SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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(Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OMEGA FINANCIAL CORP.
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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] No fee required
[ ] 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:*
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4) Proposed maximum aggregate value of transaction:
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[ ] 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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[Logo] OMEGA FINANCIAL CORPORATION
366 Walker Drive o P.O. Box 619 o State College, PA 16804-0619 o (814) 231-7680
NOTICE OF ANNUAL MEETING
OF
SHAREHOLDERS
APRIL 19, 1999
TO OUR SHAREHOLDERS:
The 1999 annual meeting of shareholders of OMEGA FINANCIAL CORPORATION
("Omega") will be held on Monday, April 19, 1999 at 10:00 A.M. (prevailing
time), at The Penn Stater, 215 Innovation Blvd., Penn State Research Park, State
College, Pennsylvania for the following purposes:
1. To elect Four 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 February 22, 1999 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
March 24, 1999
<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 Monday, April 19, 1999 at 10:00 A.M. (prevailing time) at The Penn Stater,
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 March 24, 1999.
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 did not know by March 15, 1999; (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 8,959,319 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 February 22, 1999, 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
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they are 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 four 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 1998 (see "ANNUAL REPORT AND FINANCIAL STATEMENTS").
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK
To the knowledge of Omega, as of February 22, 1999, 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 February 22, 1999, 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
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("ESOP"). 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 19,213 (b) *
Merle K. Evey 19,696 (c) *
Robert T. Gentry 27,056 (d) *
Philip E. Gingerich 58,200 (e) *
David B. Lee 197,428 (f) 2.2%
D. Stephen Martz 70,112 (g) *
Robert N. Oliver 6,333 (h) *
James W. Powers, Sr. 8,544 (i) *
Stanton R. Sheetz 4,934 (j) *
Robert A. Szeyller 5,092 (k) *
Daniel L. Warfel 75,304 (l) *
David N. Thiel 48,949 (m) *
All directors and
executive officers as
a group (14) persons 586,805 (n)(o) 6.4%
*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
February 22, 1999. 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, 1,708 shares owned solely by Mr. Agostinelli's wife, 200 shares
owned by Mr. Agostinelli as custodian for his grandchildren, 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,
15,246 shares issuable upon the exercise of stock options granted to
Mr. Gentry pursuant to the Omega Stock Option Plan and 2,533 shares
issuable upon the exercise of stock options granted pursuant to the
Omega Stock Purchase Plan, and 3,234 shares of Common Stock and 740
shares of Series A ESOP Preferred Stock (convertible into 1,165 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,
21,084 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, 2,508
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 72,431 shares
issuable upon the exercise of stock options granted to Mr. Lee pursuant
to the Omega Stock Option Plan, 826 shares issuable upon the exercise
of stock options granted pursuant to the
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Omega Stock Purchase Plan, and 16,247 shares of Common Stock and 2,595
shares of Series A ESOP Preferred Stock (convertible into 4,087 shares
of Common Stock) allocated to Mr. Lee's account under the ESOP.
(g) This amount includes 1,650 shares owned solely by Mr. Martz's wife,
1,100 shares owned by his wife and daughter, 19,171 shares issuable
upon the exercise of stock options granted to Mr. Martz pursuant to the
Omega Stock Option Plan, 1,897 shares issuable upon the exercise of
stock options granted pursuant to the Omega Stock Purchase Plan, and
3,264 shares of Common Stock and 745 shares of Series A ESOP Preferred
Stock (convertible to 1,173 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 5,850 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 1,012 shares owned by Mr. Warfel's wife as
custodian for their son and 198 shares owned solely by his son. This
amount also includes 42,178 shares issuable upon the exercise of stock
options granted to Mr. Warfel pursuant to the Omega Stock Option Plan,
826 shares issuable upon the exercise of stock options granted pursuant
to the Omega Stock Purchase Plan, and 8,648 shares of Common Stock and
1,834 shares of Series A ESOP Preferred Stock (convertible into 2,888
shares of Common Stock) allocated to Mr. Warfel's account under the
ESOP.
(m) This amount includes 8,005 shares owned jointly with Mr. Thiel's wife.
This amount also includes 29,655 shares issuable upon the exercise of
options granted to Mr. Thiel pursuant to the Omega Stock Option Plans,
2,108 shares issuable upon the exercise of stock options granted
pursuant to the Omega Stock Purchase Plan, and 7,239 shares of Common
Stock and 1,142 shares of Series A ESOP Preferred Stock (convertible
into 1,798 shares of Common Stock) allocated to Mr. Thiel's account
under the ESOP.
(n) This amount includes an aggregate of 213,671 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 45,764 shares of Common Stock and 8,587 shares of Series A
ESOP Preferred Stock (convertible into an aggregate of 13,524 shares of
Common Stock) allocated under the ESOP to the accounts of all executive
officers of Omega as a group.
(o) Does not include 467,783 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 February 22, 1999, 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 467,783 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 813,938 shares or approximately 8.75% 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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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, 1998.
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. Four directors are to be elected at the 1999 annual meeting of
shareholders for a term of three years each.
The Board of Directors, pursuant to the Bylaws, has nominated the four
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 T. Gentry 55 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 61 Director of Omega since 1994;
Director of Omega Bank since 1988.
Self-employed real estate
appraiser/consultant.
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D. Stephen Martz 56 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. 64 Director of Omega since 1994;
Director of Omega Bank since 1989;
President of Polestar Plastics,
Inc., a manufacturing company until
his retirement in 1996.
The following table sets forth certain information regarding those
directors whose terms will expire at either the 2000 or 2001 annual meeting of
shareholders:
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 64 Director of Omega Since 1993;
Director of Omega Bank since 1982;
President and owner of McLanahan
Drug Store Mgmt. Co. Inc.
Merle K. Evey 68 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.
David B. Lee 61 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.
Terms expiring at the 2001 annual meeting of shareholders:
Positions with Omega/
Principal Occupation During
Name of Director Age the Past Five Years
--------------- --- ---------------------------
Robert N. Oliver 65 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 43 Director of Omega since 1994;
Director of Hollidaysburg Trust
since 1986; Executive Vice President
and Director of Sheetz, Inc. until
1995; since 1995, Director,
President and Chief Executive
Officer of Sheetz, Inc. since 1995,
retail convenience stores.
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Robert A. Szeyller 60 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 1998, 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 have
established various committees of their respective Boards. During 1998, 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,
except Mr. Sheetz who attended 65% of the Board and committee meetings.
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
1998.
AUDIT COMMITTEE
The Board of Directors of Omega has appointed a standing Audit
Committee consisting of Raymond F. Agostinelli, Chairman, and Messrs. Robert A.
Szeyller, 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 Internal 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 1998.
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. This Committee met
three times in 1998.
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.
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.
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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, 1998, the then existing directors of Omega who were not
employees of Omega or any subsidiary, i.e. Messrs. Agostinelli, Evey, Gingerich,
Oliver, Powers, Sheetz, and Szeyller, were each automatically granted options to
purchase 500 shares of Common Stock at an exercise price of $38.125 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 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
8
<PAGE>
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 1998, 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
1998, 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 culture results,
which enhanced 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 1998, Mr. Lee's base salary
was $330,876. 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, 1998 Mr. Lee's base salary was increased by $20,778,
representing a 6.05% merit increase. His base salary at the end of the fiscal
year was $351,654.
Mr. Lee's bonus for fiscal 1998 was $179,168. 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 13,704 shares of Common Stock were
awarded to Mr. Lee for fiscal 1998 based upon the overall performance of the
Company, the number of stock options granted to Mr. Lee in 1997 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
9
<PAGE>
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 1998: ROBERT SZEYLLER, CHAIRMAN; MERLE
K. EVEY; JAMES W. POWERS, SR.; AND PHILIP E. GINGERICH.
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
1998 exceeded $100,000 for their services in all capacities during the fiscal
years ended December 31, 1998, 1997 and 1996:
<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 1998 $339,538 $179,168 13,704 153,751 (4)
Chairman and Chief 1997 319,470 168,350 13,631 155,458
Executive Officer of 1996 300,962 146,257 12,320 149,616
Omega; President and
Chief Executive Officer
of Omega Bank
D. Stephen Martz 1998 $186,360 $ 63,122 7,328 20,550 (5)
President and Chief Operating 1997 177,899 59,958 7,302 22,250
Officer of Omega; Chairman, 1996 173,664 -0- 1,686 18,723
President and Chief Executive
Officer of Hollidaysburg
Trust (5)
Daniel L. Warfel 1998 $168,980 $ 77,711 7,204 20,550 (6)
Executive Vice President 1997 160,562 73,807 7,180 22,250
and Chief Financial Officer 1996 152,499 64,669 7,295 18,723
of Omega
David N. Thiel 1998 $102,635 $ 24,717 4,474 16,733 (7)
Secretary and Senior Vice 1997 97,713 23,527 4,462 16,648
President of Omega 1996 91,556 20,621 4,422 13,528
<FN>
----------
(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 for the years
listed.
10
<PAGE>
(4) For 1998, consists of $2,500 contributed to Mr. Lee's account in the
401(k) Plan, $18,050 allocated to his account in the ESOP, $103,201
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 1998, consists of $2,500 contributed to Mr. Martz's account in the
401(k) Plan and $18,050 allocated to his account in the ESOP.
(6) For 1998, consists of $2,500 contributed to Mr. Warfel's account in the
401(k) Plan and $18,050 allocated to his account in the ESOP.
(7) For 1998, consists of $2,500 contributed to Mr. Thiel's account in the
401(k) Plan and $14,233 allocated to his account in the ESOP.
</FN>
</TABLE>
STOCK OPTION GRANTS IN 1998
Set forth below is information concerning stock options granted for
1998 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>
Potential Realizable Value at
Number of Percentage of Assumed Annual Rates of Stock
Securities Total Options Price Appreciation for
Underlying Granted to All Option Term (3)
Options Employees for Exercise or Expiration -----------------------------
Name Granted 1998 Base Price Date 0% 5% 10%
---- ---------- -------------- ----------- ---------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Lee
(1) 826 0.95% $27.23 12/31/2003 $2,495 $3,189 $4,024
(2) 12,878 16.97% 30.25 01/01/2009 N/A 244,992 620,858
D. Stephen Martz
(1) 826 0.95% 27.23 12/31/2003 2,495 3,189 4,024
(2) 6,502 8.57% 30.25 01/01/2009 N/A 123,694 313,466
Daniel L. Warfel
(1) 826 0.95% 27.23 12/31/2003 2,495 3,189 4,024
(2) 6,378 8.41% 30.25 01/01/2009 N/A 121,335 307,488
David N. Thiel
(1) 724 0.83% 27.23 12/31/2003 2,186 2,795 3,527
(2) 3,750 4.94% 30.25 01/01/2009 N/A 71,340 180,790
<FN>
- ----------
(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
11
<PAGE>
market value of the Common Stock for which such options may be exercised as
of December 31, 1998 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.
</FN>
</TABLE>
AGGREGATED STOCK OPTION EXERCISES DURING 1998
AND YEAR-END OPTION VALUES
Set forth below is information concerning the exercise during 1998 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 1998:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 December 31, 1998(2)
Shares Acquired Value Realized(1) -------------------------- --------------------------
Name On Exercise On Shares Acquired Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David B. Lee 3,006 $35,199 60,372 12,885 $805,314 -0-
D. Stephen Martz 746 2,152 14,512 6,556 155,677 -0-
Daniel L. Warfel 2,898 31,826 36,570 6,434 487,754 -0-
David N. Thiel 616 10,996 28,013 3,750 386,978 -0-
<FN>
- ----------
(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 $30.25, the market price (bid price) of
the Common Stock on December 31, 1998, and the exercise price of the
options multiplied by the number of options held.
</FN>
</TABLE>
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 Omega Peer Group (*), assuming an investment of $100 in each on
December 31, 1993 and the reinvestment of all dividends.
- --------------------------------------------------------------------------------
TOTAL RETURN PERFORMANCE
Nasdaq Composite
Market Index Omega Peer Omega Common
(US Companies)(1) Group(2) Stock
----------------- ---------- -------------
12/31/93 100.00 100.00 100.00
12/31/94 97.75 98.84 102.65
12/31/95 138.26 123.85 135.67
12/31/96 170.01 140.56 145.44
12/31/97 208.58 220.98 213.06
12/31/98 293.21 242.70 197.09
- --------------------------------------------------------------------------------
Source: SNL Securities
Charlottesville, VA
*The Omega Peer group is made up of the group of bank holding companies
(consisting of a total of 8), within the Mid-Atlantic region with total asset
sizes of between $1 and $5 billion. It is believed that this provides a
comparative view of Omega's stock performance to other institutions of its size
within its actual geographic area.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1998 were: Robert
Szeyller, Chairman; Merle K. Evey; Philip E. Gingerich; and James W. Powers, Sr.
No person who served as a member of the Compensation Committee during 1998 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 1998, 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.
13
<PAGE>
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 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.
14
<PAGE>
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 to purchase a total of 1,000,000 shares of Common Stock (subject to
appropriate adjustments to reflect changes in the capitalization of Omega).
Options to purchase an aggregate of 235,858 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 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
15
<PAGE>
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 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.
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
16
<PAGE>
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 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 500
shares). On May 1, 1996 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 up
to 500 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.
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 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; provided, however, that if an optionee ceased to
a director of the Company by reason of retirement at age 70 or above, disability
as defined in the Code, or death, the option will terminate five years after the
director's retirement, disability or death, but in no event later than ten years
from the date of 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
currently 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 the 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
Omega has an Executive Incentive Compensation Plan ("EIC Plan"). 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 1999, 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, 1998 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
18
<PAGE>
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 1998 fiscal year and has been selected to act as
Omega's independent public accountant for the 1999 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
Pursuant to recent amendments to the proxy rules under the Exchange
Act, Omega's shareholders are notified that the deadline for providing timely
notice of any shareholder proposal to be submitted outside of the Rule 14a-8
process for consideration at Omega's 2000 Annual Meeting of shareholders (the
"2000 Meeting") is February 8, 2000; as to all such matters which Omega does not
have notice of on or prior to February 8, 2000, discretionary authority shall be
granted to the persons designated in Omega's proxy related to the 2000 Meeting
to vote on such proposal. A shareholder proposal regarding the 2000 Meeting must
be submitted to the Omega Corporate Secretary, Omega Financial Corporation, P.O.
Box 619, State College, PA 16804-0619, by November 25, 1999 to receive
consideration for inclusion in Omega's 2000 proxy materials. Any such proposal
must also comply with the proxy rules under the Exchange Act, including 14a-8.
ANNUAL REPORT AND FINANCIAL STATEMENTS
This Proxy Statement is accompanied by Omega's Annual Report to
Shareholders for the year ended December 31, 1998.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF OMEGA'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 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 19, 1999
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 19th day of April, 1999,
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.
- ------------------------------------- --------------------------------------
[ ] For Robert T. Gentry [ ] For Philip E. Gingerich
[ ] Withhold authority to [ ] Withhold authority to
vote vote
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
[ ] For D. Stephen Martz [ ] For James W. Powers, Sr.
[ ] Withhold authority to [ ] Withhold authority to
vote vote
- ------------------------------------- --------------------------------------
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 1999 Annual Meeting of Shareholders and Omega's Annual Report to
Shareholders for 1998.
Dated __________________, 1999
____________________________________(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 19, 1999
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 19th day of April, 1999, 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.
- ------------------------------------- --------------------------------------
[ ] For Robert T. Gentry [ ] For Philip E. Gingerich
[ ] Withhold authority to [ ] Withhold authority to
vote vote
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
[ ] For D. Stephen Martz [ ] For James W. Powers, Sr.
[ ] Withhold authority to [ ] Withhold authority to
vote vote
- ------------------------------------- --------------------------------------
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 1999 Annual Meeting of Shareholders and Omega's Annual Report to
Shareholders for 1998.
Dated __________________, 1999
____________________________________(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.
