<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BT FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
BT FINANCIAL CORPORATION
551 MAIN STREET
JOHNSTOWN, PENNSYLVANIA 15901
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1998
Notice is hereby given that the Annual Meeting of the Shareholders of BT
Financial Corporation will be held at the Holiday Inn Downtown-Johnstown, 250
Market Street, Johnstown, Pennsylvania, on Tuesday, May 12, 1998, at 3:00
p.m., E.D.S.T., for the following purposes:
(1) To elect four directors of the class whose terms will
expire with the 2002 Annual Meeting;
(2) To approve the 1998 Equity Incentive Plan; and
(3) To transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has established the close of business on March 31,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting or any adjournments thereof.
ALL SHAREHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING, ARE
URGED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
By Order of the Board of
Directors
/s/ Laura L. Roth
Laura L. Roth, Secretary
April 3, 1998
<PAGE>
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
OF
BT FINANCIAL CORPORATION
GENERAL INFORMATION
This Proxy Statement is being mailed on or about April 3, 1998 in connection
with the solicitation of the enclosed form of proxy by the Board of Directors
of BT Financial Corporation (the "Corporation") for use at the Annual Meeting
of Shareholders of the Corporation to be held on Tuesday, May 12, 1998, and at
any adjournment or adjournments thereof.
The Corporation is a Pennsylvania business corporation and is registered
with the Federal Reserve Board as a bank holding company. Its principal
subsidiaries are Laurel Bank ("Laurel"), which is a Pennsylvania chartered
bank and trust company (the "Bank"), and Laurel Trust Company, a Pennsylvania-
chartered trust company (the "Trust Company"). Such subsidiaries are referred
to herein as "Affiliates".
Shareholders of record at the close of business on March 31, 1998 will be
entitled to vote at the Annual Meeting. On that date, there were outstanding
6,250,436 shares of the Corporation's Common Stock, par value $5.00 per share.
Each share of Common Stock entitles the holder to one vote on each matter that
may properly come before the meeting. The presence in person or by proxy of
holders of a majority of shares entitled to be cast by all outstanding shares
of Common Stock will constitute quorum for purposes of the meeting.
The enclosed form of proxy indicates the number of full shares registered in
the shareholder's name. It does not include any shares held for participants
in the Dividend Reinvestment Plan. Full shares held for such participants will
be voted by the Administrator of the Dividend Reinvestment Plan in accordance
with the participant's completed proxy.
Shares may be voted in person or by proxy. Any person giving a proxy may
revoke it at any time before it is voted, by giving written notice to the
Secretary of the Corporation. The presence at the Annual Meeting of a
shareholder who has signed a proxy does not itself revoke that proxy.
Directors are elected by the affirmative vote of a plurality of the votes
cast, and votes may be cast in favor of or withheld from each director
nominee. Votes may not be cumulated in the election of directors. An
affirmative vote of a majority of the votes entitled to be cast by
shareholders present in person or by proxy at the meeting is required for
approval of all other matters presented. Abstentions, votes withheld and
broker non-votes (described below) are counted in determining whether a quorum
is present. Abstentions with respect to any proposal other than the election
of directors will have the same effect as votes against the proposal, because
approval requires a vote in favor of the proposal by a majority of the votes
entitled to be cast by shareholders present in person or by proxy at the
meeting. Brokers and nominees holding shares for a beneficial owner are
precluded from exercising their voting discretion with respect to certain
matters to be acted upon and, in the absence of specific instructions from the
beneficial owner of the shares, will not be empowered to vote the shares on
such
2
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matters, and, therefore, will have no effect on the outcome of any of such
matters to be voted upon at the meeting. Shares represented by such broker
non-votes will, however, be counted for purposes of determining whether there
is a quorum.
If no instructions are indicated on the proxy, all shares represented by
valid proxies received pursuant to this solicitation (and not revoked before
they are voted) will be voted (i) for the election of the nominees identified
below, (ii) for the 1998 Equity Incentive Plan and (iii) by the proxies in
their discretion on any other matters to come before the meeting. Shareholders
whose shares are held of record by a broker or other nominee are nevertheless
encouraged to fill in the boxes of their choice on the proxy, as brokers and
other nominees may not be permitted to vote shares with respect to certain
matters for which they have not received specific instructions from the
beneficial owners of the shares.
All expenses of this solicitation, including the cost of mailing, will be
borne by the Corporation. The Corporation will not pay any compensation for
the solicitation of proxies, but upon request will reimburse banks, brokers,
and other nominees, fiduciaries and custodians for their reasonable expenses
incurred in sending these proxy materials to beneficial owners and obtaining
their instructions. In addition, proxies may be solicited by directors,
officers and management personnel of the Corporation and its subsidiaries, but
no additional compensation will be paid by the Corporation to such individuals
for such solicitation. Solicitations may be made by mail, telephone, telegraph
or in person.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Amended and Restated Articles of Incorporation of the Corporation
provide that the Board of Directors shall be divided into four classes. The
directors of each class serve for a term of four years, and at each Annual
Meeting the shareholders elect the successors to the directors of the class
whose terms expire at the time of such Annual Meeting. In addition, the
shareholders at the Annual Meeting elect directors to fill any vacancies in
the Board of Directors, including vacancies which have been filled on an
interim basis by the directors.
At the forthcoming Annual Meeting, the shareholders will elect four
directors for the class whose terms expire in 1998 to serve until the 2002
Annual Meeting and until their respective successors are duly elected and
qualified.
It is intended that shares represented by the enclosed form of proxy will be
voted for the election of the nominees identified below, unless authority to
so vote is withheld. If elected, all nominees have agreed and are expected to
serve until the end of their respective terms and until their successors are
duly elected and qualified. If any of them becomes unable to serve for any
reason, the persons appointed in the enclosed proxy may vote for any
substitute or substitutes nominated by the Board of Directors.
Under the Pennsylvania Business Corporation Law of 1988, as amended, the
affirmative vote of a plurality of the votes cast at an annual meeting of a
corporation is required to elect the directors of that corporation.
Accordingly, abstentions and broker non-votes have no effect on the outcome of
the election of directors. Votes may not be cumulated in the election of
directors.
3
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The following table sets forth certain information about the nominees for
election as directors and about the continuing directors of the Corporation.
Each nominee or director has been engaged in the principal occupation listed
for five years or more, except as otherwise indicated in the table. There are
no family relationships among the directors, nominees and executive officers
of the Corporation.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE PRINCIPAL OCCUPATION
------------ -------- --------------------
I. NOMINEES FOR TERMS TO EXPIRE IN 1998:
<C> <C> <S>
John H. Anderson 1993 Chairman and Chief Executive Officer of the
47 Corporation, since 1995; Chairman, President
and Chief Executive Officer of the Corporation
from 1993 to 1995; President and Chief
Operating Officer of the Corporation from 1992
to 1993; Vice Chairman of the Corporation from
1991 to 1992; Chairman of Johnstown Bank and
Trust Company (Bank and Trust) now known as
Laurel Bank, since 1993; President of Bank and
Trust from 1990 to 1991.
G. Scott Baton 1996 Chairman and Chief Executive Officer of
61 Chestnut Ridge Foam, since 1986.
Edward L. Mears 1983(b) Retired. Vice President of Mears Enterprises,
70 Inc., mining, from 1980 to 1990; Partner in C
& E Farms, since 1980; Partner in Allegheny
Farm Service, Inc., since 1994.
Roger S. Nave 1981(a) Owner-operator of Suburban Real Estate
68 Company, real estate, since 1963; President of
DoNan, Inc., a real estate holding company,
since 1979.
II. CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2001:
William B. Kania 1989(c) Partner in Kania & Sharpe, CPA's since 1991.
66 Former Proprietor of William B. Kania, CPA
from 1988 to 1991; Professor of Business and
Economics at California University of
Pennsylvania from 1961 to 1987.
Robert G. Salathe, Jr. 1991(c) Chairman and Chief Executive Officer of
68 Bedford Valley Petroleum Corporation and
Cumberland Petroleum Corporation since 1987;
President of LBS Corporation since 1988;
Treasurer of RG's Food Shops, Inc. since 1990.
William R. Snoddy 1990(c) President of Coolspring Stone Company since
60 1988; President of Golden Eagle Construction,
B&L Trucking, Inc., and WRS Rentals, a real
estate rental company since 1992;
Secretary/Treasurer of Golden Eagle
Construction from 1970 to 1992.
W.A. Thomas 1980(a) Retired. President and director of Rockwood
67 Holding Company, underwriters of workmen's
compensation insurance, from 1981 to 1988.
Chairman of Rockwood Insurance Company from
1983 to 1988.
</TABLE>
4
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<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE SINCE PRINCIPAL OCCUPATION
------------ -------- --------------------
<C> <C> <S>
III. CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000:
Martin L. Bearer 1979(b) Owner, North Cambria Fuel Co., mining, since
72 1971.
John C. Cwik 1996 Retired. Physician-Anesthesiologist of
73 Conemaugh Memorial Hospital, since 1954;
Clinical Professor of Anesthesiology, West
Virginia University, from 1975 to 1997.
Ethel J. Otrosina 1983(a) Retired. Executive Vice President and
72 Secretary of the Corporation from 1983 to
1993 and of Bank and Trust from 1980 to 1993;
Secretary and Assistant Treasurer of the
Trust Company from 1990 to 1993.
IV. CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999:
Louis G. Galliker 1978(a) President of Galliker Dairy Company, dairy
63 products, since 1968.
Gerald W. Swatsworth 1970(a) Retired. Chairman and Chief Executive Officer
71 of the Corporation from 1992 to 1993.
Chairman, President and Chief Executive
Officer of the Corporation from 1984 to 1992;
Chairman of Bank and Trust from 1984 to 1993;
Chief Executive Officer of Bank and Trust
from 1979 to 1993; President of Bank and
Trust from 1970 to 1985.
Rowland H. Tibbott, Jr. 1970(b) President and Chief Executive Officer of
57 Tibbott, Inc., a pharmacy, Wild and Free
Nature Shops and Hallmark Shops holding
company, since 1968.
Thomas A. Young 1996 Attorney-at-Law, private practice of law,
65 since 1958.
</TABLE>
- --------
(a) Includes service as a director of Bank and Trust (now known as Laurel
Bank) before Bank and Trust became a subsidiary of the Corporation on July
1, 1983.
(b) Includes service as a director of Laurel before Laurel became a subsidiary
of the Corporation on January 1, 1985.
(c) Includes service as a director of Bank and Trust.
(d) Includes service as a director of Fayette Bank.
The Board of Directors recommends that the shareholders vote FOR the
election of each of the foregoing nominees as directors.
MEETINGS AND COMMITTEES
The Board of Directors of the Corporation met 15 times in 1997. During the
year, each incumbent director named above attended 75% or more of the
aggregate number of: (i) the total number of meetings of the Board of
Directors of the Corporation and (ii) the total number of meetings of the
committees of the Board of Directors of the Corporation on which he or she
served, except Mr. Salathe due to previous commitments.
5
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The Executive Committee of the Corporation's Board of Directors met 13 times
in 1997. The Executive Committee consists of John H. Anderson, Martin L.
Bearer, William B. Kania, L. Robert Kimball, Edward L. Mears, Ethel J.
Otrosina, Robert G. Salathe, Jr., Gerald W. Swatsworth, Committee Chairman,
and W. A. Thomas. The Executive Committee, when the Board of Directors is not
in session, possesses and exercises the power of the Board except when action
by the full Board is specifically required by statute or the Corporation's By-
Laws; and also except such duties as are specifically withheld by the Board of
Directors or assigned to other committees. The Executive Committee also acts
as the Compensation Committee of the Board of Directors.
The Audit Committee of the Corporation's Board of Directors met 5 times in
1997. The members. of the Audit Committee are Louis G. Galliker, Committee
Chairman, Roger S. Nave, William R. Snoddy and Rowland H. Tibbott, Jr. The
primary responsibility of the Audit Committee is to supervise the internal
audit of the Corporation and its subsidiaries and to determine that they
maintain adequate internal controls and procedures. The Audit Committee also
reviews with the independent public accountants the scope and results of their
annual examination.
The Corporation's Board of Directors does not have a separate nominating
committee or a separate compensation committee.
DIRECTORS' COMPENSATION
Directors receive an annual retainer fee of $3,500, $800 for attending each
meeting of the Board of Directors of the Corporation and $400 for attending
each meeting of a committee of the Board. As a director of any Affiliate, each
director of the Corporation also receives $500 for attending each meeting of
such Affiliate's board of directors and $250 for attending each meeting of a
committee of such Affiliate's board of directors. Each director serves on one
of five Regional Boards which meet quarterly. Directors receive $500 for
attending each Regional Board meeting. Employees of the Corporation or any of
the Affiliates receive no compensation for their services as directors.
STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 20, 1998, Laurel Trust Company, an affiliate of the
Corporation beneficially owned (or deemed to be beneficially owned pursuant to
the rules of the Securities and Exchange Commission (the "SEC")) 571,162
shares of Common Stock of the Corporation or 9.14% of the outstanding Common
Stock of the Corporation, all of which are held in a fiduciary capacity under
various agreements with Laurel Trust Company as Trustee. Laurel Trust Company
has advised the Corporation that it has sole investment power for 571,162
shares, sole voting power with respect to 541,883 shares and shared voting
power with respect to 29,280 shares. Laurel Trust Company holds 38,601 shares
under trust arrangements for directors and officers which Common Stock is also
reported in the following table. Other than as set forth above, the
Corporation has no knowledge of any person who owned of record or beneficially
more than 5% of the outstanding Common Stock of the Corporation.
6
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STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table reflects shares of Common Stock of the Corporation
beneficially owned (or deemed to be beneficially owned pursuant to the rules
of the SEC) as of February 20, 1998 by each continuing director of the
Corporation, each of the executive officers named in the Summary Compensation
Table below and the current directors and executive officers of the
Corporation as a group.
<TABLE>
<CAPTION>
COMMON STOCK AMOUNT
NATURE OF BENEFICIAL PERCENT OF
NAME OWNERSHIP/1/ COMMON STOCK
---- -------------------- ------------
<S> <C> <C>
John H. Anderson.......................... 4,144 *
G. Scott Baton, II........................ 17,205 *
Martin L. Bearer.......................... 34,969 *
John C. Cwik.............................. 37,600/3/ *
Louis G. Galliker......................... 4,277 *
William B. Kania.......................... 42,884 *
Edward L. Mears........................... 34,638/2/ *
Roger S. Nave............................. 30,913/3/ *
Ethel J. Otrosina......................... 8,144 *
Robert G. Salathe, Jr..................... 9,156 *
William R. Snoddy......................... 17,121 *
Gerald W. Swatsworth...................... 37,848/3/ *
W. A. Thomas.............................. 7,571/3/ *
Rowland H. Tibbott, Jr.................... 15,521/4/ *
Thomas A. Young........................... 21,583/2/ *
Steven C. Ackmann......................... 2,455/2/ *
Eric F. Rummel............................ 1,649/2/ *
Kim Craig................................. 763/2/ *
William Smith............................. 44,541/2/ *
All current officers and directors as a
group (28 persons)....................... 383,241 6.13%
</TABLE>
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/1/Under regulations of the Securities and Exchange Commission, a person who
has or shares voting or investment power with respect to a security is
considered a beneficial owner of the securities. Voting power is the power to
create or direct the voting of shares, and investment power is the power to
dispose of or direct the disposition of shares. Unless as was indicated in the
other footnotes below, each director has sole voting power over the sales
indicated opposite their name.
/2/Includes the following shares held jointly with spouses and or minor
children, as to which voting and investment power is shared with the spouse or
child; Mr. Mears, 138; Mr. Young, 21,303; Mr. Ackmann, 2,455; Mr. Rummel,
1,348; Mr. Smith, 808; and Mr. Craig, 15.
/3/Includes the following shares held solely by the spouse: Mr. Cwik, 17,600;
Mr. Nave, 27,225; Mr. Swatsworth 14,488; and Mr. Thomas, 2,420.
/4/Includes 4,050 shares held by Mr. Tibbott's mother to which Mr. Tibbott has
power of attorney.
*Represents less than 1% of the Corporation's Common Stock.
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EXECUTIVE COMPENSATION
The following summary compensation table shows the compensation paid by the
Corporation and its Affiliates during the three fiscal years ended December
31, 1995, 1996 and 1997 to the Chief Executive Officer and the four most
highly compensated executive officers of the Corporation and its Affiliates
whose total annual salary and bonus exceeded $100,000 for the fiscal year
ended December 31, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
ANNUAL COMPENSATION
- -----------------------------------------------------------------------------
<CAPTION>
(A) (B) (C) (D) (E)
OTHER ANNUAL
YEAR ENDED SALARY/1/ BONUS/2/ COMPENSATION
NAME AND PRINCIPAL POSITION DECEMBER 31 ($) ($) ($)
- --------------------------- ----------- --------- -------- ------------
<S> <C> <C> <C> <C>
J.H. Anderson/4/ 1997 $288,817 $ 7,161 --
Chairman and Chief Executive 1996 $262,005 $17,256
Officer 1995 $229,544 --
S.C. Ackmann/5/ 1997 $201,253 $ 4,737 --
President and Chief Operating 1996 $189,073 $12,154
Officer 1995 $155,820 --
E. F. Rummel 1997 $171,916 $ 4,090 --
Vice Chairman (from 7/1/96 to 1996 $153,515 --
present) and President and Chief 1995 $118,583 --
Operating Officer, Laurel Bank
J. William Smith/6/ 1997 $169,338 $ 3,969 --
Vice Chairman 1996 $151,754 --
K. Craig 1997 $164,434 $ 3,564 --
President and Chief Operating 1996 $148,092 --
Officer, 1995 $125,395 --
Trust Company
</TABLE>
- --------
/1/Cash earned and received by executive officers.
/2/In 1996, the Corporation adopted a Key Employee Incentive Compensation Plan
pursuant to which certain employees receive an annual performance bonus award
consisting of cash and stock.
/3/The Corporation provides the named executive officers with certain group
health, life, medical and other non-cash benefits generally available to all
salaried employees and not required to be included in this column pursuant to
the rules of the SEC. The amounts shown in this column represent the cost of
funding projected retirement benefits under the Corporation's Supplemental
Executive Benefit Plans. The Corporation presently funds the Supplemental
Executive Benefit Plans through the purchase of life insurance and annuities.
8
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<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
- -----------------------------------------------------------------------------------------------
(F) (G)
SECURITIES (H) (I)
RESTRICTED UNDERLYING LTIP ALL OTHER
STOCK AWARDS/2/ OPTIONS PAYOUT COMPENSATION/3/
($) SARS (#) ($) ($)
- --------------- ---------- ------ ---------------
<S> <C> <C> <C>
$ 7,161 -- -- $53,817
$17,256 $42,089
-- $69,933
$ 4,736 -- -- $37,454
$12,154 $28,642
-- $51,281
$4,089 -- -- $23,598
-- $18,520
-- $ 2,525
$3,968 -- -- $35,880
-- $40,837
$3,564 -- -- $ 1,508
-- $(1,855)
-- $ 1,104
</TABLE>
- --------
/4/Mr. Anderson held the positions of Chairman, President and Chief Executive
Officer from 1993 to October 2, 1995.
/5/Mr. Ackmann held the position of Vice Chairman from 1992 to October 2,
1995.
/6/Mr. Smith was President and Chief Executive Officer of the Moxham Bank
Corporation and Moxham Bank. As part of the terms of the Corporation's merger
with Moxham Bank Corporation, Mr. Smith became Vice Chairman of the
Corporation. Mr. Smith's salary for 1996 includes $67,622 paid by Moxham and
$84,132 paid by the Corporation. Mr. Smith's "All Other Compensation" figure
for 1996 includes $13,837 in contributions to the Moxham Bank Supplemental
Executive Benefit Plan and $27,000 in contributions to the Corporation's
Supplemental Executive Benefit Plan.
9
<PAGE>
SUPPLEMENTAL EXECUTIVE BENEFIT PLAN
Both the Corporation and Laurel maintain separate but substantially
identical Supplemental Executive Benefit Plans covering designated senior
officers of the Corporation and the subsidiary bank (the "Supplemental
Plans"). The Supplemental Plans became effective in 1994 and, as amended,
supersede all prior supplemental benefit plans.
Under each Supplemental Plan, a supplemental retirement benefit is payable
to each Executive (as defined in the Supplemental Plans) upon normal
retirement after age 65 or in a reduced amount if the Executive elects early
retirement after age 55. The amount of the individual supplemental retirement
benefit payable to each Executive is calculated based upon the Executive's
annual base salary for a specified period preceding the Executive's
retirement, subject to certain adjustments. The maximum annual supplemental
benefit payable on a monthly basis, however, may not exceed 70 percent of the
Executive's annual base salary at retirement, less (a) payments made under the
Corporation's Employees Retirement Plan, (b) 50 percent of the Executive's
primary insurance benefit under Social Security, and (c) any monthly payments
to the Executive under the Moxham Bank Corporation Executive Retirement Plan
("Moxham Plan"). If, however, the Executive receives a lump sum payment under
the Moxham Plan, the Executive will not receive any supplemental retirement
payments until the aggregate amount of such payments exceeds the amount of the
lump sum payment. If each Executive remains with the Corporation until age 65
and based upon December 31, 1997 calculations, Messrs. Anderson, Ackmann,
Rummel, Smith and Craig would be entitled to receive annual supplemental
retirement benefits under the Supplemental Plans as follows: Mr. Anderson,
$159,117, Mr. Ackmann, $104,536, Mr. Rummel $61,794, Mr. Smith, $26,954. Mr.
Craig will be included in the Supplemental Plan beginning in 1998. If an
Executive is eligible for and elects early retirement after attaining age 55,
the Executive's annual supplemental retirement benefit is subject to reduction
by 5 percent for each year or part thereof between age 65 and the Executive's
age at early retirement.
Retirement benefits under the Supplemental Plans are payable monthly for the
longer of the lifetime of the Executive or ten years, unless the Executive
elects one of three alternative actuarially adjusted joint and survivor
annuity options. In lieu of monthly retirement benefits, Executives who retire
at or after attaining age 65 may elect to receive a lump-sum benefit equal to
the actuarial equivalent value of the scheduled annual supplemental retirement
benefit otherwise payable. The obligations of the Corporation and its
Affiliates to pay these benefits have been funded in large part by previously
purchased annuities and life insurance. The Corporation and its Affiliates are
not required to fund obligations under the Supplemental Plans; however, the
Corporation and its Affiliates have the discretion to set aside assets or
otherwise fund the Supplemental Plans.
The Supplemental Plans also contain salary continuation arrangements for
designated Executives and Participating Employees (as defined in the
Supplemental Plans), including Messrs. Anderson, Ackmann, Rummel, Smith and
Craig, in order to provide a continuation of income to the Executive's or
Participating Employee's family in the event of his or her death while
actively employed by the Corporation or its Affiliates. The death benefit is
payable as follows: (a) if a Participating Employee dies before age 55, his or
her designated beneficiary will receive an amount equal to 60 percent of his
or her annual base salary for one year, and thereafter 30 percent of such
salary until the month in which
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the Participating Employee would have attained the age of 65; and (b) if an
Executive dies after age 55, the beneficiary will receive an amount equal to
60 percent of the Executive's annual base salary for one year, and thereafter
30 percent of such salary for nine additional years. The Corporation and its
Affiliates may terminate their obligation to an Executive or Participating
Employee under the salary continuation arrangement upon 30 days notice at any
time before an obligation to pay benefits arises by reason of the death of an
Executive or Participating Employee. The Corporation and its Affiliates
maintain life insurance for the purpose of funding these salary continuation
obligations.
The Supplemental Plans contain provisions which are intended to provide
transitional security to the Executives designated in the plans (Messrs.
Anderson, Ackmann, Rummel, Smith and Craig) upon the occurrence of certain
specified "Change in Control" events. "Change in Control" events include: (a)
the Corporation learns that a third party has acquired beneficial ownership of
25 percent or more of the voting power of the Corporation; (b) a tender offer
is made to acquire 50 percent or more of the voting power of the Corporation;
(c) less than 51 percent of the directors of the Corporation are persons who
either were directors on the effective date of the Supplemental Plans (the
"Effective Date") or individuals whose election or nomination for election as
director was approved by a majority of the directors then in office who were
directors on the Effective Date; (d) the shareholders approve an agreement
either for the Corporation to be merged, consolidated or otherwise combined
with, or for substantially all the assets or stock of the Corporation to be
acquired by, a third party, and as a result of such event, the former
shareholders of the Corporation would own less than a majority of the voting
power of the surviving corporation or acquiring person; or (e) the
shareholders approve any liquidation of substantially all of the assets of the
Corporation or any distribution to security holders of 30 percent or more of
the total value of such assets. The Supplemental Plans provides for the
following on any "Change in Control" event: (a) a lump sum payment to the
Executive in an amount equal to three times the Executive's then annual base
salary; (b) full vesting of his or her supplemental retirement benefit,
payable at age 65, or on an actuarially reduced basis at age 55, or if "Change
of Control" event occurs prior to the Executive's eligibility for retirement
or early retirement, a lump sum payment equal to the discounted value of the
death benefits payable as if the Executive had died on the date of termination
of his employment; and (c) continuation of coverage under all group, life,
disability, accident and health insurance coverage in effect at the time of
termination of employment, for not more than five years, or, if sooner, until
the Executive obtains full-time employment, reaches age 65, or dies.
RETIREMENT PLAN
All eligible employees of the Corporation and each of the Affiliates are
covered by an Employees Retirement Plan. The retirement plan is a non-
contributory, defined benefit pension plan which provides a normal retirement
benefit based on each participant's years of service with each Affiliate and
the participant's average monthly compensation, which is defined as the
compensation received during any 60 consecutive months during the last 120
months prior to retirement, divided by 60, which produces the highest average.
Benefits are equal to one percent of average monthly compensation up to the
Social Security covered compensation level multiplied by the full years of
credited service to normal retirement date, plus one and one-half percent of
the amount of average monthly compensation in excess of such level, multiplied
by the years of credited service to normal retirement date up to a
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<PAGE>
maximum of 35 years. Normal retirement age is 65. Benefits under the
retirement plan are not subject to any deduction for Social Security or other
offset amounts. Directors are not entitled to benefits under the retirement
plan unless they are also active employees of the Corporation or one of the
Affiliates. The following table sets forth the estimated annual benefits
payable to an employee retiring in 1997 under the retirement plan, reflecting
applicable limitations under Federal tax laws:
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
-------------------------------------------------
AVERAGE
ANNUAL BASE
COMPENSATION 10 20 30 40
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 80,000................ $10,448 $20,896 $31,344 $40,567
$105,000................ $14,198 $28,396 $42,594 $54,942
$130,000................ $17,948 $35,896 $53,844 $69,317
$155,000................ $21,698 $43,396 $65,094 $83,692
$180,000................ $22,448 $44,896 $67,344 $86,567
$205,000................ $22,448 $44,896 $67,344 $86,567
$230,000................ $22,448 $44,896 $67,344 $86,567
$255,000................ $22,448 $44,896 $67,344 $86,567
</TABLE>
As of December 31, 1997, Messrs. Anderson, Ackmann, Rummel, Smith and Craig
have been credited with 13, 10, 23, 1 and 11 years of service, respectively,
for purposes of the retirement plans.
The approximate accrued benefits at age 65 (or retirement if later) based on
years of credited service are for Messrs. Anderson ($25,900), Ackmann
($18,800), Rummel ($36,700), Smith ($2,000) and Craig ($17,500). Covered
compensation is based on salary shown in column (c) of the summary
compensation table.
The approximate projected benefits at age 65 based on years of credited
service to age 65 are for Messrs. Anderson ($65,400), Ackmann ($61,000),
Rummel ($86,300), Smith ($31,900) and Craig ($70,900). Covered compensation is
based on salary shown in column (c) of the summary compensation table.
Prior to their merger into the Employees Retirement Plan of the Corporation,
the retirement plans of Laurel and Fayette Bank were amended effective January
1, 1987 to contain the provisions described above, subject to the provision
that an employee of either of those Banks who retires after 1986 will receive
a benefit not less than the benefit that he or she would have received under
the prior plans based upon the employee's compensation prior to 1987.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, John H. Anderson, Chairman and
Chief Executive Officer of the Corporation, served as a member of the
Executive Committee of the Board of Directors of the Corporation. The
Executive Committee performs the duties and functions of a Compensation
Committee.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of a registered class of the
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<PAGE>
Corporation's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other
equity, securities of the Corporation. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on review of the copies of such
reports furnished to the Corporation and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to the Corporation's officers,
directors and greater than ten-percent beneficial owners were complied with,
except as set forth in the next three sentences. Thomas A. Young filed two
reports late relating to 3 market acquisitions of shares. L. Robert Kimball
filed 3 reports late relating to 4 market acquisitions of shares. Gerald W.
Swatsworth filed one report late relating to 2 market acquisitions of shares.
EXECUTIVE COMMITTEE REPORT ON COMPENSATION
The Executive Committee of the Corporation performs the duties and functions
of a Compensation Committee. The Executive Committee consists of nine members,
eight of whom are disinterested, non-employee directors. John H. Anderson,
Chairman and Chief Executive Officer of the Corporation, is a member of the
Executive Committee. Mr. Anderson does not participate in any decisions made
by the Executive Committee relating to his own compensation.
The Executive Committee, acting as the Compensation Committee, is
responsible for all aspects of executive compensation. It determines levels of
compensation for each executive officer of the Corporation and administers the
Corporation's Supplemental Executive Benefit Plan, Key Employee Incentive
Compensation Plan as well as other employee welfare and benefit plans of the
Corporation. The Executive Committee also reviews compensation levels of other
members of management, evaluates management performance and considers
management succession issues and other related matters. Following its
deliberations, the Executive Committee reports to the entire Board of
Directors on all aspects of its compensation decisions affecting executive
officers of the Corporation.
The Corporation's overall executive compensation objective is to attract and
retain qualified executive officers by compensating them at levels comparable
to those at similar financial institutions. The Corporation's compensation
program for executive officers consists of four elements: (1) base salary, (2)
participation in the Supplemental Executive Benefit Plan, (3) performance-
based annual bonuses under the Corporation's Key Employee Incentive
Compensation Plan, and (4) participation in other welfare and benefit plans
available to employees of the Corporation and its subsidiaries generally. A
fifth component will be participation in the 1998 Equity Incentive Plan if it
is approved at the annual meeting. In previous years, perquisites in the form
of company-owned automobiles were a small component of executive compensation.
The Corporation has terminated all company-owned vehicles.
SALARY. The Executive Committee reviews and, if appropriate, revises salary
levels for each executive officer of the Corporation semi-annually and for the
Chief Executive Officer annually. Salary adjustments made by the Committee
become effective February 1 and August 1 of each fiscal year.
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<PAGE>
The Executive Committee utilizes independent compensation consultants to
assist it in fixing executive salary levels. The consultants provide
information concerning executive compensation levels in the Corporation's peer
group and submit recommendations concerning salary levels for each of the
Corporation's executive officers.
Executive officer salaries are determined in light of individual
performance, corporate performance and comparability to salaries paid to
executive officers at other bank holding companies of comparable asset size to
the Corporation in Pennsylvania. In fixing the Chief Executive Officer's
salary, the Executive Committee also considers his effectiveness in achieving
expansion and growth objectives of the Corporation.
BONUS PLAN. The Corporation adopted a Key Employee Incentive Compensation
Plan in July, 1996. The purpose of this Plan is to enhance shareholder value
and to contribute to the growth and earnings of the Corporation by directing
key employees of the Corporation and its subsidiaries to attain corporate and
individual performance goals set from year to year by the Executive Committee.
The Plan permits bonus awards to be made in the form of stock or cash to
promote ownership of the Corporation's Common Stock by key employees. Under
this Plan, at the beginning of each year the Chief Executive Officer
recommends (except as to himself) whether a bonus pool will be fixed, who will
be eligible to be considered for incentive awards, the amount of the overall
bonus pool, corporate objectives for the year and individual objectives upon
which the incentive awards will be made. Individual objectives are based on
ratings received by participants under the Corporation's Management
Performance Appraisal System utilized for determining salary levels and
eligibility for promotion. The Executive Committee makes all final
determinations as to these matters, except the Chief Executive Officer must
achieve a minimum individual performance rating specified by the plan. If any
participant does not meet his or her minimum individual performance rating,
the participant will not be entitled to any award for the year even if all
corporate performance goals are met. Each individual's share of the overall
bonus pool is based on the individual's salary compared with the salaries of
all other participants in the Plan for the year.
The Committee may also grant discretionary bonuses under this Plan. Bonuses
may be paid in cash or in unrestricted shares of the Corporation's Common
Stock, valued at the date of issuance. Shares may be newly issued, treasury
shares or shares purchased in the open market by the Corporation. Bonuses may
not be paid for any year if (a) the Corporation has violated any significant
covenant included in any credit or loan agreement, unless the violation has
been waived or cured by the end of the year, (b) payment of aggregate
incentive awards would cause the Corporation to violate any significant debt
covenant, or (c) if the Corporation does not have positive after-tax earnings
for the year. Incentive awards may be reduced pro rata to satisfy these
conditions.
For 1997, the Executive Committee established the maximum bonus pool
available to all participants as 1.5% of net income for the period January 1
through December 31, 1997, payable 50% in cash and 50% in Common Stock. The
following corporate performance goals were established: earnings per share of
at least $3.00, return on equity of at least 13.00% and an efficiency ratio
not to exceed 60%. Achievement of each corporate target was given a one-third
weight.
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<PAGE>
The bonus pool for 1997 under the Plan was $258,150. One of the corporate
performance objectives was achieved. A total of $86,050 in awards,
representing 33% of the total pool was paid in respect of 1997.
SUPPLEMENTAL EXECUTIVE BENEFIT PLAN. Certain executive officers participate
in the Corporation's Supplemental Executive Benefit Plan, which is
administered by the Executive Committee. The Supplemental Executive Benefit
Plan provides a salary continuation program for executive officers and a non-
qualified deferred compensation plan for Messrs. Anderson, Ackmann, Smith,
Craig and Rummel.
OTHER PLANS. The Corporation maintains other pension benefit and welfare
plans for employees of the Corporation and its subsidiaries, including a
defined benefit plan, a 401(k) stock purchase plan, and medical, disability
and life insurance plans. Executive officers participate in these plans on a
non-preferential basis.
For the year ended December 31, 1997, net income for the Corporation
increased by 24.5% as compared to the year ended December 31, 1996, and by
31.4% over net income for the year ended December 31, 1995. Excluding one-time
charges for reorganization costs associated with the acquisitions of Moxham
Bank Corporation and a special assessment to recapitalize the Savings
Association Insurance Fund ("SAIF"), net income in 1996 would have increased
by 19.8% as compared to 1995. Total compensation (including salaries and
bonuses) of the executive officers of the Corporation, less deferred
compensation payments made to the executive officers, over the comparable
three (3) year period increased by an average of 35.3% for each individual
executive officer of the Corporation. In addition to reviewing the net income
figures of the Corporation in determining executive compensation, the
Executive Committee also took into account total shareholder return, which
increased by 90.1% over the comparable three (3) year period. Therefore, the
Executive Committee believes that executive compensation fairly reflects the
benefits received by the Corporation's shareholders.
Additionally, the independent compensation consultant submitted a
comprehensive review of Mr. Anderson's compensation. As part of this review,
the consultant evaluated and compared the components of his total compensation
package with compensation packages of chief executives of other Pennsylvania
banks and bank holding companies of similar asset size. The consultant
concluded that Mr. Anderson's compensation program is reasonable, competitive
and equitable. While the amount of his compensation within the various pay
components is conservative, the program reflects a compensation philosophy
that seeks to maintain competitive fairness while, at the same time, linking
the Chief Executive Officer's pay with enhanced shareholder interests.
EXECUTIVE COMMITTEE
*John H. Anderson Ethel J. Otrosina
Martin L. Bearer Robert G. Salathe, Jr.
William B. Kania Gerald W. Swatsworth, Chairman
L. Robert Kimball W.A. Thomas
Edward L. Mears
February 25, 1998
- --------
*Mr. Anderson is a non-participating member of the Executive Committee as to
compensation matters.
15
<PAGE>
STOCK PRICE PERFORMANCE
The following graph compares the performance of the Corporation's Common
Stock with the performance of the NASDAQ Market index and a peer group index
over the past five years. The graph assumes that $100 was invested on December
31, 1992 in the Corporation's Common Stock, the NASDAQ Market index and the
peer group index, and that all dividends were reinvested. The peer group index
was derived from the stock performance of a composite group of financial
institutions of comparable size located in the Middle Atlantic states. The
stock price performance shown on the graph is not necessarily indicative of
future price performance:
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG BTFC, NASDAQ INDEX AND PEER GROUP INDEX
<CAPTION>
Measurement period
(Fiscal year Covered) BTFC NASDAQ PEER GROUP
- --------------------- ---- ------ ----------
<S> <C> <C> <C>
Measurement PT -
12/31/92 $100 $100 $100
FYE 12/31/93 $133 $120 $124
FYE 12/31/94 $124 $126 $118
FYE 12/31/95 $168 $163 $179
FYE 12/31/96 $219 $203 $254
FYE 12/31/97 $320 $248 $375
</TABLE>
Data in the graph was compiled by Media General Financial Services.
16
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Directors and officers of the Corporation, and certain business and non-
profit organizations and individuals associated with them or with which they
have been associated, have been customers of and have had normal banking
transactions with the Banks from time to time prior to and during 1997. All
such loans or extensions of credit have been made in the ordinary course of
the Banks' business, on terms substantially equivalent, including interest
rates and collateral, to those prevailing at the time for comparable
transactions with other customers of the Banks, and did not involve more than
the normal risk of collectibility or present other unfavorable features.
Thomas A. Young, a director of the Corporation, is engaged in the private
practice of law, and renders legal services to the Corporation.
1998 EQUITY INCENTIVE PLAN
(PROPOSAL 2)
On November 26, 1997, the Board of Directors of the Corporation adopted the
1998 Equity Incentive Plan (the "1998 Plan") subject to approval by the
shareholders of the Company. Pursuant to the 1998 Plan, equity interests may
be granted which are intended to constitute incentive stock options under the
Internal Revenue Code of 1986, as amended (the "Code"), non-qualified stock
options or other performance-based incentive awards. All employees and
directors of the Corporation and its subsidiaries are eligible to receive
options under the 1998 Plan. Only employees of the Corporation or its
subsidiaries are eligible to receive incentive stock options under the 1998
Plan.
The Board of Directors recommends that the 1998 Plan be approved because it
believes that the 1998 Plan will enhance the Corporation's ability to attract,
retain and motivate directors, officers and employees and is therefore in the
best interest of the Corporation and its shareholders.
Set forth below is a summary of the 1998 Plan, which is qualified by the
terms of the actual 1998 Plan set forth as Exhibit A to this Proxy Statement
and incorporated herein.
PURPOSE
The purpose of the 1998 Plan is (a) to assist the Corporation in recruiting
and retaining highly qualified managers, consultants and staff, (b) to provide
employees with an incentive for productivity, and (c) to provide employees an
opportunity to share in the growth and value of the Corporation.
ADMINISTRATION
The 1998 Plan will be administered by the Board of Directors which may at
any time delegate its authority to administer the Plan to a Committee which is
appointed by the Board of Directors of the Corporation and consists of not
less than two persons to administer the Plan on behalf of the Board. Members
of the Committee or the Board who are eligible for options or have received
options may vote on any matters affecting the administration of the 1998 Plan
or the awards, except for any awards to themselves. The Committee determines
which directors and employees receive an option or options
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<PAGE>
under the 1998 Plan, the type of option (incentive stock option, non-qualified
stock option or combination) to be granted, the exercise price of the options,
the number of shares subject to each option, the terms and provisions of each
option or options. The Committee also determines which directors and employees
receive phantom stock units (PSUs), the time or times PSUs are awarded, the
number of PSUs to be awarded, and the duration of the period during which and
the conditions under which a participant's right to PSUs will vest.
The Committee may, in its discretion prescribe, amend and rescind any of the
rules and regulations relating to the 1998 Plan, except that once an incentive
stock option or non-qualified stock option is granted under the 1998 Plan,
such an option remains an incentive stock option or non- qualified stock
option despite any amendment or supplementation.
AGGREGATE NUMBER OF SHARES
The aggregate number of shares which may be issued upon the exercise of
options under the 1998 Plan is 600,000 shares of Common Stock. The market
value of securities underlying the options or rights as of February 20, 1998
is $131,050,000. Options which expire or become unexerciseable for any reason
without having been exercised in full, or shares which are subsequently
repurchased by the Corporation may be returned to the Plan and are available
for future options granted under the 1998 Plan.
OPTION PRICE
The option price for incentive stock options issued under the 1998 Plan must
be at least equal to the fair market value of the Common Stock as of the date
the option is granted. If an incentive stock option is awarded to a person who
at the time of such award owns more than 10% of the total combined voting
power of all classes of the Company's stock, the price per share shall be at
least equal to 110% of the fair market value of the common stock as of the
date such option is awarded. For shares such as the Corporation's common stock
which is traded through the NASDAQ fair market value will be determined by
reference to the closing price as reported in The Wall Street Journal. The
option price for non-qualified stock options issued under the 1998 Plan must
be at least $5.00 per share.
PAYMENT
The method of payment of the option price on exercise of options granted
under the 1998 Plan is determined by the Committee at its discretion. It may
consist of (a) cash, (b) promissory notes, (c) shares of common stock having
an aggregate fair market value per share on the date of surrender equal to the
aggregate exercise price of the shares as to which the option shall be
exercised, or any combination of methods, or (d) such other consideration
permitted under any laws to which the Corporation is subject and which the
Committee approves.
EXERCISABILITY
Any option awarded under the 1998 Plan is exercisable at the times and under
the conditions specified in the option agreements. Any vesting conditions are
stated in the options agreement. Where
18
<PAGE>
no vesting conditions are stated, the options are considered fully vested as
of the granting date. Options may be exercised in any order selected by the
participant. Unless terminated by the option's terms, incentive stock options
and non-qualified stock options expire ten years after the date they are
awarded. Incentive stock options awarded to persons owning more than 10% of
the total combined voting power for all classes of the Corporation's stock,
unless terminated by the options' terms, expire five years after the date they
are awarded.
NON-TRANSFERABILITY
Options granted pursuant to the 1998 Plan are not transferable, except by
will or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
AMENDMENT OR TERMINATION; PLAN EXPIRATION
The Corporation's Board has the right at any time, and from time to time, to
amend, supplement, revise, terminate or discontinue the 1998 Plan, without
shareholder approval, except that no amendment or revision may change the
aggregate number of shares for which options may be awarded, change the
designation of the class of employees eligible to receive options or decrease
the price at which options are awarded. In the event of a "change of control"
of the Corporation, as defined in the 1998 Plan, the Board of Directors, in
its discretion, may terminate the 1998 Plan and exchange all 1998 Plan options
for options to purchase common stock in the successor corporation or
distribute for each optionee cash and/or other property minus the option price
prior to the change in control.
OPTION GRANTS
As of February 20, 1998, no options had been granted under the 1998 Plan.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF THE
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE 1998 EQUITY INCENTIVE
PLAN AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT
THERETO. THE PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT
TAX LAW ONLY AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
INCENTIVE STOCK OPTIONS
Generally, under the Code, there are no regular income tax consequences when
an incentive stock option (Incentive Option) is granted or exercised. (See,
however, discussion of Alternative Minimum Tax below). If an optionee
exercises Incentive Options and does not dispose of the shares until the later
of two years from the date the option was granted or one year from the date of
exercise, the entire gain, if any, realized upon disposition of such shares
will be taxable to the optionee as long-
19
<PAGE>
term capital gain, and the Corporation will not be entitled to any deduction.
If an optionee disposes of the shares within the period of two years from the
date of grant or one year from the date of exercise (disqualifying
disposition), the optionee generally will realize ordinary income in the year
of disposition and the Corporation will receive a corresponding deduction, in
an amount equal to the the lesser of the fair market value of the option stock
on the date of exercise, minus the option price, or the amount realized on the
disposition of the stock, minus the option price. Any additional gain realized
on the disposition will be long-term or short-term capital gain and any loss
will be long-term or short-term capital loss. The optionee will be considered
to have disposed of a share if he sells, exchanges, makes a gift of or
transfers legal title to the share (except transfers, among others, by pledge,
on death or to spouses). If the disposition is by sale or exchange, the
optionee's tax basis will equal the amount paid for the share plus any
ordinary income realized as a result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the
shares purchased at the time of the exercise (or such later date, if
applicable, as described below in "Non-Qualified Options", if the optionee is
a 16(b) Person who has not made an 83(b) Election) exceeds the option exercise
price is an adjustment for purposes of computing the so-called alternative
minimum tax. In the event of a disqualifying disposition of the shares in the
same taxable year as exercise of the Incentive Option, no adjustment is then
required for purposes of the alternative minimum tax, but regular income tax,
as described above, may result from such disqualifying disposition. Effective
January 1, 1994, the Revenue Reconciliation Act of 1994 replaced the 24%
alternative minimum tax rate on individuals with a two-tier alternative
minimum tax rate having an initial rate of 26% and second-tier rate of 28% on
alternative minimum taxable income over $175,000.
An optionee who surrenders shares as payment of the exercise price of his
Incentive Option generally will not recognize gain or loss on his surrender of
such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with
respect to such stock, such disposition will be a disqualifying disposition
that may cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise of
an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the
same capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option
had been exercised for cash.
20
<PAGE>
NON-QUALIFIED OPTIONS
Generally, there will be no federal income tax consequences to either the
optionee or the Corporation on the grant of Non-Qualified Options granted
pursuant to the 1998 Plan. On the exercise of a Non-Qualified Option, the
optionee (except as described below) has taxable ordinary income equal to the
fair market value of the shares acquired on the exercise date over the option
price of the share. The Corporation will be entitled to a federal income tax
deduction (subject to the limitations contained in Section 162) in an amount
equal to such difference. However, special rules may apply where stock is
registered under the Exchange Act and the optionee is an officer, director or
10% or greater shareholder of the Corporation subject to potential liability
under Section 16(b) of the Securities Exchange Act of 1934 ("Exchange Act")
for so-called "short-swing" profits (a "16(b) Person") in connection with
certain purchases and sales, or sales and purchases, of the Corporation's
stock within a period of six months.
According to SEC rules promulgated under Section 16(b) of the Exchange Act,
the grant of an option, not its exercise, is treated as a "purchase" for
Section 16(b) purposes. If such grant is made pursuant to a plan qualifying
under the SEC rules and six months elapse between the grant of the option and
the sale of the shares received upon the exercise thereof, such grant will be
exempt from Section 16(b). With respect to the exercise of a Non-Qualified
Option, if a 16(b) Person has not purchased or acquired shares of Common Stock
within the six month period prior to the exercise date (other than purchases
or acquisitions exempt from Section 16(b)), the 16(b) Person will be required
to recognize ordinary income (i) six months after the date of grant of
exercise (in the event of exercise within six months of the date of grant) or
(ii) the date of exercise (in the event of exercise after six months from the
date of grant). The timing of income recognition with respect to a 16(b)
Person who exercises a Non-Qualified Option within six months of a prior non-
exempt purchase or acquisition of Common Stock is uncertain. It is possible
that the Internal Revenue Service will take the position that, despite the
prior non-exempt purchase or acquisition, the 16(b) Person recognizes income
on the date of exercise rather than the date which is six months following the
date of such prior non-exempt purchase or acquisition. A 16(b) Person can be
certain of recognizing income on the exercise date by making an election not
later than 30 days following the exercise date to have the income determined
as of the date of exercise (an "83(b) Election"), in which case the
Corporation's deduction will also be determined as of the exercise date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of
capital gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a Non-
Qualified Option will not recognize gain or loss with respect to the shares so
delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying
disposition. See "Federal Income Tax Consequences--Incentive Stock Options".
The optionee will recognize ordinary income on the exercise of the Non-
Qualified Option as described
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<PAGE>
above. Of the shares received in such an exchange, that number of shares equal
to the number of shares surrendered will have the same tax basis and capital
gains holding period as the shares surrendered. The balance of the shares
received will have a tax basis equal to their fair market value on the date of
exercise and the capital gains holding period will begin on the date of
exercise (or such later date, as described above, if the optionee is a 16(b)
Person who has not made an 83(b) Election, and such later date is applicable).
PHANTOM STOCK OPTIONS
Optionee who exercises a phantom stock option is entitled to receive at some
later date cash equal to the value of the phantom shares. The Optionee is not
taxed until receipt of the cash payment on the specified date. The Corporation
will have its deduction delayed to the specified date also.
LIMITATION ON CORPORATION'S DEDUCTION
Generally, Section 162(m) of the Code limits the Corporation's federal
income tax deduction for the compensation paid in any year to its chief
executive officer and its four highest paid executive officers to $1.0
million, to the extent that such compensation is not "performance based." A
stock option will, in general, qualify as "performanced based" compensation if
it (i) has an exercise price of not less than the fair market value of the
underlying stock on the date of grant, (ii) is granted under a plan that
limits the number of shares for which options may be granted to an employee
during a specified period, which plan is approved by a majority of the
shareholders entitled to vote thereon, and (iii) is granted by a compensation
committee consisting solely of at least two independent directors. The terms
of the 1998 Plan and the composition of the committee are intended to comply
with these regulations relating to stock options. If a stock option to an
executive referred to above is not "performance based," the amount that would
otherwise be deductible by the Corporation in respect of such stock option
will be disallowed to the extent that the executive's aggregate non-
performance based compensation paid in the relevant year exceeds $1.0 million.
REASONS FOR SHAREHOLDER APPROVAL
Shareholder approval of the 1998 Plan is required by a NASD bylaw, the Code
and SEC Regulations. A NASD bylaw requires companies whose shares are reported
on the NASDAQ National market to obtain shareholder approval of stock plans
for directors, officers or key employees. The Code requires shareholder
approval of the 1998 Plan to permit options granted to qualify as incentive
stock options to the extent so designated and to permit the 1998 Plan to meet
the requirements of Section 162(m) of the Code applicable to performance-based
compensation. Rule 16b-3 under the Exchange Act includes shareholder approval.
If the requirements of Rule 16b-3 are satisfied, then neither the grant of an
option under the 1998 Plan nor subject to certain conditions, the transfer of
shares to pay an option price under the 1998 Plan, will trigger the provisions
of Section 16(b) of the Exchange Act regarding "short-swing" profits.
The Board of Directors recommends that the shareholders vote FOR the 1998
Equity Incentive Plan.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand as independent public
accountants to audit the consolidated financial statements of the Corporation
for the year ending December 31, 1998. Representatives of Coopers & Lybrand
will be present at the Annual Meeting. They will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
1999 ANNUAL MEETING
The next Annual Meeting of the Corporation's shareholders is scheduled to be
held on May 11, 1999. In order to be included in the Corporation's Proxy
Statement and form of proxy relating to the 1999 Annual Meeting, any proposal
which a shareholder intends to present for consideration at such meeting must
be received by the Secretary of the Corporation no later than December 2,
1998.
Any nomination by a shareholder for election as a director must conform to
the requirements of Section 11.2 of the By-Laws of the Corporation, a copy of
which Section will be furnished promptly without charge upon written or oral
request to the Secretary of the Corporation at its principal office, 551 Main
Street, Johnstown, Pennsylvania 15901, (814) 532-3801. Any such nomination for
the 1999 Annual Meeting must be received in writing by the Secretary of the
Corporation no later than March 19, 1999, or not later than ten days after the
date on which notice of such Annual Meeting is sent to shareholders, whichever
is later.
OTHER MATTERS
The Board of Directors does not know of any business which will come before
the Annual Meeting for action by the shareholders other than the matters
specified in the accompanying Notice of the meeting. If any other matters
requiring a shareholder vote properly come before the meeting, the persons
appointed in the enclosed proxy card will vote in accordance with their
discretion with respect to such matters.
March 24, 1998
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EXHIBIT A
BT FINANCIAL CORPORATION
1998 EQUITY INCENTIVE PLAN
Section 1. Purposes.
The BT Financial Corporation 1998 Equity Incentive Plan (the "Plan") is
effective May 12, 1998. The purposes of the Plan are to: (a) assist BT
Financial Corporation (the "Company") in recruiting and retaining highly
qualified managers, consultants and staff; (b) provide Employees with an
incentive for productivity; and (c) provide Employees an opportunity to share
in the growth and value of the Company. The equity interests granted pursuant
to the Plan are intended to constitute Incentive Stock Options within the
meaning of section 422 of the Code, Non-Qualified Stock Options, or other
performance-based incentive awards, as determined by the Committee, or the
Board if no Committee has been appointed at the time of the Award. The type of
equity interests awarded will be specified in the Option Agreement between the
Company and the Participant.
Section 2. Definitions.
(a) "Affiliate" shall mean, with respect to a Person, a Person that directly
or indirectly controls, or is controlled by, or is under common control with
such Person.
(b) "Award" shall mean a grant of a PSU or an Option or Options to an
Employee pursuant to the provisions of this Plan. Each separate grant of a
PSU, an Option or Options to an Employee and each group of PSUs or Options
which matures on a separate date, is treated as a separate Award.
(c) "Board" shall mean the Board of Directors of the Company, as constituted
from time to time.
(d) "Cause" shall mean a determination by the Board that the Participant:
(i) has engaged in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in
the course of his employment or engagement, or has otherwise
breached any duty owed to the Company;
(ii) has been convicted of a misdemeanor involving moral turpitude or a
felony;
(iii) has pled nolo contendere to a felony;
(iv) has disclosed trade secrets or confidential information of the
Company; or
(v) has breached any agreement with the Company.
(e) "Change of Control" means the date upon which any of the following events
occurs or conditions first exist:
(i) The Company acquires actual knowledge that any Person (other than
the Company or any employee benefit plan sponsored by the Company)
has acquired beneficial
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ownership, directly or indirectly, of securities of the Company
entitling such Person to 25% or more of the voting power of the
Company;
(ii) (a) A tender offer is made to acquire securities of the Company
entitling the holders thereof to 50% or more of the voting power of
the Company; or (b) voting securities of the Company are first
purchased pursuant to any other tender offer;
(iii) At any time less than 51% of the members of the Board are
individuals who were either: (a) directors of the Company on July
24, 1996; or (b) individuals whose election, or nomination for
election, was approved by a vote of a majority of the directors
then still in office who were directors on July 24, 1996 or who
were so approved;
(iv) The shareholders of the Company approve an agreement providing for
the Company to be merged, consolidated or otherwise combined with,
or for all or substantially all the Company's assets or stock to be
acquired by, another Person, as a consequence of which the former
shareholders of the Company will own, immediately after such
merger, consolidation, combination or acquisition, less than a
majority of the voting power of such surviving or acquiring Person
or the parent thereof; or
(v) The shareholders of the Company approve any liquidation of all or
substantially all of the assets of the Company or any distribution
to security holders of assets of the Company having a value equal to
30% or more of the total value of all the assets of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Committee appointed by the Board in accordance
with Section 4(a) of the Plan, if one is appointed.
(h) "Common Stock" shall mean the common stock of the Company, $5.00 par value
per Share.
(i) "Company" shall mean BT Financial Corporation.
(j) "Director" shall mean an individual who is a member of the Board of
Directors of the Company or any of its Subsidiaries.
(k) "Disability" shall mean a disability of an Employee or a Director which
renders such Employee or Director unable to perform the full extent of his
duties and responsibilities by reason of his illness or incapacity which would
entitle that employee, officer or director to receive Social Security
Disability Income under the Social Security Act, as amended, and the
regulations promulgated thereunder. "Disabled" shall mean having a Disability.
The determination of whether a Participant is Disabled shall be made by the
Committee, whose determination shall be conclusive; provided that,
(i) if a Participant is bound by the terms of an employment agreement
between the Participant and the Company or any of its Subsidiaries,
whether the Participant is "Disabled" for purposes of the Plan shall
be determined in accordance with the procedures set forth in said
employment agreement, if such procedures are therein provided; and
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(ii) a Participant bound by such an employment agreement shall not be
determined to be Disabled under the Plan any earlier than he would
be determined to be disabled under his employment agreement.
(l) "Employee" shall mean any person employed by the Company or any of its
Subsidiaries.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value Per Share" shall mean the fair market value of a share
of Common Stock, as determined pursuant to Section 8 hereof.
(o) "Incentive Stock Option" shall mean an Option which is an incentive stock
option as described in Section 422 of the Code.
(p) "Non-Employee Director" shall have the meaning set forth in Rule 16b-
3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Committee may, in its sole
discretion, substitute the definition of "outside director" provided in the
regulations under Section 162(m) of the Code in place of the definition of
Non-Employee Director contained in the Exchange Act.
(q) "Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.
(r) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option to purchase Shares that is awarded pursuant to the Plan, or a Reload
Option.
(s) "Option Agreement" shall mean a written agreement substantially in the
form of Exhibit A-1 or A-2, or such other form or forms as the Committee
(subject to the terms and conditions of this Plan) may from time to time
approve evidencing and reflecting the terms of an Award.
(t) "Participant" shall mean each Employee or Director of the Company or a
Subsidiary to whom an Award is granted pursuant to this Plan.
(u) "Person" shall mean an individual, partnership, corporation, limited
liability company, trust, joint venture, unincorporated association, or other
entity or association.
(v) "Plan" shall mean this BT Financial Corporation 1998 Equity Incentive
Plan, as amended from time to time.
(w) "Pool" shall mean the pool of Shares of Common Stock subject to the Plan,
as described in Section 6 hereof.
(x) "PSU" means a phantom stock unit award made pursuant to Section 10
hereof, which gives the Participant the right to receive the Value of such PSU
at a specified time, to be paid in cash.
(y) "Reload Option" is defined in Section 11.
(z) "Securities Act" shall mean the Securities Act of 1933, as amended.
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(aa) "Shares" shall mean shares of Common Stock contained in the Pool, as
adjusted in accordance with Section 9 of the Plan.
(bb) "Subsidiary" shall mean a subsidiary of the Company, whether now or
hereafter existing, as defined in sections 424(f) and (g) of the Code.
(cc) "Termination of Employment" means a cessation of the employer- employee
relationship between the Participant and the Company and any Subsidiary for
any reason, including (without limitation) resignation, discharge, death,
Disability, or retirement. If a Participant transfers employment from the
Company to any Subsidiary, then, unless determined otherwise by the Board, a
Termination of Employment shall not be deemed to have occurred.
(dd) "Value" means, with respect to a PSU, the Fair Market Value per Share
on the date of exercise of such PSU.
Section 3. Participation.
Participants in the Plan shall be selected by the Committee from the
Employees. The Board may make Awards at any time and from time to time to
Employees. Any Award may include or exclude any Employee, as the Board shall
determine in its sole discretion.
Section 4. Administration.
(a) Structure.
(i) In General. The Plan shall be administered by the Committee. The
Board may at any time delegate its authority to administer the Plan
to a standing committee of the board or to a special Committee
consisting of not less than two persons to administer the Plan on
behalf of the Board, subject to such terms and conditions as the
Board may prescribe. Members of the Committee shall serve for such
period of time as the Board may determine. Members of the Board or
the Committee who are eligible for Awards or have received Awards
may vote on any matters affecting the administration of the Plan or
the Award of any Options or PSUs pursuant to the Plan, except that
no such member shall act upon the Award of an Option or PSU to
himself or herself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board
or Committee during which action is taken with respect to the Award
of Options or PSUs to himself or herself.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
(ii) Committee Powers. If the Board delegates its authority to
administer the Plan to a Committee, the Committee shall possess
all of the power and authority of, and shall be authorized to take
any and all actions required to be taken hereunder by, and make
any
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and all determinations required to be taken hereunder by, the Board.
If the Board does not delegate its authority to a Committee, each
reference herein to the Committee will be construed as a reference to
the Board unless the context otherwise requires.
(iii) Company Registered Securities Under Exchange Act. So long as the
Company has a class of equity securities registered under Section
12 of the Exchange Act, the Committee shall consist of not less
than two persons, each of whom shall be a Non-Employee Director.
(b) Authority of the Committee. Subject to the provisions of the Plan, the
Committee shall have the authority, in its discretion:
(i) to make Awards;
(ii) to select the persons to whom Incentive Stock Options, Non-
Qualified Stock Options, and PSUs may from time to time be granted
hereunder;
(iii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, and PSUs, or any combination thereof,
may be granted hereunder;
(iv) to determine the exercise price of any Options to be awarded in
accordance with Sections 7 and 8 of the Plan;
(v) to determine the number of Shares to be covered by each such Award
granted hereunder;
(vi) to prescribe, amend and rescind rules and regulations relating to
the Plan;
(vii) to determine the terms and provisions of each Award under the Plan
and each Option Agreement (which need not be identical with the
terms of other Awards and Option Agreements) and, with the consent
of the Participant, to modify or amend any outstanding Option or
Option Agreement;
(viii) to accelerate the vesting or exercise date of any Award;
(ix) to interpret the Plan or any agreement entered into in connection
with the Plan;
(x) to authorize any person to execute on behalf of the Company any
instrument required to effectuate an Award or to take such other
actions as may be necessary or appropriate with respect to the
Company's rights pursuant to Awards or agreements relating to the
Award or exercise thereof; and
(xi) to make such other determinations and establish such other
procedures as it deems necessary or advisable for the
administration of the Plan.
(c) Effect of the Committee's Decision. All decisions, determinations and
interpretations of the Committee shall be final and binding with respect to
all Awards under the Plan.
(d) Limitation of Liability. Notwithstanding anything herein to the contrary
(with the exception of Section 31 hereof), no member of the Board or of the
Committee shall be liable for any good faith determination, act or failure to
act in connection with the Plan or any Award hereunder.
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Section 5. Eligibility.
Awards may be made to Employees and Directors, except that only a person
employed by the Company or any of its Subsidiaries may receive an Incentive
Stock Option. An Employee or Director who has received an Award, if he or she
is otherwise eligible, may receive additional Awards.
Section 6. Stock Subject to the Plan.
Subject to the provisions of this Section 6 and the provisions of Section 9
of the Plan, the maximum aggregate number of Shares which may be awarded and
sold under the Plan is 600,000 Shares of Common Stock (collectively, the
"Pool"). The maximum aggregate number of Shares which may be awarded and sold
under the Plan to any individual Participant is 600,000 Shares of Common
Stock. Options awarded from the Pool may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined by the Committee. If an Option
should expire or become unexercisable for any reason without having been
exercised in full, or if Shares are subsequently repurchased by the Company,
the unpurchased or repurchased Shares which were subject thereto whether they
are retired or held as treasury shares shall, unless the Plan shall have been
terminated, be returned to the Plan and become available for future Awards
under the Plan.
Section 7. Terms and Conditions of Options.
Each Option awarded pursuant to the Plan shall be authorized by the
Committee and shall be evidenced by an Option Agreement in such form as the
Committee may from time to time determine. Each Option Agreement will
incorporate by reference the terms of the Plan and will include provisions as
to the following:
(a) Number of Shares. The number of Shares subject to the Option, which may
include fractional Shares.
(b) Option Price. The price per Share payable on the exercise of any Option
which is an Incentive Stock Option shall be stated in the Option Agreement and
shall be no less than the Fair Market Value Per Share of the Common Stock on
the date such Option is awarded, without regard to any restriction other than
a restriction which will never lapse. Notwithstanding the foregoing, if an
Option which is an Incentive Stock Option shall be awarded under this Plan to
any person who, at the time of the Award of such Option, owns stock possessing
more than 10% of the total combined voting power of all classes of the
Company's stock, the price per Share payable upon exercise of such Incentive
Stock Option shall be no less than 110 percent (110%) of the Fair Market Value
Per Share of the Common Stock on the date such Option is awarded. The price
per Share payable on the exercise of an Option which is a Non-Qualified Stock
Option shall be at least $5.00 per Share and shall be stated in the Option
Agreement.
(c) Consideration. The consideration to be paid for the Shares to be issued
upon the exercise of an Option, including the method of payment, which shall
be determined by the Committee and may consist entirely of cash, promissory
notes or shares of Common Stock having an aggregate Fair Market Value Per
Share on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or any combination of such
methods of payment, or such
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other consideration and method of payment permitted under any laws to which
the Company is subject and which is approved by the Committee. In making its
determination as to the type of consideration to accept, the Committee shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
(i) If the consideration for the exercise of an Option is a promissory
note, it may, in the discretion of the Committee, be either full
recourse or nonrecourse and shall bear interest at a per annum rate
which is not less than the applicable federal rate determined in
accordance with section 1274(d) of the Code as of the date of
exercise. In such an instance the Company may, in its sole
discretion, retain the Shares purchased upon exercise of the Option
in escrow as security for payment of the promissory note.
(ii) If the consideration for the exercise of an Option is the
surrender of previously acquired and owned shares of Common Stock,
the Participant will make representations and warranties
satisfactory to the Company regarding his title to the shares of
Common Stock used to effect the purchase (the "Payment Shares"),
including without limitation, representations and warranties that
the Participant has good and marketable title to such Payment
Shares free and clear of any and all liens, encumbrances, charges,
equities, claims, security interests, options or restrictions, and
has full power to deliver such Payment Shares without obtaining
the consent or approval of any person or governmental authority
other than those which have already given consent or approval in a
manner satisfactory to the Company. The per share value of the
Payment Shares shall be the Fair Market Value Per Share of such
Payment Shares on the date of exercise as determined by the Board
in its sole discretion, exercised in good faith. If such Payment
Shares were acquired upon previous exercise of Incentive Stock
Options granted within two years prior to the exercise of the
Option or acquired by the Participant within one year prior to the
exercise of the Option, such Participant shall be required, as a
condition to using the Payment Shares in payment of the exercise
price of the Option, to acknowledge the tax consequences of doing
so, in that such previously exercised Incentive Stock Options may
have, by such action, lost their status as Incentive Stock
Options, and the Participant may recognize ordinary income for tax
purposes as a result.
(d) Form of Option. Whether the Option awarded is an Incentive Stock Option
or a Non-Qualified Stock Option, which will constitute a binding determination
as to the form of Option awarded.
(e) Exercise of Options. Any Option awarded hereunder shall be exercisable at
such times and under such conditions as shall be set forth in the Option
Agreement (as may be determined by the Committee and as shall be permissible
under the terms of the Plan), which may include performance criteria with
respect to the Company and/or the Participant, and as shall be permissible
under the terms of the Plan. An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company at its principal
executive office in accordance with the terms of the Option Agreement by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company,
accompanied by any agreements required by the terms of the Plan and the
applicable Option Agreement. Full payment may consist of such consideration
and method of payment allowable under this Section 7. No adjustment
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shall be made for a dividend or other right for which the record date is prior
to the date the Option is exercised, except as provided in Section 9.
(f) Partial Exercise. An Option may be exercised in accordance with the
provisions of this Plan as to all or any portion of the Shares then
exercisable under an Option from time to time during the term of the Option.
An Option may not be exercised for a fraction of a Share.
(g) Leave of Absence. Except as may otherwise be provided in an Option
Agreement, if an Option would first become exercisable while the Participant
is absent from service on an approved leave of absence, the Participant shall
not be permitted to exercise such Option until the Participant's return to
active employment with the Company. Except as may otherwise be provided in an
Option Agreement, if an Option had become exercisable before or as of the
commencement of an approved leave of absence, the Participant may exercise
such previously vested Option while on such leave. Whether a Participant is
absent on a leave or has terminated employment shall be determined in
accordance with the Company's regular personnel policies.
(h) Share Certificates. As soon as practicable after any proper exercise of
an Option in accordance with the provisions of the Plan, the Company shall,
without transfer or issue tax to the Participant, deliver to the Participant
at the principal executive office of the Company or such other place as shall
be mutually agreed upon between the Company and the Participant, a certificate
or certificates representing the Shares for which the Option shall have been
exercised.
(i) Vesting
(i) Any vesting conditions applicable to the Options evidenced thereby.
To the extent that no vesting conditions are stated in the Option
Agreement, the Options evidenced thereby shall be fully vested at
grant. Any Option granted hereunder which is outstanding but not
vested seven (7) years after the date of Award shall become vested
at that time. Options may be exercised in any order elected by the
Participant whether or not the Participant holds any unexercised
Options under this Plan or any other plan of the Company.
(ii) Notwithstanding any other provision of this Plan, no Option shall
be (A) awarded under this Plan after ten (10) years from the date
on which this Plan is adopted by the Board, or (B) exercisable
more than ten (10) years from the date of Award; provided,
however, that if an Option that is intended to be an Incentive
Stock Option shall be awarded under this Plan to any person who,
at the time of the Award of such Option, owns stock possessing
more than 10% of the total combined voting power for all classes
of the Company's stock, the foregoing clause (B) shall be deemed
modified by substituting "five (5) years" for the term "ten (10)
years" that appears therein.
(iii) No Option awarded to any Participant shall be treated as an
Incentive Stock Option, to the extent such Option would cause the
aggregate Fair Market Value Per Share (determined as of the date
of Award of each such Option) of the Shares with respect to which
Incentive Stock Options are exercisable by such Participant for
the first time during any calendar year to exceed $100,000. For
purposes of determining whether an Incentive Stock Option would
cause such aggregate Fair Market Value Per Share to exceed the
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$100,000 limitation, such Incentive Stock Options shall be taken into
account in the order awarded. For purposes of this subsection,
Incentive Stock Options include all Incentive Stock Options under all
plans of the Company that are Incentive Stock Option plans within the
meaning of section 422 of the Code.
(j) Termination of Options.
(1) Upon the Termination of Employment for any reason other than death,
Disability or Cause, (A) any Options that were not exercisable at
the date of Termination of Employment will expire automatically, (B)
any exercisable Option intended to be an Incentive Stock Option will
remain exercisable for ninety (90) days after the date of
Termination of Employment and (C) any exercisable Option not
intended to be an Incentive Stock Option shall remain exercisable
for twelve (12) months after the date of Termination of Employment.
(2) Upon the death of a Participant, (A) any Options that were not
exercisable at the date of death will expire automatically, (B) any
exercisable Option intended to be an Incentive Stock Option will
remain exercisable for only ninety (90) days after the date of
Termination of Employment and (C) any other exercisable Option may
be exercised by the Participant's estate or by a person who acquires
the right to exercise such Option by bequest or inheritance or by
reason of the death of the Participant, provided that such exercise
occurs within both the remaining term of the Option and one year
after the Participant's death.
(3) Upon the Termination of Employment by reason of Disability, (A) any
Options that were not exercisable at the date of Termination of
Employment will expire automatically, (B) any exercisable Option
intended to be an Incentive Stock Option will remain exercisable for
only ninety (90) days after the date of Termination of Employment
any other exercisable Option may be exercised within 36 months from
the date of Termination of Employment.
(4) Notwithstanding any other provision of this Plan, upon the
Termination of Employment of any Participant for "Cause," all of
that Participant's unexercised Options will terminate immediately
upon the date such Termination of Employment and the Participant
shall forfeit all Shares for which the Company has not yet delivered
share certificates to the Participant. The Company shall refund to
the Participant the Option purchase price paid to it, if any, in the
same form as it was paid (or in cash at the Company's discretion).
The Company may withhold delivery of share certificates pending the
resolution of any inquiry that could lead to a finding that a
Termination of Employment was for Cause.
(k) Reload Options. Whether or not Reload Options are authorized with respect
to the Options granted thereby.
Section 8. Determination of Fair Market Value Per Share of Common Stock.
(a) If shares of Common Stock are listed on a national or regional securities
exchange or traded through the NASDAQ National Market, the Fair Market Value
of a share of Common Stock shall be
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the closing price for a share of Common Stock on the exchange or on the NASDAQ
National Market, as reported in The Wall Street Journal on the relevant
valuation date, or if there is no trading on that date, on the next preceding
date on which there were reported share prices. If shares of Common Stock are
traded in the over-the-counter market, the Fair Market Value Per Share of
Common Stock shall be the mean of the bid and asked prices for a share of
Common Stock on the relevant valuation date as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotations ("NASDAQ") System), as
applicable or, if there is no trading on such date, on the next preceding date
on which there were reported share prices.
(b) If Fair Market Value Per Share of Common Stock cannot be determined in
accordance with Section 8(a), then the Fair Market Value Per Share of Common
Stock shall be determined by the Committee in good faith and in its sole
discretion. In no event shall this Section 8(b) require the Committee to
obtain any expert or independent opinion with respect to the Fair Market Value
Per Share of Common Stock.
Section 9. Adjustments.
(a) Subject to required action by the Shareholders, if any, the number of
Shares in the Pool and the number of Shares subject to outstanding Options and
the Option prices thereof shall be adjusted proportionately for any increase
or decrease in the number of outstanding Shares of Common Stock of the Company
resulting from stock splits, reverse stock splits, stock dividends,
reclassifications and recapitalizations, merger, consolidation, exchange of
shares, or rights offered to purchase shares of Common Stock at a price
substantially below Fair Market Value Per Share or any similar change
affecting Common Stock.
(b) No fractional Shares shall be issuable on account of any action mentioned
in Section 9(a), and the aggregate number of Shares into which Shares then
covered by the Award, when changed as the result of such action, shall be
reduced to the number of whole Shares resulting from such action, unless the
Board, in its sole discretion, shall determine to issue scrip certificates
with respect to any fractional Shares, which scrip certificates, in such
event, shall be in a form and have such terms and conditions as the Board in
its discretion shall prescribe. The Board, in its sole discretion, shall make
appropriate equitable anti-dilution adjustments to the number of then-
outstanding PSUs.
Section 10. Phantom Stock Units.
(a) Awards and Administration. A PSU is the right to receive a cash award in
in an amount equal to Value of the PSU on the date of exercise. The Committee
shall determine the persons to whom and the time or times at which PSUs shall
be awarded, the number of PSUs to be awarded to any such person, the duration
of the period (the "performance period") during which, and the conditions
under which, a Participant's right to PSUs will be vested, and the other terms
and conditions of the award in addition to those set forth below. The
Committee may condition the vesting of PSUs upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall
determine, in its sole discretion. The provisions of PSU awards need not be
the same with
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respect to each Participant, and such awards to individual Participants need
not be the same in subsequent years.
(b) Terms and Conditions. SUs awarded pursuant to this Section 10 shall be
subject to the following terms and conditions and such other terms and
conditions not inconsistent with this Plan as the Committee deems desirable:
(i) Conditions. At the discretion of the Committee, the Participant
shall have, with respect to each PSU, the right to receive any
distributions or dividends, equal to any distributions or dividends
actually paid in respect of outstanding shares of Common Stock
while a PSU is outstanding.
(ii) Transfer or Assignment. PSUs shall not be transferable nor
assignable.
(iii) Vesting. The Board, in its sole discretion, shall specify the
performance period during which, and the conditions under which,
the Participant's right to PSUs will be vested. At the expiration
of the performance period, the Board, in its sole discretion,
shall determine the extent to which the performance goals have
been achieved, and the percentage of the PSUs of each Participant
that have vested.
(iv) Exercise. Upon exercise of a PSU, its Value shall be payable in
cash. As a condition to payment, the Participant shall make
appropriate arrangements to satisfy applicable federal, state, or
local tax withholding requirements. Unless provided otherwise,
PSUs may be exercised only on a December 31 or January 1 of the
relevant year.
(v) Termination of Employment. Upon a Participant's Termination of
Employment, all that Participant's PSUs and any rights thereunder
will be forfeited immediately.
Section 11. Reload Options.
(a) Authorization of Reload Options. Concurrently with the award of Options,
the Committee may authorize reload options ("Reload Option") to purchase for
cash or shares a number of shares of Common Stock. The number of Reload
Options shall equal (i) the number of shares of Common Stock used to exercise
the underlying Options and (ii) to the extent authorized by the Committee, the
number of shares of Common Stock used to satisfy any tax withholding
requirement incident to the exercise of the underlying Stock Options or
Incentive Stock Options. The grant of a Reload Option will become effective
upon the exercise of underlying Options or Reload Options through the use of
shares of Common Stock held by the optionee for at least 12 months.
Notwithstanding the fact that the underlying option may be an Incentive Stock
Option, a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986.
(b) Reload Option Amendment. Each Option Agreement shall state whether the
Committee has authorized Reload Options with respect to the underlying
Options. Upon the exercise of an underlying Option or other Reload Option, the
Reload Option will be evidenced by an amendment to the underlying Option
Agreement.
(c) Reload Option Price. The option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the Fair Market
Value per Share of Common Stock on the date the grant of the Reload Option
becomes effective.
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<PAGE>
(d) Term and Exercise. Each Reload Option shall be fully exercisable six
months from the effective date of its grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Option.
(e) Termination of Employment. No additional Reload Options shall be granted
to any Optionee upon exercise of Options or Reload Options following any
Termination of Employment.
Section 12. Rights as a Shareholder.
A recipient of an Option Award or PSU shall have no rights as a Shareholder
of the Company and shall neither have the right to vote nor receive dividends
with respect to any Shares subject to an Option until such Option has been
exercised and a certificate with respect to the Shares purchased upon such
exercise has been issued to him.
Section 13. Time of Awarding Options or PSUs.
The date of an Award shall, for all purposes, be the date which the
Committee specifies when the Committee makes its determination that an Award
is made or if none is specified, then the date of the Committee's
determination. Notice of the determination shall be given to each Employee to
whom an Award is made within a reasonable time after the date of such Award.
Section 14. Modification, Extension and Renewal of Award.
Subject to the terms and conditions of the Plan, the Committee may modify,
extend or renew an Award, or accept the surrender of an Award (to the extent
not theretofore exercised). Notwithstanding the foregoing, (a) no modification
of an Award which adversely affects the Participant shall be made without the
consent of the Participant, and (b) no Incentive Stock Option may be modified,
extended or renewed if such action would cause it to cease to be an "Incentive
Stock Option" within the meaning of section 422 of the Code, unless the
Participant specifically acknowledges and consents to the tax consequences of
such action.
Section 15. Purchase for Investment and Other Restrictions.
(a) The obligation of the Company to issue Shares to a Participant upon the
exercise of an Option granted under the Plan is conditioned upon:
(i) the Company obtaining any required permit or order from appropriate
United States, state and foreign governmental agencies or stock
exchange or similar body, authorizing the Company to issue such
Shares; and
(ii) such issuance complying with all relevant provisions of applicable
law, including, without limitation, the Securities Act, the
Exchange Act, the rules and regulations promulgated thereunder and
any applicable foreign laws.
(b) At the option of the Committee, the obligation of the Company to issue
Shares to a Participant upon the exercise of an Option granted under the Plan
may be conditioned upon obtaining appropriate representations, warranties,
restrictions and agreements of the Participant. Among other
A-12
<PAGE>
representations, warranties, restrictions and agreements, the Participant may
be required to represent and agree that the purchase of Shares shall be for
investment, and not with a view to the public resale or distribution thereof,
unless the Shares are registered under the Securities Act and the issuance and
sale of the Shares complies with all other laws, rules and regulations
applicable thereto. Unless the issuance of such Shares is registered under the
Securities Act (and any similar law of a foreign jurisdiction applicable to
the Participant), the Participant shall acknowledge that the Shares purchased
are not registered under the Securities Act (or any such other law) and may
not be sold or otherwise transferred unless the Shares have been registered
under the Securities Act (or any such other law) in connection with the sale
or other transfer thereof, or that counsel satisfactory to the Company has
issued an opinion satisfactory to the Company that the sale or other transfer
of such Shares is exempt from registration under the Securities Act (or any
such other law), and unless said sale or transfer is in compliance with all
other applicable laws, rules and regulations, including all applicable
federal, state and foreign securities laws, rules and regulations. Unless the
Shares subject to an Award are registered under the Securities Act, the
certificates representing such Shares issued shall contain the following
legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO
DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED
OF, BY GIFT OR OTHERWISE, OR IN ANY WAY ENCUMBERED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR A
SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO BT FINANCIAL
CORPORATION, INC. THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND
UNDER APPLICABLE STATE SECURITIES LAWS.
If required under the laws of any jurisdiction in which the Participant
resides, the certificate or certificates may bear any such legend.
Section 16. Transferability.
No Option shall be assignable or transferable otherwise than by will or by
the laws of descent and distribution. Options shall be exercisable only by
Participant, or, in the event of his or her legal incapacity or Disability,
then by the Participant's legal guardian or representative, or by a
Participant's executor or administrator.
Section 17. Other Provisions.
Each Option Agreement may contain such other provisions as the Committee in
its discretion deems advisable and which are not inconsistent with the
provisions of this Plan, including, without limitation, restrictions upon or
conditions precedent to the exercise of the Option.
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<PAGE>
Section 18. Power of Board in Case of Change of Control.
In the event of a Change of Control, the Board shall have the authority, in
its discretion, to accelerate the vesting of all unmatured Options or to
accelerate the expiration date of all Options, whether or not matured. In
addition, in the event of a Change of Control of the Company by reason of a
merger, consolidation or tax free reorganization or sale of all or
substantially all of the assets of the Company, the Board shall have the
authority, in its discretion, to terminate this Plan and to (a) exchange all
Options for options to purchase common stock in the successor corporation or
(b) distribute to each Participant cash and/or other property in an amount
equal to and in the same form as the Participant would have received from the
successor corporation if the Participant had owned the Shares subject to the
Option rather than the Option at the time of the Change of Control, provided
that any such amount paid to a Participant shall reflect the deduction of the
exercise price the Participant would have paid to purchase such Shares. The
form of payment or distribution to the Participant pursuant to this Section
shall be determined by the Board.
Section 19. Amendment of the Plan.
Insofar as permitted by law and the Plan, the Board may from time to time
suspend, terminate or discontinue the Plan or revise or amend it in any
respect whatsoever with respect to any Shares at the time not subject to an
Option; provided, however, that without approval of the Shareholders by a
majority of the votes cast at a duly held Shareholder meeting at which a
quorum representing a majority of the Company's outstanding voting shares is
present (either in person or by proxy), within one year (365 days) of the
adoption of an amendment or revision by the Board, no such amendment or
revision may change the aggregate number of Shares for which Options may be
awarded hereunder, change the designation of the class of Employees eligible
to receive Options or decrease the price at which Options may be awarded.
The Committee may make Awards hereunder prior to approval of any amendment;
provided, however, that any and all Options so awarded automatically shall be
converted into Non-Qualified Stock Options if the amendment is not approved by
such Shareholders within 365 days of its adoption.
Any other provision of this Section 19 notwithstanding, the Board
specifically is authorized to adopt any amendment to this Plan deemed by the
Board to be necessary or advisable to assure that the Incentive Stock Options
or the Non-Qualified Stock Options available under the Plan continue to be
treated as such, respectively, under all applicable laws.
Section 20. Application of Funds.
The proceeds received by the Company from the sale of Shares pursuant to the
exercise of Options shall be used for general corporate purposes or such other
purpose as may be determined by the Board.
Section 21. No Obligation to Exercise Option.
The Award of an Option shall impose no obligation upon the Participant to
exercise such Option.
A-14
<PAGE>
Section 22. Approval of Shareholders.
This Plan shall become effective on the date that it is adopted by the
Board; provided, however, that it shall become limited to a Non-Qualified
Stock Option plan if it is not approved by the shareholders of the Company
within one year (365 days) of its adoption by the Board, by a majority of the
votes cast at a duly held shareholder meeting at which a quorum representing a
majority of the Company's outstanding voting shares is present, either in
person or by proxy. The Committee may make Awards hereunder prior to
shareholder approval of the Plan; provided, however, that any and all Options
so awarded automatically shall be converted into Non-Qualified Stock Options
if the Plan is not approved by such Shareholders within 365 days of its
adoption.
Section 23. Conditions Upon Issuance of Shares.
Shares shall not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
Section 24. Reservation of Shares.
The Company shall at all times reserve and keep available such number of
Shares as shall be sufficient to satisfy the requirements of the Plan.
The Company shall use its best efforts to seek to obtain from appropriate
regulatory agencies any requisite authorization in order to issue and sell
such number of Shares as shall be sufficient to satisfy the requirements of
the Plan. The inability of the Company to obtain from any such regulatory
agency having jurisdiction the requisite authorization(s) deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any
Shares hereunder, or the inability of the Company to confirm to its
satisfaction that any issuance and sale of any Shares hereunder will meet
applicable legal requirements, shall relieve the Company of any liability in
respect to the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
Section 25. Stock Option Agreements.
Options shall be evidenced by an Option Agreement in such form or forms as
the Board shall approve from time to time.
Section 26. Taxes, Fees, Expenses and Withholding of Taxes.
(a) The Company shall pay all original issue and transfer taxes (but not
income taxes, if any) with respect to the Award of Options and/or the issue
and transfer of Shares pursuant to the exercise thereof, and all other fees
and expenses necessarily incurred by the Company in connection therewith, and
will from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of counsel for the Company, shall be
applicable thereto.
A-15
<PAGE>
(b) The Award of Options hereunder and the issuance of Shares pursuant to the
exercise of Options is conditioned upon the Company's reservation of the right
to withhold in accordance with any applicable law, from any compensation or
other amounts payable to the Participant, any taxes required to be withheld
under federal, state or local law as a result of the Award or exercise of such
Option or the sale of the Shares issued upon exercise thereof. To the extent
that compensation or other amounts, if any, payable to the Participant is
insufficient to pay any taxes required to be so withheld, the Company may, in
its sole discretion, require the Participant (or such other person entitled
herein to exercise the Option), as a condition of the exercise of an Option,
to pay in cash to the Company an amount sufficient to cover such tax liability
or otherwise to make adequate provision for the Company's satisfaction of its
withholding obligations under federal, state and local law, provided that such
satisfaction of tax liability is made within 60 days of the date on which
written notice of exercise has been given to the Company.
Section 27. Notices.
Any notice to be given to the Company pursuant to the provisions of this
Plan shall be addressed to the Company in care of its Secretary (or such other
person as the Company may designate from time to time) at its principal
executive office, and any notice to be given to a Participant shall be
delivered personally or addressed to him or her at the address given beneath
his or her signature on his or her Option Agreement, or at such other address
as such Participant or his or her permitted transferee (upon the transfer of
the Shares) may hereafter designate in writing to the Company. Any such notice
shall be deemed duly given on the date and at the time delivered via personal,
courier or recognized overnight delivery service or, if sent via telecopier,
on the date and at the time telecopied with confirmation of delivery or, if
mailed, on the date five (5) days after the date of the mailing (which shall
be by regular, registered or certified mail). Delivery of a notice by telecopy
(with confirmation) shall be permitted and shall be considered delivery of a
notice notwithstanding that it is not an original that is received. It shall
be the obligation of each Participant and each permitted transferee holding
Shares purchased upon exercise of an Option to provide the Secretary of the
Company, by letter mailed as provided herein, with written notice of his or
her direct mailing address.
Section 28. No Enlargement of Participant Rights.
This Plan is purely voluntary on the part of the Company, and the
continuance of the Plan shall not be deemed to constitute a contract between
the Company and any Participant, or to be consideration for or a condition of
the employment or service of any Participant. Nothing contained in this Plan
shall be deemed to give any Participant the right to be retained in the employ
or service of the Company or any Subsidiary, or to interfere with the right of
the Company or any such corporation to discharge or retire any Participant
thereof at any time subject to applicable law. No Participant shall have any
right to or interest in Awards authorized hereunder prior to the Award thereof
to such Participant, and upon such Award he shall have only such rights and
interests as are expressly provided herein, subject, however, to all
applicable provisions of the Company's Certificate of Incorporation, as the
same may be amended from time to time.
A-16
<PAGE>
Section 29. Information to Participants.
The Company, upon request, shall provide without charge to each Participant
copies of such annual and periodic reports as are provided by the Company to
its Shareholders generally.
Section 30. Invalid Provisions.
If any provision of this Plan is found to be invalid or otherwise
unenforceable under any applicable law, such invalidity or unenforceability
shall not be construed as rendering any other provisions contained herein as
invalid or unenforceable, and all such other provisions shall be given full
force and effect to the same extent as though the invalid or unenforceable
provision was not contained herein.
Section 31. Applicable Law.
This Plan shall be governed by, construed and enforced in accordance with
the laws of the Commonwealth of Pennsylvania.
Executed this day of , 1998.
[CORPORATE SEAL] BT FINANCIAL CORPORATION
Attest: By:
---------------------------- ------------------------------------
ADOPTION AND APPROVAL OF PLAN
Date Plan adopted by Board:
------------------------
Date Plan approved by Shareholders:
----------------
Effective Date of Plan:
----------------------------
A-17
<PAGE>
EXHIBIT A-1
NON-QUALIFIED STOCK OPTION AGREEMENT UNDER THE
BT FINANCIAL CORPORATION 1998 EQUITY INCENTIVE PLAN
BT Financial Corporation (the "Company"), hereby grants to [name] (the
"Optionee") the option to purchase [number of shares] shares of the Company's
common stock (the "Option"). The Option is subject to the terms set forth
herein, and in all respects is subject to the terms and provisions of the BT
Financial Corporation 1998 Equity Incentive Plan (the "Plan") applicable to
non-qualified stock options, which terms and provisions are incorporated
herein by this reference. Unless the context herein requires otherwise, the
terms defined in the Plan shall have the same meanings herein.
1. NATURE OF THE OPTION. The Option is intended to be a nonstatutory stock
option for federal income tax purposes and is not intended to be an Incentive
Stock Option described by Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or to otherwise qualify the Optionee for any special tax
benefits.
2. DATE OF GRANT; TERM OF OPTION. This Option is granted as of [date of
grant}, and it may not be exercised than later than the date that is ten (10)
years after date of grant, subject to earlier termination, as provided in the
Plan.
3. OPTION EXERCISE PRICE. The exercise price to the Optionee to purchase,
pursuant to this Agreement, one share of common stock of the Company is
$[exercise price].
4. RELOAD OPTIONS. This Option Agreement does not provide for the grant of
any Reload Options.
5. EXERCISE OF OPTION. The Option shall be exercisable during its term only
in accordance with the terms and provisions of the Plan and this Option
Agreement as follows:
(A) RIGHT TO EXERCISE. The Option shall become exercisable on [exerise
date].
(B) METHOD OF EXERCISE. The Optionee may exercise the Option by providing
written notice stating the election to exercise this Option, and making
such representations and agreements as to the Optionee's investment intent
with respect to the shares underlying the Option and to be purchased (the
"Shares") as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary of
the Company or such other person as may be designated by the Company. The
written notice shall be accompanied by payment of the exercise price by
check or such other consideration and method of payment as may be
authorized by the Board pursuant to the Plan. The certificate(s) for the
Shares as to which the Option shall be exercised shall be registered in the
name of the Optionee and shall be legended as may be required under
applicable law.
(C) PARTIAL EXERCISE. The Option may be exercised in whole or in part.
A-1-1
<PAGE>
(D) RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of this Option, the Company may
require the Optionee to make any representation and warranty to the Company
as may be required by or advisable under any applicable law or regulation.
6. NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner
either voluntarily or involuntarily by operation of law, other than by will or
by the laws of descent or distribution, and may be exercised during the
lifetime of the Optionee only by such Optionee. Subject to the foregoing and
the terms of the Plan, the terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
7. CONTINUATION OF EMPLOYMENT OR ENGAGEMENT. Neither the Plan nor this Option
shall confer upon any Optionee any right to continue in the service of the
Company or limit, in any respect, the right of the Company to discharge the
Optionee at any time, with or without cause and with or without notice.
8. WITHHOLDING. The Company reserves the right to withhold, in accordance
with any applicable laws, from any consideration payable to Optionee any taxes
required to be withheld by federal, state or local law as a result of the
grant or exercise of this Option or the sale or other disposition of the
Shares issued upon exercise of this Option. If the amount of any consideration
payable to the Optionee is insufficient to pay such taxes or if no
consideration is payable to the Optionee, upon the request of the Company, the
Optionee (or such other person entitled to exercise the Option pursuant to the
Plan) shall pay to the Company an amount sufficient for the Company to satisfy
any federal, state or local tax withholding requirements it may incur as a
result of the grant or exercise of this Option or the sale or other
disposition of the Shares issued upon the exercise of this Option.
9. THE PLAN. This Option is subject to, and the Company and the Optionee
agree to be bound by, all of the terms and conditions of the Plan as such Plan
may be amended from time to time in accordance with the terms thereof,
provided that no such amendment shall deprive the Optionee, without his
consent, of this Option or any rights hereunder. Pursuant to the Plan, the
Board or the Option Committee of the Board is authorized to adopt rules and
regulations not inconsistent with the Plan as it shall deem appropriate and
proper. A copy of the Plan in its present form is available for inspection
during business hours by the Optionee or the persons entitled to exercise this
Option at the Company's principal office.
10. ENTIRE AGREEMENT. This Agreement, together with the Plan and the other
exhibits attached thereto or hereto, represents the entire agreement between
the parties.
11. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
A-1-2
<PAGE>
12. AMENDMENT. Subject to the provisions of the Plan, this Agreement may only
be amended by a writing signed by each of the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the
day of , 199 .
BT FINANCIAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
OPTIONEE
---------------------------------------
Signature
---------------------------------------
Printed Name
A-1-3
<PAGE>
ACKNOWLEDGMENT
The Optionee acknowledges receipt of a copy of the BT Financial Corporation
1998 Equity Incentive Plan (the "Plan"), a copy of which is attached hereto,
and represents that Optionee has read and is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board of
Directors or the Committee upon any questions arising under the Plan.
Date:
----------------------------- ---------------------------------------
Optionee
A-1-4
<PAGE>
EXHIBIT A-2
INCENTIVE STOCK OPTION AGREEMENT UNDER THE
BT FINANCIAL CORPORATION 1998 EQUITY INCENTIVE PLAN
BT Financial Corporation (the "Company"), hereby grants to [name] (the
"Optionee") the option to purchase [number of shares] shares of the Company's
common stock (the "Option"). The Option is subject to the terms set forth
herein, and in all respects is subject to the terms and provisions of the BT
Financial Corporation 1998 Equity Incentive Plan (the "Plan") applicable to
non-qualified stock options, which terms and provisions are incorporated
herein by this reference. Unless the context herein requires otherwise, the
terms defined in the Plan shall have the same meanings herein.
13. NATURE OF THE OPTION. The Option is intended to be an Incentive Stock
Option described by Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
14. DATE OF GRANT; TERM OF OPTION. This Option is granted as of [date of
grant], and it may not be exercised than later than the date that is ten (10)
years after date of grant, subject to earlier termination, as provided in the
Plan.
15. OPTION EXERCISE PRICE. The exercise price to the Optionee to purchase,
pursuant to this Agreement, one share of common stock of the Company is
$[exercise price].
16. RELOAD OPTIONS. This Option Agreement does not provide for the grant of
any Reload Options.
17. EXERCISE OF OPTION. The Option shall be exercisable during its term only
in accordance with the terms and provisions of the Plan and this Option
Agreement as follows:
(A) RIGHT TO EXERCISE. The Option shall become exercisable on [exercise
date].
(B) METHOD OF EXERCISE. The Optionee may exercise the Option by providing
written notice stating the election to exercise this Option, and making
such representations and agreements as to the Optionee's investment intent
with respect to the shares underlying the Option and to be purchased (the
"Shares") as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary of
the Company or such other person as may be designated by the Company. The
written notice shall be accompanied by payment of the exercise price by
check or such other consideration and method of payment as may be
authorized by the Board pursuant to the Plan. The certificate(s) for the
Shares as to which the Option shall be exercised shall be registered in the
name of the Optionee and shall be legended as may be required under
applicable law.
(C) PARTIAL EXERCISE. The Option may be exercised in whole or in part.
A-2-1
<PAGE>
(D) RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of this Option, the Company may
require the Optionee to make any representation and warranty to the Company
as may be required by or advisable under any applicable law or regulation.
18. NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner
either voluntarily or involuntarily by operation of law, other than by will or
by the laws of descent or distribution, and may be exercised during the
lifetime of the Optionee only by such Optionee. Subject to the foregoing and
the terms of the Plan, the terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
19. CONTINUATION OF EMPLOYMENT OR ENGAGEMENT. Neither the Plan nor this
Option shall confer upon any Optionee any right to continue in the service of
the Company or limit, in any respect, the right of the Company to discharge
the Optionee at any time, with or without cause and with or without notice.
20. WITHHOLDING. The Company reserves the right to withhold, in accordance
with any applicable laws, from any consideration payable to Optionee any taxes
required to be withheld by federal, state or local law as a result of the
grant or exercise of this Option or the sale or other disposition of the
Shares issued upon exercise of this Option. If the amount of any consideration
payable to the Optionee is insufficient to pay such taxes or if no
consideration is payable to the Optionee, upon the request of the Company, the
Optionee (or such other person entitled to exercise the Option pursuant to the
Plan) shall pay to the Company an amount sufficient for the Company to satisfy
any federal, state or local tax withholding requirements it may incur as a
result of the grant or exercise of this Option or the sale or other
disposition of the Shares issued upon the exercise of this Option.
21. THE PLAN. This Option is subject to, and the Company and the Optionee
agree to be bound by, all of the terms and conditions of the Plan as such Plan
may be amended from time to time in accordance with the terms thereof,
provided that no such amendment shall deprive the Optionee, without his
consent, of this Option or any rights hereunder. Pursuant to the Plan, the
Board or the Option Committee of the Board is authorized to adopt rules and
regulations not inconsistent with the Plan as it shall deem appropriate and
proper. A copy of the Plan in its present form is available for inspection
during business hours by the Optionee or the persons entitled to exercise this
Option at the Company's principal office.
22. ENTIRE AGREEMENT. This Agreement, together with the Plan and the other
exhibits attached thereto or hereto, represents the entire agreement between
the parties.
23. GOVERNING LAW. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to the application of the principles of conflicts of laws.
A-2-2
<PAGE>
24. AMENDMENT. Subject to the provisions of the Plan, this Agreement may only
be amended by a writing signed by each of the parties hereto.
25. CONVERSION TO NON-QUALIFIED OPTION. Notwithstanding anything to the
contrary set forth herein, this Option is being granted subject to the
condition that if the Plan is not approved by the shareholders of the Company
within 365 days of the date that the Plan is adopted by the Board of Directors
of the Company, this Option shall automatically be converted into a non-
qualified stock option.
26. EARLY DISPOSITION OF STOCK. Subject to the fulfillment by Optionee of any
conditions limiting the disposition of Shares received under this Option,
Optionee hereby agrees that if Optionee disposes of any Shares received under
this Option within one (1) year after such Shares were transferred to Optionee
or two (2) years after the date as of which this Option was granted, Optionee
will notify the Company in writing within thirty (30) days after the date of
such disposition.
IN WITNESS WHEREOF, this Agreement has been executed by the parties on the
day of , 199 .
BT FINANCIAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
OPTIONEE
---------------------------------------
Signature
---------------------------------------
Printed Name
A-2-3
<PAGE>
ACKNOWLEDGMENT
The Optionee acknowledges receipt of a copy of the BT Financial Corporation
1998 Equity Incentive Plan (the "Plan"), a copy of which is attached hereto,
and represents that Optionee has read and is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board of
Directors or the Committee upon any questions arising under the Plan.
Date:
----------------------------- ---------------------------------------
Optionee
A-2-4
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BT FINANCIAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1998
The undersigned hereby appoints John C. Cwik, Rowland H. Tibbott, Jr. and Thomas
A. Young and each of them, with full power of substitution in each, as proxy or
proxies to represent the undersigned and to vote all shares of Common Stock of
BT FINANCIAL CORPORATION which the undersigned would be entitled to vote if
personally present and voting at the Annual Meeting of the Corporation's
shareholders to be held on May 12, 1998, and at any adjournments thereof, upon
all matters coming before the meeting. Said proxies are directed to vote as set
forth below and, in their discretion, upon such matters as may properly come
before the meeting.
1. ELECTION OF DIRECTORS (Four-year term). Nominees: G. Scott Baton, II,
John H. Anderson, Edward L. Mears and Roger S. Nave.
[_] VOTE FOR all nominees; except authority to vote is withheld from the
following individual nominees (if any):
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[_] VOTE WITHHELD from all nominees.
PLEASE DATE AND
SIGN ON THE REVERSE
2. APPROVAL OF THE BT FINANCIAL CORPORATION 1998 EQUITY INCENTIVE PLAN.
[_] VOTE FOR the proposal. [_] VOTE AGAINST the proposal. [_] ABSTAIN.
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(Continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION,
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES FOR DIRECTOR AND FOR THE APPROVAL OF THE BT FINANCIAL CORPORATION
1998 EQUITY INCENTIVE PLAN. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF
SHAREHOLDERS.
Dated
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SIGNATURE(S)
Please sign EXACTLY as your name
appears hereon. When signing as
attorney, guardian, executor, trustee,
etc. or as officer of a corporation,
give full title as such. For joint
accounts, please obtain both
signatures.
PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY PROMPTLY.
