Document:

The Ambassadors International, Inc. 2005 Incentive Award Plan

 Exhibit 10.1 
  
  
 AMBASSADORS INTERNATIONAL, INC.

  
 2005 INCENTIVE AWARD PLAN 
  
 Ambassadors International, Inc., a Delaware corporation (the
“Company”), by resolution of the Board of Directors of the Company, hereby adopts the Ambassadors International, Inc. 2005 Incentive Award Plan (the “Plan”). The Plan will become effective upon the approval of the
Company’s stockholders (the “Effective Date”). 
  
 The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of the members of the Board, Employees, and Consultants to those of the Company’s stockholders and by providing
such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the
services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. 
  
 ARTICLE I. 
  
 DEFINITIONS 
  
 Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The
singular pronoun shall include the plural where the context so indicates. 
  
 1.1. “Administrator” shall mean the entity that conducts the general administration of the Plan as provided herein. With reference to the administration of the Plan with respect to Awards granted to
Independent Directors, the term “Administrator” shall refer to the Board. With reference to the administration of the Plan with respect to any other Award, the term “Administrator” shall refer to the Committee unless the Board
has assumed the authority for administration of the Plan generally as provided in Section 11.1. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 11.5, the term
“Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation. 
  
 1.2. “Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend Equivalents
award, a Deferred Stock award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, “Awards”). 
  
 1.3. “Award Agreement” shall mean a written agreement executed by an authorized officer of the Company and
the Holder which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. 
  
 1.4. “Award Limit” shall mean two hundred thousand shares (200,000) shares of Common Stock, as adjusted pursuant to Section 12.3;
provided, however, that, solely with respect to Performance Awards granted pursuant to Section 8.2(b), “Award Limit” shall mean $500,000. 
  
 1.5. “Board” shall mean the Board of Directors of the Company. 
  
 1.6. “Change in Control” means the occurrence of any of the
following events: 
  
 (a) the acquisition,
directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules thereunder) of “beneficial ownership” (as determined pursuant to
Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the 

  

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election of directors (“voting securities”) of the Company that represent 40% or more of the combined voting power of the Company’s then
outstanding voting securities, other than 
  
 (i)
an acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any person controlled by the Company, 
  
 (ii) an acquisition of voting securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of the stock of the Company, or 
  
 (iii) an acquisition of voting securities pursuant to a transaction described in subsection (c) below that would not be a Change in
Control under subsection (c); 
  
 provided, however, that
notwithstanding the foregoing, an acquisition of the Company’s securities by the Company which causes the Company’s voting securities beneficially owned by a person or group to represent 40% or more of the combined voting power of the
Company’s then outstanding voting securities shall not be considered an acquisition by any person or group for purposes of this subsection (a); provided, however, that if a person or group shall become the beneficial owner of 40% or more
of the combined voting power of the Company’s then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any
additional voting securities of the Company, then such acquisition shall constitute a Change in Control; 
  
 (b) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; 
  
 (c) the consummation by the Company (whether directly
involving the Company or indirectly involving the Company through one or more intermediaries) of (i) a merger, consolidation, reorganization, or business combination or (ii) a sale or other disposition of all or substantially all of the
Company’s assets or (iii) the acquisition of assets or stock of another entity, in each case, other than a transaction 
  
 (A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either
by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the
Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding
voting securities immediately after the transaction, 
  
 (B) after which more than 50% of the members of the board of directors of the Successor Entity were members of the Incumbent Board at the time of the Board’s approval of the agreement providing for the transaction or other action of
the Board approving the transaction, and 
  
 (C)
after which no person or group beneficially owns voting securities representing 40% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this subsection (iii) as
beneficially owning 40% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or 
  

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 (d) stockholder approval of a liquidation or dissolution of the Company. 
  
 For purposes of subsection (a) above, the calculation of
voting power shall be made as if the date of the acquisition were a record date for a vote of the Company’s stockholders, and for purposes of subsection (c) above, the calculation of voting power shall be made as if the date of the consummation
of the transaction were a record date for a vote of the Company’s stockholders. 
  
 1.7. “Code” shall mean the Internal Revenue Code of 1986, as amended. 
  
 1.8. “Committee” shall mean the Compensation Committee of the Board, or another committee or subcommittee of the Board, appointed as
provided in Section 11.1. 
  
 1.9. “Common Stock”
shall mean the common stock of the Company, par value $0.01 per share. 
  
 1.10. “Company” shall mean Ambassadors International, Inc., a Delaware corporation. 
  
 1.11. “Consultant” shall mean any consultant or adviser if: (a) the consultant or adviser renders bona fide services to the Company; (b)
the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities; and (c)
the consultant or adviser is a natural person who has contracted directly with the Company to render such services. 
  
 1.12. “Deferred Stock” shall mean rights to receive Common Stock awarded under Article VIII of the Plan. 
  
 1.13. “Director” shall mean a member of the Board.

  
 1.14. “Dividend Equivalent” shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends paid on Common Stock, awarded under Article VIII of the Plan. 
  
 1.15. “DRO” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. 
  
 1.16.
“Employee” shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a Subsidiary. 
  
 1.17. “Exchange Act” shall mean the Securities Exchange Act
of 1934, as amended. 
  
 1.18. “Fair Market
Value” of a share of Common Stock as of a given date shall be: (a) the closing price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which
includes such principal exchange), on the trading day previous to such date, or if shares were not traded on the trading day previous to such date, then on the next preceding date on which a trade occurred, or (b) if Common Stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by Nasdaq or such successor quotation
system, or (c) if Common Stock is not publicly traded on an exchange and not quoted on Nasdaq or a successor quotation system, the Fair Market Value of a share of Common Stock as established by the Administrator acting in good faith. 
  
 1.19. “Holder” shall mean a person who has been granted or
awarded an Award. 
  
 1.20. “Incentive Stock
Option” shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. 
  
 1.21. “Independent Director” shall mean a member of the Board who is not an Employee. 
  

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 1.22. “Non-Qualified Stock Option” shall mean an Option which is not designated as an
Incentive Stock Option by the Administrator. 
  
 1.23.
“Option” shall mean a stock option granted under Article IV of the Plan. An Option granted under the Plan shall, as determined by the Administrator, be either a Non-Qualified Stock Option or an Incentive Stock Option;
provided, however, that Options granted to Independent Directors and Consultants shall be Non-Qualified Stock Options. 
  
 1.24. “Performance Award” shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, Common Stock
or a combination of both, awarded under Article VIII of the Plan. 
  
 1.25. “Performance Criteria” means the criteria that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period. The Performance Criteria that will be
used to establish Performance Goals are limited to the following: (a) net earnings (either before or after (i) interest, (ii) taxes, (iii) depreciation and (iv) amortization), (b) sales or revenue, (c) net income (either before or after taxes), (d)
operating earnings, (e) cash flow (including, but not limited to, operating cash flow and free cash flow), (f) return on assets, (g) return on stockholders’ equity, (h) return on sales, (i) gross or net profit margin, (j) expense, (k) working
capital, (l) earnings per share, (m) price per share of Common Stock, and (n) market share, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group. The Committee
shall, within the time prescribed by Section 162(m) of the Code, define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period for such Award; provided, however, that each
Performance Criteria shall be determined in accordance with generally accepted accounting principles to the extent applicable. 
  
 1.26. “Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period
based upon the Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or
an individual. The Committee, in its discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the
rights of any Holder of a Performance Award (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event, or development, or (b) in recognition of, or in anticipation of, any other unusual or
nonrecurring events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions. 
  
 1.27. “Performance Period” means one or more periods of
time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder’s right to, and the payment of, a
Performance Award. 
  
 1.28. “Plan” shall mean
the 2005 Incentive Award Plan of Ambassadors International, Inc. 
  
 1.29. “Restricted Stock” shall mean Common Stock awarded under Article VII of the Plan. 
  
 1.30. “Restricted Stock Units” shall mean rights to receive Common Stock awarded under Article VIII. 
  
 1.31. “Rule 16b-3” shall mean Rule 16b-3 promulgated under
the Exchange Act, as such Rule may be amended from time to time. 
  
 1.32. “Section 162(m) Participant” shall mean any key Employee designated by the Administrator as a key Employee whose compensation for the fiscal year in which the key Employee is so designated or a future fiscal year may
be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 
  

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 1.33. “Securities Act” shall mean the Securities Act of 1933, as amended. 
  
 1.34. “Stock Appreciation Right” shall mean a stock
appreciation right granted under Article IX of the Plan. 
  
 1.35.
“Stock Payment” shall mean: (a) a payment in the form of shares of Common Stock, or (b) an option or other right to purchase shares of Common Stock, as part of a deferred compensation arrangement, made in lieu of all or any portion
of the compensation, including without limitation, salary, bonuses, commissions and directors’ fees, that would otherwise become payable to a key Employee, Independent Director or Consultant in cash, awarded under Article VIII of the Plan.

  
 1.36. “Subsidiary” shall mean any corporation
in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. 
  
 1.37. “Substitute Award” shall mean an Option granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate
transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with
the cancellation and repricing of an Option. 
  
 1.38.
“Termination of Consultancy” shall mean the time when the engagement of a Holder as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement, but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of
absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever,
with or without cause, except to the extent expressly provided otherwise in writing. 
  
 1.39. “Termination of Directorship” shall mean the time when a Holder who is an Independent Director ceases to be a Director for any reason, including, but not by way of limitation, a termination by
resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.

  
 1.40. “Termination of Employment” shall mean
the time when the employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death,
disability or retirement; but excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of a Holder by the Company or any Subsidiary, (b) at the discretion of the Administrator, terminations which result in a
temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former
employee. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options, unless otherwise determined
by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that,
such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. 
  

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 ARTICLE II. 
  
 SHARES SUBJECT TO PLAN 
  
 2.1. Shares Subject to Plan. 
  
 (a) Subject to Section 12.3 and Section 2.1(b), the maximum number of shares of Stock which may be issued or transferred pursuant to
Awards under the Plan shall be 600,000 shares. 
  
 (b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Common Stock then subject to such Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any shares of Common
Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by applicable law or any exchange
rule, shares of Common Stock issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall not be counted against shares of Common Stock available for
grant pursuant to this Plan. If any shares of Restricted Stock are surrendered by the Holder or repurchased by the Company pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1(a). Notwithstanding the provisions of this Section 2.1(b), no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock
option under Section 422 of the Code. 
  
 2.2. Stock
Distributed. Any Common Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, shares of Common Stock held in treasury or shares of Common Stock purchased on the open market. 

 
 2.3. Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, and subject to Article 11, the maximum number of shares of Common Stock with respect to one or more Awards that may be granted to any one Employee, Independent Director or Consultant during
each calendar year shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares subject to Awards which are canceled continue to be counted against the Award Limit. 
  
 ARTICLE III. 
  
 GRANTING OF AWARDS 
  
 3.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall contain such terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 
  
 3.2. Provisions Applicable to Section 162(m) Participants. 

 
 (a) The Committee, in its discretion, may determine
whether an Award is to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code). 
  
 (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the attainment of performance goals which are related to one or more of the Performance Criteria and any performance or incentive award described in Article VIII that vests or
becomes exercisable or payable upon the attainment of performance goals which are related to one or more of the Performance Criteria. 
  

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 (c) To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles VII and VIII which may be granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal
year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) designate one or more Section 162(m) Participants,
(ii) select the Performance Criteria applicable to the fiscal year or other designated fiscal period or period of service, (iii) establish the various performance targets, in terms of an objective formula or standard, and amounts of such Awards, as
applicable, which may be earned for such fiscal year or other designated fiscal period or period of service, and (iv) specify the relationship between Performance Criteria and the performance targets and the amounts of such Awards, as applicable, to
be earned by each Section 162(m) Participant for such fiscal year or other designated fiscal period or period of service. Following the completion of each fiscal year or other designated fiscal period or period of service, the Committee shall
certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period or period of service. In determining the amount earned by a Section 162(m) Participant, the Committee shall have
the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or
other designated fiscal period or period of service. 
  
 (d) Furthermore, notwithstanding any other provision of the Plan, any Award which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code)
shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as
performance-based compensation (as described in Section 162(m)(4)(C) of the Code), and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 
  
 3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, and any
Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment
to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such applicable exemptive rule. 
  
 3.4.
Consideration. In consideration of the granting of an Award under the Plan, the Holder shall agree, in the Award Agreement, to remain in the employ of (or to consult for or to serve as an Independent Director of, as applicable) the Company or
any Subsidiary for a period of at least one year (or such shorter period as may be fixed in the Award Agreement or by action of the Administrator following grant of the Award) after the Award is granted (or, in the case of an Independent Director,
until the next annual meeting of stockholders of the Company). 
  
 3.5. At-Will Employment. Nothing in the Plan or in any Award Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Consultant for, the Company or any Subsidiary, or as a Director of the
Company, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, except to the
extent expressly provided otherwise in a written employment agreement between the Holder and the Company and any Subsidiary. 
  

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 ARTICLE IV. 
  
 GRANTING OF OPTIONS TO EMPLOYEES, 
 CONSULTANTS AND INDEPENDENT DIRECTORS 
  
 4.1. Eligibility. Any Employee or Consultant selected by the Administrator pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each Independent Director of the Company shall be eligible to
be granted Options at the times and in the manner set forth in Section 4.5. 
  
 4.2. Disqualification for Stock Ownership. No person may be granted an Incentive Stock Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code. 
  
 4.3. Qualification
of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee. 
  
 4.4. Granting of Options to Employees and Consultants. 
  
 (a) The Administrator shall from time to time, in its absolute discretion, and, subject to applicable limitations of the Plan: 

 
 (i) Determine which Employees are key Employees and
select from among the key Employees or Consultants (including Employees or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be granted Options; 
  
 (ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key Employees or Consultants; 
  
 (iii) Subject to Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether
such Options are to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code); and 
  
 (iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and
conditions of Options intended to qualify as performance-based compensation (as described in Section 162(m)(4)(C) of the Code) shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. 
  
 (b) Upon the
selection of a key Employee or Consultant to be granted an Option, the Administrator shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. 
  
 (c) Any Incentive Stock Option granted under the Plan may be
modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. 
  
 4.5. Granting of Options to Independent Directors. The Board shall from time to time, in its absolute discretion, and
subject to applicable limitations of the Plan: 
  
 (a) Select from among the Independent Directors (including Independent Directors who have previously received Awards under the Plan) such of them as in its opinion should be granted Options; 
  
 (b) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected Independent Directors; and 
  

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 (c) Subject to the provisions of Article 5, determine the terms and conditions of such
Options, consistent with the Plan. 
  
 All the foregoing Option grants authorized
by this Section 4.5 are subject to stockholder approval of the Plan. 
  
 4.6. Options in Lieu of Cash Compensation. Options may be granted under the Plan to Employees and Consultants in lieu of cash bonuses which would otherwise be payable to such Employees and Consultants, and to Independent Directors in
lieu of directors’ fees which would otherwise be payable to such Independent Directors, pursuant to such policies which may be adopted by the Administrator from time to time. 
  
 ARTICLE V. 
  
 TERMS OF OPTIONS 
  
 5.1. Option Price. The price per share of the shares subject to each Option granted to Employees, Independent Directors and Consultants shall be
set by the Administrator; provided, however, that: 
  
 (a) In the case of Incentive Stock Options, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code); 
  
 (b) In the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or
parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or
renewed for purposes of Section 424(h) of the Code); and 
  
 (c) In the case of Non-Qualified Stock Options, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted. 
  
 5.2. Option Term. The term of an Option granted to an Employee,
Independent Director or Consultant shall be set by the Administrator in its discretion; provided, however, that, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from the date the Incentive Stock Option is granted if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Administrator may extend the term of any outstanding Option in connection with any Termination of Employment, Termination of Directorship or Termination of Consultancy of the Holder, or amend any other term
or condition of such Option relating to such a Termination of Employment, Termination of Directorship or Termination of Consultancy. 
  
 5.3. Option Vesting. 
  
 (a) The period during which the right to exercise, in whole or in part, an Option granted to an Employee, Independent Director or a
Consultant vests in the Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided, however, that, unless
the Administrator otherwise provides in the terms of the Award Agreement or otherwise, no Option shall be exercisable by any Holder who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date
the Option is granted. At any time after grant of an Option, the Administrator may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option granted to an Employee,
Independent Director or Consultant vests. 
  

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 (b) No portion of an Option granted to an Employee, Independent Director or Consultant
which is unexercisable at Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Award
Agreement or by action of the Administrator following the grant of the Option. 
  
 (c) To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the
meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any Subsidiary or parent corporation
thereof, within the meaning of Section 424 of the Code, exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by
taking Options and other “incentive stock options” into account in the order in which they were granted. For purposes of this Section 5.3(c), the fair market value of stock shall be determined as of the time the Option or other
“incentive stock options” with respect to such stock is granted. 
  
 5.4. Substitute Awards. Notwithstanding the foregoing provisions of this Article V to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option
may be less than the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b)
the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the
Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares. 
  
 ARTICLE VI. 
  
 EXERCISE OF OPTIONS 
  
 6.1. Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 
  
 6.2. Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company, or such other person or entity designated by the Board, or his, her or its office, as applicable: 
  
 (a) A written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; 
  
 (b) Such representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Administrator may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; 
  
 (c) In the event that the Option shall be exercised pursuant to Section 12.1 by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Option; and 
  
 (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Administrator may, in its discretion, (i) allow payment, in whole
or in part, through the delivery of shares of Common Stock which have been owned by the Holder for at least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of 

  

 10 

 
delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (ii) allow payment, in whole or in part, through the surrender of
shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part,
through the delivery of property of any kind which constitutes good and valuable consideration; (iv) allow payment, in whole or in part, through the delivery of a notice that the Holder has placed a market sell order with a broker with respect to
shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided that
payment of such proceeds is then made to the Company upon settlement of such sale; or (v) allow payment through any combination of the consideration provided in the foregoing subparagraphs (i), (ii), (iii) and (iv); provided, however,
that the payment in the manner prescribed in the preceding paragraphs shall not be permitted to the extent that the Administrator determines that payment in such manner shall result in an extension or maintenance of credit, an arrangement for the
extension of credit, or a renewal or an extension of credit in the form of a personal loan to or for any Director or executive officer of the Company that is prohibited by Section 13(k) of the Exchange Act or other applicable law. 
  
 6.3. Conditions to Issuance of Stock Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: 
  
 (a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed; 
  
 (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the
Administrator shall, in its absolute discretion, deem necessary or advisable; 
  
 (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; 
  
 (d) The lapse of such reasonable period of time following
the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and 
  
 (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which in the
discretion of the Administrator may be in the form of consideration used by the Holder to pay for such shares under Section 6.2(d). 
  
 6.4. Rights as Stockholders. Holders shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any
shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such Holders. 
  
 6.5. Ownership and Transfer Restrictions. The Administrator, in its absolute discretion, may impose such restrictions
on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Award Agreement and may be referred to on the certificates evidencing
such shares. The Holder shall give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (a) two years from the date of granting (including the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such shares to such Holder. 
  
 6.6. Additional Limitations on Exercise of Options. Holders may be required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. 
  

 11 

 ARTICLE VII. 
  
 AWARD OF RESTRICTED STOCK 
  
 7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be awarded to any Employee who the Administrator determines is a key Employee,
or any Independent Director or any Consultant who the Administrator determines should receive such an Award. 
  
 7.2. Award of Restricted Stock. 
  
 (a) The Administrator may from time to time, in its absolute discretion: 
  
 (i) Determine which Employees are key Employees, and select from among the Key Employees, Independent
Directors or Consultants (including Employees, Independent Directors or Consultants who have previously received Awards under the Plan) such of them as in its opinion should be awarded Restricted Stock; and 
  
 (ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with the Plan. 
  
 (b) The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of the Common
Stock to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock. 
  
 (c) Upon the selection of an Employee, Independent Director or Consultant to be awarded Restricted Stock,
the Administrator shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 
  
 7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of
the shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in his or
her Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that, in the discretion of the Administrator, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in Section 7.4. 
  
 7.4. Restriction. All shares of Restricted Stock issued under the Plan (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits
or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions as the Administrator shall provide, which restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment, directorship or consultancy with the Company, Company performance and individual performance; provided, however, that, unless the Administrator otherwise
provides in the terms of the Award Agreement or otherwise, no share of Restricted Stock granted to a person subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise transferred until at least six months and one day have elapsed
from the date on which the Restricted Stock was issued, and provided, further, that, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, by action taken after the Restricted Stock is issued, the
Administrator may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are
terminated or expire. If no consideration was paid by the Holder upon issuance, a Holder’s rights in unvested Restricted Stock shall lapse, and such Restricted Stock shall be surrendered to the Company without consideration, upon Termination of
Employment, Termination of Directorship, or Termination of Consultancy, as applicable; and, provided, however, that the Administrator in its sole and absolute discretion may provide that such rights shall not lapse in the event of a
Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, following a “change of ownership or control” (within the meaning of Treasury Regulation Section 

  

 12 

 
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because of the Holder’s death or disability; and, provided,
further, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, the Administrator in its sole and absolute discretion may provide that no such lapse or surrender shall occur in the event of a Termination of
Employment, Termination of Directorship, or Termination of Consultancy, as applicable, without cause or following any Change in Control or because of the Holder’s retirement, or otherwise. 
  
 7.5. Repurchase of Restricted Stock. The Administrator shall provide
in the terms of each individual Award Agreement that the Company shall have the right to repurchase from the Holder the Restricted Stock then subject to restrictions under the Award Agreement immediately upon a Termination of Employment, Termination
of Directorship, or Termination of Consultancy, as applicable, at a cash price per share equal to the price paid by the Holder for such Restricted Stock; provided, however, that the Administrator in its sole and absolute discretion may
provide that no such right of repurchase shall exist in the event of a Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, following a “change of ownership or control” (within the meaning of
Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because of the Holder’s death or disability; and, provided, further, that, except with respect to shares of Restricted Stock
granted to Section 162(m) Participants, the Administrator in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment, Termination of Directorship, or Termination of
Consultancy, as applicable, without cause or following any Change in Control or because of the Holder’s retirement, or otherwise. 
  
 7.6. Escrow. The Secretary of the Company or such other escrow holder as the Administrator may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed under the Award Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. 
  
 7.7. Legend. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Administrator shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Award Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby. 
  
 7.8. Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather
than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service.

  
 ARTICLE VIII. 
  
 PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK

 PAYMENTS, RESTRICTED STOCK UNITS 
  
 8.1. Eligibility. Subject to the Award Limit, one or more Performance Awards, Dividend Equivalent awards, Deferred Stock awards, Stock Payment
awards, and/or Restricted Stock Unit awards may be granted to any Employee whom the Administrator determines is a key Employee, or any Independent Director or any Consultant whom the Administrator determines should receive such an Award. 

 
 8.2. Performance Awards. 
  
 (a) Any key Employee, Independent Director or Consultant
selected by the Administrator may be granted one or more Performance Awards. The value of such Performance Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the

  

 13 

 
Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. In making such determinations, the
Administrator shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular key Employee, Independent Director or Consultant.

  
 (b) Without limiting Section 8.2(a), the
Administrator may grant Performance Awards to any Section 162(m) Participant in the form of a cash bonus payable upon the attainment of objective performance goals which are established by the Administrator and relate to one or more of the
Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to Section 162(m) Participants shall be based upon objectively determinable bonus formulas
established in accordance with the provisions of Section 3.2. The maximum aggregate amount of all Performance Awards granted to a Section 162(m) Participant under this Section 8.2(b) during any calendar year shall not exceed the Award Limit. Unless
otherwise specified by the Administrator at the time of grant, the Performance Criteria with respect to a Performance Award payable to a Section 162(m) Participant shall be determined on the basis of generally accepted accounting principles.

  
 8.3. Dividend Equivalents. 
  
 (a) Any key Employee, Independent Director or Consultant
selected by the Administrator may be granted Dividend Equivalents based on the dividends declared on Common Stock, to be credited as of dividend payment dates, during the period between the date a Stock Appreciation Right, Deferred Stock,
Performance Award or Restricted Stock Unit award is granted and the date such Stock Appreciation Right, Deferred Stock, Performance Award or Restricted Stock Unit award vests, is exercised, is distributed or expires, as determined by the
Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Administrator. 
  
 (b) Any Holder of an Option who is an Employee, Independent
Director or Consultant selected by the Administrator may be granted Dividend Equivalents based on the dividends declared on Common Stock, to be credited as of dividend payment dates, during the period between the date an Option is granted and the
date such Option vests, is exercised, or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may
be determined by the Administrator. 
  
 (c)
Dividend Equivalents granted with respect to Options intended to be qualified performance-based compensation for purposes of Section 162(m) of the Code shall be payable, with respect to pre-exercise periods, regardless of whether such Option is
subsequently exercised. 
  
 8.4. Stock Payments. Any key
Employee, Independent Director or Consultant selected by the Administrator may receive Stock Payments in the manner determined from time to time by the Administrator. The number of shares shall be determined by the Administrator and may be based
upon the Performance Criteria or other specific performance criteria determined appropriate by the Administrator, determined on the date such Stock Payment is made or on any date thereafter. 
  
 8.5. Deferred Stock. Any key Employee, Independent Director or
Consultant selected by the Administrator may be granted an award of Deferred Stock in the manner determined from time to time by the Administrator. The number of shares of Deferred Stock shall be determined by the Administrator and may be linked to
the Performance Criteria or other specific performance criteria determined to be appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Common Stock underlying a
Deferred Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or performance criteria set by the Administrator. Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall have
no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and the Common Stock underlying the Award has been issued. 
  

 14 

 8.6. Restricted Stock Units. Any key Employee, Independent Director or Consultant selected by the
Administrator may be granted an award of Restricted Stock Units in the manner determined from time to time by the Administrator. The Administrator is authorized to make awards of Restricted Stock Units in such amounts and subject to such terms and
conditions as determined by the Administrator. The Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate,
and may specify that such Restricted Stock Units become fully vested and nonforfeitable pursuant to the satisfaction of one or more Performance Goals or other specific performance goals as the Administrator determines to be appropriate at the time
of the grant of the Restricted Stock Units or thereafter, in each case on a specified date or dates or over any period or periods determined by the Administrator. The Administrator shall specify the distribution dates applicable to each award of
Restricted Stock Units which shall be no earlier than the vesting dates or events of the award and may be determined at the election of the Employee, Independent Director or Consultant. On the distribution dates, the Company shall issue to the
Holder one unrestricted, fully transferable share of Common Stock for each Restricted Stock Unit distributed. The Administrator shall specify the purchase price, if any, to be paid by the Employee, Independent Director or Consultant to the Company
for such shares of Common Stock to be distributed pursuant to the Restricted Stock Unit award. 
  
 8.7. Term. The term of a Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award shall be set by the Administrator in its discretion.

  
 8.8. Exercise or Purchase Price. The Administrator may
establish the exercise or purchase price of a Performance Award, shares of Deferred Stock, shares distributed as a Stock Payment award or shares distributed pursuant to a Restricted Stock Unit award; provided, however, that such price
shall not be less than the par value of a share of Common Stock, unless otherwise permitted by applicable state law. 
  
 8.9. Exercise upon Termination of Employment, Termination of Consultancy or Termination of Directorship. A Performance Award, Dividend Equivalent
award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award is exercisable or distributable only while the Holder is an Employee, Consultant or Independent Director, as applicable; provided, however, that the
Administrator in its sole and absolute discretion may provide that the Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award may be exercised or distributed subsequent to a
Termination of Employment, Termination of Directorship or Termination of Consultancy following a “change of control or ownership” (within the meaning of Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company; and,
provided, further, that, except with respect to Performance Awards granted to Section 162(m) Participants, the Administrator in its sole and absolute discretion may provide that Performance Awards may be exercised or paid following a
Termination of Employment, Termination of Directorship or Termination of Consultancy without cause, or following a Change in Control, or because of the Holder’s retirement, death or disability, or otherwise. 
  
 8.10. Form of Payment. Payment of the amount determined under Section
8.2 or 8.3 above shall be in cash, in Common Stock or a combination of both, as determined by the Administrator. To the extent any payment under this Article VIII is effected in Common Stock, it shall be made subject to satisfaction of all
provisions of Section 6.3. 
  
 ARTICLE IX. 
  
 STOCK APPRECIATION RIGHTS 
  
 9.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any key Employee, Independent Director or Consultant selected by the Administrator. A Stock Appreciation Right may be granted: (a) in connection and simultaneously with the grant of an Option, (b) with respect to a previously
granted Option, or (c) independent of an Option. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and shall be evidenced by an Award Agreement. 
  

 15 

 9.2. Coupled Stock Appreciation Rights. 
  
 (a) A Coupled Stock Appreciation Right
(“CSAR”) shall be related to a particular Option and shall be exercisable only when and to the extent the related Option is exercisable. 
  
 (b) A CSAR may be granted to the Holder for no more than the number of shares subject to the simultaneously or previously granted Option
to which it is coupled. 
  
 (c) A CSAR shall
entitle the Holder (or other person entitled to exercise the Option pursuant to the Plan) to surrender to the Company unexercised a portion of the Option to which the CSAR relates (to the extent then exercisable pursuant to its terms) and to receive
from the Company in exchange therefor an amount determined by multiplying the difference obtained by subtracting the Option exercise price from the Fair Market Value of a share of Common Stock on the date of exercise of the CSAR by the number of
shares of Common Stock with respect to which the CSAR shall have been exercised, subject to any limitations the Administrator may impose. 
  
 9.3. Independent Stock Appreciation Rights. 
  
 (a) An Independent Stock Appreciation Right (“ISAR”) shall be unrelated to any Option and shall have a term set by the
Administrator. An ISAR shall be exercisable in such installments as the Administrator may determine. An ISAR shall cover such number of shares of Common Stock as the Administrator may determine; provided, however, that unless
the Administrator otherwise provides in the terms of the ISAR or otherwise, no ISAR granted to a person subject to Section 16 of the Exchange Act shall be exercisable until at least six months have elapsed following the date on which the Option was
granted. The exercise price per share of Common Stock subject to each ISAR shall be set by the Administrator; provided, that such exercise price per share shall not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the ISAR is granted. An ISAR is exercisable only while the Holder is an Employee, Independent Director or Consultant; provided, that the Administrator may determine that the ISAR may be exercised subsequent to Termination of Employment,
Termination of Directorship or Termination of Consultancy without cause, or following a Change in Control of the Company, or because of the Holder’s retirement, death or disability, or otherwise. 
  
 (b) An ISAR shall entitle the Holder (or other person
entitled to exercise the ISAR pursuant to the Plan) to exercise all or a specified portion of the ISAR (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying (i) the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair Market Value of a share of Common Stock on the date of exercise of the ISAR by (ii) the number of shares of Common Stock with respect to which the ISAR shall have been
exercised, subject to any limitations the Administrator may impose. 
  
 9.4. Payment and Limitations on Exercise. 
  
 (a) Payment of the amounts determined under Section 9.2(c) and 9.3(b) above shall be in shares of Common Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised). The Company
shall not be required to issue or deliver any certificate or certificates for shares of stock issuable upon the exercise of any Stock Appreciation Right prior to fulfillment of the conditions set forth in Section 6.3 above. 
  
 (b) Holders of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement or exercise of a Stock Appreciation Right, including a window-period limitation, as may be imposed in the discretion of the Administrator. 
  

 16 

 ARTICLE X. 
  
 COMPLIANCE WITH SECTION 409A OF THE CODE 
  
 10.1. Awards subject to Code Section 409A. Any Award that constitutes, or provides for, a deferral of compensation
subject to Section 409A of the Code (a “Section 409A Award”) shall satisfy the requirements of Section 409A of the Code and this Article X, to the extent applicable. The Award Agreement with respect to a Section 409A Award shall
incorporate the terms and conditions required by Section 409A of the Code and this Article X. 
  
 10.2. Distributions under a Section 409A Award. 
  
 (a) Subject to subsection (b), any shares of Common Stock or other property or amounts to be paid or distributed upon the grant, issuance,
vesting, exercise or payment of a Section 409A Award shall be distributed in accordance with the requirements of Section 409A(a)(2) of the Code, and shall not be distributed earlier than: 
  
 (i) the Holder’s separation from service, as determined
by the Secretary of the Treasury, 
  
 (ii) the
date the Holder becomes disabled, 
  
 (iii) the
Holder’s death, 
  
 (iv) a specified time
(or pursuant to a fixed schedule) specified under the Award Agreement at the date of the deferral compensation, 
  
 (v) to the extent provided by the Secretary of the Treasury, a change in the ownership or effective control of the Company or a
Subsidiary, or in the ownership of a substantial portion of the assets of the Company or a Subsidiary, or 
  
 (vi) the occurrence of an unforeseeable emergency with respect to the Holder. 
  
 (b) In the case of a Holder who is a specified employee, the
requirement of paragraph (a)(i) shall be met only if the distributions with respect to the Section 409A Award may not be made before the date which is six months after the Holder’s separation from service (or, if earlier, the date of the
Holder’s death). For purposes of this subsection (b), a Holder shall be a specified employee if such Holder is a key employee (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) of a corporation any stock of which
is publicly traded on an established securities market or otherwise, as determined under Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations thereunder. 
  
 (c) The requirement of paragraph (a)(vi) shall be met only if, as determined under Treasury Regulations
under Section 409A(a)(2)(B)(ii) of the Code, the amounts distributed with respect to the unforeseeable emergency do not exceed the amounts necessary to satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated
as a result of the distribution, after taking into account the extent to which such unforeseeable emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Holder’s assets (to the
extent the liquidation of such assets would not itself cause severe financial hardship). 
  
 (d) For purposes of this Section, the terms specified therein shall have the respective meanings ascribed thereto under Section 409A of
the Code and the Treasury Regulations thereunder. 
  
 10.3.
Prohibition on Acceleration of Benefits. The time or schedule of any distribution or payment of any shares of Common Stock or other property or amounts under a Section 409A Award shall not be accelerated, except as otherwise permitted under
Section 409A(a)(3) of the Code and the Treasury Regulations thereunder. 
  
 10.4. Elections under Section 409A Awards. 
  
 (a) Any deferral election provided under or with respect to an Award to any Employee, Independent Director or Consultant, or to the Holder of a Section 409A Award, shall satisfy the requirements of Section
409A(a)(4)(B) of the Code, to the extent applicable, and, except as otherwise permitted under paragraph 

  

 17 

 
(i) or (ii), any such deferral election with respect to compensation for services performed during a taxable year shall be made not later than the close
of the preceding taxable year, or at such other time as provided in Treasury Regulations. 
  
 (i) In the case of the first year in which an Employee, Independent Director or Consultant, or the Holder, becomes eligible to participate
in the Plan, any such deferral election may be made with respect to services to be performed subsequent to the election within thirty (30) days after the date the Employee, Independent Director or Consultant, or the Holder, becomes eligible to
participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the Code. 
  
 (ii) In the case of any performance-based compensation based on services performed by an Employee, Independent Director or Consultant, or
the Holder, over a period of at least twelve (12) months, any such deferral election may be made no later than six months before the end of the period, as provided under Section 409A(a)(4)(B)(iii) of the Code. 
  
 (b) In the event that a Section 409A Award permits, under a
subsequent election by the Holder of such Section 409A Award, a delay in a distribution or payment of any shares of Common Stock or other property or amounts under such Section 409A Award, or a change in the form of distribution or payment, such
subsequent election shall satisfy the requirements of Section 409A(a)(4)(C) of the Code, and: 
  
 (i) such subsequent election may not take effect until at least twelve (12) months after the date on which the election is made,

  
 (ii) in the case such subsequent election
relates to a distribution or payment not described in Section 10.2(a)(ii), (iii) or (vi), the first payment with respect to such election may be deferred for a period of not less than five years from the date such distribution or payment otherwise
would have been made, and 
  
 (iii) in the case
such subsequent election relates to a distribution or payment described in Section 10.2(a)(iv), such election may not be made less than twelve (12) months prior to the date of the first scheduled distribution or payment under Section 10.2(a)(iv).

  
 10.5. Compliance in Form and Operation. A Section 409A
Award, and any election under or with respect to such Section 409A Award, shall comply in form and operation with the requirements of Section 409A of the Code and the Treasury Regulations thereunder. 
  
 ARTICLE XI. 
  
 ADMINISTRATION 
  
 11.1. Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a
“non-employee director” as defined by Rule 16b-3 and an “outside director” for purposes of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 
  
 11.2. Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the Award Agreements, and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith, to interpret, amend or revoke
any such rules and to amend any Award Agreement provided that the rights or obligations of the Holder of the Award that is the subject of any such Award Agreement are not affected adversely. Any such grant or award under the Plan need not be the
same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time 

  

 18 

 
and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to Options and Dividend Equivalents granted to Independent Directors. 
  
 11.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum
is present or by a memorandum or other written instrument signed by all members of the Committee. 
  
 11.4. Compensation; Professional Assistance; Good Faith Actions. Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and the Company’s officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Holders, the Company and all other interested persons. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action,
determination or interpretation. 
  
 11.5. Delegation of
Authority to Grant Awards. The Committee may, but need not, delegate from time to time some or all of its authority to grant Awards under the Plan to a committee consisting of one or more members of the Committee or of one or more officers of
the Company; provided, however, that the Committee may not delegate its authority to grant Awards to individuals: (a) who are subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (b) who are
Section 162(m) Participants, or (c) who are officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such
delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 11.5 shall serve in such capacity at the pleasure of the Committee. 
  
 ARTICLE XII. 
  
 MISCELLANEOUS PROVISIONS 
  
 12.1. Transferability of Awards. 
  
 (a) Except as otherwise provided in Section 12.1(b):

  
 (i) No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying
such Award have been issued, and all restrictions applicable to such shares have lapsed; 
  
 (ii) No Option, Restricted Stock award, Deferred Stock award, Performance Award, Stock Appreciation Right, Dividend Equivalent award,
Stock Payment award or Restricted Stock Unit award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and 
  

 19 

 (iii) During the lifetime of the Holder, only the Holder may exercise an Option or other
Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a DRO; after the death of the Holder, any exercisable portion of an Option or other Award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Holder’s will or under the then applicable laws of descent and distribution.

  
 (b) Notwithstanding Section 12.1(a), the
Administrator, in its sole discretion, may determine to permit a Holder to transfer a Non-Qualified Stock Option to any one or more Permitted Transferees (as defined below), subject to the following terms and conditions: (i) a Non-Qualified Stock
Option transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) any Non-Qualified Stock Option which is transferred to a Permitted
Transferee shall continue to be subject to all the terms and conditions of the Non-Qualified Stock Option as applicable to the original Holder (other than the ability to further transfer the Non-Qualified Stock Option); and (iii) the Holder and the
Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for
the transfer under applicable federal and state securities laws and (C) evidence the transfer. For purposes of this Section 12.1(b), “Permitted Transferee” shall mean, with respect to a Holder, any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Holder’s
household (other than a tenant or employee), a trust in which these persons (or the Holder) control the management of assets, and any other entity in which these persons (or the Holder) own more than fifty percent of the voting interests, or any
other transferee specifically approved by the Administrator after taking into account any state or federal tax or securities laws applicable to transferable Non-Qualified Stock Options. 
  
 12.2. Amendment, Suspension or Termination of the Plan. Except as otherwise provided in this Section 12.2, the Plan
may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator. However, without approval of the Company’s stockholders given within twelve (12) months before or after the
action by the Administrator, no action of the Administrator may, except as provided in Section 12.3, (i) increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under the Plan, (ii) expand the classes of
persons to whom Awards may be granted under the Plan, or (iii) decrease the exercise price of any outstanding Option or Stock Appreciation Right granted under the Plan. No amendment, suspension or termination of the Plan shall, without the consent
of the Holder, alter or impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after
termination of the Plan, and in no event may any Award be granted under the Plan after the first to occur of the following events: 
  
 (a) The expiration of ten (10) years from the date the Plan is adopted by the Board; or 
  
 (b) The expiration of ten (10) years from the date the Plan
is approved by the Company’s stockholders under Section 12.4. 
  
 12.3. Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events. 
  
 (a) Subject to Section 12.3(e), in the event that the Administrator determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or
sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities
of the Company, or other similar corporate transaction or event, in the Administrator’s sole discretion, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be 

  

 20 

 
made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of:

  
 (i) The number and kind of shares of Common
Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued under the Plan,
and the maximum number and kind of shares which may be granted or issued as Restricted Stock awards, Restricted Stock Unit awards, Performance Awards, Dividend Equivalent awards, Deferred Stock awards or Stock Payment awards, and adjustments of the
Award Limit); 
  
 (ii) The number and kind of
shares of Common Stock (or other securities or property) subject to outstanding Awards; and 
  
 (iii) The grant or exercise price with respect to any Award. 
  
 (b) Subject to Sections 12.3(c) and 12.3(e), in the event of any transaction or event described in Section
12.3(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting principles,
the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or
upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: 
  
 (i) To provide for either the purchase of any such Award for
an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with
other rights or property selected by the Administrator in its sole discretion; 
  
 (ii) To provide that the Award cannot vest, be exercised or become payable after such event; 
  
 (iii) To provide that such Award shall be exercisable as to
all shares covered thereby, notwithstanding anything to the contrary in Section 5.3 or the provisions of such Award; 
  
 (iv) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; 
  
 (v) To make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant, exercise or purchase price), and the criteria included in, outstanding options, rights and awards and options,
rights and awards which may be granted in the future; and 
  
 (vi) To provide that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of Restricted Stock, Restricted Stock Units or Deferred Stock may be
terminated, and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after such event. 
  
 (c) Notwithstanding any other provision of the Plan, in the
event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, the Committee may cause any or all Awards outstanding hereunder to be assumed or an equivalent option substituted by
the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for any such Award, the Committee may cause any or all of such Awards to become fully
exercisable immediately prior to the consummation of such transaction and all 

  

 21 

 
forfeiture restrictions on any or all of such Awards to lapse. Upon, or in anticipation of, a merger, consolidation or other similar transaction involving
the Company, the Committee may cause any and all Awards outstanding hereunder to terminate at a specific time in the future, including but not limited to the date of such transaction; provided, however, that each Participant shall have the right to
exercise such Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine. In the event that any agreement between the Company or any Company subsidiary or affiliate and a Participant contains provisions
that conflict with and are more restrictive than the provisions of this Section 12.3(c), this Section 12.3(c) shall prevail and control and the more restrictive terms of such agreement (and only such terms) shall be of no force or effect.

  
 (d) Subject to Sections 12.3(e), 3.2 and 3.3,
the Administrator may, in its discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company. 
  
 (e) With respect to Awards which are granted to Section
162(m) Participants and are intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 12.3 or in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this Section 12.3 or in any other provision of the Plan shall be authorized to
the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits
liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions. The number of shares of Common Stock subject to any Award shall always
be rounded to the next whole number. 
  
 (f) The
existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior
preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 
  
 (g) No action shall be taken under this Section 12.3 which shall cause an Award to fail to comply with Section 409A of the Code or the
Treasury Regulations thereunder, to the extent applicable to such Award. 
  
 12.4. Approval of Plan by Stockholders. The Plan will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s initial adoption of the Plan.
No Awards may be granted or awarded prior to such stockholder approval. In addition, if the Board determines that Awards other than Options or Stock Appreciation Rights which may be granted to Section 162(m) Participants should continue to be
eligible to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and approved by the Company’s stockholders no later than the first stockholder meeting that occurs in
the fifth year following the year in which the Company’s stockholders previously approved the Plan, as amended and restated to include the Performance Criteria. 
  
 12.5. Tax Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or
require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder’s FICA obligation) required by law to be withheld with respect to any taxable event concerning a Holder
arising as a result of this Plan. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow a Holder to elect to have the Company withhold shares of Common Stock otherwise issuable under an Award (or allow the
return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, 

  

 22 

 
the number of shares of Common Stock which may be withheld with respect to the issuance, vesting, exercise or payment of any Award (or which may be
repurchased from the Holder of such Award within six months (or such other period as may be determined by the Administrator) after such shares of Common Stock were acquired by the Holder from the Company) in order to satisfy the Holder’s
federal, state, local and foreign income and payroll tax liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or
repurchase equal to the aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income.

  
 12.6. Prohibition on Repricing. Subject to Section
12.3, the Administrator shall not, without the approval of the stockholders of the Company authorize the amendment of any outstanding Award to reduce its price per share. Furthermore, no Award shall be canceled and replaced with the grant of an
Award having a lesser price per share without the further approval of stockholders of the Company. 
  
 12.7. Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the
Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Holder to agree by separate written instrument, that: (a)(i) any proceeds, gains or other economic benefit actually or constructively received
by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Common Stock underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not
vested) shall be forfeited, if (b)(i) a Termination of Employment, Termination of Directorship or Termination of Consultancy occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (ii) the
Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (iii) the Holder
incurs a Termination of Employment, Termination of Directorship or Termination of Consultancy for “cause” (as such term is defined in the sole and absolute discretion of the Committee, or as set forth in a written agreement relating to
such Award between the Company and the Holder). 
  
 12.8.
Effect of Plan upon Options and Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of
the Company: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary, or (b) to grant or assume options or other rights or awards otherwise than under the Plan in
connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, partnership, limited liability company, firm or association. 
  
 12.9. Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of shares of Common Stock and the payment of money under the Plan or under Awards granted or
awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by
applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 
  

12.10. Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.

  
 12.11. Governing Law. The Plan and any agreements
hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof. 
  

 23Merger Agreement

 Exhibit 10.1 
  
 AGREEMENT AND PLAN OF MERGER 
  

by and between 
  
 FNB CORP. 
  
 and 
  
 UNITED FINANCIAL, INC. 
  
 THIS AGREEMENT AND PLAN
OF MERGER (this “Agreement”) is entered into as of the 9th day of May, 2005 by and between UNITED
FINANCIAL, INC., a North Carolina corporation and registered bank holding company (“United”), and FNB CORP., a North Carolina corporation and registered bank holding company (“FNB”); 
  
 WITNESSETH: 
  
 WHEREAS, the parties hereto have agreed that it is in their mutual best
interests and in the best interests of their respective shareholders for United to be merged with and into FNB pursuant to a plan of merger (the “Plan of Merger”) in the form attached hereto as Schedule A, and the parties desire to
provide for certain undertakings, conditions, representations, warranties and covenants in connection with the Merger (as defined in Section 1.1) and transactions contemplated hereby. 
  
 NOW, THEREFORE, in consideration of the premises, the mutual benefits to be derived from this Agreement, and of the
representations, warranties, conditions, covenants and promises herein contained, and subject to the terms and conditions hereof, the parties hereto mutually agree as follows: 
  
 ARTICLE I. THE MERGER 
  
 1.1 Merger. Subject to the provisions of this Agreement and the Plan of Merger, as of the Effective Time (as defined in Section 1.12
hereof), United shall be merged with and into FNB (the “Merger”), the separate corporate existence of United shall cease and the corporate existence of FNB, as the surviving corporation in the Merger, shall continue under the laws of the
State of North Carolina. FNB, as the surviving corporation in the Merger, is hereinafter sometimes referred to as the “Surviving Corporation.” 
  
 1.2 Effect of the Merger. At the Effective Time and by reason of the Merger, and in accordance with applicable law, all of the property,
assets and rights of every kind and character of FNB and of United including, without limitation, its stock in its wholly owned subsidiary, Alamance Bank (“Alamance Bank”), and all real, personal or mixed property, all debts due on
whatever account, all other choses in action and every other interest of or belonging to or due to United, whether tangible or intangible, shall vest in the Surviving Corporation, and the Surviving Corporation shall succeed to all the rights,
privileges, immunities, powers, purposes and franchises of a public or private nature of United and FNB, all without any conveyance, 

 assignment or further act or deed; and the Surviving Corporation shall become responsible for all of the liabilities,
duties and obligations of every kind, nature and description of United and FNB as of the Effective Time. 
  
 1.3 Articles of Incorporation, Bylaws and Management. The Articles of Incorporation and bylaws of FNB in effect at the Effective Time
shall be the Articles of Incorporation and bylaws of the Surviving Corporation until thereafter amended in accordance with applicable laws. The officers and directors of FNB at the Effective Time shall continue to hold such offices and positions of
the Surviving Corporation until removed as provided by law or until the election or appointment of their respective successors. 
  
 1.4 Conversion of Shares. 
  
 (a) United Stock. Except as otherwise provided herein, at the Effective Time, all rights of United’s shareholders with respect to all
then outstanding shares of the common stock of United, $1.00 par value per share (“United Stock”), shall cease to exist, and the holders of shares of United Stock shall cease to be, and shall have no further rights as, shareholders of
United. At the Effective Time, each such outstanding share of United Stock (except for shares held, other than in a fiduciary capacity or as a result of debts previously contracted, by United, FNB or any of their subsidiaries, which shall be
canceled in the Merger, and for Dissenting Shares (as defined in Section 1.9)) shall be converted, without any action on the part of the holder of such shares, into the right to receive the Merger Consideration (as defined in Section 1.5) in
accordance with this Article I. Following the Effective Time, certificates representing shares of United Stock outstanding at the Effective Time shall evidence only the right of the registered holder thereof to receive, and may be exchanged for, the
Merger Consideration.  
  
 (b) Outstanding FNB
Stock. Each share of common stock of FNB, par value $2.50 per share (“FNB Stock”), issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding and shall not be affected by the Merger.

  
 1.5 Merger Consideration. 
  
 (a) Per Share Consideration. Subject to the provisions of this
Article I, at the Effective Time each outstanding share of United Stock (except for shares held, other than in a fiduciary capacity or as a result of debts previously contracted, by United, FNB or any of their subsidiaries and for Dissenting Shares)
shall cease to represent any interest (equity, shareholder or otherwise) in United and shall automatically be converted exclusively into the right to receive, at the election of the holder thereof, either: (A) $14.25 in cash, without interest; (B)
0.6828 shares (the “Exchange Ratio”) of FNB Stock; or (C) 35% of the cash amount set forth in clause (A) above and a number of shares of FNB Stock equal to 65% of the Exchange Ratio; provided, however, that a holder of United Stock may,
pursuant to Section 1.6, make no election, in which case such shares of United Stock held by such holder shall be converted exclusively into the right to receive the consideration set forth in Section 1.6(e) below with respect to Non-Election Shares
(as defined in Section 1.6(b)). The amount of cash into which shares of United Stock shall be converted pursuant to this Agreement is sometimes hereinafter referred to as “Cash Consideration,” and the number of shares of FNB Stock into
which shares of United Stock shall 
  

 2 

 be converted pursuant to this Agreement is sometimes hereinafter referred to as “Stock Consideration.” The Cash
Consideration and Stock Consideration are sometimes referred to herein collectively as the “Merger Consideration.” No share of United Stock, other than Dissenting Shares (as defined in Section 1.9), shall be deemed to be outstanding or
have any rights other than those set forth in this Section 1.5(a) after the Effective Time. The Exchange Ratio is subject to possible adjustment in accordance with Section 1.5(c) below. 
  
 (b) Fractional Shares. Notwithstanding any other provision of this Agreement, each holder of shares of United
Stock exchanged pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of FNB Stock (after taking into account all certificates delivered by such holder under Sections 1.6(c) and 1.8(a) below and the elections
made pursuant to Section 1.6) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part of a share of FNB Stock multiplied by the market value of one share of FNB Stock at the Effective Time. The market value
of one share of FNB Stock at the Effective Time shall be the last sale price of FNB Stock on Nasdaq Stock Market, Inc. National Market System (“Nasdaq”) as reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by FNB, on the last trading day preceding the Effective Time. No such holder will be entitled to dividends, voting rights, or any other rights as a shareholder in respect of any fractional shares. 
  
 (c) Anti-Dilution Provisions. In the event FNB changes the
number of shares of FNB Stock issued and outstanding prior to the Effective Time as a result of a stock split, stock dividend, recapitalization, reclassification, combination, exchange of shares, or similar transaction with respect to such stock and
the record date therefor (in the case of a stock dividend) or the effective date thereof (in the case of a stock split, recapitalization, reclassification, combination, exchange of shares, or similar transaction for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall be appropriately adjusted to reflect such change. 
  
 1.6 Election and Allocation Procedures. 
  
 (a) An election form (an “Election Form”) and other appropriate and customary transmittal materials, which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore representing United Stock shall pass, only upon proper delivery of such certificates to the Exchange Agent (as hereinafter defined) in such form as United and FNB shall
mutually agree shall be mailed on the Mailing Date (as defined below) to each shareholder of record of United. The “Mailing Date” shall be the date on which proxy materials relating to the Merger are mailed to holders of shares of United
Stock. 
  
 (b) Each Election Form shall entitle the holder
of shares of United Stock (or the beneficial owner through appropriate and customary documentation and instructions) to (i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”), (ii) elect to
receive the Stock Consideration for all of such holder’s shares (a “Stock Election”), (iii) elect to receive Merger Consideration in accordance with clause (C) of the first sentence of Section 1.5(a) (a “Mixed Election”), or
(iv) make no election or to indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a “Non-Election”). Shareholders of record of United who hold shares of United Stock as
nominees, 
  

 3 

 trustees or in other representative capacities may submit multiple Election Forms, provided that such representative
certifies that each such Election Form covers all the shares of United Stock held by that representative for a particular beneficial owner. Shares of United Stock in respect of which a Cash Election shall have been made are referred to herein as
“Cash Election Shares.” Shares of United Stock in respect of which a Stock Election shall have been made are referred to herein as “Stock Election Shares.” Shares of United Stock in respect of which no election shall have been
made are referred to as “Non-Election Shares.” The aggregate number of shares of United Stock with respect to which a Stock Election shall have been made is referred to herein as the “Stock Election Number.” Shares of United
Stock with respect to which a Mixed Election shall have been made shall not be deemed either Stock Election Shares or Cash Election Shares, but shall in all events be converted into the right to receive the Merger Consideration as specified in
subsection (e) of this Section 1.6. 
  
 (c) To be
effective, a properly completed Election Form shall be submitted to the Exchange Agent on or before 5:00 p.m. North Carolina time on the last business day prior to the date of the shareholders’ meeting contemplated by Section 4.3(a) (or such
other time and date as United and FNB may mutually agree) (the “Election Deadline”). An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election
Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more certificates (or customary affidavits and, if required by FNB pursuant to Section 1.8(b), indemnification regarding the loss or destruction of such
certificates or the guaranteed delivery of such certificates) representing all shares of United Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. Any United shareholder may at any
time prior to the Election Deadline change his or her election by written notice received by the Exchange Agent prior to the Election Deadline accompanied by a properly completed and signed revised Election Form. Any United shareholder may, at any
time prior to the Election Deadline, revoke his or her election by written notice received by the Exchange Agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of his or her certificates, or of the guarantee of
delivery of such certificates, previously deposited with the Exchange Agent. All elections shall be revoked automatically if the Exchange Agent is notified in writing by FNB and United that this Agreement has been terminated. If a United shareholder
either (i) does not submit a properly completed Election Form by the Election Deadline, or (ii) revokes its Election Form prior to the Election Deadline, the shares of United Stock held by such shareholder shall be designated Non-Election Shares.
FNB shall cause the certificates representing United Stock described in clause (ii) above to be promptly returned without charge to the person submitting the Election Form upon written request to that effect from the person who submitted the
Election Form. Subject to the terms of this Agreement and of the Election Form, the Exchange Agent shall have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial
defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive. 
  
 (d) Notwithstanding any other provision contained in this Agreement, 65% (the “Stock Conversion Number”) of the total number of shares of
United Stock outstanding at the Effective Time to be converted into Merger Consideration pursuant to Section 1.5(a) excluding such shares as may be subject to an effective Mixed Election (the “Adjustable Conversion Shares”), shall be
converted into the Stock Consideration and the remaining 
  

 4 

 Adjustable Conversion Shares shall be converted into the Cash Consideration (in each case, excluding shares of United
Stock to be canceled as provided in Section 1.4(a) and Dissenting Shares); provided, however, that for federal income tax purposes, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Code
and in order that the Merger will not fail to satisfy continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a) of the Code, as reasonably determined by counsel to FNB, FNB
shall increase the number of Adjustable Conversion Shares that will be converted into the Stock Consideration and reduce the number of Adjustable Conversion Shares that will be converted into the right to receive the Cash Consideration. 

 
 (e) Within five business days after the later to occur of the
Election Deadline or the Effective Time, FNB shall cause the Exchange Agent to effect the allocation among holders of United Stock of rights to receive the Cash Consideration and the Stock Consideration as follows: 
  
 (i) In any event, all shares of United Stock with
respect to which a Mixed Election shall have been made shall be converted into 35% of the amount of cash set forth in clause (A) of the first sentence of Section 1.5(a) and a number of shares of FNB Stock equal to 65% of the Exchange Ratio;

  
 (ii) If the Stock Election Number
exceeds the Stock Conversion Number, then all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and each holder of Stock Election Shares will be entitled to receive the Stock
Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying (x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the Stock Conversion Number and
the denominator of which is the Stock Election Number, with the remaining number of such holder’s Stock Election Shares being converted into the right to receive the Cash Consideration; and 
  
 (iii) If the Stock Election Number is less than the
Stock Conversion Number (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the
Stock Consideration and the Non-election Shares and Cash Election Shares shall be treated in the following manner: 
  
 (A) If the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Cash Election Shares shall be
converted into the right to receive the Cash Consideration and each holder of Non-Election Shares shall receive the Stock Consideration in respect of that number of Non-Election Shares equal to the product obtained by multiplying (x) the number of
Non-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares, with the remaining number of such holder’s Non-Election Shares
being converted into the right to receive the Cash Consideration; or 
  

 5 

 (B) If the Shortfall Number exceeds the number of Non-Election Shares, then all
Non-Election Shares shall be converted into the right to receive the Stock Consideration, and each holder of Cash Election Shares shall receive the Stock Consideration in respect of that number of Cash Election Shares equal to the product obtained
by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by which (1) the Shortfall Number exceeds (2) the total number of Non-Election Shares and the denominator of which is
the total number of Cash Election Shares, with the remaining number of such holder’s Cash Election Shares being converted into the right to receive the Cash Consideration. 
  
 For purposes of this Section 1.6(e), if FNB is obligated to increase the number of Adjustable Conversion Shares to be converted into shares
of FNB Stock as a result of the application of the last clause of Section 1.6(d) above, then the higher number shall be the Stock Conversion Number in the calculations set forth in this Section 1.6(e). 
  
 1.7 Closing Payment. As of the Effective Time, FNB shall
deposit, or shall cause to be deposited, with Registrar and Transfer Company, transfer agent of FNB Stock (the “Exchange Agent”), for the benefit of each holder of United Stock for exchange in accordance with this Article I, (i)
certificates representing the aggregate number of whole shares of FNB Stock to be issued as Stock Consideration, and (ii) an aggregate amount of cash to be delivered to holders of United Stock as Cash Consideration and in lieu of any fractional
shares, to be issued and paid pursuant to this Article I for outstanding shares of United Stock (such certificates for shares of FNB Stock and such cash are referred to as the “Exchange Fund”). The Exchange Agent shall, pursuant to
irrevocable instructions in accordance with this Article I, deliver the FNB Stock and cash contemplated to be issued with respect to United Stock out of the Exchange Fund. The Exchange Fund shall not be used for any other purpose. The Exchange Agent
shall invest any cash included in the Exchange Fund, as directed by FNB, on a daily basis. Any interest and other income resulting from such investments shall be paid to FNB. 
  
 1.8 Exchange of Shares. 
  
 (a) Exchange Procedures. After the Effective Time, FNB shall cause the Exchange Agent to mail to the
shareholders of United of record at the Effective Time who did not previously submit a completed Election Form transmittal materials and other appropriate written instructions (collectively, a “Transmittal Letter”) (which shall specify
that delivery shall be effected, and risk of loss and title to the certificate representing shares of United Stock prior to such Effective Time shall pass, only upon proper delivery of such certificates to the Exchange Agent and which shall be in
such form and have such other provisions as FNB may reasonably specify). After the Effective Time and upon the proper surrender of certificate(s) representing shares of United Stock to the Exchange Agent, together with a properly completed and duly
executed Transmittal Letter or, as applicable, Election Form, the holder of such certificate(s) shall be entitled to receive in exchange therefor the number of shares of FNB Stock and the cash 
  

 6 

 to which such holder is entitled hereunder (including any cash payments to which such holder is entitled hereunder in
respect of rights to receive fractional shares and any dividends or other distributions to which such holder is entitled pursuant to Section 1.8(c)), subject to any required withholding of applicable taxes. Neither FNB nor the Exchange Agent shall
be obligated to deliver any of such payments in cash or stock until such holder surrenders the certificate(s) representing such holder’s shares. The certificate(s) so surrendered shall be duly endorsed as the Exchange Agent may require. If
there is a transfer of ownership of any shares of United Stock not registered in the transfer records of United, the Merger Consideration shall be issued to the transferee thereof if the certificates representing such United Stock are presented to
the Exchange Agent, accompanied by all documents required, in the reasonable judgment of FNB and the Exchange Agent, to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Any portion of the
Exchange Fund which remains undistributed to the holders of certificates representing United Stock for six months after the Effective Time shall be delivered to FNB, upon demand, and any shareholders of United who have not previously complied with
the provisions of this Article I shall thereafter look only to FNB for payment of their claim for FNB Stock and/or cash and any dividends or distributions with respect to FNB Stock. Any portion of the Exchange Fund remaining unclaimed by holders of
United Stock five years after the Effective Time (or such earlier date immediately prior to such time as such portion would otherwise escheat to or become property of any government entity) shall, to the extent permitted by applicable law, become
the property of FNB free and clear of any claims or interest of any person previously entitled therein. Any other provision of this Agreement notwithstanding, neither FNB nor the Exchange Agent shall be liable to any holder of shares of United Stock
for any amounts paid or properly delivered in good faith to a public official pursuant to any applicable abandoned property law. 
  
 (b) Lost Certificates. Any shareholder of United whose certificate representing shares of United Stock has been lost, destroyed, stolen or
otherwise is missing shall be entitled to receive a certificate representing the shares of FNB Stock and/or any cash, including cash in lieu of fractional shares, to which he or she is entitled in accordance with and upon compliance with conditions
reasonably imposed by the Exchange Agent or FNB (including, without limitation, a requirement that the shareholder provide a lost instruments indemnity bond in form, substance and amount reasonably satisfactory to the Exchange Agent and FNB).

  
 (c) Rights of Former United Shareholders. At the
Effective Time, the stock transfer books of United shall be closed as to holders of United Stock immediately prior to the Effective Time and no transfer of United Stock by any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 1.8(a) of this Agreement, each certificate theretofore representing shares of United Stock (other than shares to be canceled pursuant to Section 1.4(a) of this Agreement and Dissenting Shares)
shall from and after the Effective Time represent for all purposes only the right to receive the Merger Consideration. If, after the Effective Time, certificates representing United Stock are presented to FNB or the Exchange Agent for any reason,
they shall be cancelled and exchanged as provided in this Article I. To the extent permitted by North Carolina law, former shareholders of record of United shall be entitled to vote after the Effective Time at any meeting of shareholders of FNB the
number of whole shares of FNB Stock into which their respective shares of United Stock are converted, regardless of whether such holders have exchanged their 
  

 7 

 certificates representing United Stock for certificates representing FNB Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by FNB on the FNB Stock, the record date for which is at or after the Effective Time, the declaration shall include dividends or other distributions on all shares of FNB Stock to be
issued pursuant to the Merger, but beginning at the Effective Time no dividend or other distribution payable to the holders of record of FNB Stock as of any time subsequent to the Effective Time shall be delivered to the holder of any certificate
representing shares of United Stock issued and outstanding at the Effective Time until such holder surrenders such certificate for exchange as provided in Section 1.8(a) of this Agreement; provided, however, that upon surrender of such United Stock
certificate (or compliance with Section 1.8(b) of this Agreement), the FNB Stock certificate, together with all undelivered dividends or other distributions (without interest) and any cash payments to be paid for fractional share interests (without
interest), shall be delivered and paid with respect to each share represented by such United Stock certificate. 
  
 1.9 Dissenting Shares. Notwithstanding any other provision of this Agreement to the contrary, shares of United Stock that are outstanding
immediately prior to the Effective Time and that are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with Article 13 of
the North Carolina Business Corporation Act (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of
the appraised value of such shares held by them in accordance with the provisions of Article 13 of the North Carolina Business Corporation Act, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who
effectively shall have withdrawn or otherwise lost their rights to appraisal of such shares under Article 13 of the North Carolina Business Corporation Act shall thereupon be deemed to have been converted into and to have become exchangeable, as of
the Effective Time, for the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 1.8 of the certificate or certificates that, immediately prior to the Effective Time, evidenced
such shares. United shall give FNB (i) prompt notice of any written demands for appraisal of any shares of United Stock, attempted withdrawals of such demands for appraisal or any other instruments served pursuant to Article 13 of the North Carolina
Business Corporation Act and received by United relating to shareholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands under Article 13 of the North Carolina Business
Corporation Act consistent with the obligations of United thereunder. United shall not, except with the prior written consent of FNB, (x) make any payment with respect to such demand, (y) offer to settle or settle any demand for appraisal, or (z)
waive any failure to timely deliver a written demand for appraisal or timely take any other action to perfect appraisal rights in accordance with Article 13 of the North Carolina Business Corporation Act. 
  
 1.10 Treatment of United Stock Options. At the Effective
Time, each unexpired and unexercised outstanding option, whether or not then vested or exercisable in accordance with its terms, to purchase shares of United Stock (the “United Options”) previously granted by United or its subsidiaries
under the United Financial, Inc. 1999 Incentive Stock Option Plan or the United Financial, Inc. 1999 Nonstatutory Stock Option Plan (collectively, the “United Option Plan”) shall be cancelled and converted into the right to receive from
FNB, within 10 days following the Effective Time, cash in an amount equal to the product of (a) $14.25 minus the 
  

 8 

 exercise price per share of such United Option, times (b) the number of shares of United Stock that may be purchased upon
exercise of such United Option (whether or not then exercisable). Prior to (but effective at) the Effective Time, United shall use its best efforts to (i) obtain any consents from all holders of Company Options and (ii) make any amendment to the
terms of such stock option or compensation plans or arrangements that, in the case of either clause (i) or (ii), are necessary to give effect to the transactions contemplated by this Section 1.10. Immediately prior to the Effective Time, United
shall terminate the United Option Plan effective as of the Effective Time. 
  
 1.11 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Schell Bray Aycock Abel & Livingston P.L.L.C. in Greensboro,
North Carolina, or at such other place as FNB shall designate, on a date mutually agreeable to United and FNB (the “Closing Date”) after the expiration of any and all required waiting periods following the effective date of all required
approvals of the Merger by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the North Carolina Commissioner of Banks (the “Commissioner”) and any other governmental or regulatory authorities (as
soon as practicable, but in no event to be more than 60 days following the expiration of all such required waiting periods). At the Closing, FNB and United shall take such actions (including, without limitation, the delivery of certain closing
documents and the execution of Articles of Merger under North Carolina law) as are required herein and as otherwise shall be required by law to consummate the Merger and cause it to become effective. 
  
 1.12 Effective Time. Subject to satisfaction or waiver of all
conditions precedent set forth in this Agreement, the Merger shall become effective (the “Effective Time”) on the date and at the time on which Articles of Merger containing the Plan of Merger and the other provisions required by, and
executed in accordance with applicable North Carolina and applicable federal law shall have been accepted for filing by the Secretary of State of the State of North Carolina (or such later time as may be specified in the Articles of Merger);
provided, however, that unless otherwise mutually agreed upon by the parties hereto, the Effective Time shall in no event be more than ten days following the Closing Date. 
  
 1.13 Further Assurances. If at any time after the Effective Time FNB shall consider or be advised that any
further deeds, assignments or assurances in law or any other actions are necessary, desirable or proper to vest, perfect or confirm of record or otherwise, in the Surviving Corporation, the title to any property or rights of United acquired or to be
acquired by reason of, or as a result of, the Merger, United, its subsidiaries and their officers and directors shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to
vest, perfect or confirm title to such property or rights in FNB and otherwise to carry out the purpose of this Agreement, and the officers and directors of FNB are fully authorized and directed in the name of United or otherwise to take any and all
such actions. 
  
 ARTICLE II. REPRESENTATIONS AND WARRANTIES OF
UNITED 
  
 Except as otherwise specifically provided herein or
as “Previously Disclosed” to FNB, United hereby makes the following representations and warranties to FNB. (“Previously Disclosed” shall mean, as to United, the disclosure of information in a letter delivered by United to FNB
specifically referring to this Agreement and arranged in sections corresponding to the 
  

 9 

 sections, subsections and items of this Agreement applicable thereto, and which letter has been delivered prior to the
execution of this Agreement. Information shall be deemed Previously Disclosed for the purpose of a given section, subsection or item of this Agreement only to the extent that a specific reference thereto is made in connection with disclosure of such
information at the time of such delivery.) 
  
 2.1 Corporate
Organization, Capacity and Authority. 
  
 (a)
Organization. United is a corporation duly organized and validly existing under the laws of the State of North Carolina and is registered with the Commissioner as a bank holding company and with the Federal Reserve Board as a bank holding
company under the Bank Holding Company Act of 1956, as amended. 
  
 (b) Subsidiaries. United has one wholly owned subsidiary, Alamance Bank, a North Carolina banking corporation. Alamance Bank is the successor-in-interest to Alamance National Bank, a national banking corporation. All
references in this Agreement to Alamance Bank shall also refer, as appropriate in the context, to Alamance National Bank. Alamance Bank has one wholly owned subsidiary, Premier Investment Services, Inc., a North Carolina corporation
(“Premier”). Alamance Bank and Premier are sometimes referred to in this Agreement as the subsidiaries of United. Other than Alamance Bank and Premier, United has no subsidiaries, direct or indirect, and does not own, directly or
indirectly, any stock or other equity interest in any other corporation, service corporation, joint venture, partnership or other entity, except for equity issues reflected in United’s investment portfolio and securities held in a fiduciary
capacity. 
  
 (c) Organization of Subsidiaries. Each
of United’s subsidiaries is duly organized and validly existing under the laws of the State of North Carolina, and all of the outstanding capital stock of each such subsidiary is owned of record and beneficially, free and clear of all security
interests and claims, by United or Alamance Bank. All of the outstanding shares of capital stock of each of United’s subsidiaries are duly authorized, validly issued, fully paid and nonassessable except to the extent of assessability as set
forth in N.C. Gen. Stat. § 53-42. Alamance Bank has not received any notice of impairment from the Commissioner pursuant to N.C. Gen. Stat. § 53-42. 
  

(d) Power and Authority. Each of United and its subsidiaries has all requisite power and authority (corporate and other) to own, lease
and operate its properties and to carry on its business as it is now being conducted, is duly qualified to do business and is in good standing in each other jurisdiction in which the character of the properties owned, leased or operated by it
therein or in which the transaction of its business makes such qualification necessary, except where failure so to qualify would not have a Material Adverse Effect (as defined herein) on United and its subsidiaries, and, to the best knowledge and
belief of the management of United, is not transacting business or operating any properties owned or leased by it in violation of any provision of federal, state or local law or any rule or regulation promulgated thereunder, which violation would
have a Material Adverse Effect on United and its subsidiaries. For purposes of this Article II, “Material Adverse Effect” shall mean: (a) with respect to references to United, any change in the business of United that is or could be
materially adverse to the financial condition, results of operations, prospects, business, assets, 
  

 10 

 investments, properties or operations of United, or (b) with respect to references to United and its subsidiaries, any
change in the business of United or its subsidiaries that is or could be materially adverse to the financial condition, results of operations, prospects, business, assets, loan portfolio, investments, properties or operations of United and its
subsidiaries considered as one enterprise. 
  
 (e)
Constituent Documents. United has previously delivered to FNB true, accurate and complete copies of the currently effective charter and bylaws or equivalent organizational documents of each of United and its subsidiaries, including all
amendments and proposed amendments thereto. 
  
 2.2 Capital
Stock. The authorized capital stock of United consists of 10,000,000 shares of common stock, $1.00 par value per share, of which 1,640,565 shares are issued and outstanding as of May 4, 2005, and 3,000,000 shares of preferred stock, no par
value, of which no shares are issued and outstanding. Other than the United Stock, United has no outstanding class of capital stock. Each outstanding share of United Stock has been duly authorized and validly issued, is fully paid and nonassessable,
has been issued in compliance with applicable federal and state securities laws and has not been issued in violation of the preemptive rights of any shareholder. 
  
 2.3 Principal Shareholders. Except as Previously Disclosed, there are no persons or entities known to United
that own beneficially, directly or indirectly, more than 5% of the outstanding shares of United Stock. 
  
 2.4 Convertible Securities, Options, Etc. Except for the United Option Plan and the stock options granted thereunder, United does not have
any outstanding (i) securities or other obligations (including debentures or other debt instruments) which are convertible into shares of United Stock or any other securities of United, (ii) options, warrants, rights, calls or other commitments of
any nature which entitle any person to receive or acquire any shares of United Stock or any other securities of United, or (iii) plan, agreement or other arrangement pursuant to which shares of United Stock or any other securities of United or
options, warrants, rights, calls or other commitments of any nature pertaining thereto, have been or may be issued. 
  
 2.5 Authorization and Validity of Agreement. This Agreement has been duly and validly approved by United’s Board of Directors. Subject
only to approval of the Plan of Merger by the shareholders of United, (i) United has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described
herein, (ii) all corporate proceedings and approvals required to be taken to authorize United to enter into this Agreement and to perform its obligations and agreements and to carry out the transactions described herein have been duly and properly
taken, and (iii) this Agreement constitutes the valid and binding agreement of United enforceable in accordance with its terms (except to the extent enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws from time to time in effect which affect creditors’ rights generally, (B) legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (C) general principles of
equity and applicable laws or court decisions limiting the enforceability of indemnification provisions). 
  

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 2.6 Validity of Transactions; Absence of Required Consents or Waivers. Provided the
required approvals of United’s shareholders and of governmental or regulatory authorities are obtained, neither the execution and delivery of this Agreement, nor the consummation of the transactions described herein, nor compliance by United
with any of its obligations or agreements contained herein, will: (i) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation under any provision of, the Articles of Incorporation or bylaws or the
equivalent organizational documents of United or any subsidiary, or any material contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding (oral or written) to which United or any subsidiary is bound or by
which it or its business, capital stock or any of its properties or assets may be affected; (ii) result in the creation or imposition of any lien, claim, interest, charge, restriction or encumbrance upon any of the properties or assets of United or
any subsidiary; (iii) violate any applicable federal or state statute, law, rule or regulation, or any judgment, order, writ, injunction or decree of any court, administrative or regulatory agency or governmental body; (iv) result in the
acceleration of any obligation or indebtedness of United or any subsidiary; or (v) interfere with or otherwise adversely affect the ability of United to carry on its business as presently conducted, or interfere with or otherwise adversely affect
the ability of FNB to carry on such business after the Effective Time. No consents, approvals or waivers are required to be obtained from any person or entity in connection with United’s execution and delivery of this Agreement, or the
performance of its obligations or agreements or the consummation of the transactions described herein, except for required approvals of United’s shareholders as described in Section 7.1(a) below and of governmental or regulatory authorities as
described in Section 7.1(d) below and approvals previously obtained. 
  
 2.7 Books and Records. The books of account of each of United and its subsidiaries have been maintained in material compliance with all applicable legal and accounting requirements and in accordance with good business
practices, and such books of account are complete and reflect accurately in all material respects United’s and its subsidiaries’, respectively, items of income and expense and all of its assets, liabilities and shareholders’ equity.
The minute books of each of United and its subsidiaries accurately reflect in all material respects the corporate actions which its respective shareholders and board of directors, and all committees thereof, have taken during the time periods
covered by such minute books. All such minute books have been or will be made available to FNB and its representatives. 
  
 2.8 Regulatory Reports. Since January 1, 2001, each of United and Alamance Bank has filed all reports, registrations and statements,
together with any amendments required to be made with respect thereto, that were required to be filed with (i) the FDIC, (ii) the Commissioner and (iii) any other governmental or regulatory authorities having jurisdiction over United or Alamance
Bank except to the extent that failure to file such reports, registrations and statements would not have a Material Adverse Effect on United and its subsidiaries. All such reports, registrations and statements filed by United or Alamance Bank with
the FDIC, the Commissioner or other such regulatory authority are collectively referred to herein as the “United Reports.” As of their respective dates, the United Reports complied in all material respects with all the statutes, rules and
regulations enforced or promulgated by the regulatory authority with which they were filed and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading; and neither United nor 
  

 12 

 Alamance Bank has been notified that any such United Reports were deficient as to form or content. Following the date of
this Agreement, United shall deliver to FNB, simultaneous with the filing thereof, a copy of each report, registration, statement or other regulatory filing made thereafter by United or Alamance Bank, with the FDIC, the Commissioner or any other
such regulatory authority. 
  
 2.9 SEC Filings; Financial
Statements. 
  
 (a) SEC Filings. United has
filed and made available to FNB all forms, reports and documents required to be filed by United with the Securities and Exchange Commission (the “SEC”) since June 30, 2002 (collectively, the “United SEC Reports”) and Alamance
Bank has filed, and United has made available to FNB, all forms, reports and documents required to be filed by Alamance Bank with the Office of the Comptroller of the Currency (the “OCC”) pursuant to the Securities Exchange Act of 1934, as
amended (the “1934 Act”), since December 31, 1997 and prior to December 31, 2002 (collectively, the “Alamance SEC Reports”). The United SEC Reports and the Alamance SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the 1934 Act and the Securities Act of 1933, as amended (the “1933 Act”), and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such United SEC Reports or Alamance SEC Reports or necessary in order to make the statements in
such United SEC Reports or Alamance SEC Reports, in light of the circumstances under which they were made, not misleading. 
  
 (b) Financial Statements. United has filed with the SEC and made available to FNB the following financial statements (collectively, the
“United Financial Statements”): (i) its consolidated balance sheets as of December 31, 2004 and 2003 and its consolidated statements of operations, changes in shareholders’ equity and cash flows for the years ended December 31, 2004,
2003 and 2002, together with notes thereto, all as audited by Larrowe & Company, PLC, independent certified public accountants; (ii) its balance sheets as of March 31, 2005 and 2004, and the related statements of income for the three-month
periods then ended. Following the date of this Agreement, United promptly will deliver to FNB all other annual or interim financial statements prepared by or for United. The United Financial Statements (including any related notes and schedules
thereto) (x) are in accordance with United’s books and records, and (y) except as stated therein, were prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods
indicated and present fairly United’s consolidated financial condition, assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the dates indicated and for the periods specified
therein subject, in the case of unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein, which adjustments will not be material in amount or effect. 
  
 2.10 Tax Returns and Other Tax Matters. (i) Each of United and
its subsidiaries has timely filed or caused to be filed, or obtained proper extensions of time for filing, all federal, state and local income tax returns and reports which are required by law to have been filed, and all such returns and reports
were true, correct and complete in all material respects and contained all material information required to be contained therein; (ii) all federal, state and local income, 
  

 13 

 profits, franchise, sales, use, occupation, property, excise, withholding, employment and other taxes (including interest
and penalties), charges and assessments which have become due from or been assessed or levied against United, any subsidiary or their respective properties have been fully paid or, if not yet due, a reserve or accrual which is reasonably believed by
the management of United to be adequate in all material respects for the payment of all such taxes to be paid and the obligation for such unpaid taxes is reflected on the United Financial Statements; (iii) tax returns and reports of United and its
subsidiaries have not been subject to audit by the Internal Revenue Service (the “IRS”) or the North Carolina Department of Revenue in the last seven years and neither United nor any subsidiary has received any indication of the pendency
of any audit or examination in connection with any such tax return or report or has any knowledge that any such return or report is subject to adjustment; and (iv) neither United nor any subsidiary has executed any waiver or extended the statute of
limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax. 
  
 2.11 Absence of Material Adverse Changes or Certain Other Events. 
  
 (a) Since December 31, 2004, each of United and its subsidiaries have conducted its respective business only in the
ordinary course, and there has been no Material Adverse Effect, and there has occurred no event or development and there currently exists no condition or circumstance which, with the lapse of time or otherwise, may or could cause, create or result
in a Material Adverse Effect, on United and its subsidiaries. 
  
 (b) Since December 31, 2004, and other than in the ordinary course of its business, neither United nor any subsidiary has incurred any material liability or engaged in any material transaction or entered into any material agreement,
increased the salaries, compensation or general benefits payable to its employees, suffered any loss, destruction or damage to any of its respective properties or assets, or made a material acquisition or disposition of any assets or entered into
any material contract or lease. For purposes of this Section 2.11(b), “material” means material to United and its subsidiaries considered as one enterprise. 
  
 2.12 Absence of Undisclosed Liabilities. Neither United nor any subsidiary has any liabilities or obligations,
whether known or unknown, matured or unmatured, accrued, absolute, contingent or otherwise, whether due or to become due (including, without limitation, tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other
than (i) those reflected in the United Financial Statements, or (ii) obligations or liabilities incurred in the ordinary course of its business since December 31, 2004 and which are not, individually or in the aggregate, material to United and its
subsidiaries considered as one enterprise. No facts or circumstances exist that could reasonably be expected to serve as the basis for any other liabilities of United or any subsidiary. 
  
 2.13 Litigation and Compliance with Law. 
  
 (a) There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the best
knowledge and belief of management of United, any facts or circumstances which reasonably could result in such), including, without limitation, any such action by any governmental or regulatory authority, which currently exist or are ongoing,
pending or, to the best knowledge and belief of management of United, threatened, contemplated 
  

 14 

 or probable of assertion, against, relating to or otherwise affecting United, any subsidiary or any of their respective
properties, assets or employees which, if determined adversely, could result in liability on the part of United or any subsidiary for, or subject United or any subsidiary to, material monetary damages, fines or penalties or an injunction, or which
could have a Material Adverse Effect on United and its subsidiaries or on United’s ability to consummate the Merger. 
  
 (b) Except for such licenses, permits, orders, authorizations or approvals (“Permits”) the absence of which would not have a Material
Adverse Effect on United or its subsidiaries, each of United and its subsidiaries has all Permits of any federal, state, local or foreign governmental or regulatory body that are material to or necessary for the conduct of its respective business or
to own, lease and operate its respective properties. Except as would not have a Material Adverse Effect on United and its subsidiaries, all such Permits are in full force and effect and no violations are or have been recorded in respect of any such
Permits. No proceeding is pending or, to the best knowledge and belief of management of United, threatened or probable of assertion to suspend, cancel, revoke or limit any Permit. 
  
 (c) Neither United nor any subsidiary is subject to any supervisory agreement, enforcement order, writ, injunction,
capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any regulatory or other governmental authority (including, without limitation, the
Federal Reserve Board, the FDIC or the Commissioner) relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or otherwise; there are no judgments, orders, stipulations, injunctions, decrees
or awards against United or any subsidiary that in any manner limit, restrict, regulate, enjoin or prohibit any present or past business or practice of United or any subsidiary; and neither United nor any subsidiary has been advised or has any
reason to believe that any regulatory or other governmental authority or any court is contemplating, threatening or requesting the issuance of any such agreement, order, injunction, directive, memorandum, judgment, stipulation, decree or award.

  
 (d) Neither United nor any subsidiary is in violation
or default under, and each has complied with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any court or federal, state, municipal or other governmental or regulatory authority having jurisdiction or
authority over it or its business operations, properties or assets (including, without limitation, all provisions of North Carolina law relating to usury, the Consumer Credit Protection Act, and all other laws and regulations applicable to
extensions of credit) except for any such violation, default or noncompliance as does not or would not have a Material Adverse Effect on United and its subsidiaries, and, to the best knowledge and belief of management of United, there is no basis
for any claim by any person or authority for compensation, reimbursement or damages or otherwise for any violation of any of the foregoing. 
  
 2.14 Real Properties. United has Previously Disclosed to FNB a listing of all real property owned or leased by United or any subsidiary (the
“Real Property”) and all leases pertaining to any such Real Property to which United or any subsidiary is a party (the “Real Property Leases”). With respect to all Real Property, United or any subsidiary has good and marketable
fee simple title to, or a valid and subsisting leasehold interest in, such Real Property and owns the same free and clear of all mortgages, liens, leases, encumbrances, title defects and exceptions to title other than (i) the lien of current taxes
not yet due and payable, and (ii) such 
  

 15 

 imperfections of title and restrictions, covenants and easements (including utility easements) which do not materially
affect the value of the Real Property and which do not and will not materially detract from, interfere with or restrict the present or future use of the properties subject thereto or affected thereby. With respect to each Real Property Lease (i)
such lease is valid and enforceable in accordance with its terms, (ii) there currently exists no circumstance or condition which constitutes an event of default by United or any subsidiary (as lessor or lessee) or its respective lessor or which,
with the passage of time or the giving of required notices will or could constitute such an event of default, and (iii) subject to any required consent of United’s lessor, each such Real Property Lease may be assigned to FNB and the execution
and delivery of this Agreement does not constitute an event of default thereunder. To the best knowledge and belief of management of United, the Real Property complies with all applicable federal, state and local laws, regulations, ordinances or
orders of any governmental authority, including those relating to zoning, building and use permits, except for such noncompliance as does not or would not have a Material Adverse Effect on United and its subsidiaries, and the Real Property may be
used under applicable zoning ordinances for commercial banking facilities as a matter of right rather than as a conditional or nonconforming use. All improvements and fixtures included in or on the Real Property are in good condition and repair,
ordinary wear and tear excepted, and there does not exist any condition which materially adversely affects the economic value thereof or materially adversely interferes (or will interfere after the Merger) with the contemplated use thereof.

  
 2.15 Loans, Accounts, Notes and Other
Receivables. 
  
 (a) All loans, accounts, notes
and other receivables reflected as assets on the books and records of United and its subsidiaries (i) have resulted from bona fide business transactions in the ordinary course of operations of United and its subsidiaries, (ii) were made in
accordance with the standard loan policies and procedures of United and its subsidiaries, and (iii) are owned by United or a subsidiary free and clear of all liens, encumbrances, assignments, participation or repurchase agreements or other
exceptions to title or to the ownership or collection rights of any other person or entity. 
  
 (b) All of the records of United and its subsidiaries regarding all outstanding loans, accounts, notes and other receivables, and all other real estate owned, are accurate in all material respects, and, with
respect to such loans the loan documentation of which indicate are secured by any real or personal property or property rights (“Loan Collateral”), such loans are in all material respects secured by valid, perfected and enforceable liens
on all such Loan Collateral having the priority described in the records of such loan. Neither United nor any subsidiary has engaged in any form of indirect lending and no such indirect loans are outstanding. 
  
 (c) To the best knowledge and belief of management of United, each
loan reflected as an asset on the books of United and its subsidiaries and each guaranty therefor, is the legal, valid and binding obligation of the obligor or guarantor thereon, and no defense, offset or counterclaim has been asserted with respect
to any such loan or guaranty. 
  
 (d) United has Previously
Disclosed to FNB (i) a written listing of each loan, extension of credit or other asset of United or any subsidiary which, as of December 31, 2004, is classified by the FDIC, the OCC or the Commissioner as “Loss,” “Doubtful,”
“Substandard” or 
  

 16 

 “Special Mention” (or otherwise by words of similar import), or which it has designated as a special asset or
for special handling or placed on any “watch list” because of concerns regarding the ultimate collectibility or deteriorating condition of such asset or any obligor or Loan Collateral therefor, and (ii) a written listing of each loan or
extension of credit that, as of December 31, 2004, was past due as to the payment of principal or interest or both, or as to which any obligor thereon (including the borrower or any guarantor) otherwise was in default, is the subject of a proceeding
in bankruptcy or otherwise has indicated any inability or intention not to repay such loan or extension of credit. Each such listing is accurate and complete in all material respects as of the date indicated. 
  
 (e) As of December 31, 2004, United’s, or any subsidiary’s,
reserve for possible loan losses (the “Loan Loss Reserve”) has been established in conformity with GAAP, sound banking practices and all applicable requirements, rules and policies of the FDIC and the Commissioner and, in the best judgment
of management of United, (i) is reasonable in view of the size and character of its loan portfolio, current economic conditions and other relevant factors, and (ii) is adequate to provide for losses relating to or the risk of loss inherent in its
loan portfolio. At December 31, 2004, United’s Loan Loss Reserve was $1,545,808 and at March 31, 2005, United’s Loan Loss Reserve was $1,646,615. 
  
 2.16 Securities Portfolio and Investments. Except as Previously Disclosed, all securities owned by United or any subsidiary (whether owned
of record or beneficially) are held free and clear of all mortgages, liens, pledges, encumbrances or any other restriction or rights of any other person or entity, whether contractual or statutory, which would materially impair the ability of United
or any subsidiary to dispose freely of any such security or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements or undertakings to which United or any subsidiary is a party with respect
to the voting of any such securities. With respect to all “repurchase agreements” to which United or any subsidiary has “purchased” securities under agreement to resell, United or such subsidiary has a valid, perfected first lien
or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt owed that is secured by such
collateral. Except for fluctuations in the market values of its investment securities, since December 31, 2004, there has been no significant deterioration or material adverse change in the quality, or any material decrease in the value, of
United’s securities portfolio as a whole. 
  
 2.17
Personal Property and Other Assets. All tangible personal property of United or any subsidiary material to the business operations of United and such subsidiary (including, without limitation, all banking equipment, data processing
equipment, vehicles, and all other tangible personal property located in any office of or used by United or such subsidiary in the operation of its business) is owned or leased by United or such subsidiary free and clear of all liens, encumbrances,
leases, title defects or exceptions to title other than such as are not material in character, amount or extent, and which do not materially detract from the value of, or interfere with the present or future use or ability to convey, the property
subject thereto or affected thereby. All of United or any subsidiary’s tangible personal property material to its business is in good operating condition and repair, ordinary wear and tear excepted. 
  

 17 

 2.18 Patents and Trademarks. United and its subsidiaries own, possess or have the right to
use any and all patents, licenses, trademarks, trade names, copyrights, trade secrets and proprietary and other confidential information necessary to conduct their business as now conducted; and neither United nor any subsidiary has violated, and
currently is not in conflict with, any patent, license, trademark, trade name, copyright or proprietary right of any other person or entity. 
  
 2.19 Environmental Matters. 
  
 (a) United has Previously Disclosed to FNB copies of all written reports, correspondence, notices or other materials, if any, in its or any
subsidiary’s possession pertaining to environmental surveys or assessments of the Real Property or any of its Loan Collateral and any improvements thereon, or to any violation of “Environmental Laws” (as defined below) on, affecting
or otherwise involving the Real Property or any Loan Collateral. 
  
 (b) There has been no presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control,
removal, clean-up or remediation of any “Hazardous Substances” (as defined below) by any person prior to the date hereof on, from or relating to the Real Property or, to the best knowledge and belief of management of United, the Loan
Collateral, which constitutes a violation of any Environmental Laws. 
  
 (c) Neither United nor any subsidiary has violated any federal, state or local law, rule, regulation, order, permit or other requirement relating to health, safety or the environment or imposing liability, responsibility or standards
of conduct applicable to environmental conditions, and there has been no violation of any Environmental Laws (as defined in Section 2.19(f) below) (including, to the best knowledge and belief of management of United, any violation with respect to or
relating to any Loan Collateral) by any other person or entity for whose liability or obligation with respect to any particular matter or violation United or any subsidiary is or may be responsible or liable, except to the extent any violations of
which, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries. 
  
 (d) Neither United nor any subsidiary is subject to any claims, demands, causes of action, suits, proceedings, losses, damages, penalties,
liabilities, obligations, costs or expenses of any kind and nature which arise out of, under or in connection with, or which result from or are based upon the presence, use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, reporting, testing, processing, emission, discharge, release, threatened release, control, removal, clean-up or remediation of any Hazardous Substances on, from or relating to the Real Property or, to the best
knowledge and belief of management of United, any Loan Collateral by any person or entity. 
  
 (e) No facts, events or conditions relating to the Real Property or, to the best knowledge and belief of management of United, any Loan Collateral, or the operations of United or any subsidiary, will prevent,
hinder or limit continued compliance with Environmental Laws, or give rise to any investigatory, emergency removal, remedial or corrective actions, obligations or liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
pursuant to Environmental Laws. 
  

 18 

 (f) For purposes of this Agreement, “Environmental Laws” shall include: 
  
 (i) all federal, state and local statutes,
regulations, ordinances, orders, decrees, and similar provisions having the force or effect of law, 
  
 (ii) all contractual agreements, and 
  
 (iii) all common law 
  
 concerning public health and safety, worker health and safety, and pollution or protection of the environment, including without limitation all standards of conduct and
bases of obligations relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, reporting, testing, processing, discharge, release, threatened release, control, emergency
removal, clean-up or remediation of any Hazardous Substances (including without limitation the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund Amendment and Reauthorization Act, the Federal Insecticide, Fungicide
and Rodenticide Act, the Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act, the Toxic Substances Control Act, any “Superfund” or “Superlien” law, the
Americans with Disabilities Act, and the Occupational Safety and Health Act), as such may now or at any time hereafter be defined or in effect. 
  
 (g) For purposes of this Agreement, “Hazardous Substances” shall include hazardous, toxic or otherwise regulated materials, substances or
wastes; chemical substances or mixtures; pesticides; pollutants; contaminants; toxic chemicals; oil or other petroleum products, byproducts, or constituents (including but not limited to crude oil, diesel oil, fuel oil, gasoline, lubrication oil,
oil refuse, oil mixed with other waste, oil sludge, and all other liquid hydrocarbons regardless of specific gravity); asbestos or asbestos containing material; flammable explosives; polychlorinated biphenyls (“PCBs”) or any material
containing PCBs; radioactive materials; biological micro organisms, viruses, fungi, spores; environmental tobacco smoke; radon or radon gas; formaldehyde or any material containing formaldehyde; fumigants; any material or substance comprising or
contributing to conditions known as “sick building syndrome,” “building-related illness” or similar conditions or exposures; and/or any hazardous, toxic, regulated or dangerous waste, substance or material defined as such by the
United States Environmental Protection Agency or any other federal, state or local governmental agency or political subdivision thereof, or for the purpose of or by any Environmental Laws, as now or at any time hereafter may be in effect.

  
 2.20 Brokerage or Finders’ Commissions. All
negotiations relative to this Agreement and the transactions described herein have been carried on by United or its representative, The Carson Medlin Company (“Carson Medlin”), directly with FNB or its representatives, and no person or
firm other than Carson Medlin has been retained by or has acted on behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, United or its Board of Directors, as a broker, finder or agent or has performed
similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein. 
  

 19 

 2.21 Material Contracts. 
  
 (a) Except as Previously Disclosed, neither United nor any subsidiary is a party to or bound by any agreement, other
than loans made in the ordinary course of business, (i) involving money or other property in an amount or with a value in excess of $50,000, (ii) which calls for the provision of goods or services to United or any subsidiary and cannot be terminated
without material penalty upon written notice to the other party thereto, (iii) which is material to United or any subsidiary and was not entered into in the ordinary course of business, (iv) which involves hedging, options or any similar trading
activity, or interest rate exchanges or swaps, (v) which commits United or any subsidiary to extend any loan or credit (with the exception of letters of credit, lines of credit and loan commitments extended in the ordinary course of a
subsidiary’s business), (vi) which involves the purchase or sale of any assets of United or any subsidiary, or the purchase, sale, issuance, redemption or transfer of any capital stock or other securities of United or any subsidiary, or (vii)
with any director, officer or principal shareholder of United or any subsidiary (including, without limitation, any consulting agreement, but not including any agreement relating to loans or other banking services which were made in the ordinary
course of its business and on substantially the same terms and conditions as were prevailing at that time for similar agreements with unrelated persons). 
  
 (b) Neither United nor any subsidiary is in default, and there has not occurred any event which with the lapse of time or giving of notice or both
would constitute such a default, under any contract, lease, insurance policy, commitment or arrangement to which it is a party or by which it or its property is or may be bound or affected or under which it or its property receives benefits.

  
 2.22 Employment Matters; Employee Relations.

  
 (a) Each of United and its subsidiaries (i) has paid
in full to or accrued on behalf of all its respective directors, officers and employees all wages, salaries, commissions, bonuses, fees and other direct compensation for all labor or services rendered, including all wages, salaries, commissions,
bonuses, fees and other direct compensation for all labor or services performed by them to the date of this Agreement and all vacation pay, sick pay, severance pay and other amounts promised to the extent required by law or its existing policies or
practices, and (ii) is in compliance in all material respects with all applicable federal, state and local laws, statutes, rules and regulations with regard to employment and employment practices, terms and conditions, and wages and hours and other
compensation matters; and no person has, to the best knowledge and belief of management of United, asserted that United or any subsidiary is liable in any amount for any arrearages in wages or employment taxes or for any penalties for failure to
comply with any of the foregoing. 
  
 (b) There is no
action, suit or proceeding by any person pending or, to the best knowledge and belief of management of United, threatened against United or any subsidiary (or their employees), involving employment discrimination, harassment, wrongful discharge or
similar claims. Neither United nor any subsidiary is a party to or bound by any collective bargaining agreement with any of its employees, any labor union or any other collective bargaining unit or organization. There is no pending or threatened
labor dispute, work stoppage or strike involving United, any subsidiary, or any of their employees, or any pending or 
  

 20 

 threatened proceeding in which it is asserted that United or any subsidiary has committed an unfair labor practice; and,
neither United nor any subsidiary is aware of any activity involving it or any of its employees seeking to certify a collective bargaining unit or engaging in any other labor organization activity. 
  
 2.23 Employment Agreements; Employee Benefit Plans. 

 
 (a) United has Previously Disclosed to FNB a true and complete
list of all bonus, deferred compensation, pension, retirement, profit-sharing, thrift, savings, employee stock ownership, stock bonus, stock purchase, restricted stock and stock option plans; all employment and severance contracts; all medical,
dental, health, and life insurance plans; all vacation, sickness and other leave plans, disability and death benefit plans; and all other employee benefit plans, contracts, or arrangements maintained or contributed to by United or any subsidiary for
the benefit of any employees, former employees, directors, former directors or any of their beneficiaries (collectively, the “Plans”). True and complete copies of all Plans, including, but not limited to, any trust instruments or insurance
contracts, if any, forming a part thereof, and all amendments thereto, previously have been supplied to FNB. Neither United nor any subsidiary maintains, sponsors, contributes to or otherwise participates in any “Employee Benefit Plan”
within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), any “Multiemployer Plan” within the meaning of Section 3(37) of ERISA, or any “Multiple Employer Welfare
Arrangement” within the meaning of Section 3(40) of ERISA. Each Plan that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA and which is intended to be qualified under Section 401(a) of the Code, has
received or applied for a favorable determination letter from the IRS and United is not aware of any circumstances reasonably likely to result in the revocation or denial of any such favorable determination letter. All reports and returns with
respect to the Plans (and any Plans previously maintained by United or any subsidiary) required to be filed with any governmental department, agency, service or other authority, including, without limitation, Internal Revenue Service Form 5500
(Annual Report), have been properly and timely filed. 
  
 (b)
All “Employee Benefit Plans” maintained by or otherwise covering employees or former employees of United or any subsidiary currently are, and at all times have been, in compliance with all provisions and requirements of ERISA except
those the noncompliance of which, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries. There is no pending or threatened litigation relating to any Plan or any such Plan previously maintained by United or
any subsidiary. Neither United nor any subsidiary has engaged in a transaction with respect to any Plan that has subjected it, or absent the exemption under which the transaction was effected, would subject it to a tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA. 
  
 (c)
United has delivered to FNB a true, correct and complete copy (including copies of all amendments thereto) of each of its retirement plans that is intended to be qualified under Section 401(a) of the Code (collectively, the “Retirement
Plans”), together with true, correct and complete copies of the summary plan descriptions relating to the Retirement Plans, the most recent determination letters received from the IRS regarding the Retirement Plans, and the most recent Annual
Reports (Form 5500 series) and related schedules, if any, for the Retirement Plans. The Retirement Plans are qualified under the provisions of Section 401(a) of 
  

 21 

 the Code, the trusts under the Retirement Plans are exempt trusts under Section 501(a) of the Code, and determination
letters have been issued or applied for with respect to the Retirement Plans to said effect, including determination letters covering the current terms and provisions of the Retirement Plans. There are no issues relating to said qualification or
exemption of the Retirement Plans currently pending before the IRS, the United States Department of Labor, the Pension Benefit Guaranty Corporation or any court. The Retirement Plans and the administration thereof meet (and have met since the
establishment of the Retirement Plans) the requirements of ERISA, the Code and all other laws, rules and regulations applicable to the Retirement Plans and do not violate (and since the establishment of the Retirement Plans have not violated) any of
the provisions of ERISA, the Code and such other laws, rules and regulations, except to the extent such violation, when taken as a whole, would not have a Material Adverse Effect on United or its subsidiaries. Without limiting the generality of the
foregoing, all reports and returns with respect to the Retirement Plans required to be filed with any governmental department, agency, service or other authority have been properly and timely filed. There are no disputes or unresolved disagreements
with respect to the Retirement Plans or the administration thereof currently existing between United, any subsidiary or any trustee or other fiduciary thereunder, and any governmental agency, any current or former employee of United, any subsidiary
or beneficiary of any such employee or any other person or entity. No “reportable event” within the meaning of Section 4043(b) of ERISA has occurred at any time with respect to the Retirement Plans, other than those, when taken as a whole,
that would not have a Material Adverse Effect on United or its subsidiaries. 
  
 (d) No liability under subtitle C or D of Title IV of ERISA has been or is expected to be incurred by United or any subsidiary with respect to the Retirement Plans or with respect to any other ongoing, frozen
or terminated defined benefit pension plan currently or formerly maintained by United or any subsidiary. Neither United nor any subsidiary presently contributes to a “Multiemployer Plan” or has ever contributed to such a plan. All
contributions required to be made pursuant to the terms of each of the Plans (including without limitation the Retirement Plans and any other “pension plan” (as defined in Section 3(2) of ERISA, provided such plan is intended to qualify
under the provisions of Section 401(a) of the Code) maintained by United or any subsidiary have been timely made. Neither the Retirement Plans nor any other “pension plan” maintained by United or any subsidiary have an “accumulated
funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither United nor any subsidiary has provided, and is not required to provide, security to any “pension plan” or to
any “Single Employer Plan” pursuant to Section 401(a)(29) of the Code. Under the Retirement Plans and any other “pension plan” maintained by United or any subsidiary as of the last day of the most recent plan year ended prior to
the date hereof, the actuarially determined present value of all “benefit liabilities,” within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial assumptions contained in the plan’s most recent
actuarial valuation) did not exceed the then current value of the assets of such plan, and there has been no material change in the financial condition of any such plan since the last day of the most recent plan year. 
  
 (e) There are no restrictions on the rights of United or any
subsidiary to amend or terminate any Plan. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (except as otherwise specifically provided for or contemplated by the transactions
described in this Agreement) (i) result in any 
  

 22 

 payment to any person (including, without limitation, any severance compensation or payment, unemployment compensation,
“golden parachute” or “change in control” payment, or otherwise) becoming due under any plan or agreement to any director, officer, employee or consultant, (ii) increase any benefits otherwise payable under any plan or agreement,
or (iii) result in any acceleration of the time of payment or vesting of any such benefit. 
  
 2.24 Insurance. United has in effect a “financial institutions bond” and such other policies of general liability, casualty, directors and officers liability, employee fidelity, errors and
omissions and other property and liability insurance as have been Previously Disclosed to FNB (the “Policies”). The Policies provide coverage in such amounts and against such liabilities, casualties, losses or risks as is required by
applicable law or regulation; and, in the judgment of management of United, the insurance coverage provided under the Policies is reasonable and adequate in all respects for United and its subsidiaries. Each of the Policies is in full force and
effect and is valid and enforceable in accordance with its terms, and is underwritten by an insurer of recognized financial responsibility that is qualified to transact business in North Carolina; and United and its subsidiaries have taken all
requisite actions (including the giving of required notices) under each such Policy to preserve all rights thereunder with respect to all matters. Neither United nor any subsidiary is in default under the provisions of, has received notice of
cancellation or nonrenewal of or any premium increase on, or has any knowledge of any failure to pay any premium on or any inaccuracy in any application for any Policy. There are no pending claims under any Policy, and United has no knowledge of any
facts or of the occurrence of any event that is reasonably likely to result in any such claim. 
  
 2.25 Insurance of Deposits. Alamance Bank is an “insured institution” as defined in the Federal Deposit Insurance Act and applicable regulations thereunder. The deposits of each depositor in
Alamance Bank are insured by the FDIC to the maximum amount provided by law, all deposit insurance premiums due from Alamance Bank to the FDIC have been paid in full in a timely fashion, and, to the best knowledge and belief of United, no
proceedings have been commenced or are contemplated by the FDIC or otherwise to terminate such insurance. 
  
 2.26 Compensation; Stock Ownership. United has Previously Disclosed (i) the name and current salary or wage rate for each present employee
of United or its subsidiaries, (ii) the name of and number of shares of United Stock beneficially owned by each of the directors and officers of United and by any person or entity known to United to own beneficially 5% or more of United Stock, and
(iii) the name, number and vesting schedule of outstanding options and restricted stock awards held by each person to whom a stock option or restricted stock award has been granted and currently is outstanding under any stock option or other plan of
United, including, without limitation, the United Option Plan. 
  
 2.27 Affiliates. United will deliver to FNB within 15 days of the date hereof a listing of those persons deemed by United and its counsel as of the date of this Agreement to be “Affiliates” of United as that term is
defined in Rule 405 promulgated under the 1933 Act, including persons, trusts, estates or other entities related to persons deemed to be Affiliates of United. 
  

2.28 State Takeover Laws. United has taken all necessary action to exempt the transactions contemplated by this Agreement from any
applicable “moratorium,” “control share,” “fair price,” “business combination,” or other anti-takeover laws and regulations of the State of North Carolina (collectively, “Takeover Laws”). 

 

 23 

 2.29 Obstacles to Regulatory Approval or Tax Treatment. To the best knowledge and belief of
management of United, there exists no fact or condition relating to United or any subsidiary that may reasonably be expected to (i) prevent, impede or delay FNB or United from obtaining the regulatory approvals required to consummate transactions
described herein, or (ii) prevent the Merger from qualifying to be a tax-free reorganization under Section 368(a)(1)(A) of the Code; and, if any such fact or condition becomes known to United, United shall promptly (and in any event within three
days after obtaining such knowledge) communicate such fact or condition to the President of FNB. 
  
 2.30 Disclosure. To the best knowledge and belief of management of United, no written statement, certificate, schedule, list or other
written information furnished by or on behalf of United at any time to FNB in connection with this Agreement (including without limitation the statements contained herein), when considered as a whole, contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. Each document delivered or to be delivered by
United to FNB is or will be a true and complete copy of such document, unmodified except by another document delivered by United. 
  
 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF FNB 
  
 Except as otherwise specifically described herein or as “Previously Disclosed” to United, FNB hereby makes the following representations and
warranties to United. (“Previously Disclosed” shall mean, as to FNB, the disclosure of information in a letter delivered by FNB to United specifically referring to this Agreement and arranged in sections corresponding to the sections,
subsections and items of this Agreement applicable thereto, and which letter has been delivered prior to the execution of this Agreement. Information shall be deemed Previously Disclosed for the purpose of a given section, subsection or item of this
Agreement only to the extent a specific reference thereto is made in connection with disclosure of such information at the time of such delivery.) 
  
 3.1 Corporate Organization, Capacity and Authority. 
  
 (a) Organization. FNB is a corporation duly organized and validly existing under the laws of the State of
North Carolina and is registered with the Federal Reserve Board as a bank holding company under the Bank Holding Company Act of 1956, as amended. 
  
 (b) Subsidiaries. FNB has two wholly owned subsidiaries, First National Bank and Trust Company, a national banking corporation (“First
National”), and Dover Mortgage Company, a North Carolina corporation (“Dover”). First National has one wholly owned subsidiary, First National Investor Services, Inc., a North Carolina corporation (“FNIS”). First National,
Dover and FNIS are sometimes referred to as the subsidiaries of FNB. Other than First National, Dover and FNIS, FNB has no subsidiaries, direct or indirect, and does not own, 
  

 24 

 directly or indirectly, any stock or other equity interest in any other corporation, service corporation, joint venture,
partnership or other entity, except for equity issues reflected in First National’s investment portfolio and securities held in a fiduciary capacity. 
  
 (c) Organization of Subsidiaries. First National is duly organized and validly existing under the laws of the United States. Each of Dover
and FNIS is duly organized and validly existing under the laws of the State of North Carolina. Except as Previously Disclosed, all of the outstanding capital stock of each such subsidiary is owned of record and beneficially, free and clear of all
security interests and claims, by FNB or First National. All of the outstanding shares of capital stock of each of FNB’s subsidiaries are duly authorized, validly issued, fully paid and nonassessable. 
  
 (d) Power and Authority. Each of FNB and its subsidiaries has
all requisite power and authority (corporate and other) to own, lease and operate its properties and conduct its business as now being conducted, is duly qualified to do business and is in good standing in each other jurisdiction in which the
character of the properties owned or leased by it therein or in which the transaction of its business makes such qualification necessary, except where failure so to qualify would not have a Material Adverse Effect (as defined herein) on FNB and its
subsidiaries, and is not transacting business, or operating any properties owned or leased by it, in violation of any provision of federal or state law or any rule or regulation promulgated thereunder, which violation would have a Material Adverse
Effect on FNB and its subsidiaries. For purposes of this Article III, “Material Adverse Effect” shall mean: (a) with respect to references to FNB, any change in the business of FNB that is or could be materially adverse to the financial
condition, results of operations, prospects, business, assets, investments, properties or operations of FNB, or (b) with respect to references to FNB and its subsidiaries, any change in the business of FNB or its subsidiaries that is or could be
materially adverse to the financial condition, results of operations, prospects, business, assets, loan portfolio, investments, properties or operations of FNB and its subsidiaries considered as one enterprise. 
  
 (e) Constituent Documents. FNB has previously delivered to
United true, accurate and complete copies of the currently effective charter and bylaws or equivalent organizational documents of each of FNB and its subsidiaries, including all amendments and proposed amendments thereto. 
  
 3.2 Capital Stock. The authorized capital stock of FNB consists
of 10,000,000 shares of FNB Stock, of which 5,603,553 shares are issued and outstanding as of April 29, 2005, and 200,000 shares of preferred stock, par value $10.00 per share, of which no shares are issued and outstanding. Each outstanding share of
FNB Stock has been duly authorized and validly issued, is fully paid and nonassessable, has been issued in compliance with applicable federal and state securities laws and has not been issued in violation of the preemptive rights of any shareholder.
The shares of FNB Stock issued to United’s shareholders pursuant to this Agreement, when issued as described herein, will be duly authorized, validly issued, fully paid and nonassessable, and will be issued in compliance with applicable federal
and state securities laws. 
  
 3.3 Convertible Securities,
Options, Etc. Except as Previously Disclosed, FNB does not have any outstanding (i) securities or other obligations (including debentures or other 
  

 25 

 debt instruments) which are convertible into shares of FNB Stock or any other securities of FNB, (ii) options, warrants,
rights, calls or other commitments of any nature which entitle any person to receive or acquire any shares of FNB Stock or any other securities of FNB, or (iii) plan, agreement or other arrangement pursuant to which shares of FNB Stock or any other
securities of FNB, or options, warrants, rights, calls or other commitments of any nature pertaining thereto, have been or may be issued. 
  
 3.4 Authorization and Validity of Agreement. This Agreement has been duly and validly approved by FNB’s Board of Directors. Subject to
required shareholder approval, (i) FNB has the corporate power and authority to execute and deliver this Agreement and to perform its obligations and agreements and carry out the transactions described herein, (ii) all corporate proceedings and
approvals required to be taken to authorize FNB to enter into this Agreement and to perform its respective obligations and agreements and to carry out the transactions described herein have been duly and properly taken, and (iii) this Agreement
constitutes the valid and binding agreement of FNB enforceable in accordance with its terms (except to the extent enforceability may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws from time to time in
effect which affect creditors’ rights generally, (B) legal and equitable limitations on the availability of injunctive relief, specific performance and other equitable remedies, and (C) general principles of equity and applicable laws or court
decisions limiting the enforceability of indemnification provisions). 
  
 3.5 Validity of Transactions; Absence of Required Consents or Waivers. Provided the required approvals of governmental or regulatory authorities are obtained, neither the execution and delivery of this Agreement, nor the
consummation of the transactions described herein, nor compliance by FNB with any of its obligations or agreements contained herein, will: (i) conflict with or result in a breach of the terms and conditions of, or constitute a default or violation
under any provision of, the Articles of Incorporation or bylaws or the equivalent organizational documents of FNB or any subsidiary, or any material contract, agreement, lease, mortgage, note, bond, indenture, license, or obligation or understanding
(oral or written) to which FNB or any subsidiary, is bound or by which it, its business, capital stock or any of its properties or assets may be affected; (ii) result in the creation or imposition of any lien, claim, interest, charge, restriction or
encumbrance upon any of the properties or assets of FNB or any subsidiary; (iii) violate any applicable federal or state statute, law, rule or regulation, or any order, writ, injunction or decree of any court, administrative or regulatory agency or
governmental body; (iv) result in the acceleration of any obligation or indebtedness of FNB or any subsidiary; or (v) interfere with or otherwise adversely affect FNB’s ability to carry on its business as presently conducted. No consents,
approvals or waivers are required to be obtained from any governmental or regulatory authority in connection with FNB’s execution and delivery of this Agreement, or the performance of its obligations or agreements or the consummation of the
transactions described herein, except for required approvals of governmental or regulatory authorities described in Section 7.1(d) below and approvals previously obtained. 
  
 3.6 Books and Records. The books of account of FNB and its subsidiaries have been maintained in material
compliance with all applicable legal and accounting requirements and in accordance with good business practices, and such books of account are complete and reflect accurately in all material respects FNB’s and its subsidiaries’,
respectively, items of income and expense and all of its assets, liabilities and shareholders’ equity. The minute books of 
  

 26 

 each of FNB and its subsidiaries accurately reflect in all material respects the corporate actions which its respective
shareholders and board of directors, and all committees thereof, have taken during the time periods covered by such minute books. All such minute books have been or will be made available to United and its representatives. 
  
 3.7 Regulatory Reports. Since January 1, 2001, FNB and its
subsidiaries have filed all reports, registrations and statements, together with any amendments that were required to be made with respect thereto, that were required to be filed with the Federal Reserve Board, the FDIC, the Office of the
Comptroller of the Currency (“OCC”) and any other governmental or regulatory authorities having jurisdiction over FNB or its subsidiaries except to the extent that failure to file such reports, registrations and statements would not have a
Material Adverse Effect on FNB and its subsidiaries. All such reports and statements filed with the Federal Reserve Board, the FDIC, the OCC or other such regulatory authority are collectively referred to herein as the “FNB Reports.” As of
their respective dates, the FNB Reports complied in all material respects with all the statutes, rules and regulations enforced or promulgated by the regulatory authority with which they were filed and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; and, FNB has not been notified that any such
FNB Reports were deficient in any material respect as to form or content. Following the date of this Agreement, FNB shall deliver to United upon its request a copy of any report, registration, statement or other regulatory filing made by FNB or its
subsidiaries with the Federal Reserve Board, the FDIC, the OCC or any other such regulatory authority. 
  
 3.8 SEC Filings; Financial Statements. 
  
 (a) SEC Filings. FNB has filed and made available to United all forms, reports, and documents required to be filed by FNB with the SEC since
December 31, 2001 (collectively, the “FNB SEC Reports”). The FNB SEC Reports (i) at the time filed, complied in all material respects with the applicable requirements of the 1933 Act and the 1934 Act and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated in such FNB SEC Reports or
necessary in order to make the statements in such FNB SEC Reports, in light of the circumstances under which they were made, not misleading. 
  
 (b) Financial Statements. FNB has filed with the SEC and made available to United the following financial statements (collectively, the
“FNB Financial Statements”): (i) its consolidated balance sheets as of December 31, 2004 and 2003 and its consolidated statements of operations, changes in shareholders’ equity and cash flows for the years ended December 31, 2004,
2003 and 2002, together with notes thereto; and (ii) its balance sheets as of March 31, 2005 and 2004, and the related statements of income for the three-month periods then ended. Following the date of this Agreement, FNB promptly will deliver to
United all other annual or interim financial statements prepared by or for FNB. The FNB Financial Statements (including any related notes and schedules thereto) (i) are in accordance with FNB’s books and records, and (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods indicated and present fairly FNB’s consolidated financial condition, 
  

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 assets and liabilities, results of operations, changes in shareholders’ equity and changes in cash flows as of the
dates indicated and for the periods specified therein subject, in the case of unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein, which adjustments will not be material in amount or
effect. FNB’s consolidated balance sheet as of December 31, 2004 and its consolidated statements of operations, changes in shareholders’ equity and cash flows for the year ended December 31, 2004 have been audited by Dixon Hughes PLLC,
independent certified public accountants. Its consolidated balance sheet as of December 31, 2003 and its consolidated statements of operations, changes in shareholders’ equity and cash flows for the years ended December 31, 2003 and 2002 have
been audited by KPMG LLP, independent certified public accountants. 
  
 3.9 Tax Returns and Other Tax Matters. (i) Each of FNB and its subsidiaries has timely filed or caused to be filed, or obtained proper extensions of time for filing, all federal, state and local income tax returns and reports
which are required by law to have been filed, and all such returns and reports were true, correct and complete in all material respects and contained all material information required to be contained therein; (ii) all federal, state and local
income, profits, franchise, sales, use, occupation, property, excise, withholding, employment and other taxes (including interest and penalties), charges and assessments which have become due from or been assessed or levied against FNB, its
subsidiaries or their respective properties have been fully paid or, if not yet due, a reserve or accrual which is reasonably believed by the management of FNB to be adequate in all material respects for the payment of all such taxes to be paid and
the obligation for such unpaid taxes is reflected on the FNB Financial Statements; (iii) tax returns and reports of FNB and its subsidiaries have not been subject to audit by the IRS or the North Carolina Department of Revenue in the last seven
years and neither FNB nor any of its subsidiaries has received any indication of the pendency of any audit or examination in connection with any such tax return or report or has any knowledge that any such return or report is subject to adjustment;
and (iv) neither FNB nor any of its subsidiaries has executed any waiver or extended the statute of limitations (or been asked to execute a waiver or extend a statute of limitations) with respect to any tax. 
  
 3.10 Absence of Material Adverse Changes. Since December 31,
2004, there has been no material adverse change, and there has occurred no event or development and there currently exists no condition or circumstance which, with the lapse of time or otherwise, may or could cause, create or result in a Material
Adverse Effect on FNB and its subsidiaries. 
  
 3.11 Absence
of Undisclosed Liabilities. Neither FNB nor its subsidiaries have any liabilities or obligations, whether known or unknown, matured or unmatured, accrued, absolute, contingent or otherwise, whether due or to become due (including without
limitation tax liabilities or unfunded liabilities under employee benefit plans or arrangements), other than (i) those reflected in the FNB Financial Statements, or (ii) obligations or liabilities incurred in the ordinary course of its business
since December 31, 2004 and which are not, individually or in the aggregate, material to FNB and its subsidiaries considered as one enterprise. 
  
 3.12 Litigation and Compliance with Law. 
  
 (a) There are no actions, suits, arbitrations, controversies or other proceedings or investigations (or, to the best knowledge and belief of
management of FNB, any facts or 
  

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 circumstances which reasonably could result in such), including, without limitation, any such action by any governmental
or regulatory authority, which currently exist or are ongoing, pending or, to the best knowledge and belief of management of FNB, threatened, contemplated or probable of assertion, against, relating to or otherwise affecting FNB, its subsidiaries or
any of their respective properties, assets or employees which, if determined adversely, could result in liability on the part of FNB or its subsidiaries for, or subject FNB or its subsidiary to, material monetary damages, fines or penalties or an
injunction, or which could have a Material Adverse Effect on FNB and its subsidiaries or on FNB’s ability to consummate the Merger. 
  
 (b) Except for such licenses, permits, orders, authorizations or approvals (“Permits”) the absence of which would not have a Material
Adverse Effect on FNB or its subsidiaries, each of FNB and its subsidiaries has all Permits of any federal, state, local or foreign governmental or regulatory body that are material to or necessary for the conduct of its respective business or to
own, lease and operate its respective properties. Except as would not have a Material Adverse Effect on FNB and its subsidiaries, all such Permits are in full force and effect and no violations are or have been recorded in respect of any such
Permits. No proceeding is pending or, to the best knowledge and belief of management of FNB, threatened or probable of assertion to suspend, cancel, revoke or limit any Permit. 
  
 (c) Neither FNB nor any of its subsidiaries is subject to any supervisory agreement, enforcement order, writ,
injunction, capital directive, supervisory directive, memorandum of understanding or other similar agreement, order, directive, memorandum or consent of, with or issued by any regulatory or other governmental authority (including, without
limitation, the Federal Reserve Board, the FDIC or the OCC) relating to its financial condition, directors or officers, employees, operations, capital, regulatory compliance or otherwise; there are no judgments, orders, stipulations, injunctions,
decrees or awards against FNB or its subsidiaries which in any manner limits, restricts, regulates, enjoins or prohibits any present or past business or practice of FNB or its subsidiaries; and neither FNB nor any of its subsidiaries has been
advised or has any reason to believe that any regulatory or other governmental authority or any court is contemplating, threatening or requesting the issuance of any such agreement, order, injunction, directive, memorandum, judgment, stipulation,
decree or award. 
  
 (d) Neither FNB nor any of its
subsidiaries is in violation or default under, and each has complied with, all laws, statutes, ordinances, rules, regulations, orders, writs, injunctions or decrees of any court or federal, state, municipal or other governmental or regulatory
authority having jurisdiction or authority over it or its business operations, properties or assets (including without limitation all provisions of North Carolina law relating to usury, the Consumer Credit Protection Act, and all other laws and
regulations applicable to extensions of credit) except for any such violation, default or noncompliance as does not or would not have a Material Adverse Effect on FNB and its subsidiaries, and, to the best knowledge and belief of management of FNB,
there is no basis for any claim by any person or authority for compensation, reimbursement or damages or otherwise for any violation of any of the foregoing. 
  
 3.13 Absence of Brokerage or Finders’ Commissions. All negotiations relative to this Agreement and the transactions described herein
have been carried on by FNB or its representative, Keefe, Bruyette & Woods, Inc. (“KBW”) directly with United or its representatives and no person or firm other than KBW has been retained by or has acted on 
  

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 behalf of, pursuant to any agreement, arrangement or understanding with, or under the authority of, FNB or its Board of
Directors, as a broker, finder or agent or has performed similar functions or otherwise is or may be entitled to receive or claim a brokerage fee or other commission in connection with or as a result of the transactions described herein. 

 
 3.14 Obstacles to Regulatory Approval or Tax Treatment. To
the best of the knowledge and belief of the management of FNB, no fact or condition relating to FNB exists that may reasonably be expected to (i) prevent, impede or delay FNB or United from obtaining the regulatory approvals required in order to
consummate transactions described herein, or (ii) prevent the Merger from qualifying to be a tax-free reorganization under Section 368(a)(1)(A) of the Code; and, if any such fact or condition becomes known to the executive officers of FNB, FNB
promptly (and in any event within three days after obtaining such knowledge) shall communicate such fact or condition to the President of United. 
  
 3.15 Loans, Accounts, Notes and Other Receivables. 
  

(a) All loans, accounts, notes and other receivables reflected as assets on the books and records of FNB and its subsidiaries (i) have resulted
from bona fide business transactions in the ordinary course of operations of FNB and its subsidiaries, (ii) were made in accordance with the standard loan policies and procedures of FNB and its subsidiaries, and (iii) except as Previously Disclosed,
are owned by FNB or a subsidiary free and clear of all liens, encumbrances, assignments, participation or repurchase agreements or other exceptions to title or to the ownership or collection rights of any other person or entity. 
  
 (b) All of the records of FNB and its subsidiaries regarding all
outstanding loans, accounts, notes and other receivables, and all other real estate owned, are accurate in all material respects, and, with respect to such loans the loan documentation of which indicate are secured by any Loan Collateral, such loans
are in all material respects secured by valid, perfected and enforceable liens on all such Loan Collateral having the priority described in the records of such loan. 
  
 (c) To the best knowledge and belief of management of FNB, each loan reflected as an asset on the books of FNB and
its subsidiaries and each guaranty therefor, is the legal, valid and binding obligation of the obligor or guarantor thereon, and no defense, offset or counterclaim has been asserted with respect to any such loan or guaranty. 
  
 3.16 Securities Portfolio and Investments. Except as Previously
Disclosed, all securities owned by FNB or any subsidiary (whether owned of record or beneficially) are held free and clear of all mortgages, liens, pledges, encumbrances or any other restriction or rights of any other person or entity, whether
contractual or statutory, which would materially impair the ability of FNB or any subsidiary to dispose freely of any such security or otherwise to realize the benefits of ownership thereof at any time. There are no voting trusts or other agreements
or undertakings to which FNB or any subsidiary is a party with respect to the voting of any such securities. With respect to all “repurchase agreements” to which FNB or any subsidiary has “purchased” securities under agreement to
resell, FNB or any subsidiary has a valid, perfected first lien or security interest in the government securities or other collateral securing the repurchase agreement, and the value of the collateral securing each such repurchase agreement

  

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 equals or exceeds the amount of the debt owed that is secured by such collateral. Except for fluctuations in the market
values of its investment securities, since December 31, 2004, there has been no significant deterioration or material adverse change in the quality, or any material decrease in the value, of FNB’s securities portfolio as a whole. 
  
 3.17 Disclosure. To the best of the knowledge and belief of
FNB, no written statement, certificate, schedule, list or written information furnished by or on behalf of FNB at any time to United in connection with this Agreement (including, without limitation, the statements contained herein), when considered
as a whole, contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not
misleading. Each document delivered or to be delivered by FNB to United is or will be a true and complete copy of such document, unmodified except by another document delivered by FNB. 
  
 ARTICLE IV. COVENANTS OF UNITED 
  
 4.1 Affirmative Covenants of United. United hereby covenants and agrees as follows with FNB: 
  
 (a) “Affiliates” of United. United will use its best
efforts to cause each Affiliate disclosed to FNB (in addition to each additional person who shall become an Affiliate of United after the date of this Agreement or who shall be deemed by FNB or its counsel, in their sole discretion, to be an
Affiliate of United, and including persons, trusts, estates, corporations or other entities related to persons deemed to be Affiliates of United) to execute and deliver to FNB prior to the Closing a written agreement (the “Affiliates’
Agreement”) relating to restrictions on shares of FNB Stock to be received by such Affiliates pursuant to this Agreement, which Affiliates’ Agreement shall be in form and content reasonably satisfactory to FNB. Certificates for the shares
of FNB Stock issued to Affiliates of United shall bear a restrictive legend (substantially in the form as shall be set forth in the Affiliates’ Agreement) with respect to the restrictions applicable to such shares. 
  
 (b) Conduct of Business Prior to Effective Time. Between the
date of this Agreement and the Effective Time, except as otherwise agreed by FNB in writing, United will, and will cause each of its subsidiaries to, carry on its business in and only in the regular and usual course in substantially the same manner
as such business heretofore was conducted, and will, and where applicable will cause each of its subsidiaries to: 
  
 (i) make all reasonable efforts to preserve intact its present business organization, keep available their present officers and
employees, and preserve its relationships with customers, depositors, creditors, correspondents, suppliers, and others having business relationships with them; 
  

(ii) maintain all of its properties and equipment used in its business in customary repair, order and condition, ordinary wear
and tear excepted; 
  
 (iii) maintain its
books of account and records in the usual, regular and ordinary manner in accordance with sound business practices applied on a consistent basis except to the extent otherwise reasonably required by applicable laws or regulations or GAAP;

  

 31 

 (iv) comply in all material respects with all laws, rules and regulations
applicable to it, its properties, assets or employees and to the conduct of its business; 
  
 (v) not change its existing loan underwriting guidelines, policies or procedures except as may be required by law; 
  
 (vi) continue to maintain in force insurance such as
is described in Section 2.24 above; not modify any bonds or policies of insurance in effect as of the date hereof unless the same, as modified, provides substantially equivalent coverage; and, not cancel, allow to be terminated or, to the extent
available, fail to renew, any such bond or policy of insurance unless the same is replaced with a bond or policy providing substantially equivalent coverage; and 
  
 (vii) promptly provide to FNB such information about its financial condition, results of operations,
prospects, businesses, assets, loan portfolio, investments, properties or operations as FNB reasonably shall request. 
  
 (c) Loans. United will request in writing and obtain FNB’s prior approval for each new extension of credit (including the issuance of
unfunded commitments) or modification of existing credit that it or Alamance Bank proposes to make within the following categories: (i) loan participations, (ii) loans for real estate acquisition and development purposes, (iii) non-residential
construction loans exceeding $300,000 in principal amount, (iv) revolving lines of credit to residential builders, (v) loans to borrowers domiciled, or loans secured by real estate located, outside of Alamance and Orange Counties, North Carolina,
(vi) loans to Insiders, as defined in Regulation O of the Federal Reserve Board and (vii) standby letters of credit exceeding $25,000 in amount; provided, however, that if FNB does not object to a written request for approval within two business
days after receipt, the request shall be deemed approved. Neither United nor any subsidiary will enter into any form of indirect lending. Additionally, United will make available and provide to FNB the following information with respect to its and
Alamance Bank’s loans and other extensions of credit (such assets herein referred to as “Loans”) as of March 31, 2005 and as of the end of each month thereafter until the Effective Time, such information for each month to be in form
and substance as is usual and customary in the conduct of its business and to be furnished within 25 days of the end of each month ending after the date hereof, except as otherwise provided: 
  
 (i) a list of Loans past due for 30 days or more as
to principal or interest; 
  
 (ii) an
analysis of the Loan Loss Reserve and management’s assessment of the adequacy of the Loan Loss Reserve, which analysis and assessment shall include a list of all classified or “watch list” Loans, along with the outstanding balance and
amount specifically allocated to the Loan Loss Reserve for each such classified or “watch list” Loan; 
  

 32 

 (iii) a list of Loans in nonaccrual status; 
  
 (iv) a list of all Loans over $50,000 without
principal reduction for a period of longer than one year; 
  
 (v) a list of all foreclosed real property or other real estate owned and all repossessed personal property; 
  
 (vi) a list of reworked or restructured Loans over $50,000 and still outstanding, including original terms, restructured terms and
status; 
  
 (vii) a list of all Loans with
interest capitalized; and 
  
 (viii) a
list of any actual or threatened litigation by or against United or Alamance Bank pertaining to any Loans or credits, together with the pleadings and other filed documents related thereto. 
  
 (d) Notice of Certain Changes or Events. Following the
execution of this Agreement and up to the Effective Time, United promptly will notify FNB in writing of and provide to it such information as it shall request regarding (i) any material adverse change in its consolidated financial condition,
consolidated results of operations, prospects, business, assets, loan portfolio, investments, properties or operations, or of the actual or prospective occurrence of any condition or event which, with the lapse of time or otherwise, may or could
cause, create or result in any such material adverse change, or of (ii) the actual or prospective existence or occurrence of any condition or event which, with the lapse of time or otherwise, has caused or may or could cause any statement,
representation or warranty of United herein to be or become inaccurate, misleading or incomplete, or which has resulted or may or could cause, create or result in the breach or violation of any of United’s covenants or agreements contained
herein or in the failure of any of the conditions described in Sections 7.1 or 7.3 below. 
  
 (e) Consents to Assignment of Contracts and Leases. United will use its best efforts to obtain all required consents to the assignment to FNB of United’s or Alamance Bank’s rights and
obligations under any contracts or personal or real property leases, each of which consents shall be in such form as shall be specified by FNB. 
  
 (f) Qualified Plans. United shall take all appropriate action as shall be necessary to maintain the Alamance Bank Savings Plan (the
“United 401(k) Plan”) as a qualified plan for purposes of ERISA. United acknowledges that FNB intends that the United 40l(k) Plan will be merged into FNB’s Section 401(k) Savings Plan (the “FNB 401(k) Plan”) as soon as
practicable after the Effective Time. United shall take all such actions with respect to such plan as shall be necessary to accomplish such intent and, until the Effective Time, will not take any other extraordinary actions with respects to such
plan without the written consent of FNB. 
  
 (g) Deferred
Compensation Arrangements. United shall take all appropriate action as shall be necessary to cause the Previously Disclosed deferred compensation arrangements presently in effect for United’s directors to be frozen as of, and no longer
be available for the deferral of compensation or matching contributions after, June 30, 2005. All director fees payable for the period after June 30, 2005 and prior to the Effective Time shall be paid in cash and not deferred. 
  

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 (h) Further Action; Instruments of Transfer. United shall (i) use its best efforts in good
faith to take or cause to be taken all action required of it hereunder as promptly as practicable so as to permit the expeditious consummation of the transactions described herein, (ii) perform all acts and execute and deliver to FNB all documents
or instruments required herein or as otherwise shall be reasonably necessary or useful to or requested of United in consummating such transactions and (iii) cooperate with FNB fully in carrying out, and will pursue diligently the expeditious
completion of, such transactions. 
  
 4.2 Negative Covenants
of United. Between the date hereof and the Effective Time, neither United nor, if applicable, any of its subsidiaries, will do any of the following things or take any of the following actions without the prior written consent and
authorization of the President of FNB: 
  
 (a) Amendments
to Articles of Incorporation or Bylaws. Amend its Articles of Incorporation or bylaws. 
  
 (b) Change in Capital Stock. Make any change in its authorized capital stock, or create any other or additional authorized capital stock or other securities, or issue (except pursuant to the exercise of
options heretofore granted and outstanding under the United Option Plan), sell, purchase, redeem, retire, reclassify, combine or split any shares of its capital stock or other securities (including securities convertible into capital stock), or
enter into any agreement or understanding with respect to any such action. 
  
 (c) Options, Warrants and Rights. Grant or issue any options, warrants, calls, puts or other rights of any kind relating to the purchase, redemption or conversion of shares of its capital stock or any
other securities (including securities convertible into capital stock) or enter into any agreement or understanding with respect to any such action. 
  
 (d) Dividends. Declare or pay any dividends on the outstanding shares of capital stock or make any other distributions on or in respect of
any shares of its capital stock or otherwise to its shareholders. 
  
 (e) Employment, Benefit or Retirement Agreements or Plans. Except as required by law, contemplated by this Agreement or Previously Disclosed, (i) enter into, become bound by, renew or extend any oral or written contract,
agreement or commitment for the employment or compensation of any director, officer, employee or consultant which is not immediately terminable by United or any subsidiary without cost or other liability on no more than 30 days’ notice; (ii)
amend any existing, or adopt, enter into or become bound by any new or additional, profit-sharing, bonus, incentive, change in control or “golden parachute,” stock option, stock purchase, pension, retirement, insurance (hospitalization,
life or other), paid leave (sick leave, vacation leave or other) or similar contract, agreement, commitment, understanding, plan or arrangement (whether formal or informal) with respect to or which provides for benefits for any of its current or
former directors, officers, employees or consultants; (iii) grant or amend any existing options under the United Option Plan; (iv) make contributions to the United 401(k) 
  

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 Plan other than basic and matching contributions in accordance with the terms of the United 401(k) Plan as Previously
Disclosed; or (v) enter into or become bound by any contract with or commitment to any labor or trade union or association or any collective bargaining group. 
  

(f) Increase in Compensation. With the exception of the anticipated increases in annual salary and annual officer and employee bonuses
Previously Disclosed to FNB, increase the compensation or benefits of, or pay any bonus or other special or additional compensation to, any of its directors, officers, employees or consultants. 
  
 (g) Accounting Practices. Make any changes in its accounting
methods, practices or procedures or in depreciation or amortization policies, schedules or rates heretofore applied (except as required by GAAP or governmental regulations). 
  
 (h) Acquisitions; Additional Branch Offices. Directly or indirectly (i) acquire or merge with, or acquire any
branch or all or any significant part of the assets of, any other person or entity, (ii) open any new branch office, or (iii) enter into or become bound by any contract, agreement, commitment or letter of intent relating to, or otherwise take or
agree to take any action in furtherance of, any such transaction or the opening of a new branch office. 
  
 (i) Changes in Business Practices. Except as may be required by the FDIC, the Commissioner or any other governmental or other regulatory
agency or as shall be required by applicable law, regulation or this Agreement, (i) change in any material respect the nature of its business or the manner in which it conducts its business, (ii) discontinue any material portion or line of its
business or (iii) change in any material respect its lending, investment, asset-liability management or other material banking or business policies (except to the extent required by Section 4.1(b) above and Section 6.9 below). 
  
 (j) Investment Securities. (i) Acquire, other than by way of
foreclosure or acquisition in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the ordinary course of business consistent with past practice any debt security or Equity Investment (as
hereinafter defined) other than federal funds or United States Government securities or United States Government agency securities, in each case with a term of one year or less, (ii) restructure or materially change its investment securities
portfolio or its gap position, or (iii) enter into any Derivatives Contract (as hereinafter defined); provided, however, that, if FNB does not object to a written request for approval within two business days after receipt, the request shall be
deemed approved. “Equity Investment” means (i) any stock (other than adjustable-rate preferred stock, money market (auction rate) preferred stock or other instrument determined by the OCC to have the character of debt securities),
certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, or voting-trust certificate; any security convertible into
such a security; any security carrying any warrant or right to subscribe to or purchase any such security and any certificate of interest or participation in, temporary or interim certificate for or receipt for any of the foregoing, (ii) any
ownership interest in any company or other entity, any membership interest that includes a voting right in any company or other entity or any interest in real estate or (iii) any investment or transaction which in substance falls into any of these
categories even though it may be structured as some other form of investment or transaction. “Derivatives Contract” means any exchange traded or over-the- 
  

 35 

 counter equity, interest rate, foreign exchange or other swap, forward, future, option, cap, floor or collar or any other
contract that is a derivatives contract, including any combination of the foregoing. 
  
 (k) Acquisition or Disposition of Assets. 
  
 (i) Except in the ordinary course of business consistent with its past practices, sell or lease (as lessor), or enter into or
become bound by any contract, agreement, option or commitment relating to the sale, lease (as lessor) or other disposition of any real estate; or sell or lease (as lessor), or enter into or become bound by any contract, agreement, option or
commitment relating to the sale, lease (as lessor) or other disposition of any equipment or any other fixed or capital asset (other than real estate) having a book value or a fair market value, whichever is greater, of more than $25,000 for any
individual item or asset, or more than $50,000 in the aggregate for all such items or assets; 
  
 (ii) Except in the ordinary course of business consistent with past practices, purchase or lease (as lessee), or enter into or
become bound by any contract, agreement, option or commitment relating to the purchase, lease (as lessee) or other acquisition of any real property; or purchase or lease (as lessee), or enter into or become bound by any contract, agreement, option
or commitment relating to the purchase, lease (as lessee) or other acquisition of any equipment or any other fixed assets (other than real estate) having a purchase price, or involving aggregate lease payments, in excess of $25,000 for any
individual item or asset, or more than $50,000 in the aggregate for all such items or assets; 
  
 (iii) Enter into any purchase commitment for supplies or services which calls for prices of goods or fees for services materially
higher than current market prices or fees or which obligates United or any subsidiary for a period longer than six months; 
  
 (iv) Except in the ordinary course of its business consistent with its past practices, sell, purchase or repurchase, or enter into
or become bound by any contract, agreement, option or commitment to sell, purchase or repurchase, any loan or other receivable or any participation in any loan or other receivable; or 
  
 (v) Sell or dispose of, or enter into or become bound by any contract, agreement, option or
commitment relating to the sale or other disposition of, any other asset (whether tangible or intangible, and including without limitation any trade name, trademark, copyright, service mark or intellectual property right or license) other than
assets that are obsolete or no longer used in United’s business; or assign its right to or otherwise give any other person its permission or consent to use or do business under the corporate name of United or any subsidiary or any name similar
thereto; or release, transfer or waive any license or right granted to it by any other person to use any trademark, trade name, copyright, service mark or intellectual property right. 
  

 36 

 (l) Debt; Liabilities. Except in the ordinary course of its business consistent with its
past practices, (i) enter into or become bound by any promissory note, loan agreement or other agreement or arrangement pertaining to its borrowing of money, (ii) assume, guarantee, endorse or otherwise become responsible or liable for any
obligation of any other person or entity, or (iii) incur any other liability or obligation (absolute or contingent). 
  
 (m) Liens; Encumbrances. Mortgage, pledge or subject any of its assets to, or permit any of its assets to become or (with the exception of
those liens and encumbrances Previously Disclosed to FNB with specificity) remain subject to, any lien or any other encumbrance (other than in the ordinary course of business consistent with its past practices in connection with borrowings from the
Federal Home Loan Bank of Atlanta, securing of public funds deposits, repurchase agreements or other similar operating matters). 
  
 (n) Waiver of Rights. Waive, release or compromise any material rights in its favor (except in the ordinary course of business) except in
good faith for fair value in money or money’s worth, nor waive, release or compromise any rights against or with respect to any of its officers, directors or shareholders or members of families of officers, directors or shareholders.

  
 (o) Other Contracts. Except as Previously
Disclosed, enter into or become bound by any contracts, agreements, commitments or understandings (other than those described elsewhere in this Section 4.2) (i) for or with respect to any charitable contributions in excess of $15,000; (ii) with any
governmental or regulatory agency or authority; (iii) pursuant to which United or any subsidiary would assume, guarantee, endorse or otherwise become liable for the debt, liability or obligation of any other person or entity; (iv) which is entered
into other than in the ordinary course of its business; or (v) which, in the case of any one contract, agreement, commitment or understanding and whether or not in the ordinary course of its business, would obligate or commit United or any
subsidiary to make expenditures of more than $25,000 (other than contracts, agreements, commitments or understandings entered into in the ordinary course of United’s or any subsidiary’s lending operations). 
  
 (p) Deposit Liabilities. Make any change in its current deposit
policies, including pricing and acceptance, and shall not take any actions designed to materially decrease the aggregate level of deposits as of the date of this Agreement. 
  
 4.3 Shareholder Approval. 
  
 (a) Meeting of Shareholders. United shall cause a meeting of its shareholders to be duly called and held as
soon as practicable for the purpose of voting on the approval and adoption of the Plan of Merger. In connection with the call and conduct of and all other matters relating to its shareholders’ meeting (including the solicitation of proxies),
United shall fully comply with all provisions of applicable federal and state law and regulations and with its Articles of Incorporation and bylaws. 
  
 (b) Recommendation of Board of Directors. Subject to the right of United and its Board of Directors to take any action permitted by Section
4.4(b) with respect to a Superior Proposal (as defined in Section 4.4(b)), United, through its Board of Directors, shall 
  

 37 

 recommend to the shareholders of United that they vote their shares at the shareholders’ meeting contemplated by
Section 4.3(a) above to approve the Plan of Merger (the “Approval Recommendation”) and the Proxy Statement/Prospectus (as defined in Section 6.1(b)) will so indicate and state that United’s Board of Directors considers the Merger to
be advisable and in the best interests of United and its shareholders. 
  
 4.4 Certain Actions. 
  
 (a) From
the date of this Agreement through the Effective Time, except as otherwise permitted by this Section 4.4, United shall not, and shall not authorize or permit any of its directors, officers, agents, employees, investment bankers, attorneys,
accountants, advisors, agents, affiliates or representatives (collectively, “Representatives”) to, directly or indirectly, (i) initiate, solicit, encourage or take any action to facilitate, including by way of furnishing information, any
Acquisition Proposal (as defined below) or any inquiries with respect to or the making of any Acquisition Proposal, (ii) enter into, continue or otherwise participate in any discussions or negotiations with, furnish any information relating to
United or any of its subsidiaries or afford access to the business, properties, assets, books or records of United or any of its subsidiaries to, otherwise cooperate in any way with, or knowingly assist, participate in, facilitate or encourage any
effort by any third party that is seeking to make, or has made, an Acquisition Proposal or (iii) except in accordance with Section 8.2(b)(vi), approve, endorse or recommend or enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to an Acquisition Proposal. 
  
 The term “Acquisition Proposal” means any inquiry, proposal or offer, filing of any regulatory application or notice, whether in draft or final form, or disclosure of an intention to do any of the foregoing
from any person relating to any (w) direct or indirect acquisition or purchase of a business that constitutes a substantial portion of the net revenues, net income or net assets of United or any of its subsidiaries, (x) the direct or indirect
acquisition or purchase of any class of equity securities representing 10% or more of the voting power of United’s common stock, (y) tender offer or exchange offer that if consummated would result in any person beneficially owning 10% or more
of any class of equity securities of United, or (z) merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving United other than the transactions contemplated by this Agreement.

  
 (b) Notwithstanding anything herein to the contrary,
United and its Board of Directors shall be permitted (i) to comply with Rule 14d-9 and Rule 14e-2 promulgated under the 1934 Act with regard to an Acquisition Proposal, provided that the Board of Directors of United shall not withdraw or modify in a
manner adverse to FNB its Approval Recommendation except as set forth in clause (iii) below; (ii) to engage in any discussions or negotiations with, or provide any information to, any person in response to a Superior Proposal (as defined below) by
any such person, if and only to the extent that (x) United’s Board of Directors concludes in good faith, after consultation with outside counsel, that failure to do so would breach its fiduciary duties to United’s shareholders under
applicable law, (y) prior to providing any information or data to any person in connection with a Superior Proposal by any such person, United’s Board of Directors receives from such person an executed confidentiality agreement, a copy of which
executed confidentiality agreement shall have been provided to FNB for informational purposes, and (z) at least 72 hours prior to providing any information or data to any person or entering into 
  

 38 

 discussions or negotiations with any person, United promptly notifies FNB in writing of the name of such person and the
material terms and conditions of any such Superior Proposal, and (iii) to withdraw, modify, qualify in a manner adverse to FNB, condition or refuse to make its Approval Recommendation (the “Change in Recommendation”) if United’s Board
of Directors concludes in good faith, after consultation with outside counsel and financial advisors, that failure to do so would breach its fiduciary duties to United’s shareholders under applicable law. 
  
 The term “Superior Proposal” means any bona fide, unsolicited
written Acquisition Proposal made by a third party to acquire more than 50% of the combined voting power of the shares of United Stock then outstanding or all or substantially all of United’s consolidated assets for consideration consisting of
cash or securities or both that is on terms that the Board of Directors of United in good faith concludes, after consultation with its financial advisors and outside counsel, taking into account, among other things, all legal, financial, regulatory
and other aspects of the proposal and the person making the proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, (A) is on terms that the Board of Directors of United in its good faith judgment
believes to be more favorable from a financial point of view to its shareholders than the Merger; (B) for which financing, to the extent required, is then fully committed or reasonably determined to be available by the Board of Directors of United,
and (C) is reasonably capable of being completed. 
  
 (c)
United will promptly, and in any event within 24 hours, notify FNB in writing of the receipt of any Acquisition Proposal or any information related thereto, which notification shall describe the Acquisition Proposal and identify the third party
making such proposal. 
  
 (d) United shall, and shall cause
its Representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations existing as of the date of this Agreement with any parties conducted heretofore with respect to any Acquisition Proposal. 
  
 (e) If a Payment Event (as hereinafter defined) occurs, United shall
pay to FNB by wire transfer of immediately available funds, within two business days following such Payment Event, a fee of $1,250,000 (the “Break-up Fee”). The term “Payment Event” means any of the following: 
  
 (i) the termination of this Agreement by FNB pursuant
to Section 8.2(a)(vi); 
  
 (ii) the
termination of this Agreement by United pursuant to Section 8.2(b)(vi); 
  
 (iii) a tender offer or exchange offer for 25% or more of the outstanding common stock of United is commenced and United shall not have sent to its shareholders, within 10 business days after the commencement
of such tender offer or exchange offer, a statement that the Board of Directors of United recommends rejection of such tender offer or exchange offer; or 
  
 (iv) the occurrence of any of the following events within eighteen months of the termination of this Agreement pursuant to Section
8.2(a)(iv) or 
  

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 8.2(b)(iv), provided that an Acquisition Proposal shall have been made by a Third Party after the date
hereof and prior to such termination that shall not have been withdrawn in good faith prior to such termination: (A) United enters into an agreement to merge with or into, or be acquired, directly or indirectly, by merger or otherwise by, such Third
Party; (B) such Third Party, directly or indirectly, acquires substantially all of the total assets of United and its subsidiaries, taken as a whole; (C) such Third Party, directly or indirectly, acquires more than 50% of the outstanding United
Stock or (D) United adopts or implements a plan of liquidation, recapitalization or share repurchase relating to more than 50% of the outstanding United Stock or an extraordinary dividend relating to substantially all of the outstanding United Stock
or substantially all of the assets of United and its subsidiaries, taken as a whole. As used herein, “Third Party” means any person as defined in Section 13(d) of the 1934 Act other than FNB or its affiliates. 
  
 United acknowledges that the agreements contained in this Section 4.4 are an integral part of
the transactions contemplated in this Agreement and that without these agreements FNB would not enter into this Agreement. Accordingly, in the event United fails to pay to FNB the Break-up Fee, promptly when due, United shall, in addition thereto,
pay to FNB all costs and expenses, including attorneys’ fees and disbursements, incurred in collecting such Break-up Fee together with interest on the amount of the Break-up Fee or any unpaid portion thereof, from the date such payment was due
until the date such payment is received by FNB, accrued at the fluctuating prime rate as quoted in The Wall Street Journal as in effect from time to time during the period. 
  
 ARTICLE V. COVENANTS OF FNB 
  

FNB hereby covenants and agrees as follows with United: 
  
 5.1 NASDAQ Notification. Prior to the Effective Time, FNB shall file with the National Association of Securities Dealers such notifications
and other materials (and shall pay such fees) as shall be required for the listing on Nasdaq of the shares of FNB Stock to be issued to United’s shareholders pursuant to the Merger. 
  
 5.2 Employment. After the Effective Time, FNB may, but shall be under no obligation to, retain the employees
of United and its subsidiaries other than those employees who are employed by United or any subsidiary pursuant to a written employment agreement that is Previously Disclosed to FNB. Any such person retained shall be an employee of FNB on an
“at-will” basis, and nothing in this Agreement shall be deemed to constitute an employment agreement with any such person or to obligate FNB to employ any such person for any specific period of time or in any specific position or location
or to restrict FNB’s right to change the rate of compensation or terminate the employment of any such person at any time and for any reason. 
  
 5.3 Employee Benefits. 
  
 (a) Generally. Except as otherwise provided herein and to the extent permitted by contribution and deduction limitations of ERISA and the
Code with respect to FNB’s qualified plans, any employee of United or its subsidiaries who continues employment 
  

 40 

 with FNB, United or its subsidiaries at the Effective Time (a “New Employee”) shall become entitled to receive
all employee benefits and to participate in all benefit plans provided by FNB or First National on the same basis and subject to the same eligibility and vesting requirements, and to the same conditions, restrictions and limitations, as generally
are in effect and applicable to other newly hired employees of FNB or First National. However, each New Employee shall be given credit for his or her full years of service with United or its subsidiaries for purposes of (i) entitlement to vacation
and sick leave and for participation in all FNB or First National welfare, insurance and other fringe benefit plans, and (ii) eligibility for participation and vesting in the FNB 401(k) Plan and in FNB’s defined benefit pension plan (the
“FNB Pension Plan”). Notwithstanding any provision herein to the contrary, FNB will not be required to take any action that could adversely affect the continuing qualification of the FNB 40l(k) Plan or the FNB Pension Plan. FNB will grant
to each New Employee a pro rata amount of sick leave and vacation leave, in accordance with FNB standard leave policies, for the period between the Effective Time and the end of the calendar year during which the Effective Time occurs. Each New
Employee will be permitted to carry over accrued and unused sick leave and vacation leave earned at Alamance Bank but shall thereafter be subject to FNB’s leave policies. 
  
 (b) Health Insurance. Each New Employee shall be entitled to participate in First National’s group health
insurance plan at a cost equal to the cost for any First National employee and such participation shall be without regard to pre-existing condition requirements under First National’s group health insurance plan, to the extent any such
condition at the Effective Time would have been covered under the health insurance plans of United. 
  
 5.4 United Directors. 
  
 (a) Representation on FNB Board. FNB shall appoint two persons nominated by United and approved by FNB at the Effective Time to serve as
directors of FNB until the next annual meeting of shareholders at which directors of FNB are elected and shall take such actions as shall be required to increase the number of members of its Board of Directors as may be necessary to permit such
nominees to serve as directors. FNB’s Board shall nominate such persons for election at annual meetings of FNB shareholders such that those two nominees of United, if elected by FNB’s shareholders, would be able to serve as directors of
FNB for terms of no less than one year and two years, respectively, after the Effective Time. 
  
 (b) Advisory Board. Each of the members of United’s Board of Directors (other than those appointed as members of the FNB Board of Directors pursuant to Section 5.4(a) above) at the Effective Time
shall be appointed to serve as a member of FNB’s local advisory board in Alamance and Orange counties, North Carolina after the Effective Time notwithstanding any mandatory retirement policy of FNB for its directors generally. Each person so
appointed shall diligently discharge his or her duties as an advisory board member and promote in good faith FNB’s best interests. Each such person’s service as an advisory director will be at FNB’s pleasure and will be subject to
FNB’s normal policies and procedures regarding the appointment and service of directors to the boards of its subsidiaries. 
  
 (c) Deferred Compensation. FNB shall assume the obligations of United under Previously Disclosed deferred compensation arrangements
presently in effect for United’s directors; provided, however, that such arrangements shall be frozen as of June 30, 2005 as provided in Section 4.1(g). 
  

 41 

 5.5 Indemnification of Directors and Officers. 
  
 (a) After the Effective Time, without releasing any insurance carrier
and after exhaustion of all applicable director and liability insurance coverage for United and its directors and officers, FNB shall indemnify, hold harmless and defend the directors and officers of United in office on the date hereof or the
Effective Time, to the same extent as it indemnifies its own directors and officers, from and against any and all claims, disputes, demands, causes of action, suits, proceedings, losses, damages, liabilities, obligations, costs and expenses of every
kind and nature including, without limitation, reasonable attorneys’ fees and legal costs and expenses therewith whether known or unknown and whether now existing or hereafter arising which may be threatened against, incurred, undertaken,
received or paid by such persons in connection with or which arise out of or result from or are based upon any action or failure to act by such person in the ordinary scope of his duties as a director or officer of United (including service as a
director or officer of any United subsidiary or fiduciary of any of the United Plans (as defined in Section 2.23(a)) through the Effective Time; provided, however, that FNB shall not be obligated to indemnify such person for (i) any act not
available for statutory or permissible indemnification under North Carolina law, (ii) any penalty, decree, order, finding or other action imposed or taken by any regulatory authority, (iii) any violation or alleged violation of federal or state
securities laws to the extent that indemnification is prohibited by law, or (iv) any claim of sexual or other unlawful harassment, or any form of employment discrimination prohibited by federal or state law; further, provided, however, that (A) FNB
shall have the right to assume the defense thereof and upon such assumption FNB shall not be liable to any director or officer of United for any legal expenses of other counsel or any other expenses subsequently incurred by such director or officer
in connection with the defense thereof, except that if FNB elects not to assume such defense or counsel for such director or officer reasonably advises such director or officer that there are issues which raise conflicts of interest between FNB and
such director or officer, such director or officer may retain counsel reasonably satisfactory to him, and FNB shall pay the reasonable fees and expenses of such counsel, (B) FNB shall not be liable for any settlement effected without its prior
written consent, and (C) FNB shall have no obligation hereunder to any director or officer of United when and if a court of competent jurisdiction shall determine that indemnification of such director or officer in the manner contemplated hereby is
prohibited by applicable law. The indemnification provided herein shall be in addition to any indemnification rights an indemnitee may have by law, pursuant to the charter or bylaws of United or any of its subsidiaries or pursuant to any Plan for
which the indemnity serves as a fiduciary. 
  
 (b) From and
after the Effective Time, FNB will directly or indirectly cause the persons who served as directors or officers of United at the Effective Time to be covered by United’s existing directors’ and officers’ liability insurance policy
(provided that FNB may substitute therefor policies of at least the same coverage in amounts contained and terms and conditions which are not less advantageous than such policy). Such insurance coverage shall commence at the Effective Time and will
be provided for a period of no less than three years after the Effective Time. 
  

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 (c) The indemnification provided by this Section 5.5 is the sole indemnification provided by FNB
to the directors and officers of United for service in such positions up to and through the Effective Time. This Section 5.5 is intended to create personal rights in the directors and officers of United, who shall be deemed to be third-party
beneficiaries hereof. Notwithstanding any other provision of this Agreement, at the Effective Time, the indemnification rights provided herein shall not be extinguished but shall instead survive for a period of three years after the Effective Time.

  
 5.6 Notice of Certain Changes or Events.
Following the execution of this Agreement and up to the Effective Time, FNB promptly will notify United in writing of and provide to it such information as it shall request regarding (i) any material adverse change in its consolidated financial
condition, consolidated results of operations, prospects, business, assets, loan portfolio, investments, properties or operations, or of the actual or prospective occurrence of any condition or event which, with the lapse of time or otherwise, may
or could cause, create or result in any such material adverse change, or (ii) the actual or prospective existence or occurrence of any condition or event which, with the lapse of time or otherwise, has caused or may or could cause any statement,
representation or warranty of FNB herein to be or become inaccurate, misleading or incomplete, or which has resulted or may or could cause, create or result in the breach or violation of any of FNB’s covenants or agreements contained herein or
in the failure of any of the conditions described in Sections 7.1 or 7.2 below. 
  
 5.7 Further Action; Instruments of Transfer. FNB shall (i) use its best efforts in good faith to take or cause to be taken all action required of it hereunder as promptly as practicable so as to permit
the expeditious consummation of the transactions described herein, (ii) perform all acts and execute and deliver to United all documents or instruments required herein or as otherwise shall be reasonably necessary or useful to or requested of FNB in
consummating such transactions and (iii) cooperate with United fully in carrying out, and will pursue diligently the expeditious completion of, such transactions. 
  
 ARTICLE VI. MUTUAL AGREEMENTS 
  

6.1 Registration Statement; Proxy Statement/Prospectus. 
  
 (a) Registration Statement and “Blue Sky” Approvals. As soon as practicable following the execution
of this Agreement and after the furnishing by United of all information required to be contained therein, FNB shall prepare and file with the SEC under the 1933 Act a registration statement on Form S-4 (or on such other form as FNB shall determine
to be appropriate) (the “Registration Statement”) covering the FNB Stock to be issued to shareholders of United pursuant to this Agreement. Additionally, FNB shall take all such other actions, if any, as shall be required by applicable
state securities or “blue sky” laws (i) to cause the FNB Stock to be issued upon consummation of the Merger, and at the time of the issuance thereof, to be duly qualified or registered (unless exempt) under such laws, (ii) to cause all
conditions to any exemptions from qualification or registration under such laws to have been satisfied, and (iii) to obtain any and all required approvals or consents to the issuance of such stock. FNB shall deliver to United and its counsel a
preliminary draft of the Registration Statement and the Proxy Statement/Prospectus as soon as practicable after the date of this Agreement. 
  

 43 

 (b) Preparation and Distribution of Proxy Statement/Prospectus. FNB and United jointly
shall prepare a “Proxy Statement/Prospectus” for distribution to the shareholders of United as the proxy statement relating to solicitation of proxies for use at the shareholders’ meeting contemplated in Section 4.3(a) above and as
FNB’s prospectus relating to the offer and distribution of FNB Stock as described herein. The Proxy Statement/Prospectus shall be in such form and shall contain or be accompanied by such information regarding the shareholders’ meeting,
this Agreement, the parties hereto, the Merger and other transactions described herein as is required by applicable law and regulations and otherwise as shall be agreed upon by FNB and United. FNB shall include the Proxy Statement/Prospectus as the
prospectus in its “Registration Statement” described above; and FNB and United shall cooperate with each other in good faith and shall use their best efforts to cause the Proxy Statement/Prospectus to comply with any comments of the SEC.
United shall mail the Proxy Statement/Prospectus to its shareholders prior to the scheduled date of its shareholders’ meeting; provided, however, that no such materials shall be mailed to United’s shareholders unless and until FNB shall
have determined to its own satisfaction that the conditions specified in Sections 7.1(b) and (c) below have been satisfied and shall have approved such mailing. 
  

(c) Information for Proxy Statement/Prospectus and Registration Statement. Each of FNB and United shall promptly respond, and use its
best efforts to cause its directors, officers, accountants and affiliates to promptly respond, to requests by the other party and its counsel for information for inclusion in the various applications for regulatory approvals and in the Proxy
Statement/Prospectus. Each of FNB and United hereby covenants with the other that none of the information provided by it for inclusion in the Proxy Statement/Prospectus will, at the time of its mailing, contain any untrue statement of a material
fact or omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; and, at all times following such mailing up to and
including the Effective Time, none of such information contained in the Proxy Statement/Prospectus, as it may be amended or supplemented, will contain any untrue statement of a material fact or omit any material fact required to be stated therein or
necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. 
  
 6.2 Regulatory Approvals. Within 75 days after the date of this Agreement, each of FNB and United shall prepare and file, or cause to be
prepared and filed, all applications for regulatory approvals and actions as may be required of it, by applicable law and regulations with respect to the transactions described herein (including applications to the Federal Reserve Board, the
Commissioner and to any other applicable federal or state banking, securities or other regulatory authority). Each party shall use its best efforts in good faith to obtain all necessary regulatory approvals required for consummation of the
transactions described herein. Each party shall cooperate with the other party in the preparation of all applications to regulatory authorities and, upon request, promptly shall furnish all documents, information, financial statements or other
material that may be required by any other party to complete any such application; and, before the filing therefor, each party to this Agreement shall have the right to review and comment on the form and content of any such application to be filed
by any other party. Should the appearance of any of the officers, directors, employees or counsel of any of the parties hereto be requested by any other party or by any governmental agency at any hearing in connection with any such application, such
party shall promptly use its best efforts to arrange for such appearance. 
  

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 6.3 Access. Following the date of this Agreement and to and including the Effective Time,
United and FNB shall each provide the other party and such other party’s employees, accountants, counsel or other representatives, access to all its books, records, files and other information (whether maintained electronically or otherwise),
to all its properties and facilities, and to all its employees, accountants, counsel and consultants as United and FNB, as the case may be, shall, in its sole discretion, consider to be necessary or appropriate; provided, however, that any
investigation or reviews conducted by FNB or United shall be performed in such a manner as will not interfere unreasonably with the other party’s normal operations or with relationships with its customers or employees, and shall be conducted in
accordance with procedures established by the parties having due regard for the foregoing. 
  
 6.4 Costs. Subject to the provisions of Section 8.3(c) below, and whether or not this Agreement shall be terminated or the Merger shall be consummated, each of FNB and United shall pay its own legal,
accounting and financial advisory fees and all its other costs and expenses incurred or to be incurred in connection with the execution and performance of its obligations under this Agreement or otherwise in connection with this Agreement and the
transactions described herein (including, without limitation, all accounting fees, legal fees, filing fees, printing costs, mailing costs, travel expenses, and investment banking fees). 
  
 6.5 Announcements. No person other than the parties to this Agreement is authorized to make any public
announcements or statements about this Agreement or any of the transactions described herein, and, without the prior review and consent of the others (which consent shall not unreasonably be denied or delayed), no party hereto may make any public
announcement, statement or disclosure as to the terms and conditions of this Agreement or the transactions described herein, except for such disclosures as may be required incidental to obtaining the prior approval of any regulatory agency or
official to the consummation of the transactions described herein. However, notwithstanding anything contained herein to the contrary, prior review and consent shall not be required if in the good faith opinion of counsel to FNB or United any such
disclosure by FNB or United, as the case may be, is required by law or otherwise is prudent. 
  
 6.6 Confidentiality. FNB and United each shall treat as confidential and not disclose to any unauthorized person any documents or other information obtained from or learned about the other during the
course of the negotiation of this Agreement and the carrying out of the events and transactions described herein (including any information obtained during the course of any due diligence investigation or review provided for herein or otherwise) and
which documents or other information relates in any way to the business, operations, personnel, customers or financial condition of such other party; and that it will not use any such documents or other information for any purpose except for the
purposes for which such documents and information were provided to it and in furtherance of the transactions described herein. However, the above obligations of confidentiality shall not prohibit the disclosure of any such document or information by
any party to this Agreement to the extent (i) such document or information is then available generally to the public or is already known to the person or entity to whom disclosure is proposed to be made (other than through the previous actions of
such party in 
  

 45 

 violation of this Section 6.6), (ii) such document or information was available to the disclosing party on a
nonconfidential basis prior to the same being obtained pursuant to this Agreement, (iii) disclosure is required by subpoena or order of a court or regulatory authority of competent jurisdiction, or by the SEC or other regulatory authorities in
connection with the transactions described herein, or (iv) to the extent that, in the reasonable opinion of legal counsel to such party, disclosure otherwise is required by law. In the event this Agreement is terminated for any reason, then each of
the parties hereto immediately shall return to the other party all copies of any and all documents or other written materials or information (including computer generated and stored data) of or relating to such other party which were obtained from
them during the course of the negotiation of this Agreement and the carrying out of the events and transactions described herein (whether during the course of any due diligence investigation or review provided for herein or otherwise) and which
documents or other information relates in any way to the business, operations, personnel, customers or financial condition of such other party. The parties’ obligations of confidentiality under this Section 6.6 shall survive and remain in
effect following any termination of this Agreement. 
  
 6.7
Environmental Studies. At its option, FNB may cause to be conducted Phase I environmental assessments of the Real Property, the real estate subject to any Real Property Lease, or the Loan Collateral, or any portion thereof, together with
such other studies, testing and intrusive sampling and analyses as FNB shall deem necessary or desirable (collectively, the “Environmental Survey”); provided, however, that the Environmental Survey, as much as possible, shall be performed
in such a manner as will not interfere unreasonably with United’s normal operations, and provided further, however, that United shall use its best efforts to obtain any required consents of third parties to permit any Environmental Survey of
any Loan Collateral. FNB shall attempt in good faith to complete all such Phase I environmental assessments within 60 days following the date of this Agreement and thereafter to conduct and complete any such additional studies, testing, sampling and
analyses as promptly as practicable. Subject to the provisions of Section 8.3(c) below, the costs of the Environmental Survey shall be paid by FNB. If (i) the final results of any Environmental Survey (or any related analytical data) reflect that
there likely has been any discharge, disposal, release or emission by any person of any Hazardous Substance on, from or relating to any of the Real Property, real estate subject to a Real Property Lease or Loan Collateral at any time prior to the
Effective Time, or that any action has been taken or not taken, or a condition or event likely has occurred or exists, with respect to any of the Real Property, real estate subject to a Real Property Lease or Loan Collateral which constitutes or
would constitute a violation of any Environmental Laws, and if, (ii) based on the advice of its legal counsel or other consultants, FNB believes that United or, following the Merger, FNB, could become responsible for the remediation of such
discharge, disposal, release or emission or for other corrective action with respect to any such violation, or that United or, following the Merger, FNB, could become liable for monetary damages (including without limitation any civil or criminal
penalties or assessments) resulting therefrom (or that, in the case of any of the Loan Collateral, United or, following the Merger, FNB, could incur any such liability if it acquired title to such Loan Collateral), and if, (iii) based on the advice
of their legal counsel or other consultants, FNB reasonably believes the amount of expenses or liability which either of them could incur or for which either of them could become responsible or liable on account of any and all such remediation,
corrective action or monetary damages at any time or over any period of time could equal or exceed an aggregate of $250,000 over any period of time, then FNB shall give United prompt written notice thereof (together with all information in its

  

 46 

 possession relating thereto) and, at FNB’s sole option and discretion, at any time thereafter and up to the
Effective Time, it may terminate this Agreement without further obligation or liability to United or its shareholders. 
  
 6.8 Tax-Free Reorganization. FNB and United shall each use its best efforts to cause the Merger to qualify as a tax-free
“reorganization” within the meaning of Section 368(a)(1)(A) of the Code and shall not intentionally take any action that would cause the Merger to fail to so qualify. 
  
 6.9 Certain Modifications. FNB and United shall consult with each other with respect to their loan, litigation
and real estate valuation policies and practices (including loan classifications and levels of reserves) and United shall make such modifications or changes to its policies and practices, if any, prior to the Effective Time, as may be mutually
agreed upon. FNB and United also shall consult with each other with respect to the character, amount and timing of restructuring and Merger-related expense charges to be taken by each of them in connection with the transactions contemplated by this
Agreement and shall take such charges in accordance with GAAP as may be mutually agreed upon by them. The representations, warranties and covenants of each of FNB and United contained in this Agreement shall not be deemed to be inaccurate or
breached in any respect as a consequence of any modifications or charges undertaken by reason of this Section 6.9. 
  
 6.10 Transition Team. FNB and United shall create a transition team comprised of staff and representatives of United and staff and
representatives of FNB (the “Transition Team”). The purpose of the Transition Team shall be to provide detailed guidance to FNB in fulfilling and consummating the Merger, to maintain open lines of communication between United and FNB, and
to handle customer inquiries regarding the Merger. The Transition Team shall meet as necessary until the Effective Time. Members of the Transition Team shall receive no separate compensation for such service. 
  
 ARTICLE VII. CONDITIONS PRECEDENT TO MERGER 
  
 7.1 Conditions to all Parties’ Obligations.
Notwithstanding any other provision of this Agreement to the contrary, the obligations of each of the parties to this Agreement to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following
conditions precedent on or prior to the Closing Date: 
  
 (a)
Corporate Action. All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the Plan of Merger in consummation of the transactions contemplated hereby and thereby shall have been duly and
validly taken, including, without limitation, the approval of the shareholders of United of this Agreement and Plan of Merger. 
  
 (b) Registration Statement Effective. The Registration Statement (including any post-effective amendments thereto) shall be effective under
the 1933 Act, and no stop orders or proceedings shall be pending or, to the knowledge of FNB, threatened by the SEC to suspend the effectiveness of such Registration Statement. 
  

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 (c) “Blue Sky” Approvals. FNB shall have received all state securities or
“Blue Sky” permits or other authorizations, or confirmations as to the availability of exemptions from Blue Sky registration requirements as may be necessary, and no stop orders or proceedings shall be pending or, to the knowledge of FNB,
threatened by any state Blue Sky administration to suspend the effectiveness of any registration statement filed therewith with respect to the issuance of FNB Stock in the Merger. 
  
 (d) Regulatory Approvals. (i) The Merger and other transactions described herein shall have been approved, to
the extent required by law, by the Federal Reserve Board, the Commissioner, and by all other governmental or regulatory agencies or authorities having jurisdiction over such transactions, (ii) no governmental or regulatory agency or authority shall
have withdrawn its approval of such transactions or imposed any condition on such transactions or conditioned its approval thereof, which condition is reasonably deemed by FNB or United to be materially disadvantageous or burdensome or to so
adversely affect the economic or business benefits of this Agreement to FNB or United’s shareholders as to render it inadvisable for it to consummate the Merger; (iii) all applicable waiting periods following regulatory approvals shall have
expired without objection to the Merger by the Federal Reserve Board or other applicable regulatory authorities; and (iv) all other consents, approvals and permissions, and the satisfaction of all of the requirements prescribed by law or regulation,
necessary to the carrying out of the transactions contemplated herein shall have been procured. 
  
 (e) Adverse Proceedings, Injunction, Etc. There shall not be (i) any order, decree or injunction of any court or agency of competent
jurisdiction which enjoins or prohibits the Merger or any of the other transactions described herein or any of the parties hereto from consummating any such transaction, (ii) any pending or threatened investigation of the Merger or any of such other
transactions by the Federal Reserve Board, or any actual or threatened litigation under federal antitrust laws relating to the Merger or any other such transaction, (iii) any suit, action or proceeding by any person (including any governmental,
administrative or regulatory agency), pending or threatened before any court or governmental agency in which it is sought to restrain or prohibit United or FNB from consummating the Merger or carrying out any of the terms or provisions of this
Agreement, or (iv) any other suit, claim, action or proceeding pending or threatened against United or FNB or any of their respective officers or directors which shall reasonably be considered by United or FNB to be materially burdensome in relation
to the proposed Merger or materially adverse in relation to the financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of either such corporation, and which has not been
dismissed, terminated or resolved to the satisfaction of all parties hereto within 90 days of the institution or threat thereof. 
  
 (f) Tax Opinion. The parties shall have received an opinion of Schell Bray Aycock Abel & Livingston P.L.L.C. or another tax advisor in
form and substance satisfactory to FNB and United, substantially to the effect that, for federal income tax purposes: (i) consummation of the Merger will constitute a “reorganization” as defined in Section 368(a) of the Code; (ii) no gain
or loss will be recognized by FNB or United by reason of the Merger, (iii) the exchange or cancellation of shares of United Stock in the Merger will not give rise to recognition of gain or loss for federal income tax purposes to the shareholders of
United to the extent such shareholders receive FNB Stock in exchange for their shares of United Stock (except with respect to cash in lieu of fractional shares); (iv) the basis of the FNB Stock to be received 
  

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 by a shareholder of United will be the same as the basis of the United Stock surrendered in exchange therefor, decreased
by the amount of cash received, if any, and increased by the amount of dividend income or gain recognized, if any, as a result of the Merger; and (v) if United Stock is a capital asset in the hands of the shareholder at the Effective Time, the
holding period of the FNB Stock received by the shareholder in the Merger will include the holding period of United Stock surrendered in exchange therefor. In rendering its opinion, Schell Bray Aycock Abel & Livingston P.L.L.C. or such other tax
advisor will require and rely on representations by officers of FNB and United, and will be entitled to make reasonable assumptions. 
  
 (g) Nasdaq Listing. FNB shall have satisfied all requirements for the shares of FNB Stock to be issued to the shareholders of United and
holders of options issued under the United Option Plan in connection with the Merger to be listed on Nasdaq as of the Effective Time. 
  
 7.2 Additional Conditions to United’s Obligations. Notwithstanding any other provision of this Agreement to the contrary, United’s
separate obligation to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following conditions precedent on or prior to the Closing Date: 
  
 (a) Material Adverse Change. There shall not have been any
material adverse change in the consolidated financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of FNB and its consolidated subsidiaries considered as one enterprise and
there shall not have occurred any event or development and there shall not exist any condition or circumstance which, with the lapse of time or otherwise, may or could cause, create or result in any such material adverse change. 
  
 (b) Compliance with Laws. FNB shall have complied in all
material respects with all federal and state laws and regulations applicable to the transactions described herein and where the violation of or failure to comply with any such law or regulation could or may have a material adverse effect on the
consolidated financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of FNB and its consolidated subsidiaries considered as one enterprise. 
  
 (c) FNB’s Representations and Warranties and Performance of
Agreements; Officers’ Certificate. Unless waived in writing by United as provided in Section 10.2 below, (i) each of the representations and warranties of FNB contained in this Agreement shall have been true and correct as of the date
hereof and shall be true and correct on and as of the Effective Time with the same force and effect as though made on and as of such date, except (A) for changes which are not, in the aggregate, material and adverse to the consolidated financial
condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of FNB and its consolidated subsidiaries considered as one enterprise, and (B) for the effect of any activities or transactions
that may have taken place after the date of this Agreement and are expressly contemplated by this Agreement; and (ii) FNB shall have performed in all material respects all of its obligations, covenants and agreements hereunder to be performed by it
on or before the Closing Date. United shall have received a certificate dated as of the Closing Date and executed by the chief executive officer and chief financial officer of FNB to the foregoing effect and as to such other matters as may be
reasonably requested by United. 
  

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 (d) Legal Opinion of FNB’s Counsel. United shall have received from Schell Bray Aycock
Abel & Livingston P.L.L.C., counsel for FNB, a written opinion dated as of the Closing Date in form and substance customary for transactions of this nature and otherwise reasonably satisfactory to United and its counsel. 
  
 (e) Fairness Opinion. United shall have received from its
financial advisor, Carson Medlin, an opinion dated as of the date of this Agreement to United’s shareholders in connection with its shareholders’ meeting to the effect that the consideration to be received by United’s shareholders in
the Merger is fair, from a financial point of view, to United and its shareholders. 
  
 (f) Other Documents and Information from FNB. FNB shall have provided to United correct and complete copies of its Articles of Incorporation, bylaws and Board of Directors resolutions approving this
Agreement and the Merger (all certified by its Secretary), together with certificates of the incumbency of its officers and such other closing documents and information as may be reasonably requested by United or its counsel. 
  
 7.3 Additional Conditions to FNB’s Obligations.
Notwithstanding any other provision of this Agreement to the contrary, FNB’s obligations to consummate the transactions described herein shall be conditioned upon the satisfaction of each of the following conditions precedent on or prior to the
Closing Date: 
  
 (a) Material Adverse Change.
There shall not have occurred any material adverse change in the consolidated financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of United and its subsidiaries considered
as one enterprise and there shall not have occurred any event or development and there shall not exist any condition or circumstance which, with the lapse of time or otherwise, may or could cause, create or result in any such material adverse
change. 
  
 (b) Compliance with Laws. United shall
have complied in all material respects with all federal and state laws and regulations applicable to the transactions described herein and where the violation of or failure to comply with any such law or regulation could or may have a material
adverse effect on the consolidated financial condition, results of operations, prospects, businesses, assets, loan portfolio, investments, properties or operations of FNB or United. 
  
 (c) United’s Representations and Warranties and Performance of Agreements; Officers’ Certificate.
Unless waived in writing by FNB as provided in Section 10.2 below, (i) each of the representations and warranties of United contained in this Agreement shall have been true and correct as of the date hereof and shall be true and correct at and as of
the Effective Time with the same force and effect as though made on and as of such date, except (A) for changes which are not, in the aggregate, material and adverse to the consolidated financial condition, results of operations, prospects,
businesses, assets, loan portfolio, investments, properties or operations of United and its subsidiaries considered as one enterprise, and (B) for 
  

 50 

 the effect of any activities or transactions that may have taken place after the date of this Agreement and are expressly
contemplated by this Agreement, and (ii) United shall have performed in all material respects all its obligations, covenants and agreements hereunder to be performed by it on or before the Closing Date. FNB shall have received a certificate dated as
of the Closing Date and executed by the chief executive officer and chief financial officer of United to the foregoing effect and as to such other matters as may be reasonably requested by FNB. 
  
 (d) Legal Opinion of United’s Counsel. FNB shall have
received from Gaeta & Eveson, P.A. counsel to United, a written opinion, dated as of the Closing Date in form and substance customary for transactions of this nature and otherwise reasonably satisfactory to FNB and its counsel. 
  
 (e) Other Documents and Information from United. United shall
have provided to FNB correct and complete copies of United’s Articles of Incorporation, bylaws and Board and shareholder resolutions (all certified by United’s Secretary), together with certificates of the incumbency of United’s
officers and such other closing documents and information as may be reasonably requested by FNB or its counsel. 
  
 (f) Amendments to Benefit Plans. The Board of Directors of United shall have adopted and implemented, effective as of the Effective Time,
such amendments to the United Option Plan as may be necessary in accordance with the provisions of this Agreement and otherwise satisfactory to FNB. 
  
 (g) Consents to Assignment of Property Leases. United shall have obtained all required consents to the assignment to FNB of its rights and
obligations under any personal property lease and any Real Property Lease material to the business of United and its subsidiaries considered as one enterprise, and such consents shall be in such form and substance as shall be reasonably satisfactory
to FNB; and each of the lessors of United shall have confirmed in writing that United is not in default under the terms and conditions of any personal property lease or any Real Property Lease. 
  
 ARTICLE VIII. TERMINATION; BREACH; REMEDIES 
  
 8.1 Mutual Termination. At any time prior to the Effective Time
(and whether before or after approval hereof by the shareholders of United and FNB), this Agreement may be terminated by the mutual agreement of FNB and United. Upon any such mutual termination, all obligations of United and FNB hereunder shall
terminate and each party shall pay costs and expenses as provided in Section 6.4 above. 
  
 8.2 Unilateral Termination. This Agreement may be terminated by either FNB or United (whether before or after approval hereof by United’s or FNB’s shareholders) upon written notice to the other
parties and under the circumstances described below. 
  
 (a)
Termination by FNB. This Agreement may be terminated by FNB by action of its Board of Directors: 
  
 (i) if any of the conditions to the obligations of FNB (as set forth in Section 7.1 and 7.3 above) shall not have been satisfied or
effectively waived in 
  

 51 

 writing by FNB by January 31, 2006 (except to the extent that the failure of such condition to be
satisfied has been caused by the failure of FNB to satisfy any of its obligations, covenants or agreements contained herein); 
  
 (ii) if United shall have violated or failed to fully perform any of its obligations, covenants or agreements contained in Article
IV or Article VI herein in any material respect; 
  
 (iii) if FNB determines at any time that any of United’s representations or warranties contained in Article II above or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading
in any material respect when made, or that there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, may or could cause any such representations or
warranties to become false or misleading in any material respect; 
  
 (iv) if, notwithstanding FNB’s satisfaction of its obligations under Section 6.1 above, United’s shareholders do not approve this Agreement and Plan of Merger at its shareholders’ meeting held
for such purpose; 
  
 (v) if the Merger
shall not have become effective on or before January 31, 2006 unless such date is extended as evidenced by the written mutual agreement of the parties hereto; provided, however, that in the event there is a delay of not more than 30 days caused by
circumstances beyond the control of the parties hereto, the dates set forth in this Section 8.2(a) shall be extended by mutual agreement for up to an additional 60 days; 
  
 (vi) if (A) United shall have breached Section 4.4 in any respect materially adverse to FNB, (B)
United shall have breached its obligations set forth in Section 4.3(b) to make its Approval Recommendation or shall have effected a Change in Recommendation, (C) the United Board of Directors shall have recommended approval of an Acquisition
Proposal, or (D) United shall have breached its obligations set forth in Section 4.3(a) to hold the meeting of shareholders to approve and adopt the Plan of Merger; or 
  
 (vii) under the circumstances described in Section 6.7 above. 
  
 However, before FNB may terminate this Agreement for any of the reasons
specified above in (i), (ii) or (iii) of this Section 8.2(a), it shall give written notice to United as provided herein stating its intent to terminate and a description of the specific breach, default, violation or other condition giving rise to
its right to so terminate, and, such termination by FNB shall not become effective if, within 30 days following the giving of such notice, United shall cure such breach, default or violation or satisfy such condition to the reasonable satisfaction
of FNB. In the event United cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of FNB within such 30-day period, FNB shall have 30 days to notify United of its intention to terminate
this Agreement. A failure to so notify United will be deemed to be a waiver by FNB of the breach, default or violation pursuant to Section 10.2 below. 
  

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 (b) Termination by United. This Agreement may be terminated by United by action of its
Board of Directors: 
  
 (i) if any of the
conditions of the obligations of United (as set forth in Section 7.1 and 7.2 above) shall not have been satisfied or effectively waived in writing by United by January 31, 2006 (except to the extent that the failure of such condition to be satisfied
has been caused by the failure of United to satisfy any of its obligations, covenants or agreements contained herein); 
  
 (ii) if FNB shall have violated or failed to fully perform any of its obligations, covenants or agreements contained in Article V
or Article VI herein in any material respect; 
  
 (iii) if United determines that any of FNB’s representations and warranties contained in Article III herein or in any other certificate or writing delivered pursuant to this Agreement shall have been false or misleading in any
material respect when made, or that there has occurred any event or development or that there exists any condition or circumstance which has caused or, with the lapse of time or otherwise, may or could cause any such representations or warranties to
become false or misleading in any material respect; 
  
 (iv) if, notwithstanding United’s satisfaction of its obligations contained in Section 6.1 above, United’s shareholders do not approve this Agreement and Plan of Merger at its shareholders’ meeting called for such
purpose; 
  
 (v) if the Merger shall not
have become effective on or before January 31, 2006 unless such date is extended as evidenced by the written mutual agreement of the parties hereto; provided, however, that in the event there is a delay of not more than 30 days caused by
circumstances beyond the control of the parties hereto, the dates set forth in this Section 8.2(b) shall be extended by mutual agreement for up to an additional 60 days; 
  
 (vi) At any time prior to the date of mailing of the Proxy Statement/Prospectus, by United in order
to enter concurrently into an Acquisition Proposal that has been received by United and the United Board of Directors in compliance with Sections 4.4(a) and (b) and that United’s Board of Directors concludes in good faith, in consultation with
its financial and legal advisors, is a Superior Proposal; provided, however, that this Agreement may be terminated by United pursuant to this Section 8.2(b)(vi) only after the fifth Business Day following United’s provision of written notice to
FNB advising FNB that the United Board of Directors is prepared to accept a Superior Proposal and only if (x) during such five-Business Day period, United has caused its financial and legal advisors to negotiate with FNB in good faith to make such
adjustments in 
  

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 the terms and conditions of this Agreement such that such Acquisition Proposal would no longer constitute
a Superior Proposal, (y) United’s Board of Directors has considered such adjustments in the terms and conditions of this Agreement resulting from such negotiations and has concluded in good faith, based upon consultation with its financial and
legal advisers, that such Acquisition Proposal remains a Superior Proposal even after giving effect to the adjustments proposed by FNB and further provided that such termination shall not be effective until United has paid the Break-up Fee to FNB;
or 
  
 (vii) if the average of the daily
last sales prices of FNB Stock as reported on Nasdaq (as reported by The Wall Street Journal or, if not reported thereby, another authoritative source as chosen by FNB) for the twenty (20) consecutive full trading days in which such shares
are traded on Nasdaq ending at the closing of trading on the Determination Date shall be less than $14.45. “Determination Date” shall mean the fifth business day prior to the date of the meeting of the shareholders of United contemplated
by Section 4.3(a). If United desires to terminate this Agreement pursuant to this Section 8.2(b)(vii), it shall give prompt written notice thereof to FNB, which notice shall be given no later than the close of business on the second business day
prior to the date of the United shareholders’ meeting 
  
 However, before United may terminate this Agreement for any of the reasons specified above in clause (i), (ii) or (iii) of this Section 8.2(b), it shall give written notice to FNB as provided herein stating its intent to terminate and a
description of the specific breach, default, violation or other condition giving rise to its right to so terminate, and, such termination by United shall not become effective if, within 30 days following the giving of such notice, FNB shall cure
such breach, default or violation or satisfy such condition to the reasonable satisfaction of United. In the event FNB cannot or does not cure such breach, default or violation or satisfy such condition to the reasonable satisfaction of United
within such 30-day period, United shall have 30 days to notify FNB of its intention to terminate this Agreement. A failure to so notify FNB will be deemed to be a waiver by United of the breach, default or violation pursuant to Section 10.2 below.

  
 8.3 Breach; Remedies. 
  
 (a) Except as otherwise provided below or in Section 4.4, in the
event of a breach by United of any of its representations or warranties contained in this Agreement or in any other certificate or writing delivered pursuant to this Agreement, or in the event of its failure to perform or violation of any of its
obligations, agreements or covenants contained in this Agreement, then FNB’s sole right and remedy shall be to terminate this Agreement prior to the Effective Time as provided in Section 8.2 above, or, in the case of a failure to perform or
violation of any obligations, agreements or covenants, to seek specific performance thereof. 
  
 (b) Likewise, and except as otherwise provided below, in the event of a breach by FNB of any of its representations or warranties contained in this Agreement, or in the event of its failure to perform or
violation of any of its obligations, agreements or covenants contained in this Agreement, then United’s sole right and remedy shall be to terminate this 
  

 54 

 Agreement prior to the Effective Time as provided in Section 8.2 above, or, in the case of a failure to perform or
violation of any obligations, agreements or covenants, to seek specific performance thereof. 
  
 (c) Notwithstanding anything contained herein to the contrary, if either party to this Agreement breaches this Agreement by willfully or intentionally failing to perform or violating any of its obligations,
agreements or covenants contained in this Agreement, such party shall be obligated to pay all expenses of the other party described in Section 6.4, together with other damages recoverable at law or in equity. 
  
 ARTICLE IX. INDEMNIFICATION 
  
 9.1 Agreement to Indemnify. In the event this Agreement is
terminated for any reason and the Merger is not consummated, then United and FNB will indemnify each other as provided below. 
  
 (a) By United. United shall indemnify, hold harmless and defend FNB from and against any and all claims, disputes, demands, causes of
action, suits, proceedings, losses, damages, liabilities, obligations, costs and expenses of every kind and nature that arise from or are related to claims by third parties, including without limitation reasonable attorneys’ fees and legal
costs and expenses in connection therewith, whether known or unknown, and whether now existing or hereafter arising, which may be threatened against, incurred, undertaken, received or paid by FNB: 
  
 (i) in connection with or which arise out of or
result from or are based upon (A) United’s operations or business transactions or its relationship with any of its employees, or (B) United’s failure to comply with any statute or regulation of any federal, state or local government or
agency (or any political subdivision thereof) in connection with the transactions described in this Agreement; 
  
 (ii) in connection with or which arise out of or result from or are based upon any fact, condition or circumstance that constitutes
a breach by United of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of United to perform any of its covenants, agreements or obligations under
or in connection with this Agreement; 
  
 (iii) in connection with or which arise out of or result from or are based upon any information provided by United which is included in the Proxy Statement/Prospectus and which information causes the Proxy Statement/Prospectus at the
time of its mailing to United’s and FNB’s shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not false or misleading; and 
  
 (iv) in connection with or which arise out of or result from or are based upon the presence, use, production, generation, handling, transportation, 
  

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 treatment, storage, disposal, distribution, labeling, reporting, testing, processing, emission,
discharge, release, threatened release, control, removal, clean-up or remediation on, from or relating to the Real Property by United or any other person of any Hazardous Substances, or any action taken or any event or condition occurring or
existing with respect to the Real Property which constitutes a violation of any Environmental Laws by United or any other person. 
  
 (b) By FNB. FNB shall indemnify, hold harmless and defend United from and against any and all claims, disputes, demands, causes of action,
suits, proceedings, losses, damages, liabilities, obligations, costs and expenses of every kind and nature that arise from or are related to claims by third parties, including without limitation reasonable attorneys’ fees and legal costs and
expenses in connection therewith, whether known or unknown, and whether now existing or hereafter arising, which may be threatened against, incurred, undertaken, received or paid by United: 
  
 (i) in connection with or which arise out of or
result from or are based upon (A) FNB’s operations or business transactions or its relationship with any of its employees, or (B) FNB’s failure to comply with any statute or regulation of any federal, state or local government or agency
(or any political subdivision thereof) in connection with the transactions described in this Agreement; 
  
 (ii) in connection with or which arise out of or result from or are based upon any fact, condition or circumstance that constitutes
a breach by FNB of, or any inaccuracy, incompleteness or inadequacy in, any of its representations or warranties under or in connection with this Agreement, or any failure of FNB to perform any of its covenants, agreements or obligations under or in
connection with this Agreement; and, 
  
 (iii)
in connection with or which arise out of or result from or are based upon any information provided by FNB which is included in the Proxy Statement/Prospectus and which information causes the Proxy Statement/Prospectus at the time of its mailing
to FNB’s and United’s shareholders to contain any untrue statement of a material fact or to omit any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances
under which they were made, not false or misleading. 
  
 9.2
Procedure for Claiming Indemnification. 
  
 (a)
By FNB. If any matter subject to indemnification hereunder arises in the form of a claim against FNB or its successors and assigns (herein referred to as a “Third Party Claim”), FNB promptly shall give notice and details
thereof, including copies of all pleadings and pertinent documents, to United. Within 15 days of such notice, United either (i) shall pay the Third Party Claim either in full or upon agreed compromise or (ii) shall notify FNB that United disputes
the Third Party Claim and intends to defend against it, and thereafter shall so defend and pay any adverse final judgment or award in regard thereto. Such defense shall be controlled by United and the cost of such defense shall be borne by United
except that FNB shall 
  

 56 

 have the right to participate in such defense at its own expense and provided that United shall have no right in
connection with any such defense or the resolution of any such Third Party Claim to impose any cost, restriction, limitation or condition of any kind upon FNB or its successors or assigns. FNB agrees that it shall cooperate in all reasonable
respects in the defense of any such Third Party Claim, including making personnel, books and records relevant to the Third Party Claim available to United without charge therefor except for out-of-pocket expenses. If United fails to take action
within 15 days as hereinabove provided or, having taken such action, thereafter fails diligently to defend and resolve the Third Party Claim, FNB shall have the right to pay, compromise or defend the Third Party Claim and to assert the
indemnification provisions hereof. FNB also shall have the right, exercisable in good faith, to take such action as may be necessary to avoid a default prior to the assumption of the defense of the Third Party Claim by United. 
  
 (b) By United. If any matter subject to indemnification
hereunder arises in the form of a claim against United or its successors and assigns (herein referred to as a “Third Party Claim”), United promptly shall give notice and details thereof, including copies of all pleadings and pertinent
documents, to FNB. Within 15 days of such notice, FNB either (i) shall pay the Third Party Claim either in full or upon agreed compromise or (ii) shall notify United that FNB disputes the Third Party Claim and intends to defend against it, and
thereafter shall so defend and pay any adverse final judgment or award in regard thereto. Such defense shall be controlled by FNB and the cost of such defense shall be borne by FNB except that United shall have the right to participate in such
defense at its own expense and provided that FNB shall have no right in connection with any such defense or the resolution of any such Third Party Claim to impose any cost, restriction, limitation or condition of any kind upon United or its
successors and assigns. United agrees that it shall cooperate in all reasonable respects in the defense of any such Third Party Claim, including making personnel, books and records relevant to the Third Party Claim available to FNB without charge
therefor except for out-of-pocket expenses. If FNB fails to take action within 15 days as hereinabove provided or, having taken such action, thereafter fails diligently to defend and resolve the Third Party Claim, United shall have the right to pay,
compromise or defend the Third Party Claim and to assert the indemnification provisions hereof. United also shall have the right, exercisable in good faith, to take such action as may be necessary to avoid a default prior to the assumption of the
defense of the Third Party Claim by FNB. 
  
 ARTICLE X.
MISCELLANEOUS PROVISIONS 
  
 10.1 Reservation of Right
to Revise Structure. Notwithstanding any provision herein to the contrary, FNB shall have the unilateral right to revise the structure of the Merger to achieve the tax consequences described in Section 6.8 or for any other reason FNB may
deem advisable; provided, however, that no such change will (i) alter or change the amount or kind of consideration to be received by the shareholders of United in the Merger or (ii) adversely affect the tax treatment to the shareholders of United
as a result of receiving such consideration. In the event of such election by FNB, the parties hereto shall execute an appropriate amendment to this Agreement. 
  

 57 

 10.2 Survival of Representations, Warranties, Indemnification and Other Agreements.

  
 (a) Representations, Warranties and Other
Agreements. None of the representations, warranties or agreements herein shall survive the effectiveness of the Merger, and no party shall have any right after the Effective Time to recover damages or any other relief from any other party to
this Agreement by reason of any breach of representation or warranty, any nonfulfillment or nonperformance of any agreement contained herein, or otherwise; provided, however, that the parties’ agreements contained in Section 6.6 above and
FNB’s covenants contained in Sections 5.1 through 5.5 above shall survive the effectiveness of the Merger. 
  
 (b) Indemnification. The parties’ indemnification agreements and obligations pursuant to Section 9.1 above shall become effective only
in the event this Agreement is terminated, and neither of the parties shall have any obligations under Section 9.1 in the event of or following consummation of the Merger. 
  
 10.3 Waiver. Any term or condition of this Agreement may be waived (except as to matters of regulatory
approvals and approvals required by law), either in whole or in part, at any time by the party which is, and whose shareholders are, entitled to the benefits thereof, provided, however, that any such waiver shall be effective only upon a
determination by the waiving party (through action of its Board of Directors) that such waiver would not adversely affect the interests of the waiving party or its shareholders; and, provided further, that no waiver of any term or condition of this
Agreement by any party shall be effective unless such waiver is in writing and signed by the waiving party or as provided in Sections 8.2(a) and 8.2(b) above, or be construed to be a waiver of any succeeding breach of the same term or condition. No
failure or delay of any party to exercise any power, or to insist upon a strict compliance by any other party of any obligation, and no custom or practice at variance with any terms hereof, shall constitute a waiver of the right of any party to
demand full and complete compliance with such terms. 
  
 10.4
Amendment. This Agreement may be amended, modified or supplemented at any time or from time to time prior to the Effective Time, and either before or after its approval by the shareholders of United and FNB, by an agreement in writing
approved by a majority of the Boards of Directors of FNB and United executed in the same manner as this Agreement; provided however, that the provisions of this Agreement relating to the manner or basis in which shares of United Stock are converted
into FNB Stock shall not be amended after the approval of this Agreement and Plan of Merger by the shareholders of United without the requisite approval of such shareholders of such amendment. 
  
 10.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered personally or by courier, or mailed by certified mail, return receipt requested, postage prepaid, and addressed as follows: 
  
 (a) If to United, to: 
  
 United Financial, Inc. 
 Attention: William M. Griffith, Jr., President 
 1128 South Main Street 
 Graham, North Carolina 27253 
  

 58 

 With copy to: 
  

Gaeta & Eveson, P.A. 
 Attention:
Anthony Gaeta, Jr. 
 8305 Falls of Neuse Road, Suite 203 
 Raleigh, North Carolina 27615 
  
 (b) If to FNB, to: 
  
 FNB Corp. 
 Attention: Mr. Michael C. Miller, President 
 Post Office Box 1328 (27204) 
 101 Sunset Avenue 
 Asheboro, North Carolina 27203 
  
 With copy to: 
  
 Schell Bray Aycock Abel &
Livingston P.L.L.C. 
 Attention: Melanie S. Tuttle 
 1500 Renaissance Plaza 
 230 North Elm Street 
 Greensboro, North Carolina 27420 
  
 10.6 Further Assurance. United and FNB shall each furnish to the other such further assurances with respect to the matters contemplated
herein and their respective agreements, covenants, representations and warranties contained herein, including the opinion of legal counsel, as such other party may reasonably request. 
  
 10.7 Headings and Captions. Headings and captions of the sections and Sections of this Agreement have been
inserted for convenience of reference only and do not constitute a part hereof. 
  
 10.8 Entire Agreement. This Agreement (including all schedules and exhibits attached hereto and all documents incorporated herein by reference) contains the entire agreement of the parties with respect
to the transactions described herein and supersedes any and all other oral or written agreement(s) heretofore made, and there are no representations or inducements by or to, or any agreements between, any of the parties hereto other than those
contained herein in writing. 
  
 10.9 Severability of
Provisions. The invalidity or unenforceability of any term, phrase, clause, Section, restriction, covenant, agreement or other provision hereof shall in no way affect the validity or enforceability of any other provision or part hereof.

  
 10.10 Assignment. This Agreement may not be
assigned by either party hereto except with the prior written consent of the other party hereto. 
  

 59 

 10.11 Counterparts. Any number of counterparts of this Agreement may be signed and
delivered, each of which shall be considered an original and all of which together shall constitute one agreement. 
  
 10.12 Governing Law. This Agreement is made in and shall be construed and enforced in accordance with the laws of North Carolina.

  
 10.13 Inspection. Any right of FNB or United
hereunder to investigate or inspect the assets, books, records, files and other information of the other in no way shall establish any presumption that FNB or United should have conducted any investigation or that such right has been exercised by
FNB or United or their agents, representatives or others. Any investigations or inspections that have been made by FNB or United or their agents, representatives or others prior to the Closing Date shall not be deemed in any way in derogation or
limitation of the covenants, representations and warranties made by or on behalf of United or FNB in this Agreement. 
  
 [Signatures on Following Page] 
  

 60 

 IN WITNESS WHEREOF, United and FNB each has caused this Agreement to be executed in its name by its duly
authorized officers and its corporate seal to be affixed hereto as of the date first above written. 
  

			
	UNITED FINANCIAL, INC.
		
	By	 	 /s/ William M. Griffith, Jr.

	 	 	President and Chief Executive Officer
	
	FNB CORP.
		
	By	 	 /s/ Michael C. Miller

	 	 	President and Chief Executive Officer

  

 61 

 SCHEDULES TO 
 AGREEMENT AND PLAN OF MERGER 
  

			
	SCHEDULE	 	DESCRIPTION
		
	A	 	Plan of Merger

  

 62 

 SCHEDULE A 
 to Agreement and Plan of Merger 
 dated as of May 9, 2005 
  
 PLAN OF MERGER 
 OF 
 UNITED FINANCIAL, INC. 
 WITH AND INTO 
 FNB CORP. 
  
 A. Parties to Merger. The parties to the proposed merger are United Financial, Inc., a North Carolina corporation
(“United”), and FNB Corp., a North Carolina corporation (“FNB”). 
  
 B. Nature of Transaction. Subject to the provisions of this Plan of Merger, United shall be merged with and into FNB (the “Merger”) with the effect provided in the North Carolina Business Corporation
Act. 
  
 C. Surviving Corporation. FNB shall be the
surviving corporation in the Merger. At the Effective Time (as hereinafter defined) of the Merger, the name of the surviving corporation shall not be changed. 
  

D. Effective Time. The Merger shall be effective on the date and at the time on which Articles of Merger containing this Plan of Merger and the
other provisions required by, and executed in accordance with, applicable North Carolina and applicable federal law shall have been accepted for filing by the Secretary of State of the State of North Carolina (or such later time as may be specified
in the Articles of Merger) (the “Effective Time”). At the Effective Time, the separate corporate existence of United shall cease and the corporate existence of FNB shall continue with all of its purposes, objects, rights, privileges,
powers and franchises, all of which shall be unaffected and unimpaired by the Merger. 
  
 E. Conversion and Exchange of Shares. 
  
 1. At the Effective Time, all rights of United’s shareholders with respect to all then outstanding shares of the common stock of United, $1.00 par value (“United Stock”) shall cease to exist, and the
holders of United Stock shall cease to be, and shall have no further rights as, shareholders of United. Subject to Section E.7 below, at the Effective Time, each such outstanding share of United Stock (except for shares held, other than in a
fiduciary capacity or as a result of debts previously contracted, by United, FNB or any of their subsidiaries, which shall be canceled in the Merger, and for Dissenting Shares (as defined in Section E.7)) shall be converted exclusively into the
right to receive, at the election of the holder thereof, either: (A) $14.25 in cash, without interest; (B) 0.6828 shares (the “Exchange Ratio”) of the common stock of FNB, par value $2.50 (the “FNB Stock”); or (C) 35% of the cash
amount set forth in clause (A) above and a number of shares of FNB equal to 65% of the Exchange Ratio; provided, however, that a holder of United Stock may, pursuant to Section E.4, make no election, in 

 which case such shares of United Stock held by such holder shall be converted exclusively into the right
to receive the consideration set forth in Section E.4(e) below with respect to Non-Election Shares (as defined in Section E.4(b)). The amount of cash into which shares of United Stock shall be converted pursuant to this Plan of Merger is sometimes
hereinafter referred to as “Cash Consideration,” and the number of shares of FNB Stock into which shares of United Stock shall be converted pursuant to this Plan of Merger is sometimes hereinafter referred to as “Stock
Consideration.” The Cash Consideration and Stock Consideration are sometimes referred to herein collectively as the “Merger Consideration.” No share of United Stock, other than Dissenting Shares (defined in Section E.7), shall be
deemed to be outstanding or have any rights other than those set forth in this Section E.1 after the Effective Time. [The Exchange Ratio is subject to possible adjustment in accordance with Section 1.5(c) of the Agreement and Plan of Merger,
dated as of May 9, 2005, by and between FNB and United. If so adjusted, the adjusted Exchange Ratio shall be reflected in this Plan of Merger prior to filing with the Secretary of State of North Carolina.] 
  
 2. Each share of the FNB Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall continue to be issued and outstanding and shall not be affected by the Merger. 
  
 3. Notwithstanding any other provision of this Plan of Merger, each holder of shares of United Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of FNB Stock (after taking into account all certificates delivered by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of FNB Stock multiplied by the market value of one share of FNB Stock upon the Effective Time. The market value of one share of FNB Stock at the Effective Time shall be the last sale price of FNB Stock on Nasdaq Stock Market, Inc.
National Market System as reported by The Wall Street Journal or, if not reported thereby, any other authoritative source selected by FNB, on the last trading day preceding the Effective Time. No such holder will be entitled to dividends,
voting rights, or any other rights as a shareholder in respect of any fractional shares. 
  
 4. (a) An election form (an “Election Form”) and other appropriate and customary transmittal materials, which shall specify that
delivery shall be effected, and risk of loss and title to the certificates theretofore representing United Stock shall pass, only upon proper delivery of such certificates to the exchange agent in such form as United and FNB shall mutually agree
shall be mailed on the Mailing Date (as defined below) to each shareholder of record of United. The “Mailing Date” shall be the date on which proxy materials relating to the Merger are mailed to holders of shares of United Stock.

  
 (b) Each Election Form shall entitle the
holder of shares of United Stock (or the beneficial owner through appropriate and customary documentation and instructions) to (i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”), (ii) elect
to receive the Stock Consideration for all of such holder’s 
  

 2 

 shares (a “Stock Election”), (iii) elect to receive Merger Consideration in accordance with
clause (C) of the first sentence of Section E.1 (a “Mixed Election”), or (iv) make no election or to indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a
“Non-Election”). Shareholders of record of United who hold shares of United Stock as nominees, trustees or in other representative capacities may submit multiple Election Forms, provided that such representative certifies that each such
Election Form covers all the shares of United Stock held by that representative for a particular beneficial owner. Shares of United Stock in respect of which a Cash Election shall have been made are referred to herein as “Cash Election
Shares.” Shares of United Stock in respect of which a Stock Election shall have been made are referred to herein as “Stock Election Shares.” Shares of United Stock in respect of which no election shall have been made are referred to
as “Non-Election Shares.” The aggregate number of shares of United Stock with respect to which a Stock Election shall have been made is referred to herein as the “Stock Election Number.” Shares of United Stock with respect to
which a Mixed Election shall have been made shall not be deemed either Stock Election Shares or Cash Election Shares, but shall in all events be converted into the right to receive the Merger Consideration as specified in subsection (e) of this
Section E.4. 
  
 (c) To be effective, a properly
completed Election Form shall be submitted to the exchange agent on or before 5:00 p.m. North Carolina time on the last business day prior to the date on which the shareholders of United meet to vote upon this Plan of Merger (or such other time and
date as United and FNB may mutually agree) (the “Election Deadline”). An election shall have been properly made only if the exchange agent shall have actually received a properly completed Election Form by the Election Deadline. An
Election Form shall be deemed properly completed only if accompanied by one or more certificates (or customary affidavits and, if required by FNB pursuant to Section E.8, indemnification regarding the loss or destruction of such certificates or the
guaranteed delivery of such certificates) representing all shares of United Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. Any United shareholder may at any time prior to the
Election Deadline change his or her election by written notice received by the exchange agent prior to the Election Deadline accompanied by a properly completed and signed revised Election Form. Any United shareholder may, at any time prior to the
Election Deadline, revoke his or her election by written notice received by the exchange agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of his or her certificates, or of the guarantee of delivery of such
certificates, previously deposited with the exchange agent. All elections shall be revoked automatically if the exchange agent is notified in writing by FNB and United that the Agreement and Plan of Merger, dated as of May 9, 2005, by and between
FNB and United (the “Merger Agreement”) has been terminated. If a United shareholder either (i) does not submit a properly completed Election Form by the Election Deadline, or (ii) revokes its Election Form prior to the Election Deadline,
the shares of United Stock held by such shareholder shall be designated Non-Election Shares. FNB shall cause the certificates representing United Stock described in clause (ii) above to be promptly returned without charge to the person submitting
the Election Form upon written request to that effect from the person who 
  

 3 

 submitted the Election Form. Subject to the terms of this Plan and of the Election Form, the exchange
agent shall have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of the exchange agent regarding
such matters shall be binding and conclusive. 
  
 (d) Notwithstanding any other provision contained in this Plan, 65% (the “Stock Conversion Number”) of the total number of shares of United Stock outstanding at the Effective Time to be converted into Merger Consideration pursuant
to Section E.1(a) excluding such shares as may be subject to an effective Mixed Election (the “Adjustable Conversion Shares”), shall be converted into the Stock Consideration and the remaining Adjustable Conversion Shares shall be
converted into the Cash Consideration (in each case, excluding shares of United Stock to be canceled as provided in Section E.1 and Dissenting Shares); provided, however, that for federal income tax purposes, it is intended that the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the Code and, notwithstanding anything to the contrary contained herein, in order that the Merger will not fail to satisfy continuity of interest requirements under applicable
federal income tax principles relating to reorganizations under Section 368(a) of the Code, as reasonably determined by counsel to FNB, FNB shall increase the number of Adjustable Conversion Shares that will be converted into the Stock Consideration
and reduce the number of Adjustable Conversion Shares that will be converted into the right to receive the Cash Consideration. 
  
 (e) Within five business days after the later to occur of the Election Deadline or the Effective Time, FNB shall cause the exchange agent
to effect the allocation among holders of United Stock of rights to receive the Cash Consideration and the Stock Consideration as follows: 
  
 (i) In any event, all shares of United Stock with respect to which a Mixed Election shall have been made shall be converted into 35% of
the amount of cash set forth in clause (A) of the first sentence of Section 1.5(a) and 65% of the Exchange Ratio; 
  
 (ii) If the Stock Election Number exceeds the Stock Conversion Number, then all Cash Election Shares and all Non-Election Shares shall be
converted into the right to receive the Cash Consideration, and each holder of Stock Election Shares will be entitled to receive the Stock Consideration in respect of that number of Stock Election Shares equal to the product obtained by multiplying
(x) the number of Stock Election Shares held by such holder by (y) a fraction, the numerator of which is the Stock Conversion Number and the denominator of which is the Stock Election Number, with the remaining number of such holder’s Stock
Election Shares being converted into the right to receive the Cash Consideration; and 
  

 4 

 (iii) If the Stock Election Number is less than the Stock Conversion Number (the amount
by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the
Non-election Shares and Cash Election Shares shall be treated in the following manner: 
  
 (A) If the Shortfall Number is less than or equal to the number of Non-Election Shares, then all Cash Election Shares shall be converted
into the right to receive the Cash Consideration and each holder of Non-Election Shares shall receive the Stock Consideration in respect of that number of Non-Election Shares equal to the product obtained by multiplying (x) the number of
Non-Election Shares held by such holder by (y) a fraction, the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares, with the remaining number of such holder’s Non-Election Shares
being converted into the right to receive the Cash Consideration; or 
  
 (B) If the Shortfall Number exceeds the number of Non-Election Shares, then all Non-Election Shares shall be converted into the right to receive the Stock Consideration, and each holder of Cash Election Shares shall
receive the Stock Consideration in respect of that number of Cash Election Shares equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) a fraction, the numerator of which is the amount by
which (1) the Shortfall Number exceeds (2) the total number of Non-Election Shares and the denominator of which is the total number of Cash Election Shares, with the remaining number of such holder’s Cash Election Shares being converted into
the right to receive the Cash Consideration. 
  
 For purposes of
this Section E.4(e), if FNB is obligated to increase the number of Adjustable Conversion Shares to be converted into shares of FNB Stock as a result of the application of the last clause of Section E.4(d) above, then the higher number shall be the
Stock Conversion Number in the calculations set forth in this Section E.4(e). 
  
 5. Each holder of a certificate representing shares of United Stock to be converted or exchanged in the Merger shall surrender such certificate for cancellation, and after the Effective Time and after such surrender,
shall be entitled to receive in exchange therefor the consideration to which it is entitled under this Plan. Until so surrendered, each outstanding certificate that prior to the Effective Time represented shares of United Stock shall be deemed for
all purposes to evidence ownership of the consideration to be issued and paid for the conversion or exchange of such shares under this Plan. 
  

 5 

 6. From and after the Effective Time of the Merger, there shall be no further transfers
on the stock transfer books of United of the shares of United Stock that were outstanding immediately prior to the Effective Time of the Merger. If after such Effective Time, certificates representing shares of United Stock are presented to United,
FNB or the exchange agent for any reason, they shall be canceled and exchanged as provided for herein. 
  
 7. Notwithstanding any other provision of this Plan to the contrary, shares of United Stock that are outstanding immediately prior to the
Effective Time and that are held by shareholders who shall have not voted in favor of the Merger or consented thereto in writing and who properly shall have demanded appraisal for such shares in accordance with Article 13 of the North Carolina
Business Corporation Act (collectively, the “Dissenting Shares”) shall not be converted into or represent the right to receive the Merger Consideration. Such shareholders instead shall be entitled to receive payment of the appraised value
of such shares held by them in accordance with the provisions of Article 13 of the North Carolina Business Corporation Act, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have
withdrawn or otherwise lost their rights to appraisal of such shares under Article 13 of the North Carolina Business Corporation Act shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Merger Consideration upon surrender in the manner provided in Section 1.8 of the certificate or certificates that, immediately prior to the Effective Time, evidenced such shares. United shall
give FNB (i) prompt notice of any written demands for appraisal of any shares of United Stock, attempted withdrawals of such demands for appraisal or any other instruments served pursuant to Article 13 of the North Carolina Business Corporation Act
and received by United relating to shareholders’ rights of appraisal, and (ii) the opportunity to participate in all negotiations and proceedings with respect to demands under Article 13 of the North Carolina Business Corporation Act consistent
with the obligations of United thereunder. United shall not, except with the prior written consent of FNB, (x) make any payment with respect to such demand, (y) offer to settle or settle any demand for appraisal, or (z) waive any failure to timely
deliver a written demand for appraisal or timely take any other action to perfect appraisal rights in accordance with Article 13 of the North Carolina Business Corporation Act. 
  
 8. Any shareholder of United whose certificate representing shares of United Stock has been lost, destroyed,
stolen or otherwise is missing shall be entitled to receive a certificate representing the shares of FNB Stock and/or any cash, including cash in lieu of fractional shares, to which he or she is entitled in accordance with and upon compliance with
conditions reasonably imposed by the exchange agent or FNB (including, without limitation, a requirement that the shareholder provide a lost instruments indemnity bond in form, substance and amount reasonably satisfactory to the exchange agent and
FNB). 
  
 F. Abandonment. This Plan of Merger may be
terminated and the Merger may be abandoned at any time prior to the Effective Time upon termination of the Merger Agreement. 
  

 6

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