SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Omega Financial Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
[NAME OF FILER IF APPLICABLE]
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act of Rules 14a6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Totak fee paid:
/ / 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. Idenfity the previous filing by registration statement nuber,
or the Form or Schedule and the date of this filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
APRIL 28, 1998
TO OUR SHAREHOLDERS:
The 1998 annual meeting of shareholders of OMEGA FINANCIAL CORPORATION
("Omega") will be held on Tuesday, April 28, 1998 at 9:00 A.M. (prevailing
time), at The Penn Stater (formerly Penn State Scanticon), 215 Innovation Blvd.,
Penn State Research Park, State College, Pennsylvania for the following
purposes:
1. To elect three directors for three year terms, as more fully described
in the accompanying Proxy Statement; and
2. 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 2, 1998 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, 1998
<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 28, 1998 at 9:00 A.M. (prevailing time) at The Penn Stater
(formerly 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, 1998.
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"), and Penn Central National Bank ("Penn Central Bank")
(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 8,910,783 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 2, 1998, 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 1.575 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 1.575 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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<PAGE>
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
three 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 the
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 1997 (see "ANNUAL REPORT AND FINANCIAL STATEMENTS").
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock
To the knowledge of Omega, as of March 2, 1998, 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 2, 1998, 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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<PAGE>
Unless otherwise specified, all persons listed on the following chart have
sole voting and investment powers with respect to their shares:
<TABLE>
<CAPTION>
Name of Individual or Number of Shares Percent of
Identity of Group Class Beneficially Owned (a) Ownership
----------------------- ---------------------- ---------
<S> <C> <C>
Raymond F. Agostinelli 17,013 (b) *
Merle K. Evey 18,196 (c) *
Robert T. Gentry 22,571 (d) *
Philip E. Gingerich 51,200 (e) *
David B. Lee 179,769 (f) 2.0%
D. Stephen Martz 61,963 (g) *
Robert N. Oliver 6,333 (h) *
James W. Powers, Sr. 7,662 (i) *
Stanton R. Sheetz 4,764 (j) *
Robert A. Szeyller 5,053 (k) *
Daniel L. Warfel 67,344 (l) *
David N. Thiel 44,318 (m) *
All directors and executive officers as
a group (14) persons 523,962 (n)(o) 5.8%
</TABLE>
*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 2, 1998. Beneficial ownership may be
disclaimed as to certain of the securities.
(b) This amount includes 12,087 shares held jointly with Mr. Agostinelli's
wife, 708 shares owned solely by Mr. Agostinelli's wife, and 1,890 shares
owned by McLanahan Drug Store Mgmt. Co. Inc. of which Mr. Agostinelli is
president and owner. This amount also includes 1,200 shares issuable upon
the exercise of options granted under the 1994 Stock Option Plan for
Non-Employee Directors.
(c) This amount includes 1,960 shares held jointly with Mr. Evey's wife. This
amount also includes 1,200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(d) This amount includes 600 shares owned jointly with Mr. Gentry's wife,
11,250 shares issuable upon the exercise of stock options granted to Mr.
Gentry pursuant to the Omega Stock Option Plan and 1,707 shares issuable
upon the exercise of stock options granted pursuant to the Omega Stock
Purchase Plan, and 2,749 shares of Common Stock and 560 shares of Series A
ESOP Preferred Stock (convertible into 882 shares of Common Stock)
allocated to Mr. Gentry's account under the ESOP.
(e) This amount includes 4,332 shares owned jointly with Mr. Gingerich's wife.
This amount also includes 1,200 shares issuable upon the exercise of
options granted under the 1994 Stock Option Plan for Non-Employee
Directors.
(f) This amount includes 2,862 shares owned jointly with Mr. Lee's wife, 1,159
shares owned solely by her, 1,701 shares owned by Mr. Lee's daughter, 1,572
shares owned jointly by Mr. Lee's wife and son, 2,479 shares owned jointly
with his children, 2,647 shares owned by the Lee Family Partnership of
which Mr. Lee is a partner and 7,002 shares owned by Centre Foods
Enterprises, Inc., of which Mr. Lee is a director, officer and shareholder.
This amount also includes 59,546 shares issuable upon the exercise of stock
options granted to Mr. Lee pursuant to the
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<PAGE>
Omega Stock Option Plan, 1,817 shares issuable upon the exercise of stock
options granted pursuant to the Omega Stock Purchase Plan, and 15,478
shares of Common Stock and 2,336 shares of Series A ESOP Preferred Stock
(convertible into 3,679 shares of Common Stock) allocated to Mr. Lee's
account under the ESOP.
(g) This amount includes 1,250 shares owned solely by Mr. Martz's wife, 1,100
shares owned by his wife and daughter, 12,615 shares issuable upon the
exercise of stock options granted to Mr. Martz pursuant to the Omega Stock
Option Plan, 1,817 shares issuable upon the exercise of stock options
granted pursuant to the Omega Stock Purchase Plan, and 2,779 shares of
Common Stock and 566 shares of Series A ESOP Preferred Stock (convertible
to 891 shares of Common Stock) allocated to Mr. Martz's account under the
ESOP.
(h) This amount includes 1,026 shares owned jointly with Mr. Oliver's wife.
This amount also includes 1,200 shares issuable upon the exercise of
options granted under the 1994 Stock Option Plan for Non-Employee
Directors.
(i) This amount includes 5,460 shares owned by Mr. Powers' wife. This amount
also includes 1,200 shares issuable upon the exercise of options granted
under the 1994 Stock Option Plan for Non-Employee Directors.
(j) This amount includes 1,200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(k) This amount includes 1,200 shares issuable upon the exercise of options
granted under the 1994 Stock Option Plan for Non-Employee Directors.
(l) This amount includes 507 shares owned by Mr. Warfel's wife as custodian for
their son and 198 shares owned solely by his son. This amount also includes
35,744 shares issuable upon the exercise of stock options granted to Mr.
Warfel pursuant to the Omega Stock Option Plan, 1,817 shares issuable upon
the exercise of stock options granted pursuant to the Omega Stock Purchase
Plan, and 8,045 shares of Common Stock and 1,598 shares of Series A ESOP
Preferred Stock (convertible into 2,516 shares of Common Stock) allocated
to Mr. Warfel's account under the ESOP.
(m) This amount includes 8,113 shares owned jointly with Mr. Thiel's wife. This
amount also includes 25,905 shares issuable upon the exercise of options
granted to Mr. Thiel pursuant to the Omega Stock Option Plans, 2,000 shares
issuable upon the exercise of stock options granted pursuant to the Omega
Stock Purchase Plan, and 6,755 shares of Common Stock and 981 shares of
Series A ESOP Preferred Stock (convertible into 1,545 shares of Common
Stock) allocated to Mr. Thiel's account under the ESOP.
(n) This amount includes an aggregate of 174,795 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
Plan, an aggregate of 8,400 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 42,323
shares of Common Stock and 7,336 shares of Series A ESOP Preferred Stock
(convertible into an aggregate of 11,554 shares of Common Stock) allocated
under the ESOP to the accounts of all executive officers of Omega as a
group.
(o) Does not include 448,619 shares of common stock and 219,781 shares of
Series A ESOP Preferred Stock (convertible into an aggregate of 346,155
shares of common stock) which are owned by the ESOP of which Mr. Lee is a
Trustee, other than any shares which have been allocated to the accounts of
executive officers.
Series A ESOP Preferred Stock
As of March 2, 1998, 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 448,619 shares of
Common Stock. Each share of Series A ESOP Preferred Stock is convertible into
1.575 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 794,774 shares or approximately 8.59% of Omega's
Common Stock. The ESOP Trust's business address is c/o Omega Financial
Corporation, 366 Walker Drive, State College, Pennsylvania 16801.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
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, 1997.
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 ten. 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. Three directors are to be elected at the 1998 annual meeting of
shareholders for a term of three years each.
The Board of Directors, pursuant to the Bylaws, has nominated the three
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.
The Bylaws of Omega require that 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. On December 31, 1996, Montour Bank
("Montour") was also merged into 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 Director Age the Past Five Years
---------------- --- -------------------
Robert N. Oliver 64 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 42 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., retail convenience stores,
since 1995.
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<PAGE>
Robert A. Szeyller 59 Director of Omega since 1989;
Director of Omega Bank since
1985; Managing Director,
Pennsylvania Financial Group,
Inc., an insurance, securities
and consulting firm.
The following table sets forth certain information regarding those
directors whose terms will expire at either the 1999 or 2000 annual meeting of
shareholders:
Terms expiring at the 1999 annual meeting of shareholders:
Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
---------------- --- -------------------
Robert T. Gentry 54 Director of Omega since 1994;
Executive Vice President of
Omega from 1994 to 1996;
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
Philip E. Gingerich 60 Director of Omega since 1994;
Director of Omega Bank since
1988. Self-employed real estate
appraiser/consultant.
D. Stephen Martz 55 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. 63 Director of Omega since 1994;
Director of Omega Bank since
1989; President of Polestar
Plastics, Inc., a manufacturing
company until his retirement in
1996.
Terms expiring at the 2000 annual meeting of shareholders:
Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
---------------- --- -------------------
Raymond F. Agostinelli 63 Director of Omega Since 1993;
Director of Omega Bank since
1982; President and owner of
McLanahan Drug Store Mgmt. Co.
Inc.
Merle K. Evey 67 Director of Omega since 1994;
Director of Penn Central Bancorp
from 1985 to 1994; Director of
Hollidaysburg Trust since 1981;
a partner in the
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<PAGE>
law firm of Evey, Routch, Black,
Dorezas and Magee.
David B. Lee 60 Chairman of the Board of Omega
since 1989, Chief Executive
Officer of Omega since 1986;
President of Omega from 1986 to
1994; Chairman, President, Chief
Executive Officer and Director
of Omega Bank since 1977.
In accordance with the mandatory retirement provisions of the Bylaws, David
K. Goodman, Sr. retired as director effective December 31, 1997. George R.
Lovette passed away in December of 1997.
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 1997, 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 subsidiary banks has established various
committees of their respective Boards. During 1997, 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 David B. Lee, Chairman, Messrs. Merle K. Evey, Stanton R. Sheetz,
Philip E. Gingerich and Raymond F. Agostinelli. This Committee did not meet in
1997.
Audit Committee
The Board of Directors of Omega has appointed a standing Audit Committee
consisting of Raymond F. Agostinelli, Chairman, and Messrs. James W. Powers,
Sr., Stanton R. Sheetz, and Robert N. Oliver. 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 four times during 1997.
Omega Compensation Committee
The Board of Directors of Omega has appointed a standing Compensation
Committee currently consisting of Robert A. Szeyller, Chairman and Messrs. James
W. Powers, Sr., Merle K. Evey and Philip E. Gingerich. The report of the
Compensation Committee is set forth beginning on page 9.
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 $4,000. 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.
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<PAGE>
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.
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.
On May 1, 1997, the then existing directors of Omega who were not
employees of Omega or any subsidiary, i.e. Messrs. Agostinelli, Evey, Gingerich,
Goodman, Lovette, Oliver, Powers, Sheetz, and Szeyller, were each automatically
granted options to purchase 300 shares of Common Stock at an exercise price of
$28.25 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.
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 the ESOP and 401(k) 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
8
<PAGE>
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 1997, the following measures
of corporate performance were selected:
1) Percentage change in return on average assets;
2) Percentage change in Omega's net income compared to the prior fiscal
year; and
3) Change in market value of stock.
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 1986 Stock Option Plan
and the 1996 Employee Stock Option Plan (collectively the "Stock Option Plans")
as Omega's long-term incentive plan for executive officers and key managers. The
1996 Employee Stock Option Plan replaced the 1986 Stock Option Plan under which
no new options could be granted after 1996. The objectives of the Stock Option
Plans 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 Plans authorize
the Compensation Committee to award stock options to officers and key employees.
In general under the Plans, options are granted with an exercise price equal to
the fair market value of the Common Stock on the date of grant (although the
Compensation Committee has the authority to grant non-qualified options under
the 1996 Employee Stock Option Plan at an exercise price less than the fair
market value 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.
Determination of Compensation of the Chief Executive Officer. During 1997,
Mr. Lee was the Chairman and Chief Executive Officer of Omega and Chairman,
President and Chief Executive Officer of Omega Bank. The Compensation Committee
reviewed base salaries of chief executive officers of peer group companies in
determining Mr. Lee's base compensation. 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. The
Committee believed that his individual actions and leadership had a significant
effect on Omega's overall financial and business results, enhancing shareholder
value through appreciation and earnings available to pay dividends. Other
subjective criteria such as community leadership and industry involvement were
used in determining his merit increase. Mr. Lee is serving a three-year term on
the Federal Reserve Bank of Philadelphia Board of Directors which began in 1997.
At the beginning of 1997, Mr. Lee's base salary was $311,322. Taking into
consideration the responsibility as both Chairman, President and Chief Executive
Officer of a bank as well as Chairman of Omega, effective August 1, 1997 Mr.
Lee's base salary was increased by $19,554, representing a 6.28% merit increase.
His base salary at the end of the fiscal year was $330,876.
Mr. Lee's bonus in fiscal 1997 was $168,350. 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 12,885 shares of Common Stock were
awarded to Mr. Lee for fiscal 1997 based upon the overall performance of the
Company, the number of stock options granted to Mr. Lee in 1996 and reviews of
the industry surveys discussed above.
9
<PAGE>
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 which have an
exercise price of not less than the fair market value of the Common Stock on the
date of grant.
Members of the Compensation Committee for 1997: Robert Szeyller, Chairman;
George R. Lovette; Merle K. Evey; James W.
Powers, Sr.; Philip E. Gingerich and David K. Goodman, Sr.
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 three most
highly compensated executive officers of Omega whose annual compensation for
1997 exceeded $100,000 for their services in all capacities during the fiscal
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Annual Long-Term
Compensation (1) Compensation
-------------- Awards
Securities Underlying
Name and Principal Position Year Salary Bonus(2) Options(3) All Other Compensation
- --------------------------- ---- ------ ----- ------- ----------------------
<S> <C> <C> <C> <C> <C>
David B. Lee 1997 $319,470 $168,350 13,631 155,458 (4)
Chairman and Chief 1996 300,962 146,257 12,320 149,616
Executive Officer of 1995 282,733 110,546 10,939 114,656
Omega; President and
Chief Executive Officer
of Omega Bank
D. Stephen Martz 1997 $177,899 $59,958 7,302 22,250 (5)
President and Chief Operating 1996 173,664 -0- 1,686 18,723
Officer of Omega; Chairman, 1995 170,054 53,134 7,189 16,417
President and Chief Executive
Officer of Hollidaysburg
Trust (5)
Daniel L. Warfel 1997 $160,562 $73,807 7,180 22,250 (6)
Executive Vice President 1996 152,499 64,669 7,295 18,723
and Chief Financial Officer 1995 144,695 49,297 7,081 16,417
of Omega
David N. Thiel 1997 $97,713 $23,527 4,462 16,648 (7)
Secretary and Senior Vice 1996 91,556 20,621 4,422 13,528
President of Omega 1995 83,397 16,862 4,366 10,533
</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.
10
<PAGE>
(3) Represents the total of the number of stock options issued pursuant to
Omega's Employee Stock Purchase and Stock Option Plans for the years
listed.
(4) For 1997, consists of $2,375 contributed to Mr. Lee's account in the
401(k) Plan, $19,875 allocated to his account in the ESOP, $103,208
reserved for his account under the Executive Supplemental Income
Benefit Plan and $30,000 paid for the premium for a split dollar life
insurance policy.
(5) For 1997, consists of $2,375 contributed to Mr. Martz's account in the
401(k) Plan and $19,875 allocated to his account in the ESOP.
(6) For 1997, consists of $2,375 contributed to Mr. Warfel's account in
the 401(k) Plan and $19,875 allocated to his account in the ESOP.
(7) For 1996, consists of $1,775 contributed to Mr. Thiel's account in the
401(k) Plan and $14,873 allocated to his account in the ESOP.
STOCK OPTION GRANTS IN 1997
Set forth below is information concerning stock options granted for 1997
under the Stock Purchase Plan and the 1996 Stock Option Plan to the Chief
Executive Officer and the three most highly compensated executive officers of
Omega named in the Summary Compensation Table:
<TABLE>
<CAPTION>
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 for Exercise or Expiration Option Term (3)
Name Granted 1997 Base Price Date 0% 5% 10%
---- ------- ---- ---------- ---- -- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Lee
(1) 746 0.86% $30.15 12/31/2002 $2,499 $3,190 $ 4,025
(2) 12,885 17.42% 33.50 01/01/2008 N/A 271,461 687,935
D. Stephen Martz
(1) 746 0.86% 30.15 12/31/2002 2,499 3,190 4,025
(2) 6,556 8.87% 33.50 01/01/2008 N/A 138,122 350,027
Daniel L. Warfel
(1) 746 0.86% 30.15 12/31/2002 2,499 3,190 4,025
(2) 6,434 8.70% 33.50 01/01/2008 N/A 135,551 343,514
David N. Thiel
(1) 712 0.82% 30.15 12/31/2002 2,385 3,044 3,841
(2) 3,750 5.07% 33.50 01/01/2008 N/A 79,005 200,214
</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
11
<PAGE>
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, 1997 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 1997
AND YEAR-END OPTION VALUES
Set forth below is information concerning the exercise during 1997 of
options granted under the Stock Purchase Plan and Stock Option Plan by the Chief
Executive Officer and the three most highly compensated executive officers named
in the Summary Compensation Table and the value of unexercised options held by
them at the end of 1997:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Acquired Value Realized(1) December 31, 1997 December 31, 1997(2)
Name On Exercise On Shares Acquired Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Lee 1,530 $15,759 51,303 11,249 $915,187 114,402
D. Stephen Martz 1,189 20,035 13,817 615 193,907 6,255
Daniel L. Warfel -0- -0- 32,418 6,224 569,799 63,298
David N. Thiel 594 7,306 24,155 3,750 444,337 38,138
</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 $33.50, the market price (bid price) of
the Common Stock on December 31, 1997, and the exercise price of the
options multiplied by the number of options held.
12
<PAGE>
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, 1992 and the reinvestment of all dividends.
<TABLE>
<CAPTION>
Nasdaq Composite Market Index Nasdaq Bank Stock Omega Peer Omega Common
(US Companies) (1) Index (1) Group (2) Stock
------------------ --------- --------- -----
<S> <C> <C> <C> <C>
12/31/92 100.00 100.00 100.00 100.00
12/31/93 114.80 114.04 143.55 135.71
12/31/94 112.21 113.63 141.88 139.31
12/31/95 158.70 169.22 177.78 184.12
12/31/96 195.19 223.41 201.77 197.38
12/31/97 239.53 377.44 317.22 289.15
</TABLE>
(1) Source: Center for Research in Securities Prices (CRSP)
University of Chicago, Chicago, IL
(2) Source: SNL Securities
Charlottesville, VA
Omega has changed the index used for comparison with its peer group from
the NASDAQ Bank Stock index used in prior years. The new peer group consists of
the following bank holding companies within the Mid-Atlantic region with total
asset sizes of between $1 and $5 billion; BT Financial Corp, Univest Corp. of
Pennsylvania, Harleysville National Corp., National Penn Bancshares Inc.,
JeffBanks Inc., S&T Bancorp Inc., Southwest National Corp., and United National
Banmcorp. Omega believes that this will provide a more comparative view of
Omega's stock performance to other institutions of its size within its actual
geographic area. In this transition year, the graph contains comparisons to both
indices, as required by SEC regulation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 were: Robert
Szeyller, Chairman; George R. Lovette; Merle K. Evey; Philip E. Gingerich; James
W. Powers, Sr. and David K. Goodman, Sr. No person who served as a member of the
Compensation Committee during 1997 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 1997, which generally
13
<PAGE>
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 AND STOCK OPTION PLANS
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
Banks (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 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 five 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
14
<PAGE>
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.
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.
Stock Option Plans
In March 1996, the Board of Directors adopted, and in April 1996 the
shareholders approved, the 1996 Employee Stock Option Plan (the "1996 Plan").
The 1996 Plan replaces the 1986 Stock Option Plan (the "1986 Plan") under which
no new options could be granted after 1996. Under Omega's 1996 Plan, options may
be granted for a total of 1,500,000 shares of Common Stock (subject to
appropriate adjustments to reflect changes in the capitalization of Omega). As
of March 2, 1998, 1,358,146 shares remain available for grant under the 1996
Plan. Options to purchase an aggregate of 249,744 shares of Common Stock remain
outstanding under the 1986 Plan. Options issued pursuant to the 1986 Plan
continue to be administered under the terms of such Plan. Pursuant to the 1986
Plan and the 1996 Plan (collectively the "Plans"), 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 Plans 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 1996 Plan.
The Plans are 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, the
15
<PAGE>
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 Plans and the options issued pursuant to the Plans. Shares
of Common Stock subject to options under the 1996 Plan that terminate
unexercised are available for future options granted under the 1996 Plan. 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.
The option price for options issued under the 1996 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, while the option price
for non-qualified options granted under the 1996 Plan may be established by the
Committee for less than the fair market value of Omega's Common Stock on the
date of the grant. 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. The rate of option
exercisability is determined by the Committee at the time of the grant.
Generally, no stock option granted under the Plans may be exercised in the first
year after the date of grant, except in the event of a change in control (as
defined in the Plans) in which event they become immediately exercisable. After
one year from the date of grant, each optionee may exercise up to the total
number of optioned shares granted to such optionee.
Employee Stock Purchase Plan
Under Omega's Employee Stock Plan (the "Stock Purchase Plan"), options may
be granted for a total of 1,125,000 shares of Common Stock (subject to
appropriate adjustments to reflect changes in the capitalization of Omega). As
of March 2, 1998, 540,063 shares remain available for grant under the Stock
Purchase Plan. 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.
16
<PAGE>
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 300 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 300 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 300 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 30,000 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. As of March 2, 1998, 16,200 shares
remain available for grant 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) Omega Common Stock which will be valued by the
Secretary of Omega at its fair market value (unless prohibited by the Board of
Directors) or (c) any combination of cash and Common Stock of Omega valued as
provided in clause (b) (unless prohibited by the Board of Directors).
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 death, disability or mandatory retirement at
age 70, resignation, removal, failure to be reelected or otherwise, and
regardless of whether the failure to continue as a director was for cause or
otherwise) and 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.
17
<PAGE>
OTHER EMPLOYEE BENEFIT PLANS
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 two
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
four retired participants (two of which have subsequently received the maximum
benefit) and David B. Lee. Based on current estimates of Mr. Lee's final average
salary, his estimated monthly ESI Plan benefit would be approximately $11,628
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.
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 participants 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 1998, awards were made to Messrs. D. B. Lee, D. S. Martz, D. L.
Warfel and D. N. Thiel based upon results achieved during the year ended
December 31, 1997 and are included in the preceding Summary Compensation Table.
18
<PAGE>
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.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP acted as Omega's independent
public accountant for the 1997 fiscal year and has been selected to act as
Omega's independent public accountant for the 1998 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 1999 Annual Meeting of Shareholders
must be submitted to Omega by December 2, 1998 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, 1997.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF OMEGA'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 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
19
<PAGE>
OMEGA FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - APRIL 28, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF OMEGA FINANCIAL CORPORATION
The undersigned hereby constitutes and appoints David N. Thiel, Daniel L.
Warfel and JoAnn N. McMinn, and each of them, as attorneys-in-fact and proxies
of the undersigned, with full power of substitution , for and in the name, place
and stead of the undersigned, to appear at the Annual Meeting of Shareholders of
Omega Financial Corporation ("Omega") to be held on the 28th day of April, 1998,
and at any postponement or adjournment thereof, and to vote all of the shares of
Common Stock of Omega which the undersigned is entitled to vote, with all the
powers and authority the undersigned would possess if personally present. The
undersigned hereby directs that this proxy be voted as follows:
ITEM 1 - For the election of the nominees listed below for three year
terms, as described in the accompanying Proxy Statement.
<TABLE>
<S> <C> <C>
|_| For Robert N. Oliver |_| For Stanton R. Sheetz |_| For Robert A. Szeyller
|_| Withhold authority to vote |_| Withhold authority to vote |_| Withhold authority to vote
for Robert N. Oliver for Stanton R. Sheetz for Robert A. Szeyller
</TABLE>
ITEM 2 - To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
(Please date and sign on other side)
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES PROVIDED, THE PERSONS
NAMED HEREIN INTEND TO VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED.
THIS PROXY CONFERS CERTAIN DISCRETIONARY AUTHORITY DESCRIBED IN THE PROXY
STATEMENT. A MAJORITY OF SAID ATTORNEYS AND PROXIES PRESENT AT SAID MEETING (OR
IF ONLY ONE SHALL BE PRESENT, THEN THAT ONE) MAY EXERCISE ALL OF THE POWERS
HEREUNDER.
The undersigned hereby acknowledges receipt of the Omega Proxy Statement
relating to the 1998 Annual Meeting of Shareholders and Omega's Annual Report to
Shareholders for 1997.
Dated __________________, 1998
____________________________________(SEAL)
(Shareholder's Signature)
____________________________________(SEAL)
(Shareholder's Signature)
It would be helpful if you signed your
name or names exactly as it appears
hereon, indicating any official
position or representative capacity.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
OMEGA FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - APRIL 28, 1998
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF OMEGA FINANCIAL CORPORATION
The undersigned hereby instructs David B. Lee and Charles H. Zendt, Jr. ,
and each of them, Trustees under the Omega Employee Stock Ownership Plan, to
vote the shares allocated to the account of the undersigned under said Plan at
the Annual Meeting of Shareholders of Omega Financial Corporation ("Omega") to
be held on the 28th day of April, 1998, and at any postponement or adjournment
thereof, for the transaction of such business as properly comes before the
meeting, and with respect to the following matters:
ITEM 1 - For the election of the nominees listed below for three year terms,
as described in the accompanying Proxy Statement.
<TABLE>
<S> <C> <C>
|_| For Robert N. Oliver |_| For Stanton R. Sheetz |_| For Robert A. Szeyller
|_| Withhold authority to vote |_| Withhold authority to vote |_| Withhold authority to vote
for Robert N. Oliver for Stanton R. Sheetz for Robert A. Szeyller
</TABLE>
ITEM 2 - To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
(Please date and sign on other side)
THIS PROXY WILL, WHEN PROPERLY EXECUTED, BE VOTED AS DIRECTED. IF NO
DIRECTIONS TO THE CONTRARY ARE INDICATED IN THE BOXES PROVIDED, THE PERSONS
NAMED HEREIN INTEND TO VOTE "FOR" THE ELECTION OF THE NOMINEES LISTED.
THIS PROXY CONFERS CERTAIN DISCRETIONARY AUTHORITY DESCRIBED IN THE PROXY
STATEMENT. A MAJORITY OF SAID ATTORNEYS AND PROXIES PRESENT AT SAID MEETING (OR
IF ONLY ONE SHALL BE PRESENT, THEN THAT ONE) MAY EXERCISE ALL OF THE POWERS
HEREUNDER.
The undersigned hereby acknowledges receipt of the Omega Proxy Statement
relating to the 1998 Annual Meeting of Shareholders and Omega's Annual Report to
Shareholders for 1997.
Dated __________________, 1998
____________________________________(SEAL)
(Shareholder's Signature)
____________________________________(SEAL)
(Shareholder's Signature)
It would be helpful if you signed your
name or names exactly as it appears
hereon, indicating any official
position or representative capacity.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
FOR SHARES ALLOCATED UNDER THE EMPLOYEE STOCK OWNERSHIP PLAN ONLY
