<PAGE>
As filed with the Commission on August 17, 1998 Registration No. 33-*****
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 6022 25-1441348
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification
No.)
BT Financial Plaza, 551 Main Street, Johnstown, Pennsylvania 15901,
(814) 532-3801
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
John H. Anderson
Chairman and Chief Executive Officer
BT Financial Corporation
BT Financial Plaza, 551 Main Street, Johnstown, Pennsylvania 15901,
(814) 532-3801
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Dennis M. Sheedy, Esq. Peter Calarie, Esq.
Pepper Hamilton LLP Calarie & Owen
50th Floor, 200 North Jefferson Street
One Mellon Bank Center Kittanning, PA 16201
Pittsburgh, Pennsylvania 15219 724-543-1527
412-454-5000
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ].
_________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered(1) offering price per aggregate offering registration fee
registered unit(2) price(2)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par 472,800 $227 $107,325,600 $31,661.05
value $5.00 per share
- -----------------------------------------------------------------------------------------------------
Preferred Share 472,800 N.A. N.A. N.A.
Purchasee Rights
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares of common stock and preferred share
purchase rights of the registrant which may be issued to holders of The Peoples
National Bank of Rural Valley common stock upon consummation of the merger
described in this registration statement.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee, in accordance with Rule 457(f)(2) of the Securities Act
of 1933, on the basis of the book value per share of The Peoples National
Bank of Rural Valley common stock as of June 30,1998. For purposes of
estimating the offering price and the registration fee, the preferred share
purchase rights are not deemed to have any material value apart from the
registrant's common stock with which such rights are associated.
____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
BT FINANCIAL CORPORATION
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(A) OF REGULATION C AND ITEM
501(B) OF REGULATION S-K SETTING FORTH THE LOCATION IN THE PROXY
STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
<TABLE>
<CAPTION>
Form S-4 Item Number and Caption Location in Proxy Statement/Prospectus
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus Outside Front Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of Available Information; Incorporation of Certain
Prospectus Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Summary; Comparative Per Share Data;
Charges and Other Information Comparative Market Prices; Selected Financial
Information
4. Terms of the Transaction Summary; The Merger; The Merger Agreement;
Comparison of Shareholder Rights; Description of
BT Financial Capital Stock; Certain Federal
Income Tax Consequences; Accounting Treatment
5. Pro Forma Financial Information *
6. Material Contracts with the Company Being *
Acquired
7. Additional Information Required for *
Reoffering by Persons and Parties Deemed to
be Underwriters
8. Interests of Named Experts and Counsel *
9. Disclosure of Commission Position on Indemnification; The Merger Agreement;
Indemnification for Securities Act Liabilities Undertakings
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants Outside Front Cover Page; Summary; Selected
Financial Information; BT Financial Corporation
11. Incorporation of Certain Information by Incorporation of Certain Documents by Reference
Reference
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants Other *
Than S-2 or S-3 Registrants
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 *
Companies
17. Information with Respect to Companies Other Summary; Rural Valley Selected Financial
Than S-3 or S-2 Companies Information; Rural Valley; Index to Rural Valley
Financial Statements; Management's Discussion
and Analysis of Financial Condition and Results of
Operations of Rural Valley
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Incorporation of Certain Documents By
Authorizations are to be Solicited Reference; Summary; The Meeting; The Merger;
Rural Valley
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited or in an
Exchange Offer
</TABLE>
- ---------------------
* Not applicable or the answer is negative.
<PAGE>
THE PEOPLES NATIONAL BANK OF RURAL VALLEY
601 Main Street
Rural Valley, PA 16249
[Mailing Date], 1998
Dear Shareholder:
You are cordially invited to attend a special meeting of the shareholders
of The Peoples National Bank of Rural Valley ("Rural Valley") to be held at [to
be determined], at 2 p.m., eastern time, on [Meeting Date], 1998.
The purpose of the meeting is to vote on adoption and approval of the
Agreement and Plan of Reorganization dated as of June 5, 1998, by and among
Rural Valley, BT Financial Corporation, a Pennsylvania corporation ("BT
Financial"), and Laurel Bank, a Pennsylvania bank and trust company wholly-owned
by BT Financial ("Laurel Bank"), (the "Merger Agreement"), providing for the
acquisition of Rural Valley by BT Financial through the merger of Rural Valley
into Laurel Bank.
The Merger Agreement provides that at the effective time of the merger each
outstanding share of Rural Valley common stock ("Rural Valley Common Stock")
will be converted into 11.82 shares of BT Financial common stock ("BT Financial
Common Stock").
BT Financial is a bank holding company organized under the laws of the
Commonwealth of Pennsylvania with headquarters in Johnstown, Pennsylvania. As of
June 30, 1998, BT Financial had total assets of approximately $1.70 billion,
total deposits of approximately $1.36 billion and shareholders' equity of
approximately $149.25 million. BT Financial Common Stock is quoted on NASDAQ
under the symbol "BTFC". The closing price for BT Financial Common Stock on
[Mailing Date], 1998 was $__ per share.
Rural Valley is a national banking association organized under the National
Bank Act. As of June 30, 1998, Rural Valley had total assets of approximately
$37.44 million, total deposits of approximately $29.11 million and shareholder's
equity of approximately $8.20 million.
The Board of Directors of Rural Valley believes that the merger is in
the best interests of Rural Valley and its shareholders and recommends that you
vote FOR the approval and adoption of the Agreement and Plan of Reorganization
and the transactions contemplated thereby. The attached Proxy
Statement/Prospectus explains the proposed merger in detail. Please carefully
review and consider all of this information.
It is especially important that your shares be represented and voted
at the special meeting. Please complete, sign, date and promptly return the
enclosed proxy card even if you currently plan to attend the special meeting.
You may revoke your proxy at any time before it is voted by giving written
notice to Rural Valley. If you attend the meeting and vote in person, your vote
will supersede your proxy.
Sincerely,
T. Lowell Dean
President
<PAGE>
THE PEOPLES NATIONAL BANK OF RURAL VALLEY
601 Main Street
Rural Valley, Pennsylvania 16249
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On
[Meeting Date], 1998
NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting") of
shareholders of The Peoples National Bank of Rural Valley, a national banking
association ("Rural Valley"), will be held on [Meeting Date], 1998, at [to be
determined], commencing at 2 p.m., eastern time, to consider and vote upon the
following:
A proposal to adopt and approve an Agreement and Plan of
Reorganization dated as of June 5, 1998 by and among Rural Valley, BT
Financial Corporation, a Pennsylvania corporation ("BT Financial") and
Laurel Bank, a Pennsylvania bank and trust company and a wholly-owned
subsidiary of BT Financial ("Laurel Bank") (the "Merger Agreement"),
pursuant to which Rural Valley will merge with and into Laurel Bank (the
"Merger") with Laurel Bank being the surviving bank, upon the terms and
subject to the conditions set forth in the Merger Agreement, as more fully
described in the enclosed Proxy Statement/Prospectus; and
The transaction of such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
Only holders of record of shares of Rural Valley Common Stock at the
close of business on [Record Date], 1998 are entitled to notice of and to vote
at the Meeting and any adjournment or postponement thereof.
Any shareholder entitled to vote at the Meeting will have the right to
dissent from the Merger and to obtain payment for the fair value of his shares
upon compliance with 12 U.S.C. (S)214a(b). For a summary of the rights of Rural
Valley shareholders to dissent, see "The Merger--Rights of Dissenting
Shareholders" in the attached Proxy Statement/Prospectus. A copy of 12 U.S.C.
(S) 214a(b) which relates to dissenters' rights for shareholders of a national
bank, is included in the attached Proxy Statement/Prospectus as Annex B.
By Order of the Board of Directors,
Stella L. Samosky
Secretary
[Mailing Date], 1998
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY CARD
BECAUSE THAT SHAREHOLDER OWNS SHARES REGISTERED IN DIFFERENT NAMES OR AT
DIFFERENT ADDRESSES, EACH PROXY CARD SHOULD BE COMPLETED AND RETURNED. YOUR
COOPERATION WILL BE APPRECIATED. ALL PROPERLY EXECUTED PROXIES RECEIVED PRIOR
TO OR AT THE MEETING WILL BE VOTED WITH RESPECT TO THE MATTER IDENTIFIED ON THE
PROXY CARDS IN ACCORDANCE WITH ANY INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS
ARE GIVEN, WILL BE VOTED FOR ADOPTION AND APPROVAL OF THE AGREEMENT AND PLAN OF
REORGANIZATION.
<PAGE>
____________________________________________
PROXY STATEMENT
OF
THE PEOPLES NATIONAL BANK OF RURAL VALLEY
____________________________________________
PROSPECTUS
OF
BT FINANCIAL CORPORATION
____________________________________________
This Proxy Statement/Prospectus is being furnished to holders of
shares of common stock, par value $5.00 per share ("Rural Valley Common Stock"),
of The Peoples National Bank of Rural Valley, a national banking association
("Rural Valley"), in connection with the solicitation of proxies by the Board of
Directors of Rural Valley (the "Rural Valley Board") for use at a special
meeting of Rural Valley shareholders (the "Meeting") to be held on [Meeting
Date], 1998, at [to be determined], and at any adjournment or postponement
thereof. The purpose of the meeting is to consider and take action on the
proposed merger (the "Merger") of Rural Valley into Laurel Bank ("Laurel Bank"),
a Pennsylvania bank and trust company and a wholly-owned subsidiary of BT
Financial Corporation, a Pennsylvania corporation ("BT Financial"), pursuant to
the terms of the Agreement and Plan of Reorganization dated as of June 5, 1998
(the "Merger Agreement") by and among Rural Valley, BT Financial and Laurel
Bank, as more fully described elsewhere in this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus also constitutes a prospectus of BT
Financial Corporation, a Pennsylvania corporation ("BT Financial"), relating to
472,800 shares of common stock, par value $5.00 per share ("BT Financial Common
Stock"), of BT Financial to be issued to Rural Valley shareholders.
The outstanding shares of BT Financial Common Stock are, and the
shares offered hereby will be, included for quotation on the Nasdaq Market
("NASDAQ"). The closing price of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal on [Mailing Date], 1998 was $________ per share.
This Proxy Statement/Prospectus and the enclosed proxy card are first
being mailed to Rural Valley shareholders ("Rural Valley Shareholders" or
"Shareholders") on or about [Mailing Date], 1998.
All information contained in this Proxy Statement/Prospectus relating
to BT Financial and its subsidiaries has been supplied by BT Financial, and all
information contained in this Proxy Statement/Prospectus relating to Rural
Valley has been supplied by Rural Valley.
________________________________________________
THE SHARES OF BT FINANCIAL COMMON STOCK TO BE ISSUED PURSUANT TO THIS
PROXY STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF BT FINANCIAL COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF BT
FINANCIAL AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER FEDERAL OR STATE GOVERNMENT AGENCY.
________________________________________________
The date of this Proxy Statement/Prospectus is [Mailing Date], 1998.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ Information contained herein is subject to completion or amendment. A +
+ registration statement relating to these securities has been filed with the +
+ Securities and Exchange Commission. These securities may not be sold nor +
+ may offers to buy be accepted prior to the time the registration statement +
+ becomes effective. This prospectus shall not constitute an offer to sell +
+ or the solicitation of an offer to buy nor shall there be any sale of these +
+ securities in any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration or qualification under the securities laws +
+ of any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY BT FINANCIAL, RURAL VALLEY OR ANY OTHER
PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR A SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF BT FINANCIAL OR RURAL VALLEY SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
This Proxy Statement/Prospectus does not cover any resale of shares of
BT Financial Common Stock received by any person upon consummation of the
Merger, and no person is authorized to make any use of this Proxy
Statement/Prospectus in connection with any such resale.
AVAILABLE INFORMATION
BT Financial is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by BT Financial with the Commission can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's regional offices at Suite 1300, 7 World
Trade Center, New York, New York 10048, and The Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
also can be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 upon payment of prescribed rates. The
Commission maintains a web site (http:\\www.sec.gov) that contains reports,
proxy statements and other information filed by BT Financial. In addition, BT
Financial Common Stock is included for quotation on NASDAQ and such reports,
proxy statements and other information concerning BT Financial should be
available for inspection and copying at the offices of the National Association
of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
BT Financial has filed with the Commission a Registration Statement on
Form S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of BT Financial Common Stock to be issued pursuant to
the Merger Agreement. As permitted by the rules and regulations of the
Commission, this Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C., or from the Commission's regional offices in New York or
Chicago, by the means described above for obtaining reports, proxy statements
and other information filed pursuant to the Exchange Act. Statements contained
in this Proxy Statement/Prospectus or in any document incorporated by reference
in this Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete. In each
instance, reference is hereby made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document and each such statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by BT Financial
Corporation pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
1. Proxy Statement for its Annual Meeting of Shareholders held on May 12,
1998;
ii
<PAGE>
2. Annual Report on Form 10-K for the fiscal year ended December 31,
1997;
3. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1998;
4. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1998.
5. Current Report on Form 8-K dated March 25, 1998.
6. Current Report on Form 8-K dated April 3, 1998.
All documents and reports filed by BT Financial pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date when the Meeting has finally been
adjourned shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the dates of filing of such
documents and reports. Any statement contained herein or in a document or
report incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
subsequently filed document or report which is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS FILED BY
BT FINANCIAL WITH THE COMMISSION WHICH ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. SUCH DOCUMENTS (OTHER THAN THE EXHIBITS TO SUCH DOCUMENTS, UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN OR THEREIN) ARE
AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM A COPY OF THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST, DIRECTED TO BT FINANCIAL CORPORATION, BT FINANCIAL PLAZA, 551 MAIN
STREET, JOHNSTOWN, PENNSYLVANIA 15901 (TELEPHONE NUMBER: (814) 532-3801),
ATTENTION: CORPORATE SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF ANY
DOCUMENTS, ANY REQUEST SHOULD BE MADE 5 DAYS PRIOR TO MEETING DATE, 1998.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Proxy Statement/Prospectus (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operations, plans,
objectives, future performance and business of each of BT Financial and Rural
Valley, including statements preceded by, followed by, or that include the words
"believes", "estimates" or similar expressions (see "Summary"; "Reasons for the
Merger"; "Recommendation of the Rural Valley Board of Directors"; "Certain
Federal Income Tax Consequences"; "Rural Valley"; "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Rural Valley"; and
"Peoples National Bank of Rural Valley Notes to Financial Statements"). These
forward-looking statements involve certain risks and uncertainties. Factors
that may cause actual results to differ materially from those contemplated by
such forward-looking statements include, among others, the following
possibilities: (a) expected cost savings from the Merger may not be fully
realized or realized within the expected time frame; (b) revenues following the
Merger may be lower than expected, or deposit attrition, operating costs or
customer loss and business disruption following the Merger may be greater than
expected; (c) competitive pressures among depository and other financial
institutions may increase significantly; (d) costs or difficulties related to
the integration of the business of BT Financial and Rural Valley may be greater
than expected; (e) changes in the interest rate environment may reduce net
interest income; (f) general economic or business conditions, either nationally
or in the states in which BT Financial is doing business, may be less favorable
than expected resulting in, among other things, a deterioration in credit
quality or a reduced demand for credit; (g) legislative or regulatory changes
may adversely affect the business in which BT Financial is engaged; and (h)
changes may occur in the securities markets.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION.................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................ ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION............ iii
SUMMARY................................................................ vii
THE COMPANIES.......................................................... vii
BT Financial........................................................ vii
Rural Valley........................................................ vii
THE MEETING............................................................ vii
RECORD DATE............................................................ vii
VOTE REQUIRED.......................................................... vii
THE MERGER.............................................................viii
Effects of the Merger...............................................viii
Reasons for the Merger..............................................viii
Recommendation of the Rural Valley Board of Directors...............viii
Effective Time; Termination......................................... ix
Covenants........................................................... ix
Conditions.......................................................... ix
Regulatory Considerations........................................... ix
Dissenters' Rights.................................................. x
Certain Federal Income Tax Consequences............................. x
Accounting Treatment................................................ x
Comparison of Shareholder Rights.................................... x
SELECTED FINANCIAL INFORMATION......................................... xi
BT FINANCIAL CORPORATION SELECTED CONSOLIDATED FINANCIAL
DATA (UNAUDITED)..................................................... xii
RURAL VALLEY SELECTED FINANCIAL DATA (UNAUDITED)....................... xiv
COMPARATIVE PER SHARE DATA............................................. xv
COMPARATIVE MARKET PRICES..............................................xvii
THE MEETING............................................................ 1
VOTING AT THE MEETING; RECORD DATE..................................... 1
PROXIES................................................................ 1
THE MERGER............................................................. 2
Background of the Merger............................................... 2
REASONS FOR THE MERGER; RECOMMENDATION OF
THE RURAL VALLEY BOARD OF DIRECTORS................................. 3
BT Financial........................................................ 3
Rural Valley........................................................ 3
INDEMNIFICATION........................................................ 4
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
REGULATORY CONSIDERATIONS.............................................. 5
RIGHTS OF DISSENTING SHAREHOLDERS...................................... 5
RESALE RESTRICTIONS.................................................... 6
CERTAIN FEDERAL INCOME TAX CONSEQUENCES................................ 6
ACCOUNTING TREATMENT................................................... 8
THE MERGER AGREEMENT................................................... 8
The Merger.......................................................... 8
Exchange Procedures................................................. 9
Representations and Warranties...................................... 9
Certain Covenants................................................... 10
Acquisition Proposals............................................... 10
Indemnification Obligations Of Rural Valley......................... 11
Rural Valley Dividends.............................................. 11
Conditions.......................................................... 12
Termination......................................................... 13
Expenses............................................................ 13
Amendment And Waiver................................................ 14
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK.............................. 14
BT Financial Shareholder Rights Plan................................ 15
Provisions Affecting Business Combinations And Control Share
Acquisitions...................................................... 18
Pennsylvania Law.................................................... 18
Federal Law......................................................... 19
Tender Offers for and Other Proposals to Acquire BT Financial....... 19
"Supermajority" Provisions Concerning Charter Amendments............ 19
"Supermajority" Provisions Concerning Bylaw Amendments.............. 20
Shareholder Nominations for Directors............................... 20
COMPARISON OF SHAREHOLDERS RIGHTS...................................... 20
Dividends........................................................... 20
Voting; Election of Directors....................................... 21
Liquidation......................................................... 21
Preemptive Rights................................................... 21
Anti-takeover Provisions of the BCL................................. 21
Approval of Fundamental Changes..................................... 21
Dissenters' Rights.................................................. 22
Rights.............................................................. 22
Right to Call a Special Meeting..................................... 22
Duties and Liabilities of Directors................................. 22
BT FINANCIAL CORPORATION............................................... 23
Business............................................................ 23
Properties.......................................................... 24
Certain Regulatory Considerations................................... 25
Payment Of Dividends And Other Restrictions......................... 25
Loans............................................................... 26
Capital Adequacy.................................................... 26
Support Of Laurel Bank.............................................. 26
Prompt Corrective Action............................................ 27
Interstate Banking and Branching Legislation........................ 27
FDIC Insurance Assessments.......................................... 28
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
RURAL VALLEY........................................................... 28
Business............................................................ 28
Competition......................................................... 28
Certain Regulatory Considerations................................... 28
Effect Of Government Monetary Policies.............................. 29
Legislation And Regulatory Changes.................................. 29
Legal Proceedings................................................... 29
Environmental Issues................................................ 29
Regulatory Capital Requirements..................................... 30
RURAL VALLEY MARKET PRICES AND DIVIDENDS............................... 31
Rural Valley Common Stock Prices And Common Stock Dividends......... 31
RURAL VALLEY CASH DIVIDENDS DECLARED................................... 31
Dividend Restrictions on Rural Valley............................... 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF RURAL VALLEY.............................. 32
MANAGEMENT OF RURAL VALLEY............................................. 40
Directors........................................................... 40
Principal Officers.................................................. 40
Remuneration of Directors and Officers.............................. 40
Compensation Table.................................................. 41
Beneficial Ownership by Officers and Directors...................... 41
Retirement Plan..................................................... 41
Certain Transactions................................................ 42
Principal Owners of Rural Valley Voting Securities.................. 42
Legal Matters....................................................... 42
Experts............................................................. 42
Index to Rural Valley Financial Statements............................. F-1
ANNEXES
A - Agreement and Plan of Reorganization dated June 5, 1998..... A-1
B - National Bank Act Provisions for Dissenting Shareholders.... B-1
</TABLE>
vi
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained, or
incorporated by reference, in this Proxy Statement/Prospectus or contained in
the Annexes hereto. Rural Valley shareholders are urged to read this Proxy
Statement/Prospectus and the Annexes hereto in their entirety.
THE COMPANIES
BT Financial
BT Financial is a bank holding company located in Johnstown, Pennsylvania
with one commercial banking subsidiary: Laurel Bank, a member of the Federal
Reserve System. Laurel Bank conducts business through a network of 72 offices
located throughout southwestern Pennsylvania and provides a full range of
financial services to individuals, businesses and governmental bodies, including
demand, savings and time deposits, secured and unsecured loans, and electronic
data processing of payrolls. Lending services include credit cards and
consumer, real estate, commercial and industrial loans. Laurel Trust Company, a
trust company subsidiary, provides corporate pension, personal trust and other
trust related services. The principal executive offices of BT Financial are
located at BT Financial Plaza, 551 Main Street, Johnstown, Pennsylvania 15901,
and its telephone number is (814) 532-3801. As of June 30, 1998, BT Financial
had consolidated total assets of $1.70 billion, consolidated total deposits of
$1.36 billion and consolidated shareholders' equity of $149.25 million. See
"Incorporation of Certain Documents by Reference" and "BT Financial
Corporation."
Rural Valley
Rural Valley is a national banking association and member of the Federal
Reserve System that conducts business through its main office at 601 Main
Street, Rural Valley, Pennsylvania 16249. As a commercial bank, Rural Valley
provides loan and deposit services to individuals and small to medium sized
businesses in its Rural Valley, Pennsylvania market area. The office of Rural
Valley is located at 601 Main Street, Rural Valley, Pennsylvania 16249, and its
telephone number is (724) 783-7121. As of June 30, 1998, Rural Valley had total
assets of approximately $37.44 million, total deposits of approximately $29.11
million and shareholders' equity of approximately $8.20 million. See "The
Merger--Background of the Merger" and "Rural Valley."
THE MEETING
The Meeting is scheduled to be held on [Meeting Date], 1998, at [to be
determined], commencing at 2 p.m., eastern time. The purpose of the Meeting is
to consider and vote upon a proposal to adopt and approve the Merger Agreement
between BT Financial and Rural Valley.
RECORD DATE
Only holders of record of shares of Rural Valley Common Stock at the close
of business on [Record Date], 1998 are entitled to notice of and to vote at the
Meeting. As of December 31, 1997, there were 40,000 shares of Rural Valley
Common Stock outstanding held by 130 holders of record. Each holder of record
of shares of Rural Valley Common Stock as of the record date is entitled to cast
one vote per share on each matter to be acted upon or which may properly come
before the Meeting.
VOTE REQUIRED
The affirmative vote of at least two-thirds of the holders of shares of
Rural Valley Common Stock outstanding is required to adopt and approve the
Merger Agreement. BT Financial shareholders' approval is not required.
vii
<PAGE>
Each director and executive officer of Rural Valley who owns shares of
Rural Valley Common Stock has advised Rural Valley that he or she intends to
vote or direct the vote of all shares of Rural Valley Common Stock over which he
or she has voting control FOR adoption and approval of the Merger Agreement. As
of June 3, 1998, the directors and executive officers of Rural Valley were the
beneficial owners of 16,557 shares, or approximately 41.39%, of the outstanding
shares of Rural Valley Common Stock. If all shares of Rural Valley Common Stock
are present at the Meeting and the directors and executive officers of Rural
Valley all vote as they have stated that they intend to vote, the affirmative
vote of only an additional 10,111 shares (or 25.28%) of Rural Valley Common
Stock would be necessary to adopt and approve the Merger Agreement.
THE MERGER
Effects of the Merger
At the effective time of the Merger, Rural Valley will merge with and into
Laurel Bank. Laurel Bank will be the surviving bank in the Merger and will
continue its corporate existence under Pennsylvania law under its present name.
Each issued and outstanding share of Rural Valley Common Stock other than
any shares in respect of which the holders thereof have either voted against the
Merger or notified Rural Valley in writing at or before the Special Meeting that
the holder objects to the Merger Agreement and otherwise complied with the
applicable requirements of 12 U.S.C. (S) 214a(b) ("Dissenters' Shares") will be
converted into the right to receive 11.82 shares of BT Financial Common Stock.
Based upon the number of shares of BT Financial Common Stock and Rural Valley
Common Stock outstanding as of June 30, 1998, Rural Valley shareholders will
have the right to own approximately 3.6% of the outstanding shares of BT
Financial Common Stock immediately following consummation of the Merger
(assuming no Dissenters' Shares).
Upon consummation of the Merger, all issued and outstanding shares of Rural
Valley Common Stock will cease to exist. See "The Merger Agreement--The
Merger." Shareholders who properly exercise dissenters' rights will have only
the right to receive from BT Financial payment for the "fair value" of their
shares of Rural Valley Common Stock as determined in accordance with 12 U.S.C.
(S)214a(b). See "Rights of Dissenting Shareholders."
Fractional shares of BT Financial Common Stock will not be issued in the
Merger. A Shareholder otherwise entitled to a fractional share of BT Financial
Common Stock will receive, in lieu thereof, a cash payment therefor equal to
such fraction multiplied by the closing sales price on NASDAQ for a share of BT
Financial Common Stock on the Closing Date (as defined in the Merger Agreement)
as reported in The Wall Street Journal, or, if BT Financial Common Stock is not
traded on such date, the next succeeding day on which such stock is traded. See
"The Merger Agreement--Exchange Procedures."
Reasons for the Merger
BT Financial. The acquisition of Rural Valley is a natural expansion of BT
Financial's geographic market into an area contiguous to BT Financial's current
market. See "The Merger--Background of the Merger" and "Reasons for the Merger;
Recommendation of the Rural Valley Board of Directors."
Rural Valley. The Board of Directors of Rural Valley has approved the
Merger Agreement and has determined that the Merger is fair to, and in the best
interests of, Rural Valley and its Shareholders. The Rural Valley Board of
Directors believes that the Merger will enable the Shareholders to realize
significant value when compared to the value of Rural Valley Common Stock should
the Merger not occur. For a more detailed discussion of the factors considered
by the Rural Valley Board in reaching its decision with respect to the Merger
Agreement and the Merger, see "Reasons for the Merger; Recommendation of the
Rural Valley Board of Directors."
Recommendation of the Rural Valley Board of Directors
The Rural Valley Board voted to approve the Merger Agreement and the Merger
as being in the best interests of Rural Valley and Rural Valley shareholders and
recommends a vote by Rural Valley shareholders FOR adoption and approval of the
Merger Agreement.
viii
<PAGE>
Effective Time; Termination
It is anticipated that the Merger will become effective as soon as
practicable after the required Shareholder and regulatory approvals have been
obtained, and all applicable regulatory waiting periods have expired. There may
be a substantial period of time between when the Meeting is held and the
consummation of the Merger. See "Regulatory Considerations" and "The Merger
Agreement Conditions."
The Merger Agreement will terminate automatically if the Merger has not
been consummated and, therefore, the effective time of the Merger has not
occurred, by March 31, 1999 (unless extended by mutual consent) or may be
terminated prior to such time by BT Financial or Rural Valley upon the
occurrence of one or more of certain events, although the parties expect that
the Merger will be consummated before December 31, 1998. The Merger Agreement
does not limit the possible number of extensions of the termination date or the
periods for which extension of the termination date may occur. See "The Merger
Agreement Termination."
Covenants
Each of Rural Valley and BT Financial has made certain covenants, with
respect to itself and its subsidiaries, relating to the conduct of business
pending consummation of the Merger. Among other things (except as otherwise
contemplated by the Merger Agreement or with the written consent of the other
party), each has agreed not to conduct its business other than in the ordinary
and usual course, and Rural Valley agreed not to: (i) pay dividends above
certain specified levels or redeem or otherwise acquire shares of its capital
stock, issue additional shares of its capital stock or give any person the right
to acquire any such shares; (ii) increase any salaries or employee benefits or
enter into any employment agreements or employee benefit plans, except for
certain increases in the ordinary course of business and certain changes
required by law or to satisfy pre-existing contractual obligations; or (iii)
dispose of any of its assets, business or property, or acquire any business or
property of any other entities. These restrictions do not preclude Rural Valley
(a) from paying a regular quarterly cash dividend on Rural Valley Common Stock
of up to $2.00 per share but only if certain earnings requirements are met, or
(b) from making any dispositions or acquisitions in which the purchase price is
cash and does not exceed $15,000 in any one case. See "The Merger Agreement--
Certain Covenants" and "Rural Valley Dividends."
Conditions
The obligations of BT Financial, Laurel Bank and Rural Valley to consummate
the Merger are subject to the satisfaction of certain significant conditions,
including: obtaining required Shareholder and regulatory approvals; the absence
of any action, proceeding, regulation or legislation to enjoin, restrain or
prohibit, or to obtain substantial damages in respect of, the Merger Agreement
or the Merger, which, in the good faith judgment of BT Financial, would make it
inadvisable to consummate the Merger or the other transactions contemplated by
the Merger Agreement; the absence of any injunction which prohibits or restricts
the consummation of the transactions contemplated by the Merger Agreement,
which, in the good faith judgment of Rural Valley, would make it inadvisable to
consummate those transactions; and the number of Dissenters' Shares being less
than 4,000 shares of Rural Valley Stock as of the Closing Date, representing 10%
of the Rural Valley Common Stock expected to be outstanding on such date. Any
condition may be waived in writing by the Party entitled to the benefit thereof.
See "The Merger Agreement--Conditions."
Regulatory Considerations
Consummation of the Merger is subject to, and conditioned upon, receipt of
all required regulatory approvals and expiration of all applicable regulatory
waiting periods necessary to consummate the Merger, including receipt of
approvals from the Board of Governors of the Federal Reserve System (the
"Federal Reserve") and the Pennsylvania Department of Banking. Although
applications for such approvals have been filed with the relevant regulatory
authorities, there can be no assurance that the required regulatory approvals
will be obtained, and, if obtained, with what conditions. As of the date
hereof, neither the Federal Reserve nor the Pennsylvania Department of Banking
has approved the Merger. See "Regulatory Considerations" and "The Merger
Agreement--Conditions."
ix
<PAGE>
Dissenters' Rights
Under 12 U.S.C. (S) 214a(b), Rural Valley Shareholders have the right to
object to the Merger and demand to be paid in cash the "fair value" of their
shares of Rural Valley Common Stock if they comply fully with all the
requirements of 12 U.S.C. (S) 214a(b) ("Section 214a(b)"). A copy of the
provisions of Section 214a(b) is attached hereto as Annex B. See "Rights of
Dissenting Shareholders." It is a condition to BT Financial's obligation to
consummate the Merger that the number of Dissenters' Shares be less than 4,000
shares of Rural Valley Common Stock as of the Closing Date, representing 10% of
the Rural Valley Common Stock expected to be outstanding on such date. See "The
Merger Agreement--Conditions." BT Financial may waive this condition at any
time.
Certain Federal Income Tax Consequences
Consummation of the Merger is conditioned upon receipt by BT Financial of
an opinion of Pepper Hamilton LLP, counsel for BT Financial, dated as of the
Effective Date to the effect that (i) the Merger constitutes a reorganization
under Section 368 of the Code, and (ii) no gain or loss will be recognized for
federal income tax purposes by stockholders of Rural Valley who receive BT
Financial Common Shares in exchange for their shares of Rural Valley Common
Stock, except with respect to cash received in lieu of fractional share
interests.
Because certain tax consequences may vary depending upon the particular
circumstances of each Rural Valley stockholder, Rural Valley stockholders should
consult their own tax advisors concerning the federal (and any state, local and
foreign) tax consequences of the Merger in their particular circumstances. See
"The Merger--Certain Federal Income Tax Consequences."
Accounting Treatment
It is expected that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles. See "The Merger--
Conditions" and "Accounting Treatment."
Comparison of Shareholder Rights
Two major differences between the rights of shareholders of BT Financial
and the rights of shareholders of Rural Valley are that provisions of the
Pennsylvania Business Corporation Law of 1988, as amended (1988) and BT
Financial's articles and bylaws affect business combinations and control share
acquisitions involving BT Financial, but not Rural Valley, and BT Financial, but
not Rural Valley, has a shareholder rights plan. One effect of BT Financial's
shareholder rights plan may be to prevent the use of certain takeover tactics to
acquire BT Financial without the approval of BT Financial's Board of Directors.
For a more detailed description of the differences between the rights of
shareholders of the two companies and a description of the BT Financial Common
Stock, see "Comparison of Shareholders Rights" and "Description of BT Financial
Capital Stock."
x
<PAGE>
SELECTED FINANCIAL INFORMATION
The following tables set forth selected historical financial information
for BT Financial and for Rural Valley, for each of the five years in the period
ended December 31, 1997 and for the six-month periods ended June 30, 1998 and
1997. The selected historical financial information for BT Financial and Rural
Valley for the six-month periods ended June 30, 1998 and 1997 reflect, in the
opinion of management, all adjustments (comprising only normal recurring
accruals) necessary for a fair presentation of the operating results and
financial position of BT Financial and Rural Valley for such interim periods.
Results for the interim periods are not necessarily indicative of results for
the full year or any other period. The selected historical financial
information should be read in conjunction with the audited financial statements
and other financial information for BT Financial, incorporated by reference in
this Proxy Statement/Prospectus, and the unaudited financial statements for
Rural Valley, included elsewhere in this Proxy Statement/Prospectus. See
"Incorporation of Certain Documents by Reference;" "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Rural Valley;"
and "Index to Rural Valley Financial Statements."
xi
<PAGE>
BT FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA*
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
------------------------- --------------------------------------------------------------------
6/30/98 6/30/97 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest Income $ 60,651 $ 55,042 $ 113,566 $ 108,356 $ 99,828 $ 89,029 $ 81,012
Interest expense 26,842 22,775 48,185 44,732 42,679 33,129 29,134
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income 33,809 32,267 65,381 63,624 57,149 55,900 51,878
Provision for loan losses 2,895 2,090 4,230 2,441 1,566 1,168 2,168
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 30,914 30,177 61,151 61,183 55,583 54,732 49,710
Other Income 6,186 5,719 12,490 11,272 8,714 8,407 8,205
Other expenses 25,326 23,283 47,509 51,681 45,559 45,597 41,562
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes 11,774 12,613 26,132 20,774 18,738 17,542 16,353
Provision for income taxes 3,641 4,337 8,980 7,000 5,689 4,883 5,081
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before cumulative
effect of accounting 8,133 8,276 17,152 13,774 13,049 12,659 11,272
principle changes
Cumulative effect of
change in accounting for -0- -0- -0- -0- -0- -0- 86
income taxes ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income $ 8,133 $ 8,276 $ 17,152 $ 13,774 $ 13,049 $ 12,659 $ 11,358
=========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (period end)
Total assets $ 1,700,565 $ 1,552,889 $ 1,552,921 $ 1,466,308 $ 1,442,560 $ 1,338,074 $ 1,306,406
Loans, net of unearned
interest 1,144,760 1,076,065 1,067,061 1,025,765 1,011,240 892,010 832,421
Total securities 429,675 340,059 365,933 302,392 303,355 333,199 295,641
Total deposits 1,357,139 1,348,962 1,346,376 1,263,728 1,253,252 1,147,993 1,156,650
Total long-term debt 112,898 15,773 14,335 17,210 20,083 10,021 12,482
Total shareholders' equity 149,251 140,471 145,709 136,487 122,099 104,268 109,356
PER SHARE DATA (1)
Basic earnings per share $ .65 $ .66 $ 1.37 $ 1.13 $ 1.10 $ 1.07 $ 1.04
Diluted earnings per share .65 .66 1.37 1.12 1.09 1.06 1.02
Common dividends declared
per share .35 .30 .63 .51 .45 .40 .36
Period end book value 11.94 11.24 11.66 10.92 10.25 8.76 9.21
Average shares outstanding
-basic 12,500,872 12,500,872 12,500,872 12,165,952 11,753,338 11,722,354 10,855,912
Average shares outstanding
-diluted 12,500,872 12,500,872 12,500,872 12,269,584 11,975,282 11,951,952 11,085,510
FINANCIAL RATIOS
Return on average assets
(5) 1.00% 1.11% 1.13% .94% .97% .98% 1.03%
Return on average
shareholders' equity (5) 11.16 12.00 12.19 10.66 11.43 11.90 12.48
Net yield on earnings
assets (2)(5) 4.58 4.82 4.74 4.82 4.67 4.74 5.22
Common stock dividend
payout 53.79 46.00 45.85 45.10 40.17 37.34 34.65
Average shareholders'
equity to average assets 8.93 9.26 9.24 8.85 8.49 8.20 8.23
Primary capital ratio at
period end (3) 9.32 9.61 9.95 9.90 9.10 8.41 8.98
Net charge-offs to average
loans net of unearned
interest (5) .43 .40 .39 .29 .16 .11 .24
Nonperforming loans to
total loans, net of
unearned interest (4) .78 .89 .86 1.22 .73 .72 .65
Reserve for loan losses to
period end loans, net of
unearned interest .90 .90 .92 .94 .99 1.01 1.06
</TABLE>
Footnotes continued on next page
xii
<PAGE>
* Data for periods prior to 1996 has been restated due to the Moxham pooling-of-
interests acquisition on June 25, 1996.
(1) Per share data has been adjusted to reflect 5% stock dividends distributed
by BT Financial on July 26, 1993 and October 14, 1994, 10% stock dividends
distributed on October 22, 1996 and September 15, 1997 and a 2-for-1 stock
split effected in the form of a stock dividend distributed on May 1, 1998.
Additionally, per share data has been adjusted to reflect a 10% stock
dividend paid on December 30, 1994 and a two-for-one stock split paid in
February 1993 by the former Moxham Bank Corporation. Earnings per share
data for periods prior to 1997 has been restated to reflect the adoption of
SFAS No. 128 on December 31, 1997.
(2) Net interest income stated on a fully taxable equivalent basis divided by
average earning assets.
(3) The sum of shareholders' equity and the reserve for loan losses divided by
the sum of total assets and the reserve for loan losses.
(4) Nonperforming loans include nonaccrual, restructured and loans 90 days or
more past-due.
(5) Annualized.
xiii
<PAGE>
RURAL VALLEY
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Years Ended December 31,
------------------- -------------------------------------------------
6/30/98 6/30/97 1997 1996 1995 1994 1993
-------- -------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Interest Income $ 1,226 $ 1,187 $ 2,406 $ 2,364 $ 2,308 $ 2,211 $ 2,267
Interest expense 465 473 963 933 935 838 946
-------- -------- ------- ------- ------- -------- -------
Net interest income 761 714 1,443 1,431 1,373 1,373 1,321
Provision for loan losses -0- -0- -0- -0- -0- -0- 70
-------- -------- ------- ------- ------- -------- -------
Net interest income after
provision for loan losses 761 714 1,443 1,431 1,373 1,373 1,251
Other Income 25 32 67 71 82 61 61
Other expenses 369 373 700 653 693 671 673
-------- -------- ------- ------- ------- -------- -------
Income before income taxes 417 373 810 849 762 763 639
Provision for income taxes 116 104 215 213 180 173 106
-------- -------- ------- ------- ------- -------- -------
Net income $ 301 $ 269 $ 595 $ 636 $ 582 $ 590 $ 533
======== ======== ======= ======= ======= ======== =======
BALANCE SHEET DATA (period end)
Total assets $ 37,444 $ 36,465 $37,090 $35,775 $35,255 $ 34,465 $34,956
Loans, net of unearned interest 14,283 13,749 13,906 14,172 13,998 12,934 13,213
Total securities 20,275 20,282 19,839 18,992 19,076 19,460 17,915
Total deposits 29,106 28,460 28,901 27,893 27,988 27,814 28,557
Total shareholders' equity 8,199 7,884 8,053 7,747 7,155 6,558 6,316
PER SHARE DATA (restated for all stock splits and dividends)
Basic and diluted earnings
per share $ 7.52 $ 6.74 $ 14.86 $ 15.91 $ 14.55 $ 14.76 $ 13.33
Common dividends declared
per share 4.00 3.00 8.00 6.00 5.00 4.00 3.60
Period end book value 204.98 199.20 201.32 193.67 178.87 163.94 157.90
Average shares outstanding -
basic and diluted 40,000 40,000 40,000 40,000 40,000 40,000 40,000
FINANCIAL RATIOS
Return on average assets(4) 1.62% 1.56% 1.63% 1.79% 1.67% 1.70% 1.55%
Return on average
shareholders' equity(4) 7.41 6.82 7.53 8.57 8.49 9.15 8.71
Net yield on earning
assets (1)(4) 4.26 4.12 4.17 4.03 3.94 3.95 3.85
Common stock dividend
payout 53.17 44.61 53.82 37.72 34.36 27.16 27.02
Average shareholders' equity to
average assets 21.80 21.64 21.68 20.98 19.67 18.54 17.97
Primary capital ratio at period
end (2) 22.16 21.89 21.96 21.93 20.58 19.32 18.37
Net charge-offs to average
loans net of unearned
interest(4) .04 .01 .06 .01 .01 .01 .22
Nonperforming loans to total
loans, net of unearned
interest(3) .48 .85 .60 .71 .08 .12 .65
Reserve for loan losses to
period end loans, net of
unearned interest .88 .89 .84 .87 .89 .97 .96
</TABLE>
(1) Net interest income stated on a fully taxable equivalent basis divided by
average earning assets.
(2) The sum of shareholders' equity and the reserve for loan losses divided by
the sum of total assets and the reserve for loan losses.
(3) Nonperforming loans include nonaccrual, restructured and loans 90 days or
more past due.
(4) Annualized.
xiv
<PAGE>
COMPARATIVE PER SHARE DATA
The following unaudited information, adjusted to reflect the 2-for-1 BT
Financial Common Stock split distributed on May 1, 1998, to holders of record on
April 8, 1998 (the "BT Financial Stock Split") reflects, where applicable,
certain comparative per share data related to book value, cash dividends
declared, and earnings: (i) on a historical basis for BT Financial and Rural
Valley; (ii) on a pro forma combined basis per share of BT Financial Common
Stock; and (iii) on an equivalent pro forma basis per share of Rural Valley
Common Stock reflecting consummation of the Merger. Such pro forma information
has been prepared (i) on the basis of the 11.82 Exchange Ratio, and giving
effect to the Merger being treated as pooling of interests for accounting
purposes.
Pro forma financial information with respect to the Merger assumes such
acquisitions were consummated as of the beginning of each of the periods
presented.
Pro forma financial information is intended to show how the Merger might
have affected historical financial statements if the Merger had been consummated
at an earlier time. The pro forma financial information does not purport to be
indicative of the results that actually would have been realized had the Merger
taken place at the beginning of the periods presented, nor is it indicative of
the combined financial position or results of operations for future periods.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of BT
Financial and Rural Valley, including the respective notes thereto, which, as to
BT Financial, are incorporated herein by reference, and for Rural Valley,
including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus. Stockholders are urged to read such information
carefully. See "Available Information" and "Incorporation of Certain Documents
by Reference."
xv
<PAGE>
PRO FORMA AND PRO FORMA EQUIVALENT PER COMMON SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
------------- -----------------------
June 30, 1998 1997 1996 1995
------------- ------- ------ ------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE:
BT Financial (Historical):
Earnings per share - Basic $ 0.65 $ 1.37 $ 1.13 $ 1.10
Earnings per share - Diluted 0.65 1.37 1.12 1.09
Pro forma - BT Financial and Rural Valley:
Earnings per share - Basic 0.65 1.37 1.14 1.11
Earnings per share - Diluted 0.65 1.37 1.13 1.10
Rural Valley (Historical):
Earnings per share- Basic and Diluted 7.52 14.86 15.91 14.55
Pro forma equivalent - Rural Valley and
BT Financial combined:
Earnings per share - Basic 7.68 16.19 13.47 13.12
Earnings per share - Diluted 7.68 16.19 13.36 13.00
BOOK VALUE PER SHARE:
BT Financial (Historical) 11.94 11.66
Pro forma - BT Financial and Rural Valley 12.14 11.85
Rural Valley (Historical) 204.98 201.32
Pro forma equivalent - Rural Valley and
BT Financial combined 143.49 140.07
CASH DIVIDENDS DECLARED PER SHARE:
BT Financial (Historical) 0.35 0.63 0.51 0.45
Pro forma - BT Financial and Rural Valley 0.35 0.63 0.51 0.45
Rural Valley (Historical) 4.00 8.00 6.00 5.00
Pro forma equivalent - Rural Valley and
BT Financial combined 4.14 7.45 6.03 5.32
</TABLE>
xvi
<PAGE>
COMPARATIVE MARKET PRICES
BT Financial Common Stock is included for quotation on NASDAQ under the
NASDAQ symbol "BTFC". There is no established trading market for Rural Valley
Common Stock.
The table below sets forth the reported high and low closing sales prices
of BT Financial Common Stock based on published financial sources and cash
dividends declared and the range of high and low sale prices for the quarters
indicated.
<TABLE>
<CAPTION>
1998 1997 1996
========================== ======================= =======================
Quarter High Low Dividend High Low Dividend High Low Dividend
- -------- ========================== ======================= =======================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st $28.31 $24.70 $.170 $19.89 $18.07 $.150 $14.98 $13.85 $.117
2nd 30.75 25.00 .180 19.89 17.73 .155 15.60 13.28 .107
3rd -- -- -- 23.13 19.32 .155 15.57 13.12 .137
4th -- -- -- 25.75 21.66 .170 18.13 15.23 .150
----- -----
TOTAL .630 .511
===== =====
</TABLE>
On July 14, 1998, there were 4,493 record holders of BT Common Stock.
BT offers an Automatic Dividend Reinvestment Plan to provide a prompt,
simple and expense-free way for shareholders to invest cash dividends into
additional shares of BT common stock. Laurel Trust Company performs certain
bookkeeping and administrative functions in connection with the Plan. As
participants, the shareholders may add to their investment in BT common stock
through voluntary additional cash deposits with the Administrator.
The closing sales prices for the BT Financial Common Stock set forth above
has been retroactively adjusted to reflect 10% stock dividends distributed on
October 22, 1996, September 15, 1997 and a 2-for-1 stock split effected in the
form of a stock dividend distributed on May 1, 1998.
Since the market price of BT Financial Common Stock is subject to
fluctuation, the market value of the shares of BT Financial Common Stock that
holders of shares of Rural Valley Common Stock will receive in the Merger may
increase or decrease prior to and after the Merger.
On June 4, 1998, the last full trading day prior to the execution and
delivery of the Merger Agreement and the public announcement thereof, the
closing sales price per share of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal was $27.25. On [date], 1998, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus, the
closing sales price per share of BT Financial Common Stock on NASDAQ as reported
in The Wall Street Journal was $[amount].
Rural Valley Common Stock is not listed on any exchange, quotation system
or over-the-counter market and is not actively traded. Rural Valley is aware of
the sales prices in the following transactions: the lowest and highest prices
per share known by the management of Rural Valley for the above years were
between $165 and $180 per share, respectively. These prices may or may not
include any mark-up, mark-down or commission. The sale price per share of Rural
Valley Common Stock in the last known trade prior to the execution and delivery
of the Merger Agreement and the public announcement thereof, which trade
occurred on December 24, 1996, was $180. To the knowledge of Rural Valley,
since the execution and delivery of the Merger Agreement, there have been no
trades of Rural Valley Common Stock.
Rural Valley Shareholders Are Urged to Obtain Current Market Quotations for
BT Financial Common Stock Prior to the Meeting.
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THE MEETING
This Proxy Statement/Prospectus is being furnished to Rural Valley
shareholders in connection with the solicitation of proxies by the Rural Valley
Board for use at the Meeting to be held on [Meeting Date], 1998 at 2 p.m.
eastern time at [to be determined] and at any adjournment or postponement
thereof. This Proxy Statement/ Prospectus and the enclosed proxy card are first
being mailed to Shareholders on or about [Record Date], 1998.
At the Meeting, Rural Valley Shareholders will consider and vote upon a
proposal to adopt and approve the Merger Agreement and such other business as
may properly come before the Meeting or any adjournment or postponement thereof.
The Rural Valley Board voted to approve the Merger Agreement and the Merger and
recommends a vote by the Shareholders FOR adoption and approval of the Merger
Agreement.
VOTING AT THE MEETING; RECORD DATE
The Rural Valley Board has fixed [Record Date], 1998 as the record date for
determination of holders of record of shares of Rural Valley Common Stock
entitled to notice of and to vote at the Meeting. Accordingly, only holders of
record of shares of Rural Valley Common Stock at the close of business on that
date are entitled to notice of and to vote at the Meeting. As of [Record Date],
1998 there were 40,000 shares of Rural Valley Common Stock outstanding held by
130 holders of record. Each holder of record of shares of Rural Valley Common
Stock as of the record date is entitled to cast one vote per share, exercisable
in person or by properly executed proxy, on the proposal to adopt and approve
the Merger Agreement and any other matters properly submitted for a vote of the
Shareholders at the Meeting. The presence, in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Rural Valley
Common Stock entitled to vote at the Meeting is necessary to constitute a quorum
at the Meeting. The affirmative vote of at least two-thirds of the shares of
Rural Valley Common Stock outstanding is required to adopt and approve the
Merger Agreement. An abstention, whether done in person or by proxy, or a
failure to vote will have the effect of a vote against the Merger Agreement.
Each director and executive officer of Rural Valley who owns shares of
Rural Valley Common Stock has advised Rural Valley that he or she intends to
vote or direct the vote of all shares of Rural Valley Common Stock over which he
or she has voting control FOR adoption and approval of the Merger Agreement. As
of June 3, 1998, the directors and executive officers of Rural Valley were the
beneficial owners of 16,557 shares or approximately 41.39%, of the outstanding
shares of Rural Valley Common Stock. If all shares of Rural Valley Common Stock
are present at the Meeting and the directors and executive officers of Rural
Valley all vote as they have stated that they intend to vote, the affirmative
vote of only an additional 10,111 shares (or 25.28%) of the Rural Valley Common
Stock would be necessary to adopt and approve the Merger Agreement.
PROXIES
All shares of Rural Valley Common Stock which are entitled to vote and are
represented at the Meeting by properly executed proxies received prior to or at
the Meeting, and not revoked as of such time, will be voted at the Meeting in
accordance with the instructions indicated on those proxies. If no instructions
are indicated on any proxies solicited by the Rural Valley Board which are
received prior to or at the Meeting, those proxies will be voted FOR adoption
and approval of the Merger Agreement.
It is not anticipated that any matter other than the proposal to adopt and
approve the Merger Agreement will be brought before the Meeting. If any other
matter is properly presented at the Meeting for consideration, including, among
other things, a motion to adjourn the Meeting to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), the persons named in the enclosed form of proxy card and acting
thereunder will have discretion to vote on such matter in accordance with their
best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of Rural Valley, before the taking of the vote at the
Meeting, a written notice of revocation bearing a later date than the proxy
card, (ii) duly executing a later dated proxy card relating to the same shares
and delivering it to the Secretary of Rural
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Valley before the taking of the vote at the Meeting or (iii) attending the
Meeting and giving the Secretary of Rural Valley a written notice of revocation
bearing a later date than the proxy card, before the taking of the vote at the
Meeting. Attendance at the Meeting will not in and of itself constitute a
revocation of a proxy. Any written notice of revocation or subsequent proxy from
a Shareholder should be sent so as to be delivered to The Peoples National Bank
of Rural Valley, 601 Main Street, Rural Valley, Pennsylvania 16249, Attention:
Secretary, or hand delivered to the Secretary of Rural Valley, before the taking
of the vote at the Meeting.
SHAREHOLDERS ARE URGED TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE, EVEN IF THEY ARE PLANNING
TO ATTEND THE MEETING. ALL PROPERLY EXECUTED PROXIES RECEIVED PRIOR TO OR AT
THE MEETING WILL BE VOTED WITH RESPECT TO THE MATTER IDENTIFIED ON THE PROXY
CARDS IN ACCORDANCE WITH ANY INSTRUCTIONS THEREON AND, IF NO INSTRUCTIONS ARE
GIVEN, WILL BE VOTED FOR ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
All expenses of this solicitation will be paid by Rural Valley. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Rural Valley in person or by telephone,
telegram or other means of communication. Those directors, officers and
employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection with that solicitation.
Arrangements will be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by those custodians, nominees and fiduciaries, and Rural Valley will
reimburse those custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred in connection therewith.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER
Background of the Merger
The past decade has been a period of rapid change in the banking industry
in general, and especially for the banking industry in Pennsylvania. This
period has been characterized by accelerated consolidation throughout the United
States and in Pennsylvania, and by intensified competition from domestic and
foreign banks and from non-bank financial services organizations. This period
also has been characterized by increasing requirements for investments in
technology in order to meet customer needs on an efficient, competitive basis.
Part of BT Financial's long-term strategic plan has been to acquire
existing banks, savings and loan associations, savings banks and branches
thereof in areas adjacent to the geographical areas that Laurel Bank and Laurel
Trust Company currently serve. In connection with this strategic plan, BT
Financial periodically reviews possible candidates for acquisition.
The Board of Directors of Rural Valley has continually reviewed the
strategic alternatives for maximizing shareholder value.
In February 1998, John H. Anderson, Chairman and Chief Executive Officer of
BT Financial, had preliminary discussions with representatives of Rural Valley
about the possibility of an affiliation between BT Financial and Rural Valley.
These preliminary discussions continued throughout the spring of 1998.
On March 25, 1998, the Board of Directors of BT Financial confirmed actions
taken by the management of BT Financial in offering to acquire Rural Valley in
exchange for 11.82 BT Financial shares for each Rural Valley share based on an
average market value of $26.65 per share; the cash equivalent purchase price
would be $315 per share for a total consideration of $12.6 million.
In negotiating the consideration for the Merger, BT Financial was
interested in using BT Financial Common Stock as consideration for the Merger to
permit the Merger to be accounted for as a pooling of interests. Rural Valley
was interested in a transaction that would be tax-free and would result in the
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Shareholders receiving a marketable security.
On June 5, 1998, the Rural Valley Board met, reviewed the final version of
the Merger Agreement, discussed the terms of the transactions contemplated
thereby and authorized the officers of Rural Valley to execute and deliver that
agreement and to work to accomplish the transactions contemplated thereby. The
Merger Agreement was executed on the same day.
REASONS FOR THE MERGER; RECOMMENDATION OF
THE RURAL VALLEY BOARD OF DIRECTORS
BT Financial
In BT Financial's view, the Merger will extend BT Financial's geographic
market into an area that is contiguous to BT Financial's current market. At
present, Laurel Bank conducts business through a network of 72 offices located
throughout Southwestern Pennsylvania. Subsequent to the Merger, the Rural Valley
office in Rural Valley, Pennsylvania, will be operated as a branch of Laurel
Bank.
In reaching its conclusion to approve the Merger Agreement, the BT
Financial Board consulted with BT Financial's senior management, as well as with
its financial and legal advisors, and considered various factors, including the
following:
(i) Consistency with BT Financial Strategy. The impact of the Merger as a
method of furthering BT Financial's strategy for long-term growth and enhanced
stockholder value was considered. This included: (a) the fact that the Rural
Valley franchise overlaps BT Financial's northern banking franchise and provides
additional geographic and product diversity over a resulting market; (b)
opportunities to better utilize capacity in technology over a larger asset and
customer base and to realize other expense savings; and (c) the contribution of
the Merger to enhancing a regionally recognized name in the financial services
area.
(ii) Certain Financial Information. Certain financial information about
the Merger, BT Financial and Rural Valley was considered. This information
included, but was not limited to, information with regard to respective pro
forma analyses, comparative financial data, and comparable merger and
acquisition transactions as presented by BT Financial's financial advisor and
senior management. BT Financial senior management also commented on its due
diligence review. BT Financial's Board took into account that (a) there would
be some dilution in 1998 earnings per share before the Merger would have an
expected accretive effect in 1999, and (b) that there may be some adverse impact
on the BT Financial Common Stock price following announcement of the transaction
because of such dilution, the activities of arbitrageurs and the investment
objectives of certain stockholders.
(iii) Regulatory Approvals. The likelihood of the Merger being approved by
the appropriate regulatory authorities was considered. See "--Regulatory
Considerations".
The foregoing discussion of the information and factors considered by the
BT Financial Board is not intended to be exhaustive but includes all material
factors considered by the BT Financial Board. In reaching its determination to
approve the Merger Agreement, the BT Financial Board did not assign any relative
or specific weights to the foregoing factors, and individual directors may have
given differing weights to different factors. After deliberating with respect
to the Merger and the other transactions contemplated by the Merger Agreement,
and considering, among other things, the matters discussed above, the BT
Financial Board approved the Merger Agreement as being in the best interests of
BT Financial and its stockholders.
Rural Valley
The Board of Directors of Rural Valley has approved the Merger Agreement
and has determined that the Merger is fair to, and in the best interests of,
Rural Valley and its Shareholders. The Board of Directors therefore recommends
that Shareholders vote FOR adoption and approval of the Merger Agreement. The
Rural Valley Board of Directors believes that the Merger will enable the
Shareholders to realize significant value when compared to the value of Rural
Valley Common Stock if the Merger does not occur.
In reaching its determination that the Merger Agreement is fair to, and in
the best interests of, Rural
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Valley and the Shareholders, the Rural Valley Board of Directors considered a
number of factors, both from a short-term and long-term perspective, including,
without limitation, the following:
1. The absence of an established trading market for the Rural Valley Common
Stock compared to the market for BT Financial Common Stock which is
included for quotation on NASDAQ.
2. The anticipated tax-free receipt of shares of BT Financial Common Stock
in the Merger (see "Certain Federal Income Tax Consequences"); and
3. The current and prospective environment in which Rural Valley operates,
including national, state and local economic conditions, Rural Valley's
competitive environment, the increased regulatory burdens on financial
institutions generally, the trend towards consolidation in the financial
services industry in general and among financial institutions in
Pennsylvania and the likely effect of the foregoing factors on Rural
Valley's potential growth, development, productivity and profitability;
4. The Rural Valley Board of Director's familiarity with and review of
Rural Valley's business, financial condition, results of operation, and
prospects, including, but not limited to, its potential growth,
development, productivity and profitability;
5. The business, financial condition, results of operation, market
valuations and acquisition history of BT Financial and the opportunity
for the Shareholders to participate in any future growth of BT Financial
by obtaining BT Financial Common Stock in the Merger;
6. A comparison of the products and services provided by Rural Valley and
BT Financial, as well as the costs associated with and relative level of
resources available to Rural Valley and BT Financial, respectively, to
maintain and provide future enhancements to, and develop new products
and services within its markets;
INDEMNIFICATION
After the effective time of the Merger, Laurel Bank, as the successor to
Rural Valley, will indemnify and hold harmless any former directors, officers,
employees or agents of Rural Valley who have rights to indemnification under the
articles of association and bylaws of Rural Valley from and against any and all
claims, losses, liabilities or damages arising out of or in connection with any
of their activities in such capacities or on behalf of, or at the request of,
Rural Valley prior to the effective time of the Merger ("Claims") in accordance
with and to the extent required under the articles of association and bylaws of
Rural Valley and federal and state law.
BT Financial will also indemnify and hold harmless Rural Valley and each
person, if any, who controls Rural Valley within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which BT Financial or such controlling persons may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (a) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Proxy Statement/Prospectus or any amendment or supplement thereto, or any
related preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading to the extent
that any such statement or omission relates to BT Financial or (b) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact or any omission or alleged omission to state a material fact
required to be stated or necessary to make the statements not misleading in any
document distributed to any Shareholder to the extent that any such statement or
omission relates to BT Financial, and will reimburse Rural Valley and each such
controlling person for any legal or other expenses reasonably incurred by Rural
Valley or such controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action. BT Financial will not,
however, be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any of the
Proxy Statement/Prospectus or any amendment or supplement thereto or any related
preliminary prospectus that was made or omitted in reliance upon and in
conformity with written information furnished by Rural Valley specifically for
use therein.
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REGULATORY CONSIDERATIONS
Consummation of the Merger is subject to, and conditioned upon, among other
things, receipt of requisite approvals from the Federal Reserve and the
Pennsylvania Department of Banking and the expiration of all regulatory waiting
periods applicable to the Merger. As of the date hereof, applications seeking
regulatory approval of the Merger have been filed with the necessary regulatory
authorities, but neither agency has yet approved the Merger.
Section 18(c) of the Federal Deposit Insurance Act of 1950, as amended (the
"FDIA"), provides that the Federal Reserve shall not approve any proposed merger
transaction which would result in a monopoly, the effect of which in any section
of the country may be substantially to lessen competition, or to tend to create
a monopoly, or which in any other manner would be in restraint of trade.
In conducting its review of any application for approval, the Federal
Reserve is required to consider the financial and managerial resources and
future prospects of the banks concerned and the convenience and needs of the
community to be served. In addition, under the Community Reinvestment Act of
1977, the Federal Reserve must take into account the record of performance of
the existing and proposed institutions in meeting the credit needs of the entire
community, including low- and moderate-income neighborhoods, consistent with the
safe and sound operation of such institution. The Federal Reserve has also
indicated that it will not approve a significant acquisition unless the
resulting institution has adequate capitalization, taking into account, among
other things, asset quality.
The FDIA also requires the Federal Reserve to notify the Attorney General
of the United States of the approval of any transaction such as the Merger and
generally permits an action to be brought under the antitrust laws by the
Attorney General with respect to any such transaction within 30 days after the
date of approval by the Federal Reserve which period may be shortened to no less
than 15 days after such approval by the Federal Reserve with the concurrence of
the Attorney General. Transactions such as the Merger may generally not be
consummated until the conclusion of this 30-day (or shorter) period.
The FDIA provides for the publication of notices relating to the federal
filing noted above. If an interested party were permitted to intervene with
respect to the Merger, administrative and judicial proceedings could
substantially delay the regulatory approvals required for consummation of the
Merger.
The approval of the Pennsylvania Department of Banking also must be
obtained in connection with the Merger. Pursuant to the provisions of the
Pennsylvania Banking Code, the Pennsylvania Department of Banking is required to
approve or disapprove a proposed acquisition within 60 days after receipt of the
application, the articles of merger and the applicable fee, or within an
additional period of not more than thirty days after an amendment to the
application is received within the initial sixty-day period. The Pennsylvania
Department of Banking must evaluate factors similar to those considered by the
Federal Reserve in determining whether to approve the Merger.
As of the date hereof, applications seeking regulatory approval have been
filed with the necessary regulatory authorities, but neither agency has yet
approved the Merger. There can be no assurance that the necessary regulatory
authorities will approve the Merger, and if the Merger is approved, there can be
no assurance as to the dates of such approvals. There can also be no assurance
that any such approval will not contain a condition or requirement that would
cause such approval to fail to satisfy one of the conditions to consummation of
the Merger set forth in the Merger Agreement. There can likewise be no
assurance that neither the Department of Justice nor any other parties will
challenge the Merger, or if such a challenge is made, as to the results thereof.
RIGHTS OF DISSENTING SHAREHOLDERS
Any owner of shares of Rural Valley Common Stock has the right under 12
U.S.C. (S) 214a(b) to object to the Merger and demand to be paid in cash the
fair value of such shares upon complying in full with the provisions of Section
214a(b). The following does not purport to be a complete statement of the
provisions of Section 214a(b) of the National Bank Act and is qualified in its
entirety by reference to that provision a copy of which is attached hereto as
Annex B. That provision must be strictly complied with or a Shareholder's
dissenters' rights may be lost.
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If an owner of shares of Rural Valley Common Stock wants to exercise the
right to dissent, such owner must: (1) give Rural Valley written notice at or
before the special meeting that owner dissents from the plan or vote in person
--
or by proxy against adoption and approval of the Merger Agreement; and (2) make
---
a written request to Laurel Bank at any time before thirty days after the date
of consummation of the merger, accompanied by the surrender of the owner's stock
certificate. Unless an owner follows these steps, the owner will not acquire
any right to payment of the fair value of his shares and will be conclusively
presumed to have consented to the Merger and will be bound by its terms.
The value of shares held by an owner of Rural Valley Common Stock who
dissents from the plan will be determined as of the date of the Special Meeting.
Valuation will be determined by a committee of three persons, the first selected
by majority vote of the dissenting shareholders entitled to receive the value of
their shares, the second by the directors of Laurel Bank, and the third by the
two previously chosen. The value agreed upon by any two of the three selected
appraisers will govern; however, if that value is not satisfactory to any
dissenting owner of Rural Valley Common Stock who has requested payment, such
owner may, within five days after being notified of the appraised value of his
shares, appeal to the Comptroller of the Currency. The Comptroller will then
reappraise the value of the dissenting owner's shares and this reappraisal will
be binding.
If, within ninety days from the date of consummation of the Merger, for any
reason one or more of the appraisers is not selected, or if the appraisers fail
to determine the value of shares held by dissenting owners of Rural Valley
Common Stock, the Comptroller of the Currency shall, upon written request of any
interested party, issue an appraisal that is binding on all parties. The
expenses of the Comptroller in making an appraisal or reappraisal of shares
shall be paid by Laurel Bank.
Any owner of Rural Valley Common Stock wishing to provide written notice of
intent to demand payment of fair value should direct their notice to The Peoples
National Bank of Rural Valley, 601 Main Street, Rural Valley Pennsylvania 16249,
Attention: Secretary.
RESALE RESTRICTIONS
The shares of BT Financial Common Stock to be issued pursuant to the Merger
Agreement will be freely transferable under the Securities Act except for shares
issued to any Shareholder who may be deemed to be an affiliate of Rural Valley
for purposes of Rule 145 under the Securities Act as of the date of the [Meeting
Date]. Rural Valley affiliates may not sell shares of BT Financial Common Stock
acquired in the Merger except pursuant to an effective registration statement
under the Securities Act covering those shares or in compliance with Rule 145
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Persons who may be deemed to be affiliates
of Rural Valley generally include individuals or entities that control, are
controlled by, or are under common control with, Rural Valley and may include
certain officers and directors of Rural Valley as well as the principal
Shareholders. Under the Merger Agreement, BT has agreed that Rural Valley
affiliates will have rights to registration on request to enable these
affiliates to resell their shares of BT Financial Common Stock under an
effective registration statement.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Pepper Hamilton LLP, counsel to BT Financial, will render an opinion to BT
Financial as to the principal federal income tax consequences expected to result
from the Merger.
The following is a summary of Pepper Hamilton's tax opinion which is
included as an exhibit to the Registration Statement. This summary is qualified
in its entirety by reference to the full text of the opinion, including the
assumptions upon which the opinion is based. Neither the tax opinion nor this
summary address any tax considerations under foreign, state or local laws, or
the tax considerations to shareholders other than individual United States
citizens who hold their shares of Rural Valley Common Stock within the meaning
of Section 1221 of the Code.
No rulings have been requested from the Internal Revenue Service as to the
federal income tax consequences of the Merger. Shareholders should be aware
that Pepper Hamilton's opinion is not binding on the Internal Revenue Service
and the Internal Revenue Service is not precluded from taking a different
position. Shareholders should also be aware that some of the tax consequences
of the Merger are governed
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by provisions of the Code as to which there are no final regulations and little
or no judicial or administrative guidance. Pepper Hamilton's opinion is based
upon the federal income tax laws as in effect on the date of such opinion and as
those laws are currently interpreted. There can be no assurance that future
legislation, regulations, administrative rulings or court decisions will not
adversely affect the accuracy of the statements contained herein.
The federal income tax consequences discussed below are conditioned upon,
and Pepper Hamilton's tax opinion is based upon, the accuracy, as of the date
hereof and, as of and after the effective time of the Merger, of certain
assumptions, set forth in Pepper Hamilton's opinion. BT Financial and Rural
Valley believe that all of these assumptions are accurate as of the date
hereof, and will be accurate, as of and after the effective time of the Merger.
If either BT Financial or Rural Valley learns before the effective time of the
Merger that such assumptions are false and that its counsel therefore believes
that the Merger is unlikely to be treated as a tax-free reorganization, then
additional shareholder approval will be obtained before consummation of the
Merger.
On the basis of these assumptions, Pepper Hamilton LLP has advised BT
Financial and Rural Valley that, in their opinion:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, and BT Financial and Rural Valley will
each be a "party to a reorganization" within the meaning of 368(b) of
the Code.
2. No gain or loss will be recognized by BT Financial or Rural Valley as a
result of the Merger.
3. No gain or loss will be recognized by any Rural Valley shareholder upon
the exchange of that shareholder's shares of Rural Valley Common Stock
for shares of BT Financial Common Stock pursuant to the Merger.
4. A Rural Valley shareholder who dissents from the proposed Merger and
receives solely cash in exchange for that shareholder's shares of Rural
Valley Common Stock will be treated as having received that cash as a
distribution in redemption of those shares subject to the provisions and
limitations of Section 302 of the Code. If the distribution is eligible
for treatment as a distribution in redemption of that shareholder's
shares, that shareholder will have gain to the extent of the
consideration received less that shareholder's adjusted basis in those
shares.
[Rest of Page Intentionally Left Blank]
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BT Financial and Rural Valley do not currently intend to waive the receipt
of Pepper Hamilton's tax opinion; however, if such tax opinion was waived and
the material federal income tax consequences of the Merger were materially
different from those summarized above, Rural Valley would resolicit its
shareholders prior to consummating the Merger. The tax opinion of Pepper
Hamilton LLP summarized above is or will be based, among other things, on
representations relating to certain facts and circumstances of, and the
intentions of the parties to, the Merger.
Because certain tax consequences of the merger may vary depending upon the
particular circumstances of each holder of rural valley common stock and other
factors, each such holder is urged to consult such holder's own tax advisor to
determine the particular tax consequences of the merger to such holder
(including the application and effect of state and local income and other tax
laws).
The foregoing summary of the material federal income tax consequences of
the merger may not apply to special situations, such as Rural Valley
shareholders, if any, who received Rural Valley common stock as compensation, or
that are insurance companies, securities dealers, financial institutions or
foreign persons, and does not discuss any aspects of state, local or foreign
taxation. This discussion is based upon laws, regulations, rulings and decisions
now in effect and on proposed regulations, all of which are subject to change
(possibly with retroactive effect) by legislation, administrative action or
judicial decision. No ruling has been or will be requested from the internal
revenue service on any tax matter relating to the tax consequences of the
merger.
ACCOUNTING TREATMENT
Pooling of interests accounting is expected to be used to reflect the
Merger upon consummation. Under pooling of interests accounting, upon
consummation, the assets, liabilities and net income of the acquired company are
added to those of the acquiring company at their recorded book values, and the
stockholders' equity accounts of the acquired company and the acquiring company
are combined on the acquiring company's consolidated balance sheet. The income
of the surviving corporation will include the combined income of the separate
companies for the entire fiscal year in which the combination occurs after
addressing any conformity issues; and the reported income of the separate
companies for prior periods will be combined and restated as income of the
surviving corporation after addressing conformity issues. See "The Merger
Agreement--Conditions."
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement a
copy of which is attached as Annex A hereto and is incorporated by reference
herein. This summary is qualified in its entirety by reference to the full text
of the Merger Agreement.
The Merger
Upon satisfaction or waiver of the conditions set forth in the Merger
Agreement, at the effective time of the Merger, Rural Valley will merge with and
into Laurel Bank. Laurel Bank will be the surviving corporation, the separate
corporate existence of Rural Valley will cease, and Laurel Bank will succeed to
all the rights, privileges, immunities and franchises, and all the property and
assets, real, personal and mixed, of Rural Valley, without the necessity for any
separate conveyance or other transfer. After the Merger, Laurel Bank will be
responsible and liable for all liabilities and obligations of Rural Valley of
every kind and description, and neither the rights of creditors, nor any liens
on the property of Rural Valley, will be impaired by the Merger.
Each share of Rural Valley Common Stock then outstanding (except
Dissenters' Shares and treasury shares) will be converted into 11.82 shares of
BT Financial Common Stock. On the Closing Date, by virtue of the Merger, and
without any action on the part of Rural Valley shareholders, each of the then
issued and outstanding shares of Rural Valley Common Stock will cease to exist
and will be deemed canceled, retired and eliminated, and all rights in respect
thereof (other than with respect to Dissenters' Shares) will cease except the
right to receive BT Financial Common Stock, regardless of whether the
certificates representing such shares are surrendered to BT Financial by Rural
Valley shareholders. The shares of BT Financial
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Common Stock will be adjusted immediately prior to the effective time of the
Merger, if necessary, to reflect any consolidation, split-up, other subdivision
or combination of BT Financial Common Stock, any dividend payable in BT
Financial Common Stock, or any capital reorganization involving the
reclassification of BT Financial Common Stock subsequent to the date of the
Merger Agreement and prior to such time.
At the effective time of the Merger, the articles of incorporation and
bylaws of Laurel Bank as in effect immediately prior thereto will be the
articles of incorporation and bylaws of the surviving corporation. The directors
and principal officers, respectively, of the Resulting Company from and after
the Effective Time of the Merger will be the directors and principal officers of
Laurel Bank immediately prior thereto.
Exchange Procedures
After the effective time of the Merger, each holder of a Certificate
representing Rural Valley Common Stock, upon surrender of such certificate to BT
Financial or its exchange agent, together with a duly executed and completed
letter of transmittal (which will be mailed to the holders of Certificates
promptly following the effective time of the Merger), will be entitled to
receive a certificate or certificates representing the number of whole shares of
BT Financial Common Stock to which such holder is entitled as described above,
plus cash (payable by check) in lieu of any fractional share of BT Financial
Common Stock to which such holder would otherwise be entitled. Fractional
shares of BT Financial Common Stock will not be issued. In lieu of a fractional
share of BT Financial Common Stock, each Rural Valley shareholder will receive a
cash payment equal to the applicable fraction multiplied by the closing sale
price on NASDAQ for BT Financial Common Stock on the Closing Date as reported in
The Wall Street Journal, or, if BT Financial Common Stock is not traded on such
date, the next succeeding day on which such stock is traded. No interest will
be paid or accrued on the cash payable upon surrender of Certificates.
Until surrendered in accordance with the requirements of the Merger
Agreement, the Certificates (except for Certificates representing Dissenters'
Shares and treasury shares) will from and after the effective time of the Merger
represent for all purposes only the right to receive shares of BT Financial
Common Stock and cash in lieu of fractional shares. Upon surrender of a
Certificate, there will be issued to the record holder of the certificate for
shares of BT Financial Common Stock in exchange therefor (i) on the date of such
exchange, the amount of dividends theretofore accrued and payable with respect
to such full shares of BT Financial Common Stock as of any date subsequent to
the effective time of the Merger which have not yet been paid to a public
official pursuant to abandoned property laws and (ii) on the appropriate payment
date, the amount of dividends declared with a record date after the effective
time of the Merger but prior to such surrender and a payment date subsequent to
such surrender. No interest will be payable with respect to any such dividends.
At the effective time of the Merger, (i) each share of Rural Valley Common
Stock held in treasury will be canceled, retired and cease to exist and no
consideration will be paid therefor, and (ii) each Dissenters' Share will be
treated as described above (see "Rights of Dissenting Shareholders").
Representations and Warranties
The Merger Agreement contains representations and warranties of Rural
Valley, BT Financial and Laurel Bank which are customary in transactions of this
type, including, but not limited to, representations and warranties concerning:
(a) their respective organization and capitalization; (b) the due authorization,
execution and delivery and the enforceability of the Merger Agreement; and (c)
the lack of conflicts or violations under applicable articles of incorporation,
bylaws, instruments and laws, with respect to the transactions contemplated by
the Merger Agreement. The Merger Agreement also contains customary
representations and warranties by Rural Valley and BT Financial, including, but
not limited to representations and warranties concerning: (a) the documents to
be filed with the Commission and other regulatory agencies; (b) the conduct of
business in the ordinary course and absence of certain changes; (c) financial
statements; (d) compliance with laws; and (e) consents and approvals. Lastly,
the Merger Agreement contains representations and warranties of Rural Valley
such as loans, loan loss reserve, core deposits, related party transactions,
fidelity bonds, and investments.
Certain Covenants
Rural Valley has agreed that, except with the prior written consent of BT
Financial, it will not: (i)
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issue any capital notes or shares of its capital stock, declare or distribute
any stock dividend, authorize a stock split, or authorize, issue or make any
other distribution of, on, or with respect to, its capital stock, except for
Permitted Dividends, see "The Merger Agreement--Rural Valley Dividends"; (ii)
merge with, consolidate with, sell its assets to, or acquire substantially all
the assets of, any other corporation, bank or person, or enter into any other
transaction not in the ordinary course of business; (iii) make any direct or
indirect redemption, purchase or other acquisition of any of its capital stock;
(iv) create or award any pension or profit sharing plan, bonus, deferred
compensation, death benefit or retirement plan, or any other employee benefit
for, enter into any employment or consulting contract (written or otherwise) or
grant any bonuses to, any officer, director or employee; (v) amend its articles
of association or bylaws except as may be necessary to consummate the
transactions contemplated by the Merger Agreement or as required by law; (vi)
incur any liability or obligation, make any commitment or disbursement, acquire
or dispose of any property or asset, make any contract or agreement, or engage
in any transaction, except in the ordinary course of business; (vii) increase
the rate of compensation of any director, officer, employee or agent or enter
into any agreement to increase the rate of compensation of any director, officer
or employee, other than normal increases in the ordinary course of business and
consistent with past practice; (viii) unless permitted by BT Financial, take any
action which would entitle any employee to receive severance pay prior to the
Closing Date; (ix) intentionally do anything or intentionally fail to do
anything which will cause a breach or a default under any contract, agreement,
commitment or obligation to which it is a party or by which it may be bound; (x)
except for securities transactions effected in the ordinary course of business
with the prior consent of BT Financial (which consent shall not be unreasonably
withheld), make any capital expenditures in excess of $15,000 in the aggregate;
(xi) modify or extend any service bureau contracts, hardware/software
maintenance agreements, lease agreements or other contracts that involve annual
payments by Rural Valley that exceed $15,000 per contract or $50,000 in the
aggregate; (xii) change its lending, borrowing, investment, asset/liability
management or other material banking policies in any material respect, except as
may be required by changes in applicable law, regulation or regulatory
directives and except that, in connection with the closing of the transactions
contemplated hereby, Rural Valley shall cooperate in good faith with BT
Financial to adopt policies, practices and procedures consistent with those
utilized by BT Financial and its affiliates; (xiii) open any branch offices;
(xiv) fail to pay any tax or any other liability or charge when due, other than
charges contested in good faith by appropriate proceedings; or (xv) make, change
or revoke any tax election or make any agreement or settlement with any taxing
authority.
BT Financial has agreed that any full-time employee of Rural Valley whose
employment with Laurel Bank is terminated, other than for cause, by BT Financial
within six months after the Merger, and not offered a comparable job with BT
Financial or an affiliate of BT Financial, will be paid severance pay equal to
one week's compensation multiplied by each year of service with Rural Valley,
not exceeding three months salary.
BT Financial has also agreed that all employees of Rural Valley immediately
prior to the Merger who are employed by Laurel Bank following the Merger
("Transferred Employees") will be entitled to participate in BT Financial's
employee benefit plans, as to which they are eligible, without fulfilling any
vesting requirement, although such employees will not be entitled to any credit
for their length of service, compensation, job classification or position with
Rural Valley. BT Financial has agreed that any pre-existing condition,
limitation or exclusion in its health plans shall not apply to Transferred
Employees or their covered dependents who are covered under a medical or
hospitalization indemnity plan maintained by Rural Valley on the date of the
Merger and then change coverage to a BT Financial medical or hospitalization
indemnity health plan at the time such Transferred Employees are first given the
option to enroll in BT Financial's health plans.
BT Financial has further agreed that Rural Valley affiliates will have
rights to registration upon request of BT Financial Common Stock received in the
Merger which will enable Rural Valley affiliates to resell their shares of BT
Financial Common Stock under an effective registration statement.
Acquisition Proposals
Rural Valley has agreed that neither it nor any of its directors, officers
or other affiliates (as defined in Rule 12b-2 under the Exchange Act) (each, an
"Affiliate") will, and that it will cause its employees, agents and
representatives (including, without limitation, any investment banking, legal or
accounting firm retained by Rural Valley and any individual member or employee
of the foregoing) (each, an "Agent") not to, (i) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
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proposal or offer (including, without limitation, any proposal or offer to any
of them or their respective shareholders) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or a substantial portion of the assets or
equity securities of, Rural Valley (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or (ii) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or (iii)
otherwise cooperate in any effort or attempt to make, implement or accept an
Acquisition Proposal. Notwithstanding this undertaking, neither Rural Valley
nor the Rural Valley Board, is prohibited from (i) fulfilling its fiduciary
duties under Pennsylvania or federal law to the Shareholders, or (ii) permitting
to occur the transactions contemplated by the Exchange Agreement. See
"Comparative Market Prices." Rural Valley must notify BT Financial immediately
if any inquiries, proposals or offers related to an Acquisition Proposal are
received by, any confidential information or data is requested from, or any
negotiations or discussions related to an Acquisition Proposal are sought to be
initiated or continued with, it or any of the above-referenced individuals or
entities.
Indemnification Obligations Of Rural Valley
Rural Valley will indemnify and hold harmless BT Financial and Laurel Bank
and each person, if any, who controls BT Financial or Laurel Bank within the
meaning of the Securities Act ("BT Financial Indemnitees") against any losses,
claims, damages or liabilities, joint or several, to which the BT Financial
Indemnitees may become subject, which (a) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, this Proxy Statement/Prospectus or any amendment or
supplement hereto, or any related preliminary prospectus, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading to the extent that any such statement or omission was provided in
writing by Rural Valley to BT Financial, or (b) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact or any
omission or alleged omission to state a material fact required to be stated or
necessary to make the statements not misleading in any document distributed to
any Shareholder to the extent that any such statement or omission was provided
in writing by Rural Valley to BT Financial. Rural Valley is also obligated to
reimburse BT Financial Indemnitees for any legal or other expenses reasonably
incurred by BT Financial in connection with investigating or defending any such
loss, claim, damage, liability or action. Rural Valley will not be liable in
any such case to the extent that any loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any of the Registration Statement, this Proxy
Statement/Prospectus or any amendment or supplement hereto, or any related
preliminary prospectus, that was made or omitted in reliance upon and in
conformity with written information furnished by BT Financial or Laurel Bank
specifically for use herein or therein.
If recovery is not available under the indemnification provisions of the
Merger Agreement described above for any reason other than as set forth therein,
BT Financial will be entitled to contribution from Rural Valley for liabilities
and expenses, except to the extent that contribution is not permitted under
Section 11(f) of the Securities Act. In determining the amount of contribution
to which the respective parties are entitled, there will be considered the
relative benefits received by each party from the transactions contemplated by
the Merger Agreement, the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission, and any other
equitable considerations appropriate under the circumstances. Rural Valley,
Laurel Bank and BT Financial have agreed that it would not be equitable if the
amount of such contribution were determined by pro rata or per capital
allocations.
Rural Valley Dividends
Rural Valley may pay regular quarterly cash dividends not exceeding $2.00
per share for any full calendar quarter beginning with the quarter ending June
30, 1998. Rural Valley can pay the full quarterly dividend of $2.00 per share
only if net income for the previous quarter was more than $150,000. The amount
of permitted dividends payable in any quarter can be less than $2.00 per share
if net income targets are not achieved. If net income for the previous quarter
was less than $70,000, no dividend may be paid. If net income for the previous
quarter was between $70,000 and $150,000, Rural Valley may pay a dividend equal
to the amount by which net income for the quarter exceeded $70,000 divided by
40,000 shares outstanding. If any of the foregoing restrictions prevent Rural
Valley from paying a dividend of $2.00 in respect of any
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quarter, it may pay a higher divided in subsequent quarters if the net income
target of $150,000 is exceeded, but in no event may cumulative dividends paid
after June 30, 1998 exceed $2.00 per share per quarter.
Conditions
The obligations of BT Financial and Laurel Bank to consummate the Merger
are subject to the satisfaction or waiver to the extent permitted by law, on or
before the Closing Date, of each of the following conditions, among others: (i)
performance of and certification by President or Secretary of Rural Valley of
all covenants to be performed by Rural Valley; (ii) the representations and
warranties made by Rural Valley in the Merger Agreement and in any certificate
provided to BT Financial are true and correct in all material respects on the
Closing Date; (iii) Rural Valley has furnished BT Financial with a certified
copy of resolutions duly adopted by its Board of Directors authorizing and
approving the Merger Agreement and the transactions contemplated therein; (iv)
Approval by affirmative vote of the holders of two-thirds of outstanding shares
of Rural Valley Common Stock; (v) BT Financial, Laurel Bank and Rural Valley
receive all necessary governmental approvals and other consents; (vi) no action,
proceeding, regulation or legislation is instituted or threatened before any
court, governmental agency or legislative body which, in the good faith judgment
of BT Financial, would make it inadvisable to consummate such transactions;
(vii) no material misstatements or omissions in the information supplied by
Rural Valley contained in the Registration Statement which have not been cured;
(viii) no changes in financial condition of Rural Valley since the date of the
Merger Agreement; (ix) Registration Statement has been declared effective; (x)
BT Financial is in receipt of an opinion of Calarie & Owen, counsel for Rural
Valley including, but not limited to, the valid existence of Rural Valley under
the laws of the Commonwealth of Pennsylvania, the authorized capital stock of
Rural Valley and the par value of such, the Merger Agreement constituting a
valid and binding obligation on Rural Valley and the execution of the Merger
Agreement does not violate Rural Valley's articles of association or bylaws, as
amended; (xi) the number of Dissenters' Shares as of the Closing Date shall be
less than 4,000 shares of Rural Valley Common Stock; (xii) Rural Valley paid all
out-of-pocket expenses and disbursements, including legal, accounting and
investment banking fees incurred by Rural Valley in connection with the
Transactions, except for reasonable out-of-pocket expenses actually incurred
that the parties acknowledge have not been billed on or before the Closing Date;
(xiii) BT Financial has received an opinion of Pepper Hamilton LLP,
substantially to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (a) the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of Section
368 of the Code and that accordingly no gain or loss will be recognized by BT
Financial, Laurel Bank or Rural Valley as a result of the Merger; and (b) no
gain or loss will be recognized by Rural Valley 's shareholder as a result of
the receipt of BT Financial Common Stock in the Merger; (xiv) BT Financial has
received from PricewaterhouseCoopers LLP, independent accountants throughout for
BT Financial, a letter to the effect that based on their procedures, they concur
with management that no conditions exist as of the date of their letter which
would preclude accounting for the Merger as a pooling of interests; and (xv) BT
Financial has received duly executed Affiliates' Agreements from each director
and executive officer of BT Financial Corporation and Rural Valley. Under the
Merger Agreement, BT Financial shall perform a Phase I environmental assessment
on Rural Valley's property. BT Financial may terminate the Merger Agreement if
the results of this assessment reveal an environmental condition with
remediation costs or potential liability in excess of $50,000.
The obligations of Rural Valley to consummate the Merger are subject to the
satisfaction or waiver to the extent permitted by law, on or before the Closing
Date, of each of the following conditions, among others: (i) performance of and
certification by the President and Secretary of BT Financial and Laurel Bank of
all covenants to be performed by BT Financial and Laurel Bank; (ii) the
representations and warranties made by BT Financial and Laurel Bank in the
Merger Agreement and in any certificate provided to Rural Valley must be true
and correct in all material respects on the Closing Date; (iii) BT Financial and
Laurel Bank must furnish Rural Valley a certified copy of resolutions duly
adopted by their Board of Directors authorizing and approving the Merger
Agreement and the transactions contemplated therein; (iv) BT Financial, Laurel
Bank and Rural Valley must receive all necessary governmental approvals and
other consents; (v) no action, proceeding, regulation or legislation is
instituted or threatened before any court, governmental agency or legislative
body which, in the good faith judgment of Rural Valley, would make it
inadvisable to consummate such transactions; (vi) no material misstatements or
omissions in the information supplied by BT Financial and Laurel Bank in the
Registration Statement which have not been cured; (vii) no changes in financial
condition of BT Financial on a consolidated basis since the date of the Merger
Agreement; (viii) Rural Valley must receive an opinion of Pepper Hamilton LLP,
counsel for BT Financial and Laurel Bank including, but not limited to, the
valid existence of BT Financial under Pennsylvania Law,
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the authorized capital stock and par value of BT Financial common stock, the
Merger Agreement constituting a valid and binding obligation on BT Financial and
Laurel Bank and the execution of the Merger Agreement does not violate BT
Financial and Laurel Bank's articles of incorporation or bylaws, as amended;
Termination
The Merger Agreement and the transactions contemplated thereby may be
terminated at any time prior to the Effective Time of the Merger by the mutual
consent of the Boards of Directors of Rural Valley, BT Financial and Laurel
Bank. If, at any time, Rural Valley, BT Financial and Laurel Bank agree in
writing on a Closing Date on which all conditions precedent to consummation of
the Merger are expected to be satisfied or waived, one of them may postpone that
Closing Date for a reasonable period of time (which will be no more than 30 days
and in no event will end later than March 31, 1999) to enable it to perform any
obligations under the Merger Agreement. If Rural Valley, BT Financial or Laurel
Bank refuses to consummate the Merger because all conditions precedent to its
obligations to close have not been met on the Closing Date as postponed, then
such person may immediately terminate the Merger Agreement. In any event, the
Merger Agreement and the transactions contemplated thereby will terminate
automatically on March 31, 1999 if the Merger has not been consummated on or
before such date, unless extended by mutual consent of Rural Valley, BT
Financial and Laurel Bank. The parties, however, expect that the Merger will be
consummated before December 31, 1998. The Merger Agreement does not limit the
possible number of extensions of the termination date or the periods for which
extension of the termination date may occur.
In the event of any termination of the Merger Agreement: (i) certain
confidentiality provisions and other provisions relating to expenses in the
Merger Agreement will survive; (ii) if BT Financial terminates the Merger
Agreement due to the failure to satisfy a condition precedent regarding (a)
Rural Valley's performance of its covenants, (b) Rural Valley's representations
and warranties, (c) the failure to deliver Rural Valley's certified resolutions
regarding the Merger Agreement, or (d) failure to deliver the opinion of Calarie
& Owen that, among other things Rural Valley is a national banking association
duly organized and incorporated under the National Bank Act with 40,000 shares
of common stock par value $5.00, (e) shareholder approval of the Merger
Agreement, (f) material errors, misstatements or omissions by Rural Valley, (g)
changes in Rural Valley's financial condition, (h) the exceeding of the
requisite number of Dissenters' Shares or the amount of cash consideration, or
(i) Rural Valley's payment of certain expenses, and satisfaction of such
condition was within the control of Rural Valley, (j) failure to provide
affiliate agreements of each Rural Valley director and officer, then Rural
Valley will reimburse BT Financial for its attorneys' fees and other expenses
reasonably incurred in connection with the transactions described in the Merger
Agreement (to the extent not already paid by Rural Valley to BT Financial or any
of its subsidiaries) and upon payment in full thereof, shall have no further
liability or obligation hereunder to BT Financial; (iii) if Rural Valley
terminates the Merger Agreement due to the failure to satisfy a condition
precedent regarding (a) BT Financial's performance of its covenants, (b) BT
Financial's representations and warranties or (c) the failure to deliver BT
Financial's certified resolutions regarding the Merger Agreement, (d) material
errors, misstatements or omissions by BT Financial or Laurel Bank, (e) changes
in BT Financial's financial condition, or (f) the failure to deliver the opinion
of BT Financial's and Laurel Bank's counsel, and satisfaction of such condition
was within the control of BT Financial, then BT Financial will reimburse Rural
Valley for its attorneys' fees and other expenses reasonably incurred in the
transactions described in the Merger Agreement and upon payment in full thereof,
shall have no further liability or obligation hereunder to Rural Valley.
In no event shall the amount reimbursed for attorneys' fees and other
expenses reasonably incurred in combination with the transactions described
above exceed $100,000.
Expenses
Except as described under "Termination" above, all expenses incurred by
Rural Valley, BT Financial or Laurel Bank in connection with or related to the
authorization, preparation and execution of the Merger Agreement, the
solicitation of Shareholder approval and all other matters related to the
closing of the transactions contemplated by the Merger Agreement, including,
without limiting the generality of the foregoing, all fees and expenses of
agents, representatives, counsel and accountants employed by any such party,
will be borne solely and entirely by the party that has incurred the same.
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Amendment And Waiver
Any of the terms or conditions of the Merger Agreement may be waived at any
time by the party which is entitled to the benefit thereof, or any of those
terms or conditions may be amended or modified in whole or in part at any time
before or after the vote of the Shareholders on the Merger Agreement to the
extent permitted by law by agreement in writing, executed in the same manner as
the Merger Agreement after authorization to do so by the Board of Directors of
each party thereto; provided, however, that such action will be taken only if,
in the judgment of the Boards of Directors of each party taking the action, such
waiver or such amendment or modification will not have a material adverse effect
on the benefits intended under the Merger Agreement to such party and its
shareholders following approval of the Merger Agreement by the Shareholders,
unless the Merger Agreement, as modified, is resubmitted to the Shareholders for
their adoption and approval.
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK
The authorized capital stock of BT Financial consists of 25,000,000 shares
of common stock having a par value of $5.00 per share, and 2,000,000 shares of
preferred stock having no par value. The number of shares of BT Financial
Common Stock outstanding as of June 30, 1998 was 12,500,872. No shares of BT
Financial's preferred stock are outstanding. Except to the extent required by
governing law, rule or regulation or by NASDAQ rules (described below), the
shares of capital stock of BT Financial may be issued from time to time by the
Board of Directors of BT Financial without further approval of the shareholders
of BT Financial. The Board of Directors of BT Financial also has the full
authority permitted by law to divide the authorized and unissued shares of
preferred stock, no par value, of BT Financial into series and to fix by
resolution full, limited, multiple or fractional, or no voting rights, and such
designations, preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, redemption rights and other special
rights of any such series that may be desired.
Voting Rights. Holders of shares of BT Financial Common Stock are entitled
to cast one vote for each share held of record on all matters submitted to a
vote of shareholders of BT Financial. Holders of shares of BT Financial Common
Stock are not entitled to cumulate votes for the election of directors.
Classification of The Board Of Directors. The Board of Directors is
divided into four classes, as nearly equal in number as possible, and the term
of office of one class expires in each year.
Preemptive Rights. Holders of shares of BT Financial Common Stock do not
have any preemptive rights to subscribe for or to purchase any additional
securities of BT Financial.
Dividends. Subject to any rights and preferences of any class of stock
having preference over the BT Financial Common Stock, holders of shares of BT
Financial Common Stock are entitled to such dividends as may be declared by the
Board of Directors of BT Financial out of funds lawfully available therefor.
Cash available for dividend distribution to the holders of BT Financial Common
Stock must initially come from dividends paid to BT Financial by its
subsidiaries. Accordingly, restrictions on payment of cash dividends by BT
Financial are affected by any restrictions on the payment of dividends by BT
Financial's subsidiaries. See "BT Financial Corporation - Payment of Dividends
and Other Restrictions."
Liquidation. Upon any liquidation, dissolution or winding up of the
affairs of BT Financial, whether voluntary or involuntary, holders of shares of
BT Financial Common Stock will be entitled to receive pro rata the remaining
assets of BT Financial after all debts and liabilities have been paid and after
the holders of any class of stock having preference over the BT Financial Common
Stock have been paid in full any sums to which they may be entitled.
NASDAQ Listing. BT Financial Common Stock is included for quotation on
NASDAQ. In order to maintain such inclusion, approval of BT Financial's
shareholders would be required for the issuance of additional shares of BT
Financial Common Stock or securities convertible into BT Financial Common Stock
if the issuance of such securities (1) is in connection with the acquisition of
a company, is not in connection with a public offering for cash, and the
securities issued have or will have voting power equal to or in excess
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of 20% of the voting power outstanding before such issuance; (2) is in
connection with the acquisition of a company in which a director, officer or
substantial shareholder of BT Financial has a 5% or greater interest (or such
persons collectively have a 10% or greater interest) and the issuance of the
securities could result in an increase in outstanding common stock or voting
power of 5% or more; (3) is in connection with a transaction other than a public
offering at a price less than the greater of book or market value, and will
equal 20% or more of the common stock or 20% or more of the voting power
outstanding before issuance; or (4) would result in a change in control of BT
Financial. Under NASDAQ rules, shareholder approval would also be required for
the establishment of a stock option or purchase plan in which stock may be
acquired by officers and directors other than a broadly-based plan in which
other security holders of BT Financial or employees of BT Financial participate.
The NASDAQ rules do not require approval of the Merger by BT Financial
shareholders.
Also under NASDAQ Rules, BT Financial may not issue any class of security
or take other corporate action with the effect of nullifying, restricting or
disparately reducing the per share voting rights of its outstanding registered
common stock. Prohibited actions include, but are not limited to, the adoption
of time-phased voting plans, the adoption of capped voting rights, and the
issuance of super-voting stock. The following actions are presumed to have a
nullifying, restricting or disparately reducing effect: (1) corporate action to
impose any restriction on the voting power of shares of common stock by a
beneficial or record holder based on the number of shares held by such holder;
(2) corporate action to impose any restriction on the voting power of shares of
common stock held by a beneficial or record holder based on the length of time
such shares have been held by such holder or based on the number of shares held
by such holder; (3) any issuance of securities through an exchange offer for
shares of an outstanding class of common stock in which the shares issued have
voting rights greater than or less than the per share voting rights of any
outstanding class of common stock; (4) any issuance of securities pursuant to a
stock dividend, or any other type of distribution of stock in which the
securities issued have voting rights greater than the per share voting rights of
any outstanding class of common stock. The following actions are presumed not
to have a nullifying, restricting or disparately reducing effect: (1) the
issuance of securities pursuant to an initial registered public offering; (2)
the issuance of any class of securities, through a registered public offering,
with voting rights not greater than the per share voting rights of any
outstanding class of common stock; (3) the issuance of any class of securities
to effect a bona fide merger or acquisition, with voting rights not greater than
the per share voting rights of any outstanding class of common stock; or (4)
corporate action pursuant to state law requiring a domestic corporation to
condition the voting rights of a beneficial or record holder of a specified
threshold percentage of voting stock on the approval of the corporation's
independent shareholders.
BT Financial Shareholder Rights Plan
On March 27, 1991, the Board of Directors of BT Financial declared a
dividend distribution of one right for each outstanding share of BT Financial
Common Stock (each a "Right," and collectively, the "Rights"). The Rights were
distributed on April 15, 1991 to shareholders of record on that date. Each
Right entitles its registered holder to purchase from BT Financial a unit equal
to nine one-thousandths (.009) of a share of BT Financial Series A Preferred
Stock at a price of $45.35 per unit (the "Exercise Price"). The Rights are not
exercisable until the Distribution Date (as defined below). The Rights will
expire at the close of business on April 15, 2001, unless earlier redeemed or
exchanged by BT Financial as described below. Rights will be issued with the
shares of BT Financial Common Stock to be issued in the Merger, unless a
Distribution Date occurs first. All currently outstanding shares of BT
Financial Common Stock have Rights associated therewith.
The Rights will be evidenced by certificates for BT Financial Common Stock
until the close of business on the tenth day (the "Distribution Date") following
the earlier to occur of (i) the date on which a person or group of affiliated or
associated persons ("Acquiring Person"), other than (A) BT Financial, (B) any
subsidiary of BT Financial, (C) any employee benefit plan or employee stock plan
of BT Financial or of any subsidiary of BT Financial, (D) any trust or trustee,
or person acting as trustee or other entity organized, appointed, established or
holding BT Financial's voting stock pursuant to the terms of any such plan or
(E) any person or group of affiliated or associated persons which is eligible,
pursuant to Rule 13d-1(b) under the Exchange Act, to file a Statement on
Schedule 13G with respect to its or their beneficial ownership of voting stock
of BT Financial, whether or not such person or group has filed a Statement on
Schedule 13G, unless such person or any of its affiliates or associates has
filed a Statement on Schedule 13D with respect to beneficial ownership by any
one or more of them of 10% or more of the voting power of BT Financial ("Exempt
Person"), has acquired, or obtained the right to acquire, beneficial ownership
of shares of voting
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stock having 10% or more of the voting power of BT Financial and the public
announcement of such or (ii) the commencement of, or public announcement of an
intention to make, a tender or exchange offer (other than a tender or exchange
offer by an Exempt Person) which, if consummated, would result in the beneficial
ownership of shares of voting stock having 10% or more of the voting power of BT
Financial, even if no shares are actually purchased pursuant to such offer.
Until the Distribution Date, the Rights may only be transferred together with
shares of BT Financial Common Stock and the surrender for transfer of any
certificate for shares of BT Financial Common Stock having associated Rights
will constitute the transfer of such Rights. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of shares of BT Financial
Common Stock having associated Rights as of the close of business on the
Distribution Date and such separate certificates alone will evidence the Rights
from and after the Distribution Date.
The BT Financial Series A Preferred Stock will be nonredeemable and, unless
otherwise provided in connection with the creation of a subsequent series of
preferred stock, subordinate to any other series of BT Financial's preferred
stock. BT Financial Series A Preferred Stock may not be issued except upon
exercise of Rights. Each share of BT Financial Series A Preferred Stock will be
entitled to receive when, as and if declared, a quarterly cash dividend in an
amount equal to the greater of $.25 or 110.25 times any cash dividends, and
110.25 times the amount (payable in kind) of all non-cash distributions (other
than dividends payable in equity securities), paid on shares of BT Financial
Common Stock during the preceding quarter. Whenever dividends are in arrears, BT
Financial will be unable (i) to purchase or redeem any shares of stock ranking
junior to the Series A Preferred Stock or (ii) to purchase any shares of Series
A Preferred Stock or any shares ranking on a parity with them, except in
accordance with an offer made to all holders of such shares upon such terms as
the Board of Directors shall determine in good faith will result in fair and
equitable treatment among the respective series and classes. BT Financial may
at any time redeem such parity stock for shares of stock ranking junior to the
Series A Preferred Stock. In the event of liquidation, the holders of shares of
BT Financial Series A Preferred Stock will be entitled to receive a liquidation
payment in an amount equal to the greater of $5,000 plus accrued and unpaid
dividends or 110.25 times the payment to be made per share of BT Financial
Common Stock. Each share of BT Financial Series A Preferred Stock will have
110.25 votes, voting together with the shares of BT Financial Common Stock. In
the event of any merger, consolidation or other transaction in which the shares
of BT Financial Common Stock are exchanged, each share of BT Financial Series A
Preferred Stock will be entitled to receive 110.25 times the amount received per
share of BT Financial Common Stock. The rights of the BT Financial Series A
Preferred Stock as to dividends, liquidation and voting are protected by anti-
dilution provisions.
The number of shares of BT Financial Series A Preferred Stock issuable upon
exercise of the Rights and the Exercise Price are subject to certain adjustments
from time to time in the event of a stock dividend on, or a subdivision or
combination of, the BT Financial Common Stock. The Exercise Price is subject to
adjustment in the event of extraordinary distributions of cash or other property
to holders of shares of BT Financial Common Stock.
Unless the Rights are earlier redeemed or exchanged, if (a) at any time
after there is an Acquiring Person, BT Financial were to be involved in a merger
or other business combination (in which any shares of BT Financial Common Stock
are changed into or exchanged for other securities or assets) or (b) more than
50% of the assets or earning power of BT Financial and its subsidiaries (taken
as a whole) were to be sold or transferred to an Acquiring Person in one or a
series of related transactions, the Rights Agreement provides that proper
provision must be made so that each holder of record of a Right will from and
after such date have the right to receive, upon payment of the Exercise Price,
that number of shares of common stock of the acquiring company having a Fair
Market Value (as such term is defined in the Rights Agreement) at the time of
such transaction equal to two times the Exercise Price.
In addition, unless the Rights are earlier redeemed or exchanged, if BT
Financial were to be the surviving corporation in a merger or other business
combination with an Acquiring Person and the BT Financial Common Stock remained
outstanding (none of which shares were changed into or exchanged for other
securities or assets) or if an Acquiring Person engages in any of a number of
"self-dealing" transactions with BT Financial specified in the Rights Agreement
or if any person (other than an Exempt Person) or group of affiliated or
associated persons becomes the beneficial owner of shares of voting stock having
more than 10% of BT Financial's voting power (other than by purchase pursuant to
an all cash tender offer for all the voting stock which purchase increases such
person's beneficial ownership to 85% or more of the outstanding voting power of
BT Financial's voting stock) or if during such time as there is any Acquiring
Person, there is
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a reclassification of securities (including any reverse stock split) or any
recapitalization or reorganization of BT Financial or any merger or
consolidation of BT Financial with any of its Subsidiaries or any other
transaction or series of transactions involving BT Financial or any of its
subsidiaries any of which has the effect, directly or indirectly, of increasing
by more than 1% the proportionate share of the outstanding shares of any class
of equity of BT Financial or any of its subsidiaries or securities exercisable
for or convertible into equity securities of BT Financial or its subsidiaries
beneficially owned directly or indirectly by any Acquiring Person or any
affiliate and/or associate of any Acquiring Person, the Rights Agreement
provides that proper provision must be made so that each holder of record of a
Right, other than the Acquiring Person (whose Rights will thereupon become null
and void), will thereafter have the right to receive, upon payment of the
Exercise Price, that number of shares of BT Financial Series A Preferred Stock
having a Fair Market Value at the time of such transaction equal to two times
the Exercise Price.
Fractional shares of BT Financial Series A Preferred Stock may, at the
election of BT Financial, be evidenced by depositary receipts. BT Financial may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth of a share.
At any time at or prior to the close of business on the fifteenth day after
a public announcement that a person has become an Acquiring Person, BT Financial
may redeem the Rights in whole, but not in part, at a price of $.009 per Right
(the "Redemption Price"), should the BT Financial Board of Directors determine
in its sole discretion that redemption is in the best interests of BT Financial
and its shareholders, whether or not (i) any of the Rights have theretofore been
exercised, or (ii) exercise thereof at the time would be deemed economic, or
(iii) any of the transactions referred to in Section 11 or 13 of the Rights
Agreement has then been proposed. Immediately upon the action of the Board of
Directors of BT Financial authorizing redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The Board of Directors of BT Financial may, at its option, at any time
after any person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (except for Rights beneficially owned by an
Acquiring Person or by an associate or affiliate of one and which have become
void) for BT Financial Common Stock at an exchange ratio (the "Rights Exchange
Ratio") of one share of BT Financial Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after March 27, 1991. Notwithstanding the foregoing, the Board of
Directors is not empowered to effect such exchange at any time after any person
(other than an Exempt Person), together with all affiliates and associates of
such person, becomes the beneficial owner of 50% or more of the then outstanding
voting power. Immediately upon the action of the Board of Directors of BT
Financial ordering the exchange of any rights, the right to exercise such rights
will terminate and the only right thereafter of a holder of such Rights will be
to receive that number of shares of BT Financial Common Stock equal to the
number of such Rights held by such holder multiplied by the Rights Exchange
Ratio. In any such exchange, BT Financial may substitute Series A Preferred
Stock (or shares having the same rights, privileges and preferences) for BT
Financial Common Stock exchangeable for rights at the rate set forth in the
Rights Agreement.
Until a Right is exercised, the holders, as such, will have no rights as a
shareholder of BT Financial, including, without limitation, the right to vote or
to receive dividends.
BT Financial may from time to time supplement or amend the Rights Agreement
without the approval of any holders of Rights Certificates prior to the
Distribution Date to amend or supplement any provision which BT Financial may
deem necessary or desirable or, subsequent to the Distribution Date, to amend or
supplement any provision which BT Financial may deem necessary or desirable and
which will not adversely affect the interests of holders of Rights (other than
an Acquiring Person or any affiliate or associate thereof).
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement that is
attached to BT Financial's Registration Statement on Form 8-A dated April 26,
1991, which is incorporated herein by reference. A copy of that Registration
Statement can be obtained in the manner set forth under "Incorporation of
Certain Documents by Reference."
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Provisions Affecting Business Combinations And Control Share Acquisitions
The Pennsylvania Business Corporation Law of 1988, as amended, (BCL),
certain federal laws, and a number of provisions of BT Financial's articles and
bylaws address matters of corporate governance and certain of the rights of
shareholders so as to significantly restrict the ability of any person to
acquire the beneficial ownership of more than a certain minimum of any class of
equity security of BT Financial outstanding. The following discussion is a
general summary of provisions relating to stock ownership and transfers, the
Board of Directors and business combinations, that may be deemed to have such
"anti-takeover" effects. These and other provisions affect shareholder rights
and should be given careful attention. The following description of certain of
these provisions is necessarily general and reference should be made in each
case to the appropriate provision of the federal law or the articles and bylaws
of BT Financial.
Pennsylvania Law
The BCL contains a number of "anti-takeover" sections that apply to
registered corporations relating to: control share acquisitions; the
disgorgement of profits by certain controlling persons; the approval of
transactions with interested shareholders; the ability of shareholders to put
their stock following a control transaction; business combinations; severance
compensation; and preservation of labor contracts. A corporation that was a
registered corporation on April 27, 1990 could opt-out of the "control share
acquisition" or "disgorgement of profits" provisions by an explicit amendment of
its bylaws adopted by its board of directors on or before July 26, 1990. A
corporation that became a registered corporation after April 27, 1990 could opt
out by an explicit provision in its original articles of incorporation or by an
explicit amendment to its articles of incorporation adopted on or before 90 days
after the corporation first becomes a registered corporation. BT Financial has
opted out of the "control share acquisitions" and "disgorgement of profits"
sections of the BCL and along with them the provisions regarding severance
compensation and the preservation of labor contracts.
The approval of transactions with an interested shareholder section of the
BCL provides that certain transactions with an "interested shareholder,"relating
to mergers, consolidations, share exchanges and sales of assets must be approved
by the holders of a majority of disinterested shares in addition to any other
approvals that may be required. This requirement does not apply if the
transaction is approved by a disinterested majority of the board of directors,
if the consideration paid to the other shareholders in the transaction is not
less than the highest amount paid by the interested shareholder in acquiring
shares or if, immediately prior to the adoption of a plan of merger or
consolidation and thereafter until the effective date, another corporation that
is a party to the merger or consolidation owns directly or indirectly 80% or
more of each class of the constituent corporation, the business combination
section has been satisfied (if applicable), and the board of directors of the
constituent corporation has approved the plan. An "interested shareholder"
includes any shareholder who is a party to the transaction or who is treated
differently from the other shareholders and affiliates of the interested
shareholder.
Under the provision of the BCL that permits shareholders to put their
shares, shareholders of a registered corporation that becomes subject to a
"control transaction" can demand from the controlling person or group payment in
cash for his or her shares of an amount equal to the fair value of his or her
shares. The minimum value the shareholder can receive is the highest price paid
per share by the controlling person or group within the 90-day period ending on
the date of the control transaction. A "control transaction" for such purposes
is the acquisition of 20% of a corporation's voting shares by a person or group,
with several exceptions.
The business combination section of the BCL prohibits any business
combination with an interested shareholder other than: a business combination
approved by the board prior to the date on which the interested shareholder
first became an interested shareholder or where the purchase of the shares that
first made the interested shareholder such had been approved by the board prior
to the date of such purchase; a business combination approved by the affirmative
vote of a majority of the disinterested shareholders if the interested
shareholder has beneficially owned 80% or more of the voting stock for three
months and owns such amount at the time of the vote, and if shareholders receive
specified minimum values for their
shares; a business combination approved by a unanimous vote of common
shareholders; a business combination approved by a majority of disinterested
shareholders no earlier than five years after the interested shareholder became
such; or a business combination approved at a shareholders' meeting held no
earlier than five years after the interested shareholder became such if
shareholders receive specified minimum values for their
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shares. Business combinations include: mergers, consolidations, share exchanges
and divisions; sales, leases, exchanges, mortgages, pledges, transfers and other
dispositions of assets having specified values; share transfers having specified
values; liquidation; dissolution; transactions that increase the interested
shareholder's voting power; and the provision of any benefit not in proportion
to shareholdings. An interested shareholder is generally any beneficial owner of
20% of the voting shares of a corporation or an affiliate or associate of a
corporation that at any time within the five year period prior to the date in
question beneficially owned 20% of the voting shares of the corporation.
Federal Law
The Change in Bank Control Act of 1978, as amended, prohibits a person or
group of persons from acquiring "control" of a bank holding company such as BT
Financial unless the Federal Reserve Board has been given 60 days' prior written
notice of such proposed acquisition and, within that time period, the Federal
Reserve Board has not issued a notice disapproving the proposed acquisition or
extending, for up to another 30 days, the period during which such a disapproval
may be issued. This period may be further extended under certain circumstances.
An acquisition may be made prior to the expiration of the disapproval period if
the Federal Reserve Board issues written notice of its intent not to disapprove
action.
Under a rebuttable presumption established by the Federal Reserve Board,
the acquisition of 10% or more of a class of voting stock of a bank holding
company with a class of securities registered under Section 12 of the Exchange
Act would, under the circumstances set forth in the presumption, constitute the
acquisition of control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the Bank Holding Company Act before acquiring 25%
(5% in the case of an acquiror that is a bank holding company) or more of the
outstanding shares of BT Financial Common Stock, or such lesser number of shares
as constitute control over BT Financial.
Tender Offers for and Other Proposals to Acquire BT Financial
When considering any tender offer for BT Financial Common Stock the Board
of Directors of BT Financial must consider all factors it deems relevant, and
may, but is not obligated to, consider the following factors: (a) the amount
and nature of the consideration (if any) to be received by shareholders in
relation to the then current market price, the Board's estimate of the then
current value of BT Financial in a freely negotiated transaction and the Board's
estimate of the future value of BT Financial as an independent entity; and (b)
the social and economic effects of the transaction on the employees, depositors,
customers, creditors and other constituents of BT Financial and on the
communities served by BT Financial.
"Supermajority" Provisions Concerning Charter Amendments
Under the BCL, amendments to the articles of incorporation of a registered
corporation such as BT Financial may only be proposed by its board of directors.
Except for certain amendments which do not require shareholder approval and
unless a greater vote is required by its articles of incorporation, amendments
of the articles of incorporation of a Pennsylvania corporation must be approved
by the affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon and, if any class or series of shares is entitled to
vote as a class, the affirmative vote of a majority of the votes cast in each
such class vote.
The BT Financial articles require the affirmative vote of the holders of at
least 80% of the outstanding shares of capital stock of BT Financial entitled to
vote for the election of directors of BT Financial, given in person or by proxy
at a meeting duly called for the purpose of voting thereon, to amend or repeal
any provision of the sections of the BT Financial Articles relating to:
transactions with Interested Persons; factors to be considered by the Board of
Directors of BT Financial in reviewing tender offers and other transactions;
classification of the Board of Directors of BT Financial; the directors' ability
to make, amend or repeal bylaws; indemnification; or the amendment or repeal of
the BT Financial Articles. All other BT Financial Articles may be amended as
provided in the BCL.
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"Supermajority" Provisions Concerning Bylaw Amendments
The shareholders of a Pennsylvania corporation who are entitled to vote
have the power to adopt, amend and repeal the bylaws of the corporation. The
authority to adopt, amend and repeal bylaws of a corporation may be expressly
vested by the bylaws in the board of directors, subject to the power of the
shareholders to override any such action and except that a board of directors
may not have the authority to adopt or change a bylaw on any subject that is
committed expressly to the shareholders under the BCL, unless the articles of
incorporation of that corporation expressly give the board that authority.
The BT Financial articles provide that the Board of Directors of BT
Financial has the power to make, amend and repeal the bylaws as it deems
necessary or convenient for the regulation and management of BT Financial to the
extent not inconsistent with law or the BT Financial Articles. Such power is
subject to the power of the shareholders of BT Financial to amend or repeal
bylaws of BT Financial by the affirmative vote of the holders of at least 80% of
the outstanding shares of capital stock of BT Financial entitled to vote for the
election of directors of BT Financial, given in person or by proxy at a meeting
duly called for the purpose of voting thereon.
Shareholder Nominations for Directors
BT Financial's bylaws provide that, with certain exceptions, nominations of
candidates for election as Directors of BT Financial, other than those made by
management of BT Financial, must be in writing and filed with the Secretary of
BT Financial not less than 40 days prior to any shareholders' meeting called for
the election of Directors or ten days after the giving of notice of such meeting
in accordance with Article 33 of the bylaws of BT Financial, whichever is later.
This provision could be viewed as "anti-takeover" in nature, since it may make
it more difficult for shareholders to nominate candidates and may give an
advantage to incumbent management's nominees.
COMPARISON OF SHAREHOLDERS RIGHTS
The rights of the shareholders of Rural Valley are governed by the National
Bank Act and the articles of incorporation and bylaws of Rural Valley. As a
result of the Merger, shareholders of Rural Valley who receive BT Financial
Common Stock in the merger will become shareholders of BT Financial, and as
such, their rights as shareholders will be governed by the BCL and the articles
and bylaws of BT Financial. Certain differences in the rights of shareholders of
BT Financial and Rural Valley arise from the distinctions between the BCL and
National Bank Act and the articles and bylaws of each. Although it is
impracticable to note all of the differences, the following is a summary of
certain significant differences.
The Articles of Incorporation of Rural Valley authorize the issuance of
40,000 shares of common stock, $5.00 par value per share. Upon the consummation
of the Merger, the shares of Rural Valley Common Stock will be canceled, and the
holders of Rural Valley Common Stock will receive shares of BT Financial Common
Stock. See "The Merger Agreement--The Merger." The BT Financial articles
authorize the issuance of 25,000,000 shares of BT Financial Common Stock, par
value $5.00 per share, and 2,000,000 shares of preferred stock, having no par
value. On June 30, 1998, 12,500,872 shares of BT Financial Common Stock and no
shares of Preferred Stock were outstanding.
Dividends
Holders of Rural Valley Common Stock are entitled to dividends as and when
declared by the Board of Directors of Rural Valley out of funds legally
available therefor. Subject to such preferences, limitations and relative
rights as may be fixed for any series of preferred stock that may be issued,
holders of BT Financial Common Stock are entitled to receive such dividends,
when, as and if declared by the Board of Directors out of funds legally
available therefor. Cash available for dividend distribution to the holders of
BT Financial's Common Stock and preferred stocks, must initially come from
dividends paid to BT Financial by its banking subsidiary, Laurel Bank.
Accordingly, BT Financial's ability to pay cash dividends can be affected by
restrictions on the payment of dividends by BT Financial's subsidiaries. See
"BT Financial Corporation - Payment of Dividends and Other Restrictions."
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Voting; Election of Directors
Unlike holders of BT Financial Common Stock, holders of Rural Valley Common
Stock are entitled to cumulative voting rights in the election of directors. In
all other voting matters, like holders of BT Financial Common Stock, holders of
Rural Valley Common Stock are entitled to one vote for each share held. The
Bylaws of BT Financial provide for the classification of directors into four
classes, as nearly equal in number as possible, with the term of office of one
class expiring in each year. Rural Valley's board is not classified and its
directors serve one year terms. Unlike the BT Financial bylaws, the Rural
Valley bylaws do not contain a provision limiting shareholder nominations for
elections of directors, although Rural Valley's articles do require that
directors be shareholders. Also unlike the BT Financial articles and bylaws,
the Rural Valley articles and bylaws have no provisions requiring supermajority
votes on any matters. However, Rural Valley's bylaws provide that bylaws may be
amended by the vote of a majority of directors.
Liquidation
As with BT Financial Common Stock, in the event of any liquidation,
dissolution or winding up of Rural Valley, holders of Rural Valley Common Stock
will be entitled to share ratably in all assets available for distribution after
the payment of debts, liabilities and preferences.
Preemptive Rights
Unlike BT Financial Common Stock, Rural Valley Common Stock has preemptive
rights to acquire additional unissued shares of Rural Valley Common Stock in an
amount equal to the existing shares held by the Rural Valley shareholder.
Anti-takeover Provisions of the BCL
Unlike BT Financial, none of the anti-takeover sections of the BCL apply to
Rural Valley.
Section 1610 of the Banking Code, which applies to Rural Valley, provides
that any holder of voting shares of a bank that becomes subject to a "control
transaction" may make written demand on, and is entitled to receive cash from,
the control person or group equal to the fair value of each voting share as of
the day prior to the date on which the control transaction occurs. A "control
transaction" refers to the acquisition by a person or group of the status of a
controlling person or group. This status is obtained when a person, or a group
of persons acting in concert, has voting power (which can include an option or
contract) over voting shares of the bank that would entitle the holders thereof
to cast at least 30% of the votes that all shareholders would be entitled to
cast in an election of directors.
Section 112 of the Banking Code is similar, but not identical, to the
Change in Bank Control Act of 1978, as amended, which is described in
"Description of BT Financial Capital Stock--Provisions Affecting Business
Combinations and Control Share Acquisitions." Section 112 requires the approval
of the Pennsylvania Department of Banking before any person can acquire or make
a proposal to acquire more than (a) 10% of any class of outstanding shares of a
bank or (b) 5% of any such class, if the bank had net operating loss carry
forwards in excess of 20% of its total stockholders' equity, as reported in its
latest publicly available annual financial statements.
Additionally, neither the articles nor the bylaws of Rural Valley include
provisions limiting transactions with interested persons, prescribing the
factors to be considered by the Rural Valley Board with respect to tender offers
or other proposals, requiring a supermajority to amend Rural Valley's articles
or bylaws or limiting shareholder nominations of directors. See "Description of
BT Financial Capital Stock -Provisions Affecting Business Combinations and
Control Share Acquisitions." While Rural Valley's articles and bylaws do not
prescribe factors to be considered by the Rural Valley Board with respect to
tender offers and other proposals, the statutory provisions applicable to banks
permit Rural Valley's directors to consider the effects of an action on
constituencies other than shareholders.
Approval of Fundamental Changes
Under the National Bank Act, all mergers and consolidations of national
banking associations must be approved by the Office of the Comptroller of the
Currency, a majority of the board of directors, and by the
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shareholders owning at least two thirds of the capital stock outstanding. Under
the BCL a proposed plan of merger or consolidation must be approved by the board
of directors and by a majority of the votes cast by shareholders entitled to
vote thereon. In some cases, the approval of the board is sufficient.
Under the National Bank Act, the voluntary dissolution of a national
association requires the affirmative vote of two thirds of the votes which all
shareholders are entitled to cast on the plan. Under the BCL, the affirmative
vote of a majority of the votes cast by all shareholders entitled to vote
thereon is required to approve a proposal for voluntary dissolution. In
addition, the proposal of dissolution must be recommended by resolution of the
board.
In the case of both mergers and consolidations and voluntary dissolution
under the BCL, the requirement of board approval or recommendation can be
satisfied by the written agreement or consent of all shareholders entitled to
vote thereon. The National Bank Act contains no such provision.
Dissenters' Rights
As a national bank, the dissenters' rights of Rural Valley shareholders are
governed by the rights, remedies and limitations on such rights and remedies
provided in 12 U.S.C. (S) 214a(b). Any owner of shares of Rural Valley Common
Stock has the right under Section 214a(b) to object to a merger and demand to be
paid in cash upon complying with the provisions of Section 214a(b). The
dissenters' rights of BT Financial shareholders are governed by the rights and
remedies and limitations on such rights and remedies provided in the BCL. The
BCL provides for dissenters' rights in a variety of transactions including
mergers or consolidations to which a corporation is a party (other than mergers
not requiring a shareholder vote). However, except in the case of a merger or
consolidation in which their shares would be converted into something other than
shares of the surviving or new corporation (or cash in lieu of fractional
shares), shareholders are not entitled to dissenters' rights in any of the
transactions mentioned above if their stock is either listed on a national
securities exchange or held of record by 2,000 or more shareholders. While BT
Financial Common Stock is not listed on the New York or American Stock
Exchanges, BT Financial currently has in excess of 2,000 shareholders of record.
Rural Valley Common Stock, therefore, would have dissenters' rights in
circumstances in which BT Financial's Shareholders would not.
Rights
Each share of BT Financial Common Stock has attached to it one Right issued
pursuant to the Rights Agreement. See "Description of BT Financial Capital
Stock - BT Financial Shareholder Rights Plan." No such rights are attached to
the shares of Rural Valley Common Stock.
Right to Call a Special Meeting
The BCL provides that a special meeting of the shareholders of a registered
corporation may be called at any time (i) by the board of directors, (ii) by
such officers or other persons as may be designated in the bylaws of that
corporation, or (iii) by any shareholder of a registered corporation that is an
"interested shareholder" who is calling a special meeting for the purpose of
approving a "business combination" (both as defined in Section 2553 of the BCL).
The bylaws of BT Financial provide that special meetings of the shareholders of
BT Financial may be called by the Chairman of the BT Financial Board of
Directors, the President of BT Financial, the BT Financial Board of Directors or
shareholders entitled to cast at least one-fifth of the votes which all
shareholders are entitled to cast at an annual or special meeting of
shareholders. The articles of Rural Valley provide that special meetings of the
shareholders may be called by the Board of Directors or any three shareholders
by publishing notice for thirty days in a newspaper published in Rural Valley or
by mailing notice to each shareholder in writing 30 days before the meeting.
Duties and Liabilities of Directors
The BCL permits a corporation to include in its bylaws a provision adopted
by its shareholders which eliminates the personal liability of directors for
monetary damages for any action taken (or any failure to take any action) unless
(i) the directors have breached or failed to perform the duties of their
offices under the BCL and (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. However, a corporation may not
eliminate personal liability where the responsibility or liability of a director
is pursuant to any criminal statute or is for the payment of taxes pursuant to
local, state or federal law. BT
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Financial's bylaws provide that a director will not be personally liable for
monetary damages for any action taken, or failure to take any action, except
that there is no elimination of, or limitation on, the liability of a director
to the extent that such elimination or limitation of liability is expressly
prohibited by law. Rural Valley's bylaws do not provide any elimination of
personal liability for directors. Rural Valley's bylaws do not contain a similar
provision.
The BCL permits a corporation, unless otherwise restricted in its bylaws,
to indemnify any person involved in any third party or derivative action, by
reason of the fact that person is or was a representative of the corporation or
is or was serving at the request of that corporation as a representative of
another corporation or enterprise, against expenses (in both third party and
derivative actions), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection therewith, if the person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct was unlawful. In general, under
the BCL, no indemnification is allowable in derivative actions to the extent a
person has been adjudged liable to the corporation, unless, and only to the
extent that, the applicable court finds him entitled to indemnification against
expenses despite such adjudication. To the extent that a representative of a
corporation has been successful on the merits or otherwise in defense of any
third party or derivative action, indemnification against expenses is mandatory.
The BCL permits a corporation to provide additional indemnification rights to
persons seeking indemnification whether or not that corporation would have the
power to indemnify such persons under any other provision of the BCL, including
with respect to derivative actions, so long as the act or failure to act giving
rise to the indemnification right did not constitute willful misconduct or
recklessness. The BT Financial articles and bylaws do not restrict the
indemnification permitted by law.
In cases involving an administrative proceeding or civil action not
initiated by a Federal banking agency, a national bank may indemnify an
institution-affiliated party for damages and expenses, including the advancement
of expenses and legal fees, in accordance with the law of the state in which the
main office of the bank is located, the law of the state in which the bank's
holding company is incorporated, or the relevant provisions of the Model
Business Corporation Act or Delaware General Corporation Law, provided such
payments are consistent with safe and sound banking practices. A national bank
shall designate in its bylaws the body of law selected for making
indemnification payments under this paragraph. Rural Valley does not provide
for the indemnification of directors or officers in its articles or bylaws.
Under the BCL, unless otherwise provided in the articles of a corporation,
if a bylaw of that corporation adopted by the shareholders provides for a
classified board of directors, directors generally may be removed from office
only for cause by the vote of shareholders entitled to vote on the matter. The
BT Financial Articles and bylaws each provide for a classified board. The BT
Financial Articles contain a provision permitting removal of directors without
cause by the affirmative vote of the holders of at least 80% of the outstanding
shares of capital stock of BT Financial entitled to vote for the election of
directors, given in person or by proxy, at a meeting duly called for the purpose
of voting thereon. Neither the Rural Valley articles nor bylaws contain such a
provision.
The National Bank Act does not address the removal of directors. However,
the regulations promulgated thereunder provide that a national bank may adopt
the corporate law of the state where the bank is located with respect to
corporate governance issues not addressed by the National Bank Act. Rural
Valley has not elected to be governed by the BCL. Neither Rural Valley's
articles of association nor bylaws provide for removal of directors.
Under the BCL, any director or shareholder may apply to a court for the
removal of a director.
BT FINANCIAL CORPORATION
Business
BT Financial is a bank holding company located in Johnstown, Pennsylvania,
which was incorporated under the laws of the Commonwealth of Pennsylvania on
December 16, 1982.
BT Financial has one banking subsidiary: Laurel Bank. Laurel Bank's
principal place of business is
23
<PAGE>
in Johnstown, Pennsylvania. At June 30, 1998, BT Financial had total assets of
$1.70 billion. BT Financial has three non-bank subsidiaries, Bedford Associates,
Inc., which holds and leases property used by Laurel Bank in its banking
operations, Laurel Trust Company, a trust company which provides trust and
investment services, and Laurel Community Development Corporation, a corporation
which conducts community development activities.
Laurel Bank conducts business through a network of 72 offices located
throughout southwestern Pennsylvania. Laurel Bank operates under the management
of its own officers and directors, although auditing, marketing, human
resources, investment, accounting, data processing and credit review are
coordinated through BT Financial. In addition, Laurel Bank operates 52
automated teller machines ("ATM's") which are part of the "Cirrus" and "MAC"
systems. "Cirrus" and "MAC" provide links to national and regional ATM
networks.
Laurel Bank provides a full range of financial services to individuals,
businesses and governmental bodies, including accepting demand, savings and time
deposits, making secured and unsecured loans, and electronic data processing of
payrolls. Lending services include credit cards and consumer, real estate,
commercial and industrial loans. BT Financial, through its subsidiary, Laurel
Trust Company, offers a wide range of corporate pension and personal trust and
trust related services. Each of the Bank's deposits are insured by the FDIC,
the majority by the Bank Insurance Fund ("BIF"), with certain deposits insured
by the Savings Association Insurance Fund ("SAIF"). While Laurel Bank has trust
powers, substantially all trust business of BT Financial's affiliates is
conducted by Laurel Trust Company. Laurel Bank is a Pennsylvania bank and
member of the Federal Reserve System with 72 offices in Allegheny, Armstrong,
Bedford, Blair, Butler, Cambria, Fayette, Indiana, Somerset and Westmoreland
Counties. At June 30, 1998, Laurel Bank assets totaled $1.68 billion.
Laurel Trust Company, located in Johnstown, is a Pennsylvania chartered
trust company formed on April 30, 1990. The trust businesses of BT Financial's
banking subsidiaries were transferred to Laurel Trust Company.
Bedford Associates, Inc., located in Johnstown, Pennsylvania, is a wholly-
owned non-banking subsidiary of BT Financial. Its assets consist principally of
properties leased to Laurel Bank for use as community banking offices.
Laurel Community Development Corporation, formerly known as Moxham
Community Development Corporation, was organized in 1992 to conduct community
development activities. It is a for-profit Pennsylvania corporation conducting
activities consisting of equity investments as a limited partner in various
housing developments.
BT Financial and Laurel Bank are subject to competition in all aspects of
their businesses from banks as well as other financial institutions, including
savings and loan associations, savings banks, finance companies, credit unions,
money market mutual funds, brokerage firms, investment companies, credit
companies and insurance companies. They also compete with nonfinancial
institutions, including retail stores that maintain their own credit programs,
and with governmental agencies that make loans available to certain borrowers.
Some of BT Financial's competitors are larger and have greater financial
resources and facilities than BT Financial.
As of June 30, 1998, BT Financial and its subsidiaries had a total of 769
full time equivalent banking and administrative employees. BT Financial's
executive offices are located at BT Financial Plaza, 551 Main Street, Johnstown,
Pennsylvania 15901. Its telephone number is (814) 532-3801.
Properties
In February of 1990, BT Financial acquired BT Financial Plaza, an office
building located adjacent to Laurel Bank's headquarters building. The building
is occupied by BT Financial's executive offices, Laurel Trust Company, certain
other offices of BT Financial, and other business concerns. The executive
offices of Laurel Bank are located at 532-534 Main Street, Johnstown,
Pennsylvania, in a ten-story building owned by Laurel Bank free of liens and
encumbrances. The building contains approximately 62,000 usable square feet of
space and is totally occupied by Laurel Bank and BT Financial. The building was
erected in 1908 and most recently renovated in 1977. In 1987, Laurel Bank
purchased a seven-story building located on Clinton
24
<PAGE>
Street in Johnstown and is using the building as a storage facility. Some minor
renovations were made in 1987. All of the buildings are in good condition.
The Bank operates 72 banking offices, 54 of which are owned by Laurel Bank
free of liens and encumbrances. All properties and buildings are in good
condition and are continually maintained against normal wear and tear. The
remaining 18 offices are operated under leases which, including renewal options,
expire at various times between 1998 and 2025. Bedford Associates, Inc. owns 4
of the 18 leased properties, which are leased to Laurel Bank as community
banking offices. All properties of Bedford Associates, Inc. have been purchased
subsequent to 1982 and the buildings are either newly constructed or have
recently undergone major renovation.
Certain Regulatory Considerations
As a bank holding company, BT Financial is subject to regulation and
supervision by the Federal Reserve. Laurel Bank and Laurel Trust Company are
subject to supervision and examination by the Federal Reserve, the Pennsylvania
Department of Banking and, to some extent, the FDIC. Laurel Bank is also
subject to various requirements and restrictions under federal and state law,
including requirements to maintain reserves against deposits, restrictions on
the types and amounts of loans that may be granted and the interest that may be
charged thereon, and limitations on the types of investments that may be made
and the types of services that may be offered. Various consumer laws and
regulations also affect the operation of Laurel Bank. In addition to the impact
of regulation, commercial banks are affected significantly by the actions of the
Federal Reserve as it attempts to control the money supply and credit
availability in order to influence the economy.
Payment Of Dividends And Other Restrictions
BT Financial is a legal entity separate and distinct from its subsidiaries.
There are various legal and regulatory limitations under federal and state law
on the extent to which BT Financial's subsidiaries, including Laurel Bank, can
finance or otherwise supply funds to BT Financial.
The principal source of BT Financial's cash revenues is dividends from its
subsidiaries. There are limitations under federal and Pennsylvania law on the
payment of dividends by such subsidiaries. The maximum amount of dividends
available to BT Financial from Laurel Bank and the other subsidiaries of BT
Financial was approximately $90.04 million as of June 30, 1998.
Under the Pennsylvania Banking Code, the board of directors of a
Pennsylvania bank may, from time to time, declare, and that bank may pay,
dividends on its outstanding shares subject to any restrictions in the articles
of incorporation of that bank. Neither Laurel Bank nor Laurel Trust Company
have any such restrictions in their articles. In addition, the Banking Code
permits a bank to declare and pay dividends only out of accumulated net earnings
and to pay dividends in cash or other property. A dividend may not be declared
or paid unless (i) any transfer of net earnings to surplus has been made prior
to the declaration of the dividend and (ii) the surplus of the bank would not be
reduced by the payment of the dividend.
The prior approval of the Federal Reserve is required if the total of all
dividends declared by any state member bank of the Federal Reserve System such
as Laurel Bank in any calendar year exceeds the bank's net profits (as defined
in the applicable law) for that year combined with its retained net profits for
the preceding two calendar years, less any required transfers to surplus or a
fund for the retirement of any preferred stock. The Federal Reserve Board, as
well as the other federal banking regulators, has indicated that banking
organizations should pay dividends only out of current operating earnings.
Federal and state regulatory agencies also have authority to prohibit a
state member bank from engaging in what, in the opinion of such regulatory body,
constitutes an unsafe or unsound practice in conducting its business. Each of
the federal bank regulators have indicated that the payment of dividends that
would deplete a bank's capital base to an inadequate level would be an unsafe
and unsound banking practice.
In addition, Laurel Bank is subject to limitations under Sections 23A and
23B of the Federal Reserve Act with respect to extensions of credit to,
investments in, and certain other transactions with, BT Financial and its other
subsidiaries. Furthermore, loans and extensions of credit are also subject to
various collateral requirements.
25
<PAGE>
There are no dividend restrictions in the articles of incorporation of
Laurel Bank.
Loans
There are various legal restrictions on the extent to which each of BT
Financial and its nonbank subsidiaries can borrow or otherwise obtain credit
from Laurel Bank. In general, these restrictions require that any such
extensions of credit must be secured by designated amounts of specified
collateral and are limited, as to any one of BT Financial or such nonbank
subsidiaries, to ten percent of the lending bank's capital stock and surplus,
and as to BT Financial and all such nonbank subsidiaries in the aggregate, to 20
percent of such lending bank's capital stock and surplus.
Any capital loans by a bank holding company to any of its subsidiary banks
are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary banks. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Capital Adequacy
The Federal Reserve has adopted risk-based capital guidelines for bank
holding companies. The minimum guidelines ratio of total capital ("Total
Capital") to risk-weighted assets (including certain off-balance-sheet items,
such as standby letters of credit) is 8%. At least half of Total Capital must
be composed of common stockholders equity, retained earnings, minority interests
in the equity accounts of consolidated subsidiaries, ("Tier 2 Capital") and a
limited amount of perpetual preferred stock, less goodwill and certain
intangibles ("Tier 1 Capital"). The remainder may consist of certain
subordinated debt, other preferred stock and a limited amount of loan loss
reserves. At June 30, 1998, BT Financial's Tier 1 and Total Capital Ratios were
10.38% and 11.22%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to total assets, less goodwill (the "Leverage Ratio"),
of 3% for bank holding companies that meet certain specified criteria, including
those having the highest regulatory rating. All other bank holding companies
generally are required to maintain a Leverage Ratio of at least 3%, plus an
additional cushion of 100 to 200 basis points. BT Financial's Tier 1 Leverage
Ratio at June 30, 1998 was 7.55%. The Federal Reserve guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve has indicated that it will consider a "tangible
Tier I Capital leverage ratio" (deducting all intangibles) and other indicia of
capital strength in evaluating proposals for expansion or new activities.
Laurel Bank is subject to similar capital requirements.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described below
under "FDICIA."
BT Financial's current capital ratios exceed the current requirements under
these capital guidelines.
Support Of Laurel Bank
Under Federal Reserve policy, BT Financial is expected to act as a source
of financial strength to, and to commit resources to support Laurel Bank. This
support may be required at times when, absent such Federal Reserve policy, BT
Financial might not be inclined to provide it. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a subsidiary bank will be
assumed by the bankruptcy trustee and be entitled to priority of payment.
Under the Financial Institutions Reform, Recovery, and Enforcement Act
("FIRREA"), a depository institution insured by the FDIC can be held liable for
any loss incurred by, or reasonably expected to be
26
<PAGE>
incurred by, the FDIC after August 9, 1989 in connection with (i) the default of
a commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to any commonly controlled FDIC-insured depository
institution "in danger of default." The term "in danger of default" is defined
generally as the existence of certain conditions indicating that a default is
likely to occur in the absence of regulatory assistance.
Prompt Corrective Action
The Federal Deposit Insurance Corporation Act of 1991 ("FDICA"), among
other things, requires the federal banking agencies to take "Prompt Corrective
Action" in respect of depository institutions that do not meet minimum capital
requirements. FDICA establishes five capital tiers: "well capitalized";
"adequately capitalized"; "undercapitalized"; "significantly undercapitalized";
and "critically undercapitalized". A depository institution's capital tier will
depend upon how its capital levels compare to various relevant capital measures
and certain other factors, as established by regulation.
Under the regulations, an FDIC-insured bank will be (i) "well capitalized"
if it has a Total Capital ratio of ten percent or greater, a Tier 1 Capital
ratio of six percent or greater and a Leverage Ratio of five percent or greater
and is not subject to any order or written directive to meet and maintain a
specific capital level for any capital measure; (ii) "adequately capitalized" if
it has a Total Capital ratio of eight percent or greater, a Tier 1 Capital ratio
of four percent or greater and a leverage ratio of four percent or greater
(three percent in certain circumstances) and is not "well capitalized"; (iii)
"undercapitalized" if it has a Total Capital ratio of less than eight percent, a
Tier 1 Capital ratio of less than four percent or a leverage ratio of less than
four percent (three percent in certain circumstances); (iv) "significantly
undercapitalized" if it has a Total Capital ratio of less than six percent, a
Tier 1 Capital ratio of less than three percent or a Leverage Ratio of less than
three percent; and (v) "critically undercapitalized" if its tangible equity is
equal to or less than two percent of average quarterly tangible assets. An
institution may be downgraded to, or deemed to be in, a capital category that is
lower than is indicated by its capital ratios if it is determined to be in an
unsafe or unsound condition or if it receives an unsatisfactory examination
rating with respect to certain matters. As of June 30, 1998, Laurel Bank had
capital levels that qualify it as being "well capitalized" under the
regulations.
FDICA generally prohibits an FDIC-insured depository institution from
making any capital distribution (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be "undercapitalized". "Undercapitalized" depository institutions are
subject to growth limitations and are required to submit a capital restoration
plan. The federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the depository institution's capital. In
addition, for a capital restoration plan to be acceptable, the depository
institution's parent holding company must guarantee that the institution will
comply with such capital restoration plan. The aggregate liability of the parent
holding company is limited to the lesser of: (i) an amount equal to five percent
of the depository institution's total assets at the time it became
"undercapitalized"; and (ii) the amount which is necessary (or would have been
necessary) to bring the institution into compliance with all capital standards
applicable with respect to such institution as of the time it fails to comply
with the plan. If a depository institution fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized".
"Significantly undercapitalized" insured depository institutions may be
subject to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become "adequately capitalized", requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator. A bank that is not "well capitalized" is subject
to certain limitations on its ability to accept "brokered" deposits.
Interstate Banking and Branching Legislation
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") authorized interstate acquisitions of banks and bank holding
companies without geographic limitation beginning one year after enactment. In
addition, it authorized, beginning June 1, 1997, a bank to merge with a bank in
another state as long as neither of the states has opted out of interstate
branching between the date of enactment of the IBBEA and May 31, 1997. In
addition, a bank may establish and operate a de novo branch in a state in which
the bank does not maintain a branch if that state expressly permits de novo
interstate branching.
27
<PAGE>
FDIC Insurance Assessments
Effective January 1, 1996, the FDIC reduced the insurance premiums it
currently charges on bank deposits insured by BIF to the statutory minimum of
$2,000 for "well capitalized" banks. The Deposit Insurance Funds Act of 1996,
enacted on September 30, 1996 ("DIFA"), reduced the amount of semi-annual FDIC
insurance premiums for savings association deposits acquired by banks and
insured by SAIF to the same levels assessed for deposits insured by BIF. DIFA
also provided for a special one-time assessment imposed on deposits insured by
SAIF, including such deposits held by banks, to bring the SAIF up to statutorily
required levels.
DIFA further provides for assessments to be imposed on insured depository
institutions with respect to deposits insured by the BIF, and continues the
assessments currently imposed on depository institutions with respect to SAIF-
insured deposits, to pay for the cost of Financing Corporation funding.
RURAL VALLEY
Business
Rural Valley is a national banking association organized in 1933. Its
deposits are insured by the FDIC under the BIF. Rural Valley is a member of
the Federal Reserve system. Rural Valley has one office located at 601 Main
Street, Rural Valley, Pennsylvania 16249. Rural Valley owns the land and
building on this site. As of June 30, 1998, Rural Valley had total assets of
$37.44 million, total deposits of $29.11 million and total shareholders' equity
of $8.20 million.
Rural Valley is a commercial bank providing loan and deposit services to
individuals and to small to medium sized businesses in its Rural Valley,
Pennsylvania market area. Among its services, Rural Valley accepts time,
demand and savings deposits and makes secured and unsecured commercial, real
estate and consumer loans. Rural Valley's business is not seasonal in nature
and is not dependent upon any single customer or small group of customers for
deposits or loans. As of June 30, 1998, Rural Valley had nine full-time
employees and six part-time employees.
Competition
Rural Valley competes with other local credit unions, commercial banks,
thrifts and other financial institutions, as well as with major regional banking
and financial institutions. These competitors include First Commonwealth
Financial Corporation, Mellon Bank Corporation, National City Corporation,
Merchants National Bank, Apollo Trust Company, Farmers National Bank of
Kittanning, Elderton State Bank, Peoples Financial Corporation, Inc., Armstrong
County Building & Loan, PNC Bank Corporation, Marion Center National Bank,
Northwest Savings Bank, S&T Bancorp, Inc., Citizens Incorporated, Pennwood
Savings Bank, and BT Financial Corporation. Rural Valley is generally
competitive in its service area with respect to interest rates paid on time and
savings deposits, service charges on deposit accounts and interest charged on
loans.
Certain Regulatory Considerations
The operations of Rural Valley are subject to federal and state statutes
and regulations applicable to banks chartered under the banking laws of the
Commonwealth of Pennsylvania and to banks whose deposits are insured by the
FDIC. Federal and state banking laws and regulations govern, among other
things, Rural Valley's scope of business, investments, reserves against
deposits, loans and collateral, mergers and consolidations and establishment of
branches. All banks in Pennsylvania are permitted to maintain branch offices in
any county of the state. Branches may be established only after approval by the
Department. The Department is required to grant approval only if it finds that
there is a need for banking services or facilities such as are contemplated by
the proposed branch. The Department may disapprove an application if the
applicant bank does not have the requisite capital and surplus or if the
application relates to the establishment of a branch in a county contiguous to
the county in which the applicant's principal place of business is located, and
another banking institution that has its principal place of business in the
county in which the proposed branch would be located has, in good faith,
notified the Department of its intention to establish a
28
<PAGE>
branch in the same municipal location in which the proposed branch would be
located.
The laws of Pennsylvania applicable to Rural Valley include, among other
things, provisions that: (1) require the maintenance of certain reserves against
deposits; (2) limit the type and amount of loans that may be made and the
interest that may be earned thereon; (3) restrict investments and other
activities; and (4) limit the payment of dividends. The amount of funds that
Rural Valley may lend to a single borrower is limited generally under
Pennsylvania law to fifteen percent (15%) of the aggregate of its capital,
surplus, undivided profits, loan loss reserves and capital securities (all as
defined by statute and regulation).
Applicable Pennsylvania law also requires that Rural Valley obtain the
approval of the Department prior to effecting any merger where the surviving
bank would be a Pennsylvania-chartered bank. In reviewing any merger
application, the Department would consider, among other things, whether the
merger would be consistent with adequate and sound banking practices and whether
the merger would be in the public interest on the basis of several factors,
including the potential effect of the merger on competition and the convenience
and needs of the area primarily to be served by Rural Valley resulting from the
merger.
From time to time, various types of federal and state legislation have been
proposed that could result in additional regulation of, and restrictions on, the
business of Rural Valley. It cannot be predicted whether any such legislation
will be adopted or how such legislation would affect the business of Rural
Valley. As a consequence of the extensive regulation of commercial banking
activities in the United States, Rural Valley's business is particularly
susceptible to being affected by federal legislation and regulations that may
increase the cost of doing business.
Effect Of Government Monetary Policies
The earnings of Rural Valley are and will be affected by domestic economic
conditions and the monetary and fiscal policies of the United States government
and its agencies.
The monetary policies of the Federal Reserve have had, and will likely
continue to have an important impact on the operating results of commercial
banks through the Federal Reserve's power to implement national monetary policy
in order, among other things, to curb inflation or combat recession. The
Federal Reserve has a major effect upon the levels of bank loans, investments
and deposits through its open market operations in United States government
securities and through its regulation, among other things, of the discount rate
on borrowing of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature and impact of future changes
in monetary and fiscal policies.
Legislation And Regulatory Changes
From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks, bank holding companies and other financial
institutions are also frequently made in Congress, and before various bank
regulatory agencies. No prediction can be made as to the likelihood of any
major changes or the impact such changes might have on Rural Valley.
Legal Proceedings
There are no proceedings pending or, to the knowledge of Rural Valley,
threatened against Rural Valley or its business, assets, common stock or any of
the transactions contemplated by the Merger Agreement.
Environmental Issues
There are several federal and state statutes that govern the obligations of
financial institutions with respect to environmental issues. Besides being
responsible under such statutes for its own conduct, a bank also may be held
liable under certain circumstances for actions of borrowers or other third
parties on properties that collateralize loans held by the bank. Such potential
liability may far exceed the original amount of the loan made by the bank.
Currently, Rural Valley is not a party to any pending legal proceedings under
any environmental statute.
29
<PAGE>
Regulatory Capital Requirements
The following table presents Rural Valley's capital ratios at June 30,
1998.
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Tier 1 Capital $ 8,169
Tier 2 Capital $ 126
Total Capital $ 8,295
Adjusted Total Average Assets $37,552
Total Adjusted Risk-Weighted Assets (1) $ 8,295
Tier 1 Risk-Based Capital Ratio (2) 64.37%
Required Tier 1 Risk-Based Capital Ratio 4.0%
Excess Tier 1 Risk-Based Capital Ratio 60.37%
Total Risk-Based Capital Ratio (3) 65.37%
Required Total Risk-Based Capital Ratio 8.00%
Excess Total Risk-Based Capital Ratio 57.37%
Tier 1 Leverage Ratio (4) 21.75%
Required Tier 1 Leverage Ratio 3.00%
Excess Tier 1 Leverage Ratio 18.75%
</TABLE>
__________________________________
(1) Includes off-balance sheet items at credit-equivalent values less
intangible assets.
(2) Tier 1 Risk-Based Capital Ratio is defined as the ratio of Tier 1
Capital to Total Adjusted Risk-Weighted Assets.
(3) Total Risk-Based Capital Ratio is defined as the ratio of Tier 1 and
Tier 2 Capital to Total Adjusted Risk-Weighted Assets.
(4) Tier 1 Leverage Ratio is defined as the ratio of Tier 1 Capital to
Adjusted Total Average Assets.
Rural Valley was required to implement, on January 1, 1994, Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement 115"). For regulatory capital reporting
purposes, Statement 115 changed the composition of stockholders' equity in
financial statements prepared in accordance with generally accepted accounting
principles by including as a separate component of equity the amount of net
unrealized holding gains or losses on debt and equity securities that are deemed
to be available-for-sale. The implementation of Statement 115 did not have a
material effect during 1994 on the regulatory capital ratios of Rural Valley.
Effective January 27, 1995, the FDIC issued a final rule with respect to
the implementation of FASB 115 for regulatory capital reporting purposes. Under
this final rule, net unrealized holding losses on available-for-sale equity
securities (but not debt securities) with readily determinable fair values are
included (i.e., deducted) when calculating Rural Valley Tier 1 capital. All
other unrealized holding gains and losses on available-for-sale securities are
excluded (i.e., not deducted) from Rural Valley's Tier 1 capital. Based upon
the composition of Rural Valley's investment portfolio as of December 31, 1997,
such final rule had no material effect on Rural Valley's Tier 1 capital.
Rural Valley's ability to maintain the required levels of capital is
substantially dependent upon the success of Rural Valley's capital and business
plans; the impact of future economic events on Rural Valley loan customers; and
Rural Valley's ability to manage its interest rate risk and investment portfolio
and control its growth and other operating expenses.
30
<PAGE>
RURAL VALLEY MARKET PRICES AND DIVIDENDS
Rural Valley Common Stock Prices And Common Stock Dividends
There is no established public trading market for Rural Valley common
stock. Occasionally, individuals sell and buy shares of Rural Valley Common
Stock in privately negotiated transactions. Rural Valley acts as its own
transfer agent and keeps its own stock transfer ledger. According to such
ledger, the following number of shares were transferred during the years
indicated:
<TABLE>
<CAPTION>
Year Number of Shares Transferred
- ------ ----------------------------
<S> <C>
1997 1,630
1996 1,538
1995 1,710
</TABLE>
The lowest and highest prices per share known by the management of Rural
Valley for the above years were between $165 and $180 per share, respectively.
These prices may or may not include any mark-up, mark-down or commission. The
sale price per share of Rural Valley Common Stock in the last known trade prior
to the execution and delivery of the Merger Agreement and the public
announcement thereof, which trade occurred on December 24, 1996, was $180. To
the knowledge of Rural Valley, since the execution and delivery of the Merger
Agreement, there have been no trades of Rural Valley Common Stock.
The following table shows the per share cash dividends paid by Rural Valley
in 1997 and 1996:
RURAL VALLEY CASH DIVIDENDS DECLARED
<TABLE>
<CAPTION>
Quarter 1997 1996
- --------- ----- -----
<S> <C> <C>
First $1.50 $1.25
Second 1.50 1.25
Third 1.50 1.25
Fourth 3.50 2.25
Total $8.00 $6.00
------ ===== =====
</TABLE>
Dividend Restrictions on Rural Valley
Any future dividends of Rural Valley are subject to certain regulatory
considerations and the discretion of its Board of Directors and will depend upon
a number of factors, including operating results, financial conditions and
general business conditions. The shareholders are entitled to receive dividends
as and when declared by the Board of Directors of Rural Valley, out of funds
legally available therefor, subject to Federal law. The prior approval of the
Office of the Comptroller of the Currency ("OCC") is required for the payment of
any dividend by a national bank if the total of all dividends declared by the
board of directors of such bank in any calendar year will exceed the sum of such
bank's net profits for that year and its retained net profits for the preceding
two calendar years, less any required transfers to surplus. Federal law also
prohibits any national bank from paying dividends which would be greater than
such bank's undivided profits after deducting statutory bad debt in excess of
such bank's allowance for loan losses.
The Federal Deposit Insurance Act generally prohibits all payments of
dividends by any bank which is in default on any assessment for deposit
insurance premium to the FDIC.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF RURAL VALLEY
This discussion should be read in conjunction with the financial statements
of Rural Valley beginning on page F-2.
Comparison of the Six Months Ended June 30, 1998 and 1997
Financial Condition
General. Total assets during the first six months of 1998 increased by
-------
$0.3 million or 1.0% from $37.1 million at December 31, 1997, to $37.4 million
at June 30, 1998.
Securities. Rural Valley's intent is to use the securities portfolio to
----------
manage liquidity and interest rate risk by purchasing high quality securities
with medium range maturities. Rural Valley has designated substantially all
securities, except certain U.S. Treasury Notes, as being held to maturity.
Because of Rural Valley's financial condition and ability to hold these
securities to maturity the bank has decided to classify them as such. Since
some of the held to maturity securities are qualified tax exempt securities,
that are paying comparable rates to taxable securities, the bank feels that it
is receiving its best return on investment.
At June 30, 1998, Rural Valley's total securities amounted to $20.3
million, $5.2 million available for sale and $15.1 million held to maturity.
Total securities are comprised of $15.4 million or 75.9% in U. S. Government
corporation and agencies, and $4.9 million or 24.1% in obligations of states and
political subdivisions (municipal tax-free securities). Rural Valley maintains
levels of municipal securities to assist in tax planning strategies to minimize
the effects of federal tax expense.
The majority of the growth in investment securities, which occurred in
1998, was in U. S. Government corporations and agencies.
The fully taxable equivalent yield on investment securities was 5.6% for
the six months ended June 30, 1998 and 1997.
Loans. Total loans net of the allowance for loan losses amounted to $14.3
-----
million at June 30, 1998, an increase of $0.5 million or 3.6% compared with the
$13.8 million level at December 31, 1997. The increase in loans was made up of
an increase in loans to individuals of $0.4 million.
At June 30, 1998, mortgage loans amounted to $10.9 million or 76.2% of
total loans, installment loans to individuals amounted to $3.2 million or 22.4%,
and commercial loans amounted to $0.3 million or 2.1% of total loans less $0.1
million or 0.7% in reserve for loan losses.
Risk Elements of Loan Portfolio
The following table identifies nonperforming loans. Past due loans are
loans that were contractually past due 90 days or more as to interest or
principal payments. At June 30, 1998 and December 31, 1997, there were no
restructured loans or loans for which terms have been renegotiated to provide a
reduction of deferral of principal or interest as a result of the financial
position of the borrower. At June 30, 1998, Rural Valley has no loans that were
considered impaired loans in accordance with Financial Accounting Standards
Board Statement No. 114.
<TABLE>
<CAPTION>
6-30-98 12-31-97
------- --------
<S> <C> <C>
Residential Mortgages, 90 days
or more past due $68,204 $84,376
</TABLE>
During the six months ended June 30, 1998, interest income of $3,814 would
have been recorded on loans accounted for on a non-accrual basis if the loans
had been current throughout the period. The amount of interest income that
would have been received on non-accrual loans in 1997 was $3,941.
Based upon current information available and upon measures taken to
maintain the allowance for loan losses at an appropriate level, management does
not believe there are any loans classified for regulatory
32
<PAGE>
purposes as loss, doubtful, substandard, special mention, or otherwise which
will result in losses which would reasonably be expected to have a material
impact on future operations, liquidity, or capital reserves. At June 30, 1998,
there are no loans which were not included as past due, nonaccrual, or impaired
where known information about possible credit problems of borrowers causes
management to have serious doubts as to the ability of such borrowers to comply
with present loan repayment terms. Management is not aware of any other
information that causes it to have serious doubts as to the ability of borrowers
in general to comply with repayment terms.
Deposits. Total deposits increased by $0.2 million or 0.7% during the six
--------
months ended June 30, 1998. Total interest-bearing deposits increased by $0.7
million while other forms of noninterest-bearing deposits decreased by $0.5
million.
Stockholders' Equity. Total stockholders' equity amounted to $8.2 million
--------------------
at June 30, 1998. This represents an increase of $0.1 million or 1.8%. This
increase is the result of net income of $0.3 million offset by the payment of
cash dividends of $0.2 million.
Federal banking regulators have established capital adequacy requirements
for banks based on risk factors. All banks are required to have a minimum of
4.0% of risk adjusted assets in Tier I capital and 8.0% of risk adjusted assets
in total capital. As of June 30, 1998, the Bank's Tier I capital was 64.4%, and
its total risk based capital was 65.4%.
Additionally, Rural Valley is required to maintain a minimum ratio of
leverage capital to adjusted total assets of 4.0% for the top rated institutions
with less highly rated institutions, or those with higher levels of risk,
required to maintain ratios of 100 to 200 basis points above the minimum level.
Rural Valley's ratio under these guidelines as of June 30, 1998, is 21.8%.
Two key performance ratios in the banking industry are return on average
assets and return on average equity. Rural Valley's return on average assets
for the six months ended June 30, 1998 and 1997, are 1.62% and 1.56%. The Bank's
return on equity for the six months ended June 30, 1998 and 1997, are 7.41% and
6.82%.
Liquidity. Liquidity refers to the ability of Rural Valley to satisfy the
---------
financial needs of its depositors and borrowers. Liquidity can be provided by
the sale or maturity of assets or by the acquisition of additional funds in the
form of deposits or other borrowings.
Management considers its sources of liquidity to be cash and due from
banks, federal funds sold, and investment securities maturing in one year or
less. Considering these sources of liquidity, Rural Valley has $8.2 million in
liquid assets at June 30, 1998.
A measure of liquidity is the average loan to deposit ratio. This ratio
was 48.2% at June 30, 1998.
As of June 30, 1998, management believes Rural Valley has adequate
liquidity to satisfy its customers' needs. Management is not aware of any known
trends or any known demands, commitments, events or uncertainties that will
result in a material effect on the Rural Valley's liquidity.
Results of Operations
Overview. Rural Valley had net income of $300,937 for the six months ended
--------
June 30, 1998, compared to $269,450 for the six months ended June 30, 1997.
This represents an increase of $31,487 or 11.7%. The increase in net income was
primarily the result of an increase in interest income of $38,556.
Net Interest Income. Total interest income increased by $38,556 from
-------------------
$1,187,413 in 1997 to $1,225,969 in 1998. The increase was primarily the result
of increased yield on investment securities.
Net interest income increased by $45,965 to $0.761 million for 1998 from
$0.715 million for 1997.
Provision for Loan Losses. There was no provision for loan losses in 1998
-------------------------
or 1997. The provision for loan losses is an expense charged to earnings in
anticipation of estimated losses attributable to loans based upon the adequacy
of the allowance for loan losses. The adequacy of the allowance for loan losses
is based upon management's assessment of, among other things, local and national
economic conditions, historical losses, off
33
<PAGE>
balance sheet risk and an analysis of loans including specific evaluations of
the financial status, cash flow, and adequacy of collateral of borrowers with
indebtedness to Rural Valley and current levels of nonperforming loans.
Management uses a specific identification method for large loans, and for loans
that fall outside the parameters for specific identification, amounts are
allocated based upon percentages derived from historical loan loss data for each
category of loans.
While management uses available information to make evaluations of the
adequacy of the allowance, future adjustments may be necessary if conditions
differ substantially from the assumptions used in making the evaluation. While
management believes it has identified and provided for losses and that the
allowance for loan losses is adequate, management cannot assure that further
adjustments may not be necessary.
Noninterest Income. Noninterest income is comprised primarily of service
------------------
charges on deposit accounts and investment securities gains, net. Total
noninterest income amounted to $25,133 in 1998 compared to $32,247 in 1997, a
decrease of $7,114. Of the $7,114 decrease in noninterest income, $4,338 was a
result of an adjustment within the current period to miscellaneous service
charges for the year ended December 31, 1997.
Noninterest Expense. Noninterest expense is primarily made up of salaries
-------------------
and benefits, occupancy and equipment expense, deposit insurance premium, and
other items. Total noninterest expense amounted to $369,458 in 1998 compared to
$373,328 in 1997 or a decrease of $3,870.
Income Tax Expense. Income tax expense amounted to $115,600 in 1998
------------------
compared to $104,366 in 1997. The effective tax rate for 1998 was 27.8%
compared to 27.9% for 1997.
Comparison of Twelve Months Ended December 31, 1997 and 1996
Financial Condition
General. Total assets during 1997 increased by $1.3 million or 3.7% from
-------
$35.8 million at December 31, 1996, to $37.1 million at December 31, 1997. The
increase in total assets has been primarily in investment securities available
for sale, which increased by $0.8 million or 5.9%. The increase in investment
securities was primarily funded by increased levels of deposits.
Securities. Rural Valley's intent is to use the securities portfolio to
----------
manage liquidity and interest rate risk by purchasing high quality securities
with medium range maturities. Rural Valley has designated substantially all
securities, except certain U.S. Treasury Notes, as being held to maturity.
Because of Rural Valley's financial condition and ability to hold these
securities to maturity, Rural Valley has decided to classify them as such.
Since certain of the held to maturity securities are qualified tax exempt
securities that are paying comparable rates to taxable securities Rural Valley
consider these securities to be the best return on its investment.
At December 31, 1997, Rural Valley's total securities amounted to $19.8
million, consisting of $5.1 million available for sale and $14.7 million held
to maturity. Total securities are comprised of $14.9 million or 75.3% in U. S.
Government corporation and agencies and $4.9 million or 24.7% in obligations of
states and political subdivisions (municipal tax free securities). Rural Valley
maintains levels of municipal securities to assist in tax planning strategies to
minimize the effects of federal tax expense. Most of the growth in investment
securities which occurred in 1997 was in U. S. Government corporations and
agencies.
The fully taxable equivalent yield on investment securities was 5.6% for
both years ended December 31, 1997 and 1996.
Loans. Total loans net of allowance for loan losses amounted to $13.8
-----
million at December 31, 1997, a decrease of $0.2 million or 1.8% compared with
the $14.0 million level at December 31, 1996. The decrease in loans was made up
of a decrease in commercial loans to individuals of $0.3 million.
At December 31, 1997, mortgage loans amounted to $10.3 million or 74.7% of
total loans, installment loans to individuals amounted to $2.9 million or 21.2%,
and commercial loans amounted to $0.7 million or 5.0% of total loans less $0.1
million or 0.9% in reserve for loan losses.
34
<PAGE>
Risk Elements of Loan Portfolio
The following table identifies nonperforming loans. Past due loans are
loans that were contractually past due 90 days or more as to interest or
principal payments. At December 31, 1997 and 1996, there were no restructured
loans or loans for which terms have been renegotiated to provide a reduction or
deferral of principal or interest as a result of the financial position of the
borrower. At December 31, 1997, Rural Valley has no loans which were considered
impaired loans in accordance with Financial Accounting Standards Board Statement
No. 114.
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Residential Mortgages, 90 days or $84,376 $99,829
more past due
</TABLE>
During the year ended December 31, 1997, interest income of $3,941 would
have been recorded on loans accounted for on a non-accrual basis if the loans
had been current throughout the period. The amount of interest income that
would have been received on non-accrual loans was $5,242 in 1996.
Based upon current information available and upon measures taken to
maintain the allowance for loan losses at an appropriate level, management does
not believe there are any loans classified for regulatory purposes as loss,
doubtful, substandard, special mention, or otherwise which will result in losses
which would reasonably be expected to have a material impact on future
operations, liquidity, or capital reserves. At December 31, 1997, there are no
loans which were not included as past due, nonaccrual, or impaired where known
information about possible credit problems of borrowers causes management to
have serious doubts as to the ability of such borrowers to comply with present
loan repayment terms. Management is not aware of any other information which
causes it to have serious doubts as to the ability of borrowers in general to
comply with repayment terms.
Deposits. Total deposits increased by $1.0 million or 3.6% from $27.9
--------
million at December 31, 1996 to $28.9 million at December 31, 1997. Total
interest bearing deposits increased by $0.1 million while non-interest bearing
deposits increased by $0.9 million.
Stockholders' Equity. Total stockholders' equity amounted to $8.1 million
--------------------
at December 31, 1997 as compared to $7.7 million at December 31, 1996. This
represents an increase of $0.3 million or 4.0%. This increase is primarily the
result of net income of $0.6 million offset by the payment of cash dividends of
$0.3 million.
Federal banking regulators have established capital adequacy requirements
for banks based on risk factors. All banks are required to have a minimum of
4.0% of risk weighted assets in Tier I capital and 8.0% of risk weighted assets
in total capital. As of December 31, 1997, the Bank's Tier I capital was 63.6%,
and its total risk based capital was 64.5%.
Additionally, Rural Valley is required to maintain a minimum ratio of
leverage capital to adjusted total assets of 4.0% for the top rated institutions
with less highly rated institutions, or those with higher levels of risk,
required to maintain ratios of 100 to 200 basis points above the minimum level.
Rural Valley's ratio under these guidelines as of December 31, 1997, is 22.0%.
Two key performance ratios in the banking industry are return on average
assets and return on average equity. Rural Valley's return on average assets
for the years ended December 31, 1997 and 1996, are 1.63% and 1.79%. The Bank's
return on equity for the years ended December 31, 1997 and 1996, are 7.53% and
8.57%.
Liquidity. Liquidity refers to the ability of Rural Valley to satisfy the
---------
financial needs of its depositors and borrowers. Liquidity can be provided by
the sale or maturity of assets or by the acquisition of additional funds in the
form of deposits or other borrowings.
Management considers its sources of liquidity to be cash and due from
banks, federal funds sold, and investment securities maturing in one year or
less. Considering these sources of liquidity, Rural Valley has $8.1
35
<PAGE>
million in liquid assets at December 31, 1997.
A measure of liquidity is the average loan to deposit ratio. This ratio
was 48.2% at December 31, 1997.
As of December 31, 1997, management believes Rural Valley has adequate
liquidity to satisfy its customers' needs. Management is not aware of any known
trends or any known demands, commitments, events or uncertainties that will
result in a material effect on the Rural Valley's liquidity.
Market Risk Management. Market risk is the risk of losses resulting from
----------------------
adverse changes in marketing pricing and rates. Rural Valley's market risk is
primarily its interest rate risk associated with its lending, deposit and
borrowing functions as well as its investments in securities. Interest rate
risk arises when interest rates on assets change in a different time period or
in a different proportion from that of liabilities. Management actively monitors
its interest rate sensitivity position with the primary objective to prudently
structure the balance sheet so that movements of interest rates on assets and
liabilities are highly correlated and produce a relatively constant net interest
margin even in periods of volatile interest rates. Interest rate risk is
considered by management to be Rural Valley's most significant market risk that
could materially impact the Bank's financial position or results of operation.
In its normal course of business, Rural Valley is not exposed to other types of
market risks such as risk associated with commodity prices or foreign
currencies.
The following table sets forth, in summary form, Rural Valley's repricing
analysis at December 31, 1997.
<TABLE>
<CAPTION>
Non-rate
Over 1-5 years sensitive and
(in thousands) 0-90 days 91-365 days -------------- over 5 years Total
-------------- --------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
Loans $ 378 $ 171 $ 3,999 $ 9,358 $13,906
Securities 410 4,744 14,004 681 19,839
Other interest-earning assets 1,800 -- -- -- 1,800
------ ------ ------- ------- -------
Total interest-earning assets 2,588 4,915 18,003 10,039 35,545
Other assets -- -- -- 1,545 1,545
------ ------ ------- ------- -------
$2,588 $4,915 $18,003 $11,584 $37,090
------ ------ ------- ------- -------
Demand deposits -- -- -- 5,561 5,561
Savings deposits -- -- -- 13,754 13,754
Interest-bearing time deposits 1,584 5,404 1,902 696 9,586
Other liabilities -- -- -- 144 144
Shareholders' equity -- -- -- 8,045 8,045
------ ------ ------- ------- -------
$1,584 $5,404 $ 1,902 $28,200 $37,090
------ ------ ------- ------- -------
Net interest sensitivity gap $1,004 $( 489) $16,101 $16,616 $ --
====== ====== ======= ======= =======
Net cumulative interest gap $1,004 $ 515 $16,616 $ -- $ --
====== ====== ======= ======= =======
</TABLE>
The information on the above table indicates the potential for interest
rate adjustment on only a one-day position at year-end 1997. Loans and
securities are based upon contractual repayments and maturities. Included in
demand deposits are non-interest-bearing checking accounts, interest-bearing
checking accounts, and money market investment accounts. Based on historical
experience, it is assumed that demand deposits and savings deposits are stable
core deposits.
While this static evaluation of interest rate sensitivity is useful, the
repricing of various categories of assets and liabilities is subject to
competitive and other pressures in each category of asset or liability.
Accordingly, both the timing and the magnitude of repricing may vary
significantly, depending on the asset or
36
<PAGE>
liability as interest rates change. Therefore, the static gap is not necessarily
indicative of changes in net interest income that would actually occur due to
changing market interest rates.
Inflation. Assets and liabilities of a financial institution are monetary
---------
in nature. Accordingly, interest rates, which generally move with the rate of
inflation, have potentially the most significant effect on Rural Valley's net
interest income. Rural Valley attempts to limit inflation's impact on net
interest spread through effective asset/liability management.
Results of Operations
Overview. Rural Valley had net income of $0.59 million for the year ended
--------
December 31, 1997, compared to $0.64 million for the year ended December 31,
1996. This represents a decrease of $41,775 or 6.6%. The decrease in net
income for the year was primarily the result of an increase in operating
expenses of $46,845.
Net Interest Income. Total interest income increased by $41,880 from $2.36
-------------------
million in 1996 to $2.41 million in 1997. The increases were primarily the
result of increased volume and yield on short-term personal loans.
The most significant factor in the increased cost of funds was the volume
increase in time deposits. Time deposits increased $0.9 million during 1997.
The increase in time deposits was primarily due to the moving of funds from
other deposit sources within Rural Valley.
As a result of the above, net interest income increased by $11,249 to $1.44
million for 1997 from $1.43 million for 1996.
Provision for Loan Losses. There was no provision for loan losses in 1997
-------------------------
or 1996. The provision for loan losses is an expense charged to earnings in
anticipation of estimated losses attributable to loans based upon the adequacy
of the allowance for loan losses. The adequacy of the allowance for loan losses
is based upon management's assessment of, among other things, local and national
economic conditions, historical losses, off balance sheet risk and an analysis
of loans including specific evaluations of the financial status, cash flow, and
adequacy of collateral of borrowers with indebtedness to Rural Valley and
current levels of non-performing loans. Management uses a specific
identification method for large loans, and for loans which fall outside the
parameters for specific identification, amounts are allocated based upon
percentages derived from historical loan loss data for each category of loans.
The following table presents an analysis of the reserve for loan losses for
the years ended December 31, 1997 and December 31, 1996.
<TABLE>
<S> <C>
Reserve for loan losses January 1, 1996 $124,569
Charge-offs (5,665)
Recoveries 4,743
--------
Reserve for loan losses December 31, 1996 123,647
Charge-offs (8,179)
Recoveries 825
--------
Reserve for loan losses December 31, 1997 $116,293
========
</TABLE>
While management uses available information to make evaluations of the
adequacy of the allowance, future adjustments may be necessary if conditions
differ substantially from the assumptions used in making the evaluation. While
management believes it has identified and provided for losses and that the
allowance for loan losses is adequate, management cannot assure that further
adjustments may not be necessary.
Noninterest Income. Noninterest income is comprised primarily of service
------------------
charges on deposit accounts and investment securities gains, net. Total
noninterest income amounted to $67,158 in 1997 compared to $70,826 in 1996, a
decrease of $3,668. Of the $3,668 decrease in noninterest income, $3,626 was a
result of the decrease in service charges on deposit accounts.
37
<PAGE>
Noninterest Expense. Noninterest expense is primarily made up of salaries
-------------------
and benefits, occupancy and equipment expense, deposit insurance premium, and
other items. Total noninterest expense amounted to $699,691 in 1997 compared to
$652,846 in 1996 or an increase of $46,845.
Salaries and employee benefits increased by $10,796 during 1997. This
increase was made up of normal wage increases.
Other expense increased by $19,496 in 1997, which is primarily comprised of
increases in bank travel and legal fees and other professional fees relating to
the foreclosure on a real estate loan.
Income Tax Expense. Income tax expense amounted to $215,486 in 1997
------------------
compared to $212,975 in 1996. The effective tax rate for 1997 was 26.6%
compared to 25.1% for 1996. The increase in the effective tax rate was the
result of decreased earnings on tax free securities. Earnings on tax free
securities decreased by $11,791 or 5.1%.
Comparison of the Years Ended December 31, 1996 and 1995
Results of Operations
Overview. Rural Valley had net income of $636,312 for the year ended
--------
December 31, 1996, compared to $582,023 for the year ended December 31, 1995.
This represents an increase of $54,289 or 9.3%. The increase in net income for
the year was primarily the result of an increase in interest income of $55,816.
Net Interest Income. Total interest income increased by $55,816 from
-------------------
$2,307,963 in 1995 to $2,363,779 in 1996. The increases were primarily the
result of increased volume and yield on short-term personal loans.
Interest paid on deposits was approximately equal for each of the years
ending December 31, 1996 and 1995.
Net interest income increased by $58,017 to $1.431 million for 1996 from
$1.373 million for 1995.
Provision for Loan Losses. There was no provision for loan losses in 1996
-------------------------
or 1995. The provision for loan losses is an expense charged to earnings in
anticipation of estimated losses attributable to loans based upon the adequacy
of the allowance for loan losses. The adequacy of the allowance for loan losses
is based upon management's assessment of, among other things, local and national
economic conditions, historical losses, off balance sheet risk and an analysis
of loans including specific evaluations of the financial status, cash flow, and
adequacy of collateral of borrowers with indebtedness to Rural Valley and
current levels of nonperforming loans. Management uses a specific identification
method for large loans, and for loans that fall outside the parameters for
specific identification, amounts are allocated based upon percentages derived
from historical loan loss data for each category of loans.
The following table presents an analysis of the reserve for loan losses for
the years ended December 31, 1996 and 1995.
<TABLE>
<S> <C>
Reserve for loan losses January 1, 1995.... $126,148
Chargeoffs............................ -9,114
Recoveries............................ 7,535
--------
Reserve for loan losses December 31, 1995.. 124,569
Chargeoffs............................ -5,665
Recoveries............................ 4,743
--------
Reserve for loan losses December 31, 1996.. $123,647
========
</TABLE>
While management uses available information to make evaluations of the
adequacy of the allowance, future adjustments may be necessary if conditions
differ substantially from the assumptions used in making the evaluation. While
management believes it has identified and provided for losses and that the
allowance for loan losses is adequate, management cannot assure that further
adjustments may not be necessary.
38
<PAGE>
Noninterest Expense. Noninterest expense is primarily made up of salaries
-------------------
and benefits, occupancy and equipment expense, deposit insurance premium, and
other items. Total noninterest expense amounted to $652,846 in 1996 compared to
$692,813 in 1995 or a decrease of $39,967.
Salaries and employee benefits increased by $5,954 during 1996. This
increase was made up of normal wage increases.
Occupancy expenses decreased by $27,824 in 1996, which is primarily
comprised of a decrease in depreciation expense on furniture and fixtures.
Deposit insurance decreased by $30,171 in 1996. Other expense increased by
$16,347 in 1996, which is comprised of increases in various other expenses with
no one significant expense increase.
Income Tax Expense. Income tax expense amounted to $212,975 in 1996
------------------
compared to $179,928 in 1995. The effective tax rate for 1996 was 25.1%
compared to 23.6% for 1995. The increase in the effective tax rate was the
result of decreased earnings on tax-free securities. Earnings on tax free
securities decreased by $20,673 or 8.2%.
Recent Accounting Pronouncements
In February of 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits." SFAS No. 132
revises employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans. SFAS
No. 132 standardizes the disclosure requirements and requires additional
information on changes in the benefit obligations and fair value of plan assets
that will facilitate financial analysis, and eliminates certain disclosures from
SFAS No. 87 "Employers Accounting for Pensions," SFAS No. 88 "Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits," and SFAS No. 106 "Employers Accounting for
Postretirement Benefits Other Than Pensions." Rural Valley will adopt SFAS No.
132 for fiscal year 1998 reporting, and it is anticipated the adoption of this
statement will not have a material impact on Rural Valley's financial statement
disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It
requires, among other things, that an entity recognizes all derivatives as
either assets or liabilities in the statement of financial condition and
measures those instruments at fair value. The statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 1998. Since Rural
Valley does not currently use derivative financial instruments, the standard
will not have any impact on Rural Valley's financial position or results of
operations upon adoption.
Year 2000
Rural Valley utilizes and is dependent upon data processing systems and
software in its usual course of business. In 1997, Rural Valley created a Year
2000 Committee to: (1) evaluate all of Rural Valley systems including vendor
supplied systems for potential Year 2000 problems, (2) develop a process for
ensuring Rural Valley's systems are Year 2000 ready, (3) implement a project
plan for addressing all systems and functions which need to be addressed for the
Year 2000, and (4) evaluate potential Year 2000 problems on commercial customers
of Rural Valley. As of June 30, 1998, Rural Valley has completed the assessment
phase and is implementing its Year 2000 project plan, including regular contacts
with vendors and commercial customers who may be impacted by the Year 2000, as
well as, the development of contingency plans to address any possibility that
its primary servicer, Fiserve, may be unable to provide Year 2000 products on a
timely basis. Rural Valley has budgeted $10,000 for Year 2000 project needs to
be developed. Rural Valley has established an effective project management
process to ensure Rural Valley's mission critical systems are able to process
into the Year 2000.
39
<PAGE>
MANAGEMENT OF RURAL VALLEY
Directors
The following list sets forth biographical information concerning the
members of the Board of Directors of Rural Valley:
<TABLE>
<CAPTION>
Name Age Business Experience, Including
- ----------------- --- Principal Other Director
Occupation During Past Five Years Directorships Since
--------------------------------- ------------- --------
<S> <C> <C> <C> <C>
Peter Calarie 90 Attorney None 1943
Charles S. Dill 70 Retired Bank Cashier None 1960
T. Lowell Dean 66 Retired Educator None 1961
Lee J. Calarie 45 Attorney None 1978
Guy Spera Jr. 70 Contractor, Home Improvement Center None 1987
Owner
R. Keith Moore 62 Car Dealer None 1987
</TABLE>
Principal Officers
The following table sets forth selected information about the principal
officers of Rural Valley, each of whom is elected by the Board of Directors of
Rural Valley and each of whom holds office at the discretion of the Board of
Directors of Rural Valley:
<TABLE>
<CAPTION>
Number of
Shares
Beneficially
Name Age Office Owned
- ------------------- --- -------------- -----
<S> <C> <C> <C>
T. Lowell Dean 66 President 4,300
Charles S. Dill 70 Vice President 1,900
Stella L. Samosky 63 Secretary 107
</TABLE>
Remuneration of Directors and Officers
Generally, in 1997, the Board of Directors met once a month. Each
director received $250 for each Board of Directors meeting. During 1997, the
Board of Directors of Rural Valley held twelve meetings. In 1997, directors
received $18,000 in the aggregate for attendance at Board Meetings of Rural
Valley. All of the directors attended at least ninety percent (90%) of the
meetings of Rural Valley's Board of Directors.
The following table sets forth certain summary information concerning
compensation paid or accrued by Rural Valley on behalf of Rural Valley's Chief
Executive Officer. The Bank has no other compensated officers.
40
<PAGE>
Compensation Table
SUMMARY COMPENSATION TABLE****
<TABLE>
<CAPTION>
Name and Principal Year Ended Salary/1/ All Other
Position December 31 Compensation/2/
<S> <C> <C> <C>
Stella L. Samosky, Chief 1997 $41,749 $4,175
Executive Officer 1996 $40,248 $4,025
1995 $38,748 $3,875
</TABLE>
__________________
1. Cash earned and received by executive officer.
2. Rural Valley provided Ms. Samosky with group health insurance generally
available to salaried employees and not required to be included in this
column pursuant to the rules of the SEC. The amount shown in this column
represents the cost of funding projected retirement benefits under Rural
Valley's money purchase pension plan.
Beneficial Ownership by Officers and Directors
The following table sets forth as of June 3, 1998, the amount and
percentage of the Common Stock of Rural Valley beneficially owned by each
director and all officers and directors of Rural Valley as a group.
<TABLE>
<CAPTION>
Common Stock Amount
Nature of Beneficial Percent of
Name Ownership/1/ Common Stock
---- ------------ -------------
<S> <C> <C>
Lee J. Calarie 2,280/2/ 5.70%
Peter Calarie 5,500 13.75%
T. Lowell Dean 4,300 10.75%
Charles S. Dill 1,900/2/ 4.75%
R. Keith Moore 1,370 3.43%
Stella L. Samosky 107 **
Guy Spera, Jr. 1,100 2.75%
All current officers and directors as a group (7 persons) 16,557 41.39%
</TABLE>
Retirement Plan
On December 31, 1970, Rural Valley adopted a money purchase pension plan (the
"Plan") covering substantially all of its full-time employees. Rural Valley
contributes an amount equal to ten percent of an eligible employee's salary to
the plan on an annual basis.
- ------------------------------
/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 footnote below, each director has sole voting power over the shares
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. Lee J. Calarie, 1,248 and Mr. Charles S. Dill, 1,700.
* Represents less than 1% of the Corporation Common Stock.
41
<PAGE>
Certain Transactions
There have been no material transactions, proposed or consummated, between
Rural Valley and any director or executive officer of Rural Valley, or any
associate of the foregoing persons. Rural Valley has had and intends to
continue to have banking and financial transactions in the ordinary course of
business with Directors and Officers of Rural Valley and their associates on
comparable terms and with similar interest rates as those prevailing from time
to time for other customers of Rural Valley. Total loans outstanding from Rural
Valley at December 31, 1997, to Rural Valley's Officers and Directors as a group
and members of their immediate families and companies in which they had an
ownership interest of 5% or more was $62,980 or 0.8% of Rural Valley's total
equity capital accounts. Such loans do not involve more than the normal risk of
collectibility nor do they present other unfavorable features.
Principal Owners of Rural Valley Voting Securities
Other than Directors, there are no persons who own of record or who is known
to the Board of Directors of Rural Valley to be the beneficial owner of five
percent (5%) or more of the Rural valley outstanding Common Stock.
Legal Matters
The validity of the shares of BT Financial Common Stock to be issued in
connection with the Merger and certain other legal matters regarding BT
Financial will be passed upon by Pepper Hamilton LLP, Pittsburgh, Pennsylvania.
Certain legal matters regarding Rural Valley will be passed upon by Calarie &
Owen, Kittanning, Pennsylvania.
Experts
The consolidated financial statements of BT Financial as of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997 incorporated by reference in this Proxy Statement/Prospectus have been
incorporated herein in reliance on the Report of PricewaterhouseCoopers LLP,
formerly Coopers & Lybrand L.L.P. independent accountants, given on the
authority of that firm as experts in auditing and accounting.
42
<PAGE>
INDEX TO RURAL VALLEY FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Contents Page
- ----------------------------------------------------------------------------------------------- ----
<S> <C>
Rural Valley
Balance Sheet as of June 30, 1998 and December 31, 1997 and 1996 F-2
Statements of Income for the six months ended June 30, 1998 and 1997
and for the years ended December 31, 1997, 1996 and 1995 F-3
Statements of Cash Flow for the six months ended June 30, 1998 and 1997
and for the years ended December 31, 1997, 1996 and 1995 F-4
Statement of Changes in Stockholders' Equity for the years ended December 31, 1997, 1996
and 1995 F-5
Notes to Financial Statements F-6
</TABLE>
<PAGE>
PEOPLES NATIONAL BANK OF RURAL VALLEY
=====================================
BALANCE SHEET (UNAUDITED)
JUNE 30, 1998 AND DECEMBER 31, 1997 AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/98 1997 1996
- -------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 1,271,974 $ 1,186,825 $ 1,097,752
Investment securities held-to-maturity, market
$15,219,922 as of June 30, 1998, $14,791,941 in 1997
and $13,930,947 in 1996................................ 15,114,631 14,683,249 13,867,632
Investment securities available-for-sale at fair value.. 5,160,786 5,155,672 5,124,354
Federal funds sold...................................... 1,100,000 1,800,000 1,200,000
Loans receivable, net of allowance for loan losses
of $126,435 as of June 30, 1998, $116,293 in 1997
and $123,647 in 1996................................... 14,283,377 13,789,875 14,048,114
Premises and equipment, net............................. 108,284 114,217 124,539
Accrued income receivable............................... 325,874 304,156 294,914
Other assets............................................ 79,024 56,351 17,761
----------- ----------- -----------
TOTAL ASSETS.......................................... $37,443,950 $37,090,345 $35,775,066
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest-bearing............................. $ 4,405,536 $ 4,884,228 $ 3,998,569
Interest-bearing................................ 24,700,227 24,017,152 23,894,418
Accrued interest payable............................ 137,526 122,105 95,393
Other liabilities................................... 1,465 13,954 40,078
----------- ----------- -----------
Total Liabilities............................... $29,244,754 $29,037,439 $28,028,458
=========== =========== ===========
Commitments and contingencies.......................
Stockholders' equity:
Common stock, $5 par value, 40,000 shares
authorized, issued and outstanding................ 200,000 200,000 200,000
Additional paid-in capital.......................... 1,000,000 1,000,000 1,000,000
Retained earnings................................... 6,979,564 6,836,938 6,554,475
Unrealized gain/loss(-) on securities available-
for-sale, net..................................... 19,632 15,968 -7,867
----------- ----------- -----------
Total Stockholders' equity...................... 8,199,196 8,052,906 7,746,608
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................... $37,443,950 $37,090,345 $35,775,066
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an
integral part of the financial statements.
F-2
<PAGE>
PEOPLES NATIONAL BANK OF RURAL VALLEY
=====================================
STATEMENT OF INCOME (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/98 6/30/97 1997 1996 1995
- ----------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans.............. $ 591,434 $ 588,616 $1,197,250 $1,219,957 $1,167,405
Interest and dividends on investments:
Taxable................................ 485,221 445,563 911,599 853,928 826,486
Exempt from federal income taxes....... 101,436 110,192 219,525 231,316 251,989
Interest on federal funds sold.......... 47,878 43,042 77,285 58,578 62,083
---------- ---------- ---------- ---------- ----------
Total Interest Income................. 1,225,969 1,187,413 2,405,659 2,363,779 2,307,963
---------- ---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on deposits.................... 465,107 472,516 963,103 932,472 934,673
---------- ---------- ---------- ---------- ----------
NET INTEREST INCOME.................. 760,862 714,897 1,442,556 1,431,307 1,373,290
---------- ---------- ---------- ---------- ----------
OTHER INCOME:
Fees for other services................. 25,133 32,247 67,158 70,826 81,474
---------- ---------- ---------- ---------- ----------
OTHER EXPENSES:
Salaries and wages...................... 119,149 123,346 255,855 247,371 246,306
Payroll taxes and employee benefits..... 22,941 20,705 58,512 56,200 51,311
Net occupancy expenses.................. 24,875 34,406 59,787 47,417 75,241
Computer services....................... 39,377 40,168 74,914 74,676 80,438
State shares tax........................ 54,493 53,437 53,437 52,047 50,558
Deposit insurance....................... 1,736 1,259 3,010 2,000 32,171
Other expenses.......................... 106,887 100,007 194,176 173,135 156,788
---------- ---------- ---------- ---------- ----------
Total Other Operating Expenses........ 369,458 373,328 699,691 652,846 692,813
---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES........... 416,537 373,816 810,023 849,287 761,951
---------- ---------- ---------- ---------- ----------
Provision for income taxes.............. 115,600 104,366 215,486 212,975 179,928
---------- ---------- ---------- ---------- ----------
NET INCOME.......................... $ 300,937 $ 269,450 $ 594,537 $ 636,312 $ 582,023
========== ========== ========== ========== ==========
Basic common shares outstanding
(average for the year).................. 40,000 40,000 40,000 40,000 40,000
========== ========== ========== ========== ==========
Basic earnings per common share.......... $7.52 $6.74 $14.86 $15.91 $14.55
========== ========== ========== ========== ==========
Dividends paid per common share.......... $4.00 $3.00 $8.00 $6.00 $5.00
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes to financial statements are an
integral part of the financial statements.
F-3
<PAGE>
PEOPLES NATIONAL BANK OF RURAL VALLEY
=====================================
STATEMENT OF CASH FLOW (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6/30/98 6/30/97 1997 1996 1995
- ---------------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 300,937 $ 269,450 $ 594,537 $ 636,312 $ 582,023
Adjustments to reconcile net income to
cash provided by operating activities:
Provision for depreciation........................ 5,934 4,863 15,343 10,088 26,959
Amortization of premium, net of accretion
of discounts on investments..................... -3,815 -3,119 -10,458 -9,814 -7,279
Deferred income taxes............................. 10,113 -6,651 10,901 6,309 -91,553
Increase(-)/decrease in interest
receivable...................................... -21,718 -15,948 -9,242 4,463 -10,372
Increase/decrease(-) in interest
payable......................................... 15,421 15,629 26,712 -8,258 42,289
Other assets and liabilities, net................. -35,162 -79,116 -64,714 38,740 82,736
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities.................................... 271,710 185,108 563,079 677,840 624,803
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayments and maturities of securities
held-to-maturity and available for sale.......... 3,183,333 850,000 3,770,000 2,850,000 3,450,000
Purchase of securities held-to-maturity and
available for sale............................... -3,620,775 -2,136,626 -4,585,617 -2,800,405 -2,752,168
Net decrease/increase(-) in loans.................. 206,498 899,420 -341,761 -174,246 -1,365,545
Purchases of premises and equipment................ -5,021 -5,021 -7,446 -39,446
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities.......................... -230,944 -392,227 -1,162,399 -132,097 -707,159
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase/decrease(-) in deposits............... 204,383 566,868 1,008,393 -94,946 173,449
Common dividends paid.............................. -160,000 -120,000 -320,000 -240,000 -200,000
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities.......... 44,383 446,868 688,393 -334,946 -26,551
----------- ----------- ----------- ----------- -----------
Increase/decrease(-) in cash and cash
equivalents...................................... 85,149 239,749 89,073 210,797 -108,907
Cash and cash equivalents at beginning
of year.......................................... 1,186,825 1,097,752 1,097,752 886,955 995,862
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year........... $ 1,271,974 $ 1,337,501 $ 1,186,825 $ 1,097,752 $ 886,955
=========== =========== =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on deposits............................. $ 449,686 $ 456,887 $ 936,391 $ 940,730 $ 892,384
Federal income taxes, net of refunds............. 108,152 163,586 219,690 185,959 163,830
</TABLE>
The accompanying notes to financial statements are an
integral part of the financial statements.
F-4
<PAGE>
PEOPLES NATIONAL BANK OF RURAL VALLEY
=====================================
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unrealized
Common Gain/Loss(-)
Stock Additional on Securities
$5 par Paid-In Retained Available for
Value Capital Earnings Sale Total
-------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994............... $200,000 $1,000,000 $5,546,659 $-188,959 $6,557,700
Change in unrealized gain/loss(-)
on securities available for sale,
net of tax......................... 8,984 206,173 215,157
Cash dividends declared................ -200,000 -200,000
Net income............................. 582,023 582,023
-------- ---------- ---------- --------- ----------
Balance, December 31, 1995............... $200,000 $1,000,000 $5,937,666 $ 17,214 7,154,880
Prior period adjustment................ 233,022 233,022
Change in unrealized gain/loss(-)
on securities available for sale,
net of tax......................... -12,525 -25,081 -37,606
Cash dividends declared................ -240,000 -240,000
Net income............................. 636,312 636,312
-------- ---------- ---------- --------- ----------
Balance, December 31, 1996............... 200,000 1,000,000 6,554,475 -7,867 7,746,608
Change in unrealized gain/loss(-)
on securities available for sale,
net of tax......................... 7,926 23,835 31,761
Cash dividends declared................ -320,000 -320,000
Net income............................. 594,537 594,537
-------- ---------- ---------- --------- ----------
Balance, December 31, 1997............... 200,000 1,000,000 6,836,938 15,968 8,052,906
Change in unrealized gain/loss(-)
on securities available for sale,
net of tax......................... 1,689 3,664 5,353
Cash dividends declared................ -160,000 -160,000
Net income............................. 300,937 300,937
-------- ---------- ---------- ----------- -------------
Balance, June 30, 1998................... $200,000 $1,000,000 $6,979,564 $ 19,632 $8,199,196
======== ========== ========== =========== =============
</TABLE>
The accompanying notes to financial statements are
an integral part of the financial statements.
F-5
<PAGE>
PEOPLES NATIONAL BANK OF RURAL VALLEY
=====================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of Peoples National Bank of Rural Valley (the
"Bank") conform to general practices within the banking industry.
A. Business - The primary business of Peoples National Bank of Rural
--------
Valley consists of attracting deposits from the general public in the
communities that it serves and investing such deposits, together with other
funds, in residential real estate loans, consumer loans, commercial loans and
investment securities. Peoples National Bank of Rural Valley focuses on
providing a wide range of consumer and commercial services to individuals,
partnerships and corporations in Armstrong County. Peoples National Bank of
Rural Valley is also subject to the regulations of certain federal and state
agencies and undergoes periodic examinations by certain regulatory authorities.
B. Use of Estimates - The preparation of financial statements in
----------------
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expense during
the reported period. Actual results could differ from those estimates.
C. Cash Equivalents - Peoples National Bank of Rural Valley considers all
----------------
noninterest-bearing amounts due from banks to be cash equivalents. At December
31, 1997 and 1996, the Bank maintained cash balances of $436,064 and $361,287
respectively, within four large financial institutions in southwestern
Pennsylvania.
D. Investment Securities - Effective January 1, 1994, the Bank adopted
---------------------
the provisions of Statement of Financial Accounting Standards No. 115--
Accounting For Certain Debt and Equity Securities (SFAS 115). In accordance
with this statement, securities are classified as held-to-maturity, available-
for-sale or trading.
Securities classified as held-to-maturity are stated at cost adjusted for
amortization of premiums and accretion of discounts. The Bank has the positive
intent and ability to hold these securities to maturity. Securities classified
as available-for-sale may be sold in response to changes in interest rates,
liquidity needs and for other purposes. Available-for-sale securities are
carried at fair value and include all debt and equity securities not classified
as held-to-maturity or trading. Trading securities are those held principally
for the purpose of selling in the near future and are carried at fair value.
The Bank does not currently have any trading securities.
Unrealized holding gains and losses for trading securities are included in
earnings. Unrealized holding gains and losses for available-for-sale securities
are excluded from earnings and reported net of any income tax effect, as a
separate component of share-holders' equity. Realized gains and losses for
securities classified as either available-for-sale or held-to-maturity are
reported in earnings based on the adjusted cost of the specific security sold.
Prior to adoption of SFAS 115, all investment securities were stated at
cost, adjusted for amortization of premiums and accretion of discounts, similar
to the held-to-maturity category under the provisions of SFAS 115. Securities
to be held for indefinite periods of time would have been reported as held-for-
sale and carried at the lower of cost or fair value prior to implementation of
SFAS 115.
F-6
<PAGE>
E. Loans - Loans are stated at the principal amount outstanding.
-----
Deferred loan fees and the allowance for loan losses are shown as reductions of
loans. Interest income on loans is computed based on the outstanding loan
balance. Interest accrual is discontinued when it appears that collection of
principal or interest according to contractual terms may be doubtful. Interest
collections on nonaccrual loans for which the collectibility of principal is
uncertain are applied to principal. Otherwise, such collections are credited to
income when received.
The allowance for loan losses is increased by provisions for loan losses
charged to operating expense and reduced by loans charged off, net of
recoveries. The level of the allowance and the provision are determined based
on management's evaluation of the loan portfolio, current and anticipated
economic conditions, and other relevant factors. The allowance for loan losses
is available to absorb future loan losses.
While management believes it has established the allowance for loan losses
in accordance with generally accepted accounting principles and has taken into
account the views of its regulators and the current economic environment there
can be no assurance that in the future the Bank's regulators or its economic
environment will not require further increases in the allowance.
F. Premises and Equipment - Premises and equipment are stated at cost,
----------------------
less accumulated depreciated and amortization. Depreciation has been computed
on straight-line and accelerated methods, based on the estimated useful lives of
the respective asset. Costs of replacing structural parts and major units are
considered individually and are expensed or capitalized as the facts dictate.
G. Income Taxes - Deferred federal income taxes are provided based on
------------
temporary differences between carrying the amounts of assets and liabilities for
financial reporting and federal income tax purposes.
H. Effect of New Accounting Standards - In June 1996, the FASB issued FAS
----------------------------------
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" FAS 125 provides new accounting and reporting
standards for sales, securitizations and servicing of receivables and other
financial assets, for certain secured borrowing and collateral transactions, and
for extinguishments of liabilities. FAS 125 as amended by FAS 127, "Deferral of
Effective Date of Certain Provisions of FAS 125," is generally to be applied to
transactions occurring after December 31, 1996, with certain provisions having
been delayed until 1998. FAS 125 has not materially impacted Peoples National
Bank of Rural Valley's financial position or results of operations as a result
of adoption.
In February 1997, the FASB issued FAS 128, "Earnings per Share," which
supersedes APB 15, "Earnings per Share," in order to simplify the standards of
computing EPS. FAS 128 replaces the presentation of primary and fully diluted
EPS with presentation of basic and diluted EPS and requires retroactive
restatement for all periods presented. This standard is effective for periods
ending after December 15, 1997. The effect of FAS 128 on Peoples National Bank
of Rural Valley's EPS is not significant.
In February 1997, the FASB issued FAS 129, "Disclosure of Information about
Capital Structure," which consolidates existing guidance relating to capital
structure. This standard is also effective for reporting periods ending after
December 15, 1997. The standard does not significantly change the current
presentation regarding capital structure.
2. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Bank utilized quoted market values, where available, to assign fair
value to its financial instruments. In cases where quoted market values were
not available, the Bank used present value
F-7
<PAGE>
methods to estimate the fair value of its financial instruments. These estimates
of fair value are significantly affected by the assumptions made and,
accordingly, do not necessarily indicate amounts that could be realized in a
current market exchange. It is also the Bank's general practice and intent to
hold the majority of its financial instruments until maturity and therefore, the
Bank does not expect to realize the estimated amounts disclosed.
The following methods and assumptions were used by the Bank in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents and other short-term assets: The carrying
-----------------------------------------------------
amounts reported in the balance sheet for cash and due from banks, and federal
funds sold approximate those assets' fair values.
Federal funds sold: The carrying amount of overnight federal funds
------------------
approximates fair value.
Loans: The fair values for loans are estimated using interest rates
-----
currently being offered for loans with similar terms to borrowers as measured by
net credit losses and the loss of interest income from nonaccrual loans. The
carrying amount of accrued interest approximates its fair value.
Deposits: The fair values disclosed for demand deposits (e.g., noninterest
--------
and interest-bearing demand, money market and savings accounts) are, by
definition, equal to the amount payable on demand. The carrying amounts for
certificates of deposits and other time deposits approximate their fair value at
year-end.
Loan commitments: Estimates of the fair value of these off-balance sheet
----------------
items were not made because of the short-term nature of these arrangements and
the credit standing of the counterparties. Also, unfunded loan commitments
relate principally to variable rate commercial loans and fees are not normally
assessed on the balance of these unfunded commitments.
Estimates of fair value have not been made for items, which are not defined
as financial instruments.
3. CASH AND DUE FROM BANKS ON DEMAND
Regulations of the Board of Governors of the Federal Reserve System impose
uniform reserve requirements of all depository institutions with transaction
accounts (checking accounts, NOW accounts, etc.) and nonpersonal time deposits
(deposits with original maturities of 14 days or more). Reserves are maintained
in the form of vault cash or a noninterest bearing balance held with the Federal
Reserve Bank. The Bank also, from time to time, maintains deposits with the
Federal Reserve Bank and other banks for various services such as check
clearing.
For the above mentioned purposes, the Bank maintained an average balance of
$1,109,090 during 1997. Balances outstanding at other banks for various
services were $473,046 at December 31, 1997 and $474,700 at December 31, 1996.
4. INVESTMENT SECURITIES
The following tables reflect the amortized cost and estimated fair values
of debt, and equity securities held at December 31, 1997 and 1996. In
addition, gross unrealized gains and gross unrealized losses are disclosed as of
December 31, 1997 and 1996.
F-8
<PAGE>
<TABLE>
<CAPTION>
1997
----------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury obligations... $ 5,095,477 $ 28,648 $ -4,453 $ 5,119,672
Federal Reserve Bank stock.. 36,000 36,000
----------- -------- -------- -----------
Total available-for-sale.. $ 5,131,477 $ 28,648 $ -4,453 $ 5,155,672
=========== ======== ======== ===========
HELD-TO-MATURITY
U.S. Treasury Securities.... $ 7,689,802 $ 76,995 $ -6,655 $ 7,760,142
U.S. Government Sponsored
Agencies................... 2,099,967 4,788 -4,605 2,100,150
Obligations of state and
political subdivisions..... 4,893,480 38,802 -633 4,931,649
----------- -------- -------- -----------
Total held-to-maturity $14,683,249 $120,585 $-11,893 $14,791,941
=========== ======== ======== ===========
<CAPTION>
1996
--------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE
U.S. Treasury obligations... $ 5,096,221 $ 12,726 $-20,593 $ 5,088,354
Federal Reserve Bank stock.. 36,000 36,000
----------- -------- -------- -----------
Total available-for-sale.. $ 5,132,221 $ 12,726 $-20,593 $ 5,124,354
=========== ======== ======== ===========
HELD-TO-MATURITY
U.S. Treasury Securities.... $ 7,189,176 $ 61,938 $-26,196 $ 7,224,918
U.S. Government Sponsored
Agencies................... 1,900,149 1,076 -19,403 1,881,822
Obligations of state and
political subdivisions..... 4,778,307 47,571 -1,671 4,824,207
----------- -------- -------- -----------
Total held-to-maturity.... $13,867,632 $110,585 $-47,270 $13,930,947
=========== ======== ======== ===========
</TABLE>
F-9
<PAGE>
The amortized cost and estimated fair value of debt securities at December
31, 1997, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations.
<TABLE>
<CAPTION>
....AVAILABLE-FOR-SALE.... ....HELD-TO-MATURITY....
Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Due in one year or less.. $1,799,758 $1,797,819 $ 3,355,811 $ 3,353,739
Due after one through
five years............. 3,295,719 3,321,853 10,682,418 10,790,696
Due after five through
ten years.............. 591,211 593,625
Due after ten years...... 36,000 36,000 53,809 53,881
---------- ---------- ----------- -----------
$5,131,477 $5,155,672 $14,683,249 $14,791,941
========== ========== =========== ===========
</TABLE>
Fair value is established by an independent pricing service as of the
approximate dates indicated. The difference between amortized cost and fair
value reflects current interest rates and represents the potential gain or
loss had the portfolio been liquidated on that date.
At December 31, 1997, the Bank did not hold investment securities of any
single issuer, other than obligations of the U.S. Treasury and other U.S.
government agencies, who's aggregate book value exceeded ten percent of
stockholders' equity.
5. LOANS
Loans at December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Commercial.................. $ 689,815 $ 907,458
Real estate - construction.. 208,120 118,753
Real estate - mortgage...... 10,089,544 10,142,021
Installment................. $ 2,918,689 $ 3,003,529
----------- -----------
13,906,168 14,171,761
Allowance for loan losses... -116,293 -123,647
----------- -----------
Net Loans $13,789,875 $14,048,114
=========== ===========
</TABLE>
Direct and indirect loans to officers during 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Balance at beginning of year.. $ 60,281 $ 60,978
New loan disbursements...... 15,000 41,000
Repayments.................. -12,301 -41,697
-------- --------
Balance at end of year........ $ 62,980 $ 60,281
======== ========
</TABLE>
6. OTHER FINANCIAL, COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance-sheet-risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include
F-10
<PAGE>
commitments to extend credit and mortgage loans. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheet. The contract or notional amounts of those instruments reflect
the extent of involvement the Bank has in those particular financial
instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual or notional amount of those instruments. The
Bank uses the same credit policies in making commitments and conditional
obligations as it does for on-balance-sheet instruments.
<TABLE>
<CAPTION>
Contract or
Notional Amount
---------------
<S> <C>
Financial instruments whose contract amounts
represent credit risk - Commitments to
extend credit......................................... $201,706
========
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank upon extension of credit, is based on management's
credit evaluation. Collateral held varies but may include accounts receivable,
inventory, property, plant and equipment, and income-producing commercial
properties.
The Bank primarily serves customers located in Armstrong County,
Pennsylvania. As such, the Bank's loans and commitments have been granted to
customers in that area. Concentration of credit by type of loan is presented in
Note 5.
7. ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year.................. $123,647 $124,569 $126,148
Loans charged off........................... -8,179 -5,665 -9,114
Recoveries on previously charged off loans.. 825 4,743 7,535
-------- -------- --------
Balance at end of year........................ $116,293 $123,647 $124,569
======== ======== ========
</TABLE>
8. PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Land........................... $ 10,036 $ 10,036
Building and parking lot....... 151,073 151,073
Furniture and equipment........ 308,668 303,647
--------- ---------
469,777 464,756
Less accumulated depreciation.. -355,560 -340,217
--------- ---------
$ 114,217 $ 124,539
========= =========
</TABLE>
Depreciation and amortization of premises and equipment amounted to $15,343,
$10,088 and $26,959 for the years ended December 31, 1997, 1996 and 1995
respectively and $5,934 and $4,863 for the six month periods ended June 30, 1998
and 1997 respectively.
F-11
<PAGE>
9. DEPOSITS
A summary of deposits at December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Non-interest bearing demand.................. $ 4,884,228 $ 3,998,569
Interest-bearing demand...................... 676,534 810,483
Savings...................................... 13,754,025 14,359,929
Certificates of deposit of $100,000 or more.. 2,616,725 1,202,168
Other time................................... 6,969,868 7,521,838
----------- -----------
$28,901,380 $27,892,987
=========== ===========
</TABLE>
10. PENSION PLAN
The Bank has a money purchase pension plan covering substantially all of its
full time employees. The Bank contributes an amount equal to ten percent of
eligible employee's salaries to the plan on an annual basis. Contributions to
the money purchase plan totaled $14,741 for 1997, $14,231 for 1996 and
$16,912 for 1995. No contributions were made during the six month periods
ended June 30, 1998 and 1997.
11. FEDERAL INCOME TAXES
The components of the provision/benefit(-) for income taxes from operations
are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current..................................................................................... $207,260 $215,650 $188,912
Deferred.................................................................................... 8,226 -2,675 -8,984
-------- -------- --------
Total $215,486 $212,975 $179,928
======== ======== ========
</TABLE>
A reconciliation of the federal statutory tax rate effective applicable to
income taxes follows:
<TABLE>
<S> <C> <C> <C>
Federal statutory rate...................................................................... 34.0% 34.0 % 34.0 %
Add (deduct) the effect of:
Tax exempt interest..................................................................... (9.5) (9.5) (11.5)
Interest expense
limitation............................................................................ 1.1 1.1 1.3
Other, net.............................................................................. 1.0 (.5) (.2)
-------- -------- --------
Effective tax rate.......................................................................... 26.6% 25.1% 23.6%
======== ======== ========
</TABLE>
At December 31, 1997 the Bank had a deferred tax liability of $8,226, at
December 31, 1996 there was a deferred tax asset of $2,675. Both of these were
solely due to net unrealized holding gains and losses on securities.
No valuation was established at December 31, 1996 in view of the Bank's
ability to carry back net deferred taxes to taxes paid in previous years.
F-12
<PAGE>
12. REGULATORY CAPITAL
Peoples National Bank of Rural Valley is subject to various regulatory
capital requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on Peoples National Bank of Rural Valley's
financial statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, Peoples National Bank of Rural Valley
must meet specific capital guidelines that involve quantitative measures of
Peoples National Bank of Rural Valley's assets, liabilities, and certain off-
balance-sheet items as calculated under regulatory accounting practices.
Peoples National Bank of Rural Valley's capital amounts and classifications
are also subject to qualitative judgements by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require Peoples National Bank of Rural Valley to maintain minimum amounts and
ratios of total and Tier I capital to risk-weighted assets and of Tier I
capital to average assets. Management believes, as of December 31, 1997, that
Peoples National Bank of Rural Valley meets all capital ade quacy
requirements to which it is subject.
As of December 31, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized Peoples National Bank of Rural Valley
as well capitalized under the regulatory framework for prompt corrective action.
There are no conditions or events since that notification that management
believes have changed the institution's category. Peoples National Bank of Rural
Valley's actual regulatory capital amounts are as follows:
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
--------------------- ------------------ -------------------
Amount in Amount in Amount in
(thousands) Ratio (thousands) Ratio (thousands) Ratio
----------- ------ ------------ ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Risk-Based Capital (to
Risk-Weighted Assets).... $8,145 64.54% $1,010 8.00% $1,262 10.00%
Tier I Capital (to Risk-
Weighted Assets)......... 8,029 63.62% 505 4.00% 757 6.00%
Tier I Capital (to
Average Assets)........... 8,029 21.98% 1,468 4.00% 1,835 5.00%
As of December 31, 1996:
Total Risk-Based Capital (to
Risk-Weighted Assets)..... $7,879 62.04% $1,016 8.00% $1,270 10.00%
Tier I Capital (to Risk-
Weighted Assets).......... 7,755 61.06% 508 4.00% 762 6.00%
Tier I Capital (to
Average Assets)........... 7,755 21.74% 1,427 4.00% 1,783 5.00%
</TABLE>
F-13
<PAGE>
ANNEX A
Agreement and Plan of Reorganization
by and among
BT Financial Corporation,
Laurel Bank,
and
The Peoples National Bank of Rural Valley
<PAGE>
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS.......................................................................1
1.01. Definitions.......................................................................1
1.02. Accounting Terms..................................................................6
ARTICLE II - THE MERGER.......................................................................7
2.01. Merger............................................................................7
2.02. Conversion of Shares of Common Stock..............................................7
2.03. Articles of Incorporation; By-Laws................................................7
2.04. Directors and Officers............................................................8
2.05. Closing...........................................................................8
2.06. Exchange of Certificates for Stock and Cash.......................................8
2.07. Termination of this Reorganization Agreement.....................................10
2.08 Confidentiality..................................................................11
2.09. Public Disclosure................................................................11
ARTICLE III - SHAREHOLDER APPROVAL...........................................................11
3.01. Rural Valley Shareholders Meeting................................................11
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS......................................12
4.01. Representations and Warranties of Rural Valley...................................12
4.02. Representations and Warranties of BT Financial...................................26
4.03. Representations and Warranties of Laurel.........................................30
4.04. Covenants of Rural Valley........................................................33
4.05. Covenants of BT Financial and Laurel.............................................39
ARTICLE V - REGISTRATION RIGHTS..............................................................44
5.01. Registration on Request..........................................................44
5.02. Registration Procedures..........................................................45
5.03. Preparation; Reasonable Investigation............................................49
5.04. Indemnification..................................................................50
5.05. Rule 144.........................................................................53
ARTICLE VI - CONDITIONS PRECEDENT............................................................53
6.01. Conditions Precedent to the Obligations of BT Financial and Laurel...............53
6.02. Conditions Precedent to the Obligations of Rural Valley..........................57
6.03. Waivers..........................................................................61
ARTICLE VII - BROKERS AND EXPENSES...........................................................61
7.01. Brokers..........................................................................61
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.02. Expenses.........................................................................61
ARTICLE VIII - MISCELLANEOUS.................................................................61
8.01 Further Assurances...............................................................61
8.02. Survival of Representations, Warranties and Covenants............................62
8.03. Notices..........................................................................62
8.04. Binding Effect...................................................................62
8.05. Headings.........................................................................63
8.06. Counterparts.....................................................................63
8.07. Integration; No Third-Party Beneficiaries........................................63
8.08. Severability.....................................................................63
8.09. Amendments.......................................................................63
8.10. Governing Law....................................................................64
8.11. Incorporation by Reference.......................................................64
</TABLE>
Schedules and Exhibits
- ----------------------
Schedule 4.01(a) Rural Valley - Power and Authority
Schedule 4.01(d) Rural Valley - Financial Statements
Schedule 4.01(k)(ii) Rural Valley - Loans
Schedule 4.01(n) Rural Valley - Real Property
Schedule 4.01(o) Rural Valley - Environmental Conditions
Schedule 4.01(q) Rural Valley - Leases
Schedule 4.01(r) Rural Valley - Material Contracts
Schedule 4.01(t) Rural Valley - Employee Benefits
Schedule 4.01(aa)(iii) Rural Valley - Investments
Schedule 4.06(g) Certain Employees
Exhibit A Form of Affiliates' Agreement - Rural Valley
Exhibit B Form of Affiliates' Agreement - BT Financial Corporation
- ----------------
*The Table of Contents is not part of this Agreement.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, is made and entered into as
of the 5th day of June, 1998 (the "Reorganization Agreement"), by and among BT
Financial Corporation, a business corporation organized and existing under the
laws of the Commonwealth of Pennsylvania with its principal office at 532-534
Main Street, Johnstown, Pennsylvania 15901 ("BT Financial"), Laurel Bank, a bank
and trust company organized and existing under the laws of the Commonwealth of
Pennsylvania with its principal office at 532-534 Main Street, Johnstown,
Pennsylvania 15901 ("Laurel"), and The Peoples National Bank of Rural Valley, a
national banking association organized and existing under the laws of the United
States of America with its principal office at 601 Main Street, Rural Valley,
Pennsylvania 16249 ("Rural Valley").
WITNESSETH:
WHEREAS, the respective Boards of Directors of BT Financial, Laurel
and Rural Valley have determined that it would be in the best interests of their
respective organizations, shareholders and customers and the communities served
by them for Rural Valley to be merged with and into Laurel (the "Merger")
pursuant to this Reorganization Agreement, whereby the shareholders of Rural
Valley will receive shares of common stock of BT Financial and cash; and
WHEREAS, the respective Boards of Directors of BT Financial, Laurel
and Rural Valley have approved the acquisition of Rural Valley by BT Financial
through the proposed merger of Rural Valley with and into Laurel upon the terms
and conditions set forth in this Reorganization Agreement; and
WHEREAS, the parties intend that the Merger will be accounted for as a
pooling of interests under generally accepted accounting principals and qualify
as a reorganization under Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, conditions and actions hereinafter set
forth, the parties hereto, each intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. The terms defined in this Section 1.01 shall have
the meanings herein specified, unless the context clearly requires otherwise.
Other terms used herein are defined elsewhere in this Reorganization Agreement.
<PAGE>
"Affiliate" of a Party means a Person that, directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such Party.
"Articles of Merger" means the Articles of Merger delivered to the
Department of State of the Commonwealth of Pennsylvania for filing pursuant to
Section 1605(a) of the Banking Code.
"Banking Code" means the Pennsylvania Banking Code of 1965, as amended.
"BCL" means the Pennsylvania Business Corporation Law of 1988, as amended.
"BT Financial Common Stock" means the common stock, par value $5.00 per
share, of BT Financial.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"Closing Date" shall have the meaning set forth in Section 2.05(a).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1986.
"Comptroller" means the Office of the Comptroller of the Currency.
"Department of Banking" means the Pennsylvania Department of Banking.
"Dissenters' Shares" mean any shares of Rural Valley Common Stock in
respect of which the holders thereof shall have objected to the Merger and
otherwise complied with such of the requirements of Sections 1571 et seq. of the
BCL as may be applicable in order to be entitled to the rights and remedies of
dissenting shareholders.
"Effective Time of the Merger" means the date and time specified by the
Department of Banking for filing the Articles of Merger with the Secretary of
A-2
<PAGE>
State of the Commonwealth of Pennsylvania pursuant to the provisions
of Sections 1605 of the Banking Code.
"Environmental Condition" The term "Environmental Condition" means (x) the
presence in surface water, groundwater, drinking water supply, land surface,
subsurface strata, above-ground or underground storage tanks or other
containers, or ambient air of any pollutant, contaminant, industrial waste,
hazardous waste, polychlorinated biphenyls, radioactive materials, toxic or
hazardous substances ("Hazardous Substances") or (y) any violation of any
statute, ordinance, regulation, administrative order, judicial order or decree
or other governmental requirement relating to the emission, discharge, deposit,
disposal, leaching, migration or release of any Hazardous Substance into the
environment or the generation, treatment, storage, transportation or disposal of
any Hazardous Substance (i) arising out of or otherwise related to the
operations or other activities (including the disposition of such materials or
substances) of Rural Valley or of any predecessor in title, interest or line of
business to Rural Valley, conducted or undertaken prior to the Closing, or (ii)
existing at or prior to the Closing at any Owned Real Property, any real
property leased by Rural Valley ("Leased Real Property"), any real property
securing outstanding loans ("Secured Real Property"), or any property previously
owned, leased, occupied, used or foreclosed upon ("Prior Property").
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIA" means the Federal Deposit Insurance Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"FNMA" means the Federal National Mortgage Association.
"GNMA" means the Government National Mortgage Association.
A-3
<PAGE>
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASD Automated Quotations System.
"Owned Real Property" shall have the meaning set forth in Section 4.01(n).
"Parties" means BT Financial, Laurel, and Rural Valley in connection with
this Reorganization Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a government or a subdivision thereof
or a governmental agency.
"Permitted Dividend" means a regular quarterly cash dividend declared and
paid in accordance with Rural Valley's past practices as to time of declaration,
payment and amount. The aggregate amount of any Permitted Dividends declared
and paid in any calendar quarter beginning after the date of this Agreement
shall not exceed (A) the higher of (i) $80,000 in the aggregate, and (ii) the
subtrahend of $80,000 minus the aggregate amount of dividends paid since the
date of this Agreement multiplied by the number of calendar quarters ending
after the date of this Agreement, and (B) the higher of (i) the amount by which
net income for the quarter ending immediately before the quarter in which such
dividend is paid exceeded $70,000, and (ii) the amount by which cumulative net
income for each quarter ending after the date of this Agreement and before the
quarter in which such dividend is paid shall have exceeded $70,000, multiplied
by the number of quarters ending after the date of this Agreement.
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement, together
with any supplements thereto, to be sent to the shareholders of Rural Valley to
solicit their votes in connection with the transactions contemplated by this
Reorganization Agreement.
"Registrable Securities" means (a) all shares of BT Financial Common Stock
issued to shareholders of Rural Valley pursuant to this Reorganization Agreement
and (b) any shares of BT Financial Common Stock issued or issuable
A-4
<PAGE>
with respect to any BT Financial Common Stock referred to in (a) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (w) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (x) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (y) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by BT Financial and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (z) they shall have ceased to be
outstanding.
"Registration Expense" means all expenses incident to BT Financial's
performance of or compliance with Sections 5.01 through 5.05, including, without
limitation, (i) all registration, filing and NASD fees, (ii) all fees and
expenses of complying with securities or blue sky laws, (iii) all word
processing, duplicating and printing expenses, (iv) all messenger and delivery
expenses, (v) the fees and disbursements of counsel for BT Financial and of its
independent public accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such performance and
compliance, (vi) the fees and disbursements of any one counsel and any one
accountant retained by the holder or holders of more than 50% of the Registrable
Securities being registered, (vii) premiums and other costs of policies of
insurance against liabilities arising out of the public offering of the
Registrable Securities being registered if BT Financial desires such insurance,
and (viii) any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by BT Financial such expenses shall
not include salaries of BT Financial personnel or general overhead expenses of
BT Financial auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of BT Financial or other expenses for the
preparation of financial statements or other data normally prepared by BT
Financial in the ordinary course of its business or which BT Financial would
have incurred in any event.
"Registration Statement" means the registration statement on Form S-4 (or
other appropriate form) of BT Financial, including any amendments or
A-5
<PAGE>
supplements thereto, as declared effective by the SEC under the Securities Act
with respect to the issuance of BT Financial Common Stock in connection with the
Merger and the approval by the shareholders of the transactions contemplated by
this Reorganization Agreement, which Registration Statement shall include the
Prospectus/Proxy Statement.
"Regulatory Approvals" means all necessary approvals of the Merger by state
and federal agencies, including the Department of Banking, the Federal Reserve
Board, the FDIC and the Comptroller.
"Resulting Bank" means Laurel after consummation of the Merger.
"Rural Valley Common Stock" means the common stock, par value $5.00 per
share, of Rural Valley.
"Schedules" means the disclosure schedules attached hereto and made a part
hereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the United States Internal Revenue Service.
"Subsidiary" means any corporation or other entity, the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation or other entity are at the time directly or indirectly owned or
controlled by a Party.
"Taxes" means all federal, state and local taxes and similar governmental
charges.
"Transactions" means the negotiation and execution of this Reorganization
Agreement and the consummation of the transactions contemplated hereby, and all
related transactions.
A-6
<PAGE>
1.02. Accounting Terms. For all purposes of this Reorganization
Agreement, unless the context clearly requires otherwise, any accounting term
not specifically defined in this Reorganization Agreement shall have the meaning
given to it in accordance with generally accepted accounting principles and
practices within the banking industry as in effect as of the date of this
Reorganization Agreement.
ARTICLE II
THE MERGER
2.01. Merger. Upon satisfaction of the conditions set forth herein, at
the Effective Time of the Merger, Rural Valley shall merge with and into Laurel
in accordance with the provisions and procedures set forth herein, and Laurel
shall be the Resulting Bank. At the Effective Time of the Merger, the separate
corporate existence of Rural Valley shall cease and Laurel shall succeed to all
the rights, privileges, immunities and franchises, and all the property and
assets, real, personal and mixed, of Rural Valley without the necessity for any
separate conveyance or other transfer. Except as set forth in Section 4.04(g),
the Resulting Bank shall thereafter be responsible and liable for all
liabilities and obligations of every kind and description, and neither the
rights of creditors nor any liens on the property of Rural Valley shall be
impaired by the Merger.
2.02. Conversion of Shares of Common Stock.
(a) At the Effective Time of the Merger, each share of Rural Valley Common
Stock then outstanding, except Dissenters' Shares and treasury shares, shall be
converted into the right to receive 11.82 shares of BT Financial Common Stock
(the "Exchange Ratio").
(b) At the Closing Date, by virtue of the Merger, and without any action
on the part of the shareholders of Rural Valley, each of the then issued and
outstanding shares of Rural Valley Common Stock shall cease to exist and shall
be deemed canceled, retired and eliminated, and all rights in respect thereof
(other than with respect to Dissenters' Shares) shall cease except the herein
described rights to receive BT Financial Common Stock and cash, regardless of
whether the certificates representing such shares are surrendered to BT
Financial by the shareholders of Rural Valley.
(c) The Exchange Ratio shall be adjusted at the Effective Time of the
Merger to reflect any consolidation, split-up, other subdivision or combination
of BT Financial Common Stock, any dividend payable in BT Financial Common Stock,
or any capital reorganization involving the reclassification of BT Financial
Common Stock subsequent to the date of this Reorganization Agreement and prior
to such time.
A-7
<PAGE>
2.03. Articles of Incorporation; By-Laws. At the Effective Time of the
Merger, the articles of incorporation and bylaws of Laurel as in effect
immediately prior to the Effective Time of the Merger shall be the articles of
incorporation and bylaws of the Resulting Bank.
2.04. Directors and Officers. The directors and principal officers of
Laurel immediately prior to the Effective Time of the Merger shall be the
directors and principal officers of the Resulting Bank from and after the
Effective Time of the Merger.
2.05. Closing.
(a) The closing hereunder ("Closing") shall take place at the offices of
Pepper Hamilton LLP, One Mellon Bank Center, Pittsburgh, Pennsylvania 15219, or
such other place agreed upon by the Parties, on the Closing Date selected by the
Parties which shall be the latest of:
(i) Any business day within five business days after the receipt of
the approval of the Merger by the Department of Banking;
(ii) Any business day between the thirtieth and thirty-seventh day
following receipt of the last Regulatory Approval other than the
Regulatory Approval referred to in clause (ii), if all other
conditions set forth in Article VI have been satisfied or waived;
(iii) The fifth business day after any stay of any Regulatory
Approval or any injunction against consummation of the Merger is
lifted, discharged or dismissed, if all other conditions set forth in
Article VI have been satisfied or waived;
(iv) Such other date as shall be mutually agreed to in writing by the
Parties on which all other conditions set forth in Article VI shall
have been satisfied or waived.
(b) Any Party may postpone the Closing Date fixed under Section 2.05(a)
once for a reasonable period of time (which shall be no more than thirty (30)
days but in no event ending later than the day of automatic termination in
accordance with Section 2.07(g)) if necessary to enable it to perform any
obligations hereunder, provided, that such Party provides prompt written notice
to the other Parties of such postponement, stating the reasons therefor. If
Rural Valley, Laurel or BT Financial shall fail to close because all the
conditions precedent to its obligation to close shall not have been met on the
Closing Date as postponed, such Party may immediately terminate this
Reorganization Agreement by giving written notice of such termination to the
other Parties.
A-8
<PAGE>
2.06. Exchange of Certificates for Stock and Cash.
(a) Common Stock. After the Effective Time of the Merger, each holder of
a certificate for theretofore outstanding shares of Rural Valley Common Stock
will be entitled to receive in exchange therefor a certificate or certificates
representing the number of whole shares of BT Financial Common Stock to which
such shareholder is entitled as provided in Section 2.02 plus cash (payable by
check) in lieu of any fractional share of BT Financial Common Stock to which
such holder would otherwise be entitled. Such exchange will be effected upon
surrender of such certificate to BT Financial or its exchange agent, together
with a duly executed and completed Letter of Transmittal, which will be mailed
to each holder of a certificate for theretofore outstanding shares of Rural
Valley Common Stock by BT Financial or its exchange agent promptly following the
Effective Time of the Merger.
(b) Fractional Shares. Neither certificates nor scrip certificates for
fractions of shares of BT Financial Common Stock shall be issued. Holders of
Rural Valley Common Stock who would but for Section 2.06(a) be entitled to
receive fractions of shares of BT Financial Common Stock shall have none of the
rights with respect to such fractions of shares (including, without limitation,
the right to receive dividends) which a holder shall possess in respect of a
full share of BT Financial Common Stock issuable as a result of the Merger, and
each such holder shall receive, in lieu of the applicable fraction of a share of
BT Financial Common Stock, a cash payment therefor equal to such fraction of a
share of BT Financial Common Stock multiplied by the closing sales price on
NASDAQ for a share of BT Financial Common Stock on the Closing Date as reported
in the Wall Street Journal, or, if the BT Financial Common Stock is not traded
on such date, the next succeeding day on which such stock is traded. No
interest will be paid or accrued on cash payable upon surrender of certificates
previously representing Common Stock.
(c) Failure to Surrender Certificates. Until surrendered in accordance
with the provisions of this Section 2.06, the certificates which immediately
prior to the Effective Time of the Merger represented issued and outstanding
shares of Common Stock (except for certificates representing Dissenters' Shares
and treasury shares) shall from and after the Effective Time of the Merger
represent for all purposes only the right to receive BT Financial Common Stock.
Upon surrender of a certificate for theretofore outstanding shares of Rural
Valley Common Stock, there shall be paid to the recordholder of the certificate
for shares of BT Financial Common Stock issued in exchange therefor (i) on the
date of such exchange, the amount of dividends theretofore accrued and payable
with respect to such full shares of BT Financial Common Stock as of any date
subsequent to the Effective Time of the Merger which have not yet been paid to a
public official pursuant to abandoned property laws and (ii) at the appropriate
payment date, the amount of dividends with a record date after the Effective
Time of the Merger but prior to such surrender and a payment date subsequent to
such surrender. No interest shall be payable with respect to such dividends.
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(d) Treasury Shares and Dissenters' Shares. At the Effective Time of the
Merger, each share of Rural Valley Common Stock held in treasury shall be
canceled, retired and cease to exist and no consideration shall be paid
therefor, and each Dissenters' Share shall be treated in accordance with 12
U.S.C. Section 215(b), as amended.
2.07. Termination of this Reorganization Agreement. This Reorganization
Agreement and the transactions contemplated hereby may be terminated:
(a) At any time prior to the Effective Time of the Merger by mutual
consent of the Boards of Directors of BT Financial, Laurel and Rural Valley;
(b) As provided in Section 2.02(a);
(c) As provided in Section 2.05(b);
(d) At any time, by either Party hereto in writing, if the applications
for prior approval referred to in Section 4.05(e) hereof have been denied, and
the time period for appeals and requests for reconsideration has run;
(e) At any time, by either Party hereto in writing, if the stockholders
of do not approve the transactions contemplated herein at the annual or special
meetings duly called for that purpose;
(f) At any time, by either Party in writing, if any of the conditions
precedent to such Party's obligations to consummate the Merger has not been
satisfied, fulfilled or waived by the Party entitled to so waive on or before
the Closing Date, provided that the terminating Party has given the other Party
written notice with respect thereto at least 10 days prior to such termination
and has given the other Party a reasonable opportunity to discuss the matter
with a view to achieving a mutually acceptable resolution;
(g) In any event, automatically on March 31, 1999, if the Merger has not
been consummated on or before such date, unless extended by mutual consent of
the Parties.
Upon any termination hereunder,
(i) Sections 2.07 and 2.08 and Article VI hereof shall survive any
termination;
(ii) if BT Financial terminates this Reorganization Agreement under
Section 2.05(b) due to the failure of any of the conditions set forth
in Section 6.01 and satisfaction of such condition was within
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the control of Rural Valley, then Rural Valley shall reimburse BT
Financial for attorneys' fees and other expenses reasonably incurred
in connection with the Transactions (to the extent not already paid by
Laurel Valley to BT Financial or any of its Subsidiaries) and upon
payment in full thereof, shall have no further liability or obligation
hereunder to BT Financial; and
(iii) if Rural Valley terminates this Reorganization Agreement under
Section 2.05(b) due to the failure of any of the conditions set forth
in Section 6.02 and satisfaction of such condition was within the
control of BT Financial, then BT Financial shall reimburse Rural
Valley for attorneys' fees and other expenses reasonably incurred in
connection with the Transactions and upon payment in full thereof, BT
Financial shall have no further liability or obligation hereunder to
Rural Valley.
In no event shall the amount reimbursed for attorneys' fees and other
expenses reasonably incurred in connection with the Transactions under clauses
(ii) or (iii) of this Section 2.07 exceed $100,000.
2.08 Confidentiality. In connection with the Merger, each Party has
furnished and will furnish to the other Party, pursuant to this Reorganization
Agreement or otherwise, confidential information concerning its business and
financial condition. Each Party shall, and shall cause its employees, agents,
accountants, attorneys and investment advisors to, maintain the confidentiality
of such information received from the other Parties and shall not use such
information for any purpose except in furtherance of the Merger and the other
transactions contemplated hereby. In the event of a termination of this
Reorganization Agreement, upon request by a Party, the other Parties shall
return or destroy all copies of written confidential information received from
such Party, whether pursuant to this Reorganization Agreement or otherwise, and
all documents prepared by them which contain such information.
2.09. Public Disclosure. Each Party shall consult with the other Parties
before issuing any press release or making any other public disclosure regarding
the proposed Merger or the other transactions contemplated hereby and shall not
issue any press release or make any other public disclosure prior to such
consultations, except as may be required by law or by the rules of the NASD in
the opinion of counsel. A copy of such press release or public disclosure (or,
if not in written form, a written description thereof) shall be provided to the
other Parties prior to the dissemination thereof.
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ARTICLE III
SHAREHOLDER APPROVAL
3.01. Rural Valley Shareholders Meeting. Rural Valley shall submit this
Reorganization Agreement to its shareholders for approval in accordance with the
law and its articles of association and bylaws at a meeting duly convened and
held on such date as shall be agreed upon by the Parties. In connection with
such meetings, Rural Valley shall furnish the Prospectus/Proxy Statement to its
shareholders. The Board of Directors of Rural Valley shall recommend the
proposed Merger to its shareholders and use their best efforts to obtain the
affirmative vote of the shareholders required to approve the transactions
contemplated by this Reorganization Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.01. Representations and Warranties of Rural Valley. Rural Valley
represents and warrants to BT Financial and Laurel as follows:
(a) Organization and Capitalization. Rural Valley is a national banking
association duly organized and validly existing under the National Bank Act.
Except as set forth in Schedule 4.01(a), Laurel Valley has the corporate power
and authority to carry on its business as it is now being operated and to carry
out the transactions contemplated by this Reorganization Agreement. Rural Valley
's deposits are insured by the Bank Insurance Fund of the FDIC. The authorized
capital stock of Rural Valley consists of 40,000 shares of common stock having a
par value of $5.00 per share, of which 40,000 shares are issued and outstanding
as of the date hereof and no shares are held in the treasury of Rural Valley.
All issued and outstanding shares of Rural Valley Common Stock are validly
issued, fully paid and nonassessable. There is no subscription, option,
warrant, call, right, stock appreciation right or commitment of any kind
obligating to issue any of its stock or to acquire any of its stock under any
circumstances or to pay cash on account of stock appreciation. Rural Valley has
no subsidiaries.
(b) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger, when executed and delivered, will have been, duly
and validly authorized, executed and delivered by Rural Valley, subject only to
Regulatory Approvals and approval by the shareholders of Rural Valley, and each
constitutes the valid and binding obligations of Laurel Valley and are and will
be enforceable in accordance with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement nor the consummation of the transactions contemplated
hereby, nor compliance by Rural Valley with any of the provisions hereof or
thereof will (i) violate, or conflict with, or
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result in a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
imposition of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Rural Valley under any of the terms, conditions or
provisions of, (A) the articles of association or bylaws, as amended, of Rural
Valley or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Rural Valley is a
party or by which Rural Valley is bound or to which any of Rural Valley 's
properties or assets may be subject, except for such violations, conflicts,
breaches, defaults, terminations, accelerations, rights or impositions which
would not, in the aggregate, have a material adverse effect on Rural Valley 's
business or financial condition, or (ii) violate any judgment, ruling, order,
writ, injunction, decree, statute, rule or regulation applicable to Rural Valley
or any of its properties or assets.
(d) Financial Statements. Rural Valley has delivered to BT Financial
true, correct and complete copies of its unaudited financial statements for the
years ended December 31, 1995, 1996 and 1997, including its statements of
financial condition, statements of income, statements of stockholders' equity,
the notes thereto, and for the three months ended March 31, 1998, its statements
of financial condition and income. Such financial statements present fairly,
completely and accurately in all material respects Rural Valley 's financial
position, assets and liabilities and results of operations as of the dates and
for the periods covered thereby, and were prepared in accordance with generally
accepted accounting principles and practices within the banking industry
consistently applied, except that any unaudited interim financial statements are
subject to normal recurring year-end audit adjustments and do not contain all
footnotes required under generally accepted accounting principles. To the
knowledge of Rural Valley, there are no material obligations or liabilities
(whether absolute, accrued or contingent) which, in accordance with generally
accepted accounting principles, should be reflected in the financial statements
of Rural Valley or otherwise disclosed in the footnotes thereto and which are
not so reflected or disclosed, except as set forth in Schedule 4.01(d). Since
December 31, 1997, there has been no material adverse change in the financial
condition, assets, liabilities, income or operations of Rural Valley.
(e) Certain Changes. Since December 31, 1997, there has been (i) no
material change in the organization, key personnel or method of doing business
of Rural Valley, except for changes in the ordinary course of business, none of
which, individually or in the aggregate, has been material to the business or
financial condition of Rural Valley; (ii) no material damage, destruction or
casualty loss with respect to property owned or leased by Rural Valley (whether
or not covered by insurance) which affected or could affect the business or
financial condition or results of Rural Valley; (iii) no changes in the
authorized or issued shares of Rural Valley Common Stock and no declaration or
payment of distributions with respect to the Rural Valley Common Stock or
redemption or repurchase of any such shares, except for regular cash
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dividends not exceeding $2.00 per share per quarter; or (iv) no acquisition by
Rural Valley of the assets or more than 5% of the outstanding voting capital
stock of another corporation.
(f) Taxes. Rural Valley has filed when due all returns ("Returns") for
and paid in full all state, federal and local Taxes to the extent such filings
and payments were required prior to the date of this Reorganization Agreement.
Such filings comply with all applicable laws and are true, correct and complete
in all material respects. Any amounts set up as accruals or reserves in the
audited financial statements of Rural Valley are sufficient for the payment of
all Taxes, whether or not presently being asserted or assessed, the liability
for which has arisen from any action of Rural Valley prior to the dates of such
financial statements. No claims are currently being made by any taxing
authority with respect to any Return, and Rural Valley has no knowledge of any
basis for any such claims. Proper and accurate amounts have been withheld and
remitted by Rural Valley from and for their employees for all prior periods in
compliance with the tax withholding provisions of applicable federal, state and
local law. Rural Valley has not had any Tax deficiencies proposed or assessed
against it and has not executed any waiver or extended the statute of
limitations on the audit of any Return or the assessment or collection of any
Tax. Rural Valley has not made any payment, nor is it obligated to make any
payment, nor is it a party to any agreement that under certain circumstances
could obligate it to make any payment, that would not be deductible under Code
Sections 280G or 162(m).
(g) Litigation. No action, suit, investigation, claim or proceeding of
any nature or kind whatsoever, whether civil, criminal or administrative, by or
before any governmental body or arbitrator ("Litigation") is pending or, to the
knowledge of Rural Valley, threatened against or affecting Rural Valley, its
business, any of Rural Valley 's assets, any Rural Valley Common Stock, or any
of the transactions contemplated by this Reorganization Agreement, and, to the
knowledge of Rural Valley, there is no basis for any Litigation. Rural Valley
has not been a party to any other Litigation since December 31, 1992. There is
presently no outstanding judgment, decree or order of any governmental body
against or affecting Rural Valley, its business, any of Rural Valley 's assets,
any of Rural Valley 's Common Stock, or any of the transactions contemplated by
this Reorganization Agreement. Rural Valley does not have pending any
Litigation against any third party.
(h) Compliance with Laws. To the knowledge of Rural Valley, Rural Valley
is in compliance in all material respects with all laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof. Rural Valley has paid all assessments and
filed all reports and statements required to be filed with respect thereto under
the rules and regulations of the Comptroller.
(i) Agreements with Banking Authorities. Rural Valley is not a party to
any written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order or
directive by, the Comptroller or any other regulatory
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agency which restricts its activities in any manner, or in any manner relates to
the capital adequacy, credit policies or management of Rural Valley, nor has
Rural Valley been advised by any such regulatory agency that it is
contemplating, issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, directive, agreement, memorandum of
understanding, commitment letter or similar undertaking.
(j) Regulatory Reports. Rural Valley has made available for inspection by
BT Financial (i) copies of all reports, if any, to the Comptroller and (ii) all
material notices, reports and review letters received from the Comptroller or
any other governmental agency.
(k) Loans. Each loan outstanding on the books of Rural Valley is
reflected correctly in all material respects by the loan documentation relating
thereto, was made in the ordinary course of business, was not known to be
uncollectible at the time it was made, and was made in accordance with Rural
Valley 's standard loan policies. Rural Valley has not received notice from any
obligor on any such loan of a dispute with respect to the loan or that the loan
may be unenforceable against the obligor. All loans sold by Rural Valley,
including whole loans and participations, were sold without recourse.
As of December 31, 1997, except as set forth in Schedule 4.01(k) attached
hereto, Rural Valley: (i) had no loans, of any type or character, in its
portfolio (A) exceeding its lending limits under applicable provisions of
Pennsylvania and federal law, or (B) in violation of Regulation 0 or 12 C.F.R.
Part 215, or similar provisions under Pennsylvania law; (ii) had no loan in its
portfolio in excess of $250,000 which was not secured by a mortgage, note, deed
of trust, security agreement or other security and (iii) had no loans, of any
type or character, in its portfolio in excess of $250,000 which were or should
have been as of such date (A) considered non-performing or placed on a non-
accrual status or (B) classified by as other loans specially mentioned,
substandard, doubtful or loss loans, except in any case such loans as were
listed on Rural Valley 's most recent internal classified asset report, a copy
of which has been made available to BT Financial. For purposes of this
Reorganization Agreement, "non-performing" and "non-accrual" shall mean any loan
delinquent for 90 days or more as to the payment of interest and/or principal.
(l) Loan Loss Reserve. The loan loss reserve maintained by for all loans
in its portfolio is in the best judgment of Rural Valley management, adequate in
all material respects under the requirements of generally accepted accounting
principles and practices within the banking industry to cover all material known
and anticipated risks of nonpayment with regard to Rural Valley 's loan
portfolio.
(m) Core Deposits. Rural Valley has delivered to, or made available for
inspection by, BT Financial a summary of the total amounts held by depositors
that in the aggregate each have less than $100,000 on deposit with Rural Valley
("Core Deposits"). In addition, Rural Valley has
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delivered to, or made available for inspection by, BT Financial a complete list
of all depositors that have monies on deposit at Rural Valley that are not Core
Deposits.
(n) Real Property. Rural Valley has good and marketable title to the real
property (including real estate owned or acquired through foreclosure) listed in
Schedule 4.01(n) ("Owned Real Property"), free and clear of all material liens,
leases, security interests, title retention agreements, encumbrances,
restrictions, conditions, charges, equities and claims, except those referred to
in Rural Valley 's statement of financial condition dated December 31, 1997 or
the notes thereto, liens for current Taxes not yet due and payable, any unfilled
mechanics' liens and such encumbrances and imperfections of title, if any, as
are not substantial in character or amount or do not otherwise materially impair
Rural Valley. The present uses of the Owned Real Property are in compliance
with the present zoning classifications assigned to such real property, and all
improvements constructed on the land included in the Owned Real Property have
been constructed in all material respects in accordance with the requirements of
all applicable building, health, safety, environmental, zoning and other
federal, state and local laws, ordinances, regulations, codes, licenses or
permits applicable at the time of such construction, do not contain any defect
in design or construction or otherwise, and have access to existing highways,
roads and utility services. Rural Valley has not received any notice or request
from any governmental authority, utility, insurer, board of fire authorities or
similar organization for the performance of any work or alteration with respect
to the Owned Real Property or for the termination or limitation of any access,
services or insurance with respect thereto. All such Owned Real Property is
adequately insured against loss, except with respect to Environmental
Conditions. Rural Valley does not own any real property not listed in Schedule
4.01(n).
(o) Environmental. Except as disclosed in Schedule 4.01(o) attached
hereto:
(i) To the best of Rural Valley 's knowledge, there are no
Environmental Conditions; the term "Environmental Condition" means (A)
the presence in surface water, groundwater, drinking water supply,
land surface, subsurface strata, above-ground or underground storage
tanks or other containers, or ambient air of any pollutant,
contaminant, industrial waste, hazardous waste, polychlorinated
biphenyls, radioactive materials, toxic or hazardous substances
("Hazardous Substances") or (B) any violation of any statute,
ordinance, regulation, administrative order, judicial order or decree
or other governmental requirement relating to the emission, discharge,
deposit, disposal, leaching, migration or release of any Hazardous
Substance into the environment or the generation, treatment, storage,
transportation or disposal of any Hazardous Substance (i) arising out
of or otherwise related to the operations or other activities
(including the disposition of such
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materials or substances) of Rural Valley or of any predecessor in
title, interest or line of business to Rural Valley, conducted or
undertaken prior to the Closing, or (ii) existing at or prior to the
Closing at any Owned Real Property, any real property leased by Rural
Valley ("Leased Real Property"), any real property securing
outstanding loans ("Secured Real Property"), or any property
previously owned, leased, occupied, used or foreclosed upon ("Prior
Property");
(ii) No investigation, administrative order, consent order,
agreement, litigation or settlement with respect to any Environmental
Condition is proposed, threatened or in existence, and Rural Valley
has received no communication from or on behalf of any governmental
authority that alleges that any such Environmental Condition exists;
(iii) Rural Valley has obtained, holds, and will maintain all
permits, licenses, authorizations, consents, approvals, waivers,
variances or exemptions ("Governmental Approvals") issued by any
federal, state, local, foreign, regional or other judicial,
governmental, administrative or regulatory authority or
instrumentality ("Governmental Authority") required under any federal,
state, local or foreign statutory or common law, rule, regulation,
ordinance, code, policy, guidelines or Governmental Approvals,
relating to Environmental Law for the ownership, use, occupation,
operation and other activities of Rural Valley, any Owned Real
Property, Leased Real Property, Secured Real Property and Prior
Property. Rural Valley has made to any Governmental Authority all
filings, reports, registrations, notices or other submissions
("Governmental Filings") required under Environmental Laws with
respect to the ownership, use, occupation, operation and other
activities of Rural Valley and the Owned Real Property, Leased Real
Property, Secured Real Property and any Prior Property. Such required
Governmental Approvals and Governmental Filings are listed on Schedule
4.01(o) attached hereto. The term "Environmental Law" means all
statutory and common law, rules, regulations, ordinances, Governmental
Approvals, guidelines, policies, judicial or administrative orders or
decrees of any federal, state or local Governmental Authority relating
to the protection of human health and safety or the environment.
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(iv) Rural Valley has not transported or disposed of any Hazardous
Substances or arranged for the transportation or disposal of such
Hazardous Substances to any location which is listed or to the
knowledge of Rural Valley proposed for listing under CERCLA, a
comparable state statute or other Environmental Law, or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to claims against Rural Valley for
clean-up costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under
CERCLA. None of the Owned Real Property, Leased Real Property,
Secured Real Property or Prior Property is listed or, to the knowledge
of Rural Valley, proposed for listing under CERCLA or a comparable
state or other Environmental Law.
(v) Each of the Governmental Approvals set forth in Schedule 4.01(o)
is in full force and effect and is final, any fixed period for appeal
or review having elapsed (other than as to ongoing compliance or
modification during the term of such Governmental Approval as
otherwise provided by law or as indicated in Schedule 4.01(o)). No
such Governmental Approval is subject to any pending suit, action,
investigation of which Rural Valley has notice, proceeding or appeal
(whether judicial, administrative or otherwise) and, to the best of
Rural Valley 's knowledge, no such matter is threatened.
(vi) To the knowledge of Rural Valley, with respect to its operation
or other activities, any Owned Real Property, Leased Real Property,
Secured Real Property or Prior Property, Rural Valley has complied in
all material respects with, and currently is in compliance in all
material respects with: (A) the terms and conditions of all
Governmental Approvals issued or required pursuant to any
Environmental Law, and (B) all other limitations, restrictions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in any Environmental Law, or in any written
notice, order, or demand letter issued, entered, promulgated, or
approved pursuant to any Environmental Law;
(vii) Rural Valley has not received any notice of violation or other
notification from any Governmental Authority, or any written notice
from any third party, alleging that Rural Valley is now or has been in
violation of any Environmental Law;
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(viii) To the knowledge of Rural Valley, no ozone depleting
substances ("ODS"), polychlorinated biphenyls ("PCBs"), asbestos
containing material ("ACM"), or urea formaldehyde insulation ("UFI")
is present on or at any Owned Real Property, Leased Real Property,
Secured Real Property or any Prior Property, and Rural Valley has
complied with all regulatory requirements relating to the storage,
removal, disposal or release, if any, of ODS, ACM, PCB, or UFIs which
currently are or may in the past have been located on or at any Owned
Real Property, Leased Real Property, Secured Real Property and any
Prior Property.
(ix) To the knowledge of Rural Valley, there are not now any
underground or aboveground storage tanks and associated piping
("Storage Tanks") on or at any Owned Real Property, Leased Real
Property, Secured Real Property or Prior Property, nor has Rural
Valley owned or operated Storage Tanks at any time.
(x) With respect to the ownership, use, occupation, operation and
other activities of Rural Valley, any Owned Real Property, Leased Real
Property, Secured Real Property and any Prior Property, Rural Valley
has not received any written request for information from any
Governmental Authority or other Person related to any site which is,
or may be, subject to actions for removal, response, remediation or
cleanup of Hazardous Substances, including, but not limited to, any
information request pursuant to CERCLA, comparable state statutes, or
other Environmental Law;
(xi) Neither Rural Valley nor, to the knowledge of Rural Valley, any
other Person ever caused or permitted any Hazardous Substances to be
placed, stored, treated, handled or located on, under or at any Owned
Real Property, Leased Real Property, Secured Real Property or Prior
Property or any part thereof other than in the ordinary course of
business and in compliance with all Environmental Laws.
(xii) Rural Valley has complied in all material respects with all
applicable provisions of any Environmental Laws that condition,
restrict or prohibit the transfer, sale, lease or closure of any
property for environmental reasons; no environmental lien has attached
to any portion of Rural Valley or any Owned Real Property, Leased Real
Property, Secured Real Property or Prior
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Property, and no governmental actions have been taken or are in
progress that could subject any or all of the foregoing to any such
lien.
(xiii) There have been no past and there are no pending or
contemplated claims by Rural Valley, under any Environmental Laws
based on actions of others that may have impacted any Owned Real
Property, Leased Real Property, Secured Real Property or Prior
Property, and Rural Valley has not entered into any agreement with any
Person regarding liabilities or responsibilities with respect to (i)
any Environmental Law, (ii) remedial action or (iii) other
environmental expense (including contingent liabilities).
(xiv) Rural Valley has not agreed to retain, assume or guarantee the
costs of any investigation, removal, response, remediation or cleanup
of any property.
(xv) Rural Valley has provided copies of all material reports,
documents and other information pertaining to compliance with
Environmental Laws and environmental matters or liabilities arising
out of, resulting from or in connection with the operations of Rural
Valley, any Owned Real Property, Leased Real Property, Secured Real
Property or Prior Property.
(p) Personal Property. All personal property used by Rural Valley in its
business is either owned or leased by Rural Valley and is suitable for the
operations and business as currently conducted by Rural Valley.
(q) Leases. All leased real property and leased personal property of
Rural Valley is listed in Schedule 4.01(q) attached hereto. Except as disclosed
in Schedule 4.01(q), no consents or approvals are required under the leases for
such property in connection with the transactions contemplated by this
Reorganization Agreement.
(r) Material Contracts. True, correct and complete copies of all material
contracts, agreements, plans, loans, leases, indentures, mortgages, instruments,
or other commitments, arrangements, understandings, letters of credit or
undertakings, oral or written, formal or informal, to which Rural Valley is a
party or otherwise bound or to which its assets may be affected have been
submitted or made available to BT Financial or are included as part of Schedule
4.01(r) (hereinafter referred to individually as a "Contract" and collectively
as the "Contracts"). There is no breach or default (or an event which, with
notice or lapse of time or both, would constitute a default) by Rural Valley of
or with respect to any provision of any Contract to which Rural Valley is a
party that could have a material adverse effect upon the
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financial condition, operations, results of operations or business of Rural
Valley. All such Contracts, including but not limited to all contracts relating
to the purchase and sale of loans, are or will be assignable to BT Financial or
Laurel, as the case may be, without further action thereby effective as of the
Closing Date, except as listed in Schedule 4.01(r). Rural Valley is not
currently renegotiating any Contract.
(s) Insurance. Rural Valley is not in default with respect to any
provisions of any liability or other forms of insurance held by it or has failed
to give any notice or present any claim thereunder in a due and timely fashion.
All polices of insurance are in full force and effect and are carried in an
amount and are otherwise adequate to protect Rural Valley from any material
adverse loss on a consolidated basis. Rural Valley has not been denied any
application for insurance or had any policy of insurance terminated during the
past three years, nor has Rural Valley been notified of any pending termination.
(t) Employee Benefits.
(i) Benefit Plans; Company Plans. Schedule 4.01(t) discloses all
written and unwritten "employee benefit plans" within the meaning of
Section 3(3) of ERISA, and any other written and unwritten profit
sharing, pension, savings, deferred compensation, consultant, bonus,
fringe benefit, insurance, medical, medical reimbursement, life,
disability, accident, post-retirement health or welfare benefit, stock
option, stock purchase, sick pay, vacation, employment, severance,
termination or other incentive, welfare or employee benefit plan,
agreement, contract, policy, trust fund or arrangement (each a
"Benefit Plan"), whether or not funded and whether or not terminated,
(i) maintained or sponsored by Rural Valley, or (ii) with respect to
which Laurel Valley has or may have liability or is obligated to
contribute, or (iii) that otherwise covers any of the current or
former employees of Laurel Valley or their beneficiaries, or (iv) as
to which any such current or former employees or their beneficiaries
participated or were entitled to participate or accrue or have accrued
any rights thereunder (each, a "Company Plan"). For each Company Plan,
to the extent applicable to each such Company Plan, complete copies of
the following have been delivered to BT Financial: (i) the documents
embodying the Company Plans, including the plan documents, all
amendments thereto, the related trust or funding agreements,
investment management agreements, administrative service contracts,
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insurance contracts, union or trade agreements and, in the case of any
unwritten Company Plans, written descriptions thereof; (ii) annual
reports including Forms 5500 and all schedules thereto for the last
three years; (iii) financial statements for the last three years; (iv)
actuarial reports, if applicable, for the last three years; and (v)
each communication (other than routine communications) received by
from or furnished by Rural Valley to the Service, DOL, PBGC or other
governmental authorities. Rural Valley has also furnished to BT
Financial a copy of the current summary plan description and each
summary of material modification prepared in the last three years for
each Company Plan, and all employee manuals, handbooks, policy
statements and other written materials given to employees relating to
any Company Plans. No oral or written representations or commitments
inconsistent with such written materials have been made to any
employee of Rural Valley by any member of the Company Group or any
employee or agent thereof.
(ii) Company Group Matters. Rural Valley has never been a member of
a controlled group of corporations within the meaning of Sections
414(b), (c), (m) or (o) of the Code.
(iii) Compliance. Each of the Company Plans and all related trusts,
insurance contracts and funds have been created, maintained, funded
and administered in all material respects in compliance with all
applicable Laws including, without limitation, all applicable
requirements of the Code and any predecessor federal income tax laws,
ERISA, the health care continuation requirements of COBRA, and any
applicable collective bargaining agreements. Without limiting the
generality of the foregoing, Rural Valley has provided all notices and
other correspondence to employees and former employees required by the
health care continuation provisions of COBRA. Each of the Company
Plans and all related trusts, insurance contracts and funds have also
been created, maintained, funded and administered in all material
respects in compliance with applicable law, the plan document, trust
agreement, insurance policy or other writing creating the same or
applicable thereto. To the knowledge of Rural Valley, no Company Plan
is or is proposed to be under audit or investigation, and no completed
audit of any Company Plan has resulted in the imposition of any Tax,
fine or penalty.
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(iv) Qualified Plans. Schedule 4.01(t) discloses each Company Plan
that purports to be a qualified plan under Section 401(a) of the Code
and exempt from United States federal income tax under Section 501(a)
of the Code (a "Qualified Plan"). Each Qualified Plan has received a
determination letter (or opinion or notification letter, if
applicable) from the Service that such plan is qualified under Section
401(a) of the Code and exempt from federal income tax under Section
501(a) of the Code. No Qualified Plan has been amended since the date
of the most recent such letter in a manner that might adversely affect
the qualification of such plan under sections 401(c) and 501(a) of the
Code. No member of the Company Group, nor any fiduciary of any
Qualified Plan, nor any agent of any of the foregoing, has done
anything that would adversely affect the qualified status of a
Qualified Plan or the qualified status of any related trust.
(v) Defined Benefit Plans; Multi-employer Plans. Rural Valley has
never had a Company Plan that was a defined benefit plan as defined in
Section 3(35) of ERISA (a "Defined Benefit Plan"). No Company Plan is
a multi employer plan as defined in Section 3(37) or 4001(a)(3) of
ERISA. Rural Valley has no material liability for any Company Plan
that is not accrued on the December 31, 1997 Balance Sheet or, that
has arisen after December 31, 1997 and on and before the Closing.
(vi) Prohibited Transactions; Fiduciary Duties; Post-Retirement
Benefits. No prohibited transaction (within the meaning of Section
406 of ERISA and Section 4975 of the Code) with respect to any Company
Plan exists or has occurred that could subject Rural Valley, directly
or indirectly, to any material liability or Tax under Part 5 of Title
I of ERISA or Section 4975 of the Code. No reportable event (within
the meaning of Section 4043(b) of ERISA) with respect to any Company
Plan exists or has occurred that could result in any tax or liability
material to Rural Valley. No member of the Company Group, nor any
administrator or fiduciary of any Company Plan, nor any agent of any
of the foregoing, has engaged in any transaction or acted or failed to
act in a manner that could subject Rural Valley, directly or
indirectly, to any material liability for a breach of fiduciary or
other duty under ERISA or any other applicable law. With the exception
of the requirements of Section 4980B of the Code, no post-retirement
benefits are
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provided under any Company Plan that is a welfare benefit plan as
described in ERISA Section 3(1).
(vii) Except as set forth on Schedule 4.01(t), the consummation of
the transactions contemplated hereby will not create, accelerate or
increase any liability under any Company Plan because of the creation,
acceleration or increase of any rights or benefits to which employees
are entitled hereunder, and no payment required under any Company Plan
in connection with the transactions contemplated hereby shall be non-
deductible for federal income tax purposes by, reason of Section 280G
of the Code.
(u) Labor Relations. There are no pending or threatened labor disputes
with any employees of Rural Valley. Rural Valley is not a party to a collective
bargaining agreement with any of its employees. Rural Valley has no existing
employment contracts with any of its current or former employees, directors or
officers.
(v) Related Party Transactions. Rural Valley has no current contractual
arrangement with or commitment to or from any of its officers, directors or
employees other than such as are terminable at will. All current extensions of
credit to the shareholders, officers, directors and employees of Rural Valley as
well as business organizations and individuals associated with Rural Valley have
been made in the ordinary course of Rural Valley's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other banking customers, and did not, at
the time they were entered into, involve more than the normal risk of
collectibility or present other unfavorable features and are in compliance with
all applicable regulations of the FDIC. Since December 31, 1992, all
transactions with the shareholders, officers, directors and employees of Rural
Valley have complied in all material respects with the rules of the FDIC
regarding such transactions, including delivery of all reports required
thereunder. The transactions contemplated by this Reorganization Agreement will
not (either alone, or upon the occurrence of any act or event, lapse of time or
the giving of notice or failure to cure) result in any payment (severance or
otherwise) becoming due from any of the Parties to any director, officer or
employee of Rural Valley, except as contemplated herein.
(w) Fidelity Bonds. Rural Valley maintained continuously fidelity bonds
insuring it against acts of dishonesty by each of its employees in aggregate
amounts as are customary, usual and prudent for banking institutions of its
size, which coverage currently is $1,000,000.00. Since December 31, 1992, there
have been no claims under such bonds, and is not aware of any facts which would
form the basis of a claim under such bonds. Rural Valley has no reason to
believe that its fidelity coverage will not continue to be available on
substantially the same terms as its existing coverage.
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(x) Representations Not Misleading. No representation or warranty by
Rural Valley in this Reorganization Agreement contains, and no written
statement, exhibit or schedule furnished to BT Financial by or on behalf of
Rural Valley under this Reorganization Agreement will contain as of the date
thereof, any untrue statement of a material fact or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading in any material respect, when taken as a whole.
(y) Information Provided by Rural Valley. All information to be provided
in writing by Rural Valley for use in the Prospectus/Proxy Statement in
connection with the meeting of Rural Valley shareholders contemplated hereby or
in any application made by BT Financial to the Service or to any other
governmental or regulatory body in connection with the Merger, and the
information to be provided in writing by Rural Valley for use in the
Registration Statement, including any prospectus contained therein, will comply
in all material respects with applicable laws and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they are made, not misleading.
(z) Consents and Approvals. Except for: (i) the filing with any federal
or state governmental authority of a Prospectus/Proxy Statement, a Registration
Statement and any other applicable securities filings relating to the issuance
of BT Financial Common Stock and the meeting of the shareholders of Rural
Valley; (ii) Regulatory Approvals; (iii) the approval of the shareholders of
Rural Valley; (iv) the obtaining of third party consents as set forth in the
Schedules attached hereto; and (v) the expiration of any regulatory waiting
period, no consents or approvals of or filings or registrations with any third
party or any public body, agency or authority are necessary in connection with
the execution and delivery by Rural Valley of this Reorganization Agreement and
its performance of the transactions contemplated hereby.
(aa) Investments. Except as set forth in Schedule 4.01(aa)(iii) attached
hereto: (i) the investments reflected in Rural Valley 's statement of financial
condition as of December 31, 1997 are a true, correct and complete list of the
investments of Rural Valley; (ii) none of such investments are in real estate,
equity securities or corporate debt securities not of investment grade as
defined in Section 28(d) of the FDIA; (iii) no restrictions, contractual,
statutory or other, exist which would impair the ability of BT Financial to
freely dispose of such investments at any time; (iv) Rural Valley does not
engage in interest rate hedging contracts; (v) Rural Valley does not engage in
other off-balance sheet activities requiring disclosure under Statement on
Financial Accounting Standards Number 105; (vi) all mortgage-backed securities
contained in the portfolio of Rural Valley are insured or guaranteed by the
FHLMC, FNMA, or GNMA, or qualify as high quality mortgage related securities;
and (vii) the investment portfolio of Rural Valley does not contain any
agreement, document or instrument that could be considered a high risk
collateralized mortgage obligation under applicable financial institutions
regulatory guidelines.
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(bb) Intellectual Property. Rural Valley has no (i) patents, trademarks,
tradenames, and copyrights and applications therefor or (ii) trade secrets
(collectively referred to as the "Intellectual Property"). No claim, suit or
action is pending or, to the knowledge of Rural Valley, threatened alleging that
Rural Valley is infringing upon the intangible property rights of others, or
that their use of the Intellectual Property infringes or conflicts with the
rights of others.
(cc) Minute Books. The minute books of Rural Valley, which have been and
will continue to be made available through the Closing Date to BT Financial,
contain true, correct and complete records of all meetings of the shareholders,
the Board of Directors and all committees thereof and accurately reflect all of
the corporate action of the shareholders, the Board of Directors and all
committees thereof.
(dd) Reverse Repurchase Agreements. Rural Valley has no agreements
pursuant to which Rural Valley has purchased securities subject to an agreement
to resell.
(ee) Shareholder and FDIC Reports. Rural Valley has delivered to, or made
available for inspection by, BT Financial copies of all reports to its
shareholders and the FDIC made by it with respect to the three (3) years ended
December 31, 1997 and for all calendar quarters subsequent thereto. All such
reports do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(ff) Deposit Insurance. The deposits of Rural Valley are insured by the
Bank Insurance Fund of the FDIC in accordance with the provisions of the FDIA,
and Rural Valley has paid all assessments and filed all reports required by the
FDIA.
(gg) Pooling; Reorganization. Rural Valley is not aware of any reason why
the Merger may not qualify for pooling-of-interests accounting treatment or as a
reorganization under Section 368(A) of the Code.
4.02. Representations and Warranties of BT Financial.
BT Financial represents and warrants to Rural Valley as follows:
(a) Organization and Capitalization. BT Financial is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has full power and authority to carry on its
business as it is now being operated and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized capital stock of
BT Financial consists of 20,000,000 shares of common stock having a par value of
$5.00 per share, of which 12,500,872 shares are issued and outstanding as of the
date hereof, and 2,000,000
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shares of preferred stock, none of which are issued and outstanding. All issued
and outstanding shares of BT Financial Common Stock are validly issued, fully
paid and nonassessable and all shares of BT Financial Common Stock to be issued
in the Merger shall be validly issued, fully paid and nonassessable.
(b) Authority for Transactions. This Reorganization Agreement has been
and the Articles of Merger, when executed and delivered, will have been, duly
and validly authorized, executed and delivered by BT Financial, subject only to
receipt of Regulatory Approvals, and each constitute and will constitute the
valid and binding obligations of BT Financial and are and will be enforceable in
accordance with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by BT Financial, nor the consummation of the
transactions contemplated hereby, nor compliance by BT Financial with any of the
provisions hereof will (i) violate, or conflict with, or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the imposition of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
BT Financial or any of its Subsidiaries under any of the terms, conditions or
provisions of, (A) the articles of association or bylaws, as amended, of BT
Financial, or (B) any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which BT Financial or any
of its Subsidiaries is a party or by which any of them is bound or to which any
of their respective properties or assets may be subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations, rights
or impositions which would not, in the aggregate, have a material adverse effect
on BT Financial's business or financial condition on a consolidated basis, or
(ii) subject to compliance with all applicable statutes and regulations, violate
any judgment, ruling, order, writ, injunction, decree, statute, rule or
regulation applicable to them or any of their respective properties or assets.
(d) Financial Statements. BT Financial has delivered to Rural Valley
correct and complete copies of its audited consolidated financial statements,
including its consolidated balance sheets, consolidated statements of income,
consolidated statements of cash flows, consolidated statements of changes in
shareholders' equity and the notes thereto, for the years ended December 31,
1995, 1996 and 1997, and its unaudited interim consolidated balance sheets,
statements of income and statements of cash flow for the three months ended
March 31, 1998 included in its quarterly report Form 10-Q for the three months
then ended as filed with the SEC. Such financial statements present fairly,
completely and accurately BT Financial's consolidated financial position, assets
and liabilities and results of operations as of the dates of and for the periods
covered thereby and were prepared in accordance with generally accepted
accounting principles and practices within the banking industry consistently
applied, except that any unaudited interim financial statements are subject to
normal, recurring year-end adjustments and
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<PAGE>
do not contain all footnotes required under generally accepted accounting
principles. To the knowledge of BT Financial, there are no material obligations
or liabilities (whether absolute, accrued or contingent) which, in accordance
with generally accepted accounting principles, should be reflected in the
consolidated financial statements of BT Financial or otherwise disclosed in the
footnotes thereto and which are not so reflected or disclosed. Since December
31, 1997, there has been no material adverse change in the consolidated
financial condition, assets, liabilities, income or operations of BT Financial
taken as a whole.
(e) Certain Changes. Since December 31, 1997, there has been: (i) no
material adverse change in the organization, key personnel or method of doing
business of BT Financial or any of its Subsidiaries, except for changes in the
ordinary course of business, none of which, individually or in the aggregate,
has been material to the business or financial condition of BT Financial on a
consolidated basis; or (ii) no material damage, destruction or casualty loss
with respect to property owned or leased by BT Financial or any of its
Subsidiaries (whether or not covered by insurance) which affected or could
affect the business or financial condition or results of BT Financial on a
consolidated basis; or (iii) no acquisition by BT Financial of the assets or
more than 5% of the outstanding voting capital stock of another savings
association, bank or company, except for any future acquisitions.
(f) Litigation. Except for any matters referred to in its financial
statements referred to in Section 4.02(d): (i) there are no suits, actions,
investigations (formal or informal), proceedings or claims pending or, to the
knowledge of BT Financial, threatened against BT Financial or any of its
Subsidiaries or their respective assets or business or against their respective
officers or directors (in their capacity as such) in law or at equity or before
any governmental agency which are reasonably expected by BT Financial to have a
material adverse effect on the business, properties, assets, operations or
liabilities of BT Financial on a consolidated basis, or its right to conduct its
business as presently conducted, and (ii) neither BT Financial nor any of its
Subsidiaries is presently subject to any injunction, order or other decree of
any court or other governmental agency of competent jurisdiction.
(g) Compliance with Laws. To the knowledge of BT Financial, BT Financial
and each of its Subsidiaries are in compliance in all material respects with all
laws and regulations applicable to their respective operations or with respect
to which compliance is a condition of engaging in the business thereof, except
for failures to comply which, in the aggregate, would not have a material
adverse effect on the conduct of, or the financial or other condition of, BT
Financial's business on a consolidated basis. BT Financial and its Subsidiaries
have paid all assessments and filed all reports and statements required to be
filed with respect thereto under the rules and regulations of the Department of
Banking, the Federal Reserve and the FDIC.
(h) SEC and Shareholder Reports. BT Financial has delivered to Rural
Valley, or made available for inspection by Rural Valley, all reports to its
shareholders and the SEC made by it
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with respect to the four (4) years ended December 31, 1997. All such reports do
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(i) Registration Statement. All information relating to BT Financial and
its Subsidiaries which is included in the Registration Statement at the time it
becomes effective and each amendment or supplement thereto will be accurate and
complete, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(j) Representations Not Misleading. No representation or warranty by BT
Financial in this Reorganization Agreement contains, and no written statement,
exhibit or schedule furnished to by or on behalf of BT Financial under this
Reorganization Agreement will contain as of the date thereof, any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not misleading in
any material respect, when taken as a whole.
(k) Information Provided by BT Financial. All information to be provided
in writing by BT Financial for use in the Prospectus/Proxy Statement in
connection with the meeting of shareholders of Rural Valley contemplated hereby
or in any application made by BT Financial to the Service or to any other
governmental or regulatory body in connection with the Merger, and the
information to be provided in writing by BT Financial for use in the
Registration Statement, including any prospectus contained therein, will comply
in all material respects with applicable laws and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they are made, not misleading.
(l) Consents and Approvals. Except for: (i) the filing with any federal
or state governmental authority of a Prospectus/Proxy Statement, a Registration
Statement and any other applicable securities filings relating to the issuance
of BT Financial Common Stock and the meeting of Rural Valley shareholders at
which the Merger is to be considered and the review and clearance thereof by
such governmental authorities, (ii) receipt of Regulatory Approvals, and (iii)
the expiration of any regulatory waiting period, no consents or approvals of or
filings or registrations with any third party or any public body, agency, or
authority are necessary in connection with the execution and delivery by BT
Financial of this Reorganization Agreement and its performance of the
transactions contemplated hereby.
(m) Agreements with Banking Authorities. Neither BT Financial nor any of
its Subsidiaries is a party to any written agreement or memorandum of
understanding with, or a
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party to any commitment letter or similar undertaking to, or is subject to any
order or directive by, the Department of Banking, the Federal Reserve or the
FDIC, which restricts its activities in any manner, or in any manner relates to
the capital adequacy, credit policies or management of BT Financial and its
Subsidiaries, nor has BT Financial or any of its Subsidiaries been advised by
any such regulatory agency that it is contemplating, issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
directive, agreement, memorandum of understanding, commitment letter or similar
undertaking.
4.03. Representations and Warranties of Laurel.
(a) Organization and Capitalization. Laurel is a bank and trust company
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and is a member of the Federal Reserve System.
Laurel has full power and authority to carry on its business as it is now being
operated and to carry out the transactions contemplated by this Reorganization
Agreement. The authorized, issued and outstanding capital stock of Laurel
consists of 981,864 shares of common stock having a par value of $5.00 per
share. All issued and outstanding shares of Laurel Common Stock are validly
issued, fully paid and nonassessable and are owned of record and beneficially by
BT Financial.
(b) Authority for Transactions. This Reorganization Agreement has been
and the Articles of Merger, when executed and delivered, will have been, duly
and validly authorized, executed and delivered by Laurel, subject only to
receipt of Regulatory Approvals, and constitute and will constitute the valid
and binding obligations of Laurel and are and will be enforceable in accordance
with their respective terms.
(c) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement by Laurel, nor the consummation of the transactions
contemplated hereby, nor compliance by Laurel with any of the provisions hereof
will (i) violate, or conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Laurel or any of
its Subsidiaries under any of the terms, conditions or provisions of, (A) the
articles of association or bylaws, as amended, of Laurel, or (B) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Laurel is a party or by which Laurel is bound
or to which any of its properties or assets may be subject, except for such
violations, conflicts, breaches, defaults, terminations, accelerations, rights
or impositions which would not, in the aggregate, have a material adverse effect
on Laurel's business or financial condition, or (ii) subject to compliance with
all applicable statutes
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and regulations, violate any judgment, ruling, order, writ, injunction, decree,
statute, rule or regulation applicable to Laurel or any of its properties or
assets.
(d) Pooling; Reorganization. Laurel is not aware of any reason why the
Merger may not qualify for pooling-of-interests accounting treatment or as a
reorganization under Section 368(A) of the Code.
4.04. Covenants of All Parties. Each of the Parties covenants and agrees
that:
(a) Conduct of Business. From and after the date hereof and until the
Closing Date, each Party shall, and shall cause each of its Subsidiaries to:
(i) carry on its business diligently and substantially in the same
manner as heretofore and, except as otherwise provided in this
Reorganization Agreement, will not institute any unusual or novel
methods of management or operation of its properties or business;
(ii) maintain its books and records in the usual, ordinary and normal
course;
(iii) promptly advise the other Parties in writing of (A) the
initiation of any litigation of any kind against it or any litigation
by it, and (B) the happening of any event which in the reasonable
belief of its management may have an adverse effect on either Laurel,
Rural Valley or BT Financial on a consolidated basis, as the case may
be;
(iv) continue in effect its present insurance coverage at the present
levels on all properties, assets, business and personnel;
(v) use its best efforts to preserve its business organization
intact, to keep available its present employees, to preserve its
relationships with customers and others having business dealings with
it and to maintain all of its tangible property in customary repair,
order and condition (reasonable wear and tear excepted); and
(vi) ensure that its executive officers shall meet periodically with
the executive officers of the other Parties to exchange information on
their respective institutions, and to facilitate an orderly transition
following the Closing Date.
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(b) Environmental Studies. Within forty-five days following the date of
this Reorganization Agreement, BT Financial shall cause to be completed, at its
sole cost and expense, a Phase I environmental assessment ("Phase I assessment")
of all real estate owned by Rural Valley (the "Premises") and shall deliver a
copy of each such Phase I assessment to Rural Valley. If BT Financial should
determine pursuant to the results of any such Phase I assessment that (A) there
has been an Environmental Condition affecting the Premises or any storage,
discharge, disposal, release or emission of any Hazardous Substance in, on or
from the Premises and (B) BT Financial reasonably believes that it could become
responsible for the remediation of such storage, discharge, disposal, release or
emission or become liable for monetary damages resulting therefrom, and (C) the
remediation costs or potential liability is greater than $50,000, then BT
Financial shall inform Rural Valley in writing with specificity, including a
good faith estimate of the cost of remediation, within thirty (30) days of BT
Financial's receipt of the Phase I assessment, and BT Financial may, in its sole
discretion, terminate this Reorganization Agreement.
(c) Mutual Cooperation on Tax Matters. Rural Valley and BT Financial
shall each provide the other with such assistance as may reasonably be requested
by any of them in connection with the preparation of any Tax return, any Tax
audit, or any judicial or administrative proceedings relating to any Tax, and
each will retain and provide the other with any records or information that may
be relevant to such Tax return, Tax audit, proceeding or determination. The
party requesting assistance hereunder shall reimburse the other for direct
expenses incurred in providing such assistance.
(d) Fulfillment of Agreements. Each party hereto shall use its best
efforts to cause all of those conditions to the obligations of the other under
Article VI that are not beyond its reasonable control to be satisfied on or
prior to the Closing and shall use its best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Reorganization Agreement.
(e) Bank Regulatory Applications. As promptly as practicable after the
date hereof, BT Financial and/or Laurel, as appropriate, (i) shall submit any
requisite applications for prior approval of the transactions contemplated
herein and in the Articles of Merger between Rural Valley and Laurel to the
appropriate federal and state financial institution regulatory authorities, (ii)
BT Financial shall submit an application for prior approval of the Merger to the
Federal Reserve Board pursuant to the Bank Merger Act and Section 5(d)(3) of the
FDIA, and (iii) each of the parties hereto shall, and they shall cause their
respective Subsidiaries to, submit any applications, notices or other filings to
any other state or federal government agency, department or body the approval of
which is required for consummation of the Merger. BT Financial and each other
party represents and warrants to the other that all information concerning it,
its Affiliates and their respective directors, officers, stockholders and
Subsidiaries included (or
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submitted for inclusion) in any such application shall be true, correct and
complete in all material respects.
(f) Adverse Actions. No party will
(i) take any action that would, or is reasonably likely to, prevent
or impede the Merger from qualifying (1) for pooling-of-interests
accounting treatment or (2) as a reorganization within the meaning of
Section 368(A) of the Code; or
(ii) knowingly take any action that is intended or is reasonably
likely to result in
(A) any of its representations or warranties set forth in this
Plan being or becoming untrue in any material respect at any time
prior to the Effective Time,
(B) any of the conditions to the Merger set forth in Article VI
not being satisfied or
(C) a material violation of any provision of this Plan.
4.04. Covenants of Rural Valley.
Rural Valley hereby covenants and agrees that:
(a) Access to Corporate Records. Until the Closing Date, Rural Valley
shall give BT Financial and its representatives full access during normal
business hours to all their respective property, documents, contracts and
records and such information with respect to its business affairs and properties
as BT Financial from time to time may reasonably request; provided, however,
that Rural Valley shall not be required to give such access or information to
the extent that it is prohibited therefrom by a rule, regulation or order of any
regulatory body. All documents, contracts, records or information obtained
pursuant to this Section 4.04(a) shall be and remain subject to the
confidentiality provisions of Section 2.08 of this Reorganization Agreement.
(b) Financial Statements and Internal Audit Reports. Rural Valley shall
promptly provide BT Financial with copies of its annual, quarterly and monthly
financial statements for the periods ending between the date of this
Reorganization Agreement and the Effective Time of the
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Merger. Rural Valley shall promptly forward to BT Financial copies of its
periodic internal audit reports. Rural Valley shall also promptly provide or
permit inspection of all reports filed by it during such period with the
Comptroller and copies of all notices or reports sent to its shareholders to the
extent permitted by law and all material notices, reports, and review letters
received from the Comptroller. Until the Closing Date, Rural Valley will provide
copies of all such financial statements and notices, reports and review letters
to BT Financial on a prompt and timely basis.
(c) Negative Covenants - Conduct of Business. Except with the prior
written consent of BT Financial, Rural Valley shall not on or after the date
hereof:
(i) issue any capital notes or shares of its capital stock, declare
or distribute any dividend, including any stock dividend, authorize a
stock split, or authorize, issue or make any other distribution of,
on, or with respect to, its capital stock except for Permitted
Dividends.
(ii) merge with, consolidate with, sell its assets to, or acquire
substantially all the assets of, any other corporation, bank or
Person, or enter into any other transaction not in the ordinary course
of business;
(iii) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(iv) create or award any pension or profit sharing plan, bonus,
deferred compensation, death benefit or retirement plan, or any other
employee benefit, enter into any employment or consulting contract
(written or otherwise), or grant any bonuses to any officer, director
or employee;
(v) amend its articles of association or bylaws except as may be
necessary to consummate the transactions contemplated by this
Reorganization Agreement or as required by law;
(vi) incur any liability or obligation or make any commitment or
disbursement, acquire or dispose of any property or asset, make any
contract or agreement, or engage in any transaction, except in the
ordinary course of business;
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(vii) increase the rate of compensation of any director, officer,
employee or agent or enter into any agreement to increase the rate of
compensation of any director, officer or employee, other than normal
increases in the ordinary course of business and consistent with past
practice;
(viii) unless permitted by BT Financial, take any action that would
entitle any employee to receive severance pay prior to the Closing
Date;
(ix) intentionally do anything or intentionally fail to do anything
which will cause a breach or a default under any contract, agreement,
commitment or obligation to which it is a party or by which it may be
bound;
(x) except for securities transactions effected in the ordinary
course of business with the prior consent of BT Financial (which
consent shall not be unreasonably withheld), make any capital
expenditures in excess of $15,000 in the aggregate;
(xi) modify or extend any service bureau contracts, hardware/software
maintenance agreements, lease agreements or other contracts that
involve annual payments by Rural Valley that exceed $15,000 per
contract or $50,000 in the aggregate;
(xii) change its lending, borrowing, investment, asset/liability
management or other material banking policies in any material respect
except as may be required by changes in applicable law, regulation or
regulatory directives, except that, in connection with the closing of
the transactions contemplated hereby, Rural Valley shall cooperate in
good faith with BT Financial to adopt policies, practices and
procedures consistent with those utilized by BT Financial and its
affiliates;
(xiii) open any branch offices;
(xiv) fail to pay any tax or any other liability or charge when due,
other than charges contested in good faith by appropriate proceedings;
or
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(xv) make, change or revoke any tax election or make any agreement or
settlement with any taxing authority.
(d) Consents and Approvals. Rural Valley shall cooperate with BT
Financial in furnishing such information concerning Rural Valley's business and
affairs and its directors and officers as is reasonably necessary or requested
in order to enable BT Financial to prepare and file the Registration Statement
and all applications for Regulatory Approvals, and in obtaining such other
consents required under any agreements which BT Financial shall request to be
obtained to the extent required to consummate the Merger. Rural Valley shall
use its best efforts to obtain the approval or consent of any federal, state or
other regulatory agency having jurisdiction to the extent that such approvals or
consents are required to effect the Merger and the other transactions
contemplated hereby.
(e) Notice of Changes. Until the Effective Time of the Merger, Rural
Valley shall give BT Financial prompt written notice of any material change or
inaccuracies in any data previously given or made available to BT Financial
pursuant to this Reorganization Agreement. Notice of changes to Schedules
4.01(k) of this Reorganization Agreement shall be effected by promptly
furnishing to BT Financial current monthly lists of doubtful, nonperforming or
problem loans.
(f) Acquisition Proposals. Neither Rural Valley nor any of its officers,
directors or other affiliates (as defined in Rule 12b-2 under the Exchange Act)
(each, an "Affiliate") shall, and Rural Valley shall cause its employees, agents
and representatives (including, without limitation, any investment banking,
legal or accounting firm retained by and any individual member or employee of
the foregoing) (each, an "Agent") not to, (i) initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to any
of them or their respective shareholders) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or a substantial portion of the assets or
equity securities of, (any such proposal or offer being hereinafter referred to
as an "Acquisition Proposal") or (ii) engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any Person relating to an Acquisition Proposal, or (iii) otherwise cooperate in
any effort or attempt to make, implement or accept an Acquisition Proposal.
Notwithstanding the foregoing, nothing herein shall prohibit Rural Valley or its
board of directors and officers from fulfilling their fiduciary duties under
Pennsylvania or federal law to the shareholders of Rural Valley. Rural Valley
shall notify BT Financial immediately if any inquiries, proposals or offers
related to an Acquisition Proposal are received by, any confidential information
or data is requested from, or any negotiations or discussions related to an
Acquisition Proposal are sought to be initiated or continued with, them or any
individual or entity referred to in the first sentence of this Section 4.04(f).
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(g) Indemnification.
(i) Rural Valley will indemnify and hold harmless BT Financial and
Laurel and each Person, if any, who controls BT Financial or Laurel
within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which BT Financial or
such controlling Persons may become subject, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) (A) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Prospectus/Proxy
Statement or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading to the extent that any such statement or omission was
provided in writing by Rural Valley to BT Financial or (B) arise out
of or are based upon any untrue statement or alleged untrue statement
of any material fact or any omission or alleged omission to state a
material fact required to be stated or necessary to make the
statements not misleading in any document distributed to any Rural
Valley shareholder to the extent that any such statement or omission
was provided in writing by Rural Valley to BT Financial, and Rural
Valley will reimburse BT Financial and each such controlling Person
for any legal or other expenses reasonably incurred by BT Financial or
such controlling Person in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however,
that Rural Valley will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any of the Registration Statement, the
Prospectus/Proxy Statement or any amendment or supplement thereto, or
any related preliminary prospectus that was made or omitted in
reliance upon and in conformity with written information furnished by
the other Parties specifically for use therein. This indemnity
agreement will be in addition to any liability which Rural Valley may
otherwise have.
(ii) Promptly after receipt by an indemnified party under this
Section 4.04(g) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 4.04(g), notify
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the indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than
under this Section 4.04(g). In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 4.04(g) for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
(iii) If recovery is not available under the foregoing
indemnification provisions of this Section 4.04(g) for any reason
other than as specified therein, the parties entitled to
indemnification by the terms thereof shall be entitled to contribution
for liabilities and expenses, except to the extent that contribution
is not permitted under Section 11(f) of the Securities Act. In
determining the amount of contribution to which the respective parties
are entitled, there shall be considered the relative benefits received
by each party from the transactions contemplated hereby, the parties'
relative knowledge and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to
correct and prevent any statement or omission, and any other equitable
considerations appropriate under the circumstances. Rural Valley,
Laurel and BT Financial agree that it would not be equitable if the
amount of such contribution were determined by pro rata or per capital
allocations.
(h) Deposits. Rural Valley shall offer rates on all deposits which are in
accordance with present institutional guidelines and which are priced within
local competitor offerings. Further, Rural Valley shall not accept any brokered
or out of area deposits and shall price all "jumbo deposits" in accordance with
existing practice. Such jumbo deposits shall be offered only to local retail,
public or corporate accounts.
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(i) Furnishing Information. Rural Valley shall cooperate with BT
Financial in furnishing such information concerning the business of Rural Valley
as is reasonably necessary or requested in order to prepare and file the
Registration Statement and Prospectus/Proxy Statement to be used in connection
with the meeting of the stockholders of as provided in Section 3.01 hereof, or
to prepare and file any applications for regulatory or governmental approvals.
(j) Certain Tax Matters.
(i) Tax Returns and Payment of Taxes for Periods Through the Closing
Date. Rural Valley shall include its income on its federal income tax
return for all periods up to and including the Closing Date and will
pay any tax due thereon. Rural Valley also shall pay its state or
local income Tax for all taxable periods up to and including the
Closing Date. The income of Rural Valley shall be apportioned for the
period up to and including the Closing Date and the period after the
Closing Date by closing the books of Rural Valley as of the close of
business on the Closing Date.
(ii) Carrybacks. If is required to carry back any item of loss,
deduction or credit that arises in any taxable period ending after the
Closing Date to a Tax return of Rural Valley for any taxable period
ending on or before the Closing Date, BT Financial will be entitled to
an amount equal to the refund or credit of taxes realized as a result
thereof.
4.05. Covenants of BT Financial and Laurel. BT Financial and Laurel
hereby covenant and agree that:
(a) Access to Corporate Records. Until the Closing Date, BT Financial and
Laurel shall give Rural Valley and its representatives full access during normal
business hours to all its property, documents, contracts and records and such
information with respect to its business affairs and properties (in each case
including those of its Subsidiaries) as Rural Valley from time to time may
reasonably request; provided, however, that BT Financial and Laurel shall not be
required to give such access or information to the extent that it is prohibited
therefrom by a rule, regulation or order of any regulatory body. All documents,
contracts, records or information obtained pursuant to this Section 4.06(a)
shall be and remain subject to the confidentiality provisions of Section 2.08 of
this Reorganization Agreement.
(b) Financial Statements. BT Financial shall promptly provide Rural
Valley with copies of its annual and quarterly financial statements, as included
in its reports on Form 10-K or 10-Q, respectively, as filed with the SEC
pursuant to the requirements of the Exchange Act, for the
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periods ending between the date of this Reorganization Agreement and the
Effective Time of the Merger. Until the Closing Date, BT Financial will provide
copies of any reports it files with the SEC under the Exchange Act to Rural
Valley on a prompt and timely basis.
(c) Consents and Approvals. BT Financial and Laurel shall use their best
efforts to obtain the approval or consent of any federal, state or other
regulatory agency having jurisdiction to the extent that such approvals or
consents are required to effect the Merger and the other transactions
contemplated hereby.
(d) Notice of Changes. Until the Effective Time of the Merger, BT
Financial and Laurel shall give written notice of any material change or
inaccuracies in any data previously given or made available to Rural Valley
pursuant to this Reorganization Agreement.
(e) Furnishing Information. BT Financial and Laurel shall cooperate with
Rural Valley in furnishing such information concerning the business of BT
Financial and Laurel as is reasonably necessary or requested in order to prepare
and file the Registration Statement and Prospectus/Proxy Statement to be used in
connection with the Rural Valley meeting of the shareholders of Rural Valley as
provided in Section 3.01 hereof, or to prepare and file any applications for
regulatory or governmental approvals. BT Financial shall provide to Rural
Valley and its counsel a copy of the Registration Statement and each application
for regulatory or governmental approval, including all amendments to such
documents, in draft form prior to filing and, as soon as practicable after the
date of filing, a copy of the filing. BT Financial shall provide to Rural
Valley and its counsel a copy of all correspondence to and from the various
regulatory agencies with respect to the Registration Statement and the
regulatory applications.
(f) Indemnification of and Liability Insurance for Officers and Directors.
(i) After the Effective Time of the Merger, Laurel, as successor to
Rural Valley, shall indemnify and hold harmless any former directors,
officers, employees or agents of Rural Valley who have rights to
indemnification under the articles of association and bylaws of Rural
Valley from and against any and all claims, losses, liabilities or
damages arising out of or in connection with any of their activities
in such capacities or on behalf of, or at the request of Rural Valley,
prior to the Effective Time of the Merger ("Claims") in accordance
with and to the extent required under the articles of association and
bylaws of Rural Valley. This section shall not be construed to
increase, in any manner, any liabilities or obligations Laurel would
otherwise have as the successor by merger to Rural Valley.
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(ii) BT Financial will indemnify and hold harmless Rural Valley, and
each Person, if any, who controls Rural Valley within the meaning of
the Securities Act against any losses, claims, damages or liabilities,
joint or several, to which BT Financial or such controlling Persons
may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) (A) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Prospectus/Proxy Statement or any amendment or supplement thereto, or
any related preliminary prospectus, or arise out of or are based upon
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading to the extent that any such statement or
omission relates to BT Financial or (B) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
or any omission or alleged omission to state a material fact required
to be stated or necessary to make the statements not misleading in any
document distributed to any shareholder to the extent that any such
statement or omission relates to BT Financial, and will reimburse and
each such controlling Person for any legal or other expenses
reasonably incurred by or such controlling Person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that BT Financial will not be liable in any
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any of the
Prospectus/Proxy Statement or any amendment or supplement thereto, or
any related preliminary prospectus that was made or omitted in
reliance upon and in conformity with written information furnished by
Rural Valley specifically for use therein. This indemnity agreement
will be in addition to any liability which BT Financial may otherwise
have.
(iii) Promptly after receipt by an indemnified party under this
Section 4.06(f) of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 4.06(f), notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than
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under this Section 4.06(f). In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 4.06(f) for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation.
(iv) If recovery is not available under the foregoing indemnification
provisions of this Section 4.06(f) for any reason other than as
specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution for liabilities and
expenses, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties are entitled, there
shall be considered the relative benefits received by each party from
the transactions contemplated hereby, the parties' relative knowledge
and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations
appropriate under the circumstances. Rural Valley, Laurel and BT
Financial agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocations.
(g) Employee Matters.
(i) Any full-time employee of Rural Valley whose employment with the
Resulting Bank is terminated, other than for cause, by BT Financial
within six months after the Effective Time of the Merger, and not
offered a comparable job with BT Financial or an affiliate of BT
Financial, will be paid severance pay equal to one week's W-2
compensation multiplied by each year of service with not exceeding
three months salary (except that the individuals listed on
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Schedule 4.06(g) shall be entitled to a maximum of six months salary).
For purposes of this section, a job shall not be considered comparable
if it requires the employee to work less than 30 hours per week or is
at a location more than 30 miles from Rural Valley's main office.
(ii) All employees of Rural Valley immediately prior to the Effective
Time of the Merger who are employed by Laurel following the Effective
Time of the Merger ("Transferred Employees") will be entitled to
participate in BT Financial's employee benefit plans as to which they
are eligible without fulfilling any vesting requirement, but shall not
be entitled to any credit for their length of service, compensation,
job classification or position with Rural Valley. BT Financial agrees
that any pre-existing condition, limitation or exclusion in its health
plans shall not apply to Transferred Employees or their covered
dependents who are covered under a medical or hospitalization
indemnity plan maintained by on the date of the Merger and then change
coverage to BT Financial's medical or hospitalization indemnity health
plan at the time such Transferred Employees are first given the option
to enroll in BT Financial's health plans. Except with respect to any
defined benefit pension plan sponsored by BT Financial or an Affiliate
of BT Financial, a Transferred Employee's service with Rural Valley
shall be recognized as service with BT Financial for purposes of
eligibility, participation and vesting, but not benefit accruals,
subject to applicable break-in-service rules and to the extent
permissible under all applicable laws and regulations and the terms
and benefits of BT Financial's current benefit plans or those of its
Affiliates. With respect to any defined benefit pension plans
sponsored by BT Financial or an Affiliate of BT Financial, Transferred
Employees will be provided such service and benefits thereunder, if
any, as may be required by the Code, ERISA, or other applicable law.
Nothing contained in this Section shall be deemed to be a contract for
employment nor a guaranty or right to employment with BT Financial or its
Affiliates for any Person, nor shall anything contained in this Section
constitute an agreement by BT Financial or its Affiliates not to revise, amend,
revoke, or terminate any employee benefit plan or arrangement that it may in the
future make available to its employees, including Transferred Employees.
Notwithstanding anything contained herein to the contrary, the obligations of BT
Financial contained in this Section shall survive the Closing.
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(h) Registration Statement and Joint Proxy Statement. BT Financial shall
prepare, and shall file with the SEC, and shall use its best efforts to cause to
become effective, the Registration Statement covering the shares of BT Financial
Common Stock to be delivered pursuant to this Reorganization Agreement and shall
use its best efforts to register or qualify such securities, if required, under
applicable state securities laws. If any material change occurs in the facts
set forth in the Registration Statement, BT Financial shall promptly notify
Rural Valley in writing of such change (other than with respect to information
supplied by Rural Valley for inclusion therein) and shall prepare, in accordance
with the requirements of the Securities Act of 1933, as amended, and file
amendments to the Registration Statement that may be appropriate or required.
ARTICLE V
REGISTRATION RIGHTS
5.01. Registration on Request.
(a) If, at any time prior to three years after the Effective Date of the
Merger, holders of at least a majority (in number of shares) of Registrable
Securities then held, or, at any time during March 1998, any holder of
Registrable Securities then held, requests in writing that BT Financial effect
the registration under the Securities Act of all or part of their shares of BT
Financial Common Stock, BT Financial will promptly give written notice of such
requested registration to all holders of Registrable Securities, and thereupon
BT Financial will use its best efforts to effect the registration under the
Securities Act of:
(i) the Registrable Securities which BT Financial has been so
requested to register by the holders of Registrable Securities, and
(ii) all other Registrable Securities the holders of which shall have
made a written request to BT Financial for registration thereof within
30 days after the giving of such written notice by BT Financial, and
(iii) all to the extent requisite to permit the disposition of the
Registrable Securities and the additional shares of Common Stock, if
any, so to be registered, in transactions by or through broker dealers
over NASDAQ, provided that the shareholders of Rural Valley shall be
entitled to not more than one registration upon request, and provided
further that BT Financial will not be required to register securities
under this Section 5.01 to the extent that in the opinion of BT
Financial's counsel, which shall be reasonably
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satisfactory to the holders of Registrable Securities, the sale of
Registrable Securities covered by the written request for registration
may be effected pursuant to Rule 144 or otherwise without registration
within a 90 day period.
(b) Registrations under this Section 5.01 shall be on Form S-3 of the SEC
or any equivalent successor form or as shall be selected by BT Financial.
(c) BT Financial will pay all Registration Expenses in connection with
registrations requested pursuant to this Section 5.01.
(d) A registration requested pursuant to this Section 5.01 shall not be
deemed to have been effected (i) unless a registration statement with respect
thereto has become effective, provided that a registration which does not become
effective after BT Financial has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of the holders of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel
relating to a matter with respect to BT Financial) shall be deemed to have been
effected by BT Financial at the request of the holders of Registrable Securities
unless the holders of Registrable Securities shall have elected to pay all
Registration Expenses in connection with such registration, (ii) if, after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court for any reason, or (iii) the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by the holders of Registrable Securities.
5.02. Registration Procedures.
If and whenever BT Financial is required to use its best efforts to effect
the registration of any Registrable Securities under the Securities Act as
provided in Section 5.01, BT Financial shall, as expeditiously as possible:
(a) Prepare and (within 60 days after the request of a holder of
Registrable Securities eligible to make such a request under Section 5.01 or as
soon thereafter as possible) file with the SEC the requisite registration
statement to effect such registration and thereafter use its best efforts to
cause such registration statement to become and remain effective, provided
however that BT Financial may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances specified in
Section 5.01(a), its securities which are Registrable Securities) at any time
prior to the effective date of the registration statement relating thereto,
provided further that before filing such registration statement or any
amendments thereto, BT Financial will furnish to the counsel selected by the
holders of Registrable Securities which
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are to be included in such registration, copies of all such documents proposed
to be filed, which documents will be subject to the review of such counsel;
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for 60 days after such
registration statement becomes effective;
(c) Furnish to each seller of Registrable Securities covered by such
registration statement and each Requesting Holder and each underwriter, if any,
of the securities being sold by such seller such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller;
(d) Use its best efforts to register or qualify all Registrable Securities
and other securities covered by such registration statement under such other
securities laws or blue sky laws of such jurisdictions as any seller thereof and
any underwriter, if any, of the securities being sold by such seller and any
Requesting Holder shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary or advisable
to enable such seller and underwriter, if any, to consummate the disposition in
such jurisdictions of the securities owned by such seller, except that BT
Financial shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but
for the requirements of this subdivision (iv) be obligated to be so qualified,
to subject itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(e) Use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(f) Furnish to each seller of Registrable Securities and each Requesting
Holder a signed counterpart, addressed to such seller, such Requesting Holder
and the underwriters, if any, of: (x) an opinion of counsel for BT Financial,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of
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the closing under the underwriting agreement), reasonably satisfactory in form
and substance to such seller, and (y) a "comfort" letter, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified BT Financial's financial statements included in such registration
statement, covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
the accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller or such Requesting Holder or the underwriters, if any
may reasonably request;
(g) Notify the holders of Registrable Securities and the managing
underwriter or underwriters, if any, promptly and confirm such advice in writing
promptly thereafter:
(i) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment thereto, when
the same has become effective;
(ii) of any request by the SEC for amendments or supplements to the
registration statement or the prospectus or for additional
information;
(iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the registration or the initiation of any proceedings
by any Person for that purpose;
(iv) if at any time the representations and warranties of BT
Financial made as contemplated by Section 5.03 below cease to be true
and correct;
(v) of the receipt by BT Financial of any notification with respect
to the suspension of the qualification of any Registrable Securities
for sale under the securities or blue sky laws of any jurisdiction or
the initiation or threat of any proceeding for such purpose; and
(h) Notify each seller of Registrable Securities covered by such
registration statement and each Requesting Holder, at any time when a prospectus
relating thereto is required to be
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delivered under the Securities Act, upon BT Financial's discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such seller or Requesting
Holder promptly prepare and furnish to such seller or Requesting Holder and each
underwriter, if any, a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(i) Make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the registration statement at the earliest
possible moment;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with the first full
calendar quarter after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and will furnish to each such seller and each Requesting Holder
at least five business days prior to the filing thereof a copy of any amendment
or supplement to such registration statement or prospectus and shall not file
any thereof to which the holders of at least a majority of the Registrable
Securities shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(k) provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement;
(l) use its best efforts to list all Registrable Securities covered by
such registration statement on NASDAQ; and
(m) use its best efforts to provide a CUSIP number for the Registrable
Securities not later than the effective date of the registration. BT Financial
may require each seller of Registrable Securities as to which any registration
is being effected to furnish BT Financial such information regarding such seller
and the distribution of such securities as BT Financial may from time to time
reasonably request in writing.
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BT Financial will not file any registration statement or amendment thereto
or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration) to which the holders of at least a majority of the Registrable
Securities covered by such registration statement or the underwriter or
underwriters, if any, shall reasonably object, provided that BT Financial may
file such document in a form required by law or upon the advice of its counsel.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from BT Financial to the
effect that any event of the kind described in subdivision (viii) of this
Section 5.02 has or might occur, such holder will forthwith discontinue such
holder's disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until notified by BT Financial
that such disposition may resume and such holder's receipt of the copies of the
supplemented or amended prospectus if required by subdivision (viii) of this
Section 5.02 and, if so directed by BT Financial, will deliver to BT Financial
(at BT Financial's expense) all copies, other than permanent file copies, then
in such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. If BT Financial gives
any such notice, the period mentioned in paragraph (ii) of this Section 5.02
shall be extended by the length of the period from and including the date when
each seller of any Registrable Securities covered by such registration statement
shall have received such notice to the date on which each such seller has
received the copies of the supplemented or amended prospectus contemplated by
paragraph (viii) of this Section 5.02.
If any such registration or comparable statement refers to any holder of
Registrable Securities by name or otherwise as the holder of any securities of
BT Financial, then such holder shall have the right to require (i) the insertion
therein of language, in form and substance satisfactory to such holder, to the
effect that the holding by such holder of such securities is not to be construed
as a recommendation by such holder of the investment quality of BT Financial's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of BT Financial, or
(ii) in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder.
5.03. Preparation; Reasonable Investigation.
In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, BT Financial will
give the holders of Registrable Securities registered under such registration
statement, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and records and
such opportunities to
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discuss the business of BT Financial with its officers and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
5.04. Indemnification.
(a) In the event of any registration of any securities of BT Financial
under the Securities Act, BT Financial will, and hereby does, indemnify and hold
harmless (i) in the case of any registration statement filed pursuant to Section
5.01, the holder of any Registrable Securities covered by such registration
statement, its directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or underwriter or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and BT Financial will reimburse such holder, and each
such director, officer, underwriter and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
BT Financial shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished to BT Financial through an instrument duly executed by such holder
specifically stating that it is for use in the preparation thereof, provided
further that BT Financial shall not be liable to any Person who participates as
an underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
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made by or on behalf of such holder or any such director, officer, underwriter
or controlling Person and shall survive the transfer of such securities by such
holder.
(b) BT Financial may require, as a condition to including any Registrable
Securities in any registration statement filed pursuant to Section 5.01, that BT
Financial shall have received an undertaking satisfactory to it from the
prospective seller of such Registrable Securities, to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this Section 5.04) BT Financial, each director of BT Financial, each
officer of BT Financial and each other Person, if any, who controls BT Financial
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to BT Financial through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Any such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of BT Financial or any such director, officer or controlling Person
and shall survive the transfer of such securities by such seller.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 5.04, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action, provided that
the failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 5.04, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
claim or litigation. No indemnified party shall consent
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to entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the consent
of such indemnifying party.
(d) Indemnification similar to that specified in the preceding
subdivisions of this Section 5.04 (with appropriate modifications) shall be
given by BT Financial and each seller of Registrable Securities with respect to
any required registration or other qualification of securities under any Federal
or state law or regulation of any governmental authority, other than the
Securities Act.
(e) The indemnification required by this Section 5.04 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or liability
is incurred.
(f) If the indemnification provided for in the preceding subdivisions of
this Section 5.04 is unavailable to an indemnified party in respect of any
expense, loss, claim, damage or liability referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such expense, loss, claim, damage or liability (i) in such proportion as is
appropriate to reflect the relative benefits received by BT Financial on the one
hand and the holder or underwriter, as the case may be, on the other from the
distribution of the Registrable Securities, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of BT Financial on the one hand and of the
holder or underwriter, as the case may be, on the other in connection with the
statements or omissions which resulted in such expense, loss, damage or
liability, as well as any other relevant equitable considerations. The relative
benefits received by BT Financial on the one hand and the holder or underwriter,
as the case may be, on the other in connection with the distribution of the
Registrable Securities shall be deemed to be in the same proportion as the total
net proceeds received by BT Financial from the initial sale of the Registrable
Securities by BT Financial to the purchasers bear to the gain realized by the
selling holder or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of BT Financial on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by BT Financial, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of subdivision (a) of this
Section 5.04, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been
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obligated to pay by way of indemnification if the indemnification provided for
under subdivisions (a) or (b) of this Section 5.04 had been available under the
circumstances.
BT Financial and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders, Requesting Holders and
any underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph and subdivision (c) of this
Section 5.04 and any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount by which the net proceeds received by such holder from the sale of
Registrable Securities the amount of any damages that such holder or underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
5.05. Rule 144. BT Financial will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder and will take such further action as
any holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any holder of Registrable Securities,
BT Financial will deliver to such holder a written statement as to whether it
has complied with such requirements.
ARTICLE VI
CONDITIONS PRECEDENT
6.01. Conditions Precedent to the Obligations of BT Financial and Laurel.
The obligations of BT Financial and Laurel to consummate the transactions
contemplated by this Reorganization Agreement shall be subject to the
satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
BT Financial and Laurel to the extent permitted by law:
(a) Performance of Covenants. Each of the covenants to be performed by
Rural Valley hereunder on or before the Closing Date shall have been duly
performed in all material respects;
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and the President and Secretary of Rural Valley shall have executed and
delivered to BT Financial a certificate, dated as of the Closing Date, to the
effect that such officers have no knowledge of the nonfulfillment of the
foregoing condition.
(b) Representations True at Closing. The representations and warranties
made by Rural Valley herein and in any certificate provided to BT Financial
hereunder shall be true and correct in all material respects on the Closing Date
with the same force and effect as though such representations and warranties had
been made on and as of such time (or as of the date when made in the case of any
representation and warranty which specifically relates to an earlier date),
except that the representations made in Section 4.01(o) shall be modified by the
results of the Phase I assessment referred to in Section 4.04(b) or the Phase II
assessment referred to in Section 4.04(b), and the President and Secretary of
shall have executed and delivered to BT Financial a certificate, dated as of the
Closing Date, to the effect that such officers have no knowledge of the
nonfulfillment of the foregoing condition.
(c) Certified Resolutions. Rural Valley shall have furnished BT Financial
with a certified copy of resolutions duly adopted by its Board of Directors
authorizing and approving this Reorganization Agreement and the transactions
contemplated hereby.
(d) Shareholder Approval. This Reorganization Agreement shall have been
approved by the affirmative vote of [a majority] of the votes cast by all
holders of Rural Valley Common Stock entitled to vote thereon, and Rural Valley
shall have furnished BT Financial with a certified copy of resolutions duly
adopted by its shareholders authorizing and approving this Reorganization
Agreement and the transactions contemplated hereby.
(e) Government Approvals and Other Consents. BT Financial, Laurel and
Rural Valley shall have received in form and substance satisfactory to BT
Financial all necessary Regulatory Approvals and other consents necessary to
permit consummation of the Merger and the transactions contemplated hereby. No
such approvals and consents shall require BT Financial or such Subsidiary to
enter into any agreement or stipulation that is inconsistent with prior Federal
Reserve, Comptroller, FDIC or Department of Banking practice or procedure, and
all applicable waiting periods required by law shall have expired or elapsed.
(f) No Injunction. No action, proceeding, regulation or legislation shall
have been instituted or threatened before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which is related to or arises out of, this
Reorganization Agreement, the consummation of the transactions contemplated
hereby or the Merger, which, in the good faith judgment of BT Financial, would
make it inadvisable to consummate such transactions.
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(g) No Material Misstatements or Omissions. Subject to the cure
provisions of Section 2.07(f), BT Financial shall not have discovered any
material error, misstatement or omission in any information furnished in writing
or to be furnished in writing to BT Financial hereunder, or in the information
to be furnished by Rural Valley and contained in the Registration Statement.
(h) Changes in Financial Condition. Since the date of this Reorganization
Agreement, there shall not have occurred any material adverse change in the
business, financial condition results of operation or prospects of Rural Valley,
other than changes resulting from or attributable to (i) changes in laws or
regulations, generally accepted accounting principles, or interpretations
thereof, that affect the banking industry generally.
(i) Registration Statement. The Registration Statement covering the
shares of BT Financial Common Stock to be issued to the shareholders of Rural
Valley under this Reorganization Agreement shall have been declared effective by
the SEC, shall be exempt or declared effective in each state having jurisdiction
thereon, and no stop order proceeding shall be pending or threatened with
respect thereto.
(j) Opinion of Counsel. An opinion of Calarie & Owen, counsel for Rural
Valley, with respect to the opinions set forth in the first sentence of (i) and
(ii) below, shall have been delivered to BT Financial, dated the Closing Date,
and in form and substance satisfactory to BT Financial and its counsel,
substantially to the effect that:
(i) Rural Valley is a national banking association duly incorporated
and validly existing under the National Bank Act and has the corporate
power and authority to carry on its business as described in the
Prospectus/Proxy Statement and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized capital
stock of Rural Valley consists of 40,000 shares of common stock having
a par value of $5.00 per share, of which no more than 40,000 shares
are issued and outstanding as of the date hereof and no shares are
held in the treasury of Rural Valley. To their knowledge, there is no
subscription, option, warrant, call, right, stock appreciation right
or commitment of any kind obligating Rural Valley to issue any of its
stock or to acquire any of its stock under any circumstances or to
pay cash on account of stock appreciation.
(ii) The execution and delivery of this Reorganization Agreement have
been duly authorized by all necessary director and shareholder action.
This Reorganization Agreement has been duly executed and delivered by
and, assuming due authorization, execution and
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delivery by the other parties hereto, this Reorganization Agreement
will constitute valid and binding obligations of Rural Valley, and
will be enforceable in accordance with their respective terms, except
as the enforceability of each of the above documents may be limited by
(a) bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization, conservatorship, receivership or other similar laws
from time to time in effect affecting the enforcement of creditors'
rights generally or the rights of creditors of banking institutions,
(b) general equitable principles, (c) laws relating to the safety and
soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material
breaches of such agreements, and (e) the effect or availability of
equitable remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(iii) The execution and delivery by Rural Valley of, and the
performance by Rural Valley of its agreements in this Reorganization
Agreement, do not (i) violate the articles of association or bylaws,
as amended, of Rural Valley; (ii) breach or result in a default under
any existing obligation of Rural Valley under any of the agreements
identified in an officer's certificate to be attached to the opinion;
or (iii) breach or otherwise violate any existing obligation of Rural
Valley under a court order which has been identified by Rural Valley
in an officer's certificate to be attached to the opinion. In
expressing such opinion, counsel may rely on certificates of officers
and other representatives of Rural Valley as to matters of fact and
certificates of public officials as to matters within their
jurisdiction. Such opinion may be governed by the Legal Opinion
Accord of the ABA Section of Business Law (1991).
(k) Dissenters' Shares. The number of Dissenters' Shares as of the
Closing Date shall be less than 4,000 shares of Common Stock.
(l) Expenses. Rural Valley shall have paid all out-of-pocket expenses and
disbursements, including legal, accounting and investment banking fees incurred
by Rural Valley in connection with the Transactions, except for reasonable out-
of-pocket expenses actually incurred that the parties acknowledge have not been
billed on or before the Closing Date; and the President and Secretary of Rural
Valley shall each have executed and delivered to BT Financial a certificate,
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dated as of the Closing Date, to the effect that such officers have no knowledge
of the nonfulfillment of the foregoing condition.
(m) Tax Opinion. BT Financial shall have received an opinion of Pepper
Hamilton LLP, in form and substance reasonably satisfactory to BT Financial,
dated as of the Closing Date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion, (i) the Merger
will be treated for Federal income tax purposes as a reorganization within the
meaning of Section 368 of the Code and that accordingly no gain or loss will be
recognized by BT Financial, Laurel or Rural Valley as a result of the Merger;
and (ii) no gain or loss will be recognized by Rural Valley 's shareholder as a
result of the receipt of BT Financial Common Stock in the Merger. In rendering
such opinion, Pepper Hamilton may require and rely upon representations
contained in certificates of officers of BT Financial, Rural Valley, Laurel and
others.
(n) Pooling Letter. BT Financial shall have received from Coopers &
Lybrand LLP, independent auditors for BT Financial, a letter dated the date of
or shortly prior to each of the mailing date of the Proxy Statement and the
Effective Time, to the effect that such auditors are not aware of any facts or
circumstances which might cause the Merger not to qualify for pooling of
interests accounting treatment.
(o) Affiliates Agreement. BT Financial shall have received duly executed
Affiliates' Agreements from each director and executive officer of BT Financial
Corporation and Rural Valley in the form of Exhibits A and B respectively.
6.02. Conditions Precedent to the Obligations of Rural Valley. The
obligations of Rural Valley to consummate the transactions contemplated by this
Reorganization Agreement shall be subject to the satisfaction, on or before the
Closing Date, of each and every one of the following conditions, all or any of
which may be waived, in whole or in part, by to the extent permitted by law:
(a) Performance of Covenants. Each of the covenants to be performed by BT
Financial and Laurel hereunder on or before the Closing Date shall have been
duly performed in all material respects; and the President and Secretary of BT
Financial and Laurel shall each have executed and delivered to a certificate,
dated as of the Closing Date, to the effect that such officers have no knowledge
of the nonfulfillment of the foregoing condition.
(b) Representations True at Closing. The representations and warranties
made by BT Financial and Laurel herein and in any Certificate provided by BT
Financial hereunder shall be true and correct in all material respects on the
Closing Date with the same force and effect as though such representations and
warranties had been made on and as of such time (or as of the date when made in
the case of any representation and warranty which specifically relates to an
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earlier date), and the President and Secretary of BT Financial and Laurel shall
each have executed and delivered to Rural Valley a certificate, dated as of the
Closing Date, to the effect that such officers have no knowledge of the
nonfulfillment of the foregoing condition.
(c) Certified Resolutions. BT Financial and Laurel shall each have
furnished Rural Valley with a certified copy of resolutions duly adopted by the
Board of Directors of BT Financial and Laurel authorizing this Reorganization
Agreement and the transactions contemplated hereby and by BT Financial as the
shareholder of Laurel approving this Reorganization Agreement and the
transactions contemplated hereby.
(d) Government Approvals and Other Consents. BT Financial, Laurel and
Rural Valley shall have received in form and substance satisfactory to all
necessary federal and state governmental and Regulatory Approvals, shareholder
approvals and other consents necessary to permit consummation of the Merger, and
all applicable waiting periods required by law shall have expired or elapsed.
(e) No Injunction. No injunction shall have been issued by any court or
governmental agency which prohibits or restricts the consummation of the
transactions contemplated by this Reorganization Agreement which, in the good
faith judgment of Rural Valley, would make it inadvisable to consummate such
transactions.
(f) No Material Misstatements or Omissions. Rural Valley shall not have
discovered any material error, misstatement or omission in any information
furnished in writing or to be furnished in writing to hereunder, or in the
information to be furnished by BT Financial or Laurel and contained in the
Registration Statement.
(g) Changes in Financial Condition. Since the date of this Reorganization
Agreement, there shall not have occurred any material adverse change in the
financial condition of BT Financial on a consolidated basis, other than changes
resulting from or attributable to changes in laws or regulations, generally
accepted accounting principles, or interpretations thereof, that affect the
banking industry generally.
(h) Registration Statement. The Registration Statement covering the
shares of BT Financial Common Stock to be issued to the shareholders of Rural
Valley under this Reorganization Agreement shall have been declared effective by
the SEC, shall be exempt or declared effective in each state having jurisdiction
thereon, and no stop order proceeding shall be pending or threatened with
respect thereto.
(i) Opinion of BT Financial and Counsel. An opinion of Pepper Hamilton
LLP, counsel for BT Financial and Laurel, shall have been delivered to Rural
Valley, dated the Closing Date, and in form and substance satisfactory to and
its counsel, substantially to the effect that:
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(i) BT Financial is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Pennsylvania and has full power and authority to carry on its business
as described in the Prospectus/Proxy Statement and to carry out the
transactions contemplated by this Reorganization Agreement. The
authorized capital stock of BT Financial consists of 20,000,000 shares
of common stock having a par value of $5.00 per share, of which
12,500,872 shares are issued and outstanding as of the date hereof and
2,000,000 shares of preferred stock, no par value, none of which are
issued and outstanding as of the date hereof. All issued and
outstanding shares of BT Financial Common Stock are validly issued,
fully paid and nonassessable.
(ii) Laurel is a bank and trust company duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania and a member of the Federal Reserve System. Laurel has
full power and authority to carry on its business as described in the
Prospectus/Proxy Statement and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized, issued
and outstanding capital stock of Laurel consists of 981,864 shares of
common stock having a par value of $5.00 per share. All issued and
outstanding shares of Laurel Common Stock are validly issued, fully
paid and nonassessable.
(iii) This Reorganization Agreement has been, and the Articles of
Merger, when executed and delivered, will have been, duly and validly
authorized, executed and delivered by BT Financial and Laurel, and
constitute and will constitute the valid and binding obligations of BT
Financial and Laurel and are and will be enforceable in accordance
with their respective terms, except as limited by (a) bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization,
conservatorship, receivership or other similar laws from time to time
in effect affecting the enforcement of creditors' rights generally or
the rights of creditors of insured depository institutions, (b)
general equitable principles, (c) laws relating to the safety and
soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material
breaches of such agreements, and (e) the effect or availability of
equitable remedies or injunctive relief
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(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iv) Neither the execution, delivery and performance of this
Reorganization Agreement by BT Financial and Laurel, nor the
consummation of the transactions contemplated hereby, nor compliance
by BT Financial and Laurel with any of the provisions hereof will (i)
violate, or conflict with, or result in a breach of any provisions of,
or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of BT Financial or any of its
Subsidiaries under any of the terms, conditions or provisions of, (A)
the articles of incorporation or bylaws, as amended, of BT Financial
or Laurel, or (B) any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which
BT Financial or any of its Subsidiaries is a party or by which any of
them is bound or to which any of their respective properties or assets
may be subject, except for such violations, conflicts, breaches,
defaults, etc. which would not, in the aggregate, have a material
adverse effect on BT Financial's business or financial condition on a
consolidated basis, or (ii) to its knowledge, violate any judgement,
ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to them or any of their respective properties or assets.
(iv) BT Financial and Laurel have obtained all necessary federal and
state governmental and Regulatory Approvals in order to consummate the
Merger.
(v) The Registration Statement has become effective under the
Securities Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Securities Act.
In expressing such opinion, counsel may rely on opinions of other counsel
to BT Financial and Laurel, certificates of officers and other representatives
of BT Financial and Laurel as to matters of fact and certificates of public
officials as to matters within their jurisdiction.
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<PAGE>
6.03. Waivers. A condition precedent as set forth in this Article VI
shall be deemed to be satisfied if it has been materially and reasonably
satisfied, and no Party shall fail to consummate the transactions described
herein by reason of a breach of any covenant or the failure to satisfy a
condition precedent unless such breach or failure is material to such
transactions as a whole. Any condition waived in writing by the Party entitled
to the benefit thereof shall thereafter cease to be a condition precedent for
purposes of this Article VI.
ARTICLE VII
BROKERS AND EXPENSES
7.01. Brokers. BT Financial represents and warrants to Rural Valley that
no broker or finder has acted for it in connection with the execution and
delivery of this Reorganization Agreement or the transactions contemplated
hereby. Rural Valley represents and warrants to BT Financial that no broker or
finder has acted for it in connection with the execution and delivery of this
Reorganization Agreement or the transactions contemplated hereby. Each Party
shall be indemnified and held harmless by the other from any claim, suit, loss
or expense resulting from a breach of the other party's foregoing representation
and warranty.
7.02. Expenses. Except as otherwise provided in this Reorganization
Agreement, all expenses incurred by each Party in connection with or related to
the authorization, preparation and execution of this Reorganization Agreement,
the solicitation of shareholder approval and all other matters related to the
closing of the transactions contemplated hereby, including without limiting the
generality of the foregoing, all fees and expenses of agents, representatives,
counsel and accountants employed by any such Party, shall be borne solely and
entirely by the Party which has incurred the same.
ARTICLE VIII
MISCELLANEOUS
8.01 Further Assurances. From time to time as and when requested by BT
Financial or Laurel, or their respective successors or assigns, Rural Valley, or
the officers and directors of Rural Valley last in office prior to consummation
of the Merger, shall execute and deliver such further agreements, documents,
deeds and other Instruments and shall take or cause to be taken such other
actions, including those as shall be necessary to vest or perfect in or to
confirm of record or otherwise in the Resulting Bank title to and possession of
all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Rural Valley, as shall be necessary or advisable to
carry out the purposes of and effect the transactions contemplated by this
Reorganization Agreement.
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<PAGE>
8.02. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Reorganization Agreement or in
any instrument delivered pursuant hereto shall expire on, and be terminated and
extinguished on, the Closing Date, other than covenants that by their terms are
to survive or be performed after the Closing Date.
8.03. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or sent by first-class registered or certified mail, postage prepaid,
with return receipt requested, as follows:
(a) If to Rural Valley, to:
T. Lowell Dean
President
The Peoples National Bank of Rural Valley
601 Main Street
Rural Valley, Pennsylvania 16249
with a copy to:
(b) If to BT Financial or Laurel, to:
John H. Anderson
Chairman and Chief Executive Officer
BT Financial Corporation
551 Main Street
Johnstown, Pennsylvania 15901
with a copy to:
Dennis M. Sheedy, Esquire
Pepper Hamilton LLP
One Mellon Bank Center, 50th Floor
Pittsburgh, Pennsylvania 15219
or to such other address as any such Person may designate in writing to the
other Parties at the addresses listed above, in accordance with this Section.
8.04. Binding Effect. This Reorganization Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and assigns. This Reorganization Agreement may not be assigned by
any Party without the express written consent of the other Parties.
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<PAGE>
8.05. Headings. The Article, Section, paragraph and other headings in
this Reorganization Agreement are inserted solely as a matter of convenience and
for reference and are not a part of this Reorganization Agreement.
8.06. Counterparts. This Reorganization Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.07. Integration; No Third-Party Beneficiaries. This Reorganization
Agreement constitutes the entire understanding of the Parties with respect to
the subject matter hereof and supersedes all prior agreements, arrangements or
communications, oral or written, between the Parties hereto with respect to the
subject matter hereunder. This Agreement is not intended to confer upon any
Person other than the Parties hereto any rights or remedies hereunder, except
for the provisions of Section 4.05(g), 4.06(f) and Article V.
8.08. Severability. If any term or other provision of this Reorganization
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any rule of law in any particular respect or
under any particular circumstances, such term or provision shall nevertheless
remain in full force and effect in all other respects and under all other
circumstances, and all other terms, conditions and provisions of this
Reorganization Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby
is not affected in any manner materially adverse to any Party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Reorganization Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.
8.09. Amendments. This Reorganization Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the Party
against which the enforcement of such change, waiver, discharge or termination
is sought. This Agreement is not intended to confer upon any Person other than
the Parties hereto any rights or remedies hereunder, except for the provisions
of Section 4.05(g), 4.06(f) and Article V. Any of the terms or conditions of
this Reorganization Agreement may be waived at any time by the Party which is
entitled to the benefit thereof, or any of such terms or conditions may be
amended or modified in whole or in part at any time before or after the vote of
the shareholders of on this Reorganization Agreement to the extent permitted by
law by agreement in writing, executed in the same manner as this Reorganization
Agreement after authorization to do so by the Board of Directors of each Party;
provided, however, that such action shall be taken only if, in the judgment of
the Boards of Directors of each Party taking the action, such waiver or such
amendment or modification will not have a material adverse effect on the
benefits intended under this Reorganization Agreement
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<PAGE>
to such Party and its shareholders following approval of this Reorganization
Agreement by the shareholders of Rural Valley, unless this Reorganization
Agreement, as modified, is resubmitted to the shareholders of for their
approval.
8.10. Governing Law. This Reorganization Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania and, where the context so requires, under applicable federal law.
8.11. Incorporation by Reference. Any and all schedules, exhibits,
annexes, statements, reports, certificates or other documents or instruments
referred to herein or attached hereto are incorporated herein by reference
thereto as though fully set forth at the point referred to in this
Reorganization Agreement.
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<PAGE>
IN WITNESS HEREOF, each Party hereto has caused this Reorganization
Agreement to be executed on its behalf and its corporate seal to be affixed
hereto by its duly authorized officers, all as of the day and year first above
set forth.
THE PEOPLES NATIONAL BANK OF
RURAL VALLEY
ATTEST:
/s/Stella L. Samosky /s/T. Lowell Dean
-------------------- -----------------
Secretary T. Lowell Dean
(Corporate Seal) President
BT FINANCIAL CORPORATION
ATTEST:
/s/Mark L. Sollenberger /s/John H. Anderson
- ----------------------- -------------------
Secretary John H. Anderson
(Corporate Seal) Chairman and Chief Executive Officer
LAUREL BANK
ATTEST:
/s/Laura L. Roth /s/Eric F. Rummel
---------------- -----------------
Secretary Eric F. Rummel
(Corporate Seal) President
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<PAGE>
Schedules
None
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<PAGE>
Exhibit A
The Peoples National Bank of Rural Valley
Affiliate's Agreement
The undersigned, in connection with the Agreement and Plan of
Reorganization dated as of _______, 1998 (the "Agreement"), by and between The
Peoples National Bank of Rural Valley ("Rural Valley") and BT Financial
Corporation ("BT Financial") does hereby represent, warrant, undertake and agree
as follows:
1. The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be an "affiliate" of Rural Valley as the term
"affiliate" is used in and for purposes of Section 201.01 of the SEC's
Codification of Financial Reporting Policies (formerly SEC Accounting Series
Releases 130 and 135) and Rule 145 of the Securities Act of 1933, as amended
(the "Act"), although nothing contained herein should be construed as an
admission thereof;
2. The shares of BT Financial Common Stock to be issued to the
undersigned upon conversion of shares of Rural Valley Common Stock (such shares
of BT Financial Common Stock to be issued to the undersigned being referred to
herein as the "BT Financial Shares") are not being acquired with a view toward
their distribution except to the extent and in the manner permitted by paragraph
(d) of Rule 145 of the Act; and
3. Within the 30 days prior to the Effective Time, the undersigned has
not sold, exchanged, transferred, pledged, disposed of or in any other way
reduced his risk relative to, and will not sell, exchange, transfer, pledge,
dispose of or in any other way reduce his risk relative to, any shares of Rural
Valley Common Stock or BT Financial Common Stock owned of record or beneficially
by the undersigned.
The undersigned does hereby further undertake and agree as follows:
1. The undersigned will not sell, exchange, transfer, pledge, dispose of
or in any other way reduce his risk relative to his BT Financial Common Stock
until BT Financial, pursuant to Section 201.01 of the SEC's Codification of
Financial Reporting Policies shall have published combined financial results
covering a period of at least 30 days of post-Merger combined operations
subsequent to the Effective Date; and
2. The undersigned will not sell or otherwise dispose of his BT Financial
Shares except in accordance with applicable provisions of the Act and the rules
and regulations thereunder; and
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<PAGE>
3. The certificates representing his BT Financial Shares will bear the
following legend:
"The shares represented by this certificate have been issued to
the registered holder in a transaction to which Rule 145 under the
Securities Act of 1933, as amended (the "Act") applies. The shares
represented by this certificate may not be sold, transferred or
assigned, and the issuer shall not be required to give effect to any
attempted sale, transfer or assignment except pursuant to (a) a
current registration statement under the Act, or (b) a transaction
which, in the opinion of counsel reasonably satisfactory to the
issuer, is not required to be registered under the Act."
Such legend shall be subject to prompt removal upon receipt of an opinion
of counsel satisfactory to BT Financial to the effect that such removal conforms
to then existing law.
All capitalized terms which are not defined herein are used as they are
defined in the Agreement.
WITNESS the due execution hereof this ____ day of __________, 1998.
___________________________________
Accepted and Agreed:
BT Financial Corporation
By:____________________________
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<PAGE>
Exhibit B
BT Financial Corporation
Affiliate's Agreement
The undersigned, in connection with the Agreement and Plan of
Reorganization dated as of _________ 1998 (the "Agreement"), by and between The
First National Bank of Rural Valley ("Rural Valley") and BT Financial
Corporation ("BT Financial") does hereby represent, warrant, undertake and agree
as follows:
1. The undersigned has been advised that as of the date hereof the
undersigned may be deemed to be an "affiliate" of BT Financial as the term
"affiliate" is used in and for purposes of Section 201.01 of the SEC's
Codification of Financial Reporting Policies (formerly SEC Accounting Series
Releases 130 and 135) and Rule 145 of the Securities Act of 1933, as amended
(the "Act"), although nothing contained herein should be construed as an
admission thereof;
2. Within the 30 days prior to the Effective Time, the undersigned has
not sold, exchanged, transferred, pledged, disposed of or in any other way
reduced his risk relative to, and will not sell, exchange, transfer, pledge,
dispose of or in any other way reduce his risk relative to, any shares of Rural
Valley Common Stock or BT Financial Common Stock owned of record or beneficially
by the undersigned; and
3. The undersigned will not sell, exchange, transfer, pledge, dispose of
or in any other way reduce his risk relative to his BT Financial Common Stock
until BT Financial, pursuant to Section 201.01 of the SEC's Codification of
Financial Reporting Policies shall have published combined financial results
covering a period of at least 30 days of post-Merger combined operations
subsequent to the Effective Date.
All capitalized terms which are not defined herein are used as they are
defined in the Agreement.
WITNESS the due execution hereof this ____ day of __________, 1998.
___________________________________
Accepted and Agreed:
BT Financial Corporation
By:____________________________
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<PAGE>
ANNEX B
(S)214a. Procedure for conversion, merger or consolidation; vote of
stockholders
A national banking association may, by vote of the holders of at least two-
thirds of each class of its capital stock, convert into, or merge or consolidate
with, a State bank in the same State in which the national banking association
is located, under a State charter, in the following manner:
(a) Approval of board of directors; publication of notice of stockholders'
meeting; waiver of publication; notice of registered or certified mail. The
plan of conversion, merger, or consolidation must be approved by a majority of
the entire board of directors of the national banking association. The bank
shall publish notice of the time, place, and object of the shareholders' meeting
to act upon the plan, in some newspaper with general circulation in the place
where the principal office of the national banking association is located, at
least once a week for four consecutive weeks: Provided, that newspaper
publication may be dispensed with entirely if waived by all the shareholders and
in the case of a merger or consolidation one publication at least ten days
before the meeting shall be sufficient if publication for four weeks is waived
by holders of a least two-thirds of each class of capital stock and prior
written consent of the Comptroller of the Currency is obtained. The national
banking association shall send such notice to each shareholder of record by
registered mail or by certified mail at least ten days prior to the meeting,
which notice may be waived specifically by any shareholder.
(b) Rights of dissenting stockholders. A shareholder of a national banking
association who votes against the conversion, merger, or consolidation, or who
has given notice in writing to the bank at or prior to such meeting that he
dissents from the plan, shall be entitled to receive in cash the value of the
shares held by him, if and when the conversion, merger or consolidation is
consummated, upon written request made to the resulting State bank at any time
before thirty days after the date of consummation of such conversion, merger, or
consolidation, accompanied by the surrender of his stock certificates. The
value of such shares shall be determined as of the date on which the
shareholders' meeting was held authorizing the conversion, merger, or
consolidation, by a committee of three persons, one to be selected by majority
vote of the dissenting shareholders entitled to receive the value of their
shares, one by the directors of the resulting State bank, and the third by the
two so chosen. The valuation agreed upon by any two of three appraisers thus
chosen shall govern; but, if the value so fixed shall not be satisfactory to any
dissenting shareholder who has requested payment as provided herein, such
shareholder may within five days after being notified of the appraised value of
his shares appeal to the Comptroller of the Currency, who shall cause a
reappraisal to be made, which shall be final and binding as to the value of the
shares of the appellant. If, within ninety days from the date of consummation
of the conversion, merger, or consolidation, for any reason one or more of the
appraisers is not selected as herein provided, or the appraisers fail to
determine the value of such shares, the Comptroller shall upon written request
of any interested party, cause an appraisal to be made, which shall be final and
binding on all parties. The expenses of the Comptroller in making the
reappraisal, or the appraisal as the case may be, shall be paid by the resulting
State bank. The plan of conversion, merger, or consolidation shall provide the
manner of disposing of the shares of the resulting State bank not taken by the
dissenting shareholders of the national banking association.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors And Officers
Section 1741 of the BCL provide that a business corporation shall have
the power to indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action or proceeding, if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. In the case of an action by or in the
right of the corporation, Section 1742 limits such indemnification to expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to the corporation unless, and
only to the extent that, a court determines upon application that, despite the
adjudication of liability but in view of all the circumstances, such person is
fairly and reasonably entitled to indemnity for the expenses that the court
deems proper.
Section 1744 of the BCL provides that, unless ordered by a court, any
indemnification described above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made: (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to the proceeding; or (2) if such a quorum is not obtainable, or if
obtainable and a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (3) by the
shareholders. Notwithstanding the above, Section 1743 of the BCL provides that
to the extent a director, officer, employee or agent of a business corporation
is successful on the merits or otherwise in defense of any proceeding referred
to above, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
Section 1745 of the BCL provides that expenses (including attorneys'
fees) incurred by an officer, director, employee or agent of a business
corporation in defending any such action or proceeding may be paid by the
corporation in advance of the final disposition of the action or proceeding upon
receipt of an undertaking to repay the amount advanced if it is ultimately
determined that the indemnitee is not entitled to be indemnified by the
corporation.
Section 1746 of the BCL provides that the indemnification and
advancement of expenses provided by, or granted pursuant to, the provisions
described above are not exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, and
that indemnification may be granted under any bylaw, agreement, vote of
shareholders or directors or otherwise for any action taken or any failure to
take any action whether or not the corporation would have the power to indemnify
the person under any other provision of law and whether or not the indemnified
liability arises or arose from any action by or in the right to the corporation;
provided, however, that no indemnification may be made in any case where the act
or failure to act giving rise to the claim for indemnification is determined by
a court to have constituted willful misconduct or recklessness. Section 24.1 of
the registrant's By-laws provides that the registrant shall indemnify, to the
fullest extent now or hereafter permitted by law, each director or officer
(including each former director or officer) of the registrant who was or is made
a party to or a witness in or is threatened to be made a party to or a witness
in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was an authorized representative of the registrant, against all
expenses (including attorneys' fees and disbursements), judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred in connection with such action, suit or proceeding.
Section 24.2 of the registrant's By-laws provides that the
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<PAGE>
registrant shall pay expenses (including attorneys' fees and disbursements)
incurred by a director or officer of the registrant referred to in Section 24.1
in defending or appearing as a witness in any civil or criminal action, suit or
proceeding described in Section 24.1 in advance of the final disposition of such
action, suit or proceeding. The expenses incurred by such director or officer
shall be paid by the registrant in advance of the final disposition of such
action, suit or proceeding only upon receipt of an undertaking by or on behalf
of such director or officer to repay all amounts advanced if it shall ultimately
be determined that he is not entitled to be indemnified by the registrant.
Section 1747 of the BCL permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against any liability asserted against
such person and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under the provisions described above.
Section 24.5 of the registrant's By-laws provides that, except in the
circumstances set forth therein, the registrant shall purchase and maintain
insurance on behalf of each director and officer against any liability asserted
against or incurred by such director or officer in any capacity, or arising out
of such director's or officer's status as such, whether or not the registrant
would have the power to indemnify such person against such liability under the
provisions of the By-laws.
The registrant maintains directors' and officers' liability insurance
covering its directors and officers with respect to liabilities, including
liabilities under the Securities Act, which they may incur in connection with
their serving as such. Such insurance may provide coverage for the directors
and officers against certain liabilities even though such liabilities may not be
covered by the above-described By-law indemnification provision. As permitted
by Section 1713 of the BCL, the By-laws of the registrant provide that no
director shall be personally liable for monetary damages for any action taken,
or failure to take any action, except to the extent that such elimination or
limitation of liability is expressly prohibited by law. The BCL states that
this exculpation from liability does not apply (i) where the director has
breached or failed to perform the duties of his office and the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness, and
(ii) to the responsibility or liability of a director pursuant to any criminal
statute or the liability of a director for payment of taxes pursuant to federal,
state or local law. It may also not apply to liabilities imposed upon directors
by the federal securities laws.
Item 21. Exhibits And Financial Statement Schedules
(a) The following exhibits are filed herewith or incorporated by
reference as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No Description
<C> <S>
2.1. Agreement and Plan of Reorganization dated as of June 5, 1998 by and among BT
Financial Corporation, Laurel Bank and the Peoples National Bank of Rural Valley (a copy
of which is attached as Annex A to the Proxy Statement/Prospectus forming part of this
registration statement).
3.1 Articles of Incorporation of BT Financial Corporation as amended to August 16, 1991.
3.2 Amendment to Articles of Incorporation of BT Financial dated June 4, 1997.
3.3 By-laws of BT Financial Corporation as amended to September 23, 1992.
5.1 Opinion of Pepper Hamilton LLP as to legality of the shares of common stock, par value
$5.00 per share, of BT Financial Corporation being registered.
8.1 Opinion of Pepper Hamilton LLP as to certain tax matters.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Pepper Hamilton LLP (included in opinion filed as Exhibit 5.1).
23.3 Consent of Pepper Hamilton LLP (included in opinion filed as Exhibit 8.1).
25.1 Power of Attorney (filed herewith).
99.1 Form of Proxy to be delivered to shareholders of The Peoples National Bank of Rural
Valley
</TABLE>
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<PAGE>
(b) All financial statement schedules of BT Financial and Rural Valley
are omitted because they are not required, are not applicable or the required
information is given in the consolidated financial statements or notes thereto
incorporated by reference herein (in the case of BT Financial Corporation) or as
presented elsewhere herein (in the case of Rural Valley).
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a post-
effective amendment to this registration statement: 1.
To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended;
To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
That, for the purpose of determining any liability under the Securities Act
of 1933, as amended, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
That, for purposes of determining any liability under the Securities Act of
1933, as amended, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, that
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
That prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933, as amended, and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in that Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
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<PAGE>
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in that Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on June 24, 1998.
BT FINANCIAL CORPORATION
Principal Executive Officer: By: /s/ John H. Anderson Date: June 24, 1998
------------------------------------------------
JOHN H. ANDERSON
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints, John H. Anderson, Steven Ackmann and Dennis M. Sheedy
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
registration statement, and to file the same, with all exhibits thereto, and
other documentation in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof. Pursuant to the requirements of the
Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ John H. Anderson Chairman, Chief Executive Officer and June 24 ,1998
Director (Principal Executive Officer)
/s/ Mark L. Sollenberger Executive Vice President, Treasurer and June 24, 1998
Assistant Secretary (Principal Financial
Officer)
/s/ Brian H. Lehman Vice President and Controller (Principal June 24, 1998
Accounting Officer)
/s/ G. Scott Baton Director June 24, 1998
/s/ Martin L. Bearer Director July 3, 1998
/s/ John C. Cwik Director June 24, 1998
/s/ Bruno DeGol Director June 24, 1998
/s/ Louis G. Galliker Director June 24, 1998
/s/ William B. Kania Director June 24, 1998
/s/ L. Robert Kimball Director June 24, 1998
/s/ Edwin L. Mears Director June 24, 1998
/s/ Roger S. Nave Director June 24, 1998
/s/ Ethel J. Otrosina Director June 24, 1998
/s/ Robert G. Salathe, Jr. Director June 24, 1998
/s/ William R. Snoddy Director June 24, 1998
/s/ Gerald W. Swatsworth Director June 24, 1998
/s/ W. A. Thomas Director June 24, 1998
/s/ Rowland H. Tibbott, Jr. Director June 24, 1998
/s/ Thomas A. Young Director July 7, 1998
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Prior Filing or
Exhibit No. Description Sequential Page Number
- ----------- ----------- ----------------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization by and among
BT Financial Corporation, Laurel Bank and The
Peoples National Bank of Rural Valley dated June 5,
1998 (a copy of which is attached as Annex A to the
Proxy Statement/Prospectus forming part of this
registration statement).
3.1 Articles of Incorporation of BT Financial Corporation Incorporated by reference to
as amended to August 16, 1991. Registration Statement on Form S-4
(No. 33-69112)
3.2 Amendment to Articles of Incorporation of BT
Financial dated June 4, 1997
3.3 By-laws of BT Financial Corporation as amended to Incorporated by reference to
September 23, 1992. Registration Statement on Form S-4
(No. 33-69112)
5.1 Opinion of Pepper Hamilton LLP as to legality of the
shares of common stock, par value $5.00 per share, of
BT Financial Corporation being registered.
8.1 Opinion of Pepper Hamilton LLP as to certain tax
matters.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Pepper Hamilton LLP (included in opinion
filed as Exhibit 5.1).
23.3 Consent of Pepper Hamilton LLP (included in opinion
filed as Exhibit 8.1).
25.1 Power of Attorney (included on page II-4 herewith)
99.1 Proxy to be delivered to shareholders of The Peoples
National Bank of Rural Valley.
</TABLE>
<PAGE>
EXHIBIT 3.2
Microfilm Number Filed with the Department of State on June 4, 1997
----------- ------------
Entity Number 728354 s/Yvette Kane
------------- --------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
In compliance with the requirements of 15 Pa.C (S) 1915 (relating to the
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: BT Financial Corporation
-----------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county and venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 551 Main Street, Johnstown, PA 15901 Cambria
-----------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
--------------------------------------------------------------------
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was
incorporated is: Pennsylvania Business Corporation Law,
-----------------------------------------------------------
Act of May 5, 1933, P.L. 364
4. The date of its incorporation is: 12/16/82
------------------------------------------
5. (Check, and if appropriate, complete one of the following):
x The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
The amendment shall be effective on: at
---------------- ----------------
Date Hour
6. (Check one of the following):
x The amendment was adopted by the shareholders (or members)
--- pursuant to 15 Pa.C.S. (S) 1914 (a) and (b).
The amendment was adopted by the board of directors pursuant
--- to 15 Pa.C.S. (S) 1914 (c).
7. (Check, and if appropriate, complete one of the following):
The amendment adopted by the corporation, set forth in full as
--- follows:
x The amendment adopted by the corporation as set forth in full in
--- Exhibit A attached hereto and made a part hereof.
[STAMP] Jun-4 97
PA Dept. of State
<PAGE>
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
--- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned has caused these Articles of
Amendment to be signed by a duly authorized officer thereof this 30th day of
----
May , 1997.
- ------ --
BT Financial Corporation
--------------------------------------------
(Name of Corporation)
BY: /s/John H. Anderson
---------------------------------------
TITLE: John H. Anderson
------------------------------------
Chairman and CEO
<PAGE>
Exhibit "A"
BT FINANCIAL CORPORATION
Amendment to the Articles of
Incorporation Adopted by the Shareholders
The nature of the amendment is:
"5. The amount of authorized capital stock of the corporation is twenty-
seven million (27,000,000) shares divided into classes as follows:
(a) Two million (2,000,000) shares of Preferred Stock without par
value. The Board of Directors shall have authority to create and authorize
the issuance of one or more series of Preferred Stock, not to exceed an
aggregate of two million (2,000,000) shares, without par value, with full,
limited, multiple or fractional, or no voting rights, and to fix by
resolution the designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights, redemption rights
and other special rights, if any, applicable to any such series.
(b) Twenty-five million (25,000,000) shares of Common Stock of the par
value of $5.00 per share."
<PAGE>
Exhibit 5.1
[Pepper Letterhead]
August 14, 1998
BT Financial Corporation
BT Financial Plaza
551 Main Street
Johnstown, Pennsylvania 15901
Re: Legality of Shares
Ladies and Gentlemen:
We have acted as counsel for BT Financial Corporation, a Pennsylvania
corporation, in connection with the proposed issuance of up to 472,800 shares
(the "Shares") of common stock, par value $5.00 per share, of BT Financial
pursuant to an Agreement and Plan of Reorganization dated as of June 5, 1998
(the "Merger Agreement") by and among BT Financial, its wholly-owned subsidiary,
Laurel Bank and Peoples National Bank of Rural Valley, a national banking
association. As such counsel, we have also acted on behalf of BT Financial in
connection with the Registration Statement on Form S-4 (the "Registration
Statement") to be filed with the Securities and Exchange Commission for the
registration pursuant to the Securities Act of 1933, as amended (the "Act"), of
that proposed issuance. We are furnishing this opinion to you in accordance
with Item 601 (b) (5) of Regulation S-K promulgated under the Act for filing as
Exhibit 5.1 to the Registration Statement.
In preparing this opinion, we have examined (i) the Registration Statement,
(ii) the Merger Agreement, (iii) the Articles of Incorporation and By-Laws of BT
Financial, as amended to date, (iv) certain resolutions adopted by the Board of
Directors of BT Financial on [DATE], and (v) such other public and corporate
documents, certificates, instruments, corporate records, legal opinions,
statutes, decisions and questions of law as we deemed necessary or appropriate
to enable us to express an informed opinion on the matter hereinafter set forth.
In rendering an opinion on the matter hereinafter set forth, we have
assumed the authenticity of all original documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
conformed copies or photocopies thereof and the genuineness of all signatures
and the due authority of all persons executing such documents and the due
authorization, execution and delivery of such documents.
We are opining herein only as to the effect on the subject transaction of
the laws of the Commonwealth of Pennsylvania (excluding conflicts of laws rules)
and the laws of the United States of America, all as in effect on the date
hereof. Accordingly, we are not opining on, and we assume no responsibility as
to the applicability to or effect on any of the matters covered herein of the
laws of any other jurisdiction.
On the basis of and subject to the foregoing, we are pleased to advise you
that in our opinion the Shares have been duly authorized for issuance and sale
in the manner referred to in the Registration Statement and, when issued and
delivered by BT Financial pursuant to the Merger Agreement, will be validly
issued, fully paid and non-assessable.
<PAGE>
[Pepper Letterhead]
BT Financial Corporation
August 14, 1998
Page 2
This opinion is rendered as of the date hereof, and we have not undertaken
to supplement this opinion with respect to factual matters of changes in the law
which hereafter occur.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to us in the Proxy
Statement/Prospectus that is part of the Registration Statement.
Yours truly,
/s/ Pepper Hamilton LLP
<PAGE>
Exhibit 8.1
[Pepper Hamilton Letterhead]
August 14, 1998
BT Financial Corporation
551 Main Street
Johnstown, PA 15901
Re: Opinion on Certain Tax Matters
Ladies & Gentlemen:
You have requested our opinion regarding certain Federal income tax
consequences of a transaction (the "Merger") in which Peoples National Bank of
Rural Valley ("Rural Valley"), will merge into Laurel Bank, a wholly-owned
subsidiary of BT Financial Corporation ("BT Financial"). In the Merger, each
outstanding share of common stock of Rural Valley ("Rural Valley Common Stock"),
will be converted into the right to receive 11.82 shares of BT Financial Common
Stock.
In rendering this opinion, we have reviewed the Agreement and Plan of
Reorganization, dated as of June 5, 1998 (the "Merger Agreement"), by and among
BT Financial, Laurel Bank and Rural Valley, the Proxy Statement/ Prospectus
included in the Registration Statement on Form S-4 to be filed by BT Financial
with the Securities and Exchange Commission on or about August 17, 1998 (the
"Proxy Statement/Prospectus") and such other documents as we have deemed
necessary or appropriate for purposes of this opinion. We have assumed, without
independent verification, the genuineness of all signatures and the authenticity
of all documents submitted to us. As to various matters of fact material to
this opinion, we have relied upon certificates of officers of Rural Valley,
Laurel Bank and BT Financial. Our opinion is based on the facts described below
and in the above-mentioned officers' certificates and other relevant facts set
forth in the Merger Agreement which are incorporated herein as fully as though
set forth herein.
All capitalized terms not otherwise defined herein have the meanings given
such terms in the Proxy Statement/Prospectus.
For purposes of this opinion, we have assumed that the Merger will be
consummated as of [the date of this opinion] pursuant to the terms and
conditions set forth in the Merger Agreement. In addition, we have assumed the
existence of the following facts, which we understand will be confirmed to us in
writing by officers of BT Financial and Laurel Bank and Rural Valley. We have
neither investigated nor verified the accuracy of any of the assumptions upon
which this opinion is based.
1. (i) Neither Rural Valley, nor any corporation that is related to Rural
Valley, has acquired, or has any present plan or intention to acquire, any
shares of stock of Rural Valley ("Rural Valley Common Stock") in contemplation
of the Merger, or otherwise as part of a plan of which the Merger is a part.
Neither BT Financial, nor any corporation that is related to BT Financial, has a
present plan or intention to purchase Rural Valley Common Stock, other than as
expressly contemplated by the Merger Agreement. BT Financial has no present plan
or intention following the Merger, the reacquire or to cause any corporation
that is related to BT Financial to acquire any common stock of BT Financial ("BT
Financial Common Stock"). No corporation that is related to BT Financial has a
present plan or intention to purchase any BT Financial Common Stock.
<PAGE>
[Pepper Hamilton Letterhead]
BT Financial Corporation
August 14, 1998
Page 2
(ii) For purposes of this opinion letter, two corporations shall
be treated as related to one another if immediately prior to or immediately
after the Merger, as the case may be, (a) the corporations are members of the
same affiliated group (within the meaning of Section 1504 of the Internal
Revenue Code of 1986, as amended (the "Code"), but determined without regard to
Section 1504(b) of the code, or (b) one corporation owns 50% or more of the
total combined voting power of all classes of stock of the other corporation
that are entitled to vote or 50% or more of the total value of shares of all
classes of stock of the other corporation (applying the attribution rules of
Section 318 of the Code, as modified pursuant to Section 304(c)(3)(B) of the
Code).
2. Rural Valley has not made, and does not have any present plan or
intention to make, any distributions (other than the dividends made in the
ordinary course of business) prior to, in contemplation of, or otherwise in
connection with the Merger.
3. In connection with the Merger, Rural Valley will transfer to Laurel Bank
at least 90% of the fair market value of the net assets and at lease 70% of the
fair market value of the gross assets that Rural Valley held immediately prior
to the Merger. For purposes of this representation, amounts paid by Rural Valley
to dissenters or other shareholders who receive cash or other property, Rural
Valley assets used to pay its reorganization expenses and all redemptions and
distributions made by Rural Valley (other than dividends made in the ordinary
course of business) immediately preceding, or in contemplation of, the Merger
will be included as assets of Rural Valley prior to the Merger.
4. Except as provided in the Merger Agreement, immediately prior to the time
of the Merger, Rural Valley will not have any outstanding warrants, options,
convertible securities or other type of right pursuant to which any person could
acquire stock of Rural Valley.
5. Neither BT Financial or Laurel Bank (nor any other subsidiary of BT
Financial) has acquired any shares of stock of Rural Valley in contemplation of
the Merger, or otherwise as part of a plan of which the Merger is a part.
6. Prior to the Merger, BT Financial will own all of the capital stock of
Laurel Bank. No capital stock of Laurel Bank will be issued in the Merger. BT
Financial has no plan or intention to cause Laurel Bank to issue additional
shares of its stock that would result in BT Financial owning less than all the
capital stock of Laurel Bank after the Merger.
7. BT Financial has no present plan or intention to make any distributions
after the Merger to holders of BT Financial Common Stock (other than dividends
made in the ordinary course of business).
8. BT Financial has no plan or intention, following the Merger, to liquidate
Laurel Bank, to merge Laurel Bank with and into another corporation, to sell or
otherwise dispose of any of the stock of Laurel Bank, to cause Laurel Bank to
distribute to BT Financial or any of its subsidiaries (other than Laurel Bank)
any assets of Rural Valley or the proceeds of any borrowings incurred by Laurel
Bank, or to cause Laurel Bank to sell or otherwise dispose of any of the assets
of Rural Valley acquired in the Merger, except for dispositions of such assets
in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
Based solely upon the facts and representations set forth above, subject to
the foregoing, and assuming the Merger would be consummated on the date of this
letter but otherwise in accordance with the Merger Agreement, it is our opinion
that:
<PAGE>
[Pepper Hamilton Letterhead]
BT Financial Corporation
August 14, 1998
Page 3
1. The Merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code, and BT Financial and Rural Valley will each be
a "party to a reorganization" within the meaning of 368(b) of the Code.
2. No gain or loss will be recognized by BT Financial or Rural Valley as
a result of the Merger.
3. No gain or loss will be recognized by any Rural Valley shareholder
upon the exchange of that shareholder's shares of Rural Valley Common Stock for
shares of BT Financial Common Stock pursuant to the Merger.
4. A Rural Valley shareholder who dissents from the proposed Merger and
receives solely cash in exchange for that shareholder's shares of Rural Valley
Common Stock will be treated as having received that cash as a distribution in
redemption of those shares subject to the provisions and limitations of Section
302 of the Code. If the distribution is eligible for treatment as a
distribution in redemption of that shareholder's shares, that shareholder will
have gain to the extent of the consideration received less that shareholder's
adjusted basis in those shares.
This opinion is based on the Code, Treasury Regulations, Internal Revenue
Service rulings, judicial decisions, and other applicable authority, all as in
effect on the date of this opinion. The legal authorities on which this opinion
is based may be changed at any time. Any such changes may be retroactively
applied and could modify the opinions expressed above. This opinion does not
address any tax considerations under foreign, state or local laws, or the tax
considerations to certain Rural Valley or BT Financial shareholders in light of
their particular circumstances, including persons who are not United States
persons or who are resident aliens, life insurance companies, dealers in
securities, tax exempt entities, shareholders who receive shares of Rural Valley
or BT Financial Common Stock through the exercise of employee stock options or
through other compensation arrangements, or shareholders who do not hold Rural
Valley or BT Financial Common Stock as "capital assets" within the meaning of
Section 1221 of the Code.
Because the federal income tax consequences discussed above depend upon
each of the Rural Valley or BT Financial shareholder's particular tax status,
each shareholder should consult the shareholder's own tax adviser for advice on
the tax consequences of the Merger to the shareholder.
This letter is not to be quoted in whole or in part, nor filed with any
other governmental agency or any other person, without the prior written consent
of this firm.
We hereby consent to the filing of this option as Exhibit 8.1 to the
Registration Statement and to the reference to our firm in the Proxy
Statement/Prospectus that is part of the Registration Statement.
Very truly yours,
/s/ Pepper Hamilton LLP
<PAGE>
[PricewaterhouseCoopers Letterhead]
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 concerning the merger of Peoples National Bank of Rural Valley into
Laurel Bank, a wholly-owned subsidiary of BT Financial Corporation of our
report, dated January 28, 1998, on our audits of the consolidated financial
statements of BT Financial Corporation and affiliates as of December 31, 1997
and 1996 and for each of the three years in the period ended December 31, 1997.
We also consent to the reference to our firm under the caption "Experts".
/s/ PricewaterhouseCoopers LLP
August 14, 1998
<PAGE>
Exhibit 99.1
REVOCABLE PROXY
PEOPLES NATIONAL BANK OF RURAL VALLEY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Lowell Dean, Peter Calarie, and
Charles S. Dill as proxies, each with the power to appoint his substitute, and
hereby authorizes said proxies to represent and to vote, as designed on the
reverse hereof, all shares of common stock of Peoples National Bank of Rural
Valley held of record by the undersigned at the close of business on [Record
Date] at the Special Meeting of Shareholders to be held on [Meeting Date] or at
any adjournment or postponement thereof. In their discretion, the proxies are
authorized to vote on such matters as may property come before the meeting.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this Proxy will be
voted FOR the proposal described below.
Adoption and approval of an Agreement and Plan of Reorganization
dated as of June 5, 1998 by and among BT Financial Corporation,
Laurel Bank and Peoples National Bank of Rural Valley.
For Against Abstain
[ ] [ ] [ ]
Please sign EXACTLY as your name appears on
this card. When signing as trustee, executor, etc.,
title should be so stated. If shares are held jointly,
only one signature is required. If a Corporation,
please sign in full corporate name by President or
other authorized officer. If a Partnership, please
sign in partnership name by authorized persons.
Dated:___________, 1998
___________________________________________
Authorized Signature(s)
___________________________________________
Title
