ARTICLE I THE MERGER

Section 1.01 Definitions

Section 1.02 The Merger

ARTICLE II REPRESENTATIONS AND WARRANTIES OF MNB AND MERCHANTS BANK

Section 2.01 Standard

Section 2.02 Organization

Section 2.03 Capitalization

Section 2.04 Authority; No Violation

Section 2.05 Deposit Liabilities

Section 2.06 Consents

Section 2.07 Regulatory Reports; Financial Statements; Undisclosed Liabilities

Section 2.08 Taxes

Section 2.09 No Material Adverse Effect

Section 2.10 Contracts

Section 2.11 Ownership of Property; Insurance Coverage

Section 2.12 Legal Proceedings

Section 2.13 Compliance with Applicable Law

Section 2.14 Employee and Director Benefit Plans

Section 2.15 Labor Matters

Section 2.16 Brokers, Finders and Financial Advisors

Section 2.17 Environmental Matters

Section 2.18 Allowance for Loan Losses

Section 2.19 Related Party Transactions

Section 2.20 Loans

Section 2.21 MNB Information

Section 2.22 “Well Capitalized”

Section 2.23 Investment Securities

Section 2.24 Equity Plans and Agreements

Section 2.25 Tax Matters

Section 2.26 Fairness Opinion

Section 2.27 Intellectual Property

Section 2.28 State Takeover Statutes

Section 2.29 Bank Secrecy Act, Foreign Corrupt Practices Act and U.S.A. PATRIOT Act

Section 2.30 Quality of Representations.

ARTICLE III REPRESENTATIONS AND WARRANTIES OF FIDELITY AND FIDELITY BANK

Section 3.01 Standard

Section 3.02 Organization

Section 3.03 Capitalization

Section 3.04 Authority; No Violation

Section 3.05 Consents

Section 3.06 Regulatory Reports; Financial Statements; Undisclosed Liabilities

Section 3.07 Taxes

Section 3.08 Legal Proceedings

Section 3.09 No Material Adverse Effect

Section 3.10 Ownership of Property; Insurance Coverage

Section 3.11 Compliance with Applicable Law

Section 3.12 Employee and Director Benefit Plans

Section 3.13 Labor Matters

Section 3.14 Brokers, Finders and Financial Advisors

Section 3.15 Environmental Matters

Section 3.16 Related Party Transactions

Section 3.17 Loans

Section 3.18 Deposit Liabilities

Section 3.19 Allowance for Loan Losses

Section 3.20 Fidelity Information

Section 3.21 “Well Capitalized”

Section 3.22 Intellectual Property

Section 3.23 Financing

Section 3.25 Tax Matters

Section 3.26 Fairness Opinion

Section 3.27 Securities Documents

Section 3.28 Quality of Representations

ARTICLE IV COVENANTS OF THE PARTIES

Section 4.01 Conduct of MNB’s Business

Section 4.02 Conduct of Fidelity’s and Fidelity Bank’s Business

Section 4.03 Access; Confidentiality

Section 4.04 Regulatory Matters and Consents

Section 4.05 Taking of Necessary Action

Section 4.06 Indemnification; Insurance

Section 4.07 No Other Bids and Related Matters

Section 4.08 Duty to Advise; Duty to Update Disclosure Schedule

Section 4.09 Current Information

Section 4.10 Phase I Environmental Audit

Section 4.11 Shareholders and Shareholders Meetings

Section 4.12 Public Announcements

Section 4.13 Maintenance of Insurance

Section 4.14 Maintenance of Books and Records

Section 4.15 Taxes

Section 4.16 Employee Benefits

Section 4.17 System Conversion

Section 4.18 Fidelity and Fidelity Bank Board

Section 4.19 Severance

Section 4.20 Regulatory Conditions

Section 4.21 Affiliate Letters

Section 4.22 Dividends

Section 4.23 Additional Agreements

Section 4.24 Retention

Section 4.25 Conforming Accounting

Section 4.26 Control of Operations



Section 4.27 Rule 16b-3

Section 4.28 Advisory Board

Section 4.29 NASDAQ Listing and Shareholder Vote on the Issuance of Shares

Section 4.30 Control

ARTICLE V CONDITIONS

Section 5.01 Conditions to Obligations of MNB under this Agreement

Section 5.02 Conditions to Obligations of Fidelity under this Agreement

ARTICLE VI TERMINATION

Section 6.01 Termination

Section 6.02 Effect of Termination

ARTICLE VII MISCELLANEOUS

Section 7.01 Expenses

Section 7.02 Non-Survival

Section 7.03 Amendment, Extension and Waiver

Section 7.04 Entire Agreement

Section 7.05 No Assignment

Section 7.06 Notices

Section 7.07 Captions

Section 7.08 Counterparts

Section 7.09 Severability

Section 7.10 Governing Law; Jurisdiction and Venue

Section 7.17 Jury Trial Waiver



SCHEDULE 1

Identification of Certain Executive Officers and Certain Employees of Merchants Bank to be Retained by Fidelity Bank

EXHIBIT A

Form of MNB Corporation - Letter Agreement

EXHIBIT B

Form of Bank Plan of Merger

EXHIBIT C

Form of Employment Agreement

EXHIBIT D

Form of Consulting Agreement

EXHIBIT E

Form of Retention Agreement and General Release

EXHIBIT F

Form of Change in Control Agreement

EXHIBIT G

MNB Corporation – Affiliate Agreement



1.

The board of directors of each of Fidelity, Fidelity Bank, MNB and Merchants Bank deems it advisable and in each of their respective best interests and consistent with and in furtherance of their respective business strategies and goals for MNB to merge with and into Fidelity (the “Merger”), with Fidelity surviving such Merger, in accordance with this Agreement and the applicable laws of the Commonwealth of Pennsylvania, and such boards of directors have unanimously approved this Agreement, declared it advisable, and recommended that this Agreement be adopted by the shareholders of MNB and Fidelity.

2.

Fidelity and MNB intend for federal income tax purposes that the Merger qualify as a reorganization under the provisions of Section 368(a) of the IRC (as hereafter defined) and that this Agreement be and is adopted as a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

3.

Fidelity is the parent bank holding company and sole shareholder of Fidelity Bank.  MNB is the parent bank holding company and sole shareholder of Merchants Bank.

4.

As an inducement to Fidelity’s willingness to enter into this Agreement, the directors and certain shareholders of MNB, MNB’s President & Chief Executive Officer, and certain other executive officers have executed an MNB Letter Agreement in the form attached hereto as Exhibit A (“Voting Agreement”).

5.

Subject to the terms of this Agreement, the parties’ desire to merge Merchants Bank with and into Fidelity Bank, as soon as practicable after the Effective Time (as hereinafter defined) and in accordance with the Bank Plan of Merger in the form attached hereto as Exhibit B.

6.

As a condition and inducement to the parties’ willingness to enter into this Agreement, Fidelity and Fidelity Bank, as applicable, have entered into: the Employment Agreement in the form attached hereto as Exhibit C, with the officer of Merchants Bank to be retained by Fidelity Bank as identified on Schedule 1;  the Consulting Agreement in the form attached hereto as Exhibit D with the executive of Merchants Bank to be retained by Fidelity Bank as identified on Schedule 1; the Retention Agreement and General Release with the executive of Merchants Bank to be retained by Fidelity Bank identified on

Schedule 1 in the form attached hereto as Exhibit E; and the Change in Control Agreement with the executive of Merchants Bank to be retained by Fidelity Bank identified on Schedule 1 in the form attached hereto as Exhibit F, all to be effective at the Effective Time (as defined herein).

7.

The respective boards of directors of the parties have determined that it is in the best interests of their respective companies and their shareholders, respectively, to consummate the Merger provided for herein.

8.

The parties desire to set forth in this Agreement the terms and conditions governing the transactions contemplated herein.

(a)

Closing.  The closing of the Merger (the “Closing”) will take place immediately prior to the Effective Time at the offices of Bybel Rutledge LLP, Lemoyne, Pennsylvania, or such other time and place as mutually agreed to by the parties hereto; provided, in any case, that such date shall not be later than fifteen (15) business days after the satisfaction or waiver (subject to applicable law) of all conditions to closing set forth in Article V (other than

delivery of certificates, opinions, and other instruments and documents to be delivered at the Closing) (such date, the “Closing Date”).

(b)

The Merger.  Subject to the terms and conditions of this Agreement, and in accordance with Article III of the PAC, also known as the ETL, as required, at the Effective Time, MNB shall merge with and into Fidelity, the separate existence of MNB shall cease, and Fidelity shall be the surviving entity and continue to exist as a Pennsylvania business corporation and all of the assets and liabilities of MNB shall become the assets and liabilities of Fidelity. 

(c)

Effective Time; Effects of the Merger.  Subject to the provisions of this Agreement, the Statement of Merger shall be duly prepared, executed and delivered for filing with the PDS, as required, on the Closing Date.  The Merger shall become effective at such time, on such date, as the Statement of Merger is filed with the PDS, as required, or at such date and time as may be specified in the Statement of Merger (such time being the “Effective Time”).  At and after the Effective Time, the Merger shall have the effects set forth in Section 336 of the ETL and this Agreement.

(d)

Fidelity’s Articles of Incorporation and Bylaws.  On and after the Effective Time, the articles of incorporation and bylaws of Fidelity, as in effect immediately prior to the Effective Time, shall automatically be and remain the articles of incorporation and bylaws of Fidelity, until thereafter altered, amended, or replaced. 

(e)

Board of Directors and Executive Officers of Fidelity and Fidelity Bank.  Subject to satisfaction or waiver of the conditions precedent of this Agreement, at the Effective Time, the total number of persons serving on the board of directors of Fidelity and Fidelity Bank, respectively, shall be increased by two (2).  The directors of Fidelity and Fidelity Bank serving immediately prior to the Effective Time shall continue to serve and continue in their capacity as directors in accordance with the Articles and Bylaws of Fidelity and Fidelity Bank, respectively, and two (2) of the directors shall be the MNB Nominees as provided in Section 4.18 hereof. 

(f)

[Intentionally omitted]

(g)

Bank Merger.

(i)

Fidelity and MNB shall use their commercially reasonable best efforts to cause Merchants Bank to merge with and into Fidelity Bank, with Fidelity Bank surviving such merger, as soon as immediately practicable after the Effective Time.  It is intended by the parties that the Bank Merger be effected immediately after the Merger.  Concurrently with the execution and delivery of this

Agreement, Fidelity shall cause Fidelity Bank, and MNB shall cause Merchants Bank, to execute and deliver the Bank Plan of Merger in substantially the form attached hereto as Exhibit B.  

(ii)

Notwithstanding Section 1.02(g)(i), if the parties mutually agree that the Bank Merger be delayed, the parties shall cooperate to permit the Bank Merger to occur at such later time as the parties mutually agree, and any provisions of this Agreement inconsistent with such timing shall be deemed amended as appropriate to reflect such timing.

(h)

Effect on Shares.  At the Effective Time, by virtue of the Merger and without any action on the part of Fidelity, MNB or the holders of any of the following securities, the following shall occur:

(i)

Outstanding Fidelity Common Stock.  Each share of Fidelity Common Stock issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding as an identical share of Fidelity Common Stock, except that shares of Fidelity Common Stock owned by MNB (other than shares held in trust, managed, custodial or nominee accounts and the like that in any such case are beneficially owned by third parties and shares acquired in respect of debts previously contracted) shall become treasury stock of Fidelity.

(ii)

Cancellation of Certain Common Stock.  Each share of MNB Common Stock that is owned by Fidelity, or by any of its respective Subsidiaries (other than shares that are held in trust, managed, custodial or nominee accounts and the like and that are beneficially owned by third parties and other than shares acquired in respect of debts previously contracted) shall be canceled and cease to be issued and outstanding, and no consideration shall be delivered therefor.

(iii)

Conversion of MNB Common Stock.  Each share of MNB Common Stock issued and outstanding immediately prior to the Effective Time (other than shares canceled pursuant to Section 1.02(h)(ii) and Dissenting MNB Shares) shall be converted into the right to receive 1.039 shares of Fidelity Common Stock (the “Exchange Ratio”), subject to anti-dilution adjustment as provided in Section 1.02(j) below (the “Stock Consideration”).  The Stock Consideration and cash in lieu of fractional shares in the aggregate for all MNB shareholders is referred to as the “Merger Consideration.”

(iv)

Cash in Lieu of Fractional Shares.  Notwithstanding anything herein to the contrary, no fraction of a whole share of Fidelity Common Stock and no scrip or certificate therefor shall be issued in connection with the Merger. Any former MNB shareholder who would otherwise be entitled to receive a fraction of a share of Fidelity Common Stock shall receive, in lieu thereof, cash in an amount equal to the product obtained by multiplying (a) the Fidelity Determination Date Market Share Price and (b) the fractional share, calculated to the nearest ten-thousandth of the share of Fidelity Common Stock, to which the holder would otherwise be

entitled.  For purposes of determining any fractional share interest, all shares of MNB Common Stock owned by a MNB shareholder shall be combined so as to calculate the maximum number of whole shares of Fidelity Common Stock issuable to such MNB shareholders, to the extent permissible.

(v)

Dissenting MNB Shares.  The Dissenting MNB Shares that have not effectively withdrawn or lost their dissenters’ rights under the ETL, shall not be converted into or represent a right to receive the Merger Consideration under this Agreement, and the holders thereof shall be entitled only to such rights as are granted by the ETL. If any such holder of MNB Common Stock shall have failed to perfect or shall have withdrawn or lost such right, the Dissenting MNB Shares held by such holder shall receive Merger Consideration as set forth above.

(i)

Surrender and Exchange of MNB Stock Certificates and Redemption of MNB Options.  

(i)

Agent.  Prior to the Effective Time, Fidelity shall appoint its transfer agent, Computershare Shareholder Services, or another agent experienced in providing such services, and which is independent of and unaffiliated with Fidelity and MNB, as an exchange and paying agent (the “Exchange Agent”) for the payment and exchange of the Merger Consideration.

(ii)

Exchange Fund.  Three (3) days prior to the Effective Time, Fidelity shall deposit with the Exchange Agent, in trust for the benefit of holders of shares of MNB Common Stock, as applicable, sufficient certificates representing shares of Fidelity Common Stock to make all payments and deliveries to shareholders of MNB and cash in lieu of fractional shares pursuant to Sections 1.02(h)(iii) and (iv). Any certificates for Fidelity Common Stock and cash in lieu of fractional shares pursuant to Sections 1.02(h)(iii) and (iv) deposited with the Exchange Agent shall hereinafter be referred to as the “Exchange Fund.” Notwithstanding the foregoing, Fidelity may, at its election, deliver the required shares of Fidelity Common Stock in book entry form via direct registration in lieu of delivery of Fidelity Common Stock certificates.

(iii)

Exchange Procedures.  As soon as reasonably practicable after the Effective Time (and in any case no later than five (5) business days thereafter), Fidelity shall cause the Exchange Agent to mail to each record holder of a certificate representing shares of MNB Common Stock (a “MNB Certificate”) a letter of transmittal which shall specify that delivery of the MNB Certificates shall be effected, and risk of loss and title to the MNB Certificates shall pass, only upon delivery of the MNB Certificates to the Exchange Agent, and which letter shall be in customary form and have such other provisions as Fidelity may reasonably specify and instructions for effecting the surrender of such MNB Certificates in exchange for the Merger Consideration.  Upon surrender of a MNB Certificate to the Exchange Agent together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, and such other documents as may reasonably be required by the Exchange Agent, the holder of such MNB

Certificate shall be entitled to receive in exchange therefor (A) a certificate or electronic book entry to their account representing, in the aggregate, the whole number of shares of Fidelity Common Stock that such holder has the right to receive pursuant to Section 1.02(h)(iii)  and/or (B) a check in the amount equal to the aggregate amount of cash that such holder has the right to receive pursuant to Section 1.02(h)(iv). No interest will be paid or will accrue on any cash payment pursuant to Section 1.02(h)(iv). In the event of a transfer of ownership of MNB Common Stock which is not registered in the transfer records of MNB, a certificate representing, in the aggregate, the proper number of shares of Fidelity Common Stock pursuant to Section 1.02(h) and/or a check in the proper amount pursuant to Sections 1.02(h)(iv) may be issued with respect to such MNB Common Stock, as the case may be, to such a transferee if the MNB Certificate formerly representing such shares of MNB Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid.

(iv)

Distributions with Respect to Un-exchanged Shares.  No dividends or other distributions declared or made with respect to shares of Fidelity Common Stock with a record date after the Effective Time shall be paid to the holder of any un-surrendered MNB Certificate with respect to the shares of Fidelity Common Stock that such MNB Certificate holder would be entitled to receive upon surrender of such MNB Certificate until such holder shall surrender such MNB Certificate in accordance with Section 1.02(i)(iii). Subject to the effect of applicable laws, following surrender of any such MNB Certificate, there shall be paid to such holder of shares of Fidelity Common Stock issuable in exchange therefor, without interest, (a) promptly after the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Fidelity Common Stock and (b) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender payable with respect to such whole shares of Fidelity Common Stock.

(v)

No Further Ownership Rights.  All shares of Fidelity Common Stock issued and cash paid in lieu of fractional shares upon conversion of shares of MNB Common Stock in accordance with the terms of this Agreement shall be deemed to have been issued or paid in full satisfaction of all rights pertaining to the shares of MNB Common Stock.

(vi)

Termination of Exchange Fund.  Any portion of the Exchange Fund which remains undistributed to the holders of MNB Certificates for twelve (12) months after the Effective Time shall be delivered to Fidelity or otherwise on the instructions of Fidelity, and any holders of the MNB Certificates who have not previously complied with this Section 1.02(i) shall thereafter look only to Fidelity for the Merger Consideration, as applicable, with respect to the shares of MNB

Common Stock formerly represented thereby to which such holders are entitled pursuant to Section 1.02(h)(iii), any cash in lieu of fractional shares of Fidelity Common Stock to which such holders are entitled pursuant to Section 1.02(h)(iv) and any dividends or distributions with respect to shares of Fidelity Common Stock to which such holders are entitled pursuant to Section 1.02(i)(iv).

(vii)

No Liability.  None of Fidelity, MNB, any of their respective Subsidiaries or Affiliates or the Exchange Agent shall be liable to any Person in respect of any Merger Consideration from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law.

(viii)

Investment of the Exchange Fund.  The Exchange Agent shall invest any cash included in the Exchange Fund as reasonably directed by Fidelity; provided, however, that no holder of shares of MNB Common Stock shall suffer or incur any loss in connection with any such investment of the Exchange Fund. Any interest and other income resulting from such investments shall be payable to Fidelity.

(ix)

Lost Certificates.  If any MNB Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such MNB Certificate to be lost, stolen or destroyed and, if required by the Exchange Agent, the posting by such Person of a bond in such reasonable amount or such other agreement as Fidelity or the Exchange Agent may direct as indemnity against any claim that may be made against it with respect to such MNB Certificate, the Exchange Agent will deliver in exchange for such lost, stolen, or destroyed MNB Certificate the applicable Stock Consideration with respect to the shares of MNB Common Stock formerly represented thereby, any cash in lieu of fractional shares of Fidelity Common Stock to which the holders thereof are entitled pursuant to Section 1.02(h)(iv), and any dividends or other distributions on shares of Fidelity Common Stock to which the holders thereof are entitled pursuant to Section 1.02(i)(iv).

(x)

Withholding Rights.   Fidelity shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of MNB Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payment under the IRC and the rules and regulations promulgated thereunder, or any provisions of any Taxing Authority. To the extent that amounts are so withheld by Fidelity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of MNB Common Stock in respect of which such deduction and withholding was made by Fidelity.

(xi)

Stock Transfer Books.  At the Effective Time, the stock transfer books of MNB with respect to MNB Common Stock issued and outstanding prior to the Effective Time shall be closed and, thereafter, there shall be no further registration of transfers on the records of MNB of shares of MNB Common Stock issued and

outstanding prior to the Effective Time. From and after the Effective Time, the holders of MNB Certificates shall cease to have any rights with respect to such shares of MNB Common Stock, formerly represented thereby, except as otherwise provided herein or by law. At or after the Effective Time, any MNB Certificates presented to the Exchange Agent or Fidelity for any reason shall be exchanged for the Stock Consideration with respect to the shares of MNB Common Stock, formerly represented thereby, any cash in lieu of fractional shares of Fidelity Common Stock to which the holders thereof are entitled pursuant to Section 1.02(h)(iv), and any dividends or other distributions on shares of Fidelity Common Stock to which the holders thereof are entitled pursuant to Section 1.02(i)(iv).

(j)

Anti-Dilution Provisions.  If Fidelity shall, at any time before the Effective Time, (A) declare a dividend in shares of Fidelity Common Stock payable to shareholders of record before the Effective Time, (B) combine the outstanding shares of Fidelity Common Stock into a smaller number of shares, (C) subdivide or split the outstanding shares of Fidelity Common Stock, or (D) reclassify the shares of Fidelity Common Stock, then, in any such event, the number of shares of Fidelity Common Stock to be delivered to MNB shareholders who are entitled to receive shares of Fidelity Common Stock in exchange for shares of MNB Common Stock shall be adjusted so that each MNB shareholder shall be entitled to receive such number of shares of Fidelity Common Stock as such shareholder would have been entitled to receive if the Effective Time had occurred immediately prior to the happening of such event.  In addition, in the event that, prior to the Effective Time, Fidelity enters into an agreement pursuant to which shares of Fidelity Common Stock would be converted into shares or other securities or obligations of another corporation, proper provision shall be made in such agreement so that each MNB shareholder entitled to receive shares of Fidelity Common Stock in the Merger shall be entitled to receive such number of shares or other securities or amount of obligations of such other corporation as such shareholder would be entitled to receive if the Effective Time had occurred immediately prior to the happening of such event.

(k)

Possible Alternative Structures.  Notwithstanding anything to the contrary contained in this Agreement, prior to the Effective Time, Fidelity or Fidelity  Bank shall be entitled to revise the structure of the Merger and the Bank Merger, including without limitation, by merging  Merchants Bank with and into another Subsidiary of Fidelity or Fidelity Bank, provided that (i) any such Subsidiary shall become party to, and shall agree to be bound by, the terms of this Agreement; (ii) there are no adverse federal or state income Tax or other adverse Tax consequences to MNB shareholders as a result of the modification; (iii) the consideration to be paid to the holders of MNB Common Stock under this Agreement is not thereby changed in kind or value or reduced in amount; and (iv) such modification will not delay or jeopardize the receipt of approvals from Governmental Entities or jeopardize the satisfaction of any condition to Closing set forth in Article VI or otherwise adversely affect MNB or the holders of MNB Common Stock.  The parties hereto agree to appropriately amend this Agreement and any related documents in order to reflect any such revised structure.

(a)

MNB is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania.  MNB is a bank holding company duly registered under the BHCA.  MNB has the corporate power and authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operated by it.  MNB is not qualified or licensed to do business as a foreign corporation in any other jurisdiction and is not required to be so qualified or licensed as the result of the ownership or leasing of property or the conduct of its business except where the failure to be so qualified or licensed would not have a Material Adverse Effect on MNB. 

(b)

Merchants Bank is a Pennsylvania state-chartered commercial bank and is regulated by the FRB and the PDS.  Merchants Bank is duly organized and validly existing under the laws of the Commonwealth of Pennsylvania. Merchants Bank has the corporate power and

authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operated by it. The location of the principal office and each branch of Merchants Bank is set forth in MNB Disclosure Schedule 2.02(b).

(c)

MNB Disclosure Schedule 2.02(c) sets forth each MNB Subsidiary.  Each of MNB’s Subsidiaries (i) is duly organized, (ii) is validly existing and in good standing under the laws of its jurisdiction of organization, (iii) is duly licensed or qualified to do business in, and in good standing under the laws of, all jurisdictions, whether federal, state, local or foreign, where its ownership or leasing of property or the conduct of its business requires it to be so qualified, except as would not reasonably be expected to have a Material Adverse Effect on MNB or Merchants Bank and (iv) has all requisite corporate power and authority, and has all licenses, permits and authorizations of applicable Governmental Entities required to own or lease its properties and assets and to carry on its business as now conducted. The articles of incorporation, bylaws and similar governing documents of each MNB Subsidiary, copies of which have been delivered to Fidelity, are true and correct copies of such documents as amended, supplemented, restated and/or otherwise modified and in effect on the date of this Agreement.

(d)

The respective minute books of MNB, Merchants Bank, and each other MNB Subsidiary accurately record, in all material respects, all material corporate actions of their respective shareholders and boards of directors and trustees (including committees), in each case in accordance with the normal business practice of MNB and each such MNB Subsidiary.

(e)

Prior to the date of this Agreement, MNB and Merchants Bank have delivered to Fidelity true and correct copies of the articles of incorporation and bylaws of MNB and Merchants Bank.

(f)

Merchants Bank is a member in good standing of the Federal Home Loan Bank of Pittsburgh and owns the requisite amount of stock therein.

(g)

Merchants Bank has been operated in compliance with its policies and procedures and all applicable federal and state laws, regulations, rules, and orders, except to the extent that it is not reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on MNB or Merchants Bank.

(a)

The authorized capital stock of MNB consists of two hundred million (200,000,000) shares, all of which are classified as common stock, one hundred twenty five thousandths of one dollar ($0.125) par value (“MNB Common Stock”), of which (i) one million one hundred thirty-two thousand eight hundred seventy-three (1,132,873) shares are outstanding, validly issued, fully paid and nonassessable and (ii) twenty-three thousand three hundred seventy-four (23,374) shares are held by MNB as treasury stock as of the date of this Agreement. There are no shares classified as preferred stock issued or outstanding.  Except as disclosed in MNB Disclosure Schedule 2.03(a), no trust preferred or subordinated debt

securities of MNB are issued or outstanding. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which MNB’s shareholders may vote have been issued by MNB and are outstanding.  Neither MNB nor any MNB Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of MNB Common Stock, or any other security of MNB or any securities representing the right to vote, purchase or otherwise receive any shares of MNB Common Stock or any other security of MNB.

(b)

The authorized capital stock of Merchants Bank consists of two hundred million  (200,000,000) shares of common stock, par value of one hundred twenty five thousandths of one dollar ($0.125) per share (“Merchants Bank Common Stock”), of which one million forty-nine thousand nine hundred seventy-six  (1,049,976) shares are outstanding, validly issued, fully paid, nonassessable, free of preemptive rights and owned by MNB. Neither Merchants Bank nor any MNB Subsidiary has or is bound by any subscription, option, warrant, call, commitment, agreement or other Right of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of the capital stock of any MNB Subsidiary or any other security of any MNB Subsidiary or any securities representing the right to vote, purchase or otherwise receive any shares of the capital stock or any other security of any MNB Subsidiary. Either MNB or Merchants Bank owns all of the outstanding shares of capital stock of each MNB Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature. 

(c)

Except as set forth in MNB Disclosure Schedule 2.03, neither MNB nor any other MNB Subsidiary, owns any equity interest, directly or indirectly, in any other company or controls any other company, except for equity interests held in the investment portfolios of MNB and MNB Subsidiaries, and equity interests held by MNB Subsidiaries in a fiduciary capacity and equity investments held in connection with commercial loan activities of MNB’s Subsidiaries. There are no subscriptions, options, warrants, calls, commitments, agreements or other Rights outstanding and held by MNB or Merchants Bank with respect to any other company’s capital stock or the equity of any other person.

(d)

To the Knowledge of MNB, except as disclosed in MNB Disclosure Schedule 2.03(d), no person or “group” (as that term is used in Section 13(d)(3) of the Exchange Act), is the beneficial owner (as defined in Section 13(d) of the Exchange Act) of 5% or more of the outstanding shares of any class of MNB Common Stock.

(a)

MNB has full corporate power and authority to execute and deliver this Agreement and, subject to the receipt of the Regulatory Approvals and the approval and adoption of this Agreement and the Merger by the affirmative vote required of the shareholders of MNB pursuant to the ETL and MNB’s articles of incorporation and bylaws (the “MNB Shareholder Approval”), to consummate the transactions contemplated hereby. Merchants Bank has full corporate power and authority to execute and deliver the Bank Plan of Merger

and, subject to the receipt of any required Regulatory Approvals, to consummate the Bank Merger. The execution and delivery of this Agreement by MNB and the completion by MNB of the transactions contemplated hereby have been duly and validly approved by the board of directors of MNB and, except for MNB Shareholder Approval as required under the ETL and MNB’s articles of incorporation and bylaws, no other corporate proceedings on the part of MNB are necessary to complete the transactions contemplated herein. This Agreement has been duly and validly executed and delivered by MNB and, subject to (i) MNB Shareholder Approval as required under the ETL and MNB’s articles of incorporation and bylaws, (ii) approval and adoption by MNB as the sole shareholder of Merchants Bank, (iii) receipt of the required approvals from Bank Regulators, and (iv) the due and valid execution and delivery of this Agreement by Fidelity, constitutes the valid and binding obligation of MNB, enforceable against MNB in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity. 

(b)

The execution and delivery of this Agreement by MNB, subject to (i) the execution and delivery of the Bank Plan of Merger by Merchants Bank, (ii) receipt of approvals from the Bank Regulators and MNB’s and Fidelity’s compliance with any conditions contained therein, (iii) the completion of the transactions contemplated hereby, and (iv) compliance by MNB or Merchants Bank with any of the terms or provisions hereof or of the Bank Plan of Merger, will not (A) conflict with or result in a breach of any provision of the articles of incorporation or other organizational document or bylaws of MNB or any MNB Subsidiary; (B) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to MNB or any MNB Subsidiary or any of their respective properties or assets; or (C) except as set forth in the MNB Disclosure Schedule 2.04, violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of MNB or any MNB Subsidiary under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, commitment or other instrument or obligation to which MNB or any MNB Subsidiary is a party, or by which they or any of their respective properties or assets may be bound or affected, except in the case of clause (C) above, for violations, conflicts, breaches or defaults which, either individually or in the aggregate, will not have a Material Adverse Effect on MNB or any MNB Subsidiary.

(a)

The Deposit Liabilities of Merchants Bank are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due and Merchants Bank is authorized to hold the Deposit Liabilities.  Except for such liens as set forth on the MNB Disclosure Schedule 2.05(a), the Deposit Liabilities of Merchants Bank are not subject to any lien, including without limitation any liens in favor of Merchants Bank and are not, as of the close of business on the Closing Date, subject to court order, legal restraint, automatic stay in bankruptcy, or other legal process.

(b)

All of the Deposit Liabilities of Merchants Bank have been administered and originated, in compliance in all material respects with the documents governing the relevant type of deposit account and all applicable laws and regulations.  The Deposit Liabilities of Merchants Bank were opened, extended or made, and have been maintained, in accordance with all applicable federal and state laws, regulations, rules and orders, including the Bank Secrecy Act and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (“USA PATRIOT Act”), and has been operated in compliance with Merchants Bank’s policies and procedures. Except as set forth on the MNB Disclosure Schedule 2.05(b),  no Deposit Liabilities of Merchants Bank are maintained by a “money service business” within the meaning of regulations promulgated under the USA PATRIOT Act. None of the Deposit Liabilities of Merchants Bank account holders are on the list of Specially Designated Nationals or Blocked Persons of the Office of Foreign Assets Control.

(c)

Merchants Bank has properly accrued interest on the Deposit Liabilities of Merchants Bank and the records respecting the Deposit Liabilities accounts accurately reflect such accruals of interest.

(d)

Merchants Bank has made available to Fidelity a true and complete copy of each of the documents governing the Deposit Liabilities of Merchants Bank for each of the types of Deposit Liabilities of Merchants Bank offered at Merchants Bank.

(e)

Except as set forth on the MNB Disclosure Schedule 2.05(e), none of the Deposit Liabilities of Merchants Bank are “brokered deposits” within the meaning of the rules and regulations of the FDIC; none of the Deposit Liabilities of Merchants Bank were obtained through the Certificate of Deposit Account Registry Service or similar reciprocal placement network or through an internet listing service.  Except as set forth on the MNB Disclosure Schedule 2.05(e), none of the Deposit Liabilities of Merchants Bank are held by Federal, State, county or other municipal governments or governmental or quasi-governmental agencies or are subject to escheat. 

(f)

With respect to the Deposit Liabilities of Merchants Bank, Merchants Bank is in material compliance with the law and Treasury Regulations relating to (i) obtaining from depositors of the Deposit Liabilities of Merchants Bank executed IRS Forms W-8 and W-9 when appropriate and (ii) reporting of interest. With respect to the Deposit Liabilities of

Merchants Bank opened, Merchants Bank has either obtained a properly completed Form W-8 or W-9 when appropriate (and renewals of such forms, where required) or is back-up withholding on such account.

(a)

MNB has previously made available to Fidelity the MNB Regulatory Reports through September 30, 2019.  The MNB Regulatory Reports have been, or will be, prepared in all material respects in accordance with applicable regulatory accounting principles and practices including but not limited to, all applicable rules, regulations and pronouncements of applicable Bank Regulators throughout the periods covered by such statements, and fairly present, or will fairly present in all material respects, the financial position, results of operations and changes in shareholders’ equity of MNB or Merchants Bank, as the case may be, as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles including but not limited to, all applicable rules, regulations and pronouncements of applicable Bank Regulators applied on a consistent basis.

(b)

MNB has previously delivered to Fidelity the MNB Financials as of the date hereof.  The MNB Financials as of the date hereof have been, or will be, prepared in accordance with GAAP applied on a consistent basis throughout the periods covered by such statements, except as noted therein, and fairly present, or will fairly present, the consolidated financial position, results of operations and cash flows of MNB as of and for the periods ending on the dates thereof in accordance with GAAP, applied on a consistent basis, except as noted therein and except as indicated in the case of unaudited statements to normal recurring audit adjustments and the absence of footnotes.

(c)

At the date of each balance sheet included in the MNB Financials or the MNB Regulatory Reports, neither MNB nor Merchants Bank (as the case may be) had, or will have any

liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such MNB Financials or MNB Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or fully disclosed in a footnote thereto, except for liabilities, obligations and loss contingencies which are not material in the aggregate to MNB or which are incurred in the ordinary course of business, consistent with past practice, and subject, in the case of any unaudited statements, to normal recurring audit adjustments and the absence of footnotes.

(d)

Except as set forth on the MNB Disclosure Schedule 2.07, the records, systems, controls, data and information of MNB and the MNB Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of MNB or any MNB Subsidiary or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in this Section 2.07(d).  MNB (i) has implemented and maintains a system of internal control over financial reporting that is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of its financial statements for external purposes, (ii) to the extent required by applicable law, has implemented and maintains disclosure controls and procedures to ensure that material information relating to MNB, including its consolidated MNB Subsidiaries, is made known to the chief executive officer and the chief financial officer of MNB by others within those entities, and (iii) has disclosed to the MNB or Merchants Bank board of directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect MNB’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in MNB’s internal control over financial reporting.  These disclosures (if any) were made in writing by management to MNB’s auditors and audit committee and a copy has previously been made available to Fidelity.

(e)

Since March 31, 2016, (i) neither MNB nor any of the MNB Subsidiaries nor, to the Knowledge of MNB or Merchants Bank, any director, officer, employee, auditor, accountant or representative of MNB or any of the MNB Subsidiaries has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting practices, procedures, methodologies or methods of MNB or any of the MNB Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that MNB or any of the MNB Subsidiaries has engaged in illegal accounting practices, and (ii) no attorney representing MNB or any of the MNB Subsidiaries, whether or not employed by MNB or any of the MNB Subsidiaries, has reported evidence of a material violation of laws, breach of fiduciary duty or similar violation by MNB or any of its officers, directors, employees or agents to the board of directors of MNB or any committee thereof or to any director or officer of MNB.

(f)

Except as set forth in the MNB Disclosure Schedule 2.07(f),  no agreement pursuant to which any loans or other assets have been or shall be sold by MNB or the MNB Subsidiaries entitle the buyer of such loans or other assets, unless there is a material breach of representation or covenant by MNB or the MNB Subsidiaries, to cause MNB or the MNB Subsidiaries to repurchase such loan or other assets or the buyer to pursue any other form of recourse against MNB or the MNB Subsidiaries, and there has been no material breach by MNB or the MNB Subsidiaries of a representation or covenant in any such agreement.  The MNB Regulatory Reports have disclosed, since December 31, 2016, any cash, stock or other dividend or any other distribution with respect to the capital stock of MNB that has been declared, set aside or paid.

(g)

Except as set forth in the MNB Disclosure Schedule 2.07(g), since March 31, 2016, each of MNB and the MNB Subsidiaries have timely filed all MNB Regulatory Reports, schedules, forms, registrations and other documents, together with any amendments required to be made with respect thereto, that any of them were required to file with any Governmental Entity, and have timely paid all fees and assessments due and payable in connection therewith.  Except as set forth in MNB Disclosure Schedule 2.07(g), there is no material unresolved violation or exception by any Governmental Entity with respect to any report or statement relating to any examinations of MNB or any of the MNB Subsidiaries.  MNB has made available to Fidelity the MNB Regulatory Reports and the MNB Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements.

(a)

All income and other material or material in the aggregate Tax Returns required to have been filed by MNB and the MNB Subsidiaries have been or will be duly and timely filed (taking into account extensions of time to file), and except as set forth in MNB Disclosure Schedule 2.08 each such Tax Return is true, correct and complete in all material respects. All income and other material Taxes in respect of the periods covered by the Tax Returns pursuant to this Section 2.08 due and payable by MNB and the MNB Subsidiaries (whether or not shown on any Tax Return) have been paid.

(b)

There is no action, audit, dispute or claim now pending or proposed or threatened in writing against MNB or any of the MNB Subsidiaries in respect of Taxes.  Except as set forth in MNB Disclosure Schedule 2.08, neither MNB nor any of the MNB Subsidiaries is the beneficiary of any extension of time within which to file any income or other material Tax Return which Tax Return has not been filed.  No written claim has been made by a Taxing Authority in the last five (5) years in a jurisdiction where any of MNB or the MNB Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  There are no liens on any of the assets of MNB with respect to Taxes other than for Taxes not yet due and payable.

(c)

Each of MNB and the MNB Subsidiaries has withheld and timely paid all Taxes required to have been withheld and paid and has complied with all information reporting and backup withholding requirements in all material respects.

(d)

MNB Disclosure Schedule 2.08 lists all Tax Returns filed by MNB or the MNB Subsidiaries for taxable periods ended on or after December 31, 2013 that have been or are currently the subject of audit.  Except as set forth on MNB Disclosure Schedule 2.08, neither MNB nor any of the MNB Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency which waiver or extension is still in effect.

(e)

MNB is not a United States real property holding corporation within the meaning of Section 897(c)(2) of the IRC.  None of MNB or any of the MNB Subsidiaries has been a member of a Relevant Group other than a Relevant Group of which MNB is the parent.

(f)

None of MNB or any of the MNB Subsidiaries has agreed to, nor are any required to, make any adjustment under Section 481(a) of the IRC.  None of MNB or any MNB Subsidiary has been the “distributing corporation” or the “controlled corporation” with respect to a transaction described in Section 355 of the IRC within the five (5) year period ending as of the date of this Agreement.  None of MNB nor any of the MNB Subsidiaries is subject to a private ruling from or agreement with any Taxing Authority.  MNB has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the IRC.  None of MNB or any of the MNB Subsidiaries has participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4.

(g)

None of MNB or any of the MNB Subsidiaries is a party to an agreement the principal purpose of which is Tax allocation or sharing.  None of MNB or any MNB Subsidiary has liability for the Taxes of any other Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local, or foreign law), other than as a result of being a member of a Relevant Group of which MNB is the parent, or as a transferee or successor, by contract or otherwise.

(h)

None of MNB or any of the MNB Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (i) any installment sale or open transaction disposition made on or prior to the Closing Date, (ii) prepaid amount received on or prior to the Closing Date, (iii) intercompany transactions or excess loss accounts described in the Treasury Regulations under Section 1502 of the IRC (or any similar provision of state, local, or foreign Tax law) or (iv) cancellation of indebtedness arising on or prior to the Closing Date.

(i)

No bad debt reserve of MNB or any of the MNB Subsidiaries must be recaptured for federal income Tax purposes as a result of the Merger.

(a)

Except for matters that have not had and would not reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect on MNB (i) none of MNB nor any of the MNB Subsidiaries is, with or without the lapse of time or the giving of notice, or both, in breach or default in any material respect under any material contract, lease, license or other agreement or instrument, (ii) to the Knowledge of MNB, none of the other parties to any such material contract, lease, license or other agreement or instrument (excluding instruments or agreements relating to Loans) is, with or without the lapse of time or giving of notice, or both, in breach or default in any material respect thereunder, and (iii) neither MNB nor any of the MNB Subsidiaries has received any written notice of the intention of any party to terminate or cancel any such material contract, lease, license or other agreement or instrument, whether as a termination or cancellation for convenience or for default of MNB or any of the MNB Subsidiaries.

(b)

Except as described in MNB Disclosure Schedule 2.10, neither MNB nor any MNB Subsidiary is a party to or subject to: (i) any employment, consulting, termination or severance contract or arrangement in effect as of the date of this Agreement with any past or present officer, director or employee of MNB or any MNB Subsidiary or any other Person, except for “at will” arrangements; (ii) any plan, arrangement or contract providing for bonuses, pensions, options, deferred compensation, retirement payments, profit sharing, benefits, or similar arrangements for or with any past or present officers, directors or employees of MNB or any MNB Subsidiary or any other Person; (iii) any collective bargaining agreement with any labor union relating to employees of MNB or any MNB Subsidiary; (iv) any agreement which by its terms limits the payment of dividends by MNB or any MNB Subsidiary; (v) any instrument evidencing or related to indebtedness for borrowed money whether directly or indirectly, by way of purchase money obligation, conditional sale, lease purchase, guaranty or otherwise, in respect of which MNB or any MNB Subsidiary is an obligor to any person, which instrument evidences or relates to indebtedness other than deposits, repurchase agreements, Federal Home Loan Bank advances, bankers acceptances and “treasury tax and loan” accounts established in the ordinary course of business and transactions in “federal funds” or which contains financial covenants or other restrictions (other than those relating to the payment of principal and interest when due) which would be applicable on or after the Closing Date to Fidelity; or (vi) any contract (other than this Agreement) limiting the freedom of any MNB Subsidiary to engage in any type of banking or bank-related business permissible under law.

(c)

True and correct copies of agreements, plans, arrangements and instruments referred to in Section 2.10(a) and (b) have been delivered to Fidelity on or before the date hereof, are listed on MNB Disclosure Schedule 2.10 and are in full force and effect on the date hereof

and neither MNB nor any MNB Subsidiary (nor, to the Knowledge of MNB, any other party to any such contract, plan, arrangement or instrument) has breached any provision of, or is in default in any respect under any term of, any such contract, plan, arrangement or instrument which breach or default has resulted in or is reasonably likely to result in a Material Adverse Effect with respect to MNB.  Except as set forth in MNB Disclosure Schedule 2.10, no party to any material contract, plan, arrangement or instrument will have the right to terminate any or all of the provisions of any such contract, plan, arrangement or instrument as a result of the transactions contemplated by this Agreement.  Except as set forth in MNB Disclosure Schedule 2.10,  no employee (including any officer) of MNB or any MNB Subsidiary who is a party to a written employment agreement with MNB or MNB Subsidiary possesses the right to terminate such employment agreement as a result of the execution of this Agreement. Except as set forth in MNB Disclosure Schedule 2.10, no plan, employment agreement, termination agreement, or similar agreement or arrangement to which MNB or any MNB Subsidiary is a party or under which MNB or any MNB Subsidiary may be liable contains provisions which permit an employee or independent contractor to terminate it and continue to accrue future benefits thereunder. Except as set forth in MNB Disclosure Schedule 2.10, no such agreement, plan or arrangement (i) provides for acceleration in the vesting of benefits or payments due thereunder upon the occurrence of a change in ownership or control of MNB or any MNB Subsidiary; (ii) provides for benefits which may cause the disallowance of a federal income tax deduction under IRC Section 280G; or (iii) requires MNB or any MNB Subsidiary to provide a benefit in the form of MNB Common Stock or determined by reference to the value of MNB Common Stock.

(a)

MNB and each of the MNB Subsidiaries has, or will have as to property acquired after the date hereof, good and, as to real property, marketable title to all assets and properties owned by MNB or any MNB Subsidiary in the conduct of their businesses (“Owned Properties”), whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the MNB Regulatory Reports and in the MNB Financials or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of for fair value, in the ordinary course of business, since the date of such balance sheets), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure repurchase agreements and liabilities for borrowed money from a Federal Home Loan Bank, (ii) inter-bank credit facilities, or any transaction by a MNB Subsidiary acting in a fiduciary capacity, (iii) those reflected in the notes to the MNB Financials, (iv) statutory liens for amounts not yet delinquent or which are being contested in good faith, and (v) the items disclosed in MNB Disclosure Schedule 2.11.  MNB and the MNB Subsidiaries, as lessee, have the right under valid and subsisting leases of real and personal properties used by MNB and its Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Except as disclosed in MNB Disclosure Schedule 2.11, such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease

expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in the notes to the MNB Financials.

(b)

With respect to all agreements pursuant to which MNB or any MNB Subsidiary has purchased securities subject to an agreement to resell, if any, MNB or such MNB Subsidiary, as the case may be, has a valid, perfected first lien or security interest in the securities or other collateral securing the repurchase agreement, and the value of such collateral equals or exceeds the amount of the debt secured thereby.

(c)

A true and complete copy of each agreement pursuant to which MNB or any of the MNB Subsidiaries leases any real property (such agreements, together with any amendments, modifications and other supplements thereto, collectively, the “Leases”), has heretofore been delivered or made available to Fidelity and all such leases are listed on MNB Disclosure Schedule 2.11(c).  Assuming due authorization, execution and delivery by each Party thereto other than MNB or an MNB Subsidiary party thereto, as the case may be, each Lease is enforceable in accordance with its terms and is in full force and effect, except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies.  There is not under any such Lease any material existing default by MNB or any of the MNB Subsidiaries or, to the Knowledge of MNB, any party thereto, or any event which with notice of lapse of time or both would constitute such a default.  The consummation of the transactions this Agreement contemplates will not cause any default under the Leases, provided the consents and notices disclosed in MNB Disclosure Schedule 2.06 have been obtained or made, except for any such default which would not, individually or in the aggregate, have a Material Adverse Effect on MNB.

(d)

The Owned Properties and the properties leased pursuant to the Leases (the “Leased Properties”) constitute all of the real estate on which MNB and the MNB Subsidiaries maintain their facilities or conduct their business as of the date of this Agreement, except for locations the loss of which would not result in a Material Adverse Effect on MNB.

(e)

A true and complete copy of each agreement pursuant to which MNB or any of the MNB Subsidiaries leases real property to a third party (such agreements, together with any amendments, modifications and other supplements thereto, collectively, the “Third Party Leases”) has heretofore been delivered to Fidelity.  Assuming the due authorization, execution and delivery by the counterparty thereto, each Third Party Lease is valid, binding and enforceable in accordance with its terms and is in full force and effect, except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies.  To the Knowledge of MNB, there are no existing defaults by the tenant under any Third Party Lease, and no event has occurred which with notice or lapse of time or both would constitute such a default or which individually or in the aggregate would have a Material Adverse Effect on MNB.

(f)

MNB and the MNB Subsidiaries currently maintain insurance considered by MNB to be reasonable for their respective operations and similar in scope and coverage to that

maintained by other businesses similarly engaged.  Neither MNB nor any MNB Subsidiary has received notice from any insurance carrier that (i) such insurance will be cancelled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased. Except as set forth on MNB Disclosure Schedule 2.11(f), there are presently no material claims pending under such policies of insurance and no notices have been given by MNB or any MNB Subsidiary under such policies. All such insurance is valid and enforceable and in full force and effect, and within the last five (5) years MNB has received each type of insurance coverage for which it has applied and during such periods has not been denied indemnification for any material claims submitted under any of its insurance policies.

(a)

Except as set forth on MNB Disclosure Schedule 2.13, each of MNB and each MNB Subsidiary is, and since January 1, 2013 has been, in compliance in all material respects with all, and is not in default in any material respect under any, applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its customers and employees, and neither MNB nor any MNB Subsidiary has received any written notice to the contrary since January 1, 2014.

(b)

MNB and each of its Subsidiaries holds all licenses, franchises, permits and authorizations necessary for the lawful conduct of their businesses under, and have complied in all material respects with, applicable laws, statutes, orders, rules or regulations of any federal, state or local governmental authority relating to them, including, without limitation, the Equal Credit Opportunity Act, the United States Foreign Corrupt Practices Act, the Fair Housing Act, the Community Reinvestment Act, Home Mortgage Disclosure Act, the USA PATRIOT Act, the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Regulation O, applicable limits on loans to one borrower, and all other applicable fair lending laws and other laws relating to discriminatory business practice, other than where such failure to hold or such noncompliance will neither result in a

limitation in any material respect on the conduct of its businesses or otherwise have a Material Adverse Effect on MNB.

(c)

Except as set forth on MNB Disclosure Schedule 2.13, since January 1, 2016, neither MNB nor any MNB Subsidiary has received any notification or communication from any Governmental Entity:  (i) asserting that MNB or any MNB Subsidiary is not in compliance with any of the statutes, regulations or ordinances which such Governmental Entity enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to MNB or any MNB Subsidiary; (iii) requiring or threatening to require MNB or any MNB Subsidiary, or indicating that MNB or any MNB Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement restricting or limiting, or purporting to restrict or limit, in any manner the operations of MNB or any MNB Subsidiary, including without limitation any restriction on the payment of dividends; (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of MNB or any MNB Subsidiary, including without limitation any restriction on the payment of dividends; or (v) imposing any civil monetary penalties on MNB , any MNB Subsidiary, or any directors of MNB (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”).  Neither MNB nor any MNB Subsidiary is currently subject to any Regulatory Agreement.

(a)

MNB has previously made available to Fidelity true and complete copies of all employee or director benefit plans which MNB, Merchants Bank or any MNB Subsidiary currently maintains, including but not limited to bonus plans; employee benefit plans within the meaning of ERISA Section 3(3); profit sharing plans; stock purchase plans; stock ownership plans; stock option plans; phantom stock plans; deferred compensation; supplemental income plans; supplemental executive retirement plans; termination agreements; employment agreements; annual, long term or other incentive plans; severance plans; reimbursement arrangements; policies and agreements; group insurance plans; vacation pay; sick leave; life insurance; retiree life insurance plans; short-term disability; long-term disability; and medical plans or arrangements; and all other benefit plans, policies, agreements and arrangements, all of which are listed in MNB Disclosure Schedule 2.14, maintained or contributed to for the benefit of the employees, former employees (including retired employees), directors, or former directors of MNB, Merchants Bank or any MNB Subsidiary and any beneficiaries thereof or other person, or with respect to which MNB, Merchants Bank or any MNB Subsidiary has or may have any obligation or liability, whether actual or contingent (the “MNB Benefit Plans”), together with, as applicable, (i) the most recent actuarial (if any) and financial reports relating to those plans which constitute “qualified plans” under IRC Section 401(a), (ii) the most recent annual reports relating to such plans filed by them, respectively, with any government agency, (iii) all rulings and determination letters which pertain to any such plans, (iv) all contracts currently in force with third party administrators, actuaries, investment managers and other service providers to such plans, and (v) the non-discrimination testing results for the three (3) most recent plan years. 

(b)

Neither MNB, Merchants Bank, any MNB Subsidiary nor any pension plan maintained by MNB or any MNB Subsidiary, has incurred, directly or indirectly, within the past six (6) years any liability under Title IV of ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS with respect to any pension plan qualified under IRC Section 401(a) which liability has resulted in or is reasonably expected to result in a Material Adverse Effect with respect to MNB, Merchants Bank, or MNB Subsidiary, except liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4007, all of which have been fully paid, nor has any reportable event under ERISA Section 4043 occurred with respect to any such pension plan.  Except as set forth in MNB Disclosure Schedule 2.14, with respect to each of such plans that is subject to Title IV of ERISA or any MNB Benefit Plans, the fair market value of the assets under such plan exceeds the present value of the accrued benefits liability as of the end of the most recent plan year with respect to such plan calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such plan. There is not currently pending with the Pension Benefit Guaranty Corporation any filing with respect to any reportable event under Section 4043 of ERISA nor has any reportable event occurred as to which a filing is required and has not been made (other than as might be required with respect to this Agreement and the transactions contemplated thereby) with respect to any plan subject to Title IV of ERISA and to which MNB or any of its ERISA Affiliates has any liability.  MNB has not provided nor is required to provide security to any plan maintained by MNB or any of its ERISA Affiliates to which the requirements of Section 412 of the IRC apply pursuant to Section 401(a)(29) of the IRC.  Neither MNB nor any of its ERISA Affiliates has incurred or is subject to any liability under ERISA Section 4201 for a complete or partial withdrawal from a multiemployer plan.

(c)

All MNB Benefit Plans that are “employee benefit plans,” as defined in ERISA Section 3(3), comply and within the past six (6) years have complied in all material respects with (i) relevant provisions of ERISA and (ii) in the case of plans intended to qualify for favorable income tax treatment, provisions of the IRC.  All MNB Benefit Plans comply and have complied with and have been operated and administered in all material respects in accordance with their terms and with applicable law. 

(d)

To the Knowledge of MNB, no prohibited transaction (which shall mean any transaction prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any transaction prohibited under IRC Section 4975) has occurred within the past six (6) years with respect to any employee benefit plan maintained by MNB or any of its ERISA Affiliates which would result in the imposition, directly or indirectly, of an excise tax under IRC Section 4975 or other penalty under ERISA or the IRC, which, individually or in the aggregate, has resulted in or is reasonably expected to result in a Material Adverse Effect with respect to MNB.

(e)

MNB and the MNB Subsidiaries provide continuation coverage under existing group health plans for separating employees and “qualified beneficiaries” of covered employees (as defined in IRC Section 4980B(g)) in accordance with the provisions of IRC Section 4980B(f) or 40 P.S. § 756.2 et seq.

(f)

There are no current or pending or, to the Knowledge of MNB, threatened audits or investigations by any governmental entity involving any MNB Benefit Plan, and there are no current or pending or, to the Knowledge of MNB, threatened claims (except for individual claims for benefits payable in the ordinary course of operation of the MNB Benefit Plans), suits or proceedings involving any MNB Benefit Plan and, to the Knowledge of MNB, no set of circumstances exists which may reasonably be expected to give rise to any such audits, investigations, claims, suits or proceedings. 

(g)

MNB and Merchants Bank have not contributed to any “multiemployer plan” as defined in Section 3(37) of ERISA. 

(h)

All contributions required to be made under the terms of any MNB Benefit Plan have been timely made and all anticipated contributions and binding obligations are accrued monthly on MNB’s consolidated financial statements to the extent required and in accordance with GAAP. MNB has expensed and accrued as a liability the present value of future benefits in accordance with applicable laws and GAAP.  To MNB’s Knowledge, except as set forth in MNB Disclosure Schedule 2.14,  neither any pension plan nor any single-employer plan of MNB nor an ERISA Affiliate has an “accumulated funding deficiency,” whether or not waived, within the meaning of Section 412 of the IRC or Section 302 of ERISA and neither MNB nor an ERISA Affiliate has an outstanding funding waiver.

(i)

None of the execution of this Agreement, shareholder approval of this Agreement or consummation of the Merger will, except as set forth in MNB Disclosure Schedule 2.14, (i) entitle any current or former employee, consultant or director of MNB, Merchants Bank, or MNB Subsidiary to severance pay or other payments or any increase in severance pay or other payments upon any termination of employment or otherwise after the date hereof, (ii) accelerate the time of payment or vesting or trigger any payment or funding, through a grantor trust or otherwise, of compensation or benefits under, increase the amount payable to or trigger any other material obligation pursuant to, any of the MNB Benefit Plans, (iii) result in any breach or violation of, or a default under, any of the MNB Benefit Plans or (iv) result in any payment that would be a “parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the IRC. 

(j)

All required reports and descriptions, including but not limited to Form 5500 annual reports and required attachments, Forms 1099-R, summary annual reports, Forms PBGC-1 and summary plan descriptions, have been filed or distributed appropriately with respect to each MNB Benefit Plan. All required Tax Returns with respect to each MNB Benefit Plan have been made, and any Taxes due in connection with such filings have been paid.

(k)

MNB does not maintain any MNB Benefit Plan or other compensation program or arrangement under which payment is reasonably likely to become non-deductible, in whole or in part, for tax reporting purposes as a result of the limitations under Section 162(m) of the IRC and the regulations issued thereunder. 

(l)

Except as set forth in MNB Disclosure Schedule 2.14, to the Knowledge of MNB, each MNB Benefit Plan that constitutes a “non-qualified deferred compensation plan” within the meaning of Section 409A of the IRC complies or will comply in both form and operation with the requirements of Section 409A of the IRC.

(a)

Neither MNB nor any MNB Subsidiary, nor any properties owned or occupied by MNB or any MNB Subsidiary is or has been in violation of or liable under any Environmental Law which violation or liability, individually or in the aggregate, resulted in, or would reasonably be expected to result, in a Material Adverse Effect with respect to MNB.  There are no actions, suits, proceedings, or demands, claims or notices, including without limitation, demand letters or requests for information from any Governmental Entity, instituted or pending, or to the Knowledge of MNB threatened or any investigation pending relating to the liability of MNB or any MNB Subsidiary with respect to any property owned or operated by MNB or any MNB Subsidiary under any Environmental Law.

(b)

(i) No property, now or, to the Knowledge of MNB, formerly owned or operated by MNB or any MNB Subsidiary or on which MNB or any MNB Subsidiary holds or, to the Knowledge of MNB, held a mortgage or other security interest or has foreclosed or taken a deed in lieu of foreclosure, has been listed or proposed for listing on the NPL, is listed on the CERCLIS, or is listed or proposed to be listed on any state list similar to the NPL or the CERCLIS, or is the subject of federal, state or local enforcement actions or other investigations; and (ii) no property, formerly owned or operated by MNB or any MNB Subsidiary or on which MNB or any MNB Subsidiary previously held a mortgage or other security interest, was, at the time MNB or Merchants Bank owned, operated or held a mortgage or security interest was listed or proposed for listing on the NPL, was listed on

the CERCLIS, or is listed or proposed to be listed on any state list similar to the NPL or the CERCLIS, or is the subject of federal, state or local enforcement actions or other investigations; in the case of each of (i) and (ii) which is reasonably to be expected to lead to claims against MNB or any MNB Subsidiary for response costs, remedial work, investigation, damage to natural resources or for personal injury or property damage, including, but not limited to, claims under CERCLA, which would have a Material Adverse Effect.

(c)

(i) MNB and the MNB Subsidiaries are in compliance in all material respects with applicable Environmental Laws, (ii) no Contamination exceeding applicable cleanup standards or remediation thresholds under any Environmental Law exists at any real property, including buildings or other structures, currently or formerly owned or operated by MNB or any of the MNB Subsidiaries, or on any property in which MNB or any of the MNB Subsidiaries has held a security interest, lien or a fiduciary or management role (“MNB Loan Property”) that would reasonably be expected to result in a material Environmental Liability for MNB or the MNB Subsidiaries, (iii) to the Knowledge of MNB, no Contamination exists at any real property owned by a third party that would reasonably be expected to result in a material Environmental Liability for MNB or the MNB Subsidiaries, (iv) neither MNB nor any of the MNB Subsidiaries has received any written notice, demand letter, or claim alleging any material violation of, or liability under, any Environmental Law, (v) neither MNB nor any of the MNB Subsidiaries is subject to any order, decree, injunction or other agreement with any Governmental Entity or any third party under any Environmental Law that would reasonably be expected to result in a material Environmental Liability of MNB or the MNB Subsidiaries, (vi) there are no circumstances or conditions (including the presence of un-encapsulated friable asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning or automotive services) involving MNB or any of the MNB Subsidiaries, on any currently or formerly owned or operated property, or any MNB Loan Property, that could reasonably be expected to result in any material claims, liability or investigations against MNB or any of the MNB Subsidiaries, or result in any material restrictions on the ownership, use or transfer of any property pursuant to any Environmental Law or materially and adversely affect the value of any MNB Loan Property, and (vii) MNB has listed in MNB Disclosure Schedule 2.17 and delivered to Fidelity copies of all environmental reports or studies, sampling data, correspondence and filings in its possession relating to MNB, the MNB Subsidiaries and any Owned Properties, Leased Properties or MNB Loan Property (except, in the case of any MNB Loan Property, Phase I environmental site assessments which did not recommend the performance of a Phase II assessment), which were prepared in the last five (5) years, and, solely with respect to MNB Loan Properties, are material to MNB.

(a)

Each loan reflected as an asset in the MNB Financial Statements (i) is evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and correct (ii) to the extent secured, has been secured by valid liens and security interests which have been perfected, in accordance with applicable law, and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, in each case other than loans as to which the failure to satisfy the foregoing standards would not have a Material Adverse Effect on MNB.

(b)

MNB Disclosure Schedule 2.20 sets forth a listing, as of September 30, 2019, by account, of: (i) all loans (including loan participations) of Merchants Bank or any other MNB Subsidiary that have been accelerated during the past twelve months; (ii) all loan commitments or lines of credit of Merchants Bank or any other MNB Subsidiary which have been terminated by Merchants Bank or any other MNB Subsidiary during the past twelve months by reason of a default or adverse developments in the condition of the borrower or other events or circumstances affecting the credit of the borrower; (iii) each borrower, customer or other party which has notified Merchants Bank or any other MNB Subsidiary during the past twelve months of, or has asserted against Merchants Bank or any other MNB Subsidiary, in each case in writing, any “lender liability” or similar claim, and, to the Knowledge of Merchants Bank, each borrower, customer or other party which has given Merchants Bank or any other MNB Subsidiary any oral notification of, or orally asserted to or against Merchants Bank or any other MNB Subsidiary, any such claim; (iv) all loans (A) that are contractually past due 90 days or more in the payment of principal

and/or interest, (B) that are on non-accrual status, (C) that as of the date of this Agreement are classified as “Other Assets Especially Mentioned, “Substandard,” “Doubtful,” “Loss,” “Classified,” “Watch List” or words of similar import, together with the principal amount of and accrued and unpaid interest on each such loan and the identity of the obligor thereunder, (D) where, during the past one (1) year, the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay in accordance with such initial terms, or (E) where a specific reserve allocation exists in connection therewith; and (v) all assets classified by Merchants Bank or any MNB Subsidiary as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.  All loans of Merchants Bank have been classified in accordance with the loan policies and procedures of Merchants Bank.

(c)

All loans receivable (including discounts) and accrued interest entered on the books of MNB and the MNB Subsidiaries arose out of bona fide arm’s-length transactions, were made for good and valuable consideration in the ordinary course of MNB’s or the appropriate MNB Subsidiary’s respective business, and the notes or other evidences of indebtedness with respect to such loans (including discounts) are true and genuine and are what they purport to be.  The loans, discounts and the accrued interest reflected on the books of MNB and the MNB Subsidiaries are subject to no defenses, set-offs or counterclaims (including, without limitation, those afforded by usury or truth-in-lending laws), except as may be provided by bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles of equity.  All such loans are owned by MNB or the appropriate MNB Subsidiary free and clear of any and all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature.

(d)

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

(e)

MNB Disclosure Schedule 2.20 sets forth, as of September 30, 2019, a schedule of all executive officers and directors of MNB who have outstanding loans from MNB or Merchants Bank, and there has been no default on, or forgiveness or waiver of, in whole or in part, any such loan during the two years immediately preceding the date hereof.

(f)

To the Knowledge of MNB, no shares of MNB Common Stock were purchased with the proceeds of a loan made by MNB or any MNB Subsidiary.

(g)

All loans owned by MNB or any MNB Subsidiary, or in which MNB or any MNB Subsidiary has an interest, comply in all material respects with applicable laws, including applicable usury statutes, underwriting and recordkeeping requirements and the truth in Leading Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures, Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

(h)

MNB and each MNB Subsidiary hold the mortgages contained in its loan portfolio for its own benefit to the extent of its interest shown therein; such mortgages evidence liens having the priority indicated by the terms of such mortgages, including the associated loan documents, subject, as of the date of recordation or filing of applicable security instruments, only to such exceptions as are discussed in attorneys’ opinions regarding title or in title insurance policies in the mortgage files relating to the loans secured by real property or are not material as to the collectability of such loans, and all loans owned by MNB and each MNB Subsidiary are with full recourse to the borrowers, and neither MNB nor any MNB Subsidiary has taken any action which would reasonably be likely to result in a waiver or negation of any rights or remedies available against the borrower or guarantor, if any, on any loan.  To the Knowledge of MNB, all applicable remedies against all borrowers and guarantors are enforceable except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights and except as may be limited by the exercise of judicial discretion in applying principles of equity.

(i)

Each outstanding loan participation sold by MNB or any MNB Subsidiary was sold with the risk of non-payment  of all or any portion of that underlying loan to be shared by each participant proportionately to the share of such loan represented by such participation without any recourse of such other lender or participant to MNB or any MNB Subsidiary for payment or repurchase of the amount of such loan represented by the participation or liability under any yield maintenance or similar obligation.

(a)

The information relating to MNB and MNB Subsidiaries to be provided by MNB in the Proxy Statement/Prospectus, the Registration Statement, any filing by Fidelity pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act, or in any other document filed with any other Governmental Entity in connection herewith, the Proxy Statement/Prospectus (except for such portions thereof as relate only to Fidelity or the Fidelity Subsidiaries) will comply with the provisions of the Securities Act and the Exchange Act and rules and regulations thereunder, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading.

(b)

The information, relating to MNB and MNB’s Subsidiaries to be provided by MNB for inclusion in the Applications will, at the time each such document is filed with any Bank Regulator and up to and including the dates of any required Regulatory Approvals or consents, as such Applications may be amended by subsequent filings, be accurate in all material respects.

(a)

MNB and each MNB Subsidiary owns or possesses valid and binding licenses and other rights (subject to expirations in accordance with their terms) to use all patents, copyrights, trade secrets, trade or fictitious names, service marks and trademarks, which are material to the conduct of their business as currently conducted, each without payment, except for all license agreements under which license fees or other payments are due in the ordinary course of MNB’s or each of the MNB Subsidiaries’ business, and neither MNB nor any MNB Subsidiary has received any notice of conflict with respect thereto that asserts the rights of others. MNB and each MNB Subsidiary has performed all the material obligations required to be performed, and are not in default in any material respect, under any contract, agreement, arrangement or commitment relating to any of the foregoing.  To MNB’s Knowledge, the conduct of the business of MNB and each MNB Subsidiary as currently conducted or proposed to be conducted does not, in any material respect, infringe upon, dilute, misappropriate or otherwise violate any intellectual property owned or controlled by any third party.

(b)

(i) MNB and each of the MNB Subsidiaries utilize commercially reasonable actions to protect and maintain (A) all MNB intellectual property and (B) the security and integrity of their software, databases, networks, systems, equipment and hardware and protect same against unauthorized use, modification, or access thereto, or the introduction of any viruses or other unauthorized or damaging or corrupting elements, (ii) MNB’s and the MNB Subsidiaries’ computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communication lines and all other information technology equipment and all associated documents (the “IT Assets”) operate and perform in all material respects in accordance with their documentation and functional specifications and otherwise as required by MNB in connection with its business and have not materially malfunctioned or failed within the past two (2) years, (iii) to the MNB’s Knowledge, no Person has gained unauthorized access to the IT Assets and (iv) MNB has implemented commercially reasonable backup and disaster recovery technology consistent with industry practices.

(c)

Merchants Bank obtains its material data processing services, ATM and other information technology services exclusively through the contracts or agreements with the Persons described in MNB Disclosure Schedule 2.27(c) (“DP Contracts”).  A true and correct executed copy of each DP Contract, as in effect on the date hereof, has been made available to Fidelity.  Other than the DP Contracts, MNB has no agreement with any other Person for data processing, ATM or other technology services.

(a)

Fidelity is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Fidelity is a bank holding company duly

registered under the BHCA. Fidelity has the corporate power and authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operated by it. Fidelity is not qualified or licensed to do business as a foreign corporation in any other jurisdiction and is not required to be so qualified or licensed as a result of  the ownership or leasing of its property or conduct of its business, except where the failure to be so qualified would not have a Material Adverse Effect on Fidelity.

(b)

Fidelity Bank is a Pennsylvania state-chartered bank and trust company and is regulated by the FDIC and the PDS.  Fidelity is duly organized and validly existing under the laws of the Commonwealth of Pennsylvania. Fidelity Bank has the corporate power and authority to carry on its business and operations as now being conducted and to own and operate the properties and assets now owned and being operated by it.

(c)

There are no Fidelity Subsidiaries other than Fidelity Bank, and those identified on Fidelity Disclosure Schedule 3.02. Each of Fidelity’s Subsidiaries (i) was duly organized, (ii) is validly existing and in good standing under the laws of its jurisdiction of organization, (iii) is duly licensed or qualified to do business in, and in good standing under the laws of, all jurisdictions, whether federal, state, local or foreign, where its ownership or leasing of property or the conduct of its business requires it to be so qualified, except as would not reasonably be expected to have a Material Adverse Effect on Fidelity or Fidelity Bank and (iv) has all requisite corporate power and authority, and has all licenses, permits and authorizations of applicable Governmental Entities required to own or lease its properties and assets and to carry on its business as now conducted, except for purposes of clause (iii) only, as would not be reasonably likely to have, either individually or in the aggregate, a Material Adverse Effect on Fidelity.  The articles of incorporation, bylaws and similar governing documents of each Subsidiary of Fidelity, copies of which have been made available to MNB, are true and correct copies of such documents as amended, supplemented, restated and/or otherwise modified and in effect on the date of this Agreement.

(d)

The respective minute books of Fidelity and Fidelity Bank and each other Fidelity Subsidiary accurately record, in all material respects, all corporate actions of their respective shareholders and boards of directors and trustees, (including committees) in each case in accordance with the normal business practice of Fidelity and each such Fidelity Subsidiary.

(e)

Prior to the date of this Agreement, Fidelity has delivered to MNB true and correct copies of the articles of incorporation and bylaws of Fidelity and the articles of incorporation and bylaws of Fidelity Bank, each as in effect on the date hereof.

(f)

Fidelity Bank is a member in good standing of the Federal Home Loan Bank of Pittsburgh and owns the requisite amount of stock therein.

(a)

As of the date of this Agreement, the authorized capital stock of Fidelity consists of fifteen million (15,000,000) shares of without par value divided into (i) ten million (10,000,000) shares common stock, no par value (“Fidelity Common Stock”), of which three million seven hundred eighty-one thousand five hundred (3,781,500) shares are outstanding, validly issued, fully paid and nonassessable as of the date of this Agreement and free of preemptive rights and (ii) five million (5,000,000) shares of preferred stock, no par value (“Fidelity Preferred Stock”), of which no shares are outstanding. There are no shares of Fidelity Common Stock held by Fidelity as treasury stock. No bonds, debentures, notes or other indebtedness having the right to vote on any matters on which Fidelity’s shareholders may vote has been issued by Fidelity and are outstanding.  Except as disclosed in Fidelity Disclosure Schedule 3.03(a), neither Fidelity nor any Fidelity Subsidiary has or is bound by any Rights of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of Fidelity Common Stock, or any other security of Fidelity or any securities representing the right to vote, purchase or otherwise receive any shares of Fidelity Common Stock or any other security of Fidelity.

(b)

The authorized capital stock of Fidelity Bank consists of five million (5,000,000) shares of common stock, par value of $1.5625 per share (“Fidelity Bank Common Stock”), of which five million (5,000,000) shares are outstanding, validly issued, fully paid, nonassessable, and free of preemptive rights and owned by Fidelity.  Except as set forth on Fidelity  Disclosure Schedule 3.03, neither Fidelity Bank nor any Fidelity Subsidiary has or is bound by any subscription, option, warrant, call, commitment, agreement or other Right of any character relating to the purchase, sale or issuance or voting of, or right to receive dividends or other distributions on any shares of the capital stock of any Fidelity Subsidiary or any other security of any Fidelity Subsidiary or any securities representing the right to vote, purchase or otherwise receive any shares of the capital stock or any other security of any Fidelity Subsidiary. Except as set forth in Fidelity Disclosure Schedule 3.03, Fidelity and Fidelity Bank owns all of the outstanding shares of capital stock of each Fidelity Subsidiary free and clear of all liens, security interests, pledges, charges, encumbrances, agreements and restrictions of any kind or nature.

(c)

Except as set forth in Fidelity Disclosure Schedule 3.03, neither (i) Fidelity, nor (ii) any other Fidelity Subsidiary, owns any equity interest, directly or indirectly, other than treasury stock, in any other company or controls any other company, except for equity interests held in the investment portfolios of Fidelity, Fidelity Bank and Fidelity Subsidiaries, equity interests held by Fidelity Subsidiaries in a fiduciary capacity, and equity interests held in connection with the commercial loan activities of Fidelity Subsidiaries. There are no subscriptions, options, warrants, calls, commitments, agreements or other Rights outstanding and held by Fidelity or Fidelity Bank with respect to any other company’s capital stock or the equity of any other person.

(a)

Fidelity has full corporate power and authority to execute and deliver this Agreement and subject to the receipt of the Regulatory Approvals, and the approval and adoption of this Agreement and the Merger by the affirmative vote required of shareholders pursuant to the PAC and Fidelity’s articles of incorporation and bylaws and NASDAQ Listing Agreement and Listing Rules (the “Fidelity Shareholder Approval”), to consummate the transactions contemplated hereby. Fidelity Bank has full corporate power and authority to execute and deliver the Bank Plan of Merger and, subject to the receipt of any required Regulatory Approvals, to consummate the Bank Merger.  The execution and delivery of this Agreement by Fidelity and the completion by Fidelity of the transactions contemplated hereby have been duly and validly approved by the board of directors of Fidelity. Except for Fidelity Shareholder Approval as required under the PAC, Fidelity’s articles of incorporation and bylaws and NASDAQ Listing Agreement and Listing Rules, no other corporate proceedings on the part of Fidelity are necessary to complete the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Fidelity and, subject to (i) Fidelity Shareholder Approval as required and under the PAC, and Fidelity’s articles of incorporation and bylaws and NASDAQ Listing Agreement and Listing Rules, (ii) approval and adoption by Fidelity as the sole shareholder of Fidelity Bank, (iii) the receipt of the required approvals of Bank Regulators described in Section 3.04 hereof, (iv) the due and valid execution and delivery of this Agreement by MNB, (v) the filing with the SEC of the Proxy Statement/Prospectus and the Registration Statement, and the declaration of effectiveness of the Registration Statement, (vi) the filing of a Statement of Merger with, and its acceptance for record by, the PDS pursuant to the ETL and the filings required by the PDB for the Bank Merger, (vii) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the shares of Fidelity Common Stock pursuant to this Agreement, and (viii) approval of the listing on NASDAQ of such shares of Fidelity Common Stock issuable in the Merger, constitutes the valid and binding obligation of Fidelity enforceable against Fidelity in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

(b)

The execution and delivery of this Agreement by Fidelity subject to, (i) the execution and delivery of the Bank Plan of Merger by Fidelity Bank, (ii) receipt of approvals from the Bank Regulators referred to in Section 3.04 hereof and MNB’s and Fidelity’s compliance with any conditions contained therein, (iii) the completion of the transactions contemplated hereby, (iv) compliance by Fidelity with any of the terms or provisions hereof, and (v)

making the filings listed in Section 3.04(a) will not (A) conflict with or result in a material breach of any provision of the articles of incorporation or other organizational document or bylaws of Fidelity or any Fidelity Subsidiary; (B) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to Fidelity or any Fidelity Subsidiary or any of their respective properties or assets; or (C) except as set forth on Fidelity Disclosure Schedule 3.04, violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default), under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration or the creation of any lien, security interest, charge or other encumbrance upon any of the properties or assets of Fidelity or any Fidelity Subsidiary under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other investment or obligation to which Fidelity or any Fidelity Subsidiary is a party, or by which they or any of their respective properties or assets may be bound or affected, except in the case of clause (C) above, for violations which, either individually or in the aggregate, will not have a Material Adverse Effect on Fidelity or any Fidelity Subsidiary.

(a)

Fidelity has previously made available to MNB the Fidelity Regulatory Reports through June 30, 2019.  Except as set forth on Fidelity Disclosure Schedule 3.06, the Fidelity Regulatory Reports have been, or will be, prepared in all material respects in accordance with applicable regulatory accounting principles and practices including but not limited to, all applicable rules, regulations and pronouncements of applicable Bank Regulators throughout the periods covered by such statements, and fairly present, or will fairly present in all material respects, the financial position, results of operations, and changes in shareholders’ equity of Fidelity or Fidelity Bank as the case may be, as of and for the periods ended on the dates thereof, in accordance with applicable regulatory accounting principles including but not limited to, all applicable rules, regulations and pronouncements of applicable Bank Regulators applied on a consistent basis.

(b)

Fidelity has previously delivered to MNB the Fidelity Financials as of the date hereof and will deliver all the Fidelity Financials after the date hereof.  Except as set forth on Fidelity Disclosure Schedule 3.06, the Fidelity Financials have been, or will be, prepared in accordance with GAAP applied on a consistent basis throughout the periods covered by such statements, except as noted therein, and fairly present, or will fairly present, the consolidated financial position, results of operations and cash flows of Fidelity as of and for the periods ending on the dates thereof, in accordance with GAAP applied on a consistent basis, except as noted therein and except as indicated in the case of unaudited statements to normal recurring audit adjustments and the absence of footnotes.

(c)

At the date of each balance sheet included in the Fidelity Financials or Fidelity Regulatory Reports, neither Fidelity nor Fidelity Bank (as the case may be) had, or will have, any liabilities, obligations or loss contingencies of any nature (whether absolute, accrued, contingent or otherwise) of a type required to be reflected in such Fidelity Financials or Fidelity Regulatory Reports or in the footnotes thereto which are not fully reflected or reserved against therein or disclosed in a footnote thereto, except for liabilities, obligations or loss contingencies which are not material in the aggregate to Fidelity or which are incurred in the ordinary course of business, consistent with past practice, and subject, in the case of any unaudited statements, to normal recurring audit adjustments and the absence of footnotes.

(d)

Except as set forth on Fidelity Disclosure Schedule 3.06, the records, systems, controls, data and information of Fidelity and the Fidelity Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Fidelity or any Fidelity Subsidiary or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have a Material Adverse Effect on the system of internal accounting controls described in this Section 3.06(d).  Fidelity (i) has implemented and maintains a system of internal control over financial reporting that is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of its financial statements for external purposes in accordance with GAAP, as consistently applied to Fidelity, (ii) to the extent required by applicable law, has implemented and maintains disclosure controls and procedures to ensure that material information relating to Fidelity, including its consolidated Fidelity Subsidiaries, is made known to the chief executive officer and the controller of Fidelity by others within those entities, and (iii) has disclosed, based on its most recent evaluation prior to the date hereof, to Fidelity’s outside auditors and the audit committee of Fidelity’s board of directors (A) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Fidelity’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Fidelity’s internal control over financial reporting.  These disclosures (if any) were made in writing by management to Fidelity’s auditors and audit committee and a copy has previously been made available to MNB.

(e)

Except as set forth in the Fidelity Disclosure Schedule 3.06, since December 31, 2016, each of Fidelity and the Fidelity Subsidiaries have timely filed all Fidelity Regulatory Reports, schedules, forms, registrations and other documents, together with any amendments required to be made with respect thereto, that any of them were required to file with any Governmental Entity, and have timely paid all fees and assessments due and payable in connection therewith.  There is no material unresolved violation or exception by any Governmental Entity with respect to any report or statement relating to any examinations of Fidelity or any of the Fidelity Subsidiaries.  Fidelity has made available to Merchants Bank the Fidelity Regulatory Reports and the Fidelity Regulatory Reports have been prepared in all material respects in accordance with applicable regulatory accounting principles and practices throughout the periods covered by such statements.

(f)

Since December 31, 2016, (i) neither Fidelity nor any of the Fidelity Subsidiaries nor, to the Knowledge of Fidelity, Fidelity Bank, any director, officer, employee, auditor, accountant or representative of Fidelity or any of the Fidelity Subsidiaries has received or otherwise had or obtained Knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Fidelity or any of the Fidelity Subsidiaries or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that Fidelity or any of the Fidelity Subsidiaries has engaged in illegal accounting or auditing practices, and (ii) no attorney representing Fidelity or any of the Fidelity Subsidiaries, whether or not employed by Fidelity or any of the Fidelity Subsidiaries, has reported evidence of a material violation of law or regulation, breach of fiduciary duty or similar violation by Fidelity or Fidelity Bank, or any of their respective officers, directors, employees or agents to the boards of directors of Fidelity or Fidelity Bank or any committee thereof or to any director or officer of Fidelity or Fidelity Bank.

(g)

No agreement pursuant to which any loans or other assets have been or shall be sold by Fidelity or the Fidelity Subsidiaries entitle the buyer of such loans or other assets, unless there is a material breach of representation or covenant by Fidelity or the Fidelity Subsidiaries, to cause Fidelity or the Fidelity Subsidiaries to repurchase such loan or other assets or the buyer to pursue any other form of recourse against Fidelity or the Fidelity Subsidiaries, and there has been no agreement.  The Fidelity Regulatory Reports have disclosed, since December 31, 2018, any cash, stock or other dividend or any other distribution with respect to the capital stock of Fidelity that has been declared, set aside or paid.

(a)

All income and other material or material in the aggregate Tax Returns required to have been filed by Fidelity and the Fidelity Subsidiaries have been or will be duly and timely filed (taking into account extensions of time to file), and each such Tax Return is true, correct and complete in all material respects.  All income and other material Taxes in respect of the periods covered by the Tax Returns pursuant to this Section 3.07(a) due and

payable by Fidelity and the Fidelity Subsidiaries (whether or not shown on any Tax Return) have been paid.

(b)

There is no action, audit, dispute or claim now pending or proposed or threatened in writing against Fidelity or any of the Fidelity Subsidiaries in respect of Taxes.  Except as set forth in Fidelity Disclosure Schedule 3.07, neither Fidelity nor any of the Fidelity Subsidiaries is the beneficiary of any extension of time within which to file any income or other material Tax Return which Tax Return has not been filed.  No written claim has been made by a Taxing Authority in the last five (5) years in a jurisdiction where any of Fidelity or the Fidelity Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.  There are no liens on any of the assets of Fidelity with respect to Taxes other than for Taxes not yet due and payable.

(c)

Each of Fidelity and the Fidelity Subsidiaries has withheld and timely paid all Taxes required to have been withheld and paid and has complied with all information reporting and backup withholding requirements in all material respects.

(d)

Fidelity Disclosure Schedule 3.07 lists all Tax Returns filed by Fidelity or the Fidelity Subsidiaries for taxable periods ended on or after December 31, 2016 that have been or are currently the subject of audit.  Except as set forth on Fidelity Disclosure Schedule 3.07, neither Fidelity nor any of the Fidelity Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency which waiver or extension is still in effect.

(a)

Fidelity and each of the Fidelity Subsidiaries has, or will have as to property acquired after the date hereof, good and, as to real property, marketable title to all assets and properties owned by Fidelity or any Fidelity Subsidiary in the conduct of their businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the balance sheets contained in the Fidelity Regulatory Reports and in the Fidelity Financials or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of for fair value, in the ordinary course of business, since the date of such balance sheets), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure repurchase agreements and liabilities for borrowed money from a Federal Home Loan Bank, (ii) inter-bank credit facilities, or any transaction by a Fidelity Subsidiary acting in a fiduciary capacity, (iii) those reflected in the notes to the Fidelity Financials, (iv) statutory liens for amounts not yet delinquent or which are being contested in good faith, and (v) the items disclosed in Fidelity Disclosure Schedule 3.10.  Fidelity and the Fidelity Subsidiaries, as lessee, have the right under valid and subsisting leases of real and personal properties used by Fidelity and its Subsidiaries in the conduct of their businesses to occupy or use all such properties as presently occupied and used by each of them. Except as disclosed in Fidelity Disclosure Schedule 3.10, such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes and the lease expense and minimum rental commitments with respect to such leases and lease commitments are as disclosed in the notes to the Fidelity Financials.

(b)

Fidelity and the Fidelity Subsidiaries currently maintain insurance considered by Fidelity to be reasonable for their respective operations and similar in scope and coverage to that maintained by other businesses similarly engaged.  Neither Fidelity nor any Fidelity Subsidiary has received notice from any insurance carrier that (i) such insurance will be cancelled or that coverage thereunder will be reduced or eliminated, or (ii) premium costs with respect to such policies of insurance will be substantially increased.  There are presently no material claims pending under such policies of insurance and no notices have been given by Fidelity or any Fidelity Subsidiary under such policies.

(a)

Each of Fidelity and each Fidelity Subsidiary is, and since January 1, 2016 has been, in compliance in all material respects with all, and is not in default in any material respect under any, applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable to it, its properties, assets and deposits, its business, and its conduct of business and its relationship with its customers and employees, and neither Fidelity nor any Fidelity Subsidiary has received any written notice to the contrary since January 1, 2016.

(b)

Fidelity and each of its Subsidiaries holds all licenses, franchises, permits and authorizations necessary for the lawful conduct of their businesses under, and have complied in all material respects with, applicable laws, statutes, orders, rules or regulations

of any federal, state or local governmental authority relating to them, including, without limitation, the Equal Credit Opportunity Act, the United States Foreign Corrupt Practices Act, the Fair Housing Act, the Community Reinvestment Act, Home Mortgage Disclosure Act, the USA PATRIOT Act, the Bank Secrecy Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, Regulation O, applicable limits on loans to one borrower, and all other applicable fair lending laws and other laws relating to discriminatory business practice, other than where such failure to hold or such noncompliance will neither result in a limitation in any material respect on the conduct of its businesses or otherwise have a Material Adverse Effect on Fidelity.

(c)

Except as disclosed on Fidelity Disclosure Schedule 3.11, since January 1, 2016, neither Fidelity nor any Fidelity Subsidiary has received any notification or communication from any Governmental Entity (i) asserting that Fidelity or any Fidelity Subsidiary is not in compliance with any of the statutes, regulations or ordinances which such Governmental Entity enforces; (ii) threatening to revoke any license, franchise, permit or governmental authorization which is material to Fidelity or any Fidelity Subsidiary; (iii) requiring or threatening to require Fidelity or any Fidelity Subsidiary, or indicating that Fidelity or any Fidelity Subsidiary may be required, to enter into a cease and desist order, agreement or memorandum of understanding or any other agreement restricting or limiting, or purporting to restrict or limit, in any manner the operations of Fidelity or any Fidelity Subsidiary, including without limitation any restriction on the payment of dividends; or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of Fidelity or any Fidelity Subsidiary, including without limitation any restriction on the payment of dividends (any such notice, communication, memorandum, agreement or order described in this sentence is hereinafter referred to as a “Regulatory Agreement”). Neither Fidelity nor any Fidelity Subsidiary has consented to or entered into any Regulatory Agreement, except as disclosed on Fidelity Disclosure Schedule 3.11.

(a)

Fidelity Disclosure Schedule 3.12 sets forth all employee or director benefit plans which Fidelity, Fidelity Bank or any Fidelity Subsidiary currently maintains, including but not limited to bonus plans; employee benefit plans within the meaning of ERISA Section 3(3); profit sharing plans; stock purchase plans; stock ownership plans; stock option plans; phantom stock plans; deferred compensation; supplemental income plans; supplemental executive retirement plans; termination agreements; employment agreements; annual, long term or other incentive plans; severance plans; reimbursement arrangements; policies and agreements; group insurance plans; vacation pay; sick leave; life insurance; retiree life insurance plans; short-term disability; long-term disability; and medical plans or arrangements; and all other benefit plans, policies, agreements and arrangements, maintained or contributed to for the benefit of the employees, former employees (including retired employees), directors, or former directors of Fidelity, Fidelity Bank or any Fidelity Subsidiary and any beneficiaries thereof or other person, or with respect to which Fidelity, Fidelity Bank or any Fidelity Subsidiary has or may have any obligation or liability, whether actual or contingent (the “Fidelity Benefit Plans”).

(b)

Neither Fidelity, Fidelity Bank, any Fidelity Subsidiary nor any pension plan maintained by Fidelity or any Fidelity Subsidiary, has incurred, directly or indirectly, within the past six (6) years any liability under Title IV of ERISA (including to the Pension Benefit Guaranty Corporation) or to the IRS with respect to any pension plan qualified under IRC Section 401(a) which liability has resulted in or is reasonably expected to result in a Material Adverse Effect with respect to Fidelity, Fidelity Bank, or any Fidelity Subsidiary, except liabilities to the Pension Benefit Guaranty Corporation pursuant to ERISA Section 4007, all of which have been fully paid, nor has any reportable event under ERISA Section 4043 occurred with respect to any such pension plan.  Except as set forth in Fidelity Disclosure Schedule 3.12, with respect to each of such plans that is subject to Title IV of ERISA or any Fidelity Benefit Plans, the fair market value of the assets under such plan exceeds the present value of the accrued benefits liability as of the end of the most recent plan year with respect to such plan calculated on the basis of the actuarial assumptions used in the most recent actuarial valuation for such plan. There is not currently pending with the Pension Benefit Guaranty Corporation any filing with respect to any reportable event under Section 4043 of ERISA nor has any reportable event occurred as to which a filing is required and has not been made (other than as might be required with respect to this Agreement and the transactions contemplated thereby) with respect to any plan subject to Title IV of ERISA and to which Fidelity or any of its ERISA Affiliates has any liability.  Fidelity has not provided nor is required to provide security to any plan maintained by Fidelity or any of its ERISA Affiliates to which the requirements of Section 412 of the IRC apply pursuant to Section 401(a)(29) of the IRC.  Neither Fidelity nor any of its ERISA Affiliates has incurred or is subject to any liability under ERISA Section 4201 for a complete or partial withdrawal from a multiemployer plan.

(c)

All Fidelity Benefit Plans that are “employee benefit plans,” as defined in ERISA Section 3(3), comply and within the past six (6) years have complied in all material respects with (i) relevant provisions of ERISA and (ii) in the case of plans intended to qualify for favorable income tax treatment, provisions of the IRC.  Except as set forth in Fidelity Disclosure Schedule 3.12, all Fidelity Benefit Plans comply and have complied with and have been operated and administered in all material respects in accordance with their terms and with applicable law.

(d)

To the Knowledge of Fidelity, no prohibited transaction (which shall mean any transaction prohibited by ERISA Section 406 and not exempt under ERISA Section 408 or any transaction prohibited under IRC Section 4975) has occurred within the past six (6) years with respect to any employee benefit plan maintained by Fidelity or any of its ERISA Affiliates which would result in the imposition, directly or indirectly, of an excise tax under IRC Section 4975 or other penalty under ERISA or the IRC, which, individually or in the aggregate, has resulted in or is reasonably expected to result in a Material Adverse Effect with respect to Fidelity.

(e)

Fidelity and the Fidelity Subsidiaries provide continuation coverage under existing group health plans for separating employees and “qualified beneficiaries” of covered employees (as defined in IRC Section 4980B(g)) in accordance with the provisions of IRC Section 4980B(f) or 40 P.S. § 756.2 et seq.

(f)

There are no current or pending or, to the Knowledge of Fidelity, threatened audits or investigations by any governmental entity involving any Fidelity Benefit Plan, and there are no current or pending or, to the Knowledge of Fidelity, threatened claims (except for individual claims for benefits payable in the ordinary course of operation of the Fidelity Benefit Plans), suits or proceedings involving any Fidelity Benefit Plan and, to the Knowledge of Fidelity, no set of circumstances exists which may reasonably be expected to give rise to any such audits, investigations, claims, suits or proceedings. 

(g)

Fidelity has not contributed to any “multiemployer plan” as defined in Section 3(37) of ERISA.

(h)

All contributions required to be made under the terms of any Fidelity Benefit Plan have been timely made and all anticipated contributions and binding obligations are accrued monthly on Fidelity’s consolidated financial statements to the extent required and in accordance with GAAP. Fidelity has expensed and accrued as a liability the present value of future benefits in accordance with applicable laws and GAAP.  To Fidelity’s Knowledge, neither any pension plan nor any single-employer plan of Fidelity nor an ERISA Affiliate has an “accumulated funding deficiency,” whether or not waived, within the meaning of Section 412 of the IRC or Section 302 of ERISA and neither Fidelity nor an ERISA Affiliate has an outstanding funding waiver.

(a)

Neither Fidelity nor any Fidelity Subsidiary, nor any properties owned or occupied by Fidelity or any Fidelity Subsidiary is or has been in violation of or liable under any

Environmental Law which violation or liability, individually or in the aggregate, resulted in, or will result, in a Material Adverse Effect with respect to Fidelity.  There are no actions, suits, proceedings, or demands, claims or notices, including without limitation, demand letters or requests for information from any Governmental Entity, instituted or pending, or to the Knowledge of Fidelity threatened or any investigation pending relating to the liability of Fidelity or any Fidelity Subsidiary with respect to any property owned or operated by Fidelity or any Fidelity Subsidiary under any Environmental Law.

(b)

No property, now or, to the Knowledge of Fidelity, formerly owned or operated by Fidelity or any Fidelity Subsidiary or on which Fidelity or any Fidelity Subsidiary holds or, to the Knowledge of Fidelity, held a mortgage or other security interest or has foreclosed or taken a deed in lieu of foreclosure, has been listed or proposed for listing on the NPL under CERCLA, is listed on the CERCLIS, or is listed or proposed to be listed on any state list similar to the NPL or the CERCLIS, or is the subject of federal, state or local enforcement actions or other investigations which may lead to claims against Fidelity or any Fidelity Subsidiary for response costs, remedial work, investigation, damage to natural resources or for personal injury or property damage, including, but not limited to, claims under CERCLA, which would have a Material Adverse Effect.

(c)

(i) Fidelity and the Fidelity Subsidiaries are in compliance in all material respects with applicable Environmental Laws, (ii) no Contamination exceeding applicable cleanup standards or remediation thresholds under any Environmental Law exists at any real property, including buildings or other structures, currently or formerly owned or operated by Fidelity or any of the Fidelity Subsidiaries, or on any property in which Fidelity or any of the Fidelity Subsidiaries has held a security interest, lien or a fiduciary or management role (“Fidelity Loan Property”) that would reasonably be likely to result in a material Environmental Liability for Fidelity or the Fidelity Subsidiaries, (iii) no Contamination exists at any real property owned by a third party that would reasonably be likely to result in a material Environmental Liability for Fidelity or the Fidelity Subsidiaries, (iv) neither Fidelity nor any of the Fidelity Subsidiaries has received any written notice, demand letter, or claim alleging any material violation of, or liability under, any Environmental Law, (v) neither Fidelity nor any of the Fidelity Subsidiaries is subject to any order, decree, injunction or other agreement with any Governmental Entity or any third party under any Environmental Law that would reasonably be expected to result in a material Environmental Liability of Fidelity or the Fidelity Subsidiaries, (vi) there are no circumstances or conditions (including the presence of un-encapsulated friable asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning or automotive services) involving Fidelity or any of the Fidelity Subsidiaries, on any currently or formerly owned or operated property, or any Fidelity Loan Property, that could reasonably be expected to result in any material claims, liability or investigations against Fidelity or any of the Fidelity Subsidiaries, or result in any material restrictions on the ownership, use or transfer of any property pursuant to any Environmental Law or materially and adversely affect the value of any Fidelity Loan Property, and (vii) Fidelity has listed in Fidelity Disclosure Schedule 3.15 and made available to MNB copies of all environmental reports or studies, sampling data, correspondence and filings in its possession relating to Fidelity, the Fidelity Subsidiaries

and any owned properties, leased properties or Fidelity Loan Property, which were prepared in the last five (5) years, and, solely with respect to Fidelity Loan Properties, are material to Fidelity.

(a)

Each loan reflected as an asset in the Fidelity Financial Statements (i) is evidenced by notes, agreements or other evidences of indebtedness which are true, genuine and correct (ii) to the extent secured, has been secured by valid liens and security interests which have been perfected, and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and other laws of general applicability relating to or affecting creditors’ rights and to general equity principles, in each case other than loans as to which the failure to satisfy the foregoing standards would not have a Material Adverse Effect on Fidelity.

(b)

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

(c)

All loans owned by Fidelity or any Fidelity Subsidiary, or in which Fidelity or any Fidelity Subsidiary has an interest, comply in all material respects with applicable laws, including applicable usury statutes, underwriting and recordkeeping requirements and the truth in Leading Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures, Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

(a)

The Deposit Liabilities of Fidelity Bank are insured by the FDIC through the Deposit Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due and Fidelity Bank is

authorized to hold the Deposit Liabilities.  Except for such liens as set forth on the Fidelity Disclosure Schedule 3.18, the Deposit Liabilities of Fidelity Bank are not subject to any lien, including without limitation any liens in favor of Fidelity Bank and are not, as of the close of business on the Closing Date, subject to court order, legal restraint, automatic stay in bankruptcy, other legal process or stop payment orders.

(b)

All of the Deposit Liabilities of Fidelity Bank have been administered and originated, in compliance in all material respects with the documents governing the relevant type of deposit account and all applicable laws and regulations.  The Deposit Liabilities of Fidelity Bank were opened, extended or made, and have been maintained, in accordance with all applicable federal and state laws, regulations, rules and orders, and has been operated in compliance with Fidelity Bank’s policies and procedures. No Deposit Liabilities of Fidelity Bank are maintained by a “money service business” within the meaning of regulations promulgated under the USA PATRIOT Act. None of the Deposit Liabilities of Fidelity Bank account holders are on the list of Specially Designated Nationals or Blocked Persons of the Office of Foreign Assets Control.

(c)

Fidelity Bank has properly accrued interest on the Deposit Liabilities of Fidelity Bank and the records respecting the Deposit Liabilities accounts accurately reflect such accruals of interest.

(d)

None of the Deposit Liabilities of Fidelity Bank are “brokered deposits” within the meaning of the rules and regulations of the FDIC; none of the Deposit Liabilities of Fidelity Bank were obtained through the Certificate of Deposit Account Registry Service or similar reciprocal placement network or through an internet listing service.  None of the Deposit Liabilities of Fidelity Bank are held by Federal, State, county or other municipal governments or governmental or quasi-governmental agencies or are subject to escheat. 

(e)

With respect to the Deposit Liabilities of Fidelity Bank, Fidelity Bank is in material compliance with the law and Treasury Regulations relating to (i) obtaining from depositors of the Deposit Liabilities of Merchants Bank executed IRS Forms W-8 and W-9 when appropriate and (ii) reporting of interest. 

(a)

The information relating to Fidelity and Fidelity Subsidiaries to be provided by Fidelity in the Proxy Statement/Prospectus, the Registration Statement, any filing by Fidelity pursuant to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act, or in any other document filed with any other Governmental Entity in connection herewith, the Proxy Statement/Prospectus (except for such portions thereof as relate only to MNB or the MNB Subsidiaries) will comply with the provisions of the Securities Act and the Exchange Act and rules and regulations thereunder, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they were made, not misleading.

(b)

The information, relating to Fidelity and Fidelity’s Subsidiaries to be provided by Fidelity for inclusion in the Applications will, at the time each such document is filed with any Bank Regulator and up to and including the dates of any required Regulatory Approvals or consents, as such Applications may be amended by subsequent filings, be accurate in all material respects.

(a)

From the date of this Agreement to the Closing Date, MNB and its Subsidiaries will conduct their business and engage in transactions, including extensions of credit, only in the ordinary course of business consistent with past practice and policies, except as otherwise required or contemplated by this Agreement or with the written consent of Fidelity.  MNB will use its commercially reasonable efforts, and will cause each of its Subsidiaries to use its commercially reasonable efforts, to (i) preserve its business organizations intact, (ii) maintain good relationships with employees, and (iii) preserve the goodwill of its customers and others with whom business relationships exist.

(b)

From the date hereof to the Closing Date, except as otherwise consented to or approved by Fidelity in writing, which consent or approval consideration shall be undertaken and communicated by Fidelity in a commercially reasonable manner, or as permitted, or required, by this Agreement, MNB will not, and will not permit any Subsidiary to:

(i)

amend or change any provision of its articles of incorporation or bylaws;

(ii)

sell or otherwise dispose of any capital stock, change the number of authorized, issued, or outstanding shares of its capital stock or issue any shares or securities; 

(iii)

issue or grant any option, warrant, call, commitment, subscription, Right or agreement of any character relating to its authorized or issued capital stock or any

securities convertible into shares of such stock, or split, combine or reclassify any shares of capital stock;

(iv)

declare, set aside or pay any dividend or other distribution in respect of capital stock or redeem or otherwise acquire any shares of capital stock, except (a) in accordance with applicable law, regulation and rules, MNB’s board of directors may declare and cause MNB to pay a quarterly cash dividend not to exceed $0.22 per share of common stock and (b) Merchants Bank or any other MNB Subsidiary shall be permitted, subject to any required regulatory approvals, to declare, set aside and pay dividends or other distributions out of funds legally available therefore to the extent required to fund the payment by MNB of (x) a quarterly cash dividend to MNB’s shareholders in accordance with this Section 4.01(b)(iv); and (y) interest on MNB debt in place as of the date hereof and any additional draws, rollovers or renewals not in excess of principal amounts as of the date hereof;

(v)

except in connection with the payment of retention payments in accordance with the provisions of Section 4.24,  the raises and bonus payments permissible under Section 4.01(b)(vi) or as otherwise permitted in this Agreement,  grant any severance or termination pay or benefits to, or enter into any new, renew, change, modify or amend any offer, employment, consulting, severance, “change in control”, “change in control termination” or termination agreement, retention agreement, contract or other arrangement with any present or former officer, director, employee, independent contractor, consultant, agent or other Person associated with MNB or any MNB Subsidiary, or grant or increase any employee benefit, including discretionary or other incentive or bonus payments or discretionary or matching contributions to any deferred compensation plan, make any grants of awards to newly hired employees or accelerate the vesting of any unvested stock options or stock awards, including phantom units, except as required under the terms of any MNB Benefit Plan existing as of the date hereof and as disclosed on MNB Disclosure Schedule 4.01(b);

(vi)

increase the compensation of any employee, officer or director or pay any bonus to any director, officer, employee, independent contractor or consultant; provided, however, that MNB or any MNB Subsidiary may pay (w) as of or prior to the Effective Time, stay bonuses for noncontract employees to such persons as authorized in Section 4.24 or in such other amounts as mutually agreed to with Fidelity and Fidelity Bank; (x) after the date of this Agreement, salary or wage increases for noncontract employees not to exceed 3.00% of current salaries and wages in the aggregate; and (y) aggregate bonus payments (including formulaic incentive bonus payments, the discretionary portion of incentive bonuses and profit sharing, but not including 401(k) matching contributions not exceeding those made in connection with the prior year) not in excess of $350,000.00 in the aggregate.

(vii)

merge or consolidate any Subsidiary with any other corporation; sell or lease all or any substantial portion of the assets or business; make any acquisition of all or any substantial portion of the business or assets of any other person, firm, association, corporation or business organization other than in connection with the collection of any loan or credit arrangement; enter into a purchase and assumption transaction with respect to deposits and liabilities; permit the revocation or surrender by any Subsidiary of its certificate of authority to maintain, or file an application for the relocation of, any existing branch office;

(viii)

except as disclosed on MNB Disclosure Schedule 4.01(b)(viii),  sell, lease, license, mortgage or otherwise encumber or subject to any lien, or otherwise dispose of any of its properties or assets other than (A) transactions in the ordinary course of business consistent with past practice, (B) liens in favor of the Federal Home Loan Bank of Pittsburgh, and (C) transactions involving investment securities, that do not exceed $100,000.00 in the aggregate; or sell, transfer or otherwise dispose of all or any portion of interest in any Loan, other than residential mortgage loans originated for the purpose of sale consistent with past practice, without first offering such Loan or interest in a Loan for purchase to Fidelity on the same terms it would offer such Loan or interest in a Loan to a third party;

(ix)

take any action which would result in any of its representations and warranties set forth in this Agreement becoming untrue except as otherwise contemplated or permitted by this Agreement, or in any of the conditions set forth in Article VI hereof not being satisfied, except in each case as may be required by applicable law;

(x)

change any method, practice or principle of accounting or Tax accounting, except as may be required from time to time by any Governmental Entity or to comply with GAAP;

(xi)

waive, release, grant or transfer any rights of value or modify or change in any material respect any existing material agreement to which it or any Subsidiary is a party , except for modifications to loan documents in the ordinary course of the commercial lending activity of Merchants Bank;

(xii)

implement any pension, retirement, profit sharing, bonus, incentive compensation, welfare benefit or similar plan or arrangement that was not in effect on the date of this Agreement, except as may be required by law or regulation; 

(xiii)

materially amend any existing MNB Benefit Plan, except in accordance with this Agreement or as required by law or regulation;

(xiv)

materially amend or otherwise modify the underwriting and other lending guidelines and policies in effect as of the date hereof or otherwise fail to conduct

its lending activities in accordance with the law, rules and regulations of the applicable Bank Regulator and Merchants Bank lending policy, except as otherwise required by the applicable Bank Regulator or pursuant to a Regulatory Agreement;

(xv)

enter into, renew, extend or modify any transaction with any Affiliate, other than (i) deposit transactions in the ordinary course of business on terms no less favorable to Merchants Bank than the terms offered to similarly situated non-Affiliates, or (ii) loans or other extension of credit made in compliance with Regulation O;

(xvi)

change deposit or loan rates, other than in the ordinary course of business consistent with past practice of the Merchants Bank policies;

(xvii)

enter into any interest rate swap, floor or cap or similar commitment, agreement or arrangement;

(xviii)

except for the execution of this Agreement and contracts existing as of the date of this Agreement and disclosed on MNB Disclosure Schedule 4.01(b), take any action that would give rise to a right of a continuing payment to any individual under any agreement.

(xix)

make, change or revoke any material Tax election or enter into any material agreement or arrangement with respect to Taxes;

(xx)

enter into any non-loan or non-depository contract or agreement that the term or obligations of such contract or agreement would exceed the earlier of the Effective Time or June 30, 2020, except as in the ordinary course of MNB’s or Merchant Bank’s business;

(xxi)

enter into, grant, approve or extend any new loan, credit facility, line of credit, letter of credit or other extension of credit (“Loan”) (a) which would cause the loans to any borrower to exceed, in the aggregate, two million dollars ($2,000,000.00) or (b) which is not in accordance with applicable law, regulations, and Merchants Bank’s lending policies as in effect on the date hereof and in the ordinary course of business consistent with past practice;  provided, however, that Merchants Bank shall be authorized to renew or to make reasonable modifications to any credit facility in excess of two million dollars ($2,000,000.00) which is outstanding as of the date of this Agreement which is rated as “pass” or higher, following reasonable notice to Fidelity Bank;

(xxii)

take any action or knowingly failing to take any action, which action or failure to act could reasonably be expected to prevent the Merger from qualifying as a reorganization with the meaning of Section 368(a) of IRC;

(xxiii)

incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise become responsible for the obligations of any Person, other than MNB or any MNB Subsidiary, except for (A) borrowings having a maturity of not more than one year under existing credit facilities, (B) renewals, extensions or replacements of such existing credit facilities that (1) are incurred in the ordinary course of business consistent with past practice, (2) do not increase the aggregate amount available thereunder, (3) do not provide for any termination fees or pre-payment penalties, (4) do not contain any new provisions limiting or otherwise affecting the ability of MNB or any of the MNB Subsidiaries or successors from terminating or pre-paying such facilities, (5) relate to the issuance of standby letters of credit in the ordinary course of Merchant Bank’s business, and (6) do not contain financial terms materially less advantageous than existing credit facilities, (C) ordinary advances and reimbursements to employees and endorsements of banking instruments made in the ordinary course of business consistent with past practice and (D) borrowings having maturities of less than one year from the Federal Home Loan Bank of Pittsburgh made in the ordinary course of business.

(xxiv)

make any capital contributions to, or investments in, any Person other than its wholly owned Subsidiaries;

(xxv)

incur any capital expenditures in excess of $75,000.00 individually or $150,000.00 in the aggregate;

(xxvi)

pay, discharge, settle or compromise any claim, action, litigation, arbitration, suit, investigation or proceeding in which MNB or Merchants Bank is a defendant, other than any such payment, discharge, settlement or compromise in the ordinary course of business consistent with past practice that involves solely money damages in an amount payable by MNB or the MNB Subsidiaries (taking into account applicable insurance) not in excess of $75,000.00 individually or $200,000.00 in the aggregate;

(xxvii)

issue any broadly distributed communication regarding the Merger to employees, including general communications relating to benefits and compensation, or customers without the prior approval of Fidelity (which approval will not be unreasonably delayed or withheld);

(xxviii)

take any action that would be reasonably likely to materially impede or delay the ability of the Parties to obtain any necessary approvals of any Bank Regulator or other Governmental Entity required for the transactions this Agreement contemplates;

(xxix)

purchase any equity securities or purchase any debt securities other than in accordance with the investment policy of MNB as in effect as of the date hereof consistent with past practice;

(xxx)

convert the data processing and related information and/or accounting systems of MNB or any of its Subsidiaries before the earlier of (i) the consummation of the Merger or (ii) the termination of this Agreement in accordance with its terms; or

(xxxi)

agree to do any of the foregoing.

(a)

From the date of this Agreement through the Closing Date, to the extent permitted by law, each of MNB and Fidelity shall afford to, and shall cause each of its respective Subsidiaries to afford to, the other party and its authorized agents and representatives, reasonable access to their respective properties, assets, books and records and personnel, at reasonable hours and after reasonable notice; and each of MNB and Fidelity will furnish any person making such investigation on behalf of the other party with such financial and operating data and other information with respect to the businesses, properties, assets, books and records and personnel as the person making such investigation shall from time to time reasonably request.

(b)

Each of MNB and Fidelity agrees to conduct such investigation and discussions hereunder in a manner so as not to interfere unreasonably with normal operations and customer and employee relationships of the other party. Neither MNB nor Fidelity shall be required to

provide access to or disclose information where such access or disclosure would violate or prejudice the rights of customers, jeopardize any attorney-client privilege or similar privilege with respect to such information or contravene any law, rule, regulation, decree, order, fiduciary duty or agreement entered into prior to the date hereof.

(c)

Each of MNB and Fidelity shall promptly inform the other party upon receiving notice of any legal, administrative, arbitration or other proceedings, demands, notices, audits or investigations by any federal, state or local commission, agency or board relating to the alleged liability of MNB, Fidelity, or any of their respective Subsidiaries under any labor or employment law, or related to any claims made by or threatened by any current or former employee or applicant.

(d)

Except as specifically set forth herein, MNB and Fidelity mutually agree to be bound by the terms of the Confidentiality Agreement, which Confidentiality Agreement is hereby incorporated herein by reference.  The parties hereto agree that such Confidentiality Agreement shall continue in accordance with its terms, notwithstanding any termination of this Agreement.

(a)

For the purposes of (x) registering Fidelity Common Stock to be offered to holders of MNB Common Stock in connection with the Merger with the SEC under the Securities Act and (y) soliciting proxies for use at the MNB shareholder meeting and Fidelity shareholder meeting, Fidelity shall, as promptly as reasonably practicable, prepare the Registration Statement, and Fidelity and MNB shall jointly draft and prepare a Proxy Statement/Prospectus satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act and the Exchange Act.  Fidelity and MNB shall obtain MNB Financial Statements and Fidelity Financial Statements that meet the requirements of the Securities Act for use in the Registration Statement.  The parties shall use their reasonable efforts to file the Registration Statement, including the Proxy Statement/Prospectus, with the SEC as soon as practicable after the date hereof.  Fidelity and MNB shall use their reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and MNB and Fidelity shall thereafter promptly mail the Proxy Statement/Prospectus to their respective shareholders and shareholders.  Fidelity and MNB shall use commercially reasonable efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and each party shall furnish all information concerning itself and the holders of its common stock as may be reasonably requested in connection with any such action.

(b)

Each party shall provide the other with any information concerning itself that the other may reasonably request in connection with the drafting and preparation of the Proxy Statement/Prospectus, and each party shall notify the other promptly of the receipt of any comments of the SEC with respect to the Proxy Statement/Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to the other promptly copies of all correspondence between such party or any

of their representatives and the SEC.  No filing of the Registration Statement, including any amendment thereto shall be made without the parties each having the opportunity to review, comment on and revise the Registration Statement.  Fidelity and MNB agree to use commercially reasonable best efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement/Prospectus and all required amendments and supplements thereto to be mailed to the holders of MNB Common Stock and Fidelity Common Stock entitled to vote at their respective shareholders and shareholders meetings at the earliest practicable time.

(c)

Fidelity and MNB shall promptly notify the other party if at any time it has Knowledge that the Proxy Statement/Prospectus or the Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading.  In such event, the parties shall cooperate in the preparation of a supplement or amendment to such Proxy Statement/Prospectus that corrects such misstatement or omission, and Fidelity shall file an amended Registration Statement with the SEC, and the parties shall mail an amended Proxy Statement/Prospectus to their respective shareholders.

(d)

In addition to, and not by way of limitation of, the covenants of the parties set forth in this Section 4.04, the parties shall cooperate with each other and use their respective commercially reasonable best efforts to promptly prepare and file, as soon as practicable, all necessary documentation, to effect all applications, notices, publications and filings (the “Regulatory Materials”), to obtain as promptly as practicable all permits, consents, approvals and authorizations of all Governmental Entities that are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Merger and the Bank Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Entities.  Fidelity and MNB shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable laws relating to the confidentiality of information, all the information relating to Fidelity and MNB, as the case may be, that appears in any filing made with, or written materials submitted to, any Governmental Entity in connection with the transactions contemplated by this Agreement.  In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable.  The parties shall consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement.

(e)

Notwithstanding anything to the contrary in Section 4.04(d), in no event shall Fidelity and MNB be required to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining any necessary permits, consents, approvals and authorizations of any Governmental Entities, that would reasonably be expected to have a Material Adverse Effect on Fidelity and MNB (any of which, a “Materially Burdensome Regulatory Condition”).

(f)

Fidelity and MNB will use their commercially reasonable best efforts to ensure that the information relating to Fidelity and MNB that is provided by Fidelity and MNB, as applicable, for inclusion in the Proxy Statement/Prospectus or in any Regulatory Materials will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading.

(a)

Indemnification.  For a period of six (6) years after the Effective Time, Fidelity shall, to the fullest extent permitted by law or statute, (and except as may otherwise be limited by 12 CFR Part 359), indemnify each person entitled to indemnification from and of MNB and/or Merchants Bank (each, an “Indemnified Party”) against all indemnifiable liabilities arising out of actions or omissions occurring at or prior to the Effective Time, under Fidelity’s articles of incorporation and bylaws.  Provided, however, (i) Fidelity shall not be required to indemnify an Indemnified Party against civil monetary penalties, or fines, imposed or levied by any Bank Regulator, including but not limited to payments prohibited under 12 CFR Part 359, or for any liabilities, costs (except for expenses, including attorney fees, which are legally permissible for Fidelity to advance in accordance with subparagraph (ii) hereof), fines, or penalties relating to or in connection with any Regulatory Agreement entered into prior to the date of this Agreement, and (ii) if the Indemnified Party whose expenses are advanced provides an undertaking (in reasonably and customary form) to repay to Fidelity such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification, Fidelity shall advance expenses to the fullest extent permitted in accordance with its Articles and Bylaws. 

(b)

Insurance. Fidelity shall make an application for and purchase, to the extent a policy can be obtained, a directors’ and officers’ liability insurance policy providing coverage amounts not less than the coverage amounts provided under the MNB directors’ and officers’ liability insurance policy in effect as of the date of this Agreement and on terms generally no less favorable. Such policy shall cover persons who are currently covered by the MNB insurance policies for a period of six (6) years after the Effective Time; provided,

however, that Fidelity shall not be obligated to make annual premium payments for such six (6) year period which exceed 200% of the annual premium payment as the date of this Agreement (the “Maximum Amount”).  If the amount of the premiums necessary to procure such insurance coverage exceeds the Maximum Amount, Fidelity shall use its reasonable best efforts to maintain the most advantageous policies of directors’ and officers’ liability insurance obtainable for a premium equal to the Maximum Amount.

(c)

Assumption. In the event that at or after the Effective Time, Fidelity or any of its respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case the successors and assigns of such entity shall assume the obligations set forth in this Section 4.06.

(d)

Enforcement. The provisions of this Section 4.06 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

(a)

MNB and Fidelity shall promptly take all actions necessary to properly call, convene and hold special meetings of their respective shareholders as soon as practicable after the date on which the Registration Statement containing the Proxy Statement/Prospectus is declared effective, to consider and vote upon, in the case of MNB, a proposal to approve and adopt this Agreement and the transactions contemplated hereby and, in the case of Fidelity, a proposal to approve and adopt this Agreement and the transactions contemplated hereby and a proposal to approve the issuance of Fidelity Common Stock to be issued in this transaction  under the NASDAQ Listing Agreement and Listing Rules. 

(b)

The MNB board of directors will recommend that the shareholders of MNB approve and adopt this Agreement and the transactions contemplated hereby and not withdraw, modify or change in any manner adverse to Fidelity hereto such favorable recommendation; provided, however, that the board of directors of MNB may withdraw, modify or qualify such recommendation if it shall have determined, in good faith after consultation with its legal and financial advisers, that the failure to do so would result in a breach of its fiduciary duties and, in such event, may communicate the basis for its withdrawn, modified or qualified recommendation to its shareholders in the Proxy Statement/Prospectus or an appropriate amendment or supplement thereto to the extent required by law.

(c)

The Fidelity board of directors will recommend that the shareholders of Fidelity approve and adopt this Agreement and the transactions contemplated hereby and approve the issuance of Fidelity Common Stock to be issued in this transaction under the NASDAQ Listing Agreement and Listing Rules, and will not withdraw, modify or change in any manner adverse to MNB hereto such favorable recommendation.

(d)

Each of MNB and Fidelity may postpone or adjourn its respective shareholders meeting to the extent it reasonably believes it is necessary to ensure that any supplement or amendment to the Proxy Statement/Prospectus is provided sufficiently in advance of a shareholder or shareholder vote on this Agreement and the Merger.

(a)

Fidelity or its Subsidiaries shall: (i) provide MNB’s and Merchants Bank’s employees who become employees of Fidelity or its Subsidiaries credit for all years of service with MNB or any of its Subsidiaries and predecessors, prior to the Effective Time for the purpose of eligibility to participate and vesting and (ii) cause to be credited any deductibles incurred by MNB and Merchants Bank employees and their beneficiaries and dependents during the portion of the calendar year prior to their participation in the benefit plans of Fidelity after the Effective Time with the objective that there be no double counting during the year in which the Effective Time occurs of such deductible. Fidelity and its Subsidiaries agree to honor, or to cause to be honored, in accordance with their terms to the extent allowed by law, all vested or accrued benefit obligations to, and contractual rights of MNB’s and Merchant Bank’s current and former employees, including, without limitation, any benefits or rights arising as a result of the transactions contemplated by this Agreement (either alone

or in combination with any other event). At such time as employees of MNB and the MNB Subsidiaries become eligible to participate in the benefit plans of Fidelity, Fidelity shall, to the extent available from its insurers, cause each such plan to (i) waive any preexisting condition limitations to the extent such conditions are covered under the applicable benefit plans of Fidelity and (ii) waive any waiting period limitation or evidence of insurability requirement that would otherwise be applicable to such employee or dependent on or after the Effective Time to the extent such employee or dependent had satisfied any similar limitation or requirement under an analogous MNB Benefit Plan prior to the Effective Time.

(b)

MNB or its Subsidiary shall fully fund, amend, freeze, merge or terminate any MNB Benefit Plan effective before the Effective Time at the request of Fidelity, provided any such action shall be in compliance with applicable laws. Fidelity agrees that if the 401(k) plan maintain by MNB or Merchants Bank (the “MNB 401(k) plan”) shall be terminated pursuant to Fidelity’s request and if permitted by law, regulation and the Fidelity 401(k) plan, and there is no material adverse financial impact to Fidelity or Fidelity 401(k) plan participants: (i) participants in the MNB 401(k) plan shall become 100% vested in all benefits thereunder; (ii) as soon as administratively practicable following the Effective Time and in accordance with ERISA and the IRC, Fidelity shall cause the account balances in the MNB 401(k) Plan to be either distributed to the participants in the MNB 401(k) Plan and/or transferred to an eligible tax-qualified retirement plan or individual retirement account as a participant or beneficiary may direct, and (iii) Fidelity shall take all other actions necessary and proper in order to implement the termination of the MNB 401(k) Plan and related trust. If permitted by law, regulation, and the Fidelity 401(k) plan, Fidelity agrees to permit participants in the MNB 401(k) Plan to roll over their account balances in the MNB 401(k) Plan to the Fidelity 401(k) Plan if they become employees of Fidelity, and to the extent permitted by ERISA, the IRC and the terms of the Fidelity 401(k) plan, permit outstanding loans under the MNB 401(k) plan to remain outstanding under the Fidelity 401(k) plan and subject to current repayment schedules.

(c)

Except as provided on MNB Disclosure Schedule 4.16(c),  Fidelity agrees that all vacation time, sick leave, personal time or similar paid leave accrued by an employee of MNB or any MNB Subsidiary which is not used by such employee prior to the Effective Time, shall, in the case of employees of MNB or any MNB Subsidiary who become employees of Fidelity or any Fidelity Subsidiary following the Effective Time, be rolled over and available for use by such employees during such employees’ service with Fidelity as paid time off (“PTO”);  provided that (i) such employees shall not be authorized to use or, unless their employments are terminated by Fidelity without cause, be reimbursed for accrued PTO prior to the date on which system conversion occurs without the consent of Fidelity and (ii) Fidelity shall reimburse such employees for any accrued PTO which such employees have not used prior to any termination of their employments, to the same extent as MNB or Merchants Bank would have reimbursed such employees had their employments ended while they were employed by MNB or Merchants Bank. 

(d)

Nothing in this Section 4.16, express or implied shall require Fidelity to maintain any specific benefit plan of MNB or to guarantee employment of any employee for any period of time after the Effective Time.

(a)

Fidelity Board.  No later than seven (7) days prior to the initial filing date of the Registration Statement by Fidelity with the SEC, Fidelity shall take all action  necessary to (a) cause its board of directors to be increased by two members, effective as of the Effective Time, and (b) elect or appoint, effective as of the Effective Time, Richard M. Hotchkiss and one additional person who is an MNB shareholder who shall be mutually agreed upon by Fidelity and MNB (collectively the “MNB Nominees”) to serve as Class C and Class A directors of Fidelity, respectively. Fidelity and MNB shall ensure that the MNB Nominees (a) are approved by Fidelity Board of Directors, such approval not to be unreasonably withheld or delayed, (b) meet the requirements of  Fidelity’s Amended and Restated Articles of Incorporation and bylaws, (c) meet the eligibility requirements for a director of Fidelity or requirements of any Regulatory Authority relating to Fidelity, and  (d) meet any NASDAQ listing and independence requirements. Such MNB Nominees shall have agreed to execute any consent required to be filed with the Registration Statement.  On the Closing Date, the MNB Nominees shall be appointed as a directors of Fidelity, effective as of immediately following the Effective Time, to hold office until his/her successor is elected and qualified or other in accordance with applicable law and Fidelity Amended and Restated Articles of Incorporation and Bylaws. If the MNB Nominees initially named shall not be eligible to serve in accordance with this Section 4.18(a), choose not to serve or is unable to serve, then MNB and Fidelity shall mutually agree upon another person meeting the requirements of this Section 4.18(a) to be the MNB Nominees.

(b)

Fidelity Bank Board.  On the Closing Date, the MNB Nominees approved by Fidelity’s Board of Directors and subject to (a) compliance with the Fidelity Bank’s Amended and Restated Articles of Incorporation and bylaws, (b) such Persons meeting the eligibility requirements for a director of Fidelity Bank or any Regulatory Authority relating to Fidelity and Fidelity Bank, (c) approval of such Persons by Fidelity (which approval will not be unreasonably withheld or delayed), and (d) such Persons meeting any NASDAQ listing and independent requirements, shall be appointed as directors of Fidelity Bank, effective as of immediately after the Effective Time, to hold office until their successors are elected and qualified or otherwise in accordance with applicable law, and Fidelity Bank’s Amended and Restated Articles of Incorporation and Bylaws.

(a)

Approval by Shareholders of MNB.  This Agreement shall have been approved and adopted by the shareholders of MNB by such vote as is required by the ETL and MNB’s articles of incorporation and bylaws.

(b)

Approval by Shareholders of Fidelity.  This Agreement shall have been approved and adopted by the shareholders of Fidelity by such vote as is required by the ETL and Fidelity’s articles of incorporation and bylaws, and by such a vote as is required by the NASDAQ Listing Agreement and Listing Rules.

(c)

Representations and Warranties.  The representations and warranties of Fidelity set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement (except to the extent such representations and warranties speak as of an earlier date) and as of the Closing Date as though made on and as of the Closing Date.  MNB shall have received a certificate signed on behalf of Fidelity by the Chief Executive Officer and Chief Financial Officer of Fidelity to the foregoing effect.

(d)

Performance of Obligations of Fidelity and Fidelity Bank.  Fidelity shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and MNB shall have received a certificate signed on behalf of Fidelity by the Chief Executive Officer and the Chief Financial Officer of Fidelity to the foregoing effect.

(e)

Approvals of Governmental Entities.  Procurement by MNB, Merchants Bank, Fidelity and Fidelity Bank of all requisite Regulatory Approvals and consents of all Governmental

Entities and the expiration of the statutory waiting period or periods relating thereto for all requisite approvals and consents for the transactions contemplated hereby remain in full force and effect, and no such approval or consent shall have imposed any condition, restriction, or requirement which the board of directors of MNB determines in good faith would individually or in the aggregate materially and adversely affect the business, operations, financial conditions, property or assets projected to be operated by the combined enterprise of MNB, Fidelity, Merchants Bank, and Fidelity Bank.

(f)

No Injunction.  There shall not be in effect any order, decree or injunction of a court of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby.  No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits or makes illegal the completion of either of the transactions contemplated hereby.

(g)

No Material Adverse Change.   No change in the business, property, assets (including loan portfolios), liabilities (whether absolute, contingent, or otherwise), operations, business prospects, liquidity, income or financial condition of Fidelity or the Fidelity Subsidiaries shall have occurred since the date of this Agreement, which has had or would reasonably be likely to have, individually or in the aggregate, a Material Adverse Effect with respect to Fidelity.

(h)

Tax Opinion.  MNB shall have received an opinion of Mette, Evans & Woodside, special tax counsel to MNB, dated as of the Closing Date to the effect that the Merger constitutes a reorganization under Section 368(a) of the IRC.  In rendering its opinion, such counsel may require and rely upon customary representations contained in certificates of officers of MNB, Fidelity and their respective Subsidiaries, reasonably satisfactory in form and substance to such counsel.

(i)

Registration Statement.  The Registration Statement shall be effective under the Securities Act, and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings shall be pending or threatened by the SEC to suspend the effectiveness of the Registration Statement and all approvals deemed necessary by MNB’s counsel from state securities or “blue sky” authorities with respect to the transactions contemplated by this Agreement shall have been obtained.

(j)