GUARANTEE AGREEMENT
UNION NATIONAL FINANCIAL CORPORATION
Dated as of October 14, 2004
<PAGE>
TABLE OF CONTENTS
Page
____
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation................... 1
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 2.1 Powers and Duties of the Guarantee Trustee....... 4
SECTION 2.2 Certain Rights of the Guarantee Trustee.......... 5
SECTION 2.3 Not Responsible for Recitals or Issuance
of Guarantee .................................... 7
SECTION 2.4 Events of Default; Waiver........................ 7
SECTION 2.5 Events of Default; Notice........................ 8
ARTICLE III
THE GUARANTEE TRUSTEE
SECTION 3.1 The Guarantee Trustee; Eligibility............... 8
SECTION 3.2 Appointment, Removal and Resignation
of the Guarantee Trustee..... ................... 9
ARTICLE IV
GUARANTEE
SECTION 4.1 Guarantee ....................................... 9
SECTION 4.2 Waiver of Notice and Demand..................... 10
SECTION 4.3 Obligations Not Affected....................... 10
SECTION 4.4 Rights of Holders.............................. 11
SECTION 4.5 Guarantee of Payment........................... 11
SECTION 4.6 Subrogation.................................... 11
SECTION 4.7 Independent Obligations........................ 12
SECTION 4.8 Enforcement.................................... 12
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 5.1 Limitation of Transactions..................... 12
SECTION 5.2 Ranking........................................ 13
<PAGE>
ARTICLE VI
TERMINATION
SECTION 6.1 Termination.................................... 13
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Exculpation.................................... 13
SECTION 7.2 Indemnification................................ 14
SECTION 7.3 Compensation; Reimbursement of Expenses ....... 15
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Successors and Assigns......................... 15
SECTION 8.2 Amendments..................................... 16
SECTION 8.3 Notices........................................ 16
SECTION 8.4 Benefit........................................ 16
SECTION 8.5 Governing Law.................................. 16
SECTION 8.6 Counterparts................ .................. 17
<PAGE>
GUARANTEE AGREEMENT
___________________
This GUARANTEE AGREEMENT (the "Guarantee"), dated as of
October 14, 2004, is executed and delivered by Union National
Financial Corporation, a bank holding company incorporated in
Pennsylvania (the "Guarantor"), and Wilmington Trust Company, a
Delaware banking corporation, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein)
from time to time of the Capital Securities (as defined herein)
of Union National Capital Trust II, a Delaware statutory trust
(the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration
of Trust (the "Declaration"), dated as of October 14, 2004,
among
the trustees named therein of the Issuer, Union National
Financial Corporation, as sponsor, and the Holders from time to
time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof securities,
having an aggregate liquidation amount of $3,000,000,
designated
in the Declaration as MMCapS sm (the "Capital Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally
to
agree, to the extent set forth in this Guarantee, to pay to the
Holders of Capital Securities the Guarantee Payments (as
defined
herein) and to make certain other payments on the terms and
conditions
set forth herein.
NOW, THEREFORE, in consideration of the purchase by each
Holder of the Capital Securities, which purchase the Guarantor
hereby agrees shall benefit the Guarantor, the Guarantor
executes
and delivers this Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation.
_______________________________
In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee 'but not
defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) a term defined anywhere in thisGuarantee has the same
meaning throughout;
(c) all
references to "the Guarantee" or "this Guarantee"
are to this Guarantee as modified, supplemented or amended from
time to time;
(d) all references in this Guarantee to Articles and
Sections are to Articles and Sections of this Guarantee, unless
otherwise specified;
(e) terms defined in the Declaration as of the date of
execution of this Guarantee have the same meanings when used in
this Guarantee, unless otherwise defined in this Guarantee or
unless the context otherwise requires; and
<PAGE>
(f) a reference to the singular includes the plural and
vice versa.
"Beneficiaries" means any Person to whom the Issuer is or
hereafter becomes indebted or liable.
"Common Securities" has the meaning specified in the
Declaration.
"Corporate Trust Office" means the office of the
Guarantee Trustee at which at any particular time its corporate
trust business shall be principally administered, which at all
times shall be located within the United States and at the time
of the execution of this Guarantee shall be Rodney Square
North,
1100 North Market Street, Wilmington, DE 19890-0001.
"Covered Person" means any Holder of Capital Securities.
"Debenture Issuer" means Union National Financial
Corporation or any successor entity resulting from any
consolidation, amalgamation, merger or other business
combination, in its capacity as issuer of the Debentures.
"Debentures" means the junior subordinated debentures of the
Debenture Issuer that are designated in the Indenture as the
"Fixed/Floating Rate Junior Subordinated Debt Securities due 2034"
and
held by the Institutional Trustee (as defined in the Declaration)
of
the Issuer.
"Event of Default" has the meaning set forth in Section
2.4.
"Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital
Securities, to the extent not paid or made by the Issuer: (i)
any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital
Securities to the extent the Issuer has funds available in the
Property Account (as defined in the Declaration) therefor at
such
time, (ii) the price payable upon the redemption of any Capital
Securities to the extent the Issuer has funds available in the
Property Account therefor at such time, with respect to any
Capital Securities that are (1) called for redemption by the
Issuer or (2) mandatorily redeemed by the Issuer, in each case,
in accordance with the terms of such Capital Securities, and
(iii) upon a voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Issuer (other than in
connection
with the distribution of Debentures to the Holders of the
Capital
Securities in exchange therefor as provided in the
Declaration),
the lesser of (a) the aggregate of the liquidation amount of
the
Capital Securities and all accrued and unpaid Distributions on
the Capital Securities to the date of payment, to the extent
the
Issuer has funds available in the Property Account therefor at
such time, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in
liquidation of the Issuer after satisfaction of liabilities to
creditors of the Issuer as required by applicable law (in
either
case, the "Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until
a Successor Guarantee Trustee has been appointed and has
accepted
such appointment pursuant to the terms of this Guarantee and
thereafter means each such Successor Guarantee Trustee.
<PAGE>
"Holder" means any Person in whose name any Capital
Securities are registered on the books and records of the
Issuer;
provided, however, that, in determining whether the
holders of the requisite percentage of Capital Securities have
given any request, notice, consent or waiver hereunder,
"Holder"
shall not include the Guarantor or any Affiliate of the
Guarantor.
"Indemnified Person" means the Guarantee Trustee
(including in its individual capacity), any Affiliate of the
Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees,
custodians or agents of the Guarantee Trustee.
"Indenture" means the Indenture, dated as of October 14,
2004, between the Debenture Issuer and Wilmington Trust
Company,
not in its individual capacity but solely as trustee, and any
indenture supplemental thereto pursuant to which the Debentures
are to be issued to the Institutional Trustee of the Issuer.
"Liquidation Distribution" has the meaning set forth in
the definition of "Guarantee Payments" herein.
"Majority in liquidation amount of the Capital
Securities" means Holder(s) of outstanding Capital Securities,
voting together as a class, but separately from the holders of
Common Securities, of more than 50% of the aggregate
liquidation
amount (including the amount that would be paid upon the
redemption, liquidation or otherwise on the date upon which
the voting percentages are determined, plus unpaid
Distributions
accrued thereon to such date) of all Capital Securities then
outstanding.
"Obligations" means any costs, expenses or liabilities
(but not including liabilities related to taxes) of the Issuer,
other than obligations of the Issuer to pay to holders of any
Trust Securities the amounts due such holders pursuant to the
terms of the Trust Securities.
"Officer's Certificate" means, with respect to any
Person, a certificate signed by one Authorized Officer of such
Person. Any Officer's Certificate delivered with respect to
compliance with a condition or covenant provided for in this
Guarantee shall include:
(a) a statement that such officer signing the Officer's
Certificate has read the covenant or condition and the
definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in
rendering the Officer's Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion
as to whether or not such covenant or condition has been
complied
with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
<PAGE>
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association,
joint stock company, limited liability company, trust,
unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever
nature.
"Responsible Officer" means, with respect to the
Guarantee Trustee, any officer within the Corporate Trust
Office
of the Guarantee Trustee with direct responsibility for the
o administration of any matters relating to this Guarantee,
including any vice president, any assistant vice president, any
secretary, any assistant secretary, the treasurer, any
assistant
treasurer, any trust officer or other officer of the Corporate
Trust Office of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above
designated officers and also means, with respect to a
particular
corporate trust matter, any other officer to whom such matter
is
referred because of that officer's knowledge of and familiarity
with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee
Trustee
under Section 3.1.
"Trust Securities" means the Common Securities and the
Capital Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 2.1 Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee
Trustee for the benefit of the Holders of the Capital
Securities,
and the Guarantee Trustee shall not transfer this Guarantee to
any Person except a Holder of Capital Securities exercising his
or her rights pursuant to Section 4.4 (b) or to a Successor
Guarantee Trustee on acceptance by such Successor Guarantee
Trustee of its appointment to act as Successor Guarantee
Trustee.
The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, and such
vesting and cessation of title shall be effective whether or
not
conveyancing documents have
been executed and delivered pursuant to the appointment of such
Successor Guarantee Trustee.
(b) If an Event of Default actually known to a
Responsible Officer of the Guarantee Trustee has occurred and
is
continuing, the Guarantee Trustee shall enforce this
Guarantee for the benefit of the Holders of the Capital
Securities.
(c) The Guarantee Trustee, before the occurrence of any
Event of Default and alter the curing or waiving of all Events
of
Default that may have occurred, shall undertake to perform only
such duties as are specifically set forth in this Guarantee,
and
no implied covenants shall be read into this Guarantee against
the Guarantee Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.4(b))
and is actually known to a Responsible Officer of the Guarantee
Trustee, the Guarantee Trustee shall exercise such of the
rights
and powers vested in it by this Guarantee, and use the same
degree of care and skilloin its
exercise thereof, as a prudent person would exercise or use
under
the circumstances in the conduct of his or her own affairs.
<PAGE>
(d) No provision of this Guarantee shall be construed to
relieve the Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own
willful misconduct or bad faith, except that:
(i) prior to the occurrence of any Event of Default
and
after the curing or waiving of all Events of Default
that
may have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express
provisions of this Guarantee, and the Guarantee
Trustee shall not be liable except for the
performance of such duties and obligations as are
specifically set forth in this Guarantee, and no
implied covenants or obligations shall be read into
this Guarantee against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of
the Guarantee Trustee, the Guarantee Trustee may
conclusively rely, as to the truth of the statements
and the correctness of
the opinions expressed
therein, upon any certificates or opinions furnished
to the Guarantee Trustee and conforming to the
requirements of this Guarantee; but in the case of
any such certificates or opinions furnished to the
Guarantee Trustee, the Guarantee Trustee shall be
under a duty to examine the same to determine
whether or not on their face they conform to the
requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for
any
error of judgment made in good faith by a Responsible
Officer of the Guarantee Trustee, unless it shall be
proved that such Responsible Officer of the Guarantee
Trustee or the Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment
was
made;
(iii) the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it
in
good faith in accordance with the written direction of
the
Holders of a Majority in liquidation amount of the
Capital Securities relating to the time, method and place
of
conducting any proceeding for any remedy available to
the
Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this
Guarantee; and
(iv) no provision of this Guarantee shall require
the
Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of
any
of its rights or powers, if the Guarantee Trustee
shall have reasonable grounds for believing that the
repayment of such funds is not reasonably assured to it
under the terms of this Guarantee, or security and
indemnity, reasonably satisfactory to the Guarantee
Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 2.2 Certain Rights of the Guarantee Trustee.
(a) Subject to the provisions of Section 2.1:
<PAGE>
(i) The Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from
acting upon, any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to
be
genuine and to have been signed, sent or presented by
the
proper party or parties.
(ii) Any
direction or act of the Guarantor
contemplated by this Guarantee shall be sufficiently
evidenced by an Officer's Certificate.
(iii) Whenever, in the administration of this
Guarantee, the Guarantee Trustee shall deem it desirable
that
a matter be proved or established before taking,
suffering or omitting any action hereunder, the Guarantee
Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part,
request and conclusively rely upon an Officer's
Certificate of the Guarantor which, upon receipt of such
request, shall be promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see
to
any recording, filing or registration of any
instrument or other writing (or any rerecording, refiling
or
reregistration thereof).
(v) The Guarantee Trustee may consult with counsel
of
its selection, and the advice or opinion of such
counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The
Guarantee Trustee shall have the right at any time to
seek
instructions concerning the administration of this
Guarantee from any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested
in
it by this Guarantee at the request or direction of
any
Holder, unless such Holder shall have provided to the
Guarantee Trustee such security and indemnity, reasonably
satisfactory to the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses and the
expenses of the Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it
in
complying with such request or direction, including
such
reasonable advances as may be requested by the
Guarantee Trustee; provided, however, that nothing
contained in this Section 2.2(a)(vi) shall be taken to
relieve the Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise the
rights and powers vested in it by this Guarantee.
(vii) The Guarantee Trustee shall not be bound to
make
any investigation into the facts or matters stated
in
any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or
matters as it may see fit.
<PAGE>
(viii) The Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents,
nomine
