SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. [ ])
[X ] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
UNION NATIONAL FINANCIAL CORPORATION
-------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No filing fee required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1997
________________________________
TO THE SHAREHOLDERS OF UNION NATIONAL FINANCIAL CORPORATION:
Notice is hereby given that the Annual Meeting of
Shareholders of UNION NATIONAL FINANCIAL CORPORATION (the
"Corporation") will be held at 10:00 a.m., prevailing time, on
Tuesday, April 22, 1997 at The Country Table Restaurant, 740 East
Main Street, Mount Joy, Pennsylvania 17552, for the following
purposes:
1. To elect three (3) Class A Directors to serve for a
three-year term and until their successors are elected and
qualified;
2. To approve and adopt the Union National Financial
Corporation 1997 Employee Stock Purchase Plan;
3. To approve and adopt the Union National Financial
Corporation 1997 Stock Incentive Plan; and
4. To transact such other business as may properly come
before the Annual Meeting and any adjournment or postponement
thereof.
In accordance with the By-Laws of the Corporation and action
of the Board of Directors, only those shareholders of record at
the close of business on March 17, 1997, will be entitled to
notice of and to vote at the Annual Meeting and any adjournment
or postponement thereof.
A copy of the Corporation's Annual Report for the fiscal
year ended December 31, 1996, is mailed with this Notice.
Copies of the Corporation's Annual Report for the 1995 fiscal
year may be obtained at no cost by contacting William E. Eby,
President, Union National Financial Corporation, P. O. Box 567,
101 East Main Street, Mount Joy, Pennsylvania 17552, telephone:
(717) 653-1441.
<PAGE>
You are urged to mark, sign, date and promptly return your
Proxy in the enclosed envelope so that your shares may be voted
in accordance with your wishes and in order that the presence of
a quorum may be assured. The prompt return of your signed Proxy
and the voting instruction card (if applicable), regardless of
the number of shares you hold, will aid the Corporation in
reducing the expense of additional proxy solicitation. The
giving of such Proxy does not affect your right to vote in person
if you attend the meeting and give written notice to the
Secretary of the Corporation. If you are a participant in the
Corporation's Dividend Reinvestment Plan, you will receive
separate voting instructions with respect to your shares held in
the Dividend Reinvestment Plan.
By Order of the Board of Directors,
/s/ William E. Eby, President
-----------------------------------
William E. Eby, President
March 24, 1997
<PAGE>
UNION NATIONAL FINANCIAL CORPORATION
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 22, 1997
GENERAL
Introduction, Date, Time and Place of Annual Meeting
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of UNION NATIONAL
FINANCIAL CORPORATION (the "Corporation"), a Pennsylvania
business corporation, of proxies to be voted at the Annual
Meeting of Shareholders of the Corporation to be held on Tuesday,
April 22, 1997, at 10:00 a.m., prevailing time, at The Country
Table Restaurant, 740 East Main Street, Mount Joy, Pennsylvania
17552, and at any adjournment or postponement of the Annual
Meeting.
The principal executive office of the Corporation is located
at The Union National Mount Joy Bank (the "Bank"), 101 East Main
Street, Mount Joy, Pennsylvania 17552. The telephone number for
the Corporation is (717) 653-1441. All inquiries should be
directed to William E. Eby, President of the Corporation. The
Bank is a wholly-owned subsidiary of the Corporation.
Solicitation and Voting of Proxies
This Proxy Statement and the enclosed form of proxy (the
"Proxy") are first being sent to shareholders of the Corporation
on or about March 24, 1997.
Shares represented by proxies on the accompanying Proxy, if
properly signed and returned, will be voted in accordance with
the specifications made thereon by the shareholders. Any Proxy
not specifying to the contrary will be voted FOR the election of
the nominees for Class A Director named below, FOR the proposal
to approve and adopt the Union National Financial Corporation
1997 Employee Stock Purchase Plan and FOR the proposal to approve
and adopt the Union National Financial Corporation 1997 Stock
Incentive Plan. Execution and return of the enclosed Proxy will
not affect a shareholder's right to attend the Annual Meeting and
vote in person, after giving written notice to the Secretary of
the Corporation.
If a shareholder is a participant in the Corporation's
Dividend Reinvestment Plan (the "DRIP"), the enclosed Proxy will
not serve as a voting instruction card for the shares held in the
DRIP. Instead, these participants will receive, from the Trust
Department of the Bank, as the administrator of the DRIP,
separate voting instruction cards covering the shares held within
the DRIP. These separate voting instruction cards must be signed
and returned or the shares held in the DRIP will not be voted.
- 1 -
<PAGE>
The cost of preparing, assembling, printing, mailing and
soliciting proxies, and any additional material which the
Corporation may furnish shareholders in connection with the
Annual Meeting, will be borne by the Corporation. In addition to
the use of the mails, certain directors, officers and employees
of the Corporation may solicit proxies personally, by telephone,
telegraph and telecopier. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries
to forward proxy solicitation material to the beneficial owners
of stock held of record by these persons, and, upon request
therefor, the Corporation will reimburse them for their
reasonable forwarding expenses.
Revocability of Proxy
A shareholder who returns a Proxy (and a voting instruction
card, if applicable) may revoke the Proxy (and the voting
instruction card, if applicable) at any time before it is voted
only: (1) by giving written notice of revocation to Carl R.
Hallgren, Secretary of Union National Financial Corporation, at
P.O. Box 567, 101 East Main Street, Mount Joy, Pennsylvania
17552; (2) by executing a later-dated proxy and giving written
notice thereof to the Secretary of the Corporation; or (3) by
voting in person after giving written notice to the Secretary of
the Corporation.
Voting Securities, Record Date and Quorum
At the close of business on March 17, 1997, the Corporation
had outstanding 2,374,513 shares of common stock, par value $.25
per share, the only authorized class of stock (the "Common
Stock"). The Corporation has 20,942 shares of Common Stock held
in treasury as issued but not outstanding shares.
Only holders of Common Stock of record at the close of
business on March 17, 1997 will be entitled to notice of and to
vote at the Annual Meeting. Cumulative voting rights do not
exist with respect to the election of directors. On all matters
to come before the Annual Meeting, each share of Common Stock is
entitled to one vote.
Under Pennsylvania law and the By-Laws of the Corporation,
the presence of a quorum is required for each matter to be acted
upon at the Annual Meeting. Pursuant to Article 3, Section 3.1,
of the By-Laws, the presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes
that all shareholders are entitled to cast constitutes a quorum
for the transaction of business at the Annual Meeting. Votes
withheld and abstentions will be counted in determining the
presence of a quorum for the particular matter. Broker non-votes
will not be counted in determining the presence of a quorum for
the particular matter as to which the broker withheld authority.
Assuming the presence of a quorum, the three (3) nominees
for director receiving the highest number of votes cast by
shareholders entitled to vote for the election of directors shall
be elected. Votes withheld from a nominee and broker non-votes
will not be cast for such nominee. Abstentions and broker
non-votes are not votes cast and therefore do not count either
for or
against such election.
- 2 -
<PAGE>
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders is required for
approval and adoption of the Corporation's 1997 Employee Stock
Purchase Plan and for approval and adoption of the Corporation's
1997 Stock Incentive Plan. Abstentions and broker non-votes are
not votes cast and, therefore, do not count either for or against
such approval and adoption. Abstentions and broker non-votes do,
however, have the practical effect of reducing the number of
affirmative votes required to achieve a majority for each such
matter by reducing the total number of shares voted from which
the required majority is calculated.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
The following table sets forth, as of March 17, 1997, the
name and address of each person who owns of record or who is
known by the Board of Directors to be the beneficial owner of
more than 5 percent of the Corporation's outstanding Common
Stock, the number of shares beneficially owned by such person and
the percentage of the Corporation's outstanding Common Stock so
owned.
<TABLE>
<CAPTION>
Percent of
Outstanding
Shares Common Stock
Beneficially Beneficially
Name and Address Owned<F1> Owned
- - ---------------- ----------- ------------
<S> <C> <C>
Cede & Co. 162,919 6.86%
(Depository Trust)
Box 20
Bowling Green Station
New York, NY 10004
Donegal Securities
Service<F2> 122,024 5.14%
101 East Main Street
Mount Joy, Pennsylvania 17552
<FN>
<F1> See footnote (1) to the "Beneficial Ownership by Officers,
Directors and Nominees" table below for the definition of
"beneficially owned".
<F2> Donegal Securities Service is the nominee registration for
the Trust Department of the Bank. Donegal Securities Service
intends to vote all of the shares of Common Stock for which it
has sole voting power FOR the election of the nominees for Class
A Director named herein, FOR the approval and adoption of the
Corporation's 1997 Employee Stock Purchase Plan and FOR the
approval and adoption of the Corporation's 1997 Stock Incentive
Plan.
</FN>
</TABLE>
Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth, as of March 17, 1997, the
amount and percentage of the Common Stock of the Corporation
beneficially owned by each director, each nominee and all
officers and directors of the Corporation and of the Bank as a
group. This information is provided by the reporting individuals
and the Corporation. Unless otherwise noted in a footnote, all
shares are individually held.
<TABLE>
<CAPTION>
Name of Individual or Amount and Nature of Percent of
Identity of Group Beneficial Ownership<F1><F2> Class
- - --------------------- ---------------------------- ----------
<S> <C> <C>
Current Class A Directors
and Nominees for Class
A Director
(to serve until 2000)
Franklin R. Eichler 27,355 1.15%
E. Ralph Garber 14,500 .61%
Mark D. Gainer 2,000<F3> .08%
Class B Directors
(to serve until 1998)
Daniel C. Gohn 13,034<F4> .55%
Carl R. Hallgren 17,680<F5> .74%
David G. Heisey 34,336<F6> 1.45%
Daniel H. Raffensperger 7,118 .30%
Class C Directors
(to serve until 1999)
William E. Eby 14,600<F7> .61%
Benjamin W. Piersol, Jr. 1,264 .05%
William D. Linkous 2,000 .08%
Donald H. Wolgemuth 42,980<F8> 1.81%
All Officers, Directors and
Nominees as a Group
(16 persons) 189,779 7.99%
___________________
<FN>
<F1> The securities "beneficially owned" by an individual are
determined in accordance with the definitions of "beneficial
ownership" set forth in the General Rules and Regulations of the
Securities and Exchange Commission and may include securities
owned by or for the individual's spouse and minor children and
any other relative who has the same home, as well as securities
to which the individual has, or shares, voting or investment
power or has the right to acquire beneficial ownership within 60
days after March 17, 1997. Beneficial ownership may be
disclaimed as to certain of the securities.
- 4 -
<PAGE>
<F2> Rounded to the nearest whole share.
<F3> Includes 400 shares held individually by his spouse. On
February 1, 1997, Mr. Gainer was granted an option to purchase
900 shares. This option is not exercisable until August 1, 1997.
<F4> Includes 2,034 shares held individually by Mr. Gohn's
spouse.
<F5> Includes 1,600 shares held by Mr. Hallgren's daughter.
<F6> Includes 18,420 shares held individually by Mr. Heisey's
spouse. Mr. Heisey disclaims beneficial ownership as to the
shares of Common Stock held by his spouse. The inclusion of
these shares in Mr. Heisey's beneficial ownership is not an
admission that he is the beneficial owner of such securities.
<F7> Includes 10,000 shares held jointly with Mr. Eby's spouse.
On February 1, 1997, Mr. Eby was granted an option to purchase
1,000 shares. This option is not exercisable until August 1,
1997.
<F8> Includes 1,600 shares held individually by Mr. Wolgemuth's
spouse.
</FN>
</TABLE>
ELECTION OF DIRECTORS
The By-Laws of the Corporation provide that the
Corporation's business be managed by its Board of Directors.
Section 10.2 of the By-Laws provides that the number of directors
that constitute the whole Board of Directors is not less than
seven or more than twenty-five. The By-Laws provide that the
Board of Directors be classified into three classes, each class
is elected for a term of three years. The terms of the
respective classes expire in successive years. Within the
foregoing limits, the Board of Directors may from time to time
fix the number of directors and their respective classifications.
No person elected or appointed as a director serves in that
capacity after reaching the age of seventy (70) years. Each
director also owns in his or her own right shares of Common Stock
that have a fair market value, in the aggregate, of not less than
Thirty Thousand Dollars ($30,000). The Board of Directors has
fixed the number of Board members at eleven. Pursuant to Section
11.1 of the By-Laws, vacancies on the Board of Directors,
including vacancies resulting from an increase in the number of
directors, are filled by a majority of the remaining members of
the Board of Directors, though less than a quorum, and each
person so appointed is a director until the expiration of the
term of office of the class of directors to which he or she is
appointed.
In accordance with Section 10.3 of the By-Laws, at the 1997
Annual Meeting of Shareholders, three (3) Class A Directors shall
be elected to serve for a three-year term and until their
successors are elected and qualified.
Unless otherwise instructed, the Proxyholders will vote the
Proxies received by them for the election of the three (3) Class
A nominees named below. If any nominee should become unavailable
for any reason, proxies will be voted in favor of a substitute
nominee as the Board of Directors of the Corporation shall
determine. The Board of Directors has no reason to believe that
the nominees named will be unable to serve if elected.
There is no cumulative voting for the election of directors.
Each share of Common Stock held on the record date entitles the
owner thereof to cast one vote for each nominee. For example, if
a shareholder owns ten shares of Common Stock, he or she may cast
up to ten votes for each of the directors in the class to be
elected.
- 5 -
<PAGE>
INFORMATION AS TO NOMINEES AND DIRECTORS
The following table contains certain information with
respect to the nominees for Class A Director and the current
Directors of the Corporation:
<TABLE>
<CAPTION>
Principal Occupation Director
Age as of for Past Five Years Since
March 17, and Position Held Corporation/
Name 1997 with Corporation Bank
- - ---- -------- ----------------- ------------
<S> <C> <C> <C>
Nominees For
Class A Director
(to serve until 2000)
and Current Class
A Directors
(to serve until 1997)
Franklin R. Eichler 64 President and Director 1986/1983
<F1><F4><F7><F8><F10><12> of the following
companies: The Sico
Company (distributor
of petroleum products);
Rollman Supply Company;
First Mount Joy
Corporation; and First
Florin Corporation;
Director and Treasurer,
Sico Foundation; Vice
Chairman of the Corporation
since 1992; Vice Chairman
of the Bank since 1997.
E. Ralph Garber 67 Owner, Garber 1986/1979
<F2><F7> Enterprises
(business investment group)
since 1990.
- 6 -
<PAGE>
Mark D. Gainer 42 Vice President of the 1996/1996
<F2><F3><F5><F9><F13> Corporation since 1986,
Sr. Vice President of
the Bank since 1982
and Chief Operating
Officer of the Bank
since 1996.
Class B Directors
(to serve until 1998)
Carl R. Hallgren 59 Attorney-at-Law and 1986/1971
<F1><F3><F6><F8><F9> Treasurer, Morgan
<F10><F11><F13> Hallgren, Crosswell
& Kane, P.C.; Director,
Vice President and
Secretary of Conestoga
Financial Corporation
and of Conestoga Title
Insurance Co.; Director
and Treasurer, Seven
Hundred North Duke
Abstract, Inc.;
Secretary of the
Corporation since 1986;
Solicitor to the Bank
since 1979.
David G. Heisey 63 President, David G. 1986/1977
<F2><F4><F7> Heisey, Inc. (building
contractor); President,
Timber Villa, Inc.; and
President, Timber Villa
Enterprises, Inc.
Daniel C. Gohn 65 Chairman and former 1992/1992
<F2><F6><F10><F13> President, D.C. Gohn
Associates, Inc.
(engineering corporation)
Daniel H. Raffensperger 62 Chairman and President, 1992/1992
<F4><F6><F10><F12><F13> The Continental Press,
Inc. (publishing,
printing corporation).
- 7 -
<PAGE>
Class C Directors
(to serve until 1999)
Donald H. Wolgemuth 61 Partner, Donegal 1986/1967
<F14> Producers; President,
Orchard View Farms, Inc.;
Treasurer, Hill-n-Dale
Farm; and Chairman of
the Board of the
Corporation since
1986 and of the Bank
since 1979.
William E. Eby 60 President of the 1986/1985
<F1><F2><F3><F5><F9> Corporation since 1986
<F12><F13> and of the Bank since 1984.
William D. Linkous 65 Chairman and President, 1995/1995
<F9><F11><F13> C.A. Herr, Inc.
(retail hardware sales).
Benjamin W. Piersol, 44 Vice President, Co-owner 1996/1996
Jr. <F13> Sloans Pharmacy, Inc.
(Retail Pharmacy).
_______________
<FN>
<F1> Member of the Bank's Nominating Committee. This committee's
function is to nominate all committee members and officers of the
Bank. This committee met one (1) time in 1996. Mr. William E.
Eby is Chairman of this Committee.
<F2> Member of the Bank's Property and Building Committee. This
committee's function is to review Bank facilities for needed
maintenance and to advise the Board as to any construction
projects for the Bank and its facilities. This committee met
three (3) times in 1996. Mr. David G. Heisey is Chairman of this
committee.
<F3> Member of the Bank's Asset/Liability Management Investment
Committee. The functions of this committee are to make
recommendations to the Board of Directors concerning the
investment of bank funds, to monitor asset/liability management
policies, to manage earnings, liquidity and interest rate risk,
and to advise the Board of Directors concerning trends and
related risks. This committee met six (6) times in 1996. Mr.
Clement M. Hoober is Chairman of this committee.
<F4> Member of the Bank's Human Resources Committee. The Human
Resources Committee's function is to make recommendations to the
Board of Directors concerning the salaries and other benefits of
directors, officers and employees of the Bank. The Human
Resources Committee met five (5) times in 1996. Mr. Franklin R.
Eichler is Chairman of this committee.
<F5> Member of the Bank's Loan Committee. The function of the
Loan Committee is to advise and make recommendations to the
officers and directors of the Bank concerning the loan functions
of the Bank. The Loan Committee met fifty-two (52) times in
1996. Mr. William E. Eby is Chairman of this committee.
- 8 -
<PAGE>
<F6> Member of the Bank's Trust Investment Committee. The Trust
Investment Committee's function is to advise and make
recommendations to the Board of Directors concerning the
investment and disposition of all funds held in a fiduciary
capacity by the Bank's Trust Department. This committee met
eight (8) times in 1996. Mr. Charles R. Starr is Chairman of
this committee.
<F7> Member of the Bank's Audit Committee. The Bank's Audit
Committee's function is to make recommendations to the Board of
Directors concerning the audit of the entire Bank's operations.
The Audit Committee met six (6) times in 1996. Mr. Franklin R.
Eichler is Chairman of this committee.
<F8> Member of the Bank's Employees Profit-Sharing Retirement
Trust - Administrative Committee. The function of the Bank's
Employees Profit-Sharing Retirement Trust - Administrative
Committee is to make decisions on the disposition of funds as
requested by participants in the plan who have terminated their
employment. This committee met one (1) time in 1996. Mr. C.
Bernerd Grissinger was Chairman of this committee. The Chairman
of this committee for 1997 is Franklin R. Eichler.
<F9> Member of the Corporation's Strategic Planning Committee.
This committee's function is to review, analyze and present
recommendations to the Board of Directors regarding the
Corporation's and Bank's Strategic Plan. This committee met two
(2) times in 1996. Mr. William E. Eby is Chairman of this
committee.
<F10> Member of the Corporation's Stock Incentive Plan Committee.
This committee is responsible for administration of the
Corporation's Stock Incentive Plan. This committee did not meet
in 1996. Mr. Carl R. Hallgren is Chairman of this committee.
<F11> Member of the Bank's Compliance Committee. This
committee's responsibilities include monitoring procedures and
documents for compliance with government regulations, evaluating
regulatory changes, and monitoring the compliance functions in
anticipation of Federal Examiners. The Compliance Committee met
twelve (12) times in 1996. Mr. Michael L. Maurer, is Chairman of
this committee.
<F12> Member of the Bank's EDP Committee. The function of this
committee is to monitor the EDP (electronic data processing)
systems in the Bank's operations and procedures and make
recommendations for system enhancements to the Board of
Directors. This committee met one (1) time in 1996. Mr. Clement
Hoober is Chairman of this committee.
<F13> Member of the Bank's Trust Committee. This committee
provides general supervision over all trust accounts held in the
Bank's Trust Department and reviews all new and closed trust
accounts. This committee met nineteen (19) times in 1996. Mr.
Donald H. Wolgemuth is Chairman of this committee.
<F14> As Chairman of the Board of Directors, Mr. Wolgemuth is
authorized to attend each committee meeting.
During 1996, the Board of Directors of the Bank held
twenty-eight (28) meetings. During 1996, the Board of Directors
of the Corporation held sixteen (16) meetings. Each of the Directors
attended at least 75 percent of the combined total number of
meetings of the Corporation's and Bank's Boards of Directors and
the committees of which he is a member.
The Corporation does not have a nominating committee. A
shareholder who desires to propose an individual for
consideration by the Board of Directors as a nominee for director
should submit a proposal in writing to the Secretary of the
Corporation in accordance with Section 10.1 of the Corporation's
By-Laws. Any shareholder who intends to nominate any candidate
for election to the Board of Directors shall notify the Secretary
of the Corporation in writing not less than sixty (60) days prior
to the date of any meeting of shareholders called for the
election of directors.
- 9 -
<PAGE>
Human Resources Committee Interlocks and Insider Participation
The Human Resources Committee makes recommendations to the
Board of Directors concerning the compensation of employees. The
membership of this committee includes only outside directors.
EXECUTIVE COMPENSATION
Shown below is information concerning the annual
compensation for services in all capacities to the Corporation
and the Bank for the fiscal years ended December 31, 1996, 1995
and 1994 of the chief executive officer, and the other four most
highly compensated executive officers of the Corporation and the
Bank to the extent such persons' annual salary and bonus exceeded
$100,000 for the 1996 fiscal year:
</TABLE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation
-------------------
(a) (b) (c) (d) (e)
Other
Annual
Compen-
Name and Principal Salary Bonus sation
Position Year ($) ($) $
- - ----------------- ---- ------ ----- ------
<S> <C> <C> <C> <C>
William E. Eby 1996 $115,938.32 -- --
President and CEO 1995 111,384.00 -- --
of the Corporation 1994 106,080.00 4,627.35 --
and the Bank
<CAPTION>
Long-Term Compensation
----------------------
Awards Payouts
------ -------
(a) (f) (g) (h) (i)
Securities
Restricted Underlying All other
Stock Options/ LTIP Compen-
Name and Principal Award(s) SARs Payouts sation
Position ($) (#) ($) ($)<F1><F2>
- - ------------------ --------- --------- ------ -----------
<S> <C> <C> <C> <C>
William E. Eby -- -- -- 17,678.67
President and CEO -- -- -- 17,116.32
of the Corporation -- -- -- 16,886.42
and the Bank
_______________________
<FN>
<F1> Includes life insurance premiums amounting to $121.80 for
1996, 1995 and 1994 (premium cost of $50,000 term life
insurance). Also includes premiums for long-term disability
insurance amounting to $327.72 in 1996, $317.52 in 1995 and
$193.20 in 1994.
<F2> Includes contributions to the Employee Profit Sharing
Retirement Trust Fund of $17,229.15, $16,677.00 and $16,571.42
for 1996, 1995 and 1994, respectively.
</FN>
</TABLE>
- 10 -
<PAGE>
<TABLE>
Option/SAR Grants in Last Fiscal Year
- - -------------------------------------
<CAPTION>
Individual Grants
-----------------
Number of % of Total
Securities Options/SARs Exercise or
Underlying Granted to Base Price
Options/SARs Employees Price
Name Granted(#)<F1> In Fiscal Year ($/SH)
- - ---- -------------- --------------- --------
<S> <C> <C> <C>
William E. Eby 1,000 21.74% $24.43
<CAPTION>
Potential Realizable
Value at
Assumed Annual
Rates of Stock Price
Appreciation for
Expiration Option Term
Name Date 5%($) 10%($)
- - ---- ---------- ----------------------
<S> <C> <C> <C>
William E. Eby 1/31/07 $39.79 $63.37
</TABLE>
Pension Plan
The Corporation does not have a retirement or pension plan.
The Bank, however, has a non-contributory Employee Profit Sharing
Retirement Trust Fund (the "Plan") covering substantially all
employees. An employee is eligible to participate in the Plan on
the first day of the month following a year of employment in
which he or she has 1,000 "hours of service". A participant must
accumulate 1,000 "hours of service" during the plan year and be
employed on the last day of the plan year to receive an employer
contribution. Normal retirement age is 65 although the Plan
provides for early and postponed retirement. A participant's
interest in the Plan vests in 20% increments over a five (5) year
period.
The Bank makes all the payments under the Plan. A separate
account is maintained within the Plan for each participant. A
participant's retirement benefit is based on his or her
accumulated vested account balance and is distributed to the
participant upon retirement to purchase an annuity, as a one lump
sum payment, or in equal periodic payments over the participant's
life expectancy. The Bank contributed $330,720.26, $318,204.59
and $300,800.21 to the Plan during 1996, 1995 and 1994,
respectively. The pension expenses for administration of the
Plan were approximately $725 for 1996, $1,800 for 1995 and $750
for 1994. The accumulated Plan benefits and Plan net assets as
of December 31, 1996, the date of the latest actuarial report,
are presented below. Mr. Eby has 36 years of credited service
under the Plan.
Actuarial present value of accumulated plan benefits:
December 31, 1996
-----------------
Vested $5,967,886.80
Non-Vested 65,952.20
-------------
Net Assets Available for Benefits $6,033,839.00
=============
_________________________
- 11 -
<PAGE>
Compensation of Directors
Each outside Director of the Bank received, in 1996, $285
for each Board Meeting, $130 for each Committee Meeting attended,
and a $3,785 annual retainer. The Bank's directors received
$125,230 in the aggregate, for all Board of Directors and
Committee meetings of both the Bank and the Corporation attended
in 1996. Mr. Donald H. Wolgemuth, Chairman of the Boards of
Directors of the Corporation and the Bank, and C. Bernerd
Grissinger, former Vice Chairman of the Corporation, received
fees of $7,210.00 and $10,095.59, respectively, or $17,305.59 in
the aggregate, for services provided to the Corporation and to
the Bank in 1996. Included in C. Bernerd Grissinger's
compensation are fees for real estate inspections. In the
aggregate, the Boards of Directors of the Bank and of the
Corporation received $142,535.70 for all Board of Directors'
meetings and committees attended in 1996, including all fees and
retainers paid to such persons in their capacity as directors.
Directors received no remuneration for attendance at
meetings of the Board of Directors of the Corporation.
Employment Contract
On January 17, 1994, the Corporation, the Bank and Mr.
William E. Eby, President and Chief Executive Officer of the
Corporation and of the Bank, entered into an employment
agreement. The employment agreement has a term of three (3)
years, which term renews automatically for an additional twelve
months at the end of each calendar year upon written notification
of renewal by the Corporation to Mr. Eby. The term of this
agreement was extended until December 31, 1999, by the Board of
Directors on December 12, 1996. The agreement delineates Mr.
Eby's position, duties, compensation and benefits. The agreement
contains, among other things, a non-competition provision and a
confidentiality provision.
The agreement provides that Mr. Eby serve as the President
and Chief Executive Officer of the Corporation and of the Bank
and as a member of the Boards of Directors of the Corporation and
the Bank. Under the terms of the agreement, Mr. Eby is entitled
to an annual direct salary of $115,938 per year which may be
increased in subsequent years as the Boards of Directors deems
appropriate. In addition, the Boards of Directors of the
Corporation and the Bank may provide for payment of a periodic
bonus to Mr. Eby. Mr. Eby is not entitled to receive director's
fees or other compensation for serving on the Corporation's and
the Bank's Boards of Directors or committees thereof. Mr. Eby is
entitled to receive the customary employee benefits made
available to employees of the Bank.
- 12 -
<PAGE>
The agreement also provides that if his employment ends due
to death, disability or is terminated by the Corporation or Bank
for cause (as defined therein), then Mr. Eby is entitled to his
full annual direct salary through the date of termination. If
Mr. Eby's employment is terminated other than because of death,
disability or for cause (as defined therein), or if Mr. Eby
terminates his employment for good reason other than a change in
control (as defined therein), then he is entitled to his full
annual direct salary on the date of termination. If Mr. Eby
terminates his employment for good reason following a change in
control (as defined therein), then he is entitled to his full
annual direct salary from the date of termination continuing
through the last day of the term of the agreement.
Board of Directors Report on Executive Compensation
The Board of Directors of the Corporation is responsible for
the governance of the Corporation and its subsidiary, the Bank.
In fulfilling its fiduciary duties, the Board of Directors acts
in the best interests of the Corporation's shareholders,
customers and the communities served by the Corporation and the
Bank. To accomplish the strategic goals and objectives of the
Corporation, the Board of Directors engages competent persons who
undertake to accomplish these objectives with integrity and in a
cost-effective manner. The compensation of these individuals is
part of the Board of Directors' fulfilment of its duties to
accomplish the Corporation's strategic mission. The Bank
provides compensation to the employees of the Corporation and the
Bank.
The fundamental philosophy of the Corporation's and the
Bank's compensation program is to offer competitive compensation
opportunities for all employees based on the individual's
contribution and personal performance. The compensation program
is administered by the Human Resources Committee comprised of
four (4) outside directors who are listed below. The objectives
of the Committee are to establish a fair compensation policy to
govern executive officers' base salaries and incentive plans to
attract and motivate competent, dedicated, and ambitious managers
whose efforts will enhance the products and services of the
Corporation, the results of which in turn, will improve
profitability, increase dividends to our shareholders and
increase the appreciation in the market value of our shares.
Compensation of the Corporation's and Bank's top executives
is reviewed and approved annually by the Board of Directors. The
top executives whose compensation is determined by the committee
include the chief executive officer and the senior vice
president. The Human Resources Committee determines the
compensation for all officers of the Corporation and the Bank.
As a guideline for review in determining base salaries, the
committee uses information composed of outside, independent
compensation surveys. Various peer groups are provided for a
comparison basis. The peer groups include banks between $100
million to $200 million, and a regional peer group that includes
southcentral Pennsylvania banks. These peer groups are different
than the peer group used for the performance chart. The peer
group on the performance chart includes bank holding companies
and banks listed on NASDAQ which may not be located in
Pennsylvania. Pennsylvania peer group banks were used with
respect to compensation issues because of common industry issues
and competition for the same executive talent group.
- 13 -
<PAGE>
Chief Executive Officer Compensation
The Board of Directors has determined that the Chief
Executive Officer's 1996 compensation of $115,938 (an increase of
4.1% over 1995) is appropriate based on the committee's
subjective determination, after review of all information deemed
relevant, including the Corporation's and Bank's financial
performance.
Executive Officers
For 1996, the Board of Directors established that the
compensation of the Corporation's and the Bank's executive
officers would increase by 4.5 percent (4.5%) over 1995
compensation. Compensation increases were determined by the
committee based on its subjective analysis of the individual's
contribution to the Corporation's strategic goals and objectives.
In determining whether strategic goals have been achieved, the
Board of Directors considers among numerous factors the
following: the Corporation's performance as measured by
earnings, revenues, return on assets, return on equity, market
share, total assets and non-performing loans. Although the
performance and increases in compensation were measured in light
of these factors, there is no direct correlation between any
specific criterion and the employees' compensation, nor is there
any specific weight provided to any such criteria in the
committee's analysis. The determination by the committee is
subjective after review of all information, including the above,
it deems relevant.
In addition to base salary, executive officers of the
Corporation and the Bank may participate in the Corporation's
1988 Stock Incentive Plan. The Stock Incentive Plan Committee
governs awards made under such plan. The first grant of options
under this plan occurred on February 1, 1997. On this date, the
Stock Incentive Plan Committee approved the grant of 4,600
options, 1,000 of which were granted to Mr. Eby.
Total compensation opportunities available to the employees
of the Bank are influenced by general labor market conditions,
the specific responsibilities of the individual, and the
individual's contributions to the Bank's success. Individuals
are reviewed annually on a calendar year basis. The Bank strives
to offer compensation that is competitive with that offered by
employers of comparable size in the banking industry. Through
these compensation policies, the Corporation strives to meet its
strategic goals and objectives to its constituencies and provide
compensation that is fair and meaningful to its employees.
Human Resources Committee
Franklin R. Eichler David G. Heisey
Donald H. Wolgemuth Daniel H. Raffensperger
- 14 -
<PAGE>
SHAREHOLDER PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change
in the cumulative total shareholder return on the Corporation's
Common Stock against the cumulative total return of the S&P 500
Stock Index and the Peer Group Index for the period of five
fiscal years commencing January 1, 1992 and ending December 31,
1996. The shareholder return shown on the graph below is not
necessarily indicative of future performance.
<TABLE>
Comparison of Five Year Cumulative Total Return<F1>
<CAPTION>
[PERFORMANCE GRAPH OMITTED.]
[Following is a description of the performance graph in a tabular
format.]
1991 1992 1993 1994 1995 1996
---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Peer Group Total 1200.00 1535.88 2064.19 2334.22 2722.13 2950.52
Peer Group Index 100.00 127.99 172.02 194.52 226.84 245.88
Union National 100.00 121.28 162.86 217.39 320.60 390.00
Financial
Corp, Inc.
S & P 500 417.09 435.71 466.45 459.27 615.93 740.74
S & P 500 Index 100.00 104.46 111.83 110.11 147.67 177.60
<FN>
<F1> The peer group for which the information appears above
includes the following companies: ACNB Corporation, Bryn Mawr
Bank Corporation, CNB Financial Corporation, Drovers Bancshares
Corporation, First West Chester Corporation, Franklin Financial
Services Corporation, Hanover Bancorp, Inc., Heritage Bancorp,
Inc., Keystone Heritage Group, Inc., Penn Security Bank and Trust
Company, PennRock Financial Services Corporation and Pioneer
American Holding Company. These companies were selected based on
four criteria: total assets between $150 million and $650
million; market capitalization greater than $30 million;
headquarters located in Pennsylvania and not quoted on NASDAQ.
</FN>
</TABLE>
- 15 -
<PAGE>
CERTAIN TRANSACTIONS
Except as set forth in the paragraphs immediately below,
there have been no material transactions between the Corporation
and the Bank, nor any material transactions proposed, with any
director or executive officer of the Corporation and the Bank, or
any associate of the foregoing persons. The Corporation and the
Bank have had and intend to continue to have banking and
financial transactions in the ordinary course of business with
directors and officers of the Corporation and the Bank and their
associates on comparable terms and with similar interest rates as
those prevailing from time to time for other customers of the
Corporation and the Bank. Total loans outstanding from the
Corporation and the Bank at December 31, 1996, to the
Corporation's and the Bank's officers and directors as a group
and to members of their immediately families and companies in
which they had an ownership interest of 10 percent or more was
$3,380,461 or approximately 15.96 percent of the total equity
capital of the Bank. Such loans were made in the ordinary course
of business, were made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons, and do not
involve more than the normal risk of collectibility or present
other unfavorable features. The aggregate amount of indebtedness
outstanding as of the latest practicable date, February 28, 1997,
to the above described group was $3,543,328.
The following table sets forth the name and relationship of
each director who was indebted to the Bank in 1996 in an
aggregate amount considered by the management of the Corporation
and the Bank to be material, the nature or purpose of such
indebtedness and the weighted average interest rate on such
indebtedness:
<TABLE>
<CAPTION>
Weighted
Name of Person or Largest Amount Average
Entity and of Indebtedness Nature of Interest
Relationship in 1996 Indebtedness Charged
- - ---------------- -------------- ------------ --------
<S> <C> <C> <C>
David G. Heisey - $107,962 Land Development 10.10%
Director Timber (Balance as of Loan Secured by
Villa Enterprises, 1/30/97: Real Estate
Inc. $55,959.13)
David G. Heisey - $505,177 Commercial Real 9.12%
Director (Balance as of Estate Loan and
1/30/97: Personal Line of
$368,885.97) Credit Secured by
Real Estate
David G. Heisey - $723,426 Land Development 9.71%
Director Timber (Balance as of and Construction
Villa, Inc. 1/30/97: Loan Secured by
$428,070.58) Real Estate
- 16 -
<PAGE>
David G. Heisey - $427,900 Construction 9.96%
Director David G. (Balance as of Loan and
Heisey, Inc. 1/30/97: Commercial Line
$370,900) of Credit
Secured by
Real Estate
</TABLE>
All of the loans to Mr. Heisey are current as to payments of
principal and interest, and were made in the ordinary course of
business on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons.
PRINCIPAL OFFICERS OF THE CORPORATION
The following table sets forth selected information about
the principal officers of the Corporation, each of whom is
elected by the Board of Directors and each of whom holds office
at the discretion of the Board of Directors. Shares are
individually held unless otherwise noted. The footnotes to this
table follow the section entitled "Principal Officers of the
Bank."
<TABLE> Number of
Bank Shares Age as of
Held Employee Beneficially March 17,
Name and Position Since Since Owned<F1> 1997
- - ----------------- ----- -------- ------------ ---------
<S> <C> <C> <C> <C>
William E. Eby - 1986 1958 14,600<F2> 60
President
Mark D. Gainer - 1986 1976 2,000<F2> 42
Vice President
Dennis F. Fackler - 1986 1963 676<F3> 51
Treasurer
Carl R. Hallgren 1986 <F4> 17,680<F2> 59
Secretary
Clement M. Hoober 1991 1988 500<F5> 41
Chief Financial
Officer & Assistant
Treasurer
Charles R. Starr 1991 1970 2,200<F3> 50
Insider Trading
Compliance Officer
___________________
- 17 -
<PAGE>
<CAPTION>
PRINCIPAL OFFICERS OF THE BANK
The following table sets forth selected information about
the principal officers of the Bank, each of whom is elected by
the Board of Directors and each of whom holds office at the
discretion of the Board of Directors. Shares are individually
held unless otherwise noted.
Bank
Office and Position Held Employee
Name with the Bank Since Since
- - ---- ------------------- ----- --------
<S> <C> <C> <C>
William E. Eby President and CEO 1984 1958
Mark D. Gainer Senior Vice President, 1982 1976
COO
Dennis F. Fackler Vice President & 1982 1963
Cashier
Amos F. Lichty Vice President, 1982 1959
Operations
Thomas C. Mayer Vice President, 1988 1988
Human Resources
Clement M. Hoober Vice President, 1992 1988
Controller 1988
Charles R. Starr Vice President, 1982 1970
Trust
<CAPTION>
Number of Age as of
Shares Bene- March 17,
Name ficially Owned<F1> 1997
- - ---- ------------------- --------
<S> <C> <C>
William E. Eby 14,600<F2> 60
Mark D. Gainer 2,000<F2> 42
Dennis F. Fackler 676<F3> 51
Amos F. Lichty 7,400<F6> 55
Thomas C. Mayer 2,136<F3> 52
Clement M. Hoober 500<F5> 41
Charles R. Starr 2,200<F3> 50
<FN>
<F1> Rounded to the nearest whole share.
<F2> Details with respect to beneficial ownership of this
individual found in footnotes to "Beneficial Ownership of
Officers and Directors," supra.
<F3> Shares are held jointly with his spouse.
<F4> Mr. Hallgren is not an employee of the Bank.
<F5> Includes 100 shares held jointly by Mr. Hoober and his
spouse.
<F6> Includes 4,320 shares of Common Stock held jointly by Mr.
Lichty and his spouse.
</FN>
</TABLE>
- 18 -
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors, executive officers and
shareholders owning in excess of ten percent (10%) of the
Corporation's outstanding equity stock to file initial reports of
ownership and reports of changes in ownership of Common Stock and
other equity securities of the Corporation with the Securities
and Exchange Commission. Based on a review of copies of such
reports received by it, and on the statements of the reporting
persons, the Corporation believes that all such Section 16(a)
filing requirements were complied with in a timely fashion with
the exception of Mr. Benjamin W. Piersol, Jr. who did not timely
file a Form 4 reporting one transaction, during 1996.
PROPOSAL TO APPROVE AND ADOPT
THE UNION NATIONAL FINANCIAL CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
On February 1, 1997, the Board of Directors of the
Corporation (the "Board") approved and adopted the Union National
Financial Corporation 1997 Employee Stock Purchase Plan (the
"Stock Purchase Plan"). The Board of Directors directed and
ordered that the Stock Purchase Plan be submitted to the
shareholders of the Corporation for their approval and adoption
at the 1997 Annual Meeting of Shareholders to be held on April
22, 1997.
The purpose of the Stock Purchase Plan is to encourage the
employees of the Corporation and its subsidiary to acquire
ownership in the Corporation. Management is hopeful that the
Stock Purchase Plan will also aid the Corporation in attracting
and retaining competent and dedicated employees at all levels.
The Stock Purchase Plan authorizes the issuance of up to
100,000 shares of the Corporation's Common Stock, par value $0.25
per share to employees of the Corporation and its subsidiaries.
Shares that are issued pursuant to awards granted under the Stock
Purchase Plan will be authorized but previously unissued shares
or treasury shares.
The Stock Purchase Plan will be administered by a committee
of two (2) or more outside directors (the "Committee") who are
qualified to serve on the Committee as specified in section 3(a)
of the Stock Purchase Plan (Exhibit "A"). Directors who serve on
the Committee are ineligible to participate in the Stock Purchase
Plan during the period they are serving on the Committee.
Subject to the terms of the Stock Purchase Plan, the Committee
has complete discretion to adopt, amend and rescind the rules,
regulations and procedures necessary to administer the Stock
Purchase Plan, to interpret the Stock Purchase Plan, to establish
such further terms, conditions and limitations on the exercise of
options granted under the Stock Purchase Plan as it may deem
appropriate, and to make all other decisions regarding
administration of the Stock Purchase Plan. The Committee may not
revise the Stock Purchase Plan in any manner inconsistent with
the provisions of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code") or in a manner that would cause a
loss of the exemption from the short swing profit recapture
provisions of the Securities Exchange Act of 1934.
- 19 -
<PAGE>
Options may be granted under the Stock Purchase Plan only to
employees of the Corporation or of the Bank who are not subject
to the provisions of Section 16 of the Securities Exchange Act of
1934 or who otherwise do not perform policy making functions for
the Corporation or for the Bank. Employees of the Corporation,
or any subsidiary, who were employed by the Corporation or a
subsidiary on December 31 of the year immediately preceding the
year in which options are granted are eligible to receive options
under the Stock Purchase Plan, except that the Committee may
elect to exclude employees who customarily work 20 hours or less
per week and employees who customarily work for not more than
five (5) months in a calendar year. As of February 1, 1997, the
Corporation and its subsidiaries had 98 employees who would have
been eligible to participate in the Stock Purchase Plan.
When options are granted under the Stock Purchase Plan, they
must be granted to each eligible employee, and all eligible
employees shall have the same rights and privileges, except that
the number of shares which may be purchased by any employee under
such option may bear a uniform relationship to the total
compensation of all employees and the Committee may provide that
no employee may purchase more than a maximum number of shares,
provided that such limitation is uniform for all eligible
employees. An option granted pursuant to the Stock Purchase Plan
may be exercised only while the holder thereof is employed by the
Corporation or its subsidiary and, if not fully exercised prior
to termination of employment, will expire on the date of
termination.
In addition, the Committee may not grant an option to any
employee who, immediately after the grant, would own stock
possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Corporation or any
subsidiary. The Committee may not grant an option to any
employee if, at the date of the grant, the employee would be
permitted to purchase stock under the Stock Purchase Plan and all
other employee stock purchase plans of the Corporation and any
subsidiary at a rate exceeding $25,000 of fair market value for
each calendar year in which such option is outstanding at any
time.
Each option shall be evidenced by a written stock option
agreement specifying the maximum number of shares of Common Stock
of the Corporation that may be purchased pursuant to the option,
the option term, and other such terms and conditions established
by the Committee as are consistent with the terms of the Stock
Purchase Plan.
The option price per share of Common Stock, as determined by
the Committee, may not be less than the lesser of: (i)
eighty-five percent (85%) of the fair market value per share of
Common
Stock of the Corporation on the date of the grant, or (ii)
eighty-five percent (85%) of the fair market value per share of
the Common Stock of the Corporation on the date of exercise.
Each option granted under the Stock Purchase Plan will
expire on the date determined by the Committee; provided,
however, that each option must expire not later than the date
which is five (5) years from the date of grant and that any
option exercised more than 27 months after the date of the grant
must be exercised at an option price per share that is not less
than eighty-five percent (85%) of the fair market value per share
on the date of exercise.
- 20 -
<PAGE>
During the lifetime of an optionee, an option may be
exercised only by him and is not assignable by him other than by
will or the laws of descent and distribution.
Federal Income Tax Consequences of Stock Purchase Plan
It is intended that options issued pursuant to the Stock
Purchase Plan will qualify as options issued pursuant to a
qualified "employee stock purchase plan" within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). Under the provisions of the Code as in effect on the
date hereof, an employee who acquires stock by exercising an
option issued pursuant to a qualified employee stock purchase
plan will not recognize taxable income upon either the grant of
the option or the exercise of the option and the Corporation will
not be entitled to any deduction. Further, if the option price
is as least equal to the fair market value of the stock when the
option was granted and the stock acquired by exercising the
options not disposed of within two (2) years after the date of
the grant of the option and is held for at least one (1) year
after the transfer of the stock to the employee, any gain
recognized upon the sale or exchange of the stock will be
eligible to be taxed to the employee at long-term capital gain
rates and the Corporation will not be entitled to any deduction.
If the employee sells the stock before the expiration of the
required holding periods, he will recognize compensation income
to the extent of the excess of the fair market value of the stock
on the date the option was exercised over the option price for
the stock, and the Corporation will, in such event, be entitled
to a compensation expense deduction for the same amount. Any
gain recognized upon disposition in excess of such amount is
treated as capital gain. However, even if an employee holds the
stock for the required periods, he will recognize compensation
income at the time he disposes of the stock if the option price
is less than 100% of the fair market value of the stock when the
option was granted. The amount of such compensation income will
be equal to the lesser of: (i) the amount, if any, by which the
fair market value of the stock when the option was granted
exceeds the option price, or (ii) the amount, if any, by which
the fair market value of the stock at the time of disposition
exceeds the amount paid for the stock. The Corporation will not
be entitled to any deduction under these circumstances. Any
further gain recognized upon disposition will be treated as
capital gain.
The foregoing tax discussion is intended as a summary only
and the federal income tax consequences to any person who
participates in the Stock Purchase Plan and to the Corporation
may vary from those described above, depending upon individual
actions and circumstances.
- 21 -
<PAGE>
The following table sets forth the benefits that would have
been granted under the Stock Purchase Plan had it been in effect
during 1996. The table assumes that the grants would have been
made on February 1, 1997 at a discount as provided in the Stock
Purchase Plan. On February 1, 1997, the approximate fair market
value of the Corporation's Common Stock was $24.43. Currently,
it is not possible to predict the number of grants that will be
awarded under the Stock Purchase Plan in 1977, and the
Corporation has no definitive plans to issue any grants.
New Plan Benefits
-----------------
Name and Position Dollar Value ($) Number of Units
- - ----------------- ---------------- ---------------
William Eby
CEO 0 0
Executive Group 0 0
Non-Executive Director Group 0 0
Non-Executive Officer $207,655 10,000
Employee Group
The foregoing discussion of the Stock Purchase Plan consists
of only a summary and is qualified in its entirety by reference
to the full text of the Stock Purchase Plan attached as Exhibit
"A" to this Proxy Statement. Exhibit "A" is deemed to be an
integral part of this Proxy Statement and incorporated in its
entirety by reference.
The Board of Directors recommends a vote FOR the following
resolution which will be presented at the Annual Meeting:
RESOLVED, that the Union National Financial Corporation
1997 Employee Stock Purchase Plan, the text of which is set
forth in full and in its entirety in the Proxy Statement
for the 1997 Annual Meeting of Shareholders as Exhibit "A,"
is hereby approved, adopted, ratified and confirmed by the
shareholders of the Corporation.
The approval and adoption of the Employee Stock Purchase
Plan requires the affirmative vote of a majority of all votes
cast by all shareholders entitled to vote thereon. Proxies
solicited by the Board of Directors will be voted for the
foregoing resolution unless shareholders specify a contrary
choice in their proxies.
The Board of Directors recommends a vote FOR the resolution
approving and adopting the Union National Financial Corporation
1997 Employee Stock Purchase Plan.
- 22 -
<PAGE>
PROPOSAL TO APPROVE AND ADOPT
THE UNION NATIONAL FINANCIAL CORPORATION
1997 STOCK INCENTIVE PLAN
On February 1, 1997, the Board of Directors adopted the
Corporation's 1997 Stock Incentive Plan (the "Stock Incentive
Plan") and reserved 120,000 shares of Common Stock for issuance
under the Stock Incentive Plan. The purpose of the Stock
Incentive Plan is to advance the development, growth and
financial condition of the Corporation and its subsidiaries by
providing incentives through participation in the appreciation of
capital stock of the Corporation in order to secure, retain and
motivate personnel responsible for the operation and management
of the Corporation and its subsidiaries. The Stock Incentive
Plan is designed to attract and retain individuals of outstanding
ability as employees of the Corporation and its subsidiaries, to
encourage employees to acquire a proprietary interest in the
Corporation, to continue their employment with the Corporation
and its subsidiaries and to render superior performance during
such employment.
The Stock Incentive Plan will be deemed effective as of
February 1, 1997, if the Stock Incentive Plan receives approval
by the shareholders, and will continue in effect until all awards
under the Stock Incentive Plan either have lapsed, been
exercised, satisfied or canceled according to the terms under the
Stock Incentive Plan. The shares of stock that may be issued
under the Stock Incentive Plan shall not exceed in the aggregate
120,000 shares of the Common Stock, par value $0.25 per share, as
may be adjusted from time to time due to stock splits, payments
of stock dividends or other changes in the structure of the
Corporation's capital.
The Stock Incentive Plan will be administered by a committee
consisting of two or more non-employee directors (the
"Committee") and, except as otherwise permitted by certain
securities laws, who have not, during the year prior to
commencing service on the Committee been, nor will, while a
member of the Committee, be granted any awards under the Stock
Incentive Plan, or any other Stock Incentive Plan of the
Corporation that provides for discretionary grants or awards.
Persons eligible to receive awards under the Stock Incentive Plan
are those key officers and other management employees of the
Corporation and its subsidiaries as determined by the Committee.
Awards
Awards made under the Stock Incentive Plan may be in the
form of: (i) options to purchase stock intended to qualify as
incentive stock options under Sections 421 and 422 of the Code
(referred to herein as "Qualified Options"); (ii) options which
do not so qualify (referred to herein as "Non-Qualified
Options"); (iii) stock appreciation rights ("SARs"); and (iv)
restricted stock (referred to herein as "Restricted Stock").
Every award made to a person under the Stock Incentive Plan is
exercisable during his or her lifetime only by the recipient and
is not saleable, transferable or assignable by the recipient
except by will or pursuant to applicable laws of descent and
distribution. Generally, awards may be exercised in whole or in
part. Funds received by the Corporation from the exercise of any
award shall be used for its general corporate purposes. The
Committee may permit an acceleration of previously established
exercise terms of any award as, when, under such facts and
circumstances, and subject to such other or further requirements
and conditions as the Committee may deem necessary or
appropriate, including, but not limited to, upon a change of
control of the Corporation (as defined in the Stock Incentive
Plan).
- 23 -
<PAGE>
Qualified Options
Qualified Options may not be awarded under the Stock
Incentive Plan more than ten (10) years after the earlier of the
date the Stock Incentive Plan is adopted by the Board of
Directors or the date on which the Stock Incentive Plan is
approved by the shareholders are only exercisable upon the
expiration of six months after the date of the award and may not
continue beyond the expiration of ten (10) years beyond the date
of the award. The purchase price of the stock subject to any
Qualified Option, as determined by the Committee, may not be less
than the stock's fair market value (as defined in the Stock
Incentive Plan) at the time the option is awarded or less than
its par value. If the recipient of a Qualified Option ceases to
be employed by the Corporation, or subsidiary thereof, the
Committee may permit the recipient to exercise such option during
its remaining term for a period of not more than three (3)
months. This period may be extended to a 12 month period if such
employment cessation was due to the recipient's disability, as
defined in the Stock Incentive Plan. If the recipient ceases to
be employed by the Corporation, or subsidiary thereof, due to his
or her death, the committee may permit the recipient's qualified
personal representatives, or any persons who acquire the options
pursuant to his or her will or the laws of descent and
distribution, to exercise such option during its remaining term
for a period not to exceed 12 months after the recipient's death
to the extent that the option was then and remains exercisable.
Non-Qualified Options
Similar to Qualified Options, Non-Qualified Options are only
exercisable upon the expiration of six (6) months after the date
of the award and shall not continue beyond the expiration of ten
(10) years beyond the date of the award. If a recipient of a
Non-Qualified Option ceases to be eligible under the Stock
Incentive Plan before the option lapses or before it is fully
exercised, the Committee may permit the recipient to exercise the
option during its remaining term, to the extent that the option
was then and remains exercisable, for such time period and under
such terms and conditions as may be prescribed by the Committee.
The purchase price of a share of stock pursuant to a
Non-Qualified Option, as determined by the Committee, shall not
be less than the stock's fair market value (as defined in the Stock
Incentive Plan) at the time such option is awarded.
Stock Appreciation Rights
SARs may be granted either alone, or in connection with
another previously or contemporaneously granted award (other than
another SAR). Each SAR entitles its recipient to receive, upon
exercise, all or a portion of the excess of: the fair market
value at the time of such exercise of a specified number of
shares of stock as determined by the Committee; and (ii) a
specified price as determined by the Committee of such number of
shares of stock that, on a per share basis, is not less than the
stock's fair market value at the time the SAR is awarded. Upon
exercise of any SAR, the recipient is either paid in cash, in
stock or a combination thereof, as determined by the Committee.
SARs are only exercisable upon the expiration of six (6) months
after the date of the award and shall not continue beyond the
expiration of ten (10) years beyond the date of the award;
however, no SAR connected with another award shall be exercisable
beyond the last date that such other connected award may be
exercised. If a recipient of a SAR ceases to be eligible
- 24 -
<PAGE>
under the Stock Incentive Plan before it lapses or before it is
fully exercised, the Committee may permit the recipient to
exercise such SAR during its remaining term, to the extent that
the SAR was then and remains exercisable, for such time period
and under such terms and conditions as may be prescribed by the
Committee.
Restricted Stock
Restricted Stock is stock that may be acquired by and issued
to a recipient at such time, for such or for no purchase price,
and under and subject to such transfer, forfeiture and other
restrictions, conditions, or terms as are determined by the
Committee, including but not limited to, prohibitions against
transfer, substantial risks of forfeiture within the meaning of
Section 83 of the Code, and attainment of performance or other
goals, objectives or standards, all for or applicable to time
periods, determined by the Committee. A recipient of restricted
stock has the rights of a shareholder, including, without
limitation, the right to vote the shares and receive dividends on
the shares. During the period of any restrictions, conditions,
or terms applicable to the Restricted Stock, however, the shares,
the right to vote the shares and to receive dividends on the
shares may not be sold, assigned, transferred, exchanged,
pledged, hypothecated, encumbered or otherwise disposed of except
as permitted by the Stock Incentive Plan or by the award. Each
certificate for shares of Restricted Stock will bear a
restrictive legend until all conditions or restrictions lapse or
are satisfied. If a recipient's employment with the Corporation
or its subsidiaries ceases, for any reason, prior to lapse or
satisfaction of the restrictions, conditions or terms applicable
to the restricted stock, all stock subject to unexpired
restrictions is forfeited absolutely by the recipient to the
Corporation.
Federal Tax Consequences
An employee who receives Qualified Options will not
recognize taxable income on the grant or the exercise of the
option. If the stock acquired by the exercise of a Qualified
Option is held until the later of: (i) two (2) years from the
date of the grant; and (ii) one (1) year from the date of
exercise, any gain (or loss) recognized on the sale or exchange
of the stock will be treated as long-term capital gain (or loss),
and the Corporation will not be entitled to any income tax
deduction. If stock acquired on exercise of a Qualified Option
is sold or exchanged before the expiration of the required
holding period, the employee will recognize ordinary income in
the year of disposition in an amount equal to the difference
between the option price and the lesser of the fair market value
of the stock on the date of exercise, or the selling price. In
the event of a disqualifying disposition, the Corporation will be
entitled to an income tax deduction in the year of such
disposition in an amount equal to the amount of ordinary income
recognized by the employee.
An employee who receives a Non-Qualified Option will not
recognize taxable income on the grant of the option, however,
upon exercise, he or she will recognize ordinary income in an
amount equal to the excess of the fair market value of the stock
on the date that the option is exercised over the purchase price
paid for the stock. The Corporation will be entitled to an
income tax deduction in the year of exercise in an amount equal
the amount of income recognized by the employee.
A SAR is not taxed at the time it is granted, even if it is
immediately exercisable. A SAR is taxed at exercise. If cash is
received at exercise, the payment is considered compensation
income to the recipient, and the Corporation may take a deduction
for this expense. In addition, the Corporation receives a
deduction equal to the amount included in income by the
recipient.
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<PAGE>
The recipient of restricted stock is deemed to have received
gross income in an amount equal to the excess of the fair market
value of the stock over the amount paid for the stock, if any, by
the recipient at the time that all restrictions applicable to the
stock lapse or are satisfied. If the restricted stock is
forfeited prior to the lapse or satisfaction of restrictions,
there are tax consequences to the recipient. The Corporation
will be entitled to a deduction equal to the amount included in
the income of the recipient in the Corporation's taxable year in
which or with which ends the taxable year of the recipient in
which the income was included.
As of February 1, 1997, eight (8) executive officers were
eligible to participate in the Stock Incentive Plan. The size
and type of awards are generally to be determined by the
Committee in its discretion. Such future grants are not
presently determinable, and it is not possible to predict the
benefits or amounts that will be received by or allocated to
particular individuals or groups for 1997.
The following table sets forth the benefits that would have
been granted under the Stock Incentive Plan had it been in effect
during 1996. The table assumes that the grants would have been
made on February 1, 1997. On that date, the approximate fair
market value of the Corporation's Common Stock was $24.43.
Currently, the Corporation has no definitive plans to issue any
benefits under the Stock Incentive Plan.
New Plan Benefits*
Name and Position Dollar Value ($) Number of Units
- - ----------------- --------------- ---------------
William Eby $24,430 1,000
CEO
Executive Group $87,948 3,600
Non-Executive Director 0 0
Group
Non-Executive Officer 0 0
Employee Group
_____________________________
*These figures are estimated based on grants made under the
Corporation's 1988 Stock Incentive Plan. As of February 1, 1997,
only 4,600 options have been granted under the Plan, all of which
were made on February 1, 1997.
The foregoing discussion of the Stock Incentive Plan
consists of only a summary and is qualified in its entirety by
reference to the full text of the Stock Incentive Plan attached
as Exhibit "B" to this Proxy Statement. Exhibit "B" is deemed to
be an integral part of this Proxy Statement and incorporated in
its entirety by reference.
The Board of Directors recommends a vote FOR the following
resolution which will be presented at the Annual Meeting:
RESOLVED, that the Union National Financial
Corporation 1997 Stock Incentive Plan, the text of which
is set forth in full and in its entirety in the Proxy
Statement for the 1997 Annual Meeting of Shareholders as
Exhibit "B," is hereby approved, adopted, ratified and
confirmed by the shareholders of the Corporation.
- 26 -
<PAGE>
The approval and adoption of the Stock Incentive Plan
requires the affirmative vote of a majority of all votes cast by
all shareholders entitled to vote thereon. Proxies solicited by
the Board of Directors will be voted for the foregoing resolution
unless shareholders specify to the contrary on their proxies.
The Board of Directors recommends a vote FOR the resolution
approving and adopting the Union National Financial Corporation
1997 Stock Incentive Plan.
LEGAL PROCEEDINGS
In the opinion of the management of the Corporation and the
Bank, there are no proceedings pending to which the Corporation
or the Bank is a party or to which their property is subject,
which, if determined adversely to the Corporation and the Bank,
would be material in relation to the Corporation's and the Bank's
undivided profits or financial condition. There are no
proceedings pending other than ordinary routine litigation
incident to the business of the Corporation and the Bank. In
addition, no material proceedings are pending or are known to be
threatened or contemplated against the Corporation and the Bank
by government authorities.
INDEPENDENT AUDITORS
The Board of Directors has selected Trout, Ebersole & Groff,
Certified Public Accountants, of Lancaster, Pennsylvania as the
Corporation's independent auditors for its 1997 fiscal year. The
Corporation has been advised by Trout, Ebersole & Groff,
Certified Public Accountants, that none of its members has any
financial interest in the Corporation. Trout, Ebersole & Groff
served as the Corporation's independent public accountants for
the 1996 fiscal year. A representative from Trout, Ebersole &
Groff will not be present at the Annual Meeting of Shareholders.
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal
year ended December 31, 1996 is enclosed with this Proxy
Statement. A representative of the Corporation will be available
to respond to any appropriate questions concerning the Annual
Report presented by shareholders at the Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of the proxy rules of the Securities and Exchange
Commission, wishes to submit a proposal for inclusion in the
Corporation's Proxy Statement for its 1998 Annual Meeting of
Shareholders must deliver such proposal in writing to the
President of Union National Financial Corporation at its
principal executive offices, 101 East Main Street, Mount Joy,
Pennsylvania 17552, not later than Tuesday, November 25, 1997.
- 27 -
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for consideration other than the matters described in
the accompanying Notice of Annual Meeting of Shareholders, but if
any matters are properly presented, it is the intention of the
persons named in the accompanying Proxy to vote on such matters
in accordance with their best judgment.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF THE
CORPORATION'S REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED
DECEMBER 31, 1996, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, MAY BE OBTAINED, WITHOUT
CHARGE, FROM CLEMENT M. HOOBER, CHIEF FINANCIAL OFFICER, UNION
NATIONAL FINANCIAL CORPORATION, P.O. BOX 567, 101 EAST MAIN
STREET, MOUNT JOY, PENNSYLVANIA 17552.
- 28 -
<PAGE>
EXHIBIT A
UNION NATIONAL FINANCIAL CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
----------------------------------
1. Purpose of the Plan. The purpose of this Employee Stock
Purchase Plan (the "Plan") is to advance the interests of Union
National Financial Corporation, and its subsidiary and its
shareholders by encouraging its employees and the employees of
its subsidiary to acquire a stake in its future by purchasing
shares of its common stock. It is intended that the Plan shall
be an employee stock purchase plan within the meaning of Section
423 of the Internal Revenue Code of 1986, as amended.
2. Definitions. For purposes of the Plan, the following words
or phrases have the meanings assigned to them below:
(a) Board: means the Board of Directors of the Corporation.
(b) Code: means the Internal Revenue Code of 1986, as
amended.
(c) Committee: means the Committee designated by the Board
to administer the Plan, which Committee shall at all times
consist of two or more directors who are disinterested (within
the meaning of SEC Rule 16b-3(c)(2)(i) or any successor
regulation) with respect to the Plan.
(d) Corporation: means Union National Financial
Corporation.
(e) Date of Grant: means, in respect of any option granted
under the Plan, the date on which that option is granted by the
Committee.
(f) Date of Exercise: means, in respect of any option
granted under the Plan, the date specified by the Committee in
its rules and regulations governing the exercise of options
granted under the Plan.
(g) NASDAQ: means the National Association of Securities
Dealers, Inc. Automated Quotation System.
(h) Parent: means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if,
at the time of the grant of an option, each of the corporations
other than the Company owns stock possessing 50 percent (50%) or
more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
(i) Plan: means Union National Financial Corporation 1997
Employee Stock Purchase Plan.
(j) Stock: means the $.25 par value common stock of the
Corporation.
(k) Subsidiary: means any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with
the Corporation if, at the time of the grant of an option under
the Plan, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50
percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(l) Total Compensation: means the total remuneration paid
to an employee by the Corporation and its Subsidiary during any
calendar year, as reported on the employee's federal income tax
withholding statement(s) on Form W-2 ( or any successor form) in
respect of that calendar year.
3. Administration of the Plan.
(a) Committee Members. The Plan shall be administered by
the Committee which, except as otherwise determined by the Board,
shall be composed of each of those members of
<PAGE>
the Compensation Committee of the Board who has not been eligible
to participate in the Plan for a period of at least one year
prior to his election to the Committee, who is not eligible to
participate in the Plan during the period he is serving on the
Committee, and who is disinterested (within the meaning of SEC
Rule 16b-3(c)(2)(i) or an successor regulation) with respect to
the Plan.
(b) Committee Authority. The Committee shall be vested
with full authority to grant options under the Plan, to adopt,
amend and rescind such rules, regulations and procedures as it
deems necessary or desirable to administer the Plan, to interpret
the provisions of the Plan, and to make all other determinations
necessary in connection with the administration of the Plan. Any
determination, decision or action of the Committee in connection
with the construction, interpretation, administration or
application of the Plan shall be final, conclusive and binding.
No member of the Committee or of the Board shall be liable for
any determination, decision or action made in good faith with
respect to the Plan or any option granted under the Plan.
4. Stock Subject to the Plan. The maximum number of shares of
Stock that may be issued pursuant to options granted under the
Plan shall be 100,000 shares of stock, subject to adjustment as
provided in Section 10 of the Plan. Such shares may be treasury
or authorized, but unissued, shares of Stock. Shares issuable
pursuant to an option which, by reason of the expiration,
cancellation or other termination of such option prior to
issuance, are not issued shall again be available for issuance
pursuant to the award of options under the Plan.
5. Eligibility. Options may be granted under the Plan only to
employees of the Corporation and to employees of a Subsidiary who
are not subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, as amended, or who otherwise do not perform
policy - making functions for the Corporation or for its
Subsidiary. Employees of the Corporation and employees of a
Subsidiary who were employed by the Corporation or by a
Subsidiary on December 31 of the year immediately preceding the
year in which options are granted shall be eligible to receive
options under the Plan, except that the Committee may elect to
exclude those employees: (a) who customarily work twenty (20)
hours or less per week; (b) who have been employed less than two
(2) years; and (c) who customarily work for not more than five
(5) months in a calendar year.
6. Allocation of Optioned Stock.
(a) General Rule: When options are granted under the Plan,
options shall be granted to each eligible employee, and all
eligible employees shall have the same rights and privileges,
except that the number of shares subject to each option may bear
a uniform relationship to the Total Compensation, or the basic or
regular rate of compensation, of all eligible employees, and the
Committee may limit the maximum number of shares that may be
purchased pursuant to each option, provided that such limitation
is uniform for all eligible employees.
(b) Certain Limitations: All options granted under the Plan
shall be subject to the following additional limitations:
(i) Five Percent Limitation: No option shall be granted
to any employee who, immediately after the grant, would own stock
possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Corporation, its
Parent (if any) or any Subsidiary. In computing the stock
ownership of an employee for purposes of this limitation, the
rules of Section 424(d) of the Code shall apply, and stock which
an employee may purchase pursuant to options granted by the
Corporation (whether under the Plan or otherwise) shall be
treated as stock owned by the employee.
A-2
<PAGE>
(ii) $25,000 Limitation: No option shall be granted to
any employee which, at the Date of Grant, would permit his rights
to purchase Stock under the Plan and all other employee stock
purchase plans of the Company, its Parent (if any) and any
Subsidiary to accrue at a rate exceeding $25,000 of fair market
value for each calendar year in which such option is outstanding
at any time.
7. Option Price.
(a) General Rule: The option price per share of the Stock
that may be purchased pursuant to each option shall be determined
by the Committee, subject to approval by the Board, but shall not
in any event be less than the lessor of: (i) eighty-five percent
(85%) of the fair market value per share of the Stock on the Date
of Grant, or (ii) eighty-five percent (85%) of the fair market
value per share of the Stock on the Date of Exercise, subject in
either case to adjustment as set forth in Section 10 below.
(b) Fair Market Value: For purposes of the Plan, the fair
market value of the Stock shall be determined as follows:
(i) Exchange Traded: In the event that the Stock is
listed on an established stock exchange, the fair market value
shall be deemed to be the closing price of the Stock on such
exchange on the applicable date or, if no trade occurred on that
day, on the next preceding day on which a trade occurred.
(ii) NASDAQ Listed: In the event that the Stock is not
listed on an established stock exchange, but is then quoted on
NASDAQ, the fair market value per share shall be the average of
the average of the closing bid and asked quotations of the Stock
for the five (5) trading days immediately preceding the
applicable date, except that if no closing bid or asked quotation
is available on one or more of such trading days, fair market
value shall be determined by reference to the five (5) trading
days immediately preceding the applicable date on which closing
bid and asked quotations are available.
(iii) OTC Traded: In the event that the Stock is not
listed on an established stock exchange and is not quoted on
NASDAQ, the fair market value per share shall be the average of
the average of the closing bid and asked quotations of the Stock
for the five (5) trading days immediately preceding the
applicable date as reported by two (2) brokerage firms to be
selected by the Committee which are then making a market in the
Stock, except that if no closing bid or asked quotation is
available on one or more of such trading days, fair market value
shall be determined by reference to the five (5) trading days
immediately preceding the applicable date on which closing bid
and asked quotations are available.
(iv) Other: In the event that the Stock is not listed on
an established stock exchange, is not quoted on NASDAQ and no
closing bid and asked quotations are available, then fair market
value per share shall be determined in good faith by the
Committee.
8. Terms and Conditions of Options.
(a) Written Stock Option Agreement: Each option shall be
evidenced by a written stock option agreement specifying the
maximum number of shares of Stock that may be purchased pursuant
to the option, the option term, and other such terms and
conditions established by the Committee as are consistent with
the terms of the Plan.
A-3
<PAGE>
(b) Term of Options: Each option granted under the Plan
shall expire on the date determined by the Committee; provided,
however, that each option shall terminate not later than the date
which is five years from the Date of Grant, and provided further,
that options exercised more than twenty-seven (27) months after
the Date of Grant must be exercised at an option price per share
which is not less than eighty-five percent (85%) of the fair
market value per share on the Date of Exercise.
(c) Other Terms and Conditions: The Committee may from time
to time establish such further terms, conditions and limitations
on the exercise of options granted under the Plan as it may, in
its sole discretion, deem appropriate, and which are not
inconsistent with Section 423 of the Code, including, without
limitation, payroll deduction requirements, restrictions on
exercise dates, and restrictions on transfer of the Stock
purchased pursuant to the options granted under the Plan.
(d) Termination of Employment: An option granted pursuant
to the Plan may be exercised only while the holder thereof is
employed by the Company or a Subsidiary and, if not fully
exercised prior to termination of employment, will expire on the
date of termination.
(e) Limitation on Transfer of Options: During the lifetime
of an optionee, an option granted pursuant to the Plan shall be
exercisable only by the optionee and shall not be assignable or
transferable by him other than by will or the laws of descent and
distribution.
9. Exercise of Options. Each person who elects to exercise an
option granted pursuant to this Plan shall comply with such
rules, regulations and procedures (including, without limitation,
payroll deduction requirements) regarding the exercise of options
as the Committee shall from time to time establish.
10. Rights. Except as otherwise provided in the Plan, an
employee who is granted an option shall have no rights as a
holder of the stock subject thereto unless and until one or more
certificates for the shares of such stock are issued and
delivered to the employee. No adjustments shall be made for
dividends, either ordinary or extraordinary, or any other
distributions with respect to stock, whether made in cash,
securities or other property, or any rights with respect thereto,
for which the record date is prior to the date that any
certificates for stock subject to an option are issued to the
employee pursuant to his or her exercise thereof. No option, or
the grant thereof, shall limit or affect the right or power of
the Corporation or its affiliates to adjust, reclassify,
recapitalize, reorganize or otherwise change its or their capital
or business structure, or to merge, consolidate, dissolve,
liquidate or sell any or all of its or their business, property
or assets.
11. Adjustments
(a) Recapitalization: In the event of any change in the
number of issued and outstanding shares of Stock which results
from a stock split, reverse stock split, payment of a stock
dividend or any other change in the capital structure of the
Corporation, the Committee shall proportionately adjust the
maximum number of shares subject to each outstanding option, and
(where appropriate) the purchase price per share thereof (but not
the total option price), so that upon exercise or realization of
such option, the employee shall receive the same number of shares
he or she would have received had he or she been the holder of
all shares subject to his or her outstanding option and
immediately before the effective date of such change in the
number of issued and outstanding shares of Stock. Such
adjustments shall not, however, result in the issuance of
fractional shares. Any adjustment under this paragraph 11 shall
be made by the Committee, subject to approval by the Board. No
adjustments shall be made that would cause an option to fail to
continue to qualify as an incentive stock option within the
meaning of Section 423 of the Code.
(b) Merger: In the event the Corporation is a party to any
merger, consolidation or other reorganization, any and all
outstanding options shall apply and relate to the securities to
which a holder of stock is entitled after such merger,
consolidation or other
A-4
<PAGE>
reorganization. Upon any liquidation or dissolution of the
Corporation, any and all outstanding options shall terminate upon
consummation of such liquidation or dissolution, but prior to
such consummation shall be exercisable to the extent that the
same otherwise are exercisable under the Plan.
12. Registration of Stock. No option granted pursuant to the
Plan shall be exercisable in whole or in part if at any time the
Committee shall determine in its discretion that the listing,
registration or qualification of the shares of Stock subject to
such option on any securities exchange or under any applicable
law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issuance of
shares thereunder, unless such listing, registration,
qualification, consent or approval may be effected or obtained on
conditions acceptable to the Committee. Without limiting the
foregoing, the shares of Stock to be issued under the Plan shall
be registered as soon as practicable under the Securities Act of
1933, as amended, by the Company by filing an appropriate
registration statement. No option shall be exercisable, no Stock
shall be issued, and no certificates for shares of Stock shall be
delivered until such registration statement is effective.
13. Special Rules Applicable to Reporting Persons. The
following restrictions and limitations shall be applicable to any
eligible employee who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended (a "Reporting Person") at the
time of any proposed disposition of Stock acquired pursuant to
the exercise of an option granted under the Plan:
(a) Six Month Holding Period: A Reporting Person shall not
sell, transfer or otherwise dispose of any shares of Stock
acquired pursuant to the exercise of an option granted under the
Plan unless at least six (6) months have elapsed from the Date of
Grant.
(b) Cessation of Participation: In the event that a
Reporting Person elects to terminate his participation in the
Plan, such Reporting Person may not again participate in the Plan
until at least six (6) months have elapsed from the date of such
termination.
14. Amendment or Termination of the Plan.
(a) Amendment and Termination: The Board may at any time
amend, modify, suspend or terminate the Plan; provided that,
except as provided in Section 10 above, the Board may not,
without the consent of the shareholders of the Company, make any
amendment or modification which: (i) increases the maximum
number of securities that may be granted to Reporting Persons
under the Plan; (ii) materially modifies the eligibility
requirements for Reporting Persons; or (iii) increases materially
the benefits accruing to Reporting Persons under the Plan, or
(iv) otherwise requires the approval of the shareholders of the
Company in order to maintain the exemption available under Rule
16b-3 (or any similar rule) under the Securities Exchange Act of
1934.
(b) Compliance with Section 423 of the Code:
Notwithstanding the provisions of Section 12(a) above, the Board
reserves the right to amend or modify the terms and provisions of
the Plan, and of any outstanding options granted under the Plan,
to the extent necessary to qualify the options granted under the
Plan for such favorable federal income tax treatment (including
deferral of taxation upon exercise) as may be afforded options
granted under an employee stock purchase plan within the meaning
of Section 423 of the Code, the regulations promulgated
thereunder, and any amendments or replacements thereof.
(c) 10 Year Term of Plan: Unless previously terminated by
the Board, the Plan shall terminate on, and no options shall be
granted after, the tenth anniversary of the effective date of the
Plan, as set forth in Section 15, below.
A-5
<PAGE>
15. General Provisions.
(a) Effect on Employment. The grant of an option under the
Plan shall not be construed as giving the holder thereof the
right to be retained in the employ of the Corporation or any
Subsidiary. Neither the adoption of the Plan, its operation, nor
any documents describing or referring to the Plan, including,
without limitation, any stock option agreement, shall in any way
affect any right and power of the Corporation or any Subsidiary
to terminate the employment of any person at any time with or
without assigning a reason therefor.
(b) Indemnification. With respect to liabilities arising
under or relating to the Plan, the Corporation shall indemnify
each member of the Committee and each other officer or employee
of the Company to whom any duty or power relating to the plan may
be allocated or delegated, to the fullest extent permitted under
the laws of the Commonwealth of Pennsylvania and the Bylaws of
the Corporation.
(c) Governing Law. All questions pertaining to
construction, validity and effect of the provisions of the Plan
and the rights of all persons hereunder shall be governed by the
laws of the Commonwealth of Pennsylvania.
(d) Rules of Construction. Headings are given to the
sections of the Plan solely as a convenience to facilitate
reference. The reference to any statute, regulation, or other
provisions of law shall be construed to refer to any amendment to
or successor of such provisions of law. All words herein shall
be construed to be of such number and gender as the context
requires.
16. Effective Date. The Plan shall become effective on February
1, 1997, the date on which it was adopted by the Board, provided
that the Plan is approved by the shareholders of the Company at
the Annual Meeting on April 22, 1997. The Committee may issue
options pursuant to the Plan prior to its approval by the
shareholders of the Company, provided that all such options are
contingent upon shareholder approval of the Plan.
- - - - - - - - -
E N D
- - - - - - - - -
<PAGE>
EXHIBIT B
UNION NATIONAL FINANCIAL CORPORATION
1997 STOCK INCENTIVE PLAN
1. Purpose. The purpose of this Stock Incentive Plan (the
"Plan") is to advance the development, growth and financial
condition of Union National Financial Corporation (the
"Corporation") and each subsidiary thereof as defined in Section
424 of the Internal Revenue Code of 1986, as amended (the
"Code"), by providing incentives through participation in the
appreciation of capital stock of the Corporation so as to secure,
retain and motivate personnel who may be responsible for the
operation and management of the affairs of the Corporation and
any such subsidiary now or hereafter existing ("Subsidiary").
2. Term. The Plan shall become effective as of the date it is
adopted by the Corporation's Board of Directors (the "Board"), so
long as the Corporation's stockholders duly approve the Plan
within twelve (12) months either before or after the date of the
Board's adoption of the Plan. Any and all options and rights
awarded under the Plan ("Awards") before it is so approved by the
Corporation's stockholders shall be conditional upon and may not
be exercised before timely obtainment of such approval, and shall
lapse upon the failure thereof. If the Plan is so approved, it
shall continue in effect until all Awards either have lapsed or
been exercised, satisfied or cancelled according to their terms
under the Plan.
3. Stock. The shares of stock that may be issued under the
Plan shall not exceed in the aggregate 120,000 shares of the
Corporation's common stock, par value $0.25 per share (the
"Stock"), as may be adjusted pursuant to paragraph 18 hereof.
Such shares of Stock may be either authorized and unissued shares
of Stock, or authorized shares of Stock issued by the Corporation
and subsequently reacquired by it as treasury stock. Under no
circumstances shall any fractional shares of Stock be issued or
sold under the Plan or any Award. Except as may be otherwise
provided in the Plan, any Stock subject to an Award that for any
reason lapses or terminates prior to its exercise as to such
Stock shall become and again be available under the Plan. The
Corporation shall reserve and keep available, and shall duly
apply for any requisite governmental authority to issue or sell
the number of shares of Stock needed to satisfy the requirements
of the Plan while in effect. The Corporation's failure to obtain
any such governmental authority deemed necessary by the
Corporation's legal counsel for the lawful issuance and sale of
Stock under the Plan shall relieve the Corporation of any duty,
or liability for the failure to issue or sell such Stock as to
which such authority has not been obtained.
4. Administration. The Plan shall be administered by a
committee (the "Committee") consisting exclusively of two (2) or
more non-employee directors from the Board serving for such terms
as determined, selected and appointed by the Board. The Board
shall fill all vacancies occurring in the Committee's membership,
and at any time and for any reason may add additional members to
the Committee or may remove members from the Committee and
appoint their successors. Except as otherwise permitted under
Section 16(b) of the Securities Exchange Act of 1934, as amended,
and applicable rules and regulations thereto, a member of the
Committee must be a director of the Corporation and during the
year prior to commencing service on the Committee, and while a
member of the Committee, was not granted or awarded any Awards,
allocations or other options or rights of or with respect to
Stock or any other equity securities of the Corporation or its
affiliates pursuant to the Plan or any other plan of the
Corporation or its affiliates which provides for grants or
awards. A majority of the Committee's membership shall
constitute a quorum for the transaction of all business of the
Committee, and all decisions and actions taken by the Committee
shall be determined by a majority of the members of the Committee
attending a meeting at which a quorum of the Committee is
present.
The Committee shall be responsible for the management and
operation of the Plan and, subject to its provisions, shall have
full, absolute and final power and authority, exercisable in its
sole discretion: to interpret and construe the provisions of the
Plan, adopt, revise and rescind rules and regulations relating to
the Plan and its administration, and decide all questions of fact
arising in the application thereof; to determine what, to whom,
when and under what facts and circumstances Awards shall be made,
and the form, number, terms, conditions and duration thereof,
including but not limited to when exercisable, the number of
shares of Stock subject thereto, and Stock option purchase
prices; to adopt, revise and rescind procedural rules for the
transaction of the Committee's business, subject to any
directives of the Board not inconsistent with the provisions or
intent of the Plan or applicable provisions of law; and to make
all other
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determinations and decisions, take all actions and do all things
necessary or appropriate in and for the administration of the
Plan. The Committee's determinations, decisions and actions
under the Plan, including but not limited to those described
above, need not be uniform or consistent, but may be different
and selectively made and applied, even in similar circumstances
and among similarly situated persons. Unless contrary to the
provisions of the Plan, all decisions, determinations and actions
made or taken by the Committee shall be final and binding upon
the Corporation and all interested persons, and their heirs,
personal and legal representatives, successors, assigns and
beneficiaries. No member of the Committee or of the Board shall
be liable for any decision, determination or action made or taken
in good faith by such person under or with respect to the Plan or
its administration.
5. Awards. Awards may be made under the Plan in the form of:
(a) "Qualified Options" to purchase Stock that are intended to
qualify for certain tax treatment as incentive stock options
under Sections 421 and 422 of the Code, (b) "Non-Qualified
Options" to purchase Stock that are not intended to qualify under
Sections 421-424 of the Code, (c) Stock appreciation rights
("SARs"), or (d) "Restricted Stock". More than one Award may be
granted to an eligible person, and the grant of any Award shall
not prohibit the grant of any other Award, either to the same
person or otherwise, or impose any obligation upon the person to
whom granted to exercise the Award. All Awards and the terms and
conditions thereof shall be set forth in written agreements, in
such form and content as approved by the Committee from time to
time, and shall be subject to the provisions of the Plan whether
or not contained in such agreements. Multiple Awards for a
particular person may be set forth in a single written agreement
or in multiple agreements, as determined by the Committee, but in
all cases each agreement for one or more Awards shall identify
each of the Awards thereby represented as a Qualified Option,
Non-Qualified Option, SAR, or Restricted Stock, as the case may
be. Every Award made to a person (a "Recipient") shall be
exercisable during his or her lifetime only by the Recipient, and
shall not be salable, transferable or assignable by the Recipient
except by his or her Will or pursuant to applicable laws of
descent and distribution.
6. Eligibility. Persons eligible to receive Awards shall be
those key officers and other management employees of the
Corporation and each Subsidiary as determined by the Committee.
In no case, however, shall any current member of the Committee be
eligible to receive any Awards. A person's eligibility to
receive Awards shall not confer upon him or her any right to
receive any Awards; rather, the Committee shall have the sole
authority, exercisable in its discretion consistent with the
provisions of the Plan, to select when, to whom and under what
facts and circumstances Awards will be made. Except as otherwise
provided, a person's eligibility to receive, or actual receipt of
Awards under the Plan shall not limit or affect his or her
benefits under or eligibility to participate in any other
incentive or benefit plan or program of the Corporation or its
affiliates.
7. Qualified Options. In addition to other applicable
provisions of the Plan, all Qualified Options and Awards thereof
shall be under and subject to the following terms and conditions:
(a) No Qualified Option shall be awarded more than ten (10)
years after the date the Plan is adopted by the Board or the date
the Plan is approved by the Corporation's stockholders, whichever
date is earlier;
(b) The time period during which any Qualified Option is
exercisable, as determined by the Committee, shall not commence
before the expiration of six (6) months or continue beyond the
expiration of ten (10) years after the date such Option is
awarded;
(c) If the Recipient of a Qualified Option ceases to be
employed by the Corporation or any Subsidiary for any reason
other than his or her death, the Committee may permit the
Recipient thereafter to exercise such Option during its remaining
term for a period of not more than three (3) months after such
cessation of employment to the extent that the Option was then
and remains exercisable, unless such employment cessation was due
to the Recipient's disability as defined in Section 422(e)(3) of
the Code, in which case such three (3) month period shall be
twelve (12) months; if the Recipient dies while employed by the
Corporation or a Subsidiary, the Committee may permit the
Recipient's qualified personal representatives, or any persons
who acquire the Qualified Option pursuant to his or her Will or
laws of descent and distribution, thereafter to exercise such
Option during its remaining term for a period of not more than
twelve (12) months after the Recipient's death to the extent that
the Option was then and remains
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exercisable; the Committee may impose terms and conditions upon
and for said exercise of such Qualified Option after such
cessation of the Recipient's employment or his or her death;
(d) The purchase price of a share of Stock subject to any
Qualified Option, as determined by the Committee, shall not be
less than the Stock's fair market value at the time such Option
is awarded, as determined under paragraph 13 hereof, or less than
the Stock's par value.
8. Non-Qualified Options. In addition to other applicable
provisions of the Plan, all Non-Qualified Options and Awards
thereof shall be under and subject to the following terms and
conditions:
(a) The time period during which any Non-Qualified Option is
exercisable, as determined by the Committee, shall not commence
before the expiration of six (6) months or continue beyond the
expiration of ten (10) years after the date such Option is
awarded;
(b) If a Recipient of a Non-Qualified Option, before its
lapse or full exercise, ceases to be eligible under the Plan, the
Committee may permit the Recipient thereafter to exercise such
Option during its remaining term, to the extent that the Option
was then and remains exercisable, for such time period and under
such terms and conditions as may be prescribed by the Committee;
(c) The purchase price of a share of Stock subject to any
Non-Qualified Option, as determined by the Committee, shall not
be less than the Stock's fair market value at the time such
Option is awarded, as determined under paragraph 13 hereof.
9. Stock Appreciation Rights. In addition to other applicable
provisions of the Plan, all SARs and Awards thereof shall be
under and subject to the following terms and conditions:
(a) SARs may be granted either alone, or in connection with
another previously or contemporaneously granted Award (other than
another SAR) so as to operate in tandem therewith by having the
exercise of one affect the right to exercise the other, as and
when the Committee may determine; however, no SAR shall be
awarded in connection with a Qualified Option more than ten (10)
years after the date the Plan is adopted by the Board or the date
the Plan is approved by the Corporation's stockholders, whichever
date is earlier;
(b) Each SAR shall entitle its Recipient to receive upon
exercise of the SAR all or a portion of the excess of (i) the
fair market value at the time of such exercise of a specified
number of shares of Stock as determined by the Committee, over
(ii) a specified price as determined by the Committee of such
number of shares of Stock that, on a per share basis, is not less
than the Stock's fair market value at the time the SAR is
awarded;
(c) Upon exercise of any SAR, the Recipient shall be paid
either in cash or in Stock, or in any combination thereof, as the
Committee shall determine; if such payment is to be made in
Stock, the number of shares thereof to be issued pursuant to the
exercise shall be determined by dividing the amount payable upon
exercise by the Stock's fair market value at the time of
exercise;
(d) The time period during which any SAR is exercisable, as
determined by the Committee, shall not commence before the
expiration of six (6) months or continue beyond the expiration of
ten (10) years after the date such SAR is awarded; however, no
SAR connected with another Award shall be exercisable beyond the
last date that such other connected Award may be exercised;
(e) If a Recipient of a SAR, before its lapse or full
exercise, ceases to be eligible under the Plan, the Committee may
permit the Recipient thereafter to exercise such SAR during its
remaining term, to the extent that the SAR was then and remains
exercisable, for such time period and under such terms and
conditions as may be prescribed by the Committee;
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(f) No SAR shall be awarded in connection with any
Qualified Option unless the SAR (i) lapses no later than the
expiration date of such connected Option, (ii) is for not more
than the difference between the Stock purchase price under such
connected Option and the Stock's fair market value at the time
the SAR is exercised, (iii) is transferable only when and as such
connected Option is transferable and under the same conditions,
(iv) may be exercised only when such connected Option may be
exercised, and (v) may be exercised only when the Stock's fair
market value exceeds the Stock purchase price under such
connected Option.
10. Restricted Stock. In addition to other applicable
provisions of the Plan, all Restricted Stock and Awards thereof
shall be under and subject to the following terms and conditions:
(a) Restricted Stock shall consist of shares of Stock that
may be acquired by and issued to a Recipient at such time, for
such or no purchase price, and under and subject to such
transfer, forfeiture and other restrictions, conditions or terms
as shall be determined by the Committee, including but not
limited to prohibitions against transfer, substantial risks of
forfeiture within the meaning of Section 83 of the Code, and
attainment of performance or other goals, objectives or
standards, all for or applicable to such time periods as
determined by the Committee;
(b) Except as otherwise provided in the Plan or the
Restricted Stock Award, a Recipient of shares of Restricted Stock
shall have all the rights as does a holder of Stock, including
without limitation the right to vote such shares and receive
dividends with respect thereto; however, during the time period
of any restrictions, conditions or terms applicable to such
Restricted Stock, the shares thereof and the right to vote the
same and receive dividends thereon shall not be sold, assigned,
transferred, exchanged, pledged, hypothecated, encumbered or
otherwise disposed of except as permitted by the Plan or the
Restricted Stock Award;
(c) Each certificate issued for shares of Restricted Stock
shall be deposited with the Secretary of the Corporation, or the
office thereof, and shall bear a legend in substantially the
following form and content:
This Certificate and the shares of Stock hereby represented
are subject to the provisions of the Corporation's Stock
Incentive Plan and a certain agreement entered into between the
owner and the Corporation pursuant to said Plan. The release of
this Certificate and the shares of Stock hereby represented from
such provisions shall occur only as provided by said Plan and
agreement, a copy of which are on file in the office of the
Secretary of the Corporation.
Upon the lapse or satisfaction of the restrictions, conditions
and terms applicable to such Restricted Stock, a certificate for
the shares of Stock free thereof without such legend shall be
issued to the Recipient;
(d) If a Recipient's employment with the Corporation or a
Subsidiary ceases for any reason prior to the lapse of the
restrictions, conditions or terms applicable to his or her
Restricted Stock, all of the Recipient's Restricted Stock still
subject to unexpired restrictions, conditions or terms shall be
forfeited absolutely by the Recipient to the Corporation without
payment or delivery of any consideration or other thing of value
by the Corporation or its affiliates, and thereupon and
thereafter neither the Recipient nor his or her heirs, personal
or legal representatives, successors, assigns, beneficiaries, or
any claimants under the Recipient's Last Will or laws of descent
and distribution, shall have any rights or claims to or interests
in the forfeited Restricted Stock or any certificates
representing shares thereof, or claims against the Corporation or
its affiliates with respect thereto.
11. Exercise. Except as otherwise provided in the Plan, Awards
may be exercised in whole or in part by giving written notice
thereof to the Secretary of the Corporation, or his or her
designee, identifying the Award being exercised, the number of
shares of Stock with respect thereto, and other information
pertinent to exercise of the Award. The purchase price of the
shares of Stock with respect to which an Award is exercised shall
be paid with the written notice of exercise, either in cash or in
Stock at its then current fair market value, or in any
combination thereof, as the Committee shall determine; provided,
that if the Stock tendered as payment for a Qualified Option was
acquired through the exercise of a Qualified Option, the
Recipient must have held such Stock for a period not less than
the holding period described in Code
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<PAGE>
Section 422(a)(1). Funds received by the Corporation from the
exercise of any Award shall be used for its general corporate
purposes.
The number of shares of Stock subject to an Award shall be
reduced by the number of shares of Stock with respect to which
the Recipient has exercised rights under the Award. If a SAR is
awarded in connection with another Award, the number of shares of
Stock that may be acquired by the Recipient under the other
connected Award shall be reduced by the number of shares of Stock
with respect to which the Recipient has exercised his or her SAR,
and the number of shares of Stock subject to the Recipient's SARs
shall be reduced by the number of shares of Stock acquired by the
Recipient pursuant to the other connected Award.
The Committee may permit an acceleration of previously
established exercise terms of any Awards or the lapse of
restrictions thereon as, when, under such facts and
circumstances, and subject to such other or further requirements
and conditions as the Committee may deem necessary or
appropriate. In addition: (a) if the Corporation or its
stockholders execute an agreement to dispose of all or
substantially all of the Corporation's assets or capital stock by
means of sale, merger, consolidation, reorganization, liquidation
or otherwise, as a result of which the Corporation's stockholders
as of immediately before such transaction will not own at least
fifty percent (50%) of the total combined voting power of all
classes of voting capital stock of the surviving entity (be it
the Corporation or otherwise) immediately after the consummation
of such transaction, thereupon any and all Awards immediately
shall become and remain exercisable with respect to the total
number of shares of Stock still subject thereto for the remainder
of their respective terms unless the transaction is not
consummated and the agreement expires or is terminated, in which
case thereafter all Awards shall be treated as if said agreement
never had been executed; (b) if there is an actual, attempted or
threatened change in the ownership of at least twenty-five
percent (25%) of all classes of voting capital stock of the
Corporation, as determined by the Committee in its sole
discretion, through the acquisition of, or an offer to acquire
such percentage of the Corporation's voting capital stock by any
person or entity, or persons or entities acting in concert or as
a group, and such acquisition or offer has not been duly approved
by the Board, thereupon any and all Awards immediately shall
become and remain exercisable with respect to the total number of
shares of Stock still subject thereto for the remainder of their
respective terms; or (c) if during any period of two (2)
consecutive years, the individuals who at the beginning of such
period constituted the Board, cease for any reason to constitute
at least a majority of the Board, unless the election of each
director of the Board, who was not a director of the Board at the
beginning of such period, was approved by a vote of at least
two-thirds of the directors then still in office who were
directors
at the beginning of such period, thereupon any and all Awards
immediately shall become and remain exercisable with respect to
the total amount of shares of Stock still subject thereto for the
remainder of their respective terms. If an event described in
(a), (b) or (c) occurs, the Committee shall immediately notify
the Recipients in writing of the occurrence of such event and
their rights under this paragraph 11.
12. Withholding. Whenever the Corporation is about to issue or
transfer Stock pursuant to any Award, the Corporation may require
the Recipient to remit to the Corporation an amount sufficient to
satisfy fully any federal, state and other jurisdictions' income
and other tax withholding requirements prior to the delivery of
any certificates for such shares of Stock. Whenever payments are
to be made in cash to any Recipient pursuant to his or her
exercise of an Award, such payments shall be made net after
deduction of all amounts sufficient to satisfy fully any federal,
state and other jurisdictions' income and other tax withholding
requirements.
13. Value. Where used in the Plan, the "fair market value" of
Stock or Options or rights with respect thereto, including
Awards, shall mean and be determined by: (a) in the event that
the Stock is listed on an established exchange, the closing price
of the Stock on the relevant date or, if no trade occurred on
that day, on the next preceding day on which a trade occurred,
(b) in the event that the Stock is not listed on an established
exchange, but is then quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the
average of the average of the closing bid and asked quotations of
the Stock for the five (5) trading days immediately preceding the
relevant date, or (c) in the event that the Stock is not then
listed on an established exchange or quoted on NASDAQ, the
average of the average of the closing bid and asked quotations of
the Stock for five (5) trading days immediately preceding the
relevant date as reported by such brokerage firms which are then
making a market in the Stock. In the
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<PAGE>
event that the Stock is not listed on an established exchange,
quoted on NASDAQ, and no closing bid and asked quotations are
available, fair market value shall be determined in good faith by
the Committee. In the case of (b) or (c) above, in the event
that no closing bid or asked quotation is available on one or
more of such trading days, fair market value shall be determined
by reference to the five (5) trading days immediately preceding
the relevant date on which closing bid and asked quotations are
available.
14. Amendment. To the extent permitted by applicable law, the
Board may amend, suspend, or terminate the Plan at any time;
provided, however, that: (a) no amendment may be adopted that
permits an Award to be granted to any member of the Committee;
(b) with respect to qualified options, except as specified in
paragraph 18 hereof, no amendment may be adopted that will
increase the number of shares reserved for Awards under the Plan,
change the option price, or change the provisions required for
compliance with Section 422 of the Code and regulations issued
thereunder. The amendment or termination of this Plan shall not,
without the consent of the Recipients, alter or impair any rights
or obligations under any Award previously granted hereunder.
In addition and subject to the foregoing, the Committee may
prescribe other or additional terms, conditions and provisions
with respect to the grant or exercise of any or all Awards as the
Committee may determine necessary or appropriate for such Awards
and the Stock subject thereto to qualify under and comply with
all applicable laws, rules and regulations, and changes therein,
including but not limited to the provisions of Sections 421 and
422 of the Code and Section 16 of the Securities Exchange Act of
1934, as amended. Without limiting the generality of the
preceding sentence, each Qualified Option, and any SAR awarded in
connection therewith, shall be subject to such other and
additional terms, conditions and provisions as the Committee may
deem necessary or appropriate in order to qualify such Option, or
connected Option and SAR, as an incentive stock option under
Section 422 of the Code, including but not limited to the
following provisions:
(i) the aggregate fair market value, at the time such
Option is awarded, of the Stock subject thereto and of any Stock
or other capital stock with respect to which incentive stock
options qualifying under Sections 421 and 422 of the Code are
exercisable for the first time by the Recipient during any
calendar year under the Plan and any other plans of the
Corporation or its affiliates, shall not exceed $100,000.00; and
(ii) No Qualified Option, or any SAR in connection
therewith, shall be awarded to any person if at the time of such
Award, such person owns Stock possessing more than ten percent
(10%) of the total combined voting power of all classes of
capital stock of the Corporation or its affiliates, unless at the
time such Option or SAR is awarded the Stock purchase price under
such Option is at least one hundred and ten percent (110%) of the
fair market value of the Stock subject to such Option and the
Option (and any SAR connected therewith) by its terms is not
exercisable after the expiration of five (5) years from the date
it is awarded.
From time to time, the Committee may rescind, revise and add
to any of such terms, conditions and provisions as may be
necessary or appropriate to have any Awards be or remain
qualified and in compliance with all applicable laws, rules and
regulations, and may delete, omit or waive any of such terms,
conditions or provisions that are no longer required by reason of
changes in applicable laws, rules or regulations.
15. Continued Employment. Nothing in the Plan or any Award
shall confer upon any Recipient or other persons any right to
continue in the employment of, or maintain any particular
relationship with the Corporation or its affiliates, or limit or
affect any rights, powers or privileges that the Corporation or
its affiliates may have to supervise, discipline and terminate
such Recipient or other persons, and the employment and other
relationships thereof. However, the Committee may require as a
condition of making and/or exercising any Award that its
Recipient agree to, and in fact provide services, either as an
employee or in another capacity, to or for the Corporation or any
Subsidiary for such time period following the date the Award is
made and/or exercised as the Committee may prescribe. The
immediately preceding sentence shall not apply to any Qualified
Option to the extent such application would result in
disqualification of said Option as an incentive stock option
under Sections 421 and 422 of the Code.
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16. General Restrictions. Each Award shall be subject to the
requirement and provision that if at any time the Committee
determines it necessary or desirable as a condition of or in
consideration of making such Award, or the purchase or issuance
or Stock thereunder, (a) the listing, registration or
qualification of the Stock subject to the Award, or the Award
itself, upon any securities exchange or under any federal or
state securities or other laws, (b) the approval of any
governmental authority, or (c) an agreement by the Recipient with
respect to disposition of any Stock (including without limitation
that at the time of the Recipient's exercise of the Award, any
Stock thereby acquired is being and will be acquired solely for
investment purposes and without any intention to sell or
distribute such Stock), then such Award shall not be consummated
in whole or in part unless such listing, registration,
qualification, approval or agreement shall have been
appropriately effected or obtained to the satisfaction of the
Committee and legal counsel for the Corporation.
17. Rights. Except as otherwise provided in the Plan, the
Recipient of any Award shall have no rights as a holder of the
Stock subject thereto unless and until one or more certificates
for the shares of such Stock are issued and delivered to the
Recipient. No adjustments shall be made for dividends, either
ordinary or extraordinary, or any other distributions with
respect to Stock, whether made in cash, securities or other
property, or any rights with respect thereto, for which the
record date is prior to the date that any certificates for Stock
subject to an Award are issued to the Recipient pursuant to his
or her exercise thereof. No Award, or the grant thereof, shall
limit or affect the right or power of the Corporation or its
affiliates to adjust, reclassify, recapitalize, reorganize or
otherwise change its or their capital or business structure, or
to merge, consolidate, dissolve, liquidate or sell any or all of
its or their business, property or assets.
18. Adjustments. In the event of any change in the number of
issued and outstanding shares of Stock which results from a stock
split, reverse stock split, payment of a stock dividend or any
other change in the capital structure of the Corporation, the
Committee shall proportionately adjust the maximum number of
shares subject to each outstanding Award, and (where appropriate)
the purchase price per share thereof (but not the total purchase
price under the Award), so that upon exercise or realization of
such Award, the Recipient shall receive the same number of shares
he or she would have received had he or she been the holder of
all shares subject to his or her outstanding Award and
immediately before the effective date of such change in the
number of issued and outstanding shares of Stock. Such
adjustments shall not, however, result in the issuance of
fractional shares. Any adjustments under this paragraph 18 shall
be made by the Committee, subject to approval by the Board. No
adjustments shall be made that would cause a Qualified Option to
fail to continue to qualify as an incentive stock option within
the meaning of Section 422 of the Code.
In the event the Corporation is a party to any merger,
consolidation or other reorganization, any and all outstanding
Awards shall apply and relate to the securities to which a holder
of Stock is entitled after such merger, consolidation or other
reorganization. Upon any liquidation or dissolution of the
Corporation, any and all outstanding Awards shall terminate upon
consummation of such liquidation or dissolution, but prior to
such consummation shall be exercisable to the extent that the
same otherwise are exercisable under the Plan.
19. Forfeiture. Notwithstanding anything to the contrary in
this Plan, if the Committee finds after full consideration of the
facts presented on behalf of the Corporation and the involved
Recipient, that he or she has been engaged in fraud,
embezzlement, theft, commission of a felony, or dishonesty in the
course of his or her employment by the Corporation or any
Subsidiary that has damaged it, or that the Recipient has
disclosed trade secrets of the Corporation or its affiliates, the
Recipient shall forfeit all rights under and to all unexercised
Awards, and all exercised Awards under which the Corporation has
not yet delivered payment or certificates for shares of Stock (as
the case may be), all of which Awards and rights shall be
automatically canceled. The decision of the Committee as to the
cause of the Recipient's discharge from employment with the
Corporation or any Subsidiary and the damage thereby suffered
shall be final for purposes of the Plan, but shall not affect the
finality of the Recipient's discharge by the Corporation or
Subsidiary for any other purposes. The preceding provisions of
this paragraph shall not apply to any Qualified Option to the
extent such application would result in disqualification of said
Option as an incentive stock option under Sections 421 and 422 of
the Code.
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20. Indemnification. In and with respect to the administration
of the Plan, the Corporation shall indemnify each present and
future member of the Committee and/or of the Board, who shall be
entitled without further action on his or her part to indemnity
from the Corporation for all damages, losses, judgments,
settlement amounts, punitive damages, excise taxes, fines,
penalties, costs and expenses (including without limitation
attorneys' fees and disbursements) incurred by such member in
connection with any threatened, pending or completed action, suit
or other proceedings of any nature, whether civil,
administrative, investigative or criminal, whether formal or
informal, and whether by or in the right or name of the
Corporation, any class of its security holders, or otherwise, in
which such member may be or have been involved, as a party or
otherwise, by reason of his or her being or having been a member
of the Committee and/or of the Board, whether or not he or she
continues to be such a member. The provisions, protection and
benefits of this paragraph shall apply and exist to the fullest
extent permitted by applicable law to and for the benefit of all
present and future members of the Committee and/or of the Board,
and their respective heirs, personal and legal representatives,
successors and assigns, in addition to all other rights that they
may have as a matter of law, by contract, or otherwise, except
(a) as may not be allowed by applicable law, (b) to the extent
there is entitlement to insurance proceeds under insurance
coverage provided by the Corporation on account of the same
matter or proceeding for which indemnification hereunder is
claimed, or (c) to the extent there is entitlement to
indemnification from the Corporation, other than under this
paragraph, on account of the same matter or proceeding for which
indemnification hereunder is claimed.
21. Miscellaneous. Any reference contained in this Plan to a
particular section or provision of law, rule or regulation,
including but not limited to the Internal Revenue Code of 1986
and the Securities Exchange Act of 1934, both as amended, shall
include any subsequently enacted or promulgated section or
provision of law, rule or regulation, as the case may be, of
similar import. With respect to persons subject to Section 16 of
the Securities Exchange Act of 1934, as amended, transactions
under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or any successor rule that may be
promulgated by the Securities and Exchange Commission, to the
extent any provision of this Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the
extent permitted by applicable law and deemed advisable by the
Committee, and to the extent that there are additional
requirements under Rules 16b-3, it is the responsibility of the
participants to satisfy such requirements. Where used in this
Plan: the plural shall include the singular, and unless the
context otherwise clearly requires, the singular shall include
the plural; and, the term "affiliates" shall mean each and every
Subsidiary and any parent of the Corporation. The captions of
the numbered paragraphs contained in this Plan are for
convenience only, and shall not limit or affect the meaning,
interpretation or construction of any of the provisions of the
Plan.
- - - - - - - - - - -
END
- - - - - - - - - - -
<PAGE>
UNION NATIONAL FINANCIAL CORPORATION
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Marilyn Geib
and Erma Witmer and each or any of them, proxies of the
undersigned, with full power of substitution, to vote all of the
shares of Union National Financial Corporation (the
"Corporation") that the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of the Corporation to be held
at The Country Table Restaurant, 740 East Main Street, Mount Joy,
Pennsylvania 17552, on Tuesday, April 22, 1997 at 10:00 a.m.,
prevailing time, and at any adjournment or postponement thereof
as follows:
1. ELECTION OF CLASS A DIRECTORS TO SERVE FOR A THREE-YEAR TERM
Franklin R. Eichler, E. Ralph Garber, Mark D. Gainer
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed above (except to vote for all
as marked to the nominees listed
contrary below) above
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)
_______________________________________________________________
2. PROPOSAL TO APPROVE AND ADOPT THE UNION NATIONAL FINANCIAL
CORPORATION 1997 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors Recommends a Vote FOR This Proposal.
_________________________________________________________________
<PAGE>
3. PROPOSAL TO APPROVE AND ADOPT THE UNION NATIONAL FINANCIAL
CORPORATION 1997 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors Recommends a Vote FOR This Proposal.
_________________________________________________________________
4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting and
any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED ABOVE AND FOR PROPOSALS TWO (2) AND THREE (3).
Dated: __________________, 1997
_______________________________
Signature(s) of Shareholders
_______________________________
Signature(s) of Shareholders
Number of Shares Held of
Record on March 17, 1997
________________________
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND
RETURNED PROMPTLY TO THE CORPORATION IN THE ENCLOSED ENVELOPE.
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL
SHOULD SIGN. IF STOCK IS HELD JOINTLY, EACH OWNER SHOULD SIGN.
<PAGE>
[Union National Mount Joy Bank Stationery]
March 24, 1997
Dear Dividend Reinvestment Plan Participant:
As a participant in the Union National Financial Corporation
Dividend Reinvestment Plan ("Plan"), you are entitled to instruct
the Plan Administrator, Union National Mount Joy Bank, Trust
Department, to vote the shares that are held on your behalf in
the Plan at the 1997 Annual Meeting of Shareholders of the
Corporation. To instruct the Plan Administrator as to how you
would like these shares voted at the Annual Meeting, please
complete the enclosed Voting Instruction Card/Proxy. At the
Annual Meeting, in accordance with the Plan, the Plan
Administrator will vote the shares held in the Plan for which
participants have executed and returned a Voting Instruction
Card/Proxy.
Enclosed is a copy of the Corporation's Notice of Annual
Meeting and Proxy Statement in connection with the 1997 Annual
Meeting of Shareholders and a copy of the Corporation's 1996
Annual Report. Also enclosed is a Voting Instruction Card/Proxy
which should be completed and returned to the Plan Administrator
in the enclosed envelope.
If you have any questions, please contact the undersigned.
Sincerely,
/s/ Charles R. Starr
--------------------
Charles R. Starr
Vice President
<PAGE>
DIVIDEND REINVESTMENT PLAN
VOTING INSTRUCTION CARD/PROXY
UNION NATIONAL FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 22, 1997
_________________________________
The undersigned hereby constitutes and appoints Charles R.
Starr, Union National Mount Joy Bank, Plan Administrator for the
Union National Financial Corporation Dividend Reinvestment Plan
(the "Plan"), proxy of the undersigned, with full power of
substitution, to vote all of the shares of Union National
Financial Corporation (the "Corporation") that the Plan holds on
behalf of the undersigned and may be entitled to vote at the
Annual Meeting of Shareholders of the Corporation to be held at
The Country Table Restaurant, 740 East Main Street, Mount Joy,
Pennsylvania 17552, on Tuesday, April 22, 1997 at 10:00 a.m.,
prevailing time, and at any adjournment or postponement thereof
as follows:
1. ELECTION OF CLASS A DIRECTORS TO SERVE FOR A THREE-YEAR TERM
Franklin R. Eichler, E. Ralph Garber, Mark D. Gainer
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed above (except to vote for all
as marked to the nominees listed
contrary below) above
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE
PROVIDED BELOW.)
_________________________________________________________________
2. PROPOSAL TO APPROVE AND ADOPT THE UNION NATIONAL FINANCIAL
CORPORATION 1997 EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors Recommends a Vote FOR This Proposal.
_________________________________________________________________
<PAGE>
3. PROPOSAL TO APPROVE AND ADOPT THE UNION NATIONAL FINANCIAL
CORPORATION 1997 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors Recommends a Vote FOR This Proposal.
_________________________________________________________________
4. In his discretion, the proxy is authorized to vote upon such
other business as may properly come before the meeting and any
adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED DIVIDEND REINVESTMENT
PLAN PARTICIPANT. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSALS TWO (2) AND
THREE (3).
Dated:_____________, 1997
______________________________________
Signature(s) of Shareholders
Dividend Reinvestment Plan Participant
______________________________________
Signature(s) of Shareholders
Dividend Reinvestment Plan Participant
Number of Shares Held of
Record on March 17, 1997
_________________________
THE VOTING INSTRUCTIONS REQUEST PERTAINS TO SHARES OF COMMON
STOCK HELD IN YOUR DIVIDEND REINVESTMENT PLAN ACCOUNT BUT NOT
REGISTERED IN YOUR NAME. SUCH SHARES OF COMMON STOCK CAN BE
VOTED ONLY BY THE PLAN ADMINISTRATOR AS THE HOLDER OF RECORD OF
THE SHARES.
PLEASE DATE, SIGN AND RETURN YOUR VOTING INSTRUCTION
CARD/PROXY TO US PROMPTLY IN THE RETURN ENVELOPE PROVIDED.
