SEVERANCE AGREEMENT
1ST AMENDMENT TO SEVERANCE AGREEMENT
SALARY CONTINUATION AGREEMENT
 
 
       Severance Agreement by and between Omega Financial Corporation and
                                 Donita R. Koval
 
                               SEVERANCE AGREEMENT
 
      THIS SEVERANCE AGREEMENT (the "Agreement") is made this 23rd day of
December, 2003, by and between OMEGA FINANCIAL CORPORATION, a corporation
organized under the laws of Pennsylvania ("Employer") and DONITA R. KOVAL, an
individual ("Employee").
 
                                   BACKGROUND
 
      Employer currently employs Employee in the position of Executive Vice
President and Chief Operating Officer. In consideration of Employee's past,
present and future services to Employer, Employer desires to provide for the
payment of certain compensation and other benefits to Employee upon the
occurrence of certain events, all as more fully set forth below.
 
      In consideration of the mutual covenants and agreements herein contained,
and intending to be legally bound hereby, the parties agree as follows:
 
      7. Term. The term of this Agreement shall commence on January 1, 2004 and
shall continue until December 31, 2006, unless renewed or unless terminated
earlier, as hereinafter provided. During the term of this Agreement, the Board
of Directors of Employer shall review and monitor the performance of Employee,
and prior to the end of the initial twelve-month period of the term of this
Agreement, i.e., prior to December 31, 2004, if the Board concludes that it does
not wish to extend the term of this Agreement beyond the expiration of the
initial three-year term, the Board shall so notify Employee, in which event this
Agreement shall terminate at the end of such initial three-year term. In default
of such notice by the Board of Directors, the term of this Agreement shall
automatically be extended for another year so that the term of this Agreement
shall then be a three-year term beginning on the January 1, 2005 and ending on
December 31, 2007. Thereafter, the term of this Agreement shall continually be
extended in like manner for successive renewal terms of three years each unless
the Board of Directors notifies Employee prior to the end of the first 12-month
period of each such renewal term that it does not wish to extend the term of
this Agreement beyond the expiration of the then current three year term, in
which event this Agreement shall terminate at the expiration of the then current
three year term. Hereafter in this Agreement, the initial three-year term of
this Agreement, plus all successive renewal terms, shall be collectively
referred to as the "Term." At no time shall the current term of this Agreement
be for a period in excess of three years.
 
      Anything in this Agreement to the contrary notwithstanding, this Agreement
and the Term, if not previously terminated by the Board of Directors as set
forth above, shall terminate on the earliest of the following dates: (a) the
date Employee dies or becomes permanently disabled (i.e., upon her failure to
render services of the character which she had previously rendered to Employer,
because of her physical and mental illness or other incapacity beyond her
control for a continuous period of six months or for shorter periods aggregating
six months in any twelve month period); (b) termination of Employee's employment
with Employer for cause (as hereinafter defined); (c) upon mutual agreement of
Employer and Employee; (d) subject to Section 2 hereof, termination by
retirement or otherwise; or (e) upon the Employee reaching sixty-five (65) years
of age. In the event the Employee's employment with Employer is terminated
during the Term other than as set forth in Section 2 hereof, the Employee shall
have no rights or benefits under this Agreement, but shall be entitled to other
rights or benefits to which she might otherwise be entitled. For purposes of
this Agreement, the term "cause" shall mean (i) conviction of Employee for any
felony, fraud or embezzlement or (ii) Employee failing or refusing to comply
with the written policies or directives of Employer's Board of Directors or the
Employee being guilty of misconduct in connection with the performance of her
duties for Employer and the Employee fails to cure such non-compliance or
misconduct within twenty days after receiving written notice from Employer's
Board of Directors specifying such non-compliance or misconduct.
 
      8. Termination. If during the Term, Employee's employment with Employer is
terminated as set forth below, Employer will pay to Employee the amounts set
forth in Sections 3 and 4 hereof and Employee shall be entitled to the benefits
set forth in Section 4 hereof:
 
 
<PAGE>
 
      (i) Employer terminates Employee's employment with Employer without cause;
or
 
      (ii) the Employee terminates Employee's employment with Employer (a) for
any reason, whether with or without cause, at any time within [three] years
after a change in control of Employer (as defined hereinafter), or (b) due to
the fact that without Employee's consent and whether or not a change in control
of Employer has occurred, the nature and scope of Employee's authority with
Employer or the surviving or acquiring person are materially reduced to a level
below that which she enjoys on the date hereof, the duties or responsibilities
assigned to her are materially inconsistent with that which she has on the date
hereof, her then current base annual salary is materially reduced to a level
below that which she enjoys on the date hereof or at any time hereafter
(whichever may be greater), the fringe benefits which Employer provides Employee
on the date hereof or at any time hereafter (whichever may be greater) are
materially reduced, Employee's position or title with Employer or the surviving
or acquiring person is reduced from her current position or title with Employer,
or Employee's principal place of employment with Employer is changed to a
location greater than forty miles from her current principal place of residence,
provided, however, that for any termination by Employee under this clause, (b)
the Employee shall have first given Employer ten (10) days' written notice of
her intention to terminate her employment pursuant to this subsection (ii),
specifying the reason(s) for such termination, and provided further, that
Employer shall not have cured or remedied the reason(s) specified in such notice
prior to the expiration of such ten(10) day period.
 
            For the purposes of this Agreement, a "change in control of
            Employer" shall mean a change in control of Employer of a nature
            that would be required to be reported in response to Item 6(e) of
            Schedule 14A of Regulation 14A promulgated under the Securities
            Exchange Act of 1934, as amended, as enacted and in force on the
            date hereof, whether or not Employer is subject to such reporting
            requirement; provided that, without limitation, such a change of
            control shall be deemed to have occurred if (i) any persons, other
            than those persons in control of Employer on the date hereof,
            acquires the power, directly or indirectly, to direct the management
            or policies of Employer or to vote 25% or more of any class of
            voting securities of Employer; or (ii) within any period of three
            consecutive years during the term of this Agreement, individuals who
            at the beginning, of such period constitute the Board of Directors
            of Employer cease for any reason to constitute at least a majority
            thereof.
 
      9. Compensation Payments to Employee. Commencing not later than 30 days
after the date that Employee's employment with Employer is terminated pursuant
to Section 2 hereof (the "Termination Date") and subject to Employee's
compliance with Section 8 hereof, Employer shall pay annual compensation to
Employee for a period of three years following the Termination Date at a per
annum rate equal to 100% of the amount of the Employee's Highest Annual
Compensation during the three calendar years ending prior to the Termination
Date (the "Measurement Period"). For purposes of this Agreement, the term
"Highest Annual Compensation" shall mean the Employee's highest annual cash
compensation during the Measurement Period, including cash bonuses under
Employer's bonus plans, but excluding other fringe benefits. Employer agrees
that it will make the payments due under this Section 3 on the first day of each
month following the Termination Date in an amount equal to 1/12 of 100% of
Employee's Highest Annual Compensation. [Such payments to Employee shall be
coordinated with pension, annuity or other benefits or payments received by
Employee under Employer's nonqualified Supplemental Executive Retirement Plan,
as the same shall be amended from time to time (the "SERP").] The intent of this
Section 3 is that the sum of payments made under this Section 3 in any year,
when added to payments received under the SERP, will not exceed the Employee's
Highest Annual Compensation. The payments and benefits required by Sections 3
and 4 hereof shall continue despite the fact that, after the Termination Date,
the Term of this Agreement may have expired pursuant to Section 1. The payments
required by this Section 3 shall not be offset or reduced by any income or
earnings received from any other employment or other activity the Employee may
engage in during such three year period. Employee shall have no duty to mitigate
damages.
 
      10. Other Benefits. In addition to the compensation set forth in Section 3
hereof, Employee shall be entitled to receive benefits from Employer as set
forth in this Section 4. For the periods set forth below, following the
Termination Date, Employee shall be entitled to participate in the following
programs of Employer:
 
 
<PAGE>
 
            (a)   All medical, hospitalization and life insurance benefits shall
                  be continued for a period of three years except that should
                  subsequent employment be accepted during the three-year period
                  following the Termination Date, continuation of any medical,
                  hospitalization and life insurance benefits will be offset by
                  coverages provided through the Employee's subsequent employer.
 
            (b)   If permitted under the terms thereof, Employee will remain a
                  participant under the SERP.
 
            (c)   If not paid by a new employer, for a period of one year
                  following the Termination Date, reimbursement for all
                  reasonable relocation expenses incurred by Employee in
                  connection with securing new employment; provided, however, in
                  no event shall Employer be obligated to reimburse Employee
                  hereunder in excess of 1/3 of her Highest Annual Compensation.
 
      11. Withholding. Employer may withhold from any benefits payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
 
      12. Source of Payment. Except as set forth in Section 14 hereof, all
payments provided under this Agreement shall be paid in cash from the general
funds of Employer, no special or separate fund shall be required to be
established by Employer and the Employee shall have no right, title or interest
whatsoever in or to any investment which Employer may make to aid Employer in
meeting its obligations hereunder. Nothing contained in this Agreement, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind or a fiduciary relationship between Employer and Employee or
any other person.
 
      7.    (a) No Assignment. Neither this Agreement nor any right or interest
hereunder shall be assignable by Employee or her legal representatives without
Employer's prior written consent.
 
            (c) Attachment. Except as required by law, the right to receive
payments under this Agreement shall not be subject to anticipation, sale,
encumbrance, charge, levy, or similar process or assignment by operation of law.
 
      8. Confidentiality and Non-Competition. All payments to Employee under
this Agreement shall be subject to Employee's compliance with the provisions of
this Section 8. If Employee fails to comply with such provisions, her right to
any future payments under this Agreement shall terminate and Employer's
obligations under this Agreement to make such payments and provide such benefits
shall cease.
 
            (a) Employee covenants and agrees that she will not , during the
term of her employment and at any time thereafter, except with the express prior
written consent of Employer or pursuant to the lawful order of any judicial or
administrative agency of government, directly or indirectly, disclose,
communicate or divulge to any person, or use for the benefit of any person, any
knowledge or information, with respect to the conduct or details of Employer's
business which she, acting reasonably, believes or should believe to be of a
confidential nature and the disclosure of which not to be in Employer's
interest.
 
            (b) Employee covenants and agrees that she will not, during the term
of her employment and for a period of one year thereafter, except with the
express prior written consent of Employer, directly or indirectly, whether as
employee, owner, partner, consultant, agent, director, officer, shareholder or
in any other capacity, engage in or assist any person to engage in any act or
action which she, acting reasonably, believes or should believe would be harmful
or inimical to the interests of Employer.
 
            (c) Employee covenants and agrees that she will not, during the term
of her employment and for a period of one year thereafter, except with the
express prior written consent of
 
 
<PAGE>
 
Employer, in any capacity (including, but not limited to, owner, partner,
shareholder, consultant, agent, employee, officer, director or otherwise),
directly or indirectly, for her own account or for the benefit of any person,
engage or participate in or otherwise be connected with any commercial bank
which has its principal office in Centre County, Pennsylvania except that the
foregoing shall not prohibit Employee from owning as a shareholder less than 1%
of the outstanding stock of an issuer whose stock is publicly traded.
 
            (d) The parties agree that any breach by Employee of any of the
covenants or agreements contained in this Section 8 will result in irreparable
injury to Employer for which money damages could not adequately compensate
Employer and therefore, in the event of any such breach, Employer shall be
entitled (in addition to any other rights and remedies which it may have at law
or in equity) to have an injunction issued by any competent court enjoining and
restraining Employee and/or any other person involved therein from continuing
such breach. The existence of any claim or cause of action that Employee may
have against Employer or any other person (other than a claim for Employer's
breach of this Agreement for failure to make payments hereunder) shall not
constitute a defense or bar to the enforcement of such covenants. In the event
of an alleged breach by Employee of any of the covenants or agreements contained
in this Section 8, Employer shall continue any and all of the payments due
Employee under this Agreement until such time as a court shall enter a final and
non-appealable order finding such a breach; provided, however, that the
foregoing shall not preclude a court from ordering Employee to repay such
payments made to her for the period after the breach is determined to have
occurred or from ordering that payments hereunder be permanently terminated in
the event of a material and willful breach.
 
            (e) If any portion of the covenants or agreements contained in this
Section 8, or the application hereof, is construed to be invalid or
unenforceable, the other portions of such covenant(s) or agreement(s) or the
application thereof shall not be affected and shall be given full force and
effect without regard to the invalid or unenforceable portions to the fullest
extent possible. If any covenant or agreement in this Section 8 is held
unenforceable because of the area covered, the duration thereof, or the scope
thereof, then the court making such determination shall have the power to reduce
the area and/or duration, and/or limit the scope thereof, and the covenant or
agreement shall then be enforceable in its reduced form.
 
            (f) For purposes of this Section 8, the term "Employer" shall
include Employer, any successor to Employer under Section 9 hereof, and all
present and future direct and indirect subsidiaries and affiliates of Employer.
 
      9. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon any corporate or other successor of Employer which may
acquire, directly or indirectly, by merger, consolidation, purchase, or
otherwise, all or substantially all of the assets of Employer, and shall
otherwise inure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, successors and assigns.
Nothing in the Agreement shall preclude Employer from consolidating or merging
into or with or transferring all or substantially all of its assets to another
person. In that event, such other person shall assume this Agreement and all
obligations of Employer hereunder. Upon such consolidation, merger or transfer
of assets and assumption, the "Employer" as used herein, shall mean such other
person and this Agreement shall continue in full force and effect.
 
      10. Waivers Not to be Continued. Any waiver by a party of any breach of
this Agreement by another party shall not be construed as a continuing waiver or
as a consent to any subsequent breach by the other party.
 
      11. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed, certified or registered mail, return receipt
requested, with postage prepaid, to the following addresses or to such other
address as either party may designate by like notice:
 
 
<PAGE>
 
              If to Employee, to:
 
              Ms. Donita R. Koval
              c/o Omega Financial Corporation
              366 Walker Drive
              P. O. Box 298
              State College, Pennsylvania 16804-0298
 
              If to Employer, to:
 
              Omega Financial Corporation
              366 Walker Drive
              P. O. Box 298
              State College, Pennsylvania 16804-0298
              Attention:  Board of Directors
 
              In all cases with a copy to:
 
              Blank Rome LLP
              One Logan Square
              Philadelphia PA 19103-6998
              Attention:  Frederick D. Lipman, Esquire
 
and to such other party or additional person or persons as either party shall
have designated to the other party in writing by like notice.
 
      12. Jurisdiction. Employer and Employee consent to the exclusive
jurisdiction of the courts of the Commonwealth of Pennsylvania and the United
States District Court for the Central District of Pennsylvania in any and all
actions arising hereunder.
 
      13. Acceleration. If Employer fails to pay Employee any of the amounts due
her under Sections 3 or 4 hereof, or fails to provide any of the benefits due to
Employee under Section 4 hereof, which nonpayment or nonprovision shall continue
for 30 days after Employer receives written notice from Employee of such failure
to pay or provide benefits, as the case may be, the Employee shall have the
right to accelerate future payments of all sums due Employee under Section 3
hereof, without discount.
 
      14. Security.
 
            (c) In order to secure Employer's obligations to Employee under this
Agreement, Employer shall, if and when requested by the Employee, cause a
reputable bank acceptable to Employee to issue a Letter of Credit, in the face
amount of at least the sum of three times Employee's current base annual salary
on the date hereof plus $50,000 and substantially in the form attached hereto as
Exhibit "A" ("Letter of Credit"), to be issued to the Employee as beneficiary,
or in lieu thereof, establish a mutually acceptable escrow arrangement. The
Letter of Credit shall not expire sooner than one year after the date of its
issuance. Employer shall maintain the Letter of Credit in effect at all times
during the Term and any other period of time during which Employee is entitled
to any compensation or benefits under either Section 3 or 4 hereof by means of
securing renewals of the Letter of Credit from the same bank of by securing a
new Letter of Credit from some other reputable bank acceptable to Employee.
 
            (d) Employee agrees that she will not present a draft under the
Letter of Credit for payment unless she shall have first made written demand on
Employer for direct payment of the amount sought and Employer shall not have
made full payment in cash to the Employee as required by this Agreement within
30 days after the date of delivery of the written demand. Employee shall not
draw any funds under the Letter of Credit in respect of costs or expenses
already reimbursed to her by Employer.
 
      15. Indemnity. If Employer fails to pay Employee any of the amounts due
her under Sections 3 or 4 hereof or fails to provide Employee with any of the
benefits due her under Section 4 hereof, 30 days after having received written
notice from Employee of such failure, the Employee shall be entitled to full
reimbursement from Employer for all costs and expenses (including, but not
limited to, reasonable attorneys' fees) incurred by Employee in enforcing her
rights under this Agreement.
 
 
<PAGE>
 
      16. General Provisions.
 
            (i) Each of Employer's obligations and liabilities hereunder shall
not be affected or impaired by the unenforceability, invalidity, or illegality
of any other term, condition, covenant, obligation or agreement under this
Agreement, whether under the National Bank Act or otherwise.
 
            (j) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof, and supersedes and replaces
all prior agreements between the parties. No amendment, supplement, waiver or
termination of any of the provisions hereof shall be effective unless in writing
and signed by the party against whom it is sought to be enforced. Any written
amendment, supplement, waiver or termination hereof executed by Employer and
Employee shall be binding upon them and upon all other persons, without the
necessity of securing the consent of any other person and no person shall be
deemed to be a third party beneficiary under this Agreement.
 
            (k) This Agreement shall not limit or infringe upon the right of
Employer to terminate the employment of Employee at any time for any reason, nor
upon the right of Employee to terminate her employment with Employer.
 
            (l) The term "person" as used in this Agreement means a natural
person, joint venture, corporation, limited liability company, sole
proprietorship, trust, estate, partnership, cooperative, association, non-profit
organization or any other legally cognizable entity.
 
            (m) This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same Agreement.
 
            (n) No failure on the part of any party hereto to exercise and no
delay in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
remedy hereunder preclude any other of further exercise thereof or the exercise
of any other rights, power or remedy.
 
            (o) The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
 
            (p) This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the laws of the
Commonwealth of Pennsylvania applicable to contracts executed and to be
performed solely in the Commonwealth of Pennsylvania.
 
IN WITNESS WHEREOF, the parties have duly executed and delivered this Severance
Agreement as of the date first above written.
 
                                                OMEGA FINANCIAL CORPORATION
 
 
Attest: /s/ David N. Thiel                  By: /s/ David B. Lee
        Name: David N. Thiel                    Name: David B. Lee
        Title: Senior Vice President            Title: Chairman, CEO & President
 
 
Witness: /s/ Daniel L. Warfel                   /s/ Donita R. Koval
Name: Daniel L. Warfel                          DONITA R. KOVAL, as Employee
 
<PAGE>
 
                                    EXHIBIT A
 
                            FORM OF LETTER OF CREDIT
 
Top of the Document

 

EXHIBIT 10.1

AMENDMENT TO SEVERANCE AGREEMENT

     This AMENDMENT TO SEVERANCE AGREEMENT (“Amendment”) is made this 7th of November, 2007, by and between Omega Financial Corporation, a Pennsylvania corporation (“Employer”) and Donita R. Koval (“Employee”).

BACKGROUND

     Employer and Employee entered into a Severance Agreement (“Agreement”) dated December 23, 2003. In accordance with Section 16 (b) of the Agreement, the Employer and the Employee desire to amend the Agreement as set forth herein.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows:

     1. The second sentence of the second unnumbered paragraph of Section 1 of the Agreement is hereby amended to read as follows: “In the event the Employee’s employment with Employer is terminated during the Term other than (i) as set forth in Section 2 hereof and (ii) prior to the date of a Change in Control, as defined below, occurs with regard to the Employer, the Employee shall have no rights or benefits under this Agreement, but shall be entitled to other rights or benefits to which she might otherwise be entitled. Upon a Change in Control, as defined in Section 2A, with regard to the Employer that occurs on or prior to the date that the Term ends, Employee shall be entitled to receive the benefit set forth in, and subject to the requirements of, Section 2A.”

     2. Section 2 of the Agreement is hereby amended to read as follows:

“2 Termination. If during the Term, Employee’s employment with Employer is terminated as set forth below, Employer will pay to Employee the amounts set forth in Sections 3 and 4 hereof and Employee shall be entitled to the benefits set forth in Section 4 hereof:

     (i) Employer terminates Employee’s employment with Employer without cause; or

     (ii) the Employee terminates Employee’s employment with Employer (a) for any reason, whether with or without cause, at any time within three years after a change in control of Employer (as defined in the immediately following paragraph), or (b) due to the fact that without Employee’s consent and whether or not a change in control of Employer has occurred, the nature and scope of Employee’s authority with Employer or the surviving or acquiring person are materially reduced to a level below that which she enjoys on the date hereof, the duties or responsibilities assigned to her are materially inconsistent with that which she has on the date hereof, her then current base annual salary is materially reduced to a level below that which she enjoys on the date hereof or at any time hereafter (whichever may be greater), the fringe benefits which

 


 

Employer provides Employee on the date hereof or at any time hereafter (whichever may be greater) are materially reduced, Employee’s position or title with Employer or the surviving or acquiring person is reduced from her current position or title with Employer, or Employee’s principal place of employment with Employer is changed to a location greater than forty miles from her current principal place of residence, provided, however, that for any termination by Employee under this clause (b), the Employee shall have first given Employer ten (10) days, written notice of her intention to terminate her employment pursuant to this subsection (ii), specifying the reason(s) for such termination, and provided further, that Employer shall not have cured or remedied the reason(s) specified in such notice prior to the expiration of such ten (10) day period. This Section 2 shall not apply on or after the date that a Change in Control, as defined in Section 2A, occurs with regard to the benefit payable under Section 3.

For the purposes of subsection (ii) above, a “change in control of Employer” shall mean a change in control of Employer of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, as enacted and in force on the date hereof, whether or not Employer is subject to such reporting requirement; provided that, without limitation, such a change of control shall be deemed to have occurred if (i) any person, other than those persons in control of Employer on the date hereof, acquires the power, directly or indirectly, to direct the management or policies of Employer or to vote 25% or more of any class of voting securities of Employer; or (ii) within any period of three consecutive years during the term of this Agreement, individuals who at the beginning, of such period constitute the Board of Directors of Employer cease for any reason to constitute at least a majority thereof.

Notwithstanding anything contained in this Agreement to the contrary, a termination of employment with the Employer shall not occur if the Employee continues to be employed by any other entity with which the Employer would be considered a single employer under Section 414(b) (employees of controlled group of corporations) of the Internal Revenue Code of 1986, as amended (“Code”) or Code Section 414(c) (employees of partnerships etc. under common control). In the event that a termination occurs under subsection (ii) above, such termination shall constitute a termination of employment as described in this paragraph.”

     3. Section 2A is hereby added to the Agreement which shall read as follows:

“2A Change in Control Benefit. In lieu of the benefit payable under Section 3 of this Agreement, upon a Change in Control, as defined below, with regard to Employer that occurs on or prior to the date that the Term ends, the Employer shall pay a change in control benefit to the Employee in a single sum equal to three (3) times the Employee’s Highest Annual Compensation (as defined in Section 3) during the three (3) calendar years ending immediately prior to the calendar year in which the Change in Control occurs, which shall be the

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“Measurement Period” as used in the definition of Highest Annual Compensation. Payment shall be made on the date of the Change in Control.

“Change in Control” means as defined herein: (a) a Change in the Ownership of a Corporation; (b) a Change in the Effective Control of a Corporation; or (c) a Change in the Ownership of a Substantial Portion of a Corporation’s Assets. These events are intended to be coterminous with the definitions thereof in Treas. Reg. 1.409A-3, except as modified herein with regard to certain threshold percentages and shall otherwise be construed in a manner that complies with Code Section 409A.

     A Change in the Ownership of a Corporation occurs on the date that any one person, or more than one person acting as a group (as described below), acquires ownership of stock of Employer that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Employer. However, if any one person, or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of Employer, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a Change in the Effective Control of a Corporation). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property shall constitute an acquisition of stock for purposes of this definition. The event described herein shall occur when there is a transfer of stock of Employer (or issuance of stock of Employer) and stock in Employer remains outstanding after the transaction. The event described herein shall not occur if any one person, or more than one person acting as a group, is considered to effectively control Employer (ownership of stock of Employer possessing 30% or more of the total voting power of the stock of Employer) and the same person or persons acquire additional control of Employer.

     A Change in the Effective Control of a Corporation occurs on the date that either (a) any one person, or more than one person acting as a group (as described below) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Employer possessing thirty percent (30%) or more of the total voting power of the stock of Employer; or (b) a majority of members of Employer’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of Employer’s board of directors before the date of the appointment or election. If any one person, or more than one person acting as a group, is considered to effectively control Employer as described herein, the acquisition of additional control of Employer by the same person or persons does not constitute a Change in the Effective Control of a Corporation.

For purposes of Change in the Ownership of a Corporation and Change in the Effective Control of a Corporation, persons will not be considered to be acting as a group solely because they purchase stock of Employer at the same time. However,

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persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with Employer. If a person, including an entity, owns stock in both a corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

     A Change in the Ownership of a Substantial Portion of a Corporation’s Assets occurs on the date that any one person or more than one person acting as a group (as described below) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from Employer that have a total gross fair market value equal to or more than ninety-five percent (95%) of the total gross fair market value of all of the assets of Employer immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of Employer, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

No Change in the Ownership of a Substantial Portion of a Corporation’s Assets occurs: (a) if there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer or (b) if the assets are transferred to – (1) a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock; (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the corporation; (3) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the corporation; or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned directly or indirectly, by a person described in clause (3).

For purposes of a Change in the Ownership of a Substantial Portion of a Corporation’s Assets, persons will not be considered to be acting as a group solely because they purchase assets of the corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the corporation. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.”

     4. Section 3 of the Agreement is hereby amended to read as follows:

“3. Compensation Payments to Employee. In the event that the Employee’s

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employment with the Employer is terminated pursuant to Section 2 hereof prior to the date that a Change in Control occurs, and subject to the Employee’s compliance with Section 8 hereof, and the Employee’s delivery to the Employer of a general release within such time as designated by the Employer and the Employer’s determination that the general release is legally binding on the Employee, the Employer shall pay a severance benefit to the Employee in a single sum equal to three (3) times the Employee’s Highest Annual Compensation (as defined below) during the three (3) calendar years ending prior to the date that the Employee’s employment with the Employer is terminated pursuant to Section 2 hereof (“Termination Date”) (the foregoing three (3) calendar year period is referred to herein as the “Measurement Period”). Payment shall be made within the ninety (90) day period after the Termination Date (the Employee cannot designate the taxable year of payment). The severance benefit required by this Section 3 shall not be offset or reduced by any income or earnings received from any other employment or other activity in which the Employee may engage. The Employee shall have no duty to mitigate damages. If the Employee fails to deliver such legally binding general release by the due date designated by the Employer, the Employer shall not have any obligation to make any payments or provide benefits under this Agreement. In addition, if the Employee is a “specified employee” as defined in Code Section 409A with regard to the payments or benefits under this Agreement, as determined by the Employer in its sole discretion, and delayed payment is necessary to avoid the imposition of taxes on the Employee under Code Section 409A, such payments or benefits shall not be paid or provided before the date that is six (6) months plus one day after the Termination Date or other applicable date (or if earlier than the end of the six months plus one day period, the date of the Employee’s death) and shall be paid or provided by the Employer on the first regular payroll date following the expiration of that six months plus one day period or date of death, if earlier. For purposes of this Agreement, Highest Annual Compensation means the Employee’s highest paid base salary and annual incentive bonus (based on prior year performance) unreduced by the Employee’s pre-tax elective contributions to a Code Section 401(k) or Section 125 plan, but excluding other fringe benefits, during a calendar year that is within the Measurement Period. The general release shall be in the form provided by the Employer and shall not effect the Employee’s entitlement to other amounts to which the Employee may be entitled under other benefit plans of the Employer and shall be consistent with the requirements of the OWBPA and other pertinent law.”

     5. Section 4 of the Agreement is hereby amended by deleting the first sentence thereof, and inserting the following in lieu thereof.

“In addition to the compensation set forth in Section 2A or 3 hereof, as applicable, and subject to the Employee’s compliance with Section 8 hereof and the Employee’s delivery of the general release as provided in Section 3 hereof, Employee shall be entitled to receive benefits from Employer as set forth in this Section 4.”

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     6. Section 4 of the Agreement is hereby amended by adding the following flush paragraph at the end thereof:

“The in-kind life insurance benefit payable with respect to a taxable year of the Employee shall not affect the amount of in-kind life insurance benefit payable in any other taxable year. Subject to the six month plus one day delay described in Section 3 above, if applicable, any such in-kind life insurance benefit shall be paid by the Employer on or before the applicable due date to avoid a lapse of the life insurance policy but in no event shall an in kind life insurance benefit or medical/hospitalization be paid later than the last day of the Employee’s taxable year following the taxable year in which the premium for the life insurance or medical/hospitalization expense was incurred. Employee acknowledges that she may be required to pay premiums on the life insurance policies insuring her life prior to the time that the Employer may pay such premiums in order to avoid adverse tax consequences under Section 409A. The reasonable relocation expense shall be paid as soon as practicable, but in no event later than the end of the Employee’s first taxable year following the taxable year in which the Employee experienced the termination of employment.”

     7. The Agreement is hereby amended by adding the following Section 4A after Section 4:

“4A. Tax Gross-Up. (a) If any of the payments or benefits received or to be received by the Employee in connection with a Change in Control, as defined above, under this Agreement, the Employee’s Omega Financial Corporation/Omega Bank, National Association Salary Continuation Agreement, and any other plan, program, agreement or arrangment (such payment or benefits, excluding the Gross-Up Payment, being referred to herein as “Total Payments”) would be subject to the excise tax under Code Section 4999 (“Excise Tax”), the Employer shall pay to the Employee an additional amount (the “Gross-Up Payment”) equal to the Excise Tax plus any related federal, state and local income, excise, and employment taxes. The intent of the Gross-Up Payment is to ensure that the Employee does not bear the cost of the Excise Tax or tax associated with the Employer’s reimbursement of the Excise Tax.

(b) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of the Excise Tax, (1) all of the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2) unless, in the opinion of tax counsel selected by the Employer and reasonably acceptable to the Employee (“Tax Counsel”), such payments in whole or in part do not constitute parachute payments, including by reason of Code Section 280G(b)(4)(A), (2) all “excess parachute payments” within the meaning of Code Section 280G (b) (1) shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Code Section 280G(b)(4)(B)) in excess of the

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“base amount” (as defined in Code Section 280G(b)(3)) allocable to such payment, or are otherwise not subject to the Excise Tax, and (3) the value of any noncash benefits or any deferred payment or benefit shall be determined by Tax Counsel in accordance with the principles of Code Sections 280G(d)(3) and (4). For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Employee’s residence on the Termination Date net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

(c) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Employee shall repay the Employer, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Employee, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Employee’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in Code Section 1274(b)(2)(B). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Employer shall make an additional Gross-Up Payment in respect of such excess plus any interest, penalties or additions payable by the Employee with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Employee and the Employer shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. The Gross-Up Payment or additional Gross-Up Payment shall be made by the end of the Employee’s taxable year next following the Employee’s taxable year in which the Employee remits the related taxes.”

     8. Section 6 of the Agreement is hereby amended by deleting the phrase: “Except as set forth in Section 14 hereof,” and capitalizing the first word of this Section “All.”

     9. The first paragraph of Section 8 of the Agreement (the paragraph that precedes subparagraph (a)) is hereby amended by deleting the second sentence thereof.

     10. Section 8 (d) of the Agreement is hereby amended by adding the following to the end thereof:

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“In consideration that a breach of any of the covenants or agreements contained in this Section 8 may occur after the Employer has paid the full amount under Section 2A or 3, as applicable (“Total Payment”), at the time that a court shall enter an order finding that the Employee has breached any of the covenants or agreements contained in this Section 8, the court may require the Employee to repay a portion of the Total Payment in an amount not to exceed 1/36th of the Total Payment for each calendar month in which such breach occurred.”

     11. Section 13 of the Agreement is hereby amended to read as follows:

“13. Code Section 409A Matters. This Agreement is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and applicable guidance thereunder, including but not limited to Notice 2007-86 and Notice 2007-78, and the provisions of this Agreement shall be construed in accordance with that intention so as to avoid any adverse tax consequence to the Officer. Any provision required for compliance with Code Section 409A that is omitted from this Agreement shall be incorporated herein by reference and shall apply retroactively, if necessary, and be deemed a part of this Agreement to the same extent as though expressly set forth herein. Notwithstanding anything contained herein to the contrary, no payment hereunder shall be made prior to January 15, 2008 if such payment would violate the transition rules regarding the time and form of payment as set forth in Notice 2007-86.”

     12. Section 14 and Exhibit “A” of the Agreement are hereby deleted.

     13. This Amendment shall be effective as of the date of execution.

     IN WITNESS WHEREOF, the parties hereto have signed this Amendment the day and year written above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OMEGA FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

Attest:

 

/s/ Robert A. Szeyller

 

Name: Robert A. Szeyller

 

 

 

By:

 

/s/ David B. Lee

 

Name: David B. Lee

 

 

 

 

Title: Chairman, Audit Committee

 

 

 

 

 

Title: Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

Witness:

 

/s/ Daniel L. Warfel

 

Name: Daniel L. Warfel

 

 

 

 

 

/s/ Donita R. Koval

 

DONITA R. KOVAL

 

 

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Top of the Document

 

EXHIBIT 10.3

OMEGA FINANCIAL CORPORATION/OMEGA BANK, NATIONAL ASSOCIATION

SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT is made this 7th day of November, 2007, by and among Omega Financial Corporation, a Pennsylvania corporation (“OFC”), Omega Bank, National Association (“Bank”) (OFC and the Bank are collectively referred to herein as the “Company”) and Donita R. Koval (the “Officer”).

WITNESSETH

     WHEREAS, on December 23, 2003, the Bank, a wholly owned subsidiary of OFC, and the Officer entered into a deferred compensation agreement titled “Omega Bank, National Association Salary Continuation Agreement,” and on December 18, 2006, a “First Amendment to the Omega Bank, National Association Amended and Restated Salary Continuation Agreement” (collectively “Agreement”);

     WHEREAS, the Bank entered into the Agreement to encourage the Officer to remain an employee of the Bank by providing salary continuation benefits to the Officer payable from its general assets or the Omega Bank, National Association, Rabbi Trust Agreement dated March 1, 2000;

     WHEREAS, OFC has employed the Officer and hereby agrees that the benefits payable to the Officer under the Agreement are the joint and several obligations of OFC and the Bank; and

     WHEREAS, the Company and the Officer desire to further amend and restate the Agreement to make certain changes to the Agreement as provided herein, including certain changes to bring the Agreement into compliance with Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) and changes permitted under applicable guidance.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and intending to be legally bound hereby, the Company and the Officer agree as follows:

Article 1
Definitions

     Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

     1.1 “Annual Compensation” means the W-2 remuneration the Officer receives as base salary, but before deductions authorized by the Officer or required by law to be withheld from the Officer, such as income taxes or Social Security taxes, for the performance of services for the Company or any other entity with which OFC would be considered a single employer under Code Section 414(b) (employees of controlled group of corporations) or Code Section 414(c) (employees of partnerships etc. under common control).

     1.2 “Change in Control” means as defined herein: (a) a Change in the Ownership of a Corporation; (b) a Change in the Effective Control of a Corporation; or (c) a Change in the

 


 

Ownership of a Substantial Portion of a Corporation’s Assets. These events are intended to be coterminous with the definitions thereof in Treas. Reg. 1.409A-3, except as modified herein with regard to certain threshold percentages and shall otherwise be construed in a manner that complies with Code Section 409A.

     A Change in the Ownership of a Corporation occurs on the date that any one person, or more than one person acting as a group (as described below), acquires ownership of stock of OFC that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of OFC. However, if any one person, or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of OFC, the acquisition of additional stock by the same person or persons is not considered to cause a change in the ownership of the corporation (or to cause a Change in the Effective Control of a Corporation). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the corporation acquires its stock in exchange for property shall constitute an acquisition of stock for purposes of this definition. The event described herein shall occur when there is a transfer of stock of OFC (or issuance of stock of OFC) and stock in OFC remains outstanding after the transaction. The event described herein shall not occur if any one person, or more than one person acting as a group, is considered to effectively control OFC (ownership of stock of OFC possessing 30% or more of the total voting power of the stock of OFC) and the same person or persons acquire additional control of OFC.

     A Change in the Effective Control of a Corporation occurs on the date that either (a) any one person, or more than one person acting as a group (as described below) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of OFC possessing thirty percent (30%) or more of the total voting power of the stock of OFC; or (b) a majority of members of OFC’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of OFC’s board of directors before the date of the appointment or election. If any one person, or more than one person acting as a group, is considered to effectively control OFC as described herein, the acquisition of additional control of OFC by the same person or persons does not constitute a Change in the Effective Control of a Corporation.

For purposes of Change in the Ownership of a Corporation and Change in the Effective Control of a Corporation, persons will not be considered to be acting as a group solely because they purchase stock of OFC at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with OFC. If a person, including an entity, owns stock in both a corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

     A Change in the Ownership of a Substantial Portion of a Corporation’s Assets occurs on the date that any one person or more than one person acting as a group (as described below) acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from OFC that have a total gross fair market value equal to or more than ninety-five percent (95%) of the total gross fair market value of all of the

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assets of OFC immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of OFC, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

No Change in the Ownership of a Substantial Portion of a Corporation’s Assets occurs: (a) if there is a transfer to an entity that is controlled by the shareholders of the transferring corporation immediately after the transfer or (b) if the assets are transferred to – (1) a shareholder of the corporation (immediately before the asset transfer) in exchange for or with respect to its stock; (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the corporation; (3) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the corporation; or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned directly or indirectly, by a person described in clause (3).

For purposes of a Change in the Ownership of a Substantial Portion of a Corporation’s Assets, persons will not be considered to be acting as a group solely because they purchase assets of the corporation at the same time. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the corporation. If a person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of assets, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

     1.3 “Code” means the Internal Revenue Code of 1986, as amended.

     1.4 “Disability” means, if the Officer is covered by a Company sponsored disability policy, total disability as defined in such policy without regard to any waiting period. If the Officer is not covered by such a policy, Disability means the inability to substantially perform the usual and regular duties performed by the Officer as an employee of the Company. Such disability may be caused by either illness or injury and includes mental disabilities. For purposes of this Agreement, the determination of the Officer’s disability shall be made solely by the board of directors of OFC without participation by the presumed disabled Officer. Such determination by the board of directors shall be final and conclusive on all parties hereto. As a condition to receiving any Disability benefits, OFC may require the Officer to submit to such physical or mental evaluations and tests as the board of directors OFC deems appropriate.

     1.5 “Early Retirement Age” means the Officer’s 55th birthday.

     1.6 “Effective Date” means December 23, 2003. The effective date of this amendment and restatement shall be the date of the execution of this document.

     1.7 “Normal Retirement Age” means the Officer’s 62nd birthday.

     1.8 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of Employment.

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     1.9 “Plan Year” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement.

     1.10 “Termination of Employment” means that (A) the Officer ceases to be employed by OFC and any other entity with which OFC would be considered a single employer under Code Section 414(b) (employees of controlled group of corporations) or Code Section 414(c) (employees of partnerships etc. under common control) (“OFC Group”) for any reason whatsoever, voluntary, involuntary, excepting death, or (B) the level of bona fide service the Officer provides after a certain date would permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.

Article 2
Lifetime Benefits

     2.1 Normal Retirement Benefit. In lieu of any other benefit under this Agreement, upon the Officer’s Termination of Employment on or after the Normal Retirement Age for reasons other than death and prior to the date a Change in Control occurs with regard to OFC, the Company shall pay to the Officer a single sum payment equal to the amount that results from the application of the following steps (“Normal Retirement Benefit”):

     I. Calculate an annual benefit payable for a term certain of 15 years equal to seventy-five percent (75%) of the Officer’s average Annual Compensation for the previous five (5) full calendar years ending immediately prior to such Termination of Employment reduced by the following amounts (A + B + C) where

     A = (Social Security) equals 50 percent of the estimated annual primary Social Security benefit payable to the officer at age 65 calculated as of the date of such Termination of Employment without regard to any compensation after such Termination of Employment

     B = (401(k) Plan) equals 100 percent of the estimated 15-year annuity that could be purchased with the value of the Officer’s vested matching contribution account under the Omega Financial Corporation 401 (k) Profit Sharing Plan as of the date of such Termination of Employment. The annuity is to be calculated using an annual interest rate equal to the 10-year Treasury Note rate plus 150 basis points, compounded monthly.

     C = (ESOP) equals 100 percent of the estimated 15-year annuity that could be purchased with the value of the Officer’s vested account under the ESOP as of the date of such Termination of Employment. The annuity is to be calculated using an annual interest rate equal to the 10-year Treasury Note rate plus 150 basis points, compounded monthly.

     II. Calculate the present value of the amount determined under I. above.

For all purposes under this Agreement, the calculation of present value or actuarial equivalent shall be made using a discount rate equal to the 10-year Treasury Note rate plus 150 basis points and monthly compounding

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     2.1.1 Payment of Benefit. The Company shall pay the Normal Retirement Benefit to the Officer in a single sum on the first day of the month following the Officer’s Normal Retirement Date.

     2.2 No Early Termination Benefit. Upon the Officer’s Termination of Employment prior to Early Retirement Age for reasons other than death or Disability, the Officer shall have no right to any benefit under this Agreement.

     2.3 Early Retirement Benefit. In lieu of any other benefit under this Agreement, upon the Officer’s Termination of Employment on or after the Early Retirement Age and prior to (1) Normal Retirement Age for reasons other than death or Disability and (2) the date a Change in Control occurs with regard to OFC, the Company shall pay to the Officer the actuarial equivalent of the Normal Retirement Benefit that has accrued as provided in this Section 2.3 (“Early Retirement Benefit”).

     2.3.1 Amount of Benefit. The amount of the Normal Retirement Benefit that has accrued at any point in time shall be determined assuming that the Normal Retirement Benefit accrues on a monthly basis ratably over the period beginning at age 55 and ending on the Officer’s Normal Retirement Age using a numerator equal to the number of full months of service between age 55 and the date of Termination of Employment and a denominator equal to 84.

     2.3.2 Payment of Benefit. The Company shall pay the Early Retirement Benefit to the Officer in a single sum on the first day of the month following such Termination of Employment of the Officer.

     2.4 Disability Benefit. In lieu of any other benefit under this Agreement, upon the Officer’s Termination of Employment by reason of Disability prior to Normal Retirement Age, the Company shall pay to the Officer the benefit described in this Section 2.4 (“Disability Benefit”).

     2.4.1 Amount of Benefit. The Disability Benefit is the Normal Retirement Benefit described in Section 2.1.1.

     2.4.2 Payment of Benefit. The Company shall pay the Disability Benefit to the Officer in a single sum on the first day of the month following the Officer’s Termination of Employment by reason of Disability.

     2.5 Change of Control Benefit. In lieu of any other benefit under this Agreement, upon a Change in Control with regard to OFC and provided that the Officer is employed by a member of the OFC Group on such date, the Company shall pay to the Officer a single sum payment equal to the amount that results from the application of the following steps (“Change in Control Benefit”):

     I. Calculate an annual benefit payable for a term certain of 15 years equal to seventy-five percent (75%) of the Officer’s average Annual Compensation for the previous five (5) full calendar years ending immediately prior to the calendar year in which the date of the Change in Control occurs reduced by the following amounts (A + B + C) where

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     A = (Social Security) equals 50 percent of the estimated annual primary Social Security benefit payable to the officer at age 65 calculated as of the Applicable Time without regard to any compensation after such change in control

     B = (401(k) Plan) equals 100 percent of the estimated 15-year annuity that could be purchased with the value of the Officer’s vested matching contribution account under the Omega Financial Corporation 401 (k) Profit Sharing Plan as of the Applicable Time. The annuity is to be calculated using an annual interest rate equal to the 10-year Treasury Note rate plus 150 basis points, compounded monthly.

     C = (ESOP) equals 100 percent of the estimated 15-year annuity that could be purchased with the value of the Officer’s vested account under the ESOP as of the Applicable Time. The annuity is to be calculated using an annual interest rate equal to the 10-year Treasury Note rate plus 150 basis points, compounded monthly.

          II. Calculate the present value of the amount determined under I. above as of age 62.

          III. Calculate the present value of the amount determined under II. above as of the date that the Change in Control occurs.

     Applicable Time means the day immediately preceding the day that information relating to the event that constitutes the Change in Control becomes public as determined by the board of directors of OFC in its sole discretion.

     2.5.1 Payment of Benefit. The Company shall pay the Change in Control Benefit to the Officer in the form of a single sum on the date of such Change in Control.

     2.6 Delayed Payment Date. Notwithstanding anything contained herein to the contrary, if the Officer is a “specified employee” as defined in Code Section 409A with regard to the benefits hereunder, as determined by OFC in its sole discretion, and delayed payment is necessary to avoid the imposition of taxes on the Officer under Code Section 409A, such payments or benefits that would otherwise have been paid hereunder before the date that is six (6) months plus one day after the date of the Officer’s termination of employment (“Delayed Payment Date”) shall not be made before the Delayed Payment Date and shall be paid by the Company on the first regular payroll date following the Delayed Payment Date; however, in the event of the Officer’s death, the delayed payment shall be paid on the first regular payroll date following the date of the Officer’s death.

Article 3
Death Benefits

     3.1 Death during Active Service. If the Officer dies prior to her Termination of Employment, the Bank (notwithstanding anything contained herein in this Agreement to the contrary, the obligation under this Section is not joint and several with OFC) shall pay to the Officer’s beneficiary the benefit described in the Split Dollar Agreement and Endorsement attached as Addendum A between the Bank and the Officer. However, in the event that death occurs on the date of a Change in Control which results in the payment of the Change in Control

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Benefit under Section 2.5, the Bank shall have no obligation to make any payment with regard to the Officer under this Section.

     3.2 Death during Benefit Period. If the Officer dies after the benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Officer’s beneficiary at the same time and in the same amounts they would have been paid to the Officer had the Officer survived.

     3.3 Death After Termination of Employment But Before Benefit Payments Commence. If the Officer is entitled to benefit payments under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay the benefit payments to the Officer’s beneficiary that the Officer was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Officer’s death.

Article 4
Beneficiaries

     4.1 Beneficiary Designations. The Officer shall designate a beneficiary by filing a written designation with the Company. The Officer may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Officer and accepted by the Company during the Officer’s lifetime. The Officer’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Officer, or if the Officer names a spouse as beneficiary and the marriage is subsequently dissolved. If the Officer dies without a valid beneficiary designation, all payments shall be made to the Officer’s estate. This amendment and restatement of the Agreement shall not effect any beneficiary designation that the Officer has heretofore made and filed with the Company.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Company may require proof of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.

Article 5
General Limitations

     5.1 Termination for Just Cause. Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company terminates the Officer’s employment for theft, fraud, embezzlement or willful misconduct causing significant property damage to the Company or personal injury to another employee.

     5.2 Suicide or Misstatement. The Company shall not pay any benefit under this Agreement if the Officer commits suicide within two years after the date of this Agreement, or if the Officer has made any material misstatement of fact on any application for life insurance purchased by the Company.

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Article 6

Claims and Review Procedures

     6.1 Claims Procedure. The Company shall notify any person or entity that makes a claim under this Agreement (the “Claimant”) in writing, within 90 days of Claimant’s written application for benefits, of her eligibility or noneligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect her claim, and a description of why it is needed, and (4) an explanation of this Agreement’s claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If The Company determines that there are special circumstances requiring additional time to make a decision, The Company shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional 90 days.

     6.2 Review Procedure. If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle her to benefits or to greater or different benefits. Within 60 days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present her position to the Company verbally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another 60 days at the election of the Company, but notice of this deferral shall be given to the Claimant.

Article 7
Amendments and Termination

     This Agreement may be amended or terminated only by a written agreement signed by the Company and the Officer.

Article 8
Miscellaneous

     8.1 Binding Effect. This Agreement shall bind the Officer and OFC and the Bank, jointly and severally, and their beneficiaries, survivors, executors, successors, administrators and transferees.

     8.2 No Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Officer the right to remain an employee of the Company, nor does it interfere with the Company’s right to discharge the Officer. It also does not require the Officer to remain an employee nor interfere with the Officer’s right to terminate employment at any time.

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     8.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

     8.4 Reorganization. The Company shall not merge or consolidate into or with another entity, or reorganize, or sell substantially all of its assets to another entity, firm, or person unless such succeeding or continuing entity, firm, or person agrees to assume and discharge the obligations of the Company under this Agreement. Upon the occurrence of such event, the term “Company” as used in this Agreement shall be deemed to refer to the successor or survivor of each entity that constitutes the Company.

     8.5 Tax Withholding. The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

     8.6 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States of America.

     8.7 Unfunded Arrangement. The Officer and her beneficiary, if applicable, are general unsecured creditors of the Company for the payment of benefits under this Agreement. The benefits represent the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Officer’s life is a general asset of the Company to which the Officer and beneficiary have no preferred or secured claim, however, any insurance policy may be held in the Omega Bank, National Association, Rabbi Trust Agreement dated March 1, 2000 and subject to the terms and conditions of said trust.

     8.8 Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Officer as to the subject matter hereof. No rights are granted to the Officer by virtue of this Agreement other than those specifically set forth herein.

     8.9 Administration. The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

     (a) Interpreting the provisions of the Agreement;

     (b) Establishing and revising the method of accounting for the Agreement;

     (c) Maintaining a record of benefit payments; and

     (d) Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

     8.10 Named Fiduciary. The Company shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals.

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     8.11 Code Section 409A Matters. This Agreement is intended to comply with Code Section 409A and applicable guidance thereunder, including but not limited to Notice 2007-86 and Notice 2007-78, and the provisions of this Agreement shall be construed in accordance with that intention so as to avoid any adverse tax consequence to the Officer. Any provision required for compliance with Code Section 409A that is omitted from this Agreement shall be incorporated herein by reference and shall apply retroactively, if necessary, and be deemed a part of this Agreement to the same extent as though expressly set forth herein. In the event that the Officer become liable for interest or additional tax under Code Section 409A, the Company shall pay to the Officer an additional amount (the “409A Gross-Up Payment”) equal to the additional tax and interest plus any related federal, state and local income, excise, and employment taxes. The intent of the 409A Gross-Up Payment is to ensure that the Officer does not bear the cost of the imposition of such additional tax and interest under Code Section 409A. Payment of a 409A Gross-Up Payment must be claimed by the Officer so as to permit payment, and such payment shall be made, by the end of the Officer’s taxable year next following the Officer’s taxable year in which the Officer remits the related tax; however, the payment shall be subject to the six month delay rule as provided in Section 2.6. Notwithstanding anything contained herein to the contrary, no payment hereunder shall be made prior to January 15, 2008 if such payment would violate the transition rules regarding the time and form of payment as set forth in Notice 2007-86.

     8.12 4A. Tax Gross-Up. (a) If any of the payments or benefits received or to be received by the Employee in connection with a Change in Control, as defined above, under this Agreement and any other plan, program, agreement or arrangement (such payment or benefits, excluding the Gross-Up Payment, being referred to herein as “Total Payments”) would be subject to the excise tax under Code Section 4999 (“Excise Tax”), the Employer shall pay to the Employee an additional amount (the “Gross-Up Payment”) equal to the Excise Tax plus any related federal, state and local income, excise, and employment taxes. The intent of the Gross-Up Payment is to ensure that the Employee does not bear the cost of the Excise Tax or tax associated with the Employer’s reimbursement of the Excise Tax.

          (b) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of the Excise Tax, (1) all of the Total Payments shall be treated as “parachute payments” within the meaning of Code Section 280G(b)(2) unless, in the opinion of tax counsel selected by the Employer and reasonably acceptable to the Employee (“Tax Counsel”), such payments in whole or in part do not constitute parachute payments, including by reason of Code Section 280G(b)(4)(A), (2) all “excess parachute payments” within the meaning of Code Section 280G (b) (1) shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of Code Section 280G(b)(4)(B)) in excess of the “base amount” (as defined in Code Section 280G(b)(3)) allocable to such payment, or are otherwise not subject to the Excise Tax, and (3) the value of any noncash benefits or any deferred payment or benefit shall be determined by Tax Counsel in accordance with the principles of Code Sections 280G(d)(3) and (4). For purposes of determining the amount of the Gross-Up Payment, the Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Employee’s residence on the Termination Date net of

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the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.

          (c) In the event that the Excise Tax is finally determined to be less than the amount taken into account hereunder in calculating the Gross-Up Payment, the Employee shall repay the Employer, within five (5) business days following the time that the amount of such reduction in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Employee, to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Employee’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in Code Section 1274(b)(2)(B). In the event that the Excise Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Employer shall make an additional Gross-Up Payment in respect of such excess plus any interest, penalties or additions payable by the Employee with respect to such excess) within five (5) business days following the time that the amount of such excess is finally determined. The Employee and the Employer shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. The Gross-Up Payment or additional Gross-Up Payment shall be made by the end of the Employee’s taxable year next following the Employee’s taxable year in which the Employee remits the related taxes.

     IN WITNESS WHEREOF, the parties hereto have signed this Agreement the day and year written above.

 

 

 

 

 

 

 

 

 

OFFICER:

 

 

 

 

 

OMEGA FINANCIAL CORPORATION

 

 

 

 

 

 

 

 

 

 

 

/s/ Donita Koval

 

 

 

By:

 

/s/ David B. Lee

 

 

 

 

 

 

 

 

 

 

 

Donita Koval

 

 

 

 

 

Name: David B. Lee

 

 

 

 

 

 

 

 

Title: Chairman of the Board

 

 

 

 

 

 

 

 

 

OMEGA FINANCIAL CORPORATION
 

 

 

By:  

/s/ Robert A. Szeyller  

 

 

 

Name:  

Robert A. Szeyller 

 

 

 

Title:  

Chairman of the Compensation Committee 

 

 

 

 

 

 

 

 

 

OMEGA BANK, NATIONAL ASSOCIATION
 

 

 

By:  

/s/ David B. Lee  

 

 

 

Name:  

David B. Lee 

 

 

 

Title:  

Chairman of the Board 

 

 

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