvania.

 

 51

 

 

Section 11.12         Titles and Headings.

 

The table of contents and the Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.

 

Section 11.13         Waiver of Jury Trial.

 

EACH OF THE PARTIES HERETO WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY HERETO.

 

Section 11.14         Expenses.

 

Whether or not the Mergers are consummated, except as expressly provided herein,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.

 

Section 11.15         No Presumption Against Drafting Party.

 

Each of Emclaire and UA Bank acknowledges that each party to this Agreement has
been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the drafting party has no application and is expressly
waived.

 

 52

 

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.

 

  EMCLAIRE FINANCIAL CORP

 

  By: /s/ William C. Marsh     William C. Marsh     Chairman, President and
Chief Executive Officer

 

  THE FARMERS NATIONAL BANK OF EMLENTON

 

  By: /s/ William C. Marsh     William C. Marsh     Chairman, President and
Chief Executive Officer

 

  UNITED-AMERICAN SAVINGS BANK

 

  By: /s/ Tom P. Smith     Tom P. Smith     President

 

 53

 

 

Exhibit A

 

VOTING AND NON-SOLICITATION

AGREEMENT

 

VOTING AND NON-SOLICITATION AGREEMENT (the “Agreement”), dated as of December
30, 2015, by and between _______________________, a shareholder (“Shareholder”)
of United-American Savings Bank, a Pennsylvania chartered savings bank (“UA
Bank”), and Emclaire Financial Corp, a Pennsylvania corporation (“Emclaire”).
All terms used herein and not defined herein shall have the meanings assigned
thereto in the Merger Agreement (as defined below).

 

WHEREAS, Emclaire, its wholly owned subsidiary, The Farmers National Bank of
Emlenton (“Farmers National”), and UA Bank are simultaneously entering into an
Agreement and Plan of Merger, dated as of the date hereof (as may be amended
from time to time pursuant to its terms, the “Merger Agreement”), pursuant to
which a to-be-formed interim national bank to be wholly owned by Farmers
National will be merged with and into UA Bank (the “First Merger”) and UA Bank
will then merge with and into Farmers National, all on the terms and conditions
set forth therein, and in connection therewith each outstanding share of common
stock, par value $0.01 per share, of UA Bank (“UA Bank Common Stock”) shall be
converted into the right to receive $42.67 in cash;

 

WHEREAS, Annex I hereto sets forth all shares of UA Bank Common Stock over which
the Shareholder has beneficial ownership (as determined pursuant to Rule 13d-3
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (such
shares, together with all shares of UA Bank Common Stock subsequently acquired
by Shareholder during the term of this Agreement, including upon any exercise of
outstanding options to acquire shares of UA Bank Common Stock, being referred to
as the “Shares”); and

 

WHEREAS, in order to induce Emclaire to enter into the Merger Agreement,
Shareholder, solely in such Shareholder’s capacity as a shareholder of UA Bank
and not in any other capacity, has agreed to enter into and perform this
Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt, sufficiency
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.      Agreement to Vote Shares. Shareholder agrees that at any meeting of the
shareholders of UA Bank, or in connection with any written consent of the
shareholders of UA Bank at which a proposal of the type set forth in clause (ii)
below is presented for consideration by the shareholders of UA Bank, Shareholder
shall:

 

(i)          appear at each such meeting in person or by proxy or otherwise
cause the Shares to be counted as present thereat for purposes of calculating a
quorum; and

 

(ii)         vote (or cause to be voted), in person or by proxy, all the Shares,
(x) in favor of adoption and approval of the Merger Agreement and the Merger;
(y) against any action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of UA
Bank, contained in the Merger Agreement or of Shareholder contained in this
Agreement; and (z) against any action, agreement or transaction that is
intended, or would reasonably be expected, to materially impede, interfere or be
inconsistent with, delay, postpone, discourage or materially and adversely
affect consummation of the Merger or this Agreement. Except as set forth in this
clause (ii), Shareholder shall not be restricted from voting in favor of,
against or abstaining with respect to any other matter presented to the
shareholders of UA Bank.

 

 1

 

 

2.     No Transfers. From and after the date hereof through the receipt of UA
Bank Shareholder Approval of the Merger Agreement, Shareholder agrees not to,
directly or indirectly, sell, transfer, pledge, assign or otherwise dispose of,
or enter into any contract, option, commitment or other arrangement or
understanding with respect to the sale, transfer, pledge, assignment or other
disposition of, any of the Shares if such sale, transfer, pledge, assignment or
disposition could occur prior to such meeting, except the following transfers
shall be permitted: (i) transfers by will or operation of law, in which case
this Agreement shall bind the transferee, subject to applicable law, (ii)
transfers pursuant to any pledge agreement, subject to the pledgee agreeing in
writing to be bound by the terms of this Agreement, (iii) transfers in
connection with estate and tax planning purposes, including transfers to
relatives, trusts and charitable organizations, subject to the transferee
agreeing in writing to be bound by the terms of this Agreement, (iv) transfers
to any other shareholder of UA Bank who has executed a copy of this Agreement on
the date hereof with respect to some or all of the Shares held by such
Shareholder, and (v) such transfers as Emclaire may otherwise permit in its sole
discretion. Any transfer or other disposition in violation of the terms of this
Section 2 shall be null and void. Shareholder agrees that UA Bank shall not be
bound by any attempted sale of Shares, and UA Bank’s transfer agent shall be
given appropriate stop transfer instructions and shall not register any such
attempted sale, unless the sale has been effected in compliance with the terms
of this Agreement.

 

3.     Non-Solicitation; Nondisparagement.

 

A. Shareholder hereby covenants and agrees that, for a period commencing on the
Closing Date and terminating on the first anniversary of the Closing Date (the
“Restricted Period”), such Shareholder shall not within the Commonwealth of
Pennsylvania, directly or indirectly, as employee, agent, consultant, director,
equity holder, member, manager, partner or in any other capacity, without
Emclaire’s prior written consent, solicit, call upon, communicate with or
attempt to communicate (whether by mail, telephone, electronic mail, personal
meeting or any other means, excluding general solicitations of the public that
are not based in whole or in part on any list of customers of UA Bank) with any
Person that is or was a customer of UA Bank during the one-year period preceding
the Closing Date for the purpose of engaging in opportunities related to the
business of commercial, community or retail banking (the “Business”) or
contracts related to the Business or interfere with or damage (or attempt to
interfere with or damage) any relationship between Emclaire or its Affiliates
(as defined below) and any such customers. The Shareholder further covenants and
agrees that during the Restricted Period, such Shareholder shall not directly or
indirectly, as employee, agent, consultant, director, equity holder, member,
manager, partner or in any other capacity, without the prior written consent of
Emclaire, solicit or induce, or cause others to solicit or induce, for
employment or engagement, any employee of Emclaire or its Affiliates (excluding
general solicitations of the public that are not based on any list of, or
directed at, employees of Emclaire or its Affiliates). For the purposes hereof,
an “Affiliate” is defined as any other person or entity directly, or indirectly
through one or more intermediaries, controlling, controlled by or under common
control with such person or entity. For purposes of the foregoing, actions by
publicly traded entities in which the Shareholder owns less than 2% of the
outstanding shares will not be attributed to the Shareholder.

 

 2

 

 

 

B. The Shareholder further agrees and covenants that, during the Restricted
Period, he will not make, publish or communicate at any time to any person or
entity, including, but not limited to, customers, clients and investors of
Emclaire, Farmers National or any of their Affiliates, any Disparaging (defined
below) remarks, comments or statements concerning Emclaire, Farmers National or
any of their Affiliates, or any of their respective present and former members,
partners, directors, officers, employees or agents. For the purposes of this
provision, “Disparaging” remarks, comments or statements are those that impugn
the character, honesty, integrity, morality, business acumen or abilities of the
individual or entity being disparaged. Notwithstanding the foregoing, this
paragraph does not apply to (i) any truthful testimony, pleading, or sworn
statements in any legal proceeding; (ii) attorney-client communications; or
(iii) any communications with a government or regulatory agency.

 

4.     Representations and Warranties of Shareholder. Shareholder represents and
warrants to and agrees with Emclaire as follows:

 

A. Capacity. Shareholder has all requisite capacity and authority to enter into
and perform his, her or its obligations under this Agreement.

 

B. Binding Agreement. This Agreement constitutes the valid and legally binding
obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

 

C. Non-Contravention. The execution and delivery of this Agreement by
Shareholder does not, and the performance by Shareholder of his or her
obligations hereunder and the consummation by Shareholder of the transactions
contemplated hereby will not, violate or conflict with, or constitute a default
under, any agreement, instrument, contract or other obligation or any order,
arbitration award, judgment or decree to which Shareholder is a party or by
which Shareholder is bound, or any statute, rule or regulation to which
Shareholder is subject or, in the event that Shareholder is a corporation,
partnership, trust or other entity, any charter, bylaw or other organizational
document of Shareholder.

 

D. Ownership of Shares. Shareholder (or an affiliate of Shareholder) is the
beneficial owner (as determined pursuant to Rule 13d-3 under the Exchange Act)
of the Shares as of the date hereof, and, except as set forth on Annex I hereto
and arising hereunder, the Shares are so owned free and clear of any liens,
security interests, charges or other encumbrances.

 

 3

 

 

 

5.   Specific Performance and Remedies. Shareholder acknowledges that it will be
impossible to measure in money the damage to Emclaire if Shareholder fails to
comply with the obligations imposed by this Agreement and that, in the event of
any such failure, Emclaire will not have an adequate remedy at law or in equity.
Accordingly, Shareholder agrees that injunctive relief or other equitable
remedy, in addition to remedies at law or in damages, is the appropriate remedy
for any such failure and will not oppose the granting of such relief on the
basis that Emclaire has an adequate remedy at law. Shareholder agrees that
Shareholder will not seek, and agrees to waive any requirement for, the securing
or posting of a bond in connection with Emclaire’s seeking or obtaining such
equitable relief. In addition, after discussing the matter with Shareholder,
Emclaire shall have the right to inform any third party that Emclaire reasonably
believes to be, or to be contemplating, participating with Shareholder or
receiving from Shareholder assistance in violation of this Agreement, of the
terms of this Agreement and of the rights of Emclaire hereunder, and that
participation by any such persons with Shareholder in activities in violation of
Shareholder’s agreement with Emclaire set forth in this Agreement may give rise
to claims by Emclaire against such third party.

 

6.   Term of Agreement; Termination.

 

A. The term of this Agreement shall commence on the date hereof.

 

B. This Agreement shall terminate at the Effective Time of the First Merger or
the earlier of (i) by the written mutual consent of the parties hereto and (ii)
termination of the Merger Agreement in accordance with its terms; provided,
however, that notwithstanding anything herein to the contrary, in the event that
the Closing of the First Merger occurs, then the provisions of Section 3 of this
Agreement shall survive until the end of the Restricted Period.

 

7.   Entire Agreement. This Agreement supersedes all prior agreements, written
or oral, among the parties hereto with respect to the subject matter hereof and
contains the entire agreement among the parties with respect to the subject
matter hereof. This Agreement may not be amended, supplemented or modified, and
no provisions hereof may be modified or waived, except by an instrument in
writing signed by each party hereto. No waiver of any provisions hereof by
either party shall be deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver of any provision
hereof by such party. No party hereto may assign any rights or obligations
hereunder to any other person, except as required by Section 2 or upon the prior
written consent of each other party. Nothing in this Agreement, expressed or
implied, is intended to or shall confer upon any other person or entity, other
than the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

 

8.   Notices. Notices may be provided to Emclaire and the Shareholder in the
manner specified in the Merger Agreement, with all notices to the Shareholder
being provided to him or her at the address set forth in Annex I hereto.

 

 4

 

 

 

9.     Miscellaneous.

 

A. Severability. If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement, shall not be affected.

 

B. Capacity. The covenants contained herein shall apply to Shareholder solely in
his or her capacity as a beneficial owner of Shares, and, notwithstanding
anything to the contrary in this Agreement, no covenant contained herein shall
apply to Shareholder acting in his or her capacity as a director, officer or
employee of UA Bank or in any other fiduciary capacity, including, for the
avoidance of doubt and without limitation, any participation by Shareholder
acting in his capacity as a director of UA Bank in any discussions or
negotiations regarding, and making any determinations or recommendations with
respect to, Sections 5.12 or 5.13 or Article IX of the Merger Agreement or as a
fiduciary for the UA Bank Employee Stock Ownership Plan and Trust. Nothing
contained in this Agreement shall be deemed to apply to, or limit in any manner,
the obligations of the Shareholder to comply with his or her fiduciary duties as
a director of UA Bank.

 

C. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument. Signatures delivered by facsimile or
electronic means (including by “pdf”) shall be deemed effective for all
purposes.

 

D. Headings. All Section headings herein are for convenience of reference only
and are not part of this Agreement, and no construction or reference shall be
derived therefrom.

 

E. Choice of Law. This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the Commonwealth
of Pennsylvania, without reference to its conflicts of law principles.

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.

 

  EMCLAIRE FINANCIAL CORP

 

  By:         Name: William C. Marsh     Title: Chairman, President and Chief
Executive Officer

 

        SHAREHOLDER               [Print Name]

 

 5

 

 

ANNEX I

SHAREHOLDER AGREEMENT

 

   Shares of UA Bank Common Stock  UA Bank Options Name and Address of
Shareholder  Beneficially Owned (exclusive of
unexercised options)  (currently
exercisable)  (not currently
exercisable)                                 

 

 6

 

  

Exhibit B

 

AGREEMENT OF MERGER

 

THIS AGREEMENT OF MERGER (“Merger Agreement”) dated as of ____________ is made
by and between United-American Savings Bank, a Pennsylvania chartered bank (“UA
Bank”), and U-A Interim National Association (“Interim”) an interim national
banking association and wholly owned subsidiary of The Farmers National Bank of
Emlenton (“Farmers”).

 

RECITALS:

 

WHEREAS, UA Bank, Farmers and Farmers’ parent bank holding company, Emclaire
Financial Corp (“Emclaire”), previously have entered into an Agreement and Plan
of Merger, dated as of December __, 2015 (the “Plan”), providing for the merger
of Interim with and into UA Bank (the “Merger’) and the subsequent merger of the
surviving bank of the Merger (the “Surviving Bank”) with and into Farmers (the
transactions to be effectuated pursuant to the Plan and this Agreement are
referred to collectively as the “Reorganization”).

 

WHEREAS, the Plan and this Agreement have been approved by (i) more than a
majority of the boards of directors of each of UA Bank and Interim, (ii)
shareholders of UA Bank entitled to cast more than two-thirds of the votes which
all shareholders are entitled to cast thereon, and (iii) Farmers as the sole
shareholder of Interim; and

 

WHEREAS, the parties hereto desire to provide herein for the terms of the Merger
of Interim with and into UA Bank in accordance with the terms of the Plan and
this Merger Agreement.

 

NOW, THEREFORE, in consideration of the mutual promises and mutual agreements
contained herein, the parties hereto agree as follows:

 

Merger. At and on the Effective Time of the Merger (as defined below), Interim
shall be merged with and into UA Bank with UA Bank as the Surviving Bank.
Farmers shall be the owner of 100% of the outstanding common stock of the
Surviving Bank.

 

Effective Time. The Merger will be subject to the receipt of all necessary
approvals or non-objections from all requisite governmental and regulatory
authorities, including the Pennsylvania Department of Banking and Securities
(the “Department”) and the Federal Deposit Insurance Corporation (the “FDIC”),
and will be effective as of the date and time of the filing of Articles of
Merger with the Pennsylvania Department of State or the date and time as
specified in such Articles of Merger or by the Department as the effective time
of the Merger, as the case may be (the “Effective Time”).

 

 1

 

 

Conversion of UA Bank Common Stock and Interim Common Stock. As provided in
Section 2.04 of the Plan, as of the Effective Time, each share of common stock,
par value $0.01 per share, of UA Bank (“UA Bank Common Stock”), issued and
outstanding immediately prior to the Effective Time (other than shares (i) as to
which dissenters’ rights have been asserted and duly perfected in accordance
with Section 1606 of the Pennsylvania Banking Code (“Dissenting Shares”) and
(ii) held by UA Bank (including treasury shares) or Farmers or Emclaire other
than in a fiduciary capacity, which shares shall be cancelled) shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
cancelled and by operation of law be converted into and represent the right to
receive from Farmers, $42.67 in cash. At and after the Effective Time, each
share of Interim common stock issued and outstanding immediately prior to the
Effective Time shall be converted into a share of UA Bank common stock.

 

Articles of Incorporation. At the Effective Time, the articles of incorporation
of the Surviving Bank shall be the articles of incorporation of UA Bank as in
effect immediately prior to the Merger, until thereafter amended in accordance
with applicable law.

 

Name. The name of the Surviving Bank shall be United-American Savings Bank.

 

Offices. The home office of the Surviving Bank shall be 1812 East Carson Street,
Pittsburgh, Pennsylvania 15203.

 

Directors and Officers. The directors and officers of Interim immediately prior
to the Effective Time shall be the directors and officers of the Surviving Bank
after the Effective Time. Interim has [_______] directors whose names and terms
are as follows:

 

Name  Term
Expires               

 

Rights and Duties of the Surviving Bank. The business of the Surviving Bank
shall be that of a Pennsylvania stock savings bank, as provided for in its
charter. All assets, rights interests, privileges, powers, franchises and
property (real, personal and mixed) of Interim and UA Bank shall be
automatically transferred to and vested in the Surviving Bank by virtue of such
Merger without any deed or other document of transfer. The Surviving Bank,
without any order or action on the part of any court or otherwise and without
any documents of assumption or assignment, shall hold and enjoy all of the
assets, rights, privileges, powers, properties, franchises and interests,
including, without limitation, appointments, powers, designations, nominations
and all other rights, interests and powers as agent or fiduciary, in the same
manner and to the extent as such rights, interests and powers were held or
enjoyed by Interim and UA Bank, respectively. The Surviving Bank shall be
responsible for all of the liabilities, restrictions and duties of every kind
and description of both Interim and UA Bank, immediately prior to the Merger,
including, without limitation, liabilities for all deposits, debts, obligations
and contracts of Interim and UA Bank, respectively, matured or unmatured,
whether accrued, absolute, contingent or otherwise and whether or not reflected
or reserved against on balance sheets, books of accounts or records of either
Interim or UA Bank. Deposit accounts shall be deemed issued in the name of the
Surviving Bank in accordance with applicable Department and FDIC regulations.
All rights of creditors and other obligees and all liens on property of either
Interim or UA Bank shall be preserved, shall be assumed by the Surviving Bank
and shall not be released or impaired. The shareholder of the Surviving Bank
shall possess all the voting rights with respect to the shares of stock of the
Surviving Bank.

 

 2

 

 

Other Terms. All terms used in this Merger Agreement shall, unless defined
herein, have the meanings set forth in the Plan. The Plan is incorporated herein
by this reference and made a part hereof to the extent necessary or appropriate
to effect and consummate the terms of this Merger Agreement and the
Reorganization.

 

IN WITNESS WHEREOF, UA Bank and Interim have caused this Agreement to be
executed as of the date first above written.

 

ATTEST: UNITED-AMERICAN SAVINGS BANK

 

    By:   Secretary     Tom P. Smith       President

 

ATTEST: U-A INTERIM NATIONAL ASSOCIATION

 

    By:   Secretary     William C. Marsh       President and Chief Executive
Officer

 

 3

 

 

Approval is hereby granted by the Department of Banking and Securities for the
merger of U-A Interim National Association, Emlenton, Pennsylvania with and into
United-American Savings Bank, Pittsburgh, Pennsylvania, this _______ day of
_________, 2016, to be effective as of _________ _.m.