Valley Community Bank (fka VCBC)

[56Chevy]

re:TERMINATION OF THE MERGER AGREEMENT

VCBC's CEO Richard Loupe failed to mention the $500K termination fee his shareholders must pay if this deal with FNB is terminated. Our only hope of avoiding this fee is if the Fairness Hearing people don't approve the merger.

========================================

M. TERMINATION OF THE MERGER AGREEMENT

FNB Bancorp and VCB can mutually agree at any time to terminate the merger agreement without completing the merger, even if the shareholders of VCB have approved it. Also, the merger agreement can be terminated by either VCB or FNB Bancorp unilaterally if certain events occur, as described below. If the merger agreement is terminated, the merger will not occur.

< page 32 >

Either VCB or FNB Bancorp can terminate the merger agreement if:

The merger is not completed by December 31, 2014, unless this date is further extended by mutual agreement;

Any governmental agency denies or refuses to grant a required approval of the merger, unless the parties agree to appeal the denial or refusal or agree to file an amended application for the governmental approval;

VCB enters into an agreement by which it would be acquired in a business combination by another entity; or

The shareholders of VCB fail to approve the merger and there has not been a breach of one or more of the Shareholder Agreements.

FNB Bancorp can terminate the merger agreement if:

VCB breaches any representation or covenant in the merger agreement which would prevent the closing conditions from being satisfied, unless VCB cures the breach within 30 days after written notice from FNB Bancorp;

Any required governmental approval, consent or qualification includes or will not be issued without the imposition of any condition or requirement that would be materially burdensome to FNB Bancorp;

VCB fails to call a meeting of shareholders to approve the merger; or

The shareholders of VCB fail to approve the merger and there has been a breach of one or more of the Shareholder Agreements.

VCB can terminate the merger agreement if:

FNB Bancorp breaches any representative or covenant in the merger agreement which would prevent the closing conditions from being satisfied, unless FNB Bancorp cures the breach within 30 days after receipt of written notice from VCB.

Any termination described above must be made by written notice from the party seeking termination to the other party. In the event the merger agreement is terminated, it will become void and have no effect, except that the termination will not affect the provisions regarding payment of expenses, confidentiality, payment of any termination fees if applicable or any relevant general provisions of the merger agreement. In certain situations, a termination of the merger agreement will obligate VCB to pay $500,000 in liquidated damages to FNB (see Section O of this Notice, “Termination Fees”).

< page 33 >

If the merger agreement is terminated due to a party’s breach, the termination will not relieve the breaching party from its liability and the non-breaching party will retain all of its legal rights and remedies against the breaching party for its breach. Each party has acknowledged that money damages would be an insufficient remedy for any breach of the merger agreement and that irreparable damage would occur if the provisions of the merger agreement were not performed in accordance with its specific terms or were otherwise breached, and each party has agreed that each shall be entitled to an injunction or injunctions to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger agreement in any federal or state court, in addition to any other remedy to which the parties are entitled by law or in equity. The merger agreement provides that in any action at law or suit in equity in relation to the merger agreement, the prevailing party in such action or suit will be entitled to recover its reasonable attorneys’ fees plus all of its other reasonable costs and expenses incurred in such action or suit.

[....]

O. TERMINATION FEES

VCB is required to pay FNB Bancorp $500,000 in liquidated damages if FNB Bancorp terminates the merger agreement for any of the following reasons:

The special meeting of VCB shareholders has concluded with a vote to approve the principal terms of the merger agreement and the merger but the requisite two-thirds (2/3) approval is not obtained and any one or more of the VCB directors has failed to perform his or her Shareholder Agreement.

VCB failed to call a meeting of VCB shareholders and disseminate to its shareholders a Proxy Statement/Prospectus containing the unanimous recommendation of the VCB board of directors.

VCB enters into a business combination with another entity prior to December 31, 2014, or if within six (6) months after December 31, 2014, VCB enters into a definitive agreement with respect to, or consummates the transactions contemplated by, a business combination with another entity and such entity had contacted VCB with an expression of interest in discussing a possible business combination prior to December 31, 2014.

Also, VCB is required to pay FNB Bancorp $500,000 in liquidated damages if VCB terminates the merger agreement to enter into a business combination with another entity because the VCB board of directors has received a bona fide unsolicited offer for a business combination of VCB with another entity, and reasonably determines, upon advice of counsel, that as a result of such offer, any duty to act or to refrain from doing any act pursuant to the merger agreement is inconsistent with the continuing fiduciary duties of the VCB board of directors to its shareholders.

< page 34 >

The payment of $500,000 would be FNB’s sole remedy for the failure of VCB to perform or comply with these particular promises -- FNB’s sole recourse for recovery of damages under these circumstances. Filing suit to recover the expenses it had incurred, and for its lost opportunity cost, was not deemed an adequate remedy for FNB. After good faith efforts by the parties to estimate damages for the anticipated harm, the parties agreed on $500,000 as a reasonable amount. The parties discussed a similar liquidated damages provision for VCB, applicable in other circumstances, which was declined by VCB so as not to be prevented or restricted from seeking general damages in a federal or state court.

http://www.sec.gov/Archives/edgar/data/1163199/000101905614001206/ex99_1.htm

*We now have 500 thousand more reasons to want new leadership in our boardroom ":~O