<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 1996
REGISTRATION NO. 333-01797
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
BT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 6022 25-1441348
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
BT FINANCIAL PLAZA,
551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901
(814) 532-3801
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
JOHN H. ANDERSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BT FINANCIAL CORPORATION
BT FINANCIAL PLAZA,
551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901
(814) 532-3801
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
DENNIS M. SHEEDY, ESQ. EDWARD L. LUBLIN, ESQ.
KIRKPATRICK & LOCKHART LLP MANATT, PHELPS & PHILLIPS LLP
1500 OLIVER BUILDING 1501 M STREET, N.W.
PITTSBURGH, PENNSYLVANIA 15222 WASHINGTON, D.C. 20005
(412) 355-6500 (202) 463-4314
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
THE ARMSTRONG COUNTY
TRUST COMPANY
227 MARKET STREET
KITTANNING, PA 16201
April , 1996
Dear Shareholder:
You are cordially invited to attend a special meeting (the "Meeting") of
the shareholders of The Armstrong County Trust Company ("Armstrong") to be held
at Armstrong's executive offices, 227 Market Street, Kittanning, Pennsylvania,
at 2 p.m., Eastern Time, on May , 1996.
The purpose of the Meeting is to vote on adoption and approval of the
Agreement and Plan of Reorganization dated October 24, 1995, by and among
Armstrong, BT Financial Corporation, a Pennsylvania corporation ("BT
Financial"), and Johnstown Bank and Trust Company, a Pennsylvania bank and trust
company wholly owned by BT Financial ("Johnstown Bank"), as amended by the First
Amendment to Agreement and Plan of Reorganization dated March 27, 1996 (the
"Merger Agreement"), providing for the acquisition of Armstrong by BT Financial
through the merger of Armstrong into Johnstown Bank (the "Merger").
The Merger Agreement provides that at the effective time of the merger each
outstanding share of Armstrong common stock ("Armstrong Common Stock") will be
converted into 26.5 shares of BT Financial common stock ("BT Financial Common
Stock") and $596.25 in cash (the "Merger Consideration"), unless the average
closing price per share of BT Financial Common Stock on the Nasdaq Stock Market
("NASDAQ") as reported in The Wall Street Journal for the twenty (20)
consecutive trading days ending on the fifth trading day immediately preceding
the Closing Date (the "Valuation Period") is less than $27.50 or more than
$34.00.
If the average per share price of BT Financial Common Stock is less than
$27.50 for the Valuation Period, Armstrong may request that BT Financial adjust
the Merger Consideration by increasing the number of shares of BT Financial
Common Stock or the amount of cash included in the Merger Consideration, or
both, so as to maintain a total consideration of $1,325.00 per share of
Armstrong Common Stock based on the average price per share for BT Financial
Common Stock for the Valuation Period. If BT Financial does not so adjust the
Merger Consideration, Armstrong may terminate the Merger Agreement, and neither
party will have any further liability under the Merger Agreement.
If the average price per share of BT Financial Common Stock for the
Valuation Period is more than $34.00, BT Financial will have the option to
adjust the Merger Consideration by reducing the number of shares of BT Financial
Common Stock or cash included in the Merger Consideration, or both, as
determined by Armstrong, so that the total consideration does not exceed
$1,497.25 per share of Armstrong Common Stock based on the average price per
share of BT Financial Common Stock for the Valuation Period. If at any time
prior to the Closing Date or the ninety (90) day period immediately following
the Closing Date, BT Financial enters into, or announces plans to enter into any
agreement that would result in an acquisition of BT Financial or substantially
all of its business by another entity, the Merger Consideration will remain
equal to 26.5 shares of BT Financial Common Stock and $596.25 in cash for each
share of Armstrong Common Stock.
BT Financial is a multi-bank holding company organized under the laws of
the Commonwealth of Pennsylvania with headquarters in Johnstown, Pennsylvania.
At December 31, 1995, BT Financial had consolidated total assets of
approximately $1.2 billion, consolidated total deposits of approximately $1.04
billion and consolidated total shareholders' equity of approximately $102
million. BT Financial Common Stock is quoted on NASDAQ under the symbol "BTFC".
The closing price for BT Financial Common Stock on April , 1996 was $ per
share.
Armstrong is a bank and trust company organized under the laws of the
Commonwealth of Pennsylvania. At December 31, 1995, Armstrong had total assets
of approximately $52 million, total deposits of approximately $39 million and
total shareholder's equity of approximately $8 million.
<PAGE> 3
The Board of Directors of Armstrong believes that the Merger is in the best
interests of Armstrong and its shareholders and recommends that you vote FOR the
approval and adoption of the Agreement and Plan of Reorganization and the
transactions contemplated thereby. The attached Proxy Statement/Prospectus
explains the proposed Merger in detail. Please carefully review and consider all
of this information.
It is especially important that your shares be represented and voted at the
Meeting. Please complete, sign, date and promptly return the enclosed proxy card
even if you currently plan to attend the Meeting. You may revoke your proxy at
any time before it is voted by giving written notice to Armstrong. If you attend
the Meeting and vote in person, your vote will supersede your proxy.
Sincerely,
Coleman J. Clougherty
Chairman, President and
Chief Executive Officer
<PAGE> 4
THE ARMSTRONG COUNTY TRUST COMPANY
227 MARKET STREET
KITTANNING, PENNSYLVANIA 16201
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY , 1996
NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting") of
shareholders of The Armstrong County Trust Company, a Pennsylvania bank and
trust company ("Armstrong"), will be held on May , 1996, at the executive
offices of Armstrong at 227 Market Street, Kittanning, Pennsylvania, commencing
at 2 p.m., local time, to consider and vote upon the following:
1. A proposal to adopt and approve an Agreement and Plan of
Reorganization dated as of October 24, 1995 by and among Armstrong, BT
Financial Corporation, a Pennsylvania corporation ("BT Financial") and
Johnstown Bank and Trust Company, a Pennsylvania Bank and trust company
wholly-owned by BT Financial ("Johnstown Bank"), as amended by the First
Amendment to Agreement and Plan of Reorganization dated March 27, 1996 (the
"Merger Agreement"), pursuant to which Armstrong will merge with and into
Johnstown Bank (the "Merger") with Johnstown Bank being the surviving
corporation, upon the terms and subject to the conditions set forth in the
Merger Agreement, as more fully described in the enclosed Proxy
Statement/Prospectus; and
2. The transaction of such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
Only holders of record of shares of Armstrong Common Stock at the close of
business on April , 1996 are entitled to notice of and to vote at the Meeting
and any adjournment or postponement thereof.
Any shareholder entitled to vote at the Meeting will have the right to
dissent from the Merger and to obtain payment for the fair value of his shares
upon compliance with the applicable provisions of Pennsylvania law. For a
summary of the rights of Armstrong shareholders to dissent, see "The
Merger--Rights of Dissenting Shareholders" in the attached Proxy
Statement/Prospectus. A copy of Subchapter D of Chapter 15 and Section 1930 of
the Pennsylvania Business Corporation Law of 1988, which relates to dissenters'
rights, is included in the attached Proxy Statement/Prospectus as Annex D.
By Order of the Board of Directors,
Bonnie K. Rupp
Secretary
April , 1996
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY CARD BECAUSE
THAT SHAREHOLDER OWNS SHARES REGISTERED IN DIFFERENT NAMES OR AT DIFFERENT
ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED. YOUR COOPERATION
WILL BE APPRECIATED. ALL PROPERLY EXECUTED PROXIES RECEIVED PRIOR TO OR AT THE
MEETING WILL BE VOTED WITH RESPECT TO THE MATTER IDENTIFIED ON THE PROXY CARDS
IN ACCORDANCE WITH ANY INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS ARE GIVEN,
WILL BE VOTED FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
<PAGE> 5
SUBJECT TO COMPLETION
DATED APRIL 12, 1996
PROXY STATEMENT
OF
THE ARMSTRONG COUNTY TRUST COMPANY
------------------------
PROSPECTUS
OF
BT FINANCIAL CORPORATION
------------------------
This Proxy Statement/Prospectus is being furnished to holders of shares of
common stock, par value $50.00 per share ("Armstrong Common Stock"), of The
Armstrong County Trust Company, a Pennsylvania bank and trust company
("Armstrong"), in connection with the solicitation of proxies by the Board of
Directors of Armstrong (the "Armstrong Board") for use at a special meeting of
Shareholders (the "Meeting") to be held on May , 1996, at the executive
offices of Armstrong at 227 Market Street, Kittanning, Pennsylvania, and at any
adjournment or postponement thereof. The purpose of the meeting is to consider
and take action on the proposed merger (the "Merger") of Armstrong into
Johnstown Bank and Trust Company ("Johnstown Bank"), a Pennsylvania bank and
trust company wholly-owned by BT Financial Corporation, a Pennsylvania
corporation ("BT Financial"), pursuant to the terms of the Agreement and Plan of
Reorganization dated as of October 24, 1995, as amended by the First Amendment
to Agreement and Plan of Reorganization dated March 27, 1996 (the "Merger
Agreement") by and among Armstrong, BT Financial and Johnstown Bank, as more
fully described elsewhere in this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus also constitutes a prospectus of BT
Financial Corporation, a Pennsylvania corporation ("BT Financial"), relating to
a maximum of 212,000 shares of common stock, par value $5.00 per share ("BT
Financial Common Stock"), of BT Financial to be issued to Armstrong shareholders
pursuant to the Merger Agreement.
The outstanding shares of BT Financial Common Stock are, and the shares
offered hereby will be, included for quotation on the Nasdaq Stock Market
("NASDAQ"). The closing price of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal on April , 1996 was $ per share.
This Proxy Statement/Prospectus and the enclosed proxy card are first being
mailed to Armstrong shareholders on or about April , 1996.
All information contained in this Proxy Statement/Prospectus relating to BT
Financial and its subsidiaries has been supplied by BT Financial, and all
information contained in this Proxy Statement/Prospectus relating to Armstrong
has been supplied by Armstrong.
------------------------
THE SHARES OF BT FINANCIAL COMMON STOCK TO BE ISSUED PURSUANT TO THIS PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE SHARES OF BT FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF BT
FINANCIAL AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
------------------------
The date of this Proxy Statement/Prospectus is April , 1996.
<PAGE> 6
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BT FINANCIAL, ARMSTRONG OR ANY OTHER
PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR A SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF BT FINANCIAL OR ARMSTRONG SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
This Proxy Statement/Prospectus does not cover any resale of shares of BT
Financial Common Stock received by any person upon consummation of the Merger,
and no person is authorized to make any use of this Proxy Statement/Prospectus
in connection with any such resale.
<PAGE> 7
AVAILABLE INFORMATION
BT Financial is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by BT Financial with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's regional offices at Suite 1300, 7 World
Trade Center, New York, New York 10048, and The Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 upon payment of prescribed rates. In
addition, BT Financial Common Stock is included for quotation on NASDAQ and such
reports, proxy statements and other information concerning BT Financial should
be available for inspection and copying at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
BT Financial has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of BT Financial Common Stock to be issued pursuant to
the Merger Agreement. As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement. Such additional information
may be obtained from the Commission's principal office in Washington, D.C., or
from the Commission's regional offices in New York or Chicago, by the means
described above for obtaining reports, proxy statements and other information
filed pursuant to the Exchange Act. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete. In each instance,
reference is hereby made to the copy of such contract or other document filed as
an exhibit to the Registration Statement or such other document and each such
statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by BT Financial (File No.
0-12377) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
1. Proxy Statement for its Annual Meeting of Shareholders to be held on May
14, 1996;
2. Annual Report on Form 10-K for the year ended December 31, 1995;
3. Current Report on Form 8-K dated December 14, 1995, as amended on
December 29, 1995 and February 27, 1996;
4. Current Report on Form 8-K dated January 12, 1996; and
5. Registration Statement on Form 8-A dated April 26, 1991.
All documents and reports filed by BT Financial pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date when the Meeting has finally been
adjourned shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents and reports. Any statement contained herein or in a document or report
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any subsequently filed document
or report which is or is deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS FILED
BY BT FINANCIAL WITH THE COMMISSION WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN THE EXHIBITS TO SUCH DOCU-
2
<PAGE> 8
MENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN OR
THEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST, DIRECTED TO BT FINANCIAL CORPORATION, BT FINANCIAL
PLAZA, 551 MAIN STREET, JOHNSTOWN, PENNSYLVANIA 15901 (TELEPHONE NUMBER: (814)
532-3801), ATTENTION: CORPORATE SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF
ANY DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY , 1996.
3
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 2
SUMMARY............................................................................... 5
SELECTED FINANCIAL INFORMATION........................................................ 12
COMPARATIVE PER SHARE DATA............................................................ 17
COMPARATIVE MARKET PRICES............................................................. 19
THE MEETING........................................................................... 21
THE MERGER............................................................................ 23
Background of the Merger............................................................ 23
Reasons for the Merger; Recommendation of Armstrong Board........................... 24
Opinion of Armstrong Financial Advisor.............................................. 25
Interests of Certain Persons in the Merger.......................................... 27
Regulatory Considerations........................................................... 28
Rights of Dissenting Shareholders................................................... 28
Resale Restrictions................................................................. 31
Certain Federal Income Tax Consequences............................................. 31
Accounting Treatment................................................................ 34
THE MERGER AGREEMENT.................................................................. 35
The Merger.......................................................................... 35
Exchange Procedures................................................................. 36
Representations and Warranties...................................................... 36
Certain Covenants................................................................... 36
Acquisition Proposals............................................................... 37
Indemnification Obligations of Armstrong............................................ 38
Armstrong Dividends................................................................. 38
Conditions.......................................................................... 39
Termination......................................................................... 40
Expenses............................................................................ 41
Amendment and Waiver................................................................ 41
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.......................... 42
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK............................................. 49
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 56
CERTAIN INFORMATION REGARDING BT FINANCIAL............................................ 60
CERTAIN INFORMATION REGARDING ARMSTRONG............................................... 66
Armstrong Market Prices and Dividends............................................... 69
Management's Discussion and Analysis of Financial Condition and Results
of Operations of Armstrong....................................................... 70
Management of Armstrong............................................................. 75
PRINCIPAL OWNERS OF ARMSTRONG VOTING SECURITIES....................................... 77
LEGAL MATTERS......................................................................... 78
BT FINANCIAL 1997 ANNUAL MEETING...................................................... 78
EXPERTS............................................................................... 78
INDEX TO ARMSTRONG AND MOXHAM FINANCIAL STATEMENTS.................................... F-1
ANNEXES
A-AGREEMENT AND PLAN OF REORGANIZATION
B-FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
C-OPINION OF BAHIA ADVISORS, INC.
D-PENNSYLVANIA BCL PROVISIONS FOR DISSENTING SHAREHOLDERS
</TABLE>
4
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained, or
incorporated by reference, in this Proxy Statement/Prospectus or contained in
the Annexes hereto. Armstrong shareholders are urged to read this Proxy
Statement/Prospectus and the Annexes hereto in their entirety.
THE COMPANIES
BT Financial.................. BT Financial is a multi-bank holding company
located in Johnstown, Pennsylvania with three
state chartered banking subsidiaries that are
members of the Federal Reserve System:
Johnstown Bank, Laurel Bank ("Laurel Bank") and
Fayette Bank ("Fayette Bank"). These banking
subsidiaries conduct business through a network
of 65 offices located throughout southwestern
Pennsylvania and provide a full range of
financial services to individuals, businesses
and governmental bodies, including demand,
savings and time deposits, secured and
unsecured loans, and electronic data processing
of payrolls. Lending services include credit
cards and consumer, real estate, commercial and
industrial loans. BT Management Trust Company,
a trust company subsidiary, provides corporate
pension and personal trust and trust related
services. The principal executive offices of BT
Financial are located at BT Financial Plaza,
551 Main Street, Johnstown, Pennsylvania 15901,
and its telephone number is (814) 532-3801. As
of December 31, 1995, BT Financial had
consolidated total assets of approximately $1.2
billion, consolidated total deposits of
approximately $1.04 billion and consolidated
total shareholders' equity of approximately
$102 million. See "Incorporation of Certain
Documents by Reference" and "Certain
Information Regarding BT Financial."
On December 14, 1995, BT Financial acquired The
Huntington National Bank of Pennsylvania
("Huntington Bank") from Huntington Bancshares
West Virginia, Inc., for $25,500,000 in cash.
Huntington Bank was merged with and into
Fayette Bank. As of September 30, 1995,
Huntington Bank had total assets of $106
million, total deposits of $81 million and
total stockholder's equity of $16 million. The
acquisition of Huntington Bank was accounted
for under the purchase method of accounting.
BT Financial has also entered into an Agreement
and Plan of Reorganization (the "Moxham
Agreement") dated January 12, 1996, with Moxham
Bank Corporation, a multi-bank holding company
headquartered in Johnstown, Pennsylvania
("Moxham"), which provides for the merger of
Moxham with and into BT Financial (the "Moxham
Merger"). At the effective time of the Moxham
Merger, each outstanding share of Moxham common
stock ("Moxham Common Stock") is to be
converted into 1.15 shares of BT Financial
Common Stock, and each share of Moxham
preferred stock ("Moxham Preferred Stock") is
to be converted into 6.325 shares of BT
Financial Common Stock. Immediately following
the Moxham Merger, Moxham's subsidiary banks,
The Moxham National Bank of Johnstown and The
First National Bank of Garrett, will be merged
with and into Johnstown Bank. The acquisition
of Moxham is to be accounted for under the
pooling of interests method
5
<PAGE> 11
of accounting. As of December 31, 1995, Moxham
had consolidated total assets of approximately
$241 million, consolidated total deposits of
approximately $218 million and consolidated
total shareholders' equity of approximately $20
million.
On a pro forma basis giving effect to BT
Financial's acquisition of Huntington Bank and
BT Financial's pending acquisitions of
Armstrong and Moxham, BT Financial would have
had, on a consolidated basis as of December 31,
1995, approximately $1.5 billion in total
assets, $1.3 billion in total deposits and $129
million in total shareholders' equity.
Armstrong..................... Armstrong is a Pennsylvania bank and trust
company and a member of the Federal Deposit
Insurance Corporation ("FDIC") that conducts
business through its office in Kittanning,
Pennsylvania. As a commercial bank, Armstrong
provides loan and deposit services to
individuals and small to medium sized
businesses in its Kittanning, Pennsylvania
market area. The executive offices of Armstrong
are located at 227 Market Street, Kittanning,
Pennsylvania 16201, and its telephone number is
(412) 548-1555. As of December 31, 1995,
Armstrong had total assets of approximately $52
million, total deposits of approximately $39
million and shareholders' equity of
approximately $8 million. See "The
Merger--Background of the Merger" and "Certain
Information Regarding Armstrong."
The Meeting; Record Date;
Vote Required............... The Meeting is scheduled to be held on April
, 1996, at the executive offices of Armstrong
at 227 Market Street, Kittanning, Pennsylvania,
commencing at 2 p.m., local time.
Only holders of record of shares of Armstrong
Common Stock at the close of business on April
, 1996 are entitled to notice of and to vote
at the Meeting. As of April , 1996, there
were 8,000 shares of Armstrong Common Stock
outstanding held by 49 holders of record. Each
holder of record of shares of Armstrong Common
Stock as of the record date is entitled to cast
one vote per share on each matter to be acted
upon or which may properly come before the
Meeting.
The purpose of the Meeting is to consider and
vote upon a proposal to adopt and approve the
Merger Agreement. The affirmative vote of the
Shareholders entitled to cast at least
two-thirds of the votes which all Shareholders
are entitled to cast thereon is required to
adopt and approve the Merger Agreement.
Each director and executive officer of
Armstrong who owns shares of Armstrong Common
Stock has advised Armstrong that he or she
intends to vote or direct the vote of all
shares of Armstrong Common Stock over which he
or she has voting control FOR adoption and
approval of the Merger Agreement. As of April
, 1996, the directors and executive officers
of Armstrong were the beneficial owners of
5,155, or approximately 64.44%, of the
outstanding shares of Armstrong Common Stock.
If all shares of Armstrong Common Stock are
present at the Meeting and the directors and
executive officers of Armstrong all vote as
they have stated that they intend to vote, the
affirmative vote of only an additional 178
shares (or
6
<PAGE> 12
approximately 2.23%) of Armstrong Common Stock
would be necessary to adopt and approve the
Merger Agreement.
THE MERGER
Effects of the Merger......... At the effective time of the Merger, Armstrong
will merge with and into Johnstown Bank.
Johnstown Bank will be the surviving bank in
the Merger and will continue its corporate
existence under Pennsylvania law under its
present name.
Pursuant to the Merger Agreement, each issued
and outstanding share of Armstrong Common Stock
(other than any such shares in respect of which
the holders thereof have objected to the Merger
and otherwise complied with the applicable
requirements of Pennsylvania law ("Dissenters'
Shares") and treasury shares) will be converted
into the right to receive 26.5 shares of BT
Financial Common Stock and $596.25 in cash (the
"Merger Consideration"), unless the average
closing price per share of BT Financial Common
Stock on NASDAQ as reported in The Wall Street
Journal for the twenty (20) consecutive trading
days ending on the fifth trading day
immediately preceding the closing date (the
"Valuation Period") is less than $27.50 or more
than $34.00.
If the average per share price of BT Financial
Common Stock is less than $27.50 for the
Valuation Period, Armstrong may request that BT
Financial adjust the Merger Consideration by
increasing the number of shares of BT Financial
Common Stock or the amount of cash included in
the Merger Consideration, or both, so as to
maintain a total consideration of $1,325.00 per
share of Armstrong Common Stock based on the
average price per share for BT Financial Common
Stock for the Valuation Period. If BT Financial
elects not to adjust the Merger Consideration,
Armstrong may terminate the Merger Agreement,
and neither party will have any further
liability under the Merger Agreement.
If the average price per share of BT Financial
Common Stock for the Valuation Period is more
than $34.00, BT Financial shall have the option
to adjust the Merger Consideration by reducing
the number of shares of BT Financial Common
Stock or cash included in the Merger
Consideration, or both, as determined by
Armstrong, so that the total consideration does
not exceed $1,497.25 per share of Armstrong
Common Stock based on the average price per
share of BT Financial Common Stock for the
Valuation Period. If, however, at any time
prior to the Closing Date or the ninety (90)
day period immediately following the closing
date, BT Financial enters into, or announces
its plans to enter into any agreement that
would result in an acquisition of BT Financial
or substantially all of its business by another
entity, the Merger Consideration shall remain
equal to 26.5 shares of BT Financial Common
Stock and $596.25 in cash for each share of
Armstrong Common Stock.
In negotiating the components and amount of the
Merger Consideration, BT Financial was
interested in paying a combination of BT
Financial Common Stock and cash to avoid the
dilution of earnings that would result from an
all-stock transaction and to
7
<PAGE> 13
minimize the reduction in capital that would
result from an all-cash transaction. Similarly,
Armstrong was interested in a transaction that
would be partially tax-free and would result in
Armstrong shareholders receiving a marketable
security. The exact mix of stock and cash was a
result of arms-length negotiations between the
parties.
Upon consummation of the Merger, all issued and
outstanding shares of Armstrong Common Stock
will cease to exist. See "The Merger
Agreement--The Merger." Armstrong shareholders
who properly exercise dissenters' rights will
have only the right to receive from BT
Financial payment for the "fair value" of their
shares of Armstrong Common Stock as determined
in accordance with the applicable provisions of
the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL"). See "The
Merger--Rights of Dissenting Shareholders."
Fractional shares of BT Financial Common Stock
will not be issued in the Merger. An Armstrong
shareholder otherwise entitled to a fractional
share of BT Financial Common Stock will
receive, in lieu thereof, a cash payment
therefor equal to such fraction multiplied by
the closing sales price on NASDAQ for a share
of BT Financial Common Stock on the Closing
Date (as defined in the Merger Agreement) as
reported in The Wall Street Journal, or, if BT
Financial Common Stock is not traded on such
date, the next succeeding day on which such
stock is traded. See "The Merger
Agreement--Exchange Procedures."
Based upon the number of shares of BT Financial
Common Stock and Armstrong Common Stock on a
fully diluted basis as of December 31, 1995,
the price per share of BT Financial Common
Stock as of the same date and the Merger
Consideration, Armstrong shareholders will own
approximately 5.54% of the outstanding shares
of BT Financial Common Stock immediately
following consummation of the Merger (assuming
no Dissenters' Shares).
Reasons for the Merger........ BT Financial. The acquisition of Armstrong is
a natural expansion of BT Financial's
geographic market into an area that is
contiguous to BT Financial's current market.
See "The Merger--Background of the Merger" and
"--Reasons for the Merger."
Armstrong. The Armstrong Board has unanimously
approved the Merger Agreement and has
determined that the Merger is fair to, and in
the best interests of, Armstrong and its
shareholders. The Armstrong Board believes that
the Merger will enable the Armstrong
shareholders to realize significant value when
compared to the value of Armstrong Common Stock
should the Merger not occur. For a more
detailed discussion of the factors considered
by the Armstrong Board in reaching its decision
with respect to the Merger Agreement and the
Merger, see "The Merger--Reasons for the
Merger; Recommendation of Armstrong Board."
Recommendation of Armstrong
Board......................... The Armstrong Board unanimously voted to
approve the Merger Agreement and the Merger as
being in the best interests of Armstrong and
Armstrong shareholders and recommends a vote by
Armstrong shareholders FOR adoption and
approval of the Merger Agreement. For a
discussion of the factors considered by the
8
<PAGE> 14
Armstrong Board in reaching its decision with
respect to the Merger Agreement and the Merger
and the other transactions contemplated
thereby, see "The Merger--Reasons for the
Merger; Recommendation of Armstrong Board."
Opinion of Armstrong Financial
Advisor..................... On October 24, 1995, Bahia Advisors, Inc.,
Armstrong's financial advisor ("Bahia"),
delivered its written opinion to the Armstrong
Board to the effect that, as of the date
thereof, the Merger Consideration is fair to
the Shareholders from a financial point of
view. A copy of the opinion of Bahia which sets
forth the assumptions made, matters considered
and limits of its review, is attached to this
Proxy Statement/Prospectus as Annex C. See "The
Merger--Opinion of Armstrong Financial
Advisor."
Interests of Certain Persons
in the Merger............... Members of Armstrong's management and the
Armstrong Board have interests in the Merger in
addition to the interests of Armstrong
shareholders generally. BT Financial has agreed
to indemnify all current officers and directors
of Armstrong for one year after the effective
time of the Merger and to provide officers' and
directors' liability insurance coverage to
those officers and directors for one year after
the effective time of the Merger. In addition,
if the Merger is consummated, members of
Armstrong's management and the Armstrong Board
will own approximately 1.14% of the shares of
BT Financial Common Stock on a fully diluted
basis. Mr. Coleman J. Clougherty, Chairman,
President, and Chief Executive Officer of
Armstrong, will also be entitled to receive a
lump sum cash payment of $200,000, in
connection with the termination of his
employment with Armstrong on the closing date
of the Merger. After the Merger, Johnstown
Bank intends to invite Jerome Lombardi, a
director of Armstrong, to serve as a director
of Johnstown Bank. See "The Merger--Interests
of Certain Persons in the Merger."
Effective Time of the Merger;
Termination of the
Merger Agreement............ It is anticipated that the Merger will become
effective as soon as practicable after the
requisite Shareholder and regulatory approvals
have been obtained, and all applicable
regulatory waiting periods have expired. There
may be a substantial period of time between
when the Meeting is held and the consummation
of the Merger. See "The Merger--Regulatory
Considerations" and "The Merger
Agreement--Conditions."
The Merger Agreement will terminate
automatically if the Merger has not been
consummated and, therefore, the effective time
of the Merger has not occurred, by June 30,
1996 (unless extended by mutual consent) or may
be terminated prior to such time by BT
Financial or Armstrong upon the occurrence of
one or more of certain events, although the
parties expect that the Merger will be
consummated before June 30, 1996. If the Merger
has not been consummated by June 30, 1996,
Armstrong shareholders will be notified by
letter whether the Merger has been abandoned or
if the parties have agreed to extend the
termination date and what that date then is.
The Merger Agreement does not limit the
possible number of extensions
9
<PAGE> 15
of the termination date or the periods for
which extension of the termination date may
occur. See "The Merger Agreement--
Termination."
Conditions to the Merger...... The obligations of BT Financial, Johnstown Bank
and Armstrong to consummate the Merger are
subject to the satisfaction of certain
significant conditions, including: obtaining
requisite shareholder and regulatory approvals;
the absence of any action, proceeding,
regulation or legislation to enjoin, restrain
or prohibit, or to obtain substantial damages
in respect of, the Merger Agreement or the
Merger, which, in the good faith judgment of BT
Financial, would make it inadvisable to
consummate the Merger or the other transactions
contemplated by the Merger Agreement; the
absence of any injunction which prohibits or
restricts the consummation of the transactions
contemplated by the Merger Agreement, which, in
the good faith judgment of Armstrong, would
make it inadvisable to consummate those
transactions; and the number of Dissenters'
Shares being less than 800 shares of Armstrong
Common Stock as of the Closing Date,
representing 10% of the Armstrong Common Stock
expected to be outstanding on such date. Any
condition may be waived in writing by the party
entitled to the benefit thereof. See "The
Merger Agreement--Conditions."
Regulatory Considerations..... Consummation of the Merger is subject to, and
conditioned upon, receipt of all required
regulatory approvals and expiration of all
applicable regulatory waiting periods necessary
to consummate the Merger, including receipt of
approvals from the Board of Governors of the
Federal Reserve System (the "Federal Reserve")
and the Pennsylvania Department of Banking.
Although applications for such approvals have
been filed with the relevant regulatory
authorities, there can be no assurance that the
required regulatory approvals will be obtained,
and, if obtained, with what conditions. As of
the date hereof, the Federal Reserve has
approved the Merger, but the Pennsylvania
Department of Banking has not.. See "The
Merger-- Regulatory Considerations" and "The
Merger Agreement-- Conditions."
Dissenters' Rights............ Under the Pennsylvania Banking Code and the
BCL, the Shareholders have the right to object
to the Merger and demand to be paid in cash the
"fair value" of their shares of Armstrong
Common Stock if they comply fully with all the
requirements of Subchapter D of Chapter 15 of
the BCL ("Subchapter 15D"). A copy of the
provisions of Subchapter 15D and Section 1930
of the BCL are attached hereto as Annex D. See
"The Merger--Rights of Dissenting
Shareholders." It is a condition to BT
Financial's obligation to consummate the Merger
that the number of Dissenters' Shares be less
than 800 shares of Armstrong Common Stock as of
the Closing Date, representing 10% of the
Armstrong Common Stock expected to be
outstanding on such date. See "The Merger
Agreement-- Conditions." BT Financial has
reserved the right to waive this condition at
any time.
Certain Federal Income Tax
Consequences................ It is expected that the exchange of shares of
Armstrong Common Stock for shares of BT
Financial Common Stock will qualify as a
10
<PAGE> 16
tax-free reorganization pursuant to Section 368
of the Internal Revenue Code of 1986, as
amended (the "Code"). If the exchange does so
qualify, one result will be that no gain or
loss will be recognized by any Armstrong
shareholder upon the exchange of that Armstrong
shareholder's shares of Armstrong Common Stock
for shares of BT Financial Common Stock
pursuant to the Merger, except in respect of
cash received for fractional shares. Another
result will be that an Armstrong shareholder
will recognize gain with respect to the cash
portion of the Merger Consideration received,
but not in excess of the amount of cash
received. See "The Merger-- Certain Federal
Income Tax Consequences." Consummation of the
Merger is conditioned upon an opinion of
Kirkpatrick & Lockhart LLP, counsel to BT
Financial, concerning the material federal
income tax consequences expected to result from
the Merger, of which that section of this Proxy
Statement/Prospectus is, in part, a summary. A
copy of that opinion is filed as an exhibit to
the Registration Statement.
Accounting Treatment.......... The Merger will be treated as a purchase for
accounting purposes. See "The
Merger--Accounting Treatment."
Comparison of Shareholder
Rights........................ Two major differences between the rights of
shareholders of BT Financial and the rights of
shareholders of Armstrong are that provisions
of the BCL, federal law and the BT Financial
articles and bylaws affect business
combinations and control share acquisitions
involving BT Financial, but not Armstrong, and
BT Financial, but not Armstrong, has a
shareholder rights plan. An effect of BT
Financial's shareholder rights plan may be to
prevent the use of certain takeover tactics to
acquire BT Financial without the approval of BT
Financial's Board of Directors. For a more
detailed description of the differences between
the rights of shareholders of the two companies
and a description of the BT Financial Common
Stock, see "Comparison of Shareholder Rights"
and "Description of BT Financial Capital
Stock."
11
<PAGE> 17
SELECTED FINANCIAL INFORMATION
The following tables set forth selected historical financial information
(unaudited) for each of BT Financial and Armstrong, for each of the five years
in the period ended December 31, 1995. The selected historical financial
information should be read in conjunction with the audited financial statements
and other financial information for BT Financial, incorporated by reference in
this Proxy Statement/Prospectus, and for Armstrong, included elsewhere in this
Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Armstrong" and "Index to Armstrong and Moxham Financial
Statements."
The following tables set forth selected unaudited pro forma combined
financial information giving effect to the Merger under the purchase method of
accounting for the year ended December 31, 1995. The unaudited pro forma
financial information is prepared based on an exchange ratio in the Merger of
26.5 shares of BT Financial Common Stock and $596.25 in cash for each share of
Armstrong Common Stock, which is subject to possible increase in certain limited
circumstances. See "The Merger Agreement--The Merger."
The selected unaudited pro forma combined financial information also gives
effect to BT Financial's acquisition of Huntington Bank on December 14, 1995,
which was accounted for under the purchase method of accounting, for the year
ended December 31, 1995 and BT Financial's pending acquisition of Moxham, which
is expected to be accounted for under the pooling of interests method of
accounting, for the years ended December 31, 1993, 1994 and 1995. The unaudited
pro forma combined financial information gives effect to the payment of the cash
purchase price of $25,500,000 in the Huntington Bank acquisition and assumes
that 1.15 shares of BT Financial Common Stock will be issued for each share of
Moxham Common Stock and 6.325 shares of BT Financial Common Stock will be issued
for each share of Moxham Preferred Stock.
The unaudited pro forma condensed combined financial statements do not give
effect to anticipated cost savings in connection with the Merger, the Moxham
Merger or the Huntington Bank acquisition, and do not purport to be indicative
of the combined financial position or results of operations of future periods or
indicative of the results that actually would have been realized had the
entities been a single entity during these periods. The selected unaudited pro
forma combined financial information is derived from the unaudited pro forma
condensed combined financial statements appearing elsewhere herein and should be
read in conjunction with those statements. See "Unaudited Pro Forma Condensed
Combined Financial Information."
12
<PAGE> 18
BT FINANCIAL CORPORATION
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1991(6) 1992(7) 1993(8) 1994 1995(9)
-------- -------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income..................................... $ 70,780 $ 69,694 $ 66,254 $ 73,239 $ 81,837
Interest expense.................................... 36,457 29,136 23,143 26,212 33,473
-------- -------- ---------- ---------- ----------
Net interest income................................. 34,323 40,558 43,111 47,027 48,364
Provision for loan losses........................... 1,414 2,858 1,975 904 1,259
-------- -------- ---------- ---------- ----------
Net interest income after provision for loan
losses............................................ 32,909 37,700 41,136 46,123 47,105
Other income........................................ 5,208 5,922 6,894 6,974 7,251
Other expenses...................................... 28,082 31,499 33,840 37,519 37,254
-------- -------- ---------- ---------- ----------
Income before income taxes.......................... 10,035 12,123 14,190 15,578 17,102
Provision for income taxes.......................... 2,507 3,532 4,846 4,672 5,528
-------- -------- ---------- ---------- ----------
Income before cumulative effect of change in
accounting
for income taxes.................................. 7,528 8,591 9,344 10,906 11,574
Cumulative effect of change in accounting
for income taxes ................................. -- -- 113 -- --
-------- -------- ---------- ---------- ----------
Net income.......................................... $ 7,528 $ 8,591 $ 9,457 $ 10,906 $ 11,574
======== ======== ========== ========== ==========
BALANCE SHEET DATA
(PERIOD END)
Total assets........................................ $891,654 $906,948 $1,087,559 $1,107,575 $1,202,402
Loans, net of unearned interest..................... 553,384 567,211 698,408 742,657 857,557
Investment securities............................... 186,736 -- -- -- --
Securities available for sale....................... -- 219,800 231,508 248,281 208,148
Securities held-to-maturity......................... -- -- -- 22,911 35,161
Total deposits...................................... 781,761 809,023 956,961 948,233 1,035,647
Total long-term debt................................ 10,613 8,147 12,482 10,021 20,083
Total shareholders' equity.......................... 65,019 70,650 91,943 87,309 102,043
PER SHARE DATA(1)
Net income.......................................... $ 2.18 $ 2.48 $ 2.72 $ 2.85 $ 3.02
Cash dividends declared............................. .77 .86 .99 1.10 1.22
Period-end book value(2)............................ 18.80 20.43 24.03 22.82 26.67
Average shares outstanding.......................... 3,458,390 3,458,390 3,479,574 3,826,581 3,826,581
FINANCIAL RATIOS
Return on average assets............................ .93% .97% 1.05% 1.01% 1.05%
Return on average shareholders' equity.............. 12.10% 12.71% 12.69% 12.30% 12.13%
Net yield on earning assets(3)...................... 4.78% 5.12% 5.28% 4.80% 4.79%
Common stock dividend payout........................ 35.32% 34.51% 36.39% 38.60% 40.33%
Average shareholders' equity to average assets...... 7.64% 7.64% 8.24% 8.25% 8.63%
Primary capital ratio at period end(4).............. 7.82% 8.41% 9.05% 8.48% 9.10%
Net charge-offs to average loans, net of unearned
interest.......................................... .25% .36% .29% .12% .16%
Nonperforming loans to total loans, net of unearned
interest(5) ...................................... 1.02% .60% .46% .54% .53%
Reserve for loan losses to period-end loans, net of
unearned interest................................. .93% 1.08% 1.03% .97% .94%
</TABLE>
(footnotes continued on next page)
13
<PAGE> 19
- ---------
(1) Per share data has been restated to reflect the 5% stock dividends
distributed on September 11, 1992, July 26, 1993 and October 14, 1994.
(2) Book Value per share, excluding the effect of net unrealized holding gains
(losses) on securities available for sale, was $26.34, $24.53 and $22.78 at
December 31, 1995, 1994 and 1993, respectively.
(3) Net interest income stated on a fully taxable equivalent basis divided by
average earning assets.
(4) The sum of shareholders' equity and the reserve for loan losses divided by
the sum of total assets and the reserve for loan losses.
(5) Nonperforming loans include nonaccrual loans and restructured loans.
(6) Reflects the acquisitions of certain loans and deposits of Peoples Federal
Savings Bank on September 6, 1991 and the deposits of one branch of Atlantic
Financial Savings F.A. on November 15, 1991.
(7) Reflects the acquisition of Peoples Bank One on August 14, 1992.
(8) Reflects the acquisition of FirstSouth Bancorp, Inc. on December 10, 1993.
(9) Reflects the acquisition of Huntington Bank on December 14, 1995.
14
<PAGE> 20
THE ARMSTRONG COUNTY TRUST COMPANY
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1991 1992 1993 1994 1995
------- ------- ------- ------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income........................ $ 2,406 $ 2,471 $ 2,478 $ 2,563 $ 3,285
Interest expense....................... 1,195 1,063 932 856 1,485
------- ------- ------- ------- ---------
Net interest income.................... 1,211 1,408 1,546 1,707 1,800
Provision for loan losses.............. -- -- -- -- 38
------- ------- ------- ------- ---------
Net interest income after provision for
loan losses.......................... 1,211 1,408 1,546 1,707 1,762
Other income........................... 56 38 33 79 246
Other expenses......................... 674 667 732 975 1,171
------- ------- ------- ------- ---------
Income before income taxes............. 593 779 847 811 837
Provision for income taxes............. 145 180 246 230 190
------- ------- ------- ------- ---------
Income before cumulative effect of
change in accounting for income
taxes................................ 448 599 601 581 647
Cumulative effect of change in
accounting for income taxes.......... -- -- 169 -- --
------- ------- ------- ------- ---------
Net income............................. $ 448 $ 599 $ 770 $ 581 $ 647
======= ======= ======= ======= ========
BALANCE SHEET DATA (PERIOD END)
Total assets........................... $32,202 $38,531 $39,050 $40,795 $ 51,543
Loans, net of unearned interest........ 4,394 6,217 6,448 9,131 11,055
Investment securities.................. 22,779 25,464 23,542 -- --
Securities available for sale.......... -- -- -- 26,837 36,930
Securities held-to-maturity............ -- -- -- 1,825 1,355
Total deposits......................... 25,023 31,067 31,275 33,357 38,663
Accrued interest and other
liabilities.......................... 498 434 328 422 509
Total shareholders' equity............. 6,681 7,080 7,602 7,017 8,371
PER SHARE DATA
Net income............................. $ 56.00 $ 74.88 $ 96.25 $ 72.66 $ 80.90
Cash dividends declared................ 22.00 25.00 29.00 55.75 60.75
Period-end book value (regulatory
capital)............................. 835.13 885.00 950.25 967.13 987.38
Period-end book value
(Including FASB-115)................. 835.13 885.00 950.25 877.13 1,046.34
Average shares outstanding............. 8,000 8,000 8,000 8,000 8,000
FINANCIAL RATIOS
Return on average assets............... 1.40% 1.69% 1.99% 1.46% 1.40%
Return on average shareholders'
equity............................... 6.84% 8.71% 10.49% 7.95% 8.41%
Equity capital (regulatory) to total
assets............................... 20.75% 18.37% 19.47% 18.97% 15.32%
Equity capital (including FASB-115)
to total assets...................... 20.75% 18.37% 19.47% 17.20% 16.24%
</TABLE>
15
<PAGE> 21
BT FINANCIAL CORPORATION
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
FOR ALL TRANSACTIONS
(UNAUDITED)
<TABLE>
<CAPTION>
1993(1) 1994(1) 1995(2)
---------- ---------- ----------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Interest income....................................... 81,013 89,030 110,312
Interest expense...................................... 29,134 33,130 48,567
---------- ---------- ----------
Net interest income................................... 51,879 55,900 61,745
Provision for loan losses............................. 2,168 1,168 2,039
---------- ---------- ----------
Net interest income after provision for loan losses... 49,711 54,732 59,706
Other income.......................................... 8,205 8,407 9,484
Other expenses........................................ 41,563 45,597 49,963
Income before income taxes............................ 16,353 17,542 19,227
Provision for income taxes............................ 5,081 4,883 5,872
Income before cumulative effect of change in
accounting for income taxes......................... 11,272 12,659 13,355
Cumulative effect of change in accounting for income
taxes............................................... 86 -- --
---------- ---------- ----------
Net income............................................ 11,358 12,659 13,355
BALANCE SHEET DATA (PERIOD END)
Total assets.......................................... $1,306,551 $1,338,213 1,493,511
Loans, net of unearned interest....................... 832,421 892,010 1,022,295
Investment securities................................. 295,646 333,201 337,306
Securities available for sale......................... 295,646 310,290 302,145
Securities held-to-maturity........................... -- 22,911 35,161
Total deposits........................................ 1,156,650 1,147,993 1,291,915
Total long-term debt.................................. 12,360 10,021 20,083
Total shareholders' equity............................ 109,099 104,008 129,478
PER SHARE DATA
Net income............................................ $ 2.48 $ 2.56 2.59
Cash dividends declared............................... .99 1.10 1.22
Period-end book value................................. 22.54 21.04 25.07
Average shares outstanding............................ 4,580,788 4,938,822 5,160,463
<FN>
- ---------
(1) Reflects pending acquisition of Moxham.
(2) Reflects acquisition of Huntington Bank on December 14, 1995 and pending
acquisitions of Armstrong and Moxham.
</TABLE>
16
<PAGE> 22
COMPARATIVE PER SHARE DATA
Set forth below is selected income, book value and cash dividends per
common share data: (i) on an historical basis for BT Financial and Armstrong;
(ii) on an unaudited pro forma combined basis for BT Financial after giving
effect to the Merger, assuming the Merger had been effective for the year ended
December 31, 1995; (iii) on an unaudited pro forma combined basis for BT
Financial, assuming the Merger and BT Financial's acquisition of Huntington Bank
had been effective for the year ended December 31, 1995, and assuming BT
Financial's pending acquisition of Moxham had been effective for all periods
presented; (iv) on an unaudited pro forma equivalent basis for Armstrong,
assuming that the Merger had been effective for the year ended December 31,
1995; and (v) on an unaudited pro forma equivalent basis for Moxham, assuming
that the Moxham Merger had been effective for the year ended December 31, 1995
and assuming BT Financial's pending acquisition of Moxham had been effective for
all periods presented. The unaudited pro forma combined per share information
are based on the issuance of 26.5 shares of BT Financial Common Stock for each
share of Armstrong Common Stock, 1.15 shares of BT Financial Common Stock for
each share of Moxham Common Stock and 6.325 shares of BT Financial Common Stock
for each share of Moxham Preferred Stock. The information set forth below should
be read in conjunction with the respective financial statements of BT Financial
incorporated by reference in, and of Armstrong and Moxham included elsewhere in,
this Proxy Statement/Prospectus and with the unaudited pro forma condensed
combined information included under "Unaudited Pro Forma Condensed Combined
Financial Information." See "Selected Financial Information," and "Index to
Armstrong and Moxham Financial Statements."
17
<PAGE> 23
PRO FORMA AND PRO FORMA EQUIVALENT PER COMMON SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1993 1994 1995(1)
----- ------- -------------
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
ACCOUNTING PRINCIPLE CHANGE:
BT Financial:
Historical........................................ $2.72 $ 2.85 $ 3.05
Pro forma BT Financial and Armstrong.............. 2.94
Pro forma BT Financial and Moxham................. 2.48 2.56 2.66
Pro forma all transactions........................ 2.59
Armstrong:
Historical........................................ 80.90
Pro forma equivalent Armstrong and BT Financial... 77.91
Moxham:
Historical........................................ 1.98 1.81 1.51
Pro forma equivalent Moxham and BT Financial...... 2.85 2.94 3.06
BOOK VALUE PER COMMON SHARE:
BT Financial:
Historical........................................ $ 26.67
Pro forma BT Financial and Armstrong.............. 27.16
Pro forma BT Financial and Moxham................. 24.60
Pro forma all transactions........................ 25.07
Armstrong:
Historical........................................ 1,046.34
Pro forma equivalent Armstrong and BT Financial... 719.74
Moxham:
Historical........................................ 20.69
Pro forma equivalent Moxham and BT Financial...... 28.29
CASH DIVIDENDS DECLARED PER COMMON SHARE:
BT Financial:
Historical........................................ $ .99 1.10 1.22
Pro forma BT Financial and Armstrong.............. 1.22
Pro forma BT Financial and Moxham................. .99 1.10 1.22
Pro forma all transactions........................ 1.22
Armstrong:
Historical........................................ 60.75
Pro forma equivalent Armstrong and BT Financial... 32.33
Moxham:
Historical........................................ .56 .58 .64
Pro forma equivalent Moxham and
BT Financial................................... 1.14 1.27 1.40
<FN>
- ---------
(1) Includes the acquisition of Huntington Bank on December 14, 1995.
</TABLE>
18
<PAGE> 24
COMPARATIVE MARKET PRICES
The BT Financial Common Stock is traded on NASDAQ. There is no established
trading market for the Armstrong Common Stock.
The table below sets forth, for the calendar quarters indicated, the
reported high and low closing sales prices of BT Financial Common Stock based on
published financial sources.
<TABLE>
<CAPTION>
BT FINANCIAL
COMMON STOCK
--------------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1994
First Quarter............................................... $31 3/4 $30
Second Quarter.............................................. 31 28
Third Quarter............................................... 30 1/2 28
Fourth Quarter.............................................. 29 3/4 26 1/2
1995
First Quarter............................................... $29 3/4 $26
Second Quarter.............................................. 31 1/2 29
Third Quarter............................................... 37 1/4 30 1/4
Fourth Quarter.............................................. 37 1/2 33 1/2
1996
First Quarter............................................... $36 1/4 $33 1/2
Second Quarter (through April , 1996...................... 36 1/4 35 3/4
</TABLE>
The closing sales prices for the BT Financial Common Stock set forth above
have not been retroactively adjusted to reflect 5% stock dividends distributed
on July 26, 1993 and October 14, 1994.
Since the market price of BT Financial Common Stock is subject to
fluctuation, the market value of the shares of BT Financial Common Stock that
holders of shares of Armstrong Common Stock will receive in the Merger may
increase or decrease prior to and after the Merger.
On October 23, 1995, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the
closing sales price per share of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal was $36.00. On April , 1996, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus, the
closing sales price per share of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal was $ .
Armstrong Common Stock is not listed on any exchange, quotation system or
over-the-counter market and is not actively traded. Armstrong is aware of the
sales prices in the following transactions: On June 25, 1993, a trade of 200
shares at $1,100 per share; on February 16, 1994, a trade of 1 share at $1,000
per share; and on November 22, 1995, the last known trade prior to the execution
of the Merger Agreement and the public announcement thereof, a trade of 2,384
shares at $995.14 per share. The November 22, 1995 trade occurred pursuant to a
certain Stock Exchange and Redemption Agreement (the "Exchange Agreement"),
dated August 16, 1995, by and among The Farmers National Bank of Kittanning
("Farmers"), certain shareholders of Farmers ("Certain Farmers Shareholders")
and certain shareholders of Armstrong ("Certain Armstrong Shareholders"),
including Jerome Lombardi and Lynn Durham, both directors of Armstrong. The
Exchange Agreement provided for Certain Farmers Shareholders to exchange all of
the shares of the Armstrong Common Stock they owned for all of the shares of
Farmers common stock ("Farmers Common Stock") owned by Certain Armstrong
Shareholders. The remaining shares of Farmers Common Stock owned by Certain
Armstrong Shareholders were redeemed by Farmers. Following the receipt of the
requisite regulatory and shareholder approvals, the transactions closed
resulting in the acquisition of 1,172 and 1,212 additional shares of the
Armstrong Common Stock by Mr. Lombardi and Ms. Durham, respectively. To the
knowledge of Armstrong, since the execution and delivery of the Merger
Agreement, there have been no trades of Armstrong Common Stock, except pursuant
to the Exchange Agreement.
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ARMSTRONG SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR BT
FINANCIAL COMMON STOCK PRIOR TO THE MEETING.
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THE MEETING
This Proxy Statement/Prospectus is being furnished to Armstrong
shareholders in connection with the solicitation of proxies by the Armstrong
Board for use at the Meeting to be held on May , 1996 at the executive offices
of Armstrong at 227 Market Street, Kittanning, Pennsylvania, and at any
adjournment or postponement thereof. This Proxy Statement/Prospectus and the
enclosed proxy card are first being mailed to Shareholders on or about April ,
1996.
At the Meeting, Armstrong shareholders will consider and vote upon a
proposal to adopt and approve the Merger Agreement and such other business as
may properly come before the Meeting or any adjournment or postponement thereof.
The Armstrong Board unanimously voted to approve the Merger Agreement and the
Merger and recommends a vote by Armstrong shareholders FOR adoption and approval
of the Merger Agreement.
VOTING AT THE MEETING; RECORD DATE
The Armstrong Board has fixed April , 1996 as the record date for
determination of holders of record of shares of Armstrong Common Stock entitled
to notice of and to vote at the Meeting. Accordingly, only holders of record of
shares of Armstrong Common Stock at the close of business on that date are
entitled to notice of and to vote at the Meeting. As of April , 1996 there
were 8,000 shares of Armstrong Common Stock outstanding held by 49 holders of
record. Each holder of record of shares of Armstrong Common Stock as of the
record date is entitled to cast one vote per share, exercisable in person or by
properly executed proxy, on the proposal to adopt and approve the Merger
Agreement and any other matters properly submitted for a vote of the
shareholders at the Meeting. The presence, in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Armstrong
Common Stock entitled to vote at the Meeting is necessary to constitute a quorum
at the Meeting. The affirmative vote of the Shareholders entitled to cast at
least two-thirds of the votes which all Armstrong shareholders are entitled to
cast thereon is required to adopt and approve the Merger Agreement. An
abstention, whether done in person or by proxy, or a failure to vote will have
the effect of a vote against the Merger Agreement.
Each director and executive officer of Armstrong who owns shares of
Armstrong Common Stock has advised Armstrong that he or she intends to vote or
direct the vote of all shares of Armstrong Common Stock over which he or she has
voting control FOR adoption and approval of the Merger Agreement. As of April
, 1996, the directors and executive officers of Armstrong were the beneficial
owners of 5,155, or approximately 64.44%, of the outstanding shares of Armstrong
Common Stock. If all shares of Armstrong Common Stock are present at the Meeting
and the directors and executive officers of Armstrong all vote as they have
stated that they intend to vote, the affirmative vote of only an additional 178
shares (or approximately 2.23%) of the Armstrong Common Stock would be necessary
to adopt and approve the Merger Agreement.
PROXIES
All shares of Armstrong Common Stock which are entitled to vote and are
represented at the Meeting by properly executed proxies received prior to or at
the Meeting, and not revoked as of such time, will be voted at the Meeting in
accordance with the instructions indicated on those proxies. If no instructions
are indicated on any proxies solicited by the Armstrong Board which are received
prior to or at the Meeting, those proxies will be voted FOR adoption and
approval of the Merger Agreement.
It is not anticipated that any matter other than the proposal to adopt and
approve the Merger Agreement will be brought before the Meeting. If any other
matter is properly presented at the Meeting for consideration, including, among
other things, a motion to adjourn the Meeting to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), the persons named in the enclosed form of proxy card and acting
thereunder will have discretion to vote on such matter in accordance with their
best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Armstrong, before the taking of the vote at the Meeting, a
written notice of revocation bearing a later date than the proxy card, (ii) duly
executing a later dated
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proxy card relating to the same shares and delivering it to the Secretary of
Armstrong before the taking of the vote at the Meeting or (iii) attending the
Meeting and giving the Secretary of Armstrong a written notice of revocation
bearing a later date than the proxy card before the taking of the vote at the
Meeting. Attendance at the Meeting will not in and of itself constitute a
revocation of a proxy. Any written notice of revocation or subsequent proxy from
a Shareholder should be sent so as to be delivered to The Armstrong County Trust
Company, 227 Market Street, Kittanning, Pennsylvania 16201, Attention:
Secretary, or hand delivered to the Secretary of Armstrong, before the taking of
the vote at the Meeting.
ARMSTRONG SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE, EVEN IF THEY
ARE PLANNING TO ATTEND THE MEETING. ALL PROPERLY EXECUTED PROXIES RECEIVED PRIOR
TO OR AT THE MEETING WILL BE VOTED WITH RESPECT TO THE MATTER IDENTIFIED ON THE
PROXY CARDS IN ACCORDANCE WITH ANY INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS
ARE GIVEN, WILL BE VOTED FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
All expenses of this solicitation will be paid by Armstrong. In addition to
solicitation by use of the mails, proxies may be solicited by directors,
officers and employees of Armstrong in person or by telephone, telegram or other
means of communication. Those directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with that solicitation. Arrangements will be
made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by those
custodians, nominees and fiduciaries, and Armstrong will reimburse those
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
ARMSTRONG SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
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THE MERGER
BACKGROUND OF THE MERGER
The past decade has been a period of rapid change in the banking industry
in general, and especially for the banking industry in Pennsylvania. This period
has been characterized by accelerated consolidation throughout the United States
and in Pennsylvania, and by intensified competition from domestic and foreign
banks and from non-bank financial services organizations. This period also has
been characterized by increasing requirements for investments in technology in
order to meet customer needs on an efficient, competitive basis.
Part of BT Financial's long-term strategic plan has been to acquire
existing banks, savings and loan associations, savings banks and branches
thereof in areas contiguous to the geographical areas that its banking
subsidiaries currently serve. In connection with this strategic plan, BT
Financial periodically reviews possible candidates for acquisition.
The Armstrong Board has continually reviewed the strategic alternatives for
maximizing shareholder value. During 1993, the Board retained Sequoia Advisors,
Inc. ("Sequoia"), a financial consulting firm that was owned by one of the
principals of Bahia, to analyze a variety of strategic options available to
Armstrong. The range of options suggested by Sequoia and considered by the
Armstrong Board included pursuing a course of independence and growing
internally, as well as selling Armstrong in a business combination.
In December 1993, John H. Anderson, Chairman and Chief Executive Officer of
BT Financial, had preliminary discussions with representatives of Armstrong
about the possibility of an affiliation between BT Financial, Armstrong and
another institution. These preliminary discussions continued throughout the
spring of 1994. During the spring of 1994, the Armstrong Board received
unsolicited, preliminary proposals to acquire Armstrong from BT Financial and
two other financial institutions. The proposal from BT Financial entailed an
acquisition of Armstrong and another bank by means of a simultaneous merger of
Armstrong and the other bank into a newly formed bank subsidiary of BT
Financial. If this proposal had been accepted, each Armstrong shareholder would
have received 23.8 shares of BT Financial Common Stock and $687.50 in cash in
exchange for each share of Armstrong stock. Based on a then-current market price
of BT Financial Common Stock of approximately $31.00 per share, BT Financial
offered 1.54 times the book value for each of these banks, which would have
resulted in a price of $1,425.30 per share of Armstrong Common Stock. The
Armstrong Board conducted preliminary discussions throughout the spring of 1994
with BT Financial and the other two institutions that had submitted proposals.
However, none of these preliminary proposals resulted in a formal offer or a
definitive agreement to acquire Armstrong.
In July 1994, holders of a significant block of the outstanding common
stock of Armstrong (the "Selling Shareholders") retained Bahia to find a buyer
for their Armstrong Common Stock. On behalf of the Selling Shareholders, Bahia
approached a number of financial institutions in Pennsylvania, Ohio and New
York, including BT Financial, concerning the possibility of acquiring this block
of Armstrong stock. Several of these financial institutions, including BT
Financial, executed confidentiality agreements with Bahia acting on the Selling
Shareholders' behalf, and conducted a substantial amount of off-site due
diligence.
On February 22, 1995, the Board of Directors of BT Financial authorized the
management of BT Financial to make an offer to acquire Armstrong at a price of
$1,325.00 per share, consisting of 26.5 shares of BT Financial Common Stock,
which was then trading at a price of approximately $27.00 per share, and $596.25
in cash per share, for a total consideration of $10.6 million. As a result of
Bahia's efforts, in March 1995, BT Financial submitted a preliminary proposal to
Bahia to acquire 100% of the outstanding common stock of Armstrong on this
basis. Bahia informed the Armstrong Board of BT Financial's interest.
Thereafter, Bahia and representatives of BT Financial had a number of
discussions concerning the possibility of BT Financial acquiring Armstrong.
The parties subsequently began to negotiate the terms of an acquisition
agreement. During this period, BT Financial also began its due diligence
investigation for the purpose of valuing Armstrong as an acquisition candidate.
Although the parties had some preliminary conversations concerning price in
February 1995, it was not until the completion of BT Financial's due diligence
investigation and in the context of a fully negotiated acquisition agreement
that the parties agreed on the amount of the Merger Consideration. In
negotiating the
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components and amount of the Merger Consideration, BT Financial was interested
in paying a combination of BT Financial Common Stock and cash to avoid the
dilution of earnings that would result from an all-stock transaction and to
minimize the reduction in capital that would result from an all-cash
transaction. Similarly, Armstrong was interested in a transaction that would be
partially tax-free and would result in the Armstrong shareholders receiving a
marketable security. The exact mix of stock and cash was a result of arms-length
negotiations between the parties.
From February through October 1995, BT Financial conducted its due
diligence and the parties completed their negotiation of the Merger Agreement.
On October 24, 1995, the Armstrong Board met, reviewed the final version of the
Merger Agreement, discussed the terms of the transactions contemplated thereby
and authorized the officers of Armstrong to execute and deliver that agreement
and to work to accomplish the transactions contemplated thereby. The Merger
Agreement was executed on the same day.
REASONS FOR THE MERGER; RECOMMENDATION OF ARMSTRONG BOARD
BT Financial
In BT Financial's view, the Merger will extend BT Financial's geographic
market into an area that is contiguous to BT Financial's current market. At
present, BT Financial's subsidiary banks conduct business through a network of
63 offices located throughout Southwestern Pennsylvania. Subsequent to the
Merger, the Armstrong office in Kittanning, Pennsylvania, will be operated as a
branch of Johnstown Bank. Johnstown Bank currently has one other branch in
Armstrong County.
Armstrong
The Armstrong Board has unanimously approved the Merger Agreement and has
determined that the Merger is fair to, and in the best interests of, Armstrong
and its shareholders. The Armstrong Board therefore unanimously recommends that
Armstrong shareholders vote FOR adoption and approval of the Merger Agreement.
The Armstrong Board believes that the Merger will enable its shareholders to
realize significant value when compared to the value of Armstrong Common Stock
should the Merger not occur.
In reaching its determination that the Merger Agreement is fair to, and in
the best interests of, Armstrong and its shareholders, the Armstrong Board
considered a number of factors, both from a short-term and long-term
perspective, including, without limitation, the following:
1. The Armstrong Board's familiarity with and review of Armstrong's
business, financial condition, results of operation, and prospects,
including, but not limited to, its potential growth, development,
productivity and profitability;
2. The current and prospective environment in which Armstrong
operates, including national, state and local economic conditions,
Armstrong's competitive environment, the increased regulatory burdens on
financial institutions generally, the trend towards consolidation in the
financial services industry in general and among financial institutions in
Pennsylvania and the likely effect of the foregoing factors on Armstrong's
potential growth, development, productivity and profitability;
3. The business, financial condition, results of operations, market
valuations and acquisition history of BT Financial and the opportunity for
the Armstrong shareholders to participate in any future growth of BT
Financial by obtaining BT Financial Common Stock in the Merger;
4. A comparison of the products and services provided by Armstrong and
BT Financial, as well as the costs associated with and relative level of
resources available to Armstrong and BT Financial, respectively, to
maintain and provide future enhancements to, and develop new products and
services within its markets;
5. The anticipated tax-free receipt of shares of BT Financial Common
Stock in the Merger (see "The Merger--Certain Federal Income Tax
Consequences");
6. The absence of an established trading market for the Armstrong
Common Stock compared to the market for BT Financial Common Stock, which is
included for quotation on NASDAQ;
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7. The provision in the Merger Agreement permitting Armstrong to
terminate the Merger Agreement if Armstrong did not receive an opinion from
an investment advisor, in form and content satisfactory to Armstrong, to
the effect that the Merger is fair, from a financial point of view, to
Armstrong shareholders; and
8. The possibility of a special dividend being declared prior to the
effective time of the Merger if Armstrong's income exceeds a certain level.
See "The Merger Agreement--Armstrong Dividends".
OPINION OF ARMSTRONG FINANCIAL ADVISOR
The Armstrong Board retained Bahia as its financial advisor in connection
with the Merger and requested Bahia to render its opinion as to whether the
Merger Consideration to be paid to Armstrong shareholders is fair from a
financial point of view. In requesting Bahia's advice and opinion, the Armstrong
Board did not give any special instructions to or impose any limitations upon
the scope of the investigation which Bahia might wish to conduct to enable it to
give its opinion. Bahia has delivered to Armstrong its written opinion dated
October 24, 1995, to the effect that, based upon and subject to the matters set
forth therein, as of the date thereof, the Merger Consideration is fair to
Armstrong shareholders from a financial point of view. A copy of Bahia's opinion
is attached as Annex C hereto and incorporated by reference herein and should be
read in its entirety by Armstrong shareholders.
Bahia was selected by Armstrong to act as its financial advisor because of
Bahia's expertise in the valuation of businesses and their securities in
connection with mergers and acquisitions of financial institutions. Bahia has
not previously acted as a financial advisor to Armstrong. Sequoia, which was
owned by one of the principals of Bahia, provided Armstrong with financial and
strategic advice during 1993. Bahia will receive from Armstrong a fee of
$175,000, plus reimbursement of certain out-of-pocket expenses, for its services
in connection with the Merger. In addition, Armstrong has agreed to indemnify
and hold harmless Bahia and its directors, officers and employees (the "Bahia
Indemnitees") from and against any and all losses, claims, damages, costs,
liabilities and expenses related to or arising out of its services in connection
with the Merger. Armstrong will not be responsible for any such losses, claims,
damages, costs, liabilities or expenses that are determined to have solely
resulted from Bahia's willful misconduct, gross negligence or breach of
fiduciary duty in performing its services. If for any reason the foregoing
indemnification is unavailable to the Bahia Indemnitees or insufficient to hold
them harmless, then Armstrong has agreed to contribute to the amount paid or
payable to the Bahia Indemnitees as a result of such claim, damage, loss, cost,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by Armstrong and Bahia, but also the relative
fault of Armstrong and Bahia, as well as any relevant equitable consideration.
In the course of preparing its opinion, Bahia has reviewed and analyzed,
among other things, the following:
1. the Merger Agreement;
2. BT Financial's Annual Reports, BT Financial's Annual Reports on
Form 10-K and related financial information for the five years ended
December 31, 1994, BT Financial's Quarterly Reports on Form 10-Q and
related unaudited financial information for the three month periods ended
March 31, 1994, June 30, 1994, September 30, 1994, March 31, 1995 and June
30, 1995, as well as unaudited financial information for each of the one
month periods ended July 31, 1995, August 31, 1995 and September 30, 1995,
respectively;
3. Armstrong's Annual Reports, and related financial information for
the five years ended December 31, 1994, Armstrong's Quarterly Reports and
related unaudited financial information for the three month periods ended
March 31, 1994, June 30, 1994, September 30, 1994, March 31, 1995 and June
30, 1995 as well as unaudited financial information for each of the one
month periods ended July 31, 1995, August 31, 1995 and September 30, 1995,
respectively;
4. Certain other public and non-public information, including
financial and operating forecasts, relating to Armstrong and BT Financial
including: (i) the historical and current financial condition and results
of operations of Armstrong and BT Financial, including interest income,
interest expense, net interest income, net interest margin, non-interest
income, non-interest expense, earnings, dividends, internal capital
generation, book value, intangible assets, return on assets, return on
stockholders' equity, capitalization, the
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amount and type of non-performing assets, loan losses and the allowance for
loan losses; and (ii) the assets and liabilities of Armstrong and BT
Financial, including, the loan and investment portfolios, deposits, other
liabilities, historical and current liability sources and costs and
liquidity;
5. Discussions with members of senior management of Armstrong and BT
Financial concerning the financial condition, business, assets and
prospects of Armstrong and BT Financial, respectively;
6. The historical market prices and trading activity for shares of BT
Financial Common Stock;
7. A comparison of the results of operations, asset composition, and
financial condition of Armstrong with those of certain Pennsylvania-based
financial institutions that were deemed comparable to Armstrong;
8. Such other financial studies and analyses, such other
investigations performed by Bahia and such other matters as were deemed
necessary to the rendering of its opinion;
9. The valuation of BT Financial Common Stock, and a comparison of
this valuation with those of 15 publicly traded Pennsylvania banks with
assets between $500 million and $5 billion;
10. A comparison of the results of operations and financial condition
of BT Financial with those of 15 publicly traded Pennsylvania banks with
assets between $500 million and $5 billion; and
11. A comparison of the proposed financial terms of the Merger
contemplated by the Merger Agreement with the financial terms of three
groups of other merger and acquisition transactions. The first group
included 16 transactions announced or completed between January 1994 and
August 1995 where the target was a commercial bank, headquartered in
Pennsylvania, and had total assets of $200 million or less. The second
group included 6 transactions announced or completed between January 1994
and August 1995 where the target was a commercial bank, headquartered in
Pennsylvania, and had total assets of $200 million or less, an
equity/assets ratio of 10% or more, and a return on average assets ratio of
1.00% or better. The final group included 21 transactions announced or
completed between January 1994 and August 1995 where the target was a
commercial bank, headquartered in Pennsylvania, and had total assets of $1
billion or less.
In rendering its opinion, Bahia relied, without independent verification,
on the accuracy and completeness of the information concerning Armstrong and BT
Financial furnished by the respective institutions to Bahia for review for
purposes of its opinion, as well as publicly available information on other
financial institutions and economic data. With respect to the financial
forecasts Bahia reviewed for each institution, Bahia assumed that they had been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the managements of each respective institution. Armstrong and
BT Financial did not restrict Bahia as to the material it was permitted to
review. Bahia did not perform or obtain any independent appraisals or
evaluations of the assets and liabilities and potential and/or contingent
liabilities of Armstrong or BT Financial. Bahia expresses no opinion on matters
of a legal, regulatory, tax or accounting nature or the ability of the Merger as
set forth in the Merger Agreement to be consummated. Bahia's opinion was based
solely upon the information available to it and the economic, market and other
circumstances as they existed as of October 24, 1995; events occurring after
that date could materially affect the assumptions used in preparing the opinion.
In rendering its opinion, Bahia assumed that in the course of obtaining the
necessary regulatory and governmental approvals for the proposed Merger, no
restriction will be imposed on Armstrong or BT Financial that would have a
material adverse effect on the contemplated benefits of the Merger. Bahia also
assumed that there would not occur any change in applicable law or regulations
that would cause a material adverse change in the prospects or operations of
Armstrong or BT Financial after the Merger.
BAHIA'S OPINION IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF
VIEW OF THE CONSIDERATION TO BE RECEIVED BY ARMSTRONG SHAREHOLDERS AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE MEETING. THE SUMMARY OF THE OPINION OF BAHIA SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION, A COPY OF WHICH IS ATTACHED HERETO AS ANNEX C.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Armstrong Board, Armstrong
shareholders should be aware that members of Armstrong's management and the
Armstrong Board have interests in the Merger that are in addition to the
interests of Armstrong shareholders generally. The Armstrong Board was aware of
these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby.
Indemnification
After the effective time of the Merger, BT Financial, as the successor to
Armstrong, will indemnify and hold harmless any former directors, officers,
employees or agents of Armstrong who have rights to indemnification under the
articles of incorporation and bylaws of Armstrong and the BCL from and against
any and all claims, losses, liabilities or damages arising out of or in
connection with any of their activities in such capacities or on behalf of, or
at the request of, Armstrong prior to the effective time of the Merger
("Claims") in accordance with and to the extent required under the articles of
incorporation and bylaws of BT Financial and the BCL. Further, BT Financial will
be obligated to advance expenses incurred with respect to the foregoing, as they
are incurred, in each case only to the extent such advances are required under
the articles of incorporation and bylaws of BT Financial as in effect on October
24, 1995 and the BCL. The obligations of BT Financial described in the preceding
sentences will continue in full force and effect following the effective time of
the Merger for a period of one year, although all rights to indemnification in
respect of any Claim asserted or made within such period will continue until the
final disposition of such Claim. BT Financial will also provide officers' and
directors' liability insurance coverage for all former directors and officers of
Armstrong, whether or not they become part of the BT Financial organization
after the effective time of the Merger, to the same extent as such coverage is
provided to Johnstown Bank's officers and directors, for one year following the
effective time of the Merger.
BT Financial will also indemnify and hold harmless Armstrong and each
person, if any, who controls Armstrong within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
BT Financial or such controlling persons may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (a) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Proxy Statement/Prospectus or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading to the extent
that any such statement or omission relates to BT Financial or (b) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact or any omission or alleged omission to state a material fact
required to be stated or necessary to make the statements not misleading in any
document distributed to any Armstrong shareholder to the extent that any such
statement or omission relates to BT Financial, and will reimburse Armstrong and
each such controlling person for any legal or other expenses reasonably incurred
by Armstrong or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. BT Financial will
not, however, be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any of the
Proxy Statement/Prospectus or any amendment or supplement thereto or any related
preliminary prospectus that was made or omitted in reliance upon and in
conformity with written information furnished by Armstrong specifically for use
therein.
Employment Agreements
On August 3, 1994, the Armstrong Board passed a resolution entitling Mr.
Coleman J. Clougherty, Chairman, President and Chief Executive Officer of
Armstrong, to severance pay. In the Merger Agreement, BT Financial agreed to pay
Mr. Clougherty $200,000, so long as Mr. Clougherty agrees to waive in writing
his right to severance pay and any other obligations Armstrong has to him.
Directorate of Johnstown Bank
After the Merger, Johnstown Bank intends to invite Jerome Lombardi, a
director of Armstrong, to serve as a director of Johnstown Bank.
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REGULATORY CONSIDERATIONS
Consummation of the Merger is subject to, and conditioned upon, among other
things, receipt of requisite approvals from the Federal Reserve and the
Pennsylvania Department of Banking and the expiration of all regulatory waiting
periods applicable to the Merger. As of the date hereof, applications seeking
regulatory approval of the Merger have been filed with the necessary regulatory
authorities. The Federal Reserve approved the Merger on April 10, 1996, but the
Pennsylvania Department of Banking has not yet given its approval.
Section 18(c) of the Federal Deposit Insurance Act of 1950, as amended (the
"FDIA"), provides that the Federal Reserve shall not approve any proposed merger
transaction which would result in a monopoly, the effect of which in any section
of the country may be substantially to lessen competition, or to tend to create
a monopoly, or which in any other manner would be in restraint of trade.
In conducting its review of any application for approval, the Federal
Reserve is required to consider the financial and managerial resources and
future prospects of the banks concerned and the convenience and needs of the
community to be served. In addition, under the Community Reinvestment Act of
1977, the Federal Reserve must take into account the record of performance of
the existing and proposed institutions in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, consistent with the
safe and sound operation of such institution. The Federal Reserve has also
indicated that it will not approve a significant acquisition unless the
resulting institution has adequate capitalization, taking into account, among
other things, asset quality.
The FDIA also requires the Federal Reserve to notify the Attorney General
of the United States of the approval of any transaction such as the Merger and
generally permits an action to be brought under the antitrust laws by the
Attorney General with respect to any such transaction within 30 days after the
date of approval by the Federal Reserve, which period may be shortened to no
less than 15 days after such approval by the Federal Reserve with the
concurrence of the Attorney General. Transactions such as the Merger may
generally not be consummated until the conclusion of this 30-day (or shorter)
period.
The FDIA provides for the publication of notices relating to the federal
filing noted above. If an interested party were permitted to intervene with
respect to the Merger, administrative and judicial proceedings could
substantially delay the regulatory approvals required for consummation of the
Merger.
The approval of the Pennsylvania Department of Banking also must be
obtained in connection with the Merger. Pursuant to the provisions of the
Pennsylvania Banking Code, the Pennsylvania Department of Banking is required to
approve or disapprove a proposed acquisition within 60 days after receipt of the
application, the articles of merger and the applicable fee, or within an
additional period of not more than 30 days after an amendment to the application
is received within the initial 60 day period. The Pennsylvania Department of
Banking must evaluate factors similar to those considered by the Federal Reserve
in determining whether to approve the Merger.
As of the date hereof, the Pennsylvania Department of Banking has not yet
approved the Merger. There can be no assurance that the Pennsylvania Department
of Banking will approve the Merger, and if the Merger is approved, there can be
no assurance as to the date of such approval. There can also be no assurance
that any such approval will not contain a condition or requirement that would
cause such approval to fail to satisfy one of the conditions to consummation of
the Merger set forth in the Merger Agreement. There can likewise be no assurance
that neither the Department of Justice nor any complaining parties will
challenge the Merger, or if such a challenge is made, as to the results thereof.
RIGHTS OF DISSENTING SHAREHOLDERS
Any owner of shares of Armstrong Common Stock has the right under Section
1607 of the Pennsylvania Banking Code and Subchapter 15D of the BCL to object to
the Merger and demand to be paid in cash the fair value of such shares upon
complying in full with the provisions of Subchapter 15D. THE FOLLOWING DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROVISIONS OF SUBCHAPTER 15D OF THE
BCL OR SECTION 1607 OF THE PENNSYLVANIA CODE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THOSE PROVISIONS, A COPY OF WHICH IS ATTACHED
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HERETO AS ANNEX D. THOSE PROVISIONS MUST BE STRICTLY COMPLIED WITH OR A
SHAREHOLDER'S DISSENTERS' RIGHTS MAY BE LOST.
If an owner of shares of Armstrong Common Stock wants to exercise the right
to dissent, such owner must satisfy all of the following conditions. First, the
owner must file with Armstrong prior to the vote with respect to the Merger a
written notice of his intention to demand that he be paid the fair value of his
shares of Armstrong Common Stock if the Merger takes place. Neither a vote in
person or by proxy against adoption and approval of the Merger Agreement, nor an
abstention from voting with respect to, or a failure to vote for adoption and
approval of, the Merger Agreement will constitute such a written notice. Second,
the owner must not effect any change in the beneficial ownership of his shares
of Armstrong Common Stock from the date of filing such written notice
continuously through the effective time of the Merger. Finally, the owner must
not vote in person or by proxy for adoption and approval of the Merger
Agreement. Neither an abstention from voting with respect to, nor a failure to
vote in person or by proxy against adoption and approval of, the Merger
Agreement will constitute a vote for adoption and approval of the Merger
Agreement. Unless an owner follows all these steps, he will not acquire any
right to payment of the fair value of his shares and will be conclusively
presumed to have consented to the Merger and will be bound by its terms. A
written notice of an intention to demand payment of fair value should be sent
prior to the Meeting to The Armstrong County Trust Company, 227 Market Street,
Kittanning, Pennsylvania 16201, Attention: Secretary.
A person who is the beneficial owner, but not the record holder, of shares
of Armstrong Common Stock and who desires to exercise the rights of a dissenting
shareholder may assert those rights with respect to shares held on that person's
behalf and shall be treated as a dissenting shareholder under the terms of
Section 15D if he submits to Armstrong a written consent of the record holder of
those shares to such treatment no later than the time dissenters' rights are
asserted with respect to those shares. A beneficial owner may not dissent with
respect to less than all shares of which such person is the owner, whether or
not the shares so owned are registered in such person's name.
A record holder for more than one beneficial owner may assert dissenters'
rights as to less than all of the shares registered in his name only if that
holder dissents with respect to all shares beneficially owned by a person that
are held by him and discloses the name and address of that person. In that
event, the record holder will be treated as if the shares as to which he has
dissented and the other shares held by him were registered in the names of
different persons.
If the Merger Agreement is adopted and approved by the requisite vote of
the Shareholders, Armstrong or BT Financial will mail a "further notice" to each
owner who followed all of the steps described above (a "Dissenter"). The
"further notice" will: (i) state the location where and the date by which a
demand for payment must be sent and certificates formerly representing shares of
Armstrong Common Stock ("Certificates") must be deposited in order to obtain
payment, which date will not be less than 30 days after the date of mailing of
the "further notice"; (ii) inform holders of uncertificated shares to what
extent transfer of shares will be restricted from the time that demand for
payment is received; (iii) supply a form for demanding payment that includes a
request for certification of the date on which the Dissenter acquired beneficial
ownership of his shares of Armstrong Common Stock; and (iv) include a copy of
Subchapter 15D. If a Dissenter fails to timely demand payment or (in the case of
certificated shares) fails to timely deposit his Certificates as required by the
"further notice," that person will not have any right to receive payment of the
fair value of his shares.
If any shares are not represented by certificates, Armstrong or BT
Financial may restrict their transfer from the time of receipt of demand for
payment until effectuation of the Merger or the release of restrictions under
the terms of Section 1577(a) of the BCL (relating to failure to effectuate the
Merger).
The Dissenter shall retain all other rights of a shareholder until those
rights are modified by the Merger.
If the Merger has not been consummated within 60 days after the date set in
the "further notice" for demanding payment and depositing Certificates,
Armstrong or BT Financial will return any deposited Certificates and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. At any time thereafter, Armstrong or BT Financial may send a
new "further notice" containing the provisions described above to all
Dissenters.
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Promptly after the effective time of the Merger, or upon timely receipt of
demand for payment if the Merger has already occurred, BT Financial will either
(i) pay the amount that BT Financial estimates is the fair value of the
Dissenters' Shares to the Dissenters who timely made demand for payment and (if
their shares are certificated) timely deposited their Certificates, or (ii)
provide written notice to those Dissenters that no payment will be made. This
payment or written notice will be accompanied by a closing balance sheet and
statement of income of Armstrong for a fiscal year ending not more than 16
months before the date of payment or notice, the latest available interim
financial statements of Armstrong, a statement of BT Financial's estimate of the
fair value of the Dissenters' Shares, a notice of the right of a Dissenter to
demand payment or supplemental payment, as the case may be, and a copy of
Subchapter 15D. If BT Financial does not pay its estimate of the fair value of
the shares of Armstrong Common Stock of any Dissenter, it must return his
deposited Certificates to him and release uncertificated shares from any
transfer restrictions imposed by reason of the demand for payment. BT Financial
may make a notation on any returned Certificate or its records relating to any
such uncertificated shares that a demand for payment of fair value with respect
to that Certificate has been made. If shares with respect to which notation has
been made shall be transferred, each new Certificate therefor or the records
relating to any transferred uncertificated shares will bear a similar notation,
together with the name of the original dissenting holder or owner thereof. A
transferee will not acquire by transfer any rights other than those that the
original Dissenter had after making demand for payment of fair value.
If BT Financial gives notice of its estimate of the fair value of the
shares without remitting such amount, or remits payment of its estimate of the
fair value of a Dissenter's shares and the Dissenter believes that BT
Financial's estimate of the fair value of his shares of Armstrong Common Stock
is less than their fair value, that Dissenter should send BT Financial his own
estimate of their fair value. A Dissenter's estimate will constitute a demand
for payment of his estimate of the fair value of his shares of Armstrong Common
Stock or for payment of the difference between the two estimates if BT Financial
has paid that Dissenter its estimate. If a Dissenter does not file with BT
Financial his own estimate within 30 days after the mailing to him of the
payment of BT Financial's estimated fair value or its written notice thereof,
that Dissenter will not be entitled to receive any amount greater than the
payment remitted by BT Financial or the amount stated in that notice.
Within 60 days after the latest of (i) the effective time of the Merger,
(ii) timely receipt of any demands for payment of fair value in response to a
"further notice," or (iii) timely receipt of a Dissenter's estimate of the fair
value of his shares of Armstrong Common Stock, if any demands for payment
remains unsettled, BT Financial may file an application for relief in the Court
of Common Pleas of Cambria County, Pennsylvania (the "Cambria Court"),
requesting that the fair value of the remaining Dissenters' Shares be
determined. All Dissenters whose demands for payment of the fair value of their
Dissenters' Shares have not been settled will be made parties to such
proceeding. A copy of the application shall be served on each such Dissenter. If
a Dissenter is a nonresident, the copy may be served on him in the manner
provided or prescribed by or pursuant to 42 Pa. C.S. 53 (relating to bases of
jurisdiction and interstate and international procedure). The jurisdiction of
the court shall be plenary and exclusive. The court may appoint an appraiser to
receive evidence and recommend a decision on the issue of fair value. The
appraiser shall have such power and authority as may be specified in the order
of appointment or in any amendment thereof. Each Dissenter who is made a party
to such proceeding will be entitled to recover the amount by which the fair
value of his Dissenters' Shares exceeds any amount previously paid to that
Dissenter by BT Financial for his shares, plus interest.
If BT Financial fails to file an application with the Cambria Court prior
to the expiration of that 60-day period, any Dissenter who has made a demand for
payment of the fair value of his Dissenters' Shares and has not already settled
his claim against BT Financial may file an application with the Cambria Court in
the name of BT Financial within 30 days after expiration of that 60-day period.
If no such Dissenter files an application within that 30-day period, all
remaining Dissenters will be paid BT Financial's estimate of the fair value of
their Dissenters' Shares and will not be entitled to any additional amounts. In
any proceeding before the Cambria Court, the fair value of the Dissenters'
Shares to be determined by the Cambria Court is the fair value of those shares
immediately prior to the effective time of the Merger, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the Merger.
The costs and expenses of any proceeding to determine the fair value of the
remaining Dissenters' Shares will be determined by the Cambria Court and
assessed against BT Financial, although all or any part of those
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costs and expenses may be apportioned and assessed as the Cambria Court deems
appropriate against any Dissenters who are parties to the proceeding and whose
actions in demanding supplemental payments the Cambria Court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith. The fees and expenses
of counsel and experts for the respective parties may be assessed as the Cambria
Court deems appropriate against BT Financial and in favor of any or all
Dissenters if BT Financial failed to comply substantially with the requirements
of Subchapter 15D and may be assessed against BT Financial or any Dissenter, in
favor of any other party, if the Cambria Court finds that the party against whom
the fees and expenses are assessed acted in bad faith or in a dilatory,
obdurate, arbitrary or vexatious manner in respect to the rights provided by
Subchapter 15D. If the Cambria Court decides that any Dissenter's counsel
provided substantial benefits to other Dissenters, but that the fees of such
counsel should not be assessed against BT Financial, then the Cambria Court may
award that counsel reasonable fees to be paid out of the amounts awarded to
those other Dissenters.
It is a condition to BT Financial's obligation to consummate the Merger
that the number of Dissenters' Shares be less than 800 shares of Armstrong
Common Stock as of the closing date of the Merger, representing 10% of the
Armstrong Common Stock expected to be outstanding on such date. See "The Merger
Agreement--Conditions." BT Financial has reserved the right to waive this
condition at any time.
RESALE RESTRICTIONS
The shares of BT Financial Common Stock to be issued pursuant to the Merger
Agreement will be freely transferable under the Securities Act except for shares
issued to any Armstrong shareholder who may be deemed to be an affiliate of
Armstrong for purposes of Rule 145 under the Securities Act as of the date of
the Meeting. Armstrong affiliates may not sell shares of BT Financial Common
Stock acquired in the Merger except pursuant to an effective registration
statement under the Securities Act covering those shares or in compliance with
Rule 145 under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act. Persons who may be deemed to be
affiliates of Armstrong generally include individuals or entities that control,
are controlled by, or are under common control with, Armstrong and may include
certain officers and directors of Armstrong as well as the principal
shareholders. Under the Merger Agreement, BT has agreed that Armstrong
affiliates will have rights to incidental registration and registration on
request pursuant to which these affiliates may resell their shares of BT
Financial Common Stock under an effective registration statement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Kirkpatrick & Lockhart LLP, counsel to BT Financial, will render an opinion
to BT Financial as to the principal federal income tax consequences expected to
result from the Merger.
The following is a summary of such opinion. This summary is qualified in
its entirety by reference to the full text of such opinion, including the
assumptions upon which such opinion is based. Such opinion is included as an
exhibit to the Registration Statement. Neither such opinion nor this summary
address any tax considerations under foreign, state or local laws, or the tax
considerations to shareholders other than individual United States citizens who
hold their shares of Armstrong Common Stock within the meaning of Section 1221
of the Code.
No rulings have been requested from the Internal Revenue Service as to the
federal income tax consequences of the Merger. Armstrong shareholders should be
aware that the opinion of Kirkpatrick & Lockhart LLP is not binding on the
Internal Revenue Service and the Internal Revenue Service is not precluded from
taking a different position. Armstrong shareholders should also be aware that
some of the tax consequences of the Merger are governed by provisions of the
Code as to which there are no final regulations and little or no judicial or
administrative guidance. The opinion of Kirkpatrick & Lockhart LLP is based upon
the federal income tax laws as in effect on the date of such opinion and as
those laws are currently interpreted. There can be no assurance that future
legislation, regulations, administrative rulings or court decisions will not
adversely affect the accuracy of the statements contained herein.
The federal income tax consequences discussed below are conditioned upon,
and the opinion of Kirkpatrick & Lockhart LLP is based upon, the accuracy, as of
the date hereof and at, as of and after the effective time of the Merger, of
certain assumptions, including, but not limited to, the following (taking into
account for purposes hereof all events that are contemplated under the Merger
Agreement): (A) that, pursuant to the Merger, the
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former shareholders of Armstrong receive shares of BT Financial Common Stock
having a value on the date on which the effective time of the Merger occurs of
not less than forty-two percent (42%) of the value of the Armstrong Common Stock
as of the same date; (B) that following the Merger, BT Financial will continue
the historic business of Armstrong or use a significant portion of Armstrong's
historic business assets in a business; and (C) that a bona fide corporate
business purpose exists for the Merger.
BT Financial and Armstrong believe that all of the foregoing assumptions
are accurate as of the date hereof, and will be accurate at, as of and after the
effective time of the Merger. If either BT Financial or Armstrong learns before
the effective time of the Merger that such assumptions are false and that its
counsel therefore believes that the Merger is unlikely to be treated as a
tax-free reorganization, then additional shareholder approval will be obtained
before consummation of the Merger.
Kirkpatrick & Lockhart LLP has rendered an opinion to BT Financial, based
upon the assumptions set forth therein, that the Merger will have the following
federal income tax consequences:
(i) No gain or loss will be recognized by Armstrong or BT Financial as
a result of the Merger.
(ii) No gain or loss will be recognized by any Armstrong shareholder
upon the exchange of that Shareholder's shares of Armstrong Common Stock
for shares of BT Financial Common Stock pursuant to the Merger.
(iii) Armstrong shareholders will recognize gain with respect to the
cash portion of the Merger Consideration (the "Cash Consideration")
received, but not in excess of the amount of the Cash Consideration
received.
(iv) The basis of the shares of BT Financial Common Stock received by
an Armstrong shareholder (including any fractional shares) will be the same
as the basis of the shares of Armstrong Common Stock surrendered in
exchange therefor (a) decreased by the amount of the Cash Consideration,
and (b) increased by (1) the amount, if any, of the Cash Consideration that
was treated as a dividend and (2) the amount of gain recognized by that
Armstrong shareholder on the exchange (not including any portion of such
gain that is treated as a dividend).
(v) If shares of Armstrong Common Stock were capital assets in the
hands of an Armstrong shareholder immediately prior to the Merger, the
holding period of the shares of BT Financial Common Stock received by that
Shareholder in the Merger will include the holding period of the shares of
Armstrong Common Stock surrendered in exchange therefor.
(vi) An Armstrong shareholder who dissents from the proposed Merger
and receives solely cash in exchange for that shareholder's shares of
Armstrong Common Stock will be treated as having received that cash as a
distribution in redemption of those shares subject to the provisions and
limitations of Section 302 of the Code. If the distribution is eligible for
treatment as a distribution in redemption of that shareholder's shares,
that shareholder will recognize gain to the extent of the consideration
received less that shareholder's adjusted basis in those shares.
(vii) The receipt by an Armstrong shareholder of cash in lieu of a
fractional share of BT Financial Common Stock will be treated as if that
fractional share was issued to that holder in the Merger and thereafter
redeemed by BT Financial for cash. That receipt of cash by an Armstrong
shareholder will be treated as a distribution by BT Financial in full
payment in exchange for the fractional share as provided in Section 302(a)
of the Code. If the distribution is eligible for treatment as a
distribution in redemption of an Armstrong shareholder's fractional share,
that shareholder will recognize gain to the extent of the consideration
received less that shareholder's allocable adjusted basis in that
fractional share.
If the shares of Armstrong Common Stock exchanged are a capital asset, any
gain recognized will be capital gain to the extent described below. The capital
gain will be long-term if the shares of Armstrong Common Stock have been held by
the applicable shareholder for more than one year. The determination of whether
a shareholder would recognize a capital gain and/or dividend income is made by
reference to the redemption rules of Section 302 of the Code. Under Section 302,
all of the cash representing gain recognized on the exchange will be taxed as
capital gain if the deemed redemption is a "substantially disproportionate
redemption" of stock with
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respect to a shareholder or is "not essentially equivalent to a dividend." For
this purpose, the Merger will be viewed as if each shareholder had received only
BT Financial Common Stock in the Merger and as if BT Financial had thereafter
redeemed appropriate portions of the BT Financial Common Stock in exchange for
the cash received by that shareholder. The deemed redemption is a "substantially
disproportionate redemption" if that shareholder's deemed percentage share of
the outstanding BT Financial Common Stock after the Merger but before the deemed
redemption is reduced by more than 20% as a result of the deemed redemption. The
deemed redemption is "not essentially equivalent to a dividend" if that
shareholder experiences a "meaningful reduction" in his proportionate interest
in BT Financial by reason of the deemed redemption. In general, there are no
fixed rules for determining when a meaningful reduction has occurred.
In determining whether an Armstrong shareholder has a "substantially
disproportionate redemption" or experiences a "meaningful reduction" in his
proportionate interest in BT Financial, shares of BT Financial Common Stock
which are considered to be owned by that shareholder pursuant to certain
constructive stock ownership rules set forth in Code Section 318, as well as
shares actually owned, must be taken into account. In general, under Code
Section 318, a shareholder constructively owns any stock which that shareholder
has an option to acquire, or any stock owned directly or indirectly by (1) that
shareholder's spouse (unless legally separated under court decree), children,
grandchildren or parents; (2) a partnership, trust or estate in which that
shareholder has an interest to the extent of that shareholder's interest; or (3)
a corporation to the extent of that shareholder's interest, but only if that
shareholder actually or constructively owns 50% or more in value of the
corporation's stock. Also, a shareholder that is a partnership, trust or estate
will be considered to own stock owned by its partners, grantors or
beneficiaries, as the case may be, and a shareholder which is a corporation will
be considered to own stock owned by any of its shareholders who owned 50% or
more in value of the corporation's stock. An S corporation and its shareholders
are treated as if they were a partnership and partners, respectively. In many
instances, stock owned constructively as a result of the attribution rules can
be attributed again to another (for example, stock owned due to family
attribution can further be attributed to a partnership), but in other
circumstances, there is no "double" attribution.
If any of the cash received by an Armstrong shareholder has the effect of a
dividend, the portion of the gain recognized equal to that shareholder's share
of undistributed corporate earnings and profits is treated as dividend income
and the balance of the gain is capital gain. It is unclear whether it is the
earnings and profits of Armstrong which are considered or some combination of
those of Armstrong and BT Financial. It is possible that the cash distributed
might exceed the applicable earnings and profits. No loss will be recognized.
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Unless an exception is available under applicable law or regulations, 31%
of the cash portion of the Merger Consideration payable to a Shareholder will be
withheld unless that payee provides a tax identification number (social security
number or employer identification number) and certifies that such number is
correct on a Form W-9 which will be provided in the letter of transmittal that
will be used to exchange shares of Armstrong Common Stock for the Merger
Consideration.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH SHAREHOLDER
IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES OF THE MERGER TO THAT SHAREHOLDER, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME, PROPERTY,
TRANSFER AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase for financial reporting
purposes. Under this method of accounting, BT Financial will record the
acquisition of Armstrong at its cost at the effective time of the Merger, which
cost would include the cash paid in the Merger, the fair value of the shares of
BT Financial Common Stock issued in the Merger and all direct acquisition costs.
The acquisition cost will be allocated to the acquired assets and liabilities of
Armstrong based upon their fair values at the effective time of the Merger in
accordance with generally accepted accounting principles. Acquisition cost in
excess of the fair values of the net assets acquired, if any, will be recorded
as an intangible asset and amortized over a period of 15 years for financial
accounting purposes. The reported income of BT Financial would include the
operations of Armstrong after the effective time of the Merger. See "Unaudited
Pro Forma Condensed Combined Financial Information."
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement as
amended by the First Amendment, copies of which are attached as Annex A and B
hereto and are incorporated by reference herein. This summary is qualified in
its entirety by reference to the full text of the Merger Agreement.
THE MERGER
Upon satisfaction or waiver of the conditions set forth in the Merger
Agreement, at the effective time of the Merger, Armstrong will merge with and
into Johnstown Bank, with Johnstown Bank being the surviving corporation. At the
effective time of the Merger, the separate corporate existence of Armstrong will
cease and Johnstown Bank will succeed to all the rights, privileges, immunities
and franchises, and all the property and assets, real, personal and mixed, of
Armstrong, without the necessity for any separate conveyance or other transfer.
After the Merger, Johnstown Bank will be responsible and liable for all
liabilities and obligations of Armstrong of every kind and description, and
neither the rights of creditors, nor any liens on the property of Armstrong,
will be impaired by the Merger.
At the effective time of the Merger, each share of Armstrong Common Stock
then outstanding (except Dissenters' Shares and treasury shares) will be
converted into the Merger Consideration. On the Closing Date, by virtue of the
Merger, and without any action on the part of Armstrong shareholders, each of
the then issued and outstanding shares of Armstrong Common Stock will cease to
exist and will be deemed canceled, retired and eliminated, and all rights in
respect thereof (other than with respect to Dissenters' Shares) will cease
except the right to receive BT Financial Common Stock and cash (based upon the
Merger Consideration), regardless of whether the certificates representing such
shares are surrendered to BT Financial by Armstrong shareholders. The Merger
Consideration will be adjusted immediately prior to the effective time of the
Merger, if necessary, to reflect any consolidation, split-up, other subdivision
or combination of BT Financial Common Stock, any dividend payable in BT
Financial Common Stock, or any capital reorganization involving the
reclassification of BT Financial Common Stock subsequent to the date of the
Merger Agreement and prior to such time. In the Merger Agreement, each
outstanding share of Armstrong Common Stock will be converted into the Merger
Consideration, unless the average closing price per share of BT Financial Common
Stock on NASDAQ as reported in The Wall Street Journal for the Valuation Period
is less than $27.50 or more than $34.00. If the average per share price of BT
Financial Common Stock is less than $27.50 for the Valuation Period, Armstrong
may request that BT Financial adjust the Merger Consideration by increasing the
number of shares of BT Financial Common Stock or the amount of cash included in
the Merger Consideration, or both, so as to maintain a total consideration of
$1,325.00 per share of Armstrong Common Stock based on the average price per
share for BT Financial Common Stock for the Valuation Period. If BT Financial
does not elect to adjust the Merger Consideration, Armstrong may terminate the
Merger Agreement, and neither party will have any further liability under the
Merger Agreement. If the average price per share of BT Financial Common Stock
for the Valuation Period is more than $34.00, BT Financial shall have the option
to adjust the Merger Consideration by reducing the number of shares of BT
Financial Common Stock or cash included in the Merger Consideration, or both, as
determined by Armstrong, so that the total consideration does not exceed
$1,497.25 per share of Armstrong Common Stock based on the average price per
share of BT Financial Common Stock for the Valuation Period; provided however,
if at any time prior to the Closing Date or the ninety (90) day period
immediately following the closing date, BT Financial enters into, or announces
its plans to enter into any agreement that would result in an acquisition of BT
Financial or substantially all of its business by another entity, the Merger
Consideration shall remain equal to 26.5 shares of BT Financial Common Stock and
$596.25 in cash for each share of Armstrong Common Stock.
At the effective time of the Merger, the articles of incorporation and
bylaws of Johnstown Bank as in effect immediately prior thereto will be the
articles of incorporation and bylaws of the surviving bank. The directors and
principal officers, respectively, of the surviving bank from and after the
effective time of the Merger will be the directors and principal officers of
Johnstown Bank immediately prior thereto, except that Johnstown Bank intends to
invite Jerome Lombardi, a director of Armstrong, to serve as a director of
Johnstown Bank.
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EXCHANGE PROCEDURES
After the effective time of the Merger, each holder of a Certificate, upon
surrender of such Certificate to BT Financial or its exchange agent, together
with a duly executed and completed letter of transmittal (which will be mailed
to the holders of Certificates promptly following the effective time of the
Merger), will be entitled to receive a certificate or certificates representing
the number of whole shares of BT Financial Common Stock and the cash (payable by
check) to which such holder is entitled as described above, plus cash (payable
by check) in lieu of any fractional share of BT Financial Common Stock to which
such holder would otherwise be entitled. Fractional shares of BT Financial
Common Stock will not be issued. In lieu of a fractional share of BT Financial
Common Stock, each relevant Armstrong shareholder will receive a cash payment
equal to the applicable fraction multiplied by the closing sale price on NASDAQ
for BT Financial Common Stock on the Closing Date as reported in The Wall Street
Journal, or, if BT Financial Common Stock is not traded on such date, the next
succeeding day on which such stock is traded. No interest will be paid or
accrued on the cash payable upon surrender of Certificates.
Until surrendered in accordance with the requirements of the Merger
Agreement, the Certificates (except for Certificates representing Dissenters'
Shares and treasury shares) will from and after the effective time of the Merger
represent for all purposes only the right to receive shares of BT Financial
Common Stock and cash as described above. Upon surrender of a Certificate, there
will be paid to the record holder of the certificate for shares of BT Financial
Common Stock issued in exchange therefor (i) on the date of such exchange, the
amount of dividends theretofore accrued and payable with respect to such full
shares of BT Financial Common Stock as of any date subsequent to the effective
time of the Merger which have not yet been paid to a public official pursuant to
abandoned property laws and (ii) on the appropriate payment date, the amount of
dividends declared with a record date after the effective time of the Merger but
prior to such surrender and a payment date subsequent to such surrender. No
interest will be payable with respect to any such dividends.
At the effective time of the Merger, (i) each share of Armstrong Common
Stock held in treasury will be canceled, retired and cease to exist and no
consideration will be paid therefor, and (ii) each Dissenters' Share will be
treated as described above (see "The Merger--Rights of Dissenting
Shareholders").
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of Armstrong,
BT Financial and Johnstown Bank which are customary in transactions of this
type, including, but not limited to, representations and warranties concerning:
(a) their respective organization and capitalization; (b) the due authorization,
execution and delivery and the enforceability of the Merger Agreement; and (c)
consents or approvals required, and the lack of conflicts or violations under
applicable articles of incorporation, bylaws, instruments and laws, with respect
to the transactions contemplated by the Merger Agreement. The Merger Agreement
also contains customary representations and warranties by Armstrong and BT
Financial, including, but not limited to representations and warranties
concerning: (a) the documents to be filed with the Commission and other
regulatory agencies; (b) the conduct of business in the ordinary course and
absence of certain changes; (c) financial statements; and (d) compliance with
laws. Lastly, the Merger Agreement contains representations and warranties of
Armstrong concerning (a) loans; (b) loan loss reserve; (c) core deposits; (d)
related party transactions; (e) fidelity bonds; and (f) investments.
CERTAIN COVENANTS
Armstrong has agreed that, except with the prior written consent of BT
Financial, it will not: (i) issue any capital notes or shares of its capital
stock, declare or distribute any stock dividend, authorize a stock split, or
authorize, issue or make any other distribution of, on, or with respect to, its
capital stock, except that Armstrong may distribute regular quarterly cash
dividends for any full calendar quarter beginning with the quarter ending
December 31, 1995 of the lesser of $17.25 per share or seventy-five percent
(75%) of the net income earned by Armstrong during that quarter, a special
dividend of $161,236 during the first quarter of 1996 and a closing dividend
equal to the lesser of $17.25 per share or seventy-five percent (75%) of the net
income earned during the period between the end of the last full calendar
quarter for which a dividend was paid and ten (10) days prior to
36
<PAGE> 42
the Closing Date; (ii) merge with, consolidate with, sell its assets to, or
acquire substantially all the assets of, any other corporation, bank or person,
or enter into any other transaction not in the ordinary course of business;
(iii) make any direct or indirect redemption, purchase or other acquisition of
any of its capital stock; (iv) create any pension or profit sharing plan, bonus,
deferred compensation, death benefit or retirement plan, or any other fringe
benefit for, enter into any employment contract (written or otherwise) with, or
grant any bonuses to, any officer, director or employee; (v) amend its articles
of incorporation or bylaws except as may be necessary to consummate the
transactions contemplated by the Merger Agreement or as required by law; (vi)
incur any liability or obligation, make any commitment or disbursement, acquire
or dispose of any property or asset, make any contract or agreement, or engage
in any transaction, except in the ordinary course of business; (vii) increase
the rate of compensation of any director, officer, employee or agent or enter
into any agreement to increase the rate of compensation of any director, officer
or employee, other than normal increases in the ordinary course of business and
consistent with past practice; (viii) unless permitted by BT Financial, take any
action which would entitle any employee to receive severance pay prior to the
closing date of the Merger; (ix) intentionally do anything or intentionally fail
to do anything which will cause a breach or a default under any contract,
agreement, commitment or obligation to which it is a party or by which it may be
bound; (x) except for securities transactions effected in the ordinary course of
business with the prior consent of BT Financial (which consent shall not be
unreasonably withheld), make any capital expenditures in excess of $15,000 in
the aggregate; (xi) modify or extend any service bureau contracts,
hardware/software maintenance agreements, lease agreements or other contracts
that involve annual payments by Armstrong that exceed $15,000 per contract or
$50,000 in the aggregate; (xii) change its lending, borrowing, investment,
asset/liability management or other material banking policies in any material
respect, except as may be required by changes in applicable law, regulation or
regulatory directives and except that, in connection with the closing of the
transactions contemplated hereby, Armstrong shall cooperate in good faith with
BT Financial to adopt policies, practices and procedures consistent with those
utilized by BT Financial and its affiliates; (xiii) open any branch offices;
(xiv) fail to pay any tax or any other liability or charge when due, other than
charges contested in good faith by appropriate proceedings; or (xv) make, change
or revoke any tax election or make any agreement or settlement with any taxing
authority.
BT Financial has agreed that any full-time employee of Armstrong (except
Coleman Clougherty) whose employment with the Johnstown Bank is terminated,
other than for cause, by BT Financial within six months after the Merger, and
not offered a comparable job with BT Financial or an affiliate of BT Financial,
will be paid severance pay equal to one week's compensation multiplied by each
year of service with Armstrong, not exceeding three months salary (except for
certain officers who will be entitled to a maximum of six months salary).
BT Financial has also agreed that all employees of Armstrong immediately
prior to the Merger who are employed by Johnstown Bank following the Merger
("Transferred Employees") will be entitled to participate in BT Financial's
employee benefit plans, as to which they are eligible, without fulfilling any
vesting requirement, although such employees will not be entitled to any credit
for their length of service, compensation, job classification or position with
Armstrong. BT Financial has agreed that any pre-existing condition, limitation
or exclusion in its health plans shall not apply to Transferred Employees or
their covered dependents who are covered under a medical or hospitalization
indemnity plan maintained by Armstrong on the date of the Merger and then change
coverage to a BT Financial medical or hospitalization indemnity health plan at
the time such Transferred Employees are first given the option to enroll in BT
Financial's health plans.
BT Financial has further agreed that Armstrong affiliates will have rights
to incidental registration and registration upon request. Pursuant to such
rights, Armstrong affiliates may resell their shares of BT Financial Common
Stock under an effective registration statement.
ACQUISITION PROPOSALS
Armstrong has agreed that neither it nor any of its directors, officers or
other affiliates (as defined in Rule 12b-2 under the Exchange Act) (each, an
"Affiliate") will, and that it will cause its employees, agents and
representatives (including, without limitation, any investment banking, legal or
accounting firm retained by Armstrong and any individual member or employee of
the foregoing) (each, an "Agent") not to, (i) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer
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<PAGE> 43
(including, without limitation, any proposal or offer to any of them or their
respective shareholders) with respect to a merger, acquisition, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or a substantial portion of the assets or equity securities
of, Armstrong (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or (ii) engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or (iii) otherwise cooperate in
any effort or attempt to make, implement or accept an Acquisition Proposal.
Notwithstanding this undertaking, neither Armstrong nor the Armstrong Board, is
prohibited from (i) fulfilling its fiduciary duties under Pennsylvania or
federal law to its shareholders, or (ii) permitting to occur the transactions
contemplated by the Exchange Agreement. See "Comparative Market Prices."
Armstrong must notify BT Financial immediately if any inquiries, proposals or
offers related to an Acquisition Proposal are received by, any confidential
information or data is requested from, or any negotiations or discussions
related to an Acquisition Proposal are sought to be initiated or continued with,
it or any of the above-referenced individuals or entities.
INDEMNIFICATION OBLIGATIONS OF ARMSTRONG
Armstrong will indemnify and hold harmless BT Financial and Johnstown Bank
and each person, if any, who controls BT Financial or Johnstown Bank within the
meaning of the Securities Act ("BT Financial Indemnitees") against any losses,
claims, damages or liabilities, joint or several, to which the BT Financial
Indemnitees may become subject, which (a) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, this Proxy Statement/Prospectus or any amendment or
supplement hereto, or any related preliminary prospectus, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent that any such statement or omission was provided in
writing by Armstrong to BT Financial, or (b) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact or any
omission or alleged omission to state a material fact required to be stated or
necessary to make the statements not misleading in any document distributed to
any Armstrong shareholder to the extent that any such statement or omission was
provided in writing by Armstrong to BT Financial. Armstrong is also obligated to
reimburse BT Financial Indemnitees for any legal or other expenses reasonably
incurred by BT Financial in connection with investigating or defending any such
loss, claim, damage, liability or action. Armstrong will not be liable in any
such case to the extent that any loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any of the Registration Statement, this Proxy
Statement/Prospectus or any amendment or supplement hereto, or any related
preliminary prospectus, that was made or omitted in reliance upon and in
conformity with written information furnished by BT Financial or Johnstown Bank
specifically for use herein or therein.
If recovery is not available under the indemnification provisions of the
Merger Agreement described above for any reason other than as set forth therein,
BT Financial will be entitled to contribution from Armstrong for liabilities and
expenses, except to the extent that contribution is not permitted under Section
11(f) of the Securities Act. In determining the amount of contribution to which
the respective parties are entitled, there will be considered the relative
benefits received by each party from the transactions contemplated by the Merger
Agreement, the parties' relative knowledge and access to information concerning
the matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Armstrong, Johnstown Bank
and BT Financial have agreed that it would not be equitable if the amount of
such contribution were determined by pro rata or per capital allocations.
ARMSTRONG DIVIDENDS
Under the Merger Agreement, Armstrong may pay regular quarterly cash
dividends for any full calendar quarter beginning with the quarter ending
December 31, 1995 of the lesser of $17.25 per share or seventy-five percent
(75%) of the net income earned by Armstrong during that quarter and a closing
dividend equal to the lesser of $17.25 per share or seventy-five percent (75%)
of the net income earned during the period between the end of the last full
calendar quarter for which a dividend was paid and ten (10) days prior to the
closing date of
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<PAGE> 44
the Merger. In addition, Armstrong is permitted to declare and distribute during
the first quarter of 1996 a special dividend in the amount of $161,236.
CONDITIONS
The obligations of BT Financial and Johnstown Bank to consummate the Merger
are subject to the satisfaction or waiver (to the extent permitted by law), on
or before the closing date of the Merger, of each of the following conditions,
among others: (a) each of the covenants to be performed by Armstrong under the
Merger Agreement on or before the closing date of the Merger having been duly
performed; (b) the representations and warranties made by Armstrong in the
Merger Agreement being true and correct in all material respects on the closing
date of the Merger with the same force and effect as though such representations
and warranties had been made on and as of such date (or as of the date when made
in the case of any representation and warranty which specifically relates to an
earlier date); (c) Armstrong shall have furnished to BT Financial a certified
copy of the resolutions duly adopted by the Armstrong Board authorizing and
approving the Merger Agreement and the transactions contemplated thereby; (d)
the Merger Agreement having been adopted and approved by the affirmative vote of
two-thirds of the votes entitled to be cast by all Armstrong shareholders; (e)
BT Financial and Johnstown Bank having received in form and substance
satisfactory to BT Financial all necessary federal and state governmental and
regulatory approvals and other consents necessary to permit consummation of the
Merger (including, but not limited to, approvals of the Federal Reserve and the
Pennsylvania Department of Banking), no such approvals and consents requiring BT
Financial or any such subsidiary to enter into any agreement or stipulation that
is inconsistent with prior Pennsylvania Department of Banking or Federal Reserve
practice or procedure, and all applicable waiting periods required by law having
expired or elapsed; (f) no action, proceeding, regulation or legislation having
been instituted or threatened before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of, the Merger
Agreement, the consummation of the transactions contemplated thereby or the
Merger, which, in the good faith judgment of BT Financial, makes it inadvisable
to consummate such transactions; (g) subject to the cure provisions of Section
2.07(f) of the Merger Agreement, BT Financial shall not have discovered any
material error, misstatement or omission in any information furnished in writing
or to be furnished in writing to BT Financial hereunder, or in the information
to be furnished by Armstrong and contained in the Registration Statement; (h)
since the date of the Merger Agreement, there having not occurred any material
adverse change in the business, financial condition, results of operations or
prospects of Armstrong other than changes resulting from or attributable to (i)
changes in laws or regulations, generally accepted accounting principles, or
interpretations thereof that affect the banking industry generally or (ii) the
payment of any severance benefits to Mr. Clougherty or any other key employee
pursuant to any employment arrangement, if such payment is made by Armstrong at
the request of BT Financial; (i) the Registration Statement having been declared
effective by the Commission, being exempt or having been declared effective in
each state having jurisdiction thereover, and no stop order proceeding being
pending or threatened with respect thereto; (j) the number of Dissenters' Shares
as of the closing date of the Merger being less than 800 shares of Armstrong
Common Stock, representing 10% of the Armstrong Common Stock expected to be
outstanding on such date, but in no event shall the total cash consideration
paid by BT Financial for Armstrong Common Stock exceed fifty percent (50%) of
the total consideration paid by BT Financial; (k) Mr. Clougherty having waived
in writing all rights to severance pay and any other obligations Armstrong has
to him in exchange for the agreement by BT Financial to pay him $200,000 on the
closing date of the Merger (see "The Merger--Interests of Certain Persons in the
Merger"); (l) Armstrong having paid all expenses incurred thereby in connection
with the transactions contemplated by or described in the Merger Agreement,
except for reasonable out-of-pocket expenses actually incurred that the parties
acknowledge have not been billed on or before the closing date of the Merger;
(m) an opinion of Armstrong counsel on the matters specified in Section 6.01(j)
of the Merger Agreement; and (n) a tax opinion from Kirkpatrick & Lockhart LLP
on the matters specified in Section 6.01(n) of the Merger Agreement.
The obligations of Armstrong to consummate the Merger are subject to the
satisfaction or waiver (to the extent permitted by law), on or before the
Closing Date, of each of the following conditions, among others: (a) each of the
covenants to be performed by BT Financial and Johnstown Bank under the Merger
Agreement on or before the closing date of the Merger having been duly
performed; (b) the representations and warranties made
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<PAGE> 45
by BT Financial and Johnstown Bank in the Merger Agreement being true and
correct in all material respects on the closing date of the Merger with the same
force and effect as though such representations and warranties had been made on
and as of such date (or as of the date when made in the case of any
representation and warranty which specifically relates to an earlier date); (c)
BT Financial and Johnstown Bank shall have furnished to Armstrong a copy of the
resolutions duly adopted by their respective Board of Directors authorizing the
Merger Agreement and the transactions contemplated thereby and by the
shareholder of Johnstown Bank approving the Merger Agreement and the
transactions contemplated thereby; (d) BT Financial, Armstrong and Johnstown
Bank having received in form and substance satisfactory to Armstrong all
necessary federal and state governmental and regulatory approvals, shareholder
approvals and other consents necessary to permit consummation of the Merger
(including, but not limited to, approvals of the Federal Reserve, the
Pennsylvania Department of Banking and the Armstrong shareholders), and all
applicable waiting periods required by law having expired or elapsed; (e) no
injunction having been issued by any court or governmental agency which
prohibits or restricts the consummation of the transactions contemplated by the
Merger Agreement which, in the good faith judgment of Armstrong, would make it
inadvisable to consummate such transactions; (f) Armstrong shall not have
discovered any material error, misstatement or omission in any information
furnished in writing or to be furnished in writing to Armstrong hereunder, or in
the information to be furnished by BT Financial or Johnstown Bank and contained
in the Registration Statement; (g) since the date of the Merger Agreement, there
having not occurred any material adverse change in the financial condition of BT
Financial on a consolidated basis which would render consummation of the Merger
impracticable, other than changes resulting from or attributable to changes in
laws or regulations, generally accepted accounting principles, or
interpretations thereof that affect the banking industry generally; (h) the
Registration Statement having been declared effective by the Commission, being
exempt or having been declared effective in each state having jurisdiction
thereon, and no stop order proceeding being pending or threatened with respect
thereto; (i) Armstrong having received, as of the date of mailing of this Proxy
Statement/Prospectus, an opinion from its financial advisor, in form and content
satisfactory to it, to the effect that the Merger is fair, from a financial
point of view, to the Armstrong shareholders; and (j) opinion of counsel to BT
Financial and Johnstown Bank on the matters specified in Section 6.02(i) of the
Merger Agreement.
Under the Merger Agreement, BT Financial has the right to perform a Phase
II environmental assessment on the property owned by Armstrong that was
previously operated as a bulk storage depot (the "Lentz Property") and a Phase I
environmental assessment on all other Armstrong property. If the results of
these assessments reveal an environmental condition with potential liability in
excess of $200,000 on the Lentz Property, or in excess of $100,000 on the other
Armstrong property, BT Financial may terminate the Merger Agreement.
TERMINATION
The Merger Agreement and the transactions contemplated thereby may be
terminated at any time prior to the effective time of the Merger by the mutual
consent of the Boards of Directors of Armstrong, BT Financial and Johnstown
Bank. If, at any time, Armstrong, BT Financial and Johnstown Bank agree in
writing on a closing date of the Merger on which all conditions precedent to
consummation of the Merger are expected to be satisfied or waived and one of
them postpones that closing date of the Merger for a reasonable period of time
(which will be no more than 30 days and in no event will end later than June 30,
1996) to enable it to perform any obligations under the Merger Agreement and
either Armstrong, BT Financial or Johnstown Bank refuses to consummate the
Merger because all conditions precedent to its obligations to close have not
been met on the closing date of the Merger as postponed, then such person may
immediately terminate the Merger Agreement. In any event, the Merger Agreement
and the transactions contemplated thereby will terminate automatically on June
30, 1996 if the Merger has not been consummated on or before such date, unless
extended by mutual consent of Armstrong, BT Financial and Johnstown Bank. The
parties, however, expect that the Merger will be consummated before June 30,
1996. If the Merger has not been consummated by June 30, 1996, Armstrong
shareholders will be notified by letter whether the Merger has been abandoned or
if the parties have agreed to extend the termination date and what that date
then is. The Merger Agreement does not limit the possible number of extensions
of the termination date or the periods for which extension of the termination
date may occur.
In the event of any termination of the Merger Agreement: (i) certain
confidentiality provisions and other provisions relating to expenses in the
Merger Agreement will survive; (ii) if BT Financial terminates the Merger
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<PAGE> 46
Agreement due to the failure to satisfy a condition precedent regarding (a)
Armstrong's performance of its covenants, (b) Armstrong's representations and
warranties, (c) the failure to deliver Armstrong's certified resolutions
regarding the Merger Agreement, or (d) failure to deliver the opinion of
Kirkpatrick & Lockhart LLP that the Merger will be treated as a tax-free
reorganization under Section 368 of the Code and no gain or loss will be
recognized by the Armstrong shareholders as a result of their receipt of BT
Financial Common Stock, and satisfaction of such condition was within the
control of Armstrong, then Armstrong will reimburse BT Financial for its
attorneys' fees and other expenses reasonably incurred in connection with the
transactions described in the Merger Agreement (to the extent not already paid
by Armstrong to BT Financial or any of its subsidiaries) and such failure will
constitute a breach of the Merger Agreement and BT Financial will have all
rights available in law and at equity for such breach of contract; (iii) if
Armstrong terminates the Merger Agreement due to the failure to satisfy a
condition precedent regarding (a) BT Financial's performance of its covenants,
(b) BT Financial's representations and warranties or (c) the failure to deliver
BT Financial's certified resolutions regarding the Merger Agreement, and
satisfaction of such condition was within the control of BT Financial or any of
its subsidiaries, then BT Financial will reimburse Armstrong for its attorneys'
fees and other expenses reasonably incurred in the transactions described in the
Merger Agreement and such failure will constitute a breach of the Merger
Agreement and Armstrong will have all rights available in law and at equity for
such breach of contract; (iv) if BT Financial terminates the Merger Agreement
due to the failure to satisfy one or more of certain conditions precedent
regarding (a) shareholder approval of the Merger Agreement, (b) material errors,
misstatements or omissions by Armstrong, (c) changes in Armstrong's financial
condition, (d) the failure to deliver the opinion of Armstrong's counsel, (e)
the exceeding of the requisite number of Dissenters' Shares or the amount of
cash consideration, or (f) Armstrong's payment of certain expenses, then
Armstrong will reimburse BT Financial for its attorneys' fees and other expenses
reasonably incurred in connection with the transactions described in the Merger
Agreement (to the extent not already paid by Armstrong to BT Financial or any of
its subsidiaries) not to exceed $150,000, and upon payment in full thereof,
Armstrong will have no further liability or obligation to BT Financial under the
Merger Agreement; and (v) if Armstrong terminates the Merger Agreement due to
the failure to satisfy one or more of certain conditions precedent regarding (a)
material errors, misstatements or omissions by BT Financial or Johnstown Bank,
(b) changes in BT Financial's financial condition, or (c) the failure to deliver
the opinion of BT Financial's and Johnstown Bank's counsel, then BT Financial
will reimburse Armstrong for its attorneys' fees and other expenses reasonably
incurred in connection with the Merger and certain transactions described in the
Merger Agreement not to exceed $150,000 and upon payment in full thereof, BT
Financial will have no further liability or obligation to Armstrong under the
Merger Agreement.
EXPENSES
Except as described under "Termination" above, all expenses incurred by
Armstrong, BT Financial or Johnstown Bank in connection with or related to the
authorization, preparation and execution of the Merger Agreement, the
solicitation of Armstrong shareholder approval and all other matters related to
the closing of the transactions contemplated by the Merger Agreement, including,
without limiting the generality of the foregoing, all fees and expenses of
agents, representatives, counsel and accountants employed by any such person,
will be borne solely and entirely by the person that has incurred the same.
AMENDMENT AND WAIVER
Any of the terms or conditions of the Merger Agreement may be waived at any
time by the person which is entitled to the benefit thereof, or any of those
terms or conditions may be amended or modified in whole or in part at any time
before or after the vote of the Armstrong shareholders on the Merger Agreement
to the extent permitted by law by agreement in writing, executed in the same
manner as the Merger Agreement after authorization to do so by the Board of
Directors of each party thereto; provided, however, that such action will be
taken only if, in the judgment of the Boards of Directors of each party taking
the action, such waiver or such amendment or modification will not have a
material adverse effect on the benefits intended under the Merger Agreement to
such party and its shareholders following approval of the Merger Agreement by
the Armstrong shareholders, unless the Merger Agreement, as modified, is
resubmitted to the Armstrong shareholders for their adoption and approval.
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<PAGE> 47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following tables set forth unaudited pro forma condensed combined
financial information for BT Financial that gives effect to the Merger, BT
Financial's acquisition of Huntington on December 14, 1995, and BT Financial's
pending acquisition of Moxham. Both the Merger and BT Financial's acquisition of
Huntington will be accounted for under the purchase method of accounting. The
unaudited pro forma condensed combined income statement gives effect to the
Merger and the acquisition of Huntington for the year ended December 31, 1995.
The Merger Agreement provides for an exchange ratio of 26.5 shares of BT
Financial Common Stock and $596.25 in cash for each share of Armstrong Common
Stock. This exchange ratio is subject to change in certain circumstances. See
"The Merger Agreement--The Merger." The accompanying unaudited pro forma
condensed combined financial information reflects an equivalent per share of
Armstrong Common Stock at that exchange ratio.
BT Financial's pending acquisition of Moxham is expected to be accounted
for under the pooling of interests method of accounting. Under the pooling of
interests method of accounting, the historical book values of the assets,
liabilities and shareholders' equity of Moxham as reported on its consolidated
balance sheet, will be carried over onto the Consolidated Balance Sheet of BT
Financial after addressing conformity issues, and no goodwill or other
intangible assets will be created. BT Financial will include in its consolidated
statement of income the consolidated results of operations of Moxham for the
entire fiscal year in which the effective date of the Moxham Merger occurs after
addressing conformity issues. BT Financial will also combine and restate its
results of operations for prior periods to include the reported consolidated
results of operations of Moxham for prior periods after addressing conformity
issues. The unaudited pro forma condensed combined income statement gives effect
to the acquisition of Moxham for the three years ended December 31, 1995. The
accompanying unaudited pro forma condensed combined financial information
assumes that in BT Financial's pending acquisition of Moxham, 1.15 shares of BT
Financial Common Stock will be issued for each share of Moxham Common Stock and
6.325 shares of BT Financial Common Stock will be issued for each share of
Moxham Preferred Stock.
This unaudited pro forma condensed combined financial information is based
on the estimates and assumptions set forth in the notes to such statements. The
pro forma adjustments made in connection with the development of the unaudited
pro forma condensed combined financial information are preliminary and have been
made solely for purposes of developing such unaudited pro forma condensed
combined financial information as necessary to comply with the disclosure
requirements of the Commission. Where applicable, the pro forma adjustments have
been separately taxed at the statutory rate of 35%. The unaudited pro forma
condensed combined financial information has been prepared using the historical
consolidated financial statements and notes thereto, which are incorporated
herein by reference. See "Incorporation of Certain Documents by Reference." The
unaudited pro forma condensed combined financial statements do not give effect
to anticipated cost savings in connection with the Merger and do not purport to
be indicative of the combined financial position or results of operations of
future periods or indicative of the results that actually would have been
realized had the entities been a single entity during these periods.
The unaudited pro forma condensed combined financial information set forth
below should be read in conjunction with the audited financial statements,
including the notes thereto, of BT Financial that are incorporated by reference
in this Proxy Statement/Prospectus and of Armstrong and of Moxham that appear
elsewhere in this Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference," "Selected Financial Information," and "Index to
Armstrong and Moxham Financial Statements."
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<PAGE> 48
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
BT AND BT AND
PRO MOXHAM PRO ARMSTRONG PRO
BT FORMA PRO BT FORMA PRO FORMA
FINANCIAL(1) MOXHAM ADJUSTMENTS FORMA FINANCIAL(1) ARMSTRONG ADJUSTMENTS FORMA COMBINED
------------ ------ ----------- ----- ------------ --------- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash and
cash equivalents........ 50,108 8,935 59,043 50,108 1,427 (350)(6) 51,185 60,120
Money Market
Investments............. 2,688 8,961 11,649 2,688 0 2,688 11,649
Investment securities.... 243,309 60,075 (17)(2) 303,367 243,309 38,285 (4,346)(7) 277,248 337,306
Loans, net of
unearned interest....... 857,557 154,398 (715)(3) 1,011,240 857,557 11,055 868,612 1,022,295
Reserve for loan losses.. (8,071) (1,962) (10,033) (8,071) (150) (8,221) (10,183)
Premises and equipment... 25,672 6,052 31,724 25,672 312 25,984 32,036
Other assets............. 31,139 4,436 142(2)(4) 35,717 31,139 614 3,957(6)(8) 35,710 40,288
--------- ------- ------- --------- --------- -------- ------- --------- ---------
Total Assets........... 1,202,402 240,895 (590) 1,442,707 1,202,402 51,543 (739) 1,253,206 1,493,511
========= ======= ======= ========= ========= ======== ======= ========= =========
LIABILITIES:
Non-interest bearing
deposits................ 138,252 23,103 161,355 138,252 4,921 143,173 166,276
Interest bearing
deposits................ 897,395 194,502 1,091,897 897,395 33,742 931,137 1,125,639
--------- ------- ------- --------- --------- -------- ------- --------- ---------
Total deposits......... 1,035,647 217,605 1,253,252 1,035,647 38,663 1,074,310 1,291,915
Funds borrowed........... 37,579 100 37,679 37,579 4,000 41,579 41,679
Other liabilities........ 7,050 2,397 400(4) 9,847 7,050 509 7,559 10,356
Long-term debt........... 20,083 715 (715)(3) 20,083 20,083 0 20,083 20,083
--------- ------- ------- --------- --------- -------- ------- --------- ---------
Total liabilities...... 1,100,359 220,817 (315) 1,320,861 1,100,359 43,172 0 1,143,531 1,364,033
--------- ------- ------- --------- --------- -------- ------- --------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock.......... 0 1,378 (1,378)(5) 0 0 0 0 0
Common stock............. 19,133 1,808 3,827(5) 24,768 19,133 400 660(9) 20,193 25,828
Surplus.................. 33,320 3,750 (2,459)(2)(5) 34,611 33,320 850 5,722(9) 39,892 41,183
Retained earnings........ 48,336 12,780 (260)(4) 60,856 48,336 6,649 (6,649)(9) 48,336 60,856
Net unrealized holding
gains (losses) on
securities available-
for-sale................ 1,254 362 (5)(2) 1,611 1,254 472 (472)(9) 1,254 1,611
--------- ------- ------- --------- --------- -------- ------- --------- ---------
Total shareholders'
equity................ 102,043 20,078 (275) 121,846 102,043 8,371 (739) 109,675 129,478
--------- ------- ------- --------- --------- -------- ------- --------- ---------
Total liabilities
and shareholders'
equity................ 1,202,402 240,895 (590) 1,442,707 1,202,402 51,543 (739) 1,253,206 1,493,511
========= ======= ======= ========= ========= ======= ======= ======== =========
Book value per share..... 26.67 20.69 24.60 26.67 1,046.38 27.16 25.07
Shares outstanding-fully
diluted................. 3,826,581 980,852 146,217(5) 4,953,650 3,826,581 8,000 204,000(9) 4,038,581 5,165,650
</TABLE>
(footnotes continued on next page)
43
<PAGE> 49
- ---------
(1) The BT Financial balance sheet includes the assets of Huntington Bank, which
was acquired by BT Financial on December 14, 1995. Pro forma balance sheet
information for the acquisition Huntington Bank as of September 30 1995,
was previously reported in an amendment to a Form 8-K filed on February 27,
1996.
(2) Reflects the elimination of 792 shares of Moxham common stock owned by BT
Financial.
(3) Reflects the elimination of a loan from Johnstown Bank to Moxham.
(4) Reflects the recording of the liability for additional supplemental
retirement benefits due certain officers upon a change in control.
(5) Reflects the issuance of 1.15 shares of BT Financial common stock for each
share of Moxham common stock, including shares issued after the conversion
of 14,000 shares of Moxham preferred stock. Excludes 792 current shares of
Moxham common stock that is owned by BT.
(6) Reflects estimated legal, accounting and severance costs of the Armstrong
acquisition.
(7) Represents the sale of certain investment securities to fund the cash paid
to Armstrong shareholders, based upon a market value of $36.00 for BT common
stock.
(8) Represents goodwill associated with the Armstrong acquisition. Asset
valuations different than book value are currently estimated to be minimal.
(9) Represents the issuance of 26.5 shares of BT common stock (212,000 shares in
total) for each share of Armstrong common stock and cash paid to Armstrong
shareholders for a total value of $11.98 million. Proforma adjustments to
eliminate Armstrong common shares and issue BT common shares are represented
as follows:
<TABLE>
<S> <C> <C>
Common stock....................................................................... (400) 1,060
Surplus............................................................................ (850) 6,572
Retained earnings.................................................................. (6,649) --
Net unrealized holding gains (losses) on securities available-for-sale............. (472) --
------ -----
TOTAL SHAREHOLDERS' EQUITY..................................................... (8,371) 7,632
</TABLE>
44
<PAGE> 50
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
BT & BT &
PRO MOXHAM PRO ARMSTRONG PRO
BT FORMA PRO BT FORMA PRO FORMA
FINANCIAL(1) MOXHAM ADJUSTMENTS FORMA FINANCIAL(1) ARMSTRONG ADJUSTMENTS FORMA COMBINED
------------ ------ ----------- ----- ------------ --------- ----------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans, including
fees................. 71,931 14,096 (67)(2) 85,960 71,931 841 72,772 86,801
Investment
securities........... 16,845 3,770 20,615 16,845 2,436 (283)(4) 18,998 22,768
Money market
investments.......... 544 192 736 544 7 551 743
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total interest
income............ 89,320 18,058 (67) 107,311 89,320 3,284 (283) 92,321 110,312
--------- ------- ------- --------- --------- ----- ------- --------- ---------
INTEREST EXPENSE
Deposits.............. 33,799 8,995 42,794 33,799 1,358 35,157 44,152
Borrowings............ 2,458 211 2,669 2,458 126 2,584 2,795
Long-term debt........ 1,620 67 (67)(2) 1,620 1,620 0 1,620 1,620
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total interest
expense........... 37,877 9,273 (67) 47,083 37,877 1,484 0 39,361 48,567
--------- ------- ------- --------- --------- ----- ------- --------- ---------
NET INTEREST INCOME.... 51,443 8,785 0 60,228 51,443 1,800 (283) 52,960 61,745
Provision for loan
losses............... 1,694 307 2,001 1,694 38 1,732 2,039
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Net interest income
after provision for
loan losses.......... 49,749 8,478 0 58,227 49,749 1,762 (283) 51,228 59,706
--------- ------- ------- --------- --------- ----- ------- --------- ---------
OTHER INCOME:
Net security gains
(losses)............. 188 62 250 188 194 382 444
Other................. 7,587 1,401 8,988 7,587 52 7,639 9,040
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total other
income............ 7,775 1,463 0 9,238 7,775 246 0 8,021 9,484
--------- ------- ------- --------- --------- ----- ------- --------- ---------
OTHER EXPENSES:
Salaries and employee
benefits............. 20,276 4,592 24,868 20,276 474 20,750 25,342
Occupancy and
equipment expense.... 6,497 1,223 7,720 6,497 130 6,627 7,850
Amortization of
intangible assets.... 1,874 30 1,904 1,874 0 270(5) 2,144 2,174
Other operating
expenses............. 11,570 2,460 14,030 11,570 567 12,137 14,597
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Total other
expenses.......... 40,217 8,305 0 48,522 40,217 1,171 270 41,658 49,963
--------- ------- ------- --------- --------- ----- ------- --------- ---------
INCOME BEFORE INCOME
TAXES................. 17,307 1,636 0 18,943 17,307 837 (553) 17,591 19,227
Provision for income
taxes................ 5,620 161 5,781 5,620 190 (99)(6) 5,711 5,872
--------- ------- ------- --------- --------- ----- ------- --------- ---------
Net Income..... 11,687 1,475 0 13,162 11,687 647 (454) 11,880 13,355
========= ======= ======= ========= ======== ===== ======= ========= =========
Net income per share.. 3.05 1.51 2.66 3.05 80.90 2.94 2.59
Dividends paid per
share................ 1.22 0.64 1.22 1.22 60.75 1.22 1.22
Weighted average
shares outstanding-
fully diluted........ 3,826,581 976,342 145,539(3) 4,948,463 3,826,581 8,000 204,000(7) 4,038,581 5,160,463
</TABLE>
45
<PAGE> 51
PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
BT FINANCIAL
PRO FORMA AND MOXHAM
BT FINANCIAL MOXHAM ADJUSTMENTS PRO FORMA
------------ ------- ----------- ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees.............................. 55,984 12,372 (63)(2) 68,293
Investment securities.............................. 16,020 3,371 19,391
Money market investments........................... 1,235 111 1,346
--------- ------- ------- ---------
Total interest income......................... 73,239 15,854 (63) 89,030
--------- ------- ------- ---------
INTEREST EXPENSE
Deposits........................................... 24,817 6,689 31,506
Borrowings......................................... 766 229 995
Long-term debt..................................... 629 63 (63)(2) 629
--------- ------- ------- ---------
Total interest expense........................ 26,212 6,981 (63) 33,130
--------- ------- ------- ---------
NET INTEREST INCOME................................ 47,027 8,873 55,900
Provision for loan losses.......................... 904 264 1,168
--------- ------- ------- ---------
Net interest income after provision for loan
losses...................................... 46,123 8,609 0 54,732
--------- ------- ------- ---------
OTHER INCOME
Net security gains (losses)........................ 193 154 347
Other.............................................. 6,781 1,279 8,060
--------- ------- ------- ---------
Total other income............................ 6,974 1,433 0 8,407
--------- ------- ------- ---------
OTHER EXPENSES
Salaries and employee benefits..................... 18,610 4,333 22,943
Occupancy and equipment expense.................... 6,074 1,159 7,233
Amortization of intangible assets.................. 1,275 16 1,291
Other operating expenses........................... 11,560 2,570 14,130
--------- ------- ------- ---------
Total other expenses.......................... 37,519 8,078 0 45,597
--------- ------- ------- ---------
INCOME BEFORE INCOME TAXES......................... 15,578 1,964 0 17,542
Provision for income
taxes......................................... 4,672 211 4,883
--------- ------- ------- ---------
Net Income.................................... 10,906 1,753 0 12,659
========= ======= ======= =========
Net income per share............................... 2.85 1.81 2.56
Dividends paid per share........................... 1.10 0.58 1.10
Weighted average shares outstanding................ 3,826,581 967,959 144,282(3) 4,938,822
</TABLE>
46
<PAGE> 52
PRO FORMA CONDENSED COMBINED INCOME STATEMENT FOR
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
BT FINANCIAL MOXHAM ADJUSTMENTS COMBINED
------------ ------- ----------- ---------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees......................... 49,590 11,535 (61)(2) 61,064
Investment securities......................... 14,467 2,913 17,380
Money market investments...................... 2,197 372 2,569
--------- ------- ------- ---------
Total interest income.................... 66,254 14,820 (61) 81,013
--------- ------- ------- ---------
INTEREST EXPENSE
Deposits...................................... 22,471 5,956 28,427
Borrowings.................................... 336 35 371
Long-term debt................................ 336 61 (61)(2) 336
--------- ------- ------- ---------
Total interest expense................... 23,143 6,052 (61) 29,134
--------- ------- ------- ---------
NET INTEREST INCOME........................... 43,111 8,768 51,879
Provision for loan losses..................... 1,975 193 2,168
--------- ------- ------- ---------
Net interest income after provision for
loan losses............................ 41,136 8,575 0 49,711
--------- ------- ------- ---------
OTHER INCOME
Net security gains (losses)................... (4) 138 134
Other......................................... 6,898 1,173 8,071
--------- ------- ------- ---------
Total other income....................... 6,894 1,311 0 8,205
--------- ------- ------- ---------
OTHER EXPENSE
Salaries and employee benefits................ 17,183 4,123 21,306
Occupancy and equipment expense............... 5,418 1,089 6,507
Amortization of intangible assets............. 1,104 23 1,127
Other operating expenses...................... 10,135 2,488 12,623
--------- ------- ------- ---------
Total other expenses..................... 33,840 7,723 0 41,563
--------- ------- ------- ---------
INCOME BEFORE INCOME TAXES.................... 14,190 2,163 0 16,353
Provision for income taxes.................... 4,846 235 5,081
--------- ------- ------- ---------
Income before cumulative effect of accounting
principle changes........................... 9,344 1,928 0 11,272
Cumulative effect of change in accounting for
Income taxes................................ 113 (27) 86
--------- ------- ------- ---------
Net Income............................... 9,457 1,901 0 11,358
========= ======= ======= =========
Net income per share.......................... 2.72 1.98 2.48
Dividends paid per share...................... 0.99 0.56 0.99
Weighted average shares outstanding........... 3,479,574 958,370 142,844(3) 4,580,788
</TABLE>
47
<PAGE> 53
- ---------
(1) The BT Financial income statements for the year ended December 31, 1995
represents the pro forma results of BT Financial and Huntington Bank. The
acquisition was closed on December 14, 1995. Pro forma income statement
information for the acquisition of Huntington Bank for the nine months ended
September 30, 1995, was previously reported in an amendment to a Form 8-K
filed on February 27, 1996. BT Financial's Annual Report on Form 10-K for
the year ended December 31, 1995, included pro forma income statement
information for the acquisition of Huntington Bank for the twelve months
ended December 31, 1995.
(2) Reflects the elimination of interest income and expense from term debt at
Moxham borrowed from BT.
(3) Reflects the adjustment to weighted average shares due to the issuance of
1.15 shares of BT common stock for each share of Moxham common stock,
including shares issued for the conversion of 14,000 shares of Moxham
preferred stock. Excludes 792 shares of Moxham stock owned by BT.
(4) Reflects the reduction in income from the sale of certain investment
securities at an estimated average rate of 6.5% to fund the cash paid to
Armstrong shareholders.
(5) Reflects the amortization of goodwill over a 15 year period and organization
costs over a 5 year period. Purchase adjustments to other assets and
liabilities are estimated to be minimal and are not reflected in the pro
forma income statements.
(6) Reflects tax effect of item (4).
(7) Reflects the adjustment to weighted average shares due to the issuance of
26.5 shares of BT common stock for each share of Armstrong Common Stock or
212,000 shares in total.
48
<PAGE> 54
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK
CAPITAL STOCK
The authorized capital stock of BT Financial consists of 10,000,000 shares
of common stock having a par value of $5.00 per share, and 2,000,000 shares of
preferred stock having no par value. The number of shares of BT Financial Common
Stock outstanding as of April , 1996 was 3,826,581. No shares of BT
Financial's preferred stock are outstanding. Except to the extent required by
governing law, rule or regulation or by NASDAQ rules (described below), the
shares of capital stock of BT Financial may be issued from time to time by the
Board of Directors of BT Financial without further approval of the shareholders
of BT Financial. The Board of Directors of BT Financial also has the full
authority permitted by law to divide the authorized and unissued shares of
preferred stock, no par value, of BT Financial into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, redemption rights and other special
rights of any such series that may be desired.
Voting Rights. Holders of shares of BT Financial Common Stock are entitled
to cast one vote for each share held of record on all matters submitted to a
vote of shareholders of BT Financial. Holders of shares of BT Financial Common
Stock are not entitled to cumulate votes for the election of directors.
Classification of the Board of Directors. The Board of Directors is
divided into four classes, as nearly equal in number as possible, and the term
of office of one class expires in each year.
Preemptive Rights. Holders of shares of BT Financial Common Stock do not
have any preemptive rights to subscribe for or to purchase any additional
securities of BT Financial.
Dividends. Subject to any rights and preferences of any class of stock
having preference over the BT Financial Common Stock, holders of shares of BT
Financial Common Stock will be entitled to such dividends as may be declared by
the Board of Directors of BT Financial out of funds lawfully available therefor.
Cash available for dividend distribution to the holders of BT Financial Common
Stock must initially come from dividends paid to BT Financial by its
subsidiaries. Accordingly, restrictions on payment of cash dividends by BT
Financial are affected by any restrictions on the payment of dividends by BT
Financial's subsidiaries.
Liquidation. Upon any liquidation, dissolution or winding up of the
affairs of BT Financial, whether voluntary or involuntary, holders of shares of
BT Financial Common Stock will be entitled to receive pro rata the remaining
assets of BT Financial after all debts and liabilities have been paid and after
the holders of any class of stock having preference over the BT Financial Common
Stock have been paid in full any sums to which they may be entitled.
NASDAQ Listing. BT Financial Common Stock is included for quotation on
NASDAQ. In order to maintain such inclusion, approval of BT Financial's
shareholders would be required for the issuance of additional shares of BT
Financial Common Stock or securities convertible into BT Financial Common Stock
if the issuance of such securities (1) is in connection with the acquisition of
a company, is not in connection with a public offering for cash, and the
securities issued have or will have voting power equal to or in excess of 20% of
the voting power outstanding before such issuance; (2) is in connection with the
acquisition of a company in which a director, officer or substantial shareholder
of BT Financial has a 5% or greater interest (or such persons collectively have
a 10% or greater interest) and the issuance of the securities could result in an
increase in outstanding common stock or voting power of 5% or more; (3) is in
connection with a transaction other than a public offering at a price less than
the greater of book or market value, and will equal 20% or more of the common
stock or 20% or more of the voting power outstanding before issuance; or (4)
would result in a change in control of BT Financial. Under NASDAQ rules,
shareholder approval would also be required for the establishment of a stock
option or purchase plan in which stock may be acquired by officers and directors
other than a broadly-based plan in which other security holders of BT Financial
or employees of BT Financial participate. The NASDAQ rules do not require
approval of the Merger by BT Financial shareholders.
Also under NASDAQ Rules, BT Financial may not issue any class of security
or take other corporate action with the effect of nullifying, restricting or
disparately reducing the per share voting rights of its outstanding
49
<PAGE> 55
registered common stock. Prohibited actions include, but are not limited to, the
adoption of time-phased voting plans, the adoption of capped voting rights, and
the issuance of super-voting stock. The following actions are presumed to have a
nullifying, restricting or disparately reducing effect: (1) corporate action to
impose any restriction on the voting power of shares of common stock held by a
beneficial or record holder based on the length of time such shares have been
held by such holder or based on the number of shares held by such holder; (2)
any issuance of securities through an exchange offer for shares of an
outstanding class of common stock in which the shares issued have voting rights
greater than or less than the per share voting rights of any outstanding class
of common stock; (3) any issuance of securities pursuant to a stock dividend, or
any other type of distribution of stock in which the securities issued have
voting rights greater than the per share voting rights of any outstanding class
of common stock. The following actions are presumed not to have a nullifying,
restricting or disparately reducing effect: (1) the issuance of securities
pursuant to an initial registered public offering; (2) the issuance of any class
of securities, through a registered public offering, with voting rights not
greater than the per share voting rights of any outstanding class of common
stock; (3) the issuance of any class of securities to effect a bona fide merger
or acquisition, with voting rights not greater than the per share voting rights
of any outstanding class of common stock; or (4) corporate action pursuant to
state law requiring a domestic corporation to condition the voting rights of a
beneficial or record holder of a specified threshold percentage of voting stock
on the approval of the corporation's independent shareholders.
BT FINANCIAL SHAREHOLDER RIGHTS PLAN
On March 27, 1991, the Board of Directors of BT Financial declared a
dividend distribution of one right for each outstanding share of BT Financial
Common Stock (each a "Right," and collectively, the "Rights"). The Rights were
distributed on April 15, 1991 to shareholders of record on that date. Each Right
entitles its registered holder to purchase from BT Financial a unit equal to
nine one-thousandths (.009) of a share of BT Financial Series A Preferred Stock
at a price of $45.19 per unit (the "Exercise Price"). The Rights are not
exercisable until the Distribution Date (as defined below). The Rights will
expire at the close of business on April 15, 2001, unless earlier redeemed or
exchanged by BT Financial as described below. Rights will be issued with the
shares of BT Financial Common Stock to be issued in the Merger, unless a
Distribution Date occurs first. All currently outstanding shares of BT Financial
Common Stock have Rights associated therewith.
The Rights will be evidenced by certificates for BT Financial Common Stock
until the close of business on the tenth day (the "Distribution Date") following
the earlier to occur of (i) the date on which a person or group of affiliated or
associated persons ("Acquiring Person"), other than (A) BT Financial, (B) any
subsidiary of BT Financial, (C) any employee benefit plan or employee stock plan
of BT Financial or of any subsidiary of BT Financial, (D) any trust or trustee,
or person acting as trustee or other entity organized, appointed, established or
holding BT Financial's voting stock pursuant to the terms of any such plan, or
(E) any person or group of affiliated or associated persons which is eligible,
pursuant to Rule 13d-1(b) under the Exchange Act, to file a Statement on
Schedule 13G with respect to its or their beneficial ownership of voting stock
of BT Financial, whether or not such person or group has filed a Statement on
Schedule 13G, unless such person or any of its affiliates or associates has
filed a Statement on Schedule 13D with respect to beneficial ownership by any
one or more of them of 10% or more of the voting power of BT Financial ("Exempt
Person"), has acquired, or obtained the right to acquire, beneficial ownership
of shares of voting stock having 10% or more of the voting power of BT Financial
and the public announcement of such or (ii) the commencement of, or public
announcement of an intention to make, a tender or exchange offer (other than a
tender or exchange offer by an Exempt Person) which, if consummated, would
result in the beneficial ownership of shares of voting stock having 10% or more
of the voting power of BT Financial, even if no shares are actually purchased
pursuant to such offer. Until the Distribution Date, the Rights may only be
transferred together with shares of BT Financial Common Stock and the surrender
for transfer of any certificate for shares of BT Financial Common Stock having
associated Rights will constitute the transfer of such Rights. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of shares
of BT Financial Common Stock having associated Rights as of the close of
business on the Distribution Date and such separate certificates alone will
evidence the Rights from and after the Distribution Date.
50
<PAGE> 56
The BT Financial Series A Preferred Stock will be nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, subordinate to any other series of BT Financial's preferred
stock. BT Financial Series A Preferred Stock may not be issued except upon
exercise of Rights. Each share of BT Financial Series A Preferred Stock will be
entitled to receive when, as and if declared, a quarterly cash dividend in an
amount equal to the greater of $.25 or 115.76 times any cash dividends, and
115.76 times the amount (payable in kind) of all non-cash distributions (other
than dividends payable in equity securities), paid on shares of BT Financial
Common Stock during the preceding quarter. Whenever dividends are in arrears, BT
Financial will be unable (i) to purchase or redeem any shares of stock ranking
junior to the Series A Preferred Stock or (ii) to purchase any shares of Series
A Preferred Stock or any shares ranking on a parity with them, except in
accordance with an offer made to all holders of such shares upon such terms as
the Board of Directors shall determine in good faith will result in fair and
equitable treatment among the respective series and classes. BT Financial may at
any time redeem such parity stock for shares of stock ranking junior to the
Series A Preferred Stock. In the event of liquidation, the holders of shares of
BT Financial Series A Preferred Stock will be entitled to receive a liquidation
payment in an amount equal to the greater of $5,000 plus accrued and unpaid
dividends or 115.76 times the payment to be made per share of BT Financial
Common Stock. Each share of BT Financial Series A Preferred Stock will have
115.76 votes, voting together with the shares of BT Financial Common Stock. In
the event of any merger, consolidation or other transaction in which the shares
of BT Financial Common Stock are exchanged, each share of BT Financial Series A
Preferred Stock will be entitled to receive 115.76 times the amount received per
share of BT Financial Common Stock. The rights of the BT Financial Series A
Preferred Stock as to dividends, liquidation and voting are protected by
anti-dilution provisions.
The number of shares of BT Financial Series A Preferred Stock issuable upon
exercise of the Rights and the Exercise Price are subject to certain adjustments
from time to time in the event of a stock dividend on, or a subdivision or
combination of, the BT Financial Common Stock. The Exercise Price is subject to
adjustment in the event of extraordinary distributions of cash or other property
to holders of shares of BT Financial Common Stock.
Unless the Rights are earlier redeemed or exchanged, if (a) at any time
after there is an Acquiring Person, BT Financial were to be involved in a merger
or other business combination (in which any shares of BT Financial Common Stock
are changed into or exchanged for other securities or assets) or (b) more than
50% of the assets or earning power of BT Financial and its subsidiaries (taken
as a whole) were to be sold or transferred to an Acquiring Person in one or a
series of related transactions, the Rights Agreement provides that proper
provision must be made so that each holder of record of a Right will from and
after such date have the right to receive, upon payment of the Exercise Price,
that number of shares of common stock of the acquiring company having a Fair
Market Value (as such term is defined in the Rights Agreement) at the time of
such transaction equal to two times the Exercise Price.
In addition, unless the Rights are earlier redeemed or exchanged, if BT
Financial were to be the surviving corporation in a merger or other business
combination with an Acquiring Person and the BT Financial Common Stock remained
outstanding (none of which shares were changed into or exchanged for other
securities or assets) or if an Acquiring Person engages in any of a number of
"self-dealing" transactions with BT Financial specified in the Rights Agreement
or if any person (other than an Exempt Person) or group of affiliated or
associated persons becomes the beneficial owner of shares of voting stock having
more than 10% of BT Financial's voting power (other than by purchase pursuant to
an all cash tender offer for all the voting stock which purchase increases such
person's beneficial ownership to 85% or more of the outstanding voting power of
BT Financial's voting stock) or if during such time as there is any Acquiring
Person, there is a reclassification of securities (including any reverse stock
split) or any recapitalization or reorganization of BT Financial or any merger
or consolidation of BT Financial with any of its Subsidiaries or any other
transaction or series of transactions involving BT Financial or any of its
subsidiaries any of which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of any class
of equity of BT Financial or any of its subsidiaries or securities exercisable
for or convertible into equity securities of BT Financial or its subsidiaries
beneficially owned directly or indirectly by any Acquiring Person or any
affiliate and/or associate of any Acquiring Person, the Rights Agreement
provides that proper provision must be made so that each holder of
51
<PAGE> 57
record of a Right, other than the Acquiring Person (whose Rights will thereupon
become null and void), will thereafter have the right to receive, upon payment
of the Exercise Price, that number of shares of BT Financial Series A Preferred
Stock having a Fair Market Value at the time of such transaction equal to two
times the Exercise Price.
Fractional shares of BT Financial Series A Preferred Stock may, at the
election of BT Financial, be evidenced by depositary receipts. BT Financial may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth of a share.
At any time at or prior to the close of business on the fifteenth day after
a public announcement that a person has become an Acquiring Person, BT Financial
may redeem the Rights in whole, but not in part, at a price of $.009 per Right
(the "Redemption Price"), should the BT Financial Board of Directors determine
in its sole discretion that redemption is in the best interests of BT Financial
and its shareholders, whether or not (i) any of the Rights have theretofore been
exercised, or (ii) exercise thereof at the time would be deemed economic, or
(iii) any of the transactions referred to in Section 11 or 13 of the Rights
Agreement has then been proposed. Immediately upon the action of the Board of
Directors of BT Financial authorizing redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The Board of Directors of BT Financial may, at its option, at any time
after any person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (except for Rights beneficially owned by an
Acquiring Person or by an associate or affiliate of one and which have become
void) for BT Financial Common Stock at an exchange ratio (the "Rights Exchange
Ratio") of one share of BT Financial Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after March 27, 1991. Notwithstanding the foregoing, the Board of
Directors is not empowered to effect such exchange at any time after any person
(other than an Exempt Person), together with all affiliates and associates of
such person, becomes the beneficial owner of 50% or more of the then outstanding
voting power. Immediately upon the action of the Board of Directors of BT
Financial ordering the exchange of any rights, the right to exercise such rights
will terminate and the only right thereafter of a holder of such Rights will be
to receive that number of shares of BT Financial Common Stock equal to the
number of such Rights held by such holder multiplied by the Rights Exchange
Ratio. In any such exchange, BT Financial may substitute Series A Preferred
Stock (or shares having the same rights, privileges and preferences) for BT
Financial Common Stock exchangeable for rights at the rate set forth in the
Rights Agreement.
Until a Right is exercised, the holders, as such, will have no rights as a
shareholder of BT Financial, including, without limitation, the right to vote or
to receive dividends.
BT Financial may from time to time supplement or amend the Rights Agreement
without the approval of any holders of Rights Certificates prior to the
Distribution Date to amend or supplement any provision which BT Financial may
deem necessary or desirable or, subsequent to the Distribution Date, to amend or
supplement any provision which BT Financial may deem necessary or desirable and
which will not adversely affect the interests of holders of Rights (other than
an Acquiring Person or any affiliate or associate thereof).
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement that is
attached to BT Financial's Registration Statement on Form 8-A dated April 26,
1991, which is incorporated herein by reference. A copy of that Registration
Statement can be obtained in the manner set forth under "Incorporation of
Certain Documents by Reference."
PROVISIONS AFFECTING BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
The BCL, certain federal laws and a number of provisions of BT Financial's
articles and bylaws address matters of corporate governance and certain of the
rights of shareholders so as to significantly restrict the ability of any person
to acquire the beneficial ownership of more than a certain minimum of any class
of equity security of BT Financial outstanding. The following discussion is a
general summary of provisions relating to stock ownership and transfers, the
Board of Directors and business combinations, that may be deemed to have such
"anti-takeover" effects. These and other provisions affect shareholder rights
and should be given careful
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attention. The following description of certain of these provisions is
necessarily general and reference should be made in each case to the appropriate
provision of the BCL, the federal law or the articles and bylaws of BT
Financial.
Pennsylvania Law
The BCL contains a number of "anti-takeover" sections that apply to
registered corporations relating to: control share acquisitions; the
disgorgement of profits by certain controlling persons; the approval of
transactions with interested shareholders; the ability of shareholders to put
their stock following a control transaction; business combinations; severance
compensation; and preservation of labor contracts. A corporation that was a
registered corporation on April 27, 1990 could opt-out of the "control share
acquisition" or "disgorgement of profits" provisions by an explicit amendment of
its bylaws adopted by its board of directors on or before July 26, 1990. A
corporation that became a registered corporation after April 27, 1990 could opt
out by an explicit provision in its original articles of incorporation or by an
explicit amendment to its articles of incorporation adopted on or before 90 days
after the corporation first becomes a registered corporation. BT Financial has
opted out of the "control share acquisitions" and "disgorgement of profits"
sections of the BCL and along with them the provisions regarding severance
compensation and the preservation of labor contracts.
The approval of transactions with an interested shareholder section of the
BCL provides that certain transactions with an "interested shareholder,"
including mergers, consolidations, share exchanges and sales of assets must be
approved by the holders of a majority of disinterested shares in addition to any
other approvals that may be required. This requirement does not apply if the
transaction is approved by a disinterested majority of the board of directors,
if the consideration paid to the other shareholders in the transaction is not
less than the highest amount paid by the interested shareholder in acquiring
shares or if, immediately prior to the adoption of a plan of merger or
consolidation and thereafter until the effective date, another corporation that
is a party to the merger or consolidation owns directly or indirectly 80% or
more of each class of the constituent corporation, the business combination
section has been satisfied (if applicable), and the board of directors of the
constituent corporation has approved the plan. An "interested shareholder"
includes any shareholder who is a party to the transaction or who is treated
differently from the other shareholders and affiliates of the interested
shareholder.
Under the provision of the BCL that permits shareholders to put their
shares, shareholders of a registered corporation that becomes subject to a
"control transaction" can demand from the controlling person or group payment in
cash for his or her shares of an amount equal to the fair value of his or her
shares on the date that the "control transaction" occurred. A "control
transaction" for such purposes is the acquisition of 20% of a corporation's
voting shares by a person or group, with several exceptions.
The business combination section of the BCL prohibits any business
combination with an interested shareholder other than: a business combination
approved by the board prior to the date on which the interested shareholder
first became such or where the purchase of the shares that first made the
interested shareholder such had been approved by the board prior to the date of
such purchase; a business combination approved by the affirmative vote of a
majority of the disinterested shareholders if the interested shareholder has
beneficially owned 80% or more of the voting stock for three months and owns
such amount at the time of the vote, and if shareholders receive specified
minimum values for their shares; a business combination approved by a unanimous
vote of common shareholders; a business combination approved by a majority of
disinterested shareholders no earlier than five years after the interested
shareholder became such; or a business combination approved at a shareholders'
meeting held no earlier than five years after the interested shareholder became
such if shareholders receive specified minimum values for their shares. Business
combinations include: mergers, consolidations, share exchanges and divisions;
sales, leases, exchanges, mortgages, pledges, transfers and other dispositions
of assets having specified values; share transfers having specified values;
liquidation; dissolution; transactions that increase the interested
shareholder's voting power; and the provision of any benefit not in proportion
to shareholdings. An interested shareholder is generally any beneficial owner of
20% of the voting shares of a corporation or an affiliate or associate of a
corporation that at any time within the five year period prior to the date in
question beneficially owned 20% of the voting shares of the corporation.
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Federal Law
The Change in Bank Control Act of 1978, as amended, prohibits a person or
group of persons from acquiring "control" of a bank holding company unless the
Federal Reserve Board has been given 60 days' prior written notice of such
proposed acquisition and, within that time period, the Federal Reserve Board has
not issued a notice disapproving the proposed acquisition or extending, for up
to another 30 days, the period during which such a disapproval may be issued.
This period may be further extended under certain circumstances. An acquisition
may be made prior to the expiration of the disapproval period if the Federal
Reserve Board issues written notice of its intent not to disapprove action.
Under a rebuttable presumption established by the Federal Reserve Board,
the acquisition of 10% or more of a class of voting stock of a bank holding
company with a class of securities registered under Section 12 of the Exchange
Act would, under the circumstances set forth in the presumption, constitute the
acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the Bank Holding Company Act before acquiring 25%
(5% in the case of an acquiror that is a bank holding company) or more of the
outstanding shares of BT Financial Common Stock, or such lesser number of shares
as constitute control over BT Financial.
Transactions with Interested Persons of BT Financial
Article 8 of the articles of incorporation of BT Financial states that any
merger or consolidation between an Interested Person (as defined below) or an
affiliate or associate of an Interested Person or an associate of any such
affiliate or an affiliate of an associate of an Interested Person and BT
Financial or one of its subsidiaries or any disposition of all or substantially
all or a substantial part of the assets of BT Financial or one of its
subsidiaries to an Interested Person or an affiliate or associate of an
Interested Person or an associate of any such affiliate or an affiliate of an
associate of an Interested Person must be approved by the affirmative vote of
the holders of at least 80% of the outstanding shares of capital stock of BT
Financial entitled to vote for the election of directors. This supermajority
vote requirement does not apply if the transaction is approved by a majority of
the entire Board of Directors of BT Financial prior to the time that an
Interested Person becomes such or by a majority of the entire Board of Directors
of BT Financial without counting the vote of any director who is an Interested
Person or an affiliate, associate or agent thereof or an associate or agent of
any such affiliate prior to consummation of the transaction. An Interested
Person is defined in the BT Financial articles as any person that beneficially
owns 20% or more of the outstanding shares of capital stock of BT Financial
entitled to vote for the election of directors. The BCL has a comparable
provision that would not apply to Armstrong.
Tender Offers for and Other Proposals to Acquire BT Financial
When considering any tender offer for BT Financial Common Stock or any
transaction discussed under "Transactions with Interested Persons of BT
Financial" the Board of Directors of BT Financial must consider all factors it
deems relevant, and may, but is not obligated to, consider the following
factors: (a) the amount and nature of the consideration (if any) to be received
by shareholders in relation to the then current market price, the Board's
estimate of the then current value of BT Financial in a freely negotiated
transaction and the Board's estimate of the future value of BT Financial as an
independent entity; and (b) the social and economic effects of the transaction
on the employees, depositors, customers, creditors and other constituents of BT
Financial and on the communities served by BT Financial.
"Supermajority" Provisions Concerning Charter Amendments
Under the BCL, amendments to the articles of incorporation of a registered
corporation such as BT Financial may only be proposed by its board of directors.
Except for certain amendments which do not require shareholder approval and
unless a greater vote is required by its articles of incorporation, amendments
of the articles of incorporation of a Pennsylvania corporation must be approved
by the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and, if any class or series of shares is entitled to
vote as a class, the affirmative vote of a majority of the votes cast in each
such class vote.
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The BT Financial Articles require the affirmative vote of the holders of at
least 80% of the outstanding shares of capital stock of BT Financial entitled to
vote for the election of directors of BT Financial, given in person or by proxy
at a meeting duly called for the purpose of voting thereon, to amend or repeal
any provision of the sections of the BT Financial articles relating to:
transactions with Interested Persons; factors to be considered by the Board of
Directors of BT Financial in reviewing tender offers and other transactions;
classification of the Board of Directors of BT Financial; the directors' ability
to make, amend or repeal bylaws; indemnification; or the amendment or repeal of
the BT Financial articles. All other BT Financial articles may be amended as
provided in the BCL.
"Supermajority" Provisions Concerning Bylaw Amendments
The shareholders of a Pennsylvania corporation who are entitled to vote
have the power to adopt, amend and repeal the bylaws of the corporation. The
authority to adopt, amend and repeal bylaws of a corporation may be expressly
vested by the bylaws in the board of directors, subject to the power of the
shareholders to override any such action and except that a board of directors
may not have the authority to adopt or change a bylaw on any subject that is
committed expressly to the shareholders under the BCL, unless the articles of
incorporation of that corporation expressly give the board that authority.
The BT Financial articles provide that the Board of Directors of BT
Financial has the power to make, amend and repeal the bylaws as it deems
necessary or convenient for the regulation and management of BT Financial to the
extent not inconsistent with law or the BT Financial articles. Such power is
subject to the power of the shareholders of BT Financial to amend or repeal
bylaws of BT Financial by the affirmative vote of the holders of at least 80% of
the outstanding shares of capital stock of BT Financial entitled to vote for the
election of directors of BT Financial, given in person or by proxy at a meeting
duly called for the purpose of voting thereon.
Shareholder Nominations for Directors
BT Financial's bylaws provide that, with certain exceptions, nominations of
candidates for election as directors of BT Financial, other than those made by
management of BT Financial, must be in writing and filed with the Secretary of
BT Financial not less than 40 days prior to any shareholders' meeting called for
the election of directors or ten days after the giving of notice of such meeting
in accordance with Article 33 of the bylaws of BT Financial, whichever is later.
This provision could be viewed as "anti-takeover" in nature, since it may make
it more difficult for shareholders to nominate candidates and may give an
advantage to incumbent management's nominees.
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COMPARISON OF SHAREHOLDERS RIGHTS
The rights of the shareholders of Armstrong are governed by the
Pennsylvania Banking Code and the articles of incorporation and bylaws of
Armstrong. As a result of the Merger, shareholders of Armstrong who receive BT
Financial Common Stock in the merger will become shareholders of BT Financial,
and as such, their rights as shareholders will be governed by the BCL and the
articles and bylaws of BT Financial. Certain differences in the rights of
shareholders of BT Financial and Armstrong arise from the distinctions between
the Banking Code and BCL and the articles and bylaws of each. Although it is
impracticable to note all of the differences, the following is a summary of
certain significant differences.
The articles of incorporation of Armstrong authorize the issuance of 8,000
shares of common stock, $50.00 par value per share, all of which are issued and
outstanding. Upon the consummation of the Merger, the shares of Armstrong Common
Stock will be canceled, and the holders of Armstrong Common Stock will receive
shares of BT Financial Common Stock and cash. See "The Merger Agreement-The
Merger." The BT Financial articles authorize the issuance of 10,000,000 shares
of BT Financial Common Stock, par value $5.00 per share, and 2,000,000 shares of
preferred stock, having no par value. On April , 1996, 3,826,581 shares of BT
Financial Common Stock and no shares of Preferred Stock were outstanding.
Dividends. Holders of Armstrong Common Stock are entitled to dividends as
and when declared by the Armstrong Board out of funds legally available
therefor. Subject to such preferences, limitations and relative rights as may be
fixed for any series of preferred stock that may be issued, holders of BT
Financial Common Stock are entitled to receive such dividends, when, as and if
declared by the Board of Directors out of funds legally available therefor. Cash
available for dividend distribution to the holders of BT Financial's Common
Stock and preferred stocks, must initially come from dividends paid to BT
Financial by BT Financial's subsidiaries. Accordingly, BT Financial's ability to
pay cash dividends can be affected by restrictions on the payment of dividends
by BT Financial's subsidiaries. See "Description of BT Financial Capital
Stock--Capital Stock--Dividends."
Voting; Election of Directors. Holders of Armstrong Common Stock and
holders of BT Financial Common Stock are entitled to one vote for each share
held. Holders of Armstrong Common Stock have cumulative voting rights in the
election of directors. Holders of BT Financial Common Stock do not. The bylaws
of BT Financial provide for the classification of directors into four classes,
as nearly equal in number as possible, with the term of office of one class
expiring in each year. Armstrong's board is not classified and its directors
serve one year terms. Unlike the BT Financial bylaws, the Armstrong bylaws do
not contain a provision limiting shareholder nominations for elections of
directors, although Armstrong's articles do require that directors be
shareholders. Also unlike the BT Financial articles and bylaws, the Armstrong
articles and bylaws have no provisions requiring supermajority votes on any
matters. However, Armstrong's bylaws require that bylaw amendments be submitted
to the Armstrong Board before they are voted on by shareholders.
Liquidation. As with BT Financial Common Stock, in the event of any
liquidation, dissolution or winding up of Armstrong, holders of Armstrong Common
Stock will be entitled to share ratably in all assets available for distribution
after the payment of debts, liabilities and preferences.
Preemptive Rights. Like holders of BT Financial Common Stock, holders of
Armstrong Common Stock have no preemptive rights.
Anti-takeover Provisions of the BCL. Unlike BT Financial, none of the
anti-takeover sections of the BCL apply to Armstrong. However, Section 206 of
the Pennsylvania Banking Code is similar to the BCL section governing approval
of transactions with interested shareholders. In addition, Section 1610 of the
Pennsylvania Banking Code is similar to the provision of the BCL allowing
shareholders to put their shares following a control transaction. See
"Description of BT Financial Capital Stock-Provisions Affecting Business
Combinations and Control Share Acquisitions-Pennsylvania Law" for a description
of the relevant BCL provisions.
Section 1610 of the Banking Code, which applies to Armstrong, provides that
any holder of voting shares of a bank that becomes subject to a "control
transaction" may make written demand on, and is entitled to receive cash from,
the control person or group equal to the fair value of each voting share as of
the day prior to the date on which the control transaction occurs. A "control
transaction" refers to the acquisition by a person or group of
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the status of a controlling person or group. This status is obtained when a
person, or a group of persons acting in concert, has voting power (which can
include an option or contract) over voting shares of the bank that would entitle
the holders thereof to cast at least 30% of the votes that all shareholders
would be entitled to cast in an election of directors.
Section 112 of the Banking Code is similar, but not identical, to the
Change in Bank Control Act of 1978, as amended, which is described in
"Description of BT Financial Capital Stock--Provisions Affecting Business
Combinations and Control Share Acquisitions." Section 112 requires the approval
of the Pennsylvania Department of Banking before any person can acquire or make
a proposal to acquire more than (a) 10% of any class of outstanding shares of a
bank or (b) 5% of any such class, if the bank had net operating loss
carryforwards in excess of 20% of its total stockholders' equity, as reported in
its latest publicly available annual financial statements.
Additionally, neither the articles nor the bylaws of Armstrong include
provisions limiting transactions with interested persons, prescribing the
factors to be considered by the Armstrong Board with respect to tender offers or
other proposals, requiring a supermajority to amend Armstrong's articles or
bylaws or limiting shareholder nominations of directors. See "Description of BT
Financial Capital Stock--Provisions Affecting Business Combinations and Control
Share Acquisitions--Federal Law." While Armstrong's articles and bylaws do not
prescribe factors to be considered by the Armstrong Board with respect to tender
offers and other proposals, the statutory provisions applicable to banks permit
Armstrong's directors to consider the effects of an action on constituencies
other than shareholders.
Approval of Fundamental Changes. Under the Pennsylvania Banking Code, all
mergers and consolidations that will result in institutions that are subject to
the Banking Code must be approved by a majority of the board of directors and by
the shareholders entitled to cast at least two thirds of the votes which all
shareholders are entitled to cast. Under the BCL a proposed plan of merger or
consolidation must be approved by the board of directors and by a majority of
the votes cast by shareholders entitled to vote thereon. In some cases, the
approval of the board is sufficient.
Under the Pennsylvania Banking Code, a plan of dissolution requires the
affirmative vote of two thirds of the votes which all shareholders are entitled
to cast on the plan. Under the BCL, the affirmative vote of a majority of the
votes cast by all shareholders entitled to vote thereon is required to approve a
proposal for voluntary dissolution. In addition, the proposal of dissolution
must be recommended by resolution of the board.
In the case of both mergers and consolidations and voluntary dissolution
under the BCL, the requirement of board approval or recommendation can be
satisfied by the written agreement or consent of all shareholders entitled to
vote thereon. The Pennsylvania Banking Code contains no such provision.
Dissenters' Rights. The Pennsylvania Banking Code incorporates the
dissenters' rights provisions of the BCL. Therefore, the dissenters' rights of
BT Financial shareholders and Armstrong shareholders are governed by the rights
and remedies and limitations on such rights and remedies provided in the BCL.
The BCL provides for dissenters' rights in a variety of transactions including
mergers or consolidations to which a corporation is a party (other than mergers
not requiring a shareholder vote). However, except in the case of a merger or
consolidation in which their shares would be converted into something other than
shares of the surviving or new corporation (or cash in lieu of fractional
shares), shareholders are not entitled to dissenters' rights in any of the
transactions mentioned above if their stock is either listed on a national
securities exchange or held of record by 2,000 or more shareholders. While BT
Financial Common Stock is not listed on the New York or American Stock
Exchanges, BT Financial currently has in excess of 2,000 shareholders of record.
Armstrong Common Stock is not listed on the New York or American Stock Exchanges
and is not held by more than 2,000 shareholders of record, and, therefore,
Armstrong shareholders would have dissenters' rights in circumstances in which
BT Financial's Shareholders would not.
Rights. Each share of BT Financial Common Stock has attached to it one
Right issued pursuant to the Rights Agreement. See "Description of BT Financial
Capital Stock--BT Financial Rights." No such rights are attached to the shares
of Armstrong Common Stock.
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Right to Call a Special Meeting. The BCL provides that a special meeting
of the shareholders of a registered corporation may be called at any time (i) by
the board of directors, (ii) by such officers or other persons as may be
designated in the bylaws of that corporation, or (iii) by any shareholder of a
registered corporation that is an "interested shareholder" who is calling a
special meeting for the purpose of approving a "business combination" (both as
defined in Section 2553 of the BCL). The bylaws of BT Financial provide that
special meetings of the shareholders of BT Financial may be called by the
Chairman of the BT Financial Board of Directors, the President of BT Financial,
the BT Financial Board of Directors or shareholders entitled to cast at least
one-fifth of the votes which all shareholders are entitled to cast at an annual
or special meeting of shareholders. The bylaws of Armstrong provide that special
meetings of the Armstrong shareholders may be called by the Armstrong Board or
the President of Armstrong and shall be called by the President of Armstrong
upon request in writing of three or more Shareholders.
Duties and Liabilities of Directors. The BCL permits a corporation to
include in its bylaws a provision adopted by its shareholders which eliminates
the personal liability of directors for monetary damages for any action taken
(or any failure to take any action) unless (i) the directors have breached or
failed to perform the duties of their offices under the BCL and (ii) the breach
or failure to perform constitutes self-dealing, willful misconduct or
recklessness. However, a corporation may not eliminate personal liability where
the responsibility or liability of a director is pursuant to any criminal
statute or is for the payment of taxes pursuant to local, state or federal law.
BT Financial's and Armstrong's bylaws provide that a director will not be
personally liable for monetary damages for any action taken, or failure to take
any action, except that there is no elimination of, or limitation on, the
liability of a director to the extent that such elimination or limitation of
liability is expressly prohibited by law.
The BCL permits a corporation, unless otherwise restricted in its bylaws,
to indemnify any person involved in any third party or derivative action, by
reason of the fact that person is or was a representative of the corporation or
is or was serving at the request of that corporation as a representative of
another corporation or enterprise, against expenses (in both third party and
derivative actions), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection therewith, if the person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct was unlawful. In general, under
the BCL, no indemnification is allowable in derivative actions to the extent a
person has been adjudged liable to the corporation, unless, and only to the
extent that, the applicable court finds him entitled to indemnification against
expenses despite such adjudication. To the extent that a representative of a
corporation has been successful on the merits or otherwise in defense of any
third party or derivative action, indemnification against expenses is mandatory.
The BCL permits a corporation to provide additional indemnification rights to
persons seeking indemnification whether or not that corporation would have the
power to indemnify such persons under any other provision of the BCL, including
with respect to derivative actions, so long as the act or failure to act giving
rise to the indemnification right did not constitute willful misconduct or
recklessness. Neither the BT Financial articles and bylaws nor the Armstrong
bylaws restrict the indemnification permitted by law.
Under the BCL, unless otherwise provided in the articles of a corporation,
if a bylaw of that corporation adopted by the shareholders provides for a
classified board of directors, directors generally may be removed from office
only for cause by the vote of shareholders entitled to vote on the matter. The
BT Financial articles and bylaws each provide for a classified board. The BT
Financial articles contain a provision permitting removal of directors without
cause by the affirmative vote of the holders of at least 80% of the outstanding
shares of capital stock of BT Financial entitled to vote for the election of
directors, given in person or by proxy, at a meeting duly called for the purpose
of voting thereon.
Neither the Armstrong articles nor bylaws provide for a classified board.
The Pennsylvania Banking Code allows for removal without cause of the entire
board or an individual director. The removal of the entire board requires a
majority vote of shares entitled to vote. An individual director may not be
removed if there are cast against his removal the votes of a sufficient number
of shares which, if cumulatively voted at an annual election, would be
sufficient to elect one or more directors.
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Under the BCL, any director or shareholder may apply to a court for the
removal of a director. Under the Pennsylvania Banking Code, a suit must be filed
by a majority of the board of directors or holders of at least 10% of the
outstanding shares.
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CERTAIN INFORMATION REGARDING BT FINANCIAL
BUSINESS
BT Financial is a multi-bank holding company located in Johnstown,
Pennsylvania, which was incorporated under the laws of the Commonwealth of
Pennsylvania on December 16, 1982.
BT Financial has three banking subsidiaries: Johnstown Bank, Laurel Bank
and Fayette Bank (referred to as the "Banks"). The Banks' principal places of
business are in Johnstown, Ebensburg and Uniontown, Pennsylvania, respectively.
At December 31, 1995, BT Financial had total assets of approximately $1.2
billion. BT Financial also has two non-banking subsidiaries, Bedford Associates,
Inc., which holds and leases property used by the Banks in their banking
operations, and BT Management Trust Company, a trust company which provides
trust and investment services.
The Banks conduct business through a network of 65 offices located
throughout southwestern Pennsylvania. Each Bank operates under the management of
its own officers and directors, although auditing, marketing, human resources,
investment, accounting, data processing and credit review are coordinated
through BT Financial. In addition, the Banks operate 42 automated teller
machines ("ATM's") at 41 locations which are part of the "Cirrus" and "MAC"
systems. "Cirrus" and "MAC" provide links to national and regional ATM networks.
The Banks provide a full range of financial services to individuals,
businesses and governmental bodies, including accepting demand, savings and time
deposits, making secured and unsecured loans, and electronic data processing of
payrolls. Lending services include credit cards and consumer, real estate,
commercial and industrial loans. BT Financial, through BT Management Trust
Company, also offers a wide range of corporate pension and personal trust and
trust related services. Each of the Bank's deposits are insured by the FDIC, the
majority by the Bank Insurance Fund ("BIF"), with certain deposits insured by
the Savings Association Insurance Fund ("SAIF"). While each Bank has trust
powers, substantially all trust business of BT Financial's affiliates is
conducted by BT Management Trust Company.
Johnstown Bank was formed in 1934 through the consolidation of five banks.
It is a Pennsylvania bank and trust company and member of the Federal Reserve
System with 39 offices in Allegheny, Armstrong, Bedford, Butler, Cambria,
Indiana, Somerset and Westmoreland Counties. At December 31, 1995, its assets
totaled approximately $592 million.
Laurel Bank is a Pennsylvania bank and trust company and a member of the
Federal Reserve System, with total assets of approximately $229 million at
December 31, 1995. Laurel Bank operates 14 offices in Cambria, Blair and Indiana
Counties.
Fayette Bank is a Pennsylvania bank and trust company and a member of the
Federal Reserve System. Fayette Bank conducts business at 12 offices located in
Uniontown, Fayette County. Its assets totaled approximately $371 million at
December 31, 1995.
BT Management Trust Company, located in Johnstown, is a Pennsylvania
chartered trust company formed on April 30, 1990. The trust businesses of the
Banks were transferred to BT Management Trust Company at that time.
Bedford Associates, Inc., located in Johnstown, Pennsylvania, is a
wholly-owned non-banking subsidiary of BT Financial. Its assets consist
principally of properties leased to the Banks for use as community banking
offices.
BT Financial and the Banks are subject to competition in all aspects of
their businesses from banks as well as other financial institutions, including
savings and loan associations, savings banks, finance companies, credit unions,
money market mutual funds, brokerage firms, investment companies, credit
companies and insurance companies. They also compete with nonfinancial
institutions, including retail stores that maintain their own credit programs,
and with governmental agencies that make loans available to certain borrowers.
Some of BT Financial's competitors are larger and have greater financial
resources and facilities than BT Financial.
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As of December 31, 1995, BT Financial, the Banks and BT Management Trust
Company had a total of 683 full time equivalent banking and administrative
employees. BT Financial's executive offices are located at BT Financial Plaza,
551 Main Street, Johnstown, Pennsylvania 15901. Its telephone number is (814)
532-3801.
On December 14, 1995, BT Financial acquired Huntington Bank from Huntington
Bancshares West Virginia, Inc., for $25,500,000 in cash. Huntington Bank was
merged with and into Fayette Bank. As of September 30, 1995, Huntington Bank had
total assets of $106 million, total deposits of $81 million and total
stockholder's equity of $16 million. The acquisition of Huntington Bank was
accounted for under the purchase method of accounting.
BT Financial has also entered into the Moxham Agreement, which provides for
the merger of Moxham with and into BT Financial. At the effective time of the
Moxham Merger, each outstanding share of Moxham Common Stock is to be converted
into 1.15 shares of BT Financial Common Stock, and each share of Moxham
Preferred Stock is to be converted into 6.325 shares of BT Financial Common
Stock. Immediately following the Moxham Merger, Moxham's subsidiary banks, The
Moxham National Bank of Johnstown and The First National Bank of Garrett, will
be merged with and into Johnstown Bank. The acquisition of Moxham is to be
accounted for under the pooling of interests method of accounting. As of
December 31, 1995, Moxham had total assets of approximately $241 million, total
deposits of approximately $218 million and total shareholders' equity of
approximately $20 million. On a pro forma basis giving effect to BT Financial's
acquisition of Huntington Bank and BT Financial's pending acquisitions of
Armstrong and Moxham, BT Financial would have had, on a consolidated basis as of
December 31, 1995, approximately $1.5 billion in assets, $1.3 billion in
deposits and $129 million in shareholders equity.
PROPERTIES
In February of 1990, BT Financial acquired BT Financial Plaza, an office
building located adjacent to Johnstown Bank's headquarters building. The
building is occupied by BT Financial's executive offices, BT Management Trust
Company, certain other offices of BT Financial, and other business concerns. The
executive offices of Johnstown Bank are located at 532-534 Main Street,
Johnstown, Pennsylvania, in a ten-story building owned by Johnstown Bank free of
liens and encumbrances. The building contains approximately 62,000 usable square
feet of space and is totally occupied by Johnstown Bank and BT Financial. The
building was erected in 1908 and most recently renovated in 1977. In 1987,
Johnstown Bank purchased a seven-story building located on Clinton Street in
Johnstown and is using the building as a storage facility. Some minor
renovations were made in 1987. All of the buildings are in good condition.
The Banks operate 65 banking offices, 47 of which are owned by the Banks
free of liens and encumbrances. All properties and buildings are in good
condition and are continually maintained against normal wear and tear. The
remaining 18 offices are operated under leases which, including renewal options,
expire at various times between 1996 and 2025. Bedford Associates, Inc. owns 4
of the 18 leased properties, which are leased to the Banks as community banking
offices. All properties of Bedford Associates, Inc. have been recently purchased
(1983 or later), and the buildings are either newly constructed or have recently
undergone major renovation. Fayette acquired three branch offices with the
purchase of Huntington Bank in December 1995.
DIRECTORS AND OFFICERS
The directors and officers of BT Financial will remain the same after the
Merger as they were prior to the Merger.
CERTAIN REGULATORY CONSIDERATIONS
As a bank holding company, BT Financial is subject to regulation and
supervision by the Federal Reserve. The Banks and BT Management Trust Company
are subject to supervision and examination by the Federal Reserve, the
Pennsylvania Department of Banking and, to some extent, the FDIC. The Banks are
also subject to various requirements and restrictions under federal and state
law, including requirements to maintain reserves against deposits, restrictions
on the types and amounts of loans that may be granted and the interest that may
be charged thereon, and limitations on the types of investments that may be made
and the types of services that may
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be offered. Various consumer laws and regulations also affect the operations of
the Banks. In addition to the impact of regulation, commercial banks are
affected significantly by the actions of the Federal Reserve as it attempts to
control the money supply and credit availability in order to influence the
economy.
Payment of Dividends and Other Restrictions
BT Financial is a legal entity separate and distinct from its subsidiaries,
including the Banks. There are various legal and regulatory limitations under
federal and state law on the extent to which BT Financial's subsidiaries,
including the Banks, can finance or otherwise supply funds to BT Financial.
The principal source of BT Financial's cash revenues is dividends from its
subsidiaries. There are limitations under federal and Pennsylvania law on the
payment of dividends by such subsidiaries. Retained earnings of the Banks and
the other subsidiaries of BT Financial were approximately $48.3 million as of
December 31, 1995. The prior approval of the Federal Reserve is required if the
total of all dividends declared by any state member bank of the Federal Reserve
System in any calendar year exceeds the bank's net profits (as defined in the
applicable law) for that year combined with its retained net profits for the
preceding two calendar years, less any required transfers to surplus or a fund
for the retirement of any preferred stock. Federal and state regulatory agencies
also have authority to prohibit a state member bank from engaging in what, in
the opinion of such regulatory body, constitutes an unsafe or unsound practice
in conducting its business. The payment of dividends could, depending upon the
financial condition of the subsidiary, be deemed to constitute such an unsafe or
unsound practice.
Under the Pennsylvania Banking Code, the board of directors of a
Pennsylvania bank may, from time to time, declare, and that bank may pay,
dividends on its outstanding shares subject to the restrictions described below
and any restrictions in the articles of incorporation of that bank.
The Banking Code permits dividends to be declared and paid only out of
accumulated net earnings and to be paid in cash or other property. A dividend
may not be declared or paid unless (i) any transfer of net earnings to surplus
has been made prior to the declaration of the dividend and (ii) the surplus of
the bank would not be reduced by the payment of the dividend.
The board of directors of a Pennsylvania bank may distribute pro rata to
the holders of any class of its shares from time to time treasury shares and
authorized but unissued shares of that bank, subject to the restrictions
described below and the restrictions, if any, in that bank's articles of
incorporation. No distribution may be made in authorized but unissued shares of
a Pennsylvania bank unless (i) if the distribution is made in shares having a
par value, there can be transferred to capital from accumulated net earnings an
amount equal to the aggregate par value of the shares distributed or (ii) if the
distribution is made in shares without par value, the board of directors fixes a
value for the shares so issued and there can be transferred to capital at the
time of distribution an amount of accumulated net earnings equal to the
aggregate value so fixed, and (iii) immediately after the distribution, surplus
would be at least equal to the amount of capital.
In addition, the Banks are subject to limitations under Sections 23A and
23B of the Federal Reserve Act with respect to extensions of credit to,
investments in, and certain other transactions with, BT Financial and its other
subsidiaries. Furthermore, loans and extensions of credit are also subject to
various collateral requirements.
There are no dividend restrictions in the articles of incorporation of any
of the Banks.
Capital Adequacy
The Federal Reserve has adopted risk-based capital guidelines for bank
holding companies. When the guidelines became fully phased-in as of December 31,
1992, the minimum guidelines for the ratio of total capital ("Total Capital") to
risk-weighted assets (including certain off-balance-sheet items, such as standby
letters of credit) was set at 8%. At least half of Total Capital must be
composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a limited
amount of perpetual preferred stock, less goodwill ("Tier 1 Capital"). The
remainder may consist of certain subordinated debt, other preferred stock and a
limited amount of loan loss reserves.
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In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to total assets, less goodwill (the "Leverage Ratio"),
of 3% for bank holding companies that meet certain specified criteria, including
those having the highest regulatory rating. All other bank holding companies
generally are required to maintain a Leverage Ratio of at least 3%, plus an
additional cushion of 100 to 200 basis points. The guidelines also provide that
bank holding companies experiencing internal growth or making acquisitions will
be expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier I Capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA."
BT Financial's current capital ratios exceed the current requirements under
these capital guidelines.
Support of the Banks
Under Federal Reserve policy, BT Financial is expected to act as a source
of financial strength to, and to commit resources to support, each of the Banks.
This support may be required at times when, absent such Federal Reserve policy,
BT Financial might not be inclined to provide it. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and be entitled to priority of payment.
As a result of the enactment of the Financial Institutions Reform,
Recovery, and Enforcement Act ("FIRREA"), a depository institution insured by
the FDIC can be held liable for any loss incurred by, or reasonably expected to
be incurred by, the FDIC after August 9, 1989 in connection with (i) the default
of a commonly controlled FDIC-insured depository institution or (ii) any
assistance provided by the FDIC to any commonly controlled FDIC-insured
depository institution "in danger of default." The term "in danger of default"
is defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulatory assistance.
FDIC Insurance Assessments
The FDIC implemented a risk-based assessment system, effective January 1,
1994, under which a bank's premium assessment is based on the probability that
the BIF will incur a loss with respect to the bank, the likely amount of any
such loss, and the revenue needs of the BIF. As long as BIF's reserve ratio is
less than a specified "designated reserve ratio," currently 1.25%, the total
amount raised from BIF members by the risk-based assessment system may not be
less than the amount that would be raised if the assessment rate for all BIF
members were .023% of deposits. On August 8, 1995, the FDIC announced that the
designated reserve ratio had been achieved and, accordingly, issued final
regulations adopting an assessment rate schedule for BIF members of 4 to 31
basis points effective on June 1, 1995. On November 14, 1995, the FDIC further
reduced deposit insurance premiums to a range of 0 to 27 basis points effective
for the semi-annual period beginning January 1, 1996.
Federal law has established several mechanisms to increase funds to protect
deposits insured by the BIF. The FDIC is authorized to borrow: up to $30 billion
from the United States Treasury; up to 90% of the fair market value of assets of
institutions acquired by the FDIC as receiver from the Federal Financing Bank;
and from depository institutions that are members of the BIF. Any borrowings not
repaid by asset sales are to be repaid through insurance premiums assessed to
member institutions. Such premiums must be sufficient to repay any borrowed
funds within 15 years and provide insurance fund reserves of $1.25 for each $100
of insured deposits. The result of these provisions is that the assessment rate
on deposits of BIF members could increase in the future. The FDIC also has
authority to impose special assessments against insured deposits.
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During fiscal year 1995, BT Financial's FDIC insurance expense decreased by
$679,000 due to lower premiums and a retroactive deposit insurance adjustment.
The rate adjustment resulted in a $457,000 refund which was received in the
third quarter of 1995.
A number of proposals have recently been introduced in Congress to address
the disparity in bank and thrift deposit insurance premiums paid by bank members
of the BIF and by the savings associations and other members of SAIF. On
September 19, 1995, legislation was introduced and referred to the House Banking
Committee that would, among other things: (i) impose a requirement on all SAIF
member institutions to fully recapitalize the SAIF by paying a one-time special
assessment of approximately 85 basis points on all assessable deposits as of
March 31, 1995, which assessment would be due as of January 1, 1996; (ii) spread
the responsibility for interest payments on obligations of the Financing
Corporation ("FICO") across all FDIC-insured institutions on a pro-rata basis,
subject to certain exceptions; (iii) require that deposit insurance premium
assessment rates applicable to SAIF member institutions be no less than deposit
insurance premium assessment rates applicable to BIF member institutions; (iv)
provide for a merger of the BIF and the SAIF as of January 1, 1998; (v) require
savings associations to divest any activities not permissible for commercial
banks within five years; (vii) eliminate the bad-debt reserve deduction for
savings associations, although savings associations would not be required to
recapture into income their accumulated bad-debt reserves; (vii) provide for the
conversion of savings and loan holding companies into bank holding companies as
of January 1, 1998, although unitary savings and loan holding companies
authorized to engage in activities as of September 13, 1995 would have such
authority grandfathered (subject to certain limitations); and (ix) abolish the
OTS and transfer the OTS' regulatory authority to the other federal banking
agencies. The legislation would also provide that any savings association that
would become undercapitalized under the prompt corrective action regulations as
a result of the special deposit premium assessment could be exempted from
payment of the assessment, provided that the institution would continue to be
subject to the payment of semiannual assessments under the current rate schedule
following the recapitalization of the SAIF. The legislation was considered and
passed by the House Banking Committee's Subcommittee on Financial Institutions
on September 27, 1995, and has not yet been acted on by the full House Banking
Committee.
On September 20, 1995, similar legislation was introduced in the Senate
(although the Senate bill does not include a comprehensive approach, as does the
House bill, for merging the savings association and commercial bank charters).
The Senate bill remains pending before the Senate Banking Committee. A similar
proposal is included in pending comprehensive budget legislation. Enactment of
any of these proposals could result in increased insurance assestments against
the Banks.
In light of ongoing debate over the content and fate of the budget bill,
the different proposals currently under consideration and the uncertainty of the
Congressional budget and legislative processes in general, BT Financial cannot
predict whether any or all of the proposed legislation will be passed, or in
what form. If the proposed legislation is enacted, BT Financial anticipates a
one-time deposit insurance assessment of approximately $1.4 million in 1996,
relating to deposits acquired from savings and loan institutions.
FDICIA
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act and made revisions to
several other federal banking statutes.
Among other things, FDICIA requires federal banking regulators to take
prompt corrective action in respect of depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital tiers: "well
capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized" and "critically undercapitalized." A depository institution is
well capitalized if it significantly exceeds the minimum level required by
regulation for each relevant capital measure, adequately capitalized if it meets
each such measure, undercapitalized if it fails to meet any such measure,
significantly undercapitalized if it is significantly below each such measure
and critically undercapitalized if it fails to meet any critical capital level
set forth in regulations. The critical capital level is a level of tangible
equity equal to not less than 2% of total tangible assets.
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A depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System and to growth
limitations, and are required to submit capital restoration plans. A depository
institution's holding company must guarantee the capital plan, up to an amount
equal to the lesser of 5% of the depository institution's assets at the time it
becomes undercapitalized or the amount of the capital deficiency when the
institution fails to comply with the plan. Federal banking agencies may not
accept a capital plan without determining, among other things, that the plan is
based on realistic assumptions and is likely to succeed in restoring a
depository institution's capital. If a depository institution fails to submit an
acceptable plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
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CERTAIN INFORMATION REGARDING ARMSTRONG
BUSINESS
Armstrong is a Pennsylvania-chartered bank and trust company organized in
1902. Its deposits are insured by the FDIC under the BIF. Armstrong is not a
member of the Federal Reserve System. Armstrong has one office located at 227
Market Street, Kittanning, Pennsylvania 16201. Armstrong owns the land and
building on this site. As of December 31, 1995, Armstrong had total assets of
approximately $52 million, total deposits of approximately $39 million and total
shareholders' equity of approximately $8 million.
Armstrong is a commercial bank providing loan and deposit services to
individuals and small to medium sized businesses in its Kittanning, Pennsylvania
market area. Among its services, Armstrong accepts time demand and savings
deposits and makes secured and unsecured commercial, real estate and consumer
loans. Armstrong's business is not seasonal in nature and is not dependent upon
any single customer or small group of customers for deposits or loans. As of
December 31, 1995, Armstrong had 13 full-time employees and two part-time
employees.
COMPETITION
Armstrong competes with other local credit unions, commercial banks,
thrifts and other financial institutions, as well as with major regional banking
and financial institutions. These competitors include First Commonwealth
Financial Corporation, Mellon Bank Corporation, National City Corporation,
Merchants National Bank, Apollo Trust Company, Farmers National Bank of
Kittanning, Elderton State Bank, Peoples Financial Corporation, Inc., Peoples
National Bank Rural Valley, Armstrong County Building & Loan, PNC Bank
Corporation, S&T Bancorp, Inc., Citizens Incorporated, Pennwood Savings Bank,
and BT Financial Corporation. Armstrong believes that it is generally
competitive in its service area with respect to interest rates paid on time and
savings, deposits, service charges on deposit accounts and interest charged on
loans.
SUPERVISION AND REGULATION
The operations of Armstrong are subject to federal and state statutes and
regulations applicable to banks chartered under the banking laws of the
Commonwealth of Pennsylvania and to banks whose deposits are insured by the
FDIC. Federal and state banking laws and regulations govern, among other things,
Armstrong's scope of business, investments, reserves against deposits, loans and
collateral, mergers and consolidations and establishment of branches. All banks
in Pennsylvania are permitted to maintain branch offices in any county of the
state. Branches may be established only after approval by the Pennsylvania
Department of Banking. The Pennsylvania Department of Banking is required to
grant approval only if it finds that there is a need for banking services or
facilities such as are contemplated by the proposed branch. The Pennsylvania
Department of Banking may disapprove an application if the applicant bank does
not have the requisite capital and surplus or if the application relates to the
establishment of a branch in a county contiguous to the county in which the
applicant's principal place of business is located, and another banking
institution that has its principal place of business in the county in which the
proposed branch would be located has, in good faith, notified the Pennsylvania
Department of Banking of its intention to establish a branch in the same
municipal location in which the proposed branch would be located.
The laws of Pennsylvania applicable to Armstrong include, among other
things, provisions that: (1) require the maintenance of certain reserves against
deposits; (2) limit the type and amount of loans that may be made and the
interest that may be earned thereon; (3) restrict investments and other
activities; and (4) limit the payment of dividends. The amount of funds that
Armstrong may lend to a single borrower is limited generally under Pennsylvania
law to fifteen percent (15%) of the aggregate of its capital, surplus, undivided
profits, loan loss reserves and capital securities (all as defined by statute
and regulation).
Applicable Pennsylvania law also requires that Armstrong obtain the
approval of the Pennsylvania Department of Banking prior to effecting any merger
where the surviving bank would be a Pennsylvania-chartered bank. In reviewing
any merger application, the Pennsylvania Department of Banking would consider,
among other things, whether the merger would be consistent with adequate and
sound banking practices and
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whether the merger would be in the public interest on the basis of several
factors, including the potential effect of the merger on competition and the
convenience and needs of the area primarily to be served by Armstrong resulting
from the merger.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of Armstrong are and will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies.
The monetary policies of the Federal Reserve have had, and will likely
continue to have an important impact on the operating results of commercial
banks through the Federal Reserve's power to implement national monetary policy
in order, among other things, to curb inflation or combat recession. The Federal
Reserve has a major effect upon the levels of bank loans, investments and
deposits through its open market operations in United States government
securities and through its regulation, among other things, of the discount rate
on borrowing of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes
in monetary and fiscal policies.
LEGISLATION AND REGULATORY CHANGES
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions are also frequently made in Congress, and before various bank
regulatory agencies. No prediction can be made as to the likelihood of any major
changes or the impact such changes might have on Armstrong.
LEGAL PROCEEDINGS
There are no proceedings pending or, to the knowledge of Armstrong,
threatened against Armstrong or its business, assets, common stock or any of the
transactions contemplated by the Merger Agreement.
ENVIRONMENTAL ISSUES
There are several federal and state statutes that govern the obligations of
financial institutions with respect to environmental issues. Besides being
responsible under such statutes for its own conduct, a bank also may be held
liable under certain circumstances for actions of borrowers or other third
parties on properties that collateralize loans held by the bank. Such potential
liability may far exceed the original amount of the loan made by the bank.
Currently, Armstrong is not a party to any pending legal proceedings under any
environmental statute. Since January 5, 1989, Armstrong has owned one commercial
property that was previously operated as a bulk fuel oil storage depot. In
March, 1994, Armstrong had a Phase I environmental site assessment performed on
this property. The assessment showed no record of any reportable releases of
petroleum products. On February 21, 1996, Armstrong agreed to donate this
property to Havin Inc., a non-profit corporation. Armstrong expects to complete
this transfer at the end of April, 1996.
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REGULATORY CAPITAL REQUIREMENTS
The following table presents Armstrong's capital ratios at December 31,
1995.
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Tier 1 Capital............................................................... $ 7,899
Tier 2 Capital............................................................... 141
Total Capital................................................................ 8,040
Adjusted Total Average Assets................................................ 50,173
Total Adjusted Risk-Weighted Assets(1)....................................... 11,281
Tier 1 Risk-Based Capital Ratio(2)........................................... 70.0%
Required Tier 1 Risk-Based Capital Ratio..................................... 4.0%
Excess Tier 1 Risk-Based Capital Ratio....................................... 66.0%
Total Risk-Based Capital Ratio(3)............................................ 71.2%
Required Total Risk-Based Capital Ratio...................................... 8.0%
Excess Total Risk-Based Capital Ratio........................................ 63.2%
Tier 1 Leverage Ratio(4)..................................................... 15.7%
Required Tier 1 Leverage Ratio............................................... 3.0%
Excess Tier 1 Leverage Ratio................................................. 12.7%
<FN>
- ---------
(1) Includes off-balance sheet items at credit-equivalent values less intangible
assets.
(2) Tier 1 Risk-Based Capital Ratio is defined as the ratio of Tier 1 Capital to
Total Adjusted Risk-Weighted Assets.
(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier 1 and Tier 2
Capital to Total Adjusted Risk-Weighted Assets.
(4) Tier 1 Leverage Ratio is defined as the ratio of Tier 1 Capital to Adjusted
Total Average Assets.
</TABLE>
Armstrong was required to implement, on January 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement 115"). For regulatory capital reporting
purposes, Statement 115 changed the composition of stockholders' equity in
financial statements prepared in accordance with generally accepted accounting
principles by including as a separate component of equity the amount of net
unrealized holding gains or losses on debt and equity securities that are deemed
to be available-for-sale. The implementation of Statement 115 did not have a
material effect during 1994 on the regulatory capital ratios of Armstrong.
Effective January 27, 1995, the FDIC issued a final rule with respect to
the implementation of FASB 115 for regulatory capital reporting purposes. Under
this final rule, net unrealized holding losses on available-for-sale equity
securities (but not debt securities) with readily determinable fair values are
included (i.e., deducted) when calculating Armstrong Tier 1 capital. All other
unrealized holding gains and losses on available-for-sale securities are
excluded (i.e., not deducted) from Armstrong's Tier 1 capital. Based upon the
composition of Armstrong's investment portfolio as of December 31, 1995, such
final rule had no material effect on Armstrong's Tier 1 capital.
Armstrong's ability to maintain the required levels of capital is
substantially dependent upon: the success of Armstrong's capital and business
plans; the impact of future economic events on Armstrong's loan customers; and
Armstrong's ability to manage its interest rate risk and investment portfolio
and control its growth and other operating expenses.
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ARMSTRONG MARKET PRICES AND DIVIDENDS
ARMSTRONG COMMON STOCK PRICES AND COMMON STOCK DIVIDENDS
There is no established public trading market for Armstrong Common Stock.
Occasionally, individuals sell and buy shares of the Armstrong Common Stock in
privately negotiated transactions. Armstrong acts as its own transfer agent and
keeps its own stock transfer ledger. According to such ledger, the following
number of shares were transferred during the years indicated:
<TABLE>
<CAPTION>
NUMBER OF
YEAR SHARES TRANSFERRED
---- ------------------
<S> <C>
1993........................................................ 200
1994........................................................ 1
1995........................................................ 2,384
</TABLE>
The lowest and highest prices per share known by the management of
Armstrong for the above years were between $995.14 and $1100 per share,
respectively. These prices may or may not include any mark-up, mark-down or
commission. The sale price per share of Armstrong Common Stock in the last known
trade prior to the execution and delivery of the Merger Agreement and the public
announcement thereof, which trade occurred on November 22, 1995, was $995.14.
This trade occurred pursuant to the Exchange Agreement. To the knowledge of
Armstrong, since the execution and delivery of the Merger Agreement, there have
been no trades of Armstrong Common Stock, except pursuant to the Exchange
Agreement.
The following table shows the per share cash dividends paid by Armstrong in
1995 and 1994:
<TABLE>
<CAPTION>
CASH DIVIDENDS
DECLARED
-----------------
1995 1994
------ ------
<S> <C> <C>
First Quarter..................................................... $14.00 $ 5.00
Second Quarter.................................................... 15.50 17.25
Third Quarter..................................................... 21.25 8.50
Fourth Quarter.................................................... 10.00 25.00
</TABLE>
DIVIDEND RESTRICTIONS ON ARMSTRONG
Any future dividends of Armstrong are subject to certain regulatory
considerations and the discretion of the Armstrong Board and will depend upon a
number of factors, including operating results, financial conditions and general
business conditions. The shareholders are entitled to receive dividends as and
when declared by the Armstrong Board, out of funds legally available therefor,
subject to the restrictions set forth in the Pennsylvania Banking Code and the
FDIA.
The Pennsylvania Banking Code provides that cash dividends may be declared
and paid only out of accumulated net earnings and that, prior to the declaration
of any dividend, if the surplus of Armstrong is less than the amount of its
capital, Armstrong shall, until surplus is equal to such amount, transfer to
surplus an amount which is at least 10% of the net earnings of Armstrong for the
period since the end of the last fiscal year or for any shorter period since the
declaration of a dividend. If the surplus of Armstrong is less than 50% of the
amount of capital, no dividend may be declared or paid without the prior
approval of the Pennsylvania Department of Banking until such surplus is equal
to 50% of Armstrong's capital.
The FDIA generally prohibits all payments of dividends by any bank which is
in default on any assessment for deposit insurance premium to the FDIC.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF ARMSTRONG
FINANCIAL CONDITION
General
Total assets during 1995 increased by $10.7 million or 26.3% from $40.8
million at December 31, 1994, to $51.5 million at December 31, 1995. The
increase in total assets has been primarily in investment securities available
for sale, which increased by $8.3 million or 28.9%. The increase in investment
securities was primarily funded by increased levels of time deposits and other
borrowings.
Securities
Armstrong's intent is to use the securities portfolio to manage liquidity
and interest rate risk by purchasing high quality securities with medium range
maturities. Armstrong has designated substantially all securities, except those
municipal securities in Armstrong's local market, as being available for sale.
The classification provides Armstrong more flexibility in liquidating securities
for interest rate risk management and for liquidity purposes. In a volatile
interest rate environment, securities can be liquidated to maximize earnings. At
the same time, new securities must generate yields matching current interest
rates on deposit products.
At December 31, 1995, Armstrong's total securities amounted to $38.3
million, $36.9 million available for sale and $1.4 million held to maturity.
Total securities are comprised of $21.1 million or 55.3% in U. S. Government
corporation and agencies, $13.7 million or 35.7% in mortgage-backed securities
which are guaranteed by U. S. Government corporations and agencies, $3.1 million
or 8.1% in obligations of states and political subdivisions (municipal tax free
securities) and $.4 million or .1% in Federal Home Loan Bank stock. Armstrong
maintains levels of municipal securities to assist in tax planning strategies to
minimize the effects of federal tax expense.
All of the growth in investment securities which occurred in 1995 was in U.
S. Government corporations and agencies.
The fully taxable equivalent yield on investment securities was 7.44% and
6.59% for the years ended December 31, 1995 and 1994.
Loans
Total loans net of unearned income amounted to $11.1 million at December
31, 1995, an increase of $1.9 million or 21.1% over the $9.2 million level at
December 31, 1994. The increase in loans was made up of increases in mortgage
loans of $.9 million and consumer loans to individuals of $1.2 million offset by
a decline in commercial loans of $.2 million.
At December 31, 1995, mortgage loans amounted to $8.0 million or 72.4% of
total loans, consumer loans to individuals amounted to $2.3 million or 20.5%,
and commercial loans amounted to $.8 million or 7.1% of total loans.
Risk Elements of Loan Portfolio
The following table identifies nonperforming loans. Past due loans are
loans that were contractually past due 90 days or more as to interest or
principal payments. At December 31, 1994 and 1993, there were no restructured
loans or loans for which terms have been renegotiated to provide a reduction or
deferral of principal or interest as
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a result of the financial position of the borrower. At December 31, 1995,
Armstrong has no loans which were considered impaired loans in accordance with
Financial Accounting Standards Board Statement No. 114.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994 1993
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Loans accounted for on a non-accrual basis............... $114 $ 29 $ 6
Accruing loans which are contractually past due 90 days
or more................................................ 17 103 --
Impaired or restructured loans........................... -- -- --
---- ---- ----
Total non-performing loans.......................... 131 132 6
Real estate owned........................................ -- 35 50
---- ---- ----
Total non-performing assets......................... $131 $167 $ 56
==== ==== ====
Non-performing loans as a percent of total loans......... 1.18% 1.45% 0.09%
Non-performing assets as a percent of total assets....... 0.25% 0.41% 0.14%
</TABLE>
During the year ended December 31, 1995, interest income of $9,224 would
have been recorded on loans accounted for on a non-accrual basis if the loans
had been current throughout the period. The amount of interest received on
non-accrual loans was $6,711 in 1995.
Based upon current information available and upon measures taken to
maintain the allowance for loan losses at an appropriate level, management does
not believe there are any loans classified for regulatory purposes as loss,
doubtful, substandard, special mention, or otherwise which will result in losses
which would reasonably be expected to have a material impact on future
operations, liquidity, or capital reserves. At December 31, 1995, there were no
loans which were not included as past due, nonaccrual, or impaired where known
information about possible credit problems of borrowers causes Armstrong to have
serious doubts as to the ability of such borrowers to comply with present loan
repayment terms. Armstrong is not aware of any other information which causes it
to have serious doubts as to the ability of borrowers in general to comply with
repayment terms.
Deposits
Total deposits increased by $5.3 million or 15.9% during 1995. Total time
deposits increased by $8.4 million while other forms of deposits declined
collectively by $3.1 million. Much of the decline in other deposits resulted in
transfers into time deposits as customers desired to lock in at higher rates in
a declining rate environment. The growth in time deposits was spurred by
marketing efforts to bring in new deposit funds by offering a higher rate on
three year instruments. The growth in time deposits was matched off against
investment security purchases with yields to provide an appropriate net return
on assets.
Other Borrowings
Other Borrowings are comprised of advances made under the Federal Home Loan
Bank Flexline. This Flexline arrangement is a revolving line of credit and is
renewable annually. During 1995 Armstrong had a borrowing limit of $4,079,600
with a variable rate of interest. This Flexline is utilized as an additional
source of liquidity. At December 31, 1995, Armstrong had $4,000,000 in advances
outstanding under this borrowing facility.
Stockholders' Equity
Total stockholders' equity amounted to $8.4 million at December 31, 1995.
This represents an increase of $1.4 million or 19.3%. This increase is the
result of net income of $647,000 and a change in net unrealized gain (loss) on
securities of $1.2 million offset by the payment of cash dividends of $486,000.
Federal banking regulators have established capital adequacy requirements
for banks based on risk factors. All banks are required to have a minimum of
4.0% of risk adjusted assets in Tier I capital and 8.0% of risk adjusted assets
in total capital. As of December 31, 1995, the Bank's Tier I capital was 70.0%,
and its total risk based capital was 71.2%.
71
<PAGE> 77
Additionally, Armstrong is required to maintain a minimum ratio of leverage
capital to adjusted total assets of 3.0% for the top rated institutions with
less highly rated institutions, or those with higher levels of risk, required to
maintain ratios of 100 to 200 basis points above the minimum level. Armstrong's
ratio under these guidelines as of December 31, 1995, is 15.7%.
Two key performance ratios in the banking industry are return on average
assets and return on average equity. Armstrong's return on average assets for
the years ended December 31, 1995 and 1994, are 1.40% and 1.46%. The Bank's
return on equity for the years ended December 31, 1995 and 1994, are 8.41% and
7.95%.
Liquidity
Liquidity refers to the ability of Armstrong to satisfy the financial needs
of its depositors and borrowers. Liquidity can be provided by the sale or
maturity of assets or by the acquisition of additional funds in the form of
deposits or other borrowings.
Armstrong considers its sources of liquidity to be cash and due from banks,
federal funds sold, and investment securities maturing in one year or less.
Considering these sources of liquidity, Armstrong has $2.7 million in liquid
assets at December 31, 1995.
A measure of liquidity is the average loan to deposit ratio. This ratio was
28.6% at December 31, 1995.
As of December 31, 1995, Armstrong believes that it has adequate liquidity
to satisfy its customers' needs. Armstrong is not aware of any known trends or
any known demands, commitments, events or uncertainties that will result in a
material effect on the Armstrong's liquidity.
RESULTS OF OPERATIONS
Overview
Armstrong had net income of $647,000 for the year ended December 31, 1995,
compared to $581,000 for the year ended December 31, 1994. This represents an
increase of $66,000 or 11.3%. The increase in net income for the year was
primarily the result of an increase in net interest income of $93,000.
Net Interest Income
Total interest income increased by $722,000 from $2,563,000 in 1994 to
$3,285,000 in 1995. There were increases in all categories of interest income
with the exception of federal funds sold. Although the increases were the result
of combined increases in volume and yield, the primary cause of the increase was
the volume increase in investment securities. As mentioned above, investment
securities increased by $8.3 million during 1995 as part of Armstrong's
liquidity and interest rate risk strategies.
The increase in total interest income was partially offset by increased
costs of funds of deposits and borrowings.
These increases were also made up of increases in the rates paid as well as
increases in volume. The most significant factor in the increased cost of funds
was the volume increase in time deposits and borrowings. Time deposits increased
$8.4 million, and borrowings increased by $4 million during 1995. The increase
in time deposits is made up of approximately $3.1 million of funds moving from
other deposit sources within Armstrong and approximately $5.3 million in new
funds. These increases in time deposits were mirrored by purchases of securities
with similar maturities. The net interest spread as a result of these
transactions will continue to increase profits in the near future.
The increase in interest expense on borrowings is based on the increase of
average borrowings to $1.8 million during 1995. Armstrong became a member of the
Federal Home Loan Bank of Pittsburgh in 1995 which provided it with an
additional source of liquidity through the Flexline arrangement. Armstrong has
been able to utilize these funds by purchasing securities or funding loans at a
higher rate of return than the cost of funds associated with the borrowing.
Net interest income increased by $93,000 to $1.8 million for 1995 from $1.7
million for 1994.
72
<PAGE> 78
Provision for Loan Losses
The provision for loan losses amounted to $37,500 for 1995. There was no
provision for loan losses in 1994. The provision for loan losses is an expense
charged to earnings in anticipation of estimated losses attributable to loans
based upon the adequacy of the allowance for loan losses. The adequacy of the
allowance for loan losses is based upon Armstrong's assessment of, among other
things, local and national economic conditions, historical losses, off balance
sheet risk and an analysis of loans including specific evaluations of the
financial status, cash flow, and adequacy of collateral of borrowers with
indebtedness to Armstrong and current levels of non-performing loans. Armstrong
uses a specific identification method for large loans, and for loans which fall
outside the parameters for specific identification, amounts are allocated based
upon percentages derived from historical loan loss data for each category of
loans.
The following table presents an analysis of the reserve for loan losses for
the years ended December 31.
<TABLE>
<CAPTION>
1995 1994 1993
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Loans outstanding at end of period.................. $11,055 $9,131 $6,448
======= ====== ======
Average loans outstanding........................... $10,093 $7,790 $6,333
======= ====== ======
Reserve for allowance for losses on loans:
Balance, beginning of the period.................. $ 148 $ 148 $ 152
Loans charged off:
Commercial, financial, and agriculture............ -- -- --
Installment and charge card....................... -- -- 4
Real estate....................................... 35 -- --
------- ------ ------
Total loans charged off...................... 35 -- 4
------- ------ ------
Recoveries:
Commercial, financial, and agriculture............ -- -- --
Installment and charge card....................... -- -- --
Real estate....................................... -- -- --
------- ------ ------
Total recoveries............................. -- -- --
------- ------ ------
Net loans charged off........................ 35 -- 4
------- ------ ------
Provisions charged to expense....................... 37 -- --
------- ------ ------
Balance, end of period.............................. $ 150 $ 148 $ 148
======= ====== ======
Ratios:
Net charge-offs as a percent of average
loans outstanding.............................. 0.35% --% 0.06%
Allowance for losses on loans as a percent of
average loans outstanding...................... 1.49% 1.90% 2.34%
</TABLE>
While Armstrong uses available information to make evaluations of the
adequacy of the allowance, future adjustments may be necessary if conditions
differ substantially from the assumptions used in making the evaluation. While
Armstrong believes it has identified and provided for losses and that the
allowance for loan losses is adequate, Armstrong cannot assure that further
adjustments may not be necessary.
Noninterest Income
Noninterest income is comprised primarily of service charges on deposit
accounts and investment securities gains, net. Total noninterest income amounted
to $246,000 in 1995 compared to $80,000 in 1994, an increase of $166,000. Of the
$166,000 increase in noninterest income, $157,000 was a result of the increase
in gains on the sale of securities. During 1995 Armstrong recorded $194,000 in
net security gains. In an effort to maximize earnings and to manage the interest
rate risk position of Armstrong, investment activity increased during 1995.
Armstrong owned a significant volume of high-yielding mortgage-backed securities
which in a falling rate
73
<PAGE> 79
environment become highly susceptible to prepayment risk. In an effort to
minimize the effects of rapid repayment, those securities were liquidated and
replaced with average-yielding mortgaged-backed securities.
Noninterest Expense
Noninterest expense is primarily made up of salaries and benefits,
occupancy and equipment expense, deposit insurance premium, and other items.
Total noninterest expense amounted to $1,171,000 in 1995 compared to $975,000 in
1994 or an increase of $196,000.
Salaries and employee benefits increased by $52,000 during 1995. This
increase was made up of $29,000 in expense associated with a deferred
compensation arrangement for the prior president of Armstrong and $23,000 in
general pay rate increases for the year.
Other expense increased by $142,000 in 1995, which is entirely comprised of
the professional fees for legal and consulting services relating to the pending
merger of Armstrong with BT Financial.
Income Tax Expense
Income tax expense amounted to $190,000 in 1995 compared to $230,000 in
1994. The effective tax rate for 1995 was 22.7% compared to 28.4% for 1994. The
decline in the effective tax rate was the result of increased earnings on tax
free securities. Earnings on tax free securities increased by $128,000 or 72.8%.
74
<PAGE> 80
MANAGEMENT OF ARMSTRONG
DIRECTORS OF ARMSTRONG
The following list sets forth biographical information concerning the
members of the Armstrong Board:
<TABLE>
<CAPTION>
BUSINESS EXPERIENCE, INCLUDING PRINCIPAL
OCCUPATION DURING PAST FIVE DIRECTOR
NAME AND AGE YEARS, AND OTHER DIRECTORSHIPS SINCE
------------ ------------------------------ -----
<S> <C> <C>
Raymond A. Boarts (60) Secretary, Treasurer & Managing Partner-- 1986
Paul's Auto Parts
Coleman J. Clougherty (38) Chairman, President & CEO--The Armstrong 1994
County Trust Company
Byron K. Crolley (48) Comptroller--SPEDD, Inc. (Non-Profit Economic 1993
Development Company)
Lynn Campbell Durham (47) Independent Businessperson/Director--The Arthur 1995
and Pearle Campbell Charitable Foundation
Othmer K. Heilman (72) Retired President & CEO--O.K. Heilman, Inc. (Trucking) 1971
Jerome Lombardi (56) Attorney at Law 1993
Louis A. Vidic (58) Chairman & CEO--SPEDD, Inc. 1993
</TABLE>
PRINCIPAL OFFICERS OF ARMSTRONG
The following table sets forth selected information about the principal
officers of Armstrong, each of whom is elected by the Armstrong Board and each
of whom holds office at the discretion of the Armstrong Board:
<TABLE>
<CAPTION>
NUMBER
BANK OF SHARES
HELD EMPLOYEE BENEFICIALLY AGE AS OF
NAME OFFICE/POSITION WITH BANK SINCE SINCE OWNED APRIL , 1996
---- ------------------------- ----- ----- ----- --------------
<S> <C> <C> <C> <C> <C>
Coleman J. Clougherty Chairman, President & CEO 1994 (1) 1994 1 38
Bonnie Rupp Secretary/Treasurer 1991 1969 0 45
Othmer K. Heilman Vice President 1980 1980 1 72
Lori Guepfert Comptroller 1991 1978 0 35
Faith A. Stitt Consumer Loan/ 1989 1978 0 35
Compliance Officer
<FN>
- ---------
(1) From 1989-1994, Mr. Clougherty served as the Chief Financial Officer of
Summit Bancorp, Johnstown, Pennsylvania.
</TABLE>
REMUNERATION OF DIRECTORS AND OFFICERS
Generally, in 1995, the Armstrong Board met once a month. Each director
received $325 for each Armstrong Board meeting that he or she attended. In
addition, each director received $100 for each committee meeting of Armstrong
that he or she attended. During 1995, the Armstrong Board held twelve meetings.
In 1995, directors received $35,675 in the aggregate for attendance at Armstrong
Board meetings and committee meetings of Armstrong. All of the directors
attended at least seventh-five percent (75%) of the meetings of Armstrong's
Board.
The following table sets forth certain summary information concerning
compensation paid or accrued by Armstrong on behalf of Armstrong's Chief
Executive Officer. The annual salary and bonus of Armstrong's other four most
highly compensated officers did not exceed $100,000 during the last three fiscal
years.
75
<PAGE> 81
COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
--------------------------- ---- ------ ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Coleman J. Clougherty, 1995 $72,968 $11,500 $ 4,075 $ 1,566
President and Chief Executive 1994 65,965 11,900 3,750 --
Officer and Director 1993 NA NA NA NA
<FN>
- ---------
(1) Amounts shown represent Armstrong Board fees. Mr. Clougherty also received
certain perquisites, but the cost of providing such perquisites did not
exceed the lesser of $50,000 or 10% of his salary or bonus.
(2) Represents amounts contributed to Armstrong's 401(k) plan for the account of
Mr. Clougherty for the fiscal year ended December 31, 1995.
</TABLE>
BENEFICIAL OWNERSHIP BY OFFICERS AND DIRECTORS
The following table sets forth as of April , 1996, the amount and
percentage of Armstrong Common Stock of beneficially owned by each director and
all officers and directors of Armstrong as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF INDIVIDUAL OR OF BENEFICIAL PERCENT
IDENTITY OF GROUP OWNERSHIP OF CLASS
----------------- --------- --------
<S> <C> <C>
Raymond A. Boarts............................. 50 0.63%
Coleman J. Clougherty......................... 1 0.01%
Byron K. Crolley.............................. 1 0.01%
Lynn Campbell Durham.......................... 2,762(1) 34.52%
Othmer K. Heilman............................. 1 0.01%
Jerome Lombardi............................... 1,922 24.03%
Louis A. Vidic................................ 418 5.23%
All Directors and Officers as a Group (10
Persons).................................... 5,155 64.44%
<FN>
- ---------
(1) Includes 798 shares owned by the Arthur and Pearle Campbell Foundation for
which Ms. Durham serves as a director. Ms. Durham disclaims beneficial
ownership of such shares.
</TABLE>
RETIREMENT PLAN
On March 1, 1995, Armstrong adopted a defined contribution 401K retirement
plan (the "Plan"). An employee who qualifies may elect to contribute into the
Plan an amount up to 15% of his or her annual compensation. Armstrong matches
50% of an employee's contribution up to a maximum aggregate amount equal to 4%
of an employee's annual compensation. Armstrong's payments to the Plan in 1995
were $5,733.
CERTAIN TRANSACTIONS
There have been no material transactions, proposed or consummated, between
Armstrong and any director or executive officer of Armstrong, or any associate
of the foregoing persons. Armstrong has had and intends to continue to have
banking and financial transactions in the ordinary course of business with
directors and officers of Armstrong and their associates on comparable terms and
with similar interest rates as those prevailing from time to time for other
customers of Armstrong. Total loans outstanding from Armstrong at December 31,
1995, to Armstrong's officers and directors as a group and members of their
immediate families and companies in which they had an ownership interest of 5%
or more was $506,001 or 6.05% of Armstrong's total equity capital accounts. Such
loans do not involve more than the normal risk of collectibility nor do they
present other unfavorable features.
76
<PAGE> 82
PRINCIPAL OWNERS OF ARMSTRONG VOTING SECURITIES
The following table sets forth, as of April , 1996, the name and address
of each person who owns of record or who is known by the Armstrong Board to be
the beneficial owner of five percent (5%) or more of the outstanding Armstrong
Common Stock, the number of shares beneficially owned by such person and the
percentage of the outstanding Armstrong Common Stock so owned.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY COMMON STOCK
NAME AND ADDRESS OWNED (1) BENEFICIALLY OWNED
---------------- --------- ------------------
<S> <C> <C>
Scott Campbell 438 5.48%
P.O. Box 776
Hopeland, CA 95449
Thomas R. Campbell 438 5.48%
7124 Avenida Leon
Alta Loma, CA 91701
The Arthur and Pearle 798 9.98%
Campbell Foundation
201 S. McKean St.
Kittanning, PA 16201
Cheryl E. Curtis 438 5.48%
P.O. Box 15566
Beverly Hills, CA 90209-1566
Lynn Campbell Durham 1,964 24.550
205 Camino Alto, Suite 225
Mill Valley, CA 94941
Jerome D. Lombardi 1,922 24.550%
201 S. McKean Street
Kittanning, PA 16201
Frank W. Wolfe, III 418 5.225%
725 Route 66
Apollo, PA 15613
<FN>
- ---------
(1) Based on Armstrong's stock transfer ledger and information furnished by the
respective individuals. Under applicable regulations, shares are deemed to
be beneficially owned by a person if he directly or indirectly has or shares
the power to vote or dispose of the shares, whether or not he has any
economic interest in the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to the
shares.
</TABLE>
77
<PAGE> 83
LEGAL MATTERS
The validity of the shares of BT Financial Common Stock to be issued in
connection with the Merger and certain other legal matters regarding BT
Financial will be passed upon by Kirkpatrick & Lockhart LLP, Pittsburgh,
Pennsylvania. Certain legal matters regarding Armstrong will be passed upon by
Manatt, Phelps & Phillips LLP, Washington, D.C., and Blank, Rome, Comiskey &
McCauley, Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of BT Financial as of December 31,
1995 and December 31, 1994 and for the three years ended December 31, 1995
incorporated by reference in this Proxy Statement/Prospectus, have been audited
by Coopers & Lybrand LLP, independent certified public accountants, as stated in
their report appearing therein and are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
auditing and accounting.
The financial statements of Armstrong as of December 31, 1995 and for the
year ended December 31, 1995 included in this Proxy Statement/Prospectus have
been included herein in reliance upon the report of SR Snodgrass, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of Moxham as of December 31, 1995 and December 31,
1994 and for the three years ended December 31, 1995 included in this Proxy
Statement/Prospectus have been included herein in reliance upon the report of
Barnes, Saly & Company, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
BT FINANCIAL 1997 ANNUAL MEETING
The next Annual Meeting of BT Financial shareholders is scheduled to be
held on May 13, 1997. In order to be included in BT Financial's Proxy Statement
and form of Proxy relating to the 1997 Annual Meeting, any proposal which a
shareholder intends to present for consideration at such meeting must be
received by the Secretary of BT Financial at the principal executive offices of
BT Financial no later than December 4, 1996.
78
<PAGE> 84
INDEX TO ARMSTRONG AND MOXHAM FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONTENTS PAGE
- -------- ----
<S> <C>
ARMSTRONG
Report of Independent Auditors.................................................. F-2
Balance Sheet at December 31, (audited)......................................... F-3
Statements of Income for the year ended December 31, 1995 (audited) and 1994
(unaudited).................................................................... F-4
Statements of Changes in Stockholders' Equity for the year ended December 31,
1995 (audited) and 1994 (unaudited)............................................ F-5
Statements of Cash Flows for the year ended December 31, 1995 (audited) and 1994
(unaudited).................................................................... F-6
Notes to Financial Statements................................................... F-7
MOXHAM
Report of Independent Auditors.................................................. F-16
Balance Sheet at December 31, 1995 and 1994 (audited)........................... F-17
Statements of Income for the year ended December 31, 1995, 1994 and 1993
(audited)...................................................................... F-18
Statement of Stockholder's Equity for the years ended December 31, 1995, 1994
and 1993 (audited)............................................................. F-19
Statements of cash flows for the year ended December 31, 1995, 1994 and 1993
(audited)...................................................................... F-20
Notes to Consolidated Financial Statements...................................... F-22
</TABLE>
F-1
<PAGE> 85
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Armstrong County Trust Company
We have audited the accompanying balance sheet of Armstrong County Trust Company
as of December 31, 1995, and the related statements of income, changes in
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Armstrong County Trust Company
as of December 31, 1995, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
As explained in the notes to the financial statements, effective January 1,
1995, the Bank changed its method of accounting for impaired loans and related
credit loss reserves and effective January 1, 1994, changed its method of
accounting for investment securities.
S.R. Snodgrass
Wexford, PA
February 16, 1996
F-2
<PAGE> 86
ARMSTRONG COUNTY TRUST COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
ASSETS
Cash and due from banks....................................................... $ 1,426,834
Federal funds sold............................................................ --
Securities available for sale................................................. 36,929,936
Investment securities (market value of $1,359,516)............................ 1,355,000
-----------
Total investment securities......................................... 38,284,936
Loans (net of unearned income of $212,955).................................... 11,055,188
Less allowance for loan losses................................................ 150,474
-----------
Net loans........................................................... 10,904,714
Premises and equipment........................................................ 312,535
Accrued interest and other assets............................................. 613,540
-----------
TOTAL ASSETS........................................................ $51,542,559
===========
LIABILITIES
Deposits:
Noninterest-bearing demand............................................... $ 4,921,012
Money market............................................................. 3,405,305
Savings.................................................................. 9,513,030
Time..................................................................... 20,823,328
-----------
Total deposits...................................................... 38,662,675
Short-term borrowings......................................................... 4,000,000
Accrued interest and other liabilities........................................ 509,177
-----------
TOTAL LIABILITIES................................................... 43,171,852
-----------
STOCKHOLDERS' EQUITY
Common stock, par value $50; 8,000 shares issued and outstanding.............. 400,000
Capital surplus............................................................... 850,000
Retained earnings............................................................. 6,648,366
Net unrealized gain on securities............................................. 472,341
-----------
TOTAL STOCKHOLDERS' EQUITY.......................................... 8,370,707
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......................... $51,542,559
===========
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE> 87
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(UNAUDITED)
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans.................................... $ 840,730 $ 658,636
Federal funds sold............................................ 7,368 58,624
Investment securities:
Taxable interest......................................... 2,132,098 1,669,381
Tax exempt interest...................................... 304,388 176,125
---------- ----------
Total interest income............................... 3,284,584 2,562,766
---------- ----------
INTEREST EXPENSE
Deposits...................................................... 1,358,466 853,283
Short-term borrowings......................................... 126,257 2,350
---------- ----------
Total interest expense.............................. 1,484,723 855,633
---------- ----------
NET INTEREST INCOME................................................ 1,799,861 1,707,133
Provision for loan losses.......................................... 37,500 --
---------- ----------
NET INTEREST INCOME AFTER PROVISIONS FOR LOAN LOSSES............... 1,762,361 1,707,133
---------- ----------
NONINTEREST INCOME
Service charges and fees...................................... 30,890 17,329
Investment securities gains, net.............................. 193,854 36,865
Other income.................................................. 21,060 25,343
---------- ----------
Total noninterest income............................ 245,804 79,537
---------- ----------
NONINTEREST EXPENSE
Salaries and employee benefits................................ 473,932 422,158
Occupancy expense............................................. 83,911 76,573
Equipment expense............................................. 45,975 25,248
Federal deposit insurance..................................... 37,976 64,380
Other expense................................................. 529,135 386,991
---------- ----------
Total noninterest expense........................... 1,170,929 975,350
---------- ----------
Income before income taxes......................................... 837,236 811,320
Income taxes....................................................... 190,000 230,006
---------- ----------
NET INCOME......................................................... $ 647,235 $ 581,314
========== ==========
EARNINGS PER SHARE................................................. $ 80.90 $ 72.66
AVERAGE SHARES OUTSTANDING......................................... 8,000 8,000
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE> 88
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NET UNREALIZED
COMMON CAPITAL RETAINED GAIN (LOSS)
STOCK SURPLUS EARNINGS ON SECURITIES TOTAL
-------- -------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1993, as
previously reported
(unaudited).................... $400,000 $850,000 $6,247,056 $ -- $ 7,497,056
Prior period adjustment, (see
Note 2)........................ 104,760 104,760
-------- -------- ---------- ------------ -----------
Balance, December 31, 1993, as
restated (unaudited)........... 400,000 850,000 6,351,816 -- 7,601,816
Initial net unrealized gain on
securities..................... 794,587 794,587
Net income....................... 581,314 581,314
Cash dividends declared
($55.75 per share)............. (446,000) (446,000)
Net unrealized loss on
securities..................... (1,514,962) (1,514,962)
-------- -------- ---------- ------------ -----------
Balance, December 31, 1994
(unaudited).................... 400,000 850,000 6,487,130 (720,375) 7,016,755
Net income....................... 647,236 647,236
Cash dividends declared
($60.75 per share)............. (486,000) (486,000)
Net unrealized gain on
securities..................... 1,192,716 1,192,716
-------- -------- ---------- ------------ -----------
Balance, December 31, 1995....... $400,000 $850,000 $6,648,366 $ 472,341 $ 8,370,707
======== ======== ========== ============ ===========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE> 89
ARMSTRONG COUNTY TRUST COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income..................................................... $ 647,236 $ 581,314
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan losses................................. 37,500 --
Depreciation and amortization, net........................ 352,549 97,002
Deferred income taxes..................................... (20,445) 1,432
Investment securities gains, net.......................... (193,854) (36,865)
Decrease (increase) in accrued interest receivable........ (127,386) 65,260
Increase in accrued interest payable...................... 26,170 57,977
Other, net................................................ (14,604) 121,982
------------ ------------
Net cash provided by operating activities............ 707,166 888,102
------------ ------------
INVESTING ACTIVITIES
Securities available for sale:
Proceeds from sales....................................... 26,067,114 23,738,443
Proceeds from maturities or paydown....................... 3,650,928 1,297,251
Purchases of securities................................... (37,699,187) (31,602,717)
Investment securities held to maturity:
Proceeds from maturities or paydown....................... 570,000 763,000
Purchases of securities................................... (350,000) (447,845)
Net loan originations.......................................... (1,959,675) (2,682,944)
Purchases of premises and equipment............................ (262,139) (159,078)
Other, net..................................................... (106) 8,701
------------ ------------
Net cash used for investing activities.................... (9,983,065) (9,085,189)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits....................................... 5,316,179 2,100,815
Increase in other borrowings................................... 4,000,000 --
Cash dividends paid............................................ (606,000) (446,000)
------------ ------------
Net cash provided by financing activities................. 8,710,179 1,654,815
------------ ------------
Decrease in cash and cash equivalents..................... (565,720) (6,542,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................. 1,992,554 8,534,826
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................... $ 1,426,834 $ 1,992,554
============ ============
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE> 90
ARMSTRONG COUNTY TRUST COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(ALL DATA RELATED TO DECEMBER 31, 1994, AND
THE YEAR ENDED DECEMBER 31, 1994, IS UNAUDITED.)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Armstrong County Trust Company (Bank) is a state-chartered bank located in
Kittanning, Pennsylvania. The Bank's principal sources of revenue emanate from
its interest earnings on its investment securities portfolio, its portfolio of
residential real estate, commercial and consumer loans, as well as a variety of
deposit services offered to its customers. The Bank is subject to regulation and
supervision by the FDIC and the Pennsylvania Department of Banking.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the balance sheet date and
revenues and expenses for the period. Actual results could differ significantly
from estimates.
A summary of significant accounting and reporting policies applied in the
presentation of the accompanying financial statements follows:
Investment Securities
The Bank has classified investment securities into held to maturity and
available for sale classifications. Debt securities acquired with the intent to
hold to maturity are stated at cost adjusted for amortization of premium and
accretion of discount which are computed using the interest method and
recognized as adjustments of interest income. Certain other debt securities have
been classified as available for sale to serve principally as a source of
liquidity. Unrealized holding gains and losses for available for sale securities
are reported as a separate component of stockholders' equity, net of tax, until
realized. Realized security gains and losses are computed using the specific
identification method. Interest and dividends on investment securities are
recognized as income when earned.
Loans
Loans are reported at their principal amount net of unearned income and the
allowance for loan losses. Interest from certain types of installment loans is
recognized as income over their lives using methods of amortization which
approximate a level yield related to the principal amounts. Interest on all
other loans, including certain types of installment loans is recognized as
income when earned on the accrual method. Accrual of interest is discontinued
when, in the opinion of management, reasonable doubt exists as to the
collectibility of additional interest. Loans are returned to accrual status when
past due interest is collected, and the collection of principal is probable.
Allowance for Loan Losses
Effective January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
Loan," as amended by Statement No. 118, "Accounting by Creditors for Impairment
of a Loan--Income Recognition and Disclosures." Under these standards, the Bank
estimates credit losses on impaired loans based on the present value of expected
cash flows or the fair value of the underlying collateral if the loan repayment
is expected to come from the sale or operation of such collateral. Prior to
1995, the credit losses related to these loans were estimated based on
undiscounted cash flows or the fair value of the underlying collateral.
F-7
<PAGE> 91
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement 118 amends Statement 114 to permit a creditor to use existing
methods for recognizing interest income on impaired loans eliminating the income
recognition provisions of Statement 114. The adoption of Statements 114 and 118
have no material effect on the Bank's financial position or results of
operations.
The allowance for loan losses represents the amount which management
estimates is adequate to provide for potential losses in its portfolio. The Bank
uses the allowance method in providing for loan losses. Accordingly, all loan
losses are charged to the allowance, and all recoveries are credited to it. The
allowance for loan losses is established through a provision for loan losses
which is charged to operations. The provision is based upon management's
periodic evaluation of individual loans, the overall risk characteristics of the
various portfolio segments, past experience with losses, the impact of economic
conditions on borrowers, and other relevant factors. This evaluation is
inherently subjective as it requires material estimates which may be susceptible
to significant change in the near-term.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets. Expenditures for maintenance and repairs are charged
against income as incurred. Costs of major additions and improvements are
capitalized.
Income Taxes
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax basis of assets and liabilities
using the enacted marginal tax rates. Deferred income tax expense or benefit are
based on the changes in the deferred tax asset or liability from period to
period.
Earnings Per Share
Earnings per share are calculated using the weighted average number of
shares outstanding for the periods.
Cash Flow Information
The Bank has defined cash and cash equivalents as those amounts included in
the balance sheet captions cash and due from banks and federal funds sold.
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Cash paid during the year for:
Interest on deposits and borrowings........................... $1,458,553 $797,656
Income taxes.................................................. 270,457 260,000
</TABLE>
Reclassification of Comparative Amounts
Certain comparative amounts for the prior year have been reclassified to
conform to current year classifications.
2. RESTATEMENT
Retained earnings have been retroactively restated as of December 31, 1993,
for $104,760, to correct an error in recording the initial cumulative effect of
the adoption of Statement of Financial Accounting Standards No. 109. The net
effect on reported net income for 1993 was an increase of $104,760 or $13.10 per
share.
F-8
<PAGE> 92
3. INVESTMENT SECURITIES
Under adoption of Statement 115, the Bank initially transferred from the
investment securities portfolio to the investment securities available for sale
classification securities with an amortized cost of $21,651,919 and an estimated
market value of $22,855,839. This resulted in an increase to stockholders'
equity of $794,587 net of related federal income taxes.
The amortized cost and estimated market values of investment securities at
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE
U.S. Government corporations and
agencies................................ $20,752,058 $ 397,949 $ (3,991) $21,146,016
Obligations of states and political
subdivisions............................ 1,615,418 79,080 -- 1,694,498
Mortgage-backed securities................ 13,430,091 242,631 -- 13,672,722
----------- --------- -------- -----------
Total debt securities................ 35,797,567 719,660 (3,991) 36,513,236
Equity securities......................... 416,700 -- -- 416,700
----------- --------- -------- -----------
Total................................ $36,214,267 $ 719,660 $ (3,991) $36,929,936
=========== ========= ======== ===========
HELD TO MATURITY
Obligations of states and political
subdivisions............................ $ 1,355,000 $ 5,440 $ (924) $ 1,359,516
=========== ========= ======== ===========
</TABLE>
The amortized cost and estimated market values of debt securities at
December 31, 1995, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
---------------------------- ---------------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Due in one year or less.................. $ 1,000,000 $ 1,004,063 $ 245,000 $ 245,650
Due after one year through five years.... 500,000 511,406 1,010,000 1,011,652
Due after five years through ten years... 16,752,059 17,105,001 100,000 102,213
Due after ten years...................... 4,115,417 4,220,044 -- --
----------- ----------- ---------- -----------
22,367,476 22,840,514 1,355,000 1,359,515
Mortgage-backed securities............... 13,430,091 13,672,722 -- --
----------- ----------- ---------- -----------
Total............................... $35,797,567 $36,513,236 $1,355,000 $ 1,359,515
=========== =========== ========== ===========
</TABLE>
Proceeds from the sales of investments in debt securities available for
sale and the gross realized gains and losses for the years ended December 31,
1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Proceeds from sales........................................ $26,067,114 $23,738,443
Gross gains................................................ 256,716 314,600
Gross losses............................................... 62,862 277,735
</TABLE>
Investment securities with a carrying value of $3,690,814 at December 31,
1995, were pledged to secure public deposits and other purposes as required by
law.
F-9
<PAGE> 93
4. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Real estate--mortgage................................................. $ 8,001,204
Consumer loans to individuals......................................... 2,477,022
Commercial............................................................ 789,917
-----------
11,268,143
Less: Unearned discount.......................................... 212,955
Allowance for loan losses.................................. 150,474
-----------
Net loans................................................... $10,904,714
===========
</TABLE>
As of December 31, 1995, aggregate loans of $60,000 or more extended to
directors, executive officers, and their affiliates were $506,001. In
management's opinion, all of these loans are on substantially the same terms and
conditions as loans to other individuals and businesses of comparable
creditworthiness. A summary of loan activity during the year is as follows:
<TABLE>
<CAPTION>
BALANCE AMOUNTS BALANCE
DECEMBER 31, 1994 ADDITIONS COLLECTED DECEMBER 31, 1995
- ------------------ ---------- ---------- ------------------
<S> <C> <C> <C>
$320,611 437,000 251,610 $506,001
</TABLE>
The Bank grants consumer, commercial, and residential loans to customers
throughout its trade area which is concentrated in Armstrong County,
Pennsylvania. Although the Bank has a diversified loan portfolio at December 31,
1995, a substantial portion of its debtors' ability to honor their loan
agreements is dependent upon the economic stability of its immediate trade area.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31,
1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Balance, January 1.......................................... $148,292 $148,267
Add:
Provision charged to operations........................ 37,500 --
Recoveries............................................. -- 25
Less loans charged off...................................... 35,318 --
-------- --------
Balance, December 31........................................ $150,474 $148,292
======== ========
</TABLE>
6. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Land and improvements..................................................... $ 79,309
Buildings and improvements................................................ 274,832
Furniture, fixtures and equipment......................................... 640,406
--------
994,547
Less accumulated depreciation............................................. 682,012
--------
Total................................................................ $312,535
========
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1994, was
$46,334 and $19,632 respectively.
F-10
<PAGE> 94
7. DEPOSITS
Time deposits include certificates of deposit in denominations of $100,000
or more. Such deposits aggregated $4,110,685 at December 31, 1995.
8. SHORT-TERM BORROWINGS
The Bank's short-term borrowings at December 31, 1995, consists solely of
Federal Home Loan Bank (FHLB) Flexline credit arrangement. During 1995,
short-term borrowings also included federal funds purchased.
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Balance at year end..................................................... $4,000,000
Maximum amount outstanding at any month end............................. 4,950,000
Average balance outstanding during the year............................. 1,922,123
Weighted average interest rate:
As of year end..................................................... 6.05%
Paid during the year.................................................... 6.22
</TABLE>
The Flexline credit arrangement with the FHLB is a revolving line of credit
and is renewable annually. During 1995, the Bank had a borrowing limit of
$4,079,600, with a variable rate of interest based upon the FHLB's cost of
funds. Additionally, federal funds purchased represent funds acquired for
various funding requirements. Certain obligations of U.S. Government
corporations and agencies, mortgage-backed securities, and first mortgage loans
are pledged to secure such borrowings.
9. OTHER EXPENSE
Other expenses for the year ended December 31, 1995 and 1994, consists of
the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Professional fees relating to pending merger................ $142,931 $ --
Advertising................................................. 71,487 49,715
Pennsylvania Shares Tax..................................... 41,405 44,961
Other....................................................... 273,312 292,315
-------- --------
$529,135 $386,991
======== ========
</TABLE>
10. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Current..................................................... $210,445 $228,574
Deferred.................................................... (20,445) 1,432
-------- --------
Total....................................................... $190,000 $230,006
======== ========
</TABLE>
F-11
<PAGE> 95
10. INCOME TAXES (CONTINUED)
The tax effects of deductible and taxable temporary differences that give
rise to significant portions of the deferred tax assets and deferred tax
liabilities, respectively, at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Deferred Tax Assets:
Deferred compensation.......................................... $ 9,763
Allowance for loss on other real estate owned.................. 11,900
---------
Total gross deferred tax assets............................. 21,663
---------
Deferred Tax Liabilities:
Premises and equipment......................................... 14,247
Allowance for loan losses...................................... 4,218
Net unrealized gain on securities.............................. 243,328
Other, net..................................................... 151
---------
Total gross deferred tax liabilities........................ 261,944
---------
Net deferred tax liability.................................. $(240,281)
=========
</TABLE>
The following is a reconciliation of the federal statutory rate and the
Bank's effective income tax rate for the years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
% OF % OF
PRE-TAX PRE-TAX
AMOUNT INCOME AMOUNT INCOME
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Provision at statutory rate.................... $ 284,660 34.0% $ 275,849 34.0%
Effect of tax free income...................... (106,455) (12.7) (62,629) (7.7)
Non-deductible interest expense................ 10,016 1.2 5,239 0.6
Other, net..................................... 1,779 0.2 11,547 1.5
--------- ------ --------- ------
Actual tax expense and effective rate.......... $ 190,000 22.7% $ 230,006 28.4%
========= ====== ========= ======
</TABLE>
11. COMMITMENTS
In the normal course of business, the Bank makes various commitments which
are not reflected in the accompanying financial statements. These instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the balance sheet. The Bank's exposure to credit
loss in the event of nonperformance by the other parties to the financial
instruments is represented by the contractual amounts, as disclosed. Losses, if
any, are charged to the allowance for loan losses. The Bank minimizes its
exposure to credit loss under these commitments by subjecting them to credit
approval and review procedures and collateral requirements as deemed necessary.
The off-balance sheet commitments were comprised of the following:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Commitments to extend credit...................................... $185,766
Standby letters of credit......................................... 108,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the loan agreement.
These commitments are comprised primarily of available commercial lines of
credit and mortgage loan commitments. The Bank uses the same credit policies in
making loan commitments and conditional obligations as it does for on-balance
sheet instruments. The Bank evaluates each customer's creditworthiness on a case
by case basis. The amount of collateral obtained, as deemed necessary, is based
upon management's credit evaluation in compliance with the Bank's lending policy
guidelines. Customers use credit commitments to ensure that funds will be
available for working capital purposes and capital expenditures and to ensure
access to funds at specified terms and conditions.
F-12
<PAGE> 96
11. COMMITMENTS (CONTINUED)
Standby letters of credit obligate the Bank to disburse funds to a third
party if the Bank's customer fails to perform under the terms of the agreement
with the beneficiary. These instruments are issued primarily to support bid or
performance-related contracts. The coverage period for these instruments is
typically a one year period with an annual renewal option subject to prior
approval by management. The Bank holds collateral for these instruments, as
deemed necessary, which are typically Bank deposit instruments or marketable
securities.
12. REGULATORY RESTRICTIONS
Cash and Due From Banks
Included in cash and due from banks are required federal reserves of
$25,000 at December 31, 1995, for facilitating the implementation of monetary
policy by the Federal Reserve system. The required reserves are computed by
applying prescribed ratios to the classes of average deposit balances. These
reserves are held in the form of cash on hand.
Dividends
The Pennsylvania Banking Code restricts the availability of surplus for
dividend purposes. At December 31, 1995, capital surplus funds of $850,000 were
not available for dividends.
Capital Requirements (Unaudited)
The Bank is subject to risk-based capital rules. These guidelines include a
common framework for defining elements of capital and a system for relating
capital to risk. The minimum total risk-based capital requirement is 8%, of
which at least half must be Tier 1 capital. The Tier 1 and total risk-based
capital positions of the Bank as of December 31, 1995, as calculated by
management, amounted to 70.0% and 71.2%, respectively. Additionally, the general
regulatory guidelines establish a minimum ratio of leverage capital to adjusted
total assets of 3.00% for top rated financial institutions with less highly
rated institutions, or those with higher levels of risk, required to maintain
ratios of 100 to 200 basis points above the minimum level. The Bank's ratios
under these guidelines, as calculated by management, as of December 31, 1995, is
15.74%.
13. FAIR VALUE DISCLOSURE
Financial Accounting Standards Board Statement No. 107, "Disclosure About
Fair Value of Financial Instruments," requires disclosure of the estimated fair
value of the financial instruments. Financial instruments are defined as cash,
evidence of ownership interest in an entity, or a contract which creates an
obligation or right to receive or deliver cash or another financial instrument
from/to a second entity on potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could
be exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a
financial instrument, the estimated fair value would be calculated based upon
the market price per trading unit of the instrument.
If no readily available market exists, the fair value estimates for
financial instruments should be based upon management's judgment regarding
current economic conditions, interest rate risk, expected cash flows, future
estimated losses, and other factors as determined through various option pricing
formulas or simulation modeling. As many of these assumptions result from
judgments made by management based upon estimates which are inherently
uncertain, the resulting estimated fair values may not be indicative of the
amount realizable in the sale of a particular financial instrument. In addition,
changes in assumptions on which the estimated fair values are based may have a
significant impact on the resulting estimated fair values.
As certain assets, such as deferred tax assets and premises and equipment
are not considered financial instruments, the estimated fair value of financial
instruments would not represent the full value of the Bank.
F-13
<PAGE> 97
13. FAIR VALUE DISCLOSURE (CONTINUED)
The Bank employed simulation modeling in determining the estimated fair
value of financial instruments for which quoted market prices were not available
based upon the following assumptions:
Cash and Due From Banks, Accrued Interest Receivable, Short-Term Borrowings,
and Accrued Interest Payable
The fair value is equal to the current carrying value.
Investment Securities
The fair value of securities held as investments is equal to the available
quoted market price. If no quoted market price is available, fair value is
estimated using the quoted market price of similar securities.
The fair value of securities available for sale is equal to the current
carrying value.
Loans and Deposits
The fair value of loans and certificates of deposit are estimated by
discounting the future cash flows using a simulation model which estimates
future cash flows and constructs discount rates that consider reinvestment
opportunities, operating expenses, non-interest income, credit quality, and
prepayment risk. Demand accounts, passbooks, and money market deposit accounts
are valued at the amount payable on demand as of year end.
Commitments to Extend Credit and Standby Letters of Credit
These financial instruments are generally not subject to sale, and
estimated fair values are not readily available. The carrying value, represented
by the net deferred fee arising from the unrecognized commitment or letter of
credit, and the fair value, determined by discounting the remaining contractual
fee over the term of the commitment using fees currently charged to enter into
similar agreements with similar credit risk, are not considered material for
disclosure. The contractual amounts of unfunded commitments and letters of
credit are presented in Note 11.
The estimated fair values at December 31, 1995, of the Bank's financial
instruments are as follows:
<TABLE>
<CAPTION>
1995
---------------------------------
CARRYING VALUE FAIR VALUE
--------------- -----------
<S> <C> <C>
Financial assets:
Cash and due from banks.................................... $ 1,426,834 $ 1,426,834
Securities available for sale.............................. 36,929,936 36,929,936
Investment securities...................................... 1,355,000 1,359,516
Net loans.................................................. 10,904,714 11,021,210
Accrued interest receivable................................ 597,713 597,713
----------- -----------
Total................................................... $51,214,197 $51,335,209
=========== ===========
Financial liabilities:
Deposits................................................... $38,662,675 $39,136,570
Short-term borrowings...................................... 4,000,000 4,000,000
Accrued interest payable................................... 216,689 216,689
----------- -----------
Total................................................... $42,879,364 $43,353,259
=========== ===========
</TABLE>
F-14
<PAGE> 98
14. AGREEMENT AND PLAN OF REORGANIZATION
On October 24, 1995, the Bank entered into an Agreement and Plan of
Reorganization ("Agreement") with BT Financial Corporation ("BTFC"). The
Agreement provides for the Bank to be merged with and into Johnstown Bank and
Trust Company, a wholly-owned subsidiary of BTFC. The Agreement is subject to
approval of the shareholders of the Bank and the appropriate regulatory
agencies. Pursuant to the Agreement, each non-dissenting shareholder will
receive 26.5 shares of BTFC common stock and $596.25 in cash, subject to
adjustment, for each share of common stock of the Bank.
F-15
<PAGE> 99
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
Moxham Bank Corporation
Johnstown, Pennsylvania
We have audited the accompanying consolidated balance sheets of Moxham Bank
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Moxham Bank Corporation and subsidiaries as of December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Notes 1, 3 and 10 to the consolidated financial statements,
in 1994 the Company changed its method of accounting for investment securities
and in 1993 changed its method of accounting for income taxes.
Barnes, Saly & Company
February 15, 1996
F-16
<PAGE> 100
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 8,934,600 $ 8,339,500
Interest-bearing deposits with banks........................ 296,600 1,460,400
Federal funds sold.......................................... 8,665,000 -0-
Investment securities available for sale, at market:
(Note 3)
U.S. Treasury.......................................... 11,549,700 20,372,300
U.S. Government agencies............................... 39,884,300 27,779,500
Obligations of states and political subdivisions....... 7,622,000 12,504,800
Other securities....................................... 1,018,700 1,369,800
------------ ------------
Total investment securities available for sale....... $ 60,074,700 $ 62,026,400
------------ ------------
Loans (Note 4).............................................. $154,398,800 $150,197,800
Less allowance for loan losses (Note 5)..................... 1,962,400 1,826,300
------------ ------------
Net loans............................................ $152,436,400 $148,371,500
------------ ------------
Premises and equipment, net (Note 6)........................ $ 6,051,800 $ 5,908,800
Accrued income receivable and other assets.................. 4,436,000 5,253,600
------------ ------------
TOTAL ASSETS......................................... $240,895,100 $231,360,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits: (Note 7)
Non-interest bearing................................... $ 23,103,500 $ 22,262,900
Interest bearing....................................... 194,501,800 177,497,100
------------ ------------
Total deposits....................................... $217,605,300 $199,760,000
Short-term borrowings (Note 8).............................. 100,000 12,060,000
Subordinated capital note (Note 9).......................... 715,000 845,000
Other liabilities........................................... 2,396,800 1,720,700
------------ ------------
TOTAL LIABILITIES.................................... $220,817,100 $214,385,700
------------ ------------
Commitments and contingent liabilities (Notes 12 and 13)
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 250,000 shares authorized,
14,000 and 15,000 shares issued and outstanding at
December 31, 1995 and 1994 (Note 14)...................... $ 1,377,700 $ 1,476,100
Common stock, $2 par value, 2,880,000 shares authorized,
903,852 and 888,781 shares issued and outstanding at
December 31, 1995 and 1994................................ 1,807,700 1,777,600
Surplus..................................................... 3,750,600 3,481,500
Retained earnings (Notes 9 and 17).......................... 12,779,800 11,995,100
Unrealized gain (loss) on securities available for sale,
net....................................................... 362,200 (1,755,800)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY........................... $ 20,078,000 $ 16,974,500
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........... $240,895,100 $231,360,200
============ ============
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE> 101
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans................................. $14,095,600 $12,372,000 $11,534,800
Interest on investment securities and investment securities
available for sale:
U.S Treasury........................................... 871,300 1,075,600 898,900
U.S. Government agencies............................... 2,240,300 1,405,100 966,500
Obligations of state and political subdivisions........ 593,000 829,300 993,800
Other.................................................. 66,400 61,100 53,900
Interest on assets held in trading account................. 300 200 -0-
Interest on Federal funds sold............................. 138,000 27,000 78,500
Interest on deposits with banks............................ 53,500 83,700 293,100
----------- ----------- -----------
TOTAL INTEREST INCOME............................... $18,058,400 $15,854,000 $14,819,500
----------- ----------- -----------
INTEREST EXPENSE:
Interest on deposits....................................... $ 8,994,600 $ 6,688,600 $ 5,956,400
Interest on borrowings..................................... 278,200 292,100 95,900
----------- ----------- -----------
TOTAL INTEREST EXPENSE.............................. $ 9,272,800 $ 6,980,700 $ 6,052,300
----------- ----------- -----------
Net interest income.................................... $ 8,785,600 $ 8,873,300 $ 8,767,200
Provision for loan losses.................................. 307,000 263,900 192,900
----------- ----------- -----------
Net interest income after provision for loan losses.... $ 8,478,600 $ 8,609,400 $ 8,574,300
----------- ----------- -----------
OTHER INCOME:
Trust department income.................................... $ 563,900 $ 502,300 $ 450,700
Service fees............................................... 674,100 611,200 578,500
Other income............................................... 163,100 165,200 144,000
Security gains............................................. 61,700 154,300 137,500
----------- ----------- -----------
TOTAL OTHER INCOME.................................. $ 1,462,800 $ 1,433,000 $ 1,310,700
----------- ----------- -----------
OTHER EXPENSES:
Salaries and wages......................................... $ 3,402,300 $ 3,195,300 $ 3,047,400
Pension and other employee benefits........................ 1,189,800 1,137,800 1,075,400
Net occupancy and equipment expense........................ 1,223,100 1,159,300 1,088,900
Other operating expenses................................... 2,490,200 2,585,900 2,510,300
----------- ----------- -----------
TOTAL OTHER EXPENSES................................ $ 8,305,400 $ 8,078,300 $ 7,722,000
----------- ----------- -----------
INCOME BEFORE TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE....................................... $ 1,636,000 $ 1,964,100 $ 2,163,000
Provision for income taxes (Note 10)......................... 161,300 210,900 234,700
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE....................................... $ 1,474,700 $ 1,753,200 $ 1,928,300
Cumulative effect of change in accounting principle--
adoption of SFAS No. 109 (Note 10)......................... $ -0- $ -0- $ 26,900
----------- ----------- -----------
NET INCOME................................................... $ 1,474,700 $ 1,753,200 $ 1,901,400
=========== ============ ============
Primary:
Net income per share....................................... $ 1.52 $ 1.84 $ 2.03
=========== =========== ===========
Weighted average number of shares outstanding.............. 896,592 885,459 875,870
=========== =========== ===========
Fully Diluted:
Net income per share....................................... $ 1.51 $ 1.81 $ 1.98
=========== =========== ===========
Weighted average number of shares outstanding.............. 976,342 967,959 958,370
=========== =========== ===========
Dividends paid per share..................................... $ 0.64 $ 0.58 $ 0.56
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE> 102
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDINGS
PREFERRED COMMON RETAINED GAINS
STOCK STOCK SURPLUS EARNINGS (LOSSES) TOTAL
---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1992....... $1,476,100 $ 790,000 $2,027,100 $11,650,500 $ -0- $15,943,700
Net income 1993................... -- -- -- 1,901,400 -- 1,901,400
Effect of two-for-one stock
split........................... -- 793,000 (793,000) -- --
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 17,600 182,400 -- -- 200,000
Cash dividends declared:
Preferred stock ($8.00 per
share)........................ -- -- -- (120,000) -- (120,000)
Common stock ($.56 per share)... -- -- -- (494,100) -- (494,100)
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1993....... $1,476,100 $1,600,600 $1,416,500 $12,937,800 $ -0- $17,431,000
Net income 1994................... -- -- -- 1,753,200 -- 1,753,200
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 15,600 168,800 -- -- 184,400
Cash dividends declared:
Preferred stock ($8.00 pre
share)........................ -- -- -- (120,000) -- (120,000)
Common stock ($.58 per share)... -- -- -- (518,300) (518,300)
Effect of 10% stock dividend...... -- 161,400 1,896,200 (2,057,600) -- --
Change in unrealized gain (loss)
on securities
available-for-sale, net......... -- -- -- -- (1,755,800) (1,755,800)
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1994....... $1,476,100 $1,777,600 $3,481,500 $11,995,100 $(1,755,800) $16,974,500
Net income 1995................... -- -- -- 1,474,700 -- 1,474,700
Common stock issued:
Dividend reinvestment plan and
ESOP.......................... -- 19,100 181,700 -- -- 200,800
Conversion of preferred stock... (98,400) 11,000 87,400 -- -- --
Cash dividends declared:
Preferred stock ($8.00 pre
share)........................ -- -- -- (116,000) -- (116,000)
Common stock ($.64 per share)... -- -- -- (574,000) -- (574,000)
Change in unrealized gain (loss)
on securities
available-for-sale, net......... -- -- -- -- 2,118,000 2,118,000
---------- ---------- ---------- ----------- ----------- -----------
BALANCES, DECEMBER 31, 1995....... $1,377,700 $1,807,700 $3,750,600 $12,779,800 $ 362,200 $20,078,000
========== ========== ========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE> 103
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 1,474,700 $ 1,753,200 $ 1,901,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and
amortization........................... 626,800 569,400 517,900
Provision for possible loan losses........ 307,000 263,900 192,900
Amortization of investment premium, net of
accretion of investment discount....... 64,800 86,400 289,400
Provision for deferred income taxes
(credit)............................... (196,000) (292,300) (37,100)
Investment securities (gains)............. (61,700) (154,300) (137,500)
Equity in loss of limited partnership..... 171,600 99,100 118,000
(Gain) loss on sale/disposal of assets.... 26,100 (4,600) 36,600
(Increase) decrease in accrued income
receivable and other assets............ 3,800 (11,700) (132,600)
Increase (decrease) in accrued interest
payable and other liabilities.......... 461,400 55,100 149,400
------------ ------------ ------------
Net cash provided by operating
activities........................ $ 2,878,500 $ 2,364,200 $ 2,898,400
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment
securities and investment securities
available for sale........................ $ 10,354,500 $ 16,123,100 $ 25,277,500
Proceeds from sales of investment securities
and investment securities available for
sale...................................... 18,551,700 8,702,400 3,073,300
Purchase of investment securities and
investment securities available for
sale...................................... (23,728,400) (25,274,200) (41,693,900)
Net (increase) decrease in interest bearing
deposits with banks....................... 1,156,000 558,000 10,775,500
Net (increase) decrease in federal funds
sold...................................... (8,665,000) 2,945,000 (2,945,000)
Proceeds from sale of loans................. 1,264,500 921,000 415,200
Net (increase) decrease in loans............ (6,102,900) (16,364,000) (17,397,100)
Investment in limited partnership........... (144,400) (162,600) (340,400)
Purchase of premises and equipment.......... (582,200) (209,100) (1,576,300)
Proceeds from sale of assets................ 346,700 187,100 201,200
------------ ------------ ------------
Net cash provided by (used in)
investing activities.............. $ (7,549,500) $(12,573,300) $(24,210,000)
------------ ------------ ------------
</TABLE>
(Continued)
F-20
<PAGE> 104
MOXHAM BANK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits........... $ 17,845,300 $ 70,500 $22,818,400
Net increase (decrease) in short-term
borrowings.................................. (11,960,000) 11,960,000 (1,100,000)
Payments on subordinated capital note......... (130,000) (130,000) (130,000)
Proceeds from sale of common stock............ 200,800 184,400 200,000
Preferred stock cash dividends paid........... (116,000) (120,000) (120,000)
Common stock cash dividends paid.............. (574,000) (518,300) (494,100)
------------ ----------- -----------
Net cash provided by (used in)
financing activities................ $ 5,266,100 $11,446,600 $21,174,300
------------ ----------- -----------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS..... $ 595,100 $ 1,237,500 $ (137,300)
Cash and due from banks at beginning of year....... 8,339,500 7,102,000 7,239,300
------------ ----------- -----------
CASH AND DUE FROM BANKS AT END OF YEAR............. $ 8,934,600 $ 8,339,500 $ 7,102,000
============ =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid on deposits and other borrowings..... $ 8,863,800 $ 6,870,000 $ 5,998,700
Federal income taxes paid (net of refunds)......... 323,700 343,800 474,900
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES:
Other real estate acquired in settlement of
loans............................................ $ 465,300 $ 150,900 $ 58,700
Net unrealized gains (losses) on securities
available-for-sale (net of deferred taxes)....... 2,118,000 (1,755,800) -0-
Conversion of preferred stock to common stock...... 98,400 -0- -0-
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE> 105
MOXHAM BANK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting and financial
reporting policies of Moxham Bank Corporation (the Company) and its subsidiaries
whose operations relate primarily to commercial banking activities which
represent one industry segment:
a. Basis of presentation:
The consolidated financial statements of the Company include the accounts
of the Company and its wholly-owned subsidiaries, Moxham National Bank (Moxham),
the First National Bank of Garrett (Garrett), and Moxham Community Development
Corporation (MCDC). All significant intercompany accounts and transactions have
been eliminated in preparing the consolidated financial statements.
b. Cash and cash equivalents:
For purposes of reporting cash flows, cash and due from banks includes cash
on hand and amounts due from banks (including cash items in process of
clearing). Cash flows from demand deposits, NOW accounts, saving accounts,
Federal funds purchased and sold, borrowings from Federal Home Loan Bank,
Federal Reserve Bank and demand note from U.S. Treasury are reported net since
their original maturities are less than three months. The Company adopted the
provisions of Financial Accounting Standards Board Statement No. 104 "Statement
of Cash Flows--Net Reporting of Certain Cash Receipts and Cash Payments and
Clarification of Cash Flows from Hedging Transactions" (FASB 104). FASB 104
allows certain banks and savings institutions to report net cash flows for
deposits placed with other financial institutions, time deposits and lending
activities.
The Company maintains amounts due from banks which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts.
c. Trust assets:
Assets of the Trust Department, other than trust cash on deposit at the
bank, are not included in these financial statements because they are not assets
of the Company. All trust fees are recorded on the cash basis which approximates
the accrual basis for such income.
d. Investment securities:
Investment securities consist of debt and equity securities. Debt
securities consist primarily of obligations of the U.S. government, state
governments and domestic corporations. Equity securities consists primarily of
Federal Home Loan Bank and Federal Reserve Bank stock.
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities, as of January 1, 1994. SFAS No. 115 requires that management
determine the appropriate classification of investment securities at the date of
adoption, and thereafter at the date individual investment securities are
acquired. The Company has elected to classify their entire investment portfolio
as available-for-sale securities.
Securities classified as available for sale are those debt securities that
the Bank intends to hold for an indefinite period of time, but not necessarily
to maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized gains or
losses are reported as increases or decreases in stockholder's equity, net of
the related deferred tax effect. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included in earnings.
Prior to the adoption of SFAS No. 115, the Company stated its investment
securities at amortized cost. Under both the newly adopted accounting standard
and the Company's former accounting practices, premiums and discounts on
investments in debt securities are amortized over their contractual lives
computed by both the
F-22
<PAGE> 106
interest and straight line methods. Interest and dividends on investment
securities is recognized in income as accrued. Realized gains and losses,
including losses from declines in value of specific securities determined by
management to be other-than-temporary, are included in income. Realized gains
and losses are determined on the basis of the specific securities sold.
Note 3 to the financial statements provides further information about the
effect of adopting SFAS No. 115.
e. Allowance for possible loan losses:
The allowance for possible loan losses is maintained at a level considered
adequate by management to provide for losses that can be reasonably anticipated.
Amounts are added to the allowance for loan losses and charges against current
income based on such factors as historical loan loss experience, loan
concentrations, overall portfolio quality, and management's evaluation of
potential losses in the loan portfolio combined with prevailing and anticipated
economic conditions. While management uses the best information available to
make its evaluation, future adjustments to the allowance may be necessary if
there are significant changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process, periodically review
the Company's allowance for loan losses, and may require the Company to make
additions to the allowance based on their judgment about information available
to them at the time of their examinations. A charge is made to the allowance for
loan losses when a loan or part thereof is considered by management to be
uncollectible. Recoveries on previous charge-offs are added back to the
allowance.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" which was subsequently amended by SFAS No.
118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures". SFAS No. 114, as amended, addresses the treatment and disclosure
of certain loans where it is probable that the creditor will be unable to
collect all amounts due according to the contractual terms of the loan
agreement. SFAS No. 114, as amended, requires that the impairment of loans that
have been separately identified for evaluation is to be measured based on the
present value of expected future cash flows or, alternatively, the observable
market price of the loans or the fair value of the collateral. However, for
those loans that are collateral dependent (that is, if repayment of those loans
is expected to be provided solely by the underlying collateral) and for which
management has determined foreclosure is probable, the measure of impairment of
those loans is to be based on the fair value of the collateral. Statement 114,
as amended, also requires certain disclosures about investments in impaired
loans and the allowance for credit losses and interest income recognized on
those loans. The adoption of SFAS 114 resulted in one loan totaling $97,400
being specifically identified as impaired and a corresponding allocation reserve
of $50,000 was established.
f. Premises and Equipment:
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of premises, furniture and equipment
are computed by both straight-line and accelerated methods for financial
reporting and by use of the accelerated cost recovery system for tax reporting
purposes. Listed below are the estimated useful lives used for financial
reporting:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements................................... 5-40
Furniture and equipment...................................... 5-25
Vehicles..................................................... 3
</TABLE>
Maintenance repairs and minor renewals are charged to income as incurred.
Expenditures for betterments and major renewals are capitalized and depreciated
over their estimated useful lives.
g. Interest income:
Interest on installment loans is recorded as income in amounts that will
provide an approximate level yield over the terms of the loans. Accrual of
interest on other loans is based generally on the daily amount of principal
outstanding. Accrual of interest is discontinued on a loan when management
believes, after considering collection efforts and other factors, that the
borrower's financial condition is such that collection of interest is doubtful.
A
F-23
<PAGE> 107
commercial loan is placed automatically on non-accrual status when principal or
interest becomes 90 days past due and is not expected to be brought current
within 30 days. All other loans are placed on non-accrual status when principal
or interest becomes 90 days past due, unless the loan is both well secured and
full payment of interest and principal is expected. A non-accrual loan may be
restored to accrual status when its financial status has been significantly
improved and after becoming current and remaining current for three consecutive
months.
h. Income taxes:
The provision for income taxes relates to items of revenue and expenses
recognized for financial accounting purposes during each of the years. The
actual current tax liability may be more or less than the charge against
earnings due to the effect of timing differences between financial and tax
accounting resulting in deferred income taxes. The primary differences result
from depreciation, non-qualified deferred compensation plan, loan loss
provisions and deferred loan fees. In February 1992, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes". The statement provides that the effect of
its adoption may be recorded entirely in the year of adoption or retroactively
by restating one or more prior years. The Company adopted SFAS No. 109 as of
January 1, 1993 and has recorded the effect of its adoption entirely in 1993.
Under the assets and liability method provided for by SFAS No. 109, deferred tax
assets and liabilities are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
bases of existing assets and liabilities. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
(See further Note 10.) The Corporation and its subsidiaries file a consolidated
federal income tax return.
i. Shareholders' equity:
On December 30, 1994, a 10 percent stock dividend was distributed to
shareholders of record on December 27, 1994. Fractional shares were paid in
cash. As a result of the stock dividend, 80,692 additional shares were issued
and $2,057,600 was transferred from retained earnings to common stock and
surplus ($25.50 per share).
On December 8, 1992, the Board of Directors authorized a two-for-one stock
split of the Company's common stock, effected in the form of a stock dividend.
The additional shares were distributed in February 1993 to shareholders of
record on February 1, 1993. As a result of the split, 396,492 additional shares
were issued and $793,000 was transferred from surplus to common stock. Earnings
and dividends per share included in the consolidated financial statements have
been adjusted to reflect the stock split and stock dividend.
j. Per share data:
Net income per share amounts are computed by dividing net income, after
deducting preferred stock dividends, by the weighted average number of shares of
common stock outstanding during each year and is adjusted for the 10 percent
stock dividend and two-for-one stock split. Cash dividends per share are based
on the number of shares outstanding at the respective declaration date. Fully
diluted earnings per share amounts are calculated assuming that the Series A
$8.00 cumulative convertible non-voting preferred stock was converted at the
beginning of the year into 5.5 shares of the Company's common stock and that no
preferred dividends were paid.
k. Loan fees:
Certain loan and commitment fees and certain direct loan origination costs
are being deferred and the net amount amortized into interest and fees on loans.
Generally these fees are amortized over the contractual life of the related
loan. Fee amortization is determined by the straight-line method which
approximates the level yield method. The following fees and costs are being
deferred and amortized over the life of the loan: Dealer retention advances,
commercial loan fees and costs, and home equity third-party origination costs.
F-24
<PAGE> 108
NOTE 2: CASH AND DUE FROM BANKS
Cash and due from banks includes $100,000 at December 31, 1995 and 1994,
representing balances required to be maintained with Federal Reserve Banks.
NOTE 3: INVESTMENT SECURITIES AND INVESTMENT SECURITIES AVAILABLE FOR SALE
Carrying amounts and fair values of investment securities available for
sale are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities............... $11,519,000 $ 73,300 $ 42,600 $11,549,700
U.S. Government agencies............... 39,631,100 401,200 148,000 39,884,300
Obligations of states and political
subdivisions......................... 7,344,700 282,100 4,800 7,622,000
Other securities....................... 1,018,700 -0 - -0 - 1,018,700
----------- -------- ---------- -----------
$59,513,500 $756,600 $ 195,400 $60,074,700
=========== ======== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------------------------------------
GROSS GROSS APPROXIMATE
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities............... $21,121,400 $ -0 - $ 749,100 $20,372,300
U.S. Government agencies............... 29,496,700 1,400 1,718,600 27,779,500
Obligations of states and political
subdivisions......................... 12,698,800 69,900 263,900 12,504,800
Other securities....................... 1,369,800 -0 - -0 - 1,369,800
----------- -------- ---------- -----------
$64,686,700 $ 71,300 $2,731,600 $62,026,400
=========== ======== ========== ===========
</TABLE>
The amortized cost and fair value of investment securities available for
sale as of December 31, 1995 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
APPROXIMATE
AMORTIZED MARKET
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less.................................. $12,823,400 $12,751,100
Due after one year through 5 years....................... 37,879,200 38,276,200
Due after 5 years through 10 years....................... 1,676,500 1,701,400
Due after 10 years....................................... 7,134,400 7,346,000
----------- -----------
$59,513,500 $60,074,700
=========== ===========
</TABLE>
Gross realized gains and losses for the years ended December 31, 1995, 1994 and
1993 are as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES 1994 1993 1992
--------------------- -------- -------- --------
<S> <C> <C> <C>
Realized gains..................................... $144,900 $193,600 $137,500
Realized losses.................................... 83,200 39,300 -0-
</TABLE>
The other securities category included nonmarketable equity securities, in
the amount of $908,800 and $1,299,900 at December 31, 1995 and 1994
respectively, and consists primarily of Federal Home Loan Bank stock and Federal
Reserve Bank stock.
Investment securities with a carrying amount of $20,214,500 at December 31,
1995 and $28,430,800 at December 31, 1994 were pledged to secure public and
trust deposits and for other purposes as required or permitted by law.
F-25
<PAGE> 109
As discussed in Note 1, the Company adopted SFAS No. 115 as of January 1,
1994. In accordance with SFAS No. 115, the 1993 comparative financial statements
have not been restated for the change in accounting principle. The January 1,
1994 balance of stockholders' equity was increased by $550,000, net of the
$283,300 related deferred tax effect, to recognize the net unrealized holding
gain on securities available for sale at that date.
NOTE 4: LOANS RECEIVABLE
The composition of the Company's loan portfolio at December 31, 1995 and
1994 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Commercial............................................. $ 57,548,700 $ 51,592,500
Real estate--construction.............................. 1,300,800 3,823,200
Real estate--mortgage.................................. 51,140,000 50,361,600
Consumer............................................... 43,249,300 44,119,600
Other.................................................. 1,160,000 300,900
------------ ------------
$154,398,800 $150,197,800
============ ============
</TABLE>
Included in consumer loans are education loans held-for-sale that totaled
$2,412,500 and $2,404,600 at December 31, 1995 and 1994, respectively.
Loans on which the accrual of interest has been discontinued amounted to
$811,000 and $1,131,700 at December 31, 1995 and 1994, respectively. The
following reflects the effect of non-accrual loans on both interest income and
net interest income for December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------- --------
<S> <C> <C>
Interest income due in accordance with original terms.......... $69,100 $100,400
Interest income recorded and reflected in total operating
income....................................................... 39,900 76,800
------- --------
Net reduction in interest income and net interest income....... $29,200 $ 23,600
======= ========
</TABLE>
In the ordinary course of business, the subsidiaries have transactions,
including loans, with their officers, directors and their affiliated companies.
These transactions were on substantially the same terms as those prevailing at
the time for comparable transactions with unaffiliated parties and do not
involve more than the normal risk. These loans totaled $2,975,000 and $2,049,300
at December 31, 1995 and 1994, respectively. Aggregate loan transactions with
related parties were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1994
---------- -----------
<S> <C> <C>
Balance, beginning of year................................. $2,049,300 $ 2,350,300
New loans............................................. 1,341,300 716,800
Payments.............................................. (415,600) (1,017,800)
---------- -----------
Balance, end of year....................................... $2,975,000 $ 2,049,300
========== ===========
</TABLE>
F-26
<PAGE> 110
NOTE 5: ALLOWANCE FOR POSSIBLE LOAN LOSSES
Transactions in the allowance for possible loan losses were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year.................. $1,826,300 $1,643,100 $1,485,700
Additions:
Provision of loan losses.................... 307,000 263,900 192,900
Recoveries of loans charged off............. 37,400 41,100 74,600
Deductions:
Loans charged off........................... (208,300) (121,800) (110,100)
---------- ---------- ----------
Balance at end of year........................ $1,962,400 $1,826,300 $1,643,100
========== ========== ==========
</TABLE>
NOTE 6: PREMISES AND EQUIPMENT
Major classes of premises and equipment at December 31, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Land...................................................... $ 783,800 $ 783,800
Buildings and leasehold improvements...................... 5,686,100 5,178,500
Furniture and equipment................................... 3,803,000 3,561,000
----------- -----------
$10,272,900 $ 9,523,300
Less: Accumulated depreciation............................ (4,221,100) (3,614,500)
----------- -----------
Premises and equipment, net............................... $ 6,051,800 $ 5,908,800
=========== ===========
</TABLE>
Depreciation of premises and equipment amounted to $595,300 in 1995,
$551,600 in 1994 and $491,600 in 1993.
NOTE 7: DEPOSITS
The composition of deposits is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Demand................................................. $ 23,103,500 $ 22,262,900
NOW accounts........................................... 17,995,800 19,312,900
Savings................................................ 48,803,400 47,568,000
Time certificates, $100,000 or more.................... 13,091,200 13,669,900
Other time deposits.................................... 114,611,400 96,946,300
------------ ------------
$217,605,300 $199,760,000
============ ============
</TABLE>
Interest expense on deposits consisted of the following for the years
ending December 31, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
NOW accounts.................................. $ 517,100 $ 431,400 $ 311,600
Savings....................................... 1,605,300 1,178,500 1,154,800
Time certificates, $100,000 or more........... 832,000 728,700 644,400
Other time deposits........................... 6,040,200 4,350,000 3,845,600
---------- ---------- ----------
Total interest on deposits.................... $8,994,600 $6,688,600 $5,956,400
========== ========== ==========
</TABLE>
F-27
<PAGE> 111
NOTE 8: SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 1995 and 1994 consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
------------------ ------------------
AMOUNT RATE AMOUNT RATE
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Federal funds purchased (a)
Year end balance....................................... $ -0 - -- $4,750,000 6.85%
Average during year.................................... 2,156,500 6.02% 2,158,400 4.81%
Maximum month-end balance during the year.............. 5,050,000 4,750,000
Federal home loan bank (b)
Year end balance....................................... -0 - -- 7,210,000 6.61%
Average during year.................................... 1,233,500 6.10% 2,315,700 5.18%
Maximum month-end balance during the year.............. 6,950,000 7,210,000
Other short-term borrowings (c)
Year end balance....................................... 100,000 4.65% 100,000 5.03%
Average during year.................................... 97,600 5.90% 128,900 3.76%
Maximum month-end balance during the year.............. 1,139,600 850,000
<FN>
Average amounts outstanding during the year represent daily averages. Average
interest rates represent interest expense divided by the related average
balances.
(a) Federal funds purchased generally represent the overnight federal fund
transactions of banking subsidiaries with correspondent banks. The maximum
amount available for borrowing is $5,250,000.
(b) During 1993 the Company's banking subsidiaries established lines of credit
commitments with the Federal Home Loan Bank (FHLB). The maximum amount
available for borrowing under these credit lines was $23,072,700 and
$20,983,700 at December 31, 1995 and 1994, respectively. The interest rate
charged for usage of these lines is the variable rate posted by FHLB at the
date of the drawdown. The commitment is partially collateralized at the date
of drawdown. Unless extended by the Company in accordance with the terms of
the agreement, $4,448,200 of the lines expire October 2, 1996, and
$18,624,500 of the lines expire January 2, 1997.
(c) Other short borrowings consist primarily of Federal Reserve Bank borrowings.
</TABLE>
NOTE 9: SUBORDINATED CAPITAL NOTE
The subordinated capital note outstanding amounted to $715,000 and $845,000
at December 31, 1995 and 1994, respectively. The subordinated capital note
requires quarterly payments of $32,500 from July 1, 1991 to April 1, 1998 with a
final payment of $390,000 due on January 1, 1999. Interest is payable monthly at
the lending bank's prime rate (8.75% at December 31, 1995) on the outstanding
unpaid principal balance. The weighted average interest rate on this
subordinated capital note was 8.8% during December 31, 1995. The agreement
contains restrictions regarding, among other matters, the pledging of assets,
the issuance of additional debt, the declaration or payment of cash dividends
and the maintenance of certain ratios. As a result, at December 31, 1995,
approximately $47,300 of retained net income was available for cash dividends.
For the years ended December 31, 1995 and 1994 the Company was in compliance
with these restrictions.
F-28
<PAGE> 112
The principal maturities on the subordinated capital note for each of the
years following at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1996................................................. $130,000
1997................................................. 130,000
1998................................................. 65,000
1999................................................. 390,000
--------
$715,000
========
</TABLE>
NOTE 10: INCOME TAXES
The Company adopted SFAS No. 109 as of January 1, 1993 and has recorded the
effect of its adoption entirely in 1993. The adoption of SFAS No. 109 resulted
in the recognition of a non-recurring charge of $26,900 or $.03 per share on
both a primary and fully diluted basis.
The provision for federal income taxes in the consolidated statement of
income consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Currently paid or payable......................... $ 357,300 $503,200 $271,800
Deferred (benefit) provision...................... (196,000) (292,300) (37,100)
--------- -------- --------
$ 161,300 $210,900 $234,700
========= ======== ========
</TABLE>
The following is a reconciliation between the amount of income taxes
computed at the Federal statutory rate and the income tax expense reflected in
the financial statements.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
% OF % OF % OF
PRE TAX PRE TAX PRE TAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Provision at statutory
rate....................... $ 556,200 34.0% $ 667,800 34.0% $ 735,400 34.0%
Tax-exempt interest.......... (218,700) (13.4)% (296,100) (15.1)% (367,300) (17.0)%
Scale back of interest
deduction.................. 28,200 1.7% 33,500 1.7% 41,200 1.9%
Tax credits.................. (216,200) (13.2)% (185,400) (9.4%) (191,300) (8.8)%
Other........................ 11,800 0.8% (8,900) (0.5%) 16,700 0.8%
--------- ------- --------- ------- --------- -------
Actual tax expense and
effective rate............. $ 161,300 9.9% $ 210,900 10.7% $ 234,700 10.9%
========= ======= ========= ======= ========= =======
</TABLE>
Deferred income taxes result from timing differences in the recognition of
revenue and expense for tax and financial reporting purposes. The following is a
summary of these timing differences and the related tax effect of each:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
Provision for possible loan losses............... $ (46,300) $ (62,300) $(53,500)
Pension expense.................................. (31,600) (61,500) (17,400)
Depreciation..................................... 12,400 19,200 23,000
Tax credits...................................... (123,600) (183,100) -0-
Other............................................ (6,900) (4,600) 10,800
--------- --------- --------
$(196,000) $(292,300) $(37,100)
========= ========= ========
</TABLE>
F-29
<PAGE> 113
The significant components of the Company's deferred tax liabilities and
assets at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................. $ 130,600 $ 118,800
Deferred loan fees, net....................................... 130,100 149,000
Unrealized gains on securities available for sale............. 199,000 -0-
---------- ----------
Total deferred tax liabilities........................... $ 459,700 $ 267,800
---------- ----------
Deferred tax assets:
Provision for possible loan losses............................ $ 547,800 $ 501,500
Pension expense............................................... 210,300 178,800
Non-accrual loan interest..................................... 14,700 26,700
Unrealized losses on securities available for sale............ -0- 904,500
Tax credits................................................... 306,700 183,100
Other......................................................... 26,900 27,300
---------- ----------
Total deferred tax assets................................ $1,106,400 $1,821,900
---------- ----------
Net deferred tax assets.................................. $ 646,700 $1,554,100
========== ==========
</TABLE>
At December 31, 1995, the Company had approximately $169,000 of low income
housing tax credit available for carryforward, with $65,800 expiring in 2009 and
$103,200 in 2010. In addition, the Company had $137,800 in alternative minimum
tax credits available for carryforward.
As required by SFAS No. 109, the Company has determined that it is not
required to establish a valuation reserve for the deferred tax asset since it is
more likely than not that the deferred tax asset of $1,106,400 will be
principally realized through future reversals of existing taxable temporary
differences, and to a lesser extent, future taxable income and tax planning
strategies. The Company's conclusion that it is "more likely than not" that the
deferred tax asset will be realized is based on a history of growth in earnings
and prospects for continued growth. Management believes that future taxable
income will be sufficient to realize the benefits of temporary deductible
differences that cannot be realized through the reversal of future temporary
taxable differences. The Company will continue to review the tax criteria
related to the recognition of deferred tax assets on a regular basis.
NOTE 11: EMPLOYEE BENEFIT PLANS
The Company has a noncontributory target benefit pension plan covering all
employees who meet the eligibility requirements. To be eligible, an employee
must be 21 years of age and have completed one year of continuous service.
Contributions are determined by a formula specified in the target benefit plan
based on a participant's annual compensation and years of service. Plan assets
are primarily U.S. Treasury and agency securities, corporate notes and bonds,
listed common stocks and cash surrender value of life insurance.
Contributions to the Company's target benefit plan included in the
consolidated statements of income was $199,500 for 1995, $176,500 for 1994 and
$195,200 for 1993.
The Company also maintains a non-qualified deferred compensation plan (the
plan) for certain employees. To participate in the plan, these employees must
have completed at least twelve consecutive months of service with the Company.
The plan provides payments from the participant's "account", payable at age
sixty-two, or upon the participant's retirement from the Company, whichever is
later, or upon the participant's death or becoming totally disabled. Payments
are to be made from the participant's account in equal quarterly installments
over a period of ten years, or the participant may elect to receive the payment
in a lump sum.
Annually, the Company's Board of Directors determines whether participants'
accounts will receive contributions. The final amount of contributions to be
received is based on a formula specified in the plan.
F-30
<PAGE> 114
Contributions to this plan included in the consolidated statements of income was
$61,800 for 1995, $61,700 for 1994 and $38,800 for 1993.
The assets available and liabilities expected under this plan totaled
$628,200 and $552,000 at December 31, 1995 and 1994, respectively, and are
included as other assets and other liabilities on the consolidated balance
sheet.
NOTE 12: LEASE COMMITMENTS
As of December 31, 1995, the Company is obligated under non-cancelable
leases, principally for banking premises and equipment with expiration dates
through 2004. These leases are classified as operating leases.
At December 31, 1995, the minimum future lease payments under operating
leases are as follows:
<TABLE>
<S> <C>
1996.................................................... $ 90,400
1997.................................................... 85,300
1998.................................................... 73,900
1999.................................................... 63,900
2000.................................................... 50,300
Thereafter.............................................. 62,800
--------
Total minimum payments.................................. $426,600
========
</TABLE>
In addition to the amounts set forth above, certain of the leases require
payments by the Company for taxes, insurance and maintenance.
The accompanying consolidated statements of income include rent expense of
$73,300 for 1995, $60,700 for 1994 and $105,500 for 1993.
NOTE 13: COMMITMENTS AND CONTINGENT LIABILITIES
a. Financial instruments with off-balance-sheet risk:
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such commitments and standby letters of credit involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated financial statements. The contract amounts
of those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
Commitments to extend credit represent the Company's obligation to fund
commercial and real estate loans, including home equity lines, lines of credit,
revolving lines of credit and other types of commitments. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained if deemed necessary by the
Company upon extension of credit is based on management's credit evaluation of
the counterpart. Collateral held varies, but may include accounts receivable,
inventory and property, plant and equipment for those commitments for which
collateral is deemed necessary.
Standby letters of credit written are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan commitments to customers. Letters of credit are
issued both on an unsecured and secured basis. Collateral securing these types
of transactions is similar to collateral securing the Company's commercial
loans.
F-31
<PAGE> 115
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit written is represented by the contractual amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments.
The face amounts of financial instruments with off-balance-sheet risk at
December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Loan commitments to extend credit................ $23,040,200 $24,682,300
Standby letters of credit........................ 926,300 1,658,300
</TABLE>
b. Concentrations of credit risk:
Most of the Company's loans, commitments to extend credit, and standby
letters of credit have been granted to customers located within its primary
market area, an area that generally includes the counties of Cambria, Somerset,
Westmoreland and Indiana. The distribution of commitments to extend credit was
directed primarily to commercial borrowers and those secured by real estate.
Standby letters of credit were granted primarily to commercial borrowers. No
specific industry concentration exceeded 10 percent of total potential exposure.
c. Other Commitment:
At December 31, 1995, as part of its investment in limited partnerships,
the Company is required to make the following annual capital contributions:
<TABLE>
<S> <C>
1996...................................................... $140,600
1997...................................................... 140,600
1998...................................................... 140,600
1999...................................................... 140,600
2000...................................................... 140,600
Thereafter................................................ 274,200
</TABLE>
d. Contingencies:
Due to the nature of its activities, the Company is at various times
engaged in legal proceedings which arise in the normal course of business. While
it is difficult to predict or determine the outcome of these proceedings, it is
the opinion of management that the ultimate liability, if any, will not
materially affect the Company's financial position.
NOTE 14: PREFERRED STOCK
In July 1992, the Company issued 15,000 shares of Series A $8.00 cumulative
convertible non-voting preferred stock (Series A Preferred Stock). An annual
dividend of $8.00 per share, payable quarterly on the last day of March, June,
September and December, commenced September 30, 1992. Cash dividends on the
Series A preferred stock was cumulative from date of issue. Dividends on Series
A preferred stock must be paid or set apart for payment before any dividends may
be paid or set apart for payment on the common stock. Each share of the Series A
preferred stock is convertible at any time into 5.5 shares of the Company's
common stock. 1,000 shares of preferred stock was converted into 5,500 shares of
common stock for the year ending December 31, 1995. There were no shares
converted for the years ending December 31, 1994 and 1993. The Company may
F-32
<PAGE> 116
redeem the Series A preferred stock, in whole or in part, at the following
prices plus accrued dividends, if any, if redeemed during the twelve month
period beginning August 1, in each of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- --------
<S> <C>
1992...................................................... $ 104.00
1993...................................................... 103.00
1994...................................................... 102.00
1995...................................................... 101.00
1996...................................................... 100.00
</TABLE>
Any holder of Series A preferred stock who has not redeemed or converted
his shares as of July 31, 1997 must, on that date, convert such shares of
preferred stock into common stock of the corporation at the conversion rate then
in effect as stated above.
The liquidation preference is $100.00 per share, together with accrued
dividends, if involuntary; the redemption price then in effect, together with
accrued dividends, if voluntary. The preferred stock ranks senior to the common
stock in respect of liquidation rights.
As of December 31, 1995, the Company has reserved 77,000 shares of
authorized and unissued common stock for the conversion of preferred stock.
NOTE 15: EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan for the benefit of all
eligible employees. The purpose of the plan is to enable full-time employees who
are at least 21 years of age and have been employed for at least one year to
acquire stock ownership in the Company. Contributions to the plan are determined
by the Board of Directors. The Company may contribute cash or shares of company
stock to the plan. Employees may also make contributions to the plan by electing
to defer between 1-15% of their current compensation or through voluntary
contributions. The Company will provide a matching contribution of 25% of an
employee contribution in the plan up to 4% of compensation for those electing
the deferral option for the years ended December 31, 1995 and 1994.
The Company's contribution to the plan was $143,200 in 1995, $142,200 in
1994 and $142,200 in 1993. Contributions to the plan are included in pension and
other employee benefits in the consolidated statements of income.
In the event a terminated plan participant desires to sell his or her
shares of the Company's stock, or for certain employees who elect to diversify
their account balances, the Company may decide to purchase the shares from the
participant at their fair market value. At December 31, 1995 and 1994 the Plan
held 45,556 shares and 35,985 shares, respectively, all of which have been
allocated to Plan participants. The fair market value of those shares totaled
$1,685,600 and $863,600 as of December 31, 1995 and 1994, respectively. During
the years ended December 31, 1995, 1994 and 1993, no stock was purchased by the
Company from Plan participants. Dividends paid on the Plan shares are recorded
as a reduction of retained earnings.
NOTE 16: DIVIDEND REINVESTMENT PLAN
A dividend reinvestment plan (the Plan) was adopted by the Company's Board
of Directors on April 9, 1991. The purpose of this plan is to provide
shareholders with a convenient and economical method of increasing their equity
ownership in the Company without payment of any brokerage commission, service
charge or other similar expense. A participant in the plan may elect to reinvest
dividends on all of his shares of common stock. The price of shares purchased by
a participant in the plan will be at fair market value. A participant may
withdraw from the plan at any time. 75,000 shares of Company stock has been
reserved for the plan. At the discretion of the Company's Board of Directors,
shares reserved for the plan may be provided from authorized but unissued shares
or shares bought in the open market. At December 31, 1995, the Company had
74,772 unissued reserved shares available under the plan.
F-33
<PAGE> 117
NOTE 17: PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
The condensed balance sheets as of December 31, 1995 and 1994, and
statements of income and cash flows for each of the three years in the period
ended December 31, 1995 of Moxham Bank Corporation are presented below.
BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS:
Cash........................................................ $ 169,000 $ 189,300
Investment in banking subsidiaries.......................... 20,030,700 17,089,700
Investment in non-banking subsidiary........................ 287,000 196,200
Advances to non-banking subsidiary.......................... 62,500 238,400
Other assets................................................ 250,100 116,700
----------- -----------
Total Assets........................................... $20,799,300 $17,830,300
=========== ===========
LIABILITIES:
Capital subordinate note.................................... $ 715,000 $ 845,000
Other Liabilities........................................... 6,400 10,800
----------- -----------
Total Liabilities...................................... $ 721,400 $ 855,800
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock............................................. $ 1,377,700 $ 1,476,100
Capital Stock............................................... 1,807,700 1,777,600
Surplus..................................................... 3,750,600 3,481,500
Retained Earnings........................................... 12,779,700 11,995,100
Unrealized gain (loss) on securities available for sale,
net........................................................ 362,200 (1,755,800)
----------- -----------
TOTAL STOCKHOLDER' EQUITY.............................. $20,077,900 $16,974,500
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....................... $20,799,300 $17,830,300
=========== ===========
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Dividends from subsidiaries........................... $ 930,000 $ 864,000 $1,357,900
Interest Expense...................................... 67,400 63,500 61,300
Operating Expense..................................... 501,300 492,100 577,600
---------- ---------- ----------
Income before income tax credit and equity in
undistributed income of subsidiaries................ $ 361,300 $ 308,400 $ 719,000
Income tax benefit.................................... 199,600 188,900 213,900
---------- ---------- ----------
Income before equity in undistributed income of
subsidiaries........................................ $ 560,900 $ 497,300 $ 932,900
Equity in undistributed income of subsidiaries........ 913,800 1,255,900 968,500
---------- ---------- ----------
Net Income............................................ $1,474,700 $1,753,200 $1,901,400
========== ========== ==========
</TABLE>
F-34
<PAGE> 118
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $1,474,700 $ 1,753,200 $1,901,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed income of
subsidiaries............................. (913,800) (1,255,900) (968,500)
Provision for deferred income taxes........ (125,100) (78,500) 3,100
Decrease (increase) in other assets........ (8,300) 122,100 (94,100)
Increase (decrease) in other liabilities... (4,500) (111,600) (5,700)
---------- ----------- ----------
Net cash provided by operating
activities.......................... $ 423,000 $ 429,300 $ 836,200
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments from (advances to) subsidiaries,
net........................................... $ 175,900 $ 33,600 $ (242,200)
---------- ----------- ----------
Net cash provided by (used in)
investing activities................ $ 175,900 $ 33,600 $ (242,200)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on subordinated capital note........... $ (130,000) $ (130,000) $ (130,000)
Proceeds from sale of stock--common............. 200,800 184,400 200,000
Preferred stock cash dividends paid............. (116,000) (120,000) (120,000)
Common stock cash dividends paid................ (574,000) (518,300) (494,100)
---------- ----------- ----------
Net cash provided by (used in)
financing activities................ $ (619,200) $ (583,900) $ (544,100)
---------- ----------- ----------
Increase (decrease) in cash.......................... $ (20,300) $ (121,000) $ 49,900
Cash at beginning of year............................ 189,300 310,300 260,400
---------- ----------- ----------
Cash at end of year.................................. $ 169,000 $ 189,300 $ 310,300
========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest on subordinated capital note and
long-term debt................................. $ 67,400 $ 63,500 $ 61,300
Federal income taxes paid (net of refunds)....... 323,700 343,800 474,900
</TABLE>
The Company's subsidiary banks are subject to legal limitations on the
amount of dividends that can be paid to the parent company. The approval of the
Comptroller of the Currency is required for a national bank to pay dividends if
the total of all dividends declared in any calendar year exceeds the bank's
retained net profits for that year combined with its retained net profits for
the preceding two calendar years. At December 31, 1995, the subsidiary banks
could pay an additional $2,891,600 in cash dividends to the parent company. In
addition, the Federal Reserve Act requires that extensions of credit by the
Company's subsidiary banks to certain affiliates, including the Company, be
secured by specified assets. Further, such extensions of credit are limited to
10% of the subsidiary bank's capital and surplus and that extensions of credit
to all such affiliates be limited to 20% of capital and surplus.
Federal regulatory agencies have adopted various capital standards for
financial institutions, including risk-based capital standards. The primary
objectives of the risk-based capital framework are to provide a more consistent
system for comparing capital positions of financial institutions and to take
into account the different risks among financial institutions' assets and
off-balance-sheet items.
Risk-based capital standards have been supplemented with requirements for a
minimum Tier 1 capital to assets ratio (leverage ratio). In addition, regulatory
agencies consider the published capital levels as minimum levels and may require
a Financial Institution to maintain capital at higher levels.
F-35
<PAGE> 119
A comparison of the Company's capital as of December 31, 1995 with the
minimum requirements is presented below:
<TABLE>
<CAPTION>
REQUIREMENTS
------------------
ACTUAL MINIMUM
------ -------
<S> <C> <C>
Leverage Ratio.......................................... 7.53% 3.00%
Risk Based Capital:
Tier 1 or core capital............................. 11.27% 4.00%
Tier 2 or total capital............................ 13.78% 8.00%
</TABLE>
NOTE 18: DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Changes in the assumptions or methodologies used to estimate fair values
may materially affect the estimated amounts. Also, management is concerned that
there may not be reasonable comparability between institutions due to the wide
range of permitted assumptions and the methodologies in absence of active
markets. This lack of uniformity gives rise to a high degree of subjectivity in
estimating financial instrument fair values. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument. Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash and short-term investments: The carrying amounts reported in the
balance sheet for cash and short-term instruments approximate their fair values.
Investment securities (including mortgage-backed securities): Fair values
for investment securities are based on quoted market prices, where available. If
quoted market prices are not available, fair values are based on quoted market
prices of comparable instruments.
Loans receivable: For variable-rate loans that reprice frequently and with
no significant change in credit risk, fair values are based on carrying values.
The fair values for other loans (primarily commercial real estate and rental
property mortgage loans, commercial and industrial loans, financial institution
loans, and agricultural loans) are determined using estimated future cash flows,
discounted at the interest rates currently being offered for loans with similar
terms to borrowers with similar credit quality.
Deposit liabilities: The fair values of demand deposits, savings accounts
and money market deposits equal their carrying amounts which represents the
amount payable on demand. The carrying amounts for variable-rate time deposits
and certificates of deposit approximate their fair values at the reporting date.
Fair values for fixed-rate time deposits and certificates of deposit are
estimated using a discounted cash flow calculation that applies interest rates
currently being offered on certificates to a schedule of aggregated expected
monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
approximate their fair values.
Long-term borrowings: The fair values of the Company's long-term
borrowings (other than deposits) are estimated using rates currently available
to the Company for debt with similar terms and remaining maturities.
Commitments to extend credit and standby letters of credit: The fair value
of commitments and letters of credit is insignificant and are generally priced
at market at the time of funding.
F-36
<PAGE> 120
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial Assets:
Cash and short-term
investments.................. $ 9,231,200 $ 9,231,200 $ 9,799,900 $ 9,799,900
Federal funds sold............. 8,665,000 8,665,000 -- --
Investment securities.......... 59,513,500 60,074,700 64,686,700 62,026,400
Loans, net..................... 152,436,400 155,708,000 148,371,500 153,558,000
Financial Liabilities:
Deposits....................... 217,605,300 214,497,000 199,760,000 197,162,800
Short term borrowings.......... 100,000 100,000 12,060,000 12,060,000
Subordinated capital note...... 715,000 715,000 845,000 845,000
</TABLE>
NOTE 19: RECLASSIFICATIONS
For comparative purposes, reclassifications have been made to certain
amounts previously reported in the consolidated financial statements.
NOTE 20: SUBSEQUENT EVENTS
a. Merger
The Company and BT Financial Corporation ("BTFC") announced on January 11,
1996, that they have reached a definitive merger agreement effective January 12,
1996, pursuant to which the Company's two banks, Moxham and Garrett would merge
into BTFC's largest affiliate, Johnstown Bank and Trust Company. The definitive
agreement provides for the payment to the Company's common and preferred
stockholders at the closing of the merger 1.15 and 6.325 shares of BTFC's common
stock, respectively, for each company share outstanding. The purchase is
expected to be accounted for as a pooling of interests. The transaction is
subject to regulatory approvals and to the approvals of the stockholders of the
Company and BT Financial Corporation.
b. Branch Disposition
On February 1, 1996, Moxham and NBOC Bank ("NBOC") of Indiana, Pennsylvania
entered into a purchase and assumption agreement (the "Branch Agreement"),
pursuant to which Moxham agreed to sell certain assets and assign certain
liabilities of the Moxham Branch office located in Delmont, Pennsylvania.
Pursuant to the Branch Agreement, and subject to certain conditions set forth
therein, Moxham will:
(i) Assign certain deposit liabilities and a real estate lease relating to
the Branch (total deposits were approximately $7,940,000 at December
31, 1995);
(ii) Sell furniture, fixtures and equipment owned or leased at the Branch;
(iii) Assign contracts that relate to the operation of the Branch; and
(iv) Sell the vault, teller and ATM cash
The consummation of the Branch disposition is contingent upon, among other
things, receipt of all necessary regulatory approvals.
F-37
<PAGE> 121
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
BT FINANCIAL CORPORATION,
JOHNSTOWN BANK AND TRUST COMPANY,
AND
THE ARMSTRONG COUNTY TRUST COMPANY
<PAGE> 122
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01 Definitions................................................................. A-4
1.02 Accounting Terms............................................................ A-6
ARTICLE II
THE MERGER
2.01 Merger...................................................................... A-6
2.02 Conversion of Shares of Armstrong Common Stock.............................. A-7
2.03 Articles of Incorporation; By-Laws.......................................... A-7
2.04 Directors and Officers...................................................... A-7
2.05 Closing..................................................................... A-8
2.06 Exchange of Certificates for Stock and Cash................................. A-8
2.07 Termination of this Reorganization Agreement................................ A-9
2.08 Confidentiality............................................................. A-10
2.09 Public Disclosure........................................................... A-10
ARTICLE III
SHAREHOLDER APPROVAL
3.01 Armstrong Shareholders Meeting.............................................. A-10
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.01 Representations and Warranties of Armstrong................................. A-10
4.02 Representations and Warranties of BTFC...................................... A-19
4.03 Representations and Warranties of Johnstown................................. A-21
4.04 Covenants of Armstrong...................................................... A-22
4.05 Covenants of All Parties.................................................... A-25
4.06 Covenants of BTFC and Johnstown............................................. A-26
ARTICLE V
CONDITIONS PRECEDENT
5.01 Incidental Registration..................................................... A-29
5.02 Registration on Request..................................................... A-30
5.03 Registration Procedures..................................................... A-31
5.04 Underwritten Offerings...................................................... A-34
5.05 Preparation; Reasonable Investigation....................................... A-35
5.06 Rights of Requesting Holders................................................ A-35
5.07 Indemnification............................................................. A-35
5.08 Rule 144.................................................................... A-38
</TABLE>
A-2
<PAGE> 123
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
ARTICLE VI
CONDITIONS PRECEDENT
6.01 Conditions Precedent to the Obligations of BTFC and Johnstown............... A-38
6.02 Conditions Precedent to the Obligations of Armstrong........................ A-41
6.03 Waivers..................................................................... A-42
ARTICLE VII
BROKERS AND EXPENSES
7.01 Brokers..................................................................... A-42
7.02 Expenses.................................................................... A-42
ARTICLE VIII
MISCELLANEOUS
8.01 Further Assurances.......................................................... A-42
8.02 Survival of Representations, Warranties and Covenants....................... A-43
8.03 Notices..................................................................... A-43
8.04 Binding Effect.............................................................. A-43
8.05 Headings.................................................................... A-43
8.06 Counterparts................................................................ A-43
8.07 Integration................................................................. A-43
8.08 Severability................................................................ A-44
8.09 Amendments.................................................................. A-44
8.10 Governing Law............................................................... A-44
8.11 Incorporation by Reference.................................................. A-44
</TABLE>
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 4.01(a) Armstrong--Power and Authority
Schedule 4.01(d) Armstrong--Financial Statements
Schedule 4.01(k)(ii) Armstrong--Loans
Schedule 4.01(n) Armstrong--Real Property
Schedule 4.01(o) Armstrong--Environmental Conditions
Schedule 4.01(q) Armstrong--Leases
Schedule 4.01(r) Armstrong--Material Contracts
Schedule 4.01(t) Armstrong--Employee Benefits
Schedule 4.01(aa)(iii) Armstrong--Investments
Schedule 4.06(h)(i) Certain Employees
</TABLE>
- ---------
* The Table of Contents is not part of this Agreement.
A-3
<PAGE> 124
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, is made and entered into as of
the day of October, 1995 (the "Reorganization Agreement"), by and among
BT Financial Corporation, a business corporation organized and existing under
the laws of the Commonwealth of Pennsylvania with its principal office at
532-534 Main Street, Johnstown, Pennsylvania 15901 ("BTFC"), Johnstown Bank and
Trust Company, a bank and trust company organized and existing under the laws of
the Commonwealth of Pennsylvania with its principal office at 532-534 Main
Street, Johnstown, Pennsylvania 15901 ("Johnstown"), and The Armstrong County
Trust Company, a bank and trust company organized and existing under the laws of
the Commonwealth of Pennsylvania with its principal office at 227 Market Street,
Kittanning, Pennsylvania 16201 ("Armstrong").
WITNESSETH:
WHEREAS, the respective Boards of Directors of BTFC, Johnstown and
Armstrong have determined that it would be in the best interests of their
respective organizations, shareholders and customers and the communities served
by them for Armstrong to be merged with and into Johnstown (the "Merger")
pursuant to this Reorganization Agreement, whereby the shareholders of Armstrong
will receive shares of common stock of BTFC and cash; and
WHEREAS, the respective Boards of Directors of BTFC, Johnstown and
Armstrong have approved the acquisition of Armstrong by BTFC through the
proposed merger of Armstrong with and into Johnstown upon the terms and
conditions set forth in this Reorganization Agreement in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, conditions and actions hereinafter set forth, the parties
hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. The terms defined in this Section 1.01 shall have the
meanings herein specified, unless the context clearly requires otherwise. Other
terms used herein are defined elsewhere in this Reorganization Agreement.
"Affiliate" of a Party means a Person that, directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such Party.
"Armstrong Common Stock" means the common stock, par value $50.00 per
share, of Armstrong.
"Articles of Merger" means the Articles of Merger delivered to the
Department of State of the Commonwealth of Pennsylvania for filing pursuant to
Sections 1921 et seq. of the BCL.
"Banking Code" means the Pennsylvania Banking Code of 1965, as amended.
"BCL" means the Pennsylvania Business Corporation Law of 1988, as amended.
"BTFC Common Stock" means the common stock, par value $5.00 per share, of
BTFC.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Closing Date" shall have the meaning set forth in Section 2.05(a).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1986.
"Department of Banking" means the Pennsylvania Department of Banking.
A-4
<PAGE> 125
"Dissenters' Shares" mean any shares of Armstrong Common Stock in respect
of which the holders thereof shall have objected to the Merger and otherwise
complied with such of the requirements of Sections 1571 et seq. of the BCL as
may be applicable in order to be entitled to the rights and remedies of
dissenting shareholders.
"Effective Time of the Merger" means the date and time the Articles of
Merger are filed with the Secretary of State of the Commonwealth of Pennsylvania
pursuant to the provisions of Sections 1921 et seq. of the BCL, which filing
shall be made on the Closing Date or such later date and time as may be mutually
agreed upon by the Parties and as specified in the Articles of Merger.
"Environmental Condition" shall have the meaning set forth in Section
4.01(o).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"GNMA" means the Government National Mortgage Association.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASD Automated Quotations System.
"Owned Real Property" shall have the meaning set forth in Section 4.01(n).
"Parties" means BTFC, Johnstown, and Armstrong in connection with this
Reorganization Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or a subdivision thereof
or a governmental agency.
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement, together
with any supplements thereto, to be sent to the shareholders of Armstrong to
solicit their votes in connection with the transactions contemplated by this
Reorganization Agreement.
"Registrable Securities" means (a) all shares of BTFC Common Stock issued
to shareholders of Armstrong pursuant to this Reorganization Agreement and (b)
any shares of BTFC Common Stock issued or issuable with respect to any BTFC
Common Stock referred to in (a) above by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, (x) they shall have been distributed to the public pursuant to Rule
144 (or any successor provision) under the Securities Act, (y) they shall have
been otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by BTFC and subsequent
disposition of them shall not require registration or qualification of them
under the Securities Act or any similar state law then in force, or (z) they
shall have ceased to be outstanding.
"Registration Expense" means all expenses incident to BTFC's performance of
or compliance with Sections 5.01 through 5.07, including, without limitation,
(i) all registration, filing and NASD fees, (ii) all fees and expenses of
complying with securities or blue sky laws, (iii) all word processing,
duplicating and printing expenses, (iv) all messenger and delivery expenses, (v)
the fees and disbursements of counsel for BTFC and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required
A-5
<PAGE> 126
by or incident to such performance and compliance, (vi) the fees and
disbursements of any one counsel and any one accountant retained by the holder
or holders of more than 50% of the Registrable Securities being registered,
(vii) premiums and other costs of policies of insurance against liabilities
arising out of the public offering of the Registrable Securities being
registered if BTFC desires such insurance, and (viii) any fees and disbursements
of underwriters customarily paid by issuers or sellers of securities, but
excluding underwriting discounts and commissions and transfer taxes, if any,
provided that, in any case where Registration Expenses are not to be borne by
BTFC such expenses shall not include salaries of BTFC personnel or general
overhead expenses of BTFC auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of BTFC or other expenses for the
preparation of financial statements or other data normally prepared by BTFC in
the ordinary course of its business or which BTFC would have incurred in any
event.
"Registration Statement" means the registration statement on Form S-4 (or
other appropriate form) of BTFC, including any amendments or supplements
thereto, as declared effective by the SEC under the Securities Act with respect
to the issuance of BTFC Common Stock in connection with the Merger and the
approval by the shareholders of Armstrong of the transactions contemplated by
this Reorganization Agreement, which Registration Statement shall include the
Prospectus/Proxy Statement.
"Resulting Company" means Johnstown after consummation of the Merger.
"Schedules" means the disclosure schedules attached hereto and made a part
hereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the United States Internal Revenue Service.
"Subsidiary" means any corporation or other entity, the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation or other entity are at the time directly or indirectly owned or
controlled by a Party.
"Taxes" means all federal, state and local taxes and similar governmental
charges.
"Transactions" means the negotiation and execution of this Reorganization
Agreement and the consummation of the transactions contemplated hereby, and all
related transactions.
1.02. Accounting Terms. For all purposes of this Reorganization Agreement,
unless the context clearly requires otherwise, any accounting term not
specifically defined in this Reorganization Agreement shall have the meaning
given to it in accordance with generally accepted accounting principles and
practices within the banking industry as in effect as of the date of this
Reorganization Agreement.
ARTICLE II
THE MERGER
2.01. Merger. Upon satisfaction of the conditions set forth herein, at the
Effective Time of the Merger, Armstrong shall merge with and into Johnstown in
accordance with the provisions and procedures set forth herein, and Johnstown
shall be the Resulting Company. At the Effective Time of the Merger, the
separate corporate existence of Armstrong shall cease and Johnstown shall
succeed to all the rights, privileges, immunities and franchises, and all the
property and assets, real, personal and mixed, of Armstrong without the
necessity for any separate conveyance or other transfer. Except as set forth in
Section 4.04(g), the Resulting Company shall thereafter be responsible and
liable for all liabilities and obligations of Armstrong of every kind and
description, and neither the rights of creditors nor any liens on the property
of Armstrong shall be impaired by the Merger.
A-6
<PAGE> 127
2.02. Conversion of Shares of Armstrong Common Stock.
(a) At the Effective Time of the Merger, each share of Armstrong Common
Stock then outstanding, except Dissenters' Shares and treasury shares, shall be
converted into the right to receive 26.5 shares of BTFC Common Stock and $596.25
in cash (the "Exchange Ratio"), unless the average closing price per share of
BTFC Common Stock on the NASDAQ National Market as reported in the Wall Street
Journal for the twenty (20) consecutive trading days ending on the fifth trading
day immediately preceding the Closing Date (the "Valuation Period") is less than
$27.50 or more than $34.00. If the average per share price of BTFC Common Stock
is less than $27.50 for the Valuation Period, Armstrong may request that BTFC
adjust the Exchange Ratio by increasing the number of shares of BTFC Common
Stock or the amount of cash included in the Exchange Ratio, or both, so as to
maintain a total consideration of $1,325.00 per share of Armstrong Common Stock
based on the average price per share for BTFC Common Stock for the Valuation
Period and so as not to prevent the rendering of the tax opinion contemplated by
Section 6.01(n). If BTFC does not elect to so adjust the Exchange Ratio,
Armstrong may elect to terminate this Agreement, and neither party shall have
any further liability hereunder. If the average price per share of BTFC Common
Stock for the Valuation Period is more than $34.00, BTFC shall have the option
to adjust the Exchange Ratio by reducing the number of shares of BTFC Common
Stock or cash included in the Exchange Ratio, or both, as determined by
Armstrong, so that the total consideration does not exceed $1,497.25 per share
of Armstrong Common Stock based on the average price per share of BTFC Common
Stock for the Valuation Period and so as not to prevent the rendering of the tax
opinion contemplated by Section 6.01(n); provided, however, that if at any time
prior to the Closing Date or the ninety (90) day period immediately following
the Closing Date, BTFC enters into, or announces its plans to enter into, an
agreement, a letter of intent, or an agreement in principle to merge with
another entity or to sell substantially all of its assets to another entity or
any similar agreement that would result in an acquisition of BTFC or
substantially all of its business by another entity, the Exchange Ratio shall
remain equal to 26.5 shares of BTFC Common Stock and $596.25 in cash for each
share of Armstrong Common Stock. If such an announcement, agreement, letter of
intent, or agreement in principle is made within the ninety (90) day period
following the Closing Date, BTFC shall pay the shareholders of Armstrong as of
the Effective Time of the Merger within thirty (30) days of such announcement,
agreement, letter of intent, or agreement in principle the residual
consideration required to equal a total consideration of 26.5 shares of BTFC
Common Stock and $596.25 in cash for each share of Armstrong Common Stock.
(b) At the Closing Date, by virtue of the Merger, and without any action on
the part of the shareholders of Armstrong, each of the then issued and
outstanding shares of Armstrong Common Stock shall cease to exist and shall be
deemed canceled, retired and eliminated, and all rights in respect thereof
(other than with respect to Dissenters' Shares) shall cease except the herein
described rights to receive BTFC Common Stock and cash, regardless of whether
the certificates representing such shares are surrendered to BTFC by the
shareholders of Armstrong.
(c) The Exchange Ratio shall be adjusted at the Effective Time of the
Merger to reflect any consolidation, split-up, other subdivision or combination
of BTFC Common Stock, any dividend payable in BTFC Common Stock, or any capital
reorganization involving the reclassification of BTFC Common Stock subsequent to
the date of this Reorganization Agreement and prior to such time. BTFC shall
register under the Securities Act all shares of BTFC Common Stock to be issued
in the Merger prior to the Effective Time of the Merger.
2.03. Articles of Incorporation; By-Laws. At the Effective Time of the
Merger, the articles of incorporation and bylaws of Johnstown as in effect
immediately prior to the Effective Time of the Merger shall be the articles of
incorporation and bylaws of the Resulting Company.
2.04. Directors and Officers. The directors and principal officers of
Johnstown immediately prior to the Effective Time of the Merger shall be the
directors and principal officers of the Resulting Company from and after the
Effective Time of the Merger.
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<PAGE> 128
2.05. Closing.
(a) The closing hereunder ("Closing") shall take place at the offices of
Kirkpatrick & Lockhart LLP, 1500 Oliver Building, Pittsburgh, Pennsylvania
15222, or such other place agreed upon by the Parties, on the Closing Date
selected by the Parties which shall be the latest of:
(i) Any business day within five business days after the receipt of
the approval of the Merger by the Department of Banking;
(ii) Any business day between the thirtieth and thirty-seventh day
following the later to occur of (A) approval by the Federal Reserve Board
and the FDIC or other applicable federal regulatory agency of the
acquisition of control of Armstrong by BTFC or (B) approval of the Merger
by the Federal Reserve Board and the FDIC or other applicable federal
regulatory agency, if all other conditions set forth in Article VI have
been satisfied or waived;
(iii) The fifth business day after any stay of any approval of the
transactions referred to in clause (ii) of this Section 2.05 or any
injunction against consummation of such transactions is lifted, discharged
or dismissed, if all other conditions set forth in Article VI have been
satisfied or waived;
(iv) Such other date as shall be mutually agreed to in writing by the
Parties on which all other conditions set forth in Article VI shall have
been satisfied or waived.
(b) Any Party may postpone the Closing Date fixed under Section 2.05(a)
once for a reasonable period of time (which shall be no more than thirty (30)
days but in no event ending later than the day of automatic termination in
accordance with Section 2.07(g)) if necessary to enable it to perform any
obligations hereunder, provided, that such Party provides prompt written notice
to the other Parties of such postponement, stating the reasons therefor. If
Armstrong, Johnstown or BTFC shall fail to close because all the conditions
precedent to its obligation to close shall not have been met on the Closing Date
as postponed, such Party may immediately terminate this Reorganization Agreement
by giving written notice of such termination to the other Parties.
2.06. Exchange of Certificates for Stock and Cash.
(a) Armstrong Common Stock. After the Effective Time of the Merger, each
holder of a certificate for theretofore outstanding shares of Armstrong Common
Stock, upon surrender of such certificate to BTFC or its exchange agent,
together with a duly executed and completed Letter of Transmittal, which shall
be mailed to each holder of a certificate for theretofore outstanding shares of
Armstrong Common Stock by BTFC or its exchange agent promptly following the
Effective Time of the Merger, shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of whole shares of BTFC
Common Stock to which such shareholder is entitled as provided in Section 2.02
and cash (payable by check) in an amount equal to the amount of cash to which
such shareholder is entitled as provided in Section 2.02, plus cash (payable by
check) in lieu of any fractional share of BTFC Common Stock to which such holder
would otherwise be entitled. Neither certificates nor scrip certificates for
fractions of shares of BTFC Common Stock shall be issued, and holders of
Armstrong Common Stock who would but for this Section 2.06(a) be entitled to
receive fractions of shares of BTFC Common Stock shall have none of the rights
with respect to such fractions of shares (including, without limitation, the
right to receive dividends) which a holder shall possess in respect of a full
share of BTFC Common Stock, and each such holder shall receive, in lieu of the
applicable fraction of a share of BTFC Common Stock, a cash payment therefor
equal to such fraction of a share of BTFC Common Stock multiplied by the closing
sales price on NASDAQ for a share of BTFC Common Stock on the Closing Date as
reported in the Wall Street Journal, or, if the BTFC Common Stock is not traded
on such date, the next succeeding day on which such stock is traded. No interest
will be paid or accrued on cash payable upon surrender of certificates
previously representing Armstrong Common Stock.
(b) Failure to Surrender Certificates. Until surrendered in accordance with
the provisions of this Section 2.06, the certificates which immediately prior to
the Effective Time of the Merger represented issued and outstanding shares of
Armstrong Common Stock (except for certificates representing Dissenters' Shares
and treasury shares) shall from and after the Effective Time of the Merger
represent for all purposes only the right to receive BTFC Common Stock and cash
as provided in Section 2.02. Upon surrender of a certificate for
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<PAGE> 129
theretofore outstanding shares of Armstrong Common Stock, there shall be paid to
the recordholder of the certificate for shares of BTFC Common Stock issued in
exchange therefor (i) on the date of such exchange, the amount of dividends
theretofore accrued and payable with respect to such full shares of BTFC Common
Stock as of any date subsequent to the Effective Time of the Merger which have
not yet been paid to a public official pursuant to abandoned property laws and
(ii) at the appropriate payment date, the amount of dividends with a record date
after the Effective Time of the Merger but prior to such surrender and a payment
date subsequent to such surrender. No interest shall be payable with respect to
such dividends.
(c) Treasury Shares and Dissenters' Shares. At the Effective Time of the
Merger, each share of Armstrong Common Stock held in treasury shall be canceled,
retired and cease to exist and no consideration shall be paid therefor, and each
Dissenters' Share shall be treated in accordance with Sections 1571 et seq. of
the BCL.
2.07. Termination of this Reorganization Agreement. This Reorganization
Agreement and the transactions contemplated hereby may be terminated:
(a) At any time prior to the Effective Time of the Merger by mutual consent
of the Boards of Directors of BTFC, Johnstown and Armstrong;
(b) As provided in Section 2.02(a);
(c) As provided in Section 2.05(b);
(d) At any time, by either Party hereto in writing, if the applications for
prior approval referred to in Section 4.05(e) hereof have been denied, and the
time period for appeals and requests for reconsideration has run;
(e) At any time, by either Party hereto in writing, if the stockholders of
Armstrong do not approve the transactions contemplated herein at the annual or
special meetings duly called for that purpose;
(f) At any time, by either Party in writing, if any of the conditions
precedent to such Party's obligations to consummate the Merger has not been
satisfied, fulfilled or waived by the Party entitled to so waive on or before
the Closing Date, provided that the terminating Party has given the other Party
written notice with respect thereto at least 10 days prior to such termination
and has given the other Party a reasonable opportunity to discuss the matter
with a view to achieving a mutually acceptable resolution;
(g) In any event, automatically on March 31, 1996, if the Merger has not
been consummated on or before such date, unless extended by mutual consent of
the Parties.
Upon any termination hereunder,
(i) Sections 2.07 and 2.08 and Article VI hereof shall survive any
termination;
(ii) if BTFC terminates this Reorganization Agreement under Section
2.05(b) due to the failure of any of the conditions set forth in Section
6.01 (a), (b), (c) or (n) and satisfaction of such condition was within the
control of Armstrong, then Armstrong shall reimburse BTFC for attorneys'
fees and other expenses reasonably incurred in connection with the
Transactions (to the extent not already paid by Armstrong to BTFC or any of
its Subsidiaries), and such failure shall constitute a breach of this
Reorganization Agreement, and BTFC shall have all rights available in law
and at equity for such breach of contract;
(iii) if Armstrong terminates this Reorganization Agreement under
Section 2.05(b) due to the failure of any of the conditions set forth in
Section 6.02 (a), (b) or (c), and satisfaction of such condition was within
the control of BTFC or any of its Subsidiaries, then BTFC shall reimburse
Armstrong for attorneys' fees and other expenses reasonably incurred in
connection with the Transactions, and such failure shall constitute a
breach of this Reorganization Agreement, and Armstrong shall have all
rights available in law and at equity for such breach of contract;
(iv) if BTFC terminates this Reorganization Agreement under Section
2.05(b) due to the failure of any of the conditions set forth in Section
6.01 (d), (g), (h), (j), (k), or (m), then Armstrong shall reimburse BTFC
for attorneys' fees and other expenses reasonably incurred in connection
with the Transactions (to the extent not already paid by Armstrong to BTFC
or any of its Subsidiaries) and upon payment in full thereof, Armstrong
shall have no further liability or obligation hereunder to BTFC; and
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(v) if Armstrong terminates this Reorganization Agreement under
Section 2.05(b) due to the failure of any of the conditions set forth in
Section 6.02 (f), (g) or (i), then BTFC shall reimburse Armstrong for
attorneys' fees and other expenses reasonably incurred in connection with
the Transactions and upon payment in full thereof, BTFC shall have no
further liability or obligation hereunder to Armstrong.
In no event shall the amount reimbursed for attorneys' fees and other expenses
reasonably incurred in connection with the Transactions under clause (iv) or (v)
of this Section 2.07 exceed $150,000.
2.08 Confidentiality. In connection with the Merger, each Party has
furnished and will furnish to the other Party, pursuant to this Reorganization
Agreement or otherwise, confidential information concerning its business and
financial condition. Each Party shall, and shall cause its employees, agents,
accountants, attorneys and investment advisors to, maintain the confidentiality
of such information received from the other Parties and shall not use such
information for any purpose except in furtherance of the Merger and the other
transactions contemplated hereby. In the event of a termination of this
Reorganization Agreement, upon request by a Party, the other Parties shall
return or destroy all copies of written confidential information received from
such Party, whether pursuant to this Reorganization Agreement or otherwise, and
all documents prepared by them which contain such information.
2.09. Public Disclosure. Each Party shall consult with the other Parties
before issuing any press release or making any other public disclosure regarding
the proposed Merger or the other transactions contemplated hereby and shall not
issue any press release or make any other public disclosure prior to such
consultations, except as may be required by law or by the rules of NASD in the
opinion of counsel. A copy of such press release or public disclosure (or, if
not in written form, a written description thereof) shall be provided to the
other Parties prior to the dissemination thereof.
ARTICLE III
SHAREHOLDER APPROVAL
3.01. Armstrong Shareholders Meeting. Armstrong shall submit this
Reorganization Agreement to its shareholders for approval in accordance with the
BCL at a meeting duly convened and held on such date as shall be agreed upon by
the Parties. In connection with such meetings, Armstrong shall furnish the
Prospectus/Proxy Statement to its shareholders. The Board of Directors of
Armstrong shall recommend the proposed Merger to its shareholders and use their
best efforts to obtain the affirmative vote of the shareholders required to
approve the transactions contemplated by this Reorganization Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.01. Representations and Warranties of Armstrong. Armstrong represents
and warrants to BTFC and Johnstown as follows:
(a) Organization and Capitalization. Armstrong is a bank and trust company
duly organized and validly existing under the Banking Code and is not a member
of the Federal Reserve System. Except as set forth in Schedule 4.01(a),
Armstrong has the corporate power and authority to carry on its business as it
is now being operated and to carry out the transactions contemplated by this
Reorganization Agreement. Armstrong's deposits are insured by the Bank Insurance
Fund of the FDIC. The authorized capital stock of Armstrong consists of 8,000
shares of common stock having a par value of $50.00 per share, of which 8,000
shares are issued and outstanding as of the date hereof and no shares are held
in the treasury of Armstrong. To the knowledge of Armstrong, all issued and
outstanding shares of Armstrong Common Stock are validly issued, fully paid and
nonassessable. There is no subscription, option, warrant, call, right, stock
appreciation right or commitment of any kind obligating Armstrong to issue any
of its stock or to acquire any of its stock under any circumstances or to pay
cash on account of stock appreciation.
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(b) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger, when executed and delivered, will have been, duly
and validly authorized, executed and delivered by Armstrong, subject only to the
approval of the shareholders of Armstrong, the Department of Banking, the FDIC
or other applicable federal regulatory agency, and each constitutes the valid
and binding obligations of Armstrong and are and will be enforceable in
accordance with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement nor the consummation of the transactions contemplated
hereby, nor compliance by Armstrong with any of the provisions hereof or thereof
will (i) violate, or conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Armstrong under
any of the terms, conditions or provisions of, (A) the articles of incorporation
or bylaws, as amended, of Armstrong or (B) any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Armstrong is a party or by which Armstrong is bound or to which any of
Armstrong's properties or assets may be subject, except for such violations,
conflicts, breaches, defaults, terminations, accelerations, rights or creations
which would not, in the aggregate, have a material adverse effect on Armstrong's
business or financial condition, or (ii) violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Armstrong or
any of its properties or assets.
(d) Financial Statements. Armstrong has delivered to BTFC true, correct
and complete copies of its unaudited financial statements for the years ended
December 31, 1992, 1993 and 1994, including its statements of financial
condition, statements of income, statements of stockholders' equity, the notes
thereto, and for the nine months ended September 30, 1994 and 1995, its
statements of financial condition and income. Such financial statements present
fairly, completely and accurately in all material respects Armstrong's financial
position, assets and liabilities and results of operations as of the dates and
for the periods covered thereby and were prepared in accordance with generally
accepted accounting principles and practices within the banking industry
consistently applied, except that any unaudited interim financial statements are
subject to normal recurring year-end audit adjustments and do not contain all
footnotes required under generally accepted accounting principles. To the
knowledge of Armstrong, there are no material obligations or liabilities
(whether absolute, accrued or contingent) which, in accordance with generally
accepted accounting principles, should be reflected in the financial statements
of Armstrong or otherwise disclosed in the footnotes thereto and which are not
so reflected or disclosed, except as set forth in Schedule 4.01(d). Since
December 31, 1994, there has been no material adverse change in the financial
condition, assets, liabilities, income or operations of Armstrong.
(e) Certain Changes. Since December 31, 1994, there has been (i) no
material change in the organization, key personnel or method of doing business
of Armstrong, except for changes in the ordinary course of business, none of
which, individually or in the aggregate, has been material to the business or
financial condition of Armstrong; (ii) no material damage, destruction or
casualty loss with respect to property owned or leased by Armstrong (whether or
not covered by insurance) which affected or could affect the business or
financial condition or results of Armstrong; (iii) no changes in the authorized
or issued shares of Armstrong Common Stock and no declaration or payment of
distributions with respect to the Armstrong Common Stock or redemption or
repurchase of any such shares, except for dividends distributed on April 4, July
5 and September 28, 1995 of $14.00, $15.50 and $21.25 per share, respectively;
or (iv) no acquisition by Armstrong of the assets or more than 5% of the
outstanding voting capital stock of another bank or trust company.
(f) Taxes. Armstrong has filed when due all returns ("Returns") for and
paid in full all Taxes to the extent such filings and payments were required
prior to the date of this Reorganization Agreement. Such filings comply with all
applicable laws and are true, correct and complete in all material respects. Any
amounts set up as accruals or reserves in the audited financial statements of
Armstrong are sufficient for the payment of all Taxes, whether or not presently
being asserted or assessed, the liability for which has arisen from any action
of Armstrong prior to the dates of such financial statements. No claims are
currently being made by any taxing authority with respect to any Return, and
Armstrong has no knowledge of any basis for any such claims. Proper and accurate
amounts have been withheld and remitted by Armstrong from and for their
employees for all prior periods in compliance with the tax withholding
provisions of applicable federal, state and local law. Armstrong
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has not had any Tax deficiencies proposed or assessed against it and has not
executed any waiver or extended the statute of limitations on the audit of any
Return or the assessment or collection of any Tax. Armstrong has not made any
payment, nor is it obligated to make any payment, nor is it a party to any
agreement that under certain circumstances could obligate it to make any
payment, that would not be deductible under Code Sections 280G or 162(m).
(g) Litigation. No action, suit, investigation, claim or proceeding of any
nature or kind whatsoever, whether civil, criminal or administrative, by or
before any governmental body or arbitrator ("Litigation") is pending or, to the
knowledge of Armstrong, threatened against or affecting Armstrong, its business,
any of Armstrong's assets, any Armstrong Common Stock, or any of the
transactions contemplated by this Reorganization Agreement, and, to the
knowledge of Armstrong, there is no basis for any Litigation. Armstrong has not
been a party to any other Litigation since December 31, 1990. There is presently
no outstanding judgment, decree or order of any governmental body against or
affecting Armstrong, its business, any of Armstrong's assets, any of Armstrong's
Common Stock, or any of the transactions contemplated by this Reorganization
Agreement. Armstrong does not have pending any Litigation against any third
party.
(h) Compliance with Laws. To the knowledge of Armstrong, Armstrong is in
compliance in all material respects with all laws and regulations applicable to
its operations or with respect to which compliance is a condition of engaging in
the business thereof. Armstrong has paid all assessments and filed all reports
and statements required to be filed with respect thereto under the rules and
regulations of the Department of Banking and the FDIC.
(i) Agreements with Banking Authorities. Armstrong is not a party to any
written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, the Department of Banking, the FDIC or any other regulatory agency
which restricts its activities in any manner, or in any manner relates to the
capital adequacy, credit policies or management of Armstrong, nor has Armstrong
been advised by any such regulatory agency that it is contemplating, issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, directive, agreement, memorandum of understanding, commitment letter
or similar undertaking.
(j) Regulatory Reports. Armstrong has made available for inspection by
BTFC (i) copies of all reports, if any, to the Department of Banking or the FDIC
and (ii) all material notices, reports and review letters received from the FDIC
or any other governmental agency.
(k) Loans. Each loan outstanding on the books of Armstrong is reflected
correctly in all material respects by the loan documentation relating thereto,
was made in the ordinary course of business, was not known to be uncollectible
at the time it was made, and was made in accordance with Armstrong's standard
loan policies. Armstrong has not received notice from any obligor on any such
loan of a dispute with respect to the loan or that the loan may be unenforceable
against the obligor. All loans sold by Armstrong, including whole loans and
participations, were sold without recourse.
As of December 31, 1994, except as set forth in Schedule 4.01(k) attached
hereto, Armstrong: (i) had no loans, of any type or character, in its portfolio
(A) exceeding its lending limits under applicable provisions of Pennsylvania and
federal law, or (B) in violation of Regulation 0 or 12 C.F.R. Part 215, or
similar provisions under Pennsylvania law; (ii) had no loan in its portfolio in
excess of $100,000 which was not secured by a mortgage, note, deed of trust,
security agreement or other security and (iii) had no loans, of any type or
character, in its portfolio in excess of $100,000 which were or should have been
as of such date (A) considered non-performing or placed on a non-accrual status
or (B) classified by Armstrong as other loans specially mentioned, substandard,
doubtful or loss loans, except in any case such loans as were listed on
Armstrong's most recent internal classified asset report, a copy of which has
been made available to BTFC. For purposes of this Reorganization Agreement,
"non-performing" and "non-accrual" shall mean any loan delinquent for 90 days or
more as to the payment of interest and/or principal.
(l) Loan Loss Reserve. The loan loss reserve maintained by Armstrong for
all loans in its portfolio is in the best judgment of Armstrong management,
adequate in all material respects under the requirements of generally
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accepted accounting principles and practices within the banking industry to
cover all material known and anticipated risks of nonpayment with regard to
Armstrong's loan portfolio.
(m) Core Deposits. Armstrong has delivered to, or made available for
inspection by, BTFC a summary of the total amounts held by depositors that in
the aggregate each have less than $100,000 on deposit with Armstrong ("Core
Deposits"). In addition, Armstrong has delivered to, or made available for
inspection by, BTFC a complete list of all depositors that have monies on
deposit at Armstrong that are not Core Deposits.
(n) Real Property. Armstrong has good and marketable title to the real
property (including real estate owned or acquired through foreclosure) listed in
Schedule 4.01(n) ("Owned Real Property"), free and clear of all material liens,
leases, security interests, title retention agreements, encumbrances,
restrictions, conditions, charges, equities and claims, except those referred to
in Armstrong's statement of financial condition dated December 31, 1994 or the
notes thereto, liens for current Taxes not yet due and payable, any unfilled
mechanics' liens and such encumbrances and imperfections of title, if any, as
are not substantial in character or amount or do not otherwise materially impair
Armstrong. The present uses of the Owned Real Property are in compliance with
the present zoning classifications assigned to such real property, and all
improvements constructed on the land included in the Owned Real Property have
been constructed in all material respects in accordance with the requirements of
all applicable building, health, safety, environmental, zoning and other
federal, state and local laws, ordinances, regulations, codes, licenses or
permits applicable at the time of such construction, do not contain any defect
in design or construction or otherwise, and have access to existing highways,
roads and utility services. Armstrong has not received any notice or request
from any governmental authority, utility, insurer, board of fire authorities or
similar organization for the performance of any work or alteration with respect
to the Owned Real Property or for the termination or limitation of any access,
services or insurance with respect thereto. All such Owned Real Property is
adequately insured against loss, except with respect to Environmental
Conditions. Armstrong does not own any real property not listed in Schedule
4.01(n).
(o) Environmental. Except as disclosed in Schedule 4.01(o) attached
hereto:
(i) To the best of Armstrong's knowledge, there are no Environmental
Conditions. The term "Environmental Condition" means (x) the presence in
surface water, groundwater, drinking water supply, land surface, subsurface
strata, above-ground or underground storage tanks or other containers, or
ambient air of any pollutant, contaminant, industrial waste, hazardous
waste, polychlorinated biphenyls, radioactive materials, toxic or hazardous
substances ("Hazardous Substances") or (y) any violation of any statute,
ordinance, regulation, administrative order, judicial order or decree or
other governmental requirement relating to the emission, discharge,
deposit, disposal, leaching, migration or release of any Hazardous
Substance into the environment or the generation, treatment, storage,
transportation or disposal of any Hazardous Substance (i) arising out of or
otherwise related to the operations or other activities (including the
disposition of such materials or substances) of Armstrong or of any
predecessor in title, interest or line of business to Armstrong, conducted
or undertaken prior to the Closing, or (ii) existing at or prior to the
Closing at any Owned Real Property, any real property leased by Armstrong
("Leased Real Property"), any real property securing outstanding loans
("Secured Real Property"), or any property previously owned, leased,
occupied, used or foreclosed upon ("Prior Property");
(ii) No investigation, administrative order, consent order, agreement,
litigation or settlement with respect to any Environmental Condition is
proposed, threatened or in existence, and Armstrong has received no
communication from or on behalf of any governmental authority that alleges
that any such Environmental Condition exists;
(iii) Armstrong has obtained, holds, and will maintain all permits,
licenses, authorizations, consents, approvals, waivers, variances or
exemptions ("Governmental Approvals") issued by any federal, state, local,
foreign, regional or other judicial, governmental, administrative or
regulatory authority or instrumentality ("Governmental Authority") required
under any federal, state, local or foreign statutory or common law, rule,
regulation, ordinance, code, policy, guidelines or Governmental Approvals,
relating to Environmental Law for the ownership, use, occupation, operation
and other activities of Armstrong, any Owned Real Property, Leased Real
Property, Secured Real Property and Prior Property. Armstrong has made to
any Governmental Authority all filings, reports, registrations, notices or
other submissions ("Governmental
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Filings") required under Environmental Laws with respect to the ownership,
use, occupation, operation and other activities of Armstrong and the Owned
Real Property, Leased Real Property, Secured Real Property and any Prior
Property. Such required Governmental Approvals and Governmental Filings are
listed on Schedule 4.01(o) attached hereto. The term Environmental Law
means all statutory and common law, rules, regulations, ordinances,
Governmental Approvals, guidelines, policies, judicial or administrative
orders or decrees of any federal, state or local Governmental Authority
relating to the protection of human health and safety or the environment.
(iv) Armstrong has not transported or disposed of any Hazardous
Substances or arranged for the transportation or disposal of such Hazardous
Substances to any location which is listed or to the knowledge of Armstrong
proposed for listing under CERCLA, a comparable state statute or other
Environmental Law, or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against Armstrong for clean-up costs, remedial work, damages to natural
resources or for personal injury claims, including, but not limited to,
claims under CERCLA. None of the Owned Real Property, Leased Real Property,
Secured Real Property or Prior Property is listed or, to the knowledge of
Armstrong, proposed for listing under CERCLA or a comparable state or other
Environmental Law.
(v) Each of the Governmental Approvals set forth in Schedule 4.01(o)
is in full force and effect and is final, any fixed period for appeal or
review having elapsed (other than as to ongoing compliance or modification
during the term of such Governmental Approval as otherwise provided by law
or as indicated in Schedule 4.01(o)). No such Governmental Approval is
subject to any pending suit, action, investigation of which Armstrong has
notice, proceeding or appeal (whether judicial, administrative or
otherwise) and, to the best of Armstrong's knowledge, no such matter is
threatened.
(vi) To the knowledge of Armstrong, Armstrong, with respect to its
operation or other activities, any Owned Real Property, Leased Real
Property, Secured Real Property or Prior Property, has complied in all
material respects with, and currently is in compliance in all material
respects with: (A) the terms and conditions of all Governmental Approvals
issued or required pursuant to any Environmental Law, and (B) all other
limitations, restrictions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any Environmental Law,
or in any written notice, order, or demand letter issued, entered,
promulgated, or approved pursuant to any Environmental Law;
(vii) Armstrong has not received any notice of violation or other
notification from any Governmental Authority, or any written notice from
any third party, alleging that Armstrong is now or has been in violation of
any Environmental Law;
(viii) To the knowledge of Armstrong, no ozone depleting substances
("ODS"), polychlorinated biphenyls ("PCBs"), asbestos containing material
("ACM"), or urea formaldehyde insulation is present on or at any Owned Real
Property, Leased Real Property, Secured Real Property or any Prior Property
and Armstrong has complied with all regulatory requirements relating to the
storage, removal, disposal or release, if any, of ODS, ACM or PCBs which
currently are or may in the past have been located on or at any Owned Real
Property, Leased Real Property, Secured Real Property and any Prior
Property.
(ix) To the knowledge of Armstrong, there are not now any underground
or aboveground storage tanks and associated piping ("Storage Tanks") on or
at any Owned Real Property, Leased Real Property, Secured Real Property or
Prior Property, nor has Armstrong owned or operated Storage Tanks at any
time.
(x) Armstrong, with respect to the ownership, use, occupation,
operation and other activities of Armstrong, any Owned Real Property,
Leased Real Property, Secured Real Property and any Prior Property, has not
received any written request for information from any Governmental
Authority or other Person related to any site which is, or may be, subject
to actions for removal, response, remediation or cleanup of Hazardous
Substances, including, but not limited to, any information request pursuant
to CERCLA, comparable state statutes, or other Environmental Law;
(xi) Neither Armstrong nor, to the knowledge of Armstrong, any other
Person ever caused or permitted any Hazardous Substances to be placed,
stored, treated, handled or located on, under or at any Owned Real
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Property, Leased Real Property, Secured Real Property or Prior Property or
any part thereof other than in the ordinary course of business and in
compliance with all Environmental Laws.
(xii) Armstrong has complied in all material respects with all
applicable provisions of any Environmental Laws that condition, restrict or
prohibit the transfer, sale, lease or closure of any property for
environmental reasons; no environmental lien has attached to any portion of
Armstrong or any Owned Real Property, Leased Real Property, Secured Real
Property or Prior Property, and no governmental actions have been taken or
are in progress that could subject any or all of the foregoing to any such
lien.
(xiii) There have been no past and there are no pending or
contemplated claims by Armstrong, under any Environmental Laws based on
actions of others that may have impacted any Owned Real Property, Leased
Real Property, Secured Real Property or Prior Property, and Armstrong has
not entered into any agreement with any Person regarding liabilities or
responsibilities with respect to (i) any Environmental Law, (ii) remedial
action or (iii) other environmental expense (including contingent
liabilities).
(xiv) Armstrong has not agreed to retain, assume or guarantee the
costs of any investigation, removal, response, remediation or cleanup of
any property.
(xv) Armstrong has provided copies of all material reports, documents
and other information pertaining to compliance with Environmental Laws and
environmental matters or liabilities arising out of, resulting from or in
connection with the operations of Armstrong, any Owned Real Property,
Leased Real Property, Secured Real Property or Prior Property.
(p) Personal Property. All personal property used by Armstrong in its
business is either owned or leased by Armstrong and is suitable for the
operations and business as currently conducted by Armstrong.
(q) Leases. All leased real property and leased personal property of
Armstrong is listed in Schedule 4.01(q) attached hereto. Except as disclosed in
Schedule 4.01(q), no consents or approvals are required under the leases for
such property in connection with the transactions contemplated by this
Reorganization Agreement.
(r) Material Contracts. True, correct and complete copies of all material
contracts, agreements, plans, loans, leases, indentures, mortgages, instruments,
or other commitments, arrangements, understandings, letters of credit or
undertakings, oral or written, formal or informal, to which Armstrong is a party
or otherwise bound or to which its assets may be affected have been submitted or
made available to BTFC or are included as part of Schedule 4.01(r) (hereinafter
referred to individually as a "Contract" and collectively as the "Contracts").
There is no breach or default (or an event which, with notice or lapse of time
or both, would constitute a default) by Armstrong of or with respect to any
provision of any Contract to which Armstrong is a party that could have a
material adverse effect upon the financial condition, operations, results of
operations or business of Armstrong. All such Contracts, including but not
limited to all contracts relating to the purchase and sale of loans, are or will
be assignable to BTFC or Johnstown, as the case may be, without further action
thereby effective as of the Closing Date, except as listed in Schedule 4.01(r).
Armstrong is not currently renegotiating any Contract.
(s) Insurance. Armstrong is not in default with respect to any provisions
of any liability or other forms of insurance held by it or has failed to give
any notice or present any claim thereunder in a due and timely fashion. All
polices of insurance are in full force and effect and are carried in an amount
and are otherwise adequate to protect Armstrong from any material adverse loss
on a consolidated basis. Armstrong has not been denied any application for
insurance or had any policy of insurance terminated during the past three years,
nor has Armstrong been notified of any pending termination.
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(t) Employee Benefits.
(i) Benefit Plans; Company Plans. Schedule 4.01(t) discloses all
written and unwritten "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and any other written and unwritten profit sharing,
pension, savings, deferred compensation, consultant, bonus, fringe benefit,
insurance, medical, medical reimbursement, life, disability, accident,
post-retirement health or welfare benefit, stock option, stock purchase,
sick pay, vacation, employment, severance, termination or other incentive,
welfare or employee benefit plan, agreement, contract, policy, trust fund
or arrangement (each a "Benefit Plan"), whether or not funded and whether
or not terminated, (i) maintained or sponsored by Armstrong, or (ii) with
respect to which Armstrong has or may have liability or is obligated to
contribute, or (iii) that otherwise covers any of the current or former
employees of Armstrong or their beneficiaries, or (iv) as to which any such
current or former employees or their beneficiaries participated or were
entitled to participate or accrue or have accrued any rights thereunder
(each, a "Company Plan"). For each Company Plan, to the extent applicable
to each such Company Plan, complete copies of the following have been
delivered to BTFC (but in any event, no later than seven (7) days prior to
the Closing Date): (i) the documents embodying the Company Plans, including
the plan documents, all amendments thereto, the related trust or funding
agreements, investment management agreements, administrative service
contracts, insurance contracts, union or trade agreements and, in the case
of any unwritten Company Plans, written descriptions thereof; (ii) annual
reports including Forms 5500 and all schedules thereto for the last three
years; (iii) financial statements for the last three years; (iv) actuarial
reports, if applicable, for the last three years; and (v) each
communication (other than routine communications) received by Armstrong
from or furnished by Armstrong to the Service, DOL, PBGC or other
governmental authorities. Armstrong has also furnished to BTFC a copy of
the current summary plan description and each summary of material
modification prepared in the last three years for each Company Plan, and
all employee manuals, handbooks, policy statements and other written
materials given to employees relating to any Company Plans. No oral or
written representations or commitments inconsistent with such written
materials have been made to any employee of Armstrong by any member of the
Company Group or any employee or agent thereof.
(ii) Company Group Matters. Armstrong has never been a member of a
controlled group of corporations within the meaning of Sections 414(b),
(c), (m) or (o) of the Code.
(iii) Compliance. Each of the Company Plans and all related trusts,
insurance contracts and funds have been created, maintained, funded and
administered in all material respects in compliance with all applicable
Laws including, without limitation, all applicable requirements of the Code
and any predecessor federal income tax laws, ERISA, the health care
continuation requirements of COBRA, and any applicable collective
bargaining agreements. Without limiting the generality of the foregoing,
Armstrong has provided all notices and other correspondence to employees
and former employees required by the health care continuation provisions of
COBRA. Each of the Company Plans and all related trusts, insurance
contracts and funds have also been created, maintained, funded and
administered in all material respects in compliance with applicable law,
the plan document, trust agreement, insurance policy or other writing
creating the same or applicable thereto. To the knowledge of Armstrong, no
Company Plan is or is proposed to be under audit or investigation, and no
completed audit of any Company Plan has resulted in the imposition of any
Tax, fine or penalty.
(iv) Qualified Plans. Schedule 4.01(t) discloses each Company Plan
that purports to be a qualified plan under Section 401(a) of the Code and
exempt from United States federal income tax under Section 501(a) of the
Code (a "Qualified Plan"). Each Qualified Plan has received a determination
letter (or opinion or notification letter, if applicable) from the Service
that such plan is qualified under Section 401(a) of the Code and exempt
from federal income tax under Section 501(a) of the Code. No Qualified Plan
has been amended since the date of the most recent such letter in a manner
that might adversely affect the qualification of such plan under sections
401(c) and 501(a) of the Code. No member of the Company Group, nor any
fiduciary of any Qualified Plan, nor any agent of any of the foregoing, has
done anything that would adversely affect the qualified status of a
Qualified Plan or the qualified status of any related trust.
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(v) Defined Benefit Plans; Multiemployer Plans. Armstrong has never
had a Company Plan that was a defined benefit plan as defined in Section
3(35) of ERISA (a "Defined Benefit Plan"). No Company Plan is a
multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.
Armstrong has no material liability for any Company Plan that is not
accrued on the December 31, 1994 Balance Sheet or, that has arisen after
December 31, 1994 and on and before the Closing.
(vi) Prohibited Transactions; Fiduciary Duties; Post-Retirement
Benefits. No prohibited transaction (within the meaning of Section 406 of
ERISA and Section 4975 of the Code) with respect to any Company Plan exists
or has occurred that could subject Armstrong, directly or indirectly, to
any material liability or Tax under Part 5 of Title I of ERISA or Section
4975 of the Code. No reportable event (within the meaning of Section
4043(b) of ERISA) with respect to any Company Plan exists or has occurred
that could result in any tax or liability material to Armstrong. No member
of the Company Group, nor any administrator or fiduciary of any Company
Plan, nor any agent of any of the foregoing, has engaged in any transaction
or acted or failed to act in a manner that could subject Armstrong,
directly or indirectly, to any material liability for a breach of fiduciary
or other duty under ERISA or any other applicable law. With the exception
of the requirements of Section 4980B of the Code, no post-retirement
benefits are provided under any Company Plan that is a welfare benefit plan
as described in ERISA Section 3(1).
(vii) Except as set forth on Schedule 4.01(t), the consummation of the
transactions contemplated hereby will not create, accelerate or increase
any liability under any Company Plan because of the creation, acceleration
or increase of any rights or benefits to which employees are entitled
hereunder, and no payment required under any Company Plan in connection
with the transactions contemplated hereby shall be non-deductible for
federal income tax purposes by reason of Section 280G of the Code.
(u) Labor Relations. There are no pending or threatened labor disputes
with any employees of Armstrong. Armstrong is not a party to a collective
bargaining agreement with any of its employees. Armstrong has no existing
employment contracts with any of its current or former employees, directors or
officers.
(v) Related Party Transactions. Armstrong has no current contractual
arrangement with or commitment to or from any of its officers, directors or
employees other than such as are terminable at will. All current extensions of
credit to the shareholders, officers, directors and employees of Armstrong as
well as business organizations and individuals associated with Armstrong have
been made in the ordinary course of Armstrong's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other banking customers, and did not, at
the time they were entered into, involve more than the normal risk of
collectibility or present other unfavorable features and are in compliance with
all applicable regulations of the FDIC. Since January 1, 1990, all transactions
with the shareholders, officers, directors and employees of Armstrong have
complied in all material respects with the rules of the FDIC regarding such
transactions, including delivery of all reports required thereunder. The
transactions contemplated by this Reorganization Agreement will not (either
alone, or upon the occurrence of any act or event, lapse of time or the giving
of notice or failure to cure) result in any payment (severance or otherwise)
becoming due from any of the Parties to any director, officer or employee of
Armstrong, except as contemplated herein.
(w) Fidelity Bonds. Armstrong maintained continuously fidelity bonds
insuring it against acts of dishonesty by each of its employees in aggregate
amounts as are customary, usual and prudent for banking institutions of its
size, which coverage currently is $1,000,000.00. Since January 1, 1990, there
have been no claims under such bonds, and Armstrong is not aware of any facts
which would form the basis of a claim under such bonds. Armstrong has no reason
to believe that its fidelity coverage will not continue to be available on
substantially the same terms as its existing coverage.
(x) Representations Not Misleading. No representation or warranty by
Armstrong in this Reorganization Agreement contains, and no written statement,
exhibit or schedule furnished to BTFC by or on behalf of Armstrong under this
Reorganization Agreement will contain as of the date thereof, any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not misleading in
any material respect, when taken as a whole.
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(y) Information Provided by Armstrong. All information to be provided in
writing by Armstrong for use in the Prospectus/Proxy Statement in connection
with the meeting of shareholders of Armstrong contemplated hereby or in any
application made by BTFC to the Service or to any other governmental or
regulatory body in connection with the Merger, and the information to be
provided in writing by Armstrong for use in the Registration Statement,
including any prospectus contained therein, will comply in all material respects
with applicable laws and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in light of the circumstances under which they are made, not
misleading.
(z) Consents and Approvals. Except for: (i) the filing with any federal or
state governmental authority of a Prospectus/Proxy Statement, a Registration
Statement and any other applicable securities filings relating to the issuance
of BTFC Common Stock and the meeting of the shareholders of Armstrong; (ii) the
approval of the Department of Banking, the Federal Reserve Board and the FDIC of
BTFC's acquisition of all of the issued and outstanding shares of Armstrong;
(iii) the approval of the shareholders of Armstrong; (iv) the obtaining of third
party consents as set forth in the Schedules attached hereto; and (v) the
expiration of any regulatory waiting period, no consents or approvals of or
filings or registrations with any third party or any public body, agency or
authority are necessary in connection with the execution and delivery by
Armstrong of this Reorganization Agreement and its performance of the
transactions contemplated hereby.
(aa) Investments. Except as set forth in Schedule 4.01(aa)(iii) attached
hereto: (i) the investments reflected in Armstrong's statement of financial
condition as of December 31, 1994 are a true, correct and complete list of the
investments of Armstrong; (ii) none of such investments are in real estate,
equity securities or corporate debt securities not of investment grade as
defined in Section 28(d) of the FDIA; (iii) no restrictions, contractual,
statutory or other, exist which would impair the ability of BTFC to freely
dispose of such investments at any time; (iv) Armstrong does not engage in
interest rate hedging contracts; (v) Armstrong does not engage in other off
balance sheet activities requiring disclosure under Statement on Financial
Accounting Standards Number 105; (vi) all mortgage-backed securities contained
in the portfolio of Armstrong are insured or guaranteed by the FHLMC, FNMA, or
GNMA, or qualify as high quality mortgage related securities; and (vii) the
investment portfolio of Armstrong does not contain any agreement, document or
instrument that could be considered a high risk collateralized mortgage
obligation under applicable financial institutions regulatory guidelines.
(bb) Intellectual Property. Armstrong has no (i) patents, trademarks,
tradenames, and copyrights and applications therefor or (ii) trade secrets
(collectively referred to as the "Intellectual Property"). No claim, suit or
action is pending or, to the knowledge of Armstrong, threatened alleging that
Armstrong is infringing upon the intangible property rights of others, or that
their use of the Intellectual Property infringes or conflicts with the rights of
others.
(cc) Minute Books. The minute books of Armstrong, which have been and will
continue to be made available through the Closing Date to BTFC, contain true,
correct and complete records of all meetings of the shareholders, the Board of
Directors and all committees thereof and accurately reflect all of the corporate
action of the shareholders, the Board of Directors and all committees thereof.
(dd) Reverse Repurchase Agreements. Armstrong has no agreements pursuant
to which Armstrong has purchased securities subject to an agreement to resell.
(ee) Shareholder and FDIC Reports. Armstrong has delivered to, or made
available for inspection by, BTFC copies of all reports to its shareholders and
the FDIC made by it with respect to the three (3) years ended December 31, 1994
and for all calendar quarters subsequent thereto. All such reports do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(ff) Deposit Insurance. The deposits of Armstrong are insured by the Bank
Insurance Fund of the FDIC in accordance with the provisions of the FDIA, and
Armstrong has paid all assessments and filed all reports required by the FDIA.
(gg) Stock Exchange and Redemption Agreement. Armstrong has provided to
BTFC a true, correct and complete copy of the Stock Exchange and Redemption
Agreement dated August 16, 1995 by and between certain
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shareholders of Armstrong, The Farmers National Bank of Kittanning ("Farmers")
and certain shareholders of Farmers (the "Stock Exchange and Redemption
Agreement") and any related side agreements between the parties to the Stock
Exchange and Redemption Agreement.
4.02. Representations and Warranties of BTFC. BTFC represents and warrants
to Armstrong as follows:
(a) Organization and Capitalization. BTFC is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business as it is
now being operated and to carry out the transactions contemplated by this
Reorganization Agreement. The authorized capital stock of BTFC consists of
10,000,000 shares of common stock having a par value of $5.00 per share, of
which 3,826,581 shares are issued and outstanding as of the date hereof and
2,000,000 shares of preferred stock, none of which are issued and outstanding.
All issued and outstanding shares of BTFC Common Stock are validly issued, fully
paid and nonassessable and all shares of BTFC Common Stock to be issued in the
Merger shall be validly issued, fully paid and nonassessable.
(b) Authority for Transactions. This Reorganization Agreement has been and
the Articles of Merger, when executed and delivered, will have been, duly and
validly authorized, executed and delivered by BTFC, subject only to the approval
of the Department of Banking, the Federal Reserve Board and the FDIC, and each
constitute and will constitute the valid and binding obligations of BTFC and are
and will be enforceable in accordance with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by BTFC, nor the consummation of the transactions
contemplated hereby, nor compliance by BTFC with any of the provisions hereof
will (i) violate, or conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of BTFC or any of its
Subsidiaries under any of the terms, conditions or provisions of, (A) the
articles of incorporation or bylaws, as amended, of BTFC, or (B) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which BTFC or any of its Subsidiaries is a party or
by which any of them is bound or to which any of their respective properties or
assets may be subject, except for such violations, conflicts, breaches,
defaults, terminations, accelerations, rights or creations which would not, in
the aggregate, have a material adverse effect on BTFC's business or financial
condition on a consolidated basis, or (ii) subject to compliance with all
applicable statutes and regulations, violate any judgment, ruling, order, writ,
injunction, decree, statute, rule or regulation applicable to them or any of
their respective properties or assets.
(d) Financial Statements. BTFC has delivered to Armstrong correct and
complete copies of its audited consolidated financial statements, including its
consolidated balance sheets, consolidated statements of income, consolidated
statements of cash flows, consolidated statements of changes in shareholders'
equity and the notes thereto, for the years ended December 31, 1992, 1993 and
1994, and its unaudited interim consolidated balance sheets, statements of
income and statements of cash flow for the six months ended June 30, 1994 and
1995 included in its quarterly report Form 10-Q for the six months then ended as
filed with the SEC. Such financial statements present fairly, completely and
accurately BTFC's consolidated financial position, assets and liabilities and
results of operations as of the dates of and for the periods covered thereby and
were prepared in accordance with generally accepted accounting principles and
practices within the banking industry consistently applied, except that any
unaudited interim financial statements are subject to normal, recurring year-end
adjustments and do not contain all footnotes required under generally accepted
accounting principles. To the knowledge of BTFC, there are no material
obligations or liabilities (whether absolute, accrued or contingent) which, in
accordance with generally accepted accounting principles, should be reflected in
the consolidated financial statements of BTFC or otherwise disclosed in the
footnotes thereto and which are not so reflected or disclosed. Since December
31, 1994, there has been no material adverse change in the consolidated
financial condition, assets, liabilities, income or operations of BTFC taken as
a whole.
(e) Certain Changes. Since December 31, 1994, there has been: (i) no
material adverse change in the organization, key personnel or method of doing
business of BTFC or any of its Subsidiaries, except for changes in the ordinary
course of business, none of which, individually or in the aggregate, has been
material to the
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business or financial condition of BTFC on a consolidated basis; (ii) no
material damage, destruction or casualty loss with respect to property owned or
leased by BTFC or any of its Subsidiaries (whether or not covered by insurance)
which affected or could affect the business or financial condition or results of
BTFC on a consolidated basis; or (iii) no acquisition by BTFC of the assets or
more than 5% of the outstanding voting capital stock of another savings
association, bank or company, except for the acquisition of The Huntington
National Bank under the Stock Purchase Agreement dated September 1, 1995 by and
among Huntington Bancshares West Virginia, Inc., The Huntington National Bank of
Pennsylvania and BTFC, and except for any future acquisitions.
(f) Litigation. There are no suits, actions, investigations (formal or
informal), proceedings or claims pending or, to the knowledge of BTFC,
threatened against BTFC or any of its Subsidiaries or their respective assets or
business or against their respective officers or directors (in their capacity as
such) in law or at equity or before any governmental agency which are reasonably
expected by BTFC to have a material adverse effect on the business, properties,
assets, operations or liabilities of BTFC on a consolidated basis, or its right
to conduct its business as presently conducted. Neither BTFC nor any of its
Subsidiaries is presently subject to any injunction, order or other decree of
any court or other governmental agency of competent jurisdiction.
(g) Compliance with Laws. To the knowledge of BTFC, BTFC and each of its
Subsidiaries are in compliance in all material respects with all laws and
regulations applicable to their respective operations or with respect to which
compliance is a condition of engaging in the business thereof, except for
failures to comply which, in the aggregate, would not have a material adverse
effect on the conduct of, or the financial or other condition of, BTFC's
business on a consolidated basis. BTFC and its Subsidiaries have paid all
assessments and filed all reports and statements required to be filed with
respect thereto under the rules and regulations of the Department of Banking,
the Federal Reserve and the FDIC.
(h) SEC and Shareholder Reports. BTFC has delivered to, or made available
for inspection by, Armstrong of all reports to its shareholders and the SEC made
by it with respect to the four (4) years ended December 31, 1994. All such
reports do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(i) Registration Statement. All information relating to BTFC and its
Subsidiaries which is included in the Registration Statement at the time it
becomes effective and each amendment or supplement thereto will be accurate and
complete, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Representations Not Misleading. No representation or warranty by BTFC
in this Reorganization Agreement contains, and no written statement, exhibit or
schedule furnished to Armstrong by or on behalf of BTFC under this
Reorganization Agreement will contain as of the date thereof, any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not misleading in
any material respect, when taken as a whole.
(k) Information Provided by BTFC. All information to be provided in
writing by BTFC for use in the Prospectus/Proxy Statement in connection with the
meeting of shareholders of Armstrong contemplated hereby or in any application
made by BTFC to the Service or to any other governmental or regulatory body in
connection with the Merger, and the information to be provided in writing by
BTFC for use in the Registration Statement, including any prospectus contained
therein, will comply in all material respects with applicable laws and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading.
(l) Consents and Approvals. Except for: (i) the filing with any federal or
state governmental authority of a Prospectus/Proxy Statement, a Registration
Statement and any other applicable securities filings relating to the issuance
of BTFC Common Stock and the meeting of Armstrong shareholders at which the
Merger is to be considered and the review and clearance thereof by such
governmental authorities, (ii) the approval of the Department of Banking, the
Federal Reserve Board and the FDIC of BTFC's acquisition of all of the issued
and outstanding shares of Armstrong and the Merger, and (iii) the expiration of
any regulatory waiting period, no
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consents or approvals of or filings or registrations with any third party or any
public body, agency, or authority are necessary in connection with the execution
and delivery by BTFC of this Reorganization Agreement and its performance of the
transactions contemplated hereby.
(m) Taxes. BTFC and its Subsidiaries have filed when due all returns
("Returns") for and paid in full all Taxes to the extent such filings and
payments were required prior to the date of this Reorganization Agreement. Such
filings comply with all applicable laws and are true and correct. Any amounts
set up as accruals or reserves in the audited consolidated financial statements
of BTFC are sufficient for the payment of all Taxes, whether or not presently
being asserted or assessed, the liability for which has arisen from any action
of BTFC or any of its Subsidiaries prior to the dates of such financial
statements. No claims are currently being made by any taxing authority with
respect to any Return, and BTFC has no knowledge of any basis for any such
claims. Proper and accurate amounts have been withheld and remitted by BTFC and
its Subsidiaries from and for their employees for all prior periods in
compliance with the tax withholding provisions of applicable federal, state and
local law. BTFC has not had any Tax deficiencies proposed or assessed against it
and has not executed any waiver or extended the statute of limitations on the
audit for any Return or the assessment or collection of any Tax.
(n) Agreements with Banking Authorities. Neither BTFC nor any of its
Subsidiaries is a party to any written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, the Department of Banking, the Federal
Reserve or the FDIC, which restricts its activities in any manner, or in any
manner relates to the capital adequacy, credit policies or management of BTFC
and its Subsidiaries, nor has BTFC or any of its Subsidiaries been advised by
any such regulatory agency that it is contemplating, issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
directive, agreement, memorandum of understanding, commitment letter or similar
undertaking.
4.03. Representations and Warranties of Johnstown.
(a) Organization and Capitalization. Johnstown is a bank and trust company
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is a member of the Federal Reserve System.
Johnstown has full power and authority to carry on its business as it is now
being operated and to carry out the transactions contemplated by this
Reorganization Agreement. The authorized, issued and outstanding capital stock
of Johnstown consists of 981,864 shares of common stock having a par value of
$5.00 per share. All issued and outstanding shares of Johnstown Common Stock are
validly issued, fully paid and nonassessable and are owned of record and
beneficially by BTFC.
(b) Authority for Transactions. This Reorganization Agreement has been and
the Articles of Merger, when executed and delivered, will have been, duly and
validly authorized, executed and delivered by Johnstown, subject only to the
approval of the Department of Banking, the Federal Reserve Board and the FDIC,
and constitute and will constitute the valid and binding obligations of
Johnstown and are and will be enforceable in accordance with their respective
terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by Johnstown, nor the consummation of the transactions
contemplated hereby, nor compliance by Johnstown with any of the provisions
hereof will (i) violate, or conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
Johnstown or any of its Subsidiaries under any of the terms, conditions or
provisions of, (A) the articles of incorporation or bylaws, as amended, of
Johnstown, or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Johnstown is a party
or by which Johnstown is bound or to which any of its properties or assets may
be subject, except for such violations, conflicts, breaches, defaults,
terminations, accelerations, rights or creations which would not, in the
aggregate, have a material adverse effect on Johnstown's business or financial
condition, or (ii) subject to compliance with all applicable statutes and
regulations, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Johnstown or any of its properties or
assets.
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4.04. Covenants of Armstrong. Armstrong hereby covenants and agrees that:
(a) Access to Corporate Records. Until the Closing Date, Armstrong shall
give BTFC and its representatives full access during normal business hours to
all their respective property, documents, contracts and records and such
information with respect to their business affairs and properties as BTFC from
time to time may reasonably request; provided, however, that Armstrong shall not
be required to give such access or information to the extent that it is
prohibited therefrom by a rule, regulation or order of any regulatory body. All
documents, contracts, records or information obtained pursuant to this Section
4.04(a) shall be and remain subject to the confidentiality provisions of Section
2.08 of this Reorganization Agreement.
(b) Financial Statements and Internal Audit Reports. Armstrong shall
promptly provide BTFC with copies of its annual, quarterly and monthly financial
statements for the periods ending between the date of this Reorganization
Agreement and the Effective Time of the Merger. Armstrong shall promptly forward
to BTFC copies of its periodic internal audit reports. Armstrong shall also
promptly provide or permit inspection of all reports filed by it during such
period with the Department of Banking and the FDIC and copies of all notices or
reports sent to its shareholders to the extent permitted by law and all material
notices, reports, and review letters received from the Department of Banking and
the FDIC. Until the Closing Date, Armstrong will provide copies of all such
financial statements and notices, reports and review letters to BTFC on a prompt
and timely basis.
(c) Negative Covenants--Conduct of Business. Except with the prior written
consent of BTFC, Armstrong shall not on or after the date hereof:
(i) issue any capital notes or shares of its capital stock, declare or
distribute any dividend, including any stock dividend, authorize a stock
split, or authorize, issue or make any other distribution of, on, or with
respect to, its capital stock; provided, however, that Armstrong shall be
permitted to distribute regular quarterly cash dividends for any full
calendar quarter beginning with the quarter ending December 31, 1995 of the
lesser of $17.25 per share or seventy-five percent (75%) of the net income
earned by Armstrong during that quarter and a closing dividend equal to the
lesser of $17.25 per share or seventy-five percent (75%) of the net income
earned during the period between the end of the last full calendar quarter
for which a dividend was paid and ten (10) days prior to the Closing Date.
(ii) merge with, consolidate with, sell its assets to, or acquire
substantially all the assets of, any other corporation, bank or Person, or
enter into any other transaction not in the ordinary course of business;
(iii) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(iv) create or award any pension or profit sharing plan, bonus,
deferred compensation, death benefit or retirement plan, or any other
employee benefit, enter into any employment or consulting contract (written
or otherwise), or grant any bonuses to any officer, director or employee;
(v) amend its articles of incorporation or bylaws except as may be
necessary to consummate the transactions contemplated by this
Reorganization Agreement or as required by law;
(vi) incur any liability or obligation or make any commitment or
disbursement, acquire or dispose of any property or asset, make any
contract or agreement, or engage in any transaction, except in the ordinary
course of business;
(vii) increase the rate of compensation of any director, officer,
employee or agent or enter into any agreement to increase the rate of
compensation of any director, officer or employee, other than normal
increases in the ordinary course of business and consistent with past
practice;
(viii) unless permitted by BTFC, take any action that would entitle
any employee to receive severance pay prior to the Closing Date;
(ix) intentionally do anything or intentionally fail to do anything
which will cause a breach or a default under any contract, agreement,
commitment or obligation to which it is a party or by which it may be
bound;
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(x) except for securities transactions effected in the ordinary course
of business with the prior consent of BTFC (which consent shall not be
unreasonably withheld), make any capital expenditures in excess of $15,000
in the aggregate;
(xi) modify or extend any service bureau contracts, hardware/software
maintenance agreements, lease agreements or other contracts that involve
annual payments by Armstrong that exceed $15,000 per contract or $50,000 in
the aggregate;
(xii) change its lending, borrowing, investment, asset/liability
management or other material banking policies in any material respect
except as may be required by changes in applicable law, regulation or
regulatory directives, except that, in connection with the closing of the
transactions contemplated hereby, Armstrong shall cooperate in good faith
with BTFC to adopt policies, practices and procedures consistent with those
utilized by BTFC and its affiliates;
(xiii) open any branch offices;
(xiv) fail to pay any tax or any other liability or charge when due,
other than charges contested in good faith by appropriate proceedings; or
(xv) make, change or revoke any tax election or make any agreement or
settlement with any taxing authority.
(d) Consents and Approvals. Armstrong shall cooperate with BTFC in
furnishing such information concerning Armstrong's business and affairs and its
directors and officers as is reasonably necessary or requested in order to
enable BTFC to prepare and file the Registration Statement and all applications
for regulatory approvals of the Merger, including applications to the Department
of Banking, the Federal Reserve Board and the FDIC, and in obtaining such other
consents required under any agreements which BTFC shall request to be obtained
to the extent required to consummate the Merger. Armstrong shall use its best
efforts to obtain the approval or consent of any federal, state or other
regulatory agency having jurisdiction to the extent that such approvals or
consents are required to effect the Merger and the other transactions
contemplated hereby.
(e) Notice of Changes. Until the Effective Time of the Merger, Armstrong
shall give BTFC prompt written notice of any material change or inaccuracies in
any data previously given or made available to BTFC pursuant to this
Reorganization Agreement. Notice of changes to Schedules 4.01(k) of this
Reorganization Agreement shall be effected by Armstrong by promptly furnishing
to BTFC current monthly lists of doubtful, nonperforming or problem loans.
(f) Acquisition Proposals. Neither Armstrong nor any of its officers,
directors or other affiliates (as defined in Rule 12b-2 under the Exchange Act)
(each, an "Affiliate") shall, and Armstrong shall cause their employees, agents
and representatives (including, without limitation, any investment banking,
legal or accounting firm retained by Armstrong and any individual member or
employee of the foregoing) (each, an "Agent") not to, (i) initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer (including, without limitation, any proposal or offer
to any of them or their respective shareholders) with respect to a merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving, or any purchase of all or a substantial portion
of the assets or equity securities of, Armstrong (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal") or (ii) engage in
any negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any Person relating to an Acquisition Proposal, or
(iii) otherwise cooperate in any effort or attempt to make, implement or accept
an Acquisition Proposal. Notwithstanding the foregoing, nothing herein shall
prohibit Armstrong or its board of directors and officers from: (iv) fulfilling
their fiduciary duties under Pennsylvania or federal law to the shareholders of
Armstrong; or (v) permitting to occur the transactions contemplated by the Stock
Exchange and Redemption Agreement dated August 16, 1995 by and between certain
shareholders of Armstrong, The Farmers National Bank of Kittanning ("Farmers")
and certain shareholders of Farmers. Armstrong shall notify BTFC immediately if
any inquiries, proposals or offers related to an Acquisition Proposal are
received by, any confidential information or data is requested from, or any
negotiations or discussions related to an Acquisition Proposal are sought to be
initiated or continued with, them or any individual or entity referred to in the
first sentence of this Section 4.04(f).
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(g) Indemnification.
(i) Armstrong will indemnify and hold harmless BTFC and Johnstown and
each Person, if any, who controls BTFC or Johnstown within the meaning of
the Securities Act against any losses, claims, damages or liabilities,
joint or several, to which BTFC or such controlling Persons may become
subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) (A) arise
out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the
Prospectus/Proxy Statement or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading to the extent that any such statement or omission was provided
in writing by Armstrong to BTFC or (B) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact or any
omission or alleged omission to state a material fact required to be stated
or necessary to make the statements not misleading in any document
distributed to any Armstrong shareholder to the extent that any such
statement or omission was provided in writing by Armstrong to BTFC, and
will reimburse BTFC and each such controlling Person for any legal or other
expenses reasonably incurred by BTFC or such controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Armstrong will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any of the
Registration Statement, the Prospectus/Proxy Statement or any amendment or
supplement thereto, or any related preliminary prospectus that was made or
omitted in reliance upon and in conformity with written information
furnished by the other Parties specifically for use therein. This indemnity
agreement will be in addition to any liability which Armstrong may
otherwise have.
(ii) Promptly after receipt by an indemnified party under this Section
4.04(g) of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 4.04(g), notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under this Section 4.04(g). In case any such action is
brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 4.04(g) for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
(iii) If recovery is not available under the foregoing indemnification
provisions of this Section 4.04(g) for any reason other than as specified
therein, the parties entitled to indemnification by the terms thereof shall
be entitled to contribution for liabilities and expenses, except to the
extent that contribution is not permitted under Section 11(f) of the
Securities Act. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative
benefits received by each party from the transactions contemplated hereby,
the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Armstrong, Johnstown
and BTFC agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capital allocations.
(h) Deposits. Armstrong shall offer rates on all deposits which are in
accordance with present institutional guidelines and which are priced within
local competitor offerings. Further, Armstrong shall not accept any broker or
out of area deposits and shall price all "jumbo deposits" in accordance with
existing practice. Such jumbo deposits shall be offered only to local retail,
public or corporate accounts.
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(i) Furnishing Information. Armstrong shall cooperate with BTFC in
furnishing such information concerning the business of Armstrong as is
reasonably necessary or requested in order to prepare and file the Registration
Statement and Prospectus/Proxy Statement to be used in connection with the
meeting of the stockholders of Armstrong as provided in Section 3.01 hereof, or
to prepare and file any applications for regulatory or governmental approvals.
(j) Certain Tax Matters.
(i) Tax Returns and Payment of Taxes for Periods Through the Closing
Date. Armstrong shall include its income on its federal income tax return
for all periods up to and including the Closing Date and will pay any tax
due thereon. Armstrong also shall pay its state or local income Tax for all
taxable periods up to and including the Closing Date. The income of
Armstrong shall be apportioned for the period up to and including the
Closing Date and the period after the Closing Date by closing the books of
Armstrong as of the close of business on the Closing Date.
(ii) Carrybacks. If Armstrong is required to carry back any item of
loss, deduction or credit that arises in any taxable period ending after
the Closing Date to a Tax return of Armstrong for any taxable period ending
on or before the Closing Date, BTFC will be entitled to an amount equal to
the refund or credit of taxes realized as a result thereof.
4.05. Covenants of All Parties. Each of the Parties covenants and agrees
that:
(a) Conduct of Business. From and after the date hereof and until the
Closing Date, each Party shall, and shall cause each of its Subsidiaries to:
(i) carry on its business diligently and substantially in the same
manner as heretofore and, except as otherwise provided in this
Reorganization Agreement, will not institute any unusual or novel methods
of management or operation of its properties or business;
(ii) maintain its books and records in the usual, ordinary and normal
course;
(iii) promptly advise the other Parties in writing of (A) the
initiation of any litigation of any kind against it or any litigation by it
and (B) the happening of any event which in the reasonable belief of its
management may have an adverse effect on either Armstrong or BTFC on a
consolidated basis, as the case may be;
(iv) continue in effect its present insurance coverage at the present
levels on all properties, assets, business and personnel;
(v) use its best efforts to preserve its business organization intact,
to keep available its present employees, to preserve its relationships with
customers and others having business dealings with it and to maintain all
of its tangible property in customary repair, order and condition
(reasonable wear and tear excepted); and
(vi) ensure that its executive officers shall meet periodically with
the executive officers of the other Parties to exchange information on
their respective institutions, and to facilitate an orderly transition
following the Closing Date.
(b) Environmental Studies.
(i) Within forty-five days following the date of this Reorganization
Agreement, BTFC shall cause to be completed, at its sole cost and expense,
a Phase I environmental assessment ("Phase I assessment") of all real
estate owned by Armstrong other than the Lentz Property referred to in
clause (ii) below (the "Armstrong Premises") and shall deliver a copy of
each such Phase I assessment to Armstrong. If BTFC should determine
pursuant to the results of any such Phase I assessment that (A) there has
been an Environmental Condition affecting the Armstrong Premises or any
storage, discharge, disposal, release or emission of any Hazardous
Substance in, on or from the Armstrong Premises and (B) BTFC reasonably
believes that it could become responsible for the remediation of such
storage, discharge, disposal, release or emission or become liable for
monetary damages resulting therefrom, and (C) the remediation costs or
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potential liability is greater than $100,000, then BTFC shall inform
Armstrong in writing with specificity, including a good faith estimate of
the cost of remediation, within thirty (30) days of BTFC's receipt of the
Phase I assessment, and BTFC may, in its sole discretion, terminate this
Reorganization Agreement.
(ii) Within forty-five days following the date of this Reorganization
Agreement, BTFC shall cause to be completed, at its sole cost and expense,
a Phase II environmental assessment ("Phase II assessment") of Armstrong's
Owned Real Property on Route 66 in Manorville, Pennsylvania (the "Lentz
Property") and shall deliver a copy of such Phase II assessment to
Armstrong. If BTFC should determine pursuant to the results of such Phase
II assessment that (A) there has been an Environmental Condition affecting
the Lentz Property or any storage, discharge, disposal, release or emission
of any Hazardous Substance in, on or from the Lentz Property and (B) BTFC
reasonably believes that it could become responsible for the remediation of
such storage, discharge, disposal, release or emission or become liable for
monetary damages resulting therefrom, and (C) remediation costs or
potential liability is greater than $200,000, then BTFC shall inform
Armstrong in writing with specificity, including a good faith estimate of
the cost of remediation, within thirty (30) days of BTFC's receipt of the
Phase II assessment, and BTFC may, in its sole discretion, terminate this
Reorganization Agreement.
(c) Mutual Cooperation on Tax Matters. Armstrong and BTFC shall each
provide the other with such assistance as may reasonably be requested by any of
them in connection with the preparation of any Tax return, any Tax audit, or any
judicial or administrative proceedings relating to any Tax, and each will retain
and provide the other with any records or information that may be relevant to
such Tax return, Tax audit, proceeding or determination. The party requesting
assistance hereunder shall reimburse the other for direct expenses incurred in
providing such assistance.
(d) Fulfillment of Agreements. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other under
Article VI that are not beyond its reasonable control to be satisfied on or
prior to the Closing and shall use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Reorganization Agreement.
(e) Bank Regulatory Applications. As promptly as practicable after the
date hereof, BTFC and/or Johnstown, as appropriate, (i) shall submit any
requisite applications for prior approval of the transactions contemplated
herein and in the Articles of Merger between Armstrong and Johnstown to the
appropriate federal and state (if applicable) financial institution regulatory
authorities depending upon the structure of the Merger, (ii) BTFC shall submit
an application for prior approval of the Merger to the Federal Reserve Board
pursuant to the Bank Merger Act and Section 5(d)(3) of the FDIA, and (iii) each
of the parties hereto shall, and they shall cause their respective Subsidiaries
to, submit any applications, notices or other filings to any other state or
federal government agency, department or body the approval of which is required
for consummation of the Merger. BTFC and Armstrong each represents and warrants
to the other that all information concerning it, its Affiliates and their
respective directors, officers, stockholders and Subsidiaries included (or
submitted for inclusion) in any such application shall be true, correct and
complete in all material respects.
4.06. Covenants of BTFC and Johnstown. BTFC and Johnstown hereby covenant
and agree that:
(a) Access to Corporate Records. Until the Closing Date, BTFC and
Johnstown shall give Armstrong and its representatives full access during normal
business hours to all its property, documents, contracts and records and such
information with respect to its business affairs and properties (in each case
including those of its Subsidiaries) as Armstrong from time to time may
reasonably request; provided, however, that BTFC and Johnstown shall not be
required to give such access or information to the extent that it is prohibited
therefrom by a rule, regulation or order of any regulatory body. All documents,
contracts, records or information obtained pursuant to this Section 4.06(a)
shall be and remain subject to the confidentiality provisions of Section 2.08 of
this Reorganization Agreement.
(b) Financial Statements. BTFC shall promptly provide Armstrong with
copies of its annual and quarterly financial statements, as included in its
reports on Form 10-K or 10-Q, respectively, as filed with the SEC pursuant to
the requirements of the Exchange Act, for the periods ending between the date of
this Reorganization
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Agreement and the Effective Time of the Merger. Until the Closing Date, BTFC
will provide copies of any reports it files with the SEC under the Exchange Act
to Armstrong on a prompt and timely basis.
(c) Consents and Approvals. BTFC and Johnstown shall use their best
efforts to obtain the approval or consent of any federal, state or other
regulatory agency having jurisdiction to the extent that such approvals or
consents are required to effect the Merger and the other transactions
contemplated hereby.
(d) Notice of Changes. Until the Effective Time of the Merger, BTFC and
Johnstown shall give Armstrong written notice of any material change or
inaccuracies in any data previously given or made available to Armstrong
pursuant to this Reorganization Agreement.
(e) Furnishing Information. BTFC and Johnstown shall cooperate with
Armstrong in furnishing such information concerning the business of BTFC and
Johnstown as is reasonably necessary or requested in order to prepare and file
the Registration Statement and Prospectus/Proxy Statement to be used in
connection with the meetings of the shareholders of Armstrong as provided in
Section 3.01 hereof, or to prepare and file any applications for regulatory or
governmental approvals. BTFC shall provide to Armstrong and their respective
counsel a copy of the Registration Statement and each application for regulatory
or governmental approval, including all amendments to such documents, in draft
form prior to filing and, as soon as practicable after the date of filing, a
copy of the filing. BTFC shall provide to Armstrong and their respective counsel
a copy of all correspondence to and from the various regulatory agencies with
respect to the Registration Statement and the regulatory applications.
(f) Indemnification of and Liability Insurance for Armstrong Officers and
Directors.
(i) After the Effective Time of the Merger, BTFC, as successor to
Armstrong, shall indemnify and hold harmless any former directors,
officers, employees or agents of Armstrong who have rights to
indemnification under the articles of incorporation and bylaws of Armstrong
and the BCL from and against any and all claims, losses, liabilities or
damages arising out of or in connection with any of their activities in
such capacities or on behalf of, or at the request of, Armstrong prior to
the Effective Time of the Merger ("Claims") in accordance with and to the
extent required under the articles of incorporation and bylaws of BTFC and
the BCL. Further, BTFC shall be obligated to advance expenses incurred with
respect to the foregoing, as they are incurred, in each case only to the
extent such advances are required under the articles of incorporation and
bylaws of BTFC as in effect on the date hereof and the BCL. The obligations
of BTFC specified in the preceding sentences shall survive the Merger and
shall continue in full force and effect following the Effective Time of the
Merger for a period of no more than one year; provided, that all rights to
indemnification in respect of any Claim asserted or made within such period
shall continue until the final disposition of such Claim. BTFC shall
provide officers and directors liability insurance coverage for all former
directors and officers of Armstrong, whether or not they become part of the
BTFC organization after the Effective Time of the Merger, to the same
extent as such coverage is provided to Johnstown's officers and directors
for a period of one year following the Effective Time of the Merger. This
section shall not increase, in any manner, any liabilities or obligations
BTFC would otherwise have as the successor by merger to Armstrong.
(ii) BTFC will indemnify and hold harmless Armstrong and each Person,
if any, who controls Armstrong within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several, to
which BTFC or such controlling Persons may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (A) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Prospectus/Proxy Statement or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading to the extent that any such statement or omission
relates to BTFC or (B) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact or any omission or alleged
omission to state a material fact required to be stated or necessary to
make the statements not misleading in any document distributed to any
Armstrong shareholder to the extent that any such statement or omission
relates to BTFC, and will reimburse Armstrong and each such controlling
Person for any legal or other expenses reasonably incurred
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by Armstrong or such controlling Person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that BTFC will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in any of the Prospectus/Proxy Statement or any amendment or
supplement thereto, or any related preliminary prospectus that was made or
omitted in reliance upon and in conformity with written information
furnished by Armstrong specifically for use therein. This indemnity
agreement will be in addition to any liability which BTFC may otherwise
have.
(iii) Promptly after receipt by an indemnified party under this
Section 4.06(f) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section 4.06(f), notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have
to any indemnified party otherwise than under this Section 4.06(f). In case
any such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section 4.06(f) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(iv) If recovery is not available under the foregoing indemnification
provisions of this Section 4.06(f) for any reason other than as specified
therein, the parties entitled to indemnification by the terms thereof shall
be entitled to contribution for liabilities and expenses, except to the
extent that contribution is not permitted under Section 11(f) of the
Securities Act. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative
benefits received by each party from the transactions contemplated hereby,
the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Armstrong, Johnstown
and BTFC agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capital allocations.
(g) Sale of Computer System. At the request of Farmers National Bank of
Kittanning ("Farmers") on or before the Closing, BTFC shall sell to Farmers the
computer system that Farmers has jointly owned with Armstrong for the book value
as of September 30, 1995 of that system.
(h) Employee Matters.
(i) Any full-time employee of Armstrong (except Coleman Clougherty)
whose employment with the Resulting Bank is terminated, other than for
cause, by BTFC within six months after the Effective Time of the Merger,
and not offered a comparable job with BTFC or an affiliate of BTFC, will be
paid severance pay equal to one week's W-2 compensation multiplied by each
year of service with Armstrong not exceeding three months salary (except
that the individuals listed on Schedule 4.06(h) shall be entitled to a
maximum of six months salary). For purposes of this section, a job shall
not be considered comparable if it requires the employee to work less than
30 hours per week or is at a location more than 30 miles from Armstrong's
main office.
(ii) BTFC shall pay Coleman Clougherty severance pay equal to $200,000
on the Closing Date.
(iii) All employees of Armstrong immediately prior to the Effective
Time of the Merger who are employed by Johnstown following the Effective
Time of the Merger ("Transferred Employees") will be entitled to
participate in BTFC's employee benefit plans as to which they are eligible
without fulfilling any vesting requirement but shall not be entitled to any
credit for their length of service, compensation, job classification or
position with Armstrong. BTFC agrees that any pre-existing condition,
limitation or exclusion in its health plans shall not apply to Transferred
Employees or their covered dependents who are
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covered under a medical or hospitalization indemnity plan maintained by
Armstrong on the date of the Merger and then change coverage to BTFC's
medical or hospitalization indemnity health plan at the time such
Transferred Employees are first given the option to enroll in BTFC's health
plans. Except with respect to any defined benefit pension plan sponsored by
BTFC or an Affiliate of BTFC, a Transferred Employee's service with
Armstrong shall be recognized as service with BTFC for purposes of
eligibility, participation and vesting, but not benefit accruals, subject
to applicable break-in-service rules and to the extent permissible under
all applicable laws and regulations and the terms and benefits of BTFC's
current benefit plans or those of its Affiliates. With respect to any
defined benefit pension plans sponsored by BTFC or an Affiliate of BTFC,
Transferred Employees will be provided such service and benefits
thereunder, if any, as may be required by the Code, ERISA, or other
applicable law.
Nothing contained in this Section shall be deemed to be a contract for
employment nor a guaranty or right to employment with BTFC or its Affiliates for
any Person, nor shall anything contained in this Section constitute an agreement
by BTFC or its Affiliates not to revise, amend, revoke, or terminate any
employee benefit plan or arrangement that it may in the future make available to
its employees, including Transferred Employees. Notwithstanding anything
contained herein to the contrary, the obligations of BTFC contained in this
Section shall survive the Closing.
(i) Registration Statement and Joint Proxy Statement. BTFC shall
prepare, and shall file with the SEC, and shall use its best efforts to
cause to become effective, the Registration Statement covering the shares
of BTFC Common Stock to be delivered pursuant to this Reorganization
Agreement and shall use its best efforts to register or qualify such
securities, if required, under applicable state securities laws. If any
material change occurs in the facts set forth in the Registration
Statement, BTFC shall promptly notify Armstrong in writing of such change
(other than with respect to information supplied by Armstrong for inclusion
therein) and shall prepare, in accordance with the requirements of the
Securities Act of 1933, as amended, and file amendments to the Registration
Statement that may be appropriate or required.
ARTICLE V
REGISTRATION RIGHTS
5.01. Incidental Registration.
(a) If prior to three years after the Effective Time of the Merger, BTFC
proposes to register any of its securities under the Securities Act (other than
by a registration on Form S-4, S-8, or any successor or similar forms), whether
or not for sale for its own account, it will at such time give prompt written
notice to all holders of Registrable Securities of its intention to do so/and of
such holders' rights under this Section 5.01. Upon the written request of any
such holder made within 20 days after the receipt of such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and the intended method of disposition thereof), BTFC will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which BTFC has been so requested to register by the holders thereof,
to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered, by inclusion of such Registrable Securities in the registration
statement which covers the securities which BTFC proposes to register, provided
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, BTFC shall determine for any reason
either not to register or to delay registration of such securities, BTFC may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 5.02, and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 5.01 shall relieve BTFC
of its obligation to effect any registration upon
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request under Section 5.02, nor shall any such registration hereunder be deemed
to have been effected pursuant to Section 5.02.
(b) If (i) the registration pursuant to this Section 5.01 involves an
underwritten offering of the securities so being registered, whether or not for
sale for the account of BTFC, to be distributed (on a firm commitment basis) by
or through one or more underwriters of recognized standing under underwriting
terms appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale for the account of holders of Registrable
Securities are not also to be included in such underwritten offering (either
because BTFC has not been requested so to include such Registrable Securities
pursuant to Section 5.04(b) or, if requested to do so, is not obligated to do so
under Section 5.04(b)), and (iii) the managing underwriter of such underwritten
offering shall inform BTFC and holders of the Registrable Securities requesting
such registration by letter of its belief that the distribution of all or a
specified number of such Registrable Securities concurrently with the securities
being distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such writing
to state the basis of such belief and the approximate number of such Registrable
Securities which may be distributed without such effect), then BTFC may, upon
written notice to all holders of such Registrable Securities, reduce pro rata
(if and to the extent stated by such managing underwriter to be necessary to
eliminate such effect) the number of such Registrable Securities the
registration of which shall have been requested by each holder of Registrable
Securities so that the resultant aggregate number of such Registrable Securities
so included in such registration shall be equal to the number of shares stated
in such managing underwriter's letter.
(c) BTFC shall pay all Registration Expenses in connection with all
registrations requested pursuant to this Section 5.01.
5.02. Registration on Request.
(a) If, at any time prior to three years after the Effective Date of the
Merger, holders of at least a majority (in number of shares) of Registrable
Securities then held, or, at any time during March 1998, any holder of
Registrable Securities then held, requests in writing that BTFC effect the
registration under the Securities Act of all or part of their shares of BTFC
Common Stock, BTFC will promptly give written notice of such requested
registration to all holders of Registrable Securities, and thereupon BTFC will
use its best efforts to effect the registration under the Securities Act of:
(i) the Registrable Securities which BTFC has been so requested to
register by the holders of Registrable Securities,
(ii) all other Registrable Securities the holders of which shall have
made a written request to BTFC for registration thereof within 30 days
after the giving of such written notice by BTFC, and
(iii) all shares of Common Stock which BTFC may elect to register in
connection with the offering of Registrable Securities pursuant to this
Section 5.02,
all to the extent requisite to permit the disposition of the Registrable
Securities and the additional shares of Common Stock, if any, so to be
registered, in an underwritten offering, provided that the shareholders of
Armstrong shall be entitled to not more than one registration upon request,
and provided further that BTFC will not be required to register securities
under this Section 5.02 to the extent that in the opinion of BTFC's
counsel, which shall be reasonably satisfactory to the holders of
Registrable Securities, the sale of Registrable Securities covered by the
written request for registration may be affected pursuant to Rule 144 or
otherwise without registration within a 90 day period.
(b) Registrations under this Section 5.02 shall be on such appropriate
registration form of the SEC (i) as shall be selected by BTFC and (ii) as shall
permit the disposition of such Registrable Securities in an underwritten
offering. BTFC agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) BTFC will pay all Registration Expenses in connection with
registrations requested pursuant to this Section 5.02.
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(d) A registration requested pursuant to this Section 5.02 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, provided that a registration which does not become
effective after BTFC has filed a registration statement with respect thereto
solely by reason of the refusal to proceed of the holders of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel
relating to a matter with respect to BTFC) shall be deemed to have been effected
by BTFC at the request of the holders of Registrable Securities unless the
holders of Registrable Securities shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court for
any reason, or (iii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than by reason of some act or omission by
the holders of Registrable Securities.
(e) If a requested registration pursuant to this Section 5.02 shall involve
an underwritten offering, the underwriter or underwriters thereof shall be
selected by BTFC and shall be reasonably acceptable to the holders of at least a
majority (by number of shares) of the Registrable Securities as to which
registration has been requested.
(f) If a requested registration pursuant to this Section 5.02 shall involve
an underwritten offering, and the managing underwriter shall advise BTFC in
writing (with a copy to each holder of Registrable Securities requesting
registration) that, in its opinion, the number of securities requested to be
included in such registration (including securities of BTFC which are not
Registrable Securities) exceeds the number which can be sold in such offering
within a price range acceptable to the holders of a majority of the Registrable
Securities so requested to be included, BTFC will include in such registration,
to the extent of the number which BTFC is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by the holder or holders of Registrable Securities, pro rata among
such holders requesting such registration on the basis of the number of such
securities requested to be included by such holders, (ii) second, other BTFC
Common Stock, including that held by the holders of Registrable Securities, and
(iii) third, BTFC Common Stock that BTFC proposes to sell and other BTFC Common
Stock included in such registration by the holders thereof.
5.03. Registration Procedures. If and whenever (a) BTFC is required to use
its best efforts to effect the registration of any Registrable Securities under
the Securities Act as provided in Sections 5.01 and 5.02 or (b) there is a
Requesting Holder (as defined in Section 5.06) in connection with any other
proposed registration by BTFC under the Securities Act, BTFC shall, as
expeditiously as possible:
(i) prepare and (within 60 days after the request of a holder of
Registrable Securities eligible to make such a request under Sections 5.01
or 5.02 or as soon thereafter as possible) file with the SEC the requisite
registration statement to effect such registration and thereafter use its
best efforts to cause such registration statement to become and remain
effective, provided however that BTFC may discontinue any registration of
its securities which are not Registrable Securities (and, under the
circumstances specified in Section 5.02(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto, provided further that before
filing such registration statement or any amendments thereto, BTFC will
furnish to the counsel selected by the holders of Registrable Securities
which are to be included in such registration, copies of all such documents
proposed to be filed, which documents will be subject to the review of such
counsel;
(ii) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement for 60
days after such registration statement becomes effective;
(iii) furnish to each seller of Registrable Securities covered by such
registration statement and each Requesting Holder and each underwriter, if
any, of the securities being sold by such seller such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and any
other prospectus
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filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such
seller and underwriter, if any, may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such seller;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws of such jurisdictions as
any seller thereof and any underwriter, if any, of the securities being
sold by such seller and any Requesting Holder shall reasonably request, to
keep such registrations or qualifications in effect for so long as such
registration statement remains in effect, and take any other action which
may be reasonably necessary or advisable to enable such seller and
underwriter, if any, to consummate the disposition in such jurisdictions of
the securities owned by such seller, except that BTFC shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (iv) be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and each
Requesting Holder a signed counterpart, addressed to such seller, such
Requesting Holder and the underwriters, if any, of:
(x) an opinion of counsel for BTFC, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to such seller, and
(y) a "comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, a letter dated the date of the closing under the underwriting
agreement), signed by the independent public accountants who have
certified BTFC's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of the accountants' letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters, and,
in the case of the legal opinion, such other legal matters, as such
seller or such Requesting Holder or the underwriters, if any may
reasonably request;
(vii) notify the holders of Registrable Securities and the managing
underwriter or underwriters, if any, promptly and confirm such advice in
writing promptly thereafter:
(A) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto, when the
same has become effective;
(B) of any request by the SEC for amendments or supplements to the
registration statement or the prospectus or for additional information;
(C) of the issuance by the SEC of any stop order suspending the
effectiveness of the registration or the initiation of any proceedings
by any Person for that purpose;
(D) if at any time the representations and warranties of BTFC made as
contemplated by Section 5.04 below cease to be true and correct;
(E) of the receipt by BTFC of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the
initiation or threat of any proceeding for such purpose; and
(viii) notify each seller of Registrable Securities covered by such
registration statement and each Requesting Holder, at any time when a
prospectus relating thereto is required to be delivered under the
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Securities Act, upon BTFC's discovery that, or upon the happening of any
event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller or
Requesting Holder promptly prepare and furnish to such seller or Requesting
Holder and each underwriter, if any, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing;
(ix) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
(x) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period
of at least twelve months, but not more than eighteen months, beginning
with the first full calendar quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and will furnish to each
such seller and each Requesting Holder at least five business days prior to
the filing thereof a copy of any amendment or supplement to such
registration statement or prospectus and shall not file any thereof to
which the holders of at least a majority of the Registrable Securities
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or of the rules or regulations thereunder;
(xi) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement;
(xii) use its best efforts to list all Registrable Securities covered
by such registration statement on NASDAQ; and
(xiii) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration.
BTFC may require each seller of Registrable Securities as to which any
registration is being effected to furnish BTFC such information regarding such
seller and the distribution of such securities as BTFC may from time to time
reasonably request in writing.
BTFC will not file any registration statement or amendment thereto or any
prospectus or any supplement thereto (including such documents incorporated by
reference and proposed to be filed after the initial filing of the registration)
to which the holders of at least a majority of the Registrable Securities
covered by such registration statement or the underwriter or underwriters, if
any, shall reasonably object, provided that BTFC may file such document in a
form required by law or upon the advice of its counsel.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from BTFC to the effect
that any event of the kind described in subdivision (viii) of this Section 5.03
has or might occur, such holder will forthwith discontinue such holder's
disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until notified by BTFC that such
disposition may resume and such holder's receipt of the copies of the
supplemented or amended prospectus if required by subdivision (viii) of this
Section 5.03 and, if so directed by BTFC, will deliver to BTFC (at BTFC's
expense) all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice. In the event BTFC shall give any such
notice, the period mentioned in paragraph (ii) of this Section 5.03 shall be
extended by the length of the period from and including the date when each
seller of any Registrable Securities covered by such registration statement
shall have received such notice to the date on which each such seller has
received the copies of the supplemented or amended prospectus contemplated by
paragraph (viii) of this Section 5.03.
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If any such registration or comparable statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any securities of
BTFC, then such holder shall have the right to require (i) the insertion therein
of language, in form and substance satisfactory to such holder, to the effect
that the holding by such holder of such securities is not to be construed as a
recommendation by such holder of the investment quality of BTFC's securities
covered thereby and that such holding does not imply that such holder will
assist in meeting any future financial requirements of BTFC, or (ii) in the
event that such reference to such holder by name or otherwise is not required by
the Securities Act or any similar federal statute then in force, the deletion of
the reference to such holder.
5.04. Underwritten Offerings.
(a) If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested under
Section 5.02, BTFC will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be satisfactory in substance
and form to BTFC, each such holder and the underwriters, and to contain such
representations and warranties by BTFC and such other terms as are generally
prevailing in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 5.07. The
holders of the Registrable Securities will cooperate with BTFC in the
negotiation of the underwriting agreement and will give consideration to the
reasonable suggestions of BTFC regarding the form thereof, provided that nothing
herein contained shall diminish the foregoing obligations of BTFC. The holders
of Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and shall be required to make such
holder's proportionate share of the representations and warranties contained
therein, provided that the foregoing shall only be applicable if such
underwriting agreement or a separate agreement between BTFC and such holder
shall contain a provision that limits the liability of such holder to the
proceeds to be received by such holder from the sale of such holder's
Registrable Securities and that provides that such holder's liability shall be
pro rata in accordance with the number of Registrable Securities sold by such
holder as compared to the aggregate number of Registrable Securities and other
securities sold in such underwritten offering.
(b) If BTFC at any time proposes to register any of its securities under
the Securities Act as contemplated by Section 5.01 and such securities are to be
distributed by or through one or more underwriters, BTFC will, if requested by
any holder of Registrable Securities as provided in Section 5.01 and subject to
the provisions of Section 5.01(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and sold by
such holder among the securities to be distributed by such underwriters,
provided that if the managing underwriter of such underwritten offering shall
inform the holders of the Registrable Securities requesting such registration
and the holders of any other shares of Common Stock which shall have exercised,
in respect of such underwritten offering, registration rights comparable to the
rights under Section 5.01 by letter of its belief that inclusion in such
underwritten distribution of all or a specified number of such Registrable
Securities or of such other shares of Common Stock so requested to be included
would interfere with the successful marketing of the Common Stock (other than
such Registrable Securities and other shares of Common Stock so requested to be
included) by the underwriters (such writing to state the basis of such belief
and the approximate number of such Registrable Securities and shares of other
Common Stock so requested to be included which may be included in such
underwritten offering without such effect), then BTFC may, upon written notice
to all holders of such Registrable Securities and of such other shares of Common
Stock so requested to be included, exclude pro rata from such underwritten
offering (if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect) the number of such Registrable Securities
and shares of such other Common Stock so requested to be included the
registration of which shall have been requested by each holder of Registrable
Securities and by the holders of such other Common Stock so that the resultant
aggregate number of such Registrable Securities and of such other shares of
Common Stock so requested to be included which are included in such underwritten
offering shall be equal to the approximate number of shares stated in such
managing underwriter's letter. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting agreement
between BTFC and such underwriters and shall be required to make such holder's
proportionate share of the representations and warranties contained therein,
provided that the foregoing shall only be applicable if such underwriting
agreement or a separate agreement between BTFC and such holder shall contain a
provision that limits the liability of such
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holder to the proceeds to be received by such holder from the sale of such
holder's Registrable Securities and that provides that such holder's liability
shall be pro rata in accordance with the number of Registrable Securities sold
by such holder as compared to the aggregate number of Registrable Securities and
other securities sold in such underwritten offering.
(c) Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities, if so required by the managing underwriter, not to sell,
make any short sale of, loan, grant any option for the purchase of, effect any
public sale or distribution of or otherwise dispose of any equity securities of
BTFC, during the seven days prior to and the 90 days after any underwritten
registration pursuant to Section 5.01 or 5.02 has become effective, except as
part of such underwritten registration, whether or not such holder participates
in such registration. Each holder of Registrable Securities agrees that BTFC may
instruct its transfer agent to place stop transfer notations in its records to
enforce this Section 5.04(c).
(d) No Person may participate in any underwritten offering hereunder unless
such Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved, subject to the terms and conditions
hereof, by BTFC and the holders of a majority of Registrable Securities to be
included in such underwritten offering, (ii) completes and executes all
questionnaires, indemnities, underwriting agreements and other documents (other
than powers of attorney) required under the terms of such underwriting
arrangements and (iii) makes the representations and warranties provided for in
Section 5.04(a) or 5.04(b), as the case may be.
5.05. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, BTFC will give the holders of Registrable Securities
registered under such registration statement, their underwriters, if any, each
Requesting Holder and their respective counsel and accountants, the opportunity
to participate in the preparation of such registration statement, each
prospectus included therein or filed with the SEC, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of BTFC with its officers
and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
5.06. Rights of Requesting Holders. BTFC will not file any registration
statement under the Securities Act (other than by a registration on Form S-4 or
S-8), unless it shall first have given to each holder of Registrable Securities
at the time outstanding (other than any such Person who acquired all such
securities held by such Person in a public offering registered under the
Securities Act or as the direct or indirect transferee of shares initially
issued in such an offering), at least 20 days prior written notice thereof. Any
such Person who shall so request within 20 days after such notice (a "Requesting
Holder") shall have the rights of a Requesting Holder provided in Sections 5.03,
5.05 and 5.07. In addition, if any such registration statement refers to any
Requesting Holder by name or otherwise as the holder of any securities of BTFC,
then such holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such holder, to the effect that
the holding by such holder of such securities does not necessarily make such
holder a "controlling Person" of BTFC within the meaning of the Securities Act
and is not to be construed as a recommendation by such holder of the investment
quality of BTFC's debt or equity securities covered thereby and that such
holding does not imply that such holder will assist in meeting any future
financial requirements of BTFC, or (b) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any rules
and regulations promulgated thereunder, the deletion of the reference to such
holder.
5.07. Indemnification.
(a) In the event of any registration of any securities of BTFC under the
Securities Act, BTFC will, and hereby does, indemnify and hold harmless (i) in
the case of any registration statement filed pursuant to Section 5.01 or 5.02,
the holder of any Registrable Securities covered by such registration statement,
its directors and officers, each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, and (ii) in the case of any registration statement of BTFC, any
Requesting Holder, its directors and officers and each other Person, if any, who
controls such Requesting Holder within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such holder or Requesting Holder or
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any such director or officer or underwriter or controlling Person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
BTFC will reimburse such holder, such Requesting Holder and each such director,
officer, underwriter and controlling Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that BTFC shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to BTFC
through an instrument duly executed by such holder or Requesting Holder, as the
case may be, specifically stating that it is for use in the preparation thereof,
provided further that BTFC shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such Requesting Holder or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by such holder.
(b) BTFC may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to Section 5.03, that
BTFC shall have received an undertaking satisfactory to it from the prospective
seller of such Registrable Securities, to indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 5.07) BTFC, each director of BTFC, each officer of BTFC and each other
Person, if any, who controls BTFC within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or alleged omission
from such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to BTFC
through an instrument duly executed by such seller specifically stating that it
is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Any
such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of BTFC or any such director, officer or
controlling Person and shall survive the transfer of such securities by such
seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 5.07, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 5.07, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
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defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. No indemnified party shall consent to entry of any judgment
or enter into any settlement of any such action the defense of which has been
assumed by an indemnifying party without the consent of such indemnifying party.
(d) Indemnification similar to that specified in the preceding subdivisions
of this Section 5.07 (with appropriate modifications) shall be given by BTFC and
each seller of Registrable Securities with respect to any required registration
or other qualification of securities under any Federal or state law or
regulation of any governmental authority, other than the Securities Act.
(e) The indemnification required by this Section 5.07 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
(f) If the indemnification provided for in the preceding subdivisions of
this Section 5.07 is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, claim, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits received by BTFC on the one hand
and the holder or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of BTFC on the one hand and of the holder or
underwriter, as the case may be, on the other in connection with the statements
or omissions which resulted in such expense, loss, damage or liability, as well
as any other relevant equitable considerations. The relative benefits received
by BTFC on the one hand and the holder or underwriter, as the case may be, on
the other in connection with the distribution of the Registrable Securities
shall be deemed to be in the same proportion as the total net proceeds received
by BTFC from the initial sale of the Registrable Securities by BTFC to the
purchasers bear to the gain realized by the selling holder or the underwriting
discounts and commissions received by the underwriter, as the case may be. The
relative fault of BTFC on the one hand and of the holder or underwriter, as the
case may be, on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by BTFC, by
the holder or by the underwriter and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, provided that the foregoing contribution agreement shall not inure to
the benefit of any indemnified party if indemnification would be unavailable to
such indemnified party by reason of the provisions contained in the first
sentence of subdivision (a) of this Section 5.07, and in no event shall the
obligation of any indemnifying party to contribute under this subdivision (f)
exceed the amount that such indemnifying party would have been obligated to pay
by way of indemnification if the indemnification provided for under subdivisions
(a) or (b) of this Section 5.07 had been available under the circumstances.
BTFC and the holders of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders, Requesting Holders and
any underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and subdivision (c) of this
Section 5.07 and any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person
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guilty of fraudulent misrepresentation (within the meaning of Section 11(f) the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
5.08 Rule 144. BTFC will file the reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the SEC. Upon the request of any holder of Registrable Securities, BTFC will
deliver to such holder a written statement as to whether it has complied with
such requirements.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. Conditions Precedent to the Obligations of BTFC and Johnstown. The
obligations of BTFC and Johnstown to consummate the transactions contemplated by
this Reorganization Agreement shall be subject to the satisfaction, on or before
the Closing Date, of each and every one of the following conditions, all or any
of which may be waived, in whole or in part, by BTFC and Johnstown to the extent
permitted by law:
(a) Performance of Covenants. Each of the covenants to be performed by
Armstrong hereunder on or before the Closing Date shall have been duly performed
in all material respects; and the President and Secretary of Armstrong shall
have executed and delivered to BTFC a certificate, dated as of the Closing Date,
to the effect that such officers have no knowledge of the nonfulfillment of the
foregoing condition.
(b) Representations True at Closing. The representations and warranties
made by Armstrong herein and in any certificate provided to BTFC hereunder shall
be true and correct in all material respects on the Closing Date with the same
force and effect as though such representations and warranties had been made on
and as of such time (or as of the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except that the representations made in Section 4.01(o) shall be modified by the
results of the Phase I assessment referred to in Section 4.05(b)(i) or the Phase
II assessment referred to in Section 4.05(b)(ii), and the President and
Secretary of Armstrong shall have executed and delivered to BTFC a certificate,
dated as of the Closing Date, to the effect that such officers have no knowledge
of the nonfulfillment of the foregoing condition.
(c) Certified Resolutions. Armstrong shall have furnished BTFC with a
certified copy of resolutions duly adopted by its Board of Directors authorizing
and approving this Reorganization Agreement and the transactions contemplated
hereby.
(d) Shareholder Approval. This Reorganization Agreement shall have been
approved by the affirmative vote of a majority of the votes cast by all holders
of Armstrong Common Stock entitled to vote thereon, and Armstrong shall have
furnished BTFC with a certified copy of resolutions duly adopted by its
shareholders authorizing and approving this Reorganization Agreement and the
transactions contemplated hereby.
(e) Government Approvals and Other Consents. BTFC, Johnstown and Armstrong
shall have received in form and substance satisfactory to BTFC all necessary
federal and state governmental and regulatory approvals and other consents
necessary to permit consummation of the Merger and the transactions contemplated
hereby (including but not limited to approvals of the Federal Reserve Board, the
FDIC or other applicable federal regulatory agency and the Department of
Banking). No such approvals and consents shall require BTFC or such Subsidiary
to enter into any agreement or stipulation that is inconsistent with prior FDIC
or Department of Banking practice or procedure, and all applicable waiting
periods required by law shall have expired or elapsed.
(f) No Injunction. No action, proceeding, regulation or legislation shall
have been instituted or threatened before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of, this
Reorganization Agreement, the consummation of the transactions contemplated
hereby or the Merger, which, in the good faith judgment of BTFC, would make it
inadvisable to consummate such transactions.
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(g) No Material Misstatements or Omissions. Subject to the cure provisions
of Section 2.07(f), BTFC shall not have discovered any material error,
misstatement or omission in any information furnished in writing or to be
furnished in writing to BTFC hereunder, or in the information to be furnished by
Armstrong and contained in the Registration Statement.
(h) Changes in Financial Condition. Since the date of this Reorganization
Agreement, there shall not have occurred any material adverse change in the
business, financial condition results of operation or prospects of Armstrong,
other than changes resulting from or attributable to (i) changes in laws or
regulations, generally accepted accounting principles, or interpretations
thereof, that affect the banking industry generally, or (ii) the payment of any
severance benefits to Coleman Clougherty or any other key employee pursuant to
any employment arrangement, if such payment is made by Armstrong at the request
of BTFC.
(i) Registration Statement. The Registration Statement covering the shares
of BTFC Common Stock to be issued to the shareholders of Armstrong under this
Reorganization Agreement shall have been declared effective by the SEC, shall be
exempt or declared effective in each state having jurisdiction thereon, and no
stop order proceeding shall be pending or threatened with respect thereto.
(j) Opinion of Armstrong Counsel. An opinion of Manatt, Phelps & Phillips,
counsel for Armstrong, and Blank, Rome, Comisky & McCauley with respect to the
opinions set forth in the first sentence of (i) and (ii) below, shall have been
delivered to BTFC, dated the Closing Date, and in form and substance
satisfactory to BTFC and its counsel, substantially to the effect that:
(i) Armstrong is a bank and trust company duly incorporated and
validly existing under the Banking Code and has the corporate power and
authority to carry on its business as described in the Prospectus/Proxy
Statement and to carry out the transactions contemplated by this
Reorganization Agreement. The authorized capital stock of Armstrong
consists of 8,000 shares of common stock having a par value of $50.00 per
share, of which no more than 8,000 shares are issued and outstanding as of
the date hereof and no shares are held in the treasury of Armstrong. To our
knowledge, there is no subscription, option, warrant, call, right, stock
appreciation right or commitment of any kind obligating Armstrong to issue
any of its stock or to acquire any of its stock under any circumstances or
to pay cash on account of stock appreciation.
(ii) The execution and delivery of this Reorganization Agreement and
the Plan of Merger have been duly authorized by all necessary director and
shareholder action. This Reorganization Agreement and the Plan of Merger
have been duly executed and delivered by Armstrong and, assuming due
authorization, execution and delivery by the other parties hereto, this
Reorganization Agreement and the Plan of Merger will constitute valid and
binding obligations of Armstrong, and will be enforceable in accordance
with their respective terms, except as the enforceability of each of the
above documents may be limited by (a) bankruptcy, insolvency, fraudulent
conveyance, moratorium, reorganization, conservatorship, receivership or
other similar laws from time to time in effect affecting the enforcement of
creditors' rights generally or the rights of creditors of banking
institutions, (b) general equitable principles, (c) laws relating to the
safety and soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material breaches of
such agreements, and (e) the effect or availability of equitable remedies
or injunctive relief (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iii) The execution and delivery by Armstrong of, and the performance
by Armstrong of its agreements in this Reorganization Agreement, do not (i)
violate the articles of incorporation or bylaws, as amended, of Armstrong;
(ii) breach or result in a default under any existing obligation of
Armstrong under any of the agreements identified in an officer's
certificate to be attached to the opinion; or (iii) breach or otherwise
violate any existing obligation of Armstrong under a court order which has
been identified by Armstrong in an officer's certificate to be attached to
the opinion.
In expressing such opinion, Manatt, Phelps & Phillips and Blank, Rome, Comisky &
McCauley may rely on certificates of officers and other representatives of
Armstrong as to matters of fact and certificates of public officials as to
matters within their jurisdiction. Such opinion shall be governed by the Legal
Opinion Accord of the ABA Section of Business Law (1991).
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(k) Dissenters' Shares. The number of Dissenters' Shares as of the Closing
Date shall be less than 800 shares of Armstrong Common Stock, but in no event
shall the total cash consideration paid by BTFC for Armstrong County Stock
exceed fifty percent (50%) of the total consideration paid by BTFC.
(l) Employment Agreements. Coleman Clougherty shall have waived in writing
all rights to severance pay and any other obligations Armstrong has to him in
exchange for the agreement by BTFC to pay him $200,000.00 on the Closing Date.
(m) Expenses. Armstrong shall have paid all out-of-pocket expenses and
disbursements, including legal, accounting and investment banking fees incurred
by Armstrong in connection with the Transactions, except for reasonable
out-of-pocket expenses actually incurred that the parties acknowledge have not
been billed on or before the Closing Date; and the President and Secretary of
Armstrong shall each have executed and delivered to BTFC a certificate, dated as
of the Closing Date, to the effect that such officers have no knowledge of the
nonfulfillment of the foregoing condition.
(n) Tax Opinion. BTFC shall have received an opinion of Kirkpatrick &
Lockhart LLP, in form and substance reasonably satisfactory to BTFC, dated as of
the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger will
be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368 of the Code and that accordingly no gain or loss will be
recognized by BTFC, Johnstown or Armstrong as a result of the Merger; and (ii)
no gain or loss will be recognized by Armstrong's shareholder as a result of the
receipt of BTFC Common Stock in the Merger. In rendering such opinion,
Kirkpatrick & Lockhart may require and rely upon representations contained in
certificates of officers of BTFC, Armstrong, Johnstown and others.
6.02. Conditions Precedent to the Obligations of Armstrong. The
obligations of Armstrong to consummate the transactions contemplated by this
Reorganization Agreement shall be subject to the satisfaction, on or before the
Closing Date, of each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by Armstrong to the extent permitted
by law:
(a) Performance of Covenants. Each of the covenants to be performed by
BTFC and Johnstown hereunder on or before the Closing Date shall have been duly
performed in all material respects; and the President and Secretary of BTFC and
Johnstown shall each have executed and delivered to Armstrong a certificate,
dated as of the Closing Date, to the effect that such officers have no knowledge
of the nonfulfillment of the foregoing condition.
(b) Representations True at Closing. The representations and warranties
made by BTFC and Johnstown herein and in any Certificate provided by BTFC
hereunder shall be true and correct in all material respects on the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such time (or as of the date when made in the case of any
representation and warranty which specifically relates to an earlier date), and
the President and Secretary of BTFC and Johnstown shall each have executed and
delivered to Armstrong a certificate, dated as of the Closing Date, to the
effect that such officers have no knowledge of the nonfulfillment of the
foregoing condition.
(c) Certified Resolutions. BTFC and Johnstown shall each have furnished
Armstrong with a certified copy of resolutions duly adopted by the Board of
Directors of BTFC and Johnstown authorizing this Reorganization Agreement and
the transactions contemplated hereby and by the shareholder of Johnstown
approving this Reorganization Agreement and the transactions contemplated
hereby.
(d) Government Approvals and Other Consents. BTFC, Johnstown and Armstrong
shall have received in form and substance satisfactory to Armstrong all
necessary federal and state governmental and regulatory approvals, shareholder
approvals and other consents necessary to permit consummation of the Merger
(including but not limited to approvals of the Federal Reserve Board, the FDIC,
the Department of Banking and the shareholders of Armstrong), and all applicable
waiting periods required by law shall have expired or elapsed.
(e) No Injunction. No injunction shall have been issued by any court or
governmental agency which prohibits or restricts the consummation of the
transactions contemplated by this Reorganization Agreement which, in the good
faith judgment of Armstrong, would make it inadvisable to consummate such
transactions.
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(f) No Material Misstatements or Omissions. Armstrong shall not have
discovered any material error, misstatement or omission in any information
furnished in writing or to be furnished in writing to Armstrong hereunder, or in
the information to be furnished by BTFC or Johnstown and contained in the
Registration Statement.
(g) Changes in Financial Condition. Since the date of this Reorganization
Agreement, there shall not have occurred any material adverse change in the
financial condition of BTFC on a consolidated basis, other than changes
resulting from or attributable to changes in laws or regulations, generally
accepted accounting principles, or interpretations thereof, that affect the
banking industry generally.
(h) Registration Statement. The Registration Statement covering the shares
of BTFC Common Stock to be issued to the shareholders of Armstrong under this
Reorganization Agreement shall have been declared effective by the SEC, shall be
exempt or declared effective in each state having jurisdiction thereon, and no
stop order proceeding shall be pending or threatened with respect thereto.
(i) Opinion of BTFC and Counsel. An opinion of Kirkpatrick & Lockhart LLP,
counsel for BTFC and Johnstown, shall have been delivered to Armstrong, dated
the Closing Date, and in form and substance satisfactory to Armstrong and its
counsel, substantially to the effect that:
(i) BTFC is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has full
power and authority to carry on its business as described in the
Prospectus/Proxy Statement and to carry out the transactions contemplated
by this Reorganization Agreement. The authorized capital stock of BTFC
consists of 10,000,000 shares of common stock having a par value of $5.00
per share, of which 3,826,581 shares are issued and outstanding as of the
date hereof and 2,000,000 shares of preferred stock, no par value, none of
which are issued and outstanding as of the date hereof. All issued and
outstanding shares of BTFC Common Stock are validly issued, fully paid and
nonassessable.
(ii) Johnstown is a bank and trust company duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and a member of the Federal Reserve System. Johnstown has full
power and authority to carry on its business as described in the
Prospectus/Proxy Statement and to carry out the transactions contemplated
by this Reorganization Agreement. The authorized, issued and outstanding
capital stock of Johnstown consists of 981,864 shares of common stock
having a par value of $5.00 per share. All issued and outstanding shares of
Johnstown Common Stock are validly issued, fully paid and nonassessable.
(iii) This Reorganization Agreement has been, and the Articles of
Merger, when executed and delivered, will have been, duly and validly
authorized, executed and delivered by BTFC and Johnstown, and constitute
and will constitute the valid and binding obligations of BTFC and Johnstown
and are and will be enforceable in accordance with their respective terms,
except as limited by (a) bankruptcy, insolvency, fraudulent conveyance,
moratorium, reorganization, conservatorship, receivership or other similar
laws from time to time in effect affecting the enforcement of creditors'
rights generally or the rights of creditors of insured depository
institutions, (b) general equitable principles, (c) laws relating to the
safety and soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material breaches of
such agreements, and (e) the effect or availability of equitable remedies
or injunctive relief (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(iv) Neither the execution, delivery and performance of this
Reorganization Agreement by BTFC and Johnstown, nor the consummation of the
transactions contemplated hereby, nor compliance by BTFC and Johnstown with
any of the provisions hereof will (i) violate, or conflict with, or result
in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of BTFC or any of its
Subsidiaries under any of the terms, conditions or provisions of, (A) the
articles of incorporation or bylaws, as amended, of BTFC or Johnstown, or
(B) any note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other
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instrument or obligation to which BTFC or any of its Subsidiaries is a
party or by which any of them is bound or to which any of their respective
properties or assets may be subject, except for such violations, conflicts,
breaches, defaults, etc. which would not, in the aggregate, have a material
adverse effect on BTFC's business or financial condition on a consolidated
basis, or (ii) to its knowledge, violate any judgement, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to them or
any of their respective properties or assets.
(iv) BTFC and Johnstown has obtained all necessary federal and state
governmental and regulatory approvals in order to consummate the Merger.
(v) The Registration Statement has become effective under the
Securities Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are pending or
threatened under the Securities Act.
In expressing such opinion, counsel may rely on opinions of other counsel to
BTFC and Johnstown, certificates of officers and other representatives of BTFC
and Johnstown as to matters of fact and certificates of public officials as to
matters within their jurisdiction.
(j) Fairness Opinion. Armstrong shall have received an opinion from Bahia
Advisors, Inc. dated prior to the date of the Prospectus/Proxy Statement that
the consideration to be paid to shareholders of Armstrong pursuant to this
Reorganization Agreement is fair from a financial point of view to the
shareholders of Armstrong.
6.03. Waivers. A condition precedent as set forth in this Article VI shall
be deemed to be satisfied if it has been materially and reasonably satisfied,
and no Party shall fail to consummate the transactions described herein by
reason of a breach of any covenant or the failure to satisfy a condition
precedent unless such breach or failure is material to such transactions as a
whole. Any condition waived in writing by the Party entitled to the benefit
thereof shall thereafter cease to be a condition precedent for purposes of this
Article VI.
ARTICLE VII
BROKERS AND EXPENSES
7.01. Brokers. BTFC represents and warrants to Armstrong that no broker or
finder has acted for it in connection with the execution and delivery of this
Reorganization Agreement or the transactions contemplated hereby, except for
Berwind Financial Group, Inc. Armstrong represents and warrants to BTFC that no
broker or finder has acted for it in connection with the execution and delivery
of this Reorganization Agreement or the transactions contemplated hereby, except
for Bahia Advisors, Inc. Each Party shall be indemnified and held harmless by
the other from any claim, suit, loss or expense resulting from a breach of the
other party's foregoing representation and warranty.
7.02. Expenses. Except as otherwise provided in this Reorganization
Agreement, all expenses incurred by each Party in connection with or related to
the authorization, preparation and execution of this Reorganization Agreement,
the solicitation of shareholder approval and all other matters related to the
closing of the transactions contemplated hereby, including without limiting the
generality of the foregoing, all fees and expenses of agents, representatives,
counsel and accountants employed by any such Party and the broker referred to in
Section 6.01, shall be borne solely and entirely by the Party which has incurred
the same.
ARTICLE VIII
MISCELLANEOUS
8.01 Further Assurances. From time to time as and when requested by BTFC
or Johnstown, or their respective successors or assigns, Armstrong, or the
officers and directors of Armstrong last in office prior to consummation of the
Merger, shall execute and deliver such further agreements, documents, deeds and
other instruments and shall take or cause to be taken such other actions,
including those as shall be necessary to vest or
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perfect in or to confirm of record or otherwise in the Resulting Company title
to and possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Armstrong, as shall be necessary
or advisable to carry out the purposes of and effect the transactions
contemplated by this Reorganization Agreement.
8.02. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Reorganization Agreement or in
any instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished on, the Closing Date, other than covenants that by their terms are
to survive or be performed after the Closing Date.
8.03. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or sent by first-class registered or certified mail, postage prepaid,
with return receipt requested, as follows:
(a) If to Armstrong, to:
Coleman J. Clougherty
Chairman, President and Chief Executive Officer
The Armstrong County Trust Company
227 Market Street
Kittanning, Pennsylvania 16201
with a copy to:
Edward L. Lublin, Esq.
Manatt, Phelps and Phillips
1501 M Street, N.W.
Washington, D.C. 20005
(b) If to BTFC or Johnstown, to:
John H. Anderson
Chairman and Chief Executive Officer
BT Financial Corporation
532-534 Main Street
Johnstown, Pennsylvania 15901
with a copy to:
Dennis M. Sheedy, Esquire
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
or to such other address as any such Person may designate in writing to the
other Parties at the addresses listed above, in accordance with this Section.
8.04. Binding Effect. This Reorganization Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns. This Reorganization Agreement may not be assigned by any Party
without the express written consent of the other Parties.
8.05. Headings. The Article, Section, paragraph and other headings in this
Reorganization Agreement are inserted solely as a matter of convenience and for
reference and are not a part of this Reorganization Agreement.
8.06. Counterparts. This Reorganization Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.07. Integration; No Third-Party Beneficiaries. This Reorganization
Agreement constitutes the entire understanding of the Parties with respect to
the subject matter hereof and supersedes all prior agreements, arrangements or
communications, oral or written, between the Parties hereto with respect to the
subject matter
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hereunder. This Agreement is not intended to confer upon any Person other than
the Parties hereto any rights or remedies hereunder, except for the provisions
of Section 4.04(g), 4.06(f) and 4.06(h).
8.08. Severability. If any term or other provision of this Reorganization
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any rule of law in any particular respect or
under any particular circumstances, such term or provision shall nevertheless
remain in full force and effect in all other respects and under all other
circumstances, and all other terms, conditions and provisions of this
Reorganization Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Reorganization Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
8.09. Amendments. This Reorganization Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Party
against which the enforcement of such change, waiver, discharge or termination
is sought. This Agreement is not intended to confer upon any Person other than
the Parties hereto any rights or remedies hereunder, except for the provisions
of Section 4.04(g), 4.06(f) and 4.06(h). Any of the terms or conditions of this
Reorganization Agreement may be waived at any time by the Party which is
entitled to the benefit thereof, or any of such terms or conditions may be
amended or modified in whole or in part at any time before or after the vote of
the shareholders of Armstrong on this Reorganization Agreement to the extent
permitted by law by agreement in writing, executed in the same manner as this
Reorganization Agreement after authorization to do so by the Board of Directors
of each Party; provided, however, that such action shall be taken only if, in
the judgment of the Boards of Directors of each Party taking the action, such
waiver or such amendment or modification will not have a material adverse effect
on the benefits intended under this Reorganization Agreement to such Party and
its shareholders following approval of this Reorganization Agreement by the
shareholders of Armstrong, unless this Reorganization Agreement, as modified, is
resubmitted to the shareholders of Armstrong for their approval.
8.10. Governing Law. This Reorganization Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania and, where the context so requires, under applicable federal law.
8.11. Incorporation by Reference. Any and all schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
thereto as though fully set forth at the point referred to in this
Reorganization Agreement.
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IN WITNESS HEREOF, each Party hereto has caused this Reorganization
Agreement to be executed on its behalf and its corporate seal to be affixed
hereto by its duly authorized officers, all as of the day and year first above
set forth.
<TABLE>
<S> <C>
ATTEST: THE ARMSTRONG COUNTY TRUST COMPANY
/s/ BONNIE RUPP By: /s/ COLEMAN J. CLOUGHERTY
- --------------------------------------------- -----------------------------------------
Bonnie Rupp Coleman J. Clougherty
Secretary Chairman, President and Chief Executive
Officer
(Corporate Seal)
ATTEST: BT FINANCIAL CORPORATION
/s/ STEVEN C. ACKMANN By: /s/ JOHN H. ANDERSON
- --------------------------------------------- -----------------------------------------
Steven C. Ackmann John H. Anderson
President and Chief Operating Officer Chairman and Chief Executive Officer
(Corporate Seal)
ATTEST: JOHNSTOWN BANK AND TRUST COMPANY
/s/ JOHN W. EGNOT By: /s/ ERIC F. RUMMEL
- --------------------------------------------- -----------------------------------------
John W. Egnot Eric F. Rummel
Executive Vice President President
(Corporate Seal)
</TABLE>
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<PAGE> 166
ANNEX B
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF REORGANIZATION
THIS FIRST AMENDMENT, is made and entered into as of the 27th day of March,
1996 (the "First Amendment"), by and among BT Financial Corporation, a business
corporation organized and existing under the laws of the Commonwealth of
Pennsylvania with its principal office at 532-534 Main Street, Johnstown,
Pennsylvania 15901 ("BTFC"), Johnstown Bank and Trust Company, a bank and trust
company organized and existing under the laws of the Commonwealth of
Pennsylvania with its principal office at 532-534 Main Street, Johnstown,
Pennsylvania 15901 ("Johnstown"), and The Armstrong County Trust Company, a bank
and trust company organized and existing under the laws of the Commonwealth of
Pennsylvania with its principal office at 227 Market Street, Kittanning,
Pennsylvania 16201 ("Armstrong").
WITNESSETH:
WHEREAS, the above-named entities are parties to that certain Agreement and
Plan of Reorganization dated October 24, 1995 (the "Reorganization Agreement");
WHEREAS, Section 2.07(g) of the Reorganization Agreement provides that the
Reorganization Agreement and the transactions contemplated thereby may be
terminated, in any event, automatically on March 31, 1996, if the Merger has not
been consummated on or before such date, unless extended by mutual consent of
the Parties;
WHEREAS, the Parties desire to amend Section 2.07(g) of the Reorganization
Agreement as hereinafter provided;
WHEREAS, Section 4.04(c)(i) of the Reorganization Agreement provides that
Armstrong shall not, except with the prior written consent of BTFC, declare or
distribute any dividend besides the regular quarterly cash dividends and closing
dividend described in Section 4.04(c)(i);
WHEREAS, BTFC consents to the distribution of the special dividend
hereinafter described;
WHEREAS, the SEC requires that certain of Armstrong's financial statements
be audited, and such audit will be performed by the accounting firm of S.R.
Snodgrass ("Snodgrass"); and
WHEREAS, BTFC agrees to bear the costs of the Snodgrass audit whether or
not the Reorganization Agreement is terminated;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed to them in the Reorganization Agreement.
2. Section 2.07(g) of the Reorganization Agreement is amended to read as
follows:
In any event, automatically on June 30, 1996, if the Merger has not
been consummated on or before such date, unless extended by mutual consent
of the Parties.
3. Section 4.04(c)(i) of the Reorganization Agreement is amended by adding
at the end thereof:
In addition, Armstrong is permitted to declare and distribute during
the first quarter of 1996 a special cash dividend in the amount of one
hundred sixty-one thousand, two hundred thirty-six dollars ($161,236.00).
4. Section 7.02 of the Reorganization Agreement is amended by adding at the
end thereof:
Notwithstanding the foregoing, BTFC shall bear the costs of the audit
of Armstrong's financial statements for the year ended December 31, 1995 by
the firm of S. R. Snodgrass, whether or not the Merger
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<PAGE> 167
is consummated. BTFC shall pay such costs directly to S. R. Snodgrass. The
costs associated with the audit shall not be deemed an expense of Armstrong
for dividend or other purposes.
5. Except as hereby amended, the Reorganization Agreement shall remain in
full force and effect.
6. This First Amendment may be executed in one or more duplicate
counterparts, each of which shall constitute an original and all of which when
taken together shall constitute one and the same document.
IN WITNESS WHEREOF, each Party hereto has caused this First Amendment to be
executed on its behalf and its corporate seal to be affixed hereto by its duly
authorized officers, all as of the day and year first above set forth.
<TABLE>
<S> <C>
ATTEST THE ARMSTRONG COUNTY TRUST COMPANY
/s/ Bonnie K. Rupp By: /s/ Coleman J. Clougherty
- -------------------------------------------- --------------------------------------------
Secretary Coleman J. Clougherty
Chairman, President and Chief Executive
Officer
(Corporate Seal)
ATTEST: BT FINANCIAL CORPORATION
/s/ Laura L. Roth By: /s/ John H. Anderson
- -------------------------------------------- --------------------------------------------
Secretary John H. Anderson
Chairman and Chief Executive Officer
(Corporate Seal)
ATTEST: JOHNSTOWN BANK AND TRUST COMPANY
/s/ Laura L. Roth By: /s/ Eric F. Rummel
- -------------------------------------------- --------------------------------------------
Secretary Eric F. Rummel
President
(Corporate Seal)
</TABLE>
B-2
<PAGE> 168
ANNEX C
October 24, 1995
The Board of Directors
Armstrong County Trust Company
227 Market Street
Kittanning, PA 16201
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the common stockholders of Armstrong County Trust Company
("Armstrong") of the Consideration (as defined below) to be received by such
holders, for the exchange of Armstrong common stock, par value $50.00 per share
(the "Armstrong Common Stock"), in the proposed acquisition (the "Acquisition")
of Armstrong by BT Financial Corporation ("BT Financial") by means of a merger
of Armstrong with and into Johnstown Bank and Trust Company ("Johnstown B&T"), a
wholly owned subsidiary of BT Financial pursuant to the Agreement and Plan of
Reorganization dated as of October 24, 1995 by and among BT Financial, Johnstown
B&T and Armstrong (the "Agreement"). Under the terms of the Agreement, each
outstanding share of Armstrong Common Stock will be exchanged for 26.5 shares of
BT Financial common stock and $596.25 in cash (the "Consideration"), provided
that BT Financial's common stock price is between $27.50 and $34.00 per share.
If BT Financial's common stock price is above or below this range, the exchange
ratio will be adjusted to a minimum of $1,325.00 per share of Armstrong Common
Stock and a maximum of $1,497.25 per share of Armstrong Common Stock. The terms
and conditions of the Acquisition are more fully set forth in the Agreement.
In arriving at our opinion, we have reviewed and analyzed, among other
things, the following:
(1) the Agreement;
(2) BT Financial's Annual Reports, BT Financial's Annual Reports on Form
10-K and related financial information for the five years ended December 31,
1994, BT Financial's Quarterly Reports on Form 10-Q and related unaudited
financial information for the three months ended March 31, 1994, June 30, 1994,
September 30, 1994, March 31, 1995 and June 30, 1995, as well as unaudited
financial information for the one month ended July 31, 1995, August 31, 1995 and
September 30, 1995 respectively;
(3) Armstrong's Annual Report and related financial information for the
five years ended December 31, 1994, Armstrong's Quarterly Reports and related
unaudited financial information for the three months ended March 31, 1994, June
30, 1994, September 30, 1994, March 31, 1995 and June 30, 1995, as well as
unaudited financial information for the one month ended July 31, 1995, August
31, 1995 and September 30, 1995, respectively;
(4) Certain other public and non-public information, including financial
and operating forecasts, relating to Armstrong and BT Financial, including: (i)
the historical and current financial condition and results of operations of
Armstrong and BT Financial, including interest income, interest expense, net
interest income, net interest margin, non-interest income, non-interest expense,
earnings, dividends, internal capital generation, book value, intangible assets,
return on assets, return on stockholders' equity, capitalization, the amount and
type of non-performing assets, loan losses and the allowance for loan losses;
and (ii) the assets and liabilities of Armstrong and BT Financial, including the
loan and investment portfolios, deposits, other liabilities, historical and
current liability sources and costs and liquidity.
(5) Conducted discussions with members of senior management of Armstrong
and BT Financial concerning the financial condition, business, assets and
prospects of Armstrong and BT Financial, respectively;
(6) The historical market prices and trading activity for BT Financial
common shares;
(7) The valuation of BT Financial common shares, and compared this
valuation with those of certain other publicly traded depository institutions
which we deemed to be relevant;
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(8) Compared the results of operation and financial condition of BT
Financial with those of certain publicly traded companies which we deemed
relevant to BT Financial;
(9) Compared the results of operation and financial condition of Armstrong
with those of certain Pennsylvania-based financial institutions which we deemed
relevant to Armstrong;
(10) Compared the proposed financial terms of the Acquisition contemplated
by the Agreement with the financial terms of certain other mergers and
acquisitions which we deemed to be relevant; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we deemed
necessary to the rendering of this opinion.
In conducting our review and in arriving at our opinion, we have relied
upon, and assumed the accuracy and completeness of, the financial and other
information provided to us or publicly available and have not attempted
independently to verify the same or undertaken an independent evaluation or
appraisal of the assets or liabilities of Armstrong or BT Financial nor have we
been furnished any such evaluation or appraisal. In addition, we have not
examined any individual loan credit files or conducted evaluations of the
adequacy of either company's allowances for loan losses. We have relied upon the
management of Armstrong and of BT Financial as to the reasonableness and
achievablility of the financial and operating forecasts and other financial
information provided to us, and we have assumed that such information reflects
the best currently available estimates and judgments of such managements. It is
understood that we were retained by the Board of Directors of Armstrong and that
our opinion, as expressed herein, is limited to the fairness, from a financial
point of view, to the holders of Armstrong Common Stock of the Consideration to
be received by such holders, in the Acquisition and does not address Armstrong's
underlying business decision to proceed with the Acquisition. Our opinion has
been rendered without regard to the necessity for, or level of, any
restrictions, obligations or undertakings which may be imposed or required in
the course of obtaining regulatory approval for the Acquisition.
Our opinion is necessarily based on economic, market, monetary and other
conditions as in effect on, and the information made available to us as of, the
date hereof. This letter does not constitute a recommendation to the Board of
Directors or any holder of Armstrong Common Stock with respect to any approval
of the Agreement. Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Consideration is fair, from a financial point
of view, to the holders of Armstrong Common Stock.
Very truly yours,
/s/ BAHIA ADVISORS, INC.
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ANNEX D
PENNSYLVANIA BUSINESS CORPORATION LAW OF 1988, AS AMENDED,
PROVISIONS FOR DISSENTING SHAREHOLDERS
Section 1930. Dissenters Rights
(A) General Rule. If any shareholder of a domestic business corporation
that is to be a party to a merger or consolidation pursuant to a plan of merger
or consolidation objects to the plan of merger or consolidation and complies
with the provisions of Subchapter D of Chapter 15 (relating to dissenters
rights), the shareholder shall be entitled to the rights and remedies of
dissenting shareholders therein provided, if any. See also section 1906(c)
(relating to dissenters rights upon special treatment).
(B) Plans Adopted by Directors Only. Except as otherwise provided pursuant
to section 1571(c) (relating to grant of optional dissenters rights), Subchapter
D of Chapter 15 shall not apply to any of the shares of a corporation that is a
party to a merger or consolidation pursuant to section 1924(b)(1)(i) (relating
to adoption by board of directors).
(C) Cross References. See sections 1571(b) (relating to exceptions) and
1904 (relating to de facto transaction doctrine abolished).
Subchapter D. Dissenters Rights
Section 1571. Application and Effect of Subchapter
(A) General Rule. Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any corporate
action, or to otherwise obtain fair value for his shares, where this part
expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(c) (relating to dissenters rights upon election).
Section 2705(d) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of qualifying
conditions).
Section 7104(b)(3) (relating to procedure).
(B) Exceptions.
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
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(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles, the
plan or the terms of the transaction entitle all shareholders of the
class to vote thereon and require for the adoption of the plan or the
effectuation of the transaction the affirmative vote of a majority of
the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase,
lease, exchange or other disposition all or substantially all of the
shares, property or assets of another corporation by the issuance of
shares, obligations or otherwise, with or without assuming the liabilities
of the other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(C) Grant of Optional Dissenters Rights. The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(D) Notice of Dissenters Rights. Unless otherwise provided by statute, if
a proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(E) Other Statutes. The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part that
makes reference to this subchapter for the purpose of granting dissenters
rights.
(F) Certain Provisions of Articles Ineffective. This subchapter may not be
relaxed by any provision of the articles.
(G) Cross References. See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
Section 1572. Definitions
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"Corporation." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation, division,
conversion or otherwise of that issuer. A plan of division may designate which
of the resulting corporations is the successor corporation for the purposes of
this subchapter. The successor corporation in a division shall have sole
responsibility for payments to dissenters and other liabilities under this
subchapter except as otherwise provided in the plan of division.
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"Dissenter." A shareholder or beneficial owner who is entitled to and does
assert dissenters rights under this subchapter and who has performed every act
required up to the time involved for the assertion of those rights.
"Fair Value." The fair value of shares immediately before the effectuation
of the corporate action to which the dissenter objects, taking into account all
relevant factors, but excluding any appreciation or depreciation in anticipation
of the corporate action.
"Interest." Interest from the effective date of the corporate action until
the date of payment at such rate as is fair and equitable under all the
circumstances, taking into account all relevant factors, including the average
rate currently paid by the corporation on its principal bank loans.
Section 1573. Record and Beneficial Holders and Owners
(A) Record Holders of Shares. A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares of the
same class or series beneficially owned by any one person and discloses the name
and address of the person or persons on whose behalf he dissents. In that event,
his rights shall be determined as if the shares as to which he has dissented and
his other shares were registered in the names of different shareholders.
(B) Beneficial Owners of Shares. A beneficial owner of shares of a
business corporation who is not the record holder may assert dissenters rights
with respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner, whether
or not the shares so owned by him are registered in his name.
Section 1574. Notice of Intention to Dissent
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed corporate
action shall constitute the written notice required by this section.
Section 1575. Notice to Demand Payment
(A) General Rule. If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice of
intention to demand payment of the fair value of their shares and who refrained
from voting in favor of the proposed action. If the proposed corporate action is
to be taken without a vote of shareholders, the corporation shall send to all
shareholders who are entitled to dissent and demand payment of the fair value of
their shares a notice of the adoption of the plan or other corporate action. In
either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
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(B) Time for Receipt of Demand for Payment. The time set for receipt of
the demand and deposit of certificated shares shall be not less than 30 days
from the mailing of the notice.
Section 1576. Failure to Comply with Notice to Demand Payment, Etc.
(A) Effect of Failure of Shareholder to Act. A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575 (relating
to notice to demand payment) shall not have any right under this subchapter to
receive payment of the fair value of his shares.
(B) Restriction on Uncertificated Shares. If the shares are not
represented by certificates, the business corporation may restrict their
transfer from the time of receipt of demand for payment until effectuation of
the proposed corporate action or the release of restrictions under the terms of
section 1577(a) (relating to failure to effectuate corporate action).
(C) Rights Retained by Shareholder. The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
Section 1577. Release of Restrictions or Payment for Shares
(A) Failure to Effectuate Corporate Action. Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares from
any transfer restrictions imposed by reason of the demand for payment.
(B) Renewal of Notice to Demand Payment. When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(C) Payment of Fair Value of Shares. Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance under
this section will be made. The remittance or notice shall be accompanied by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(D) Failure to Make Payment. If the corporation does not remit the amount
of its estimate of the fair value of the shares as provided by subsection (c),
it shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenters had
after making demand for payment of their fair value.
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Section 1578. Estimate by Dissenter of Fair Value of Shares
(A) General Rule. If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the fair
value of the shares, which shall be deemed a demand for payment of the amount or
the deficiency.
(B) Effect of Failure to File Estimate. Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the corporation.
Section 1579. Valuation Proceedings Generally
(A) General Rule. Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating
to estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may
file in court an application for relief requesting that the fair value of
the shares be determined by the court.
(B) Mandatory Joinder of Dissenters. All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(C) Jurisdiction of the Court. The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(D) Measure of Recovery. Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found to
exceed the amount, if any, previously remitted, plus interest.
(E) Effect of Corporation's Failure to File Application. If the
corporation fails to file an application as provided in subsection (a), any
dissenter who made a demand and who has not already settled his claim against
the corporation may do so in the name of the corporation at any time within 30
days after the expiration of the 60-day period. If a dissenter does not file an
application within the 30-day period, each dissenter entitled to file an
application shall be paid the corporation's estimate of the fair value of the
shares and no more, and may bring an action to recover any amount not previously
remitted.
Section 1580. Costs and Expenses of Valuation Proceedings
(A) General Rule. The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
(B) Assessment of Counsel Fees and Expert Fees Where Lack of Good Faith
Appears. Fees and expenses of counsel and of experts for the respective parties
may be assessed as the court deems appropriate against the corporation and in
favor of any or all dissenters if the corporation failed to comply substantially
with the
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requirements of this subchapter and may be assessed against either the
corporation or a dissenter, in favor of any other party, if the court finds that
the party against whom the fees and expenses are assessed acted in bad faith or
in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights
provided by this subchapter.
(C) Award of Fees for Benefits to Other Dissenters. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
other dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of the
amounts awarded to the dissenters who were benefitted.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1741 of the BCL provide that a business corporation shall have the
power to indemnify any person who was or is a party, or is threatened to be made
a party, to any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, if such person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. In the case of an action by or in the right of the
corporation, Section 1742 limits such indemnification to expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
has been adjudged to be liable to the corporation unless, and only to the extent
that, a court determines upon application that, despite the adjudication of
liability but in view of all the circumstances, such person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 1744 of the BCL provides that, unless ordered by a court, any
indemnification described above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made:
(1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a
majority vote of a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding the above, Section 1743 of the BCL provides that to the
extent a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
Section 1745 of the BCL provides that expenses (including attorneys' fees)
incurred by an officer, director, employee or agent of a business corporation in
defending any such action or proceeding may be paid by the corporation in
advance of the final disposition of the action or proceeding upon receipt of an
undertaking to repay the amount advanced if it is ultimately determined that the
indemnitee is not entitled to be indemnified by the corporation.
Section 1746 of the BCL provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the provisions described above
are not exclusive of any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, and that indemnification
may be granted under any bylaw, agreement, vote of shareholders or directors or
otherwise for any action taken or any failure to take any action whether or not
the corporation would have the power to indemnify the person under any other
provision of law and whether or not the indemnified liability arises or arose
from any action by or in the right to the corporation; provided, however, that
no indemnification may be made in any case where the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Section 24.1 of the registrant's By-laws provides that the registrant shall
indemnify, to the fullest extent now or hereafter permitted by law, each
director or officer (including each former director or officer) of the
registrant
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who was or is made a party to or a witness in or is threatened to be made a
party to or a witness in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is or was an authorized representative of the
registrant, against all expenses (including attorneys' fees and disbursements),
judgments, fines (including excise taxes and penalties) and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding.
Section 24.2 of the registrant's By-laws provides that the registrant shall
pay expenses (including attorneys' fees and disbursements) incurred by a
director or officer of the registrant referred to in Section 24.1 in defending
or appearing as a witness in any civil or criminal action, suit or proceeding
described in Section 24.1 in advance of the final disposition of such action,
suit or proceeding. The expenses incurred by such director or officer shall be
paid by the registrant in advance of the final disposition of such action, suit
or proceeding only upon receipt of an undertaking by or on behalf of such
director or officer to repay all amounts advanced if it shall ultimately be
determined that he is not entitled to be indemnified by the registrant.
Section 1747 of the BCL permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against any liability asserted against
such person and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under the provisions described above.
Section 24.5 of the registrant's By-laws provides that, except in the
circumstances set forth therein, the registrant shall purchase and maintain
insurance on behalf of each director and officer against any liability asserted
against or incurred by such director or officer in any capacity, or arising out
of such director's or officer's status as such, whether or not the registrant
would have the power to indemnify such person against such liability under the
provisions of the By-laws.
The registrant maintains directors' and officers' liability insurance
covering its directors and officers with respect to liabilities, including
liabilities under the Securities Act, which they may incur in connection with
their serving as such. Such insurance may provide coverage for the directors and
officers against certain liabilities even though such liabilities may not be
covered by the above-described By-law indemnification provision.
As permitted by Section 1713 of the BCL, the By-laws of the registrant
provide that no director shall be personally liable for monetary damages for any
action taken, or failure to take any action, except to the extent that such
elimination or limitation of liability is expressly prohibited by law. The BCL
states that this exculpation from liability does not apply (i) where the
director has breached or failed to perform the duties of his office and the
breach or failure to perform constitutes self-dealing, willful misconduct or
recklessness, and (ii) to the responsibility or liability of a director pursuant
to any criminal statute or the liability of a director for payment of taxes
pursuant to federal, state or local law. It may also not apply to liabilities
imposed upon directors by the federal securities laws.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated by reference
as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ ------------------------------------------------------------------------------
<C> <S>
2.1.1 Agreement and Plan of Reorganization dated as of October 24, 1995 by and among
BT Financial Corporation, Johnstown Bank and Trust Company and The Armstrong
County Trust Company (a copy of which is attached as Annex A to the Proxy
Statement/Prospectus forming part of this registration statement).
2.1.2 First Amendment to Agreement and Plan of Reorganization dated March 27, 1996
by and among BT Financial Corporation, Johnstown Bank and Trust Company and
The Armstrong County Trust Company (a copy of which is attached as Annex B to
the Proxy Statement/Prospectus forming part of this registration statement).
2.2 Agreement and Plan of Reorganization by and between BT Financial Corporation
and Moxham Bank Corporation, dated January 12, 1996.(1)
2.3 Stock Purchase Agreement dated September 1, 1995 by and among Huntington
Bancshares West Virginia, Inc., The Huntington National Bank of Pennsylvania
and BT Financial Corporation.(2)
3.1 Articles of Incorporation of BT Financial Corporation as amended to August 16,
1991.(3)
3.2 By-laws of BT Financial Corporation as amended to September 23, 1992.(4)
5.1 Form of opinion of Kirkpatrick & Lockhart LLP as to legality of the shares of
common stock, par value $5.00 per share, of BT Financial Corporation being
registered.
8.1 Form of opinion of Kirkpatrick & Lockhart LLP as to certain tax matters.
24.1 Consent of Coopers & Lybrand LLP.
24.2 Consent of S.R. Snodgrass (previously filed).
24.3 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit
5.1).
24.4 Consent of Kirkpatrick & Lockhart LLP (included in opinion filed as Exhibit
8.1).
24.5 Consent of Bahia Advisors, Inc. (previously filed).
24.6 Consent of Barnes, Saly & Company (previously filed).
25.1 Power of Attorney (previously filed).
99.1 Form of Proxy to be delivered to shareholders of The Armstrong County Trust
Company (previously filed).
<FN>
- ---------
(1) Incorporated by reference to Current Report on Form 8-K dated January 12,
1996.
(2) Incorporated by reference to Current Report on Form 8-K dated December 14,
1995 (as amended).
(3) Incorporated by reference to Registration Statement on Form S-4 (No.
33-69112).
(4) Incorporated by reference to Registration Statement on Form S-4 (No.
33-69112).
</TABLE>
(b) All financial statement schedules of BT Financial, Armstrong and Moxham
are omitted because they are not required, are not applicable or the required
information is given in the consolidated financial statements or notes thereto
incorporated by reference herein (in the case of BT Financial Corporation) or as
presented elsewhere herein (in the case of Armstrong and Moxham).
(c) The opinion of Bahia Advisors, Inc. is included as Annex C to the Proxy
Statement/Prospectus which forms a part of this registration statement.
II-3
<PAGE> 179
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, as amended, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended, and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in that Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE> 180
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on April 11, 1996.
BT FINANCIAL CORPORATION
By: /s/ JOHN H. ANDERSON
---------------------------
John H. Anderson
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ JOHN H. ANDERSON Chairman, Chief Executive Officer April 11, 1996
- ----------------------------------- and Director (Principal Executive
John H. Anderson Officer)
/s/ MARK L. SOLLENBERGER Executive Vice President, April 11, 1996
- ----------------------------------- Treasurer and Assistant Secretary
Mark L. Sollenberger (Principal Financial Officer)
/s/ DAVID A. CASADO Vice President and Controller April 11, 1996
- ----------------------------------- (Principal Accounting Officer)
David A. Casado
* Director April 11, 1996
- -----------------------------------
Martin L. Bearer
* Director April 11, 1996
- -----------------------------------
Bruno DeGol
* Director April 11, 1996
- -----------------------------------
Louis G. Galliker
* Director April 11, 1996
- -----------------------------------
William B. Kania
* Director April 11, 1996
- -----------------------------------
L. Robert Kimball
* Director April 11, 1996
- -----------------------------------
Edward L. Mears
* Director April 11, 1996
- -----------------------------------
Roger S. Nave
* Director April 11, 1996
- -----------------------------------
Ethel J. Otrosina
</TABLE>
II-6
<PAGE> 182
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
* Director April 11, 1996
- -----------------------------------
Robert G. Salathe, Jr.
* Director April 11, 1996
- -----------------------------------
William R. Snoddy
* Director April 11, 1996
- -----------------------------------
Gerald W. Swatsworth
* Director April 11, 1996
- -----------------------------------
W.A. Thomas
* Director April 11, 1996
- -----------------------------------
Rowland H. Tibbott, Jr.
* /s/ JOHN H. ANDERSON
- -----------------------------------
John H. Anderson
Pursuant to Power of Attorney
</TABLE>
II-7
<PAGE> 183
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
PRIOR FILING
OR
EXHIBIT NO. DESCRIPTION SEQUENTIAL PAGE NUMBER
- ----------- ----------- ----------------------
<C> <S> <C>
2.1.1 Agreement and Plan of Reorganization dated as
of October 24, 1995 by and among BT Financial
Corporation, Johnstown Bank and Trust Company,
and The Armstrong County Trust Company (a copy
of which is attached as Annex A to the Proxy
Statement/ Prospectus forming part of this
registration statement).
2.1.2 First Amendment to Agreement and Plan of
Reorganization dated March 27, 1996 by and
among BT Financial Corporation, Johnstown Bank
and Trust Company and The Armstrong County
Trust Company (a copy of which is attached as
Annex B to the Proxy Statement/Prospectus
forming part of this registration statement).
2.2 Agreement and Plan of Reorganization by and Incorporated by reference to
between BT Financial Corporation and Moxham Current Report on Form 8-K
Bank Corporation dated January 12, 1996. dated January 12, 1996
2.3 Stock Purchase Agreement dated September 1, Incorporated by reference to
1995 by and among Huntington Bancshares West Current Report on Form 8-K
Virginia, Inc., The Huntington National Bank of dated December 14, 1995 (as
Pennsylvania and BT Financial Corporation. amended)
3.1 Articles of Incorporation of BT Financial Incorporated by reference to
Corporation as amended to August 16, 1991. Registration Statement on Form
S-4 (No. 33-69112)
3.2 By-laws of BT Financial Corporation as amended Incorporated by reference to
to September 23, 1992. Registration Statement on Form
S-4 (No. 33-69112)
5.1 Form of opinion of Kirkpatrick & Lockhart LLP
as to legality of the shares of common stock,
par value $5.00 per share, of BT Financial
Corporation being registered.
8.1 Form of opinion of Kirkpatrick & Lockhart LLP
as to certain tax matters.
24.1 Consent of Coopers & Lybrand.
24.2 Consent of S.R. Snodgrass (previously filed).
24.3 Consent of Kirkpatrick & Lockhart LLP (included
in opinion filed as Exhibit 5.1).
24.4 Consent of Kirkpatrick & Lockhart LLP (included
in opinion filed as Exhibit 8.1).
24.5 Consent of Bahia Advisors, Inc. (previously
filed).
24.6 Consent of Barnes, Saly & Company (previously
filed).
25.1 Power of Attorney (included on page II-3
herewith) (previously filed).
99.1 Form of Proxy to be delivered to shareholders
of The Armstrong County Trust Company
(previously filed).
</TABLE>
<PAGE> 1
Exhibit 5.1
FORM OF OPINION OF KIRKPATRICK & LOCKHART LLP
AS TO LEGALITY OF THE SHARES OF COMMON STOCK, PAR VALUE
$5.00 PER SHARE, OF BT FINANCIAL CORPORATION BEING REGISTERED.
April ___, 1996
BT Financial Corporation
BT Financial Plaza
551 Main Street
Johnstown, Pennsylvania 15901
Re: Legality of Shares
------------------
Gentlemen:
We have acted as counsel for BT Financial Corporation, a Pennsylvania
corporation, in connection with the proposed issuance of up to 212,000 shares
(the "Shares") of common stock, par value $5.00 per share, of BT Financial
pursuant to an Agreement and Plan of Reorganization dated as of October 24,
1995, as amended by The First Amendment to Agreement and Plan of Reorganization
dated March 27, 1996 (the "Merger Agreement") by and among BT Financial,
Johnstown Bank and Trust Company, a Pennsylvania bank and trust company and a
wholly owned subsidiary of BT Financial, and The Armstrong County Trust
Company, a Pennsylvania bank and trust company. As such counsel, we have also
acted on behalf of BT Financial in connection with the Registration Statement
on Form S-4 (the "Registration Statement") to be filed with the Securities and
Exchange Commission for the registration pursuant to the Securities Act of
1933, as amended (the "Act"), of that proposed issuance. We are furnishing
this opinion to you in accordance with Item 601(b)(5) of Regulation S-K
promulgated under the Act for filing as Exhibit 5.1 to the Registration
Statement.
In preparing this opinion, we have examined (i) the Registration
Statement, (ii) the Merger Agreement, (iii) the Articles of Incorporation and
By-Laws of BT Financial, as amended to date, (iv) certain resolutions adopted
by the Board of Directors of BT Financial on February 22, 1995 and (v) such
other public and corporate documents, certificates, instruments, corporate
records, legal opinions, statutes, decisions and questions of law as we deemed
necessary or appropriate to enable
<PAGE> 2
us to express an informed opinion on the matter hereinafter set forth.
In rendering an opinion on the matter hereinafter set forth, we have
assumed the authenticity of all original documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as conformed copies or photocopies thereof and the genuineness of all
signatures and the due authority of all persons executing such documents and
the due authorization, execution and delivery of such documents.
We are opining herein only as to the effect on the subject transactions
of the laws of the Commonwealth of Pennsylvania (excluding conflicts of laws
rules) and the laws of the United States of America, all as in effect on the
date hereof. Accordingly, we are not opining on, and we assume no
responsibility as to, the applicability to or effect on any of the matters
covered herein of the laws of any other jurisdiction.
On the basis of and subject to the foregoing, we are pleased to advise
you that in our opinion the Shares have been duly authorized for issuance and
sale in the manner referred to in the Registration Statement and, when issued
and delivered by BT Financial pursuant to the Merger Agreement, will be validly
issued, fully paid and non-assessable.
This opinion is rendered as of the date hereof, and we have not
undertaken to supplement this opinion with respect to factual matters or
changes in the law which hereafter occur.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us in the Proxy
Statement/Prospectus that is part of the Registration Statement.
Yours truly,
<PAGE> 1
Exhibit 8.1
FORM OF OPINION OF KIRKPATRICK & LOCKHART LLP
AS TO CERTAIN TAX MATTERS
April __, 1996
BT Financial Corporation
532-534 Main Street
Johnstown, PA 15901
Ladies & Gentlemen:
You have requested our opinion regarding certain Federal income tax
consequences of a transaction (the "Merger") in which The Armstrong County
Trust Company ("Armstrong"), will merge into Johnstown Bank and Trust Company
("Johnstown"), a wholly owned subsidiary of BT Financial Corporation ("BT
Financial"). In the Merger, each outstanding share of common stock of Armstrong
("Armstrong Common Stock"), will be converted into the right to receive 26.5
shares of common stock of BT Financial ("BT Financial Common Stock") and
$596.25 in cash.
In rendering this opinion, we have reviewed the Agreement and Plan of
Reorganization, dated as of October 24, 1995, as amended by The First Amendment
to Agreement and Plan of Reorganization dated March 27, 1996 (the "Merger
Agreement"), among BT Financial, Johnstown and Armstrong, the Proxy
Statement/Prospectus included in the Registration Statement on Form S-4 to be
filed by BT Financial with the Securities and Exchange Commission on or about
April __, 1995 (the "Proxy Statement/Prospectus") and such other documents as
we have deemed necessary or appropriate for purposes of this opinion. We have
assumed, without independent verification, the genuineness of all signatures
and the authenticity of all documents submitted to us. As to various matters
of fact material to this opinion, we have relied upon certificates of officers
of Armstrong and BT Financial. Our opinion is based on the facts described
below and in the afore-referenced officers' certificates and any other
relevant facts set forth in the Merger Agreement which are incorporated herein
as fully as though set forth herein.
All capitalized terms not otherwise defined herein have the meanings
given such terms in the Proxy Statement/Prospectus.
<PAGE> 2
BT Financial Corporation
April __, 1996
Page 2
For purposes of this opinion, we have assumed that the Merger would be
consummated as of the date of this opinion pursuant to the terms and conditions
set forth in the Merger Agreement. In addition, we have assumed the existence
of the following facts, which we understand will be confirmed to us in writing
by officers of BT Financial and Armstrong. We have neither investigated nor
verified the accuracy of any of the assumptions upon which this opinion is
based.
1. The aggregate fair market value of the total consideration to
be paid to the holders of Armstrong Common Stock pursuant to the Merger,
including BT Financial Common Stock and the cash consideration, will be
approximately equal to the aggregate fair market value of the Armstrong
Common Stock surrendered by the holders of Armstrong Common Stock
pursuant to the Merger.
<PAGE> 3
BT Financial Corporation
April __, 1996
Page 3
2. The fair market value of the BT Financial Common Stock
received by each holder of shares of the Armstrong Common Stock as a
result of the Merger is expected to equal approximately 60%, and will
not equal less than 42%, of the fair market value of the Armstrong
Common Stock surrendered in exchange therefor.
3. There is no plan or intention by the shareholders of
Armstrong who own five percent or more of the Armstrong Common Stock,
and to the best knowledge of each of Armstrong and BT Financial, no
holders of Armstrong Common Stock plan or intend to sell, exchange or
otherwise dispose of in the foreseeable future a number of shares of
BT Financial Common Stock received pursuant to the Merger such that the
ownership of BT Financial Common Stock by former holders of Armstrong
Common Stock would be reduced to a number of shares having a value, as
of the date of the Merger, of less than 50 percent of the value of all
of the outstanding Armstrong Common Stock as of the same date. For
purposes of this assumption, shares of Armstrong Common Stock
surrendered upon the exercise of dissenters' rights or exchanged for
cash in lieu of fractional shares of BT Financial Common Stock will be
treated as outstanding BT Financial Common Stock on the date of the
Merger. Moreover, shares of BT Financial Common Stock and shares of
Armstrong Common Stock held by Armstrong shareholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the Merger will
be considered in making this assumption.
4. Johnstown will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Armstrong immediately prior
to the Merger. For purposes of this representation, amounts paid by
Armstrong to shareholders who receive cash, Armstrong assets used to pay
its reorganization expenses, and all redemptions and distributions
(except for regular, normal dividends) made by Armstrong immediately
preceding the transfer, will be included as assets of Armstrong held
immediately prior to the consummation of the Merger.
5. Prior to the Merger, BT Financial will be in control of
Johnstown within the meaning of Section 368(c)(1) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE> 4
BT Financial Corporation
April __, 1996
Page 4
6. Following the Merger, Johnstown will not issue additional
shares of its stock that would result in BT Financial losing control
of Johnstown within the meaning of Section 368(c)(1) of the Code.
7. BT Financial has no plan or intention to reacquire any of
its stock issued in the Merger to holders of Armstrong Common Stock.
8. Other than dispositions or transfers made in the ordinary
course of business, BT Financial has no plan or intention to liquidate
Johnstown, to merge Johnstown with and into another corporation,
to sell or otherwise dispose of the stock of Johnstown or to cause
Johnstown to sell or otherwise dispose of any of the assets of
Armstrong acquired by Johnstown in the Merger.
9. The liabilities of Armstrong assumed by Johnstown and the
liabilities to which the transferred assets of Armstrong are subject
were incurred by Armstrong in the ordinary course of its business.
10. Following the Merger, Johnstown will continue the historic
business of Armstrong or use a significant portion of Armstrong's
business assets in a business.
11. Armstrong, BT Financial, Johnstown and the shareholders of
Armstrong will pay their respective expenses, if any, incurred in
connection with the Merger.
12. There is no intercorporate indebtedness existing between
BT Financial and Armstrong or between Johnstown and Armstrong that was
issued, acquired, or will be settled at a discount.
13. None of BT Financial, Johnstown or Armstrong is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv)
of the Code.
14. Armstrong is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
15. The fair market value of the assets of Armstrong
transferred to Johnstown will equal or exceed the sum of the liabilities
assumed by Johnstown in the Merger, including the amount of
liabilities, if any, to which the transferred assets are subject.
<PAGE> 5
BT Financial Corporation
April __, 1996
Page 5
16. No stock of Johnstown will be issued in the Merger.
17. The payment of cash in lieu of fractional shares of the BT
Financial Common Stock is solely for the purpose of avoiding the expense
and inconvenience to BT Financial of issuing fractional shares and does
not represent separately bargained-for consideration. The total cash
consideration that will be paid in the Merger to Armstrong shareholders
instead of issuing fractional shares of BT Financial Common Stock will
not exceed one percent of the total consideration that will be issued in
the Merger to Armstrong shareholders in exchange for their shares of the
Armstrong Common Stock. The fractional share interests of each Armstrong
stockholder will be aggregated, and no Armstrong stockholder will
receive cash in lieu of a fractional share in an amount equal to or
greater than the value of one full share of BT Financial Common Stock.
18. Neither BT Financial nor Johnstown will assume in the
Merger any liabilities of Armstrong which arise out of or are fixed and
determined in or as a result of the Merger except for legal fees,
accounting fees, securities registration expenses, transfer agents'
fees, printing costs, investment banking fees and payments to dissenting
Armstrong shareholders.
19. The Merger is being entered into and carried out for a bona
fide business purpose.
OPINION
-------
Based solely upon the facts and representations set forth above,
subject to the foregoing, and assuming the Merger would be consummated on the
date of this letter but otherwise in accordance with the Merger Agreement, it
is our opinion that:
(1) The Merger will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, and BT Financial, Johnstown
and Armstrong will each be a "party to a reorganization" within the
meaning of 368(b) of the Code. In reaching this opinion, we are
mindful that for purposes of determining whether the Merger satisfies
the "continuity of interest" test, certain transactions consummated by
the holders of Armstrong Common Stock prior to the Merger may result
in the value of the BT Financial Common Stock received by the holders
of Armstrong Common Stock being denied to be less than 50% of the
value of the shares of Armstrong Common Stock exchanged therefor. In
the context of a merger, it is the current practice of the IRS, for
purposes of issuing private letter rulings, to require that at least
50% of the consideration received by the former owners of an acquired
corporation be stock of the acquiring corporation. Established case
law requires that the continuing common stock interest of the former
owners of the acquired corporation, considered in the aggregate,
represent a "substantial part" of the value of their former interest,
and provide them with a "definite and substantial interest" in the
affairs of the acquiring corporation. Paulsen v. Comm'r, 469 U.S. 131
(1985); Helvering v. Minnesota Tea Co., 296 U.S. 860 (1951); John A.
Nelson Co. v. Helvering, 296 U.S. 374 (1935); Southwest Natural Gas
Co. v. Comm'r, 189 F.2d 332 (5th Cir. 1951), cert. denied, 342 U.S.
860 (1951). The Supreme Court of the United States has held the
continuity of ownership interest test to be satisfied where 38% of the
consideration received for common stock of the acquired corporation
was stock of the acquiring corporation. See John A. Nelson Co. v.
Helvering, infra. In light of established case law and the fact that
not less than 42% of the aggregate consideration received by holders
of Armstrong Common Stock will consist of shares of BT Financial
Common Stock, we believe that the continuity of ownership interest
test will be satisfied.
(2) No gain or loss will be recognized by BT Financial,
Johnstown or Armstrong as a result of the Merger. However, we express no
opinion on the effect, if any, of other tax aspects of the Merger,
including
<PAGE> 6
BT Financial Corporation
April __, 1996
Page 6
the carryover, carryback or limitation on tax attributes of BT
Financial or Armstrong or the other matters governed by Sections 381
through 384 of the Code, or the like.
(3) No gain or loss will be recognized by any Armstrong
shareholder upon the exchange of that shareholder's shares of Armstrong
Common Stock for shares of BT Financial Common Stock pursuant to the
Merger.
(4) Armstrong shareholders will recognize gain with respect to
the cash portion of the Merger Consideration (the "Cash Consideration")
received, but not in excess of the amount of the Cash Consideration.
(5) The basis of the shares of BT Financial Common Stock
received by an Armstrong shareholder (including any fractional shares)
will be the same as the basis of the shares of Armstrong Common Stock
surrendered in exchange therefor (a) decreased by the amount of the Cash
Consideration, and (b) increased by the amount of gain recognized by
that shareholder on the exchange.
(6) If shares of Armstrong Common Stock were capital assets in
the hands of an Armstrong shareholder immediately prior to the Merger,
the holding period of the shares of BT Financial Common Stock received
by that Armstrong shareholder in the Merger will include the holding
period of the shares of Armstrong Common Stock surrendered in exchange
therefor.
(7) An Armstrong shareholder who dissents from the proposed
Merger and receives solely cash in exchange for that shareholder's
shares of Armstrong Common Stock will be treated as having received that
cash as a distribution in redemption of those shares subject to the
provisions and limitations of Section 302 of the Code. If the
distribution is eligible for treatment as a distribution in redemption
of that shareholder's shares, that shareholder will have gain to the
extent of the consideration received less that shareholder's adjusted
basis in those shares.
(8) The receipt by an Armstrong shareholder of cash in lieu of a
fractional share of BT Financial Common Stock will be treated as if
that fractional
<PAGE> 7
BT Financial Corporation
April __, 1996
Page 7
shares were issued to that holder in the Merger and thereafter redeemed
by BT Financial for cash. That receipt of cash by a shareholder will be
treated as a distribution by BT Financial in full payment in exchange
for the fractional share as provided in Section 302(a) of the Code. If
the distribution is eligible for treatment as a distribution in
redemption of a shareholder's fractional share, that shareholder will
have gain to the extent of the consideration received less that
shareholder's allocable adjusted basis in that fractional share.
(9) If the shares of Armstrong Common Stock exchanged are a
capital asset, any gain recognized will be capital gain to the extent
described below. The capital gain will be long-term if the shares of
Armstrong Common Stock have been held by the applicable shareholder for
more than one year. The determination whether a shareholder would
recognize a capital gain and/or dividend income is made by reference to
the redemption rules of Section 302 of the Code. Under Section 302, all
of the cash representing gain recognized on the exchange will be taxed
as capital gain if the deemed redemption is a "substantially
disproportionate redemption" of stock with respect to a shareholder or
is "not essentially equivalent to a dividend." For this purpose, the
Merger will be viewed as if each shareholder had received only BT
Financial Common Stock in the Merger and as if BT Financial had
thereafter redeemed appropriate portions of the BT Financial Common
Stock in exchange for the cash received by that shareholder. The deemed
redemption is a "substantially disproportionate redemption" if that
shareholder's deemed percentage share of the outstanding BT Financial
Common Stock after the Merger but before the deemed redemption is
reduced by more than 20% as a result of the deemed redemption. The
deemed redemption is "not essentially equivalent to a dividend" if that
shareholder experiences a "meaningful reduction" in his proportionate
interest in BT Financial by reason of the deemed redemption. In general,
there are no fixed rules for determining when a meaningful reduction has
occurred.
In determining whether a shareholder has a "substantially
disproportionate redemption" or experiences a "meaningful reduction" in
his proportionate interest in BT Financial, shares of
<PAGE> 8
BT Financial Corporation
April __, 1996
Page 8
BT Financial Common Stock which are considered to be owned by that
shareholder pursuant to certain constructive stock ownership rules set
forth in Code Section 318, as well as shares actually owned, must be
taken into account. In general, under Code Section 318, a shareholder
constructively owns any stock which that shareholder has an option to
acquire, or any stock owned directly or indirectly by: (1) that
shareholder's spouse (unless legally separated under court decree),
children, grandchildren or parents; (2) a partnership, trust or estate
in which that shareholder has an interest to the extent of that
shareholder's interest; or (3) a corporation to the extent of that
shareholder's interest, but only if that shareholder actually or
constructively owns 50% or more in value of the corporation's stock.
Also, a shareholder that is a partnership, trust or estate will be
considered to own stock owned by its partners, grantors or
beneficiaries, as the case may be, and a shareholder which is a
corporation will be considered to own stock owned by any of its
shareholders who owned 50% or more in value of the corporation's stock.
An S corporation and its shareholders are treated as if they were a
partnership and partners, respectively. In many instances, stock owned
constructively as a result of the attribution rules can be attributed
again to another (for example, stock owned due to family attribution can
further be attributed to a partnership), but in other circumstances,
there is no "double" attribution.
If any of the cash received by a shareholder has the effect of a
dividend, the portion of the gain recognized equal to that shareholder's
share of undistributed corporate earnings and profits is treated as
dividend income and the balance of the gain is capital gain. It is
unclear whether it is the earnings and profits of Armstrong which are
considered or some combination of those of Armstrong and BT Financial.
It is possible that the cash distributed might exceed the applicable
earnings and profits. No loss will be recognized.
This opinion is based on the Code, Treasury Regulations, Internal
Revenue Service rulings, judicial decisions, and other applicable authority, all
as in effect on the date of this opinion. The legal authorities on which this
opinion is based may be changed at any time. Any such changes may be
retroactively applied and could modify the opinions
<PAGE> 9
BT Financial Corporation
April __, 1996
Page 9
expressed above. This opinion does not address any tax considerations under
foreign, state or local laws, or the tax considerations to certain Armstrong or
BT Financial shareholders in light of their particular circumstances, including
persons who are not United States persons or who are resident aliens, life
insurance companies, dealers in securities, tax exempt entities,
shareholders who received shares of Armstrong or BT Financial Common Stock
through the exercise of employee stock options or through other compensation
arrangements, or shareholders who do not hold Armstrong or BT Financial common
stock as "capital assets" within the meaning of Section 1221 of the Code.
This opinion is not and does not constitute advice on Federal income
tax consequences to any particular Armstrong or BT Financial shareholder.
Because the federal income tax consequences discussed above depend upon each of
Armstrong or BT Financial shareholder's particular tax status, each shareholder
should consult the shareholder's own tax adviser for advice on the tax
consequences of the Merger to the shareholder.
This letter is solely for your information in connection with the
proposed Merger. This letter is not to be quoted in whole or in part, nor filed
with any other governmental agency or any other person, without the prior
written consent of this firm.
Very truly yours,
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this amendment No. 1 to the
registration statement dated April 12, 1996 on Form S-4 (concerning the
acquisition of The Armstrong County Trust Company by BT Financial Corporation)
of our report dated January 23, 1996, on our audits of the consolidated
financial statements of BT Financial Corporation and affiliates as of December
31, 1995 and 1994 and for the years ended December 31, 1995, 1994 and 1993. We
also consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND LLP
Coopers & Lybrand LLP
600 Grant Street
Pittsburgh, PA
April 12, 1996
