SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OMEGA FINANCIAL CORPORATION
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
APRIL 23, 1996
TO OUR SHAREHOLDERS:
The 1996 annual meeting of shareholders of OMEGA FINANCIAL CORPORATION
("Omega") will be held on Tuesday, April 23, 1996 at 10:00 A.M. (prevailing
time), at The Penn State Scanticon, 215 Innovation Blvd., Penn State Research
Park, State College, Pennsylvania for the following purposes:
1. To elect six directors for three year terms, as more fully described
in the accompanying Proxy Statement;
2. To vote on a proposal to approve the 1996 Employee Stock Option
Plan; and
3. To transact such other business as may properly come before this
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed March 1, 1996 as the record date for the
determination of shareholders entitled to vote at the annual meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the annual meeting.
If the annual meeting is adjourned for one or more periods aggregating at
least 15 days because of the absence of a quorum, those shareholders entitled to
vote who attend the reconvened annual meeting, if less than a quorum as
determined under applicable law, shall nevertheless constitute a quorum for the
purpose of acting upon any matter set forth in this Notice of Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By order of the Board of Directors,
David N. Thiel, Secretary
April 1, 1996
<PAGE>
OMEGA FINANCIAL CORPORATION
366 Walker Drive
State College, Pennsylvania 16801
PROXY STATEMENT
The enclosed proxy is solicited by and on behalf of Omega Financial
Corporation ("Omega") for use at the annual meeting of shareholders to be held
on Tuesday, April 23, 1996 at 10:00 A.M. (prevailing time) at The Penn State
Scanticon, 215 Innovation Blvd., Penn State Research Park, State College,
Pennsylvania and at any postponement or adjournment thereof. The approximate
date on which this Proxy Statement and the accompanying form of proxy will first
be sent or given to shareholders is April 1, 1996.
Sending in a signed proxy will not affect the shareholder's right to
attend the annual meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of Omega at any time before the proxy is
exercised.
The expense of the proxy solicitation will be borne by Omega. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or teletype by directors, officers or employees of Omega and its bank
subsidiaries, Omega Bank, N.A. ("Omega Bank"), Hollidaysburg Trust Company
("Hollidaysburg Trust "), Penn Central National Bank ("Penn Central Bank"), and
Montour Bank ("Montour") (collectively, the "Banks"), without additional
compensation. Omega is required to pay the reasonable expenses incurred by
recordholders of Omega Common Stock who are brokers, dealers, banks or voting
trustees, or their nominees, for mailing proxy material and annual shareholder
reports to any beneficial owners of Omega's Common Stock they hold of record,
upon request of such recordholders.
A form of proxy is enclosed. If properly executed and received in time for
voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of Omega
Common Stock for the election of all nominees for directorships hereinafter
named.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the meeting: (i)
matters which Omega does not know, a reasonable time before the proxy
solicitation, are to be presented at the meeting; (ii) approval of the minutes
of a prior meeting of shareholders, if such approval does not amount to
ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this Proxy Statement
and Proxy pursuant to Rule 14a-8 or Rule 14a-9 promulgated under the Securities
Exchange Act of 1934; and (v) matters incident to the conduct of the meeting. In
connection with such matters, the persons named in the enclosed form of proxy
will vote in accordance with their best judgment.
Omega had 6,027,004 shares of common stock, par value $5.00 per share
("Common Stock"), and 219,781 shares of Series A ESOP Cumulative Convertible
Preferred Stock, par value $5.00 per share ("Series A ESOP Preferred Stock"),
outstanding at the close of business on March 1, 1996, the record date for the
determination of shareholders entitled to receive notice of, and to vote at, the
annual meeting. Each share of Series A ESOP Preferred Stock is currently
convertible into 1.05 shares of Common Stock. All Series A ESOP Preferred Stock
is held of record by Omega's Employee Stock Ownership Plan Trust ("ESOP Trust").
Except for certain restrictions (hereinafter summarized) on the right to cast
more than 10% of the total votes which all shareholders are entitled to cast,
each holder of Omega's Common Stock and each holder of Series A ESOP Preferred
Stock, voting together and not as separate classes, is entitled to one vote for
each share of Common Stock and 1.05 votes for each share of Series A ESOP
Preferred Stock, respectively, held of record on the record date on each matter
which may be brought before the annual meeting.
The presence, in person or by proxy, of holders entitled to cast at least
a majority of the votes which the holders of all of the aggregate outstanding
shares of Omega Common Stock and Series A ESOP Preferred Stock are entitled to
cast constitutes a quorum for the purpose of considering and acting on such
matters. All shares of Omega's Common Stock and Series A ESOP Preferred Stock
present in person or represented by proxy and entitled to vote, no matter how
they are
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voted or whether they abstain from voting, will be counted in determining the
presence of a quorum. If the annual meeting is adjourned because of the absence
of a quorum, those shareholders entitled to vote who attend the adjourned
meeting, although constituting less than a quorum as provided herein, shall
nevertheless constitute a quorum for the purpose of electing directors. If the
Annual Meeting is adjourned for one or more periods aggregating at least 15 days
because of the absence of a quorum, those shareholders entitled to vote who
attend the reconvened Annual Meeting, if less than a quorum as determined under
applicable law, shall nevertheless constitute a quorum for the purpose of acting
upon any matter set forth in the Notice of Annual Meeting.
The election of directors will be determined by a plurality vote and the
six nominees receiving the most "for" votes will be elected. Approval of any
other proposal will require the affirmative vote of a majority of the shares
cast on the proposal. Under the Pennsylvania Business Corporation Law, an
abstention, withholding of authority to vote or broker non-vote will not have
the same legal effect as an "against" vote and will not be counted in
determining whether a proposal has received the required shareholder vote.
Omega is not currently aware of any matters which will be brought before
the annual meeting (other than procedural matters) which are not referred to in
the enclosed notice of the annual meeting.
Article 8 of Omega's Amended and Restated Articles of Incorporation, as
amended (the "Restated Articles"), restricts the rights of a Person (as
hereafter defined) to cast (or execute written consent with respect to) more
than 10% of the total votes which all shareholders are entitled to cast at a
meeting, unless authorized to do so by the Board of Directors and subject to
such conditions as the Board of Directors may impose. The term "Person" includes
not only individuals and entities, but also groups of individuals and entities
who act together for the purpose of acquiring, holding, disposing of or voting
Common Stock. The restrictions of Article 8 do not apply to the shares of Omega
Common Stock or Series A ESOP Preferred Stock held by the ESOP Trust.
The casting of votes by a Person as a proxy holder for other shareholders
is not counted in computing the 10% limitation to the extent that the proxies so
voted were revocable and were secured from other shareholders who are not
members of a group which includes such Person. Giving a revocable proxy to a
Person does not in itself cause the shareholder giving the proxy to be a member
of a group which includes such Person. Article 8 provides that the determination
by the Board of Directors of the existence or membership of a group, and of a
number of votes any Person or each member of a group is entitled to cast, is
final and conclusive absent clear and convincing evidence of bad faith.
In the event of a violation of Article 8, in addition to other remedies
afforded Omega, the judges of election cannot count votes cast in violation of
Article 8 and Omega or its nominees have an option to acquire from the violator
shares of Common Stock in excess of the 10% limit at prices which would in
certain situations be lower than the then current market prices of such shares.
The foregoing is a brief summary of Article 8 and is qualified and
amplified in all respects by the exact provisions of the Restated Articles,
which can be obtained in the same manner as Omega's Annual Report on Form 10-K
for 1995 (see "ANNUAL REPORT AND FINANCIAL STATEMENTS").
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
To the knowledge of Omega, as of March 1, 1996, no person or entity, other
than the ESOP Trust, was the beneficial owner of five percent or more of its
outstanding Common Stock. For information concerning the beneficial ownership of
Omega Common Stock and Series A ESOP Preferred Stock by the ESOP Trust, see
"Series A ESOP Preferred Stock." The following table sets forth certain
information, as of March 1, 1996, with respect to Omega's Common Stock
beneficially owned by each director and nominee for director, each executive
officer of the Company named in the "Summary Compensation Table" and by all
directors, nominees for director and executive officers of Omega as a group.
Also included is information with respect to shares of Series A ESOP Preferred
Stock which has been allocated to the accounts of directors and officers who are
participants in Omega's Employee Stock Ownership Plan ("ESOP").
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Unless otherwise specified, all persons listed on the following chart have sole
voting and investment powers with respect to their shares:
Name of Individual or Number of Shares Percent of
Identity of Group Class Beneficially Owned (a) Ownership
----------------------- ---------------------- ---------
Raymond F. Agostinelli 10,462(b) *
Merle K. Evey 11,531(c) *
Robert T. Gentry 7,893(d) *
Philip E. Gingerich 27,200(e) *
David K. Goodman, Sr. 9,756(f) *
William E. Henry, O.D. 8,182(g) *
David B. Lee 108,715(h) 1.8%
George R. Lovette 10,653(i) *
D. Stephen Martz 34,568(j) *
Don C. Meyer 38,618(k) *
Robert N. Oliver 3,622(l) *
James W. Powers, Sr. 4,394(m) *
Stanton R. Sheetz 2,235(n) *
Robert A. Szeyller 2,568(o) *
Daniel L. Warfel 38,766(p) *
Samuel D. Zeiders, Jr. 7,113(q) *
Charles H. Zendt, Jr. 39,047(r) *
All directors and executive officers as
a group (19) persons 399,021(s)(t) 6.5%
*less than 1%
(a) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and, accordingly, may
include securities owned by or for, among others, the spouse and/or minor
children of the individual and any other relative who has the same
residence as such individual, as well as other securities as to which the
individual has or shares voting or investment power or has the right to
acquire within 60 days after March 1, 1996. Beneficial ownership may be
disclaimed as to certain of the securities.
(b) This amount includes 8,058 shares held jointly with Mr. Agostinelli's wife,
472 shares owned solely by Mr. Agostinelli's wife, and 1,260 shares owned
by McLanahan Drug Store Mgmt. Co. Inc. of which Mr. Agostinelli is
president and owner. This amount also includes 200 shares issuable upon the
exercise of options granted under the 1994 Stock Option Plan for
Non-Employee Directors.
(c) This amount includes 1,307 shares held jointly with Mr. Evey's wife. This
amount also includes 200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(d) This amount includes 400 shares owned jointly with Mr. Gentry's wife, 200
shares owned by their children, 2,500 shares issuable upon the exercise of
stock options granted to Mr. Gentry pursuant to the Omega Stock Option Plan
and 1,267 shares issuable upon the exercise of stock options granted
pursuant to the Omega Stock Purchase Plan, and 1,004 shares of Common Stock
and 284 shares of Series A ESOP Preferred Stock (convertible into 298
shares of Common Stock) allocated to Mr. Gentry's account under the ESOP.
(e) This amount includes 2,888 shares owned jointly with Mr. Gingerich's wife.
This amount also includes 200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(f) This amount includes 200 shares issuable upon the exercise of options
granted to Mr. Goodman under the 1994 Stock Option Plan for Non-Employee
Directors.
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(g) This amount includes 200 shares issuable upon the exercise of options
granted to Mr. Henry under the 1994 Stock Option Plan for Non-Employee
Directors.
(h) This amount includes 1,908 shares owned jointly with Mr. Lee's wife, 733
shares owned solely by her, 1,134 shares owned by Mr. Lee's daughter, 1,048
shares owned jointly by Mr. Lee's wife and son, 1,053 shares owned jointly
with his children, 1,765 shares owned by the Lee Family Partnership of
which Mr. Lee is a partner and 4,668 shares owned by Centre Foods
Enterprises, Inc., of which Mr. Lee is a director, officer and shareholder.
This amount also includes 38,300 shares issuable upon the exercise of stock
options granted to Mr. Lee pursuant to the Omega Stock Option Plan, 2,833
shares issuable upon the exercise of stock options granted pursuant to the
Omega Stock Purchase Plan, and 8,750 shares of Common Stock and 1,865
shares of Series A ESOP Preferred Stock (convertible into 1,958 shares of
Common Stock) allocated to Mr. Lee's account under the ESOP.
(i) This amount represents 8,415 shares owned jointly with Mr. Lovette's wife
and 2,038 shares owned jointly with his grandchildren. This amount also
includes 200 shares issuable upon the exercise of options granted under the
1994 Stock Option Plan for Non-Employee Directors.
(j) This amount includes 425 shares owned jointly with Mr. Martz's wife, 4,000
shares issuable upon the exercise of stock options granted to Mr. Martz
pursuant to the Omega Stock Option Plan, 1,608 shares issuable upon the
exercise of stock options granted pursuant to the Omega Stock Purchase
Plan, and 1,023 shares of Common Stock and 289 shares of Series A ESOP
Preferred Stock (convertible to 303 shares of Common Stock) allocated to
Mr. Martz's account under the ESOP.
(k) This amount includes 22,506 shares owned jointly with Mr. Meyer's wife,
12,354 shares owned solely by her, and an aggregate of 63 shares owned
jointly with his grandchildren. This amount also includes 200 shares
issuable upon the exercise of options granted under the 1994 Stock Option
Plan for Non-Employee Directors.
(l) This amount includes 684 shares owned jointly with Mr. Oliver's wife. This
amount also includes 200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(m) This amount includes 3,594 shares owned by Mr. Powers' wife. This amount
also includes 200 shares issuable upon the exercise of options granted
under the 1994 Stock Option Plan for Non-Employee Directors.
(n) This amount also includes 200 shares issuable upon the exercise of options
granted to Mr. Sheetz under the 1994 Stock Option Plan for Non-Employee
Directors.
(o) This amount also includes 200 shares issuable upon the exercise of options
granted to Mr. Szeyller under the 1994 Stock Option Plan for Non-Employee
Directors.
(p) This amount includes 220 shares owned by Mr. Warfel's wife as custodian for
their two sons. This amount also includes 23,240 shares issuable upon the
exercise of stock options granted to Mr. Warfel pursuant to the Omega Stock
Option Plan, 1,413 shares issuable upon the exercise of stock options
granted pursuant to the Omega Stock Purchase Plan, and 4,221 shares of
Common Stock and 1,240 shares of Series A ESOP Preferred Stock (convertible
into 1,302 shares of Common Stock) allocated to Mr. Warfel's account under
the ESOP.
(q) This amount includes 812 shares owned by Dr. Zeiders' wife. This amount
also includes 200 shares issuable upon the exercise of options granted
under the 1994 Stock Option Plan for Non-Employee Directors.
(r) This amount includes 2,868 shares owned jointly with Mr. Zendt's wife. This
amount also includes 25,842 shares issuable upon the exercise of options
granted to Mr. Zendt pursuant to the Omega Stock Option Plan, 638 shares
issuable upon the exercise of stock options granted pursuant to the Omega
Stock Purchase Plan, and 5,188 shares of Common Stock and 1,149 shares of
Series A ESOP Preferred Stock (convertible into 1,206 shares of Common
Stock) allocated to Mr. Zendt's account under the ESOP.
(s) This amount includes an aggregate of 123,230 shares issuable upon the
exercise of stock options granted to all executive officers of Omega as a
group pursuant to the Omega Stock Option Plan and the Omega Stock Purchase
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Plan, an aggregate of 2,400 shares issuable upon the exercise of options
granted to all non-employee directors of Omega as a group under the 1994
Stock Option Plan for Non-Employee Directors, and an aggregate of 25,770
shares of Common Stock and 6,103 shares of Series A ESOP Preferred Stock
(convertible into an aggregate of 6,408 shares of Common Stock) allocated
under the ESOP to the accounts of all executive officers of Omega as a
group.
(t) Does not include 237,117 shares of common stock and 219,781 shares of
Series A ESOP Preferred Stock (convertible into an aggregate of 230,770
shares of common stock) which are owned by the ESOP of which Mr. Lee, Mr.
Zendt and Mr. Lovette are Trustees, other than any shares which have been
allocated to their respective accounts.
Series A ESOP Preferred Stock
As of March 1, 1996, all of the 219,781 shares of the Series A ESOP
Preferred Stock outstanding were held of record by Omega's ESOP Trust.
Additionally, as of such date, the ESOP Trust held of record 237,117 shares of
Common Stock. Each share of Series A ESOP Preferred Stock is convertible into
1.05 shares of Common Stock. If all of the shares of Series A ESOP Preferred
Stock held of record by the ESOP Trust were converted into Common Stock, the
ESOP Trust would hold of record 467,887 shares or approximately 7.5% of Omega's
Common Stock. The ESOP Trust's business address is c/o Omega Financial
Corporation, 366 Walker Drive, State College, Pennsylvania 16801.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Omega's
executive officers, directors, and persons who beneficially own more than ten
percent of a registered class of Omega's Common Stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of Omega.
Executive officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish Omega with copies of all Section 16(a)
forms they file.
To Omega's knowledge, based solely on a review of the copies of such
reports furnished to Omega and written representations that no other reports
were required, all Section 16(a) filing requirements applicable to Omega's
executive officers, directors and greater than ten percent beneficial
shareholders were complied with during the year ended December 31, 1995.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Bylaws of Omega provide that the Board of Directors shall consist of
not less than five nor more than twenty-five directors and that within these
limits the number of directors shall be as established by the Board of
Directors. The Board of Directors has set the number of directors at fifteen.
The Bylaws further provide that the Board shall be classified into three
classes, as nearly equal in number as possible. One class of directors is to be
elected annually. Six directors are to be elected at the 1996 annual meeting of
shareholders for a term of three years each.
In connection with the merger of Penn Central Bancorp, Inc. ("Penn Central
Bancorp") into Omega on January 28, 1994, Merle K. Evey, Robert T. Gentry, David
K. Goodman, Sr., D. Stephen Martz, Robert N. Oliver and Stanton R. Sheetz were
appointed to the Board of Directors of Omega. Subject to reaching Omega's
mandatory retirement age of 70, Omega has undertaken to have the individuals
designated by Penn Central Bancorp as directors to serve for a period of not
less than three years from and after the effective date of the merger.
The Board of Directors, pursuant to the Bylaws, has nominated the six
persons listed below to be nominees for election to the Board of Directors. All
are currently serving as directors of Omega. If any of the nominees becomes
unavailable for election for any reason, the Board of Directors may designate a
substitute nominee. Omega expects all nominees to be willing and able to serve.
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The Bylaws of Omega require that written nominations for directors to be
elected at the annual meeting of shareholders, other than those made by or on
behalf of the existing management of Omega, must be in writing, must contain
certain information required by the Bylaws and must be delivered or mailed to
the President of Omega not less than fourteen days nor more than fifty days
preceding the date of the annual meeting.
On March 18, 1995, Omega's banking subsidiaries, Peoples National Bank of
Central Pennsylvania ("Peoples Bank") and The Russell National Bank ("Russell
Bank"), merged to form Omega Bank. Any reference below to service with Omega
Bank includes service with Omega Bank's predecessors prior to such merger.
The following table sets forth certain information regarding Omega's
nominees for election to the Board of Directors:
Positions with Omega/
Principal Occupation During
Name of Nominee Age the Past Five Years
--------------- --- -------------------
Robert T. Gentry 52 Director and Executive Vice
President of Omega since 1994;
Director of Penn Central Bancorp and
Penn Central Bank from 1991 to 1994.
Executive Vice President and Chief
Operating Officer of Penn Central
Bancorp from 1991 to 1994; Chairman,
President and Chief Executive Officer
of Penn Central Bank since 1991; Chief
Executive Officer of First Virginia
Bank-Central Maryland from 1985 to
1991.
Philip E. Gingerich 58 Director of Omega since 1994; Director
of Omega Bank since 1988.
Self-employed real estate
appraiser/consultant.
David K. Goodman, Sr. 68 Director of Omega since 1994;
Director of Penn Central Bancorp
from 1992 to 1994; Director of
Penn Central Bank since 1987.
Chairman and President of the
Board of D.C. Goodman and Sons,
Inc., a plumbing and heating
contractor.
D. Stephen Martz 53 Director of Omega since 1994;
President and Chief Operating
Officer of Omega since 1994;
Chairman, President, Chief
Executive Officer and Director
of Penn Central Bancorp from
1985 to 1994; Director of
Hollidaysburg Trust since 1974;
Chairman, President and Chief
Executive Officer of
Hollidaysburg Trust since 1984.
James W. Powers, Sr. 61 Director of Omega since 1994;
Director of Omega Bank since 1989;
President of Polestar Plastics, Inc.,
a manufacturing company.
Samuel D. Zeiders, Jr., DDS 70 Director of Omega since 1986; Director
of Omega Bank since 1971; retired
dentist.
The following table sets forth certain information regarding those
directors whose terms will expire at either the 1997 or 1998 annual meeting of
shareholders:
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Terms expiring at 1997 annual meeting of shareholders:
Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
---------------- --- -------------------
Raymond F. Agostinelli 61 Director of Omega Since 1993;
Director of Omega Bank since
1982; President and owner of
McLanahan Drug Store Mgmt. Co.
Inc.
Merle K. Evey 65 Director of Omega since 1994;
Director of Penn Central Bancorp
from 1985 to 1994; Director of
Hollidaysburg Trust since 1981;
a partner in the law firm of
Evey, Routch, Black, Dorezas and
Magee.
William E. Henry, O.D. 69 Director of Omega since 1986;
Director of Omega Bank since
1972; self-employed optometrist.
David B. Lee 58 Chairman of the Board of Omega
since 1989, Chief Executive
Officer of Omega since 1986;
President of Omega from 1986 to
1994; President, Chief Executive
Officer and Director of Omega
Bank since 1977; Director,
President and CEO of Montour
since 1995.
Don C. Meyer 69 Director of Omega since 1989;
Director of Omega Bank since
1961; President and Owner of
Autoport Motel and Restaurant,
Inc.
Terms expiring at the 1998 annual meeting of shareholders:
Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
---------------- --- -------------------
George R. Lovette 65 Director of Omega since 1986;
Director of Omega Bank since 1982;
Vice President for Business and
Operations of Pennsylvania State
University until retirement in 1989.
Robert N. Oliver 62 Director of Omega since 1994;
Director of Penn Central Bancorp
from 1993 to 1994; Director of
Penn Central Bank since 1991;
owner and operator of Oliver
Farms.
Stanton R. Sheetz 40 Director of Omega since 1994;
Director of Hollidaysburg Trust
since 1986; Executive Vice
President and Director of
Sheetz, Inc. until 1995,
Director, President and Chief
Executive Officer of Sheetz,
Inc. since 1995, retail
convenience stores.
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Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
---------------- --- -------------------
Robert A. Szeyller 57 Director of Omega since 1989;
Director of Omega Bank since 1985;
Managing Director, Pennsylvania
Financial Group, Inc., an insurance,
securities and consulting firm.
Except as indicated above, each of the nominees or continuing directors
has had the same principal occupation for at least five years.
COMMITTEES OF THE BOARD, ATTENDANCE AND RELATED MATTERS
In 1995, there were twelve regular board meetings of Omega. The Board of
Directors of Omega has established an Audit Committee, Executive Committee and a
Compensation Committee. The entire Board serves as the Nominating Committee for
Omega. In addition, each of Omega's four subsidiary banks have established
various committees of their respective Boards. During 1995, all directors of
Omega attended at least 75% of the total number of meetings of the Board of
Directors of Omega and of all committees of which they were members.
Executive Committee
The Board of Directors has appointed an Executive Committee to act on
behalf of the Board in the intervals between meetings. The Executive Committee
is composed of William E. Henry, Chairman and Messrs. David B. Lee, D. Stephen
Martz, David K. Goodman, Sr., Samuel D. Zeiders, Jr., George R. Lovette, Philip
E. Gingerich and Raymond F. Agostinelli. This Committee met once in 1995.
Audit Committee
The Board of Directors of Omega has appointed a standing Audit Committee
consisting of Raymond F. Agostinelli, Chairman, and Messrs. Don C. Meyer, James
W. Powers, Sr., Stanton R. Sheetz, Robert N. Oliver and Samuel D. Zeiders, Jr.
The principal duties of the Audit Committee are to meet with the independent
certified public accountants of Omega for the purpose of reviewing the scope and
results of the annual audit, to review the reports of examination of various
regulatory agencies and the replies to these reports. This committee reviews,
formulates and approves procedures for the Omega Audit Department. In addition,
the Committee reviews and recommends to the Board of Directors the firm to be
engaged as Omega's independent public accountants. This committee met five times
during 1995.
Omega Compensation Committee
The Board of Directors of Omega has appointed a standing Compensation
Committee consisting of Robert A. Szeyller, Chairman and Messrs. William E.
Henry, George R. Lovette, Merle K. Evey, David K. Goodman, Sr. and Don C. Meyer.
The report of the Compensation Committee is set forth beginning on page 11.
Director Compensation
The Board members of Omega are paid $600 for each regular meeting of the
Board of Directors attended, along with an annual retainer of $3,000. Members of
the Omega Board are not compensated for committee meetings.
Each director of Omega Bank is paid $350 for attendance at each regular
monthly meeting of the Board of Directors and an annual retainer of $1,800.
Board members are not compensated for committee meetings.
Board members of Penn Central Bank are paid $400 for each monthly meeting
plus an annual retainer of $1,200 provided at least 75% of the regularly
scheduled meetings are attended. Directors are permitted two absences and are
not paid for committee meetings.
8
<PAGE>
Hollidaysburg Trust directors are paid $400 for each monthly meeting plus
an annual retainer of $1,200 provided at least 75% of the regularly scheduled
meetings are attended. Directors are permitted only one absence and are not paid
for committee meetings.
Montour directors are paid $75 for each meeting attended and $50 for each
committee meeting.
On May 1, 1995, the then existing directors of Omega who were not
employees of Omega or any subsidiary, i.e. Messrs. Agostinelli, Evey, Gingerich,
Goodman, Henry, Lovette, Meyer, Oliver, Powers, Sheetz, Szeyller and Zeiders,
were each automatically granted options to purchase 200 shares of Common Stock
at an exercise price of $25.75 per share pursuant to the 1994 Stock Option Plan
for Non-Employee Directors. See "Executive Compensation - 1994 Stock Option Plan
for Non-Employee Directors.
Certain directors of Omega and Omega Bank have elected to participate in
the Deferred Compensation Plan for Directors. Any director may elect to
participate in the Plan by executing a Deferred Compensation Agreement, under
the terms of which the participating director waives for a specified period his
right to receive the directors' fees to which he would otherwise be entitled in
return for an undertaking on the part of Omega to invest those fees and to pay
him or his designated beneficiary the amounts so deferred, together with the
interest earned on such amounts, over a specified period commencing either at
age 62, upon his retirement as a director, or upon his death.
No director of Omega, or any of its bank subsidiaries, who is also an
employee of Omega, or any of its bank subsidiaries, receives director's fees.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table reflects information concerning the annual and long
term compensation earned by the Chief Executive Officer and the four most highly
compensated executive officers of Omega whose annual compensation for 1995
exceeded $100,000 for their services in all capacities during the fiscal years
ended December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Annual Long-Term
Compensation(1) Compensation
--------------- ------------
Awards
------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus(2) Options(3) Compensation
- --------------------------- ---- ------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
David B. Lee 1995 $282,733 $110,546 7,293 $114,656(5)
Chairman and Chief 1994 253,582 88,000 7,520 113,887
Executive Officer of 1993 228,827 70,500 7,420 86,260
Omega; President and
Chief Executive Officer
of Omega Bank; and
President and Chief
Executive Officer of
Montour (4)
D. Stephen Martz 1995 $170,054 $ 53,134 4,793 $ 16,417(7)
President and Chief 1994 161,584 42,900 4,815 15,698
Operating Officer of 1993 129,307 22,195 -- 12,885
Omega; Chairman, President
and Chief Executive Officer
of Hollidaysburg Trust (6)
9
<PAGE>
Annual Long-Term
Compensation(1) Compensation
--------------- ------------
Awards
------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus(2) Options(3) Compensation
- --------------------------- ---- ------ -------- ---------- ------------
Daniel L. Warfel 1995 $144,695 $49,297 4,721 $16,417(8)
Executive Vice President 1994 133,208 36,400 4,692 14,698
and Chief Financial 1993 120,785 34,800 4,628 11,360
Officer of Omega
Charles H. Zendt, Jr. 1995 $129,323 $21,951 4,638 $34,194(9)
Executive Vice President 1994 122,801 18,700 4,615 33,076
of Omega Bank . 1993 116,267 19,000 4,599 25,233
Robert T. Gentry
Executive Vice President 1995 $128,333 $21,920 3,137 16,324(11)
of Omega; Chairman, 1994 123,372 17,800 3,130 14,803
President and Chief 1993 111,267 19,000 -- 13,600
Executive Officer of Penn
Central Bank (10)
</TABLE>
(1) Does not include the value of perquisites provided to certain executive
officers which in the aggregate did not exceed the lesser of $50,000 or
10% of such officer's salary and bonus.
(2) Represents the bonus paid in the following year for services
performed in the year listed.
(3) Represents the total of the number of stock options issued pursuant to
Omega's Employee Stock Purchase and Stock Option Plans during the years
listed.
(4) Mr. Lee also served as the President of Omega until the merger with
Penn Central Bancorp on January 28, 1994.
(5) For 1995, consists of $2,276 contributed to Mr. Lee's account in the
401(k) Plan, $14,141 allocated to his account in the ESOP and $98,239
reserved for his account under the Executive Supplemental Income Benefit
Plan.
(6) Mr. Martz also served as Chairman, President and Chief Executive Officer
of Penn Central Bancorp until the merger with Omega on January 28, 1994.
Compensation for all periods prior to the merger was paid by Penn Central
Bancorp and Hollidaysburg Trust.
(7) For 1995, consists of $2,276 contributed to Mr. Martz's account in
the 401(k) Plan and $14,141 allocated to his account in the ESOP.
(8) For 1995, consists of $2,276 contributed to Mr. Warfel's account in
the 401(k) Plan and $14,141 allocated to his account in the ESOP.
(9) For 1995, consists of $2,310 contributed to Mr. Zendt's account in the
401(k) Plan, $14,141 allocated to his account in the ESOP and $17,743
contributed to his account under his salary continuation agreement.
(10) Mr. Gentry also served as Executive Vice President and Chief Operating
Officer of Penn Central Bancorp until the merger with Omega on January 28,
1994. Compensation for all periods prior to the merger was paid by Penn
Central Bancorp and Penn Central Bank.
(11) For 1995, consists of $2,218 contributed to Mr. Gentry's account in
the 401(k) Plan and $14,106 allocated to his account in the ESOP.
10
<PAGE>
THE COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is composed of
directors who are not employees of Omega or the Banks and is responsible for
developing and making recommendations to the Board with respect to Omega's
executive compensation programs. In addition, the Compensation Committee,
pursuant to authority delegated by the Board, determines on an annual basis the
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of Omega.
The policies of Omega's executive compensation program are to:
1) Provide compensation that will attract and retain superior executive
talent;
2) Support the achievement of the goals contained in Omega's annual plan by
linking a portion of the executive officer's compensation to the
achievement of such goals; and
3) Enhance shareholder value by the use of stock options to further align the
interests of the executive officers with those of shareholders.
The Compensation Committee believes that its executive compensation
program provides an overall level of compensation opportunity that is
competitive to that offered within the banking community. Actual compensation
levels may be greater or less than median competitive levels based on the
surveys to which the Compensation Committee subscribes.
Omega's executive officer compensation program is comprised of base
salary, annual cash incentive compensation, long term incentive compensation in
the form of stock options, and various benefits generally available to employees
of Omega, including employee stock purchase plan options, group medical and life
insurance coverage and participation in ESOP, 401(k) and pension plans. In
determining the level of base salary, annual incentive compensation and stock
options for executive officers, the Compensation Committee reviews the
recommendations made by the Chief Executive Officer with respect to subordinate
executive officers, consults with an independent executive compensation
specialist, reviews surveys of compensation data for comparable banks and bank
holding companies and uses its discretion to set compensation for individual
executive officers, including the Chief Executive Officer, at levels where, in
its judgment, external, internal or individual circumstances warrant.
Base Salary. Base salary levels for Omega's executive officers are
competitively set relative to companies in the banking industry of comparable
size within Pennsylvania as well as in the United States. In determining
salaries, the Committee also takes into account individual experience and
performance of executive officers as it relates to the particular needs of
Omega.
Annual Incentive Compensation. Omega's Executive Incentive Compensation
Plan is the Company's annual incentive program for executive officers and key
managers. The purpose of this Plan is to provide a direct financial incentive in
the form of an annual cash bonus to executives to achieve Omega's annual goals
set at the beginning of each fiscal year. In fiscal 1995, the following measures
of corporate performance were selected:
1) Percentage change in return on average assets; and
2) Percentage change in Omega's net income compared to the prior fiscal year.
Individual performance may also be taken into account in determining bonus, but
no bonus is paid unless a predetermined threshold for return on average assets
has been reached. Target bonus awards are set at competitive levels within the
banking industry determined by review of the industry surveys discussed above
and advice of the compensation consultant.
Stock Options. The Compensation Committee uses the Stock Option Plan as
Omega's long-term incentive plan for executive officers and key managers. The
objectives of this Plan are to align the long-term interests of executive
officers and shareholders by creating a direct link between executive
compensation and shareholder return and to enable executives to develop and
maintain a significant long-term equity interest in Omega. The Stock Option Plan
authorizes the Compensation Committee to award stock options to officers and key
employees. In general under the Plan, options are
11
<PAGE>
granted with an exercise price equal to the fair market value of the Common
Stock on the date of grant and are exercisable beginning one year after the date
of the grant (earlier in the event of a "change in control" as defined in the
Plan) up to ten years after the date of grant. Awards are made at a level
calculated to be competitive within the banking industry based on reviews of
industry surveys and advice of the compensation consultant. Subject to
shareholder approval, the Stock Option Plan will be replaced by the 1996
Employee Stock Option Plan, see "Proposal Two - 1996 Employee Stock Option
Plan."
Determination of Compensation of the Chief Executive Officer. Mr. Lee was
the Chairman and Chief Executive Officer of Omega and President and Chief
Executive Officer of Omega Bank and Montour Bank during 1995. With respect to
the base salary granted to Mr. Lee in 1995, the Compensation Committee took into
consideration a comparison of base salaries of chief executive officers of peer
group companies. Also taken into consideration was the fact that Mr. Lee served
as Chief Executive Officer for Omega and Montour Banks and Omega Financial
Corporation. The committee reviewed Mr. Lee's performance with respect to
corporate goals and objectives such as earnings per share, return on equity,
return on assets and non interest expense control. Other subjective criteria
such as leadership, community and industry involvement were used in determining
his merit increase. At the beginning of 1995, Mr. Lee's base salary was
$274,998. Taking into consideration the responsibility as both President and
Chief Executive Officer of two banks as well as Chairman of Omega and the
effective management of the successful merger with Montour Bank during 1995,
effective August 1, 1995 Mr. Lee's base salary was increased by $18,564,
representing a 6.75% merit increase. His base salary at the end of the fiscal
year was $293,562.
Mr. Lee's bonus in fiscal 1995 was $110,546. The bonus was determined in
accordance with the Executive Incentive Compensation Plan and was based upon
attainment of the performance goals established for Omega at the beginning of
the year. Options to purchase a total of 6,500 shares of Common Stock were
awarded to Mr. Lee during fiscal 1995 based upon the overall performance of the
Company, the number of stock options granted to Mr. Lee in 1994 and reviews of
the industry surveys discussed above.
Policy with respect to Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code denies a deduction for certain
compensation exceeding $1,000,000 paid to the chief executive officer and four
other highest paid executive officers excluding (among other things) certain
performance based compensation. The Compensation Committee continually evaluates
to what extent 162(m) applies to its compensation program. Where appropriate,
the Compensation Committee has taken action to reduce the impact of this
provision. For example, the 1996 Employee Stock Option Plan is intended to
comply with the regulations relating to the performance based exception for
stock options. See "PROPOSAL TWO - 1996 EMPLOYEE STOCK OPTION PLAN - Federal
Income Tax Consequences - Limitation of Company's Deduction."
Members of the Compensation Committee: Robert Szeyller, Chairman, William E.
Henry, George R. Lovette, Don C. Meyer, Merle K. Evey and David K. Goodman, Sr.
Stock Performance Graph
The following graph illustrates the five-year cumulative total return for
Omega's Common Stock as compared to The Nasdaq Stock Market Composite Market
Index and The Nasdaq Bank Stock Index, assuming an investment of $100 in each on
December 31, 1990 and the reinvestment of all dividends.
12
<PAGE>
Date Omega Common Stock Nasdaq Composite Nasdaq Bank Stock
Market Index (US Index (1)
Companies) (1)
- --------------------------------------------------------------------------------
12/31/90 100.000 100 100
1/31/91 100.000 111.086 105.716
2/28/91 100.000 121.769 117.729
3/31/91 100.667 129.918 123.719
4/30/91 99.141 130.741 131.358
5/31/91 97.616 136.742 136.848
6/30/91 98.283 128.415 135.667
7/31/91 96.747 136.017 144.772
8/31/91 96.747 142.778 154.529
9/30/91 97.414 143.304 151.736
10/31/91 97.414 148.057 155.812
11/30/91 97.414 143.092 151.631
12/31/91 98.444 160.563 164.092
1/31/92 98.444 169.954 172.301
2/29/92 100.007 173.805 181.349
3/31/92 102.297 165.602 183.980
4/30/92 132.199 159.436 179.756
5/31/92 122.756 158.500 192.439
6/30/92 125.057 160.560 201.123
7/31/92 125.057 154.283 200.584
8/31/92 122.683 159.747 205.650
9/30/92 122.618 154.865 201.907
10/31/92 127.396 160.622 206.831
11/30/92 127.077 166.949 211.179
12/31/92 127.865 180.230 224.945
1/31/93 146.372 186.867 238.854
2/28/93 141.324 192.186 248.135
3/31/93 150.525 185.016 254.000
4/30/93 150.525 190.372 264.286
5/31/93 182.659 182.247 253.508
6/30/93 176.803 193.135 248.381
7/31/93 176.803 194.028 255.413
8/31/93 195.503 194.257 264.531
9/30/93 186.212 204.297 271.577
10/31/93 167.420 210.382 279.193
11/30/93 167.420 215.110 275.115
12/31/93 178.640 208.696 264.092
1/31/94 182.075 214.512 272.395
2/28/94 176.922 221.022 276.869
3/31/94 176.174 218.957 273.389
4/30/94 176.174 205.489 269.100
5/31/94 179.629 202.822 277.800
6/30/94 178.871 203.318 290.466
7/31/94 180.608 195.885 290.480
8/31/94 180.608 199.908 294.512
9/30/94 172.955 212.650 302.037
10/31/94 178.196 212.104 293.698
11/30/94 181.690 216.272 284.881
12/31/94 182.720 209.097 272.990
1/31/95 175.693 209.687 271.410
2/28/95 189.748 210.786 280.536
3/31/95 181.994 221.922 294.257
4/30/95 187.295 228.493 297.160
5/31/95 185.528 235.679 305.398
6/30/95 188.386 241.779 314.688
7/31/95 193.717 261.362 328.074
8/31/95 199.049 280.536 343.519
9/30/95 214.358 286.237 361.935
10/31/95 214.358 292.821 370.328
11/30/95 225.075 290.997 376.332
12/31/95 240.517 297.840 395.680
(1) Source: Center for Research in Securities Prices (CRSP)
University of Chicago, Chicago, IL
On April 7, 1992, Omega's Common Stock was listed for trading on The Nasdaq
Stock Market under the symbol "OMEF." Prior to that time, the Common Stock was
traded over-the-counter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1995 were: Robert
Szeyller, Chairman, William E. Henry, George R. Lovette, Don C. Meyer, Merle K.
Evey and David K. Goodman, Sr. No person who served as a member of the
Compensation Committee during 1995 was a current or former officer or employee
of Omega or the Banks or engaged in certain transactions with Omega or the Banks
required to be disclosed by regulations of the Securities and Exchange
Commission. Additionally, there were no compensation committee "interlocks"
during 1995, which generally means that no executive officer of Omega served as
a director or member of the compensation committee of another entity, one of
whose executive officers served as a director or member of the Compensation
Committee of Omega.
SEVERANCE AND SALARY CONTINUATION AGREEMENTS
Severance Agreements
Omega and certain of the Banks have entered into Severance Agreements with
David B. Lee, Daniel L. Warfel, D. Stephen Martz, and Robert T. Gentry each
providing for certain severance payments in the event that (i) Omega and/or the
Bank (collectively, "Employer" except that in the case of Mr. Warfel, "Employer"
shall mean Omega only) terminates such employee's employment without cause or
(ii) such employee terminates his employment with the Employer (a) for any
reason, whether with or without cause, at any time within three years after a
"change in control of Employer," or (b) due to the fact that, without such
employee's consent and whether or not a change in control of Employer has
occurred, the nature
13
<PAGE>
and scope of his authority with the Employer or the surviving or acquiring
person are materially reduced to a level below that which he enjoys on the date
of the Severance Agreement, the duties or responsibilities assigned to him are
materially inconsistent with that which he has on the date of the Severance
Agreement, his then current base annual salary is materially reduced to a level
below that which he enjoys on the date of the Severance Agreement or at any time
thereafter (whichever may be greater), such employee's position or title with
the Employer or the surviving or acquiring person is reduced from his current
position or title with the Employer, such employee's principal place of
employment with the Employer is changed, in the case of Mr. Lee, to a location
greater than 40 miles from his current principal place of employment with the
Employer, or, in the case of Mr. Warfel, to a location greater than 40 miles
from his current principal place of residence, and in the case of Messrs. Martz
and Gentry, to a location greater than 50 miles from his current principal place
of employment, or in the case of Messrs. Lee and Warfel if the fringe benefits
the Employer provides such employee on the date of the Severance Agreement or at
any time thereafter (whichever may be greater) are materially reduced.
"Cause" is defined in Messrs. Lee's, Martz's and Gentry's agreements as a
conviction for any felony, fraud or embezzlement or failure or refusal to comply
with the written policies or directives of the Board of the Employer or being
guilty of misconduct in connection with the performance of his duties for the
Employer and failing to cure such non-compliance or misconduct within 20 days of
receiving written notice from the Board of Directors of the Employer; Mr.
Warfel's agreement does not define cause.
A "change in control of Employer" is defined as a change in control of the
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), whether or not the Employer is subject to such
reporting requirement. Additionally, a change of control of the Employer is
deemed to have occurred if (i) any person other than those persons in control of
the Employer on the date of the Severance Agreement, acquires the power,
directly or indirectly, to direct the management or policies of the Employer or
to vote 25% or more of any class of voting securities of the Employer or (ii)
within any period of three consecutive years during the term of the Severance
Agreement, individuals who at the beginning of such period constitute the Board
of Directors of the Employer cease for any reason to constitute at least a
majority thereof.
The term of each of Messrs. Lee's, Martz's and Gentry's Severance
Agreement will end on the earliest of his death or permanent disability, the
termination of his employment for cause, mutual agreement, resignation or
retirement or upon his reaching age 65, in the case of Mr. Lee, or age 60 in the
case of Messrs. Martz and Gentry. Mr. Warfel's Severance Agreement provides for
a three year term beginning June 1, 1990, unless terminated earlier as provided
in the Agreement, and will continue for successive terms of three years each
unless the Omega Board of Directors notifies him during the first year of any
three year term that it does not intend to renew the Severance Agreement at the
end of the then current three year term. Accordingly, Mr. Warfel's Severance
Agreement will continue until at least June 1, 1999.
In the event that an employee is entitled to severance payments under his
Severance Agreement, he will be paid annual compensation for a period of three
years (in the case of Messrs. Lee and Warfel), or 5 years (in the case of
Messrs. Martz and Gentry) following the date on which his employment is
terminated ("Termination Date") at a rate equal to 100% (in the case of Messrs.
Lee and Warfel), or 85% and 75% (in the case of Messrs. Martz and Gentry
respectively), of his highest annual cash compensation, including cash bonuses,
during the three year period ending on the Termination Date. In the case of
Messrs. Lee, Martz and Gentry, such amount will be increased on January 1 of
each year following the Termination Date based on the increase in the cost of
living as measured by the consumer price index.
In the event that an employee is entitled to severance payments, he will
also be entitled to all medical, hospitalization, and life insurance benefits
for a period of three years following the Termination Date, in the case of
Messrs. Lee and Warfel, or five years, in the case of Messrs. Martz and Gentry,
except that, if new employment is accepted by the employee during such period,
continuation of such benefits will be offset by coverages provided through the
employee's subsequent employer. For a period of one year following the
Termination Date, Mr. Lee will be entitled to reimbursement for all reasonable
expenses incurred by him in connection with the search for new employment and
reimbursement for all reasonable relocation expenses incurred by him in
connection with securing such new employment, provided however, that, in each
case, such reimbursement will not exceed one-third of his highest annual
compensation. Mr. Warfel is entitled to reimbursement for all reasonable
relocation expenses incurred by him and not paid by his new employer in securing
new employment, provided that such reimbursement will not exceed one-third of
his highest annual compensation.
14
<PAGE>
Messrs. Lee's and Warfel's agreements provide that each of them may
require the Employer to maintain a letter of credit in the face amount of three
times his current base annual salary on the date of grant plus $50,000 to secure
the Employer's obligations under the agreement. Messrs. Lee's and Warfel's
agreements provide that the severance payments and benefits to which each may be
entitled under their respective Severance Agreements will not be otherwise
offset or reduced by any income or earnings received from any other employment
or other activity that such employee may engage in during the three year period
following the Termination Date. Messrs. Martz's and Gentry's agreements provide
that any severance payments and benefits which they may be receiving will
terminate immediately upon death or upon his reaching age 60. No terminated
employee is required to mitigate his damages. The Severance Agreements also
contain provisions restricting each of the employee's right to compete with
Employer in certain portions of Pennsylvania for varying periods following the
Termination Date.
Mr. Lee's Severance Agreement also amends his Executive Supplemental
Income Plan Agreement ("ESI Agreement") by providing that in the event that the
Termination Date occurs after a sale of stock or assets, merger or substantial
change in ownership of Omega Bank, Mr. Lee will have the right to defer any
retirement benefit to which he is entitled under the ESI Agreement for any
period of time until he reaches age 65 and, in such event, solely for the
purpose of calculating his annual average compensation in order to determine the
benefits payable under the ESI Agreement, Mr. Lee will be deemed to have
remained an employee of Omega Bank from the Termination Date until he elects to
receive his retirement benefit or reaches age 65, whichever occurs first, and
his annual compensation during such period shall be deemed to be equal to his
highest annual compensation, as calculated for the purposes of the Severance
Agreement, increased as of January 1 of each year following the Termination Date
by the cost of living increase as measured by the consumer price index.
Salary Continuation Agreement
Omega Bank has a non-qualified deferred compensation agreement with Mr.
Zendt which provides for monthly benefits to him or on his behalf at a normal
retirement age of 65 and has provisions for death and disability benefits. The
retirement benefit is a monthly payment of $3,333 for a period of ten years. The
disability benefit is a monthly payment of $1,250 for ten years. The death
benefit payable to Mr. Zendt's beneficiary is $2,083 per month payable for a
period of ten years.
Stock Option Plan (1986)
Under Omega's Stock Option Plan (1986) (the "Stock Option Plan"), options
may be granted for a total of 750,000 shares of Common Stock (subject to
appropriate adjustments to reflect changes in the capitalization of Omega).
Pursuant to the Stock Option Plan, stock options may be granted which are
intended to qualify as incentive stock options under the Internal Revenue Code
of 1986, as amended ("Code"), as well as stock options not intended to so
qualify. The purpose of the Stock Option Plan is to provide additional incentive
to employees of Omega by encouraging them to invest in Omega Common Stock and
thereby acquire a proprietary interest in Omega and an increased personal
interest in Omega's continued success and progress. All officers and key
employees of Omega or any current or future subsidiary are eligible to receive
options under the Stock Option Plan.
The Stock Option Plan is administered by the Compensation Committee
("Committee") which is appointed by the Board. The Committee determines, among
other things, which officers and key employees will receive an option or options
under the Stock Option Plan, the type of option (incentive or non-qualified, or
both) to be granted, the number of shares subject to each option, the rate of
option exercisability, and subject to certain limitations, the option price and
duration of the option. The Committee has the exclusive right to adopt rules for
the administration and interpretation of the Stock Option Plan and the options
issued pursuant to the Stock Option Plan. Shares of Common Stock subject to
options that terminate unexercised are available for future option granted under
the Stock Option Plan. For incentive stock options granted before January 1,
1987, the aggregate fair market value of the stock for which an optionee could
have been granted incentive stock options in any calendar year was limited to
$100,000 plus any unused limit carryover to such year. For incentive stock
options granted after December 31, 1986, the Code provides that the aggregate
fair market value of the stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year cannot
exceed $100,000 and the excess amount will be treated as non-qualified options.
15
<PAGE>
The option price for options issued under the Stock Option Plan must be at
least equal to 100% of the fair market value of Omega Common Stock as of the
date of the grant of the option, as determined by the Committee. Unless
terminated earlier by the option's terms, incentive options expire ten years
after the date of grant, and non-qualified options expire ten years and ten days
after the date of grant. Payment of the option price on exercise of both
incentive options and non-qualified options may be made in cash, Omega Common
Stock, or a combination of both. Except in the event of a "change in control"
(as defined in the Stock Option Plan), no stock option granted under the Stock
Option Plan may be exercised in the first year after the date of grant;
thereafter, each optionee may exercise up to the total number of optioned shares
granted to such optionee.
If Proposal Two is approved, the 1996 Employee Stock Option Plan will
replace the existing Stock Option Plan.
Employee Stock Purchase Plan
Under Omega's Employee Stock Plan (the "Stock Purchase Plan"), options may
be granted for a total of 750,000 shares of Common Stock (subject to appropriate
adjustments to reflect changes in the capitalization of Omega). The Stock
Purchase Plan is intended to advance the interests of Omega by giving employees
of Omega and its subsidiaries a vested interest in the growth and earnings of
Omega. The Stock Purchase Plan is administered by the Committee. The Committee
is authorized to grant options to purchase Common Stock of Omega to employees of
Omega and its subsidiaries. The Committee has discretion as to the total number
of options, if any, granted in each year, the rate of exercisability, the price
as to which each option is exercisable, and the duration of each option. Shares
of Common Stock subject to options which expire unexercised are available for
future option grants under the Stock Purchase Plan.
All options granted under the Stock Purchase Plan expire at such time, not
later than five years after the date of grant, as the Committee shall determine;
provided, however, that options exercised more than 27 months after the date of
grant must be exercised at an option price equal to at least 85% of the fair
market value of the shares on the date of exercise. No option may be granted to
any person who immediately after the grant would own more than 5% of Omega
Common Stock and no option may be granted which, at the date the option is
granted, would permit such person's right to purchase stock under the Stock
Purchase Plan and all other employee stock purchase plans of Omega and
subsidiaries to accrue at a rate exceeding $25,000 of the fair market value of
such stock (determined at the time such option is granted) for each year such
option is outstanding. Except as noted above, the option price per share must
not be less than the lesser of: (a) 85% of the fair market value of the stock on
the date of grant, or (b) 85% of the fair market value on the date of exercise.
If the Committee decides to issue options pursuant to the Stock Purchase
Plan, options must be granted to all employees of Omega and its subsidiaries who
have been employed for at least one year subject to certain exclusions. When
options are granted, each eligible employee will be permitted to elect to
purchase the number of whole shares which could be purchased with no more than
25% of his "base salary rate" (as defined) determined as of the date the option
is granted. The Committee, in its discretion, may change the maximum percentage
of "base salary rate" which may be elected by eligible employees so long as such
change applies to all eligible employees. Based on the elections by eligible
employees, if the total number of whole shares elected to be purchased exceeds
the total number of shares determined by the Committee to be allocated to any
date on which options are granted, then each eligible employee will be granted
an option for such proportion of the total shares allocated by the Committee as
the number of shares elected to be purchased by such eligible employee bears to
the total number of shares elected to be purchased by all eligible employees.
Stock Option Grants
The following information concerning stock options granted for 1995 under
the Stock Purchase Plan and the Stock Option Plan to the Chief Executive Officer
and the four most highly compensated executive officers of Omega named in the
Summary Compensation Table:
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<PAGE>
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN 1995
Number of Percentage of Potential Realizable Value at
Securities Total Options Assumed Annual Rates of Stock
Underlying Granted to All Price Appreciation for
Options Employees in Exercise or Expiration Option Term (3)
Name Granted 1995 Base Price Date 0% 5% 10%
---- ---------- -------------- ----------- ---------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Lee
(1) 793 1.40% $ 28.35 12/31/1999 $2,498 $ 3,188 $ 4,023
(2) 6,500 13.77% 31.50 01/01/2005 N/A 128,766 326,319
D. Stephen Martz
(1) 793 1.40% 28.35 12/31/1999 2,498 3,188 4,023
(2) 4,000 8.47% 31.50 01/01/2005 N/A 79,241 200,812
Daniel L. Warfel
(1) 721 1.26% 28.35 12/31/1999 2,271 2,898 3,658
(2) 4,000 8.47% 31.50 01/01/2005 N/A 79,241 200,812
Charles H. Zendt, Jr.
(1) 638 1.11% 28.35 12/31/1999 2,010 2,565 3,237
(2) 4,000 8.47% 31.50 01/01/2005 N/A 79,241 200,812
Robert. T. Gentry
(1) 637 1.11% 28.35 12/31/1999 2,007 2,561 3,232
(2) 2,500 5.30% 31.50 01/01/2005 N/A 49,256 125,507
</TABLE>
(1) Granted pursuant to the Employee Stock Purchase Plan. "Exercise or Base
Price" column shows the exercise price in effect for the first 27 months
after the date of grant. See footnote (3).
(2) Granted pursuant to the Stock Option Plan.
(3) Shows the difference between the market value of the Common Stock for
which the option may be exercised less the exercise price of the option
assuming that the market price of the Common Stock appreciates in value
from the date of grant to the end of the option term at annualized rates
of 5% and 10%, respectively. The rates of appreciation used in this table
are prescribed by regulations of the Securities and Exchange Commission
and are not intended to forecast future appreciation of the market value
of the Common Stock. Because the Employee Stock Purchase Plan options were
granted at 90% of the market price of the Common Stock on the date of
grant, the "0%" column shows the market value of the Common Stock for
which such options may be exercised as of December 31, 1994 less the
exercise price and assumes no appreciation in the value of the Common
Stock during the option term. By the terms of the Employee Stock Purchase
Plan options, the exercise price of options exercised more than 27 months
after the date of grant cannot be less than 90% of the fair market value
of Omega's Common Stock on the date of exercise, which provision is
reflected in the "5%" and "10%" appreciation columns for such options.
AGGREGATED STOCK OPTION EXERCISES DURING 1995
AND YEAR-END OPTION VALUES
Set forth below is information concerning the exercise during 1995 of
options granted under the Stock Purchase Plan and Stock Option Plan by the Chief
Executive Officer and the five most highly compensated executive officers named
in the Summary Compensation Table and the value of unexercised options held by
them at the end of 1995:
17
<PAGE>
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Acquired Value Realized(1) December 31, 1995 December 31, 1995(2)
Name On Exercise On Shares Acquired Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Lee 7,440 $102,822 41,133 6,500 $493,903 -0-
D. Stephen Martz -0- -0- 5,608 4,000 38,200 -0-
Daniel L. Warfel 628 5,307 24,653 4,000 294,267 -0-
Charles H. Zendt, Jr. 5,472 73,428 27,180 4,000 338,020 -0-
Robert T. Gentry -0- -0- 3,767 2,500 25,460 -0-
</TABLE>
(1) Represents the difference between the market price (bid price) of the
Common Stock on the date of exercise and the exercise price of the options
multiplied by the number of options exercised.
(2) Represents the difference between $31.50, the market price (bid price) of
the Common Stock on December 31, 1995, and the exercise price of the
options multiplied by the number of options held.
1994 Stock Option Plan for Non-Employee Directors
In March, 1994, the Board of Directors adopted, and in April 1995, the
shareholders approved, the 1994 Stock Option Plan for Non-Employee Directors
(the "Director Plan"). The purpose of the Director Plan is to provide additional
incentive to members of the Board of Directors of Omega who are not also
employees of Omega or any subsidiary corporation by encouraging them to invest
in Omega's Common Stock and thereby acquire a further proprietary interest in
Omega and an increased personal interest in Omega's continued success and
progress.
Each person who was, as of May 1, 1994, a director of Omega, and who was
not as of such date an employee of Omega or any subsidiary corporation, was, as
of May 1, 1994, automatically granted an option to purchase 200 shares of
Omega's Common Stock. Each person who was not a director of Omega as of May 1,
1994, and is not an employee of Omega or any subsidiary corporation and who on
or after May 1, 1994 is first elected or appointed as a director of Omega, shall
as of the date of such election or appointment, automatically be granted an
option to purchase a prorated number of shares of Omega's Common Stock (not to
exceed 200 shares). On May 1, 1995 and on each May 1st thereafter (each, an
"anniversary date") and provided a person described in the two preceding
sentences continues to be a non-employee director on such anniversary date, such
person shall automatically be granted on each such anniversary date an option to
purchase 200 shares of Omega's Common Stock or such lower number of shares as
shall be equal to the number of shares as shall then be available (if any) for
grant under the Director Plan divided by the number of persons who are to
receive an option on such anniversary date.
The Director Plan is administered by the Board of Directors of Omega,
including non-employee directors. Under the Director Plan, the Board has the
right to adopt such rules for the conduct of its business and the administration
of the Director Plan as it considers desirable. The Board of Directors has the
exclusive right to construe the Director Plan and the options issued pursuant to
it, to correct defects and omissions and to reconcile inconsistencies to the
extent necessary to effectuate the purpose of the Director Plan and the options
issued pursuant to it.
The aggregate number of shares which may be issued upon the exercise of
options under the Director Plan is 20,000 shares of Omega Common Stock. In the
event of any change in the capitalization of Omega, such as by stock dividend,
stock split or what the Board of Directors deems in its sole discretion to be
similar circumstances, the aggregate number and kind of shares which may be
issued under the Director Plan will be appropriately adjusted in a manner
determined in the sole discretion of the Board of Directors. Reacquired shares
of Omega's Common Stock, as well as unissued shares, may be used for the purpose
of the Director Plan. Common Stock of Omega subject to options which have
terminated unexercised, either in whole or in part, will be available for future
options granted under the Director Plan.
The option price for options issued under the Director Plan will be equal
to the fair market value of Omega Common Stock on the date of grant. Fair market
value shall mean the last reported sale price of Omega's Common Stock as
reported on the Nasdaq National Market System as of the date of grant. Payment
of the option price on exercise of options granted under the Director Plan may
be made in (a) cash, (b) (unless prohibited by the Board of Directors) Omega
18
<PAGE>
Common Stock which will be valued by the Secretary of Omega at its fair market
value or (c) (unless prohibited by the Board of Directors) any combination of
cash and Common Stock of Omega valued as provided in clause (b).
Options granted pursuant to the Director Plan may be exercised in whole,
or from time to time in part, beginning on the earlier to occur of (i) one year
after the date of their grant or (ii) a "change in control" of Omega, as such
term is defined in the Director Plan. Unless terminated earlier by the option's
terms, options granted under the Director Plan will expire ten years after the
date they are granted. Options terminate one year after the optionee ceases to
be a director of Omega (whether by resignation, removal, failure to be reelected
or otherwise, and regardless of whether the failure to continue as a director
was for cause or otherwise) except that the options will terminate one year
after the optionee ceases to be a director due to death, disability or mandatory
retirement at age 70, but in all events not later than ten years after the date
of option grant. Options granted pursuant to the Director Plan are not
transferable, except by will or the laws of descent and distribution in the
event of death. During an optionee's lifetime, the option is exercisable only by
the optionee, including, for this purpose, the optionee's legal guardian or
custodian in the event of disability. Options may not be granted pursuant to the
Director Plan after the expiration of ten years from and after the adoption of
the Director Plan by Omega's shareholders at the 1994 Annual Meeting.
OTHER EMPLOYEE BENEFIT PLANS
Omega Financial Corporation Retirement Plan
The Omega Financial Corporation Defined Benefit Pension Plan ("Retirement
Plan") provides for monthly benefits to or on behalf of each covered employee at
the normal retirement age of 65. During 1994, the Retirement Plan was frozen
with no further accrual of benefits. The Retirement Plan was terminated
effective October 31, 1995. Omega will distribute to all participants in the
Plan their accrued benefit derived from Omega's contributions to the Plan. The
amount to be paid to participants in the Plan, including the amount to be paid
to each of the executive officers named in the summary compensation table, has
not yet been determined.
Peoples Executive Supplemental Income Benefit Plan
In September, 1984, the Board of Directors of Peoples Bank (now Omega
Bank) adopted a nonqualified Executive Supplemental Income Benefit Plan ("ESI
Plan") effective as of January 1, 1984. The ESI Plan is an unfunded plan which
provides death benefits and supplemental retirement benefits for David B. Lee
and four retired participants.
Under the ESI Plan, Omega Bank enters into individual agreements with
participants. The agreements provide for annual payments to the participant's
designated beneficiary for a specified period of years following the
participant's death. The ESI Plan also provides for supplemental retirement
benefits for a participant who has attained age 65 and who has remained in the
continuous employment of Omega Bank (or its predecessor) until his retirement;
however, in the case of the sale of the stock or assets, merger or substantial
change in the ownership of Omega Bank, continuous employment of the participant
is required only until the date the participant voluntarily terminates his
employment or is discharged by the Bank without "just cause."
Under the supplemental retirement provisions, participants are eligible
for supplemental benefits of up to 75% of the participant's final average
salary. Those supplemental retirement benefits are subject to reduction for
social security benefits and benefits received under the Omega Retirement Plan.
Subject to the approval of Omega Bank Board of Directors, a participant can
elect early retirement at age 55; however, a participant can elect early
retirement without Board approval at age 55 if there is a sale of the stock or
assets, merger, or substantial change in ownership of Omega Bank. The retirement
benefits payable to a participant who has elected early retirement will be
actuarially reduced.
In 1988, Peoples Bank terminated the ESI Plan for all participants except
the four retired participants and David B. Lee. Based on current estimates of
Mr. Lee's final average salary, his estimated monthly ESI Plan benefit would be
approximately $11,180 per month payable for a period of 15 years beginning at
age 65. In the event that Mr. Lee should die prior to retirement, his
beneficiaries would receive $8,166 per month for the first year following his
death, $6,125 per month for the next four years, and $4,083 per month for the
next ten years.
19
<PAGE>
Omega Executive Incentive Compensation Plan
The Russell Bank Executive Incentive Compensation Plan was discontinued in
1987 and a new Executive Incentive Compensation Plan ("EIC Plan") for Omega was
implemented. The purpose of this plan is to motivate key management level
employees by rewarding performance which exceeds normal expectations. The EIC
Plan is administered by the Omega Compensation Committee which designates
permanent and special participants in the EIC Plan. Individuals are selected by
the Omega Compensation Committee based on their responsibilities and value to
Omega, and once selected generally remain a participant as long as the level of
responsibility is not significantly reduced. In addition, other employees may
from time to time be selected by the management of Omega as special participants
in the EIC Plan in any given plan year based upon outstanding individual
contribution to Omega.
Awards to the permanent participants under the EIC Plan are based on
pre-determined performance goals which are established by the Compensation
Committee each year and are based upon such standards as change in return on
average assets and net income. Awards to such special participants are made from
a special bonus pool established each year not to exceed 25% of the amount
awarded in any EIC Plan Year to the permanent participants as a group. Awards
are paid to the participants in the first quarter following the end of each
year. During 1995, awards were made to Messrs. D. B. Lee, D. S. Martz, D. L.
Warfel, R. T. Gentry, and C. H. Zendt, Jr. based upon results achieved during
the year ended December 31, 1995 and are included in the preceding Summary
Compensation Table.
CERTAIN TRANSACTIONS
Through its bank subsidiaries, Omega has had, and expects to continue to
have, loan and other banking transactions (including, but not limited to,
checking accounts and savings and time deposits) with certain of its directors,
nominees for director, officers, certain of their immediate family members and
certain corporations or organizations with which they are affiliated. All such
loan and other banking transactions (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and (iii) did not involve more than the normal
risk of collectibility or present other unfavorable features.
PROPOSAL TWO
1996 EMPLOYEE STOCK OPTION PLAN
In March 1996, the Board of Directors of Omega adopted the 1996 Employee
Stock Option Plan (the "1996 Plan"), subject to approval by the shareholders of
Omega. The 1996 Plan will replace the Stock Option Plan (1986) which expires in
October 1996. Pursuant to the 1996 Plan, stock options may be granted which
qualify under the Code as incentive stock options as well as stock options that
do not qualify as incentive stock options or are designated as not intended to
so qualify. All officers and key employees of Omega or any current or future
subsidiary corporation are eligible to receive options under the 1996 Plan.
The Board of Directors recommends that the 1996 Plan be approved because
it believes that the 1996 Plan will advance the interest of Omega and its
shareholders by strengthening Omega's ability to attract, retain and motivate
officers and key employees.
Set forth below is a summary of the provisions of the 1996 Plan. This
summary is qualified and amplified in its entirety by the detailed provisions of
the text of the actual 1996 Plan set forth as Exhibit A to this Proxy Statement,
all of which are incorporated herein.
Purpose
The purpose of the 1996 Plan is to provide additional incentive to
employees of Omega by encouraging them to invest in Omega's Common Stock and
thereby acquire a proprietary interest in Omega and an increased personal
interest in Omega's continued success and progress.
20
<PAGE>
Administration
The 1996 Plan will be administered by the Compensation Committee
("Committee") which is appointed by the Board of Directors and consists only of
Directors who are not eligible to receive options under the 1996 Plan. The
Committee determines, among other things, which officers and key employees
receive an option or options under the 1996 Plan, the type of option (incentive
stock options or non-qualified stock options, or both) to be granted, the number
of shares subject to each option, the rate of option exercisability, and,
subject to certain other provisions to be discussed below, the option price and
duration of the option.
The Committee may, in its discretion, amend or supplement any of the
option terms hereafter described, provided that if an incentive option is
granted under the 1996 Plan, the option as amended or supplemented continues to
be an incentive stock option.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options under the 1996 Plan is 1,000,000 shares of Common Stock. In the event of
any change in the capitalization of Omega, such as by stock dividend, stock
split or what the Board of Directors deems in its sole discretion to be similar
circumstances, the aggregate number and kind of shares which may be issued under
the 1996 Plan will be appropriately adjusted in a manner determined in the sole
discretion of the Board of Directors. Reacquired shares of Omega's Common Stock,
as well as unissued shares, may be used for the purpose of the 1996 Plan. Common
Stock of Omega subject to options which have terminated unexercised, either in
whole or in part, will be available for future options granted under the 1996
Plan.
Option Price
The option price for incentive stock options issued under the 1996 Plan
must be at least equal to 100% of the fair market value of the Common Stock as
of the date the option is granted. The fair market value is determined by the
Committee. The option price for non-qualified stock options issued under the
1996 Plan may, in the discretion of the Compensation Committee, be at less than
the fair market value of the Common Stock as of the date the option is granted.
Payment
Payment of the option price on exercise of options granted under the 1996
Plan may be made in (a) cash and includes cash received from a stock brokerage
firm in a so-called "cashless exercise," (b) (unless prohibited by the Board of
Directors) Omega Common Stock which will be valued by the Secretary of Omega at
its fair market value or (c) (unless prohibited by the Board of Directors) any
combination of cash and Common Stock of Omega valued as provided in clause (b).
Under the terms of the 1996 Plan, the Board has interpreted the provision
of the 1996 Plan which allows payment of the option price in Common Stock of
Omega to permit the "pyramiding" of shares in successive exercises. Thus, an
optionee could initially exercise an option in part, acquiring a small number of
shares of Common Stock, and immediately thereafter effect further exercises of
the option, using the Common Stock acquired upon earlier exercises to pay for an
increasingly greater number of shares received on each successive exercise. This
procedure could permit an optionee to pay the option price by using a single
share of Common Stock or a small number of shares of Common Stock and to acquire
a number of shares of Common Stock having an aggregate fair market value equal
to the excess of (a) the fair market value (as determined above) of all shares
to which the option relates over (b) the aggregate exercise price under the
option. A vote in favor of Proposal Two is also a vote in favor of this
interpretation.
Exercisability
Except as otherwise described below, none of the options granted under the
1996 Plan may be exercised during the first year after the date granted.
Thereafter, each optionee may exercise up to 100% of the option. In the event of
a "change in control" of Omega, as defined in the 1996 Plan, each optionee may
exercise the total number of shares then subject to the option. Consequently,
the approval of the 1996 Plan may be deemed to have certain "anti-takeover" and
"anti-greenmail" effects. The Committee has the authority to provide for a
different rate of option exercisability for any optionee.
21
<PAGE>
Option Expiration and Termination
Unless terminated earlier by the option's terms, incentive stock options
expire ten years after the date they are granted and non-qualified stock options
expire ten years and ten days after the date they are granted.
Options terminate three months (but not later than the scheduled
termination date) after the date on which employment is terminated (whether such
termination be voluntary or involuntary) other than by reason of retirement at
age 65 (or such earlier retirement age as may be approved by the Compensation
Committee), death or disability. The option terminates one year from the date of
termination of employment due to retirement, death or disability (but not later
than the scheduled termination date).
Non-Transferability
Options granted pursuant to the 1996 Plan are not transferable, except by
Will or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
Amendment or Termination; Plan Expiration
Omega's Board of Directors has the right at any time, and from time to
time, to amend, supplement, suspend or terminate the 1996 Plan, without
shareholder approval, except to the extent that shareholder approval of the 1996
Plan amendment or supplement is required by the Code to permit the granting of
incentive stock options under the 1996 Plan. Any such action will not affect
options previously granted. If the Board of Directors voluntarily submits a
proposed amendment, supplement, suspension or termination for shareholder
approval, such submission will not require any future amendments, supplements,
suspensions or terminations (whether or not relating to the same provision or
subject matter) to be similarly submitted for shareholder approval. Options may
not be granted under the 1996 Plan after March 26, 2006.
Option Grants
As of April 1, 1996, no options had been granted under the 1996 Plan.
The following table sets forth information concerning options granted to
date under Omega's Stock Option Plan (1986), including options which have been
exercised:
Total Weighted Average
Name Options Granted Exercise Price
---- --------------- --------------
David B. Lee..................... 57,400 $19.88
D. Stephen Martz................. 8,000 28.00
Daniel L. Warfel................. 34,800 19.94
Charles H. Zendt................. 34,800 19.94
Robert T. Gentry................. 5,000 28.00
All Executive Officers and 170,305 20.61
Directors as a Group..........
All Employees, other than 136,449 20.73
Executive Officers and Directors,
as a Group.......................
On March 1, 1996, the last sale price of Omega's Common Stock was $33.50.
22
<PAGE>
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF
THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE 1996 PLAN AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Code, an optionee will not realize taxable income by
reason of the grant or the exercise of an incentive stock option ("Incentive
Option") (see, however, discussion of Alternative Minimum Tax below). If an
optionee exercises an Incentive Option and does not dispose of the shares until
the later of (i) two years from the date the option was granted and (ii) one
year from the date of exercise, the entire gain, if any, realized upon
disposition of such shares will be taxable to the optionee as long-term capital
gain, and Omega will not be entitled to any deduction. If an optionee disposes
of the shares within the period of two years from the date of grant or one year
from the date of exercise (a "disqualifying disposition"), the optionee
generally will realize ordinary income in the year of disposition and Omega will
receive a corresponding deduction, in an amount equal to the excess of (1) the
lesser of (a) the amount, if any, realized on the disposition and (b) the fair
market value of the shares on the date the option was exercised (or such later
date, if applicable, as described below in "Non-Qualified Options", if the
optionee is a "16(b) Person" who has not made an "83(b) Election," as such terms
are defined in "Non-Qualified Options" below) over (2) the option price. Any
additional gain realized on the disposition will be long-term or short-term
capital gain and any loss will be long-term or short-term capital loss. The
optionee will be considered to have disposed of a share if he sells, exchanges,
makes a gift of or transfers legal title to the share (except transfers, among
others, by pledge, on death or to spouses). If the disposition is by sale or
exchange, the optionee's tax basis will equal the amount paid for the share plus
any ordinary income realized as a result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise (or such later date, if applicable, as
described below in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not made an 83(b) Election) exceeds the option exercise price is an
adjustment for purposes of computing the so-called alternative minimum tax. In
the event of a disqualifying disposition of the shares in the same taxable year
as exercise of the Incentive Option, no adjustment is then required for purposes
of the alternative minimum tax, but regular income tax, as described above, may
result from such disqualifying disposition. Effective January 1, 1994, the
Revenue Reconciliation Act of 1994 replaced the 24% alternative minimum tax rate
on individuals with a two-tier alternative minimum tax rate having an initial
rate of 26% and a second-tier rate of 28% on alternative minimum taxable income
over $175,000.
An optionee who surrenders shares as payment of the exercise price of his
Incentive Option generally will not recognize gain or loss on his surrender of
such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such stock, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise of
an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option had
been exercised for cash.
23
<PAGE>
Non-Qualified Options
Generally, there will be no federal income tax consequences to either the
optionee or Omega on the grant of Non-Qualified Options granted pursuant to the
1996 Plan. On the exercise of a Non-Qualified Option, the optionee (except as
described below) has taxable ordinary income equal to the excess of the fair
market value of the shares acquired on the exercise date over the option price
of the shares. Omega will be entitled to a federal income tax deduction (subject
to the limitations contained in Section 162) in an amount equal to such excess.
However, special rules apply where stock is registered under the Exchange Act
and the optionee is an officer, director or 10% or greater shareholder of Omega
subject to potential liability under Section 16(b) of the Securities Exchange
Act of 1934 ("Exchange Act") for so-called "short-swing" profits (a "16(b)
Person") in connection with certain purchases and sales, or sales and purchases,
of Omega's stock within a period of six months.
Under SEC rules promulgated under Section 16(b) of the Exchange Act, the
grant of an option, not its exercise, is treated as a "purchase" for Section
16(b) purposes. If such grant is made pursuant to a plan qualifying under the
SEC rules and six months elapse between the grant of the option and the sale of
the shares received upon the exercise thereof, such grant will be exempt from
Section 16(b). With respect to the exercise of a Non-Qualified Option, if a
16(b) Person has not purchased or acquired shares of Common Stock within the six
month period prior to the exercise date (other than purchases or acquisitions
exempt from Section 16(b)), the 16(b) Person will be required to recognize
ordinary income (i) six months after the date of grant (in the event of exercise
within six months of the date of grant) or (ii) the date of exercise (in the
event of exercise after six months from the date of grant). The timing of income
recognition with respect to a 16(b) Person who exercises a Non-Qualified Option
within six months of a prior non-exempt purchase or acquisition of Common Stock
is uncertain. It is possible that the Internal Revenue Service will take the
position that, despite the prior non-exempt purchase or acquisition, the 16(b)
Person recognizes income on the date of exercise rather than the date which is
six months following the date of such prior non-exempt purchase or acquisition.
A 16(b) Person can be certain of recognizing income on the exercise date by
making an election not later than 30 days following the exercise date to have
the income determined as of the date of exercise (an "83(b) Election"), in which
case Omega's deduction will also be determined as of the exercise date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of capital
gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying disposition.
See "Federal Income Tax Consequences - Incentive Stock Options". The optionee
will recognize ordinary income on the exercise of the Non-Qualified Option as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered will have the same tax basis
and capital gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market value on the
date of exercise and the capital gains holding period will begin on the date of
exercise (or such later date, as described above, if the optionee is a 16(b)
Person who has not made an 83(b) Election, and such later date is applicable).
Limitation on Company's Deduction
Section 162(m) of the Code will generally limit to $1.0 million Omega's
federal income tax deduction for compensation paid in any year to its chief
executive officer and its four highest paid executive officers, to the extent
that such compensation is not "performance based." Under Treasury regulations,
and subject to certain transition rules, a stock option will, in general,
qualify as "performance based" compensation if it (i) has an exercise price of
not less than the fair market value of the underlying stock on the date of
grant, (ii) is granted under a plan that limits the number of shares for which
options may be granted to an employee during a specified period, which plan is
approved by a majority of the shareholders entitled to vote thereon, and (iii)
is granted by a compensation committee consisting solely of at least two
independent directors. The terms of the 1996 Plan and the composition of the
committee are intended to comply with these regulations relating to stock
options. If a stock option to an executive referred to above is not "performance
based," the amount that would otherwise be deductible by Omega in respect of
such stock option will be disallowed to the extent that the executive's
aggregate non-performance based compensation paid in the relevant year exceeds
$1.0 million.
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Reasons for Shareholder Approval
There are three reasons for seeking shareholder approval of the proposed
1996 Plan. One is to satisfy a NASD bylaw that requires companies whose shares
are reported on the Nasdaq National Market to obtain shareholder approval of
stock plans for directors, officers or key employees. The second reason is to
satisfy requirements of the Code which require shareholder approval of the 1996
Plan to permit options granted to qualify as incentive stock options to the
extent so designated and to permit the 1996 Plan to meet the requirements of
Section 162(m) of the Code applicable to performance-based compensation. The
final reason is to satisfy the requirements of Rule 16b-3 under the Exchange
Act, which include shareholder approval. If the requirements of Rule 16b-3 are
satisfied, then neither the grant of an option under the 1996 Plan, nor, subject
to certain conditions, the transfer of shares to pay an option price under the
1996 Plan, will trigger the provisions of Section 16(b) of the Exchange Act
regarding "short-swing" profits.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP acted as Omega's independent
public accountant for the 1995 fiscal year and has been selected to act as
Omega's independent public accountant for the 1996 fiscal year. A representative
of Arthur Andersen LLP is expected to be present at the Annual Shareholders'
Meeting and to have the opportunity to make a statement, if he desires to do so,
and is expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals regarding the 1997 Annual Meeting of Shareholders
must be submitted to Omega by December 2, 1996 for inclusion in Omega's Proxy
Statement.
ANNUAL REPORT AND FINANCIAL STATEMENTS
This Proxy Statement is accompanied by Omega's Annual Report to
Shareholders for the year ended December 31, 1995.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF OMEGA'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION, WITHOUT CHARGE EXCEPT FOR EXHIBITS TO THE REPORT, BY
SENDING A WRITTEN REQUEST TO:
Corporate Secretary
Omega Financial Corporation
P. O. Box 619
State College, PA 16804-0619
A COPY OF THE REQUIRED ANNUAL FINANCIAL DISCLOSURES FOR EACH BANK
SUBSIDIARY WILL ALSO BE PROVIDED, WITHOUT CHARGE, UPON WRITTEN REQUEST TO:
Corporate Secretary
Omega Financial Corporation
P. O. Box 619
State College, PA 16804-0619
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Appendix A
Omega Financial Corporation
1996 EMPLOYEE STOCK OPTION PLAN
1. Purpose of Plan
The purpose of the 1996 Employee Stock Option Plan (the "Plan") is
to provide additional incentive to officers and other key employees of Omega
Financial Corporation ("Omega") and each present or future parent or subsidiary
corporation by encouraging them to invest in shares of Omega's common stock,
$5.00 par value ("Common Stock"), and thereby acquire a proprietary interest in
Omega and an increased personal interest in Omega's continued success and
progress, to the mutual benefit of officers, employees and shareholders.
2. Aggregate Number of Shares
1,000,000 shares of Omega's Common Stock shall be the aggregate
number of shares which may be issued under this Plan. Notwithstanding the
foregoing, in the event of any change in the outstanding shares of the Common
Stock of Omega by reason of a stock dividend, stock split, combination of
shares, recapitalization, merger, consolidation, transfer of assets,
reorganization, conversion or what the Compensation Committee (defined in
Section 4(a)), deems in its sole discretion to be similar circumstances, the
aggregate number and kind of shares which may be issued under this Plan shall be
appropriately adjusted in a manner determined in the sole discretion of the
Compensation Committee. Reacquired shares of Omega's Common Stock, as well as
unissued shares, may be used for the purpose of this Plan. Common Stock of Omega
subject to options which have terminated unexercised, either in whole or in
part, shall be available for future options granted under this Plan.
3. Class of Persons Eligible to Receive Options; Limitations
All officers and key employees of Omega and of any present or future
Omega parent or subsidiary corporation are eligible to receive an option or
options under this Plan. The individuals who shall, in fact, receive an option
or options shall be selected by the Compensation Committee, in its sole
discretion, except as otherwise specified in Section 4 hereof. During the term
of this Plan, no optionee under this Plan shall be entitled to be granted
options to purchase shares of Omega's Common Stock in excess of the total number
of shares set forth in Section 2 of this Plan (as adjusted pursuant to Section
2).
4. Administration of Plan
(a) This Plan shall be administered by the Compensation Committee
("Committee") appointed by Omega's Board of Directors. The Committee shall
consist of a minimum of two and a maximum of seven members of the Board of
Directors, each of whom shall be a "disinterested person" within the meaning of
Rule 16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended, or
any future corresponding rule. The Committee shall, in addition to its other
authority and subject to the provisions of this Plan, determine which
individuals shall in fact be granted an option or options, whether the option
shall be an Incentive Stock Option or a Non-Qualified Stock Option (as such
terms are defined in Section 5(a)), the number of shares to be subject to each
of the options, the time or times at which the options shall be granted, the
rate of option exercisability, and, subject to Section 5 hereof, the price at
which each of the options is exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of its
business and administration of this Plan as it considers desirable. A majority
of the members of the Committee shall constitute a quorum for all purposes. The
vote or written consent of a majority of the members of the Committee on a
particular matter shall constitute the act of the Committee on such matter. The
Committee shall have the right to construe the Plan and the options issued
pursuant to it, to correct defects and omissions and to reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the
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exercise of an authority or discretion granted in connection with the Plan to a
Committee or the Board of Directors, or for the acts or omissions of any other
members of a Committee or the Board of Directors. Subject to the numerical
limitations on Committee membership set forth in Section 4(a) hereof, the Board
of Directors may at any time appoint additional members of the Committee and may
at any time remove any member of the Committee with or without cause. Vacancies
in the Committee, however caused, may be filled by the Board of Directors, if it
so desires.
5. Incentive Stock Options and Non-Qualified Stock Options
(a) Options issued pursuant to this Plan may be either Incentive
Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified Stock
Options granted pursuant to Section 5(c) hereof, as determined by the Committee.
An "Incentive Stock Option" is an option which satisfies all of the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
the regulations thereunder, and a "Non-Qualified Stock Option" is an option
which either does not satisfy all of those requirements or the terms of the
option provide that it will not be treated as an Incentive Stock Option. The
Committee may grant both an Incentive Stock Option and a Non-Qualified Stock
Option to the same person, or more than one of each type of option to the same
person. The option price for Incentive Stock Options issued under this Plan
shall be equal at least to the fair market value (as defined below) of Omega's
Common Stock on the date of the grant of the option. The option price for
Non-Qualified Stock Options issued under this Plan may, in the sole discretion
of the Compensation Committee, be less than the fair market value of Omega's
Common Stock on the date of the grant of the option. The fair market value of
Omega's Common Stock on any particular date shall mean it's fair market value as
of such date as determined by the Committee in accordance with it's
interpretation of the requirements of Section 422 of the Code and the
regulations thereunder.
(b) Subject to the authority of the Committee set forth in Section
4(a) hereof, Incentive Stock Options issued pursuant to this Plan shall be
issued substantially in the form set forth in Appendix I hereof, which form is
hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Incentive Stock
Options shall not be exercisable after the expiration of ten years from the date
such options are granted, unless terminated earlier under the terms of the
option. At the time of the grant of an Incentive Stock Option hereunder, the
Committee may, in its discretion, amend or supplement any of the option terms
contained in Appendix I for any particular optionee, provided that the option as
amended or supplemented satisfies the requirements of Section 422 of the Code
and the regulations thereunder. Each of the options granted pursuant to this
Section 5(b) is intended, if possible, to be an "Incentive Stock Option" as that
term is defined in Section 422 of the Code and the regulations thereunder. In
the event this Plan or any option granted pursuant to this Section 5(b) is in
any way inconsistent with the applicable legal requirements of the Code or the
regulations thereunder for an Incentive Stock Option, this Plan and such option
shall be deemed automatically amended as of the date hereof to conform to such
legal requirements, if such conformity may be achieved by amendment.
(c) Subject to the authority of the Committee set forth in Section
4(a) hereof, Non-Qualified Stock Options issued pursuant to this Plan shall be
issued substantially in the form set forth in Appendix II hereof, which form is
hereby incorporated by reference and made a part hereof, and shall contain
substantially the terms and conditions set forth therein. Non-Qualified Stock
Options shall expire ten years and 10 days after the date they are granted,
unless terminated earlier under the option terms. At the time of granting a
Non-Qualified Stock Option hereunder, the Committee may, in its discretion,
amend or supplement any of the option terms contained in Appendix II for any
particular optionee.
(d) Neither Omega nor any of its current or future parent,
subsidiaries or affiliates, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
optionee in the event (i) an option granted pursuant to Section 5(b) hereof does
not qualify as an "Incentive Stock Option" as that term is used in Section 422
of the Code and the regulations thereunder; (ii) any optionee does not obtain
the tax treatment pertaining to an Incentive Stock Option; or (iii) any option
granted pursuant to Section 5(c) hereof is an "Incentive Stock Option."
6. Amendment, Supplement, Suspension and Termination
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of
Directors of Omega. The Board of Directors reserves the right at any time, and
from time to time, to amend or supplement this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If an amendment or
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supplement of this Plan is required by the Code or the regulations thereunder to
be approved by the shareholders of Omega in order to permit the granting of
"Incentive Stock Options" (as that term is defined in Section 422 of the Code
and regulations thereunder) pursuant to the amended or supplemented Plan, such
amendment or supplement shall also be approved by the shareholders of Omega in
such manner as is prescribed by the Code and the regulations thereunder. If the
Board of Directors voluntarily submits a proposed amendment, supplement,
suspension or termination for shareholder approval, such submission shall not
require any future amendments, supplements, suspensions or terminations (whether
or not relating to the same provision or subject matter) to be similarly
submitted for shareholder approval.
7. Effectiveness of Plan
This Plan shall become effective on the date of its adoption by
Omega's Board of Directors, subject however to approval by the holders of
Omega's Common Stock in the manner as prescribed in the Code and the regulations
thereunder. Options may be granted under this Plan prior to obtaining
shareholder approval, provided such options shall not be exercisable until
shareholder approval is obtained.
8. General Conditions
(a) Nothing contained in this Plan or any option granted pursuant to
this Plan shall confer upon any employee the right to continue in the employ of
Omega or any affiliated or subsidiary corporation or interfere in any way with
the rights of Omega or any affiliated or subsidiary corporation to terminate his
employment in any way.
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
complete as of the date when the Committee authorizes the grant of the option to
the employee, regardless of when the option is actually delivered to the
employee or acknowledged or agreed to by him.
(c) The terms "parent corporation" and "subsidiary corporation" as
used throughout this Plan, and the options granted pursuant to this Plan, shall
(except as otherwise provided in the option form) have the meaning that is
ascribed to that term when contained in Section 422(b) of the Code and the
regulations thereunder, and Omega shall be deemed to be the grantor corporation
for purposes of applying such meaning.
(d) References in this Plan to the Code shall be deemed to also
refer to the corresponding provisions of any future United States revenue law.
(e) The use of the masculine pronoun shall include the feminine
gender whenever appropriate.
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APPENDIX I
INCENTIVE STOCK OPTION
To:
Name
Address
Date of Grant:__________
You are hereby granted an option, effective as of the date hereof, to
purchase __________ shares of common stock, $5.00 par value ("Common Stock"), of
Omega Financial Corporation ("Omega") at a price of $____ per share pursuant to
Omega's 1996 Employee Stock Option Plan (the "Plan").
Your option may first be exercised on and after one year from the date of
grant, but not before that time. On and after one year and prior to ten years
from the date of grant, your option may be exercised for up to 100% of the total
number of shares subject to the option minus the number of shares previously
purchased by exercise of the option (as adjusted for any change in the
outstanding shares of the Common Stock of Omega by reason of a stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation,
transfer of assets, reorganization, conversion or what the Compensation
Committee deems in its sole discretion to be similar circumstances). No
fractional shares shall be issued or delivered. This option shall terminate and
is not exercisable after ten years from the date of its grant (the "Scheduled
Termination Date"), except if terminated earlier as hereafter provided.
In the event of a "change of control" (as hereafter defined) of Omega,
your option may, from and after the date of the change of control, and
notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of Omega by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the members of the
board of directors of Omega;
2. A change within a twelve-month period in the holders of more than 50% of
the outstanding voting stock of Omega; or
3. Any other event deemed to constitute a "change of control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary of
Omega on forms supplied by Omega at its then principal executive office,
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check and includes cash received
from a stock brokerage firm in a so-called "cashless exercise;" (b) (unless
prohibited by the Compensation Committee) certificates representing shares of
Common Stock of Omega, which will be valued by the Secretary of Omega at the
fair market value per share of Omega's Common Stock (as determined in accordance
with the Plan) on the date of delivery of such certificates to Omega,
accompanied by an assignment of the stock to Omega; or (c) (unless prohibited by
the Compensation Committee) any combination of cash and Common Stock of Omega
valued as provided in clause (b). Any assignment of stock shall be in a form and
substance satisfactory to the Secretary of Omega, including guarantees of
signature(s) and payment of all transfer taxes if the Secretary deems such
guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you, terminate
one year after the date on which your employment by Omega or an Omega subsidiary
corporation is terminated (whether such termination be voluntary or involuntary)
other than by reason of retirement at age 65 (or such earlier retirement age as
may be approved by the Compensation Committee), disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to retirement, disability or
death (but in no event later than the Scheduled Termination Date). After the
date your employment is terminated, as aforesaid, you may exercise this option
only for the number of shares which you had a right to purchase and did not
purchase on the date your employment terminated. If you are employed by an Omega
subsidiary corporation, your employment shall be deemed to have terminated on
the date your employer ceases to be an Omega subsidiary corporation, unless you
are on that date transferred to Omega or another Omega subsidiary corporation.
Your employment shall
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not be deemed to have terminated if you are transferred from Omega to an Omega
subsidiary corporation, or vice versa, or from one Omega subsidiary corporation
to another Omega subsidiary corporation.
If you die while employed by Omega or an Omega subsidiary corporation,
your executor or administrator, as the case may be, may, at any time within one
year after the date of your death (but in no event later than the Scheduled
Termination Date), exercise the option as to any shares which you had a right to
purchase and did not purchase during your lifetime. If your employment with
Omega or an Omega parent or subsidiary corporation is terminated by reason of
your becoming disabled (within the meaning of Section 22(e)(3) of the Code and
the regulations thereunder), you or your legal guardian or custodian may at any
time within one year after the date of such termination (but in no event later
than the Scheduled Termination Date), exercise the option as to any shares which
you had a right to purchase and did not purchase prior to such termination. Your
executor, administrator, guardian or custodian must present proof of his
authority satisfactory to Omega prior to being allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock
of Omega by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Compensation Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price of such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Compensation Committee.
This option is not transferable otherwise than by Will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of Omega. Omega reserves the right not to
deliver to you the shares purchased by virtue of the exercise of this option
during any period of time in which Omega deems, in its sole discretion, that
such delivery would violate a federal, state, local or securities exchange rule,
regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Omega in the manner prescribed by the Code and
the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as Omega may deem necessary or desirable;
(c) During any period of time in which Omega deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Omega to be legally obligated to issue or
sell more shares than Omega is legally entitled to issue or sell; or
(d) Until you have paid or made suitable arrangements to pay (i) all
federal, state and local income tax withholding required to be withheld by Omega
in connection with the option exercise and (ii) the employee's portion of other
federal, state and local payroll and other taxes due in connection with the
option exercise.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Omega to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
Omega may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to Omega that the proposed transaction will be exempt
from such registration."
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The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Omega that said
registration is no longer required.
The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of Omega and you that this option shall, if possible,
be an "Incentive Stock Option" as that term is used in Section 422 of the Code
and the regulations thereunder. In the event this option is in any way
inconsistent with the legal requirements of the Code or the regulations
thereunder for an "Incentive Stock Option," this option shall be deemed
automatically amended as of the date hereof to conform to such legal
requirements, if such conformity may be achieved by amendment.
Nothing herein shall modify your status as an at-will employee of Omega.
Further, nothing herein guarantees you employment for any specified period of
time. This means that either you or Omega may terminate your employment at any
time for any reason, or no reason. You recognize that, for instance, you may
terminate your employment or Omega may terminate your employment prior to the
date on which your option becomes vested.
Any dispute or disagreement between you and Omega with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with Omega
over this option amicably and informally, in good faith, for a period not to
exceed two weeks. Thereafter, the dispute or disagreement will be submitted to
arbitration. At any time prior to a decision from the arbitrator(s) being
rendered, you and Omega may resolve the dispute by settlement. You and Omega
shall equally share the costs charged by the American Arbitration Association or
its successor, but you and Omega shall otherwise be solely responsible for your
own respective counsel fees and expenses. The decision of the arbitrator(s)
shall be made in writing, setting forth the award, the reasons for the decision
and award and shall be binding and conclusive on you and Omega. Further, neither
you nor Omega shall appeal any such award. Judgment of a court of competent
jurisdiction may be entered upon the award and may be enforced as such in
accordance with the provisions of the award.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Omega and you with respect to the subject matter hereof
and no amendment, supplement or waiver of this option, in whole or in part,
shall be binding upon Omega unless in writing and signed by the President of
Omega. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
Please sign the copy of this option and return it to Omega's Secretary,
thereby indicating your understanding of and agreement with its terms and
conditions.
OMEGA FINANCIAL CORPORATION
By:
------------------------
I hereby acknowledge receipt of a copy of the foregoing stock option and,
having read it hereby signify my understanding of, and my agreement with, its
terms and conditions.
------------------------ -------
(Signature) (Date)
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APPENDIX II
NON-QUALIFIED STOCK OPTION
To:
Name
Address
Date of Grant:__________
You are hereby granted an option, effective as of the date hereof, to
purchase _________ shares of common stock, $5.00 par value ("Common Stock"), of
Omega Financial Corporation ("Omega") at a price of $____ per share pursuant to
Omega's 1996 Employee Stock Option Plan (the "Plan").
Your option may first be exercised on and after one year from the date of
grant, but not before that time. On and after one year and prior to ten years
and thirty days from the date of grant, your option may be exercised for up to
100% of the total number of shares subject to the option minus the number of
shares previously purchased by exercise of the option (as adjusted for any
change in the outstanding shares of the Common Stock of Omega by reason of a
stock dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). No fractional shares shall be issued or delivered. This option
shall terminate and is not exercisable after ten years and ten days from the
date of its grant (the "Scheduled Termination Date"), except if terminated
earlier as hereafter provided.
In the event of a "change of control" (as hereafter defined) of Omega,
your option may, from and after the date of the change of control, and
notwithstanding the foregoing paragraph, be exercised for up to 100% of the
total number of shares then subject to the option minus the number of shares
previously purchased upon exercise of the option (as adjusted for any change in
the outstanding shares of the Common Stock of Omega by reason of a stock
dividend, stock split, combination of shares, recapitalization, merger,
consolidation, transfer of assets, reorganization, conversion or what the
Compensation Committee deems in its sole discretion to be similar
circumstances). A "change of control" shall be deemed to have occurred upon the
happening of any of the following events:
1. A change within a twelve-month period in a majority of the members of the
board of directors of Omega;
2. A change within a twelve-month period in the holders of more than 50% of
the outstanding voting stock of Omega; or
3. Any other event deemed to constitute a "change of control" by the
Compensation Committee.
You may exercise your option by giving written notice to the Secretary of
Omega on forms supplied by Omega at its then principal executive office,
accompanied by payment of the option price for the total number of shares you
specify that you wish to purchase. The payment may be in any of the following
forms: (a) cash, which may be evidenced by a check and includes cash received
from a stock brokerage firm in a so-called "cashless exercise;" (b) (unless
prohibited by the Compensation Committee) certificates representing shares of
Common Stock of Omega, which will be valued by the Secretary of Omega at the
fair market value per share of Omega's Common Stock (as determined in accordance
with the Plan) on the date of delivery of such certificates to Omega,
accompanied by an assignment of the stock to Omega; or (c) (unless prohibited by
the Compensation Committee) any combination of cash and Common Stock of Omega
valued as provided in clause (b). Any assignment of stock shall be in a form and
substance satisfactory to the Secretary of Omega, including guarantees of
signature(s) and payment of all transfer taxes if the Secretary deems such
guarantees necessary or desirable.
Your option will, to the extent not previously exercised by you, terminate
one year after the date on which your employment by Omega or an Omega subsidiary
corporation is terminated (whether such termination be voluntary or involuntary)
other than by reason of retirement at age 65 (or such earlier retirement age as
may be approved by the Compensation Committee), disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder, or death, in which case your option will terminate one
year from the date of termination of employment due to retirement, disability or
death (but in no event later than the Scheduled Termination Date). After the
date your employment is terminated, as aforesaid, you may exercise this option
only for the number of shares which you had a right to purchase and did not
purchase on the date your employment terminated. If you are employed by an Omega
subsidiary corporation, your employment shall be deemed to have terminated on
the date your employer ceases to be an Omega subsidiary corporation, unless you
are on that date transferred to Omega or another Omega subsidiary corporation.
Your employment shall not be deemed to have terminated if you are transferred
from Omega to an Omega subsidiary corporation, or vice versa, or from one Omega
subsidiary corporation to another Omega subsidiary corporation.
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If you die while employed by Omega or an Omega subsidiary corporation,
your executor or administrator, as the case may be, may, at any time within one
year after the date of your death (but in no event later than the Scheduled
Termination Date), exercise the option as to any shares which you had a right to
purchase and did not purchase during your lifetime. If your employment with
Omega or an Omega parent or subsidiary corporation is terminated by reason of
your becoming disabled (within the meaning of Section 22(e)(3) of the Code and
the regulations thereunder), you or your legal guardian or custodian may at any
time within one year after the date of such termination (but in no event later
than the Scheduled Termination Date), exercise the option as to any shares which
you had a right to purchase and did not purchase prior to such termination. Your
executor, administrator, guardian or custodian must present proof of his
authority satisfactory to Omega prior to being allowed to exercise this option.
In the event of any change in the outstanding shares of the Common Stock
of Omega by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion or what the Compensation Committee deems in its sole discretion to be
similar circumstances, the number and kind of shares subject to this option and
the option price of such shares shall be appropriately adjusted in a manner to
be determined in the sole discretion of the Compensation Committee.
This option is not transferable otherwise than by Will or the laws of
descent and distribution, and is exercisable during your lifetime only by you,
including, for this purpose, your legal guardian or custodian in the event of
disability. Until the option price has been paid in full pursuant to due
exercise of this option and the purchased shares are delivered to you, you do
not have any rights as a shareholder of Omega. Omega reserves the right not to
deliver to you the shares purchased by virtue of the exercise of this option
during any period of time in which Omega deems, in its sole discretion, that
such delivery would violate a federal, state, local or securities exchange rule,
regulation or law.
Notwithstanding anything to the contrary contained herein, this option is
not exercisable until all the following events occur and during the following
periods of time:
(a) Until the Plan pursuant to which this option is granted is
approved by the shareholders of Omega in the manner prescribed by the Code and
the regulations thereunder;
(b) Until this option and the optioned shares are approved and/or
registered with such federal, state and local regulatory bodies or agencies and
securities exchanges as Omega may deem necessary or desirable;
(c) During any period of time in which Omega deems that the
exercisability of this option, the offer to sell the shares optioned hereunder,
or the sale thereof, may violate a federal, state, local or securities exchange
rule, regulation or law, or may cause Omega to be legally obligated to issue or
sell more shares than Omega is legally entitled to issue or sell; or
(d) Until you have paid or made suitable arrangements to pay (i) all
federal, state and local income tax withholding required to be withheld by Omega
in connection with the option exercise and (ii) the employee's portion of other
federal, state and local payroll and other taxes due in connection with the
option exercise.
The following two paragraphs shall be applicable if, on the date of
exercise of this option, the Common Stock to be purchased pursuant to such
exercise has not been registered under the Securities Act of 1933, as amended,
and under applicable state securities laws, and shall continue to be applicable
for so long as such registration has not occurred:
(a) The optionee hereby agrees, warrants and represents that he will
acquire the Common Stock to be issued hereunder for his own account for
investment purposes only, and not with a view to, or in connection with, any
resale or other distribution of any of such shares, except as hereafter
permitted. The optionee further agrees that he will not at any time make any
offer, sale, transfer, pledge or other disposition of such Common Stock to be
issued hereunder without an effective registration statement under the
Securities Act of 1933, as amended, and under any applicable state securities
laws or an opinion of counsel acceptable to Omega to the effect that the
proposed transaction will be exempt from such registration. The optionee shall
execute such instruments, representations, acknowledgements and agreements as
Omega may, in its sole discretion, deem advisable to avoid any violation of
federal, state, local or securities exchange rule, regulation or law.
(b) The certificates for Common Stock to be issued to the optionee
hereunder shall bear the following legend:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under applicable state
securities laws. The shares have been acquired for investment and may not
be offered, sold, transferred, pledged or otherwise disposed of without an
effective registration statement under the Securities Act of 1933, as
amended, and under any applicable state securities laws or an opinion of
counsel acceptable to Omega that the proposed transaction will be exempt
from such registration."
The foregoing legend shall be removed upon registration of the legended shares
under the Securities Act of 1933, as amended, and under any applicable state
laws or upon receipt of any opinion of counsel acceptable to Omega that said
registration is no longer required.
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The sole purpose of the agreements, warranties, representations and legend
set forth in the two immediately preceding paragraphs is to prevent violations
of the Securities Act of 1933, as amended, and any applicable state securities
laws.
It is the intention of Omega and you that this option shall not be an
"Incentive Stock Option" as that term is used in Section 422 of the Code and the
regulations thereunder.
Nothing herein shall modify your status as an at-will employee of Omega.
Further, nothing herein guarantees you employment for any specified period of
time. This means that either you or Omega may terminate your employment at any
time for any reason, or no reason. You recognize that, for instance, you may
terminate your employment or Omega may terminate your employment prior to the
date on which your option becomes vested.
Any dispute or disagreement between you and Omega with respect to any
portion of this option or its validity, construction, meaning, performance or
your rights hereunder shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association or its
successor, as amended from time to time. However, prior to submission to
arbitration you will attempt to resolve any disputes or disagreements with Omega
over this option amicably and informally, in good faith, for a period not to
exceed two weeks. Thereafter, the dispute or disagreement will be submitted to
arbitration. At any time prior to a decision from the arbitrator(s) being
rendered, you and Omega may resolve the dispute by settlement. You and Omega
shall equally share the costs charged by the American Arbitration Association or
its successor, but you and Omega shall otherwise be solely responsible for your
own respective counsel fees and expenses. The decision of the arbitrator(s)
shall be made in writing, setting forth the award, the reasons for the decision
and award and shall be binding and conclusive on you and Omega. Further, neither
you nor Omega shall appeal any such award. Judgment of a court of competent
jurisdiction may be entered upon the award and may be enforced as such in
accordance with the provisions of the award.
This option shall be subject to the terms of the Plan in effect on the
date this option is granted, which terms are hereby incorporated herein by
reference and made a part hereof. In the event of any conflict between the terms
of this option and the terms of the Plan in effect on the date of this option,
the terms of the Plan shall govern. This option constitutes the entire
understanding between Omega and you with respect to the subject matter hereof
and no amendment, supplement or waiver of this option, in whole or in part,
shall be binding upon Omega unless in writing and signed by the President of
Omega. This option and the performances of the parties hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
Please sign the copy of this option and return it to Omega's Secretary,
thereby indicating your understanding of and agreement with its terms and
conditions.
OMEGA FINANCIAL CORPORATION
By:
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I hereby acknowledge receipt of a copy of the foregoing stock option and,
having read it hereby signify my understanding of, and my agreement with, its
terms and conditions.
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(Signature) (Date)
