<PAGE>
As filed with the Commission on April 14, 1999 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)
<TABLE>
<S> <C> <C>
Pennsylvania 6022 25-1441348
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number Identification No.)
</TABLE>
BT Financial Plaza, 551 Main Street,
Johnstown, Pennsylvania 15901, (814) 532-3801
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
John H. Anderson
Chairman and Chief Executive Officer
BT Financial Corporation
BT Financial Plaza, 551 Main Street,
Johnstown, Pennsylvania 15901, (814) 532-3801
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Dennis M. Sheedy, Esquire Charles B. Jarrett, Jr., Esquire
Pepper Hamilton LLP Plowman, Spiegel & Lewis, P.C.
50th Floor, Grant Building, Suite 230
One Mellon Bank Center Pittsburgh, Pennsylvania 15219
Pittsburgh, Pennsylvania 15219 412-471-8521
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
value $5.00 per share 2,904,580 $26.32 $76,447,800 $21,252.49
- -----------------------------------------------------------------------------------------------------
Preferred Share
Purchasee Rights 2,904,580 N.A. N.A. N.A.
- -----------------------------------------------------------------------------------------------------
</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 First
Philson Financial Corporation Common Stock upon consummation of the merger
described in this registration statement.
(2) Calculated in accordance with Rule 457(f)(1) based upon the aggregate
market value on April 9, 1999 of the shares of common stock, par value
$2.50 per share, of First Philson Financial Corporation ("First Philson
Common Stock") expected to be cancelled in connection with the merger and
computed by dividing (i) the product of (A) the average of the high and low
prices of First Philson Common Stock as reported on the American Stock
Exchange (the "AMEX") on April 9, 1999 (43.875) and (B) 1,742,400
representing the maximum number of shares of First Philson Common Stock
expected to be canceled in connection with the merger, by (ii) 2,904,580
representing the maximum number of shares of BT Financial Corporation
Common Stock to be issued in connection with the merger. 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 BT
Financial'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 or until this Registration Statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
BT FINANCIAL CORPORATION FIRST PHILSON FINANCIAL CORPORATION
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of BT Financial Corporation and First Philson
Financial Corporation have agreed on a merger of BT Financial Corporation and
First Philson Financial Corporation with BT Financial as the resulting
institution. Following the merger, BT Financial Corporation will have assets of
approximately $1.9 billion, deposits of approximately $1.6 billion and
shareholders' equity of approximately $189 million. BT Financial and First
Philson are convinced that this merger will position BT Financial to grow and
flourish as the financial services industry evolves and consolidates.
In the merger, BT Financial Corporation, a Pennsylvania corporation,
and First Philson Financial Corporation, a Delaware corporation, will combine
with BT Financial Corporation as the surviving corporation. Each share of First
Philson Financial Corporation Common Stock held will become exchangeable for
[Number of shares of BT Financial Common Stock based on Merger Agreement
calculation, which is determined five days prior to Mailing Date] shares of the
BT Financial Corporation.
BT Financial Common Stock is included for quotation on NASDAQ under
the symbol "BTFC." First Philson Common Stock is listed on the AMEX under the
symbol "FPB."
BT Financial and First Philson cannot complete the merger unless the
shareholders of both companies approve it. BT Financial and First Philson will
each hold a meeting of the shareholders to vote on this merger proposal. Each
shareholders' vote is very important. Whether or not you plan to attend your
shareholder meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, your proxy will be counted as a vote in favor
of the merger. Not returning your card or not instructing your broker how to
vote any shares held for you in "street name" will have the same effect as a
vote against the merger.
The dates, times and places of the meetings are as follows:
---------------------------------------------------------------------
For BT Financial Shareholders: For First Philson Shareholders:
*** 1999, ** a.m., local time **, 1999, ** a.m., local time
BT Financial Corporation First Philson Financial Corporation
BT Financial Plaza 534 Main Street
551 Main Street Berlin, Pennsylvania 15530
Johnstown, Pennsylvania 15901
---------------------------------------------------------------------
This document provides detailed information about these meetings and
the proposed merger. You can also get information about BT Financial and First
Philson from publicly available documents that our companies have filed with the
Securities and Exchange Commission. We encourage you to read this entire
document carefully.
We strongly support this combination of our companies and join with
the majorities of our Boards of Directors in enthusiastically recommending that
you vote in favor of the merger.
John H. Anderson George W. Hay
Chairman and Chief Executive Officer President and Chief Executive Officer
BT Financial Corporation First Philson Financial Corporation
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this Joint Proxy Statement-Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense. These securities are not
savings or deposit accounts or other obligations of any bank or non-bank
subsidiary of any of the parties, and they are not insured by the Federal
Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental
agency.
- -------------------------------------------------------------------------------
Joint Proxy Statement-Prospectus dated ***, 1999
and first mailed to shareholders on [Mailing Date]
<PAGE>
The information in this prospectus is not complete and may be changed. BT
Financial may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and BT Financial is not soliciting an offer to
buy these securities in any state where the offer to sell is not permitted.
<PAGE>
BT FINANCIAL CORPORATION
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [BT Meeting Date]
[MAILING DATE at least 10 days before Meeting]
TO THE SHAREHOLDERS OF BT FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Special Meeting of shareholders of BT Financial
Corporation will be held on [BT Meeting Date], 3:00 p.m. local time, at 551 Main
Street, Johnstown, Pennsylvania 15901, for the purpose of considering and voting
upon the following matters:
1. To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated as of February 23, 1999, by and between First
Philson Financial Corporation, a Delaware corporation, and BT Financial
Corporation, a Pennsylvania corporation, and the consummation of the
transactions contemplated by that agreement, pursuant to which, among other
things, First Philson will merge with and into BT Financial upon the terms
and subject to the conditions set forth in the Agreement and Plan of
Reorganization, as more fully described in the enclosed Joint Proxy
Statement-Prospectus.
2. To transact such other business as may properly be brought before the
Special Meeting or any adjournments or postponements of the Special Meeting.
The close of business on [BT Record Date] has been fixed as the date of record
for those shareholders entitled to vote at the Special Meeting and any
adjournments or postponements of the Special Meeting. Accordingly, only
shareholders of record on such date are entitled to notice of, and to vote at,
the Special Meeting and any adjournments or postponements of the Special
Meeting.
By ORDER OF THE BOARD OF DIRECTORS
/s/ Laura L. Roth
Laura L. Roth,
Secretary
Whether or not you plan to attend the Special Meeting in person, please
complete, date, sign and return the enclosed proxy card in the enclosed
envelope, which requires no postage if mailed in the United States. If you
attend the Special Meeting, you may vote in person if you wish, even if you have
previously returned your proxy card.
<PAGE>
FIRST PHILSON FINANCIAL CORPORATION
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON [First Philson Meeting Date]
____________________________
[MAILING DATE at least 20 days before Meeting]
TO THE SHAREHOLDERS OF
FIRST PHILSON FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of shareholders of First Philson
Financial Corporation, a Delaware corporation, will be held on [F.P. Meeting
Date], [F.P. Meeting Time] a.m., local time, at 534 Main Street, Berlin,
Pennsylvania 15530, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Reorganization, dated as of February 23, 1999, by and between First
Philson Financial Corporation, a Delaware corporation, and BT Financial
Corporation, a Pennsylvania corporation, and the consummation of the
transactions contemplated by that agreement, pursuant to which, among other
things, First Philson will merge with and into BT Financial upon the terms
and subject to the conditions set forth in the Agreement and Plan of
Reorganization, as more fully described in the enclosed Joint Proxy
Statement-Prospectus.
2. To elect three directors for a term of three years or until their
successors are elected or until the merger becomes effective whichever
first occurs. (For more details, First Philson shareholders should see
enclosed additional Proxy Statement of First Philson which is incorporated
by reference.)
3. To transact such other business as may properly be brought before the Annual
Meeting or any adjournments or postponements of the Annual Meeting.
The close of business on [F.P. Record Date] has been fixed as the record date
for determining shareholders entitled to vote at the annual meeting of First
Philson shareholders and any adjournments or postponements of the Annual
Meeting. Accordingly, only shareholders of record on such date are entitled to
notice of, and to vote at, the Annual Meeting and any adjournments or
postponements of the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Cathy E. Webreck
Cathy E. Webreck
Secretary
Whether or not you plan to attend the Annual Meeting in person, please complete,
date, sign and return the enclosed proxy card in the enclosed envelope, which
requires no postage if mailed in the United States. If you attend the Annual
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
<PAGE>
TABLE OF CONTENTS
SUMMARY...................................................................... 1
THE COMPANIES................................................................ 1
THE SHAREHOLDERS' MEETINGS................................................... 1
VOTING AT THE MEETINGS; RECORD DATES......................................... 2
REASONS FOR THE MERGER....................................................... 3
RECOMMENDATION OF THE BOARDS OF DIRECTORS.................................... 3
THE MERGER................................................................... 3
Opinions of Financial Advisors............................................. 4
Termination................................................................ 4
Certain Covenants.......................................................... 4
Completion of Merger....................................................... 5
Regulatory Considerations.................................................. 5
No Rights for Dissenting Shareholders...................................... 6
Certain Material Federal Income Tax Consequences........................... 6
Accounting Treatment....................................................... 6
Comparison of Shareholders Rights.......................................... 6
Stock Option Agreement..................................................... 6
Interests of First Philson Directors and Officers in the Merger............ 7
Election of First Philson Directors........................................ 7
SELECTED FINANCIAL DATA...................................................... 8
BT FINANCIAL CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (UNAUDITED).... 9
FIRST PHILSON SELECTED HISTORICAL FINANCIAL INFORMATION (UNAUDITED).......... 11
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA.................................. 12
COMPARATIVE PER SHARE DATA................................................... 13
PRO FORMA AND PRO FORMA EQUIVALENT PER COMMON SHARE DATA (UNAUDITED)......... 14
COMPARATIVE MARKET PRICES.................................................... 15
THE MEETINGS................................................................. 17
VOTING AT THE MEETINGS; RECORD DATES......................................... 17
PROXIES...................................................................... 18
THE MERGER................................................................... 20
Background of the Merger................................................... 20
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARDS OF DIRECTORS............ 21
(i)
<PAGE>
BT Financial............................................................... 21
First Philson.............................................................. 22
Opposition to the Merger................................................... 23
Response of First Philson Management....................................... 25
Opinions of Financial Advisors............................................. 26
INDEMNIFICATION.............................................................. 33
REGULATORY CONSIDERATIONS.................................................... 34
NO RIGHTS FOR DISSENTING SHAREHOLDERS........................................ 35
RESALE RESTRICTIONS.......................................................... 35
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES............................. 35
ACCOUNTING TREATMENT......................................................... 36
THE MERGER AGREEMENT......................................................... 36
The Merger................................................................. 36
Exchange Procedures........................................................ 37
Representations and Warranties............................................. 38
Certain Covenants.......................................................... 38
Interests of First Philson Directors and Officers in the Merger............ 40
Stock Option Agreement..................................................... 40
Acquisition Proposals...................................................... 41
First Philson Dividends.................................................... 41
Conditions................................................................. 41
Termination................................................................ 43
Expenses................................................................... 45
Amendment And Waiver....................................................... 45
DESCRIPTION OF BT FINANCIAL CAPITAL STOCK.................................... 45
BT Financial Shareholder Rights Plan....................................... 47
Provisions Affecting Business Combinations And Control Share Acquisition... 49
Pennsylvania Law........................................................... 50
Federal Law................................................................ 51
Tender Offers for and Other Proposals to Acquire BT Financial.............. 51
"Supermajority" Provisions Concerning Charter Amendments................... 51
"Supermajority" Provisions Concerning Bylaw Amendments..................... 51
Shareholder Nominations for Directors...................................... 52
COMPARISON OF SHAREHOLDERS RIGHTS............................................ 52
Dividends.................................................................. 52
Voting..................................................................... 52
Cumulative Voting.......................................................... 53
Classified Board of Directors; Election of Directors....................... 53
Annual Meetings............................................................ 53
Removal of Directors....................................................... 53
Liquidation................................................................ 53
Preemptive Rights.......................................................... 53
Anti-takeover Provisions................................................... 54
Approval of Fundamental Changes............................................ 54
Rights..................................................................... 54
Right to Call a Special Meeting............................................ 54
Action by Shareholders Without a Meeting................................... 55
(ii)
<PAGE>
Duties and Liabilities of Directors........................................ 55
REGULATION OF BT FINANCIAL UNDER BANKING LAWS................................ 57
Payment Of Dividends And Other Restrictions................................ 57
Loans...................................................................... 58
Capital Adequacy........................................................... 58
Support Of Laurel Bank..................................................... 58
Prompt Corrective Action................................................... 59
Interstate Banking and Branching Legislation............................... 60
FDIC Insurance Assessments................................................. 60
BT FINANCIAL CORPORATION..................................................... 61
Business................................................................... 61
Management and Additional Information...................................... 62
FIRST PHILSON................................................................ 63
Business................................................................... 63
Management and Additional Information...................................... 63
LEGAL MATTERS................................................................ 64
EXPERTS...................................................................... 64
WHERE YOU CAN FIND MORE INFORMATION.......................................... 64
FORWARD-LOOKING STATEMENTS................................................... 66
FINANCIAL INFORMATION........................................................ 66
PRO FORMA CONDENSED COMBINED BALANCE SHEETFOR THE YEAR ENDED
DECEMBER 31, 1998......................................................... 68
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1998................................................... 69
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1997................................................... 70
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR
ENDED DECEMBER 31, 1996................................................... 71
INDEX TO EXHIBITS............................................................ 84
ANNEXES
A - Agreement and Plan of Reorganization dated February 23, 1999...........A-1
B - Stock Option Agreement dated February 23, 1999.........................B-2
C - Fairness Opinion of Berwind Financial, L.P.............................C-1
D - Fairness Opinion of Hopper Soliday, A Division of
Tucker Anthony Incorporated............................................D-1
(iii)
<PAGE>
SUMMARY
The following summary highlights selected information from this Joint
Proxy Statement-Prospectus, and may not contain all of the information that is
important to you. For a more complete understanding of the merger and for a
more complete description of the legal terms of the merger, you should read this
entire document carefully, as well as the additional documents to which this
document refers you. See "Where You Can Find More Information" on page 64.
THE COMPANIES (pages 61 and 63)
BT FINANCIAL CORPORATION
551 Main Street
Johnstown, Pennsylvania 15901
(814) 531-3801
BT Financial is a bank holding company registered under federal law
and incorporated in Pennsylvania. BT Financial has one banking subsidiary,
Laurel Bank, which is a member of the Federal Reserve System. Laurel Bank
conducts business through a network of 69 offices located throughout
southwestern Pennsylvania and provides a full range of financial services to
individuals, businesses and governmental bodies, including accepting demand,
savings and time deposits, safe deposit facilities, electronic banking services,
debit cards, money transfer services, and other banking services. Lending
services include consumer, real estate, commercial and industrial loans. BT
Financial has four non-bank subsidiaries: Laurel Trust Company, a trust company
which provides trust and investment services, Laurel Community Development
Corporation, a corporation which conducts community development activities,
Bedford Associates Inc., which holds and leases property, and Bedford Associates
of Delaware, Inc., an investment holding company. As of December 31, 1998, BT
Financial had total assets of $1.70 billion, total deposits of $1.39 billion and
shareholders' equity of $163.60 million.
FIRST PHILSON FINANCIAL CORPORATION
534 Main Street
Berlin, Pennsylvania 15530
(814) 267-4666
First Philson is a bank holding company registered under federal law
and incorporated in Delaware. First Philson has one banking subsidiary, First
Philson Bank, N.A. ("First Philson Bank"), which is a national banking
association. First Philson Bank conducts business through 9 branches in
Somerset and Fayette counties. First Philson also owns a finance company
subsidiary, Flex Financial Consumer Discount Company ("Flex"), licensed by the
Pennsylvania Department of Banking and providing consumer lending to customers
within the Somerset, Pennsylvania market area. Flex has one office in Somerset
county. As a commercial bank, First Philson Bank provides loan and deposit
services to individuals and small to medium sized businesses in its Fayette and
Somerset Counties, Pennsylvania market areas. As of December 31, 1998, First
Philson had total assets of $213.60 million, total deposits of $185.10 million
and shareholders' equity of $25.60 million.
THE SHAREHOLDERS' MEETINGS (page 17)
BT Financial Shareholders. The BT Financial Special Meeting will be
held on [BT Meeting Date], at [BT Meeting Time] p.m., local time, at 551 Main
Street, Johnstown, Pennsylvania 15901. At the BT Financial Special Meeting,
shareholders will vote:
1. to approve the merger of BT Financial and First Philson; and
2. to act on any other items that may be properly submitted to a vote
at the Special Meeting.
1
<PAGE>
First Philson Shareholders. The First Philson Annual Meeting will be
held on [F.P. Meeting Date] at [F.P. Meeting Time], local time, at 534 Main
Street, Berlin, Pennsylvania 15530. At the First Philson Annual Meeting,
shareholders will vote:
1. to approve the merger of BT Financial and First Philson;
2. to elect three directors, and
3. to act on any other items that may be properly submitted to a vote
at the Annual Meeting.
VOTING AT THE MEETINGS; RECORD DATES (page 17)
BT Financial Shareholders. BT Financial shareholders can vote at the
Special Meeting of BT Financial shareholders if they owned BT Financial Common
Stock at the close of business on [BT Record Date]. Each BT Financial
shareholder may cast one vote for each share of BT Financial Common Stock owned
on [BT Record Date]. In order to approve the merger, the holders of a majority
of the votes cast at BT Financial's Special Meeting must vote in favor of the
merger.
BT Financial shareholders can vote their shares by attending the
Special Meeting of BT Financial shareholders in person or can mark the enclosed
proxy card, sign it and mail it in the enclosed return envelope. BT Financial
shareholders can revoke their proxy as late as the date of the meeting either by
sending in a new proxy or by attending the meeting and voting in person.
Each director and executive officer of BT Financial who owns shares of
BT Financial Common Stock intends to vote or direct the vote of all shares of BT
Financial Common Stock over which he or she has voting control FOR adoption and
approval of the Merger Agreement. As of February 19, 1999, the directors and
executive officers of BT Financial were the beneficial owners of 777,714 shares,
or approximately 5.99%, of the outstanding shares of BT Financial Common Stock.
If all shares of BT Financial Common Stock are present at the Special Meeting
and the directors and executive officers of BT Financial all vote as they have
stated that they intend to vote, the affirmative vote of only an additional
5,714,923 shares (or 44.01%) of BT Financial Common Stock would be necessary to
adopt and approve the Merger Agreement.
First Philson Shareholders. First Philson shareholders can vote at
the Annual Meeting of First Philson shareholders if they owned First Philson
Common Stock at the close of business on [F.P. Record Date]. Each First Philson
shareholder may cast one vote for each share of First Philson Common Stock owned
on [F.P. Record Date]. In order to approve the merger, the holders of a
majority of the shares of First Philson Common Stock outstanding must vote in
its favor. Each First Philson shareholder can vote their shares by attending
the Annual Meeting of First Philson shareholders and voting in person, or by
marking the enclosed proxy card with your vote, signing it and mailing it in the
enclosed return envelope. First Philson shareholders can revoke their proxy as
late as the date of the meeting either by sending in a new proxy, changing your
vote by telephone or over the Internet, or by attending the meeting and voting
in person.
Each director and executive officer of First Philson, with the
exception of Messrs. Tommy Croner and Gary Sterner, has advised First Philson
that they intend to vote or direct the vote of all shares of First Philson
Common Stock over which each has voting control FOR approval of the merger. As
of December 31, 1998, the directors and officers of First Philson, excluding
Messrs. Croner and Sterner, were the beneficial owners of 413,116 shares, or
approximately 23.71%, of the outstanding shares of First Philson Common Stock.
If all shares of First Philson Common Stock are present at the Annual Meeting
and the directors and officers of First Philson, with the exception of Messrs.
Croner and Sterner, all vote as they have stated they intend to vote, the
affirmative vote of only an additional 458,085 shares (or 26.29%) of First
Philson Common Stock would be necessary to approve the merger.
2
<PAGE>
REASONS FOR THE MERGER (page 21)
BT Financial. The merger will result in a combined entity with
increased financial, managerial and technological resources. The combined
company will be able to offer existing services at a lower cost and offer new
services such as trust and investment advisory services, to First Philson's
existing customers. BT Financial believes that cost savings from the
elimination of duplicative staff and support functions will enhance the
profitability of the combined entity with the result that the merger will be
accretive to earnings beginning in the year 2000.
First Philson. After careful deliberation, First Philson's Board
believes that a merger at this time with BT Financial will benefit First
Philson's shareholders and customers. Shareholders will benefit because they
will receive a premium price for their shares - BT Financial Common Stock is
worth 41% more than First Philson shares valued as of the day before the merger
was publicly announced. Dividends per share will also increase. BT Financial's
then current annual dividend rate was $1.20 per First Philson share compared
with First Philson's then current annual dividend rate of $0.495 per share. BT
Financial Common Stock is traded on NASDAQ and offers better liquidity than
First Philson Common Stock. Taking into account the Board's overall assessment
of First Philson's prospects and BT Financial's prospects, First Philson's Board
believes that an investment in BT Financial Common Stock under the terms of the
Merger Agreement offers First Philson shareholders a substantially better
prospect for return on investment than a continued investment in First Philson
Common Stock. In addition, the merger will benefit First Philson's customers
because they will be customers of a significantly larger financial institution
having a strong community orientation similar to First Philson's but with a
broader array of financial products and more banking locations than First
Philson now provides.
RECOMMENDATION OF THE BOARDS OF DIRECTORS (page 21)
The BT Financial and First Philson Boards each voted to approve the
Merger Agreement and the merger as being in the best interests of their
respective corporations and shareholders and recommend a vote by their
respective shareholders FOR adoption and approval of the Merger Agreement.
THE MERGER
The Agreement and Plan of Reorganization dated February 23, 1999 is
attached to this document as Annex A and referred to throughout as the Merger
Agreement.
General. The Merger Agreement provides that First Philson will merge
with BT Financial, with BT Financial as the surviving corporation. The merger
is expected to be completed by December of 1999.
Exchange of Shares (page 37). Each share of First Philson Common
Stock will become exchangeable for [number of shares of BT Financial Common
Stock based on Merger Agreement calculation, which is determined on the fifth
day preceding the mailing date] shares of BT Financial Common Stock. The total
number of shares a First Philson shareholder will receive will therefore be
equal to [# of shares] times the number of shares of First Philson Common Stock
owned. BT Financial will not issue fractional shares. Instead, First Philson
Shareholders will receive the value of any fractional shares in cash, based on
the market value of BT Financial's Common Stock, as defined in the Merger
Agreement. Following the merger, First Philson shareholders will be entitled to
exchange their shares of First Philson Common Stock for BT Financial Common
Stock by sending the First Philson certificates and a form sent to the
shareholders by BT Financial to Laurel Trust Company, which will exchange the
shares to BT Financial Common Stock. For more information about the exchange
procedures, see page 37. As an example, if a First Philson shareholder owned
twenty shares of First Philson Common Stock, after the merger the Shareholder
will send a letter of transmittal and First Philson certificates to Laurel Trust
Company and in exchange will receive [** calculated based on exchange ratio]
shares of BT Financial Common Stock and a check for the market value of
[** calculated based on exchange ratio] of a share.
3
<PAGE>
Shares of First Philson Common Stock are quoted on the American Stock
Exchange. Shares of BT Financial Common Stock are quoted on the NASDAQ National
Market. On December 9, 1998, the last trading day before the corporations
announced the merger, BT Financial Common Stock closed at $27.75 per share and
First Philson Common Stock closed at $32.75 per share. On February 23, 1999,
the day the Merger Agreement was signed, BT Financial Common Stock closed at
$27.375 per share and First Philson Common Stock closed at $42.75 per share.
Based on the exchange ratio in the merger, which is [Exchange Ratio],
the market value of the consideration that First Philson Shareholders will
receive in the merger for each share of BT Financial Common Stock would be ***
based on BT Financial's closing stock price on [5 days before Mailing Date]. The
market price of BT Financial Common Stock will fluctuate prior to the merger
while the exchange ratio is fixed. BT Financial's and First Philson's
shareholders should obtain current stock price quotations for each corporation's
common stock. These quotations are available from stock brokers, in major
newspapers like The Wall Street Journal and on the Internet.
Opinions of Financial Advisors (page 26)
BT Financial. Berwind Financial, L.P. has delivered to BT Financial's
Board of Directors, its opinion that, as of the date of this document, the
exchange ratio is fair to BT Financial's Shareholders from a financial point of
view. This opinion is attached in its entirety at Annex C. Read the opinion to
completely understand the assumptions made, matters considered and limitations
of the review made by Berwind Financial, L.P.
First Philson. Hopper Soliday, a Division of Tucker Anthony
Incorporated has delivered to First Philson's Board of Directors its opinion
that, as of the date of this document, the exchange ratio is fair to First
Philson's Shareholders from a financial point of view. This opinion is attached
in its entirety in Annex D. Read the opinion to completely understand the
assumptions made, matters considered and limitations of the review made by
Hopper Soliday.
Termination (page 43)
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 meetings are held and the
completion of the merger.
The Merger Agreement will terminate automatically if the merger has
not been completed by December 31, 1999, unless extended by mutual consent. The
Merger Agreement may be terminated prior to December 31, 1999 by BT Financial or
First Philson upon the occurrence of one or more of certain events. 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.
Certain Covenants (page 38)
First Philson and BT Financial have made certain covenants, with
respect to themselves and their subsidiaries, relating to the conduct of
business. Each has agreed not to conduct its business other than in the
ordinary and usual course, and First Philson agreed not to:
(i) pay dividends above certain historical levels which are specified as
Permitted Dividends in the Merger Agreement attached as Annex A 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
4
<PAGE>
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 except in the ordinary
course.
These restrictions do not preclude First Philson from distributing (a)
a Permitted Dividend as that term is defined in the Merger Agreement attached as
Annex A or (b) from making any capital expenditures that do not exceed $150,000
in the aggregate.
Completion of Merger
The completion of the merger depends on a number of conditions being
met. In addition to each corporation's compliance with the Merger Agreement,
these include:
1. Approval of the Merger Agreement by both BT Financial shareholders
and First Philson shareholders.
2. Approval of the merger by certain federal and state regulatory
authorities.
3. Receipt by BT Financial and First Philson of a legal opinion that
for United States federal income tax purposes, First Philson
shareholders who exchange their shares for shares of BT Financial
Common Stock, will not recognize any gain or loss as a result of
the merger, except in connection with the payment of cash received
instead of fractional shares. These opinions will be subject to
various limitations. It is suggested that shareholders of each
corporation read the fuller description of tax consequences
provided in this document, beginning at page 35.
4. Receipt of letters from each corporation's independent accountants
that the merger will qualify for "pooling of interests" accounting
treatment.
5. The absence of any injunction or legal restraint blocking the
merger or governmental proceedings trying to block the merger.
Where the law permits, BT Financial or First Philson could decide to
complete the merger even though one or more of these conditions has not been
met. Neither corporation can be sure when or if the conditions will be
satisfied or waived, or if the merger will be completed. Any condition may be
waived in writing by the Party entitled to the benefit thereof.
Regulatory Considerations (page 34)
The merger must be approved by the Board of Governors of the Federal
Reserve System. After the Board of Governors approves the merger, BT Financial
and First Philson must wait for up to 30 days before the corporations complete
the merger, for the Department of Justice to complete its review.
In addition, certain state and other regulatory authorities will need
to approve the merger or be notified of the merger before it is completed.
Although applications for such approvals have been filed with the
regulatory authorities, there can be no assurance that the required regulatory
approvals will be obtained, and, if obtained, with what conditions may be
imposed. As of the date of this document, no regulatory authorities have
approved the merger.
5
<PAGE>
No Rights for Dissenting Shareholders (page 35)
BT Financial Shareholders. Pennsylvania law does not provide BT
Financial shareholders with dissenters' appraisal rights in the merger.
First Philson Shareholders. Delaware law does not provide First
Philson shareholders with dissenters' appraisal rights in the merger.
Certain Material Federal Income Tax Consequences (page 35)
Pepper Hamilton LLP has advised BT Financial and First Philson that in
the opinion of Pepper Hamilton LLP the merger will qualify as a reorganization
and that:
. neither BT Financial nor First Philson will recognize gain or loss
for U.S. federal income tax purposes as a result of the merger,
and
. the exchange of shares of First Philson Common Stock for BT
Financial Common Stock will not cause First Philson shareholders
to recognize any gain or loss.
First Philson shareholders will, however, have to recognize gain or
loss in connection with any cash received instead of fractional shares.
Pepper Hamilton LLP's opinion is based on certain assumptions and on
representations and covenants made by BT Financial and First Philson. The
opinion will not bind the Internal Revenue Service, which could have a different
view of the taxation of the merger.
The tax treatment of certain First Philson shareholders may vary
depending upon the particular circumstances of each First Philson shareholder.
First Philson shareholders should consult their own tax advisor for a full
understanding of the merger's tax consequences.
Accounting Treatment (page 36)
BT Financial and First Philson expect the merger to qualify as a
pooling of interests, which means the companies will be treated as if they had
always been combined for accounting and financial reporting purposes.
Comparison of Shareholders Rights (page 52)
The rights of First Philson shareholders are currently governed by the
Delaware General Corporation Law, the Certificate of Incorporation and the
Bylaws of First Philson. The rights of BT Financial shareholders are currently
governed by the Pennsylvania Business Corporation Law of 1988, as amended, the
Articles of Incorporation and Bylaws of BT Financial. After the merger, First
Philson shareholders will become BT Financial shareholders, governed by
Pennsylvania law and BT Financial's articles and bylaws.
There is one major difference between the rights of shareholders of BT
Financial and the rights of shareholders of First Philson. BT Financial has a
shareholders rights plan and First Philson does not. BT Financial's shareholder
rights plan may prevent a takeover of BT Financial without approval of the
takeover by BT Financial's Board of Directors.
Stock Option Agreement (page 40)
BT Financial and First Philson entered into a Stock Option Agreement
dated February 23, 1999, granting BT Financial the option to purchase up to
348,400 shares of First Philson's Common Stock. First Philson granted BT
Financial this option to induce BT Financial to enter into the Merger Agreement
and to increase the likelihood that the corporations would complete the merger.
The Stock Option Agreement could discourage other companies from trying or
proposing to combine with First Philson before the completion of
6
<PAGE>
the merger. The Stock Option Agreement in its entirety is attached as Annex B.
The largest number of shares that BT Financial could purchase under
the Stock Option Agreement is 19.99% of the total outstanding shares of First
Philson's Common Stock. The purchase price per share is $45.00 per option
share.
BT Financial cannot exercise this option unless certain events occur.
These events include business combinations or acquisition transactions relating
to First Philson and First Philson's failure to satisfy certain provisions in
the Merger Agreement. Neither First Philson nor BT Financial is aware of any
event, as of the date of this document, which would permit BT Financial to
exercise this option.
Interests of First Philson Directors and Officers in the Merger (page 40)
Some First Philson directors and officers have interests in the merger
that are different from, or in addition to, their interests as shareholders of
First Philson. These interests exist because of change-of-control employment
agreements that certain officers have with salary and benefits for a certain
number of years if their employment with BT Financial is terminated after the
merger.
The members of the BT Financial and First Philson Boards knew about
these additional interests, and considered them, when each Board approved the
Merger Agreement.
Election of First Philson Directors
In connection with First Philson's Annual Meeting, three persons will
be elected directors of First Philson to serve for a term of three years or
until their successors are elected or until the merger becomes effective. The
Board of Directors has nominated Tommy R. Croner, George W. Hay and George R.
Shafer for election as Class II directors. Each First Philson shareholder has
one vote for each share registered in his or her name, and there are no
cumulative voting rights. Directors shall be elected by a plurality of votes
cast at the Annual Meeting by holders of stock present in person or proxy and
entitled to vote. Votes marked "WITHHOLD AUTHORITY" in the election of
directors are counted toward a quorum but have no effect on the outcome of the
election. For further information see the enclosed additional Proxy Statement
of First Philson, which is incorporated by reference.
7
<PAGE>
SELECTED FINANCIAL DATA
The following tables show summarized historical financial data for
each of BT Financial and First Philson and also show similar pro forma
information reflecting the merger. The pro forma information is prepared as if
the two corporations had always been combined for accounting and financial
reporting purposes (known as "pooling of interests" accounting.)
The corporations expect to incur reorganization and restructuring
expenses as a result of combining the two companies. The corporations also
anticipate that the merger will provide the combined company with financial
benefits that include reduced operating expenses and the opportunity to earn
more revenue. The pro forma information, while helpful in illustrating the
financial characteristics of the new company under one set of assumptions,
doesn't attempt to predict or suggest future results.
The information in the following tables is based on historical
financial information that BT Financial and First Philson presented in prior
Securities and Exchange Commission filings. All of the summary financial
information provided in the following tables should be read in connection with
this historical financial information and with the more detailed financial
information provided in this document, which can be found beginning at page 67.
This historical financial information has also been incorporated into this
document by reference. See "Where You Can Find More Information" on page 64.
8
<PAGE>
BT FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1998 1997/(7)/ 1996/(6)/ 1995/(5)/ 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
--------------------------------------------------------------------
RESULTS OF OPERATIONS
Interest income $ 123,931 $ 115,972 $ 110,719 $ 102,136 $ 91,240
Interest expense 54,557 49,148 45,664 43,614 33,967
----------- ----------- ----------- ----------- -----------
Net interest income 69,374 66,824 65,055 58,522 57,273
Provision for loan losses 5,940 4,230 2,441 1,566 1,168
----------- ----------- ----------- ----------- -----------
Net interest income after provision for loan
losses 63,434 62,594 62,614 56,956 56,105
Other income 13,736 12,557 11,343 8,796 8,468
Other expenses 50,956 48,209 52,334 46,252 46,268
----------- ----------- ----------- ----------- -----------
Income before income taxes 26,214 26,942 21,623 19,500 18,305
Provision for income taxes 7,936 9,195 7,213 5,869 5,056
----------- ----------- ----------- ----------- -----------
Net income $ 18,278 $ 17,747 $ 14,410 $ 13,631 $ 13,249
=========== =========== =========== =========== ===========
BALANCE SHEET DATA (period end)
Total assets $ 1,702,328 $ 1,590,011 $ 1,502,083 $ 1,477,815 $ 1,372,539
Loans, net of unearned interest 1,218,186 1,080,967 1,039,937 1,025,238 904,944
Total securities 346,598 385,772 321,384 322,431 352,659
Total deposits 1,393,020 1,375,277 1,291,621 1,281,240 1,175,807
Total long-term debt 100,031 14,335 17,210 20,083 10,021
Total shareholders' equity 163,583 153,762 144,233 129,487 110,826
PER SHARE DATA /(1)/
Basic earnings per share $ 1.41 $ 1.37 $ 1.13 $ 1.10 $ 1.08
Diluted earnings per share 1.41 1.37 1.13 1.09 1.07
Common dividends declared per share .72 .63 .51 .44 .40
Period end book value 12.60 11.84 11.11 10.43 8.95
Average shares outstanding - basic 12,985,272 12,985,272 12,650,352 12,237,738 12,206,754
Average shares outstanding - diluted 12,985,272 12,985,272 12,753,984 12,459,682 12,436,352
FINANCIAL RATIOS
Return on average assets 1.08% 1.14% .96% .99% .99%
Return on average shareholders' equity 11.56 11.92 10.53 11.26 11.74
Net yield on earning assets /(2)/ 4.55 4.73 4.81 4.66 4.74
Common stock dividend payout 51.06 46.11 44.77 39.92 36.89
Average shareholders' equity to average
assets 9.31 9.54 9.15 8.78 8.47
Primary capital ratio at period end/(3)/ 10.19 10.23 10.19 9.37 8.69
Net charge-offs to average loans net of
unearned interest .42 .39 .28 .15 .11
Nonperforming loans to total loans, net of
unearned interest /(4)/ .61 .86 1.22 .73 .72
Reserve for loan losses to period end loans,
net of unearned interest .90 .91 .94 .99 1.01
</TABLE>
9
<PAGE>
. Financial data for prior periods has been restated to give effect to
acquisitions accounted for as pooling-of-interests.
(1) Per share data has been adjusted to reflect the 5% stock dividend
distributed by BT on October 14, 1994, the 10% stock dividends distributed
on October 22, 1996 and September 15, 1997 and the two-for-one stock split
effected in the form of a stock dividend distributed on May 1, 1998.
Additionally, per share data has been adjusted to reflect the 10% stock
dividend paid on December 30, 1994 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 earnings 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) Reflects the purchase acquisition of Huntington National Bank of
Pennsylvania on December 14, 1995.
(6) Reflects the purchase acquisition of Armstrong County Trust Company on June
13, 1996.
(7) Reflects the purchase acquisition of three branch offices of National City
Bank of Pennsylvania on June 6, 1997.
10
<PAGE>
FIRST PHILSON
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands, except per share data)
-------------------------------------------
RESULTS OF OPERATIONS
Interest income $ 14,995 $ 14,541 $ 14,059 $ 13,646 $ 12,380
Interest expense 5,864 5,839 5,989 6,217 5,207
---------- ---------- ---------- ---------- ----------
Net interest income 9,131 8,702 8,070 7,429 7,173
Provision for loan losses 44 20 - - 118
---------- ---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 9,087 8,682 8,070 7,429 7,291
Other income 1,025 1,017 942 887 1,012
Other expenses 6,292 5,940 5,779 5,789 6,170
---------- ---------- ---------- ---------- ----------
Income before income taxes 3,820 3,759 3,233 2,527 2,133
Provision for income taxes 1,039 1,028 843 584 333
---------- ---------- ---------- ---------- ----------
Net income $ 2,781 $ 2,731 $ 2,390 $ 1,943 $ 1,800
========== ========== ========== ========== ==========
BALANCE SHEET DATA
(period end)
Total assets $ 213,607 $ 202,025 $ 197,665 $ 198,918 $ 191,945
Loans, net of unearned interest 107,555 105,293 100,654 92,632 89,242
Investment securities 89,244 77,631 79,281 88,142 86,770
Securities available for sale 42,690 20,183 579 - -
Securities held-to-maturity 46,554 57,448 78,702 88,142 86,770
Total deposits 185,130 174,243 173,480 170,858 166,700
Funds borrowed 134 1,674 845 283 573
Total shareholders' equity 25,589 23,471 21,199 19,334 17,783
PER SHARE DATA
Net income $ 1.60 $ 1.57 $ 1.37 $ 1.12 $ 1.03
Cash dividends declared 0.49 0.38 0.31 0.22 0.05
Period-end book value 14.69 13.47 12.17 11.10 10.21
Average shares outstanding 1,742,400 1,742,400 1,742,400 1,742,400 1,742,400
FINANCIAL RATIOS
Return on average assets 1.33% 1.35% 1.20% 0.99% 0.93%
Return on average shareholders' equity 11.24 12.17 11.76 10.44 10.57
Net yield on average earning assets 4.81 4.75 4.50 4.21 4.14
Common stock dividend payout 31.03 24.41 22.78 20.17 4.84
Average shareholders' equity to average
assets 11.80 11.12 10.25 9.49 8.80
Primary capital ratio at period end 13.09 12.80 12.07 11.01 10.54
Net (charge-offs) recoveries to average
loans, net of unearned interest (0.04) (0.30) 0.14 0.17 0.10
Nonperforming loans to total loans, net
of unearned interest 0.21 0.79 0.69 0.17 0.50
Reserve for loan losses to period-end
loans, net of unearned interest 2.54 2.59 3.00 3.11 3.06
</TABLE>
All per share amounts have been restated to reflect a 4-to-1 stock split
approved on August 19, 1997.
11
<PAGE>
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma financial data combine BT
Financial's results with First Philson's historical results, in each case as of
or for the fiscal years ended December 31, 1998, 1997 and 1996. The unaudited
pro forma condensed combined statements of income information gives effect to
the merger as if it had occurred on January 1, 1996. The unaudited pro forma
condensed combined balance sheet information gives effect to the merger as if it
occurred on the date of the information presented.
See "Where You Can Find More Information" on page 64 and "Unaudited
Pro Forma Condensed Combined Financial Information" on pages 67 to 70.
<TABLE>
<CAPTION>
As of or for the year ended
----------------------------------
December 31
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
[millions, except per share data]
Pro Forma Condensed Combined Statement of Income
Total interest income and other income $ 153,687 $ 144,087 $ 137,063
Net Income 21,059 20,478 16,800
Net Income per common share:
Basic 1.33 1.29 1.08
Diluted 1.33 1.29 1.07
Cash dividends declared per common share .64 .56 .45
Pro Forma Condensed Combined Balance Sheet
Total assets (end of period) $1,915,908 $1,792,036 $1,699,748
Long term borrowings (end of period) 100,031 14,335 17,210
Total stockholders' equity (end of period) 189,145 177,233 165,432
</TABLE>
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table shows information about BT Financial's and First
Philson's income per share, dividends per share and book value per share and
similar information (which is called "pro forma" information). This information
has been adjusted to reflect the 2-for-1 BT Financial Common Stock split
effected in the form of a stock dividend distributed on May 1, 1998 and the
stock dividends distributed on September 15, 1997 and October 22, 1996 and to
reflect the 4-for-1 First Philson Common Stock split effected in the form of a
stock dividend distributed on October 24, 1997. The pro forma information has
been prepared on the basis of the 1.667 Exchange Ratio, and reflecting the
"pooling of interests" method of accounting.
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 corporations expect to incur reorganization
and restructuring expenses as a result of combining the two companies. The
corporations also anticipate that the merger will provide BT Financial with
financial benefits that include reduced operating expenses and the opportunity
to earn more revenue. The pro forma financial information, while helpful in
illustrating the financial characteristics of BT Financial post-merger under one
set of assumptions, doesn't attempt to predict or suggest future results.
The information in the following table is based on the historical
financial information present in BT Financial's and First Philson's Securities
and Exchange Commission filings. These materials have been incorporated by
reference. See "Where You Can Find More Information" on page 64.
13
<PAGE>
PRO FORMA AND PRO FORMA EQUIVALENT PER COMMON SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
EARNINGS PER SHARE:
BT Financial (Historical):
Earnings per share - Basic $ 1.41 $ 1.37 $ 1.13
Earnings per share - Diluted 1.41 1.37 1.13
Pro forma - BT Financial and First Philson :
Earnings per share - Basic 1.33 1.29 1.08
Earnings per share - Diluted 1.33 1.29 1.07
First Philson (Historical):
Earnings per share- Basic and Diluted 1.60 1.57 1.37
Pro forma equivalent - First Philson and
BT Financial combined:
Earnings per share - Basic 2.22 2.15 1.80
Earnings per share - Diluted 2.22 2.15 1.78
BOOK VALUE PER SHARE:
BT Financial (Historical) $12.60 $11.84 $11.11
Pro forma - BT Financial and First Philson 11.91 11.15 10.64
First Philson (Historical) 14.69 13.47 12.17
Pro forma equivalent - First Philson and
BT Financial combined 19.85 18.59 17.74
CASH DIVIDENDS DECLARED PER SHARE:
BT Financial (Historical) $ 0.72 $ 0.63 $ 0.51
Pro forma - BT Financial and First Philson 0.64 0.56 0.45
First Philson (Historical) 0.49 0.38 0.31
Pro forma equivalent - First Philson and
BT Financial combined 1.07 0.93 0.75
</TABLE>
14
<PAGE>
COMPARATIVE MARKET PRICES
BT Financial Common Stock is included for quotation on NASDAQ under
the symbol "BTFC". First Philson Common Stock is listed on the AMEX under the
symbol "FPB".
The table below sets forth the reported high and low closing sales
prices of BT Financial and First Philson 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>
BT Financial First Philson
Common Stock Common Stock
======================== ========================
1998 High Low Dividend High Low Dividend
---- ===================================================
<S> <C> <C> <C> <C> <C> <C>
1st $28.31 $24.70 $ 0.17 $29.25 $25.63 $0.12
Quarter
2nd 30.75 25.00 0.18 26.38 23.00 0.12
Quarter
3rd 28.25 22.00 0.18 26.63 21.75 0.12
Quarter
4th 28.75 24.25 0.19 43.00 26.25 0.13
Quarter
<CAPTION>
BT Financial First Philson
Common Stock Common Stock
======================== ========================
1997 High Low Dividend High Low Dividend
- ---- ==================================================
<S> <C> <C> <C> <C> <C> <C>
1st $19.89 $18.07 $ 0.15 $14.00 $13.50 $0.08
Quarter
2nd 19.89 17.73 0.15 15.00 14.00 0.09
Quarter
3rd 23.13 19.32 0.15 15.13 15.00 0.09
Quarter
4th 25.75 21.66 0.17 29.00 15.50 0.12
Quarter
</TABLE>
On March 1, 1999, there were 4,736 record holders of BT Financial
Common Stock. On March 1, 1999, there were 648 record holders of First Philson
Common Stock.
BT Financial offers an Automatic Dividend Reinvestment Plan to provide
a prompt, simple and expense-free way for shareholders to automatically reinvest
cash dividends into additional shares of BT Financial Common Stock. Laurel
Trust Company performs certain bookkeeping and administrative functions in
connection with the Plan. Participants may add to their investment in BT
Financial Common Stock through voluntary additional cash deposits with the
Administrator.
The closing sales prices for BT Financial Common Stock set forth above
has been retroactively adjusted to reflect the 10% stock dividend distributed on
September 15, 1997 and the 2-for-1 stock split effected in the form of a stock
dividend distributed on May 1, 1998. The closing sales prices for First
15
<PAGE>
Philson Common Stock set forth above has been retroactively adjusted to reflect
a 4-for-1 stock split effected in the form of a stock dividend distributed on
October 24, 1997.
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 First Philson Common Stock will receive in the merger may
increase or decrease prior to and after the merger.
On December 9, 1998, the last full trading day prior to the execution
and delivery of the letter of intent and the public announcement of the merger,
the closing sales price per share of BT Financial Common Stock on NASDAQ as
reported in The Wall Street Journal was $27.75 and the closing sales price per
share of First Philson Common Stock on AMEX as reported in The Wall Street
Journal was $32.75. The pro forma equivalent per share value of First Philson
Common Stock was $[FP pro forma price] on such date. On [date prior to printing
of proxy],the most recent practicable date prior to the printing of this Joint
Proxy Statement-Prospectus, the closing sales price per share of BT Financial
Common Stock on NASDAQ as reported in The Wall Street Journal was $[BT price
prior to printing], and the closing price per share of First Philson Common
Stock on the AMEX as reported in The Wall Street Journal was $[FP price prior to
printing].
BT FINANCIAL AND FIRST PHILSON SHAREHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR BT FINANCIAL AND FIRST PHILSON COMMON STOCK PRIOR
TO THE MEETING.
16
<PAGE>
THE MEETINGS
BT Financial. This Joint Proxy Statement-Prospectus is being
furnished to BT Financial shareholders in connection with the solicitation of
proxies by the BT Financial Board for use at the Special Meeting to be held on
[BT Meeting date] at [BT Meeting time] p.m. eastern time at 551 Main Street,
Johnstown, Pennsylvania 15901 and at any adjournment or postponement thereof.
This Joint Proxy Statement-Prospectus, the notice of the Special Meeting, and
the enclosed proxy card are first being mailed to BT Financial shareholders on
or about [BT Mailing Date].
At the Special Meeting, BT Financial 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 Special Meeting or any adjournment or
postponement thereof. The BT Financial 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.
First Philson Annual Meeting. This Joint Proxy Statement-Prospectus
is being mailed by First Philson to First Philson shareholders in connection
with the solicitation of proxies by the First Philson Board for use at the
Annual Meeting to be held on [FP Meeting Date] at [FP Meeting time] p.m. eastern
time at 534 Main Street, Berlin, Pennsylvania 15530 and at any adjournment or
postponement thereof. An additional Proxy Statement of First Philson is also
enclosed herewith which provides information associated with the election of
three directors of First Philson. The Joint Proxy Statement-Prospectus, the
notice of the Annual Meeting, the enclosed proxy card, as well as, the
additional Proxy Statement for First Philson attached are first being mailed to
First Philson shareholders on or about [FP Mailing Date].
At the Annual Meeting, First Philson shareholders will consider and
vote upon a proposal to adopt and approve the Merger Agreement, the election of
three directors and such other business as may properly come before the Meeting
or any adjournment or postponement thereof. The First Philson 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 and FOR all three
director nominees listed on the proxy card.
VOTING AT THE MEETINGS; RECORD DATES
BT Financial. The BT Financial Board has fixed [BT Record Date], as
the record date to determine the holders of record of shares of BT Financial
Common Stock. Only holders of record of shares of BT Financial Common Stock at
the close of business on that date are entitled to notice of and to vote at the
Special Meeting. As of March 1, 1999, there were 12,985,272 shares of BT
Financial Common Stock outstanding held by 4,736 holders of record. Each holder
of record of shares of BT Financial Common Stock as of the record date is
entitled to cast one vote per share at the Special Meeting.
There must be a quorum present at the Special Meeting to vote on the
Merger Agreement. The presence, in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of BT Financial Common Stock
entitled to vote at the Meeting constitutes a quorum. To approve the Merger
Agreement, the holders of a majority of the votes cast at BT Financial's Special
Meeting must vote in favor of the merger. If a shareholder abstains in person
or by proxy, or a shareholder fails to vote, it will have the effect of a vote
against the Merger Agreement.
Each director and executive officer of BT Financial who owns shares of
BT Financial Common Stock has advised BT Financial that he or she intends to
vote or direct the vote of all shares of BT Financial Common Stock over which he
or she has voting control FOR adoption and approval of the Merger Agreement. As
of February 19, 1999, the directors and executive officers of BT Financial were
the beneficial owners of 777,714 shares or approximately 5.99%, of the
outstanding shares of BT Financial Common Stock. If all shares of BT Financial
Common Stock are present at the Meeting and the directors and executive officers
of BT Financial all vote as they have stated that they intend to vote, the
affirmative vote of an additional 5,714,923 shares (or 44.01%) of the BT
Financial Common Stock would be necessary to adopt and approve the Merger
Agreement.
17
<PAGE>
First Philson. The First Philson Board has fixed [FP Record Date], as
the record date to determine the holders of record of shares of First Philson
Common Stock entitled to notice of and to vote at the Annual Meeting. Only
holders of record of shares of First Philson Common Stock at the close of
business on that date are entitled to notice of and to vote at the Meeting. As
of [FP Record Date], there were 1,742,400 shares of First Philson Common Stock
outstanding held by 648 holders of record. Each holder of record of shares of
First Philson 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, the election of three directors and
any other matters properly submitted for a vote of the Shareholders at the
Meeting. There are no cumulative voting rights for the election of directors.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of First Philson Common Stock entitled to
vote at the Meeting is necessary to constitute a quorum at the Meeting. The
affirmative vote of at least a majority of the shares of First Philson 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. A plurality of votes cast at
the meeting is necessary to elect directors. A vote to "WITHHOLD AUTHORITY"
will have no legal effect on the election of directors.
Each director and executive officer of First Philson who owns shares
of First Philson Common Stock, with the exception of Messrs. Tom Croner and
Gary Sterner, has advised First Philson that he or she intends to vote or direct
the vote of all shares of First Philson Common Stock over which he or she has
voting control FOR adoption and approval of the Merger Agreement. As of March
31, 1999, the directors and executive officers of First Philson, excluding
shares owned by Messrs. Croner and Sterner, were the beneficial owners of
413,116 shares or approximately 23.71%, of the outstanding shares of First
Philson Common Stock. If all shares of First Philson Common Stock are present at
the Meeting and the directors and executive officers of First Philson all vote
as they have stated that they intend to vote, the affirmative vote of only an
additional 458,085 shares (or 26.29%) of the First Philson Common Stock would be
necessary to adopt and approve the Merger Agreement.
PROXIES
BT Financial. The accompanying form of proxy is for use at the BT
Financial Special Meeting if a shareholder is unable or unwilling to attend the
Special Meeting. The proxy may be revoked by a BT Financial shareholder at any
time before it is exercised, by (i) filing with the Secretary of BT Financial,
before the taking of the vote at the Special Meeting of the corporation, 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 BT Financial before the taking of the vote at the BT
Financial Special Meeting or (iii) attending the Special Meeting and giving the
Secretary of BT Financial a written notice of revocation bearing a later date
than the proxy card, before the taking of the vote at the BT Financial Special
Meeting. Attendance at the BT Financial Special Meeting will not in and of
itself constitute a revocation of a proxy. Any written notice of revocation or
subsequent proxy from a BT Financial shareholder should be sent so as to be
delivered to BT Financial Corporation, 551 Main Street, Johnstown, Pennsylvania
15901, Attention: Secretary, or hand delivered to the Secretary of BT Financial,
before the taking of the vote at the Special Meeting.
All shares of BT Financial Common Stock which are entitled to vote
and are represented at the Special Meeting by properly executed proxies received
prior to or at the Special Meeting, and not revoked as of such time, will be
voted at the Special Meeting in accordance with the instructions indicated on
those proxies. If no instructions are indicated on any proxies solicited by the
BT Financial Board which are received prior to or at the Special 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 Special Meeting. If
any other matter is properly presented at the Special Meeting for consideration,
including, among other things, a motion to adjourn the Special 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.
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BT Financial 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.
BT Financial will bear the cost of the solicitation of proxies from BT
Financial shareholders. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of each corporation from
the shareholders of each corporation 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 BT Financial will reimburse those
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
First Philson. The accompanying form of proxy is for use at the First
Philson Annual Meeting if a shareholder is unable or unwilling to attend the
Annual Meeting. The proxy may be revoked by a First Philson shareholder at any
time before it is exercised, by (i) filing with the Secretary of First Philson,
before the taking of the vote at the First Philson Annual 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 First Philson before the taking of the vote at the First
Philson Annual Meeting or (iii) attending the First Philson Annual Meeting and
giving the Secretary of First Philson a written notice of revocation bearing a
later date than the proxy card, before the taking of the vote at the First
Philson Annual Meeting. Attendance at the First Philson Annual Meeting will not
in and of itself constitute a revocation of a proxy. Any written notice of
revocation or subsequent proxy from a First Philson shareholder should be sent
so as to be delivered to First Philson Financial Corporation, 534 Main Street,
Berlin, Pennsylvania 15530, Attention: Secretary, or hand delivered to the
Secretary of First Philson, before the taking of the vote at the Annual Meeting.
All shares of First Philson Common Stock which are entitled to vote
and are represented at the First Philson Annual Meeting by properly executed
proxies received prior to or at the Annual Meeting, and not revoked as of such
time, will be voted at the Annual Meeting in accordance with the instructions
indicated on those proxies. If no instructions are indicated on any proxies
solicited by the First Philson's Board which are received prior to or at the
First Philson Annual Meeting, those proxies will be voted FOR adoption and
approval of the Merger Agreement. In addition, shareholders of First Philson
will be asked to vote on the election of three (3) directors. Proxies will be
voted in accordance with the instructions therein. If there are no instructions
indicated, they will be voted in favor of the election of the three persons
nominated by the First Philson Board of Directors. See the enclosed additional
Proxy Statement for information regarding the election of First Philson
directors.
It is not anticipated that any matter other than the proposal to adopt
and approve the Merger Agreement and the election of three directors will be
brought before the Annual Meeting. If any other matter is properly presented at
the Annual Meeting for consideration, including, among other things, a motion to
adjourn the Annual 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.
First Philson 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 Annual Meeting will be voted with respect to the
matters 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, and for the election as directors of the three
persons nominated by the First Philson Board of Directors.
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First Philson will bear the cost of the solicitation of proxies from
First Philson shareholders. In addition to solicitation by use of the mails,
proxies may be solicited by directors, officers and employees of each
corporation from the shareholders of each corporation 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 First Philson will
reimburse those custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses incurred in connection therewith.
First Philson 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 First Philson has continually reviewed the
strategic alternatives for maximizing shareholder value.
From October, 1993 through October, 1997, John H. Anderson, Chairman
and Chief Executive Officer of BT Financial had isolated contacts with George W.
Hay, President and Chief Executive Officer of First Philson, and other First
Philson executives and board members where the possibility of a business
combination was discussed in general terms. As a result of those contacts, in
September, 1998, Mr. Hay invited Mr. Anderson to make a specific business
combination proposal to First Philson's Board of Directors.
On September 24, 1998, after receiving authorization from the BT
Financial Board of Directors, Mr. Anderson submitted a proposal to First
Philson's Board of Directors outlining a merger transaction between the two
corporations. Under the proposal, First Philson shareholders would receive 1.667
shares of BT Financial Common Stock with a value of approximately $45.00 per
share based on the market value of BT Financial's Common Stock at that time. The
current annual dividend rate on the shares First Philson shareholders would
receive is $1.20 per First Philson share of Common Stock compared with a current
annual dividend rate of $0.495 per share. First Philson's Board of Directors did
not accept the first proposal and it subsequently expired on October 15, 1998.
On October 22, 1998, Mr. Anderson submitted a second proposal, with the same
terms as the first proposal but with a later expiration date of November 16,
1998. First Philson's Board of Directors considered BT Financial's second
proposal and requested that BT Financial extend the proposal expiration date for
the express purpose of allowing First Philson to solicit other competing offers.
BT Financial extended the expiration date to December 11, 1998. During this
time, First Philson solicited offers from other financial institutions. Two
other financial institutions Omega Financial Corporation and Susquehanna
Bancshares, Inc. made offers to acquire First Philson. Neither offer equaled BT
Financial's. After further discussions with Mr. Anderson, on December 9, 1998,
First Philson's Board accepted the second BT Financial proposal which contained
the same terms as the first proposal letter. On December 10, 1998, BT Financial
and First Philson publicly announced their intention to merge.
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After December 10, 1998, BT Financial and First Philson negotiated the
terms of the definitive Merger Agreement, which was signed on February 23, 1999.
In negotiating the consideration for the merger, BT Financial was
interested in:
. using BT Financial Common Stock to allow both a tax free
reorganization and pooling of interests; and
. pricing that would be accretive to earnings taking into account
the cost savings that would be derived from the combination.
First Philson was interested in:
. a fair price, including a premium over current market price
reflecting a change in control;
. a tax free transaction; and
. receiving a marketable security that offered greater liquidity
than First Philson Common Stock.
REASONS FOR THE MERGER; RECOMMENDATION OF
THE BOARDS OF DIRECTORS
BT Financial
The Board of Directors of BT Financial has approved the Merger
Agreement and has determined that the merger is fair to, and in the best
interests of, BT Financial and its shareholders. In reaching its determination,
the BT Financial Board of Directors considered a number of factors, including
the following:
1. The merger will result in a combined entity which has increased
financial, managerial, technological and other resources and will
be better able to meet increased competition and to profit from the
opportunities resulting from the changing legal and regulatory
environment facing banks and bank holding companies;
2. The merger will result in a combined entity which will be in a
position to provide new services or expand into additional markets
and to offer existing services with increased efficiency. The
merger is expected to result in significant opportunities to
generate additional revenue through providing services and products
to First Philson's existing customer base, which First Philson does
not currently offer;
3. Although no assurances can be given that any specific level of
expense savings will be achieved or as to the timing thereof, BT
Financial has identified potential annual pre-tax savings expected
to be achieved after the merger by consolidating certain
operations, facilities and business lines and eliminating redundant
costs. The merger is expected to generate certain cost savings
which will materially contribute to BT Financial's profitability,
resulting in the transaction becoming accretive to earnings per
share in 2000;
4. The merger will expand BT Financial's customer base and increase
the presence of BT Financial in Somerset and Fayette counties;
5. The merger will enhance the talent and experience of BT Financial's
personnel operating within Somerset and Fayette counties through
the retention of certain key
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people of First Philson, including George W. Hay, President and
Chief Executive Officer of First Philson;
6. The merger could be accounted for on a pooling of interests
basis;
7. The anticipated tax-free nature of the merger (see "Certain
Material Federal Income Tax Consequences" on page 35);
8. A favorable due diligence review of First Philson's operations,
financial records, capital position and legal matters conducted by
BT Financial's employees, financial advisor and attorneys;
9. Berwind Financial, L.P.'s opinion that, as of the date of this
Joint Proxy Statement-Prospectus, the exchange ratio was fair to BT
Financial's shareholders from a financial point of view.
The BT Financial Board of Directors did not formally attach any weight
to the foregoing factors, but the foregoing list is generally in order of
importance.
First Philson
The Board of Directors of First Philson has approved the Merger
Agreement and has determined that the merger is fair to, and in the best
interests of, First Philson and its shareholders. The Board of Directors
therefore recommends that shareholders vote FOR adoption and approval of the
Merger Agreement. The First Philson Board of Directors believes that the merger
will enable the shareholders to realize significant value when compared to the
value of First Philson 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, First Philson and the shareholders, the First
Philson Board of Directors considered a number of factors, both from a short-
term and long-term perspective, including, without limitation, the following:
1. The First Philson Board of Director's familiarity with and review
of First Philson's business, financial condition, results of
operation, and prospects, including, but not limited to, its
potential growth, development, productivity and profitability;
2. A detailed study of the financial impact of the merger on First
Philson's shareholders which confirmed, based on the price of BT
Financial Common Stock and First Philson Common Stock as of
December 9, 1998, the day before the merger was announced
publicly: (i) a 41% premium to the market price of First
Philson's stock (ii) a price over 300% of First Philson's fully
diluted book value, as of September 30, 1998, (iii) a multiple of
29.5 times First Philson's net income as of September 30, 1998,
and (iv) a projected dividend increase from $0.495 per share to
$1.20 per share on an annualized basis. Furthermore,
respectively, of the pro forma combined company as of September
30, 1998. First Philson shareholders would own approximately 19%
of the outstanding shares after its merger while contributing
11.3% of the total assets, 14.1% of the shareholders' equity and
13.5% of net income. Finally, former First Philson shareholders
will be eligible to participate in BT Financial's Automatic
Dividend Reinvestment Plan and will also become participants in
the BT Financial Shareholder Rights Plan;
3. In response to BT Financial's initial proposal, the First Philson
Board of Directors instructed management to seek additional
offers to buy First Philson. This was done, and no other offer
received was even close to BT Financial's in terms of financial
return;
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4. The anticipated tax-free exchange of First Philson Common Stock
for BT Financial Common Stock in the merger (see "Certain
Material Federal Income Tax Consequences" on page 35);
5. The current and prospective environment in which First Philson
operates, including national, state and local economic
conditions, First Philson'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
First Philson's potential growth, development, productivity and
profitability;
6. 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;
7. An in depth due diligence review of BT Financial's operations,
financial records, capital position and legal matters conducted
by First Philson employees, financial advisor and attorneys;
8. BT Financial's intention to offer all employees of First Philson
and its subsidiaries with more than 15 years service, employment
for at least one year and its agreement to pay severance benefits
to other employees, including Messrs. Hay and Deskevich;
9. A comparison of the products and services provided by First
Philson and BT Financial, as well as the costs associated with
and relative level of resources available to First Philson and BT
Financial, respectively, to maintain and provide future
enhancements to, and develop new products and services within its
markets;
10. The increase in cash dividends, net income per share and book
value per share that First Philson's shareholders will receive as
a result of the receipt of BT Financial's Common Stock in the
merger.
11. The condition in the Merger Agreement that permits First Philson
to terminate the Merger Agreement if it does not receive an
opinion from its financial advisor, in form and content
satisfactory to First Philson, to the effect that the merger is
fair, from a financial point of view to the shareholders. This
opinion has been received and is attached hereto as Annex D.
In addition, the First Philson Board is of the opinion that the merger
will result in a combined entity which has increased financial, managerial,
technological and other resources and will be better able to meet increased
competition and to profit from the opportunities resulting from the changing
legal and regulatory environment facing banks and bank holding companies.
The First Philson Board of Directors did not formally attach any weight
to the factors, but the foregoing list is generally in order of importance.
Opposition to the Merger
The following two statements are provided by Messrs. Croner and
Sterner, directors of First Philson who oppose the merger, detailing each
individual's reasons for voting against the merger.
Tom Croner
I oppose the merger of First Philson Financial Corporation into BT
Financial Corporation for the following reasons:
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I have always believed in the philosophy of First Philson's management
and board. "Preserving tradition and securing a future." We have always stated
this as our motto. Along with our mission of "Best in customer service from
friendly knowledgeable people." I believe and wholeheartedly supported that
philosophy. First Philson has been operating under a strategic plan developed
in 1997 that did not include the sale of the bank. In fact, we addressed that
issue specifically and determined that we were community bankers and were going
to remain community bankers. However, it is my opinion some board members never
could accept that direction and continued to work to encourage an offer from BT
Financial. Each time the offer is raised the issue surfaces providing further
distraction to the board, management, and employees. A number of employees have
already left the bank and others are circulating their resumes. Customers are
seeking other banks that are perceived to have the community banking philosophy.
To my knowledge, all aspects of the 1997 strategic plan have been met,
in a period of time less than the scope of the plan itself. We met in September
of 1998 to update the plan in an effort to make an informed rational decision
which option to recommend to the shareholders. As of November, the board was
told the strategic plan was to be completed and then presented to the board.
However, the staff of First Philson was told not to complete the survey
soliciting their input. In my opinion, this is a breach of "The duty of trust"
between the board and management. I feel we are taking a path inconsistent with
our strategic plan. Although the enhancement of shareholder value is an
important concern it is not the only concern a director must consider. We have
an obligation to the employees and the customers. Only some of the employees
will be guaranteed employment for one year. Many of those will have to travel
greater distance or relocate. The customers will have to deal with a different
operating philosophy, and in some cases even different offices. This may
eventually exclude some customers of service altogether. BT's stated goal of
maximizing shareholder value by continually seeking offers to buy, does not give
customers and employees much comfort that the local management will continue to
prevail. With management and the board representation coming directly from our
marketing area, we have been able to keep in close touch with our customer
concerns. Many customers have tolerated our rates because of the level of
service we provide. BT does not have a good reputation for service in our
market area.
Recognizing my obligation to the shareholders I support their
opportunity to choose which choice to make. However, the shareholders do not
know that we have a plan to carry the bank into the next millennium led by an
extremely competent, experienced management team. I fear they will never be
told. To me the choice is quite simple. Do the shareholders choose to maximize
their financial gain by merging with BT Financial, or do the shareholders choose
to preserve the community banking culture and heritage, with returns similar to
past performance of First Philson.
Hopefully this better articulates my position on this issue.
Sincerely,
Tom Croner
Gary W. Sterner
Reasons for non-support of BT buyout offer:
------
1. First Philson had profitable and steady growth in the past, and,
with the fulfillment of its strategic plan, that will continue. This
institution is clean and solid, in both its loan and investment portfolios. It
enjoys the blessings of all regulatory bodies. We don't have to be afraid of
the future. Inspired businesses will always do a better job for their
shareholders than their larger, more awkward competition.
2. There is shareholder advantage to keeping ownership within sight and
communication. With this sellout, individual shareholder percent of ownership
will be minuscule, and control of it will not only be transferred to Johnstown
but may soon be in New York City, Boston, Cleveland, or Charlotte.
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Response of First Philson Management
The following is provided by First Philson's Board of Directors
(Messrs. Lewis W. Berkley, Richard P. Bulow, Gregory A. Croner, James E. Croner,
Theodore Deskevich, George W. Hay, George R. Shafer, Earl K. Wahl, Jr. and H.
Dean White) in response to Messrs. Croner and Sterner's statements.
. It is the opinion of management and the Board of Directors that the
merger will permit us to offer additional services to our customers
while still remaining a community bank, albeit a larger one. All
banks are being challenged to provide more and more services at
lower and lower costs. A strategic merger with a larger institution
in our market area is a good way to provide the additional services,
such as Trust and Asset Management, that future banking will
require.
. As to the matter of employees circulating their resumes, we have not
detected any loss of employees in excess of normal turnover in the
three months since the merger announcement. The Merger Agreement
provides employment for essentially all of the current employees of
the bank. For many of our employees, the merger will provide
additional opportunities for career advancement that are not often
available in a smaller institution.
. We are not aware of any widespread dissatisfaction by the community-
at-large with the services of BT Financial. We have been competitors
of BT Financial for many years and would never have considered a
merger with them if we had any facts to believe that our customers
were not going to receive comparable service as they experienced in
the past.
. A strategic plan is a course of action developed jointly by
management and the Board of Directors to serve as a guide for
management in planning the future direction of the institution. It
is under a constant state of development and is, in fact, updated
every time the Board of Directors adopts a course of action either
contemplated by the plan, or contrary to it. The Board of Directors
believes that management has done an outstanding job, both in
developing and implementing the strategic plan, and firmly believes
there has been no breach of the duty of trust and care.
. As in any merger, emphasis must be placed on the benefits to be
received by Shareholders. As set forth in this Prospectus/Proxy
Statement, First Philson Shareholders will receive a considerably
enhanced dividend return, a wider market for stock and greater
possibilities for future profitable combination of BT Financial with
another entity.
. First Philson's Strategic Plan is silent regarding the merger of the
bank. The discussions regarding the bank's independence are
conditioned upon no significant changes in the condition of the bank
or its markets. An unsolicited offer of $45.00 per share for the
outstanding stock of First Philson, when it was selling on the open
market at $22.00, was deemed by the Board of Directors to be
significant enough to warrant allowing all of the shareholders to
exercise their right to vote on the merger. In fact, failure to
present such an offer quite possibly could be determined to be a
breach of duty. If dividends remain at the current level, the
proposed merger will result in an increase of 142% in the annual
dividends. The Board of Directors feels that they have seriously
considered the primary aspect of the strategic plan "Enhance
Shareholder Value."
. First Philson Financial Corporation is itself the product of a
merger between the First Philson National Bank and the National Bank
of Western Pennsylvania. We believe a good case could be made that
the shareholders, customers and employees have all been better
served as the result of that merger. It is the opinion of the
majority of the Board of Directors that a vote of more than 50% of
the 1,742,400 outstanding shares of stock in favor of a merger with
BT Financial will be the proper course of action. The Board of
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Directors and management encourage the shareholders to vote in favor
of the merger. It will be difficult to enhance shareholder value, to
the extent outlined above, in the foreseeable future without the
merger.
/s/ Lewis W. Berkley /s/ James E. Croner /s/ George R. Shafer
/s/ Richard P. Bulow /s/ Theodore Dreskevich /s/ Earl K. Wahl, Jr.
/s/ Gregory A. Croner /s/ George W. Hay /s/ H. Dean White
Opinions of Financial Advisors
BT Financial. BT Financial retained Berwind Financial, L.P. to act as
its financial advisor and render a fairness opinion in connection with the
merger. Berwind rendered its opinion to the Board of Directors of BT Financial
that, based upon and subject to the various considerations set forth therein, as
of, February 23, 1999 (the "February Opinion"), and as of [Mailing Date of
Proxy] (the "Proxy Opinion"), the exchange ratio is fair, from a financial point
of view, to the holders of BT Financial Common Stock.
The full text of Berwind's Proxy Opinion, which sets forth the
assumptions made, matters considered and limitations of the review undertaken,
is attached as Annex C to this Joint Proxy Statement-Prospectus, is incorporated
herein by reference, and should be read in its entirety in connection with this
Joint Proxy Statement-Prospectus. The summary of the opinion of Berwind set
forth herein is qualified in its entirety by reference to the full text of such
opinion attached as Annex C to this Joint Proxy Statement-Prospectus.
Berwind was selected to act as BT Financial's financial advisor in
connection with the merger based upon its qualifications, expertise, reputation
and experience. Berwind has regularly acted as financial advisor to BT
Financial in connection with prior acquisition transactions. Berwind has
knowledge of, and experience with, Pennsylvania and surrounding banking markets
as well as banking organizations operating in those markets and was selected by
BT Financial because of its knowledge of, experience with, and reputation in the
financial services industry. Berwind, as part of its investment banking
business, is engaged regularly in the valuation of assets, securities and
companies in connection with various types of asset and securities transactions,
including mergers, acquisitions, private placements, and valuations for various
other purposes and in the determination of adequate consideration in such
transactions.
On February 23, 1999, BT Financial executed the Merger Agreement in
accordance with Board approval. Prior to such approval, Berwind delivered its
February Opinion to BT Financial's Board stating that, as of such date, the
exchange ratio pursuant to the Merger Agreement was fair to the shareholders of
BT Financial from a financial point of view. Berwind reached the same opinion
as of the date of the Proxy Opinion. The full text of the Proxy Opinion which
sets forth assumptions made, matters considered and limits on the review
undertaken is attached as Annex C to this Joint Proxy Statement-Prospectus. No
limitations were imposed by BT Financial's Board of Directors upon Berwind with
respect to the investigations made or procedures followed by Berwind in
rendering the February Opinion or the Proxy Opinion.
In rendering the Proxy Opinion, Berwind, among other things:
. reviewed the historical financial performances, current financial
positions and general prospects of BT Financial and First Philson
and reviewed certain internal financial analyses and forecasts
prepared by the management of BT Financial and First Philson;
. reviewed the Merger Agreement;
. reviewed and analyzed the stock market performance of BT Financial
and First Philson;
. studied and analyzed the consolidated financial and operating data
of BT Financial and First Philson;
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. considered the terms and conditions of the proposed merger as
compared with the terms and conditions of comparable bank and
bank holding company mergers and acquisitions;
. met and/or communicated with certain members of BT Financial's and
First Philson's senior management to discuss their respective
operations, historical financial statements, and future prospects;
. reviewed the Joint Proxy Statement-Prospectus;
. compared the financial performance of BT Financial and First Philson
and the prices and trading activity of BT Financial Common Stock
with certain other comparable bank holding companies and their
securities;
. discussed the strategic objectives of the merger and plans for the
combined company with senior executives of BT Financial and First
Philson, including estimates of the cost savings and other synergies
projected by BT Financial for the combined company;
. participated in discussions and negotiations among representatives
of BT Financial and First Philson and their financial and legal
advisors;
. reviewed the Merger Agreement and certain related documents; and
. conducted such other financial analyses, studies and investigations
as Berwind deemed appropriate.
In delivering its February Opinion and Proxy Opinion, Berwind assumed
that in the course of obtaining the necessary regulatory and governmental
approvals for the merger, no restriction would be imposed on First Philson or BT
Financial that would have a material adverse effect on the contemplated benefits
of the merger. Berwind also assumed that there would be no change in applicable
law or regulation that would cause a material adverse change on the contemplated
benefits of the merger.
Berwind relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by and
discussed with it for purposes of its opinions. With respect to BT Financial's
and First Philson's financial forecasts and other information reviewed by
Berwind in rendering its opinions, Berwind assumed that such information was
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the management of BT Financial and First Philson as to their
most likely future performance and the cost savings and other potential
synergies (including the amount, timing and achievability thereof) anticipated
to result from the merger. Berwind did not make an independent evaluation or
appraisal of the assets (including loans) or liabilities of BT Financial or
First Philson nor was it furnished with any such appraisal. Berwind also did
not independently verify and has relied on and assumed that all allowances for
loan and lease losses set forth in the balance sheets of BT Financial and First
Philson were adequate and complied fully with applicable law, regulatory policy
and sound banking practice as of the date of such financial statements. In
addition, Berwind did not review credit files of either BT Financial or First
Philson.
The following is a summary of selected analyses prepared by Berwind
and presented to BT Financial's Board in connection with the February Opinion
and analyzed by Berwind in connection with the February Opinion and Proxy
Opinion. In connection with delivering the Proxy Opinion, Berwind updated
certain analyses to reflect current market conditions and events occurring since
the date of the February Opinion. Such reviews and updates led Berwind to
conclude that it was not necessary to change the conclusions it had reached in
connection with rendering the February Opinion.
Comparable Companies and Comparable Acquisition Transaction Analyses.
Berwind compared selected financial, operating and stock market data for BT
Financial with those of a peer group of selected publicly traded banks and bank
holding companies with total assets between $1 billion and $3.5 billion, as of
the most recent financial period publicly available, headquartered in
Pennsylvania, Maryland,
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Ohio or West Virginia. Financial, operating and stock market data, ratios and
multiples compared in the analysis of the BT Financial peer group included but
were not limited to:
. return on average assets,
. return on average shareholders' equity,
. shareholders' equity to asset ratios,
. certain asset quality ratios,
. price to book value,
. price to tangible book value,
. price to earnings (latest twelve months, estimated 1999 and 2000),
and
. dividend yield.
Berwind also compared selected financial and operating data for First
Philson with those of a peer group of selected publicly traded banks and bank
holding companies with total assets between $150 million and $275 million, as of
the most recent period publicly available, headquartered in Pennsylvania.
Financial data and operating ratios compared in the analysis of the First
Philson peer group included but were not limited to:
. return on average assets,
. return on average shareholders' equity,
. shareholders' equity to assets ratio, and
. certain asset quality ratios.
Berwind also compared the multiples of book value, tangible book value
and latest twelve months' earnings inherent to the merger with the multiples
paid in recent acquisitions of banks and bank holding companies that Berwind
deemed comparable. The transactions deemed comparable by Berwind included both
interstate and intrastate acquisitions announced during the twelve months
preceding the date of the Proxy Opinion, in which the selling institution's
assets were between $150 million and $500 million as of the most recent period
publicly available prior to announcement. Berwind compared transactions located
throughout the country and analyzed those transactions in four groups:
. a national group,
. a regional group,
. a recently announced group, and
. a performance group.
The national group included bank institution transactions throughout
the United States; the regional group included transactions involving bank
institutions in which the acquired company was located in Pennsylvania, West
Virginia, Ohio, New Jersey or Virginia; the recently announced group consisted
of transactions announced during the three months preceding the date of the
Proxy Opinion; and the performance group included transactions involving banking
institutions in which the acquired company had shareholders' equity as a
percentage of assets greater than 10.00% and a return on shareholders' equity
greater than 11.00% as of the most recent period publicly available prior
to the date of announcement.
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No company or transaction, however, used in this analysis is identical
to BT Financial, First Philson or the merger. Accordingly, an analysis of the
result of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that would affect the public
trading values of the companies or company to which they are being compared.
Pro Forma Contribution Analysis. Berwind analyzed the contribution of
each of First Philson and BT Financial of selected balance sheet and income
statement items to the pro forma combined company as if the merger had been
consummated as of the most recent quarter publicly available prior to the Proxy
Opinion. The analysis demonstrated, among other factors, First Philson's and BT
Financial's contribution to total assets, total loans, total loan loss reserves,
total deposits, total shareholders' equity and total net income of the pro forma
company. Berwind did not consider estimated cost savings and earnings
improvements from the merger in this analysis.
Berwind performed a variety of financial analyses. Although the
evaluation of the fairness, from a financial point of view, of the consideration
to be paid in the merger was to some extent a subjective one based on the
experience and judgment of Berwind and not merely the result of mathematical
analysis of financial data, Berwind relied principally on the previously
discussed financial valuation methodologies in its determinations. Berwind
believes its analyses must be considered as a whole and that selecting portions
of such analyses and factors considered by Berwind without considering all such
analyses and factors could create an incomplete view of the process underlying
Berwind's opinions. In its analysis, Berwind made numerous assumptions with
respect to business, market, monetary and economic conditions, industry
performance and other matters, many of which are beyond BT Financial's and First
Philson's control. Any estimates contained in Berwind's analyses are not
necessarily indicative of future results or values, which may be significantly
more or less favorable than such estimates.
None of the analyses or factors considered by Berwind was assigned any
greater weighting by Berwind than any other analysis. Although the foregoing
summary describes the material provisions of the analyses conducted by Berwind
in connection with the delivery of the February Opinion and Proxy Opinion, it
does not purport to be a complete description of all the analyses performed by
Berwind and is qualified by reference to the written opinion of Berwind set
forth in Annex C. As a result of its consideration of the aggregate of all
factors present and analyses performed, Berwind reached the conclusion, and
opined, that the exchange ratio is fair to the shareholders of BT Financial from
a financial point of view.
Berwind's Proxy Opinion was based solely upon the information
available to it and the economic, market and other circumstances as they existed
and could be evaluated as of the date the Proxy Opinion was delivered; events
occurring after the date of the Proxy Opinion could materially affect the
assumptions used in preparing the Proxy Opinion. Berwind has not undertaken to
reaffirm or revise its Proxy Opinion or otherwise comment upon any events
occurring after the date thereof.
Pursuant to the terms of the engagement letter dated January 6, 1999,
BT Financial has paid Berwind $50,000 for serving as financial advisor. BT
Financial has also agreed to pay Berwind a $100,000 contingent fee payable only
upon completion of the merger for acting as financial advisor and delivering
the February Opinion and Proxy Opinion. Whether or not the merger is
consummated, BT Financial has also agreed to reimburse Berwind for all
reasonable out-of-pocket expenses incurred with the services provided by
Berwind, and to indemnify Berwind and certain related persons against certain
liabilities relating to or arising out of its engagement.
The full text of the Proxy Opinion of Berwind dated as of the date of
this Joint Proxy Statement-Prospectus, which sets forth the assumptions made,
matters considered and limitations of the review undertaken is attached hereto
as Annex C. BT Financial's shareholders are urged to read the Proxy Opinion in
its entirety. Berwind's Proxy Opinion is directed only to the fairness of the
exchange ratio pursuant to the merger agreement from a financial point of view
to BT Financial, is for the information of the board of directors and
shareholders of BT Financial, and does not address any other aspect of the
merger nor does it constitute a recommendation to any holder of BT Financial
Common Stock as to how such holder should vote at the special meeting.
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The foregoing provides only a summary of the Proxy Opinion of Berwind
and is qualified in its entirety by reference to the full text of that opinion,
which is set forth in Annex C to this Joint Proxy Statement-Prospectus.
First Philson. Pursuant to the engagement letter dated December 16,
1998 (the "Hopper Soliday Engagement Letter"), the First Philson Board retained
Hopper Soliday to render financial advisory and investment banking services to
First Philson in connection with the sale of First Philson to BT Financial.
Hopper Soliday has no other material relationship with First Philson or BT
Financial.
Hopper Soliday is a regional investment banking firm and as a
customary part of its investment banking business is engaged in the valuation of
bank and bank holding company securities in connection with mergers,
acquisitions, underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for various other purposes. As a
specialist in the securities of financial institutions, Hopper Soliday has
experience in, and knowledge of, the valuation of banking enterprises. The
First Philson Board selected Hopper Soliday on the basis of Hopper Soliday's
ability to evaluate the fairness of the Merger from a financial point of view,
its qualifications, its previous experience and its reputation in the banking
and investment communities. Hopper Soliday has acted exclusively for the First
Philson Board in rendering its fairness opinion and will receive a fee from
First Philson for its services.
Hopper Soliday has rendered a written opinion to the First Philson
Board, dated as of the date of this Joint Proxy Statement-Prospectus (the
"Hopper Soliday Opinion"), to the effect that, as of such date, the Merger
Consideration is fair, from a financial point of view, to the shareholders of
First Philson. The full text of the Hopper Soliday Opinion is attached as Annex
D to this Joint Proxy Statement-Prospectus and is incorporated herein by
reference. First Philson shareholders are urged to read the Hopper Soliday
Opinion in its entirety for a description of the procedures followed,
assumptions made, matters considered, and qualifications and limitations on the
review undertaken by Hopper Soliday in connection therewith. The following
summary of the Hopper Soliday Opinion is qualified in its entirety by reference
to the full text of the Hopper Soliday Opinion. The Merger Consideration was
determined by negotiation between BT Financial and First Philson and was not
determined by Hopper Soliday. See Background of the Merger on page 20.
The Hopper Soliday Opinion is directed only to the Merger
Consideration and does not constitute a recommendation to any First Philson
shareholder as to how such shareholder should vote at the Special Meeting.
In rendering its opinion, Hopper Soliday reviewed, among other things:
i) First Philson's Annual Reports and related financial information for years
ended December 31, 1994 through December 31, 1997 and First Philson's Quarterly
Reports on Form 10-Q for the periods ending March 31, 1998, June 30, 1998 and
September 30, 1998; ii) BT Financial's Annual Reports on Form 10-K and related
financial information for years ended December 31, 1994 through December 31,
1997 and Quarterly Reports on Form 10-Q for the periods ending March 31, 1998,
June 30, 1998 and September 30, 1998; iii) certain information concerning the
respective businesses, operations, regulatory condition and prospects of BT
Financial and First Philson, including financial forecasts, relating to the
business, earnings, assets and prospects of BT Financial and First Philson,
furnished to Hopper Soliday by BT Financial and First Philson, which Hopper
Soliday discussed with members of senior management of BT Financial and First
Philson; iv) historical market prices and trading activity for the BT Financial
Common Stock and First Philson Common Stock and similar data for certain
publicly traded companies which Hopper Soliday deemed to be relevant; v) the
results of operations of BT Financial and First Philson and similar data for
certain companies which Hopper Soliday deemed to be relevant; vi) the financial
terms of the Merger contemplated by the Agreement and Plan of Reorganization and
the financial terms of certain other mergers and acquisitions which Hopper
Soliday deemed to be relevant; vii) the pro forma impact of the Merger on the
earnings and book value per share, consolidated capitalization and certain
balance sheet and profitability ratios of BT Financial; viii) the Agreement and
Plan of Reorganization; and ix) such other matters as Hopper Soliday deemed
necessary. Hopper Soliday also met with certain members of senior management
and other representatives of BT Financial and First Philson to discuss the
foregoing as well as other matters Hopper Soliday deemed relevant. Hopper
Soliday also considered such financial and other factors as it deemed
appropriate under the circumstances and took into account its assessment of
general economic, market and financial conditions, and its experience in similar
transactions, as
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well as its experience in securities valuation and its knowledge of the banking
industry generally. Hopper Soliday's opinions are necessarily based upon
conditions as they existed and could be evaluated on the respective dates
thereof and the information made available to Hopper Soliday through the
respective dates thereof.
Hopper Soliday relied without independent verification upon the
accuracy and completeness of all of the financial and other information reviewed
by and discussed with it for purposes of its Opinion. With respect to the
financial forecasts reviewed by Hopper Soliday in rendering its Opinion, Hopper
Soliday assumed that such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of First Philson and BT Financial as to the future financial
performance of First Philson and BT Financial. Hopper Soliday did not make any
independent evaluation or appraisals of the assets or liabilities of BT
Financial nor was it furnished with any such appraisals. Hopper Soliday also
assumed, without independent verification, that the aggregate allowances for
loan losses for First Philson and BT Financial were adequate.
The summary set forth below does not purport to be a complete
description of the analyses performed by Hopper Soliday in this regard. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Accordingly, notwithstanding
the separate factors discussed below, Hopper Soliday believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all analyses and factors,
could create an incomplete view of the evaluation process underlying its
opinion. No one of the analyses performed by Hopper Soliday was assigned a
greater significance with respect to industry performance, business and economic
conditions and other matters, many of which are beyond First Philson's or BT
Financial's control. The analyses performed by Hopper Soliday are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, analyses relating to the values of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
Transaction Summary. Hopper Soliday reviewed with the First Philson
Board the key financial terms of the proposed merger, including the expected
method of accounting, the Exchange Ratio, the share price of BT Financial as of
December 9, 1998, the resulting indicated value per share of First Philson
Common Stock of the Merger and the resulting indicated aggregate consideration
to be paid in the Merger. The proposed method of accounting for the Merger was
a pooling-of-interests in a tax-free exchange. The indicated value was $46.26
per share of BT Financial Common Stock, determined by multiplying the Exchange
Ratio by the closing price on the Nasdaq National Market of BT Financial Common
Stock on December 9, 1998. The indicated aggregate consideration to be paid in
the merger was $80.6 million based on 1,742,400 fully diluted shares of First
Philson Common Stock outstanding. Hopper Soliday noted that the value of the
Merger Consideration represented a 41% premium to First Philson's market price
of $32.75 per share on December 9, 1998. Hopper Soliday also noted that the
$46.26 per share value represented 319% of First Philson's fully-diluted book
value per share as of September 30, 1998 and a multiple of 29.5 times First
Philson's net income for the trailing twelve months ended September 30, 1998.
Contribution Analysis. Hopper Soliday reviewed the contribution made
by each of First Philson and BT Financial to various balance sheet items and net
income of the combined company at the proposed Exchange Ratio based on balance
sheet data at September 30, 1998 and trailing twelve months earnings as of
September 30, 1998. This analysis showed that First Philson shareholders would
own approximately 18.9% of the aggregate shares outstanding of the combined
company and that First Philson was contributing 11.3% of total assets, 8.1% of
total loans, 12.1% of total deposits, 14.1% of shareholders' equity and 13.5% of
net income, respectively, of the pro forma combined company as of September 30,
1998.
Summary Comparison of Selected Institutions - First Philson. Hopper
Soliday compared selected balance sheet data, asset quality, capitalization and
profitability ratios and market statistics using financial data at or for the
twelve months ended September 30, 1998 and market data as of December 9, 1998
for First Philson and market data as of December 14, 1998 for a group of
Pennsylvania banks and bank holding companies consisting of nine institutions
with total assets between $210 million and $399 million (the "First
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Philson Peer Group"). The analysis included, but was not limited to, the
following ratios: loans/deposits, equity/assets, non-performing assets/total
assets, allowance for loan losses/ non-performing assets, net interest margin,
efficiency ratio, return on average assets, return on average equity,
price/earnings, price/book and dividend yield. The analysis showed that: i)
First Philson's loans/deposits ratio was 56.8% versus a First Philson Peer Group
median of 74.1%; ii) First Philson's equity/assets ratio was 11.83% versus a
First Philson Peer Group median of 11.06%; iii) First Philson's ratio of non-
performing assets to total assets was 0.23% versus a First Philson Peer Group
median of 0.77%; iv) First Philson's allowance for loan losses/non-performing
assets ratio was 568.1% versus a First Philson Peer Group median of 122.5%; v)
First Philson's net interest margin was 4.85% versus a Peer Group median of
4.42%; vi) First Philson's efficiency ratio was 60.08% versus a Peer Group
median of 57.98%; vii) First Philson's return on average assets and return on
average equity were 1.33% and 11.41%, respectively, versus First Philson Peer
Group medians of 1.26% and 11.13%, respectively; viii) First Philson's
price/earnings and price/book ratios were 20.9x and 226.0%, respectively, versus
First Philson Peer Group medians of 16.6x and 176.0%, respectively; and ix)
First Philson's dividend yield was 1.47% versus a Peer Group median of 2.12%.
Summary Comparison of Selected Institutions - BT Financial. Hopper
Soliday compared selected balance sheet data, asset quality, capitalization and
profitability ratios and market statistics using financial data at or for the
twelve months ended September 30, 1998 and market data as of December 9, 1998
for BT Financial and market data as of December 14, 1998 for a group of
Pennsylvania, Ohio and West Virginia banks and bank holding companies consisting
of 13 institutions with total assets between $1.0 billion and $3.1 billion (the
"BT Peer Group"). The analysis included, but was not limited to, the following
ratios: loans/deposits, equity/assets, non-performing assets/total assets,
allowance for loan losses/ non-performing assets, net interest margin,
efficiency ratio, return on average assets, return on average equity,
price/earnings, price/book and dividend yield. The analysis showed that: i) BT
Financial's loans/deposits ratio was 87.9% versus a BT Peer Group median of
86.4%; ii) BT Financial's equity/assets ratio was 9.18% versus a BT Peer Group
median of 8.94%; iii) BT Financial's ratio of non-performing assets to total
assets was 0.57% versus a BT Peer Group median of 0.64%; iv) BT Financial's
allowance for loan losses/non-performing assets ratio was 111.8% versus a BT
Peer Group median of 118.1%; v) BT Financial's net interest margin was 4.57%
versus a Peer Group median of 4.48%; vi) BT Financial's efficiency ratio was
56.91% versus a Peer Group median of 54.80%; vii) BT Financial's return on
average assets and return on average equity were 1.07% and 11.86%, respectively,
versus BT Peer Group medians of 1.14% and 12.38%, respectively; viii) BT
Financial's price/earnings and price/book ratios were 18.9x and 214.0%,
respectively, versus BT Peer Group medians of 18.8x and 207.0%, respectively;
and ix) BT Financial's dividend yield was 2.87% versus a Peer Group median of
2.58%.
Summary of Selected Bank Merger and Acquisition Transactions. Hopper
Soliday compared the ratios of price/book, price/trailing 12 months earnings,
book/book, BT's price/book / transaction price/book and BT's price/earnings /
transaction price/earnings for the proposed merger to the maximum, mean, median
and minimum ratios for a group of 11 transactions announced since January 1,
1995. The selected transactions (the "Selected Transactions") involved the
acquisition of profitable commercial banks and bank holding companies
headquartered in Pennsylvania, Delaware, Maryland, New Jersey, New York, Ohio
and West Virginia with buyer total assets greater than $1.0 billion and
announced transaction values between $50 million and $125 million. This analysis
showed that: i) the Merger Consideration represented 319.0% of First Philson's
fully-diluted book value versus a median of 293.3% for the Selected
Transactions; ii) the Merger Consideration represented a price/trailing 12
months earnings ratio of 29.5x compared to a median of 25.5x for the Selected
Transactions; iii) the Merger Consideration represented a book/book ratio of
134.0% compared to a median of 116.1% for Selected Transactions; iv) the Merger
Consideration represented a ratio of BT's price/book to the transaction
price/book of 70.5% compared to a median of 79.9% for the Selected Transactions;
and v) the Merger Consideration represented a ratio of BT's price/earnings to
the transaction price/earnings of 67.1% compared to a median of 65.7% for the
Selected Transactions.
No company or transaction used in the above analysis as a comparison
is identical to First Philson, BT Financial or the contemplated transaction.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex consideration and judgments concerning differences
in financial and operating characteristics of the companies and other factors
that could affect the public trading value of the companies to which they are
being compared. The ranges of valuations resulting from any
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particular analysis described above should not be taken to be Hopper Soliday's
view of the actual value of First Philson or BT Financial. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given more weight than any other analyses.
In performing its analyses, Hopper Soliday made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of First Philson or BT
Financial. The analyses performed by Hopper Soliday are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. In addition, as described above, Hopper
Soliday's opinion and presentation to the First Philson Board is just one of
many factors taken into consideration by the First Philson Board.
Pursuant to the Hopper Soliday Engagement Letter, First Philson agreed
to pay Hopper Soliday a fee of 0.15% of the aggregate consideration to be paid
in the Merger (the "Contingent Fee"). The contingent fee is payable only if the
merger is consummated. A non-refundable retainer fee of $5,000 was paid to
Hopper Soliday upon execution of the Hopper Soliday Engagement Letter. A non-
refundable payment of $20,000 was made to Hopper Soliday upon delivery of Hopper
Soliday's written fairness opinion. The contingent fee is due upon consummation
of the Merger. Both the retainer fee and the $20,000 payment will be credited
towards the contingent fee. Hopper Soliday will be reimbursed for reasonable
out-of-pocket expenses incurred on behalf of First Philson. First Philson has
agreed to indemnify Hopper Soliday against certain liabilities.
INDEMNIFICATION
After the merger, BT Financial, will indemnify and hold harmless any
former directors, officers, employees or agents of First Philson who have rights
to indemnification under the certificate of incorporation and bylaws of First
Philson. Those persons will be indemnified against all claims, losses,
liabilities or damages arising out of their activities in such capacities or on
behalf of, or at the request of, First Philson prior to the merger. BT
Financial will indemnify each in accordance with and to the extent required
under the certificate of incorporation and bylaws of First Philson and federal
and state law.
BT Financial will also indemnify and hold harmless First Philson and
each person, if any, who controls First Philson 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 Joint
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
First Philson and each such controlling person for any legal or
other expenses reasonably incurred by First Philson 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 Joint Proxy Statement-Prospectus or any amendment or
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supplement thereto or any related preliminary prospectus that was made or
omitted in reliance upon and in conformity with written information furnished by
First Philson specifically for use therein.
REGULATORY CONSIDERATIONS
The merger must be approved by the Board of Governors of the Federal
Reserve System and the Pennsylvania Department of Banking. 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. 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.
Federal Reserve Approval. The Merger is subject to approval by the
Federal Reserve Board. The Federal Reserve Board is prohibited from approving a
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 Federal Reserve is also required 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 Federal Reserve Board regulations require the publication of
notice of, and the opportunity for public comment on, the application submitted
by BT Financial and First Philson for the approval of the merger, and authorize
the Federal Reserve Board to hold a public hearing in connection therewith if
the Federal Reserve Board determines that such a hearing would be appropriate.
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.
BT Financial's right to exercise its option under the Stock Option
Agreement is subject to the prior approval of the Federal Reserve Board, to the
extent that the exercise of the option would result in BT Financial owning more
than 5% of the outstanding shares of First Philson Common Stock. The Federal
Reserve Board would generally apply the same statutory criteria it would apply
to the consideration of approval of the merger.
Pennsylvania Department of Banking Approval. 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
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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.
NO RIGHTS FOR DISSENTING SHAREHOLDERS
First Philson shareholders will not be entitled to dissenters' rights
because First Philson's stock is listed on the American Stock Exchange. Section
262(b) of the Delaware General Corporation Law provides that no appraisal rights
shall be available for the shares of any class or series of stock, which stock
at the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of shareholders to act upon the agreement
of merger or consolidation, was either (i) listed on a national securities
exchange, or (ii) held of record by more than 2,000 holders. The listed
company exception would not apply and First Philson shareholders would be
entitled to dissenters' rights if they were required to accept anything other
than (i) stock in the surviving corporation, (ii) stock of another corporation
which is not listed or held by more than 2,000 holders or (iii) cash in lieu of
fractional shares or any combination of the above. First Philson Common Stock
is listed on the American Stock Exchange. The Merger Agreement provides at the
Effective Time First Philson shareholders will receive only BT Financial Common
Stock and cash in lieu of fractional shares. Neither Delaware General
Corporation Law, the Merger Agreement, First Philson's certificate of
incorporation, or bylaws provide for dissenters' rights in these circumstances.
Therefore, none of the limitations or the exception are applicable, and First
Philson shareholders will not be entitled to dissenters' rights under Delaware
law.
BT Financial shareholders will not have dissenters' rights because BT
Financial has more than 2,000 shareholders. Section 1571 of the Pennsylvania
BCL of 1988, as amended, provides that shareholders of a corporation engaged in
a merger as a general rule are entitled to dissenters' rights. Section 1571(b)
provides that holders of any class of shares that are either listed on a
national securities exchange or held of record by more than 2,000 shareholders
are not entitled to dissenters' rights with some exceptions that are not
applicable in this case. BT Financial has more than 2,000 shareholders; and
therefore they will not be entitled to dissenters' rights under the BCL.
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 First Philson shareholder who may be deemed to be an
affiliate of First Philson for purposes of Rule 145 under the Securities Act as
of [FP Meeting Date]. First Philson 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 First Philson generally include individuals or
entities that control, are controlled by, or are under common control with,
First Philson and may include certain officers and directors of First Philson as
well as the principal shareholders.
CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material federal income tax
consequences relating to the merger. Neither the tax opinion of Pepper
Hamilton LLP, described below, 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 First
Philson Common Stock as a capital asset within the meaning of Section 1221 of
the Code. It also does not address all aspects of U.S. Federal income taxation
that may be relevant to a particular holder of shares of First Philson Common
Stock in light of the holder's particular circumstances or holders subject to
special treatment under the U.S. Federal income tax laws, such as financial
institutions, insurance companies, dealers in securities, tax-exempt entities,
persons who hold First Philson Common Stock or BT Financial Common Stock as part
of a "hedge", "straddle" or "conversion
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transaction" or holders who acquired their First Philson Common Stock pursuant
to the exercise of an employee stock option or otherwise as compensation
It is the opinion of Pepper Hamilton LLP, based on the assumptions,
representations and covenants set forth in its letter to BT Financial and First
Philson, that for U.S. federal income tax purposes:
1. The merger will constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by BT Financial or First Philson
as a result of the merger.
3. No gain or loss will be recognized by any First Philson shareholder
upon the exchange of that shareholder's shares of First Philson
Common Stock for shares of BT Financial Common Stock pursuant to
the merger.
Cash received in lieu of fractional share interests will be treated as
received in exchange for a fractional share of BT Financial Common Stock. Gain
or loss recognized on the exchange will be measured by the difference between
the amount of cash received and the portion of the tax basis in the shares of
First Philson Common Stock surrendered that is allocable to such fractional
shares. The gain or loss on the fractional share exchange will be capital gain
or loss. Capital gains of individuals derived from assets held for more than
one year are subject to maximum federal income tax rates of 20%. The
deductibility of capital losses is subject to limitations.
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, and the Internal Revenue Service is not bound by the opinion of Pepper
Hamilton LLP.
Each holder of First Philson Common Stock is urged to consult such
holder's own tax advisor to determine the particular tax consequences of the
merger to the holder (including the application and effect of state and local
income and other tax laws).
ACCOUNTING TREATMENT
It is anticipated that the merger will be accounted for as a "pooling
of interests" transaction under generally accepted accounting principles. Under
pooling of interests accounting, following the merger, the assets, liabilities
and net income of First Philson will be added to those of BT Financial at their
recorded book values, and the shareholders' equity accounts of First Philson and
BT Financial will be combined on BT Financial's consolidated balance sheet. No
goodwill will be created. The income of BT Financial will include the combined
income of BT Financial and First Philson for the entire fiscal year in which the
merger occurs after addressing any conformity issues; and the reported income
of BT Financial and First Philson for prior periods will be combined and
restated as income of BT Financial after addressing conformity issues.
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
The Board of Directors of First Philson and BT Financial have approved
the Merger Agreement, which provides for the merger of First Philson with and
into BT Financial, with BT Financial as the
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surviving corporation. At the effective time of the merger each share of First
Philson Common Stock outstanding will be converted into the right to receive
[exchange ratio] shares of BT Financial Common Stock. Each of the then issued
and outstanding shares of First Philson Common Stock will cease to exist and
will be deemed canceled, retired and eliminated, and all rights in respect
thereof 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 First Philson shareholders. At the effective time, BT
Financial will succeed to all the rights, privileges, immunities and franchises,
and all the property and assets, real, personal and mixed, of First Philson,
without the necessity for any separate conveyance or other transfer. After the
merger, BT Financial will be responsible and liable for all liabilities and
obligations of First Philson of every kind and description, and neither the
rights of creditors, nor any liens on the property of First Philson, will be
impaired by the merger. The shares of BT Financial 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 BT Financial 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 BT Financial from and after
the effective time of the merger will be the directors and principal officers of
BT Financial immediately prior thereto. Following the merger, in accordance with
the Merger Agreement, two directors of First Philson designated by First Philson
and acceptable to BT Financial shall also become directors of BT Financial.
Exchange Procedures
After the effective time of the merger, a form of transmittal letter
will be mailed by BT Financial's Exchange Agent, Laurel Trust Company, to the
holders of First Philson Common Stock. The form of transmittal letter will
contain instructions with respect to the surrender of certificates representing
First Philson Common Stock. First Philson Common Stock certificates should not
be returned with the enclosed proxy and should not be forwarded to Laurel Trust
Company until the First Philson shareholder receives the letter of transmittal.
Upon surrender of the certificate representing First Philson Common
Stock to Laurel Trust Company, together with a duly executed and completed
letter of transmittal, the shareholder 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, plus cash (payable by check) in lieu of
any fractional share of BT Financial Common Stock to which such holder would
otherwise be entitled.
Until surrendered in accordance with the requirements of the Merger
Agreement, the certificates 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, BT Financial will issue to the record holder of the
certificate, a new certificate for shares of BT Financial Common Stock. When
such certificates are surrendered, any unpaid dividends or other distributions
will be paid without interest.
Fractional shares of BT Financial Common Stock will not be issued. In
lieu of a fractional share of BT Financial Common Stock, each First Philson
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.
If a certificate for First Philson Common Stock has been lost, stolen,
or destroyed, the Exchange Agent will issue the consideration properly payable
in accordance with the Merger Agreement upon receipt of appropriate evidence as
to such loss, theft, or destruction, appropriate evidence as to the ownership of
such certificate by such claimant, and appropriate customary identification.
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At the effective time of the merger, each share of First Philson
Common Stock held in treasury will be canceled, retired and cease to exist and
no consideration will be paid therefor.
Representations and Warranties
The Merger Agreement contains representations and warranties of First
Philson and BT Financial 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 respective organization and capitalization of the subsidiaries
of each corporation;
(c) the due authorization, execution and delivery and the
enforceability of the Merger Agreement;
(d) the lack of conflicts or violations under applicable articles or
certificate of incorporation, bylaws, instruments and laws, with
respect to the transactions contemplated by the Merger Agreement;
(e) financial statements and the documents to be filed with the
Commission and other regulatory agencies;
(f) the conduct of business in the ordinary course and absence of
certain changes;
(g) certain litigation;
(h) consents and approvals; and
(i) Year 2000 status.
The Merger Agreement also contains representations and warranties of
First Philson with respect to, but not limited to, loans, loan loss reserve,
core deposits, related party transactions, fidelity bonds, and investments. The
Merger Agreement also contains representations and warranties of BT Financial,
including, but not limited to, BT Financial's intention to offer all employees
of First Philson and its subsidiaries with 15 or more years of employment with
First Philson or its subsidiaries employment for one year with BT Financial or
its subsidiaries, and thereafter employment-at-will. Such employment will
include salaries and benefits commensurate with salaries in comparable positions
at BT Financial or its subsidiaries.
Certain Covenants
First Philson and BT Financial have agreed, among other things, to
mutually cooperate on regulatory applications and tax matters and to conduct
their businesses in the ordinary course. The parties have agreed that within 60
days after the Merger Agreement was executed, BT Financial will conduct a Phase
I environmental assessment of all real estate owned by First Philson. If the
results of the Phase I assessment indicate that there is an environmental
condition with potential liability in excess of $100,000, BT Financial may
terminate the Merger Agreement.
First Philson has also agreed that, except with the prior written
consent of BT Financial, it will not:
(a) 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--First Philson Dividends" on page 41;
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(b) 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;
(c) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(d) 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;
(e) amend its certificate of incorporation or bylaws except as may be
necessary to consummate the transactions contemplated by the
Merger Agreement or as required by law;
(f) 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;
(g) 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;
(h) unless permitted by BT Financial, take any action which would
entitle any employee to receive severance pay prior to the Closing
Date;
(i) 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;
(j) 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 $150,000 in the aggregate;
(k) modify or extend any service bureau contracts, hardware/software
maintenance agreements, lease agreements or other contracts that
involve annual payments by First Philson that exceed $25,000 per
contract or $100,000 in the aggregate;
(l) 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, First
Philson shall cooperate in good faith with BT Financial to adopt
policies, practices and procedures consistent with those utilized
by BT Financial and its affiliates;
(m) open any branch offices, except for the proposed new office for
Flex;
(n) fail to pay any tax or any other liability or charge when due,
other than charges contested in good faith by appropriate
proceedings; or
(o) make, change or revoke any tax election or make any agreement or
settlement with any taxing authority.
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BT Financial has agreed that following the merger, any full-time
employee of First Philson, with the exceptions of Messrs. Hay, Deskevich, Finui
and Zimmerman, who is terminated by BT Financial, other than for cause, within
six months after the effective time, 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 First
Philson or any of its subsidiaries. This compensation will not exceed three
month's salary.
BT Financial has also agreed that all employees of First Philson or
any of its subsidiaries who are employed by BT Financial following the Merger
will be entitled to participate in BT Financial's employee benefit plans as to
which they are eligible without fulfilling any vesting requirement. Such
employee will be entitled to credit for their length of service, compensation,
job classification or position with First Philson or any of its subsidiaries, to
the extent permissible under all applicable laws and regulations and the terms
and benefits of BT Financial's current benefit plans. 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 First
Philson 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.
Such employees' service with First Philson will be recognized as service with BT
Financial for purposes of eligibility, participation, vesting, benefit accruals,
subject to applicable laws and BT Financial's current benefit plans.
Interests of First Philson Directors and Officers in the Merger
First Philson, First Philson Bank and George W. Hay, President and
Chief Executive Officer of First Philson, are parties to an Agreement dated May
16, 1995 (the "Hay Agreement") which generally provides that following any sale
or merger of First Philson, his compensation and all benefits will continue for
five years after the sale or merger, whether or not Mr. Hay remains employed by
First Philson Bank or any successor to First Philson. Therefore, immediately
following the merger, Mr. Hay could voluntarily terminate his employment and he
would be entitled to receive compensation and benefits for five years. The Hay
Agreement also provides that if he is employed by a successor to First Philson,
such as BT Financial, any post-merger compensation received by Mr. Hay will be
deducted from his five-year severance package. This provision provides a
disincentive for Mr. Hay to join BT Financial after the merger. One factor
considered by BT Financial's Board in approving the merger was retention of Mr.
Hay as an executive of BT Financial. BT Financial has agreed to employ Mr. Hay
as Vice Chairman of BT Financial and Community Banking Executive of Laurel
following the merger at the same compensation level he now receives with First
Philson, plus normal benefits. In addition, BT Financial has agreed to pay Mr.
Hay a one-time bonus of $200,000 at the time of the merger in recognition of the
fact that all compensation he receives after the merger would be deducted from
his five-year severance benefit if his employment is terminated for any reason.
Stock Option Agreement
In order to induce BT Financial to enter into the Merger Agreement and
to provide reasonable assurances that the transaction contemplated by the Merger
Agreement will be consummated, First Philson granted BT Financial an option to
purchase up to 348,400 shares of First Philson Common Stock at a price of $45.00
per share pursuant to the Stock Option Agreement, dated February 23, 1999, a
copy of which is attached hereto as Annex B. The Stock Option Agreement could
discourage other companies from trying or proposing to combine with First
Philson before the completion of the merger.
The largest number of shares that BT Financial could purchase under
the Stock Option Agreement is 19.99% of the total outstanding shares of First
Philson's Common Stock. The purchase price per share is $45.00 per option
share.
BT Financial cannot exercise this option unless certain events occur.
These events include:
1. any corporation, partnership, or other entity or group commences a
tender offer or exchange offer for at least 20% of First Philson's
outstanding Common Stock;
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2. any corporation, partnership, or other entity or group acquires
direct or indirect ownership of 20% or more of First Philson's
outstanding Common Stock;
3. First Philson fails to satisfy the conditions of Section 6.01 of
the Merger Agreement, which generally provides that First Philson
represents and warrants that no broker or finder acted for it, in
connection with the Merger Agreement;
4. First Philson breaches Section 4.04(f) of the Merger Agreement,
which generally provides that First Philson will not initiate or
solicit any acquisition proposals; and
5. First Philson or its affiliates solicit proxies in opposition to
the merger.
Neither First Philson nor BT Financial is aware of any event, as of
the date of this document, which would permit BT Financial to exercise this
option.
Acquisition Proposals
First Philson has agreed that First Philson and its directors,
officers, employees, agents, representative or other affiliates will not:
(i) initiate, solicit or encourage any acquisition proposals,
(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 First Philson nor the First
Philson Board, is prohibited from (i) fulfilling its fiduciary duties under
Delaware or federal law to the shareholders, or (ii) permitting to occur the
transactions contemplated by the Merger Agreement. First Philson 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.
First Philson Dividends
First Philson may pay regular quarterly cash dividends in accordance
with its historical practices. This means that First Philson may pay a
quarterly cash dividend not exceeding $0.13 1/2 per share for any full calendar
quarter beginning with the quarter ending March 31, 1999, provided that net
income per share for the previous quarter exceeds $0.53 1/2 per share. The
quarterly dividend for December 31, 1999, may be increased in accordance with
First Philson's past practices by an aggregate amount not to exceed $0.01 per
share, provided that the net income for the quarter ending September 30, 1999
shall have exceeded $0.40 per share.
The Merger Agreement provides that First Philson will coordinate the
declaration and payment of dividends in respect of First Philson Common Stock
with the intent that holders thereof will not receive two dividends for a single
quarter or fail to receive one dividend which they would otherwise receive in
the absence of the merger.
Conditions
The obligations of both BT Financial and First Philson 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:
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(i) performance of and certification by President and Secretary of
First Philson of all covenants to be performed by First
Philson;
(ii) the representations and warranties made by First Philson 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) First Philson 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 a majority of the shares of
First Philson Common Stock outstanding;
(v) BT Financial and First Philson 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 First Philson contained in the Registration
Statement which have not been cured;
(viii) no changes in financial condition of First Philson since
the date of the Merger Agreement;
(ix) Registration Statement has been declared effective;
(x) BT Financial is in receipt of an opinion of Plowman, Spiegel &
Lewis, P.C., counsel for First Philson including, but not
limited to, the valid existence of First Philson under the laws
of the State of Delaware, the authorized capital stock of First
Philson and the par value of such, the valid existence of First
Philson Bank under the National Bank Act, the authorized
capital stock of First Philson Bank and par value of such, the
valid existence of Flex under the laws of the Commonwealth of
Pennsylvania, the authorized capital stock of Flex and the par
value of such, the Merger Agreement and the articles and
certificate of merger have been duly executed, authorized and
delivered and will constitute a valid and binding obligation on
First Philson and the execution, delivery and performance of
the Merger Agreement do not violate First Philson's certificate
of incorporation or bylaws, as amended;
(xi) First Philson paid all out-of-pocket expenses and
disbursements, including legal, accounting and investment
banking fees incurred by First Philson 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;
(xii) 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 or First Philson as a result of the merger; and (b)
no gain or loss will be recognized by First Philson's
shareholder as a result of the receipt of BT Financial Common
Stock in the merger;
(xiii) BT Financial has received from PricewaterhouseCoopers LLP,
independent accountants throughout for BT Financial, a letter
dated the date of or shortly prior to the mailing date of the
Joint Proxy
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Statement-Prospectus and the effective time, to the effect that
they are not aware of any facts or circumstances which might
cause the merger not to qualify for pooling of interests
accounting treatment; and
(xiv) BT Financial has received duly executed Affiliates' Agreements
from each director and executive officer of BT Financial and
First Philson.
The obligations of First Philson 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 of all covenants to be performed by BT
Financial;
(ii) the representations and warranties made by BT Financial in the
Merger Agreement and in any certificate provided to First
Philson must be true and correct in all material respects on the
Closing Date;
(iii) BT Financial must furnish First Philson a certified copy of
resolutions duly adopted by their Board of Directors authorizing
and approving the Merger Agreement and the transactions
contemplated therein;
(iv) approval by affirmative vote of a majority of the shares of BT
Financial Common Stock outstanding;
(v) BT Financial, Laurel Bank and First Philson must 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 First
Philson, would make it inadvisable to consummate such
transactions;
(vii) no material misstatements or omissions in the information
supplied by BT Financial in the Registration Statement which
have not been cured;
(viii) no changes in financial condition of BT Financial on a
consolidated basis since the date of the Merger Agreement;
(ix) First Philson must receive an opinion of Pepper Hamilton LLP,
counsel for BT Financial including, but not limited to, the
valid existence of BT Financial under Pennsylvania Law, 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 the execution of the Merger
Agreement does not violate BT Financial's articles of
incorporation or bylaws, as amended;
(x) First Philson must receive an opinion dated prior to the date of
the Joint Proxy Statement-Prospectus, from Hopper Soliday, a
division of Tucker Anthony Incorporated, that the consideration
to be paid to First Philson shareholders is fair.
Termination
The Merger Agreement may be terminated at any time prior to the
effective time of the merger by the mutual consent of the Boards of Directors of
First Philson and BT Financial. The Merger Agreement may also be terminated if:
(i) either First Philson or BT Financial fail to satisfy conditions
precedent to their obligation to close on a mutually agreed
upon Closing Date and still do not satisfy these conditions to
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close after the postponement of the Closing Date for a
reasonable period of time (which will be no more than 30 days)
to enable it to satisfy conditions precedent to their
obligation to close and the other party does not waive the
unsatisfied conditions;
(ii) the state or federal regulatory approvals of the merger are
denied;
(iii) the BT Financial or First Philson shareholders do not approve
the Merger Agreement; or
(iv) the option granted under the Stock Option Agreement is
exercised.
In any event, the Merger Agreement will terminate automatically on
December 31, 1999 if the merger has not been consummated on or before such date,
unless extended by mutual consent of First Philson and BT Financial. The
parties, however, expect that the merger will be consummated before December 31,
1999. 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, certain
confidentiality provisions and other provisions relating to expenses in the
Merger Agreement will survive. First Philson will be obligated to reimburse BT
Financial for its attorneys' fees and other expenses reasonably incurred in
connection with the Merger Agreement (to the extent not already paid by First
Philson to BT Financial or any of its subsidiaries), if BT Financial terminates
the Merger Agreement due to First Philson's failure to satisfy any of the
following conditions precedent and satisfaction of the condition was within the
control of First Philson:
(a) failure to deliver the opinion of Plowman, Spiegel & Lewis, P.C.,
that, among other things, First Philson is a Delaware corporation
duly organized and incorporated under the Delaware General
Corporation Law with 1,742,400 shares of common stock outstanding
par value $2.50,
(b) shareholder approval of the Merger Agreement,
(c) material errors, misstatements or omissions by First Philson,
(d) changes in First Philson's financial condition, or
(e) First Philson's payment of certain expenses.
BT Financial will be obligated to reimburse First Philson for its
attorneys' fees and other expenses reasonably incurred in connection with the
Merger Agreement (to the extent not already paid by BT Financial to First
Philson or any of its subsidiaries), if First Philson terminates the Merger
Agreement due to BT Financial's failure to satisfy any of the following
conditions precedent and satisfaction of such condition was within the control
of BT Financial:
(a) material errors, misstatements or omissions by BT Financial,
(b) changes in BT Financial's financial condition,
(c) the failure to have the Registration Statement declared effective
by the SEC,
(d) the failure to deliver the opinion of BT Financial's counsel, or
(e) shareholder approval of the Merger Agreement.
In no event shall the amount reimbursed by BT Financial or First
Philson for attorneys' fees and other expenses reasonably incurred in connection
with the transactions described above exceed $250,000.
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Expenses
Except as described under "Termination" above, all expenses incurred
by First Philson or BT Financial 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.
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
As a result of the conversion of shares of First Philson Financial
Common Stock to shares of BT Financial Common Stock at the effective time, First
Philson shareholders become BT Financial shareholders. The following is a
description of BT Financial Capital Stock, including the BT Financial Common
Stock to be issued in the merger.
General. As of the Effective Time, the authorized capital stock of BT
Financial will consist 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.
As of the date of this Joint Proxy Statement-Prospectus, no shares of BT
Financial's preferred stock are issued and outstanding and 12,985,272 shares of
BT Financial Common Stock are issued and outstanding. Except to the extent
required by governing law, or by NASDAQ rules, the Board of Directors of BT
Financial may issue the shares of capital stock of BT Financial without further
approval of BT Financial shareholders. The Board of Directors of BT Financial
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 one vote for each share 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 are
not entitled to 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 dividends declared by the Board of
Directors of BT Financial out of funds legally available therefor. Cash
available for dividend distribution to the holders of BT Financial Common Stock
must initially come from dividends paid to
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BT Financial by its subsidiaries. Accordingly, restrictions on payment of cash
dividends by BT Financial are affected by any restrictions on the payment of
dividends by BT Financial's subsidiaries.
Liquidation. If there is a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of BT Financial, 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.
NASDAQ Listing. BT Financial Common Stock is included for quotation
on NASDAQ. In order to maintain such inclusion, approval of BT Financial's
shareholders would be required for the issuance of additional shares of BT
Financial Common Stock or securities convertible into BT Financial Common Stock
if the issuance of such securities:
1. is in connection with the acquisition of a company, is not in
connection with a public offering for cash, and the securities
issued have or will have voting power equal to or in excess of 20%
of the voting power outstanding before such issuance;
2. is in connection with the acquisition of a company in which a
director, officer or substantial shareholder of BT Financial has a
5% or greater interest (or such persons collectively have a 10% or
greater interest) and the issuance of the securities could result
in an increase in outstanding common stock or voting power of 5% or
more;
3. is in connection with a transaction other than a public offering at
a price less than the greater of book or market value, and will
equal 20% or more of the common stock or 20% or more of the voting
power outstanding before issuance; or
4. would result in a change in control of BT Financial. Under NASDAQ
rules, shareholder approval would also be required for the
establishment of a stock option or purchase plan in which stock may
be acquired by officers and directors other than a broadly-based
plan in which other security holders of BT Financial or employees
of BT Financial participate. The NASDAQ rules do not require
approval of the merger by BT Financial shareholders.
Also under NASDAQ Rules, BT Financial may not issue any class of
security or take other corporate action with the effect of nullifying,
restricting or disparately reducing the per share voting rights of its
outstanding 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.
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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 four one-thousandths (.004) of a share of BT Financial Series A Preferred
Stock at a price of $17.85 per unit (the "Exercise Price"). The Rights are not
exercisable until the Distribution Date (as defined below). The Rights will
expire at the close of business on April 15, 2001, unless earlier redeemed or
exchanged by BT Financial as described below. Rights will be issued with the
shares of BT Financial Common Stock to be issued in the merger, unless a
Distribution Date occurs first. All currently outstanding shares of BT
Financial Common Stock have Rights associated therewith.
The Rights will be evidenced by certificates for BT Financial Common
Stock until the close of business on the tenth day (the "Distribution Date")
following the earlier to occur of (i) the date on which a person or group of
affiliated or associated persons ("Acquiring Person"), other than (A) BT
Financial, (B) any subsidiary of BT Financial, (C) any employee benefit plan or
employee stock plan of BT Financial or of any subsidiary of BT Financial, (D)
any trust or trustee, or person acting as trustee or other entity organized,
appointed, established or holding BT Financial's voting stock pursuant to the
terms of any such plan or (E) any person or group of affiliated or associated
persons which is eligible, pursuant to Rule 13d-1(b) under the Exchange Act, to
file a Statement on Schedule 13G with respect to its or their beneficial
ownership of voting stock of BT Financial, whether or not such person or group
has filed a Statement on Schedule 13G, unless such person or any of its
affiliates or associates has filed a Statement on Schedule 13D with respect to
beneficial ownership by any one or more of them of 10% or more of the voting
power of BT Financial ("Exempt Person"), has acquired, or obtained the right to
acquire, beneficial ownership of shares of voting stock having 10% or more of
the voting power of BT Financial and the public announcement of such or (ii) the
commencement of, or public announcement of an intention to make, a tender or
exchange offer (other than a tender or exchange offer by an Exempt Person)
which, if consummated, would result in the beneficial ownership of shares of
voting stock having 10% or more of the voting power of BT Financial, even if no
shares are actually purchased pursuant to such offer. Until the Distribution
Date, the Rights may only be transferred together with shares of BT Financial
Common Stock and the surrender for transfer of any certificate for shares of BT
Financial Common Stock having associated Rights will constitute the transfer of
such Rights. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of shares of BT Financial Common Stock having associated
Rights as of the close of business on the Distribution Date and such separate
certificates alone will evidence the Rights from and after the Distribution
Date.
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
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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 280.14
times any cash dividends, and 280.14 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 280.14 times the payment to be
made per share of BT Financial Common Stock. Each share of BT Financial Series A
Preferred Stock will have 280.14 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 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.
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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 $.004
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 "Where You Can Find More
Information'' on page 64.
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.
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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 shares. Business combinations include: mergers, consolidations, share
exchanges and divisions; sales, leases, exchanges, mortgages, pledges, transfers
and other dispositions of assets having specified values; share transfers having
specified values; liquidation; dissolution; transactions that increase the
interested shareholder's voting power; and the provision of any benefit not in
proportion to shareholdings. An interested shareholder is generally any
beneficial owner of 20% of the voting shares of a corporation or an affiliate or
associate of a corporation that at any time within the five year period prior to
the date in question beneficially owned 20% of the voting shares of the
corporation.
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Federal Law
The Change in Bank Control Act of 1978, as amended, prohibits a person
or group of persons from acquiring "control" of a bank holding company 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.
"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.
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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 First Philson are governed by the
Delaware General Corporation Law ("GCL") and the certificate of incorporation
and bylaws of First Philson. As a result of the merger, shareholders of First
Philson 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 First Philson
arise from the distinctions between the BCL and GCL and the articles and bylaws
of each corporation. Although it is impracticable to note all of the
differences, the following is a summary of certain significant differences.
This summary is not meant to be relied upon as an exhaustive list or a detailed
description of the provisions discussed and is qualified in its entirety by
reference to the BCL, the GCL, and the governing corporate instruments of BT
Financial and First Philson.
The Certificate of Incorporation of First Philson authorizes the
issuance of 10,000,000 shares of common stock, $2.50 par value per share of
which 1,742,400 are outstanding. Upon the consummation of the merger, the
shares of First Philson Common Stock will be canceled, and the holders of First
Philson Common Stock will receive shares of BT Financial Common Stock. The BT
Financial Articles of Incorporation 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. As of the date of this Joint Proxy
Statement - Prospectus, 12,985,272 shares of BT Financial Common Stock and no
shares of preferred stock were outstanding.
Dividends
Holders of First Philson Common Stock are entitled to dividends as and
when declared by the Board of Directors of First Philson out of funds legally
available therefor. Cash available for dividends distribution must initially
come from dividends paid to First Philson by its banking subsidiary, First
Philson Bank, N.A. 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, both BT
Financial's and First Philson's ability to pay cash dividends can be affected by
restrictions on the payment of dividends by BT Financial's or First Philson's
subsidiaries.
Voting
Like holders of BT Financial Common Stock, holders of First Philson
Common Stock are entitled to one vote for each share held in all voting matters.
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Cumulative Voting
Like BT Financial shareholders, First Philson shareholders are not
permitted to cumulate votes in the election of directors, that is to say, no
shareholder shall have the right to multiply the number of votes to which he is
entitled by the total number of directors to be elected in the same election by
the holders of the class of shares of which his are a part.
Classified Board of Directors; Election of Directors
The BT Financial bylaws 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. First Philson's board is classified
into three classes, as equal in number as possible, with the term of office of
one class expiring each year. Like the BT Financial bylaws, the First Philson
bylaws contain a provision limiting shareholder nominations for elections of
directors. The BT Financial articles and bylaws have supermajority provisions
(described on page 51). The First Philson certificate and bylaws have
provisions requiring 80% of the outstanding shares entitled to vote for the
removal of a director, with or without cause, and for certain bylaw amendments.
Annual Meetings
The annual meeting of BT Financial for the election of directors shall
be held on the second Tuesday of May of each year or at such other time as may
be fixed by the Board of Directors. Written notice of the meeting stating the
place, day and hour of the meeting must be mailed at least 5 days before the
meeting to each shareholder entitled to vote at the meeting. The annual meeting
of First Philson for the election of directors shall be held at such time fixed
by the First Philson Board of Directors. Written notice of the meeting must be
mailed to each shareholder entitled to vote at the meeting at least 10 days but
not more than sixty days before the date of the meeting.
Removal of Directors
Under the BCL, unless otherwise provided in the articles of
incorporation, 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. Under the BCL, any director or shareholder
may apply to a court for the removal of a director.
The GCL provides that any director or the entire board of directors
may be removed with or without cause by a majority of shareholders entitled to
vote at an election of directors. First Philson's certificate of incorporation
provides that a director may be removed, with or without cause, only by the
affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote.
Liquidation
As with BT Financial Common Stock, in the event of any liquidation,
dissolution or winding up of First Philson, holders of First Philson Common
Stock will be entitled to share ratably in all assets available for distribution
after the payment of debts, liabilities and preferences.
Preemptive Rights
Holders of BT Financial Common Stock and First Philson Common Stock
are not entitled to preemptive rights to acquire additional unissued shares of
each corporation's common stock.
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Anti-takeover Provisions
BT Financial is subject to the anti-takeover sections of the BCL
described on page 49. First Philson is not subject to the BCL. The provisions
of First Philson's certificate of incorporation and bylaws creating a classified
board of directors and requiring the affirmative vote of at least 80% of the
outstanding shares entitled to vote to remove a director with or without cause
have "anti-takeover" effects.
First Philson is also subject to the anti-takeover provisions of the
GCL. The GCL contains a business combination section which generally provides
that any person who acquires 15% or more of a corporation's voting stock thereby
becoming an interested stockholder, may not engage in a wide range of business
combinations for a period of three years following the date the person became an
interested stockholder, unless (i) the board of directors of the corporation has
approved prior to the date of the interested stockholder's acquisition, either
the business combination or the interested stockholder's acquisition, (ii) the
interested stockholder acquires at least 85% of the corporation's voting stock
at the time of the transaction in which the interested stockholder became an
interested stockholder, or (iii) the transaction is approved by the board of
directors and authorized at an annual or special meeting by at least 2/3 of the
outstanding shares not owned by the interested stockholder. These restrictions
on interested stockholders do not apply, if (i) the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203 of the GCL, or (ii) the corporation, by action of its
stockholders, adopts an amendment to its by-laws or certificate of incorporation
expressly electing not to be governed by such section. First Philson is
governed by this section because there is no express provision otherwise
contained in its charter or bylaws.
Like BT Financial, First Philson, as a bank holding company, is also
governed by the Change in Bank Control Act of 1978, as amended, described on
page 50.
Approval of Fundamental Changes
Under the GCL and 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 the shareholders entitled to vote thereon. In some cases, under the BCL, the
approval of the board is sufficient.
Under the BCL, to authorize the voluntary dissolution of a
corporation, there must be (1) approval by an affirmative vote of a majority of
the votes cast by all shareholders entitled to vote thereon and (2) the proposal
to voluntarily dissolve must be recommended by the board of directors. Under
the GCL, there must be (1) approval by an affirmative vote of the majority of
the votes cast by all stockholders entitled to vote thereon and (2) approval of
a majority of the board of directors. The GCL also provides that the
dissolution of a corporation may also be authorized without action of the
directors if all shareholders entitled to vote thereon shall consent in writing.
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" on page 47. No such
rights are attached to the shares of First Philson 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.
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The GCL provides that special meetings of the stockholders may be
called by the board of directors or persons authorized by the certificate of
incorporation or bylaws. The certificate of incorporation of First Philson
provides that special meetings of the shareholders may be called by the majority
of the Board of Directors, the Chairman of the Board, or the President.
Action by Shareholders Without a Meeting
BT Financial's by-laws provide that shareholders may act by unanimous
written consent in lieu of a meeting on any action to be taken at a meeting.
First Philson's Certificate of Incorporation provides that no action required or
permitted to be taken at any annual or special meeting of First Philson's
shareholders may be taken without a meeting and the power of First Philson's
shareholders to consent in writing to the action without a meeting is expressly
denied.
Duties and Liabilities of Directors
The BCL permits a corporation to include in its bylaws a provision
adopted by its shareholders which eliminates the personal liability of directors
for monetary damages for any action taken (or any failure to take any action)
unless (i) the directors have breached or failed to perform the duties of their
offices under the BCL and (ii) the breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness. However, a corporation may
not eliminate personal liability where the responsibility or liability of a
director is pursuant to any criminal statute or is for the payment of taxes
pursuant to local, state or federal law. BT Financial's bylaws provide that a
director will not be personally liable for monetary damages for any action
taken, or failure to take any action, except that there is no elimination of, or
limitation on, the liability of a director to the extent that such elimination
or limitation of liability is expressly prohibited by law. The GCL permits a
corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of directors for monetary damages
for breach of fiduciary duty as a director. Such provision shall not eliminate
or limit the liability of a director: for any breach of the duty of loyalty to
the corporation or its stockholders; for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; or any
wilful or negligent violation of the dividend provision of the GCL ((S)173) or
the stock ownership provision of the GCL ((S)160); or for any transaction from
which the director derived an improper benefit. First Philson's certificate
does not contain such a 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.
The GCL authorizes a corporation to indemnify any director who has
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. GCL extends this protection
to any person who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise if that person was or is party or is
threatened to be made party to any threatened, pending or completed action, suit
or proceeding. The GCL mandates indemnification for expenses where a director
or officer of a corporation has been successful on the merits or otherwise in
defense of the suit. The GCL permits indemnification where the
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director or officer is unsuccessful, but does not mandate indemnification. The
GCL authorizes indemnification only for expenses (including attorneys' fees)
incurred in derivative suits. First Philson's bylaws permit indemnification to
the fullest extent of the law.
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REGULATION OF BT FINANCIAL UNDER BANKING LAWS
BT Financial is a bank holding company as defined in the Bank Holding
Company Act of 1956, as amended ("BHCA"). As such, BT Financial is subject to
regulation and supervision by the Federal Reserve. BT Financial is required to
file reports with the Federal Reserve. BT Financial may not, without prior
approval of the Federal Reserve, acquire 5% or more of the voting shares of
another bank. 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. BT Financial receives
substantially all of its dividend revenue from Laurel Bank. In 1999, under
regulatory guidelines and without prior approval of bank regulators, Laurel Bank
can declare dividends to BT Financial generally equal to the net earnings of
Laurel Bank for the period January 1, 1999 through the date of declaration less
dividends previously paid in 1999.
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.
There are no dividend restrictions in the articles of incorporation of
Laurel Bank.
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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 non-bank 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 December 31, 1998, BT Financial's Tier 1 and Total Capital Ratios
were 11.25% and 12.13%, 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 December 31, 1998 was 8.41%. 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.
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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 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.
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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.
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.
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BT FINANCIAL CORPORATION
Business
BT Financial is a bank holding company located in Johnstown,
Pennsylvania. BT Financial 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 in Johnstown, Pennsylvania. At December 31,
1998, BT Financial had total assets of $1.70 billion, total deposits of $1.39
billion and total shareholders' equity of $163.6 million. BT Financial has
four wholly-owned non-bank subsidiaries;
. Bedford Associates, Inc., which holds and leases property used by BT
Financial's subsidiaries;
. Laurel Trust Company, a trust company which provides trust and
investment services;
. Laurel Community Development Corporation, a corporation which
conducts community development activities; and
. Bedford Associates of Delaware, Inc., which is an investment holding
company.
BT Financial's business is primarily incident to Laurel Bank. Laurel
Bank conducts business through a network of 69 full-service offices located
throughout Allegheny, Armstrong, Bedford, Blair, Butler, Cambria, Fayette,
Indiana, Somerset and Westmoreland counties. Laurel Bank operates under the
management of its own officers and directors, although marketing, human
resources, investment, accounting, data processing and credit review are
coordinated through BT Financial. In addition, Laurel Bank operates 54
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, safe deposit facilities, electronic banking services,
debit cards, money transfer services and other banking services. Laurel Bank
also offers lending services, including consumer, real estate, commercial and
industrial loans. 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.
Bedford Associates, Inc. is a Pennsylvania corporation formed for the
purpose of holding and leasing property used by BT Financial's Subsidiaries.
It is located in Johnstown, Pennsylvania and is a wholly-owned non-banking
subsidiary of BT Financial.
Laurel Trust Company, formerly known as BT Management Trust Company,
is located in Johnstown, Pennsylvania. It is a Pennsylvania chartered trust
company formed on April 30, 1990. Laurel Trust Company offers a wide range of
corporate and personal trust services, as well as pension and fiduciary
services. As of December 31, 1998, Laurel Trust Company manages assets with a
market value of $792 million.
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.
Bedford Associates of Delaware, Inc., a Delaware corporation was
formed in 1998 for the purpose of holding and managing certain investments of BT
Financial. It is located in Wilmington, Delaware, and is a wholly-owned non-
banking subsidiary of BT Financial.
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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 December 31, 1998, BT Financial and its subsidiaries had a total
of 777 full time equivalent banking and administrative employees.
Management and Additional Information
Certain information relating to BT Financial's executive compensation,
various benefit plans (including stock option plan), voting securities and the
principal holders thereof, certain relationships and related transactions and
other related matters as to BT Financial is incorporated herein by reference or
set forth in BT Financial's Annual Report on Form 10-K for the year ended
December 31, 1998, incorporated herein by reference. Shareholders desiring
copies of such documents may contact BT Financial at its address or telephone
number indicated under "Where You Can Find More Information," on pages 62 and
63.
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FIRST PHILSON
Business
First Philson is a bank holding company organized in 1985 under the
GCL and is registered under the Bank Holding Company Act of 1956, as amended.
First Philson Bank, N.A. (the "Bank") and Flex Financial Consumer Discount
Company ("Flex") are wholly-owned subsidiaries of First Philson. The Bank is
the surviving bank of the former National Bank of Western Pennsylvania and The
Philson National Bank, which merged on January 1, 1991. The Bank is a national
banking association organized under the laws of the United States. In order for
First Philson to offer product diversification within the surrounding market
area, First Philson formed Flex. Flex was incorporated, as a consumer discount
company, under the laws of Pennsylvania, in May 1997 and began operations on
September 22, 1997. Flex is regulated by the Pennsylvania Department of
Banking. First Philson's principal activities consist of owning and operating
the Bank and Flex.
First Philson and its subsidiaries derive substantially all their
income from banking and bank-related services. First Philson functions
primarily as a coordinating and servicing unit for its subsidiaries in general
management, loan policies and procedures, accounting and taxes, loan review,
auditing, investment advisory, compliance, marketing, general corporate
services, and financial and strategic planning.
The business conducted by First Philson and its subsidiaries is not
seasonal nor does it have any risks attendant to foreign sources.
The Bank conducts general banking business through nine locations in
Somerset and Fayette Counties, Pennsylvania. The Bank is a full-service bank
offering (1) retail banking services, such as demand, savings and time deposits,
money market accounts, secured and unsecured loans, mortgage loans, safe deposit
boxes, holiday club accounts, money orders, and traveler's checks; (2) lending,
depository and related financial services to commercial, industrial, financial,
and governmental customers, such as a real estate mortgage loans, revolving
credit arrangements, lines of credit, real estate construction loans, business
money market and savings accounts, certificates of deposit, wire transfers, and
night depository; and (3) credit card operations through MasterCard, VISA and
Discover. The Bank also operates seven automated bank teller machines,
("ATMS").
The Bank's deposit base is such that the loss of one depositor or a
related group of depositors would not have a materially adverse effect on its
business. In addition, the loan portfolio is also diversified so that one
industry or group of related industries does not comprise a material portion of
the loan portfolio.
The Bank is federally chartered and is subject to primary supervision
by the Office of the Comptroller of the Currency ("OCC"). The Bank is also
subject to the regulations of the Board of Governors of the Federal Reserve Bank
("Federal Reserve Board") and the Federal Deposit Insurance Corporation
("FDIC"). Its deposits are insured by the Bank Insurance Fund ("BIF") of the
FDIC.
Flex conducts consumer lending through its one office located in
Somerset, Pennsylvania. Flex offers consumer discount loans, sales finance
loans, and first and second residential mortgage loans, to customers within the
surrounding market area.
As of December 31, 1998, First Philson and its subsidiaries had 105
full-time employees and 126 total employees.
Management and Additional Information
Certain information relating to First Philson's executive
compensation, various benefit plans, voting securities and the principal holders
thereof, certain relationships and related transactions and other related
matters as to First Philson is incorporated herein by reference or set forth in
First Philson's Annual Report on Form 10-K for the year ended December 31, 1998,
incorporated herein by reference. Shareholders desiring copies of such
documents may contact First Philson at its address or telephone number indicated
under "Where You Can Find More Information" on page 64.
63
<PAGE>
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 First Philson will be passed upon by Plowman,
Spiegel & Lewis, P.C., Pittsburgh, Pennsylvania.
EXPERTS
The consolidated financial statements of BT Financial as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998 incorporated by reference in this Joint Proxy Statement-Prospectus have
been incorporated herein in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of that firm as experts in
auditing and accounting.
The consolidated financial statements of First Philson as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998 incorporated by reference in this Joint Proxy Statement-Prospectus have
been incorporated herein in reliance on the report of S.R. Snodgrass, A.C.,
independent certified public accountants, given on authority of that firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
BT Financial has filed with the Commission a Registration Statement
under the Securities Act that registers the distribution to First Philson
Stockholders of the shares of BT Financial Common Stock to be issued in
connection with the merger (the "Registration Statement"). The Registration
Statement, including the attached exhibits and schedules, contain additional
relevant information about BT Financial and BT Financial Common Stock. The
rules and regulations of the Commission allow us to omit certain information
included in the Registration Statement from this Joint Proxy Statement-
Prospectus.
In addition, BT Financial and First Philson file reports, proxy
statements and other information with the Commission under the Exchange Act.
You may read and copy this information at the following locations of the SEC:
<TABLE>
<CAPTION>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, DC 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. For information, call 1-800-SEC-
0330.
The Commission also maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers, like BT
Financial and First Philson, who file electronically with the Commission. The
address of that site is http://www.sec.gov. The address of BT Financial's site
is http://www.btfinancial.com.
You can also inspect reports, proxy statements and other information
about BT Financial at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006 and about First
Philson at the offices of the American Stock Exchange, 86 Trinity Place, New
York, NY 10006-1872.
64
<PAGE>
The Commission allows BT Financial and First Philson to "incorporate
by reference" information into this Joint Proxy Statement-Prospectus. This
means that the companies can disclose important information to you by referring
you to another document filed separately with the Commission. The information
incorporated by reference is considered to be a part of this Joint Proxy
Statement-Prospectus, except for any information that is superseded by
information that is included directly in this document.
This Joint Proxy Statement-Prospectus incorporates by reference the
documents listed below that BT Financial and First Philson have previously filed
with the Commission. They contain important information about the companies and
their financial condition.
<TABLE>
<CAPTION>
BT Financial SEC Filings Period
------------------------ ------
<S> <C>
Annual Report on Form 10-K............. Year ended December 31, 1998, as filed March 31,
1999
Current Reports on Form 8-K............ Filed March 8, 1999
<CAPTION>
First Philson SEC Filings Period
------------------------- ------
<S> <C>
Annual Report on Form 10-K............. Year ended December 31, 1998, as filed March 30,
1999
Proxy Statement on Schedule 14A........ Filed ***, 1999
Current Reports on Form 8-K............ Filed March 12, 1999
</TABLE>
BT Financial and First Philson incorporate by reference additional
documents that either company may file with the Commission between the date of
this Joint Proxy Statement-Prospectus and the dates of the BT Financial Special
Meeting and the First Philson Annual Meeting. These documents include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
BT Financial has supplied all information contained or incorporated by
reference in this Joint Proxy Statement-Prospectus relating to BT Financial, as
well as all pro forma financial information, and First Philson has supplied all
such information relating to First Philson.
You can obtain any of the documents incorporated by reference in this
document through BT Financial or First Philson, as the case may be, or from the
Commission through the Commission's web site at the address described above.
Documents incorporated by reference are available from the companies without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Joint Proxy
Statement-Prospectus. You can obtain documents incorporated by reference in
this Joint Proxy Statement-Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
BT FINANCIAL FIRST PHILSON
BT Financial Corporation First Philson Financial Corporation
551 Main Street 534 Main Street
Johnstown, PA 15901 Berlin, PA 15530
Telephone: (814) 532-3801 Telephone: (814) 267-4666
If you would like to request documents, please do so by [Date five
days before Meeting Date] to receive them before the Meetings. If you request
any incorporated documents from BT Financial or First Philson, we will mail them
to you by first class mail, or another equally prompt means, within one business
day after we receive your request.
65
<PAGE>
BT Financial and First Philson have not authorized anyone to give any
information or make any representation about the merger or our companies that is
different from, or in addition to, that contained in this Joint Proxy Statement-
Prospectus or in any of the materials that are incorporated into this document.
Therefore, if anyone does give a shareholder information of this sort, the
shareholder should not rely on it. If the shareholder is in a jurisdiction
where offers to exchange or sell, or solicitations of offers to exchange or
purchase, the securities offered by this document or the solicitation of proxies
is unlawful, or if the shareholder is a person to whom it is unlawful to direct
these types of activities, then the offer presented in this document does not
extent to that shareholder. The information contained in this document speaks
only as of the date of this document unless the information specifically
indicates that another date applies.
FORWARD-LOOKING STATEMENTS
This Joint 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 First
Philson, as well as certain information relating to the merger, including,
without limitation (i) statements relating to the cost savings expected to
result from the merger, (ii) statements relating to revenues expected to result
from the merger; (iii) statements preceded by, followed by or that include the
words "believes," "expects," "estimates" or similar expressions. These forward-
looking statements involve certain risks and uncertainties. Actual results may
differ materially from those contemplated by such forward-looking statements due
to, among others, the following factors: (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 First Philson into BT
Financial may be greater than expected; (e) changes in the interest rate
environment may reduce margins; (f) general economic or business conditions,
either nationally or in Pennsylvania in which BT Financial and First Philson are
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 or First Philson is engaged; (h) technological changes (including
"Year 2000" data systems compliance issues) may be more difficult or expensive
than anticipated; and (i) changes may occur in the securities markets. See
"Where You Can Find More Information" on page 64.
66
<PAGE>
FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial
information and explanatory notes are presented to show the impact on the
historical financial positions and results of operations of BT Financial and
First Philson of the merger under the "pooling of interests" method of
accounting. The unaudited pro forma condensed combined financial information
combines the historical financial information of BT Financial and First Philson
for the twelve-month periods ended December 31, 1998, 1997, and 1996
respectively. The unaudited pro forma condensed combined statements of income
give effect to the merger as if the merger occurred at the beginning of each
period covered by such statements of income. The pro forma condensed combined
balance sheet assumes the merger was consummated on December 31, 1998.
The pro forma condensed combined financial information as of December
31, 1998 and each of the three years ended December 31, 1998, 1997 and 1996,
respectively, is based on and derived from, and should be read in conjunction
with, (a) the historical consolidated financial statements and the related notes
thereto of BT Financial, which are incorporated by reference herein, and (b) the
historical consolidated financial statements and the related notes thereto of
First Philson, which are incorporated by reference herein. See "Where You Can
Find More Information" on page 64. The pro forma condensed combined financial
statements do not give effect to the anticipated cost savings or potential
revenue enhancements in connection with the merger.
The pro forma data are presented for comparative purposes only and are
not necessarily indicative of the future financial position or results of
operations of the combined company or of the combined financial position or the
results of operations that would have been realized had the merger been
consummated during the period or as of the dates for which the pro forma data
are presented.
67
<PAGE>
PRO FORMA CONDENSED COMBINED BALANCE SHEET
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except for share per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
BT Financial First Philson Adjustments Combined
------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents 57,522 10,301 67,823
Interest-bearing deposits with banks 57 - 57
Federal funds sold 17,000 2,700 19,700
Investment securities 346,598 89,244 (27) /(1)/ 435,815
Loans, net of unearned interest 1,218,186 107,555 1,325,741
Reserve for loan losses (10,971) (2,731) (13,702)
Premises and equipment 28,665 3,512 32,177
Other assets 45,271 3,026 48,297
------------------------------------------------------------------------
Total assets 1,702,328 213,607 (27) 1,915,908
========================================================================
Liabilities:
Non-interest bearing deposits 210,127 24,663 234,790
Interest bearing deposits 1,182,893 160,467 1,343,360
------------------------------------------------------------------------
Total deposits 1,393,020 185,130 1,578,150
Funds borrowed 37,258 1,941 39,199
Other liabilities 8,436 947 9,383
Long-term borrowings 100,031 0 100,031
------------------------------------------------------------------------
Total liabilities 1,538,745 188,018 1,726,763
------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock - - -
Common stock 64,926 4,356 10,167 /(2)/ 79,449
Surplus 43,993 11,644 (10,167) /(2)/ 45,470
Retained earnings 53,057 9,163 62,220
Treasury stock - - (24) /(1)/ (24)
Accumulated other comprehensive
income 1,607 426 (3) /(1)/ 2,030
------------------------------------------------------------------------
Total shareholders' equity 163,583 25,589 (27) 189,145
------------------------------------------------------------------------
Total liabilities and shareholders'
equity 1,702,328 213,607 (27) 1,915,908
========================================================================
Book value per share 12.60 14.69 11.91
Shares outstanding 12,985,272 1,742,400 1,162,180 /(2)/ 15,889,852
</TABLE>
(1) Records the 1000 shares of BT Financial stock owned by First Philson as
treasury stock.
(2) Reflects the issuance of 1.667 shares of BT Financial Common Stock for each
share of First Philson Common Stock.
68
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(In thousands, except for share and per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
BT Financial First Philson Adjustments Combined
------------ ------------- ----------- ---------
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees 97,041 9,552 106,593
Investment securities 26,529 4,716 31,245
Money market investments 361 727 1,088
------------------------------------------------------------------------
Total interest income 123,931 14,995 138,926
------------------------------------------------------------------------
Interest Expense
Deposits 47,171 5,753 52,924
Short-term borrowings 2,876 111 2,987
Long-term borrowings 4,510 - 4,510
------------------------------------------------------------------------
Total interest expense 54,557 5,864 60,421
------------------------------------------------------------------------
Net Interest Income 69,374 9,131 78,505
Provision for loan losses 5,940 44 5,984
------------------------------------------------------------------------
Net interest income after provision
for loan losses 63,434 9,087 72,521
------------------------------------------------------------------------
Other Income
Net security gains 454 - 454
Other 13,282 1,025 14,307
------------------------------------------------------------------------
Total other income 13,736 1,025 14,761
------------------------------------------------------------------------
Other Expenses
Salaries and employee benefits 25,063 3,391 28,454
Occupancy and equipment expense 9,529 917 10,446
Amortization of intangible assets 2,095 - 2,095
Other operating expenses 14,269 1,984 16,253
------------------------------------------------------------------------
Total other expenses 50,956 6,292 57,248
------------------------------------------------------------------------
26,214 3,820 30,034
Income Before Income Taxes
Provision for income taxes 7,936 1,039 8,975
------------------------------------------------------------------------
Net Income 18,278 2,781 21,059
========================================================================
Earnings per share - basic 1.41 1.60 1.33
Weighted average shares outstanding-
basic 12,985,272 1,742,400 1,161,780 /(1)/ 15,889,452
Earnings per share - diluted 1.41 1.60 1.33
Weighted average shares outstanding-
diluted 12,985,272 1,742,400 1,161,780 /(1)/ 15,889,452
Dividends paid per common share 0.72 0.49 0.64
</TABLE>
(1) Reflects the adjustment to weighted average shares due to the issuance of
1.667 shares of BT Financial Common Stock for each share of First Philson
Common Stock, excluding the weighted average shares of BT Financial Common
Stock that was held by First Philson.
69
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except for share and per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
BT Financial First Philson Adjustments Combined
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees 92,112 9,301 101,413
Investment securities 23,161 4,627 27,788
Money market investments 699 613 1,312
-------------------------------------------------------------
Total interest income 115,972 14,541 130,513
-------------------------------------------------------------
Interest Expense
Deposits 46,131 5,741 51,872
Short-term borrowings 1,905 98 2,003
Long-term borrowings 1,112 - 1,112
-------------------------------------------------------------
Total interest expense 49,148 5,839 54,987
-------------------------------------------------------------
Net Interest Income 66,824 8,702 75,526
Provision for loan losses 4,230 20 4,250
-------------------------------------------------------------
Net interest income after
provision for loan losses 62,594 8,682 71,276
-------------------------------------------------------------
Other Income
Net security gains (losses) 195 - 195
Other 12,362 1,017 13,379
-------------------------------------------------------------
Total other income 12,557 1,017 13,574
-------------------------------------------------------------
Other Expenses
Salaries and employee benefits 23,783 3,184 26,967
Occupancy and equipment expense 9,328 831 10,159
Amortization of intangible assets 2,020 - 2,020
Other operating expenses 13,078 1,925 15,003
-------------------------------------------------------------
Total other expenses 48,209 5,940 54,149
-------------------------------------------------------------
Income Before Income Taxes 26,942 3,759 30,701
Provision for income taxes 9,195 1,028 10,223
-------------------------------------------------------------
Net Income 17,747 2,731 20,478
=============================================================
Earnings per share - basic 1.37 1.57 1.29
Weighted average shares
outstanding-basic 12,985,272 1,742,400 1,162,180 /(1)/ 15,889,852
Earnings per share - diluted 1.37 1.57 1.29
Weighted average shares
outstanding-diluted 12,985,272 1,742,400 1,162,180 /(1)/ 15,889,852
Dividends paid per common share 0.63 0.38 0.56
</TABLE>
(1) Reflects the adjustment to weighted average shares due to the issuance of
1.667 shares of BT Financial Common Stock for each share of First Philson
Common Stock.
70
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands, except for share and per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
BT Financial First Philson Adjustments Combined
------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees 88,969 8,667 97,636
Investment securities 20,470 5,002 25,472
Money market investments 1,280 390 1,670
--------------------------------------------------------------
Total interest income 110,719 14,059 124,778
--------------------------------------------------------------
Interest Expense
Deposits 43,140 5,853 48,993
Short-term borrowings 1,256 136 1,392
Long-term borrowings 1,268 - 1,268
--------------------------------------------------------------
Total interest expense 45,664 5,989 51,653
--------------------------------------------------------------
Net Interest Income 65,055 8,070 73,125
Provision for loan losses 2,441 - 2,441
--------------------------------------------------------------
Net interest income after provision
for loan losses 62,614 8,070 70,684
--------------------------------------------------------------
Other Income
Net security gains 406 - 406
Other 10,937 942 11,879
--------------------------------------------------------------
Total other income 11,343 942 12,285
--------------------------------------------------------------
Other Expenses
Salaries and employee benefits 24,674 3,007 27,681
Occupancy and equipment expense 9,013 964 9,977
Amortization of intangible assets 1,991 - 1,991
Other operating expenses 16,656 1,808 18,464
--------------------------------------------------------------
Total other expenses 52,334 5,779 58,113
--------------------------------------------------------------
Income Before Income Taxes 21,623 3,233 24,856
Provision for income taxes 7,213 843 8,056
--------------------------------------------------------------
Net Income 14,410 2,390 16,800
==============================================================
Earnings per share - basic 1.13 1.37 1.08
Weighted average shares outstanding-
basic 12,650,352 1,742,400 1,162,180 /(1)/ 15,554,932
Earnings per share - diluted 1.13 1.37 1.07
Weighted average shares outstanding-
diluted 12,753,984 1,742,400 1,162,180 /(1)/ 15,658,564
Dividends paid per common share 0.51 0.31 0.45
</TABLE>
(1) Reflects the adjustment to weighted average shares due to the issuance of
1.667 shares of BT Financial Common Stock for each share of First Philson
Common Stock.
71
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
by and between
BT Financial Corporation,
and
First Philson Financial Corporation
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS................................................ 1
1.01. Definitions................................................ 1
1.02. Accounting Terms........................................... 5
ARTICLE II - THE MERGER................................................ 6
2.01. Merger..................................................... 6
2.02. Conversion of Shares of Common Stock....................... 6
2.03. Articles of Incorporation; By-Laws......................... 7
2.04. Directors and Officers..................................... 7
2.05. Closing.................................................... 8
2.06. Exchange of Certificates for Stock and Cash................ 8
2.07. Termination of this Reorganization Agreement............... 9
2.08. Consequences of Termination................................ 10
2.09. Confidentiality............................................ 11
2.10. Public Disclosure.......................................... 11
ARTICLE III - SHAREHOLDER APPROVAL..................................... 11
3.01. First Philson Shareholders Meeting......................... 11
3.02. BT Financial Shareholders Meeting.......................... 12
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS................. 12
4.01. Representations and Warranties of First Philson............ 12
4.02. Representations and Warranties of BT Financial............. 26
4.03. Covenants of All Parties................................... 30
4.04. Covenants of First Philson................................. 33
4.05. Covenants of BT Financial.................................. 38
ARTICLE V - CONDITIONS PRECEDENT....................................... 42
5.01. Conditions Precedent to the Obligations of BT Financial.... 42
5.02. Conditions Precedent to the Obligations of First Philson... 47
5.03. Waivers.................................................... 50
ARTICLE VI - BROKERS AND EXPENSES...................................... 51
6.01. Brokers.................................................... 51
6.02. Expenses................................................... 51
ARTICLE VII - MISCELLANEOUS............................................ 51
7.01. Further Assurances......................................... 51
7.02. Survival of Representations, Warranties and Covenants...... 51
7.03. Notices.................................................... 52
7.04. Binding Effect............................................. 52
<PAGE>
7.05. Headings................................................... 53
7.06. Counterparts............................................... 53
7.07. Integration; No Third-Party Beneficiaries.................. 53
7.08. Severability............................................... 53
7.09. Amendments................................................. 53
7.10. Governing Law.............................................. 54
7.11. Incorporation by Reference................................. 54
Schedules and Exhibits
- ----------------------
Schedule 4.01(f) First Philson - Financial Statements
Schedule 4.01(m) First Philson - Loans
Schedule 4.01(p) First Philson - Real Property
Schedule 4.01(q) First Philson - Environmental Conditions
Schedule 4.01(q)(iii) First Philson - Governmental Filings
Schedule 4.01(s) First Philson - Leases
Schedule 4.01(t) First Philson - Material Contracts
Schedule 4.01(v) First Philson - Employee Benefits
Schedule 4.01(w) First Philson - Employment Contract
Schedule 4.01(y) First Philson - Bond Claim
Schedule 4.01(cc) First Philson - Investments
Exhibit A First Philson Financial Corporation Affiliates Agreement
Exhibit B BT Financial Corporation Affiliates Agreement
- ----------------
*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 this 23rd day of February, 1999 (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
551 Main Street, Johnstown, PA 15901 ("BT Financial"),
AND
First Philson Financial Corporation, a corporation organized and existing under
the laws of Delaware with its principal office at 534 Main Street, Berlin, PA
15530 ("First Philson").
WITNESSETH:
WHEREAS, the respective Boards of Directors of BT Financial and First
Philson have determined that it would be in the best interests of their
respective organizations, shareholders and customers and the communities served
by them for First Philson to be merged with and into BT Financial (the "Merger")
pursuant to this Reorganization Agreement, whereby the shareholders of First
Philson will receive shares of common stock of BT Financial in exchange for
their First Philson Common Stock; and
WHEREAS, the respective Boards of Directors of BT Financial and First
Philson have approved the proposed merger of First Philson with and into BT
Financial upon the terms and conditions set forth in this Reorganization
Agreement; and
WHEREAS, the parties intend that the Merger will (i) be accounted for
as a pooling of interests under generally accepted accounting principals and
(ii) 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.
A-1
<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.
"AMEX" means the American Stock Exchange.
"Articles of Merger" means the Articles of Merger delivered to
the Department of State of the Commonwealth of Pennsylvania for filing
pursuant to Sections 1921 et seq. of the BCL.
"Bank" means First Philson Bank, N.A.
"Banking Code" means the Pennsylvania Banking Code of 1965, as
amended.
"Bank Merger" means the merger of Bank with and into Laurel Bank,
with Laurel Bank as the Resulting Institution.
"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.
"Certificate of Merger" means the Certificate of Merger delivered
to the Secretary of State of Delaware for filing pursuant to Section
252 of the GCL.
"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.
"Computer Systems" means the hardware, software and embedded
microcontrollers in noncomputer equipment.
A-2
<PAGE>
"Department of Banking" means the Pennsylvania Department of
Banking.
"Effective Time" means the date and time specified in the
Articles of Merger and Certificate of Merger.
"Environmental Condition" shall have the meaning set forth in
Section 4.01(q).
"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.
"First Philson Common Stock" means the common stock, $2.50 par
value per share, of First Philson.
"FNMA" means the Federal National Mortgage Association.
"GCL" means the Delaware General Corporation Law , as amended.
"GNMA" means the Government National Mortgage Association.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the NASD Automated Quotations System.
"Option" means the Option granted to BT Financial by First
Philson under the Stock Option Agreement of even date herewith between
BT Financial and First Philson.
A-3
<PAGE>
"Owned Real Property" shall have the meaning set forth in Section
4.01(p).
"Parties" means BT Financial and First Philson.
"PBG" 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) a regular quarterly cash
dividend declared and paid in accordance with First Philson's past
practices as to time of declaration, payment and amount, whose
aggregate amount shall not exceed the lower of (A) the higher of (i)
$.13 1/2 per share, and (ii) the subtrahend of $.13 1/2 per share
minus the amount of quarterly 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 per share for the quarter ending immediately before
the quarter in which such dividend is paid exceeded $.53 1/2 per share
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 $.53 1/2 per share
multiplied by the number of quarters ending after the date of this
Agreement. The quarterly dividend for December 31, 1999, may be
increased in accordance with First Philson's past practices by an
aggregate amount not to exceed $.01 per share, provided that the net
income for the quarter ending September 30, 1999 shall have exceeded
$.40 per share.
"Joint Proxy Statement/Prospectus" means the Prospectus/Proxy
Statement, together with any supplements thereto, to be sent to the
shareholders of each of First Philson and BT Financial to solicit
their votes in connection with the transactions contemplated by this
Reorganization Agreement.
"Registration Statement" means the registration statement on Form
S-4 (or other appropriate form) of BT Financial, including any
amendments or 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 Joint Proxy
Statement/Prospectus.
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"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.
"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.
"Surviving Corporation" means BT Financial after consummation of
the Merger.
"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.
"Year 2000 Compliant" means all of the Computer Systems will
correctly differentiate between years in different centuries that end
in the same two digits, and will accurately process date/time data
(including but not limited to calculating, comparing and sequencing)
from into and between the twentieth and twenty-first centuries,
including leap year calculations.
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.
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ARTICLE II
THE MERGER
2.01. Merger. Upon satisfaction of the conditions set forth herein, at
the Effective Time, First Philson shall merge with and into BT Financial in
accordance with the provisions and procedures set forth herein, and BT Financial
shall be the Surviving Corporation (the "Merger"). At the Effective Time, the
separate corporate existence of First Philson shall cease and BT Financial shall
succeed to all the rights, privileges, immunities and franchises, and all the
property and assets, real, personal and mixed, of First Philson without the
necessity for any separate conveyance or other transfer. Except as set forth in
Section 4.05(g), the Surviving Corporation 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 First Philson
shall be impaired by the Merger.
2.02. Conversion of Shares of Common Stock.
(a) At the Effective Time, each share of First Philson Common Stock then
outstanding, except treasury shares, shall be converted into the right to
receive 1.667 shares of BT Financial Common Stock (the "Exchange Ratio"),
unless the average closing price per share of BT Financial Common Stock on the
NASDAQ National Market as reported in the Wall Street Journal for the thirty
---- ------ -------
(30) consecutive trading days ending on the fifth trading day immediately
preceding the mutually agreed upon mailing date of the Joint Proxy/Prospectus
(the "Mailing Date")(the "Valuation Period") is less than $24 or more than $32.
(i) If the average per share price of BT Financial Common Stock is
less than $24 for the Valuation Period, BT Financial shall have the
option to adjust the Exchange Ratio by increasing the number of shares
of BT Financial Common Stock included in the Exchange Ratio, so as to
maintain a total consideration of $24 per share of Common Stock based
on the average price per share for BT Financial Common Stock for the
Valuation Period. If BT Financial does not elect to so adjust the
Exchange Ratio, First Philson may elect to terminate this Agreement,
and neither party shall have any further liability hereunder; or
(ii) If the average price per share of BT Financial Common Stock for
the Valuation Period is more than $32, BT Financial shall have the
option to adjust the Exchange Ratio by reducing the number of shares
of BT Financial Common Stock included in the Exchange Ratio, so that
the total consideration does not exceed $32 per share of Common Stock
based on the average price per share of BT Financial Common Stock for
the Valuation Period.
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(b) At the Effective Time, by virtue of the Merger, and without any
action on the part of the shareholders of First Philson, each of the then issued
and outstanding shares of First Philson Common Stock shall cease to exist and
shall be deemed canceled, retired and eliminated, and all rights in respect
thereof shall cease except the right to receive BT Financial Common Stock,
regardless of whether the certificates representing such shares are surrendered
to BT Financial by the shareholders of First Philson.
(c) The Exchange Ratio shall be adjusted at the Effective Time 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.
BT Financial shall register under the Securities Act all shares of BT Financial
Common Stock to be issued in the Merger prior to the Effective Time.
2.03. Articles of Incorporation; By-Laws. At the Effective Time, the
articles of incorporation and bylaws of BT Financial as in effect immediately
prior to the Effective Time shall be the articles of incorporation and bylaws of
the Surviving Corporation.
2.04. Directors and Officers.
(a) The directors and principal officers of BT Financial immediately
prior to the Effective Time shall be the directors and principal officers of the
Surviving Corporation from and after the Effective Time. In addition, two
directors of First Philson designated by First Philson, who shall be acceptable
to BT Financial, shall become directors of BT Financial at the Effective Time to
serve for such terms as may be determined by BT Financial consistent with its
director retirement policies.
(b) In addition, two directors of First Philson designated by First
Philson, (who may include those persons selected to be directors pursuant to
clauses (a) or (c) of this Section 2.04), shall be acceptable to BT Financial,
shall become directors of Laurel Trust Company at the Effective Time to serve
until the 2001 annual meeting of the shareholders of BT Financial.
(c) Immediately after the Bank Merger, two directors of First
Philson, selected by First Philson (who may include those persons selected to be
directors of BT Financial pursuant to clauses (a) or (b) of this Section 2.04)
and acceptable to BT Financial shall be appointed to the Board of Directors of
Laurel Bank, each to serve until the 2001 annual meeting of the shareholders of
BT Financial.
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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, 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 V 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(h)) if (i) 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, or (ii)
the other Party would have the right to terminate this Reorganization Agreement
on the basis of the average per share price of BT Financial Common Stock for the
Valuation Period under Section 2.02.
(c) If First Philson 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 Party.
2.06. Exchange of Certificates for Stock and Cash.
(a) Common Stock. After the Effective Time, each holder of a certificate
for theretofore outstanding shares of First Philson 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
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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 First Philson Common Stock by
BT Financial or its exchange agent promptly following the Effective Time.
(b) Fractional Shares. Neither certificates nor scrip certificates for
fractions of shares of BT Financial Common Stock shall be issued. Holders of
First Philson 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 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 represented issued and outstanding shares of Common
Stock (except for certificates representing treasury shares) shall from and
after the Effective Time represent for all purposes only the right to receive BT
Financial Common Stock. Upon surrender of a certificate for theretofore
outstanding shares of First Philson Common Stock, there shall be paid to the
record holder of the certificate for shares of BT Financial Common Stock issued
in exchange therefor (i) on the date of such exchange, the amount of dividends
theretofore accrued and payable with respect to such full shares of BT Financial
Common Stock as of any date subsequent to the Effective Time 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 but prior to such surrender and a payment date subsequent to
such surrender. No interest shall be payable with respect to such dividends.
(d) Treasury Shares. At the Effective Time, each share of First Philson
Common Stock held in treasury shall be canceled, retired and cease to exist and
no consideration shall be paid therefor.
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 by mutual consent of the
Boards of Directors of BT Financial and First Philson;
(b) As provided in Section 2.02(a);
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(c) As provided in Section 2.05(c);
(d) At any time, by either Party hereto in writing, if the applications
for prior approval referred to in Section 4.03(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
either First Philson or BT Financial 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, as postponed under Section 2.05(b);
(g) Upon exercise of the Option in whole or in part; or
(h) In any event, automatically on December 31, 1999, if the Merger has
not been consummated on or before such date, unless extended by mutual consent
of the Parties.
2.08. Consequences of Termination. Upon any termination hereunder:
(a) Sections 2.08, 2.09 and 2.10 and Article VI hereof shall survive any
termination;
(b) If BT Financial terminates this Reorganization Agreement under Section
2.05(c) due to the failure of any of the conditions set forth in Section 5.01
(a), (b), (c), (m) or (n) and satisfaction of such condition was within the
control of First Philson, or if this Reorganization Agreement terminates under
Section 2.07(f), then First Philson shall reimburse BT Financial for attorneys'
fees and other expenses reasonably incurred in connection with the Transactions
[to the extent not already paid by First Philson to BT Financial]; any such
failure of condition shall constitute a breach of this Reorganization Agreement,
and BT Financial shall have all rights available in law and at equity for such
breach of contract;
(c) If First Philson terminates this Reorganization Agreement under
Section 2.05(c) due to the failure of any of the conditions set forth in Section
5.02 (a), (b), (c), (l) or (m), and satisfaction of such condition was within
the control of BT Financial or any of its Subsidiaries, then BT Financial shall
reimburse First Philson for attorneys' fees and other expenses reasonably
incurred in connection with the Transactions; such failure shall constitute a
breach of this Reorganization Agreement, and First Philson shall have all rights
available in law and at equity for such breach of contract;
(d) If BT Financial terminates this Reorganization Agreement under Section
2.05(c) due to the failure of any of the conditions set forth in Section 5.01
(d), (g), (h), (j), (k), or (l), then First Philson shall reimburse BT Financial
for attorneys' fees and other expenses reasonably
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incurred in connection with the Transactions [to the extent not already paid by
First Philson to BT Financial] and upon payment in full thereof, First Philson
shall have no further liability or obligation hereunder to BT Financial; and
(e) If First Philson terminates this Reorganization Agreement under
Section 2.05(c) due to the failure of any of the conditions set forth in Section
5.02 (g), (h) or (i), then BT Financial shall reimburse First Philson 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 First Philson.
In no event shall the amount reimbursed for attorneys' fees and other
expenses reasonably incurred in connection with the Transactions under clause
(d) or (e) of this Section 2.08 exceed $250,000.
2.09. 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 Party 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.
2.10. 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 AMEX
or 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.
ARTICLE III
SHAREHOLDER APPROVAL
3.01. First Philson Shareholders Meeting. First Philson shall submit
this Reorganization Agreement to its shareholders for approval in accordance
with the GCL at a meeting duly convened and held on such date as shall be agreed
upon by the Parties. In connection with such meetings, First Philson shall
furnish the Joint Proxy Statement/Prospectus to its shareholders. The Board of
Directors of First Philson shall recommend the proposed Merger to its
shareholders and use their best efforts to obtain the affirmative vote of the
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shareholders required to approve the transactions contemplated by this
Reorganization Agreement.
3.02. BT Financial Shareholders Meeting. BT Financial shall submit
this Reorganization Agreement to its shareholders for approval in accordance
with the BCL at a meeting duly convened and held on such date as shall be
mutually agreed upon by BT Financial and First Philson. In connection with such
meeting, BT Financial shall furnish the Joint Proxy Statement/Prospectus to its
stockholders. The Board of Directors of BT Financial shall recommend the
proposed Merger to its shareholders and use its best efforts to obtain the
affirmative vote of the shareholders of BT Financial required to approve the
transactions contemplated by this Reorganization Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.01. Representations and Warranties of First Philson. First Philson
represents and warrants to BT Financial as follows:
(a) Organization and Capitalization. First Philson is a corporation duly
organized and validly existing under Delaware law. First Philson 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. The authorized capital stock of First Philson consists of 10,000,000
shares of common stock having a par value of $2.50 per share, of which 1,742,400
shares are issued and outstanding as of the date hereof and no shares are held
in the treasury of First Philson. To the knowledge of First Philson, all issued
and outstanding shares of First Philson 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 First Philson 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.
(b) The Bank. The Bank is a national banking association duly organized
and validly existing under the National Bank Act. The Bank 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. The
Bank's deposits are insured by the Bank Insurance Fund of the FDIC. The
authorized capital stock of the Bank consists of 300,000 shares of common stock
having a par value of $10 per share, of which all shares are issued and
outstanding as of the date hereof and no shares are held in the treasury of the
Bank. All issued and outstanding shares of First Philson 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 the Bank 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. First
Philson owns all of the issued and outstanding common stock of the Bank.
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(c) Flex Organization and Capitalization. Flex Financial Consumer
Discount Company ("Flex") is a finance company validly existing under the laws
of the Commonwealth of Pennsylvania. Flex 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 Flex consists of 1,000 shares of common stock
having a par value of $1.00 per share. All issued and outstanding shares of
Flex common stock are validly issued, fully paid and nonassessable and are owned
of record and beneficially by First Philson.
(d) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger and Certificate of Merger, when executed and
delivered, will have been, duly and validly authorized, executed and delivered
by First Philson, subject only to Regulatory Approvals and approval by the
shareholders of First Philson, and each constitutes the valid and binding
obligations of First Philson and are and will be enforceable in accordance with
their respective terms.
(e) No Conflicts. Neither the execution, delivery and performance of this
Reorganization Agreement nor the consummation of the transactions contemplated
hereby, nor compliance by First Philson and any of its Subsidiaries with any of
the provisions hereof or thereof will (i) violate, or conflict with, or result
in a breach of any provisions of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of First Philson or any of its Subsidiaries under any of
the terms, conditions or provisions of, (A) the articles of incorporation or
bylaws, as amended, of First Philson or any of its Subsidiaries or (B) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which First Philson or any of its Subsidiaries is a
party or by First Philson or any of its Subsidiaries which is bound or to which
any of First Philson's properties or assets or any of its Subsidiaries'
properties or assets may be subject, except for such violations, conflicts,
breaches, defaults, terminations, accelerations, rights or creations which would
not, in the aggregate, have a material adverse effect on First Philson's or any
of its Subsidiaries' business or financial condition, or (ii) violate any
judgment, ruling, order, writ, injunction, decree, statute, rule or regulation
applicable to First Philson or any of its properties or assets or any of its
Subsidiaries' or their properties or assets.
(f) Financial Statements and SEC Documents. First Philson's Annual
Reports on Form 10-K for the fiscal years ended December 31, 1996, 1997 and
1998, and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it or any of its
Subsidiaries subsequent to December 31, 1995 under the Securities Act of 1933,
as amended (together with the rules and regulations thereunder, the "Securities
Act") or under Sections 13(a), 13(c) 14(d) and 15(d) of the Securities Exchange
Act of 1934, as amended (together with the rules and regulations thereunder, the
"Exchange Act"), in the form filed, or to be filed, with the SEC (collectively,
the "SEC Documents") (i) complied or will comply in all
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material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (ii) did not and
will not, at the time of such filing, 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; and each of the balance sheets in or
incorporated by reference into any such SEC Document (including the related
notes and schedules thereto) fairly presents and will fairly present the
financial position of the entity or entities to which it relates as of its date
and each of the statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such report and documents (including any
related notes and schedules thereto) fairly presents and will fairly present the
results of operations, changes in stockholder's equity and changes in cash
flows, as the case may be, of the entity to entities to which it relates for the
periods set forth therein, in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(g) Certain Changes. Since December 31, 1998, there has been (i) no
material adverse change in the financial condition, assets, liabilities, income
or operations of First Philson, or any of its Subsidiaries, (ii) no material
change in the organization or key personnel of First Philson or any of its
Subsidiaries; (iii) no material damage, destruction or casualty loss with
respect to property owned or leased by First Philson (whether or not covered by
insurance) which affected or could affect the business or financial condition or
results of First Philson; (iv) no changes in the authorized or issued shares of
First Philson Common Stock and no declaration or payment of distributions with
respect to the First Philson Common Stock or redemption or repurchase of any
such shares, except for Permitted Dividends; or (v) no acquisition by First
Philson or any of its Subsidiaries of the assets or more than 5% of the
outstanding voting capital stock of another bank or trust company.
(h) Taxes. First Philson and its Subsidiaries have 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 First Philson 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 First Philson
or any of its Subsidiaries prior to the dates of such financial statements. No
claims are currently being made by any taxing authority with respect to any
Return, and First Philson has no knowledge of any basis for any such claims.
Proper and accurate amounts have been withheld and remitted by First Philson and
its Subsidiaries from and for their employees for all prior periods in
compliance with the tax withholding provisions of applicable federal, state and
local law. First Philson and its Subsidiaries have 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. First Philson and its Subsidiaries have not made any
payment, nor is either obligated to make any
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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).
(i) 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 First Philson, threatened against or affecting First Philson, or
any of its Subsidiaries, or their respective businesses, business assets, Common
Stock, or any of the transactions contemplated by this Reorganization Agreement,
and, to the knowledge of First Philson, there is no basis for any Litigation.
There is presently no outstanding judgment, decree or order of any governmental
body against or affecting First Philson or any of its Subsidiaries, or their
respective businesses, business assets, Common Stock, or any of the transactions
contemplated by this Reorganization Agreement.
(j) Compliance with Laws. First Philson and each of its Subsidiaries are
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. First Philson and the Bank have paid all assessments
and filed all reports and statements required to be filed with respect thereto
under the rules and regulations of the Comptroller.
(k) Agreements with Banking Authorities. Neither First Philson nor any of
its Subsidiaries is a party to any written agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is subject to any order or directive by, the Federal Reserve or the
Comptroller or any other regulatory agency which restricts its activities in any
manner, or in any manner relates to the capital adequacy, credit policies or
management of First Philson or any of its Subsidiaries, nor has First Philson 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.
(l) Regulatory Reports. First Philson and its Subsidiaries have made
available for inspection by BT Financial (i) copies of all reports, if any, by
First Philson or its Subsidiaries to the Comptroller and (ii) all material
notices, reports and review letters received from the Federal Reserve or
Comptroller or any other governmental agency.
(m) Loans. Each loan outstanding on the books of the Bank 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 the Bank's standard
loan policies. The Bank 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 the Bank, including whole loans and
participations, were sold without recourse.
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As of December 31, 1998, except as set forth in Schedule 4.01(m)
attached hereto, the Bank: (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 loans, of
any type or character, in its portfolio in excess of $100,000 which were or
should have been as of such date (A) considered non-performing or placed on a
non-accrual status or (B) classified by as other loans specially mentioned,
substandard, doubtful or loss loans, except in any case such loans as were
listed on the Bank'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.
(n) Loan Loss Reserve. The loan loss reserve maintained by the Bank for
all loans in its portfolio is in the best judgment of Bank 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 the Bank's loan portfolio.
(o) Core Deposits. The Bank 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 the Bank
("Core Deposits"). In addition, the Bank has delivered to, or made available
for inspection by, BT Financial a complete list of all depositors that have
monies on deposit at the Bank that are not Core Deposits.
(p) Real Property. First Philson and its Subsidiaries have good and
marketable title to the real property (including real estate owned or acquired
through foreclosure) listed in Schedule 4.01(p) ("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 First Philson's statement of financial
condition dated December 31, 1998 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 First Philson or any of its Subsidiaries, as
the case may be. 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. Neither First Philson nor any of its Subsidiaries
have 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
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Owned Real Property is adequately insured against loss, except with respect to
Environmental Conditions. Neither First Philson nor any of its Subsidiaries own
any real property not listed in Schedule 4.01(p).
(q) Environmental. Except as disclosed in Schedule 4.01(q) attached
hereto:
(i) To the best knowledge of First Philson and its Subsidiaries, there
are no Environmental Conditions. The term "Environmental Condition"
means (x) the presence in surface water, groundwater, drinking water
supply, land surface, subsurface strata, above-ground or underground
storage tanks or other containers, or ambient air of any pollutant,
contaminant, industrial waste, hazardous waste, polychlorinated
biphenyls, radioactive materials, toxic or hazardous substances
("Hazardous Substances") or (y) any violation of any statute,
ordinance, regulation, administrative order, judicial order or decree
or other governmental requirement relating to the emission, discharge,
deposit, disposal, leaching, migration or release of any Hazardous
Substance into the environment or the generation, treatment, storage,
transportation or disposal of any Hazardous Substance (i) arising out
of or otherwise related to the operations or other activities
(including the disposition of such materials or substances) of First
Philson, or any of its Subsidiaries, or of any predecessor in title,
interest or line of business to First Philson, 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 First Philson, or
any of its Subsidiaries, ("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 First Philson and its
Subsidiaries have not received any communication from or on behalf of
any governmental authority that alleges that any such Environmental
Condition exists;
(iii) First Philson and its Subsidiaries have obtained, hold, 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 First Philson and any of its
Subsidiaries, any Owned Real Property, Leased Real Property, Secured
Real Property and Prior Property. First Philson
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and its Subsidiaries have 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 First Philson and any of its Subsidiaries 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(q)(iii) attached hereto. The term
"Environmental Law" means all statutory and common law, rules,
regulations, ordinances, Governmental Approvals, guidelines, policies,
judicial or administrative orders or decrees of any federal, state or
local Governmental Authority relating to the protection of human
health and safety or the environment.
(iv) Neither First Philson nor any of its Subsidiaries have
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 First Philson or any
of its Subsidiaries 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 First Philson or any of its
Subsidiaries 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 First Philson, or any of its Subsidiaries, 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(q)(iii) 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(q)(iii)). No such Governmental Approval is subject to any pending
suit, action, investigation of which First Philson or its Subsidiaries
has notice, proceeding or appeal (whether judicial, administrative or
otherwise) and, to the best of First Philson's knowledge, no such
matter is threatened.
(vi) To the knowledge of First Philson or its Subsidiaries, with
respect to First Philson's or its Subsidiaries' operations or other
activities, any Owned Real Property, Leased Real Property, Secured
Real Property or Prior Property, First Philson and each of its
Subsidiaries have complied in all material respects with, and
currently are 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
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Environmental Law, or in any written notice, order, or demand letter
issued, entered, promulgated, or approved pursuant to any
Environmental Law;
(vii) Neither First Philson nor any of its Subsidiaries have received
any notice of violation or other notification from any Governmental
Authority, or any written notice from any third party, alleging that
First Philson or any of its Subsidiaries is now or has been in
violation of any Environmental Law;
(viii) To the knowledge of First Philson and its Subsidiaries, 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 First
Philson and each of its Subsidiaries have 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 First Philson and each of its Subsidiaries,
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
First Philson nor any of its Subsidiaries owned or operated Storage
Tanks at any time.
(x) With respect to the ownership, use, occupation, operation and
other activities of First Philson, any Owned Real Property, Leased
Real Property, Secured Real Property and any Prior Property, neither
First Philson nor any of its Subsidiaries have 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) To the knowledge of First Philson, neither First Philson nor any
of its Subsidiaries, nor 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) First Philson and its Subsidiaries have 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 <PAGE>
reasons; no environmental lien has attached to any portion of First
Philson or any of its Subsidiaries or any Owned Real Property, Leased
Real Property, Secured Real Property or Prior Property, and no
governmental actions have been taken or are in progress that could
subject any or all of the foregoing to any such lien.
(xiii) There have been no past and there are no pending or
contemplated claims by First Philson or any of its Subsidiaries, 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 neither First Philson nor any of its
Subsidiaries have 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) Neither First Philson nor any of its Subsidiaries have
agreed to retain, assume or guarantee the costs of any investigation,
removal, response, remediation or cleanup of any property.
(xv) First Philson and its Subsidiaries have 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 First Philson or any of its Subsidiaries, any Owned Real
Property, Leased Real Property, Secured Real Property or Prior
Property.
(r) Personal Property. All personal property used by First Philson and
its Subsidiaries in its business is either owned or leased by First Philson or
its Subsidiaries and is suitable for the operations and business as currently
conducted by First Philson and its Subsidiaries.
(s) Leases. All leased real property and leased personal property of
First Philson and its Subsidiaries is listed in Schedule 4.01(s) attached
hereto. Except as disclosed in Schedule 4.01(s), no consents or approvals are
required under the leases for such property in connection with the transactions
contemplated by this Reorganization Agreement.
(t) 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 First Philson or any
of its Subsidiaries 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(t) (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 First Philson or any of its Subsidiaries of or with respect to any
provision of any Contract to which First Philson is a party that could have a
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material adverse effect upon the financial condition, operations, results of
operations or business of First Philson. 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 BT Financial, as the case may be, without
further action thereby effective as of the Closing Date, except as listed in
Schedule 4.01(t). Neither First Philson nor any of its Subsidiaries is
currently renegotiating any Contract.
(u) Insurance. Neither First Philson nor any of its Subsidiaries is in
default with respect to any provisions of any liability or other forms of
insurance held by each 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 First Philson from any material adverse loss on a consolidated basis.
Neither First Philson nor any of its Subsidiaries have been denied any
application for insurance or had any policy of insurance terminated during the
past three years, nor has First Philson or any of its Subsidiaries been notified
of any pending termination.
(v) Employee Benefits.
(i) Benefit Plans; Company Plans. Schedule 4.01(v) 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 First Philson or any of its
Subsidiaries, or (ii) with respect to which First Philson or any of
its Subsidiaries has or may have liability or is obligated to
contribute, or (iii) that otherwise covers any of the current or
former employees of First Philson or any of its Subsidiaries 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 (but in any event, no later than seven (7)
days prior to the Closing Date): (i) the documents embodying the
Company Plans, including the plan documents, all amendments thereto,
the related trust or funding agreements, investment management
agreements, administrative service contracts, insurance contracts,
union or trade agreements and, in the case of any unwritten Company
Plans, written descriptions thereof; (ii) annual reports including
Forms 5500 and all schedules thereto for the last three years; (iii)
financial statements for the last three years; (iv) actuarial reports,
if applicable, for the last three years; and (v) each
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communication (other than routine communications) received by First
Philson or any of its Subsidiaries from or furnished by First Philson
or any of its Subsidiaries to the Service, DOL, PBGC or other
governmental authorities. First Philson and its Subsidiaries have 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 by any member of the
Company Group or any employee or agent thereof.
(ii) Company Group Matters. First Philson 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, First Philson and its Subsidiaries have
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
First Philson and its Subsidiaries, no Company Plan is or is proposed
to be under audit or investigation, and no completed audit of any
Company Plan has resulted in the imposition of any Tax, fine or
penalty.
(iv) Qualified Plans. Schedule 4.01(v) 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
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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. Schedule 4.01(v)
discloses each Company Plan that is 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. Neither First Philson nor any of its Subsidiaries have a
material liability for any Company Plan that is not accrued on the
December 31, 1998 Balance Sheet or, that has arisen after December 31,
1998 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 First Philson or any of
its Subsidiaries, 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 First Philson or any of its
Subsidiaries. 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 First Philson or any of its Subsidiaries, directly
or indirectly, to any material liability for a breach of fiduciary or
other duty under ERISA or any other applicable law. With the exception
of the requirements of Section 4980B of the Code, no post-retirement
benefits are provided under any Company Plan that is a welfare benefit
plan as described in ERISA Section 3(1).
(vii) Except as set forth on Schedule 4.01(v), 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.
(w) Labor Relations. There are no pending or threatened labor disputes
with any employees of First Philson or employees of any of its Subsidiaries.
Neither First Philson nor any of its Subsidiaries are a party to a collective
bargaining agreement with any of its employees. Neither First Philson nor any of
its Subsidiaries has existing employment contracts with any of its current or
former employees, directors or officers, with the exception of those agreements
listed in Schedule 4.01(w).
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(x) Related Party Transactions. Neither First Philson nor any of its
Subsidiaries have current contractual arrangements with or commitments to or
from any officers, directors or employees of each other than such as are
terminable at will. All current extensions of credit to the shareholders,
officers, directors and employees of First Philson or any of its Subsidiaries as
well as business organizations and individuals associated either have been made
in the ordinary course of First Philson's or any of its Subsidiaries' 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 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
First Philson or any of its Subsidiaries, except as contemplated herein.
(y) Fidelity Bonds. First Philson and each of its Subsidiaries 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 with the
exception of the claim disclosed in Schedule 4.01(y), and neither First Philson
nor any of its Subsidiaries is aware of any facts which would form the basis of
a claim under such bonds. Neither First Philson nor any of its Subsidiaries has
reason to believe that its fidelity coverage will not continue to be available
on substantially the same terms as its existing coverage.
(z) Representations Not Misleading. No representation or warranty by
First Philson or any of its Subsidiaries in this Reorganization Agreement
contains, and no written statement, exhibit or schedule furnished to BT
Financial by or on behalf of First Philson or any of its Subsidiaries 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.
(aa) Information Provided by First Philson. All information to be
provided in writing by First Philson or any of its Subsidiaries for use in the
Joint Proxy Statement/Prospectus in connection with each of the meetings of
shareholders of First Philson and BT Financial 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 First Philson or any of its Subsidiaries for use in the
Registration Statement, including any prospectus contained therein, will comply
in all material respects with
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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.
(bb) Consents and Approvals. Except for: (i) the filing with any federal
or state governmental authority of a Joint Proxy Statement/Prospectus, a
Registration Statement and any other applicable securities filings relating to
the issuance of BT Financial Common Stock and each of the meetings of the
shareholders of First Philson and BT Financial; (ii) Regulatory Approvals; (iii)
the approval of the shareholders of First Philson; (iv) the approval of the
shareholders of BT Financial; (v) the obtaining of third party consents as set
forth in the Schedules attached hereto; (vi) the expiration of any regulatory
waiting period and (vii) the notification of AMEX and NASDAQ, 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 First Philson of this Reorganization Agreement and its performance
of the transactions contemplated hereby.
(cc) Investments. Except as set forth in Schedule 4.01(cc) attached
hereto, the investments reflected in First Philson's statement of financial
condition as of December 31, 1998 are a true, correct and complete list of the
investments of First Philson.
(dd) Intellectual Property. First Philson and its Subsidiaries have 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 First Philson or any
of its Subsidiaries, threatened alleging that First Philson or any of its
Subsidiaries 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.
(ee) Minute Books. The minute books of First Philson and each of its
Subsidiaries, 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.
(ff) Reverse Repurchase Agreements. Neither First Philson nor any of its
Subsidiaries have any agreements pursuant to which purchased securities are
subject to an agreement to resell.
(gg) Shareholder and FDIC Reports. First Philson and its Subsidiaries
have 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, 1998 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.
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(hh) Deposit Insurance. The deposits of the Bank are insured by the Bank
Insurance Fund of the FDIC in accordance with the provisions of the FDIA, and
has paid all assessments and filed all reports required by the FDIA.
(ii) Pooling; Reorganization. First Philson 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.
(jj) Year 2000 Status. First Philson and each of its Subsidiaries have
conducted a thorough inventory and assessment of the hardware, software and
embedded microcontrollers in noncomputer equipment (collectively, the "Computer
Systems") used by First Philson and its Subsidiaries in its business, in order
to determine which parts of the Computer Systems are not Year 2000 Compliant (as
defined below) and to estimate the cost of rendering such Computer Systems Year
2000 Compliant prior to January 1, 2000 or such earlier date on which the
Computer Systems may shut down or may produce incorrect calculations or
otherwise malfunction without becoming totally inoperable. Based on the above
inventory and assessment, the estimated total cost of rendering the Computer
Systems Year 2000 Compliant is $100,000, which expenditure has been included in
the budget adopted by First Philson for 1999.
4.02. Representations and Warranties of BT Financial.
BT Financial represents and warrants to First Philson 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 12,985,292 shares are issued and outstanding as of the
date hereof and 2,000,000 shares of preferred stock, none of which are issued
and outstanding. All issued and outstanding shares of 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) Laurel Bank Organization and Capitalization. Laurel Bank 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 Bank 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 Bank consists of 981,864 shares of common
stock having a par value of $5.00 per share. All issued and outstanding shares
of Laurel Bank common stock are validly issued, fully paid and nonassessable and
are owned of record and beneficially by BT Financial.
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(c) Authority for Transactions. This Reorganization Agreement has been,
and the Articles of Merger and Certificate 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.
(d) 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 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 (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 creations 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.
(e) Financial Statements and SEC Documents. BT Financial's Annual Reports
on Form 10-K for the fiscal years ended December 31, 1996, 1997 and 1998, and
all other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by it or any of its Subsidiaries
subsequent to December 31, 1995 under the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the "Securities Act") or
under Sections 13(a), 13(c) 14(d) and 15(d) of the Securities Exchange Act of
1934, as amended (together with the rules and regulations thereunder, the
"Exchange Act"), in the form filed, or to be filed, with the SEC (collectively,
the "SEC Documents") (i) complied or will comply in all material respects as to
form with the applicable requirements under the Securities Act or the Exchange
Act, as the case may be, and (ii) did not and will not, at the time of such
filing, 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; and each of the balance sheets in or incorporated by reference into
any such SEC Document (including the related notes and schedules thereto) fairly
presents and will fairly present the financial position of the entity or
entities to which it relates as of its date and each of the statements of income
and changes in stockholders' equity and cash flows or equivalent statements in
such report and documents (including any related notes and schedules thereto)
fairly presents and will fairly present the results of operations, changes in
stockholder's equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates
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for the periods set forth therein, in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal year-end audit
adjustments in the case of unaudited statements.
(f) Certain Changes. Since December 31, 1998, there has been: (i) no
material adverse change in the consolidated financial condition, assets,
liabilities, income or operations of BT Financial taken as a whole; (ii) no
material adverse change in the organization or key personnel 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; (iii)
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 (iv) 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.
(g) Litigation. Except for any matters referred to in its financial
statements referred to in Section 4.02(e), (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.
(h) 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.
(i) SEC and Shareholder Reports. BT Financial has delivered to First
Philson, or made available for inspection by First Philson, all reports to its
shareholders and the SEC made by it with respect to the four (4) years ended
December 31, 1998. 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.
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(j) 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.
(k) 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.
(l) Information Provided by BT Financial. All information to be provided
in writing by BT Financial for use in the Joint Proxy Statement/Prospectus in
connection with each of the meetings of shareholders of First Philson and BT
Financial 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.
(m) Consents and Approvals. Except for: (i) the filing with any federal
or state governmental authority of a Joint Proxy Statement/Prospectus, a
Registration Statement and any other applicable securities filings relating to
the issuance of BT Financial Common Stock and each of the meetings of First
Philson and BT Financial 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, and (iv) the notification of AMEX and NASDAQ, 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.
(n) Taxes. BT Financial and its Subsidiaries have filed when due all
returns ("Returns") for and paid in full all Taxes to the extent such filings
and payments were required prior to the date of this Reorganization Agreement.
Such filings comply with all applicable laws and are true and correct. Any
amounts set up as accruals or reserves in the audited consolidated financial
statements of BT Financial 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 BT Financial or any of its Subsidiaries prior to the dates of
such financial statements. No claims are currently being made by any taxing
authority with respect to any Return, and BT Financial has no
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knowledge of any basis for any such claims. Proper and accurate amounts have
been withheld and remitted by BT Financial and its Subsidiaries from and for
their employees for all prior periods in compliance with the tax withholding
provisions of applicable federal, state and local law. BT Financial has not had
any Tax deficiencies proposed or assessed against it and has not executed any
waiver or extended the statute of limitations on the audit for any Return or the
assessment or collection of any Tax.
(o) 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 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.
(p) Pooling; Reorganization. BT Financial 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.
(q) Employment Matters. BT Financial intends to offer all employees of
First Philson and its Subsidiaries with 15 or more years of employment with
First Philson or its Subsidiaries, employment for one year with BT Financial or
its Subsidiaries, and thereafter employment-at-will. Such employment will
include such salaries and benefits commensurate with the salaries in comparable
positions at BT Financial or its Subsidiaries as the case may be.
(r) Year 2000 Status. BT Financial and each of its subsidiaries have
conducted a thorough inventory and assessment of the hardware, software and
embedded microcontrollers in noncomputer equipment (collectively, the "Computer
Systems") used by BT Financial and its Subsidiaries in its business, in order to
determine which parts of the Computer Systems are not Year 2000 Compliant and to
estimate the cost of rendering such Computer Systems Year 2000 Compliant prior
to January 1, 2000 or such earlier date on which the Computer Systems may shut
down or may produce incorrect calculations or otherwise malfunction without
becoming totally inoperable. Based on the above inventory and assessment, the
estimated total cost of rendering the Computer Systems Year 2000 Compliant is
$756,000, of which $500,000 has already been spent and the remaining amount
expected for completion, $256,000 has been included in the budget adopted by BT
Financial for 1999.
4.03. 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:
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(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 First
Philson, 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.
(b) Environmental Studies. Within sixty 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 First Philson (the "Premises") and shall deliver a copy
of each such Phase I assessment to First Philson. 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 $100,000, then BT
Financial shall inform First Philson 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. First Philson 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
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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, (i) shall submit any requisite applications for
prior approval of the transactions contemplated herein and in the Certificate of
Merger between First Philson and BT Financial and the Articles of Merger between
Laurel Bank and the Bank to the appropriate federal and state (if applicable)
financial institution regulatory authorities depending upon the structure of the
Merger, (ii) BT Financial shall submit applications for prior approval of the
Merger to the Federal Reserve Board, 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 First Philson represent and warrant to the other that
all information concerning it, its Affiliates and their respective directors,
officers, shareholders and Subsidiaries included (or 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 the
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 IV
not being satisfied, or
(C) a material violation of any provision of this Plan.
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4.04. Covenants of First Philson.
First Philson hereby covenants and agrees that:
(a) Access to Corporate Records. Until the Closing Date, First Philson
and each of its Subsidiaries 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 their
business affairs and properties as BT Financial from time to time may reasonably
request; provided, however, that First Philson and each of its Subsidiaries
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 2.09 of this Reorganization Agreement.
(b) Financial Statements and Internal Audit Reports. First Philson 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. First Philson shall promptly
forward to BT Financial copies of its periodic internal audit reports. First
Philson shall also promptly provide or permit inspection of all reports filed by
it and the Bank during such period with the Federal Reserve Board and 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 Federal Reserve Board and the Comptroller. Until the
Closing Date, First Philson 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, neither First Philson nor any of its
Subsidiaries, shall 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 dividends, authorize a
stock split, or authorize, issue or make any other distribution of,
on, or with respect to, its capital stock except for (a) Permitted
Dividends whose record dates and payable dates for such quarterly
Permitted Dividends shall be synchronized with BT Financial's record
dates and payable dates for dividends and First Philson shall confer
with BT Financial prior to fixing any such record dates or payable
dates, prior to any quarterly Permitted Divided distributions, and (b)
the Option granted pursuant to the Stock Option Agreement between
First Philson and BT Financial of even date herewith;
(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;
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(iii) make any direct or indirect redemption, purchase or other
acquisition of any of its capital stock;
(iv) create or award any pension or profit sharing plan, bonus,
deferred compensation, death benefit or retirement plan, or any other
employee benefit, enter into any employment or consulting contract
(written or otherwise), or grant any bonuses to any officer, director
or employee;
(v) amend its articles of incorporation or bylaws except as may be
necessary to consummate the transactions contemplated by this
Reorganization Agreement or as required by law;
(vi) incur any liability or obligation or make any commitment or
disbursement, acquire or dispose of any property or asset, make any
contract or agreement, or engage in any transaction, except in the
ordinary course of business;
(vii) increase the rate of compensation of any director, officer,
employee or agent or enter into any agreement to increase the rate of
compensation of any director, officer or employee, other than normal
increases in the ordinary course of business and consistent with past
practice;
(viii) unless permitted by 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 $150,000 in the aggregate;
(xi) modify or extend any service bureau contracts, hardware/software
maintenance agreements, lease agreements or other contracts that
involve annual payments that exceed $25,000 per contract or $100,000
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, shall cooperate in good faith
with BT Financial to adopt policies, practices and procedures
consistent with those utilized by BT Financial and its Affiliates;
<PAGE>
(xiii) open or close any branch offices except for the proposed new
office for Flex;
(xiv) fail to pay any tax or any other liability or charge when due,
other than charges contested in good faith by appropriate proceedings;
or
(xv) make, change or revoke any tax election or make any agreement or
settlement with any taxing authority.
(d) Consents and Approvals. First Philson and each of its Subsidiaries
shall cooperate with BT Financial in furnishing such information concerning
First Philson'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. First Philson and each of its Subsidiaries 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, First Philson and each
of its Subsidiaries 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
Schedule 4.01(m) 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 First Philson nor any of its
Subsidiaries, nor any of its officers or directors or the officers and
directors of its Subsidiaries, nor any of its other affiliates (as defined in
Rule 12b-2 under the Exchange Act) (each, an "Affiliate") shall, and First
Philson shall cause it and its Subsidiaries' 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
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(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 First Philson
or its board of directors and officers from fulfilling their fiduciary duties
under Delaware or federal law to the shareholders of First Philson. First
Philson 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).
(g) Indemnification.
(i) First Philson will indemnify and hold harmless BT Financial and
each Person, if any, who controls BT Financial 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 Joint 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 was provided in writing
by First Philson or any of its Subsidiaries 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 First
Philson shareholder to the extent that any such statement or omission
was provided in writing by First Philson or any of its Subsidiaries to
BT Financial, and First Philson 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 First Philson 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 Joint Proxy Statement/Prospectus or
any amendment or supplement
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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 First
Philson may otherwise have.
(ii) Promptly after receipt by an indemnified party under this Section
4.04(g) of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 4.04(g), notify the indemnifying
party of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section
4.04(g). In case any such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section 4.04(g) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(iii) If recovery is not available under the foregoing indemnification
provisions of this Section 4.04(g) for any reason other than as
specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution for liabilities and
expenses, except to the extent that contribution is not permitted
under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties are entitled, there
shall be considered the relative benefits received by each party from
the transactions contemplated hereby, the parties' relative knowledge
and access to information concerning the matter with respect to which
the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations
appropriate under the circumstances. First Philson 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. First Philson shall offer rates on all deposits which are
in accordance with present institutional guidelines and which are priced within
local competitor offerings. Further, First Philson shall not accept any broker
or out of area deposits and shall price all "jumbo deposits" in accordance with
existing practice. Such jumbo deposits shall be offered only to local retail,
public or corporate accounts.
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(i) Furnishing Information. First Philson and each of its Subsidiaries
shall cooperate with BT Financial in furnishing such information concerning the
business of First Philson and each of its Subsidiaries as is reasonably
necessary or requested in order to prepare and file the Registration Statement
and Joint Proxy Statement/Prospectus 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. First Philson 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. First Philson also shall pay its state or
local income tax for all taxable periods up to and including the
Closing Date. The income of First Philson 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 First Philson 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 First Philson 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. BT Financial hereby covenants and
agrees that:
(a) Access to Corporate Records. Until the Closing Date, BT Financial
shall give First Philson 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 First Philson from time to time may
reasonably request; provided, however, that BT Financial 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 4.05(a)
shall be and remain subject to the confidentiality provisions of Section 2.09 of
this Reorganization Agreement.
(b) Financial Statements. BT Financial shall promptly provide First
Philson with copies of its annual and quarterly financial statements, as
included in its reports on Form 10-K or 10-Q, respectively, as filed with the
SEC pursuant to the requirements of the Exchange Act, for the periods ending
between the date of this Reorganization Agreement and the Effective Time. Until
the Closing Date, BT Financial will provide copies of any reports it files with
the SEC under the Exchange Act to First Philson on a prompt and timely basis.
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(c) Consents and Approvals. BT Financial 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.
(d) Notice of Changes. Until the Effective Time, BT Financial shall give
First Philson prompt written notice of any material change or inaccuracies in
any data previously given or made available to First Philson pursuant to this
Reorganization Agreement.
(e) Furnishing Information. BT Financial shall cooperate with First
Philson in furnishing such information concerning the business of BT Financial
as is reasonably necessary or requested in order to prepare and file the
Registration Statement and Joint Proxy Statement/Prospectus to be used in
connection with the meetings of the shareholders of First Philson as provided in
Section 3.01 hereof, or to prepare and file any applications for regulatory or
governmental approvals. BT Financial shall provide to First Philson and their
respective counsel a copy of the Registration Statement and each application for
regulatory or governmental approval, including all amendments to such documents,
in draft form prior to filing and, as soon as practicable after the date of
filing, a copy of the filing. BT Financial shall provide to First Philson and
their respective counsel a copy of all correspondence to and from the various
regulatory agencies with respect to the Registration Statement and the
regulatory applications.
(f) Indemnification of and Liability Insurance for Officers and Directors.
(i) After the Effective Time, BT Financial, as successor to First
Philson, shall indemnify and hold harmless any former directors,
officers, employees or agents of First Philson or any of its
Subsidiaries who have rights to indemnification under the articles of
incorporation and bylaws of First Philson 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 First Philson, prior to the Effective Time ("Claims")
in accordance with and to the extent required under the articles of
incorporation and bylaws of First Philson. This section shall not be
construed to increase, in any manner, any liabilities or obligations
BT Financial would otherwise have as the successor by merger to First
Philson.
(ii) BT Financial will indemnify and hold harmless First Philson and
each Person, if any, who controls First Philson 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 Joint
Proxy Statement/Prospectus or any amendment or supplement thereto, or
any related
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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 Joint
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
First Philson 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 4.05(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 4.05(f), notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than under this
Section 4.05(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 4.05(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 4.05(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
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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. First Philson 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 First Philson, subject to Section
4.02(q), whose employment with First Philson or any of its
Subsidiaries is terminated, other than for cause, by BT Financial
within six months after the Effective Time, 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 First Philson or any of its Subsidiaries
not exceeding three 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 First Philson's main office.
(ii) All employees of First Philson or any of its Subsidiaries
immediately prior to the Effective Time who are employed by BT
Financial following the Effective Time ("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
and shall be entitled to credit for their length of service,
compensation, job classification or position with First Philson or any
of its Subsidiaries, 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. 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 First Philson 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
First Philson or any of its Subsidiaries shall be recognized as
service with BT Financial for purposes of eligibility, participation,
vesting, and 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
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respect to any defined benefit pension plans sponsored by BT Financial
or an Affiliate of BT Financial, a Transferred Employee's service with
First Philson or any of its Subsidiaries shall be recognized as
service with BT Financial for purposes of eligibility, participation,
vesting, benefit accruals, subject 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.
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.
(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
First Philson in writing of such change (other than with respect to information
supplied by First Philson 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
CONDITIONS PRECEDENT
5.01. Conditions Precedent to the Obligations of BT Financial. The
obligations of BT Financial 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 to the extent
permitted by law:
(a) Performance of Covenants. Each of the covenants to be performed by
First Philson hereunder on or before the Closing Date shall have been duly
performed in all material respects; and the President and Secretary of First
Philson shall each 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.
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(b) Representations True at Closing. The representations and warranties
made by First Philson 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(q) shall be modified by the
results of the Phase I assessment referred to in Section 4.03(b), and the
President and Secretary of First Philson shall each 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. First Philson and the Bank shall each have
furnished BT Financial with a certified copy of resolutions duly adopted by each
of its Board of Directors authorizing and approving this Reorganization
Agreement and the transactions contemplated hereby and by the shareholders of
the Bank approving this Reorganization Agreement and the transactions
contemplated thereby.
(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 BT Financial Common Stock entitled to vote thereon. This Reorganization
Agreement shall have been approved by the affirmative vote of the holders of a
majority of the outstanding shares of First Philson Common Stock, and First
Philson 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 and First
Philson and their Subsidiaries shall have received in form and substance
satisfactory to BT Financial all necessary federal and state Regulatory
Approvals, shareholder or other consents necessary to permit consummation of the
Merger and the Bank Merger transactions contemplated hereby and all applicable
waiting periods required by law shall have expired or elapsed. 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,
Delaware and Pennsylvania law 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 First Philson or any of its Subsidiaries 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, or results of operation of First Philson 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.
(i) Registration Statement. The Registration Statement covering the
shares of BT Financial Common Stock to be issued to the shareholders of First
Philson 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 Plowman, Spiegel & Lewis, P.C.
counsel for First Philson 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) First Philson is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has
full power and authority to carry on its business as described in the
Joint Proxy Statement/Prospectus and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized capital
stock of First Philson consists of 10,000,000 shares of common stock
having a par value of $2.50 per share, of which 1,742,400 shares are
issued and outstanding as of the date hereof. All issued and
outstanding shares of First Philson Common Stock are validly issued,
fully paid and nonassessable.
(ii) The Bank is a national banking association duly organized and
validly existing under the National Bank Act. The Bank 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. The Bank's deposits are insured by the Bank
Insurance Fund of the FDIC. The authorized capital stock of the Bank
consists of 300,000 shares of common stock having a par value of $10
per share, of which all shares are issued and outstanding as of the
date hereof and no shares are held in the treasury of the Bank. All
issued and outstanding shares of the Bank 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 the Bank to issue any of its stock or to
acquire any of its stock under any circumstances or to pay cash on
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account of stock appreciation. First Philson owns all of the issued
and outstanding common stock of the Bank.
(iii) Flex Organization and Capitalization. Flex Financial Consumer
Discount Company ("Flex") is a finance company validly existing under
the laws of the Commonwealth of Pennsylvania. Flex 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
Flex consists of 1,000 shares of common stock having a par value of
$1.00 per share. All issued and outstanding shares of Flex common
stock are validly issued, fully paid and nonassessable and are owned
of record and beneficially by First Philson.
(iv) This Reorganization Agreement has been, and the Articles and
Certificate of Merger, when executed and delivered, will have been,
duly and validly authorized, executed and delivered by First Philson,
and constitute and will constitute the valid and binding obligations
of First Philson and are and will be enforceable in accordance with
their respective terms, except as limited by (a) bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization,
conservatorship, receivership or other similar laws from time to time
in effect affecting the enforcement of creditors' rights generally or
the rights of creditors of insured depository institutions, (b)
general equitable principles, (c) laws relating to the safety and
soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material
breaches of such agreements, and (e) the effect or availability of
equitable remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(v) Neither the execution, delivery and performance of this
Reorganization Agreement by First Philson, nor the consummation of the
transactions contemplated hereby, nor compliance by First Philson 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 First Philson or any of its Subsidiaries under any of the terms,
conditions or provisions of, (A) the articles of incorporation or
bylaws, as amended, of First Philson or the Bank, or (B) any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which First Philson 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
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be subject, except for such violations, conflicts, breaches, defaults,
etc. which would not, in the aggregate, have a material adverse effect
on First Philson'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.
(vi) First Philson has obtained all necessary federal and state
governmental and Regulatory Approvals in order to consummate the
Merger.
(vi) 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 certificates of officers
and other representatives of First Philson as to matters of fact and
certificates of public officials as to matters within their jurisdiction. Such
opinion shall be governed by the Legal Opinion Accord of the ABA Section of
Business Law (1991).
(k) Expenses. First Philson shall have paid all out-of-pocket expenses
and disbursements, including legal, accounting and investment banking fees
incurred by First Philson 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 First Philson shall each 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.
(l) 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 or First Philson as a result of the Merger; and (ii)
no gain or loss will be recognized by First Philson's shareholders 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, First Philson, and others.
(m) Pooling Letter. BT Financial shall have received from
PricewaterhouseCoopers LLP, independent accountants for BT Financial, a letter
dated the date of or shortly prior to the mailing date of the Joint Proxy
Statement/Prospectus and the Effective Time, to the effect that such accountants
are not aware of any facts or circumstances which might cause the Merger not to
qualify for pooling of interests accounting treatment.
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(n) Affiliates Agreements. BT Financial shall have received duly executed
Affiliates' Agreements from each director and officer of BT Financial and First
Philson in the forms of Exhibits A and B respectively.
5.02. Conditions Precedent to the Obligations of First Philson. The
obligations of First Philson 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 First Philson to the extent
permitted by law:
(a) Performance of Covenants. Each of the covenants to be performed by BT
Financial hereunder on or before the Closing Date shall have been duly performed
in all material respects; and the President and Secretary of BT Financial shall
each have executed and delivered to First Philson 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 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 earlier date),
and the President and Secretary of BT Financial shall each have executed and
delivered to First Philson 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 Bank shall each have
furnished First Philson with a certified copy of resolutions duly adopted by the
Board of Directors of BT Financial and Laurel Bank authorizing this
Reorganization Agreement and the transactions contemplated hereby and by the
shareholder of Laurel Bank 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 First Philson Common Stock entitled to vote thereon. This Reorganization
Agreement shall have been approved by the affirmative vote of the holders of a
majority of the outstanding shares of BT Financial Common Stock, and BT
Financial shall have furnished First Philson 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 and First
Philson and their Subsidiaries shall have received in form and substance
satisfactory to BT Financial all necessary federal and state governmental and
Regulatory Approvals, shareholder approvals and other consents necessary to
permit consummation of the Merger and the Bank Merger transactions
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contemplated hereby, and all applicable waiting periods required by law shall
have expired or elapsed. No such approvals and consents shall require First
Philson or its Subsidiaries to enter into any agreement or stipulation that is
inconsistent with prior Federal Reserve, Comptroller, FDIC, Department of
Banking practice or procedure, or Delaware or Pennsylvania law.
(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 First Philson, would
make it inadvisable to consummate such transactions.
(g) No Material Misstatements or Omissions. Subject to the cure
provisions of Section 2.07(f), First Philson 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 its Subsidiaries 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, or results of operation 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.
(i) Registration Statement. The Registration Statement covering the
shares of BT Financial Common Stock to be issued to the shareholders of First
Philson 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 BT Financial and Counsel. An opinion of Pepper Hamilton
LLP, counsel for BT Financial, shall have been delivered to First Philson, dated
the Closing Date, and in form and substance satisfactory to and its counsel,
substantially to the effect that:
(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 Joint Proxy Statement/Prospectus 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
12,985,292 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
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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 Bank 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 Bank
has full power and authority to carry on its business as described in
the Joint Proxy Statement/Prospectus and to carry out the transactions
contemplated by this Reorganization Agreement. The authorized, issued
and outstanding capital stock of Laurel Bank consists of 981,864
shares of common stock having a par value of $5.00 per share. All
issued and outstanding shares of Laurel Bank Common Stock are validly
issued, fully paid and nonassessable.
(iii) This Reorganization Agreement has been, and the Articles and
Certificate of Merger, when executed and delivered, will have been,
duly and validly authorized, executed and delivered by BT Financial,
and constitute and will constitute the valid and binding obligations
of BT Financial and are and will be enforceable in accordance with
their respective terms, except as limited by (a) bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization,
conservatorship, receivership or other similar laws from time to time
in effect affecting the enforcement of creditors' rights generally or
the rights of creditors of insured depository institutions, (b)
general equitable principles, (c) laws relating to the safety and
soundness of insured depository institutions, (d) the possible
unavailability of certain remedies in the event of non-material
breaches of such agreements, and (e) the effect or availability of
equitable remedies or injunctive relief (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(iv) Neither the execution, delivery and performance of this
Reorganization Agreement by 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 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 Bank, 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
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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.
(v) BT Financial has obtained all necessary federal and state
governmental and Regulatory Approvals in order to consummate the
Merger.
(vi) 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 certificates of officers and
other representatives of BT Financial as to matters of fact and certificates of
public officials as to matters within their jurisdiction. Such opinion shall be
governed by the Legal Opinion Accord of the ABA Section of Business Law (1991).
(k) Fairness Opinion. First Philson shall have received an opinion from
Hopper Soliday & Co. dated prior to the date of the Joint Proxy
Statement/Prospectus that the consideration to be paid to shareholders of First
Philson pursuant to this Reorganization Agreement is fair from a financial point
of view to the shareholders of First Philson.
(l) Tax Opinion. First Philson shall have received an opinion of Pepper
Hamilton LLP, in form and substance reasonably satisfactory to First Philson,
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 Bank or First Philson as a result of the
Merger; and (ii) no gain or loss will be recognized by First Philson's
shareholders 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, First
Philson, Laurel Bank and others.
(m) Pooling Letter. First Philson shall have received from
PricewaterhouseCoopers LLP, independent accountants for BT Financial, a letter
dated the date of or shortly prior to the mailing date of the Joint Proxy
Statement/Prospectus and the Effective Time, to the effect that such accountants
are not aware of any facts or circumstances which might cause the Merger not to
qualify for pooling of interests accounting treatment.
5.03. Waivers. A condition precedent as set forth in this Article V
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
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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 V.
ARTICLE VI
BROKERS AND EXPENSES
6.01. Brokers. BT Financial represents and warrants to First Philson
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. First Philson 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.
6.02. 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 VII
MISCELLANEOUS
7.01. Further Assurances. (a) From time to time as and when requested
by BT Financial or Laurel Bank, or their respective successors or assigns, First
Philson, or the officers and directors of First Philson last in office prior to
consummation of the Merger, shall execute and deliver such agreements, documents
and other instruments necessary to permit the Bank Merger to take place, subject
to the completion of the Merger; (b) 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 Surviving Corporation title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of First Philson, as shall be necessary or advisable to
carry out the purposes of and effect the transactions contemplated by this
Reorganization Agreement.
7.02. Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants in this Reorganization Agreement or in
any instrument delivered
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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.
7.03 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 First Philson, to:
George W. Hay
President
First Philson Financial Corporation
534 Main Street
Berlin, Pennsylvania 15530
with a copy to:
Charles B. Jarrett, Jr., Esquire
Plowman, Spiegel & Lewis, P.C.
Grant Building, Suite 230
Pittsburgh, PA 15219
(b) If to BT Financial:
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
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.
7.04. 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
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Reorganization Agreement may not be assigned by any Party without the express
written consent of the other Parties.
7.05. 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.
7.06. 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.
7.07. 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 Reorganization Agreement is not intended to
confer upon any Person other than the Parties hereto any rights or remedies
hereunder, except for the provisions of Sections 4.04(g) and 4.05(f).
7.08. 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.
7.09. 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 Sections 4.04(g) and 4.05(f). 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 First Philson and BT Financial 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
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such amendment or modification will not have a material adverse effect on the
benefits intended under this Reorganization Agreement to such Party and its
shareholders following approval of this Reorganization Agreement by the
shareholders of First Philson, unless this Reorganization Agreement, as
modified, is resubmitted to the shareholders of First Philson and BT Financial
for their approval.
7.10. 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.
7.11. 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.
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.
ATTEST: First Philson Financial Corporation
/s/ Cathy E. Webreck /s/ George W. Hay
- ------------------------- ------------------------------------
Cathy E. Webreck George W. Hay
Secretary President and Chief Executive Officer
(Corporate Seal)
ATTEST: BT Financial Corporation
/s/ Laura L. Roth /s/ John H. Anderson
- ------------------------- ------------------------------------
Laura L. Roth John H. Anderson
Secretary Chairman and Chief Executive Officer
(Corporate Seal)
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<PAGE>
Schedule 4.01(f) First Philson Financial Statements
There are no exceptions to the criteria set forth in Section 4.01(f) with
respect to financial statements and other SEC documents.
A-53
<PAGE>
Schedule 4.01(m) First Philson Loans
None.
A-54
<PAGE>
Schedule 4.01(p) First Philson Real Property
1. Headquarter Office
534 Main Street
Berlin, PA 15530
2. Berlin Office
506 Main Street
Berlin, PA 15530
3. Somerset Office
509 E. Main Street (Route 31)
Somerset, PA 15501
4. Vacant Lot
East side of 509 Main Street (Route 31)
Somerset, PA 15501
5. New Centerville Office
2937 New Centerville Road (Route 281)
Rockwood, PA 15557
6. Confluence Office
508-510 Hugart Street
Confluence, PA 15424
7. Old Trails Office
4640 National Pike (Route 40)
Markleysburg, PA 15459
8. Indian Head Office
2066 Indian Head Road
Indian Head, PA 15446
9. Shanksville Office
1235 Main Street
Shanksville, PA 15560
10. Stoystown Office
100 East Main Street
Stoystown, PA 15563
All documents, including deeds, relating to real estate owned by First Philson
have been provided or made available to BT Financial.
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<PAGE>
Schedule 4.01(q) First Philson Environmental Conditions
None.
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<PAGE>
Schedule 4.01(q)(iii) First Philson Governmental Filings
None.
A-57
<PAGE>
Schedule 4.01(s) First Philson Leases
REAL PROPERTY LEASED:
1. Meyersdale Office
7109 Mason Dixon Highway (Route 219)
Meyersdale, PA 15552
2. Flex Financial Consumer Discount Company
1111 West Main Street (Route 31)
Somerset, PA 15501
PERSONAL PROPERTY LEASED:
1. Paragon II Postage Equipment
Model SP6K
506 Main Street
Berlin, PA 15530
2. Time and Temperature Sign
(8 Locations)
509 East Main Street, Somerset
7109 Mason Dixon Highway, Meyersdale
2937 New Centerville Road, Rockwood
508-510 Hugart Street, Confluence
4640 National Pike, Markleysburg
2066 Indian Head Road, Indian Head
1235 Main Street, Shanksville
100 East Main Street, Stoystown
3. Credit Report Machine (2)
506 Main Street, Berlin
509 East Main Street, Somerset
All leases of real and personal property of First Philson have been provided or
made available to BT Financial.
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<PAGE>
Schedule 4.01(t) First Philson Material Contracts
All material contracts have been submitted or made available to BT Financial as
provided in Section 4.01(t).
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<PAGE>
Schedule 4.01(v) First Philson Employee Benefits
1. Medical Insurance
Blue Cross/Blue Shield
2. Section 125 (flexible medical and child care expense)
Benefit Coordinators Corporation
3. Dental Insurance
Delta Dental
4. Life Insurance
UNUM Insurance Company
5. Long Term Disability
CNA Insurance
6. Short Term Disability
Self-Insured through the Bank
7. 401k Plan (Cash Op)
First Philson Bank, N.A. Cash Op Plan
Self-Directed Investments in Mutual Funds through Putnam Investments
8. Defined Benefit Plan
First Philson Bank, N.A. Pension Plan
9. Employee Stock Ownership Plan
First Philson Bank, N.A. Employee Stock Ownership Plan*
10. Executive Supplement Income Plan
Massachusetts Mutual Insurance Company (George Hay and Theodore Deskevich -
annual premium being paid)
Reliance Standard Insurance Company (10 current employees and 6 former
employees)
Metropolitan Life (2 former employees)
First Colony Life (3 former employees)
*The plan has been terminated subject to final approval of the Internal Revenue
Service.
All "employee benefit plans" of First Philson have been provided or made
available to BT Financial.
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<PAGE>
Schedule 4.01(w) First Philson Employment Contracts
First Philson and/or the Bank have entered into employment contracts
with George W. Hay, Theodore Deskevich, David A. Finui and James D. Zimmerman,
copies of which contracts have been submitted to BT Financial.
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<PAGE>
Schedule 4.01(y) First Philson Bond Claim
There is one existing claim against the Bank's fidelity bond carrier with
respect to a defalcating employee. The details of the matter have been
submitted to BT Financial.
A-62
<PAGE>
Schedule 4.01(cc) First Philson Investments
None.
A-63
<PAGE>
Exhibit A
First Philson Financial Corporation
Affiliate's Agreement
The undersigned, in connection with the Agreement and Plan of
Reorganization dated as of the "Agreement"), by and between
-----------------
First Philson Financial Corporation ("First Philson") 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 First Philson 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 First Philson 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 First
Philson 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 Time; 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
3. The certificates representing his BT Financial Shares will bear the
following legend:
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<PAGE>
"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 , 1999.
---- ----------
-----------------------------------
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 1999 (the "Agreement"), by and between
---------
First Philson Financial Corporation ("First Philson") 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 First
Philson 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 Time.
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 , 1999.
---- ----------
------------------------------------
Accepted and Agreed:
BT Financial Corporation
By:
----------------------------
66
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<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made and entered into as
of this 23rd day of February 1999, by and between FIRST PHILSON FINANCIAL
CORPORATION, a Delaware corporation ("Issuer"),
and
BT FINANCIAL CORPORATION, a Pennsylvania corporation ("Grantee"), and is the
Option Agreement referred to in the Merger Agreement referred to herein.
WHEREAS, Grantee and Issuer contemplate entering into an Agreement and Plan
of Reorganization of even date herewith (the "Merger Agreement") providing for
the Merger of Issuer into Grantee, with Grantee as the surviving corporation
(the "Merger"); and
WHEREAS, in order to induce Grantee to enter into the Merger Agreement and
to provide reasonable assurances that the transactions contemplated by the
Merger Agreement will be consummated, Issuer desires to grant Grantee an option
to purchase 348,400 authorized but unissued shares of Issuer Common Stock, $2.50
par value ("Issuer Common Stock"), upon the terms and subject to the conditions
set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound, Issuer and Grantee agree as follows:
1. Grant. Subject to the terms and conditions set forth herein, Issuer
hereby grants to Grantee an exclusive and irrevocable option (the "Option") to
purchase from Issuer up to 348,400 authorized but unissued shares of Issuer
Common Stock (the "Option Shares") at a price of $45.00 per Option Share (the
"Exercise Price"); provided that in no event shall the number of shares for
which this Option is exercisable exceed the lesser of (i) 19.99% of the issued
and outstanding shares of Common Stock and (ii) such number of shares of Common
Stock that will avoid application of the provisions of Subchapter E of Chapter
25 of the BCL. The number of shares of Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth. Grantee and any person to whom it may assign its rights
hereunder is referred to as a "Holder."
2. Exercise. (a) The Option may be exercised by any Holder, in whole or
in part, at any time or from time to time, on or after the date hereof and
within six months following the occurrence of any of the Exercise Events
described in Subsection 2 (b). The Option will terminate and be of no further
force or effect (i) at the Effective Time or (ii) upon termination of the Merger
Agreement in accordance with the provisions thereof. Any such exercise will be
subject to compliance with applicable law, including receipt of all required
regulatory approvals. Issuer will not take any action which would have the
effect of preventing or disabling Issuer from delivering the Option Shares or
otherwise performing its obligations under this Agreement.
(b) Any of the following events occurring between the date hereof and
the Effective Time will be an "Exercise Event" for the purposes of this
Agreement:
(i) any corporation (other than Grantee or any Grantee Subsidiary),
partnership, individual, trust, unincorporated association, other
entity or group (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act")) (collectively "Persons")
shall have (A) commenced a tender offer or exchange offer for at least
twenty percent (20%) of the then outstanding shares of Issuer Common
Stock or (B) acquired direct or indirect "beneficial ownership" (as
defined under the Exchange Act) of twenty percent (20%) or more of the
then outstanding shares of Issuer Common Stock;
B-1
<PAGE>
(ii) Issuer shall have (A) acted or failed to act so as to have
caused the conditions specified in Section 6.01 of the Merger
Agreement to be met, whether or not the Merger Agreement shall have
been terminated, or (B) breached or violated Section 4.04(f) of the
Merger Agreement; or
(iii) any Person shall, with respect to Issuer Common Stock,
solicit proxies or written consents or become a "participant" in any
"solicitation" (as such terms are defined in Regulation 14A under the
Exchange Act) in opposition to the Merger.
(c) To exercise the Option, the Holder will send a written notice to
Issuer specifying the number of Option Shares Holder will purchase and the place
and date for closing the purchase. The date so specified is referred to herein
as the "Closing Date." The Closing Date shall be not later than ten business
days from the date such notice is mailed, but not earlier than the expiration or
termination of any applicable waiting period under the Bank Holding Company Act
of 1956, as amended (the "BHC Act"). If the Closing Date is to occur sooner
than two business days from the date such notice is mailed, telegraphic or
telephonic notice will also be given at the time such written notice is given.
(d) Upon any exercise of the Option hereunder, the Merger Agreement will
terminate, as provided in Section 2.07(g) of the Merger Agreement, without any
further action of the parties and the Plan of Merger will be deemed to be
abandoned. Exercise of the Option will not constitute a breach of the Merger
Agreement or a failure by Grantee to perform its obligations under the Merger
Agreement.
3. Payment and Delivery of Certificate(s). At the closing of any purchase
of any of the Option Shares hereunder, (a) Holder will pay to Issuer the
aggregate price for the Option Shares so purchased by certified or cashier's
check or wire transfer of immediately available funds and (b) Issuer will
deliver to Holder a duly issued certificate (or certificates in the
denominations designated by Holder in its notice of exercise) representing the
number of Option Shares purchased. The obligation of Issuer to deliver the
Option Shares at such closing will be subject only to the condition that no
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction will be in effect which would prohibit such sale
and delivery.
4. Notification of Record Date. Issuer will give Grantee at least ten
business days' prior written notice before setting the record date for
determining the holders of record of Issuer Common Stock entitled to notice of,
or to vote on, any matter, to receive any dividend or distribution, or to
participate in any rights offering or other matters, or to receive any other
benefit or right, with respect to Issuer Common Stock.
5. Postponement of Meeting. If the Holder elects to exercise the Option
granted hereunder after the record date set by Issuer for any shareholders'
meeting called to approve the Merger, or called for any other purpose, then,
subject to applicable law and Issuer's certificate of incorporation and bylaws,
Issuer will, upon request by Holder, promptly postpone the meeting to a later
date and set a later record date for such later meeting; provided, however, that
the record date for such later meeting will be a date that is not less than ten
nor more than thirty business days after the postponement of the originally
scheduled shareholders' meeting.
6. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of Issuer, has been duly executed by a
duly authorized officer of Issuer and is valid, binding and enforceable against
Issuer in accordance with its terms.
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<PAGE>
(b) Option Shares. Issuer has taken all necessary corporate action to
authorize and reserve for issuance, upon exercise of the Option, the Option
Shares, and at all times from the date hereof through the date of the exercise
in full or the termination of the Option, Issuer will have reserved for issuance
upon exercise of the 348,400 shares of Issuer Common Stock. The Option Shares,
upon purchase by Holder, will be fully and validly issued, fully paid and
nonassessable, and delivered free and clear of all claims, liens, encumbrances
and security interests, including any preemptive or similar rights.
7. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of Grantee and has been duly executed by
a duly authorized officer of Grantee, and is valid, binding and enforceable
against Grantee in accordance with its terms.
(b) Investment Intent. Any Option Shares acquired upon exercise of
the Option will not be taken by Holder with a view to the public distribution
thereof, and will not be transferred, except in a transaction registered or
exempt from registration under the Securities Act of 1933 (the "Securities
Act").
8. Anti-dilution Provisions. In the event of any change in the
outstanding Issuer Common Stock by reason of stock dividends, stock splits,
split-ups, mergers, Mergers, recapitalizations, combinations, conversions,
exchanges of shares or otherwise, the number and kinds of shares or securities
subject to the Option and the purchase price per Option Share will be
appropriately adjusted so as to fairly and equitably preserve, as far as
practicable, the original Option rights granted hereby so that Holder will be
entitled to purchase the number of shares of Issuer Common Stock that will be
equal to 19.99% of the then outstanding shares of Issuer Common Stock (after
giving effect to such exercise and assuming all options and rights to purchase
or convert into shares of Issuer Common Stock will have been exercised and
taking into account shares of Issuer Common Stock held by Grantee or its
subsidiaries on the date hereof) for an aggregate purchase price of $15,678,000;
provided that in no event shall the number of shares for which this Option is
exercisable exceed the lesser of (i) 19.99% of the issued and outstanding shares
of Common Stock and (ii) such number of shares of Common Stock that will avoid
application of the provisions of Subchapter E of Chapter 25 of the BCL. The
number of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment as herein set forth.
9. Registration Under the Securities Act. If the Option is exercised and
if Holder should so request by written notice, Issuer will use its best efforts
to promptly effect the registration ("Registration") under the Securities Act or
any successor statute then in effect and any applicable state laws covering such
Issuer Common Stock owned by Grantee and its subsidiaries and affiliates as such
notice will designate, but not less than 17,424 shares of Issuer Common Stock,
in accordance with the intended method of sale or other disposition requested by
Holder, and to keep such Registration effective for a period of not less than
twelve months, unless, in the written opinion of counsel to Issuer, which will
be delivered to Holder and which will be reasonably satisfactory to Holder and
its counsel, such Registration is not required to be made as a precondition to
the lawful sale and distribution of such shares in the manner contemplated;
provided that if in Issuer's reasonable judgment the Registration at the time
requested would impose material burdens on Issuer other than those routinely
associated with registration under the Securities Act, Issuer may elect to delay
the Registration for up to 30 days.
Holder will provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder.
B-3
<PAGE>
The out-of-pocket expenses incurred in connection with such Registration
will be borne by Issuer except for underwriting discounts and commissions, any
transfer taxes and the fees and expenses of counsel for Holder. Issuer will
have no further obligation hereunder after two Registrations have been effected.
10. Transfer of Option to Issuer. If after the date hereof and before the
Effective Time,
(a) one of the Exercise Events specified in Subsection 2(b)(ii) will
have occurred; or
(b) Issuer's shareholders have failed to approve the Merger by the
earlier of (i) the conclusion of such meeting of Issuer shareholders as is
called for the purpose of approving the Merger and (ii) December 31, 1999 and
there shall have occurred and be continuing any of the Exercise Events specified
in Subsection 2(b)(i) or (iii);
then Holder will have the right (whether or not the Option will have previously
terminated) to notify Issuer of its election to transfer the Option to Issuer
together with any shares of Issuer Common Stock purchased by Holder pursuant
hereto, and within two business days after the giving by Holder of such notice,
Issuer will pay to Holder the sum of
(x) the Exercise Price paid by Holder for any shares of Issuer
Common Stock acquired pursuant to the Option;
(y) the difference between the "Market/Offer Price" for shares of
Issuer Common Stock (defined as the higher of the highest price per
share at which a tender or exchange offer has been made or the highest
sale price for shares of Issuer Common Stock on the principal trading
market on which shares are traded, as reported by a recognized source,
during the 365-day period preceding the notice of the required
purchase under this Section (10) and the Exercise Price paid by Holder
for any shares of Issuer Common Stock purchased pursuant to the
exercise of the Option, multiplied by the number of shares so
purchased, but only if the Market/Offer Price is greater than such
Exercise Price; and
(z) the difference between the Market/Offer Price and the Exercise
Price of the Option, multiplied by the number of shares of Issuer
Common Stock with respect to which the Option has not been exercised,
but only if the Market/Offer Price is greater than such exercise
price, payable in immediately available funds, at which time the
Option will terminate.
11. Right of First Refusal.
(a) At least five business days before making any sale or other
disposition of Option Shares, Holder will give Issuer a notice (the "Disposition
Notice") advising Issuer of the number and type of Option Shares proposed to be
disposed of and the proposed purchase price therefor, and, if Holder then
intends to tender such Shares into a tender or exchange offer by a Person other
than Holder or any subsidiary or affiliate of Holder, advising Issuer of such
specific offer to purchase such Shares, the price to be paid thereunder and the
identity of the offeror. For purposes hereof, a tender or exchange offer to
purchase Issuer Common Stock will be deemed to be an offer at the price
specified therein, without regard to any provisions thereof with respect to
proration or conditions to the offeror's obligation to purchase. Issuer will
have the right, exercisable by written notice given by Issuer to Holder within
five business days after receipt of the Disposition Notice, but in no event
later than 24 hours before the earlier of the proration date or the date on
which withdrawal rights expire for any such offer, to purchase (or to cause its
designee or designees to purchase) all, but not less than all, of the Option
Shares specified in such Disposition
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<PAGE>
Notice for cash at the price set forth therein. If the purchase price specified
in the Disposition Notice includes any property other than cash, such purchase
price will be deemed to be the amount of any cash included in the purchase price
plus the value (as determined by a nationally recognized investment banking firm
mutually selected by the parties whose fees will be borne equally by Issuer and
Holder) of such other property included in such price; provided that the time
during which Issuer must exercise its right of first refusal and consummate the
purchase of the Issuer Common Stock will not be affected by the time required to
make such determination.
(b) If Issuer exercises its right of first refusal hereunder, the
closing of the purchase of the Option Shares with respect to which such right
has been exercised will take place within two business days after Issuer gives
notice of such exercise, but no later than 6 hours before the earlier of the
proration date or the date on which withdrawal rights expire for any such offer.
Delivery of payment and certificates at such closing will be substantially as
set forth in Section 3 above; provided, however, that if the determination of
value of any noncash consideration has not yet been made, as to that portion of
the purchase price Issuer will pay an amount equal to such value as estimated by
the investment banking firm at closing, with an adjusting payment to be made by
the appropriate party when the final determination has been made. If Issuer
does not exercise its right of first refusal hereunder within the time specified
and pay to Holder the amount due for the Option "shares subject to such right of
first refusal, Holder will at all times thereafter be free to sell the Option
Share specified in such Disposition Notice to the offeror, if any, identified
therein or to any other party, at the price specified therein or at any price in
excess thereof.
12. Specific Performance. Issuer and Grantee acknowledge that the Option
granted to Grantee herein, the right of first refusal granted to Issuer in
Section 11 hereof and the Option Shares covered hereby, are unique and that
neither party hereto will have an adequate remedy at law if the other breaches
any covenant contained herein or fails to perform any of its obligations
hereunder. Accordingly, each party agrees that the other will have the right,
in addition to any other rights which it may have, to specific performance and
equitable and injunctive relief if the other party will fail or threaten to fail
to perform any of its obligations under this Agreement.
13. Miscellaneous.
(a) Assignability. Grantee's rights hereunder may be assigned to any
subsidiary or affiliate of Grantee. Issuer may not assign its rights hereunder
without the prior written consent of Grantee, and any purported assignment
without such prior written consent will be null and void.
(b) Third Parties. Nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give to any third party any
rights or remedies by virtue of this Agreement or any exercise or non-exercise
of the Option granted hereby.
(c) Entire Agreement; Amendments. Except as otherwise expressly
provided herein, this Agreement contains the entire agreement of the parties
hereto with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereto, written or oral.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(d) Notices. Except as otherwise expressly provided herein, all
notices, requests, claims, demands and other communications hereunder will be in
writing and will be furnished by hand delivery, by telegram or telex, or by mail
(registered or certified, postage prepaid, return receipt requested) to the
parties at the addresses set forth below. Any such notice (except a notice
pursuant to Section 10 hereof) will be deemed duly given upon the date it is
actually received by the party to whom notice is intended to be given or is
actually delivered at his address as shown below:
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<PAGE>
If to Issuer:
George W. Hay
First Philson Financial Corporation
534 Main Street
Berlin, PA 15530
with a copy to:
Charles B. Jarrett, Jr., Esq.
Plowman, Spiegel & Lewis
230 Grant Building
Pittsburgh, PA 15219
If to Grantee:
John H. Anderson
BT Financial Corporation
551 Main Street
Johnstown, PA 15901
with a copy to:
Dennis M. Sheedy, Esq.
Pepper Hamilton, LLP
One Mellon Bank Center
Pittsburgh, PA 15219
The addresses set forth above may be changed by any party upon furnishing to the
other party a notice of change of address in accordance with the terms of this
paragraph.
(e) Governing Law. This Agreement will be governed by and construed in
accordance with the substantive law of the Commonwealth of Pennsylvania
applicable to contracts made and to be performed in such state.
(f) Counterparts. This Agreement may be executed in several
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
(g) Effect of Headings. The section and paragraph headings herein are
for convenience only and will not affect the construction hereof.
(h) Time of the Essence. The parties agree that time will be of the
essence in the performance of obligations hereunder.
(i) Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
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<PAGE>
remainder of the terms, provisions, covenants and restrictions contained herein
will remain in full force and effect, and will in no way be effected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Option will not permit Holder to acquire or Issuer to repurchase
pursuant to Section 10 the full number of shares of Issuer Common Stock provided
in Section 8 hereof (as adjusted pursuant to Section 8 hereof), it is the
express intention of Issuer to allow Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without amendment
or modification hereof.
(j) Definitions. Capitalized Terms used but not defined herein will
have the meanings ascribed to them in the Merger Agreement.
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<PAGE>
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed on the day and year first above written.
ATTEST First Philson Financial Corporation
By /s/ Cathy E. Webreck By /s/ George W. Hay
------------------------ -------------------------------------
Cathy E. Webreck George W. Hay
Secretary President
(Corporate Seal)
BT Financial Corporation
By /s/ Laura L. Roth By /s/ Steven C. Ackmann
------------------------ -------------------------------------
Laura L. Roth Steven C. Ackmann
Secretary President
(Corporate Seal)
B-8
<PAGE>
ANNEX C
Draft
[Berwind Letterhead]
BERWIND FAIRNESS OPINION
[Mailing Date]
Board of Directors
BT Financial Corporation
551 Main Street
BT Financial Plaza
Johnstown, Pennsylvania 15901
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding shares of the common stock (the
"Shares") of BT Financial Corporation ("BT") of the exchange ratio of [**]
shares of BT for each outstanding share of First Philson Financial Corporation
("Philson") common stock (the "Exchange Ratio") in the proposed merger (the
"Proposed Merger") by and between BT and Philson as set forth in the Agreement
and Plan of Reorganization dated February 23, 1999 (the "Merger Agreement").
Berwind Financial, L.P., as part of its investment banking business,
regularly is engaged in the valuation of assets, securities and companies in
connection with various types of asset and security transactions, including
mergers, acquisitions, private placements and valuations for various other
purposes, and in the determination of adequate consideration in such
transactions.
In arriving at our opinion, we have, among other things: (i) reviewed the
historical financial performances, current financial positions and general
prospects of BT and Philson and reviewed certain internal financial analyses and
forecasts prepared by the management of BT and Philson, (ii) reviewed the Merger
Agreement, (iii) reviewed and analyzed the stock market performance of BT and
Philson, (iv) studied and analyzed the consolidated financial and operating data
of BT and Philson, (v) considered the terms and conditions of the Proposed
Merger between BT and Philson as compared with the terms and conditions of
comparable bank and bank holding company mergers and acquisitions, (vi) met
and/or communicated with certain members of BT's and Philson's senior management
to discuss their respective operations, historical financial statements and
future prospects, (vii) reviewed this Joint Proxy Statement-Prospectus, and
(viii) conducted such other financial analyses, studies and investigations as we
deemed appropriate.
Our opinion is given in reliance on information and representations made or
given by BT and Philson, and their respective officers, directors, auditors,
counsel and other agents, and on filings, releases and other information issued
by BT and Philson including financial statements, financial projections, and
stock price data as well as certain information from recognized independent
sources. We have not independently verified the information concerning BT and
Philson nor other data which we have considered in our review and, for purposes
of the opinion set forth below, we have assumed and relied upon the accuracy and
completeness of all such information and data. We have not conducted any
valuation or appraisal of any assets or liabilities of BT or Philson, nor have
any such valuations or appraisals been provided to us. Additionally, we assume
that the Proposed Merger is, in all respects, lawful under applicable law.
With regard to financial and other information relating to the general
prospects of BT and Philson, we have assumed that such information has been
reasonably prepared and reflects the best currently available estimates and
judgment of the management of BT and Philson as to their most likely future
performance and the cost savings and other potential synergies (including the
amount, timing and achievability thereof) anticipated to result from the
Proposed Merger. For BT and Philson, we have assumed the allowance for loan
losses indicated on the balance sheets of each entity is adequate to cover such
losses; we have not reviewed
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<PAGE>
credit files of either BT or Philson. Also, in rendering our opinion, we have
assumed that in the course of obtaining the necessary regulatory approvals for
the Proposed Merger no conditions will be imposed that will have a material
adverse effect on the contemplated benefits of the Proposed Merger to BT or
Philson.
Our opinion is based upon information provided to us by the management of
BT and Philson, as well as market, economic, financial and other conditions as
they exist and can be evaluated only as of the date hereof and speaks to no
other period. Our opinion pertains only to the Exchange Ratio, is for the
information of the Board of Directors of BT in connection with its evaluation of
the Proposed Merger and does not constitute a recommendation to the Board of BT
and does not constitute a recommendation to BT shareholders as to how such
shareholders should vote on the Proposed Merger.
Based on the foregoing, it is our opinion that, as of the date hereof that
the Exchange Ratio pursuant to the Merger Agreement is fair, from a financial
point of view, to the holders of Shares.
Sincerely,
BERWIND FINANCIAL, L.P.
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<PAGE>
ANNEX D
Draft
[Hopper Soliday letterhead]
HOPPER SOLIDAY FAIRNESS OPINION
[Mailing Date]
Board of Directors
First Philson Financial Corporation
534 Main Street
Berlin, PA 15530
Gentlemen:
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, of the terms of the proposed merger (the
"Merger") of First Philson Financial Corporation ("First Philson") with and into
BT Financial Corporation ("BT"). Pursuant to the Agreement and Plan of
Reorganization dated February 23, 1999 between First Philson and BT (the "Merger
Agreement"), each share of First Philson Common Stock outstanding at the
Effective Time of Merger will be converted into the right to receive (the
"Merger Consideration") [**] shares of BT Common Stock (the "Exchange Ratio").
Hopper Soliday, a division of Tucker Anthony Incorporated ("Hopper
Soliday"), as a customary part of its investment banking business, is engaged in
valuing businesses and their securities in connection with mergers and
acquisitions, stock purchase offers, negotiated underwritings, secondary
distributions of securities, private placements and for estate, corporate
reorganization and other purposes.
Hopper Soliday reviewed, among other things: i) First Philson's Annual
Reports and related financial information for years ended December 31, 1994
through December 31, 1997 and First Philson's Quarterly Reports on form 10-Q for
the periods ending March 31, 1998, June 30, 1998 and September 30, 1998; ii)
BT's Annual Reports on Form 10-K and related financial information for years
ended December 31, 1994 through December 31, 1998 and Quarterly Reports on Form
10-Q for the periods ending March 31, 1998, June 30, 1998 and September 30,
1997; iii) certain information concerning the respective businesses, operations,
regulatory condition and prospects of BT and First Philson, including financial
forecasts, relating to the business, earnings, assets and prospects of BT and
First Philson, furnished to Hopper Soliday by BT and First Philson, which Hopper
Soliday discussed with members of senior management of BT and First Philson; iv)
historical market prices and trading activity for the BT Common Stock and First
Philson Common Stock and similar data for certain publicly traded companies
which Hopper Soliday deemed to be relevant; v) the results of operations of BT
and First Philson and similar data for certain companies which Hopper Soliday
deemed to be relevant; vi) the financial terms of the Merger contemplated by the
Merger Agreement and the financial terms of certain other mergers and
acquisitions which Hopper Soliday deemed to be relevant; vii) the pro forma
impact of the Merger on the earnings and book value per share, consolidated
capitalization and certain balance sheet and profitability ratios of BT; viii)
the Merger Agreement; and ix) such other matters as Hopper Soliday deemed
necessary. Hopper Soliday also met with certain members of senior management
and other representatives of BT and First Philson to discuss the foregoing as
well as other matters Hopper Soliday deemed relevant.
In conducting our review and in arriving at our opinion, we relied upon and
assumed the accuracy and completeness of the financial and other information
provided to us or that which was publicly available and did not attempt
independently to verify such information. We relied upon the managements of
First Philson and BT as to the reasonableness and achievability of the financial
and operating forecasts and projections (and the assumptions and bases thereof)
provided to us and assumed that such forecasts and projections reflected the
best currently available estimates and judgements of such managements and that
such forecasts and projections would be realized
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<PAGE>
in the amounts and in the time periods estimated by such managements. We also
assumed, without independent verification, that the aggregate allowances for
loan losses for First Philson and BT were adequate. We did not make or obtain
any evaluations or appraisals of the assets of First Philson and BT, nor did we
examine any individual loan credit files. Our opinion is limited to the
fairness, from a financial point of view, to the shareholders of First Philson
of the Merger Consideration.
In rendering our opinion we have assumed that in the course of obtaining
the necessary regulatory approvals for the Merger, no conditions will be imposed
that will have a material adverse effect on the contemplated benefits of the
Merger to either First Philson or, on a pro forma basis, the resulting company
following the Merger. Our opinion necessarily is based upon conditions as they
exist on, and can be evaluated as of, the date of this letter.
On the basis of the aforementioned analysis, and subject to the
qualifications described above, as of the date hereof, we are of the opinion
that the Merger Consideration provided for by the Merger Agreement is fair to
the shareholders of First Philson from a financial point of view.
Sincerely,
Hopper Soliday, a Division of Tucker Anthony Incorporated
D-2
<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
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<PAGE>
all expenses (including attorneys' fees and disbursements), judgments, fines
(including excise taxes and penalties) and amounts paid in settlement actually
and reasonably incurred in connection with such action, suit or proceeding.
Section 24.2 of the registrant's By-laws provides that the registrant shall pay
expenses (including attorneys' fees and disbursements) incurred by a director or
officer of the registrant referred to in Section 24.1 in defending or appearing
as a witness in any civil or criminal action, suit or proceeding described in
Section 24.1 in advance of the final disposition of such action, suit or
proceeding. The expenses incurred by such director or officer shall be paid by
the registrant in advance of the final disposition of such action, suit or
proceeding only upon receipt of an undertaking by or on behalf of such director
or officer to repay all amounts advanced if it shall ultimately be determined
that he is not entitled to be indemnified by the registrant.
Section 1747 of the BCL permits a Pennsylvania business corporation to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against any liability asserted against
such person and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
the person against such liability under the provisions described above.
Section 24.5 of the registrant's By-laws provides that, except in the
circumstances set forth therein, the registrant shall purchase and maintain
insurance on behalf of each director and officer against any liability asserted
against or incurred by such director or officer in any capacity, or arising out
of such director's or officer's status as such, whether or not the registrant
would have the power to indemnify such person against such liability under the
provisions of the By-laws.
The registrant maintains directors' and officers' liability insurance
covering its directors and officers with respect to liabilities, including
liabilities under the Securities Act, which they may incur in connection with
their serving as such. Such insurance may provide coverage for the directors
and officers against certain liabilities even though such liabilities may not be
covered by the above-described By-law indemnification provision. As permitted
by Section 1713 of the BCL, the By-laws of the registrant provide that no
director shall be personally liable for monetary damages for any action taken,
or failure to take any action, except to the extent that such elimination or
limitation of liability is expressly prohibited by law. The BCL states that
this exculpation from liability does not apply (i) where the director has
breached or failed to perform the duties of his office and the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness, and
(ii) to the responsibility or liability of a director pursuant to any criminal
statute or the liability of a director for payment of taxes pursuant to federal,
state or local law. It may also not apply to liabilities imposed upon directors
by the federal securities laws.
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<PAGE>
Item 21. Exhibits And Financial Statement Schedules
(a) The following exhibits are filed herewith or incorporated by
reference as part of this Registration Statement:
Exhibit No Description
2.1. Agreement and Plan of Reorganization dated as of February 23, 1999
by and between BT Financial Corporation and First Philson Financial
Corporation (a copy of which is attached as Annex A to the Joint
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 Corporation
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
10.1 Stock Option Agreement dated February 23, 1999, by and between BT
Financial Corporation and First Philson Financial Corporation (a
copy of which is attached as Annex B to the Joint Proxy Statement-
Prospectus forming part of this registration statement).
22.1 Subsidiaries of BT Financial Corporation.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of S.R. Snodgrass A.C.
23.3 Consent of Pepper Hamilton LLP (included in opinion filed as
Exhibit 5.1).
23.4 Consent of Pepper Hamilton LLP (included in opinion filed as
Exhibit 8.1).
23.5 Consent of Berwind Financial, L.P.
23.6 Consent of Hopper Soliday, A Division of Tucker Anthony Incorporated
25.1 Power of Attorney (filed herewith).
99.1 Form of Proxy to be delivered to shareholders of First Philson
Financial Corporation
99.2 Form of Proxy to be delivered to shareholders of BT Financial
Corporation
(b) All financial statement schedules of BT Financial and First Philson
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.
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<PAGE>
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:
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 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
II-4
<PAGE>
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.
II-5
<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 Johnstown, Commonwealth
of Pennsylvania, on March 24, 1999.
BT FINANCIAL CORPORATION
Principal Executive Officer: By: /s/ John H. Anderson Date: March 24, 1999
------------------------
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 March 24, 1999
Director (Principal Executive Officer)
/s/ Steven C. Ackmann President and Chief Operating Officer March 24, 1999
(Principal Operating Officer)
/s/ Mark L. Sollenberger Executive Vice President and Chief March 24, 1999
Financial
Officer (Principal Financial Officer)
/s/ Brian H. Lehman Vice President and Controller (Principal March 24, 1999
Accounting Officer)
/s/ G. Scott Baton, II Director March 24, 1999
/s/ Martin L. Bearer Director March 24, 1999
/s/ John C. Cwik Director March 24, 1999
/s/ Louis G. Galliker Director April 7, 1999
/s/ William B. Kania Director March 24, 1999
/s/ Edwin L. Mears Director March 24, 1999
/s/ Roger S. Nave Director March 24, 1999
/s/ Ethel J. Otrosina Director March 24, 1999
/s/ Robert G. Salathe, Jr. Director April 7, 1999
/s/ William R. Snoddy Director April 6, 1999
/s/ Gerald W. Swatsworth Director March 24, 1999
/s/ W. A. Thomas Director March 24, 1999
/s/ Rowland H. Tibbott, Jr. Director March 24, 1999
/s/ Thomas A. Young Director March 24, 1999
</TABLE>
II-6
<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 Filed herewith.
BT Financial Corporation and First Philson Financial
Corporation dated February 23, 1999 (a copy of
which is attached as Annex A to the Joint 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 Incorporated by reference to
Financial Corporation dated June 4, 1997 Registration Statement on Form S-4
(No. 333-61683)
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 Filed herewith.
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 Filed herewith.
matters.
10.1 Stock Option Agreement, dated February 23, 1999 by Filed herewith.
and between BT Financial and First Philson (a copy
of which is attached as Annex B)
21.1 Subsidiaries of BT Financial Corporation Filed herewith.
23.1 Consent of PricewaterhouseCoopers LLP Filed herewith.
23.2 Consent of S.R. Snodgrass, A.C. Filed herewith.
23.3 Consent of Pepper Hamilton LLP (included in Filed herewith.
opinion filed as Exhibit 5.1).
23.4 Consent of Pepper Hamilton LLP (included in Filed herewith.
opinion filed as Exhibit 8.1).
23.5 Consent of Berwind Financial, L.P. Filed herewith.
23.6 Consent of Hopper Soliday, A Division of Tucker Filed herewith.
Anthony Incorporated
24.1 Power of Attorney (included on page II-6 herewith) Filed herewith.
99.1 Proxy to be delivered to shareholders of First Philson Filed herewith.
Financial Corporation
99.2 Proxy to be delivered to shareholders of BT Financial Filed herewith.
Corporation
</TABLE>
<PAGE>
Exhibit 5.1
[Pepper Hamilton Letterhead]
April 14, 1999
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 3,136,320 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 February 23,
1999 (the "Merger Agreement") by and between BT Financial and First Philson
Financial Corporation, a Delaware corporation. 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 January 27, 1999 and March 24, 1999, 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.
This opinion is rendered as of the date hereof, and we have not undertaken
to supplement this opinion
<PAGE>
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 Joint Proxy Statement-
Prospectus that is part of the Registration Statement.
Yours truly,
/s/ Pepper Hamilton LLP
<PAGE>
Exhibit 8.1
April 14, 1999
BT Financial Corporation
BT Financial Plaza
551 Main Street
Johnstown, PA 15901
Merger Agreement
----------------
Dated as of February 23, 1999
-----------------------------
By and Between BT Financial Corporation and
-------------------------------------------
First Philson Financial Corporation,
------------------------------------
Ladies and Gentlemen:
We have acted as counsel for BT Financial Corporation in connection
with the proposed merger (the "Merger") of First Philson Financial Corporation,
a Delaware corporation ("First Philson") with and into BT Financial Corporation,
a Pennsylvania corporation, ("BT Financial") pursuant to an Agreement and Plan
of Reorganization dated as of February 23, 1999, (the "Merger Agreement") by and
between BT Financial and First Philson under which each issued and outstanding
share of First Philson common stock, par value $2.50 per share (the "First
Philson Common Stock") will be converted into the right to receive common stock
of BT Financial (the "BT Financial Common Stock").
In that connection, you have requested our opinion regarding the
taxability of the BT Financial Common Stock received by the holders of First
Philson Common Stock (in the aggregate the "Sellers") as a result of the Merger.
In providing our opinion, we have examined the Merger Agreement and the Proxy
Statement/Prospectus contained in the Registration Statement dated April 14,
1999 and such other documents and corporate records as we have deemed necessary
or appropriate for purposes of our opinion. In addition, we have assumed that
(i) the Merger will be consummated in accordance with the provisions of the
Merger Agreement, (ii) the statements concerning the Merger set forth in the
Merger Agreement are true, correct and complete and will continue to be true,
correct and complete at all times up to and including the closing date of the
Merger (the "Closing Date"), (iii) the representations made to us by the BT
Financial and First Philson in their respective letters to us each dated the
date hereof, and delivered to us for purposes of this opinion are true, correct
and complete and will continue to be true, correct and complete at all times up
to and including the Closing Date (such letters, the "Representation Letters"),
(iv) BT Financial and First Philson will complete all actions as represented in
the Representation Letters that are to be completed after the Closing Date, and
(iv) any representations made in the Representation Letters, the Merger
Agreement, and the Proxy Statement/Prospectus "to the best knowledge of" or
similarly qualified are correct, and will continue to be true, correct and
complete at all times up to and including the Closing Date, in each case without
such qualification. If any of the above-described assumptions are untrue for any
reason or if the Merger is consummated in a manner that is inconsistent with the
manner in which it is described in the Merger Agreement or the Proxy
Statement/Prospectus, our opinions as expressed below may be adversely affected
and may not be relied upon.
Based upon the foregoing, in our opinion, for U.S. Federal income tax
purposes,
(a) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) First Philson and BT Financial will each be a party to the
reorganization as defined in
<PAGE>
Section 368(c) of the Code;
(c) neither First Philson nor BT Financial will recognize gain or
loss because of the Merger;
(d) Sellers will not recognize gain or loss on the exchange of the
First Philson Common Stock for the BT Financial Common Stock pursuant to the
Merger.
With respect to cash received for fractional shares, it is our opinion
the difference between the cash received and the portion of the tax basis in the
shares of the First Philson Common Stock surrendered that is allocable to the
fractional shares will be capital gain or loss, assuming the First Philson
Common Stock is held as a capital asset, as defined by Section 1221 of the Code
by the Seller.
The opinions expressed herein are based upon existing statutory,
regulatory and judicial authority, any of which may be changed at any time with
retroactive effect. In addition, our opinions are based solely on the documents
that we have obtained, the statements contained in the Representation Letters,
and the assumptions referred to above, all of which we have assumed will be
true, correct and complete (without regard to any "to the best knowledge of" or
similar qualification) as of the effective time of the Merger. Our opinions
cannot be relied upon if any of the facts pertinent to the Federal income tax
treatment of the Merger stated in such documents or in such additional
information is, or later becomes, inaccurate, or if any of the statements
contained in the Representation Letters, or the assumptions referred to above
are, or later become, inaccurate. Finally, our opinions are limited to the tax
matters specifically covered hereby, and we have not been asked to address, nor
have we addressed, any other tax consequences of the Merger or any other
transactions.
This opinion is being furnished to you for use in connection with the
Form S-4 filed by BT Financial in connection with the Merger (the "Form S-4").
We consent to the filing of this opinion as an exhibit to the Form S-4. We also
consent to the references to Pepper Hamilton LLP under the headings "Certain
Material Federal Tax Consequences" and "Opinion of Pepper Hamilton as to certain
tax matters" which is filed as Exhibit 8.1, in the proxy statement/prospectus
forming a part of the Form S-4.
Very truly yours,
/s/ Pepper Hamilton LLP
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF BT FINANCIAL CORPORATION
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
- ---- ----------------------
<S> <C>
Laurel Bank Pennsylvania
Bedford Associates, Inc. Pennsylvania
Laurel Trust Company Pennsylvania
Laurel Community Development Corporation Pennsylvania
Bedford Associates of Delaware, Inc. Delaware
</TABLE>
<PAGE>
Exhibit 23.1
[PCW Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 concerning the merger of First Philson Financial Corporation into BT
Financial Corporation of our report, dated January 27, 1999, except for Note 22,
as to which the date is February 23, 1999, on our audits of the consolidated
financial statements of BT Financial Corporation and affiliates as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998. We also consent to the reference to our firm under the caption
"Experts".
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
600 Grant Street
Pittsburgh, PA 15219-2777
Dated: April 14, 1999
<PAGE>
Exhibit 23.2
[Snodgrass Letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 concerning the merger of First Philson Financial Corporation into BT
Financial Corporation of our report, dated January 22, 1999 and for note 17, as
to which the date is February 23, 1999, on our audits of the consolidated
financial statements of First Philson Financial Corporation and affiliates as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998. We also consent to the reference to our firm under the
caption "Experts".
/s/ S.R. Snodgrass, A.C.
S.R. Snodgrass, A.C.
101 Bradford Road
Suite 100
Wexford, PA 15090
Dated: April 6, 1999
<PAGE>
Exhibit 23.5
[Berwind Letterhead]
CONSENT OF BERWIND FINANCIAL, L.P.
We consent to the use of our name Berwind Financial, L.P. in this
registration statement on Form S-4 concerning the merger of First Philson
Financial Corporation into BT Financial Corporation and consent to the inclusion
of our Fairness Opinion, dated the date of this Proxy Statement-Prospectus in
this registration statement.
/s/ Berwind Financial, L.P.
Berwind Financial, L.P.
3000 Centre Square West
1500 Market Street
Philadelphia, PA 19102
Dated: April 8, 1999
<PAGE>
Exhibit 23.6
[Hopper Soliday Letterhead]
CONSENT OF HOPPER SOLIDAY, A DIVISION OF TUCKER ANTHONY INCORPORATED
We hereby consent to the use in the Registration on Form S-4 of the
draft of our opinion relating to the fairness to the shareholders of First
Philson Financial Corporation, from a financial point of view, of the terms of
the merger between first Philson Financial Corporation, First Philson National
Bank and BT Financial Corporation, Laurel Bank and to the references to Hopper
Soliday in the Joint Proxy Statement/Prospectus constituting part of this
registration statement. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ Hopper Soliday, a division of Tucker Anthony Incorporated
Hopper Soliday, a division of Tucker Anthony Incorporated
1703 Oregon Pike
Lancaster, PA 17601-4201
Dated: April 8, 1999
<PAGE>
Exhibit 99.1
REVOCABLE PROXY
First Philson Financial Corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints __________________ 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 First Philson Financial Corporation held of record by the undersigned
at the close of business on [FP Record Date] at the Annual Meeting of
Shareholders to be held on [FP 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 ALL listed proposals
(1) Adoption and approval of an Agreement and Plan of Reorganization dated
as of February 23, 1999 by and between BT Financial Corporation and First
Philson Financial Corporation.
For Against Abstain
[ ] [ ] [ ]
(2) Election of Directors - Nominees:
Tommy R. Croner
George W. Hay
George R. Shafer
For All Nominees Withhold All Nominees For all except ____________
(To withhold authority to vote for
any individual nominee, write the
nominee's name in the space provided
above.)
[ ] [ ] [ ]
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:___________, 1999
___________________________________________
Authorized Signature(s)
___________________________________________
Title
<PAGE>
Exhibit 99.2
REVOCABLE PROXY
BT Financial Corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints __________________ 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 BT Financial Corporation held of record by the undersigned at the close
of business on [BT Record Date[ at the Special Meeting of Shareholders to be
held on [BT 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
February 23, 1999 by and between BT Financial Corporation and First Philson
Financial Corporation.
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:___________, 1999
___________________________________________
Authorized Signature(s)
___________________________________________
Title
