ITEM 1.01
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Entry into a Material Definitive Agreement
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On May 24, 2018, Emclaire
Financial Corp (“Emclaire”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with
Community First Bancorp, Inc., a Pennsylvania corporation (“Community”), providing for the merger of Community with
and into Emclaire (the “Merger”).
Following consummation of the Merger, Community First
Bank, a Pennsylvania chartered bank and subsidiary of Community, will be merged with and into The Farmers National Bank Emlenton,
the wholly owned national banking subsidiary of Emclaire (“Farmers National”), pursuant to an Agreement of Merger (the
“Bank Merger Agreement”) (the “Bank Merger”).
Subject to the terms
and conditions of the Merger Agreement, which has been unanimously approved by the Boards of Directors of Emclaire and Community,
upon completion of the Merger, each outstanding share of common stock, par value $0.50 per share, of Community issued and outstanding
immediately prior to the effective time of the Merger
(other than certain shares held directly or
indirectly by Emclaire or Community or shares held by shareholders of Community who exercise their dissenters’ rights), will
be converted automatically into the right to receive 1.2008 shares of
common stock, par value $1.25 per share, of Emclaire,
subject to adjustment
, plus $6.95 in cash. In addition, pursuant to the Bank Merger Agreement, approximately
$4.1 million of outstanding shares of Community First Bank’s Series A and Series B Non-Cumulative Perpetual Preferred Stock
(other than dissenting shares) will be exchanged on a one-for-one basis for shares of two newly created series of Emclaire Non-Cumulative
Preferred Stock.
The Merger Agreement
contains customary representations and warranties from both Emclaire and Community and each has agreed to customary covenants,
including, among others, covenants relating to: (1) the conduct of Community’s business during the interim period between
the execution of the Merger Agreement and the completion of the Merger; (2) Community’s obligation to convene and hold a
meeting of its shareholders to consider and vote upon the approval of the Merger Agreement and the transactions contemplated by
it; and (3) subject to certain exceptions, the recommendation by the Board of Directors of Community in favor of the approval by
its shareholders of the Merger, the Merger Agreement and the other transactions contemplated thereby. Community has also agreed
not to (1) solicit proposals relating to alternative business combination transactions or (2) subject to certain exceptions, enter
into any discussions, or enter into any agreement, concerning, or provide confidential information in connection with, any proposals
for alternative business combination transactions.
Completion of the Merger
is subject to certain customary conditions, including, among others, (1) approval of the Merger Agreement by Community’s
shareholders and the Bank Merger Agreement by Community First Bank’s shareholders; (2) receipt of required regulatory approvals;
and (3) the absence of any injunction, order or other legal restraint prohibiting the completion of the Merger. Subject
to the receipt of all required approvals and the satisfaction of all other conditions, the Merger is expected to be completed in
the fourth quarter of 2018. All of the directors and executive officers of Community have entered into Voting and Support Agreements
with Emclaire pursuant to which, among other things, they have agreed to vote their shares in favor of the Merger and the Bank
Merger.
The Merger Agreement
contains certain termination rights for Emclaire and Community, as the case may be, applicable in the following circumstances:
(1) the mutual written consent of the parties; (2) if the Merger has not been completed by February 28, 2019, but only if the failure
to complete the Merger is not due to the failure of the terminating party to comply with the Merger Agreement; (3) the failure
of Community’s shareholders to approve the Merger Agreement and the Merger or the failure of Community First Bank’s
shareholders to approve the Bank Merger Agreement and the Bank Merger by the required vote; (4) a breach of the Merger Agreement
by the other party that is not or cannot be cured or is not waived within 30 days after notice of such breach, if such breach would
result in a failure of the conditions to closing set forth in the Merger Agreement; (5) if any required regulatory approvals for
consummation of the Merger or the other transactions contemplated by the Merger Agreement are denied; (6) by Emclaire if Community
shall have received a superior proposal and the Community Board of Directors enters into an acquisition agreement with respect
to a superior proposal and terminates the Merger Agreement or fails to recommend that the shareholders of Community adopt the Merger
Agreement or if it withdraws, modifies or changes such recommendation in a manner which is adverse to Emclaire; or (7) by Community
in order to accept a superior proposal, which has been received and considered by Community in compliance with the applicable terms
of the Merger Agreement.
Community also has
the right to terminate the Merger Agreement if both of the following conditions are satisfied: (i) the average closing price of
Emclaire common stock for the 20 consecutive trading days ending on the tenth calendar day immediately prior to the effective date
of the Merger is less than 82.5% of the starting price, as defined, and (ii) a specified ratio of the sales prices of Emclaire
common stock is less than a specified index ratio of stocks of a bank peer group. In addition, the Merger Agreement provides that,
upon termination of the Merger Agreement in certain circumstances, Community may be required to pay Emclaire a termination fee
of $750,000.
The foregoing description
of the Merger Agreement and the Merger does not purport to be complete and is qualified in its entirety by reference to the Merger
Agreement, which is filed as Exhibit 10.1 hereto, and is incorporated into this report, by reference.