<PAGE> 1
[Glacier Bancorp, Inc. Letterhead]
July 16, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Glacier
Meeting") of Stockholders of Glacier Bancorp, Inc. ("Glacier"), a Delaware
corporation and bank holding company, which will be held on Friday, August 21,
1998, at 9:00 a.m. local time, at The Outlaw Inn, 1701 Highway 93 South,
Kalispell, Montana.
At the Glacier Meeting, you will be asked to consider and approve (i)
the Plan and Agreement of Merger dated December 30, 1997 and amended as of June
30, 1998 (the "Merger Agreement") between Glacier and HUB Financial Corporation
("HUB") and the Agreement and Plan of Share Exchange dated December 30, 1997
(the "Share Exchange Agreement") between Glacier and Valley Bank of Helena
("VB"). The Merger Agreement provides for the merger ("Merger") of HUB with and
into Glacier, and the Share Exchange Agreement provides that, immediately
following the closing of the Merger, all outstanding common stock of VB that
is not owned by HUB will be converted into the right to receive Glacier Common
Stock (the "Share Exchange"). Following the closings of both the Merger and the
Share Exchange, HUB and VB stockholders will become stockholders of Glacier,
and VB will be the wholly-owned subsidiary of Glacier. The total number of
shares of Glacier Common Stock, $.01 par value (Glacier Common Stock") to be
issued in the Merger and the Share Exchange combined is 620,000 shares. The
Merger and the Share Exchange are sometimes together referred to as the
"Transactions" in the accompanying Joint Proxy Statement, which also serves as
Glacier's Prospectus for the Glacier Common Stock to be issued in the
Transactions. The complete texts of the Merger Agreement, as amended, and the
Share Exchange Agreement appear as APPENDICES A through C to the Prospectus/
Joint Proxy Statement.
Your Board of Directors has received an opinion from D.A. Davidson &
Co., a regional investment banking firm, to the effect that the consideration to
be paid to HUB and VB stockholders in the Transactions is fair from a financial
point of view. YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER AND THE SHARE
EXCHANGE ARE IN THE BEST INTERESTS OF GLACIER AND ITS STOCKHOLDERS, AND HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE SHARE EXCHANGE AGREEMENT. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE TRANSACTIONS.
Approval of the Transactions requires the affirmative vote of the
holders of a majority of the outstanding shares of Glacier Common Stock. We urge
you to read the attached Prospectus/Joint Proxy Statement and to consider your
vote carefully. If you have any questions regarding this material in advance of
the Glacier Meeting, please call James H. Strosahl, Glacier's Secretary, at
(406) 756-4263. Regardless of the size of your holdings, it is important that
your shares be voted at the Glacier Meeting.
Whether or not you plan to attend the Glacier Meeting, please be
certain to complete, sign and date the enclosed proxy, and return it promptly in
the postage-paid envelope provided. If you attend the Glacier Meeting, you may
vote in person if you wish, even though you have previously returned your proxy.
If for any reason you should desire to revoke your proxy, you may do so at any
time before it is voted at the Glacier Meeting.
On behalf of your Board of Directors, I recommend that you vote FOR
approval of the Transactions.
Sincerely,
John S. MacMillan Michael J. Blodnick
Chairman of the Board President and Chief Executive Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 2
Glacier Bancorp, INC.
P.O. BOX 27
202 MAIN STREET
KALISPELL, MONTANA 59903-0027
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD August 21, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting ("Glacier Meeting") of
Stockholders of Glacier Bancorp, Inc. ("Glacier"), a Delaware corporation and
bank holding company, will be held on Friday, August 21, 1998 at 9:00 a.m. local
time, at The Outlaw Inn, 1701 Highway 93 South, Kalispell, Montana. The Meeting
is for the following purposes:
1. ACQUISITION OF HUB FINANCIAL CORPORATION AND VALLEY BANK OF HELENA:
MERGER AND SHARE EXCHANGE AGREEMENTS. To consider and vote upon a proposal to
approve (i) the Agreement and Plan of Merger ("Merger Agreement") dated as of
December 30, 1997 and amended as of June 30, 1998 between Glacier and HUB
Financial Corporation ("HUB") a Montana corporation and bank holding company,
under the terms of which HUB will merge with and into Glacier, and (ii) the Plan
and Agreement of Share Exchange ("Share Exchange Agreement") dated as of
December 30, 1997 between Glacier and Valley Bank of Helena ("VB"), under the
terms of which all share of the common stock of VB outstanding at the closing of
the Merger that are not owned by HUB will be converted into the right to receive
shares of Glacier Common Stock, $.01 par value per share ("Glacier Common
Stock"). The Merger Agreement, as amended, and the Share Exchange Agreement are
more fully described in the accompanying Prospectus/Joint Proxy Statement, and
are attached as APPENDICES A through C to such document.
2. OTHER MATTERS. To act upon such other matters as may properly come
before the Glacier Meeting or any adjournment thereof.
Only holders of record of the Glacier Common Stock, $.01 par value per
share ("Glacier Common Stock"), at the close of business on July 15, 1998 (the
record date for the Glacier Meeting), are entitled to notice of, and to vote at,
the Glacier Meeting or any adjournments or postponements thereof. The
affirmative vote of the holders of a majority of the outstanding shares of
Glacier Common Stock is required for approval of the Merger Agreement and the
Share Exchange Agreement. As of July 15, 1998, there were 6,943,534 shares of
Glacier Common Stock outstanding.
All stockholders are cordially invited to attend the Glacier Meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope in order to vote your shares of Glacier Common Stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to Glacier's secretary at or prior to the
Glacier Meeting, or by appearing and voting at the Glacier Meeting in person.
Attendance at the Glacier Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors
James H. Strosahl, Secretary
Kalispell, Montana
July 16, 1998
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE GLACIER MEETING. APPROVAL OF THE MERGER AND SHARE
EXCHANGE REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF GLACIER COMMON STOCK. IN ORDER TO ENSURE THAT THE
REQUISITE VOTES ARE OBTAINED AND THAT A QUORUM IS ATTAINED, WE URGE YOU TO SIGN,
DATE AND RETURN THE ENCLOSED PROXY FORM.
<PAGE> 3
[HUB Financial Corporation Letterhead]
July 16, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Stockholders of HUB Financial Corporation ("HUB"), a Montana
corporation and bank holding company for Valley Bank of Helena ("VB"). The
Special Meeting will be held on Monday, August 24, 1998, at 3:00 p.m.
local time, in the Community Room of the main office of Valley Bank of Helena,
3030 N. Montana Avenue, Helena, Montana.
The attached Notice of Special Meeting and Prospectus/Joint Proxy
Statement describe the formal business to be transacted at the Special Meeting.
At the Special Meeting, you will be asked to consider and vote upon a proposal
to approve the Plan and Agreement of Merger ("Merger Agreement"), dated as of
December 30, 1997 and amended as of June 30, 1998, between Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company, and HUB. The
Merger Agreement provides for the merger ("Merger") of HUB with and into
Glacier, with Glacier as the surviving corporation. Consequently, HUB's
stockholders would become stockholders of Glacier, and VB would become a
subsidiary of Glacier.
The Merger is subject to various conditions which, with other terms of
the Merger, are contained in the Merger Agreement and described in the attached
Joint Proxy Statement, which also serves as a Prospectus of Glacier for its
common stock, $.01 par value per share ("Glacier Common Stock") to be issued in
the Merger. If the Merger is completed, each HUB stockholder will receive shares
of Glacier Common Stock for each share of HUB Common Stock, no par value per
share ("HUB Common Stock") owned, based on an exchange formula detailed in the
Prospectus/Joint Proxy Statement. The complete text of the Merger Agreement, as
amended, appears at APPENDICES A and B to the Prospectus/Joint Proxy Statement.
Your Board of Directors has received an opinion from Columbia Financial
Advisors, Inc. to the effect that, as of the date of this Prospectus/Joint Proxy
Statement and based on the factors and assumptions described in the opinion, the
consideration to be received by HUB and its stockholders in the Merger is fair
from a financial point of view. THE BOARD OF DIRECTORS BELIEVES THAT THE MERGER
IS IN THE BEST INTERESTS OF HUB AND ITS STOCKHOLDERS, AND HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE MERGER.
Approval of the Merger requires the affirmative vote of the holders of
two-thirds of the outstanding shares of HUB Common Stock. We urge you to review
the attached Prospectus/Joint Proxy Statement and to consider your vote
carefully. If you have any questions regarding this material in advance of the
Special Meeting, please call Fred Flanders at (406) 443-7440.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, REGARDLESS OF THE SIZE OF YOUR HOLDINGS, AND WHETHER YOU PLAN TO ATTEND
THE SPECIAL MEETING IN PERSON OR NOT. A FAILURE TO VOTE, EITHER BY NOT RETURNING
THE ENCLOSED PROXY OR BY CHECKING THE "ABSTAIN" BOX ON THE PROXY, WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE MERGER AGREEMENT. TO ASSURE THAT
YOUR SHARES ARE REPRESENTED IN VOTING ON THIS VERY IMPORTANT MATTER, PLEASE
SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND, YOU
MAY (IF YOU WISH), REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT THE
SPECIAL MEETING.
On behalf of your Board of Directors, we recommend that you vote FOR
approval of the Merger Agreement.
Very truly yours,
Thomas F. Dowling
Chairman of the Board, President and Chief Executive
Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 4
HUB FINANCIAL CORPORATION
3030 N. MONTANA AVENUE
HELENA, MONTANA 59801-0551
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 24, 1998
TO THE STOCKHOLDERS OF HUB FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that pursuant to call of its directors, a
Special Meeting ("Special Meeting") of Stockholders of HUB Financial Corporation
("HUB"), a Montana corporation and bank holding company, will be held on
Monday, August 24, 1998, at 3:00 p.m. local time, in the Community Room of the
main office of Valley Bank of Helena, 3030 N. Montana Avenue, Helena, Montana.
The Special Meeting is for the following purposes:
1. MERGER AGREEMENT. To consider and vote upon a proposal to approve
the Plan and Agreement of Merger ("Merger Agreement"), dated as of December 30,
1997 and amended as of June 30, 1998, between HUB and Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company, under the terms of
which HUB will merge with and into Glacier, as more fully described in the
accompanying Prospectus/Joint Proxy Statement. The Merger Agreement, as amended,
is attached at APPENDICES A and B to the Prospectus/Joint Proxy Statement.
2. OTHER MATTERS. To act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only holders of record of the HUB Common Stock, no par value per share,
at 5:00 p.m. on July 15, 1998 (the record date for the Special Meeting),
are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof. The affirmative vote of the holders of
two-thirds or more of the outstanding shares of HUB Common Stock is required for
approval of the Merger Agreement. As of July 15, 1998, there were 9,265 shares
of HUB Common Stock outstanding.
HUB stockholders desiring to do so may dissent from the Merger and
obtain payment for their shares in accordance with the provisions of the Montana
Business Corporation Act, Sections 35-1-826 through 35-1-839, a copy of which is
included in the Prospectus/Joint Proxy Statement. See "THE MERGER -- Dissenters'
Rights of Appraisal" and APPENDIX H.
All stockholders are cordially invited to attend the Special Meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope in order to vote your shares of HUB Common Stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to HUB's Secretary at or prior to the
Special Meeting, or by appearing and voting at the Special Meeting in person.
Attendance at the Special Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
James T. Harrison, Jr.
Helena, Montana
July 16, 1998
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE MERGER REQUIRES
THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES OF HUB
COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE OBTAINED AND A
QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
FORM.
<PAGE> 5
[Valley Bank of Helena Letterhead]
July 16, 1998
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Stockholders of Valley Bank of Helena ("VB"), a Montana banking
corporation. The Special Meeting will be held on Monday, August 24, 1998, at
3:00 p.m local time, in the Community Room of the main office of Valley Bank of
Helena, 3030 N. Montana Avenue, Helena, Montana.
The attached Notice of Special Meeting and Prospectus/Joint Proxy
Statement describe the formal business to be transacted at the Special Meeting.
At the Special Meeting, you will be asked to consider and vote upon a proposal
to approve the Agreement and Plan of Share Exchange ("Share Exchange
Agreement"), dated as of December 30, 1997, between Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company, and VB. The Share
Exchange Agreement provides for the exchange ("Share Exchange") of outstanding
shares of VB common stock for shares of Glacier Common Stock. Concurrently with
the Special Meeting, stockholders of HUB Financial Corporation ("HUB"), the
parent company of VB, will be voting on a Plan and Agreement of Merger that, if
approved, will cause HUB to be merged with and into Glacier (the "Merger"),
causing VB to become a subsidiary of Glacier. Following the closing of the
Merger and the Share Exchange, VB's stockholders would become stockholders of
Glacier, and VB would become a wholly-owned subsidiary of Glacier. The purpose
of the Share Exchange is to afford the minority stockholders of VB (VB
stockholders other than HUB) the same opportunity as HUB stockholders to
participate in the Merger.
The Share Exchange is subject to various conditions which, with other
terms of the Share Exchange, are contained in the Share Exchange Agreement and
described in the attached Joint Proxy Statement, which also serves as a
Prospectus of Glacier for its common stock, $.01 par value per share ("Glacier
Common Stock") to be issued in the Share Exchange. If the Share Exchange is
completed, each VB stockholder will receive shares of Glacier Common Stock for
each share of VB Common Stock, $40.00 par value per share ("VB Common Stock")
owned, based on an exchange formula detailed in the Prospectus/Joint Proxy
Statement. The complete text of the Share Exchange Agreement appears as APPENDIX
C to the Prospectus/Joint Proxy Statement.
Your Board of Directors has received an opinion from Columbia Financial
Advisors, Inc. to the effect that, as of the date of this Prospectus/Joint Proxy
Statement and based on the factors and assumptions described in the opinion, the
consideration to be received by VB and its stockholders in the Share Exchange is
fair from a financial point of view. THE BOARD OF DIRECTORS BELIEVES THAT THE
SHARE EXCHANGE IS IN THE BEST INTERESTS OF VB AND ITS STOCKHOLDERS, AND HAS
UNANIMOUSLY APPROVED THE SHARE EXCHANGE AGREEMENT. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE SHARE EXCHANGE. HUB HAS AGREED TO VOTE
ALL SHARES OF VB COMMON STOCK OWNED BY IT (APPROXIMATELY 86.5% OF OUTSTANDING VB
COMMON STOCK) IN FAVOR OF THE SHARE EXCHANGE. CONSEQUENTLY, THE RECEIPT OF
REQUISITE VB STOCKHOLDER APPROVAL OF THE SHARE EXCHANGE IS ASSURED.
Approval of the Share Exchange requires the affirmative vote of the
holders of two-thirds of the outstanding shares of VB Common Stock. We urge you
to review the attached Prospectus/Joint Proxy Statement and to consider your
vote carefully. If you have any questions regarding this material in advance of
the Special Meeting, please call Fred Flanders at (406) 443-7440.
IT IS VERY IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL
MEETING, REGARDLESS OF THE SIZE OF YOUR HOLDINGS, AND WHETHER YOU PLAN TO ATTEND
THE SPECIAL MEETING IN PERSON OR NOT. A FAILURE TO VOTE, EITHER BY NOT RETURNING
THE ENCLOSED PROXY OR BY CHECKING THE "ABSTAIN" BOX ON THE PROXY, WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST APPROVAL OF THE SHARE EXCHANGE AGREEMENT. TO
ASSURE THAT YOUR SHARES ARE REPRESENTED IN VOTING ON THIS VERY IMPORTANT MATTER,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU
DO ATTEND, YOU MAY (IF YOU WISH), REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON AT THE SPECIAL MEETING.
On behalf of your Board of Directors, we recommend that you vote FOR
approval of the Share Exchange Agreement.
Very truly yours,
Mary D. Munger, Chairman Fred J. Flanders, President
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 6
VALLEY BANK OF HELENA
3030 N. MONTANA AVENUE
HELENA, MONTANA 59601-0551
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 24, 1998
TO THE STOCKHOLDERS OF VALLEY BANK OF HELENA:
NOTICE IS HEREBY GIVEN that pursuant to call of its directors, a
Special Meeting ("Special Meeting") of Stockholders of Valley Bank of Helena
("VB"), a Montana banking corporation, will be held on Monday, August 24, 1998,
at 3:00 p.m. local time, in the Community Room of the main office of Valley
Bank of Helena, 3030 N. Montana Avenue, Helena, Montana. The Special Meeting is
for the following purposes:
1. SHARE EXCHANGE AGREEMENT. To consider and vote upon a proposal to
approve the Agreement and Plan of Share Exchange ("Share Exchange Agreement"),
dated as of December 30, 1997, between VB and Glacier Bancorp, Inc. ("Glacier"),
a Delaware corporation and bank holding corporation, under the terms of which
all outstanding shares of VB's common stock ("VB Common Stock") will be
exchanged with Glacier for shares of Glacier's common stock ("Glacier Common
Stock"), as more fully described in the accompanying Prospectus/Joint Proxy
Statement. The Share Exchange Agreement is attached as APPENDIX C to the
Prospectus/Joint Proxy Statement.
2. OTHER MATTERS. To act upon such other matters as may properly come
before the Special Meeting or any adjournment thereof.
Only holders of record of VB Common Stock, $40.00 par value per share,
at 5:00 p.m. on July 15, 1998 (the record date for the Special Meeting),
are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof. The affirmative vote of the holders of
two-thirds or more of the outstanding shares of VB Common Stock is required for
approval of the Share Exchange Agreement. As of July 15, 1998, there
were 11,000 shares of VB Common Stock outstanding.
VB stockholders desiring to do so may dissent from the Share Exchange
and obtain payment for their shares in accordance with the provisions of the
Montana Business Corporation Act, Sections 35-1-826 through 35-1-839, a copy of
which is included in the Prospectus/Joint Proxy Statement. See "THE SHARE
EXCHANGE -- Dissenters' Rights of Appraisal" and APPENDIX H.
All stockholders are cordially invited to attend the Special Meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope in order to vote your shares of VB Common Stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to VB's Secretary at or prior to the
Special Meeting, or by appearing and voting at the Special Meeting in person.
Attendance at the Special Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
Peter Van Nice, Secretary
Helena, Montana
July 16, 1998
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE SHARE EXCHANGE
REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES
OF VB COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE OBTAINED AND
A QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
FORM.
<PAGE> 7
JOINT PROXY STATEMENT
HUB FINANCIAL CORPORATION, VALLEY BANK OF HELENA, AND GLACIER BANCORP, INC.
PROSPECTUS
GLACIER BANCORP, INC. COMMON STOCK ($.01 PAR VALUE)
This Prospectus/Joint Proxy Statement is being furnished to holders of
shares of common stock, no par value ("HUB Common Stock"), of HUB Financial
Corporation ("HUB"), a Montana corporation and bank holding company, and to
holders of common stock, $40.00 par value ("VB Common Stock"), of Valley Bank of
Helena ("VB"), a Montana banking corporation and the subsidiary of HUB
Financial, in connection with the solicitation of proxies by the respective
Boards of Directors of (1) HUB ("HUB Board") for use at the Special Meeting of
HUB Stockholders ("HUB Meeting") to be held on August 24, 1998, at 3:00 p.m.
local time, in the Community Room of the main office of Valley Bank of Helena,
3030 N. Montana Avenue, Helena, Montana and at any adjournments or
postponements of the HUB Meeting, and (2) VB ("VB Board") for use at the
Special Meeting of VB Stockholders ("VB Meeting") to be held on August 24,
1998, at 3:00 p.m. local time, in the Community Room of the main office of
Valley Bank of Helena, 3030 N. Montana Avenue, Helena, Montana and at any
adjournments or postponements of VB Meeting. This Prospectus/Joint Proxy
Statement and the accompanying proxy forms are first being mailed to the
stockholders of HUB and VB on July 20, 1998.
This Prospectus/Joint Proxy Statement is also being furnished by
Glacier Bancorp, Inc. ("Glacier"), a Delaware corporation and bank holding
company, to the holders of record as of July 15, 1998, of Glacier common stock,
$.01 per share par value ("Glacier Common Stock") in connection with the
solicitation of proxies by the Board of Directors of Glacier ("Glacier Board")
for use at the special Meeting ("Glacier Meeting") to be held on August 21, 1998
and at any adjournments or postponements of the Glacier Meeting. This
Prospectus/Joint Proxy Statement and the accompanying proxy form are first
being mailed to the stockholders of Glacier on July 20, 1998.
At the HUB Meeting, the stockholders of HUB will vote upon a proposal
to approve the merger ("Merger") of HUB with and into Glacier, under the
terms of the Plan and Agreement of Merger ("Merger Agreement") dated as of
December 30, 1997 and amended as of June 30, 1998, between Glacier and
HUB. The Merger Agreement is hereby incorporated in this Prospectus/Joint Proxy
Statement by reference. The Merger Agreement and the amendment to such Merger
Agreement are attached to this Prospectus/Joint Proxy Statement at APPENDICES A
and B.
At the VB Meeting, the stockholders of VB will vote upon a proposal to
approve the share exchange ("Share Exchange") pursuant to which those shares of
VB Common Stock outstanding immediately following consummation of the Merger
that are not owned by Glacier (the "Minority Stock") will be transferred to
Glacier in exchange for shares of Glacier's Common Stock, under the terms of the
Agreement and Plan of Share Exchange ("Share Exchange Agreement") dated as of
December 30, 1997 between Glacier and VB. The Share Exchange would be effected
immediately following consummation of the Merger, thereby making VB the
wholly-owned subsidiary of Glacier. The Share Exchange Agreement is incorporated
in this Prospectus/Joint Proxy Statement by reference. The Share Exchange
Agreement is attached to this Prospectus/Joint Proxy Statement as APPENDIX C.
At the Glacier Meeting, the stockholders of Glacier will vote upon a
proposal to approve the Merger of HUB with and into Glacier, and the related
Share Exchange between Glacier and the holders of the Minority Stock of VB. The
Merger and the Share Exchange are separate transactions, but are both related to
Glacier's acquisition of VB, and will be voted on together as one item by
Glacier stockholders at the Glacier Meeting. The Merger and the Share Exchange
are sometimes collectively referred to in this Prospectus/Joint Proxy Statement
as the " HUB/VB Transactions."
This Prospectus/Joint Proxy Statement also constitutes the Prospectus
of Glacier filed as part of a Registration Statement on Form S-4 ("Registration
Statement") with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended ("1933 Act"), relating to the shares of
Glacier Common Stock to be issued in the Merger and the Share Exchange. When the
Merger becomes effective, all outstanding shares of HUB Common Stock will be
converted into the right to receive shares of Glacier Common Stock. In the
Merger, cash will be paid in lieu of fractional shares. When the Share Exchange
becomes effective immediately following consummation of the Merger, all Minority
Stock will be transferred to Glacier in exchange for shares of Glacier Common
Stock. HUB stockholders and VB stockholders desiring to do so may dissent from
the Merger and the Share Exchange, respectively, and obtain payment for their
shares in accordance with the provisions of the Montana Business Corporations
Act ("MBCA"), Sections 35-1-826 through 35-1-839, a copy of which is included as
Appendix H to this Prospectus/Joint Proxy Statement. Glacier stockholders are
not entitled to any dissenters' rights under the Delaware General Corporation
Law ("DGCL"). For a more detailed discussion of the foregoing provisions, and a
description
<PAGE> 8
of certain other significant considerations in connection with the Merger and
the Share Exchange, see "THE MERGER --Basic Terms of Merger; Dissenters' Rights
of Appraisal; Conditions to the Merger; and Interests of Certain Persons in the
Merger," and "THE SHARE EXCHANGE -- Basic Terms of Share Exchange; Dissenters'
Rights of Appraisal; Conditions to the Share Exchange; and Interests of Certain
Persons in the Share Exchange."
THIS PROSPECTUS/JOINT PROXY STATEMENT DOES NOT COVER ANY RESALE OF THE
SECURITIES TO BE RECEIVED BY STOCKHOLDERS OF HUB UPON CONSUMMATION OF THE
MERGER, OR BY STOCKHOLDERS OF VB UPON CONSUMMATION OF THE SHARE EXCHANGE, AND NO
PERSON IS AUTHORIZED TO MAKE ANY USE OF THIS PROSPECTUS/JOINT PROXY IN
CONNECTION WITH ANY SUCH RESALE.
THE SHARES OF GLACIER COMMON STOCK ISSUABLE IN THE MERGER AND THE SHARE
EXCHANGE ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A
BANK AND ARE NOT INSURED BY A BANK INSURANCE FUND OF THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR
INSTRUMENTALITY.
THE SHARES OF GLACIER COMMON STOCK ISSUABLE IN THE MERGER AND THE SHARE
EXCHANGE HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus/Joint Proxy Statement is July 16, 1998.
<PAGE> 9
AVAILABLE INFORMATION
Glacier is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended ("1934 Act"). Glacier is the
successor issuer of Original Glacier, which was subject to the reporting
requirements of the 1934 Act until the date of the Curative Transaction. In
accordance with the 1934 Act, Glacier files reports, proxy statements, and other
information with the SEC. HUB is not subject to the information and reporting
requirements of the 1934 Act.
Under the rules and regulations of the SEC, the solicitations of
stockholders to approve the Merger and the Share Exchange constitute an offering
of the Glacier Common Stock to be issued in conjunction with the Merger and the
Share Exchange. Glacier has filed a Registration Statement with the SEC under
the 1933 Act covering the Glacier Common Stock to be issued in connection with
the Merger and the Share Exchange. The Registration Statement and the exhibits
thereto, as well as the reports, proxy statements, and other information
previously filed with the SEC by Original Glacier under the 1934 Act may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at 7
World Trade Center, Thirteenth Floor, New York, New York 10048, and at The
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may also be obtained at prescribed rates from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of materials filed by Original Glacier with the SEC may also be
obtained through the SEC's Internet address at http://www.sec.gov. In addition,
materials filed by Glacier are available for inspection at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement constitutes part of the
Registration Statement (File No. 333-58503) filed by Glacier with the SEC under
the 1933 Act. This Prospectus/Joint Proxy Statement omits certain information
contained in the Registration Statement in accordance with the rules and
regulations of the SEC. Reference is made hereby to the Registration Statement
and related exhibits for further information with respect to Glacier and the
Glacier Common Stock. Statements contained herein or in any document
incorporated herein by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement or such other document incorporated
herein by reference. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Original Glacier with the SEC under the
1934 Act are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1997
("1997 10-K");
2. Quarterly Reports on Form 10-Q for the quarter ended March 31, 1998;
3. Proxy Statement for its 1998 Annual Meeting of Stockholders ("1998
Proxy"); and
4. Current Reports on Form 8-K filed during the fiscal year 1998 ("1998
8-K's").
All documents filed by Glacier under Sections 13(a), 13(c), 14 and
15(d) of the 1934 Act after the date hereof and before the HUB Meeting, VB
Meeting and the Glacier Meeting are incorporated by reference herein and are a
part hereof from each document's date of filing. Any statement contained in a
document incorporated by reference herein as modified or superseded for purposes
hereof to the extent that a statement contained herein or in any other
subsequently filed document that also is incorporated by reference herein
modifies or supersedes that statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part
hereof.
-------------------
All information contained in this Prospectus/Joint Proxy Statement
relating to Glacier has been furnished by Glacier, and HUB and VB are relying
upon the accuracy of that information. All information contained in this
Prospectus/Joint Proxy Statement relating to HUB has been furnished by HUB, and
Glacier is relying upon the accuracy of that information. All information
contained in this Prospectus/Joint Proxy Statement relating to VB has been
furnished by VB, and Glacier is relying upon the accuracy of that information.
<PAGE> 10
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/JOINT PROXY STATEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY GLACIER, HUB OR VB. THIS PROSPECTUS/JOINT PROXY
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS/JOINT PROXY STATEMENT, OR
THE SOLICITATION OF A PROXY, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER, SOLICITATION OF AN OFFER, OR PROXY SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS/JOINT PROXY STATEMENT NOR ANY
DISTRIBUTION OF THE SECURITIES OFFERED UNDER THE TERMS OF THIS PROSPECTUS/JOINT
PROXY STATEMENT SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS
OF HUB, VB, AND GLACIER OR ANY OF THEIR RESPECTIVE SUBSIDIARIES SINCE THE DATE
OF THIS PROSPECTUS/JOINT PROXY STATEMENT OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
<PAGE> 11
<TABLE>
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TABLE OF CONTENTS
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GLOSSARY OF CERTAIN KEY TERMS...........................................................................................G-1
SUMMARY ..................................................................................................................1
INTRODUCTION..............................................................................................................1
The Transactions.................................................................................................1
Recent Developments..............................................................................................1
HUB MERGER................................................................................................................2
Introduction.....................................................................................................2
Parties to the Merger............................................................................................2
HUB Special Stockholders Meeting.................................................................................3
Glacier Special Stockholders Meeting.............................................................................3
The Merger; Exchange Ratio.......................................................................................3
Reasons for the Merger...........................................................................................3
Recommendation of the HUB Board..................................................................................5
Recommendation of the Glacier Board..............................................................................5
Opinion of Financial Advisor to HUB..............................................................................5
Effective Date of the Merger.....................................................................................5
Exchange of Stock Certificates...................................................................................5
Conditions; Regulatory Approvals.................................................................................6
Stock Option Agreement...........................................................................................6
Amendment or Termination of Merger Agreement.....................................................................6
Directors and Executive Officers After the Merger................................................................6
Federal Income Tax Treatment of the Merger.......................................................................7
Accounting Treatment of the Merger...............................................................................7
Dissenters' Rights of Appraisal..................................................................................7
Interests of Certain Persons in the Merger.......................................................................7
Comparison of Stockholders' Rights...............................................................................7
Trading Markets..................................................................................................8
VB SHARE EXCHANGE.........................................................................................................8
Introduction.....................................................................................................8
Parties to the Share Exchange....................................................................................8
VB Special Stockholders Meeting..................................................................................8
Glacier Special Stockholders Meeting.............................................................................9
The Share Exchange; Exchange Ratio...............................................................................9
Reasons for the Share Exchange...................................................................................9
Recommendation of the VB Board..................................................................................10
Recommendation of the Glacier Board.............................................................................10
Opinion of Financial Advisor to Glacier.........................................................................10
Opinion of Financial Advisor to VB..............................................................................10
Effective Date of the Share Exchange............................................................................10
Exchange of Stock Certificates..................................................................................11
Conditions; Regulatory Approvals................................................................................11
Amendment or Termination of Share Exchange Agreement............................................................11
Directors and Executive Officers After the Share Exchange.......................................................11
Federal Income Tax Treatment of the Share Exchange..............................................................11
Accounting Treatment of the Share Exchange......................................................................12
Dissenters' Rights of Appraisal.................................................................................12
Interests of Certain Persons in the Share Exchange..............................................................12
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Comparison of Stockholders' Rights..............................................................................12
Trading Markets.................................................................................................12
STOCK PRICE AND DIVIDEND INFORMATION.....................................................................................13
Glacier ........................................................................................................13
HUB ............................................................................................................13
VB .............................................................................................................13
Recent Stock Price Data.........................................................................................13
EQUIVALENT PER COMMON SHARE DATA.........................................................................................15
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA...............................................................15
HUB SPECIAL STOCKHOLDERS MEETING.........................................................................................19
Date, Time, Place...............................................................................................19
Purpose.........................................................................................................19
Record Date; Shares Outstanding and Entitled to Vote............................................................19
Vote Required...................................................................................................19
Voting, Solicitation, and Revocation of Proxies.................................................................19
VB SPECIAL STOCKHOLDERS MEETING..........................................................................................20
Date, Time, Place...............................................................................................20
Purpose.........................................................................................................20
Record Date; Shares Outstanding and Entitled to Vote............................................................20
Vote Required...................................................................................................20
Voting, Solicitation, and Revocation of Proxies.................................................................20
GLACIER SPECIAL STOCKHOLDERS MEETING.....................................................................................21
Date, Time, Place...............................................................................................21
Purpose.........................................................................................................21
Record Date; Shares Outstanding and Entitled to Vote............................................................21
Vote Required...................................................................................................21
Voting, Solicitation, and Revocation of Proxies.................................................................21
BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE..............................................................22
Background......................................................................................................22
Recent Developments.............................................................................................23
Reasons For Merger - HUB........................................................................................23
Reasons For The Share Exchange - VB.............................................................................24
Reasons for the Merger and Share Exchange - Glacier.............................................................24
Opinion of HUB and VB Financial Advisor.........................................................................26
Recommendation of the HUB Board and VB Board....................................................................28
Opinion of Glacier Financial Advisor............................................................................28
Recommendation of the Glacier Board.............................................................................31
THE MERGER...............................................................................................................31
General.........................................................................................................31
Basic Terms of the Merger.......................................................................................31
Mechanics of the Merger.........................................................................................32
Exchange of Stock Certificates..................................................................................32
Cash for Fractional Shares......................................................................................32
Conditions to the Merger; Regulatory Approvals..................................................................32
Stock Option Agreement..........................................................................................33
Amendment or Termination of Merger Agreement....................................................................33
Conduct Pending the Merger......................................................................................34
Directors and Executive Officers After the Merger...............................................................35
ii
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Employee Benefit Plans..........................................................................................35
Interests of Certain Persons in the Merger......................................................................35
Federal Income Tax Treatment of the Merger......................................................................36
Accounting Treatment of Merger..................................................................................36
Dissenters' Rights of Appraisal.................................................................................37
Stock Resales by HUB Affiliates.................................................................................37
No Solicitation.................................................................................................38
Expenses .......................................................................................................38
THE SHARE EXCHANGE.......................................................................................................38
General.........................................................................................................38
Basic Terms of the Share Exchange...............................................................................38
Mechanics of the Share Exchange.................................................................................39
Exchange of Stock Certificates..................................................................................39
Cash for Fractional Shares......................................................................................39
Conditions to the Share Exchange; Regulatory Approvals..........................................................39
Amendment or Termination of the Share Exchange Agreement........................................................40
Conduct Pending the Share Exchange..............................................................................40
Directors and Executive Officers After the Share Exchange.......................................................40
Interests of Certain Persons in the Share Exchange..............................................................40
Certain Federal Income Tax Consequences of the Share Exchange...................................................40
Accounting Treatment of Share Exchange..........................................................................41
Dissenters' Rights of Appraisal.................................................................................41
Stock Resales by HUB Affiliates.................................................................................42
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS..............................................................42
Basis of Presentation Unaudited Condensed Pro Forma Combined Financial Statements...............................42
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS..............................................................43
INFORMATION CONCERNING GLACIER...........................................................................................49
General.........................................................................................................49
Year 2000 Issues................................................................................................49
INFORMATION CONCERNING HUB AND VB........................................................................................50
Business........................................................................................................50
Competition.....................................................................................................50
Facilities......................................................................................................51
Employees.......................................................................................................51
Legal Proceedings...............................................................................................51
HUB AND VB MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................................................................52
Overview .......................................................................................................52
Results of Operations...........................................................................................52
Financial Condition.............................................................................................54
Liquidity and Source of Funds...................................................................................56
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS - HUB...................................................56
Other Principal Stockholder.....................................................................................57
MANAGEMENT...............................................................................................................57
SUPERVISION AND REGULATION...............................................................................................58
Introduction....................................................................................................58
The Holding Companies...........................................................................................58
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General.........................................................................................................58
Bank Holding Company Structure..................................................................................58
Transactions with Affiliates....................................................................................59
Regulation of Management........................................................................................59
FIRREA..........................................................................................................59
Tie-In Arrangements.............................................................................................59
State Law Restrictions..........................................................................................59
Securities Registration and Reporting...........................................................................60
The Subsidiaries................................................................................................60
General.........................................................................................................60
Loans-to-One Borrower...........................................................................................60
FDIC Insurance..................................................................................................60
Capital Requirements............................................................................................61
Restrictions on Capital Distributions...........................................................................62
Federal Home Loan Bank System...................................................................................63
Federal Reserve System..........................................................................................63
Recent Federal Legislation......................................................................................63
DESCRIPTION OF GLACIER'S CAPITAL STOCK...................................................................................64
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER, HUB AND VB COMMON STOCK..............................................64
CERTAIN LEGAL MATTERS....................................................................................................69
EXPERTS .................................................................................................................69
OTHER MATTERS............................................................................................................69
FINANCIAL STATEMENTS OF HUB FINANCIAL CORPORATION
</TABLE>
APPENDIX A - Plan and Agreement of Merger
APPENDIX B - First Amendment of Plan and Agreement of Merger
APPENDIX C - Agreement and Plan of Share Exchange
APPENDIX D - Stock Option Agreement
APPENDIX E - Opinion of Columbia Financial Advisors, Inc. - HUB
APPENDIX F - Opinion of Columbia Financial Advisors, Inc. - VB
APPENDIX G - Opinion of D.A. Davidson & Co.
APPENDIX H - Sections 35-1-826 through 35-1-839 of the Montana
Business Corporation Act (Dissenters' Rights of
Appraisal under Montana Law)
iv
<PAGE> 15
GLOSSARY OF CERTAIN KEY TERMS
ORIGINAL GLACIER.................. Glacier Bancorp, Inc.'s predecessor
corporation, a Delaware corporation that
ceased corporate existence on the closing
of the Curative Transaction.
1933 ACT.......................... The Securities Act of 1933, as amended,
and the rules and regulations promulgated
thereunder.
1934 ACT.......................... The Securities Exchange Act of 1934, as
amended, and related rules and
regulations.
BHCA.............................. Bank Holding Company Act of 1956, as
amended.
BOARD............................. Board of Directors.
CFA............................... Columbia Financial Advisors, Inc., HUB's
financial advisors.
CLOSING........................... The closings of the Merger and Share
Exchange transactions contemplated in the
Merger Agreement and the Share Exchange
Agreement.
CODE.............................. The Internal Revenue Code of 1986, as
amended.
CURATIVE TRANSACTION.............. The merger of Original Glacier with and
into GB, Inc., effective July 8, 1998;
G.B, Inc.'s name was changed to "Glacier
Bancorp, Inc." on the effectiveness of
such merger.
D.A. DAVIDSON..................... D.A. Davidson & Co., Glacier's financial
advisor.
DISSENTING SHARES................. Those shares of HUB Common Stock or VB
Common Stock with respect to which HUB's
stockholders or VB stockholders, as the
case may be, have perfected their
dissenters' rights under Montana law.
EXCHANGE AGENT.................... The company designated by Glacier
HUB and VB to handle (1) the exchange of
HUB Common Stock for Glacier Common Stock
or cash (in the case of holders that
would otherwise be entitled to a
fractional share of Glacier Common
Stock), and (2) the exchange of VB Common
Stock for Glacier Common Stock or cash
(in the case of holders that would
otherwise be entitled to a fractional
share of Glacier Common Stock).
FDIC.............................. The Federal Deposit Insurance
Corporation.
FRB............................... The Board of Governors of the Federal
Reserve System.
GAAP.............................. Generally accepted accounting principles,
consistently applied.
GLACIER........................... Glacier Bancorp, Inc., a Delaware
corporation and bank holding company
and the successor corporation to Original
Glacier following the Curative
Transaction.
GLACIER BANK SUBSIDIARIES......... Glacier Bank, Glacier Bank of Whitefish,
Glacier Bank of Eureka, and First
Security Bank of Missoula, Glacier's
subsidiary banks.
GLACIER COMMON STOCK.............. Glacier, Inc.'s common stock, $.01 par
value per share.
GLACIER FINANCIAL
STATEMENTS........................ Glacier's (i) audited consolidated
statements of financial condition, as of
December 31, 1997 and 1996, and the
related audited consolidated statements
of operations, cash flows and
stockholders' equity for each of the
years in the three-year period ended
December 31, 1997 and (ii) unaudited
consolidated financial statement of
condition as of March 31, 1998, and the
related unaudited statements of
operations, cash flows and stockholders'
equity for the period then ended.
G-1
<PAGE> 16
GLACIER MEETING................... Special meeting of Glacier stockholders
to be held on August 21, 1998.
GLACIER RECORD DATE............... 5:00 p.m. local time, July 15, 1998.
HOLA.............................. Home Owner's Loan Act, as amended.
HUB............................... HUB Financial Corporation, a Montana
corporation and a bank holding company.
HUB COMMON STOCK.................. HUB's common stock, no par value per
share.
HUB FINANCIAL STATEMENTS.......... HUB's audited consolidated statements of
financial condition as of December 31,
1997 and the related audited consolidated
statements of operations, cash flows and
stockholders' equity for the year ended
December 31, 1997.
HUB MEETING....................... Special meeting of HUB stockholders to be
held on August 24, 1998.
HUB PURCHASE PRICE................ The aggregate number of shares of
Glacier Common Stock to be provided by
Glacier to HUB's stockholders in exchange
for their HUB Common Stock shares.
HUB RECORD DATE................... 5:00 p.m. local time, July 15, 1998.
HUB/VB TRANSACTIONS............... The Merger and the Share Exchange,
collectively.
KPMG.............................. KPMG Peat Marwick LLP, independent
certified public accountants.
MBCA.............................. The Montana Business Corporations Act, as
amended.
MERGER............................ The merger of HUB with and into Glacier
in accordance with the Merger Agreement.
MERGER AGREEMENT.................. The Plan and Agreement of Merger, dated
as of December 30, 1997, between Glacier
and HUB, as amended as of June 30, 1998
MERGER EFFECTIVE DATE............. The date on which the Closing of the
Merger will occur.
MINORITY STOCK.................... The outstanding shares of VB that are not
owned by HUB as of the Merger Effective
Date.
OPTION............................ Stock option granted by HUB to Glacier
in the Stock Option Agreement, dated
December 30, 1997.
PROSPECTUS/JOINT PROXY STATEMENT.. The Prospectus/Joint Proxy Statement,
contained in the Registration Statement,
and to be mailed to HUB's stockholders
and VB's stockholders, together with any
amendments and supplements.
PURCHASE PRICE.................... The aggregate number of shares of
Glacier Common Stock to be provided by
Glacier to HUB's stockholders in
exchange for their HUB Common Stock
shares, and to VB's stockholders in
exchange for their VB Common Stock shares
(i.e., the total of the HUB Purchase
Price and the VB Purchase Price).
REGISTRATION STATEMENT............ The Registration Statement on Form S-4,
of which this Prospectus/Joint Proxy
Statement forms a part, filed with the
SEC by Glacier under the 1933 Act, for
the purpose of registering the shares of
Glacier Common Stock to be issued in the
Merger and the Share Exchange.
REGULATORY APPROVALS.............. The required regulatory approvals of the
transaction by the FRB.
SEC............................... The Securities and Exchange Commission.
SHARE EXCHANGE.................... The exchange of Glacier Common Stock for
the Minority Stock of VB in accordance
with the Share Exchange Agreement.
G-2
<PAGE> 17
SHARE EXCHANGE AGREEMENT.......... The Agreement and Plan of Share Exchange,
dated as of December 30, 1997, between
Glacier and VB.
SHARE EXCHANGE EFFECTIVE DATE..... The date on which the Closing of the
Share Exchange will occur.
STOCK OPTION AGREEMENT............ Stock Option Agreement between Glacier
and HUB, dated as of December 30, 1997.
TANGIBLE EQUITY CAPITAL........... The tangible equity capital (i.e., common
stock, paid-in capital and retained
earnings, plus (or minus) net unrealized
gain (or loss) on available-for-sale
securities and minus goodwill) of HUB and
VB on a consolidated basis as of the last
day of the month preceding the Effective
Date, determined in accordance with GAAP.
TERMINATION DATE.................. October 31, 1998, the date after which
each party has the right to terminate the
Merger Agreement and/or the Share
Exchange Agreement, if the Closing has
not occurred by that date.
VB................................ Valley Bank of Helena, a state-chartered
commercial bank and HUB's sole
subsidiary.
VB COMMON STOCK................... VB's Common Stock, $40.00 par value per
share.
VB MEETING........................ Special meeting of the VB stockholders to
be held on August 24, 1998.
VB PURCHASE PRICE................. The aggregate number of shares of GB
Common Stock to be provided to holders of
the Minority Stock of VB, in exchange for
such shares of Minority Stock.
VB RECORD DATE.................... 5:00 p.m. local time, July 15, 1998.
G-3
<PAGE> 18
SUMMARY
The following material summarizes certain information contained
elsewhere in this Prospectus/Joint Proxy Statement. This summary is not intended
to be complete and is qualified by reference to the more detailed information
contained elsewhere in this Prospectus/Joint Proxy Statement (including the
appendices). Capitalized terms used in this Prospectus/Joint Proxy Statement,
unless the context otherwise requires, have the meanings ascribed to them in the
Glossary of Certain Key Terms inside the front cover. Additionally, terms used
principally in particular sections of this Prospectus/Joint Proxy Statement are
defined in the sections where they are used.
INTRODUCTION
THE TRANSACTIONS
Glacier desires to acquire Valley Bank of Helena ("VB"), a subsidiary
of HUB Financial Corporation ("HUB") and operate VB as an independent,
wholly-owned subsidiary of Glacier. The Boards of Directors of HUB and VB desire
to afford all stockholders of HUB and VB with the same opportunity to
participate in the acquisition. Because HUB does not own 100% of the outstanding
shares of VB Common Stock, the acquisition will be accomplished through two
transactions; the Merger with HUB and the Share Exchange with VB. The total
Purchase Price that Glacier will pay for the acquisition (both the Merger and
the Share Exchange) is 620,000 shares of Glacier Common Stock, subject to
certain adjustments described below.
Based on their relative ownership of VB, the consideration (i.e.,
shares of Glacier Common Stock) to be received by holders of HUB Common Stock in
the Merger, and by holders of VB Minority Stock in the Share Exchange, will be
exactly the same.
Holders of HUB Common Stock will vote on the Merger, and such persons
should pay particular attention to those portions of this Prospectus/Joint Proxy
Statement that describe the Merger (see the summary of the HUB Merger below and
"THE MERGER"). HUB stockholders who are also VB stockholders should also read
the portions of this Prospectus/Joint Proxy Statement that describe the Share
Exchange, as such persons will be voting on that transaction as well.
Holders of VB Common Stock will vote on the Share Exchange, and such
persons should pay particular attention to those portions of this
Prospectus/Joint Proxy Statement that describe the Share Exchange (see the
summary of the Share Exchange below and "THE SHARE EXCHANGE"). As part of the
Merger Agreement, HUB has agreed to vote the shares of VB Common Stock that it
owns (approximately 86.5% of the outstanding VB Common Stock) in favor of the
Share Exchange, which is more than the required number of votes required to
approve the Share Exchange. Because the Merger will close prior to the Share
Exchange, the shares of VB that HUB owns will be owned by Glacier at the time
the Share Exchange closes. As a result, the Glacier Common Stock issued in the
Share Exchange will be issued only in exchange for the shares of VB that HUB did
not own at the Closing of the Merger (the "Minority Stock"). Holders of Minority
Stock who are also HUB stockholders should also read the portions of this
Prospectus/Joint Proxy Statement that describe the Merger, as such persons will
be voting on that transaction as well.
Glacier stockholders will vote on both the Merger and the Share
Exchange (which are sometimes collectively referred to as the "HUB/VB
Transactions") together as one item and thus should pay particular attention to
the portions of the Prospectus/Joint Proxy Statement that describe both the
Merger and the Share Exchange.
RECENT DEVELOPMENTS
Glacier's predecessor corporation ("Original Glacier") and HUB
initially entered into the Merger Agreement on December 30, 1997 (the "Initial
Agreement"). Subsequent to the execution of the Initial Agreement, Original
Glacier discovered certain technical issues associated with its capital stock,
including the existence of fewer authorized shares than Original Glacier had
previously believed were available. Because these issues created uncertainty
about the validity of certain outstanding shares of Original Glacier common
stock, original Glacier completed a transaction designed to cure such concerns
(the "Curative Transaction"). The Curative Transaction, which was completed on
July 8, 1998, is described in "BACKGROUND OF AND REASONS FOR THE MERGER AND
SHARE EXCHANGE - Recent Developments." As explained in that section of the
Prospectus/Joint Proxy Statement, Glacier is the successor corporation to
Original Glacier, the corporation that signed the Initial Agreement. The Initial
Agreement was amended to reflect the Curative Transaction, by execution of the
"First Amendment of Plan and Agreement of Merger between Glacier Bancorp, Inc.
and HUB Financial
1
<PAGE> 19
Corporation" dated as of June 30, 1998 (the "Merger Agreement Amendment"). A
copy of the Merger Agreement Amendment is attached to this Prospectus/Joint
Proxy Statement at APPENDIX B. Unless otherwise clearly stated, all references
in this Prospectus/Joint Proxy Statement to the "Merger Agreement" refer to the
Initial Agreement as amended by the Merger Agreement Amendment. All references
in this Prospectus/Joint Proxy Statement to "Glacier" refer to the corporation
that resulted from the Curative Transaction; in certain instances where helpful
to the understanding of the Curative Transaction and its effects, Glacier is
also referred to as "New Glacier." See "BACKGROUND OF AND REASONS FOR THE MERGER
AND SHARE EXCHANGE -- Recent Developments."
HUB MERGER
INTRODUCTION
Glacier and HUB propose to merge under the terms of the Merger
Agreement. If the Merger Agreement is approved by the stockholders of HUB and
Glacier, HUB will merge with and into Glacier ("Merger"). Consequently, holders
of HUB Common Stock would become stockholders of Glacier, and VB, which is
presently a subsidiary of HUB, would become a subsidiary of Glacier. After the
Merger is consummated, HUB stockholders will no longer own any stock in HUB, and
HUB will cease to exist.
The respective Boards of Directors ("Boards") of Glacier and HUB have
unanimously adopted the Merger Agreement, and recommend, respectively, that the
stockholders of Glacier and HUB vote to approve the Merger Agreement. Subject to
approval of the Merger Agreement by the stockholders of Glacier and HUB, receipt
of required regulatory approvals, and satisfaction of certain other conditions,
HUB will merge with and into Glacier. HUB's stockholders, other than those who
have perfected their dissenters' rights or would otherwise be entitled to
fractional shares of Glacier Common Stock based on the Merger exchange ratio,
will receive shares of Glacier Common Stock in exchange for their shares of HUB
Common Stock. See "THE MERGER -- Basic Terms of the Merger; Cash for Fractional
Shares; -- Dissenters' Rights of Appraisal."
PARTIES TO THE MERGER
HUB. HUB is a Montana corporation and a registered bank holding company
under the BHCA. HUB was incorporated on May 7, 1982, and its business and
activities are conducted primarily through VB, its sole subsidiary. HUB owns
approximately 86.5% of the Common Stock of VB, a state-chartered commercial bank
organized under Montana law on October 18, 1978. HUB has no significant
operations separate from VB.
At December 31, 1997, VB had deposits of approximately $56 million and
assets of approximately $68 million. HUB is headquartered in Helena, Montana,
its executive offices are located at 3030 N. Montana Avenue, Helena, Montana
59601-0551, and its telephone number is (406) 442-7440. VB has facilities in
three locations in Montana. For additional information about HUB and its
business, see "INFORMATION CONCERNING HUB AND VB."
Glacier. Glacier is a Delaware corporation, a registered bank holding
company under the BHCA. Glacier's date of incorporation is March 24, 1998, and
its principal business activities are conducted through four bank subsidiaries
("Glacier Bank Subsidiaries"), as follows: (i) Glacier Bank, a bank that has
been in operation since 1955, (ii) Glacier Bank of Whitefish, (iii) Glacier Bank
of Eureka, and (iv) First Security Bank of Missoula. The deposits of each of the
Glacier Bank Subsidiaries are insured by the Federal Deposit Insurance
Corporation ("FDIC"). Each of the Glacier Bank Subsidiaries is a Montana
state-chartered bank. Glacier has one non-bank subsidiary, Community First Inc.,
which offers full service brokerage services through Robert Thomas Securities,
an unrelated brokerage firm. Glacier is the successor in interest to the
Original Glacier, as described above under "Introduction - Recent Developments"
and "BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE - Recent
Developments."
At July 1, 1998, the Glacier Subsidiaries had facilities in a total of
18 locations in Montana, operating a total of 18 full-service offices and one
limited service branch. Glacier is headquartered in Kalispell, Montana, its
executive offices are located at 202 Main Street, Kalispell, Montana 59903-0027,
and its telephone number is (406) 756-4200.
Additional information concerning Glacier and its business is included
in the documents incorporated into this Prospectus/Joint Proxy Statement by
reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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<PAGE> 20
HUB SPECIAL STOCKHOLDERS MEETING
The HUB Meeting will be held on August 24, 1998, at 3:00 p.m. local
time, in the Community Room of the main office of Valley Bank of Helena, 3030
N. Montana Avenue, Helena, Montana. The purpose of the HUB Meeting is to vote
on (i) approval of the Merger Agreement, and (ii) any other matters that may
properly come before the HUB Meeting.
Only shares of HUB Common Stock held of record on July 15, 1998
at 5:00 p.m. ("HUB Record Date") are entitled to notice of, and to vote at, the
HUB Meeting. The affirmative vote of at least two-thirds of the shares of HUB
Common Stock outstanding on the HUB Record Date is required to approve the
Merger Agreement. On the HUB Record Date, there were 9,265 shares of HUB Common
Stock outstanding, and the directors and executive officers of HUB and VB were
entitled to vote an aggregate of 8,535 shares, representing approximately 92.1
percent of the total HUB Common Stock outstanding on the HUB Record Date. For
additional information about the HUB Meeting, see "HUB SPECIAL STOCKHOLDER
MEETING."
GLACIER SPECIAL STOCKHOLDERS MEETING
The Glacier Meeting will be held on August 21, 1998, at 9:00 a.m.
local time, at The Outlaw Inn, 1701 Highway 93 South, Kalispell, Montana. The
purpose of the Glacier Meeting is to vote on (i) the HUB/VB Transactions (ii)
any other matters that may properly come before the Glacier Meeting.
Only shares of Glacier Common Stock held of record on July 15, 1998 at
5:00 p.m. ("Glacier Record Date") are entitled to notice of, and to vote at, the
Glacier Meeting. The affirmative vote of at least a majority of the shares of
Glacier Common Stock outstanding on the Glacier Record Date is required to
approve the HUB/VB Transactions. On the Glacier Record Date, there were
6,943,534 shares of Glacier Common Stock outstanding, and the directors and
officers of Glacier were entitled to vote an aggregate of 1,388,012 shares,
representing approximately 20% of the total Glacier Common Stock outstanding
on the Glacier Record Date. For additional information about the Glacier
Meeting, see "GLACIER SPECIAL STOCKHOLDER MEETING."
THE MERGER; EXCHANGE RATIO
In accordance with the Merger Agreement, on the Effective Date, HUB
will merge with and into Glacier, with Glacier as the surviving corporation. As
long as HUB does not exceed its transaction expense limitation of $110,000,
HUB's stockholders will be entitled to receive from Glacier the aggregate
consideration of the number of shares of Glacier Common Stock determined by
multiplying 620,000 by HUB's fractional ownership interest in VB Common Stock at
Closing, rounded to the nearest whole number (the "Merger Purchase Price") if
the Merger is completed. Each holder of HUB Common Stock, other than holders of
Dissenting Shares, will receive, in exchange for each share of HUB Common Stock
held of record on the Merger Effective Date, the number of shares of Glacier
Common Stock resulting from a division of the Merger Purchase Price by the
aggregate number of shares of HUB Common Stock that are issued and outstanding
on the Merger Effective Date, rounded to two decimals. See "THE MERGER - Basic
Terms of the Merger."
The aggregate market value of the Glacier Common Stock that HUB
stockholders will receive in the Merger will depend on the market value of
Glacier Common stock on the Merger Effective Date. Cash will be paid in lieu of
issuing fractional shares of Glacier Common Stock. Upon completion of the
Merger, stockholders of HUB will no longer own any stock in HUB. For more
detailed information concerning the Merger, the Merger exchange ratio, and how
HUB Stockholders may exchange certificates representing shares of HUB Common
Stock, see "THE MERGER -- Basic Terms of the Merger; Cash for Fractional Shares;
- --Exchange of Stock Certificates."
REASONS FOR THE MERGER
The HUB Board believes that the terms of the Merger Agreement are fair
and in the best interests of HUB and its stockholders. In reaching a decision on
the Merger Agreement, the HUB Board considered numerous factors taken as a
whole, none of which were accorded any particular or relative weight, and
consulted with legal, tax, accounting and financial advisors as well as HUB and
VB senior management. The factors considered included:
(i) the fairness opinion of CFA with respect to the Merger Agreement;
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<PAGE> 21
(ii) the federal tax treatment to HUB stockholders of the proposed
transaction which provides for tax deferred treatment of the
exchange of stock contemplated by the Merger Agreement;
(iii) the liquidity of Glacier Common Stock created by the market
available for the trading of Glacier Common Stock and the
comparatively more limited liquidity of HUB Common Stock;
(iv) the increased financial and technology resources of Glacier
which will be available to VB following the Merger;
(v) the financial, business and other prospects of Glacier in its
existing markets and in the markets served by VB;
(vi) the compatibility of VB and Glacier senior management and the
opportunity for continuity of employment of VB employees
following consummation of the Merger;
(vii) the enhancement of HUB stockholder value anticipated by reason
of the issuance of the shares of Glacier Common Stock in
exchange for HUB Common Stock in the Merger;
(viii) the availability and continuity of services to existing VB
customers and the Helena community served by VB;
(ix) the competitive nature of the commercial banking industry and
the banking markets served by VB;
(x) the future business and other prospects of VB and HUB.
At a special meeting of the HUB Board held on December 29, 1997 the
Board determined that the Merger Agreement is in the best interests of HUB and
its stockholders and voted unanimously to approve the Merger Agreement.
The Glacier Board has unanimously adopted and approved the Merger
Agreement and determined that the Merger is fair to, and in the best interests
of, Glacier and its stockholders. In making this determination, the Glacier
Board considered a variety of factors, including:
(i) the Glacier Board's review of the financial condition, results
of operations, and business operations and prospects of HUB and
VB;
(ii) the Glacier Board's evaluation of the financial and other terms
of the Merger and their effect on the stockholders of Glacier,
and the Glacier Board's belief that such terms are fair to
Glacier and its stockholders;
(iii) the Glacier Board's belief that the acquisition of HUB will
expand and enhance Glacier's existing Helena operations;
(iv) the Glacier Board's belief that the acquisition of HUB will
expand and augment Glacier's banking franchise in Montana. After
the acquisition of HUB, Glacier's banking operations are
expected to rank among the largest in western Montana with over
$650 million in assets, thus placing Glacier in a leading
position in this market;
(v) the Glacier Board's belief that the Merger will diversify
Glacier's loan and deposit mix;
(vi) the Glacier Board's review of the short-term and long-term
impact the Merger is anticipated to have on Glacier's financial
condition and results of operations; and
(vii) the Glacier Board's belief that the acquisition will increase
Glacier's market diversification through an enhanced competitive
position in the key western Montana market of Helena, the
state's capital.
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RECOMMENDATION OF THE HUB BOARD
THE HUB BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS
ADVISABLE AND IN THE BEST INTERESTS OF HUB AND ITS STOCKHOLDERS, AND RECOMMENDS
THAT HUB STOCKHOLDERS APPROVE THE MERGER AGREEMENT. For a more detailed
discussion of the factors considered by the HUB Board in reaching its
determination to approve the Merger Agreement, see "BACKGROUND OF AND REASONS
FOR THE MERGER AND SHARE EXCHANGE."
RECOMMENDATION OF THE GLACIER BOARD
THE GLACIER BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS
ADVISABLE AND IN THE BEST INTERESTS OF THE GLACIER AND ITS STOCKHOLDERS, AND
RECOMMENDS THAT GLACIER STOCKHOLDERS APPROVE THE MERGER AGREEMENT. For a more
detailed discussion of the factors considered by the Glacier Board in reaching
its determination to approve the Merger Agreement, see "BACKGROUND OF AND
REASONS FOR THE MERGER AND SHARE EXCHANGE."
OPINION OF FINANCIAL ADVISOR TO GLACIER
D.A. Davidson, Glacier's financial advisor, has delivered a written
opinion to the Glacier Board, dated as of December 30, 1997, and updated as of
the date of this Prospectus/Joint Proxy Statement, to the effect that the
consideration to be paid to HUB stockholders and the minority stockholders of VB
in the Merger and the Share Exchange is fair, from a financial point of view, to
Glacier and its stockholders. A copy of D.A. Davidson's opinion setting forth
the limits of its review, assumption made, matters considered and procedures
followed is attached to this Prospectus/Joint Proxy Statement as APPENDIX G and
should be read in its entirety by Glacier's stockholders. See "BACKGROUND OF AND
REASONS FOR THE MERGER AND SHARE EXCHANGE -- Opinion of Glacier Financial
Advisor."
OPINION OF FINANCIAL ADVISOR TO HUB
Columbia Financial Advisors, Inc. ("CFA"), financial advisor to HUB and
VB, has delivered written opinions to the HUB Board and VB Board, each dated as
of December 29, 1997, and updated as of the date of this Prospectus/Joint Proxy
Statement, to the effect that the Merger is fair, from a financial perspective,
to HUB and its stockholders, and that the Share Exchange is fair, from a
financial perspective, to VB and its stockholders. A copy of CFA's opinion to
the HUB Board setting forth the limits of its review, assumptions made, matters
considered and procedures followed is attached to this Prospectus/Joint Proxy
Statement as APPENDIX E and should be read in its entirety by HUB's
stockholders. See "BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE
- -- Opinions of HUB and VB Financial Advisor."
EFFECTIVE DATE OF THE MERGER
The parties presently expect to consummate the Merger in the third
quarter of 1998, although the timing is subject to the satisfaction of certain
conditions (discussed below). The date on which the Merger is consummated is
referred to in this Prospectus/Joint Proxy Statement as the "Merger Effective
Date." The Merger Agreement provides that if the Merger has not been consummated
by October 31, 1998, at any time after that date, the Board of either Glacier or
HUB may vote to abandon the Merger. See "THE MERGER -- Basic Terms of the
Merger; -- Termination of the Merger Agreement."
EXCHANGE OF STOCK CERTIFICATES
On and after the Merger Effective Date, certificates representing HUB
Common Stock will be deemed to represent only the right to receive Glacier
Common Stock or cash as provided in the Merger Agreement. HUB stockholders will
receive written instructions and the required letter of transmittal after the
Merger is effective. DO NOT SEND YOUR CERTIFICATES AT THIS TIME. See "THE MERGER
- -- Exchange of Stock Certificates."
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<PAGE> 23
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is conditioned on (i) approval of the Merger
Agreement by the holders of at least two-thirds of the outstanding shares of HUB
Common Stock and by the holders of at least a majority of the Glacier Common
Stock; (ii) receipt of all necessary approvals of the Merger by governmental
regulatory agencies, including the FRB; (iii) receipt by each party of a
favorable tax opinion from Graham & Dunn P.C. ("Graham & Dunn"); (iv) receipt of
a letter from KPMG Peat Marwick LLP ("KPMG") to the effect that they concur with
the respective management's conclusions that the Merger qualifies for
pooling-of-interests accounting treatment; (v) the continuing accuracy of the
representations and warranties of each party; (vi) the performance of specified
obligations by each party; and (vii) certain other conditions. See "THE MERGER
- -- Conditions to the Merger" and "SUPERVISION AND REGULATION."
Glacier has received conditional approval of the Merger from the FRB.
STOCK OPTION AGREEMENT
As an inducement to Glacier to enter into the Merger Agreement, HUB has
granted Option to Glacier, by agreement dated December 30, 1997, to purchase
authorized but unissued shares of HUB Common Stock, which if issued, would
constitute 19.9 percent of the outstanding HUB Common Stock, at a price equal to
$781 per share. Glacier may exercise the Option only upon (i) the occurrence of
certain events set forth in the Stock Option Agreement (none of which have
occurred as of the date of this Prospectus/Joint Proxy Statement), and (ii)
obtaining any regulatory approvals necessary for the acquisition of the HUB
Common Stock subject to the Option, and additionally Glacier must have performed
its obligations under the Merger Agreement. Glacier may transfer the Option only
if an event occurs triggering Glacier's right to exercise the Option. See "THE
MERGER - Stock Option Agreement."
AMENDMENT OR TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be amended at any time before the Effective
Date upon approval of both the Glacier and HUB Boards. However, no amendment
reducing the amount or changing the form of any consideration to be received by
HUB's stockholders may be effected without the approval of HUB's stockholders.
Further, at any time before the Effective Date, the Merger Agreement may be
terminated, and the Merger abandoned (whether before or after the adoption of
the Merger Agreement by the respective stockholders of Glacier and HUB) (i) by
the mutual majority votes of the Glacier and HUB Boards, or (ii) unilaterally,
by either of the Boards under certain specified circumstances (including a
failure to consummate the Merger by October 31, 1998). See "THE MERGER --
Amendment or Termination of the Merger Agreement."
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
Upon consummation of the Merger, the Glacier Board will consist of
Glacier's current directors, with the addition of Fred J. Flanders, who is
presently a member of the HUB Board and currently serves as VB's President.
The respective executive officers of Glacier and VB in office
immediately before the Effective Date are expected to remain unchanged following
the Merger, except that following the Merger Mr. Fred Flanders will become
Chairman and Chief Executive Officer of VB. On the Effective Date, the VB Board
will consist of all persons who were directors of VB immediately before the
Merger is consummated, except that (i) Messrs. Harris Hanson and James Foley,
and Ms. Mary Munger, will retire and resign on the Merger Effective Date, and
(ii) two directors, to be designated by Glacier, will be added to the VB Board.
For more information on the anticipated composition of the respective Boards and
managements of Glacier and VB after the Merger, see "THE MERGER -- Directors and
Executive Officers After the Merger; Interests of Certain Persons in the
Merger."
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FEDERAL INCOME TAX TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon receipt by Glacier, and
delivery to HUB, of an opinion from Graham & Dunn to the effect that (i) the
Merger will constitute a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended ("Code"); (ii) no
gain or loss will be recognized, under the provisions of Section 354(a)(i) of
the Code, by any stockholder who exchanges his or her shares of HUB Common Stock
solely for shares of Glacier Common Stock; and (iii) the payment of cash to a
HUB stockholder in lieu of a fractional share of Glacier Common Stock will be
treated as a distribution in redemption of the fractional share interest,
subject to the limitations of Section 302 of the Code. See "THE MERGER --
Federal Income Tax Treatment of the Merger."
ACCOUNTING TREATMENT OF THE MERGER
It is anticipated that the Merger will be accounted for as a pooling of
interests by Glacier under generally accepted accounting principles. The Merger
Agreement provides that, as a condition to Glacier's obligation to consummate
the Merger, Glacier must receive a letter from KPMG, Glacier's independent
auditors, to the effect that they concur with the respective management's
conclusions that the Merger will qualify for pooling of interests accounting
treatment. See "THE MERGER --Accounting Treatment of the Merger."
DISSENTERS' RIGHTS OF APPRAISAL
Holders of shares of HUB Common Stock have the right to dissent from
the Merger, if they follow certain procedures and the Merger is effectuated, to
obtain payment of the fair value of their shares in cash, in accordance with
applicable provisions of Montana law. A STOCKHOLDER'S FAILURE TO FOLLOW EXACTLY
THE PROCEDURES SPECIFIED IN THE MONTANA STATUTE WILL RESULT IN LOSS OF SUCH
STOCKHOLDER'S DISSENTERS RIGHTS. Accordingly, the stockholders of HUB wishing to
dissent from the Merger are urged to carefully read "THE MERGER -- Dissenters'
Rights of Appraisal," and the copy of Sections 35-1-826 through 35-1-839 of the
MBCA set forth in APPENDIX H to this Prospectus/Joint Proxy Statement.
Glacier stockholders are not entitled to any dissenters' rights under
the DGCL. See "THE MERGER -- Dissenters' Rights of Appraisal."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Glacier's management and the Glacier Board may be
deemed to have interests in the Merger in addition to their interests as
stockholders of Glacier generally, as a result of provisions in the Merger
Agreement relating to the appointment of two current directors of Glacier to the
VB Board.
Certain members of HUB's management and the HUB Board may be deemed to
have interests in the Merger in addition to their interests as stockholders of
HUB generally, as a result of provisions in the Merger Agreement relating to
indemnification, employment agreements, and appointments to the Glacier Board.
These provisions are discussed in "THE MERGER -- Interests of Certain Persons in
the Merger."
As a condition to execution of the Merger Agreement, VB has entered
into an employment agreement with its President, Fred J. Flanders, which Glacier
has ratified. Under the terms of the employment agreement, Mr. Flanders will
continue to serve as VB's President; it is anticipated that Mr. Flanders will be
named Chairman and Chief Executive Officer of VB following the Merger.
Additionally, Glacier has agreed to appoint Mr. Flanders to the Glacier Board,
effective upon Closing. The other directors and management of VB are expected to
remain in their respective positions with VB after the Merger. See "THE MERGER -
Directors and Executive Officers After the Merger."
COMPARISON OF STOCKHOLDERS' RIGHTS
Stockholders of HUB who receive Glacier Common Stock shares in the
Merger in exchange for their shares of HUB Common Stock shares will be governed,
with respect to their rights as stockholders, by Glacier's Certificate of
Incorporation and Bylaws, and Delaware law. Presently, the rights of HUB's
stockholders are determined under HUB's Articles of Incorporation and Bylaws,
and Montana law. For a discussion of certain material differences in the rights
of stockholders of Glacier and HUB, and
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<PAGE> 25
an explanation of certain possible anti-takeover effects of certain provisions
in Glacier's Certificate of Incorporation and Bylaws, see "COMPARISON OF CERTAIN
RIGHTS OF HOLDERS OF GLACIER, HUB AND VB COMMON STOCK."
TRADING MARKETS
The Glacier Common Stock is quoted on The Nasdaq National Market under
the symbol "GBCI" and is registered as a class with the SEC under the 1934 Act.
Accordingly, Glacier is required to file certain periodic and annual reports
with the SEC and to make information about Glacier available to its stockholders
and the public. See "AVAILABLE INFORMATION."
HUB is not subject to the information and reporting requirements of the
1934 Act and the HUB Common Stock is not actively traded, or listed on any
market system. See "STOCK PRICE AND DIVIDEND INFORMATION."
VB SHARE EXCHANGE
INTRODUCTION
Glacier and VB have entered into the Share Exchange under the terms of
the Share Exchange Agreement. If the Share Exchange Agreement is approved by the
stockholders of VB and Glacier, and other conditions to closing are satisfied,
all shares of VB's Common Stock outstanding immediately following consummation
of the Merger that were not owned by HUB on the Merger Effective Date (the
"Minority Stock") will be transferred to Glacier in exchange for shares of
Glacier Common Stock. Consequently, holders of Minority Stock would become
stockholders of Glacier, and VB, which is presently a subsidiary of HUB and
would become a subsidiary of Glacier upon consummation of the Merger, would
become the wholly-owned subsidiary of Glacier upon consummation of the Share
Exchange. HUB HAS AGREED TO VOTE ALL SHARES OF VB OWNED BY IT (APPROXIMATELY
86.5% OF OUTSTANDING VB COMMON STOCK) IN FAVOR OF THE SHARE EXCHANGE.
CONSEQUENTLY, THE SHARE EXCHANGE IS ASSURED OF APPROVAL BY THE VB STOCKHOLDERS.
The respective Boards of Glacier and VB have unanimously adopted the
Share Exchange Agreement. The VB Board recommends that VB stockholders vote to
approve the Share Exchange Agreement. Subject to approval of the Share Exchange
Agreement by the stockholders of Glacier and VB, receipt of required regulatory
approvals, stockholder approval and satisfaction of certain other conditions,
all shares of Minority Stock will be transferred to Glacier in exchange for
shares of Glacier's Common Stock. Holders of Minority Stock, other than those
who have perfected their dissenters' rights or would otherwise be entitled to
fractional shares of Glacier Common Stock based on the Share Exchange exchange
ratio, will receive shares of Glacier Common Stock in exchange for their shares
of Minority Stock. See "THE SHARE EXCHANGE - Basic Terms of the Share Exchange;
- -- Cash for Fractional Shares; -- Dissenters' Rights of Appraisal."
The Glacier Board recommends that Glacier stockholders vote to approve
the Share Exchange. As noted elsewhere in this Prospectus/Joint Proxy Statement,
the Share Exchange is one of two related transactions (together with the Merger)
by which Glacier will acquire VB, and Glacier stockholders will vote on the two
related transactions, which are sometimes referred to collectively as the HUB/VB
"Transactions", as one item at the Glacier Meeting. See "Introduction" at the
beginning of this Summary and "GLACIER SPECIAL STOCKHOLDERS MEETING."
PARTIES TO THE SHARE EXCHANGE
VB. VB is a Montana chartered state commercial bank organized October
18, 1978. VB is a member of the FDIC. VB is not a member of the Federal Reserve
System. VB engages in a general commercial banking business from three locations
in Helena, Montana, including its principal office at 3030 N. Montana Avenue in
Helena, Montana. VB has no subsidiaries. Approximately 86.5% of outstanding VB
common stock is owned by HUB.
GLACIER. For information regarding Glacier, see above under "SUMMARY --
HUB MERGER -- Parties to the Merger."
VB SPECIAL STOCKHOLDERS MEETING
The VB Meeting will be held on August 24, 1998, at 3:00 p.m. local
time, in the Community Room of the main office of Valley Bank of Helena, 3030
N. Montana Avenue, Helena, Montana. The purpose of the VB Meeting is to vote
on (i) approval of the Share Exchange Agreement, and (ii) any other matters
that may properly come before VB Meeting.
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Only shares of VB Common Stock held of record on July 15, 1998 at
5:00 p.m.("VB Record Date") are entitled to notice of, and to vote at, the VB
Meeting. The affirmative vote of at least two-thirds of the shares of VB Common
Stock outstanding on the VB Record Date is required to approve the Share
Exchange Agreement. On the VB Record Date, there were 11,000 shares of VB Common
Stock outstanding. For additional information about the VB Meeting, see "VB
SPECIAL STOCKHOLDER MEETING." HUB HAS AGREED TO VOTE ALL SHARES OF VB OWNED BY
IT (APPROXIMATELY 86.5% OF OUTSTANDING VB COMMON STOCK) IN FAVOR OF THE SHARE
EXCHANGE. CONSEQUENTLY, THE SHARE EXCHANGE IS ASSURED OF APPROVAL BY THE VB
STOCKHOLDERS.
GLACIER SPECIAL STOCKHOLDERS MEETING
As noted elsewhere in this Prospectus/Joint Proxy Statement (see
"GLACIER SPECIAL STOCKHOLDERS MEETING"), at the Glacier Meeting, Glacier
stockholders will vote to approve the HUB/VB Transactions (that is, both the
Merger and the Share Exchange) together as one item. The affirmative vote of at
least a majority of the shares of Glacier outstanding on the Glacier Record Date
is required to approve the HUB/VB Transactions.
THE SHARE EXCHANGE; EXCHANGE RATIO
In accordance with the Share Exchange Agreement, on the Share Exchange
Effective Date, all shares of Minority Stock outstanding immediately following
consummation of the Merger will be transferred to Glacier in exchange for shares
of Glacier Common Stock. The total number of shares of Glacier Common Stock that
holders of Minority Stock will be entitled to receive in exchange for their
Minority Stock (the "Share Exchange Purchase Price") will be the number of
shares of Glacier Common Stock calculated by multiplying 620,000 by the
percentage of VB Common Stock owned by holders of Minority Stock on the Merger
Effective Date. Each holder of Minority Stock, other than holders of Dissenting
Shares, will receive, in exchange for each share of Minority Stock held of
record on the Share Exchange Effective Date, the number of shares of Glacier
Common Stock resulting from a division of the Share Exchange Purchase Price by
the aggregate number of shares of Minority Stock that are outstanding on the
Share Exchange Effective Date, rounded to two decimals. See "THE SHARE EXCHANGE
- -- Basic Terms of the Share Exchange."
The aggregate market value of the Glacier Common Stock that holders of
Minority Stock will receive in the Share Exchange will depend on the market
value of Glacier Common Stock on the Share Exchange Effective Date. Cash will be
paid in lieu of issuing fractional shares of Glacier Common Stock. Upon
completion of the Share Exchange, holders of Minority Stock will no longer own
any stock in VB. For more detailed information concerning the Share Exchange,
the Share Exchange exchange ratio, and how holders of Minority Stock may
exchange certificates representing shares of Minority Stock, see "THE SHARE
EXCHANGE -- Basic Terms of the Share Exchange; -- Cash for Fractional Shares; --
Exchange of Stock Certificates."
REASONS FOR THE SHARE EXCHANGE
The VB Board believes that the terms of the Share Exchange Agreement
are fair and in the best interests of VB and its stockholders. In reaching a
decision on the Share Exchange Agreement, the VB Board considered numerous
factors taken as a whole, none of which were accorded any particular or relative
weight, and consulted with legal, tax, accounting and financial advisors as well
as VB senior management. The factors considered included:
(i) the fairness opinion of CFA with respect to the Share Exchange;
(ii) the federal tax treatment to VB stockholders of the proposed
transaction which provides for tax deferred treatment of the
exchange of stock contemplated by the Share Exchange Agreement;
(iii) the liquidity of Glacier Common Stock created by the market
available for the trading of Glacier Common Stock and the
comparatively more limited liquidity of VB common stock;
(iv) the effect on VB stockholders of holding a minority ownership in
VB following the Merger;
(v) the financial, business and other prospects of Glacier in its
existing markets and in the markets served by VB;
(vi) the compatibility of VB and Glacier senior management and the
opportunity for continuity of employment of VB employees
following consummation of the Share Exchange;
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(vii) the enhancement of VB stockholder value anticipated by reason of
the issuance of the shares of Glacier Common Stock in exchange
for VB Common Stock in the Share Exchange;
(viii) the future business and other prospects of VB.
At a special meeting of the VB Board held on December 29, 1997 the
Board determined that the Share Exchange Agreement is in the best interests of
VB and its stockholders and voted unanimously to approve the Share Exchange
Agreement.
The Glacier Board has unanimously adopted and approved the Share
Exchange, which the Board considered together with the Merger, and determined
that the Share Exchange is fair to, and in the best interests of, Glacier and
its stockholders. The factors considered by the Glacier Board are summarized
above under "Reasons for the Merger" and are set forth in more detail under
"BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE -- Reasons for the
Merger and Share Exchange-Glacier."
RECOMMENDATION OF THE VB BOARD
THE VB BOARD HAS UNANIMOUSLY APPROVED THE SHARE EXCHANGE AGREEMENT AS
ADVISABLE AND IN THE BEST INTERESTS OF VB AND ITS STOCKHOLDERS, AND RECOMMENDS
THAT VB STOCKHOLDERS APPROVE THE SHARE EXCHANGE AGREEMENT. For a more detailed
discussion of the factors considered by the VB Board in reaching its
determination to approve the Share Exchange Agreement, see "BACKGROUND OF AND
REASONS FOR THE MERGER AND SHARE EXCHANGE."
RECOMMENDATION OF THE GLACIER BOARD
THE GLACIER BOARD HAS UNANIMOUSLY APPROVED THE SHARE EXCHANGE AGREEMENT
AS ADVISABLE AND IN THE BEST INTERESTS OF GLACIER AND ITS STOCKHOLDERS, AND
RECOMMENDS THAT GLACIER STOCKHOLDERS APPROVE THE SHARE EXCHANGE BY APPROVING THE
HUB/VB TRANSACTIONS. For a more detailed discussion of the factors considered by
the Glacier Board in reaching its determination to approve the HUB/VB
Transactions, see "BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE."
OPINION OF FINANCIAL ADVISOR TO GLACIER
D.A. Davidson, Glacier's financial advisor, has delivered a written
opinion to the Glacier Board, dated as of December 30, 1997, and updated as of
the date of this Prospectus/Joint Proxy Statement, to the effect that the
consideration to be paid to HUB stockholders and the minority stockholders of VB
in the Merger and the Share Exchange is fair, from a financial point of view, to
Glacier and its stockholders. A copy of D.A. Davidson's opinion setting forth
the limits of its review, assumption made, matters considered and procedures
followed is attached to this Prospectus/Joint Proxy Statement as APPENDIX G and
should be read in its entirety by Glacier's stockholders. See "BACKGROUND OF AND
REASONS FOR THE MERGER AND SHARE EXCHANGE -- Opinion of Glacier Financial
Advisor."
OPINION OF FINANCIAL ADVISOR TO VB
CFA, financial advisor to HUB and VB, has delivered written opinions to
the VB Board, each dated as of December 29, 1997, and updated as of the date of
this Prospectus/Joint Proxy Statement, to the effect that the Merger is fair,
from a financial perspective, to HUB and its stockholders, and that the Share
Exchange is fair, from a financial perspective, to VB and its stockholders. A
copy of CFA's opinion to the VB Board setting forth the limits of its review,
assumptions made, matters considered and procedures followed is attached to this
Prospectus/Joint Proxy Statement as APPENDIX F and should be read in its
entirety by VB's stockholders. See "BACKGROUND OF AND REASONS FOR THE MERGER AND
SHARE EXCHANGE -- Opinions of HUB and VB Financial Advisor."
EFFECTIVE DATE OF THE SHARE EXCHANGE
The parties presently expect to consummate the Share Exchange in the
third quarter of 1998 (on the same date as the Closing of the Merger), although
the timing is subject to the satisfaction of certain conditions (discussed
below). The date on which the Share Exchange is consummated is referred to in
this Prospectus/Joint Proxy Statement as the "Share Exchange
10
<PAGE> 28
Effective Date." The Share Exchange Agreement provides that if the Merger has
not been consummated in accordance with the Merger Agreement (which provides,
among other things, that the Merger may be terminated if not consummated by
October 31, 1998), the Share Exchange Agreement will automatically terminate.
See "THE SHARE EXCHANGE -- Basic Terms of the Share Exchange; -- Termination of
the Share Exchange Agreement."
EXCHANGE OF STOCK CERTIFICATES
On and after the Share Exchange Effective Date, certificates
representing Minority Stock will be deemed to represent only the right to
receive Glacier Common Stock or cash as provided in the Share Exchange
Agreement. VB stockholders will receive written instructions and the required
letter of transmittal after the Share Exchange is effective. DO NOT SEND YOUR
CERTIFICATES AT THIS TIME. See "THE SHARE EXCHANGE -- Exchange of Stock
Certificates."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Share Exchange is conditioned on (i) VB's and
Glacier's respective stockholders' approval of the Share Exchange Agreement,
(ii) consummation of the Merger pursuant to the Merger Agreement, (iii) receipt
by Glacier of all necessary regulatory approvals from governmental regulatory
authorities, (iv) VB's receipt of an opinion from Graham & Dunn PC to the effect
that, among other things, the Share Exchange will qualify as a tax-free
reorganization under Section 368(a)(1)(B) of the Code, (v) VB's receipt of an
opinion from Columbia Financial to the effect that the financial terms of the
Share Exchange are financially fair to VB's stockholders, (vi) the treatment of
the Merger as a "pooling of interests" for accounting purposes, and (vii) other
conditions. See "THE SHARE EXCHANGE -- Conditions to the Share Exchange" and
"SUPERVISION AND REGULATION."
AMENDMENT OR TERMINATION OF SHARE EXCHANGE AGREEMENT
The Share Exchange Agreement may be amended at any time before the
Effective Date upon approval of both the Glacier and VB Boards. However, no
amendment reducing the amount or changing the form of any consideration to be
received by VB's stockholders may be effected without the approval of VB's
stockholders. Further, at any time before the Effective Date, the Share Exchange
Agreement may be terminated, and the Share Exchange abandoned (whether before or
after the approval of the Share Exchange Agreement by the stockholders of VB and
Glacier (i) upon termination of the Merger Agreement for any reason; (ii) upon
the failure of any condition set forth in the Share Exchange Agreement. See "THE
SHARE EXCHANGE -- Amendment or Termination of the Share Exchange Agreement."
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE SHARE EXCHANGE
The Share Exchange itself will have no effect on the composition of the
Glacier Board or the VB Board. However, pursuant to the Merger Agreement,
following the Merger the Glacier Board will consist of Glacier's current
directors plus Fred Flanders, who is presently a member of the VB Board and
currently serves as VB's President. Also, pursuant to the Merger Agreement, two
directors, to be designated by Glacier, will be added to the VB Board.
Additionally, Mr. Flanders will be named Chairman and Chief Executive Officer of
VB following the Merger. Although it is not a requirement of the Merger
Agreement or any other agreement between Glacier and HUB or VB, on the Merger
Effective Date Messrs. Harris Hanson and James Foley, and Ms. Mary Munger, will
retire and resign from the VB Board. See "THE MERGER -- Directors and Executive
Officers After the Merger."
FEDERAL INCOME TAX TREATMENT OF THE SHARE EXCHANGE
Consummation of the Share Exchange is conditioned upon receipt by
Glacier, and delivery to VB, of an opinion from Graham & Dunn to the effect that
(i) the Share Exchange will constitute a tax-free reorganization within the
meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended
("Code"); (ii) no gain or loss will be recognized, under the provisions of
Section 354(a)(i) of the Code, by any stockholder who exchanges his or her
shares of VB Common Stock solely for shares of Glacier Common Stock; and (iii)
the payment of cash to a VB stockholder in lieu of a fractional share of Glacier
Common Stock will be treated as a distribution in redemption of the fractional
share interest, subject to the limitations of Section 302 of the Code. See "THE
SHARE EXCHANGE -- Certain Federal Income Tax Consequences."
11
<PAGE> 29
ACCOUNTING TREATMENT OF THE SHARE EXCHANGE
It is anticipated that the Share Exchange will be accounted for as a
purchase transaction under generally accepted accounting principles. See "THE
SHARE EXCHANGE -- Accounting Treatment of the Share Exchange."
DISSENTERS' RIGHTS OF APPRAISAL
Holders of shares of Minority Stock have the right to dissent from the
Share Exchange if they follow certain procedures and the Share Exchange is
effectuated, to obtain payment of the fair value of their shares in cash, in
accordance with applicable provisions of Montana law. A STOCKHOLDER'S FAILURE TO
FOLLOW EXACTLY THE PROCEDURES SPECIFIED IN THE MONTANA STATUTE WILL RESULT IN
LOSS OF SUCH STOCKHOLDER'S DISSENTERS RIGHTS. Accordingly, holders of Minority
Stock wishing to dissent from the Share Exchange are urged to carefully read
"THE SHARE EXCHANGE -- Dissenters' Rights of Appraisal," and the copy of
Sections 35-1-826 through 35-1-839 of the MBCA set forth in APPENDIX H to this
Prospectus/Joint Proxy Statement.
Glacier stockholders are not entitled to any dissenters' rights under
the DGCL. See "THE SHARE EXCHANGE - Dissenters' Rights of Approval."
INTERESTS OF CERTAIN PERSONS IN THE SHARE EXCHANGE
Certain members of VB's management may be deemed to have interests in
the Share Exchange in addition to their interests as stockholders of VB
generally. See "THE SHARE EXCHANGE -- Interests of Certain Persons in the Share
Exchange."
COMPARISON OF STOCKHOLDERS' RIGHTS
Holders of Minority Stock who receive Glacier Common Stock shares in
the Share Exchange in exchange for their shares of Minority Stock will be
governed, with respect to their rights as stockholders, by Glacier's Certificate
of Incorporation and Bylaws, and Delaware law. Presently, the rights of VB's
stockholders are determined under VB's Articles of Agreement and Bylaws, and
Montana law. For a discussion of certain material differences in the rights of
stockholders of Glacier, HUB, and VB, and an explanation of certain possible
anti-takeover effects of certain provisions in Glacier's Certificate of
Incorporation and Bylaws, see "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
Glacier, HUB AND VB COMMON STOCK."
TRADING MARKETS
The Glacier Common Stock is quoted on the Nasdaq National Market under
the symbol "GBCI" and is registered as a class with the SEC under the 1934 Act.
Accordingly, Glacier is required to file certain periodic and annual reports
with the SEC and to make information about Glacier available to its stockholders
and the public. See "AVAILABLE INFORMATION."
VB is not subject to the information and reporting requirements of the
1934 Act and the VB Common Stock is not actively traded, or listed on any market
system. See "STOCK PRICE AND DIVIDEND INFORMATION."
12
<PAGE> 30
STOCK PRICE AND DIVIDEND INFORMATION
Glacier
The Glacier Common Stock trades on the Nasdaq National Market under the
symbol "GBCI," and its primary market makers are (i) Piper Jaffray Companies,
Inc.; (ii) Herzog, Heine, Geduld, Inc.; (iii) S.J. Wolfe & Co.; (iv) D.A.
Davidson; and (v) Wedbush Morgan Securities Inc. The respective high and low
sale prices of the Glacier Common Stock for the periods indicated are shown
below. The prices below do not include retail mark-ups, mark-downs or
commissions, and may not represent actual transactions. The per share
information has been adjusted retroactively for all stock dividends and splits
previously issued. As of July 1, 1998, there were approximately 790 holders of
record of the Glacier Common Stock.
<TABLE>
<CAPTION>
1998 1997
1996 ----------------------------- ------------------------------
- ---------------------------------- Cash Cash
Cash Dividends Dividends
Dividends Period Market Price(1) Declared Market Price
Declared(2) Market Price Declared(2) ------ ---------------
- -------- ------------ ----------- ------------ -----------
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1ST QUARTER $ 29.57 $ 23.25 $ 0.12 $ 16.50 $ 15.50 $ 0.11 $ 13.63 $11.82 $ 0.10
2ND QUARTER 28.50 26.50 0.13 21.00 15.25 0.12 14.92 12.73 0.11
3RD QUARTER (3) 29.00 27.00 -0- 19.50 17.50 0.12 16.83 13.50 0.11
4TH QUARTER N/A N/A N/A 25.00 18.63 0.17 16.83 15.50 0.11
</TABLE>
- ----------
(1) A 3-for-2 stock split was declared in April, 1997.
(2) A 10% stock dividend was paid in May of 1996 and 1995.
(3) Through July 10, 1998
HUB
No broker makes a market in the HUB Common Stock, and the trades that
have occurred cannot be characterized as amounting to an established public
trading market. The HUB Common Stock is traded by individuals on a personal
basis and is not listed on any exchange or traded on the over-the-counter
market. To the knowledge of HUB as its own transfer agent, there were no trades
of HUB Common Stock during the years 1998, 1997 or 1996.
VB
No broker makes a market in VB Common Stock, and the trades that have
occurred cannot be characterized as amounting to an established public trading
market. VB Common Stock is traded by individuals on a personal basis and is not
listed on any exchange or traded on the over-the-counter market, and the prices
reported reflect only the transactions known to management. The data below
include trades between individual investors, as reported to VB as its own
transfer agent. Due to the limited information available, the following data may
not accurately reflect the actual market value of VB Common Stock.
<TABLE>
<CAPTION>
Number of Shares No. of Cash Dividends
Period Reported as Traded Transactions Stock Prices Paid
------ ------------------ ------------ ------------ ----
High Low
<S> <C> <C> <C> <C> <C>
1998 [THROUGH 6/15/98] -0- -0- N/A N/A $16.00
1997 2 1 $509.80 $509.80 31.58
1996 130 6 445.81 425.00 29.50
</TABLE>
RECENT STOCK PRICE DATA
The following table sets forth the closing price per share of (1)
Glacier Common Stock, as reported on the Nasdaq National Market, (2) HUB Common
Stock, in addition to the equivalent per share price for HUB Common Stock, and
(3) VB Common Stock, on December 30, 1997 (the last full trading day prior to
the public announcement of the execution of the Merger Agreement) and on July 9,
1998, the most recent date for which it is practicable to obtain market price
data prior to the printing of this Prospectus/Joint Proxy Statement. HOLDERS OF
HUB COMMON STOCK AND VB COMMON STOCK ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR SHARES OF GLACIER COMMON STOCK.
13
<PAGE> 31
<TABLE>
<CAPTION>
CLOSING PRICE PER SHARE: December 31, 1997 July 10, 1998
----------------- --------------------
<S> <C> <C>
Glacier Common Stock $ 22.88 $ 27.50
HUB Common Stock(1) (1) (1)
HUB Equivalent Pro Forma(2) 1,323.83 1,591.49
VB Common Stock(1) 509.80 509.80
VB Financial Equivalent Pro Forma(3) 1,289.32 1,550.00
</TABLE>
- ----------
(1) There are no publicly available quotations of HUB Common Stock or VB
Common Stock. The market price per share as of December 30, 1997, and
July 10, 1998, respectively (quoted above), represent the purchase
prices known to VB's management to have been paid for VB Common Stock
in the last transaction prior to such dates. There were no trades in
HUB Common Stock during the years 1998, 1997 or 1996, and as a result
no price per share is provided.
(2) Giving effect for the Merger and computed by multiplying the closing
price per share of Glacier Common Stock by the Merger exchange ratio.
(3) Giving effect for the Share Exchange and computed by multiplying the
closing price per share of Glacier Common Stock by the Share Exchange
exchange ratio.
14
<PAGE> 32
EQUIVALENT PER COMMON SHARE DATA
<TABLE>
<CAPTION>
Glacier HUB VB
--------------------------- ---------------------------- ----------------------------
Pro Forma
Combined Pro Forma Pro Forma
Historical Corporation Historical Equivalent Historical Equivalent
------------ -------------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
BOOK VALUE PER SHARE (1)
March 31, 1998 $ 8.90 $ 9.01 $ 575.18 $ 521.43 $ 553.25 $ 507.84
December 31, 1997 8.70 8.82 557.58 510.43 537.14 497.13
December 31, 1996 7.65 7.79 487.75 450.83 475.61 439.07
December 31, 1995 6.93 6.97 431.41 403.37 427.81 392.85
EARNINGS PER SHARE (2)
March 31, 1998 $ 0.35 $ 0.36 $ 22.13 $ 20.83 $ 23.24 $ 20.29
December 31, 1997 1.35 1.37 94.33 79.29 93.98 77.22
December 31, 1996 1.11 1.13 84.40 65.40 83.93 63.69
December 31, 1995 1.18 1.18 69.94 68.29 71.83 66.51
DILUTED EARNINGS PER SHARE (3)
March 31, 1998 $ 0.34 $ 0.35 $ 22.13 $ 20.26 $ 23.24 $ 19.73
December 31, 1997 1.32 1.35 94.33 78.13 93.98 76.09
December 31, 1996 1.09 1.12 84.40 64.82 83.93 63.13
December 31, 1995 1.18 1.18 69.94 68.29 71.83 66.51
CASH DIVIDENDS DECLARED PER SHARE
March 31, 1998 $ 0.12 $ 0.12 $ 6.04 $ 6.94 $ 8.00 $ 6.76
December 31, 1997 0.52 0.51 23.96 29.51 31.50 28.75
December 31, 1996 0.42 0.34 22.02 19.68 29.50 19.16
December 31, 1995 0.37 0.27 12.84 15.63 27.00 15.22
</TABLE>
- -------
(1) Book value per share is calculated by dividing the total actual
historical and pro forma equity as of the date indicated by the actual
historical and pro forma number of shares outstanding as of the same
date.
(2) Earnings per share is calculated by dividing total actual historical and
pro forma net income for the periods ended by the actual historical and
pro forma weighted average number of shares of common stock for the
period indicated.
(3) Diluted earnings per share includes the net increase in shares if all
outstanding stock options were exercised, using the treasury stock
method.
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The tables on the following pages set forth, for the respective periods
specified, selected historical consolidated financial data for each of Glacier,
HUB, and VB, and selected unaudited pro forma combined financial data giving
effect to the Merger on a pooling of interests basis. The pro forma combined
financial data are presented as though the Merger had been consummated at the
beginning of the period set forth; however, such data is not necessarily
indicative of actual or future operating results or the financial position that
would have occurred or will occur upon the consummation of the Merger. The data
has been derived in part from, and should be read in conjunction with, the
consolidated financial statements and notes thereto and other financial
information with respect to Glacier, HUB and VB set forth elsewhere in this
Prospectus/Joint Proxy Statement or incorporated herein by reference, and such
data are qualified in their entirety by reference thereto.
All adjustments that the respective managements of Glacier, HUB and VB
believe to be necessary for a fair presentation of the data have been included.
The March 31, 1997 and 1998 ratios have been annualized where necessary. Dollar
amounts are in thousands, except per share data.
15
<PAGE> 33
PRO FORMA GLACIER AND HUB FINANCIAL CORPORATION COMBINED (UNAUDITED)
The following table presents unaudited information concerning certain
financial information and ratios on a pro forma basis giving effect to the
proposed Merger on a pooling of interests accounting basis. The pro forma
combined information are presented as if the Merger had been consummated at the
beginning of each period presented. Any adjustments necessary to present this
information have been of a normal recurring nature. The information is qualified
in its entirety by reference to more detailed financial information and
financial statements presented elsewhere in this Prospectus/Proxy Statement.
Dollar amounts are in thousands, except per share data.
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
---------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ------- ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income ......................... $ 12,635 11,765 49,381 45,915 40,987 32,651 29,588
Interest expense ......................... 5,625 5,357 22,134 20,521 17,752 12,893 12,050
Net interest income .................... 7,010 6,408 27,247 25,394 23,235 19,758 17,538
Provision for loan losses ................ 217 173 807 880 581 295 239
Net interest income after
provision for loan losses ........... 6,793 6,235 26,440 24,514 22,654 19,463 17,299
Non-interest income ...................... 2,521 2,162 9,615 9,540 8,550 7,805 8,655
Non-interest expense ..................... 5,145 4,928 20,093 20,215 17,004 15,033 13,910
Earnings before income taxes ........... 4,169 3,469 15,962 13,839 14,200 12,235 12,044
Income taxes ............................. 1,534 1,283 5,908 5,632 5,577 4,815 4,647
Net earnings ........................... 2,635 2,186 10,054 8,207 8,623 7,420 7,397
Per share data:
Basic earnings per common share (1) ...... 0.36 0.30 1.37 1.13 1.18 1.03 1.03
Diluted earnings per common share (1) .... 0.35 0.29 1.35 1.12 1.18
Dividends declared per share (1) ......... 0.12 0.11 0.51 0.34 0.27 0.24 0.19
Period end book value .................... 9.01 7.84 8.82 7.79 6.97 5.93 5.22
Average common shares outstanding (1) .... 7,397,993 7,332,709 7,343,769 7,244,092 7,286,511 7,227,545 7,215,490
Summary of Financial Condition:
Total assets ............................ $ 658,586 615,755 648,709 608,467 546,675 475,314 406,097
Investment securities .................... 106,511 115,908 116,120 117,746 104,960 83,668 73,468
Loans receivable, net .................... 482,913 431,967 466,917 429,362 386,476 346,991 290,473
Total deposits ........................... 411,341 374,697 402,997 371,571 335,684 302,265 285,074
Total borrowed funds ..................... 167,506 169,529 171,470 164,813 147,004 119,855 74,078
Stockholders' equity ..................... 66,688 57,483 64,775 56,467 50,816 42,837 37,691
Financial Ratios:
Return on:
Average assets ....................... 1.64% 1.44% 1.60% 1.42% 1.70% 1.69% 1.89%
Beginning stockholders' equity ....... 16.40% 15.31% 17.81% 16.15% 20.13% 19.69% 22.75%
Equity as a percentage of total assets ... 10.13% 9.34% 9.99% 9.28% 9.30% 9.01% 9.28%
Dividend payout ratio .................... 33.47% 35.77% 37.27% 30.40% 22.53% 22.92% 18.90%
Efficiency ratio ......................... 53.98% 57.50% 54.51% 57.87% 53.50% 54.54% 53.11%
Net loans to total assets ................ 73.33% 70.15% 71.98% 70.56% 70.70% 73.00% 71.53%
Net interest margin on average
earning assets (tax equivalent) ...... 5.07% 4.79% 4.73% 4.76% 4.96% 4.88% 5.14%
Nonperforming assets to total assets ..... 0.32% 0.31% 0.23% 0.34% 0.20% 0.27% 0.25%
Allowance for loan losses to total loans 0.85% 0.89% 0.86% 0.86% 0.91% 0.93% 1.00%
Allowance for loan losses
to nonperforming assets .............. 198% 203% 275% 173% 323% 289% 481%
</TABLE>
Revised for stock splits and dividends. Includes shares to be issued to HUB
stockholders; excludes shares to be issued to VB stockholders
16
<PAGE> 34
GLACIER
The following table presents unaudited information concerning certain
financial information and ratios for Glacier Dollars are in thousands, except
per share data.
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
----------------------- ------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ------ ------ ------- ------ ------ ------
Summary of Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income .......................... $ 11,260 10,511 44,004 41,148 36,852 29,361 26,434
Interest expense ......................... 5,050 4,838 19,878 18,556 16,069 11,496 10,713
Net interest income .................... 6,210 5,673 24,126 22,592 20,783 17,865 15,721
Provision for loan losses ................ 202 163 747 880 581 321 239
Net interest income after
provision for loan losses ........... 6,008 5,510 23,379 21,712 20,202 17,544 15,482
Non-interest income ...................... 2,140 1,878 8,339 8,339 7,592 6,734 7,416
Non-interest expense ..................... 4,326 4,249 17,219 17,536 14,680 12,922 11,826
Earnings before income taxes ........... 3,822 3,139 14,499 12,515 13,114 11,356 11,072
Income taxes ............................. 1,392 1,153 5,319 5,090 5,139 4,467 4,249
Net earnings ........................... 2,430 1,986 9,180 7,425 7,975 6,889 6,823
Per share data:
Basic earnings (1) ..................... $ 0.35 0.29 1.35 1.11 1.18 1.03 1.02
Diluted earnings (1) ................... 0.34 0.29 1.32 1.09 1.18 1.03 1.01
Dividends declared (1) ................. 0.12 0.11 0.52 0.42 0.37 0.33 0.28
Period end book value (1) .............. 8.92 7.77 8.70 7.65 6.93 5.87 5.17
Average common shares outstanding (1) .. 6,861,693 6,796,409 6,807,469 6,707,792 6,750,211 6,691,245 6,679,190
Summary of Financial Condition:
Total assets ............................. $ 590,350 552,372 580,398 545,992 493,064 425,667 363,032
Investment securities .................... 94,986 104,331 104,266 105,505 90,855 68,831 58,829
Loans receivable, net .................... 436,601 388,760 421,048 386,641 353,263 317,902 266,357
Total deposits ........................... 355,439 323,232 346,784 321,739 291,585 258,722 247,615
Total borrowed funds ..................... 162,248 163,989 166,233 158,282 143,019 117,993 72,720
Stockholders' equity ..................... 61,359 52,813 59,609 51,948 46,819 39,858 34,772
Financial Ratios:
Return on:
Average assets ....................... 168% 1.46% 1.63% 1.43% 1.74% 1.75% 1.96%
Beginning stockholders' equity ....... 16.31% 15.29% 17.67% 15.86% 20.01% 19.81% 22.61%
Equity to total assets ................... 10.39% 9.56% 10.27% 9.51% 9.50% 9.36% 9.58%
Dividend payout ratio .................... 34.29% 37.93% 38.52% 38.18% 31.64% 31.89% 27.41%
Efficiency ratio ......................... 51.81% 56.27% 53.04% 56.69% 51.74% 52.53% 51.11%
Net loans to total assets ................ 73.96% 70.38% 72.54% 70.81% 71.65% 74.68% 73.37%
Net interest margin on average
earning assets (tax equivalent) ...... 4.72% 4.49% 4.64% 4.69% 4.56% 4.91% 4.88%
Nonperforming assets to total assets ..... 0.31% 0.28% 0.21% 0.29% 0.11% 0.17% 0.28%
Allowance for loan losses to total loans 0.83% 0.85% 0.83% 0.84% 0.86% 0.83% 0.87%
Allowance for loan losses
to nonperforming assets .............. 198% 212% 265% 198% 547% 502% 381%
</TABLE>
(1) Revised for stock splits and dividends.
17
<PAGE> 35
HUB FINANCIAL CORPORATION
The following table presents unaudited information concerning certain
consolidated financial information and ratios for HUB. The information is
qualified in its entirety by reference to more detailed financial information
and financial statements presented elsewhere in this Prospectus/Proxy Statement.
Dollar amounts are in thousands, except per share data.
<TABLE>
<CAPTION>
Three months ended
March 31, Year ended December 31,
------------------ ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations:
Interest income .......................... $ 1,375 1,254 5,377 4,767 4,135 3,290 3,154
Interest expense ......................... 575 519 2,256 1,965 1,683 1,397 1,337
Net interest income .................... 800 735 3,121 2,802 2,452 1,893 1,817
Provision for loan losses ................ 15 10 60 0 0 (26) 0
Net interest income after
provision for loan losses ........... 785 725 3,061 2,802 2,452 1,919 1,817
Non-interest income ...................... 381 284 1,276 1,201 958 1,071 1,239
Non-interest expense ..................... 819 679 2,874 2,679 2,324 2,111 2,084
Earnings before income taxes ........... 347 330 1,463 1,324 1,086 879 972
Income taxes ............................. 142 130 589 542 438 348 398
Net earnings ........................... 205 200 874 782 648 531 574
Per share data:
Basic earnings ......................... 22.13 21.59 94.33 84.40 69.94 60.58 60.24
Diluted earnings ....................... 22.13 21.59 94.33 84.40 69.94 60.58 60.24
Dividends declared ..................... 6.04 6.04 23.96 22.02 12.84 6.73 0.00
Period end book value .................. 575.18 504.05 557.58 487.75 431.41 339.87 306.33
Average common shares outstanding ...... 9,265 9,265 9,265 9,265 9,265 8,765 9,529
Summary of Financial Condition:
Total assets ............................. $68,236 63,383 68,311 62,475 53,611 49,647 43,065
Investment securities .................... 11,525 11,577 11,854 12,241 14,105 14,837 14,639
Loans receivable, net .................... 46,312 43,207 45,869 42,721 33,213 29,089 24,116
Total deposits ........................... 55,902 51,465 56,213 49,832 44,099 43,543 37,459
Total borrowed funds ..................... 5,258 5,540 5,237 6,531 3,985 1,862 1,358
Stockholders' equity ..................... 5,329 4,670 5,166 4,519 3,997 2,979 2,919
Financial Ratios:
Return on:
Average assets ....................... 1.20% 1.27% 1.34% 1.35% 1.26% 1.15% 1.35%
Beginning stockholders' equity ....... 15.87% 17.70% 19.34% 19.56% 21.75% 18.19% 24.49%
Equity as a percentage of total assets ... 7.81% 7.37% 7.56% 7.23% 7.46% 6.00% 6.78%
Dividend payout ratio .................... 27.32% 28.00% 25.40% 26.09% 18.36% 11.11% 0.00%
Efficiency ratio ......................... 69.35% 66.63% 65.36% 66.92% 68.15% 71.22% 68.19%
Net loans to total assets ................ 67.87% 68.17% 67.15% 68.38% 61.95% 58.59% 56.00%
Net interest margin on average
earning assets ....................... 5.68% 5.23% 5.54% 5.48% 5.37% 4.58% 9.38%
Nonperforming assets to total assets ..... 0.38% 0.55% 0.40% 0.78% 0.99% 1.20% 0.52%
Allowance for loan losses to total loans 1.07% 1.27% 1.04% 1.00% 1.35% 2.02% 2.47%
Allowance for loan losses
to nonperforming assets .............. 193% 161% 175% 88% 86% 101% 273%
Financial Ratios Valley Bank only:
Return on:
Average assets ....................... 1.52% 1.53% 1.57% 1.57% 1.52% 1.37% 1.53%
Beginning stockholders' equity ....... 17.31% 18.06% 19.76% 19.62% 19.94% 17.64% 19.97%
Equity as a percentage of total assets ... 8.94% 8.50% 8.68% 8.37% 8.78% 7.98% 8.60%
Dividend payout ratio .................... 34.42% 37.18% 33.52% 35.15% 37.59% 33.70% 32.13%
</TABLE>
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<PAGE> 36
HUB SPECIAL STOCKHOLDERS MEETING
DATE, TIME, PLACE
The HUB Meeting will be held on Monday, August 24, 1998, at 3:00 p.m.
local time, in the Community Room of the main office of VB, 3030 N. Montana
Avenue, Helena, Montana.
PURPOSE
The purposes of the HUB Meeting are as follows: (i) to consider and
vote upon approval of the Merger Agreement, and (ii) to act upon other matters,
if any, that may properly come before the HUB Meeting.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The HUB Board has fixed 5:00 p.m. on July 15, 1998 as the HUB Record
Date for determining the holders of shares of HUB Common Stock entitled to
notice of and to vote at the HUB Meeting. At the close of business on the HUB
Record Date, there were 9,265 shares of HUB Common Stock issued and outstanding
held by approximately 18 holders of record. Holders of record of HUB Common
Stock on the HUB Record Date are entitled to one vote per share, and are also
entitled to exercise dissenters' rights if certain procedures are followed. See
"THE MERGER -- Dissenters' Rights of Appraisal" and APPENDIX H.
VOTE REQUIRED
The affirmative vote of two-thirds of all shares of HUB Common Stock
outstanding on the HUB Record Date is required to approve the Merger Agreement.
HUB's stockholders are entitled to one vote for each share of HUB Common Stock
held. The presence of a majority of the outstanding shares of HUB Common Stock
in person or by proxy is necessary to constitute a quorum of stockholders for
the HUB Meeting. For this purpose, abstentions and broker nonvotes (i.e.,
proxies from brokers or nominees indicating that such person has not received
instructions from the beneficial owners or other persons entitled to vote shares
as to a matter with respect to which the broker or nominees do not have
discretionary power to vote) are counted in determining the shares present at a
meeting. For voting purposes, however, only shares affirmatively voted for the
approval of the Merger Agreement, and neither abstentions nor broker nonvotes,
will be counted as favorable votes in determining whether the Merger Agreement
is approved by the holders of HUB Common Stock. As a consequence, abstentions
and broker nonvotes will have the same effect as votes against approval of the
Merger Agreement.
As of the HUB Record Date, directors and executive officers of HUB and
VB, and their affiliates, owned and were entitled to vote 8,535 shares at the
HUB Meeting, representing approximately 92.1 percent of the outstanding shares
of HUB Common Stock. See "INFORMATION CONCERNING HUB AND VB -- Security
Ownership of Management and Certain Beneficial Owners." Each director of HUB and
VB has agreed to vote all shares of HUB Common Stock held or controlled by him
or her (a total of 8,454 shares, or approximately 91.25 percent of the shares
outstanding), in favor of approval of the Merger.
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the HUB
Meeting, it will be voted in accordance with the instructions given. If no
instruction is given, it is the intention of the persons named in the proxy to
vote the shares represented by the proxy FOR THE APPROVAL OF THE MERGER
AGREEMENT AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTER COMING BEFORE THE
MEETING, unless otherwise directed by the proxy. Any proxy given by a
stockholder may be revoked before its exercise by written notice to the
Secretary of HUB, or by a subsequently dated proxy, or in open meeting before
the stockholder vote is taken. The shares represented by properly executed,
unrevoked proxies will be voted in accordance with the instructions in the
proxy. Stockholders are entitled to one vote for each share of HUB Common Stock
held on the HUB Record Date.
The proxy for the HUB Meeting is being solicited on behalf of the HUB
Board. HUB will bear the cost of solicitation of proxies from its stockholders.
In addition to using the mails, proxies may be solicited by personal interview,
telephone, and wire. Banks, brokerage houses, other institutions, nominees, and
fiduciaries will be requested to forward their proxy soliciting material to
their principals and obtain authorization for the execution of proxies. Officers
and other employees of HUB may solicit proxies personally. HUB is not expected
to pay any compensation for the solicitation of proxies, but will, upon request,
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<PAGE> 37
pay the standard charges and expenses of banks, brokerage houses, other
institutions, nominees, and fiduciaries for forwarding proxy materials to and
obtaining proxies from their principals.
VB SPECIAL STOCKHOLDERS MEETING
DATE, TIME, PLACE
The VB Meeting will be held on Monday, August 24, 1998, at 3:00 p.m.
local time, in the Community Room of the main office of VB, 3030 N. Montana
Avenue, Helena, Montana.
PURPOSE
The purposes of the VB Meeting are as follows: (i) to consider and vote
upon approval of the Share Exchange Agreement, and (ii) to act upon other
matters, if any, that may properly come before the VB Meeting.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The VB Board has fixed 5:00 p.m. on July 15, 1998 as the VB Record
Date for determining the holders of shares of VB Common Stock entitled to
notice of and to vote at the VB Meeting. At the close of business on the VB
Record Date, there were 11,000 shares of VB Common Stock issued and outstanding
held by approximately 132 holders of record. Holders of record of VB Common
Stock on the VB Record Date are entitled to one vote per share, and are also
entitled to exercise dissenters' rights if certain procedures are followed. See
"THE SHARE EXCHANGE -- Dissenters' Rights of Appraisal" and APPENDIX H.
VOTE REQUIRED
The affirmative vote of two-thirds of all shares of VB Common Stock
outstanding on VB Record Date is required to approve the Share Exchange
Agreement. VB's stockholders are entitled to one vote for each share of VB
Common Stock held. The presence of a majority of the outstanding shares of VB
Common Stock in person or by proxy is necessary to constitute a quorum of
stockholders for the VB Meeting. For this purpose, abstentions and broker
nonvotes (i.e., proxies from brokers or nominees indicating that such person has
not received instructions from the beneficial owners or other persons entitled
to vote shares as to a matter with respect to which the broker or nominees do
not have discretionary power to vote) are counted in determining the shares
present at a meeting. For voting purposes, however, only shares affirmatively
voted for the approval of the Share Exchange Agreement, and neither abstentions
nor broker nonvotes, will be counted as favorable votes in determining whether
the Share Exchange Agreement is approved by the holders of VB Common Stock. As a
consequence, abstentions and broker nonvotes will have the same effect as votes
against approval of the Share Exchange Agreement.
HUB HAS AGREED TO VOTE ALL SHARES OF VB COMMON STOCK OWNED BY IT
(APPROXIMATELY 86.5% OF OUTSTANDING VB COMMON STOCK) IN FAVOR OF THE SHARE
EXCHANGE. CONSEQUENTLY, THE REQUISITE STOCKHOLDER APPROVAL OF THE SHARE EXCHANGE
IS ASSURED.
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the VB
Meeting, it will be voted in accordance with the instructions given. If no
instruction is given, it is the intention of the persons named in the proxy to
vote the shares represented by the proxy FOR THE APPROVAL OF THE SHARE EXCHANGE
AGREEMENT AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTER COMING BEFORE THE
MEETING, unless otherwise directed by the proxy. Any proxy given by a
stockholder may be revoked before its exercise by written notice to the
Secretary of VB, or by a subsequently dated proxy, or in open meeting before the
stockholder vote is taken. The shares represented by properly executed,
unrevoked proxies will be voted in accordance with the instructions in the
proxy. Stockholders are entitled to one vote for each share of VB Common Stock
held on the VB Record Date.
The proxy for the VB Meeting is being solicited on behalf of the VB
Board. VB will bear the cost of solicitation of proxies from its stockholders.
In addition to using the mails, proxies may be solicited by personal interview,
telephone, and wire. Banks, brokerage houses, other institutions, nominees, and
fiduciaries will be requested to forward their proxy soliciting material to
their principals and obtain authorization for the execution of proxies. Officers
and other employees of VB may solicit proxies personally. VB is not expected to
pay any compensation for the solicitation of proxies, but will, upon request,
pay the
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<PAGE> 38
standard charges and expenses of banks, brokerage houses, other institutions,
nominees, and fiduciaries for forwarding proxy materials to and obtaining
proxies from their principals.
GLACIER SPECIAL STOCKHOLDERS MEETING
DATE, TIME, PLACE
The Glacier Meeting will be held on Friday, August 21, 1998, at 9:00
a.m. local time, at The Outlaw Inn, 1701 Highway 93 South, Kalispell,
Montana.
PURPOSE
The purposes of the Glacier Meeting are as follows: (i) to consider and
vote upon approval of the Merger Agreement and the related Share Exchange
Agreement, together as one item (the "HUB/VB Transactions") and (ii) to act upon
other matters, if any, which properly come before the Glacier Meeting.
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The Glacier Board has fixed the close of business on July 15, 1998, as
the Glacier Record Date for determining the holders of shares of Glacier Common
Stock entitled to notice of and to vote at the Glacier Meeting. At the close of
business on the Glacier Record Date, there were 6,943,534 shares of Glacier
Common Stock issued and outstanding held by approximately 790 holders of
record. Holders of record of Glacier Common Stock on the Glacier Record Date are
entitled to one vote per share.
VOTE REQUIRED
The affirmative vote of holders of a majority of all shares of Glacier
Common Stock outstanding on the Glacier Record Date is required to approve the
HUB/VB Transactions. Glacier stockholders will vote on the HUB/VB Transactions
(that is, the Merger Agreement and the related Share Exchange Agreement) as a
single item at the Glacier Meeting. Glacier's stockholders are entitled to one
vote for each share of Glacier Common Stock held. The presence of a majority of
the outstanding shares of Glacier Common Stock in person or by proxy is
necessary to constitute a quorum of stockholders for the Glacier Meeting. For
this purpose, abstentions and broker nonvotes (i.e., proxies from brokers and
nominees indicating that such person has not received instructions from the
beneficial owners or other persons entitled to vote shares as a matter with
respect to which the broker or nominees do not have discretionary power to vote)
will be counted in determining the shares present at the Glacier Meeting. For
voting purposes, however, only shares affirmatively voted for the approval of
the HUB/VB Transactions, and neither abstentions nor broker nonvotes, will be
counted as favorable votes in determining whether the HUB/VB Transactions are
approved by the holders of Glacier Common Stock. As a consequence, abstentions
and broker nonvotes will have the same effect as votes against approval of the
HUB/VB Transactions.
As of the Glacier Record Date, Glacier's directors and executive
officers and their affiliates owned and were entitled to vote 1,388,012
shares at the Glacier Meeting, representing approximately 20% percent of the
outstanding shares of Glacier Common Stock on the Glacier Record Date.
VOTING, SOLICITATION, AND REVOCATION OF PROXIES
If the enclosed proxy is duly executed and received in time for the
Glacier Meeting, it will be voted in accordance with the instructions given. If
no instruction is given, it is the intention of the persons named in the proxy
to vote the shares represented by the proxy FOR THE APPROVAL OF THE HUB/VB
TRANSACTIONS AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTER COMING BEFORE THE
MEETING, unless otherwise directed by the proxy. Any proxy given by a
stockholder may be revoked before its exercise by written notice to the
Secretary of Glacier, or by a subsequently dated proxy, or in open meeting
before the stockholder vote is taken. The shares represented by properly
executed, unrevoked proxies will be voted in accordance with the instructions in
the proxy. Stockholders are entitled to one vote for each share of Glacier
Common Stock held on the Glacier Record Date.
The proxy for the Glacier Meeting is being solicited on behalf of the
Glacier Board. Glacier will bear the cost of solicitation of proxies from its
stockholders. In addition to using the mails, proxies may be solicited by
personal interview, telephone, and
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<PAGE> 39
wire. Banks, brokerage houses, other institutions, nominees, and fiduciaries
will be requested to forward their proxy soliciting material to their principals
and obtain authorization for the execution of proxies. Officers and other
employees of Glacier may solicit proxies personally. Glacier is not expected to
pay any compensation for the solicitation of proxies, but will, upon request,
pay the standard charges and expenses of banks, brokerage houses, other
institutions, nominees, and fiduciaries for forwarding proxy materials to and
obtaining proxies from their principals.
BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE EXCHANGE
BACKGROUND
VB was organized in 1978 by a group of business and professional people
who recognized the need for banking services in a fast-growing business district
along Helena's northern edge. VB was well received and experienced strong growth
during the early years of its existence. HUB was formed in 1982 as a one-bank
holding company to hold, acquire, and finance the bank's stock. Early in 1997,
several HUB stockholders who had either retired or were approaching retirement
expressed interest in obtaining liquidity from some of their investment. The HUB
and VB Boards, along with management, reassessed their organizations and the
current market for successful community banks. It was determined that the timing
was appropriate to seek a suitable partner with which to merge. During the third
quarter, a committee of the HUB Board was formed to develop a strategy for
marketing the Bank. As discussions about marketing the Bank developed, Mr.
Flanders (VB's President and Chief Executive Officer) was contacted by Mr.
William Bouchee, a representative of Glacier (President and Chief Executive
Officer of First Security Bank of Missoula, a Glacier subsidiary) to determine
if the HUB Board had any interest in discussing a merger with Glacier. On
September 3, 1997 Mr. Bouchee met with a committee of the Board to discuss his
bank's experience as a Glacier affiliate.
As a result of the meeting with Mr. Bouchee, certain members of
Glacier's management team, including Messrs. Bouchee, John MacMillan (at the
time, Glacier's Chief Executive Officer and Board Chairman) and Michael Blodnick
(at the time, Glacier's Executive Vice President and Chief Operating Officer)
met with representatives of HUB. Discussion at that meeting on October 15, 1997
centered on background information of the two companies, management values and
strategies, organizational philosophies, and stockholder value. Following the
meeting, Glacier officials prepared pro forma combined financial schedules and
had several telephone discussions with Mr. Flanders concerning relative values
of both organizations and the merits of merging the two in a tax-free, pooling
of interests-transaction. Encouraged by these discussions, both parties agreed
to meet to begin the negotiation process. Messrs. Flanders and J. T. Harrison,
Jr. (a HUB Director) met again with Messrs. MacMillan and Blodnick on October
22, 1997 to discuss possible pricing and the structure of a transaction. After
ongoing negotiations, in early November the parties reached agreement on a
price. Subsequently, regulatory and SEC issues were discussed, a joint
confidentiality agreement was executed, an agreement to proceed with due
diligence was reached, and a letter of intent to proceed with formal
negotiations toward a definitive merger agreement was signed. On December 29 and
30 both Boards held special meetings attended by their respective legal counsel
and financial advisors, where upon the definitive agreement was approved and
executed.
Glacier and HUB share a community banking philosophy and strategy which
emphasize responsiveness to local markets and delivery of personalized service
through locally managed banks. The parties believe that a bank holding company
composed of autonomous banks, emphasizing high-quality personalized customer
service and strong local identification is a viable alternative to the
super-regional organizations which have acquired many smaller independent banks
in recent years and operated them as branches. Glacier expects to continue to
emphasize this strategy after the Merger and intends to operate VB as a separate
subsidiary with local management and Directors that are involved in, and
knowledgeable about, its community.
The parties believe that the Merger will enable VB and Glacier to
provide enhanced services to customers, to compete more effectively in the
present banking environment and to realize operating synergies and revenue
enhancements. The parties note that their geographic markets, products and
services are complimentary. VB is located in Helena, Montana with its primary
market area as Lewis and Clark County in west central Montana. The primary
market areas for both Glacier and VB are among the fastest growing areas in
Montana, according to the State's Bureau of Business and Economic Research.
The parties anticipate that the Merger will provide financial benefit
to stockholders through increased efficiencies and revenue enhancements,
particularly in the areas of loan participations, cross selling of complimentary
products and services, and enhanced marketing efforts. More over, having banking
offices in multiple counties in western Montana is
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<PAGE> 40
expected to enable the parties to more effectively pursue their strategy of
providing community banking services to individuals, small and medium-sized
businesses throughout the geographic region.
RECENT DEVELOPMENTS
Original Glacier and HUB entered into the Merger Agreement as of
December 30, 1997. Subsequent to the signing of the Merger Agreement, Original
Glacier discovered certain technical issues related to its capital stock. These
technical issues, which involved the failure to obtain stockholder approval and
make certain corporate filings in connection with a stock split in 1997, created
uncertainty about the validity of certain shares of Original Glacier stock that
were outstanding. Additionally, Original Glacier identified a concern that the
total number of shares of common stock that were issued and outstanding exceeded
the number that could be duly issued under its certificate of incorporation. In
order to address these issues, on July 8, 1998, Original Glacier merged (the
"Curative Transaction") with and into a newly-formed subsidiary, GB, Inc. In the
Curative Transaction, GB, Inc. issued one share of its common stock for each
share of Original Glacier common stock then outstanding. Original Glacier and
GB, Inc. have obtained a legal opinion from special Delaware counsel, to the
effect that all of the GB, Inc. shares issued in the Curative Transaction, in
exchange for the shares of Original Glacier common stock then outstanding, are
validly issued, fully paid and non-assessable. When the Curative Transaction was
completed, the name of the continuing corporation was changed from GB, Inc. to
Glacier Bancorp, Inc. ("New Glacier").
In addition to completing the Curative Transaction, the Glacier Board
determined that it was appropriate to file a declaratory judgement action in
Delaware, which action was filed on March 9, 1998. The declaratory judgment
action seeks a judicial declaration that the Curative Transaction is in
compliance with Delaware law and that the shares of Glacier Common Stock issued
in the Curative Transaction were validly issued. The Court of Chancery of
Delaware has not taken any action with respect to the declaratory judgment
action, and has not set any date for a hearing or other proceeding.
New Glacier is the successor in interest to all of the rights and
liabilities of Original Glacier, including all of Original Glacier's rights and
liabilities under the Merger Agreement and the Share Exchange Agreement. The
corporate attributes of New Glacier, the material aspects of which are set forth
elsewhere in this Prospectus/Joint Proxy Statement, are identical to those of
Original Glacier, except that New Glacier has a larger number of authorized
shares than Original Glacier had. The shares of Glacier Common Stock that are
being registered pursuant to the Registration Statement of which this Prospectus
is a part, and which will be issued in the Merger and the Share Exchange, are
shares of New Glacier. Such shares of Glacier Common Stock have been listed for
trading on the Nasdaq National Market, under the ticker symbol "GBCI", which was
also the symbol under which the common stock of Original Glacier traded. The
shares of Glacier Common Stock that were outstanding prior to the Curative
Transaction have been withdrawn from quotation on the Nasdaq National Market and
from registration under Section 12 of the 1934 Act.
The Curative Transaction was consummated on July 8, 1998. In order to
reflect the effects of the Curative Transaction, Original Glacier and HUB
entered into the Amended Merger Agreement, effective June 30, 1998. The Amended
Merger Agreement is attached to this Prospectus/Joint Proxy Statement at
APPENDIX B. The related Share Exchange Agreement was effectively amended to the
extent that it refers to the Merger Agreement.
REASONS FOR MERGER - HUB
The HUB Board believes that the terms of the Merger Agreement are fair
and in the best interests of HUB and its stockholders. In reaching a decision on
the Merger Agreement, the HUB Board considered numerous factors taken as a
whole, none of which were accorded any particular or relative weight, and
consulted with legal, tax, accounting and financial advisors as well as HUB and
VB senior management. The factors considered included:
(i) the fairness opinion of CFA with respect to the Merger
Agreement;
(ii) the federal tax treatment to HUB stockholders of the proposed
transaction which provides for tax deferred treatment of the
exchange of stock contemplated by the Merger Agreement;
(iii) the liquidity of Glacier Common Stock created by the market
available for the trading of Glacier Common Stock and the
comparatively more limited liquidity of HUB Common Stock;
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<PAGE> 41
(iv) the increased financial and technology resources of Glacier
which will be available to VB following the Merger;
(v) the financial, business and other prospects of Glacier in its
existing markets and in the markets served by VB;
(vi) the compatibility of VB and Glacier senior management and the
opportunity for continuity of employment of VB employees
following consummation of the Merger;
(vii) the enhancement of HUB stockholder value anticipated by reason
of the issuance of the shares of Glacier Common Stock in
exchange for HUB Common Stock in the Merger;
(viii) the availability and continuity of services to existing VB
customers and the Helena community served by VB;
(ix) the competitive nature of the commercial banking industry and
the banking markets served by VB;
(x) the future business and other prospects of VB and HUB.
At a special meeting of the HUB Board held on December 29, 1997 the
Board determined that the Merger Agreement is in the best interests of HUB and
its stockholders and voted unanimously to approve the Merger Agreement.
REASONS FOR THE SHARE EXCHANGE - VB
The VB Board believes that the terms of the Share Exchange Agreement
are fair and in the best interests of VB and its stockholders. In reaching a
decision on the Share Exchange Agreement, the VB Board considered numerous
factors taken as a whole, none of which were accorded any particular or relative
weight, and consulted with legal, tax, accounting and financial advisors as well
as VB senior management. The factors considered included:
(i) the fairness opinion of CFA with respect to the Share Exchange;
(ii) the federal tax treatment to VB stockholders of the proposed
transaction which provides for tax deferred treatment of the
exchange of stock contemplated by the Share Exchange Agreement;
(iii) the liquidity of Glacier Common Stock created by the market
available for the trading of Glacier Common Stock and the
comparatively more limited liquidity of VB common stock;
(iv) the effect on VB stockholders of holding a minority ownership in
VB following the Merger;
(v) the financial, business and other prospects of Glacier in its
existing markets and in the markets served by VB;
(vi) the compatibility of VB and Glacier senior management and the
opportunity for continuity of employment of VB employees
following consummation of the Share Exchange;
(vii) the enhancement of VB stockholder value anticipated by reason of
the issuance of the shares of Glacier Common Stock in exchange
for VB Common Stock in the Share Exchange;
(viii) the future business and other prospects of VB.
At a special meeting of the VB Board held on December 29, 1997 the
Board determined that the Share Exchange Agreement is in the best interests of
VB and its stockholders and voted unanimously to approve the Share Exchange
Agreement.
REASONS FOR THE MERGER AND SHARE EXCHANGE - GLACIER
At its special meeting on December 30, 1997, the Glacier Board
determined that the Merger, Merger Agreement, Share Exchange and Share Exchange
Agreement are fair to, and in the best interests of, Glacier and its
stockholders. In reaching that
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<PAGE> 42
conclusion, Glacier determined that the Merger and Share Exchange would advance
Glacier's strategic plan of growing its franchise through internal and external
opportunities. The Glacier Board determined that the Merger and Share Exchange
would allow it to increase its market share and presence in the Helena market
and continue its philosophy of expanding its Montana banking franchise through
acquisitions. The Glacier Board believes that the Merger and Share Exchange will
also immediately have a positive impact on both Glacier's financial condition
and statement of operations. In addition, Glacier believes that the Merger and
Share Exchange will enhance Glacier's prospects for growth in the Helena market,
as well as serve as a platform for continued acquisition opportunities in
southwestern Montana.
Glacier believes that the Merger and Share Exchange will combine two
financially sound institutions with complementary businesses and strategies,
thereby creating a stronger combined organization with greater size,
flexibility, efficiency, and profitability. In addition, Glacier believes that
Glacier, HUB and VB each bring certain strengths that will augment the other's
operations. The Glacier Board believes that (i) each institution is currently
well managed, (ii) the companies have compatible corporate philosophies and
strategic objectives, (iii) the combined entity will be able to realize the
benefits of complementary strengths at both organizations, (iv) the Merger and
Share Exchange will allow for an increased presence in the key western Montana
market of Helena, and (v) the strong capitalization of the combined entity will
allow it to take advantage of future acquisition opportunities. The Glacier
Board also believes that the Merger and Share Exchange will further allow it to
compete effectively in the rapidly changing market place of banking and
financial services and to take advantage of opportunities for growth and
diversification in Montana.
In reaching its decision to approve the Merger Agreement and Share
Exchange Agreement and recommend the approval of the Merger and Share Exchange
to Glacier stockholders, the Glacier Board considered a number of factors, none
of which were assigned any specific relative value or weight. The factors
considered included the following:
(i) the financial condition, results of operation and business
operations and prospects of HUB and VB;
(ii) the current banking industry environment, including the rapid
consolidation and the need to effectively and proactively
position Glacier competitively;
(iii) the prospect that the Merger and Share Exchange will expand and
enhance Glacier's existing Helena operations;
(iv) the belief that the Merger and Share Exchange will expand
Glacier's banking franchise in the Montana market;
(v) the prospect that the Merger and Share Exchange will allow for
revenue enhancement and operating synergies, as well as various
cross-selling opportunities;
(vi) the belief that the Merger and Share Exchange will be
immediately accretive to both Glacier's earnings and book value
per share;
(vii) the belief that the Merger and Share Exchange will diversify
Glacier's loan portfolio and deposit mix by geography and
product types;
(viii) the judgement that HUB and VB are well-managed institutions and
will be superior merger partners as a result of the similarities
of the institutions in culture and commitment to the Montana
market;
(ix) the belief that the Merger and Share Exchange will advance
Glacier's external growth strategy of acquiring profitable,
well-managed institutions and further promote Glacier as a
consolidator of regionally-based banks;
(x) the belief that the Merger and Share Exchange will increase
Glacier's market capitalization and liquidity of its shares;
(xi) evaluation of the financial terms of the Merger and their effect
on Glacier and the Glacier Board's belief that such terms are
fair to Glacier and its stockholders, based in part on the
financial presentations of D.A. Davidson regarding the Merger
and the expression of D.A. Davidson's opinion as to the fairness
to Glacier of the consideration to be delivered by Glacier in
the Merger and Share Exchange (see "BACKGROUND OF AND REASONS
FOR THE MERGER AND SHARE EXCHANGE -- Opinion of Glacier
Financial Advisor"); and
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(xii) the belief, after consultation with its legal counsel, that the
required regulatory approvals could be obtained to consummate
the Merger and Share Exchange.
The foregoing discussion of the information and factors considered by
the Glacier Board is not intended to be exhaustive but is believed to encompass
the material factors considered by the Glacier Board. On the basis of the
foregoing factors, the Glacier Board concluded that the terms of the Merger and
Share Exchange are fair to, and in the best interests of, Glacier and its
stockholders.
OPINIONS OF HUB AND VB FINANCIAL ADVISOR
Columbia Financial Advisors, Inc. ("CFA") has delivered written
opinions to the HUB Board and VB Board to the effect that, as of the date of
this Proxy Statement/Prospectus, the consideration to be received by HUB and VB
common stockholders pursuant to the terms of the Merger Agreement and the Share
Exchange Agreement is fair to such stockholders from a financial point of view.
The exchange ratio has been determined by HUB, VB and Glacier through
negotiations. The CFA opinion is directed only to the fairness, from a financial
point of view, of the consideration to be received and does not constitute a
recommendation to any HUB or VB stockholder as to how such stockholder should
vote at the HUB meeting or the VB meeting. As of July 10, 1998, the price of
Glacier's common stock was $27.50, and the total purchase price was $1,550.00
per share for all of the 11,000 outstanding shares of VB, and, since HUB owns
9,513 shares of VB, the total purchase price for HUB is the product of 9,513
shares and $1,550.00 and is then divided by 9,265 shares outstanding for HUB
to equal $1,591.49 per HUB share.
HUB and VB retained CFA as their exclusive financial advisor pursuant
to an engagement letter dated November 24, 1997 and December 23, 1997,
respectively, in connection with the Merger and the Share Exchange. CFA is a
regionally recognized investment banking firm that is regularly engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions. HUB and VB Board selected CFA to act as HUB's exclusive financial
advisor based on CFA's experience in mergers and acquisitions and in securities
valuation generally.
On December 29, 1997, CFA issued its opinions to the HUB Board and VB
Board that, in its opinion as investment bankers, the terms of the Merger as
provided in the Merger Agreement are fair, from a financial view point, to HUB,
VB and their respective stockholders. THE FULL TEXT OF THE CFA OPINIONS TO HUB
AND TO VB, WHICH SET FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITS
ON ITS REVIEW, ARE ATTACHED HERETO AS APPENDICES E AND F. THE SUMMARY OF THE CFA
OPINIONS IN THIS JOINT PROXY STATEMENT/PROSPECTUS ARE QUALIFIED IN THEIR
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINIONS. HUB AND VB STOCKHOLDERS
ARE URGED TO READ THE ENTIRE CFA OPINIONS.
In rendering its opinions to HUB and VB, CFA reviewed, among other
things, historical financial data of HUB, certain internal financial data and
assumptions of HUB and VB prepared for financial planning and budgeting purposes
furnished by the management of HUB and VB and, to the extent publicly available,
the financial terms of certain change of control transactions involving
Northwest community banks. CFA discussed with HUB's management and VB's
management the financial condition, current operating results, and business
outlook for HUB. CFA also reviewed certain publicly available information
concerning GB and certain financial and securities data of GB and companies
deemed similar to GB. CFA discussed with Glacier's management the financial
condition, current operating results, and business outlook for Glacier and
Glacier's plans relating to HUB and VB. In rendering its opinion, CFA relied,
without independent verification, on the accuracy and completeness of all
financial and other information reviewed by it and did not attempt to verify or
to make any independent evaluation or appraisal of the assets of HUB, VB or
Glacier nor was it furnished with any such appraisals. HUB and VB did not impose
any limitations on the scope of the CFA investigation in arriving at its
opinion.
CFA analyzed the total Purchase Price on a cash equivalent fair market
value basis using standard evaluation techniques (as discussed below) including
comparable sales multiples, net present value analysis, and net asset value
based on certain assumption of projected growth, earnings and dividends and a
range of discount rates from 16% to 18%. Please note that HUB owns 9,513 shares
of VB, and minority stockholders own 1,487 shares of VB. Since Glacier is paying
$1,366.82 to all stockholders of VB, the analysis of the fairness for HUB
stockholders also pertains to minority stockholders of VB.
NET ASSET VALUE is the value of the net equity of a bank, including
every kind of property and value. This approach normally assumes the liquidation
on the date of appraisal with the recognition of the investment securities gains
or losses, real estate appreciation or depreciation, adjustments to the loan
loss reserve, discounts to the loan portfolio and changes in the net value of
other assets. As such, it is not the best evaluation approach when valuing a
going concern because it is based
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on historical costs and varying accounting methods. Even if the assets and
liabilities are adjusted to reflect prevailing market prices and yields (which
is often of limited accuracy due to the lack of readily available data), it
still results in a liquidation value. In addition, since this approach fails to
account for the values attributable to the going concern such as the
interrelationship among HUB's and VB's assets and liabilities, customer
relations, market presence, image and reputation, staff expertise and depth,
little weight is given by CFA to the net asset value approach to valuation.
MARKET VALUE is generally defined as the price, established on an
"arms-length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The "hypothetical" market value for a small bank with a thin market for
its common stock is normally determined by comparison to the average price to
stockholders equity, price to earnings, and price to total assets, adjusting for
significant differences in financial performance criteria and for any lack of
marketability or liquidity of the buyer. The market value in connection with the
evaluation of control of a bank is determined by the previous sales of small
banks in the state or region. In valuing a business enterprise, when sufficient
comparable trade data are available, the market value approach deserves greater
weighting than the net asset value approach and similar weight as the investment
value approach as discussed below.
CFA maintains a comprehensive data base concerning prices paid for
banking institutions in the Northwest, particularly Montana, Washington and
Oregon banking institutions, during 1988 through 1997. This data base provides
comparable pricing and financial performance data for banking institutions sold
or acquired. Organized by different peer groups, these data present medians of
financial performance and purchase price levels, thereby facilitating a valid
comparative purchase price analysis. In analyzing the transaction value of HUB
and VB, CFA has considered the market approach and has evaluated price to
stockholders equity and price to earnings multiples and the price to total
assets percentage for transactions involving Montana, Oregon and Washington
banking organizations with total assets less than $100 million that sold for
100% common stock from January 1988 to September 1997.
COMPARABLE SALES MULTIPLES. CFA calculated a "Merger
Consideration-Adjusted Book Value" for HUB's September 30, 1997 stockholders
equity and the estimated June 30, 1998 stockholders' equity adjusted for the
price to stockholders' equity ratios for a sample of Northwest banking
institutions with assets below $100 million which sold between January 1, 1993
through December 29, 1997 and a sample of Northwest banking institutions with
total assets below $100 million which sold between January 1, 1996 and December
29, 1997. The calculations are $959.64 and $1,089.03 per share, respectively,
for the September 30, 1997 stockholders' equity for the two samples. For the
estimated June 30, 1998 stockholders' equity, the calculations are $1,048.81 and
$1,190.22 per share, respectively. For HUB's 1997 net income and twelve months
prior to June 30, 1998, the calculations are $1,046.39 and $1,549.05 per share,
respectively.
TRANSACTION VALUE AS A PERCENTAGE OF TOTAL ASSETS. CFA calculated the
percentage of total assets which the transaction represents as a price level
indicator. The transaction value as a percentage of total assets facilitates a
truer price level comparison with comparable banking organizations, regardless
of the differing levels of stockholders' equity and earnings. In this instance,
a transaction value of $1,403.41 per HUB share results in a transaction value as
a percentage of total assets of 19.13%. The median price as a percentage of
total assets for a sample of Northwest banking institutions with assets below
$100 million which sold between January 1, 1993 through December 29, 1997 and a
sample of Northwest banking institutions with total assets below $100 million
which sold between January 1, 1996 and December 29, 1997 of 16.3% and 17.8% of
total assets, respectively.
INVESTMENT VALUE is sometimes referred to as the income or earnings
value. One investment value method frequented used estimates the present value
of an institution's future earnings or cash flow which is discussed below.
NET PRESENT VALUE ANALYSIS. The investment or earnings value of any
banking organization's stock is an estimate of the present value of future
benefits, usually earnings, dividends, or cash flow, which will accrue to the
stock. An earnings value is calculated using an annual future earning stream
over a period of time of not less than five years and the residual or terminal
value of the earnings stream after five years, using HUB's estimates of future
growth and an appropriate capitalization or discount rate. CFA's calculations
were based on an analysis of banking industry, HUB's earnings estimates for
1998-2002, historical levels of growth and earnings, and the competitive
situation in HUB's market area. Using discount rates of 16% and 18%, acceptable
discount rates considering the risk-return relationship most investors would
demand for an investment of this type as of the valuation date, the "Net Present
Value of Future Earnings" provided a range of $1,256.09 to $1,492.09 per share.
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When the net asset value, market value and investment value approaches
are subjectively weighed, using the appraiser's experience and judgment, it is
CFA's opinion that the proposed transaction is fair, from a financial point of
view to the HUB stockholders.
In addition to the net asset value, market value and investment value
approaches, CFA investigated control premiums for publicly traded community
banks which have sold in a change of control transaction during the period of
January 1, 1996 and December 29, 1997 and had a consideration of less than $50
million. A sample of twelve financial institutions which were publicly traded
before they announced a transaction with third parties indicates that the median
control premium was 21.8% above the prevailing market price prior to the merger
announcement. Using the control premium of 21.8%, minority stockholders could
then expect to receive a price of $997.82 per share. However, GBCI has agreed to
circumvent this control premium issue by paying all minority stockholders of VB
the price per share of $1,366.82, as of January 16, 1998.
When the net asset value, market value, investment value, and control
premium approaches are subjectively weighted, using the appraiser's experience
and judgment, it is CFA's opinion that the proposed transaction is fair, from a
financial point of view to VB's stockholders.
Pursuant to the terms of the Engagement Letter, HUB has agreed to pay
CFA a fee of $25,000 for the fairness opinion. Pursuant to the terms of the
Engagement Letter, VB has agreed to pay CFA a fee of $5,000 for the fairness
opinion In addition, HUB has agreed to reimburse CFA for its reasonable
out-of-pocket expenses, including the fees and disbursements of its counsel, and
to indemnify CFA against certain liabilities.
RECOMMENDATION OF THE HUB BOARD AND VB BOARD
THE HUB BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
THE VB BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR
APPROVAL OF THE SHARE EXCHANGE AGREEMENT.
OPINION OF GLACIER FINANCIAL ADVISOR
Pursuant to an engagement letter dated October 16, 1997, Glacier
engaged D.A. Davidson to provide investment banking advice and services in
relation to the Merger. D.A. Davidson attended the special meeting of the
Glacier Board held on December 30, 1997, at which the Glacier Board approved the
Merger Agreement. The Glacier Board retained D.A. Davidson based upon its
experience, expertise and familiarity with Glacier and with financial
institutions in the Northern Rocky Mountain and Pacific Northwest regions. D.A.
Davidson is a recognized regional investment firm which, as a part of its
business, is engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, underwritings, private placements, investment
research and other purposes.
D.A. Davidson has delivered its written opinion dated December 30,
1997, and dated the date of this Prospectus/Joint Proxy Statement, to the effect
that, based upon and subject to the factors and assumptions set forth in such
written opinions, and as of the date of each such opinion, the consideration to
be delivered by Glacier in the Merger and Share Exchange is fair to Glacier
stockholders from a financial point of view. The full text of the D.A. Davidson
opinion, which sets forth the assumptions made, matters considered, and limits
on its review, is attached as APPENDIX G. The summary of the D.A. Davidson
opinion in this Prospectus/Joint Proxy Statement is qualified in its entirety by
reference to the full text of such opinion.
In arriving at its written opinion presented to the Glacier Board on
December 30, 1997, D.A. Davidson (i) reviewed the financial statements and
related financial reports of HUB and VB for the years ended December 31, 1994,
1995, and 1996 and for the nine months ended September 30, 1996 and 1997; (ii)
reviewed certain internally prepared financial reports and schedules of HUB and
VB; (iii) reviewed various regulatory reporting statements of VB; (iv) reviewed
Original Glacier's Annual Reports, Forms 10-K and related financial information
for the years ended December 31, 1994, 1995, and 1996 and Original Glacier's
Form 10-Q for the periods ended September 30, 1997 and 1996; (v) reviewed
certain other information, including financial forecasts, relating to the
respective businesses, earnings, assets and prospects for Glacier, HUB and VB
furnished to it by Glacier, HUB, and VB; (vi) conducted discussions with members
of management of Glacier, HUB and VB concerning their respective business and
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prospects; (vii) considered certain financial and common stock performance
information with respect to Glacier; (viii) considered securities data of
certain publicly traded financial institutions in businesses similar to those of
Glacier, HUB and VB; (ix) compared the proposed financial terms of the
transactions contemplated by the Merger and Share Exchange with financial terms
of certain other mergers and acquisitions which it deemed to be relevant; (x)
considered the pro forma effect of the Merger and Share Exchange on Glacier's
capitalization ratios, assets, loans, deposits, earnings, book value and
tangible book value per share; (xi) reviewed the Merger Agreement; and (xii)
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which D.A. Davidson
deemed relevant.
D.A. Davidson has relied, without independent verification, upon the
accuracy and completeness of all financial and other information publicly
available or provided to it for the purpose of its opinion. D.A. Davidson also
relied upon the management of Glacier, HUB and VB as to the reasonableness and
achievability of the financial and operating forecasts (and the assumptions and
bases therefor) provided to it. D.A. Davidson is not an expert in the evaluation
of allowances for loan losses and it has not made an independent evaluation of
the adequacy of the allowance for loan losses of Glacier, HUB or VB nor has it
reviewed any individual credit files. In addition, D.A. Davidson has not made an
independent evaluation or appraisal of the assets and liabilities of Glacier and
HUB or any of their subsidiaries, and has not been furnished with any such
evaluation or appraisal.
The following is a summary of the analyses D.A. Davidson utilized in
arriving at its opinion as to the fairness of the consideration to be delivered
by Glacier in the Merger and Share Exchange and that D.A. Davidson discussed
with the Glacier Board on December 30, 1997. D.A. Davidson arrived at its
opinion based on the results of all the analyses described below assessed as a
whole and did not reach any specific conclusions from or with regard to any one
method of analysis. The analyses performed by D.A. Davidson are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by such analyses.
General. Through the various analyses which are summarized below and
were presented to the Glacier Board on December 30, 1997, D.A. Davidson
attempted to determine the value of HUB, assuming that HUB owned 100% of VB. As
such, future references to HUB in this section "Opinion of Glacier Financial
Advisor" will refer to HUB and VB on a combined basis and references to the
Merger will include the acquisition by Glacier of the operations of both HUB and
VB. D.A. Davidson also noted that the transactions with VB minority
stockholders, as contemplated by the Share Exchange Agreement, would be
accounted for as a purchase transaction and, therefore, made appropriate
adjustments to its pro forma merger analysis. In the determination of value to
be delivered by Glacier to HUB, D.A. Davidson noted in its presentation to the
Glacier Board on December 30, 1997, that under the terms of the Merger, HUB
stockholders would receive shares of Glacier worth $13.6 million based on the
closing price of Glacier Common Stock on December 29, 1997. Based upon the
closing price of Glacier Common Stock on July 10, 1998, HUB stockholders would
receive shares of Glacier Common Stock worth approximately $17,050,000.
Pro Forma Merger Analysis. D.A. Davidson analyzed certain pro forma
effects resulting from the Merger. The analysis indicated that the Merger would
result in earnings accretion per Glacier share for the twelve months ended
September 30, 1997 of 1.6%. The analysis also indicated that the Merger would
result in book value and tangible book value accretion per Glacier share at
September 30, 1997 of 2.6% and 1.2%, respectively. On a pro forma basis, at
September 30, 1997, Glacier's total assets would increase from $574 million to
$645 million, its deposits would increase from $347 million to $404 million, and
its stockholders' equity would increase from $57 million to $64 million. The
analysis also indicated that for the twelve months ended September 30, 1997,
Glacier's net earnings would increase from $8.7 million to $9.7 million, its
return on average assets would decrease from 1.58% to 1.56%, and its return on
average equity would decrease from 16.3% to 16.2%. D.A. Davidson also observed
that under the terms of the Merger, current Glacier stockholders would own
approximately 91.7 % and former HUB stockholders would own 8.3 % of the combined
entity after giving effect for the Merger. D.A. Davidson noted that these
relative ownership positions compared to the relative contributions of Glacier
and HUB to the combined entity's pro forma financial results for the twelve
months ended September 30, 1997 and pro forma financial condition at September
30, 1997 as follows: 89.0% and 11.0%, respectively, of assets, 86.0% and 14.0%,
respectively, of deposits, 89.3% and 10.7%, respectively, of book value, 90.6%
and 9.4%, respectively, of tangible book value, and 90.4% and 9.6%,
respectively, of net earnings.
Discounted Dividend Stream Analysis. Using a discounted dividend stream
analysis, D.A. Davidson estimated the present value of the future streams of
after-tax cash flows that HUB could produce through 2001 and distribute to
stockholders ("dividendable net income"). In this analysis, D.A. Davidson
assumed that HUB performed in accordance with the earnings growth rate estimates
provided to D.A. Davidson by the management of HUB, and that HUB could pay out
up
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to 100% of its net income with the constraint that its tangible equity to assets
ratio be maintained at a minimum 7 % level. D.A. Davidson estimated the terminal
value for the HUB common stock at 10.0 times estimated 2001 net income. The
dividendable net income streams and terminal value were then discounted to a
present value using differing discount rates (13% to 15%) chosen to reflect
different assumptions regarding the required rates of return for holders or
prospective buyers of HUB common stock. This analysis indicated a reference
range of between $13.3 million and $14.1 million aggregate value for HUB. This
analysis was based upon the projections and assumptions of HUB's management.
Management's projections and assumptions are based upon a variety of factors,
many of which are beyond the control of HUB. This analysis is not necessarily
indicative of actual values or actual future results and does not purport to
reflect the price at which any securities may trade at the present or at any
time in the future.
Comparison of Selected Public Companies. D.A. Davidson reviewed and
compared certain financial, operating and market information of HUB with the
following eight publicly traded banking organizations that it believed to be
appropriate for comparison: First State Bancorp., West Coast Bancorp, United
Security Bancorp, Northrim Bank, Cascade Bancorp, Centennial Bancorp, Columbia
Banking System, and Glacier (collectively "Composite"). Such information
included market valuation, profitability, asset quality, reserve coverage and
capital ratios. Among the market information compared were market price to:
latest twelve months earnings ("LTM earnings"), estimated 1997 earnings, book
value, assets, and deposits. D.A. Davidson noted that the average price to LTM
earnings of the Composite was 21.3x, the price to estimated 1997 earnings was
20.5x, the price to book value was 2.49x, the price to assets was .261x, and the
price to deposits was .328x. In applying these valuation multiples to HUB, D.A.
Davidson derived an average market value of $18.3 million.
In addition, D.A. Davidson examined an index of 18 regional bank
systems across the U.S. ("Regional Bank Index"), and noted that the average
price to 1996 earnings was 21.lx, the price to estimated 1997 earnings was
18.2x, the price to book value was 3.12x, and the price to assets was .248x. In
applying these multiples to HUB, D.A. Davidson derived an average value for HUB
of $18.4 million.
D.A. Davidson noted that neither the Composite nor the Regional Bank
Index is identical to HUB, and that various adjustments could be applied to the
comparison multiples in consideration of the varying size, financial and
operating characteristics of the compared entities.
Analysis of Acquisition Transactions. D.A. Davidson reviewed the
pricing multiples paid in recently announced or completed financial institution
merger or acquisition transactions as a basis for comparison of the financial
terms contemplated in the Merger Agreement. D.A. Davidson examined six
transactions involving bank and thrift acquisitions in Montana which had
characteristics relevant to the Merger. Those transactions included First
Interstate BancSystem of Montana, Inc.'s acquisition of Citizen's Bancshares,
Inc., First Interstate BancSystem of Montana, Inc.'s acquisition of First
National Park Bank, Original Glacier's acquisition of Missoula Bancshares, Inc.,
First Interstate BancSystem of Montana, Inc.'s acquisition of Wells Fargo's
Montana and Wyoming branches, WesterFed Financial Corp.'s acquisition of
Security Bancorp, Inc., and United Financial Corp.'s merger with Heritage
Bancorporation. D.A. Davidson noted that the average valuation multiples
involved with these transactions were: price to LTM earnings of 12.2x, price to
book value of 1.92x, price to assets of .152x, and price to deposits of .186x.
This analysis yielded an average implied value of $11.6 million for HUB. D.A.
Davidson noted that due to the relative infrequency of transactions in Montana,
this group of bank mergers or acquisitions took place over a period of three
years. D.A. Davidson also noted that over that three year period, bank
valuations in both the public market and in the merger and acquisition market
have significantly increased. As such, the multiples paid in earlier
transactions may tend to understate values in the existing bank valuation
environment.
In addition to pricing multiples paid in specific Montana transactions,
D.A. Davidson also examined a broad index of transactions which was compiled by
CS First Boston and includes all transactions completed in the third quarter of
1997. The reported average valuation multiples involved with these transactions
were: price to LTM earnings of 18.3x, price to book value of 2.25x, price to
assets of .163x, and price to deposits of .207x. This analysis yielded an
average implied value based upon a broad compilation of recent bank merger and
transactions of approximately $15.5 million.
No Company or transaction used in the above analysis as a comparison is
identical to HUB or the Merger. Accordingly, an analysis of the results of the
foregoing necessarily involves complex considerations and judgements concerning
differences in financial and operating characteristics of the companies and
transactions analyzed.
In connection with its opinion dated as of the date of this
Prospectus/Joint Proxy Statement, D.A. Davidson reviewed, discussed and analyzed
updated information and financial statements of Glacier, HUB and VB and
performed
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procedures to update certain of the analyses and reviewed the assumptions on
which such analyses were based and the factors considered in connection
therewith.
The summary of the analyses set forth above provides a description of
the main elements of D.A. Davidson's presentation to the Glacier Board on
December 30, 1997. It does not purport to be a complete description of the
presentation by D.A. Davidson to the Glacier Board or of the analyses performed
by D.A. Davidson. The preparation of a fairness opinion is not susceptible to
partial analysis or summary description. D.A. Davidson believes that its
analyses and the summary set forth above must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, or
selecting part of the above summary, without considering all factors, analyses
and circumstances, would create an incomplete view of the procedures underlying
the analyses set forth in the D.A. Davidson presentation and opinion.
In performing its analyses, D.A. Davidson made or relied upon certain
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of Glacier
or HUB. The analyses summarized above were prepared solely as part of D.A.
Davidson's analysis of the fairness, from a financial point of view, of the
consideration to be delivered by Glacier in the Merger and were provided to the
Glacier Board in connection with the delivery of D.A. Davidson's opinions. In
addition, as described above, D.A. Davidson's opinion and presentation to the
Glacier Board is only one of many factors taken into consideration by the
Glacier Board.
Under the terms of a letter agreement dated October 16, 1997 between
D.A. Davidson and Glacier, Glacier will pay D.A. Davidson a fee on the Closing
Date of the Merger of approximately $180,000. The letter agreement with D.A.
Davidson also provides that Glacier will reimburse D.A. Davidson for its
reasonable out-of-pocket expenses and will indemnify D.A. Davidson against
certain liabilities, including liabilities under securities laws, incurred in
connection with its services.
RECOMMENDATION OF THE GLACIER BOARD
THE GLACIER BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT AND THE SHARE EXCHANGE AGREEMENT.
THE MERGER
GENERAL
The following description of the material aspects of the Merger does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement. Glacier and HUB stockholders are being asked to approve the
Merger in accordance with the terms of the Merger Agreement, and are urged to
read the Merger Agreement, as amended, which is attached to this
Prospectus/Joint Proxy Statement at APPENDICES A and B, carefully.
BASIC TERMS OF THE MERGER
The Merger Agreement provides for the merger of HUB with and into
Glacier, with the result that HUB stockholders would become stockholders of
Glacier and VB would become a direct subsidiary of Glacier. HUB would cease to
exist after the Merger. While Glacier and HUB believe that they will receive the
requisite regulatory approvals for the Merger, there can be no assurance that
such approvals will be received or, if received, as to the timing of these
approvals or as to the ability to obtain these approvals on satisfactory terms.
See "-- Conditions to the Merger."
Subject to the transaction expense limitation described below, the
total Purchase Price that Glacier will pay to HUB stockholders in the Merger
("Merger Purchase Price") will be the number of shares of Glacier Common Stock
(rounded to the nearest whole number) determined by multiplying 620,000 by HUB's
fractional ownership interest in VB Common Stock at Closing. By way of example
only, if HUB owns 86.5% of the outstanding shares of VB Common Stock on the
Merger Effective Date, the total number of Glacier Common Stock shares to be
received by HUB stockholders would be 536,300 shares (620,000 times 86.5%).
However, the Merger Agreement provides that if the costs and expenses
incurred by HUB in connection with the Merger exceed $110,000, the Purchase
Price will be reduced by the number of shares of Glacier Common Stock equal in
value to the excess. For purposes of any reduction in the Purchase Price under
this provision, the Merger Agreement provides that Glacier Common Stock will be
valued at $21.00 per share.
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Exchange Ratio. The number of shares of Glacier Common Stock that each HUB
stockholder (other than holders of Dissenting Shares) will receive in exchange
for his or her shares of HUB Common Stock will be determined in accordance with
an Exchange Ratio. This Exchange Ratio will be computed by dividing the Merger
Purchase Price by the aggregate number of shares of HUB Common Stock that are
issued and outstanding on the Merger Effective Date, rounded to 2 decimals. If,
as in the example above, the Purchase Price was 536,300 shares, and if on the
Merger Effective Date there were 9,265 shares of HUB Common Stock outstanding,
each holder of HUB Common Stock would receive 57 shares of Glacier Common Stock
for each share of HUB Common Stock held.
MECHANICS OF THE MERGER
On the Merger Effective Date, HUB will be merged with and into Glacier.
At that time, all business, assets, and liabilities formerly carried on or owned
by HUB will be transferred to and vested in Glacier. HUB will cease to have a
corporate existence separate from Glacier, and VB will be a directly owned
subsidiary of Glacier.
EXCHANGE OF STOCK CERTIFICATES
On and after the Merger Effective Date, certificates representing HUB
Common Stock will be deemed to represent only the right to receive Glacier
Common Stock or cash as provided in the Merger Agreement. Upon surrender to the
Exchange Agent designated by Glacier and HUB of certificates that, before the
Merger Effective Date, represented shares of HUB Common Stock, together with a
properly executed transmittal letter form and any other required documents, the
holder surrendering the certificates will be entitled to receive certificates
representing the number of shares of Glacier Common Stock, and cash, if any, to
which he or she is entitled in accordance with the terms of the Merger
Agreement. DO NOT SEND IN YOUR CERTIFICATES AT THIS TIME. HUB stockholders will
receive written instructions and the required letter of transmittal after the
Merger is effective.
All Glacier Common Stock issued under the Merger Agreement will be
deemed issued as of the Merger Effective Date. No distributions or dividends
paid upon shares of Glacier Common Stock after Closing of the Merger will be
paid to holders of HUB Common Stock who are entitled under the Merger Agreement
to receive Glacier Common Stock until such holders have surrendered the
certificates formerly representing shares of HUB Common Stock, at which time any
accumulated dividends and distributions since the Merger Effective Date, without
interest, will be paid.
CASH FOR FRACTIONAL SHARES
Glacier will not issue certificates for fractional shares of Glacier
Common Stock. The Merger Agreement provides that each HUB stockholder who is
otherwise entitled to receive a fractional share, will receive cash in lieu
thereof in an amount equal to the product of such fraction multiplied by $21.00,
and such HUB stockholder will have no other rights with respect to such
fractional shares or other shares.
CONDITIONS TO THE MERGER; REGULATORY APPROVALS
Consummation of the Merger is subject to various conditions. No
assurance can be provided as to whether these conditions will be satisfied or
waived by the appropriate party. Accordingly, there can be no assurance that the
Merger will be completed. In the event that conditions to the Merger remain
unsatisfied and the Merger has not been effected on or before October 31, 1998,
the Merger Agreement may be terminated by either party to the Merger Agreement.
The Merger can occur only if the holders of the shares of HUB Common
Stock and Glacier Common Stock approve the transaction. In accordance with
applicable Montana corporate laws, approval of the Merger requires the
affirmative vote of the holders of two-thirds of all outstanding share of HUB
Common Stock. In accordance with the Delaware General Corporation Law, approval
of the Merger requires the affirmative vote of the holders of a majority of all
outstanding shares of Glacier Common Stock. In addition, approval of the Merger
is required from the FRB. Conditional approval has been received from the FRB.
Although no assurance can be given, the parties expect to receive final approval
in due course.
Certain conditions must be satisfied or events must occur before the
parties will be obligated to complete the Merger. Each party's obligations under
the Merger Agreement are conditioned on satisfaction by the other parties of
their conditions. Some of these conditions are as follows: (a) the
representations and warranties of each party are true in all material respects
(as of Closing), and each party has complied with its covenants in the Merger
Agreement; (b) no Material Adverse Effect, as defined
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in the Merger Agreement, has occurred with respect to a party; (c) each party's
Board and HUB's and Glacier's stockholders have approved the Merger; (d) Glacier
has appointed, effective as of Closing, Fred J. Flanders to serve on Glacier's
Board; (e) the parties have received and/or provided one another with the
counsel, tax, accounting treatment, and fairness opinions required by the Merger
Agreement; (f) the SEC has declared the effectiveness of the registration
statement for the shares of Glacier Common Stock to be issued in the Merger; (g)
HUB and VB have met certain financial condition requirements; (h) no action or
proceeding has been commenced or is threatened by any governmental agency to
restrain or prohibit or invalidate the Merger; and (i) the aggregate cash to be
paid to holders of HUB Common Stock, for fractional shares and to holders of
Dissenting Shares, does not exceed 10% of the Merger Purchase Price.
Either Glacier or HUB may waive any of the other party's conditions,
except those that are required by law (such as receipt of regulatory and
stockholder approval). Either Glacier or HUB may also grant extended time to the
other party to complete an obligation or condition.
STOCK OPTION AGREEMENT
As a condition to Glacier's execution of the Merger Agreement, Glacier
and HUB have entered into a Stock Option Agreement, dated as of December 30,
1997, under which HUB grants to Glacier an option ("Option") to purchase 2,302
authorized but unissued shares of HUB Common Stock (representing approximately
19.9% of HUB's issued and outstanding shares of common stock after the Option
shares are issued) at a per share price of $781.00. This Option effectively
makes acquisition of HUB by a party other than Glacier more expensive (and
therefore less likely) as there would be more shares of HUB Common Stock
outstanding.
Glacier may not exercise the Option unless and until certain
"Triggering Events" occur. These Triggering Events include (among other events):
o HUB or the HUB Board enters into an agreement under which
another person or business entity would (1) merge, consolidate
with, or acquire 51% or more of the assets or liabilities of
HUB, or engage in similar transactions with HUB, or (2) purchase
or otherwise acquire securities representing 10% or more of
HUB's voting shares.
o Any person or business entity acquires, subject to additional
criteria set forth in the Stock Option Agreement, the beneficial
ownership or the right to acquire beneficial ownership of
securities which, when aggregated with other securities owned by
such person or business entity, represents 10% or more of the
voting shares of HUB.
o The failure of the HUB Board to recommend the Merger to HUB's
stockholders, or the withdrawal of such recommendation.
o The failure of HUB's stockholders to approve the Merger at the
HUB Meeting after any person or business entity announces its
proposal to (1) acquire HUB by merger, consolidation or
otherwise, or acquire 51% or more of HUB's assets and
liabilities, (2) purchase or otherwise acquire 25% or more of
HUB's voting stock, or (3) change the composition of the HUB
Board.
AMENDMENT OR TERMINATION OF MERGER AGREEMENT
The Merger Agreement may be amended or supplemented at any time by
written agreement of the parties, whether before or after the Meeting. To the
extent permitted under applicable law, the parties may make any amendment or
supplement without further approval of HUB's stockholders, except amendments
which would reduce the amount or change the form of consideration HUB
stockholders will receive in the Merger transaction.
The Merger Agreement contains several provisions entitling either HUB
or Glacier to terminate the Merger Agreement under certain circumstances. The
following briefly describes these provisions:
Lapse of Time. If the Merger has not closed by October 31, 1998, then
at any time after that date, either Glacier or HUB may terminate the Merger
Agreement, as long as the party terminating has not caused the delay in closing
by breaching its obligations under the Merger Agreement.
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Mutual Consent. The parties may terminate the Merger Agreement at any
time before Closing, whether before or after approval by the parties'
stockholders, by mutual consent.
Failure of HUB to Recommend Approval or Stock Option Becomes
Exercisable. Glacier may terminate the Merger Agreement before HUB stockholders
approve it if the HUB Board fails to recommend (or adversely modifies, withdraws
or changes its recommendation) approval of the Merger to its stockholders.
Glacier may also terminate the Merger if the Option under the Stock Option
Agreement becomes exercisable by Glacier, unless Glacier has exercised the
Option.
Impracticability. The parties may terminate the Merger Agreement if the
party seeking termination, through its Board, has determined that the
transaction has become inadvisable or impracticable by reason of litigation by
the federal government or the government of Montana to restrain or invalidate
the Merger.
HUB's Conditions Not Met. Glacier may terminate the Merger Agreement
if, by October 31, 1998, any of HUB's conditions to closing are not met. Among
such conditions are (i) HUB's Tangible Equity Capital, determined in accordance
with GAAP, must be at least $5.9 million; (ii) there must have been no event
that causes a Material Adverse Effect, as defined in the Merger Agreement, with
respect to HUB or VB; (iii) HUB's financial condition must meet the criteria set
forth in the Merger Agreement; and (iv) the aggregate amount of cash to be paid
by Glacier for fractional shares and to holders of Dissenting Shares must not
exceed 10% of the Merger Purchase Price. Additionally, Glacier may terminate the
Merger Agreement and the Share Exchange if any event has occurred that would
adversely affect Glacier's ability to account for the Merger as a "pooling of
interests." In this regard, affiliates of HUB who own shares of Glacier Common
Stock and VB Common Stock, and who vote in favor of the Merger, have undertaken
not to dissent from the Share Exchange in their capacities as VB stockholders,
as this would adversely affect "pooling of interests" accounting treatment.
Glacier's Conditions Not Met. HUB may terminate the Merger Agreement
if, by October 31, 1998, any of HUB's conditions to closing are not met. Among
such conditions are (i) there must have been no event that causes a Material
Adverse Effect, as defined in the Merger Agreement, with respect to Glacier; and
(ii) Glacier must have complied with all terms, covenants and conditions of the
Merger Agreement.
Termination Fees. If HUB terminates the Merger Agreement under certain
circumstances, or Glacier terminates the Merger Agreement under certain
circumstances due to HUB's failure to comply with or satisfy certain conditions
to closing, HUB will pay to Glacier a termination fee of $250,000. If Glacier
terminates the Merger Agreement under certain circumstances, or HUB terminates
the Merger Agreement under certain circumstances due to Glacier's failure to
comply with or satisfy certain conditions to closing, Glacier will pay to HUB a
termination fee of $85,000.
Allocation of Costs Upon Termination. If the Merger Agreement is
terminated, Glacier and HUB will each pay their own out-of-pocket expenses
incurred in connection with the transaction and, except for applicable
termination fees, will have no other liability to the other party. Termination
of the Merger Agreement does not, however, affect Glacier's rights under the
Option Agreement.
CONDUCT PENDING THE MERGER
The Merger Agreement provides that, until the Merger is effective, HUB
will, and will cause VB to, conduct its business only in the ordinary and usual
course, and use all reasonable efforts to preserve its present business
organization, retain the services of its present management, and preserve the
goodwill of all parties with whom it has business dealings. The Merger Agreement
also provides that, unless Glacier otherwise consents in writing, HUB will
refrain from engaging in various activities such as: (i) effecting any stock
split or other recapitalization, (ii) except under certain limited
circumstances, declaring or paying dividends or other distributions except
dividends from VB to HUB to support the operations of HUB and HUB's regular
quarterly dividends to its stockholders, consistent with past practices and not
exceeding $6.00 per HUB Common Stock share, (iii) acquiring or disposing of
assets or making with respect to assets material commitments outside the
ordinary course of business, (iv) with certain exceptions, soliciting or
accepting deposit accounts of a different type than previously accepted by VB,
or incurring any indebtedness in excess of $25,000, (v) acquiring real property
without conducting an environmental evaluation, (vi) with certain exceptions,
entering into or terminating any contracts with a term of more than one year or
that require HUB or VB of more than $25,000, (vii) selling investment securities
if the aggregate gain realized would exceed $50,000, or transferring investment
securities between portfolios, (viii) amending or materially changing its
policies, (ix) increasing its full-time employees above 47, (x) with certain
exceptions, making capital expenditures in excess of
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$10,000 per project or $50,000 in the aggregate, and (xi) entering into
transactions or incurring any expenses that are not in the ordinary course of
business.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
In connection with the Merger, Glacier intends to appoint Fred J.
Flanders to the Glacier Board. Mr. Flanders is currently VB's President. Mr.
Flanders' appointment will be effective on the Merger Effective Date. Further,
after the Merger becomes effective, Mr. Flanders will continue to serve as VB's
President; it is anticipated that Mr. Flanders will be named Chairman and Chief
Executive Officer of VB following the Merger.
Pursuant to the Merger Agreement, on the Merger Effective Date two
directors, to be designated by Glacier, will be added to the VB Board.
Additionally, although it is not a requirement of the Merger Agreement or any
other agreement between Glacier and HUB or VB, three current directors of VB,
Messrs. Harris Hanson, James Foley, and Ms. Mary Munger, have announced that
they intend to retire and resign effective on the Merger Effective Date. All
other current directors of the VB Board will remain as members of the VB Board
following the Merger. VB's directors will serve until the 1999 annual meeting of
VB's stockholders or until their successors have been elected and qualified.
VB's executive officers will remain unchanged following consummation of the
Merger.
As a condition to the execution of the Merger Agreement, each member of
the respective Boards of HUB and VB entered into a Director Noncompetition
Agreement with Glacier and HUB. Except under certain limited circumstances, the
Director Noncompetition Agreement prohibits these directors from competing with
Glacier in Flathead, Lewis and Clark, and Missoula Counties, Montana, for the
lesser of (a) two years after the director's service as a director of HUB, VB,
Glacier, or any affiliate of Glacier, is terminated or (b) three years from the
Merger Effective Date.
As a further condition to the execution of the Merger Agreement, VB has
entered into an employment agreement with Mr. Flanders, which Glacier has
ratified. Mr. Flanders will continue as President (as noted above, Mr. Flanders
will be named Chairman and Chief Executive Officer) of VB under the terms and
conditions of the employment agreement. See "-- Interests of Certain Persons in
the Merger."
EMPLOYEE BENEFIT PLANS
The Merger Agreement confirms Glacier's intention to allow VB's
employees who continue as employees of VB after the Merger to participate in
certain Glacier employee benefit plans, including Glacier's stock option plans.
HUB's employee benefit plans will be terminated as soon as practical after the
Merger, and the employee interests in those plans will be transferred or merged
into Glacier's employee benefit plans. HUB will terminate its Profit Sharing
Plan as soon as practicable after Closing and distribute the proceeds to the
participants as appropriate.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the HUB Board and management may be deemed to have
interests in the Merger, in addition to their interests as stockholders of HUB.
The HUB Board was aware of these factors and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.
Employment Agreement. Glacier has ratified an employment agreement
between VB and Fred J. Flanders. The employment agreement is for a term of two
years, beginning on the Merger Effective Date. Mr. Flanders' base annual salary
as provided in the employment agreement is $42,000. VB may terminate the
agreement at any time for Cause (as defined in the employment agreement) without
incurring any post-termination obligations or penalties. If VB terminates the
employment agreement without cause or terminates the employment agreement under
certain circumstances tied to a change in control of VB, Mr. Flanders will be
entitled to severance payments consisting of the compensation and other benefits
to the end of the term of his employment agreement, as to which he would have
been entitled to if his employment had not been terminated. Mr. Flanders is
prohibited from competing with Glacier or VB in Lewis and Clark County, Montana
for the lesser of (i) two years after his employment with VB and Glacier has
terminated or (ii) three years from the Merger Effective Date.
Appointments to the Glacier Board and Composition of VB Board. Glacier
has also agreed to appoint Mr. Flanders to the Glacier Board effective on
Closing of the Merger. The current directors of VB will continue to serve as
directors following the Merger,
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except that three current directors will retire and resign, and two directors
designated by Glacier will become members of VB Board, on the Merger Effective
Date. See "--Directors and Executive Officers After the Merger" above.
FEDERAL INCOME TAX TREATMENT OF THE MERGER
The Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Code for federal income tax purposes. HUB and Glacier will
receive at Closing an opinion from Graham & Dunn that the Merger will constitute
a tax-free reorganization for federal tax purposes. Such opinion will not bind
the Internal Revenue Service or preclude the Internal Revenue Service from
adopting a contrary position. The opinion is based upon facts and assumptions
and representations and assurances made by HUB and Glacier. THE FEDERAL INCOME
TAX DISCUSSION SET FORTH BELOW MAY NOT APPLY TO PARTICULAR CATEGORIES OF HOLDERS
OF HUB COMMON STOCK SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX
LAWS, SUCH AS FOREIGN HOLDERS OR HOLDERS WHOSE STOCK MAY HAVE BEEN ACQUIRED AS
COMPENSATION. IN ADDITION, THERE MAY BE RELEVANT STATE, LOCAL OR OTHER TAX
CONSEQUENCES, NONE OF WHICH ARE DESCRIBED BELOW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR ADVISORS TO DETERMINE THE SPECIFIC PERSONAL TAX CONSEQUENCES OF
THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL, AND
OTHER TAX LAWS.
The Graham & Dunn opinion will state that:
1. The merger of HUB with and into Glacier will constitute a
tax-free reorganization.
2. No gain or loss will be recognized by either HUB or Glacier as a
result of the Merger.
3. The tax basis and holding period for the HUB assets that are
received by Glacier in the Merger will be the same as the tax
basis and holding period of the assets held immediately before
the exchange by HUB.
4. No gain or loss will be recognized by holders of HUB Common
Stock upon the receipt of Glacier Common Stock in exchange for
HUB Common Stock in the Merger.
5. The tax basis of the Glacier Common Stock received in the Merger
by HUB stockholders will be the same as the tax basis of the
shares of HUB Common Stock surrendered in the exchange, reduced
by any basis allocable to a fractional share interest in the
Glacier Common Stock for which cash is received. The holding
period for the shares of Glacier Common Stock received in the
Merger will include the holding period of HUB shares exchanged,
provided that HUB shares were held as capital assets at the time
of the Merger.
6. Gain or loss will be recognized by HUB stockholders who receive
cash in lieu of fractional shares of Glacier Common Stock, or
who exercise dissenters' rights and receive cash for their
shares. The amount of such gain or loss will be the difference
between the cash received and the basis of the shares or
fractional share interests surrendered in the exchange. Such
gain or loss will be a capital gain or loss provided that the
shares of HUB Common Stock surrendered were capital assets at
the time of surrender, and will be long-term capital gain or
loss if such shares of HUB have been held for more than one
year.
ACCOUNTING TREATMENT OF MERGER
It is anticipated that the Merger will be accounted for as a pooling of
interests for accounting purposes. Under this method of accounting, assets and
liabilities of HUB and Glacier are carried forward at their previously recorded
amounts, and operating results of Glacier and HUB will represent the combined
results for periods before and after the Merger. No recognition of goodwill
arising from the Merger is required of any party to the Merger. Under the Merger
Agreement, receipt of a letter from KPMG that they concur with the respective
management's conclusions that the Merger will qualify for the pooling of
interests treatment is a condition to the obligation of Glacier to consummate
the Merger.
The unaudited condensed pro forma combined financial information
contained in this Prospectus/Joint Proxy Statement has been prepared using the
pooling of interests accounting method to account for the Merger. See "UNAUDITED
CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS," including the related Notes.
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DISSENTERS' RIGHTS OF APPRAISAL
Under Montana law (MBCA Section 35-1-826 through 35-1-839), a
stockholder of HUB may exercise "dissenters' rights" and receive the fair value
of his or her shares in cash, if certain procedures are followed. To exercise
these rights, a HUB stockholder must (1) deliver to HUB before the vote on the
approval of the Merger is taken, written notice of intent to demand payment for
his or her shares if the Merger is effected, and (2) not vote in favor of the
Merger.
If the stockholders of HUB approve the Merger and the Merger Agreement,
then HUB will deliver a written Dissenters' Notice to all stockholders who have
previously satisfied the statutory requirements listed above. The Dissenters'
Notice must be sent within ten days after the stockholders of HUB voted to
approve the Merger and the Merger Agreement. The Dissenters' Notice must (1)
state where the payment demand must be sent and where and when certificates for
certified shares must be deposited, (2) inform stockholders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment is received, (3) supply a form for demanding payment which includes the
date of the first announcement to the news media or to stockholders of the terms
of the proposed Merger Agreement and Merger and requires the person asserting
dissenters' rights to certify whether or not he or she acquired beneficial
ownership of the shares before that date, (4) set a date (not fewer than 30 nor
more than 60 days after the date the Dissenters' Notice is delivered) by which
HUB must receive the dissenting HUB's stockholder's payment demand, and (5) be
accompanied by a copy of MBCA Sections 35-1-826 through 35-1-839.
A HUB stockholder who receives a Dissenters' Notice as described above
must (1) demand payment, (2) certify whether the stockholder acquired beneficial
ownership of his/her shares before the date set forth in the Dissenter's Notice,
and (3) deposit his or her certificates in accordance with the terms of the
Dissenters' Notice. A HUB stockholder who demands payment and deposits his or
her certificates in accordance with the Dissenters' Notice and Montana law, will
retain all other rights of a HUB stockholder until these rights are canceled or
modified by the consummation of the Merger as provided in the Merger Agreement.
A stockholder who does not demand payment or deposit his or her certificates
when and where required, each by the date set in the Dissenters' Notice, is not
entitled to payment under these Montana dissenters' rights provisions for his or
her shares.
Except in the case of after acquired shares, if the HUB stockholders
approve the Merger and the Merger Agreement, and upon receipt of a payment
demand as described above, HUB will pay each dissenter who has satisfied the
statutory requirements, the amount that HUB estimates to be the fair value of
his/her shares, plus accrued interest.
HUB's payment to each dissenting HUB stockholder will be accompanied
by: (1) HUB's balance sheet as of the end of a fiscal year ending not more than
16 months before the date the payment will be made, an income statement for that
year, a statement of changes in stockholder equity for that year, and HUB's
latest available interim financial statements, if any; (2) a statement of HUB's
estimate of the fair value of the shares; (3) an explanation of how the interest
paid to the dissenter was calculated; (4) a statement of the dissenter's right
to demand payment if the dissenter disagrees with HUB's assessment of the fair
value of his/her shares under the appropriate Montana statutes, and (5) a copy
of MBCA Section 35-1-826 through 35-1-839. If a stockholder exercises
dissenters' rights, the dissenting stockholder is entitled to receive the fair
value of his or her shares in cash. Such value may be higher or lower than the
value of Glacier's Common Stock issuable under the Merger Agreement.
THE FAILURE OF A HUB STOCKHOLDER TO COMPLY STRICTLY WITH THE MONTANA
STATUTORY REQUIREMENTS WILL RESULT IN A LOSS OF DISSENTERS' RIGHTS. A COPY OF
THE RELEVANT STATUTORY PROVISIONS IS ATTACHED AS APPENDIX H. HUB STOCKHOLDERS
SHOULD REFER TO THIS APPENDIX FOR A COMPLETE STATEMENT CONCERNING DISSENTERS'
RIGHTS AND THE FOREGOING SUMMARY OF SUCH RIGHTS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH APPENDIX.
STOCK RESALES BY HUB AFFILIATES
The Glacier Common Stock to be issued in the Merger will be
transferable free of restrictions under the 1933 Act, except for shares received
by persons, including directors and executive officers of HUB, who may be deemed
to be "affiliates" of HUB, as that term is used in (i) paragraphs (c) and (d) of
Rule 145 under the 1933 Act and/or (ii) Accounting Series Releases 130 and 135,
as amended, of the SEC. Affiliates may not sell their shares of Glacier Common
Stock acquired in the Merger, except (a) pursuant to an effective registration
statement under the 1933 Act covering those shares, (b) in compliance with Rule
145, or (c) in accordance with an opinion of counsel reasonably satisfactory to
GB, under other applicable exemptions from the
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registration requirements of the 1933 Act. SEC guidelines further indicate that
the pooling of interests method of accounting will generally not be challenged
on the basis of sales by affiliates of the acquiring or acquired company if such
affiliates do not dispose of any of the shares of the acquiring or acquired
company they owned before the consummation of a merger or shares of the
acquiring corporation they receive in connection with the merger during the
period beginning 30 days before the Effective Date and ending when financial
results covering at least 30 days of post-merger operations of the combined
organization have been published. Glacier will obtain customary agreements with
all HUB directors, officers, and affiliates of HUB and Glacier, under which such
persons have represented that they will not dispose of their shares of Glacier
received in the Merger or the shares of capital stock of HUB or Glacier held by
them before the Merger, except (i) in compliance with the 1933 Act and the rules
and regulations promulgated thereunder, and (ii) in a manner that would not
adversely affect the ability of Glacier to treat the Merger as a pooling of
interests for financial reporting purposes. This Prospectus/Joint Proxy
Statement does not cover any resales of the Glacier Common Stock received by
affiliates of HUB.
NO SOLICITATION
HUB has agreed in the Merger Agreement that, except as required by
fiduciary duties under applicable law, neither HUB nor any of its officers or
directors will (i) solicit, encourage, entertain or facilitate any other
proposals or inquiries for an acquisition of the shares or assets of HUB or its
subsidiaries, (ii) enter into discussions concerning any such acquisition, or
(iii) furnish any nonpublic information relating to Glacier's business or
organization to any person that is not affiliated with HUB or Glacier.
EXPENSES
Subject to possible termination fees described under "-- Amendment or
Termination of the Merger Agreement," if the Merger Agreement is terminated or
abandoned, each party will pay its own out-of-pocket expenses incurred in
connection with the Merger Agreement.
THE SHARE EXCHANGE
GENERAL
The following description of the material aspects of the Share Exchange
does not purport to be complete and is qualified in its entirety by reference to
the Share Exchange Agreement. Glacier and VB stockholders are being asked to
approve the Share Exchange in accordance with the terms of the Share Exchange
Agreement, and are urged to read the Share Exchange Agreement carefully.
BASIC TERMS OF THE SHARE EXCHANGE
The Share Exchange Agreement provides for the exchange of the shares of
VB that HUB does not own at the Closing of the Merger (the "Minority Stock") for
shares of Glacier Common Stock, with the result that holders of Minority Stock
would become stockholders of Glacier and VB would become a wholly owned, direct
subsidiary of Glacier. While Glacier and VB believe that they will receive the
requisite regulatory approvals for the Share Exchange, there can be no assurance
that such approvals will be received or, if received, as to the timing of these
approvals or as to the ability to obtain these approvals on satisfactory terms.
See "-- Conditions to the Share Exchange."
The total Purchase Price that Glacier will pay to holders of Minority
Stock (the "VB Purchase Price") will be the number of shares of Glacier Common
Stock calculated by multiplying 620,000 by the percentage of VB Common Stock
owned by holders of Minority Stock at the Merger Effective Date. By way of
example, if Minority Stock constitutes 13.5% of all VB Common Stock on the
Merger Effective Date, the total VB Purchase Price would be 83,700 shares of
Glacier Common Stock (620,000 X 13.5%).
Exchange Ratio. The number of shares of Glacier Common Stock that each
holder of Minority Stock (other than Dissenting Shares) will receive in exchange
for his or her shares of Minority Stock will be determined in accordance with an
Exchange Ratio. This Exchange Ratio will be computed by dividing the VB Purchase
Price by the aggregate number of shares of Minority Stock that are outstanding
on the Share Exchange Effective Date, rounded to two decimals. If, as in the
example above, the VB Purchase Price was 83,700 shares of Glacier Common Stock,
and if on the Share Exchange Effective Date there were 1,485 shares of Minority
Stock outstanding, each holder of Minority Stock would receive 56.36 shares of
Glacier Common Stock for each share of Minority Stock held. Because cash will be
paid in lieu of fractional shares, 56 shares of
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Glacier Common Stock would be issued, and cash would be paid for the .36
fractional share, for each share of Minority Stock. See "-- Cash for Fractional
Shares."
MECHANICS OF THE SHARE EXCHANGE
On the Share Exchange Effective Date and immediately following
consummation of the Merger, each share of Minority Stock outstanding will be
transferred to Glacier in exchange for shares of Glacier Common Stock. VB will
then become a wholly-owned subsidiary of Glacier.
EXCHANGE OF STOCK CERTIFICATES
On and after the Share Exchange Effective Date, certificates
representing Minority Stock will be deemed to represent only the right to
receive Glacier Common Stock or cash as provided in the Share Exchange
Agreement. Upon surrender to the Exchange Agent designated by Glacier and VB, of
certificates that, before the Share Exchange Effective Date, represented shares
of Minority Stock, together with a properly executed transmittal letter form and
any other required documents, the holder surrendering the certificates will be
entitled to receive certificates representing the number of shares of Glacier
Common Stock, and cash, if any, to which he or she is entitled in accordance
with the terms of the Share Exchange Agreement. DO NOT SEND IN YOUR CERTIFICATES
AT THIS TIME. Holders of Minority Stock will receive written instructions and
the required letter of transmittal after the Share Exchange is effective.
All Glacier Common Stock issued under the Share Exchange Agreement will
be deemed issued as of the Share Exchange Effective Date. No distributions or
dividends paid upon shares of Glacier Common Stock after Closing of the Share
Exchange will be paid to holders of Minority Stock who are entitled under the
Share Exchange Agreement to receive Glacier Common Stock until such holders have
surrendered the certificates formerly representing shares of Minority Stock, at
which time any accumulated dividends and distributions since the Share Exchange
Effective Date, without interest, will be paid.
CASH FOR FRACTIONAL SHARES
Glacier will not issue certificates for fractional shares of Glacier
Common Stock. Each holder of Minority Stock who is otherwise entitled to receive
a fractional share, will receive cash in lieu thereof in an amount equal to the
product of such fraction multiplied by the fair market value of a share of
Glacier Common Stock at Closing, and such holder of Minority Stock will have no
other rights with respect to such fractional shares or other shares.
CONDITIONS TO THE SHARE EXCHANGE; REGULATORY APPROVALS
Consummation of the Share Exchange is subject to various conditions. No
assurance can be provided as to whether these conditions will be satisfied or
waived by the appropriate party. Accordingly, there can be no assurance that the
Share Exchange will be completed. In the event that conditions to the Share
Exchange remain unsatisfied, or if the Merger Agreement is terminated for any
reason, then the Share Exchange Agreement will terminate.
In accordance with applicable Montana laws, approval of the Share
Exchange requires the affirmative vote of two-thirds of the holders of all
shares outstanding of VB Common Stock. HUB HAS AGREED TO VOTE ALL OF THE VB
STOCK OWNED BY IT (APPROXIMATELY 86.5% OF OUTSTANDING VB COMMON STOCK) IN FAVOR
OF THE SHARE EXCHANGE. CONSEQUENTLY, STOCKHOLDER APPROVAL OF THE SHARE EXCHANGE
BY VB STOCKHOLDERS IS ASSURED. The Share Exchange Agreement must also be
approved by the holders of at least a majority of the shares of Glacier Common
Stock outstanding on the Glacier Record Date. In addition, approval of the Share
Exchange Agreement is required from the FRB. Conditional approval has been
received from the FRB. Although no assurance can be given, the parties expect to
receive the approval in due course.
Certain conditions must be satisfied or events must occur before the
parties will be obligated to complete the Share Exchange. As noted above, if the
Merger does not occur for any reason, the Share Exchange Agreement will be
terminated, and the Share Exchange will not occur. Each party's obligations
under the Share Exchange Agreement are also conditioned on satisfaction by the
other parties of their conditions. Some of these conditions are as follows: (a)
VB's receipt of an opinion from Graham & Dunn, P.C. to the effect that, among
other things, the Share Exchange will qualify as a tax-free reorganization under
Section 368(a)(1)(B) of the Code, (b) VB's receipt of an opinion from CFA to the
effect that the financial terms of the Share Exchange are financially fair to
VB's stockholders, (c) Glacier's and VB's receipt of opinions from Holland &
Hart LLP
39
<PAGE> 57
and Graham & Dunn, P.C., respectively, to the effect that, among other things,
VB and Glacier have the corporate power and authority, and have taken all
necessary corporate action, to execute, deliver and perform the Share Exchange
Agreement, and (d) other conditions. Additionally, Glacier may terminate the
Merger Agreement and the Share Exchange if any event has occurred that would
adversely affect Glacier's ability to account for the Merger as a "pooling of
interests." In this regard, affiliates of HUB who own shares of Glacier Common
Stock and VB Common Stock, and who vote in favor of the Merger, have undertaken
not to dissent from the Share Exchange in their capacities as VB stockholders,
as this would adversely affect "pooling of interests" accounting treatment of
the Merger.
Either Glacier or VB may waive any of the other party's conditions,
except those that are required by law (such as receipt of regulatory and
stockholder approval). Either Glacier or VB may also grant extended time to the
other party to complete an obligation or condition.
AMENDMENT OR TERMINATION OF THE SHARE EXCHANGE AGREEMENT
The Share Exchange Agreement may be amended or supplemented at any time
by written agreement of the parties, whether before or after the Meeting. To the
extent permitted under applicable law, the parties may make any amendment or
supplement without further approval of VB's stockholders, except amendments
which would reduce the amount or change the form of consideration VB
stockholders will receive in the Share Exchange transaction.
The Share Exchange Agreement may be terminated upon (i) the termination
of the Merger Agreement for any reason, or (ii) the material failure of any
condition set forth in the Share Exchange Agreement.
CONDUCT PENDING THE SHARE EXCHANGE
The Share Exchange Agreement provides that, until the Share Exchange is
effective, VB will conduct its business only in the ordinary and usual course,
and use all reasonable efforts to preserve its present business organization,
retain the services of its present management, and preserve the goodwill of all
parties with whom it has business dealings.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE SHARE EXCHANGE
The Share Exchange itself will have no effect on the composition of the
Glacier Board or the VB Board. However, pursuant to the Merger Agreement,
following the Merger the Glacier Board will consist of Glacier's current
directors plus Fred Flanders, who is presently a member of the VB Board and
currently serves as VB's President. Also, pursuant to the Merger Agreement, two
directors, to be designated by Glacier, will be added to the VB Board. Although
it is not a requirement of the Merger Agreement or any other agreement between
Glacier and HUB or VB, on the Merger Effective Date Messrs. Harris Hanson and
James Foley, and Ms. Mary Munger, will retire and resign from the VB Board. See
"THE MERGER - Directors and Executive Officers After the Merger." VB's executive
officers will remain unchanged following consummation of the Share Exchange,
although it is anticipated that Mr. Fred Flanders, currently VB's President,
will be named Chairman and Chief Executive Officer of VB following the Share
Exchange.
INTERESTS OF CERTAIN PERSONS IN THE SHARE EXCHANGE
Mr. Fred J. Flanders, VB's President, will be appointed to the Glacier
Board on the Merger Effective Date. Additionally, Glacier has ratified an
employment agreement between VB and Mr. Flanders, providing for his continued
service as President of VB; it is anticipated that Mr. Flanders will be named
Chairman and Chief Executive Officer following the Share Exchange. See "THE
MERGER -- Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE SHARE EXCHANGE
The Share Exchange is intended to qualify as a tax-free reorganization
under Section 368(a) of the Code for federal income tax purposes. VB and Glacier
will receive at Closing an opinion from Graham & Dunn that the Share Exchange
will constitute a tax-free reorganization for federal tax purposes. Such opinion
will not bind the Internal Revenue Service or preclude the Internal Revenue
Service from adopting a contrary position. The opinion is based upon facts and
assumptions and representations and assurances made by VB and Glacier. THE
FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW MAY NOT APPLY TO PARTICULAR
CATEGORIES OF HOLDERS OF VB COMMON STOCK SUBJECT TO SPECIAL TREATMENT UNDER THE
FEDERAL INCOME TAX LAWS, SUCH AS FOREIGN HOLDERS OR HOLDERS WHOSE STOCK MAY HAVE
BEEN ACQUIRED AS COMPENSATION. IN ADDITION, THERE MAY BE
40
<PAGE> 58
RELEVANT STATE, LOCAL OR OTHER TAX CONSEQUENCES, NONE OF WHICH ARE DESCRIBED
BELOW. STOCKHOLDERS ARE URGED TO CONSULT THEIR ADVISORS TO DETERMINE THE
SPECIFIC PERSONAL TAX CONSEQUENCES OF THE SHARE EXCHANGE, INCLUDING THE
APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS.
The Graham & Dunn opinion will state that:
1. The Share Exchange will constitute a tax-free reorganization.
2. No gain or loss will be recognized by either VB or Glacier as a
result of the Share Exchange.
3. No gain or loss will be recognized by holders of VB Common Stock
upon the receipt of Glacier Common Stock in exchange for VB
Common Stock in the Share Exchange.
4. The tax basis of the Glacier Common Stock received in the Share
Exchange by VB stockholders will be the same as the tax basis of
the shares of VB Common Stock surrendered in the exchange,
reduced by any basis allocable to a fractional share interest in
the Glacier Common Stock for which cash is received. The holding
period for the shares of Glacier Common Stock received in the
Share Exchange will include the holding period of VB shares
exchanged, provided that VB shares were held as capital assets
at the time of the Share Exchange.
5. Gain or loss will be recognized by VB stockholders who receive
cash in lieu of fractional shares of Glacier Common Stock, or
who exercise dissenters' rights and receive cash for their
shares. The amount of such gain or loss will be the difference
between the cash received and the basis of the shares or
fractional share interests surrendered in the exchange. Such
gain or loss will be a capital gain or loss provided that the
shares of VB Common Stock surrendered were capital assets at the
time of surrender, and will be long-term capital gain or loss if
such shares of VB Common Stock have been held for more than one
year.
ACCOUNTING TREATMENT OF SHARE EXCHANGE
Although the acquisition of the outstanding Minority Stock of VB is not
a "business combination" as defined by GAAP, such transactions generally are
accounted for by the purchase method. To apply the purchase method to the
acquisition of the Minority Stock, Glacier will first assign fair values to all
of the individual assets and liabilities of VB, including identifiable
intangible assets. The proportionate share of each asset and liability acquired
in the Share Exchange will be adjusted to fair value. The excess of the purchase
price for the Minority Stock over the fair value of the proportionate share of
each asset and liability acquired will be allocated to goodwill. The
proportionate share of VB assets and liabilities currently owned by HUB will not
be recorded at fair value. See "THE MERGER - Accounting Treatment of the
Merger."
DISSENTERS' RIGHTS OF APPRAISAL
Under Montana law (MBCA Section 35-1-826 through 35-1-839), a holder of
Minority Stock may exercise "dissenters' rights" and receive the fair value of
his or her shares in cash, if certain procedures are followed. To exercise these
rights, the holder of Minority Stock must (1) deliver to VB before the vote on
the approval of the Share Exchange is taken, written notice of intent to demand
payment for his or her shares if the Share Exchange is effected, and (2) not
vote in favor of the Share Exchange.
If the stockholders of VB approve the Share Exchange and the Share
Exchange Agreement, then VB will deliver a written Dissenters' Notice to all
stockholders who have previously satisfied the statutory requirements listed
above. The Dissenters' Notice must be sent within ten days after VB stockholders
voted to approve the Share Exchange and the Share Exchange Agreement. The
Dissenters' Notice must (1) state where the payment demand must be sent and
where and when certificates for certified shares must be deposited, (2) inform
stockholders of uncertificated shares to what extent transfer of the shares will
be restricted after the payment is received, (3) supply a form for demanding
payment which includes the date of the first announcement to the news media or
to stockholders of the terms of the proposed Share Exchange Agreement and Share
Exchange and requires the person asserting dissenters' rights to certify whether
or not he or she acquired beneficial ownership of the shares before that date,
(4) set a date (not fewer than 30 nor more than 60 days after the date the
Dissenters' Notice is delivered) by which VB must receive the dissenting VB
stockholder's payment demand, and (5) be accompanied by a copy of MBCA Sections
35-1-826 through 35-1-839.
41
<PAGE> 59
A holder of Minority Stock who receives a Dissenters' Notice as
described above must (1) demand payment, (2) certify whether the stockholder
acquired beneficial ownership of his/her shares before the date set forth in the
Dissenter's Notice, and (3) deposit his or her certificates in accordance with
the terms of the Dissenters' Notice. A holder of Minority Stock who demands
payment and deposits his or her certificates in accordance with the Dissenters'
Notice and Montana law, will retain all other rights of a VB stockholder until
these rights are canceled or modified by the consummation of the Share Exchange
as provided in the Share Exchange Agreement. A stockholder who does not demand
payment or deposit his or her certificates when and where required, each by the
date set in the Dissenters' Notice, is not entitled to payment under the Montana
dissenters' rights provisions for his or her shares.
Except in the case of after acquired shares, if VB stockholders approve
the Share Exchange and the Share Exchange Agreement, and upon receipt of a
payment demand as described above, VB will pay each dissenter who has satisfied
the statutory requirements, the amount that VB estimates to be the fair value of
his/her shares, plus accrued interest.
VB's payment to each dissenting VB stockholder will be accompanied by:
(1) VB's balance sheet as of the end of a fiscal year ending not more than 16
months before the date the payment will be made, an income statement for that
year, a statement of changes in stockholder equity for that year, and VB's
latest available interim financial statements, if any; (2) a statement of VB's
estimate of the fair value of the shares; (3) an explanation of how the interest
paid to the dissenter was calculated; (4) a statement of the dissenter's right
to demand payment if the dissenter disagrees with VB's assessment of the fair
value of his/her shares under the appropriate Montana statutes, and (5) a copy
of MBCA Section 35-1-826 through 35-1-839. If a stockholder exercises
dissenters' rights, the dissenting stockholder is entitled to receive the fair
value of his or her shares in cash. Such value may be higher or lower than the
value of Glacier's Common Stock issuable under the Share Exchange Agreement.
THE FAILURE OF A HOLDER OF MINORITY STOCK TO COMPLY STRICTLY WITH THE
MONTANA STATUTORY REQUIREMENTS WILL RESULT IN A LOSS OF DISSENTERS' RIGHTS. A
COPY OF THE RELEVANT STATUTORY PROVISIONS IS ATTACHED AS APPENDIX H. HOLDERS OF
MINORITY STOCK SHOULD REFER TO THIS APPENDIX FOR A COMPLETE STATEMENT CONCERNING
DISSENTERS' RIGHTS AND THE FOREGOING SUMMARY OF SUCH RIGHTS IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH APPENDIX.
STOCK RESALES BY VB AFFILIATES
The Glacier Common Stock to be issued in the Share Exchange will be
transferable free of restrictions under the 1933 Act, except for shares received
by persons, including directors and executive officers of VB, who may be deemed
to be "affiliates" of VB, as that term is used in (i) paragraphs (c) and (d) of
Rule 145 under the 1933 Act and/or (ii) Accounting Series Releases 130 and 135,
as amended, of the SEC. Affiliates may not sell their shares of Glacier Common
Stock acquired in the Share Exchange, except (a) pursuant to an effective
registration statement under the 1933 Act covering those shares, (b) in
compliance with Rule 145, or (c) in accordance with an opinion of counsel
reasonably satisfactory to Glacier, under other applicable exemptions from the
registration requirements of the 1933 Act. Glacier will obtain customary
agreements with all VB directors, officers, and affiliates of VB and Glacier,
under which such persons have represented that they will not dispose of their
shares of Glacier received in the Share Exchange or the shares of capital stock
of VB or Glacier held by them before the Share Exchange, except in compliance
with the 1933 Act and the rules and regulations promulgated thereunder. This
Prospectus/Joint Proxy Statement does not cover any resales of the Glacier
Common Stock received by affiliates of VB.
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL
STATEMENTS.
The unaudited condensed pro forma combined statements of financial
condition on the following page combines the historical consolidated balance
sheets of Glacier and HUB as if the Merger had become effective on March 31,
1998, under the pooling-of-interests method of accounting. In addition, the
effect of the exchange of shares with the minority shareholders of VB, using the
purchase accounting method for the exchange, is also presented.
The pro forma combined statements of operation on the following pages
give effect to the merger of Glacier and HUB, based on the pooling-of-interests
method of accounting, as if the Merger occurred on January 1, 1995. The exchange
of shares with the minority shareholders of VB, using the purchase accounting
method for the Share Exchange, is presented as if the Share Exchange occurred on
January 1, 1997.
42
<PAGE> 60
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
PRO FORMA COMBINED STATEMENTS OF FINANCIAL CONDITION
AS OF MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
HUB/Glacier Minority Total
Adjustments Pro Forma Adjustments Company
(dollars in thousands) Glacier HUB (Note 1) Combined (Note 2) Combined
--------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash on hand and in banks ....................... $ 24,843 3,203 28,046 28,046
Interest bearing cash deposits and Fed Funds sold 3,842 3,675 7,517 7,517
Cash and cash equivalents .................. 28,685 6,878 0 35,563 0 35,563
Investment securities, available-for-sale ....... 90,075 6,415 96,490 96,490
Investment securities, held-to-maturity ......... 4,911 5,110 10,021 10,021
Total investment securities ................ 94,986 11,525 0 106,511 0 106,511
Loans receivable ................................ 440,242 46,813 487,055 487,055
Allowance for loan losses ....................... (3,641) (501) (4,142) (4,142)
Total loans, net ........................... 436,601 46,312 0 482,913 0 482,913
Premises and equipment, net ..................... 12,446 1,892 14,338 14,338
Real estate and other assets owned, net ......... 152 0 152 152
Federal Home Loan Bank of Seattle stock, at cost 10,527 638 11,165 11,165
Federal Reserve Bank stock, at cost ............. 1,067 0 1,067 1,067
Accrued interest receivable ..................... 3,547 542 4,089 4,089
Goodwill, net ................................... 1,386 0 1,386 1,150 2,536
Deferred income taxes ........................... 0 0 0 0 0 0
Other assets .................................... 953 449 1,402 1,402
Total assets ............................... $ 590,350 68,236 0 658,586 1,150 659,736
Liabilities and Stockholders' Equity:
Deposits - interest bearing ..................... $ 283,217 46,752 329,969 329,969
Deposits - non-interest bearing ................. 72,222 9,150 81,372 81,372
Total deposits ............................. 355,439 55,902 0 411,341 0 411,341
Advances from Federal Home Loan Bank of Seattle . 148,028 2,535 150,563 150,563
Securities sold under agreements to repurchase .. 10,616 2,507 13,123 13,123
Other borrowed funds ............................ 3,604 216 3,820 3,820
Total borrowed funds ....................... 162,248 5,258 0 167,506 0 167,506
Accrued interest payable ........................ 1,988 290 2,278 2,278
Current income taxes ............................ 1,609 321 1,930 1,930
Deferred income taxes ........................... 1,888 (35) 0 1,853 0 1,853
Minority interest ............................... 300 817 1,117 (817) 300
Other liabilities ............................... 5,519 354 5,873 5,873
Total liabilities .......................... 528,991 62,907 0 591,898 (817) 591,081
Stockholders' equity
Common stock .................................... 69 540 (535) 74 1 75
Paid-in capital ................................. 35,673 200 0 35,873 1,966 37,839
Retained earnings ............................... 25,646 4,856 254 30,756 0 30,756
Treasury stock .................................. (1,066) (281) 281 (1,066) 0 (1,066)
Net unrealized gains on
securities available-for-sale ............ 1,037 14 1,051 1,051
Total stockholders' equity ................. 61,359 5,329 0 66,688 1,967 68,655
Total liabilities and stockholders' equity . $ 590,350 68,236 0 658,586 1,150 659,736
</TABLE>
Note 1 - Restates capital accounts to reflect $.01 per share stock value.
Note 2 - Reflects purchase of minority interest using purchase accounting method
at stock price of $23.50.
43
<PAGE> 61
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Glacier/HUB
(amounts in thousands, except per share data) Pro Forma
Glacier HB Combined
--------- ------- --------
<S> <C> <C> <C>
Interest Income:
Real estate loans .................................. $ 4,077 218 4,295
Commercial loans ................................... 3,029 522 3,551
Installment and other loans ........................ 2,397 382 2,779
Investment securities .............................. 1,757 253 2,010
Total Interest Income .......................... 11,260 1,375 12,635
Interest Expense:
Deposits ........................................... 2,813 503 3,316
FHLB advances ...................................... 2,006 40 2,046
Securities sold under agreements to repurchase ..... 183 27 210
Other borrowed funds ............................... 48 5 53
Total Interest Expense ......................... 5,050 575 5,625
Net Interest Income ............................ 6,210 800 7,010
Provision for loan losses .......................... 202 15 217
Net Interest Income After Provision
for Loan Losses .............................. 6,008 785 6,793
Non-Interest Income:
Service charges and other fees ..................... 1,930 359 2,289
Gain (Loss) on sale of investments, net ............ 0 (1) (1)
Other income ....................................... 210 23 233
Total Non-Interest Income ...................... 2,140 381 2,521
Non-Interest Expense:
Compensation, employee benefits and related expenses 2,254 387 2,641
Occupancy and equipment expense .................... 460 104 564
Data processing expense ............................ 199 66 265
Other expense ...................................... 1,399 227 1,626
Minority interest .................................. 14 35 49
Total Non-Interest Expense ..................... 4,326 819 5,145
Earnings before income taxes ....................... 3,822 347 4,169
Federal and state income tax expense ............... 1,392 142 1,534
Net Earnings ................................... $ 2,430 205 2,635
Average common shares outstanding .................. 6,862 536 7,398
Basic net earnings per share of common stock ....... $ 0.35 0.38 0.36
Diluted net earnings per share of common stock ..... 0.34 0.38 0.35
</TABLE>
44
<PAGE> 62
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Glacier/HUB
(amounts in thousands, except per share data) Pro Forma
Glacier HUB Combined
-------- ----- ----------
<S> <C> <C> <C>
Interest Income:
Real estate loans .................................. $ 3,999 203 4,202
Commercial loans ................................... 2,376 481 2,857
Installment and other loans ........................ 2,212 348 2,560
Investment securities .............................. 1,924 222 2,146
Total Interest Income .......................... 10,511 1,254 11,765
Interest Expense:
Deposits ........................................... 2,690 437 3,127
FHLB advances ...................................... 1,950 53 2,003
Securities sold under agreements to repurchase ..... 148 26 174
Other borrowed funds ............................... 50 3 53
Total Interest Expense ......................... 4,838 519 5,357
Net Interest Income ............................ 5,673 735 6,408
Provision for loan losses .......................... 163 10 173
Net Interest Income After Provision
for Loan Losses .............................. 5,510 725 6,235
Non-Interest Income:
Service charges and other fees ..................... 1,697 270 1,967
Gain (Loss) on sale of investments, net ............ 0 0 0
Other income ....................................... 181 14 195
Total Non-Interest Income ...................... 1,878 284 2,162
Non-Interest Expense:
Compensation, employee benefits and related expenses 2,279 334 2,613
Occupancy and equipment expense .................... 477 83 560
Data processing expense ............................ 185 53 238
Other expense ...................................... 1,295 177 1,472
Minority interest .................................. 13 32 45
Total Non-Interest Expense ..................... 4,249 679 4,928
Earnings before income taxes ....................... 3,139 330 3,469
Federal and state income tax expense ............... 1,153 130 1,283
Net Earnings ................................... $ 1,986 200 2,186
Average common shares outstanding (1) .............. 6,796 536 7,332
Basic net earnings per share of common stock (1) ... $ 0.29 0.37 0.30
Diluted net earnings per share of common stock (1) . 0.29 0.37 0.30
</TABLE>
(1) Adjusted for 3 for 2 stock split in 1997
45
<PAGE> 63
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Glacier/HUB
(amounts in thousands, except per share data) Pro Forma
Glacier HUB Combined
-------- ----- ---------
<S> <C> <C> <C>
Interest Income:
Real estate loans .................................. $16,353 837 17,190
Commercial loans ................................... 10,500 2,055 12,555
Installment and other loans ........................ 9,379 1,505 10,884
Investment securities .............................. 7,772 980 8,752
Total Interest Income .......................... 44,004 5,377 49,381
Interest Expense:
Deposits ........................................... 11,092 1,919 13,011
FHLB advances ...................................... 7,599 193 7,792
Securities sold under agreements to repurchase ..... 951 121 1,072
Other borrowed funds ............................... 236 23 259
Total Interest Expense ......................... 19,878 2,256 22,134
Net Interest Income ............................ 24,126 3,121 27,247
Provision for loan losses .......................... 747 60 807
Net Interest Income After Provision
for Loan Losses .............................. 23,379 3,061 26,440
Non-Interest Income:
Service charges and other fees ..................... 7,488 1,211 8,699
Gain (Loss) on sale of investments, net ............ 197 0 197
Other income ....................................... 654 65 719
Total Non-Interest Income ...................... 8,339 1,276 9,615
Non-Interest Expense:
Compensation, employee benefits and related expenses 9,185 1,393 10,578
Occupancy and equipment expense .................... 1,916 344 2,260
Data processing expense ............................ 768 228 996
Other expense ...................................... 5,282 769 6,051
Minority interest .................................. 68 140 208
Total Non-Interest Expense ..................... 17,219 2,874 20,093
Earnings before income taxes ....................... 14,499 1,463 15,962
Federal and state income tax expense ............... 5,319 589 5,908
Net Earnings ................................... $ 9,180 874 10,054
Average common shares outstanding (1) .............. 6,807 536 7,343
Basic net earnings per share of common stock (1) ... $ 1.35 1.63 1.37
Diluted net earnings per share of common stock (1) . 1.32 1.63 1.35
</TABLE>
(1) Adjusted for 3 for 2 stock split in 1997
46
<PAGE> 64
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Glacier/HUB
(amounts in thousands, except per share data) Pro Forma
Glacier HUB Combined
-------- ----- ---------
<S> <C> <C> <C>
Interest Income:
Real estate loans .................................. $15,962 823 16,785
Commercial loans ................................... 9,008 1,698 10,706
Installment and other loans ........................ 8,374 1,216 9,590
Investment securities .............................. 7,804 1,030 8,834
Total Interest Income .......................... 41,148 4,767 45,915
Interest Expense:
Deposits ........................................... 10,272 1,669 11,941
FHLB advances ...................................... 7,302 184 7,486
Securities sold under agreements to repurchase ..... 772 103 875
Other borrowed funds ............................... 210 9 219
Total Interest Expense ......................... 18,556 1,965 20,521
Net Interest Income ............................ 22,592 2,802 25,394
Provision for loan losses .......................... 880 0 880
Net Interest Income After Provision
for Loan Losses .............................. 21,712 2,802 24,514
Non-Interest Income:
Service charges and other fees ..................... 7,212 1,148 8,360
Gain (Loss) on sale of investments, net ............ 121 (1) 120
Other income ....................................... 1,006 54 1,060
Total Non-Interest Income ...................... 8,339 1,201 9,540
Non-Interest Expense:
Compensation, employee benefits and related expenses 8,608 1,240 9,848
Occupancy and equipment expense .................... 1,688 329 2,017
Data processing expense ............................ 666 214 880
Other expense ...................................... 6,510 769 7,279
Minority interest .................................. 64 127 191
Total Non-Interest Expense ..................... 17,536 2,679 20,215
Earnings before income taxes ....................... 12,515 1,324 13,839
Federal and state income tax expense ............... 5,090 542 5,632
Net Earnings ................................... $ 7,425 782 8,207
Average common shares outstanding (1) .............. 6,708 536 7,244
Basic net earnings per share of common stock (1) ... $ 1.11 1.46 1.13
Diluted net earnings per share of common stock (1) . 1.09 1.46 1.11
</TABLE>
(1) Adjusted for 3 for 2 stock split in 1997
47
<PAGE> 65
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Glacier/HUB
(amounts in thousands, except per share data) Pro Forma
Glacier HUB Combined
-------- ----- ---------
<S> <C> <C> <C>
Interest Income:
Real estate loans .................................. $ 16,095 700 16,795
Commercial loans ................................... 8,284 1,344 9,628
Installment and other loans ........................ 6,436 960 7,396
Investment securities .............................. 6,037 1,131 7,168
Total Interest Income .......................... 36,852 4,135 40,987
Interest Expense:
Deposits ........................................... 8,619 1,504 10,123
FHLB advances ...................................... 6,041 120 6,161
Securities sold under agreements to repurchase ..... 1,199 28 1,227
Other borrowed funds ............................... 210 31 241
Total Interest Expense ......................... 16,069 1,683 17,752
Net Interest Income ............................ 20,783 2,452 23,235
Provision for loan losses .......................... 581 0 581
Net Interest Income After Provision
for Loan Losses .............................. 20,202 2,452 22,654
Non-Interest Income:
Service charges and other fees ..................... 6,623 1,002 7,625
Gain (Loss) on sale of investments, net ............ (6) (17) (23)
Other income ....................................... 975 (27) 948
Total Non-Interest Income ...................... 7,592 958 8,550
Non-Interest Expense:
Compensation, employee benefits and related expenses 7,514 1,069 8,583
Occupancy and equipment expense .................... 1,529 256 1,785
Data processing expense ............................ 499 183 682
Other expense ...................................... 5,026 700 5,726
Minority interest .................................. 112 116 228
Total Non-Interest Expense ..................... 14,680 2,324 17,004
Earnings before income taxes ....................... 13,114 1,086 14,200
Federal and state income tax expense ............... 5,139 438 5,577
Net Earnings ................................... $ 7,975 648 8,623
Average common shares outstanding (1) .............. 6,750 536 7,286
Basic net earnings per share of common stock (1) ... $ 1.18 1.21 1.18
Diluted net earnings per share of common stock (1) . 1.18 1.21 1.18
</TABLE>
(1) Adjusted for 3 for 2 stock split in 1997
48
<PAGE> 66
INFORMATION CONCERNING GLACIER
GENERAL
Glacier is a corporation organized under Delaware law, and a registered
bank holding company under the BHCA. Glacier's principal office is located in
Kalispell, Montana, and presently has four bank subsidiaries. Glacier has
long-standing roots in northwest Montana dating back to 1955, and owns (i) all
of the outstanding common stock of the Glacier Bank, First Security Bank of
Missoula, and Community First, Inc., a full-service brokerage firm; (ii)
approximately 94% of the outstanding common stock of Glacier Bank of Whitefish;
and (iii) approximately 98% of the outstanding common stock of Glacier Bank of
Eureka.
Glacier offers a broad range of community banking services throughout
the 18-office network located primarily in northwest Montana and Billings,
Montana. The business of the Glacier Subsidiaries consists primarily of
attracting deposit accounts from the general public and originating commercial,
residential, and installment loans. The Glacier Subsidiaries' principal sources
of income are interest on loans, loan origination fees, and interest and
dividends on investment securities, while principal expenses consist of interest
on savings deposits, FHLB advances, and repurchase agreements, as well as
general and administrative expenses. Glacier also offers full service brokerage
services through Community First Inc., a subsidiary corporation that is
maintained for this purpose.
Glacier's expansion plans include internally-generated growth from
strategically-located existing branches, some selected new branch expansion and
expansion into other areas of Montana. In addition to limited de novo branching,
Glacier's management strategy has also been to pursue attractive alliance
opportunities with other well-run community banks such as the proposed
transaction with HUB, as well as other financial service related companies.
Glacier has continued to invest significantly in management and other resources
to support its expansion.
As described under "BACKGROUND OF AND REASONS FOR THE MERGER AND SHARE
EXCHANGE --Recent Developments", Glacier is a newly-created corporation, which
is the continuing corporation following the Curative Transaction. Glacier (or
"New Glacier" as it is sometimes referred to in this document), was incorporated
in Delaware on March 24, 1998, the successor in interest to all of the rights
and liabilities of Original Glacier. Glacier's corporate existence and corporate
attributes, as described in this Prospectus/Joint Proxy Statement, are identical
to those of Original Glacier, except that Glacier has more authorized shares of
common stock than Original Glacier had. Unless otherwise clearly set forth in
this Prospectus/Joint Proxy Statement, all references to "Glacier" are
references to the currently existing corporation. Information regarding Glacier
which is incorporated by reference to certain filings with the SEC, as described
in "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" is information filed by,
and regarding, Original Glacier.
Financial and other information regarding Glacier, including
information relating to Glacier's directors and executive officers, are set
forth in the 1997 10-K and 1998 10-Qs and the 1998 Proxy filed by Original
Glacier and incorporated by reference into this Prospectus/Joint Proxy
Statement. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE
INFORMATION."
YEAR 2000 ISSUES
Glacier is aware of the issues associated with computer systems as the
year 2000 approaches. The basic issue is whether computer systems will properly
recognize date-sensitive information when the year changes to 2000. Glacier has
a task force to identify all equipment, software, vendor dependencies, and
customers that may be affected by the year 2000 problem. Glacier has provided
its business customers, suppliers and vendors with information regarding
Glacier's progress on year 2000 issues with information regarding Glacier's
progress on year 2000 issues and has requested similar information in return.
All software currently used within Glacier is supplied by vendors. Vendor
readiness for year 2000 has been assessed, and testing to assure proper
functioning is scheduled to be related to the year 2000 issue and could be
adversely affected if other entities not affiliated with Glacier do not
appropriately address their own year 2000 compliance issues. Based on the study
and analysis conducted, the dollar amount required to remediate the known year
2000 issues is not expected to be material to Glacier's business. Unanticipated
problems or difficulties, however, could significantly increase Glacier's
estimated expenditures for the year 2000 project.
The discussion above with regards to the century date change for the
year 2000 includes certain "forward looking statements" concerning the future
operations of Glacier. It is Glacier's desire to take advantage of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. This
statement is for the express purpose of availing Glacier of the protections of
such safe harbor with respect to all "forward looking statements." Management's
ability to predict results of the effect of future
49
<PAGE> 67
plans is inherently uncertain, and is subject to factors that may cause actual
results to differ materially from those projected. Factors that could affect the
actual results include the possibility that systems modifications will not
operate as intended, unexpected costs, and the uncertainty associated with the
impact of the century change on Glacier's customers, vendors and third-party
service providers.
INFORMATION CONCERNING HUB AND VB
BUSINESS
HUB was organized under Montana law in 1982 for the purpose of
acquiring and financing the stock of VB. HUB is registered with the Board of
Governors of the Federal Reserve System as a bank holding company under the Bank
Holding Act, as amended, and has no significant operations separate or apart
from VB. The principal offices of HUB are located at the main office of VB at
3030 North Montana Avenue, Helena, Montana.
VB is a state-chartered bank. It engages in commercial banking
activities from its main office located at 3030 North Montana Avenue, Helena,
Montana, and two branch facilities also located in Helena, Montana. The Bank was
originally organized to address a perceived need for the services of a local
community bank with a commitment to personalized service to the businesses and
residents of Helena and the surrounding area. VB offers commercial banking
services, primarily to small and medium-sized businesses, professionals, and
retail customers, including commercial loans, consumer installment loans,
residential real estate loans, certificates of deposit, and checking and savings
accounts.
VB's deposit accounts are insured by the FDIC. As of December 31, 1997,
VB had deposits of approximately $56 million, and total assets of approximately
$68 million and $68 million and $56 million, respectively, as of March 31, 1998.
HUB owns approximately 86.46% of the common stock in VB. HUB has no
other bank or non-bank subsidiaries.
VB's current management began with VB in June 1991. VB has carved out
niches in the commercial real estate, small business and residential real estate
loan areas.
COMPETITION
Competition in the banking industry is significant and has intensified
with interest rate deregulation. Furthermore, competition from outside the
traditional banking system from investment banking firms, insurance companies
and related industries offering bank-like products has widened the competition
for deposits and loans.
The banking industry in VB's primary market area is characterized by
well-established branches of large banks controlled by holding companies with
headquarters located outside the State of Montana, five credit unions, seven
offices of Montana-based savings associations or commercial banks and two
locally owned commercial banks.
VB's traditional competition for deposits comes from commercial banks,
savings and loan associations, credit unions, and money market funds, many of
which have more office locations or offer higher rates of interest than does VB.
Competition for deposit funds also comes from issuers of corporate and
governmental securities, insurance companies, mutual funds, and other financial
intermediaries. VB competes for deposits by offering a variety of deposit
accounts at rates generally competitive with similar financial institutions in
the area.
In competing for deposits, VB is subject to certain regulations not
applicable to non-bank competitors. Legislation enacted in the 1980s authorized
banks to offer deposit instruments with rates competitive with money market
funds, but subject to restrictions not applicable to those funds. Legislation
has also made non-bank financial institutions more effective competitors.
Savings and loan associations and credit unions are now permitted to offer
checking accounts and to make commercial loans with certain limitations.
VB's competition for loans comes primarily from the same financial
institutions with which VB competes for deposits. VB competes for loan
originations primarily through the level of interest rates and loan fees
charged, the variety of commercial and mortgage loan products offered, and the
efficiency and quality of services provided to borrowers. Factors which affect
loan competition include the availability of lendable funds, local and national
economic conditions, current
50
<PAGE> 68
interest rate levels, and loan demand. VB engages in loan origination for
residential loans which are sold to traditional secondary market investors which
generates fee income while preserving its liquidity.
The offices of the larger banks and savings and loan associations have
competitive advantages over VB in that they have high public visibility and are
able to maintain advertising and marketing activity on a much larger scale than
VB can economically maintain. Because single borrower lending limits imposed by
law are tied to the institution's capital, the branches or offices of larger
institutions with substantial capital bases are also at an advantage with
respect to loan applications for amounts in excess of VB's legal lending limits.
FACILITIES
The principal offices of HUB and VB are located at the Bank's main
office at 3030 North Montana Avenue, Helena, Montana. HUB has no facilities but
holds title to an undeveloped commercial lot with potential as a branch site.
The 3030 North Montana Avenue building houses employee offices, a lobby with six
teller stations, a four-lane drive-in bank, and an ATM. VB also operates two
branch facilities in Helena, Montana, one of which is located at 1900 9th Avenue
and the other in Van's Thriftway Supermarket at the Lundy Center located at 306
Euclid Avenue. The 9th Avenue Branch is a full-service unit, while the Van's
Thriftway Branch primarily offers deposit services. VB also operates ATMs at the
two branches, and at two other locations in Helena.
EMPLOYEES
HUB has no compensated employees. As of December 31, 1997, VB had 46
full-time-equivalent (41 full-time and 8 part-time) employees. Employee turnover
has historically been relatively low.
LEGAL PROCEEDINGS
VB is from time to time a party to various legal proceedings arising in
the ordinary course of VB's business. Management believes that there is no
threatened or pending proceedings against HUB or VB which, if determined
adversely, would have a material effect on the business or financial position of
either, respectively.
51
<PAGE> 69
HUB AND VB MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis is intended to provide greater
details of the results of operations and financial condition of HUB and of VB.
The following discussion should be read in conjunction with the selected
financial and other data and the consolidated financial statements and related
notes with respect to HUB appearing elsewhere in this Prospectus/Joint Proxy
Statement.
HUB, through VB, operates three banking offices in Helena, Montana.
Neither HUB nor VB has any substantial business activities other than the VB
commercial banking activities. HUB does not own material assets other than
approximately 86.5 percent of VB Common Stock. HUB's income is derived solely
from the income generated by VB, consisting of net interest income and other
operating income. Net interest income consists of the excess of interest income,
received primarily on customer loans and investment securities, over-interest
expense, paid principally on customer deposits and indebtedness. Other operating
income primarily includes service charges on deposit accounts and loan and other
fee income. On a consolidated basis, all of VB's income, less the value of the
minority interest not held by HUB, is attributed to HUB.
Since December 31, 1996, VB has experienced deposit growth of
approximately $6.6 million or 12.8 percent and asset growth during the same time
period of approximately $5.6 million or nine percent. Both deposit and asset
growth are consistent with recent historical growth rates for VB and are in
excess of peer group growth rates. At December 31, 1997, VB had total deposits
of $56.3 million and total assets of $68 million and deposits of $56.1 million
and total assets of $68 million at March 31, 1998.
RESULTS OF OPERATIONS
Net Income and Expense. HUB net income after income taxes increased from
approximately $782,000 in 1996 to approximately $874,000 in 1997, an increase of
approximately 11.9 percent, corresponding to the increase in VB net income
during the same period Net income after taxes for the period ended March 31,
1998 was approximately $205,000. As previously noted, HUB does not earn income
separate from dividends received on VB Common Stock nor does HUB have
significant operating or other expenses. HUB currently is obligated on an
unsecured loan in the principal balance of approximately $215,000 at December
31, 1997. Interest paid on the unsecured loan totaled $20,746 in 1997 and $6,834
in 1996.
VB net income increased 11.9 percent from $923,000 in 1996 to $1.034
million in 1997. The increase in VB's net income is attributable primarily to an
increase in net interest income during 1997 arising from both growth in the VB
loan portfolio and increases in average interest rate spreads of approximately
0.10 percent. VB net income for the quarter ended March 31, 1998 was $255,628,
an increase of $9,415, or 8% over the same quarter in 1997.
VB net income remained constant at approximately 1.57 percent of average
assets in both 1996 and 1997. The net income represented return on VB
stockholders equity of 19.34% and 19.56% respectively in 1997 and 1996.
Net Interest Income. VB net interest income is the largest source of VB
operating income. As noted above, net interest income is derived from interest,
dividends and fees received from interest-earning assets, less interest expense
incurred on interest-bearing liabilities. Interest-earning assets primarily
include loans and investment securities. Interest-bearing liabilities primarily
include deposits and various forms of indebtedness.
VB's net interest income for the quarter ended March 31, 1998 was
$804,532, an increase of $65,851 or 8.9%, over the same quarter in 1997.
VB's net interest income for 1997 was $3.142 million, an increase of
11.8 percent over the net interest income in 1996 of $2.809 million. The
increase resulted primarily from the asset and loan growth of VB during 1997.
Total interest expense in 1997 was $2.234 million, an increase of 14.1 percent
from the total interest expense in 1996 of $1.957 million.
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<PAGE> 70
The most significant impact on VB's net interest income between periods
is derived from the interaction of changes in the volume of and rates earned or
paid on interest-earning assets and interest-bearing liabilities. The volume of
loans, investment securities and other interest-earning assets, compared with
the volume of interest-bearing deposits and indebtedness, combined with the
spread, produces the changes in the net interest income between periods. The
increase in interest expense was due primarily to the growth in customer
deposits during 1997.
Non-interest Income and Expense. VB experienced an increase in
non-interest income in 1997 as compared to 1996, of approximately $72,000. VB
also experienced an increase in non-interest expense of approximately $170,000
from $2.538 million in 1996 to $2.709 million in 1997. Salaries and benefits
accounted for approximately $116,000 or 68 percent of the increase in
non-interest expense in 1997 as compared to 1996. Additional increases in
non-interest expense are attributable to the new branch office opened by VB in
December 1997. Increases in non-interest expenses during the first quarter of
1998 when compared with the first quarter of 1997 were also attributable to the
new branch office.
Provision for Loan Losses. The provision for loan losses creates an
allowance for future loan losses based upon management's current estimates. The
loan loss provision for each year is dependent on many factors, including loan
growth, net charge-offs, changes in the composition of the loan portfolio,
delinquencies, management's assessment of the quality of loan portfolio, the
value of the underlying collateral on problem loans and the general economic
conditions in the relevant markets. VB performs a monthly assessment of the risk
inherent in its loan portfolio, as well as a detailed review of each asset
determined to have identified weaknesses. Based on the analysis, which includes
reviewing historical loss trends, current economic conditions, industry
concentrations and specific reviews of assets classified with identified
weaknesses, VB may make provisions for potential loan losses.
Specific allocations are made for loans where the probability of a loss
can be defined and reasonably determined, while the balance of the provisions
for loan losses are based on historical data, delinquency trends and economic
conditions. Fluctuations in the provision for loan loss result from management's
assessment of the adequacy of the allowance and ultimate loan losses may vary
from current estimates.
At December 31, 1997, the allowance for loan losses was $483,000 or
approximately 1.04 percent of total loans. The allowance for loan losses at
December 31, 1996, was $431,000 or 1.0 percent of total loans at such date. The
increase in the allowance reflects, among other things, the growth of the VB
loan portfolio from $43.151 million at December 31, 1996, to $46.351 million at
December 31, 1997, an increase of $3.2 million or 7.4 percent. VB made a net
provision to the allowance of $60,000 during 1997. At March 31, 1998, the
allowance for loan losses was $500,967, or 1.07%.
The following table sets forth activity in the allowance for loan
losses for the three months March 31, 998 and for the years ended December 31,
1997, and December 31, 1996:
53
<PAGE> 71
<TABLE>
<CAPTION>
Three Months
(Dollars in thousands) ended For the year ended December 31,
March 31, 1998 1997 1996
-------------- -------- --------
<S> <C> <C> <C>
Balance beginning of period $ 483 431 454
Charge-offs:
Commercial 0 (60) (33)
Real estate 0 0 0
Consumer 1 (74) (24)
-------- -------- --------
1 (134) (57)
-------- -------- --------
Recoveries:
Commercial 1 115 18
Real estate 0 0 0
Consumer 1 11 16
-------- -------- --------
2 126 34
-------- -------- --------
Net (chargeoffs) recoveries 3 (8) (23)
Provision charged to operations 15 60 0
Balance at end of period $ 501 483 431
======== ======== ========
Ratio of net (charge-offs) recoveries to
average outstanding loans during period 0.01% -0.02% -0.06%
Average outstanding loans during period $ 46,872 45,169 38,651
</TABLE>
Income Tax Expense. HUB's effective consolidated federal tax rate was
approximately 34 percent for the year ended December 31, 1997 and is expected to
remain approximately 34% for 1998. HUB's effective federal tax rate for 1996 was
34 percent. HUB's effective Montana tax rate was 6.75 percent for the year ended
December 31, 1997 and will remain constant in 1998.
FINANCIAL CONDITION
Loans. VB's loan portfolio consists of a mix of commercial, consumer,
real estate, agricultural and other loans, including fixed and variable rate
loans. Fluctuations in the loan portfolio are directly related to the economics
of the markets served by VB. Thus, VB borrowers could be adversely impacted by a
downturn in the sectors of the economy which could have a material adverse
effect on the borrower's abilities to repay loans.
VB's gross loans increased to $46.352 million for the year ended
December 31, 1997, from $43.152 million for the year ended December 31, 1996, an
increase of approximately $3.2 million or 7.4 percent. At March 31, 1998, gross
loans were $46,813 million, an increase of $461,000 over the corresponding
period in 1997.
The following table presents the composition of VB's loan portfolio as
of the dates indicated.
<TABLE>
<CAPTION>
(Dollars in thousands) 1997 1996
------------------------------ -------------------------------
March 31, 1998 Amount Percent of Total Amount Percent of Total
-------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C>
Commercial & Agricultural $22,052 $21,586 46.6% $19,336 44.8%
Consumer 15,589 15,799 34.1 13,885 32.2
Real Estate
Construction 1,192 1,107 2.4 903 2.1
Mortgage 7,981 7,860 16.9 9,028 20.9
------- ------- ------- ------- -------
Total Gross Loans $46,814 $46,352 100.0 $43,152 100.0%
======= ======= ======= ======= =======
</TABLE>
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<PAGE> 72
Both agricultural loans and real estate loans declined at December 31,
1997 as compared to 1996. The decline in agricultural loans to $152,000 from
$395,000 in 1996 represents a decline of 61.5 percent and resulted from the full
payment by one borrower of all outstanding loans to that borrower. Agricultural
loans as a percentage of gross loans was only 0.71 percent in 1997 and 0.92
percent in 1996.
Real estate loans declined to $8.967 million at December 31, 1997 from
$9.931 million at December 31, 1996, a decrease of 10.7 percent. VB sells
substantially all residential real estate loans made within a short time period
following closing of the loan. The decrease in real estate loan balances from
1996 to 1997 is primarily attributable to the timing of disposition of
residential real estate loans at the respective year ends.
The number and dollar volume of both commercial and consumer loans
increased during 1997, reflecting a stable and moderately growing Helena,
Montana economy and additional marketing efforts of VB. The number of commercial
loans held by VB increased from 378 at December 31, 1996 to 408 at December 31,
1997 while the dollar volume of such loans increased from $18,941 million to
$21,443 million at the respective year ends.
Nonperforming and Classified Assets. Federal regulation and VB loan
policies require that VB classify its assets on a regular basis. VB management
generally places loans on nonaccrual when they become 90 days past due unless
they are well secured and in the process of collection. When a loan is placed on
nonaccrual status, any interest previously accrued but not collected is reversed
from income. Loans are charged off when management determines that collection
has become unlikely. OREO consists of real property acquired through foreclosure
on the related collateral underlying defaulted loans.
The following tables set forth certain information with respect to
non-performing assets as of the dates indicated.
<TABLE>
<CAPTION>
As of As of December 31,
March 31, 1998 1997 1996
-------------- ---- ----
<S> <C> <C> <C>
Nonperforming loans:
Non-accrual loans 191 189 90
Accruing loans past due 90 days or more 69 67 65
Restructured loans 27 27 0
--- --- ---
Total nonperforming loans 287 283 155
Other real estate owned (OREO) 0 0 96
--- --- ---
Total nonperforming assets 287 283 251
=== === ===
Nonperforming assets to total loans and OREO 0.62% 0.61% 0.59%
</TABLE>
At December 31, 1997, VB held no OREO, a decrease of $96,000 from
December 31, 1996. The December 31, 1996, balance reflected one property held as
OREO which was disposed of in 1997.
Investment Securities. VB's investment portfolio is managed to meet its
liquidity needs and is utilized for pledging requirements for deposits of state
and political subdivisions and securities sold under repurchase agreements. The
portfolio is comprised of U.S. Treasury securities, U.S. Government agency
securities, tax-exempt securities, mortgage backed securities and real estate
investment conduits or REMIC's. Federal funds sold are additional investments
which are not classified as investment securities. Investment securities
classified as available for sale are recorded at fair market value while
investment securities classified as held to maturity are recorded at cost.
Unrealized gains or losses, net of the deferred tax effect, are reported as
increases or decreases in stockholders' equity for available for sale
securities.
The balance of investment securities remained relatively constant at
$8.54 million at December 31, 1997 compared to $12.791 million at December 31,
1996. The decrease is primarily attributable to loan growth during 1997 and the
shifting of resources to fund loan growth.
Approximately $3.5 million of U.S. Government and Federal Agencies
securities held by VB matured in 1997. The substantial maturities in 1997 were
partially attributable to longer term securities purchased by VB under
investment policies in effect at the time of purchase.
A comparison of the amortized cost and estimated fair value of VB's
investment securities is set forth in Note 3 to the HUB Consolidated Audited
Financial Statements.
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<PAGE> 73
Deposits. VB's deposits consist primarily of demand deposits,
interest-bearing demand deposits, savings accounts and time deposits (CDs).
LIQUIDITY AND SOURCE OF FUNDS.
Liquidity is the ability of VB to meet its day-to-day cash flow
requirements of customers who may wish to withdraw funds on deposit with VB or
required funds to meet credit needs. VB manages its liquidity with the intent to
meet the cash flow requirements while maintaining an appropriate balance between
assets and liabilities to meet the return on investment objectives of its
stockholders.
VB's primary source of funds are deposits, loan repayments, retained
earnings, maturity of investment securities and, to a lesser extent, FHLB
borrowings.
VB's primary source of funds is customer deposits, maturities of
investment securities, loan repayments, net income, sales or "available for
sale" securities, and advances from the Federal Home Loan Bank of Seattle. VB
primarily attracts deposits from its primary market areas through competitive
pricing policies and delivery of products demanded in the market. VB's deposit
growth has been consistent over the last three years with an average annual
increase of 9% per year in the three-year period from January 1, 1995, through
December 31, 1997, for an aggregate increase of approximately 29% in deposits
during that period. VB's liquidity ratio as of December 31, 1996, was 19.6% and
December 31, 1997, was 21.5%.
Management anticipates that VB will continue relying on customer
deposits, maturity of investment securities, loan repayments and net income to
provide liquidity. Although deposit balances have shown strong historical
growth, such balances may be influenced by changes in the banking industry,
interest rates available on other investments, general economic conditions,
competition and other factors. Federal Home Loan Bank borrowings may also be
used on a short-term basis to compensate for reduction in other sources of
funds. Federal Home Loan Bank borrowings may also be used on a long-term basis
to support expanded lending activities and to match maturities or repricing
intervals of assets.
Capital Resources. Stockholders' equity increased approximately 13%
from $5.231 million in 1996 to $5.909 million in 1997, primarily as a result
of an increase in retained earnings. A similar increase was shown between the
first quarter of 1998 over the first quarter of 1997. Both HUB and VB are
subject to capital adequacy requirements established by bank regulators. At
December 31, 1997 both HUB and VB were considered "Well-Capitalized" under
applicable bank and bank holding company regulatory standards.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS - HUB
The following table sets forth information regarding the beneficial
ownership of HUB Common Stock as of June 29, 1998 by (i) each person known to
HUB to own beneficially more than 5 percent of HUB Common Stock; (ii) each
current director of HUB; and (iii) all executive officers and directors of HUB
and VB as a group. Except as otherwise indicated, each of the persons named
below has sole voting and investment power with respect to the HUB Common Stock
owned by them.
Each of the following persons may be reached at the main office location of HUB.
<TABLE>
<CAPTION>
Amount and Nature Percentage of
Name of Stockholder of Beneficial Ownership Shares Outstanding
------------------- ----------------------- ------------------
<S> <C> <C>
Thomas F. Dowling (1) 730 7.88%
Robert J. Peccia (2) 878 9.47%
James H. Foley (3) 11 .12%
James T. Harrison, Jr. (4) 897 9.68%
Joseph G. Loendorf (5) 730 7.88%
Mary D. Munger (6) 846 9.13%
Fred J. Flanders (7) 197 2.13%
Dr. Harris D. Hanson (8) 801 8.65%
Jerome T. Loendorf 878 9.47%
Dr. Gary L. Mihelish (9) 730 7.88%
Joan S. Poston 878 9.47%
John P. Poston (10) 878 9.47%
</TABLE>
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<PAGE> 74
<TABLE>
<CAPTION>
<S> <C> <C>
J. Andrew O'Neill (11) 40 .43%
Peter J. Van Nice (12) 41 .44%
All Directors and Officers
as a Group 8,535 92.10%
</TABLE>
(1) Includes 365 shares owned by Mr. Dowling's spouse controlled by
Mr. Dowling.
(2) Includes 684 shares owned with Mr. Peccia's spouse.
(3) Includes one share owned with Mr. Foley's spouse.
(4) Includes 684 shares owned with Mr. Harrison's spouse and 19 shares
owned by Carol E. Harrison, Mr. Harrison's spouse.
(5) Includes 667 shares owned with Mr. Loendorf's spouse and 27 shares
held in an individual retirement account for the benefit of Sharlene L.
Loendorf, Mr. Loendorf's spouse. Also includes 31 shares held in an individual
retirement account for Mr. Loendorf.
(6) All shares are owned in joint tenancy with right of survivorship
with Ms. Munger's spouse.
(7) Includes 197 shares held in an individual retirement account for
Mr. Flanders.
(8) Includes 684 shares held with Dr. Hanson's spouse and 48 shares
held by Dr. Hanson's spouse, Mary E. Hanson. Also includes 23 shares held in a
profit-sharing plan substantially for the benefit of Dr. Hanson and his spouse.
(9) Includes 720 shares owned by Dr. Mihelish with his spouse.
(10) Includes 184 shares held in a profit-sharing trust in a
self-directed account for Mr. Poston.
(11) Includes 40 shares held with Mr. O'Neill's spouse
(12) Includes 41 shares held in an individual retirement account for
the benefit of Mr. Van Nice.
OTHER PRINCIPAL STOCKHOLDER
<TABLE>
<S> <C> <C>
Vincent A. Amicucci Revocable Trust 730 7.88%
</TABLE>
MANAGEMENT
Following the consummation of the Merger and the Share Exchange, Fred
J. Flanders will be appointed to serve on the Glacier Board and as the Chairman
and Chief Executive Officer of VB.
Mr. Flanders, age 62, has been a director of VB and has acted as its
President since June, 1992. Prior to joining VB, Mr. Flanders was a managing
agent for the Resolution Trust Corporation, and prior to that, acted as the
Commissioner of Financial Institutions for the State of Montana. Mr. Flanders is
also a former president of the Bank of Montana and a Senior Vice President of
Norwest Bank Helena.
Mr. Flanders was paid a salary of $42,000, $42,000 and $84,000 in 1997,
1996 and 1995, respectively. The decrease in Mr. Flanders' salary from 1995 to
1996 was attributable to his having assumed a part-time status beginning in
1996. He also received bonuses of $4,725, $5,544 and $6,227 in 1997, 1996 and
1995, respectively. In addition to the foregoing, Mr. Flanders received
compensation in the form of contributions to his pension plan and payment of
premiums for a life insurance policy on Mr. Flanders by VB. Such amounts
totaled, in the aggregate, $2,680, $3,436 and $6,275 in 1997, 1996 and 1995,
respectively.
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SUPERVISION AND REGULATION
INTRODUCTION
The following generally refers to certain statutes and regulations
affecting banking industry. These references provide brief summaries only and
are not intended to be complete. They are qualified in their entirety by the
referenced statutes and regulations. In addition, some statutes and regulations
may exist which apply to and regulate the banking industry, but are not
referenced below.
THE HOLDING COMPANIES
GENERAL
Glacier is a bank holding company, due to its ownership of Glacier
Bank, Glacier Bank of Whitefish, Glacier Bank of Eureka, and First Security Bank
of Missoula, all of which are Montana-state chartered commercial banks, and all
of which are members of the Federal Reserve (collectively, the "State Banks").
Until recently, Glacier was also a savings and loan holding company within the
meaning of the Home Owners' Loan Act ("HOLA") prior to Glacier Bank's conversion
from a federal savings bank to a state-chartered commercial bank and, as such,
was registered with and subject to examination and supervision by the OTS. With
the enactment of the Economic Growth and Regulatory Paperwork Reduction Act of
1996 ("Economic Growth Act"), the OTS no longer supervises a holding company
like Glacier that is registered as a bank holding company. HUB is also a bank
holding company, due to its ownership of VB, a Montana state-chartered
commercial bank. Accordingly, the BHCA subjects each of Glacier, HUB, and their
respective subsidiaries to supervision and examination by the FRB, and the bank
holding companies file annual reports of their operations with the FRB.
BANK HOLDING COMPANY STRUCTURE
In general, the BHCA limits bank holding company business to owning or
controlling banks and engaging in other banking-related activities. Certain
recent legislation designed to expand interstate branching and relax federal
restrictions on interstate banking may expand opportunities for bank holding
companies (see "Regulation of Banking Subsidiaries - Recent Federal Legislation
- - Interstate Banking and Branching" below). The Economic Growth Act has relaxed
certain BHCA restrictions on bank holding companies' engagement in permissible
nonbanking activities. However, the impact that this legislation may have on
Glacier, HUB, and their subsidiaries is unclear at this time.
Bank holding companies must obtain the FRB's approval before they: (1)
acquire direct or indirect ownership or control of any voting shares of any bank
that results in total ownership or control, directly or indirectly, of more than
5% of the voting shares of such bank; (2) merge or consolidate with another bank
holding company; or (3) acquire substantially all of the assets of any
additional banks. Until late September of 1995, the BHCA also prohibited bank
holding companies from acquiring any such interest in any bank or bank holding
company located in a state other than the state in which bank holding company
was located, unless the laws of both states expressly authorized the
acquisition. Now, subject to certain state laws, such as age and contingency
laws, a bank holding company that is adequately capitalized and adequately
managed may acquire the assets of an out-of-state bank.
Control of Nonbanks. With certain exceptions, the BHCA also prohibits
bank holding companies from acquiring direct or indirect ownership or control of
voting shares in any company that is not a bank or a bank holding company unless
the FRB determines that the activities of such company are incidental to the
business of banking. When making this determinations, the FRB weighs the
expected benefit to the public, such as greater convenience, increased
competition or gains in efficiency, against the possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest or unsound banking practices. The Economic Growth Act amended the
BHCA to eliminate the requirement that a bank holding company seek FRB approval
before engaging de novo in permissible nonbanking activities if the hold company
is well-capitalized and meets other criteria specified in the statute.
Control Transactions. The Change in Bank Control Act of 1978, as
amended, requires a person (or group of persons acting in concert) acquiring
"control" of a bank holding company to provide the FRB with 60 days' prior
written notice of the proposed acquisition. Following receipt of this notice,
the FRB has 60 days within which to issue a notice disapproving the proposed
acquisition, but the FRB may extend this time period for up to another 30 days.
An acquisition may be completed
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before expiration of the disapproval period if the FRB issues written notice of
its intent not to disapprove the transaction. In addition, any "company" must
obtain the FRB's approval before acquiring 25% (5% if the "company" is a bank
holding company) or more of the outstanding shares or otherwise obtaining
control over Glacier or HUB.
TRANSACTIONS WITH AFFILIATES
Glacier and its subsidiaries, and likewise HUB and its subsidiaries,
are deemed affiliates within the meaning of the Federal Reserve Act, and
transactions between affiliates are subject to certain restrictions.
Accordingly, Glacier and HUB and their respective subsidiaries must comply with
Sections 23A and 23B of the Federal Reserve Act. Generally, Sections 23A and
23B: (1) limit the extent to which the financial institution or its subsidiaries
may engage in "covered transactions" with an affiliate, as defined, to an amount
equal to 10% of such institution's capital and surplus and an aggregate limit on
all such transactions with all affiliates to an amount equal to 20% of such
capital and surplus, and (2) require all transactions with an affiliate, whether
or not "covered transactions," to be on terms substantially the same, or at
least as favorable to the institution or subsidiary, as those provided to a
non-affiliate. The term "covered transaction" includes the making of loans,
purchase of assets, issuance of a guarantee and other similar types of
transactions.
REGULATION OF MANAGEMENT
Federal law: (1) sets forth the circumstances under which officers or
directors of a financial institution may be removed by the institution's federal
supervisory agency; (2) places restraints on lending by an institution to its
executive officers, directors, principal stockholders, and their related
interests; and (3) prohibits management personnel from serving as a director or
in other management positions with another financial institution which has
assets exceeding a specified amount or which has an office within a specified
geographic area.
FIRREA
The Financial Institution Reform, Recovery and Enforcement Act of 1989
("FIRREA") became effective on August 9, 1989. Among other things, this
far-reaching legislation (1) phased in significant increases in the FDIC
insurance premiums paid by commercial banks; (2) created two deposit insurance
pools within the FDIC, one to insure commercial bank and savings bank deposits
and the other to insure savings association deposits; (3) for the first time,
permitted bank holding companies to acquire healthy savings associations; (4)
permitted commercial banks that meet certain housing-related asset requirements
to secure advances and other federal services from their local Federal Home Loan
Banks; and (5) greatly enhanced the regulators' enforcement powers by removing
procedural barriers and sharply increasing the civil and criminal penalties for
violating statutes and regulations.
TIE-IN ARRANGEMENTS
Glacier, HUB and their subsidiaries cannot engage in certain tie-in
arrangements in connection with any extension of credit, sale or lease of
property or furnishing of services. For example, with certain exceptions,
neither Glacier, HUB, nor their subsidiaries may condition an extension of
credit on either (1) a requirement that the customer obtain additional services
provided by it or (2) an agreement by the customer to refrain from obtaining
other services from a competitor.
In 1997, the FRB adopted significant amendments to its anti-tying rules
that: (1) removed FRB-imposed anti-tying restrictions on bank holding companies
and their non-bank subsidiaries; (2) allowed banks greater flexibility to
package products with their affiliates; and (3) established a safe harbor from
the trying restrictions for certain foreign transactions. These amendments were
designed to enhance competition in banking and nonbanking products and to allow
banks and their affiliates to provide more efficient, lower cost service to
their customers. However, the impact of the amendments on Glacier, HUB and their
respective subsidiaries is unclear at this time.
STATE LAW RESTRICTIONS
As a Delaware corporation, Glacier may be subject to certain
limitations and restrictions as provided under applicable Delaware corporate
law. As a Montana corporation, HUB may be subject to certain limitations and
restrictions as provided under applicable Montana corporate law. Each of the
State Banks, as Montana state-chartered commercial banks, and VB are subject to
supervision and regulation by the Montana Department of Commerce's Banking and
Financial Institutions Division.
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SECURITIES REGISTRATION AND REPORTING
The common stock of Glacier is registered as a class with the SEC under
the Securities Exchange Act of 1934 and thus is subject to the periodic
reporting and proxy solicitation requirements and the insider-trading
restrictions of that Act. The periodic reports, proxy statements, and other
information filed by Glacier under that Act can be inspected and copied at or
obtained from the Washington, D.C., office of the SEC. In addition, the
securities issued by Glacier are subject to the registration requirements of the
Securities Act of 1933 and applicable state securities laws unless exemptions
are available.
THE SUBSIDIARIES
GENERAL
Applicable federal and state statutes and regulations governing a
bank's operations relate, among other matters, to capital requirements, required
reserves against deposits, investments, loans, legal lending limits, certain
interest rates payable, mergers and consolidations, borrowings, issuance of
securities, payment of dividends (see below), establishment of branches, and
dealings with affiliated persons. The FRB and the FDIC have authority to
prohibit banks under their supervision from engaging in what they consider to be
an unsafe and unsound practice in conducting their business.
Until December 31, 1997, two of Glacier's subsidiaries -- Glacier Bank
of Eureka and Glacier Bank of Whitefish -- were organized as national banking
associations and as such, were subject to primary regulation by the Office of
the Comptroller of the Currency ("OCC"). Additionally, until February 1, 1998,
Glacier Bank was organized as a federal savings bank, and as such was subject to
primary regulation by the Office of Thrift Supervision. All of these Glacier
subsidiaries have been converted to Montana state-charters and are members in
the Federal Reserve System. Accordingly, Glacier's subsidiaries, as well as VB,
are subject to extensive regulation and supervision by the Montana Department of
Commerce's Banking and Financial Institutions Division, and they are also
subject to regulation and examination by the FRB as a result of their membership
in the Federal Reserve System. VB is subject to regulation by the FDIC as a
state non-member commercial bank. The federal laws that apply to Glacier's and
HUB's banking subsidiaries regulate, among other things, the scope of their
business, their investments, their reserves against deposits, the timing of the
availability of deposited funds and the nature and amount of and collateral for
loans. The laws and regulations governing Glacier's and HUB's banking
subsidiaries generally have been promulgated to protect depositors and not to
protect stockholders of such institutions or their holding companies.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires federal banking regulators to adopt regulations in a number
of areas to ensure bank safety and soundness, including: internal controls;
credit underwriting; asset growth; management compensation; ratios of classified
assets to capital; and earnings. FDICIA also contains provisions which are
intended to change independent auditing requirements; restrict the activities of
state-chartered insured banks; amend various consumer banking laws; limit the
ability of "undercapitalized banks" to borrow from the FRB's discount window;
and require regulators to perform annual on-site bank examinations and set
standards for real estate lending. FDICIA recapitalized the Bank Insurance Fund
("BIF") and required the FDIC to maintain the BIF and the Savings Association
Fund ("SAIF") at 1.25% of insured deposits by increasing the deposit insurance
premiums as necessary to maintain such ratio. (See "FDIC Insurance" below).
LOANS-TO-ONE BORROWER
Each of Glacier's and HUB's banking subsidiaries is subject to
limitations on the aggregate amount of loans that it can make to any one
borrower, including related entities. Applicable regulations generally limit
loans-to-one borrower to 15 to 20% of unimpaired capital and surplus. As of
December 31, 1997, each of Glacier's and HUB's banking subsidiaries was in
compliance with applicable loans-to-one borrower requirements.
FDIC INSURANCE
Generally, customer deposit accounts in banks are insured by the FDIC
for up to a maximum amount of $100,000. The FDIC has adopted a risk-based
insurance assessment system under which depository institutions contribute funds
to the BIF and the SAIF based on their risk classification. The FDIC assigns
institutions a risk classification based on three capital groups and three
supervisory groups.
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With the enactment of the Deposit Insurance Funds Act of 1996 ("Funds
Act"), a one-time assessment was imposed on institutions holding SAIF deposits
on March 31, 1995, in an amount necessary for SAIF to reach its 1.25 designated
reserve ratio. Because the deposits of Glacier Bank were insured by the SAIF
until the bank's recent conversion from a savings association to a state bank,
Glacier Bank paid that assessment. In addition to the one-time SAIF assessment,
for the three year period beginning in 1997, the Funds Act subjects BIF-insured
deposits to a Financing Corporation ("FICO") premium assessment on domestic
deposits at one-fifth the premium rate (approximately 1.3 basis points) imposed
on SAIF-insured deposits (approximately 6.5 basis points). In the year 2000,
BIF-insured institutions will be required to share in the payment of the FICO
obligations on a pro-rata basis with all thrift institutions, with annual
assessments expected to equal approximately 2.4 basis points until the year
2017, and to be phased out completely by 2019.
Currently, institutions in the lowest risk category will continue to
pay no BIF premiums, and other institutions will be assessed based on a range of
rates, with those in the highest risk category paying 27 cents for every $100 of
BIF-insured deposits. Rates in the SAIF assessment schedule, previously ranging
from 4 to 31 basis points, have been adjusted by 4 basis points to a range of 1
to 27 basis points. The Funds Act provides for the merger of the BIF and SAIF on
January 1, 1999, only if no thrift institutions exist on that date..
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged or
is engaging in unsafe or unsound practices, is in an unsafe or unsound condition
to continue operations, or has violated any applicable law. The insurance may be
terminated permanently, if the institution has no tangible capital. If deposit
insurance is terminated, the accounts at the institution at the time of the
termination, less subsequent withdrawals, will continue to be insured for a
period of six months to two years, as determined by the FDIC.
CAPITAL REQUIREMENTS
Banks and Bank Holding Companies. The FRB, the FDIC, and the OCC
(collectively, the "Agencies") have established uniform capital requirements for
all commercial banks. Bank holding companies are also subject to certain minimum
capital requirements. A bank that does not achieve and maintain required capital
levels may be subject to supervisory action through the issuance of a capital
directive. In addition, banks must meet certain guidelines concerning the
maintenance of an adequate allowance for loan and lease losses.
The Agencies' "risk-based" capital guidelines make regulatory capital
requirements more sensitive to differences in risk profiles among banking
organizations, take off-balance sheet exposures into explicit account in
assessing capital adequacy, and minimize disincentives to holding liquid,
low-risk assets. The current guidelines require banks to achieve a minimum total
risk-based capital ratio of 8% and a minimum Tier 1 risk-based capital ratio of
4%. Tier 1 capital includes common stockholders' equity, qualifying perpetual
preferred stock, and minority interests in equity accounts of consolidated
subsidiaries, but excludes goodwill and most other intangibles. Tier 2 capital
includes the excess of any preferred stock not included in the Tier 1 capital,
mandatory convertible securities, subordinated debt and general reserves for
loan and lease losses up to 1.25% of risk-weighted assets.
The Agencies also have adopted leverage ratio standards that require
commercial banks to maintain a minimum ratio of core capital to total assets
("Leverage Ratio") of 3%. Any institution operating at or near this level should
have well-diversified risk, and in general, be a strong banking organization
without any supervisory, financial or operational weaknesses or deficiencies.
Institutions experiencing or anticipating significant growth would be expected
to maintain capital ratios, including tangible capital positions, well above the
minimum levels (e.g., an additional cushion of at least 100 to 200 basis points,
depending upon the particular circumstances and risk profile).
The minimum ratio of total capital to risk-adjusted assets required by
the FRB for bank holding companies is 8%. At least one-half of the total capital
must be Tier 1 capital; the remainder may consist of Tier 2 capital. Bank
holding companies are also subject to minimum Leverage Ratio guidelines. These
guidelines provide for a minimum Leverage Ratio of 3% for bank holding companies
meeting certain specified criteria, including achievement of the highest
supervisory rating. All other bank holding companies are required to maintain a
Leverage Ratio which is at least 100 to 200 basis points higher (4 to 5%). These
guidelines provide that banking organizations experiencing internal growth or
making acquisitions are expected to maintain strong capital positions
substantially above the minimum supervisory levels, without significant reliance
on intangible assets.
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Interest-Rate-Risk ("IRR") Component. FDICIA requires the Agencies to
revise their respective risk-based capital standards to ensure that they take
adequate account of interest-rate risk ("IRR"), concentration of credit risk and
the risks of nontraditional activities, as well as reflect the actual
performance and expected risk of loss on multi-family residential loans.
When evaluating the capital adequacy of a bank, examiners from the
Agencies consider exposure to declines in the economic value of a bank's capital
due to changes in interest rates. A bank may be required to hold additional
capital for IRR if it has significant exposure or a weak interest rate risk
management process. In addition, the Agencies have amended their respective
risk-based capital standards to incorporate a measure for market risk to cover
all positions located in an institution's trading account and foreign exchange
and commodity positions wherever located. The rule effectively requires banks
and bank holding companies with significant exposure to market risk to measure
that risk using their own internal value-at-risk model, subject to the
parameters of the rule, and to hold a sufficient amount of capital to support
the institution's risk exposure. Institutions subject to this rule must have
been in compliance with it by January 1, 1998. The rule applies to any bank or
bank holding company, regardless of size, whose trading activity equals 10% or
more of its total assets, or whose trading activity equals $1 billion or more.
The Agencies may require an institution not otherwise subject to the rule to
comply with it for safety and soundness reasons and also may exempt an
institution otherwise subject to the rule from compliance under certain
circumstances.
Prompt Corrective Action. Under FDICIA, each federal banking agency
must implement a system of prompt corrective action for institutions that it
regulates. In September 1992, the Agencies adopted substantially similar
regulations, which became effective on December 19, 1992, intended to implement
this prompt corrective action system. Under the regulations, an institution is
deemed to be (1) "well capitalized" if it has a total risk-based capital ratio
of 10% or more, a Tier I risk-based capital ratio of 6% or more, a Tier I
leverage capital ratio of 5% or more and is not subject to specified
requirements to meet and maintain a specific capital level for any capital
measure; (2) "adequately capitalized" if it has a total risk-based capital ratio
of 8% or more, a Tier I risk-based capital ratio of 4% or more, a Tier I
leverage capital ratio of 4% or more (3% under certain circumstances) and does
not meet the definition of "well capitalized;" (3) "undercapitalized" if it has
a total risk-based capital ratio of under 8%, a Tier I risk-based capital ratio
of under 4% and a Tier I leverage capital ratio of under 4% (3% under certain
circumstances); (4) "significantly undercapitalized" if it has a total
risk-based capital ratio of under 6%, a Tier I risk-based capital ratio of under
3%, a Tier I leverage capital ratio of under 3%; and (5) "critically
undercapitalized" if it has a ratio of tangible equity to total assets of 2% or
less.
Increasingly severe restrictions are imposed on the payment of
dividends and management fees, asset growth and other aspects of the operations
of institutions that fall below the category of "adequately capitalized."
Undercapitalized institutions must develop and implement capital plans
acceptable to the appropriate federal regulatory agency. Such plans must require
any company that controls an undercapitalized institution to provide certain
guarantees that the institution will comply with the plan until it is
"adequately capitalized". As of December 31, 1997, neither the State Banks, nor
VB were subject to any regulatory order, agreement, or directive to meet and
maintain a specific capital level for any capital measure.
RESTRICTIONS ON CAPITAL DISTRIBUTIONS
Dividends paid to Glacier by its banking subsidiaries are a material
source of Glacier's cash flow. Likewise, dividends paid to HUB by VB are a
material source of HUB's cash flow. Various federal and state statutory
provisions limit the amount of dividends Glacier's and HUB's banking
subsidiaries are permitted to pay to Glacier and HUB, respectively, without
regulatory approval. FRB policy further limits the circumstances under which
bank holding companies may declare dividends.
If, in the opinion of the applicable federal banking agency, a
depository institution under its jurisdiction is engaged in or is about to
engage in an unsafe or unsound practice (which, depending on the financial
condition of the institution, may include the payment of dividends), the agency
may require, after notice and hearing, that such institution cease and desist
from such practice. In addition, the FRB and the FDIC have issued policy
statements which provide that insured banks and bank holding companies should
generally pay dividends only out of current operating earnings.
The State Banks and VB. Montana law imposes the following limitations
on the payment of dividends by Montana state banks: (1) until the bank's surplus
fund is equal to 50% of its paid-up capital stock, no dividends may be declared
unless at least 25% of bank's net earnings for the dividend period have been
carried to the surplus account, and (2) a bank must give notice to the Banking
and Financial Institutions Division before declaring a dividend larger than the
previous two years' net earnings.
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FEDERAL HOME LOAN BANK SYSTEM
All of Glacier's banking subsidiaries, and VB, are members of the FHLB
of Seattle, which is one of the 13 regional FHLBs that administer the home
financing credit function of savings associations. Each FHLB serves as a reserve
or central bank for its members within its assigned region. It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the Board of Directors of the FHLB.
As members, the respective banking subsidiaries of Glacier and HUB
must purchase and maintain stock in the FHLB of Seattle in an amount equal to at
least 1% of its aggregate unpaid residential mortgage loans, home purchase
contracts or similar obligations at the beginning of each year. On December 31,
1997, Glacier's banking subsidiaries had $10.330 million in FHLB stock, which
was sufficient to comply with this requirement. On December 31, 1997, VB had
$626,000 in FHLB stock, which was sufficient to comply with this requirement.
The FHLBs must provide funds for the resolution of troubled savings
associations and contribute to affordable housing programs through direct loans
or interest subsidies on advances targeted for community investment in low- and
moderate-income housing projects. These contributions have adversely affected
the level of FHLB dividends paid and could continue to do so in the future.
These contributions also could have an adverse effect on the value of FHLB stock
in the future. Dividends paid by the FHLB of Seattle to Glacier's banking
subsidiaries for the years ended December 31, 1997 and 1996, totaled $739,000
and $620,000 respectively.
FEDERAL RESERVE SYSTEM
The FRB requires all depository institutions to maintain reserves
against their transaction accounts (primarily checking accounts) and
non-personal time deposits. Currently, reserves of 3% must be maintained against
total transaction accounts of $49.8 million or less (after a $4.2 million
exemption), and an initial reserve of 10% (subject to adjustment by the FRB to a
level between 8% and 14%) must be maintained against that portion of total
transaction accounts in excess of such amount. On December 31, 1997, each of
Glacier's and HUB's banking subsidiaries was in compliance with applicable
requirements.
The balances maintained to meet the reserve requirements imposed by the
FRB may be used to satisfy applicable liquidity requirements. Because required
reserves must be maintained in the form of vault cash or a non-interest-bearing
account at a Federal Reserve Bank, the effect of this reserve requirement is to
reduce the earning assets of Glacier's and HUB's banking subsidiaries.
RECENT FEDERAL LEGISLATION
Interstate Banking and Branching. The Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994 ("Interstate Act") permits nationwide
interstate banking and branching. This legislation generally authorizes
interstate branching and relaxes federal law restrictions on interstate banking.
These new interstate banking and branching powers have been phased in and
individual states may "opt out" of certain of these provisions. Accordingly,
states have been able to enact "opting-in" legislation that (1) permits
interstate mergers within their own borders before June 1, 1997, and (2) permits
out-of-state banks to establish de novo branches within the state. Subject to
certain state laws, such as age and contingency laws, bank holding companies may
purchase banks in any state. Additionally, subject to such state laws, beginning
June 1, 1997, banks have been permitted to merge with banks in any other state
as long as the home state of neither merging bank has "opted out." The
Interstate Act requires regulators to consult with community organizations
before permitting an interstate institution to close a branch in a low-income
area.
As of March 20, 1997, Montana has "opted-out" of the Interstate Act and
prohibited in-state banks from merging with out-of-state banks if the merger
would be effective on or before September 30, 2001. Montana law generally
authorizes the acquisition of an in-state bank by an out-of-state bank holding
company through the acquisition of a financial institution if the in-state bank
being acquired has been in existence for at least 5 years prior to the
acquisition. Banks, bank holding companies, and their respective subsidiaries
cannot acquire control of a bank located in Montana if, after the acquisition,
the acquiring institution, together with its affiliates, would directly or
indirectly control more than 22% of the total deposits of insured depository
institutions and credit unions located in Montana.
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At this time, the full impact that the Interstate Act might have on
Glacier, HUB and their subsidiaries is impossible to predict.
DESCRIPTION OF GLACIER'S CAPITAL STOCK
Glacier's authorized capital stock consists of 16,000,000 common stock
shares with a $.01 per share par value, and 1,000,000 preferred stock shares
with a $.01 per share par value. As of the date of this Prospectus/Joint Proxy
Statement, Glacier had no shares of preferred stock issued. The Glacier Board is
authorized, without further stockholder action, to issue preferred stock shares
with such designations, preferences and rights as the Glacier Board may
determine.
Glacier's stockholders do not have preemptive rights to subscribe to
any additional securities that may be issued. If Glacier is liquidated, the
holders of Glacier Common Stock are entitled to share, on a pro rata basis,
Glacier's remaining assets after provision for liabilities. The Glacier Board is
authorized to determine the liquidation rights of any preferred stock that may
be issued.
Under the DGCL, a stockholder who has neither voted in favor of a
proposed merger nor consented in writing to a proposed merger is entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares, unless the merger is a stock-for-stock merger and either (i) the stock
is listed on a national exchange or is designated a national market system
security on an interdealer quotation system by The Nasdaq Stock Market, (ii) the
stock is held by more than 2,000 stockholders, or (iii) stockholders are not
entitled to vote on the merger. Because Glacier's Common Stock is traded on
NASDAQ, in the event of a proposed merger, Glacier stockholders will not be
entitled under Delaware law to appraisal rights (rights to receive the fair
value of their shares in cash upon dissent from the proposed merger and rights
to an appraisal of the fair value of their shares), regardless of whether such
Glacier stockholders vote for or against the proposed merger.
Under the DGCL, Glacier may acquire shares of its own stock. Glacier's
stockholders may amend Glacier's Certificate of Incorporation by an affirmative
majority vote of the shares entitled to vote on the matter following approval of
the amendment by Glacier's Board, but the anti-takeover provisions detailed in
Section 9.6 of Glacier's Certificate of Incorporation, may not be amended or
repealed and provisions inconsistent with Article 9 may not be adopted without
the affirmative vote of 80% of Glacier's outstanding voting stock. Glacier's
Board is authorized to alter, amend or repeal Glacier's Bylaws by affirmative
vote; Glacier's stockholders are authorized to alter, amend or repeal Glacier's
Bylaws by majority vote at an annual stockholders meeting or at a special
stockholders meeting.
For additional information concerning Glacier's capital stock, see
"COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER, HUB AND VB COMMON STOCK."
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
GLACIER, HUB AND VB COMMON STOCK
The DGCL, as amended, and Glacier's Certificate of Incorporation and
Bylaws, both as amended, govern the rights of Glacier stockholders and will
govern the rights of HUB's stockholders and holders of Minority Stock who become
stockholders of Glacier as a result of the Merger and the Share Exchange. The
rights of HUB stockholders are currently governed by the MBCA, as amended, and
by HUB's Articles of Agreement and Bylaws. The rights of VB stockholders are
currently governed by the MBCA, as amended, and by VB's Articles of
Incorporation and Bylaws. The following is a brief summary of certain
differences between the rights, respectively, of HUB, VB and Glacier
stockholders. This summary does not purport to be complete and is qualified by
the documents and statutes referenced and by other applicable law.
GENERAL
Under its Certificates of Incorporation, Glacier's authorized capital
stock consists of 16,000,000 of common stock, par value $.01 per share, and
1,000,000 shares of preferred stock, $.01 par value per share. No shares of
preferred stock are currently outstanding.
Under its Articles of Incorporation, HUB's authorized capital consists
of 50,000 shares of common stock, no par value. Under its Articles of
Incorporation, VB's authorized capital consists of 11,000 shares of common
stock, par value $40.00 per share.
The following is a more detailed description of Glacier's, HUB's and
VB's capital stock.
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<PAGE> 82
COMMON STOCK
As of July 1, 1998, there were 6,943,534 shares of Glacier Common
Stock issued and outstanding, in addition to options for the purchase of
469,211 shares of Glacier Common Stock under Glacier's employee and director
stock option plans.
As of July 1, 1998, there were 9,265 shares of HUB Common Stock
issued and outstanding.
As of July 1, 1998, there were 11,000 shares of VB Common Stock
issued and outstanding.
PREFERRED STOCK
As of the date of this Prospectus/Joint Proxy Statement, neither
Glacier, HUB nor VB had shares of preferred stock issued. The Glacier Board is
authorized, without further stockholder action, to issue preferred stock shares
with such designations, preferences and rights as the Glacier Board may
determine.
DIVIDEND RIGHTS
Dividends may be paid on Glacier Common Stock as and when declared by
the Glacier Board out of funds legally available for the payment of dividends.
The Glacier Board may issue preferred stock that is entitled to such dividend
rights as the Glacier Board may determine, including priority over the common
stock in the payment of dividends. The ability of Glacier to pay dividends
basically depends on the amount of dividends paid to it by its subsidiaries.
Accordingly, the dividend restrictions imposed on the subsidiaries by statute or
regulation effectively may limit the amount of dividends Glacier can pay. See
"SUPERVISION AND REGULATION -- The Bank Subsidiaries; Dividend Restrictions."
Under the DGCL, the Glacier Board can declare dividends out of Glacier's
surplus. If there is no surplus, the Board may declare dividends out of
Glacier's net profits for the fiscal year in which the dividend is declared, or
for the preceding fiscal year, unless there is a deficiency in the amount of
capital represented by the issued and outstanding stock of all classes having a
preference to the distribution of assets.
VOTING RIGHTS
All voting rights are currently vested in the holders of Glacier Common
Stock, HUB Common Stock, and VB Common Stock, respectively, with each share
being entitled to one vote.
Glacier's Bylaws provide that stockholders do not have cumulative
voting rights in the election of directors. Under governing law both HUB and VB
stockholders are entitled to cumulate their shares in the voting for directors
by multiplying the number of shares held by the number of directors to be
elected and distributing the votes among the candidates. The Glacier Board is
also authorized to determine the voting rights of any preferred stock that may
be issued.
PREEMPTIVE RIGHTS
Glacier's and VB's stockholders do not have preemptive rights to
subscribe to any additional securities that may be issued. HUB stockholders are
entitled to preemptive rights to acquire unissued or treasury shares of HUB
Common Stock or obligations of HUB convertible into such stock.
LIQUIDATION RIGHTS
If Glacier is liquidated, the holders of Glacier Common Stock are
entitled to share, on a pro rata basis, Glacier's remaining assets after
provision for liabilities. The Glacier Board is authorized to determine the
liquidation rights of any preferred stock that may be issued.
If HUB is liquidated, the holders of HUB Common Stock are entitled to
share, on a pro rata basis, HUB's remaining assets after provision for
liabilities.
If VB is voluntarily liquidated, the holders of VB common stock are
entitled to share, on a pro rata basis, VB's remaining assets after provision
for liabilities, subject to certain limitations and bank regulatory requirements
applicable to VB under the Montana Bank Act.
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<PAGE> 83
ASSESSMENTS
All outstanding shares of Glacier Common Stock and HUB Common Stock are
fully paid and nonassessable.
All outstanding shares of VB Common Stock are fully paid and
nonassessable except to the extent of assessments under the Montana Bank Act.
STOCK REPURCHASES
Under Delaware and Montana law, a corporation may acquire shares of its
own stock. Therefore, Glacier, HUB and VB may repurchase shares of their own
capital stock.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Under Delaware law, Glacier's stockholders may amend Glacier's
Certificate of Incorporation by an affirmative majority vote of the shares
entitled to vote on the matter following approval of the amendment by Glacier's
Board, but the anti-takeover provisions detailed in Article 9 of Glacier's
Certificate of Incorporation may not be amended or repealed, and provisions
inconsistent with Article 9 may not be adopted, without the affirmative vote of
80% of the outstanding voting stock. Glacier's Board is authorized to alter,
amend or repeal Glacier's Bylaws by affirmative vote; Glacier's stockholders are
authorized to alter, amend or repeal Glacier's Bylaws by majority vote at an
annual stockholders meeting or at a special stockholders meeting.
Under the MBCA, HUB and VB stockholders may amend their respective
Articles of Incorporation by an affirmative majority vote of the shares entitled
to vote on the matter following recommendation (unless special circumstances
exist, in which case no Board recommendation is required) of the amendment by
the respective Board.
The HUB Board and the VB Board, or the respective stockholders, may
amend the respective Bylaws.
APPROVAL OF CERTAIN TRANSACTIONS
Under the DGCA, sales of assets, mergers and dissolutions must be
approved by a majority of a corporation's outstanding stock. In addition, the
DGCA prohibits certain business combinations with a business entity for a period
of three years following the entity's acquisition of at least 15% of the
corporation's voting stock. Article 9 of Glacier's Certificate of Incorporation
provides that certain mergers involving a stockholder owning 10% or more of
Glacier's outstanding voting stock must be approved by 80% of Glacier's
outstanding voting stock. These provisions are described in "Potential
`Anti-Takeover' Provisions" below.
Under the MBCA, unless a corporation's articles of incorporation
provide for a lesser vote (but not less than a majority), approval by at least
two-thirds of the outstanding shares entitled to vote or two-thirds of each
voting group is required for mergers, asset sales, and dissolutions. Separate
voting by voting groups is required (i) on a plan of share exchange, and (ii) on
a plan of merger if it contains provisions that would require separate voting if
contained in an amendment to articles of incorporation. Neither HUB's nor VB's
Articles of Incorporation contain provisions pertaining to stockholder approval
of mergers and share exchanges.
DISSENTERS' RIGHTS
Under the DGCL, a stockholder who has neither voted in favor of a
proposed merger nor consented in writing to a proposed merger is entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares, unless the merger is a stock-for-stock merger and either (i) the stock
is listed on a national exchange or is designated a national market system
security on an interdealer quotation system by The Nasdaq Stock Market, (ii) the
stock is held by more than 2,000 stockholders, or (iii) stockholders are not
entitled to vote on the merger. Because Glacier's Common Stock is traded on
NASDAQ, in the event of a proposed merger, Glacier stockholders will not be
entitled under Delaware law to appraisal rights (rights to receive the fair
value of their shares in cash upon dissent from the proposed merger and rights
to an appraisal of the fair value of their shares), regardless of whether a
Glacier stockholder votes for or against such proposed merger.
Under the MBCA, a stockholder is entitled to dissent from, and, upon
completion of various notice and demand requirements prescribed in Section
35-1-826 through Section 35-1-839, to obtain the fair value of his or her shares
in the event of certain
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<PAGE> 84
corporate actions, including certain mergers, share exchanges, sales of
substantially all assets of the corporation, and certain amendments to the
corporation's articles of incorporation.
BOARD OF DIRECTORS
Glacier's Certificate of Incorporation provides for division of its
Board into three classes, as nearly equal in number as possible. Each director
serves for a three-year term, and the classes are staggered so that one class is
elected each year. The Glacier Board sets the exact number of directors by
resolution. Currently, the Glacier Board has nine directors. A Glacier director
may be removed with cause by Glacier's stockholders if a majority of the
stockholders entitled to vote on the matter vote in favor of removal at a
meeting expressly called for that purpose. A Glacier director may not be removed
without cause.
The HUB Board is elected at the annual meeting of stockholders, with
each director serving a one year term. The Board is not divided into classes nor
are the terms of directors staggered. Currently, there are 11 directors of HUB.
A director may be removed in accordance with the provisions of the MBCA.
In accordance with governing law, the VB Board is elected at the annual
meeting of stockholders, with each director serving a one year term. Under the
VB Articles of Incorporation the VB Board must consist of not less than three or
more than 11 directors. The Board is not divided into classes nor are the terms
of the directors staggered. Not less than two-thirds of the directors must be
residents of the State of Montana. There are currently 11 directors of VB, each
of whom is a resident of the State of Montana.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Glacier's Certificate of Incorporation provides that the personal
liability of Glacier's directors and officers for monetary damages shall be
eliminated to the fullest extent permitted under the DGCL.
Glacier's Bylaws provide that Glacier will indemnify any present or
former director, officer or employee, or any present or former director, officer
or employee of another business entity serving in such capacity at Glacier's
request, from any threatened, pending or completed action, suit or proceeding
against expenses (including attorney's fees), judgments, fines, excise taxes and
settlement amounts actually and reasonably incurred by such person to the
fullest extent permitted under Sections 145(a)-(d) of the DGCL. Glacier will not
be liable, however, for any settlement amounts which are effected without
Glacier's prior written consent, or any amounts claimed in an action that was
initiated by any person seeking indemnification without Glacier's prior written
consent. Reasonable expenses (including attorney's fees) will be advanced to any
person claiming indemnification if that person undertakes in writing to repay
Glacier if it is ultimately determined that the person is not entitled to
indemnification. Glacier's obligation to indemnify and advance expenses to
persons covered by Glacier's bylaw indemnification provisions will continue
despite the subsequent amendment or repeal of Glacier's bylaw indemnification
provisions. Indemnification rights and procedures are set forth in more detail
in Glacier's Bylaws.
Neither the HUB or VB Articles of Incorporation provide for any
indemnification or limitation of liability with respect to their respective
directors, officers or employees.
The MBCA provides for mandatory indemnification of a director or
officer who has been wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the director was made a party because he is
or was a director or officer of the corporation. The MBCA also provides for
discretionary indemnification by a corporation of a director, officer or
employee subject to certain statutory requirements.
The Montana Bank Act authorizes VB to provide, in its Articles of
Incorporation, for director indemnification consistent with the MBCA.
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<PAGE> 85
POTENTIAL "ANTI-TAKEOVER" PROVISIONS
Glacier's Certificate of Incorporation and the DGCL contain certain
provisions which may limit or prevent certain acquisitions. These provisions are
briefly summarized below.
1. Glacier's Certificate of Incorporation.
Glacier's Certificate of Incorporation includes certain provisions that
could make it more difficult for another party to acquire Glacier by means of a
tender offer, a proxy contest, merger or otherwise. These provisions include (i)
a requirement that at least 80% of Glacier's outstanding voting stock approve
business combinations (discussed in more detail below), (ii) an authorization to
Glacier's Board allowing it to issue preferred stock (discussed in more detail
below), and (iii) restrictions on removal of directors which could limit changes
in the composition of the Glacier Board (see "-- Board of Directors" above).
Article 9 of Glacier's Certificate of Incorporation contains detailed
provisions governing certain change-in-control transactions, including mergers
and consolidations, and significant sales of corporate assets, involving
business entities owning at least 10% of Glacier's outstanding voting stock, or
which have the opportunity, through beneficial ownership of the voting stock or
rights to acquire Glacier voting stock, to own or control at least 10% of
Glacier's voting stock. Other transactions treated as business combinations
under these change-in-control provisions are detailed in Section 9.1 of
Glacier's Certificate of Incorporation. All such business combinations must be
approved by at least 80% of Glacier's outstanding voting stock entitled to vote
generally in the election of directors, all of which will vote as one class,
with each share entitled to the number of votes that it is granted either under
the Certificate of Incorporation, or, if preferred stock, as designated by the
Board of Directors when the preferred shares were issued. The "super-majority"
voting requirement applies regardless of other requirements in Glacier's
Certificate of Incorporation and Bylaws, lesser voting requirements provided by
applicable law, and requirements imposed under any agreement between Glacier and
any national securities exchange.
The "super-majority" voting requirement does not apply to those
business combinations which meet all the criteria prescribed in Section 9.2 of
Glacier's Certificate of Incorporation. Some of these stringent criteria include
the approval of the business combination by directors unaffiliated with the
Glacier stockholder seeking the business combination, the payment of fair and
adequate consideration (based upon recent pricing history of Glacier's stock),
limitations on the form of consideration payable to Glacier's stockholders, and
Glacier's continuing ability to pay dividends of a consistent value on its
outstanding stock. Other requirements are detailed in Section 9.2 of Glacier's
Certificate of Incorporation.
In addition, the authorization of preferred stock, which is intended
primarily as a financing tool and not as a defense against takeovers, may
potentially be used by management to render more difficult uninvited attempts to
acquire control of Glacier (e.g., by diluting the ownership interest of a
substantial stockholder, increasing the amount of consideration necessary for a
stockholder to obtain control, or selling authorized but unissued shares to
friendly third parties).
The requirement of a super-majority vote of stockholders to approve
change-in-control transactions, the availability of Glacier's preferred stock
for issuance without stockholder approval, the staggered terms for Glacier's
directors, provisions in Glacier's Certificate of Incorporation permitting the
removal of directors only for cause and the Glacier Board's ability to expand
the Board size and fill resulting vacancies, may have the effect of lengthening
the time required for a person to acquire control of Glacier through a tender
offer, proxy contest, the election of a majority of the Glacier Board, or
otherwise, and may deter any potential unfriendly offers or other efforts to
obtain control of Glacier. This could deprive Glacier's stockholders of
opportunities to realize a premium for their Glacier Common Stock and could make
removal of incumbent directors more difficult, even in circumstances where the
action was favored by a majority of Glacier's stockholders.
2. Delaware Law.
Delaware's significant anti-takeover provisions are generally described
below.
Delaware prohibits business combinations with an interested stockholder
(i.e., a stockholder who owns at least 15% of the voting stock of a corporation)
for a period of three years following the date the stockholder becomes
interested. Business combinations with an interested stockholder are not
prohibited, however, if (i) the corporation's board of directors approves in
advance either the business combination or the transaction in which the
stockholder becomes an interested stockholder, (ii) the stockholder acquires 85%
or more of the outstanding voting stock in the same transaction in which the
stockholder becomes
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<PAGE> 86
interested, or (iii) the board of directors approves the business combination
and at least two-thirds of the outstanding voting stock (excluding those shares
held by the acquiring stockholder) approve the transaction by affirmative vote.
These change-of-control provisions of the DGCL will not apply if (i) a
corporation expressly elects not to follow them, (ii) a stockholder
inadvertently becomes interested and divests his shares as soon as practicable,
or (iii) the corporation has no stock listed on a national securities exchange,
authorized for quotation on an inter dealer quotation system of a registered
national securities association, or held of record by more than 2,000
stockholders.
3. Montana Law.
The MBCA contains no significant anti-takeover provisions. All
provisions regarding mergers, consolidations, exchange of shares and related
business combinations are governed by Sections 35-1-813 through 35-1-839, the
MBCA's standard merger and consolidation provisions. Neither the HUB or VB
Articles of Incorporation contain any anti-takeover provisions.
CERTAIN LEGAL MATTERS
The validity of the Glacier Common Stock to be issued in the Merger
and Share Exchange will be passed upon for Glacier by its counsel, Graham &
Dunn, PC, Seattle/Tacoma, Washington. Graham & Dunn, P.C. also will give an
opinion concerning certain tax matters related to the Merger and Share Exchange.
EXPERTS
The consolidated financial statements of Glacier as of December 31,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997, are incorporated in this Prospectus/Joint Proxy Statement and in the
Registration Statement in reliance on the report of KPMG, independent certified
public accountants, as indicated in their reports with respect thereto, and on
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of HUB as of December 31, 1997
and for the year then ended included in this Prospectus/Joint Proxy Statement
and in the Registration Statement in reliance on the report of KPMG, independent
certified public accountants, as indicated in their report with respect thereto,
and on the authority of such as experts in accounting and auditing.
OTHER MATTERS
Neither the Glacier Board, the HUB Board nor the VB Board is aware of
any business to come before the Glacier Meeting, HUB Meeting or the VB Meeting,
as the case may be, other than those matters described above in this
Prospectus/Joint Proxy Statement. However, if any other matters should properly
come before either of the meetings, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
judgment of the persons voting the proxies.
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Independent Auditor's Report
The Board of Directors and Stockholders
HUB Financial Corporation:
We have audited the accompanying consolidated statement of financial condition
of HUB Financial Corporation and subsidiary as of December 31, 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of HUB Financial
Corporation and subsidiary as of December 31, 1997, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Billings, Montana
January 16, 1998
<PAGE> 88
HUB FINANCIAL CORPORATION
Independent Auditor's Report
and
Consolidated Financial Statements
December 31, 1997
Unaudited December 31, 1996 Consolidated Statement of Financial Condition, and
unaudited Consolidated Statements of Operations,
Stockholders' Equity, and Cash Flows
for the year ended December 31, 1996.
<PAGE> 89
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
(Unaudited)
December 31, December 31,
(dollars in thousands) 1997 1996
- ---------------------- ------------ ------------
ASSETS:
<S> <C> <C>
Cash on hand and in banks ............................................. $ 3,261 $ 3,760
Federal funds sold .................................................... 3,860 550
-------- --------
Cash and cash equivalents ........................................... 7,121 4,310
Interest bearing deposits ............................................. 595 0
Investment securities, available-for-sale ............................. 6,220 6,498
Investment securities, held-to-maturity (market value December 31,
1997 -- $5,213, December 31, 1996 -- $5,899 unaudited) ............... 5,039 5,743
Loans receivable, net ................................................. 45,869 42,721
Premises and equipment, net ........................................... 1,861 1,732
Real estate and other assets owned .................................... 0 96
Federal Home Loan Bank of Seattle stock, at cost ...................... 626 536
Accrued interest receivable ........................................... 475 469
Deferred income taxes ................................................. 42 43
Other assets .......................................................... 463 370
-------- --------
........................................................................ $ 68,311 $ 62,518
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits - non-interest bearing ....................................... 9,996 9,599
Deposits - interest bearing ........................................... 46,217 40,233
Advances from Federal Home Loan Bank of Seattle ....................... 2,603 3,927
Securities sold under agreements to repurchase ........................ 2,418 2,528
Notes payable ......................................................... 216 76
Accrued interest payable .............................................. 428 414
Advance payments by borrowers for taxes and insurance ................. 45 47
Current income taxes .................................................. 178 224
Minority interest ..................................................... 800 708
Other liabilities ..................................................... 244 243
-------- --------
Total liabilities ................................................... 63,145 57,999
Stockholders' equity
Common stock, no par value per share. Authorized 50,000 shares;
outstanding 9,265 shares ............................................. 540 540
Additional paid-in capital ............................................ 200 200
Retained earnings ..................................................... 4,701 4,050
Treasury stock at cost, 703 shares .................................... (281) (281)
Net unrealized gains on securities available-for-sale ................. 6 10
-------- --------
Total stockholders' equity .......................................... 5,166 4,519
-------- --------
........................................................................ 68,311 62,518
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 90
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
Year ended Year ended
December 31, December 31,
(dollars in thousands except per share data) 1997 1996
- -------------------------------------------- ------------ ------------
<S> <C> <C>
INTEREST INCOME:
Real estate loans ...................................... $ 837 823
Commercial loans ....................................... 2,055 1,698
Consumer and other loans ............................... 1,505 1,216
Investment securities .................................. 980 1,030
------ ------
TOTAL INTEREST INCOME ................................ 5,377 4,767
------ ------
INTEREST EXPENSE:
Deposits ............................................... 1,919 1,669
Advances ............................................... 193 184
Securities sold under agreements to repurchase ......... 121 103
Other borrowed funds ................................... 23 9
------ ------
TOTAL INTEREST EXPENSE ............................... 2,256 1,965
------ ------
NET INTEREST INCOME .................................. 3,121 2,802
Provision for loan losses .............................. 60 0
------ ------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................... 3,061 2,802
NON-INTEREST INCOME:
Service charges and other fees ......................... 595 617
Miscellaneous loan fees and charges .................... 616 531
Other income ........................................... 65 53
------ ------
TOTAL NON-INTEREST INCOME ............................ 1,276 1,201
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses ... 1,393 1,240
Occupancy expense ...................................... 344 329
Data processing expense ................................ 228 214
FDIC insurance expense ................................. 6 2
Other expense .......................................... 763 767
Minority interest ...................................... 140 127
------ ------
TOTAL NON-INTEREST EXPENSE ........................... 2,874 2,679
------ ------
Earnings before income taxes ........................... 1,463 1,324
Federal and state income tax expense ................... 589 542
------ ------
NET EARNINGS ......................................... $ 874 782
====== ======
Net earnings per share ................................. $94.33 84.40
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 91
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Net
Common Stock Additional unrealized Total
------------------- paid-in Retained Treasury gains stockholders'
($ in thousands, except per share data) Shares Amount capital earnings stock on securities equity
- --------------------------------------- ------ ------ ---------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995
(unaudited) ...................... 9,265 $ 540 200 3,472 (281) 66 3,997
Cash dividends declared
($22 per share) (unaudited) ...... -- -- -- (204) -- -- (204)
Decrease in net unrealized gains
on available-for-sale securities
(unaudited) ...................... -- -- -- -- -- (56) (56)
Net earnings (unaudited) .............. -- -- -- 782 -- -- 782
----- ----- ---- ----- ---- --- -----
Balance at December 31, 1996 .......... 9,265 540 200 4,050 (281) 10 4,519
Cash dividends declared
($24 per share) .................. -- -- -- (223) -- -- (223)
Decrease in net unrealized gains on
available-for-sale securities .... -- -- -- -- -- (4) (4)
Net earnings .......................... -- -- -- 874 -- -- 874
----- ----- ---- ----- ---- --- -----
Balance at December 31, 1997 .......... 9,265 $ 540 200 4,701 (281) 6 5,166
===== ====== ==== ===== ==== === =====
</TABLE>
<PAGE> 92
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(unaudited)
Years ended December 31,
(dollars in thousands) 1997 1996
---------------------- -------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings ......................................................... $ 874 782
Adjustments to reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Provision for loan losses .......................................... 60 0
Depreciation of premises and equipment ............................. 201 192
Amortization of investment securities premiums, net ................ 24 18
Net increase (decrease) in deferred income taxes ................... 5 (41)
Net decrease (increase) in interest receivable ..................... (6) 13
Net increase in interest payable ................................... 15 40
Net increase (decrease) in current income taxes .................... (46) 123
Net increase in other assets ....................................... (93) (56)
Net increase in other liabilities and minority interest ............ 94 42
FHLB stock dividends ............................................... (45) (38)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................... 1,083 1,075
-------- --------
INVESTING ACTIVITIES:
Net increase in interest bearing deposits ............................ (595) 0
Proceeds from maturities and prepayments of investment
securities available-for-sale .................................... 3,737 4,181
Purchases of investment securities available-for-sale ................ (2,768) (1,831)
Proceeds from maturities and prepayments of investment
securities held-to-maturity ...................................... 75 95
Purchases of investment securities held-to-maturity .................. (94) (700)
Principal collected on installment and commercial loans .............. 21,754 20,260
Installment and commercial loans originated or acquired .............. (29,501) (30,354)
Proceeds from sales of commercial loans .............................. 3,575 2,791
Principal collections on mortgage loans .............................. 964 2,713
Mortgage loans originated or acquired ................................ (16,020) (17,815)
Proceeds from sales of mortgage loans ................................ 16,020 12,897
Net proceeds from sale (acquisition) of real estate owned ............ 96 (96)
Net purchase of FHLB stock ........................................... (45) 0
Net addition of premises and equipment ............................... (330) (218)
Acquisition of minority interest ..................................... (1) (57)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES ........................... (3,133) (8,134)
-------- --------
FINANCING ACTIVITIES:
Net increase in deposits ........................................... 6,381 5,733
Net increase (decrease) in FHLB advances & other borrowing ......... (1,185) 1,199
Net increase (decrease) in advance payments from
borrowers for taxes and insurance .............................. (2) 1
Net increase (decrease) in securities sold under
repurchase agreements .......................................... (110) 1,347
Cash dividends paid to stockholders ................................ (223) (204)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES .......................... 4,861 8,076
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS .......................... 2,811 1,017
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................... 4,310 3,293
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ......................... $ 7,121 4,310
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest ......................... $ 2,241 1,925
Income taxes ..................... $ 584 867
</TABLE>
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) GENERAL
HUB Financial Corporation, a Montana corporation and a registered bank holding
company under the Bank Holding Company Act of 1956, as amended, (the "Company")
was incorporated on May 7, 1982 and provides a full range of banking services to
individual and corporate customers primarily in Lewis and Clark county through
its subsidiary bank, Valley Bank of Helena ("VB"). The Company owns
approximately 86.5% of the common stock of VB, a state-chartered commercial bank
organized under Montana law on October 18, 1978.
VB is subject to competition from other financial service providers. VB is also
subject to the regulations of certain government agencies and undergoes periodic
examinations by those regulatory agencies.
The accounting and consolidated financial statement reporting policies of the
Company conform with generally accepted accounting principles and prevailing
practices within the banking industry. In preparing consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported and disclosed amounts of assets and liabilities as of the date of
the statement of financial condition and income and expenses for the period.
Actual results could differ significantly from these estimates.
Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review VB's allowance for loan losses.
Such agencies may require VB to recognize additions to the allowance based on
their judgements about information available to them at the time of their
examination.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
VB. All significant intercompany balances and transactions have been eliminated
in consolidation.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are considered to be cash on hand, cash held as demand
deposits at various banks and regulatory agencies, federal funds sold and time
deposits with original maturities of three months or less.
(d) INVESTMENT SECURITIES
Debt securities for which the Company has the positive intent and ability to
hold to maturity are classified as held-to-maturity and are stated at amortized
cost. Debt and equity securities held primarily for the purpose of selling them
in the near term are classified as trading securities and are reported at fair
market value, with unrealized gains and losses included in income. Debt and
equity securities not classified as held-to-maturity or trading are classified
as available-for-sale and are reported at fair value with unrealized gains and
losses, net of income taxes, shown as a separate component of stockholders'
equity.
(e) LOANS RECEIVABLE
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at their outstanding
unpaid principal balance reduced by any chargeoffs or specific valuation
accounts and net of any deferred fees or costs on originated loans or
unamortized premiums or discounts on purchased loans. Discounts and premiums on
purchased loans and net loan fees on originated loans are amortized over the
expected life of loans using methods that approximate the interest method.
<PAGE> 94
(f) LOANS HELD FOR SALE
Mortgage loans originated and intended for sale in the secondary market are
carried at the lower of cost or estimated market value in the aggregate. Net
unrealized losses are recognized by charges to income.
(g) ALLOWANCE FOR LOAN LOSSES
Management's periodic evaluation of the adequacy of the allowance is based on
factors such as the Company's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the borrower's
ability to repay, the estimated value of any underlying collateral, current
economic conditions, and independent appraisals.
The Company also provides an allowance for losses on specific loans which are
deemed to be impaired. Groups of small balance homogeneous loans (generally
consumer and residential real estate loans) are evaluated for impairment
collectively. A loan is considered impaired when, based upon current information
and events, it is probable that the Company will be unable to collect, on a
timely basis, all principal and interest according to the contractual terms of
the loans's original agreement. When a specific loan is determined to be
impaired, the allowance for loan losses is increased through a charge to expense
for the amount of the impairment. The amount of the impairment is measured using
cash flows discounted at the loan's effective interest rate, except when it is
determined that the sole source of repayment for the loan is the operations or
liquidation of the underlying collateral. In such cases, the current value of
the collateral, reduced by anticipated selling costs, will be used in place of
discounted cash flows. Generally, when a loan is deemed impaired, current period
interest previously accrued but not collected is reversed against current period
interest income. Income on such impaired loans is then recognized only to the
extent that cash in excess of any amounts charged off to the allowance for loan
losses is received and where the future collection of principal is probable.
Interest accruals are resumed on such loans only when they are brought fully
current with respect to interest and principal and when, in the judgement of
management, the loans are estimated to be fully collectible as to both principal
and interest.
During 1997 the amount of impaired loans was not material.
(h) PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less depreciation. Depreciation is
generally computed on a straight-line method over the estimated useful lives,
which range from 3 to 40 years, of the various classes of assets from their
respective dates of acquisition.
(i) REAL ESTATE OWNED
Property acquired by foreclosure or deed in lieu of foreclosure is carried at
the lower of cost or estimated fair value, not to exceed estimated net
realizable value. Costs, excluding interest, relating to the improvement of
property are capitalized, whereas those relating to holding the property are
charged to expense. Fair value is determined as the amount that could be
reasonably expected in a current sale (other than a forced or liquidation sale)
between a willing buyer and a willing seller. If the fair value of the asset
minus the estimated cost to sell is less than the cost of the property, this
deficiency is recognized as a valuation allowance and is charged to expense.
(j) STOCK INVESTMENTS
The Company holds stock in the Federal Home Loan Bank (FHLB) with the investment
carried at the lower of cost or market value.
(k) INCOME TAXES
Deferred tax assets and liabilities are recognized for estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
<PAGE> 95
(l) EARNINGS PER SHARE
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share"
was issued in February 1997 to simplify the standard for computing earnings per
share (EPS) by replacing the presentation of primary and fully diluted EPS on
the face of the income statement for all entities with complex capital
structures. SFAS No. 128 also requires a reconciliation of the numerator and the
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. The provisions of SFAS No. 128 apply to financial
statements issued for periods ending after December 15, 1997 with restatement
required of all prior-period EPS data presented. The weighted average number of
shares outstanding at December 31, 1997 is 9,265.
(m) IMPAIRMENT AND DISPOSAL OF LONG-LIVED ASSETS
Long lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An asset is deemed impaired
if the sum of the expected future cash flow is less than the carrying amount of
the asset. If impaired, an impairment loss is recognized to reduce the carrying
value of the asset to fair value. At December 31, 1997 there were no assets that
were considered impaired.
(n) TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF
LIABILITIES SFAS No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," provides guidance on accounting for
transfers and servicing of financial assets, recognition and measurement of
servicing assets and liabilities, financial assets subject to prepayment,
secured borrowings and collateral, and extinguishment of liabilities.
SFAS No. 125 generally requires the recognition as separate assets the rights to
service mortgage loans for others, whether the servicing rights are acquired
through purchases or loan originations. SFAS No. 125 also specifies that
financial assets subject to prepayment, including loans that can be
contractually prepaid or otherwise settled in such a way that the holder would
not recover substantially all of its recorded investment be measured like debt
securities available-for-sale under SFAS No. 115, as amended by SFAS No. 125.
SFAS No. 125 was adopted by the Company January 1, 1997 and did not have a
material impact on the Company's financial position or results of operations.
(o) FUTURE ACCOUNTING PRONOUNCEMENTS
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued and is
effective January 1, 1998, with all prior periods presented. SFAS No. 130
establishes standards for the reporting and display of comprehensive income and
its components in a full set of financial statements. All items required to be
recognized under accounting standards as components of comprehensive income are
to be reported in a financial statement that is displayed as prominently as
other financial statements. SFAS No. 130 also requires the classification of
items of other comprehensive income by their nature in a financial statement and
the display of other comprehensive income separately from retained earnings and
paid-in capital in the stockholders' equity section of the statement of
financial condition. The Company's only significant elements of comprehensive
income is the unrealized gains and losses on available-for-sale securities.
<PAGE> 96
2. CASH ON HAND AND IN BANKS:
Valley Bank is required to maintain an average reserve balance with the Federal
Reserve Bank, or maintain such reserve in the form of cash on hand. The amount
of this required reserve balance was approximately $410,000 at December 31,
1997, and was met by maintaining cash on hand and an average reserve balance
with the Federal Reserve Bank in excess of this amount.
<PAGE> 97
3. INVESTMENT SECURITIES:
A comparison of the amortized cost and estimated fair value of the Company's
investment securities is as follows at:
<TABLE>
<CAPTION>
Gross Unrealized Estimated
DECEMBER 31, 1997 Amortized --------------------- Fair
(dollars in thousands) Costs Gains Losses Value
--------- ------- -------- ---------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
----------------
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing within one year................. $ 305 9 0 314
maturing one year through five years..... 4,041 160 0 4,201
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year................. 50 0 0 50
maturing one year through five years..... 394 6 (1) 399
maturing five years through ten years.... 249 0 0 249
------ ---- ---- -----
TOTAL HELD-TO-MATURITY SECURITIES $5,039 175 (1) 5,213
====== ==== ==== =====
AVAILABLE-FOR-SALE
------------------
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing within one year................. $1,246 0 (11) 1,235
maturing one year through five years..... 2,503 0 (15) 2,488
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year................. 260 1 (2) 259
maturing one year through five years..... 100 3 0 103
maturing five years through ten years.... 1,021 31 (3) 1,049
maturing after ten years................. 104 0 (1) 103
MORTGAGE-BACKED SECURITIES................. 310 11 (2) 319
REAL ESTATE MORTGAGE INVESTMENT CONDUITS... 665 3 (4) 664
------ ---- ---- -----
TOTAL AVAILABLE-FOR-SALE SECURITIES $6,209 49 (38) 6,220
====== ==== ==== =====
</TABLE>
Maturities of securities do no reflect repricing opportunities present in many
adjustable rate securities, nor do they reflect expected shorter maturities
based upon early prepayment of principal.
The Company has not entered into any swaps, options or future contracts.
Included in the U.S. Government and Federal Agencies securities amounts are
investments in structured notes which have contractual step-up interest rates
and call features.
There were no sales of investment securities during 1997.
At December 31, 1997, the Company had investment securities with book values of
approximately $10,886,000 pledged as security for deposits of local government
units, securities sold under agreements to repurchase, and as collateral for the
U.S. Treasury tax account.
The Real Estate Mortgage Investment Conduits consist of six certificates which
are backed by the FNMA, FHLB or FHLMC.
<PAGE> 98
4. LOANS RECEIVABLE:
The following is a summary of loans receivable at:
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- ----------------------------------------------------------------------------------- ------------
<S> <C>
REAL ESTATE LOANS AND CONTRACTS:
Residential first mortgage loans ............................................. $ 6,809
Construction ................................................................. 1,107
Loans held for sale .......................................................... 1,051
--------
8,967
COMMERCIAL LOANS:
Real estate .................................................................. 9,156
Other commercial loans ....................................................... 12,430
--------
21,586
INSTALLMENT AND OTHER LOANS:
Consumer loans ............................................................... 14,934
Home equity loans ............................................................ 865
--------
15,799
LESS:
Allowance for losses ......................................................... (483)
--------
$ 45,869
========
SUMMARY OF ACTIVITY IN ALLOWANCE FOR LOSSES ON LOANS:
Year Ended
December 31,
- ----------------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- ----------------------------------------------------------------------------------- ------------
Balance, beginning of period .................................................. $ 431
Net charge offs ............................................................... (8)
Provision ..................................................................... 60
--------
Balance, end of period ........................................................ $ 483
========
</TABLE>
Approximately 95 percent of the Company's loans have been granted to customers
in the Company's market area.
The weighted average interest rate on loans was 9.48% at December 31, 1997
THE COMPANY HAD OUTSTANDING COMMITMENTS AS FOLLOWS:
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- ----------------------------------------------------------------------------------- ------------
<S> <C>
Letters of credit.............................................................. $ 425
loans and loans in process .................................................... 6,785
Unused consumer lines of credit ............................................... 771
--------
$ 7,981
========
</TABLE>
The Company is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
Those financial instruments include commitments to extend credit, and letters of
credit, and involve, to varying degrees, elements of credit risk.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend letters of
credit is represented by the contractual amount of these instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.
<PAGE> 99
<TABLE>
<CAPTION>
December 31,
------------
LOANS SOLD TO OTHERS AND SERVICED BY THE COMPANY (THOUSANDS) 1997
------------
<S> <C>
$ 8,198
==========
ACCRUED INTEREST RECEIVABLE:
December 31,
- ---------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- ---------------------------------------------------------------------------- ------------
Investment securities ................................................ $ 150
Loans receivable ..................................................... $ 325
----------
$ 475
==========
</TABLE>
LOANS TO OFFICERS AND DIRECTORS:
The Company has entered into transactions with its directors, significant
shareholders and their affiliates (related parties). The aggregate amount of
loans to such related parties at December 31, 1997 was $1,495,165. During 1997,
new loans to such related parties amounted to $704,809 and repayments were
$780,204.
<PAGE> 100
5. PREMISES AND EQUIPMENT:
Office properties and equipment consist of the following at:
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------- ------------
(dollars in thousands) 1997
- -------------------------------------------------------------- ------------
<S> <C>
Land ......................................................... $ 452
Office buildings and construction in progress ................ 1,496
Furniture, fixtures and equipment ............................ 726
Accumulated depreciation ..................................... (813)
--------
$ 1,861
========
</TABLE>
<PAGE> 101
6. DEPOSITS:
<TABLE>
<CAPTION>
December 31,
-------------
1997
----------------------------------
- --------------------------------------------------------------------------- Weighted
(dollars in thousands) Average Rate Amount
- --------------------------------------------------------------------------- ------------ --------------
<S> <C> <C>
Demand accounts ........................................................... 0.0% $ 9,996
-----------
Interest bearing demand accounts .......................................... 1.5% 8,686
Savings accounts .......................................................... 3.3% 8,896
Money market demand accounts .............................................. 4.3% 8,929
Certificate accounts:
4.01% to 5.00% ....................................................... 890
5.01% to 6.00% ....................................................... 10,113
6.01% to 7.00% ....................................................... 2,548
7.01% to 8.00% ....................................................... 6,155
-----------
Total certificate accounts .................................... 6.2% 19,706
-----------
Total interest bearing deposits ........................................... 4.8% 46,217
-----------
Total deposits ............................................................ 3.4% $ 56,213
===========
Deposits with a balance in excess of $100,000 ............................. $16,439,000
</TABLE>
Deposits in excess of $100,000 include a certificate of deposit in the amount of
$6,155,000. This certificate pays interest at 7.05% through February 28, 2000.
Principal payments are due annually as follows: 1998 -- $305,000, 1999 --
$325,000, 2000 -- $5,525,000.
At December 31, 1997, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
Years ending December 31,
- ---------------------- ----- -----------------------------------------------------------------------
(dollars in thousands) Total 1998 1999 2000 2001 Thereafter
- ---------------------- ----- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
4.01% to 5.00% ....... $ 890 890 0 0 0 0
5.01% to 6.00% ....... 10,113 7,911 2,055 147 0 0
6.01% to 7.00% ....... 2,548 827 216 1,505 0 0
7.01% to 8.00% ....... 6,155 305 325 5,525 0 0
------- ----- ----- ----- --- ---
$19,706 9,933 2,596 7,177 0 0
======= ===== ===== ===== === ===
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
Year ended
- -------------------------------------------- December 31,
(dollars in thousands) 1997
- -------------------------------------------- -------------
<S> <C>
Interest bearing demand accounts............ $ 124
Money market demand accounts ............... 316
Certificate accounts ....................... 1,168
Savings accounts ........................... 311
------
$1,919
======
</TABLE>
<PAGE> 102
7. ADVANCES FROM FEDERAL HOME LOAN BANK OF SEATTLE:
Advances from the Federal Home Loan Bank of Seattle consist of the following at
December 31, 1997:
<TABLE>
<CAPTION>
Maturing in years ending December 31,
- ------------------------------- -----------------------------------------------------------------------------------
(dollars in thousands) Total 1998 1999 2000 2001 2002 2003-2010
- ------------------------------- ----- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
5.01% to 6.00%................. $1,607 194 194 491 622 66 40
6.01% to 7.00% ................ 505 40 40 40 40 40 305
7.01% to 8.00% ................ 491 40 40 240 40 40 91
------ --- --- --- --- --- ---
$2,603 274 274 771 702 146 436
====== === === === === === ===
</TABLE>
These advances were collateralized by the Federal Home Loan Bank of Seattle
stock held by the Company, and qualifying real estate loans and investments
totaling approximately $5,449,000.
The weighted average interest rate on these advances at December 31, 1997 was
6.29%.
<PAGE> 103
8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE AND OTHER BORROWED FUNDS:
<TABLE>
<CAPTION>
Securities sold under agreements to repurchase consist Book Market
of the following at: Weighted value of value of
- --------------------------------------------- Repurchase average underlying underlying
(dollars in thousands) amount rate paid assets assets
- --------------------------------------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1997:
Securities sold under agreements to
repurchase within:
1-30 days .......................... $ 2,418 4.79% 3,513 3,491
======= ==== ====== =====
</TABLE>
The securities underlying agreements to repurchase entered into by the Company
are for the same securities originally sold, and are held in a custody account
by a third party. For the year ended December 31, 1997 securities sold under
agreements to repurchase averaged approximately $2,600,000 and the maximum
outstanding at any month end during the year was approximately $3,992,000.
<PAGE> 104
9. STOCKHOLDERS' EQUITY:
The Federal Reserve Board has adopted capital adequacy guidelines pursuant to
which it assesses the adequacy of capital in supervising a bank holding company.
The following table illustrates the Federal Reserve Board's capital adequacy
guidelines and the subsidiary bank's compliance with those guidelines as of
December 31, 1997.
<TABLE>
<CAPTION>
Tier I (Core) Capital Tier II (Total) Capital Leverage Capital
- -------------------------------------------------- --------------------- ----------------------- ------------------
(dollars in thousands) $ % $ % $ %
- -------------------------------------------------- ------ ------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital ..................................... $ 5,909 $ 5,909 $ 5,909
Net unrealized gains on securities
available-for-sale .......................... (6) (6) (6)
General loan valuation allowance ................. -- 483 --
-------- -------- --------
Regulatory capital computed ...................... $ 5,903 $ 6,386 $ 5,903
======== ======== ========
Risk weighted assets ............................. $ 45,437 $ 45,437
======== ========
Total assets ..................................... $68,109
=======
Regulatory capital as % of assets ................ 12.99% 14.05% 8.67%
Regulatory "well capitalized" requirement ........ 6.00% 10.00% 5.00%
------ ------- ------
Excess over "well capitalized" requirement ....... 6.99% 4.05% 3.67%
====== ======= ======
</TABLE>
The primary source of revenue for the Company is dividends from VB. The Federal
Deposit Insurance Corporation Improvement Act generally restricts a depository
institution from making any capital distribution (including payment of a
dividend) or paying any management fee to its holding company if the depository
institution would thereafter be capitalized at less than 8% of total risk-based
capital, 4% of Tier I capital, or a 4% leverage ratio. At December 31, 1997,
VB's capital measures exceed the "well capitalized" supervisory threshold, which
requires total Tier II capital of at least 10%, Tier I capital of at least 6%,
and a leverage ratio of at least 5%.
State banks may pay dividends up to the total of the prior two years earnings
without permission of the state regulator. The amount available for dividend
distribution by VB as of December 31, 1997 was approximately $1,288,000.
The Company's shareholders have entered into a buy-sell agreement which (1)
grants the Company and the Company shareholders a first right of refusal to
purchase shares of a disposing shareholder's stock at the price offered by the
third-party purchaser and (2) allows the shareholders to request the Company and
the remaining shareholders to purchase the stock of the requesting shareholder
at a negotiated value in the absence of a third-party offer. The request may be
denied by the Company or the shareholders at their sole discretion. The
obligation of the Company to purchase the stock is subject to regulatory
approval. Similar provisions exist with respect to Company shares held in the
estate of a deceased shareholder.
<PAGE> 105
10. FEDERAL AND STATE INCOME TAXES:
<TABLE>
<CAPTION>
The following is a summary of consolidated income tax expense for: Year ended
December 31,
- -------------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- -------------------------------------------------------------------------------- ------------
<S> <C>
Current:
Federal ................................................................... $ 484
State ..................................................................... 110
----
Total current tax expense ........................................... 594
----
Deferred:
Federal ................................................................... (4)
State ..................................................................... (1)
----
Total deferred tax benefit .......................................... (5)
----
Total income tax expense ................................. $ 589
======
</TABLE>
Federal and state income tax expense differs from that computed at the statutory
corporate tax rate as follows for:
<TABLE>
<CAPTION>
December 31,
------------
1997
------------
<S> <C>
Federal statutory rate ......................................................... 34.0%
State taxes, net of federal income tax benefit ................................. 4.5%
Other, net ..................................................................... 1.8%
----
40.3%
====
</TABLE>
The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets and deferred tax liabilities are as follows at:
<TABLE>
<CAPTION>
December 31,
- -------------------------------------------------------------------------------- ------------
(dollars in thousands) 1997
- -------------------------------------------------------------------------------- ------------
<S> <C>
Deferred tax assets:
Allowance for losses on loans ............................................... $ 118
Other ....................................................................... 35
----
Total gross deferred tax assets ...................................... 153
----
Deferred tax liabilities:
Fixed assets, due to differences in depreciation ............................ (89)
Federal Home Loan Bank stock dividends ...................................... (18)
Available-for-sale securities fair value adjustment ......................... (4)
Other ....................................................................... 0
----
Total gross deferred tax liabilities ................................ (111)
----
Net deferred tax asset .............................................. $ 42
=====
</TABLE>
There was no valuation allowance at December 31, 1997 because management
believes that it is more likely than not that the Company's deferred tax assets
will be realized by offsetting future taxable income from reversing taxable
temporary differences and anticipated future taxable income.
<PAGE> 106
11. EMPLOYEE BENEFIT PLANS:
The Company has an employees' savings plan. The plan allows eligible employees
to contribute up to 4% of their salaries. The Company matches an amount equal to
50% of the employees contribution, up to 4% of the employees total pay.
Participants are at all times fully vested in all contributions. The Company's
contribution to the savings plan for the year ended December 31, 1997 was
approximately $16,000.
The Company also has a noncontributory profit sharing plan with the contribution
amount for each employee determined on a sliding scale based on the banks return
on assets as compared to the return on assets of all banks in Montana.
Contributions under this plan vest over a five year period. The Company's
contribution to this plan in 1997 was approximately $46,000.
The Company has entered into employment contracts with three senior officers
that provide benefits under certain conditions following a change in control of
the Company.
<PAGE> 107
12. NON-INTEREST EXPENSES IN EXCESS OF 1% OF TOTAL INCOME:
Included in other expenses are advertising expenses of $106,000, expenses for
contract services of $74,000, postage expenses of $71,000, and expenses for
Federal Reserve processing of $69,000.
<PAGE> 108
13. NOTES PAYABLE:
During 1997 the Company obtained a loan from the Flint Creek Valley Bank in the
amount of $222,520, the proceeds of which were used to payoff a contract for the
purchase of treasury stock and to purchase land for a potential future bank
site. The note is unsecured and bears interest at 9% per annum, payable
quarterly. Principal payments are due quarterly with aggregate payments by year
as follows: 1998 -- $30,000, 1999 -- $60,000, 2000 -- $60,000, 2001 -- $65,577.
<PAGE> 109
14. PARENT COMPANY INFORMATION (CONDENSED):
The following condensed financial information is the unconsolidated (Parent
Company Only) information for Hub Financial Corporation:
<TABLE>
<CAPTION>
STATEMENT OF FINANCIAL CONDITION December 31,
- ------------------------------------------------------------ ---------------
(dollars in thousands) 1997
- ------------------------------------------------------------ ---------------
<S> <C>
ASSETS:
Cash and cash equivalents .................................. $ 13
Other assets ............................................... 262
Investment in subsidiary ................................... 5,110
-------
$ 5,385
=======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable .............................................. $ 216
Other liabilities .......................................... 3
Common stock ............................................... 540
Additional paid-in capital ................................. 200
Retained earnings .......................................... 4,701
Treasury stock at cost, 703 shares ......................... (281)
Net unrealized gains on securities available-for-sale ...... 6
-------
Total stockholders' equity ........................ 5,166
-------
$ 5,385
=======
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS December 31,
- ------------------------------------------------------------ ---------------
(dollars in thousands) 1997
- ------------------------------------------------------------ ---------------
<S> <C>
REVENUES
Dividends from subsidiary .................................. $ 304
Other income ............................................... 0
-------
Total revenues ........................................ 304
-------
EXPENSES
Interest expense ........................................... 21
Other operating expenses ................................... 24
-------
Total expenses ........................................ 45
-------
Income before income tax benefit and equity in undistributed
income of subsidiary ................................. 259
Income tax benefit ......................................... (25)
-------
Income before equity in undistributed income
of subsidiary ........................................ 284
Equity in undistributed income of subsidiary ............... 590
-------
NET INCOME ................................................. $ 874
=======
</TABLE>
<PAGE> 110
<TABLE>
<CAPTION>
Year ended
STATEMENT OF CASH FLOWS December 31,
- ------------------------------------------------------------ ------------
(dollars in thousands) 1997
- ------------------------------------------------------------ ------------
<S> <C>
OPERATING ACTIVITIES
Net income ............................................... $ 874
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Undistributed earnings of subsidiary ..................... (590)
Net increase in other assets ............................. (30)
Net decrease in other liabilities ........................ (3)
-------
Net cash provided by operating activities ... .............. 251
-------
INVESTING ACTIVITIES
Payment for land purchase ................................ (160)
Purchase of minority shares of subsidiary ................ (1)
-------
Net cash used by investing activities ...................... (161)
-------
FINANCING ACTIVITIES
Cash dividends paid to stockholders ...................... (223)
Principal reductions on bank loan ........................ (82)
Proceeds from new bank loan .............................. 222
-------
Net cash used by financing activities ...................... (83)
-------
Net increase in cash and cash equivalents .................. 7
Cash and cash equivalents at beginning of period ........... 6
-------
Cash and cash equivalents at end of period ................. $ 13
=======
</TABLE>
<PAGE> 111
15. FAIR VALUE OF FINANCIAL INSTRUMENTS.
Financial instruments has been defined to generally mean cash or a contract that
implies an obligation to deliver cash or another financial instrument to another
entity. For purposes of the Company's Consolidated Statement of Financial
Condition, this includes the following items:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------
(dollars in thousands) Amount Fair Value
---------------------- ------ ----------
<S> <C> <C>
FINANCIAL ASSETS:
Cash on hand and in banks .................................... $ 3,261 3,261
Federal funds sold ........................................... 3,860 3,860
Interest bearing deposits .................................... 595 595
Investment securities ........................................ 11,259 11,433
Loans ........................................................ 45,869 45,622
Federal Home Loan Bank of Seattle stock ...................... 626 626
FINANCIAL LIABILITIES:
Deposits ..................................................... $56,213 56,250
Advances from the Federal Home Loan Bank ..................... 2,603 2,635
Repurchase agreements and notes payable ...................... 2,634 2,634
</TABLE>
Financial assets and financial liabilities other than investment securities are
not traded in active markets. The above estimates of fair value require
subjective judgments and are approximate. Changes in the following methodologies
and assumptions could significantly affect the estimates. These estimates may
also vary significantly from the amounts that could be realized in actual
transactions.
Financial Assets -- The estimated fair value approximates the book value of cash
on hand and in banks, and federal funds sold. For investment securities, the
fair value is based on quoted market prices. The fair value of loans is
estimated by discounting future cash flows using current rates at which similar
loans would be made, and appropriate prepayment assumptions. The fair value of
FHLB stock approximates the book value.
Financial Liabilities -- The estimated fair value of demand and savings deposits
approximates the book value since rates are periodically adjusted to market
rates. Certificates of deposit fair value is estimated by discounting the future
cash flows using current rates for similar deposits. Advances from the FHLB of
Seattle fair value is estimated by discounting future cash flows using current
rates for advances with similar weighted average maturities. Repurchase
agreements have variable interest rates, or are short term, so fair value
approximates book value. The note payable is at the current market interest rate
so fair value approximates book value.
Off-balance sheet financial instruments -- Commitments to extend credit and
letters of credit represent the principal categories of off-balance sheet
financial instruments. Rates for these commitments are set at time of loan
closing, so no adjustment is necessary to reflect these commitments at market
value. See Note 4 to consolidated financial statements.
<PAGE> 112
16. AGREEMENT TO MERGE
On December 30, 1997, the Company entered into a definitive agreement to merge
with Glacier Bancorp, Inc. (Glacier). Upon completion of the merger VB will
operate as an independent, wholly owned subsidiary of Glacier. Because the
Company does not own 100% of the outstanding shares of VB common stock, the
acquisition will be accomplished through two transactions: the merger with the
Company and a share exchange with VB minority shareholders. The total purchase
price that Glacier will pay for the acquisition, (both the merger and share
exchange) is 620,000 shares of Glacier common stock, subject to adjustment for
those shareholders that have perfected their dissenters rights. While it is
anticipated that the acquisition will be completed in 1998, it is subject to
certain conditions, including the approval of the shareholders of the Company
and VB. The merger is considered a change of control under the provisions of the
employment contracts.
<PAGE> 113
Appendix A
================================================================================
PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
HUB FINANCIAL CORPORATION
================================================================================
Dated as of December 30, 1997
<PAGE> 114
TABLE OF CONTENTS
EXHIBITS and SCHEDULES:
<TABLE>
<CAPTION>
EXHIBIT A Form Affiliate Letter Page
<S> <C>
SCHEDULE 1 Exceptions to Representations
SCHEDULE 2 Offices
SCHEDULE 3 Subsidiaries
SCHEDULE 4 Glacier Stock Plans
SCHEDULE 5 Material Contracts
SCHEDULE 6 HUB's Required Third Party Consents
SCHEDULE 7 HUB's Asset Classification List
SCHEDULE 8 HUB's Investments
SCHEDULE 9 HUB's Property Encumbrances
SCHEDULE 10 HUB's and the Bank's Offices and Branches
SCHEDULE 11 HUB's Compliance with Laws
SCHEDULE 12 HUB's Litigation Disclosure
SCHEDULE 13 HUB's and The Bank's Insurance Policies
SCHEDULE 14 HUB's Employee Benefit Plans
</TABLE>
i
<PAGE> 115
INDEX OF DEFINITIONS
<TABLE>
<CAPTION>
TERMS SECTION
<S> <C>
Agreement Intro. Paragraph
ASR 4.3.2
Asset Classification 3.2.4
Bank Recital A
Bank Common Stock 3.1.3((b))((7))
BHCA Recital A
Closing 1.2.1
Columbia Recital I
Compensation Plans 3.2.13((b))
Continuing Corporation Recital B.1
Continuing Corporation Common Stock Recital B.2
Continuing Employees 6.4
Contracts 3.2.3((b))
D. A. Davidson Recital I
Dissenting Shares 1.4
Effective Date 2.1
Employees 3.2.13((b))
Environmental Laws 3.2.14((a))((2))
ERISA 3.2.13((a))
ERISA Affiliate 3.2.13((d))
Exchange Act 3.1.5((b))
Exchange Agent 1.3.6((a))
Exchange Ratio 1.3.2
</TABLE>
ii
<PAGE> 116
<TABLE>
<CAPTION>
TERMS SECTION (CAPS)
<S> <C>
Executive Officer 3.1.8
FDIA 3.1.2((b))
FDIC 3.1.2((b))
Federal Reserve Board Recital D.3
Financial Statements 3.1.5((d))((1))
GAAP 3.1.5((d))
Glacier Intro. Paragraph
Glacier Common Stock 3.1.3((a))((1))
Glacier Financial Statements 3.1.5((d))((2))
Glacier Preferred Stock 3.1.3((a))((1))
Glacier Shares 1.3.2
Glacier Stock Plans 3.1.3((a))((2))
Governmental Entity 3.2.3((a))
Hazardous Substances 3.2.14((a))((3))
HOLA Recital A
HUB Intro. Paragraph
HUB Common Stock 3.1.3((b))((1))
HUB Financial Statements 3.1.5((d))((4))
IRC Recital J
Liens 3.1.3((a))((5))
Material Adverse Effect 3.1.6
Merger Recital B
Pension Plan 3.2.13((c))
Plan/Plans 3.2.13((a))
</TABLE>
iii
<PAGE> 117
<TABLE>
<CAPTION>
TERMS SECTION (CAPS)
<S> <C>
Plan of Exchange Recital G
Property 4.1.10
Prospectus/Proxy Statement 4.2.1((a))
Purchase Price 1.3.1
Registration Statement 4.2.1((a))
Regulatory Approvals Recital D.3
Reports 3.1.5((b))
SEC 3.1.5((a))
Securities Act 3.1.5((b))
Securities Laws 3.1.5((b))
Stock Option Agreement Recital H
Subject Property 3.2.14((a))((1))
Subsequent Glacier Financial Statements 3.1.5((d))((3))
Subsequent HUB Financial Statements 3.1.5((d))((5))
Subsidiary/Subsidiaries 3.1.2((a))
Tangible Equity Capital 5.2.3
Tax 3.2.10
Termination Date 2.1
Transaction 1.1
Transaction Fees 1.3.3
WBCA 1.2
</TABLE>
iv
<PAGE> 118
PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
HUB FINANCIAL CORPORATION
This Plan and Agreement of Merger ("Agreement"), dated as of December
30, 1997, is between GLACIER BANCORP, INC. ("Glacier"), a Delaware corporation
and HUB FINANCIAL CORPORATION ("HUB"), a Montana corporation.
PREAMBLE
Glacier's and HUB's management and boards of directors believe,
respectively, that the merger of HUB with and into Glacier, on the terms and
conditions set forth in this Agreement, is in the best interests of Glacier's
and HUB's stockholders.
RECITALS
A. THE PARTIES. Glacier is a corporation duly organized and validly
existing under Delaware law and is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended ("BHCA"), and a
savings and loan holding company within the meaning of the Home Owner's
Loan Act, as amended ("HOLA"). Glacier's principal office is located in
Kalispell, Montana. Glacier owns (1) all of the outstanding common stock
of Glacier Bank, F.S.B. and First Security Bank of Missoula, (2) 93% of
the outstanding common stock of Glacier National Bank of Whitefish, and
(3) 93% of the outstanding common stock of First National Bank of
Eureka. HUB is a corporation duly organized and validly existing under
Montana law and is a registered bank holding company under the BHCA.
HUB's principal office is located in Helena, Montana. HUB owns
approximately 86.5% of the outstanding shares of common stock of Valley
Bank of Helena ("Bank"), a Montana state-chartered commercial bank.
B. THE MERGER. On the Effective Date, the following will occur:
1. HUB will merge with and into Glacier ("Merger"), and Glacier
will be the surviving corporation under the name Glacier
Bancorp, Inc. ("Continuing Corporation"). The Bank will become a
separate direct subsidiary of Glacier.
2. Except as otherwise provided in this Agreement, the outstanding
shares of HUB Common Stock will be converted into common stock
shares of the Continuing Corporation ("Continuing Corporation
Common Stock").
C. BOARD APPROVALS. Glacier's and HUB's respective boards of directors have
approved this Agreement and authorized its execution and delivery.
D. OTHER APPROVALS. The Merger is subject to:
1. satisfaction of the conditions described in this Agreement;
2. approval by HUB's stockholders; and
2
<PAGE> 119
3. approval or acquiescence, as appropriate, by (a) the
Board of Governors of the Federal Reserve System
("Federal Reserve Board") and (b) the State of Montana
(collectively, "Regulatory Approvals").
E. EMPLOYMENT AGREEMENT. The Bank has entered into an employment agreement,
effective as of the Effective Date, with Fred J. Flanders, the Bank's
President and CEO.
F. DIRECTOR NONCOMPETITION AGREEMENT. Each Director of HUB's and the Bank's
boards of directors has signed a Director Noncompetition Agreement.
These noncompetition agreements will take effect on the Effective Date.
G. PLAN OF EXCHANGE. Glacier and the Bank have entered into an Agreement
and Plan of Share Exchange ("Plan of Exchange") providing for the
exchange of Bank Common Stock shares owned by the Bank's minority
shareholders for Glacier Common Stock shares. This exchange will take
place immediately following Closing.
H. STOCK OPTION AGREEMENT. As an inducement to and condition of Glacier's
execution of this Agreement, HUB has approved the grant of an option to
Glacier under the Stock Option Agreement, as provided in Subsection 1.8.
I. FAIRNESS OPINIONS. HUB has received from Columbia Financial Advisors,
Inc. ("Columbia") and delivered to Glacier an opinion to the effect that
the financial terms of the Transaction are financially fair to HUB's
stockholders. As a condition to Closing of the Transaction, Columbia
will update this fairness opinion immediately before HUB mails the
Prospectus/Proxy Statement to its stockholders and immediately before
Closing. Glacier has received from D.A. Davidson & Co. ("D.A. Davidson")
an opinion to the effect that the financial terms of the Transaction are
financially fair to Glacier's stockholders.
J. INTENTION OF THE PARTIES--ACCOUNTING AND TAX TREATMENT. The parties
intend the Merger to qualify, for accounting purposes, as a "pooling of
interests." The parties intend the Merger to qualify, for federal
income tax purposes, as a tax-free reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended ("IRC").
AGREEMENT
Glacier and HUB agree as follows:
SECTION 1
TERMS OF TRANSACTION
1.1 TRANSACTION. Under and subject to this Agreement and the other
documents referred to in this Agreement, HUB will merge with and into
transaction contemplated by this Agreement, subject to any modifications
Glacier elects in accordance with Subsection 1.5.
1.2 MERGER. On the Effective Date, HUB will merge with and into Glacier,
with Glacier being the surviving corporation, in accordance with the
provisions of, and with the effect provided in the Montana Business
Corporation Act ("MBCA"), Part 8, Sections 35-1-813, et. seq. and Del.
Corp. Stat., Title 8, Subchapter 9. On the Effective Date, the
certificate of incorporation and bylaws of the Continuing Corporation
will be Glacier's Certificate of Incorporation and Bylaws as in effect
immediately before the Effective Date. The Continuing Corporation's name
will be "Glacier
3
<PAGE> 120
Bancorp, Inc.," and the Continuing Corporation's principal office will
be Glacier's principal office. Except as otherwise provided in
Subsections 5.3.11 and 6.2, on the Effective Date, Glacier's directors
and Glacier's officers will become the directors and officers of the
Continuing Corporation. On the Effective Date, Glacier's shares then
issued and outstanding will become issued and outstanding shares of the
Continuing Corporation. HUB's stockholders (other than holders of
Dissenting Shares) on the Effective Date will become stockholders of the
Continuing Corporation by virtue of the Merger.
1.2.1 CLOSING. Closing of the Transaction ("Closing") will take place
in accordance with Section 2. All shares, other than Dissenting
Shares, of HUB Common Stock issued and outstanding immediately
before Closing will be converted at Closing into shares of
Continuing Corporation Common Stock in accordance with
Subsection 1.3, by virtue of the Merger.
1.2.2 THE BANK. By virtue of the Merger, the Bank will become the
Continuing Corporation's subsidiary. On the Effective Date, the
Bank's board of directors will be all directors who are the
Bank's directors immediately before the Merger plus two
additional Glacier directors designated by Glacier and
reasonably acceptable to HUB. These directors will serve on the
Bank's board of directors until the next annual meeting of the
Bank's stockholders or until their successors have been elected
and qualified. Nothing in this Agreement is intended to restrict
in any way any rights of the Bank's stockholders and directors
at any time after the Effective Date to nominate, elect, select,
or remove the Bank's directors.
1.2.3 EFFECT ON GLACIER COMMON STOCK. Glacier Common Stock shares
issued and outstanding immediately before the Effective Date
will remain outstanding and unchanged after the Merger.
1.3 CONSIDERATION.
1.3.1 PURCHASE PRICE. Except as otherwise provided in Subsection 1.4
and Subject to Subsection 1.3.3, the aggregate consideration
HUB's stockholders will be entitled to receive from Glacier in
connection with the Transaction ("Purchase Price") will be the
number of Glacier Common Stock shares (rounded to the nearest
whole number, rounding down if the first decimal is four or less
and rounding up if the first decimal if five or more) determined
by multiplying 620,000 by HUB's fractional ownership of the Bank
at Closing. HUB's fractional ownership of the Bank at Closing
will be determined by dividing the number of Bank Common Stock
shares owned by HUB on the Effective Date by the number of Bank
Common Stock shares outstanding on the Effective Date and
rounding the quotient to two decimals (rounding down if the
third decimal is four or less and rounding up if the third
decimal is five or more).
1.3.2 EXCHANGE RATIO. Subject to the conditions and limitations in
this Agreement, holders of HUB Common Stock will receive shares
of Continuing Corporation Common Stock in exchange for their HUB
Common Stock shares. The number of Continuing Corporation Common
Stock shares each holder will receive in exchange for each HUB
Common Stock share she holds of record on the Effective Date
will be determined according to a ratio ("Exchange Ratio")
computed as follows: In exchange for each share of HUB Common
Stock held of record on the Effective Date, the holder will
receive that number (rounded to 2 decimals, rounding down if the
third decimal is four or less or up if it is five
4
<PAGE> 121
or more) of shares of Continuing Corporation Common Stock
calculated by dividing the Purchase Price (as it may be adjusted
under this Agreement) by the aggregate number of shares of HUB
Common Stock that on the Effective Date are issued and
outstanding. The shares of Continuing Corporation Common Stock
to be issued to HUB Stockholders under this Agreement in
connection with the Transaction are referred to as the "Glacier
Shares."
1.3.3 HUB EXPENSE LIMITATION. If HUB's Transaction Fees exceed
$100,000, then before the Exchange Ratio is calculated, the
Purchase Price will be reduced by the number of Glacier Common
Stock shares equal in value to the excess. For purposes of
determining this reduction in the Purchase Price, Glacier Common
Stock shares will be valued at $21 per share. "Transaction Fees"
means all costs and expenses incurred by HUB or owed or paid by
HUB to third parties in connection with the preparation,
negotiation and execution of this Agreement, the Plan of
Exchange, and all related documents and the consummation of the
Transaction, including expenses incurred by HUB in connection
with obtaining approvals for the Transaction from regulators and
stockholders, expenses related to the audits of the HUB
Financial Statements required under this Agreement, not
including exercise of options.
1.3.4 CHANGE IN EQUITY CAPITAL. If, after the date of this Agreement
but before the Effective Date, Glacier's or HUB's Common Stock
issued and outstanding increases or decreases in number or is
changed into or exchanged for a different kind or number of
securities, through a recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
change in capitalization (not including increases in number due
to issuances of shares upon exercise of any outstanding options
to purchase Glacier Common Stock shares) of Glacier or HUB, as
the case may be, then, as appropriate, the parties will make the
proportionate adjustment to the Purchase Price.
1.3.5 NO FRACTIONAL SHARES. The Continuing Corporation will not issue
fractional shares of Continuing Corporation Common Stock. In
lieu of fractional shares, if any, each stockholder of HUB who
is otherwise entitled to receive a fractional share of
Continuing Corporation Common Stock will receive an amount of
cash equal to the product of such fraction times $21. Such
fractional share interest will not include the right to vote or
receive dividends or any interest on dividends.
1.3.6 CERTIFICATES.
(a) Surrender of Certificates. Each certificate evidencing
HUB Common Stock shares (other than Dissenting Shares)
will, on and after the Effective Date, be deemed for all
corporate purposes to represent and evidence only the
right to receive a certificate representing the Glacier
Shares (or to receive the cash for fractional shares) to
which the HUB Common Stock shares converted in
accordance with the provisions of this Subsection 1.3.
Following the Effective Date, HUB stockholders may
exchange HUB Common Stock certificates by surrendering
them to the agent ("Exchange Agent") designated by
Glacier and HUB to effect the exchange of HUB Common
Stock certificates for certificates representing Glacier
Shares (or for cash in lieu of fractional shares), in
accordance with any instructions provided by the
Exchange Agent and together with a properly completed
and executed form of transmittal letter. Until a
holder's certificate evidencing HUB Common Stock is so
surrendered, the holder
5
<PAGE> 122
will not have any right to receive any certificates
evidencing Glacier Shares or cash in lieu of fractional
shares.
(b) Issuance of Certificates in Other Names. Any person
requesting that any certificate evidencing Glacier
Shares be issued in a name other than the name in which
the surrendered HUB Common Stock certificate is
registered, must: (1) establish to the Exchange Agent's
satisfaction the right to receive the certificate
evidencing Glacier Shares and (2) either pay to the
Exchange Agent any applicable transfer or other taxes or
establish to the Exchange Agent's satisfaction that all
applicable taxes have been paid or are not required.
(c) Lost, Stolen, and Destroyed Certificates. The Exchange
Agent will be authorized to issue a certificate
representing Glacier Shares in exchange for a HUB Common
Stock certificate that has been lost, stolen or
destroyed, if the holder provides the Exchange Agent
with: (1) satisfactory evidence that the holder owns HUB
Common Stock and that the certificate representing this
ownership is lost, stolen, or destroyed, (2) any
appropriate affidavit the Exchange Agent may reasonably
require, and (3) any indemnification assurances that the
Exchange Agent may reasonably require.
(d) Rights to Dividends and Distributions. No holder of a
certificate evidencing HUB Common Stock shares will be
entitled to receive any dividends or other distributions
otherwise payable to holders of record of Glacier Common
Stock on any date after the Effective Date, unless the
holder (1) is entitled by this Agreement to receive a
certificate representing Glacier Shares and (2) has
surrendered in accordance with this Agreement her HUB
Common Stock certificates (or has met the requirements
of 1.3(c) above) in exchange for certificates
representing Glacier Shares. Surrender of HUB Common
Stock certificates will not deprive the holder of any
dividends or distributions that the holder is entitled
to receive as a record holder of HUB Common Stock on a
date before the Effective Date. When the holder
surrenders her certificates, the holder will receive the
amount, without interest, of any cash dividends and any
other distributions distributed to holders of record of
Glacier Common Stock on or after the Effective Date on
the whole number of shares of Glacier Shares into which
the holder's HUB Common Stock was converted at the
Effective Date.
(e) Checks in Other Names. Any person requesting that a
check for cash in lieu of fractional shares be issued in
a name other than the name the HUB Common Stock
certificate surrendered in exchange for the cash is
registered in, must establish to the Exchange Agent's
satisfaction the right to receive this cash.
1.4 PAYMENT TO DISSENTING STOCKHOLDERS. For purposes of this Agreement,
"Dissenting Shares" means those shares of HUB Common Stock as to which
stockholders have properly taken all steps necessary to perfect their
dissenters' rights under MBCA Sections 35-1-826 through 35-1-839. Each
outstanding Dissenting Share of HUB Common Stock will be converted at
Closing into the rights provided under those sections of the MBCA.
1.5 ALTERNATIVE STRUCTURES. Subject to the conditions set forth below,
Glacier may, within 90 days of the execution of this Agreement and in
its sole discretion, elect to consummate the Transaction by means other
than those specified in this Section 1. If Glacier so elects, any
6
<PAGE> 123
means, procedures, or amendments necessary or desirable to consummate
the Transaction, in the opinion of Glacier's counsel, will supersede any
conflicting, undesirable or unnecessary provisions of this Agreement.
But, unless this Agreement is amended in accordance with Section 9, the
following conditions will apply: (1) the type and amount of
consideration set forth in Subsection 1.3 will not be modified and (2)
the tax consequences to HUB and its stockholders will not be adversely
affected. If Glacier elects an alternative structure under this
Subsection 1.5, HUB will cooperate with and assist Glacier with the
following: (1) any amendments to this Agreement necessary or desirable
in the opinion of Glacier's counsel and (2) the preparation and filing
of any applications, documents, instruments and notices necessary or
desirable, in the opinion of Glacier's counsel, to effect the
alternative structure and to obtain the necessary stockholder approvals
and approvals of any regulatory agency, administrative body, or other
governmental entity. Glacier will pay any additional expenses incurred
by HUB in connection with any such changes, if those expenses would not
have been incurred by HUB absent Glacier's election under this
Subsection 1.5, and the expenses so incurred will not be deemed
Transaction Fees.
1.6 LETTER OF TRANSMITTAL. Glacier will prepare a transmittal letter form
reasonably acceptable to HUB for use by stockholders holding HUB Common
Stock. Certificates representing shares of HUB Common Stock must be
delivered for payment in the manner provided in the transmittal letter
form. On or about the Effective Date, Glacier will mail the transmittal
letter form to HUB stockholders.
1.7 UNDELIVERED CERTIFICATES. If outstanding certificates for HUB Common
Stock are not surrendered or the payment for them is not claimed before
those payments would escheat or become the property of any governmental
unit or agency, the unclaimed items will, to the extent permitted by
abandoned property or any other applicable law, become the property of
the Continuing Corporation (and to the extent not in its possession will
be paid over to the Continuing Corporation), free and clear of all
claims or interests of any person previously entitled to such items.
But, neither the Continuing Corporation nor either party to this
Agreement will be liable to any holder of HUB Common Stock for any
amount paid to any governmental unit or agency having jurisdiction over
any such unclaimed items under the abandoned property or other
applicable law of the jurisdiction, and the Continuing Corporation will
pay no interest on amounts owed to stockholders for shares of HUB Common
Stock.
1.8 STOCK OPTION AGREEMENT. As a condition to the execution of this
Agreement, Glacier and HUB will sign a Stock Option Agreement of even
date with this Agreement.
SECTION 2
CLOSING OF THE TRANSACTION
2.1 CLOSING. Closing will occur on the Effective Date. If Closing does not
occur on or before August 31, 1998 ("Termination Date"), either Glacier
or HUB may terminate this Agreement in accordance with Section 7. Unless
Glacier and HUB agree upon another date, the Effective Date will be a
date selected by Glacier within 30 calendar days after the following:
(a) each condition precedent set forth in Section 5 has been either
fulfilled or waived; and
(b) each approval required by Section 5 has been granted, and all
applicable waiting periods have expired.
7
<PAGE> 124
2.2 EVENTS OF CLOSING. On the Effective Date, all properly executed
documents required by this Agreement will be delivered to the proper
party in form consistent with this Agreement. If any party fails to
deliver a required document on the Effective Date or otherwise defaults
under this Agreement on or before the Effective Date, then the
Transaction will not occur unless the adversely affected party waives
the default.
2.3 PLACE OF CLOSING. Unless Glacier and HUB agree otherwise, Closing will
occur on the Effective Date at Glacier's main office, 202 Main Street,
Kalispell, Montana.
SECTION 3
REPRESENTATIONS
3.1 REPRESENTATIONS OF GLACIER AND HUB. Subject to Subsection 3.3 and
except as expressly set forth in Schedule 1, Glacier represents to HUB,
and HUB represents to Glacier, the following:
3.1.1 CORPORATE ORGANIZATION AND QUALIFICATION.
(a) It is a corporation duly organized and validly existing
under the state laws of either Montana or Delaware (as
applicable), and its activities do not require it to be
qualified in any jurisdiction other than Montana.
(b) It has the requisite corporate power and authority to
own or lease its properties and assets and to carry on
its businesses as they are now being conducted.
(c) The location of each of its offices is listed in
Schedule 2.
(d) It has made available to the other party to this
Agreement a complete and correct copy of its certificate
or articles of incorporation and bylaws, each as amended
to date and currently in full force and effect.
3.1.2 SUBSIDIARIES.
(a) Schedule 3 lists all of its Subsidiaries and its
percentage ownership of these Subsidiaries, as of the
date of this Agreement. In this Agreement, the term
"Subsidiary" with respect to a party means any
corporation, partnership, financial institution, trust
company, or other entity owned or controlled by that
party or any of its subsidiaries or affiliates (or owned
or controlled by that party together with one or more of
its subsidiaries or affiliates). A Subsidiary is
considered to be owned or controlled by a party if that
party or any of its Subsidiaries (individually or
together with the party) directly or indirectly owns,
controls, or has the ability to exercise 50% or more of
the voting power of the Subsidiary.
(b) Each of its depository institution Subsidiaries is an
"insured depository institution," as defined in the
Federal Deposit Insurance Act ("FDIA") and applicable
regulations under the FDIA, having deposits insured by
the Federal Deposit Insurance Corporation ("FDIC"),
subject to applicable FDIC coverage limitations.
(c) Each of its Subsidiaries is: (1) either a commercial
bank, a federally chartered savings bank, or a
corporation; (2) duly organized and validly existing
under
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either federal or Montana law (as applicable); and (3)
qualified to do business and in good standing in each
jurisdiction where the property owned, leased, or
operated, or the business conducted by the Subsidiary,
requires this qualification.
(d) Each of its Subsidiaries has the requisite corporate
power and authority to own or lease its properties and
assets and to carry on its business as it is now being
conducted.
3.1.3 CAPITAL STOCK.
(a) Glacier. Glacier represents:
(1) on the date this Agreement was signed, Glacier's
authorized capital stock consists of 20 million
shares divided into two classes: (i) 12.5
million shares of common stock, par value $.01
per share ("Glacier Common Stock"), 6,833,693
shares of which are issued and outstanding and
(ii) 7.5 million shares of blank-check preferred
stock, par value $.01 per share, none of which
is outstanding ("Glacier Preferred Stock");
(2) options or rights to acquire not more than an
aggregate of 451,374 Glacier Common Stock shares
(subject to adjustment on the terms set forth in
the Glacier Stock Plans) are outstanding under
the stock option plans listed in Schedule 4
("Glacier Stock Plans");
(3) No Glacier Common Stock shares are reserved for
issuance, other than the shares reserved for
issuance under the Glacier Stock Plans, and
Glacier has no shares of Glacier Preferred Stock
reserved for issuance;
(4) all outstanding shares of Glacier Common Stock
have been duly authorized and validly issued and
are fully paid and nonassessable;
(5) all outstanding shares of capital stock of each
of Glacier's Subsidiaries owned by Glacier or a
Subsidiary of Glacier have been duly authorized
and validly issued and are fully paid and
nonassessable, except to the extent any
assessment is required under federal law, and
are owned by Glacier or a Subsidiary of Glacier
free and clear of all liens, pledges, security
interests, claims, proxies, preemptive or
subscriptive rights or other encumbrances or
restrictions of any kind (collectively,
"Liens"); and
(6) except as set forth in this Agreement or in the
Glacier Stock Plans, there are no preemptive
rights or any outstanding subscriptions,
options, warrants, rights, convertible
securities, or other agreements or commitments
of Glacier or any of its Subsidiaries of any
character relating to the issued or unissued
capital stock or other equity securities of
Glacier (including those relating to the
issuance, sale, purchase, redemption,
conversion, exchange, redemption, voting or
transfer of such stock or securities).
(b) HUB. HUB represents:
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(1) HUB's authorized capital stock consists of (i)
50,000 shares of common stock, no par value
("HUB Common Stock"), 9,265 shares of which are
issued and outstanding,
(2) no options or rights to acquire HUB Common Stock
shares are outstanding;
(3) Neither HUB nor any of its Subsidiaries have any
stock option plans, employee stock purchase
plans, or other plans or agreements providing
for the grant of options or other rights to
acquire HUB Common Stock shares or shares of
capital stock of any of HUB's Subsidiaries, and
no HUB Common Stock shares or capital stock
shares of any of its Subsidiaries are reserved
for issuance;
(4) all outstanding HUB Common Stock shares have
been duly authorized and validly issued and are
fully paid and nonassessable;
(5) all outstanding shares of capital stock of each
of HUB's Subsidiaries have been duly authorized
and validly issued and are fully paid and
nonassessable, except to the extent of any
assessment required under the Montana Bank Act
Section 32-1-506, and, except as otherwise
provided in this Agreement, at Closing will be
owned by HUB or a Subsidiary of HUB free and
clear of all Liens;
(6) There are no preemptive rights or any
outstanding subscriptions, options, warrants,
rights, convertible securities, or other
agreements or commitments of HUB or any of its
Subsidiaries of any character relating to the
issued or unissued capital stock or other equity
securities of HUB or any of its Subsidiaries
(including those relating to the issuance, sale,
purchase, redemption, conversion, exchange,
registration, voting or transfer of such stock
or securities);
(7) the Bank's authorized capital stock consists of
(i) 11,000 shares of common stock, par value $40
per share ("Bank Common Stock"), 11,000 shares
of which are issued and outstanding;
(8) it owns 9,513 of the 11,000 total shares of Bank
Common Stock outstanding and all, if any, of the
Bank's preferred stock outstanding, and these
shares are free and clear of all encumbrances;
and
(9) HUB has no Subsidiaries other than the Bank, and
the Bank has no Subsidiaries.
3.1.4 CORPORATE AUTHORITY.
(a) It has the requisite corporate power and authority and
has taken all corporate action necessary in order to
execute and deliver this Agreement, subject (in HUB's
case) only to the approval by HUB's stockholders of the
plan of Merger contained in this Agreement to the extent
required by MBCA Sections 35-1-815 and 35-1-819, to
complete the Transaction.
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(b) This Agreement is a valid and legally binding agreement
of it, enforceable in accordance with the terms of this
Agreement.
3.1.5 REPORTS AND FINANCIAL STATEMENTS.
(a) Filing of Reports. Since January 1, 1994, it and each of
its Subsidiaries has filed all reports and statements,
together with any required amendments to these reports
and statements, that it was required to file with (1)
the Securities and Exchange Commission ("SEC"), (2) the
Federal Reserve Board, (3) the FDIC, and (4) any other
applicable federal or state banking, insurance,
securities, or other regulatory authorities. Each of
these reports and statements (as amended before the date
of this Agreement), including the related financial
statements and exhibits, complied (or will comply, in
the case of reports or statements filed after the date
of this Agreement) as to form in all material respects
with all applicable statutes, rules and regulations as
of their respective dates (and, in the case of reports
or statements filed before the date of this Agreement,
without giving effect to any amendments or modifications
filed after the date of this Agreement).
(b) Delivery to Other Party of Reports. It has delivered to
the other party a copy of each registration statement,
offering circular, report, definitive proxy statement or
information statement under the Securities Act of 1933,
as amended, ("Securities Act"), the Securities Exchange
Act of 1934, as amended, ("Exchange Act"), and state
securities and "Blue Sky" laws (collectively, the
"Securities Laws") filed, used or circulated by it with
respect to periods since January 1, 1994, through the
date of this Agreement. It will promptly deliver to the
other party each such registration statement, offering
circular, report, definitive proxy statement or
information statement filed, used or circulated after
the date of this Agreement (collectively, its
"Reports"), each in the form (including related exhibits
and amendments) filed with the SEC (or if not so filed,
in the form used or circulated).
(c) Compliance with Securities Laws. As of their respective
dates (and without giving effect to any amendments or
modifications filed after the date of this Agreement),
each of the Reports, including the related financial
statements, exhibits and schedules, filed, used or
circulated before the date of this Agreement complied
(and each of the Reports filed after the date of this
Agreement, will comply) with applicable Securities Laws,
and did not (or in the case of reports, statements, or
circulars filed after the date of this Agreement, 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.
(d) Financial Statements. Each of its balance sheets
included in the Financial Statements fairly presents
(or, in the case of Financial Statements for periods
ending on a date following the date of this Agreement,
will fairly present) the consolidated financial position
of it and its Subsidiaries as of the date of the balance
sheet. Each of the consolidated statements of income,
cash flows and stockholders' equity included in the
Financial Statements fairly presents (or, in the case of
Financial Statements for periods ending on a date
following the date of this Agreement, will fairly
present) the consolidated results of operations,
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retained earnings and cash flows, as the case may be, of
it and its Subsidiaries for the periods set forth in
these statements (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in
each case in accordance with generally accepted
accounting principles, consistently applied ("GAAP"),
except as may be noted in these statements.
(1) "Financial Statements" means: (i) in Glacier's
case, the Glacier Financial Statements (or for
periods ending on a date following the date of
this Agreement, the Subsequent Glacier Financial
Statements); and (ii) in HUB's case, the HUB
Financial Statements (or for periods ending on a
date following the date of this Agreement, the
Subsequent HUB Financial Statements).
(2) "Glacier Financial Statements" means Glacier's
(i) audited consolidated statements of financial
condition as of December 31, 1996 and 1995, and
the related audited statements of income,
cashflows and changes in stockholders' equity
for each of the years ended December 31, 1996
and 1995; and (ii) unaudited consolidated
statements of financial condition as of the end
of each fiscal quarter following December 31,
1996 but preceding the date of this Agreement,
and the related unaudited statements of income,
cashflows and changes in stockholders' equity
for each such quarter.
(3) "Subsequent Glacier Financial Statements" means
(i) audited consolidated statements of financial
condition as of December 31, 1997, and the
related audited statements of income, cashflows,
and changes in stockholders' equity for the year
ended December 31, 1997, and (ii) unaudited
balance sheets and related statements of income
and stockholders' equity for each of Glacier's
fiscal quarters ending after the December 31,
1997 and before Closing.
(4) "HUB Financial Statements" means (i) HUB's
unaudited consolidated statements of financial
condition as of December 31, 1996, 1995, and
1994, and the related unaudited statements of
income, cashflows and changes in stockholders'
equity for each of the years ended December 31,
1996, 1995, and 1994; and (ii) HUB's unaudited
consolidated statements of financial condition
as of the end of each fiscal quarter following
December 31, 1996 but preceding the date of this
Agreement, and the related unaudited statements
of income, cashflows and changes in
stockholders' equity for each such quarter.
(5) "Subsequent HUB Financial Statements" means (i)
unaudited balance sheets and related statements
of income and stockholders' equity for each of
HUB's and the Bank's fiscal quarters ending
after the date of this Agreement and before
Closing, and (ii) HUB's audited consolidated
statements of financial condition as of December
31, 1997, and the related audited statements of
income, cashflows, and changes in stockholders'
equity for the year ended December 31, 1997.
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3.1.6 ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed in
its Financial Statements and Reports, since December 31, 1996:
(1) it and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course of the
businesses and (2) no change or development or combination of
changes or developments has occurred that, individually or in
the aggregate, is reasonably likely to result in a Material
Adverse Effect with respect to it or its Subsidiaries. For
purposes of this Agreement, "Material Adverse Effect" with
respect to any corporation means an effect that: (1) is
materially adverse to the business, financial condition, results
of operations or prospects of the corporation and its
Subsidiaries taken as a whole; (2) significantly and adversely
affects the ability of the corporation to consummate the
transactions contemplated by this Agreement by the Termination
Date or to perform its material obligations under this
Agreement; or (3) enables any persons to prevent the
consummation by the Termination Date of the transactions
contemplated by this Agreement. No Material Adverse Effect will
be deemed to have occurred on the basis of any effect resulting
from actions or omissions of the corporation taken with the
explicit prior consent of the other party to this Agreement.
3.1.7 MATERIAL AGREEMENTS.
(a) Except for the Glacier Stock Plans (in Glacier's case)
and arrangements made after the date and in accordance
with the terms of this Agreement, it and its
Subsidiaries are not bound by any material contract (as
defined in Item 601(b)(10) of Regulation S-K under the
Securities Act) that: (1) is to be performed after the
date of this Agreement and (2) has not been filed with
or incorporated by reference in its Reports or set forth
in Schedule 5.
(b) Neither it nor any of its Subsidiaries is in default
under any contract, agreement, commitment, arrangement,
lease, insurance policy, or other instrument.
3.1.8 KNOWLEDGE AS TO CONDITIONS. Its President, Chief Executive
Officer, and Chief Financial Officer (collectively, "Executive
Officers") know of no reason why the Regulatory Approvals and,
to the extent necessary, any other approvals, authorizations,
filings, registrations, and notices should not be obtained
without the imposition of any condition or restriction that is
reasonably likely to have a Material Adverse Effect with respect
to it, its Subsidiaries, or the Continuing Corporation, or the
opinion of the tax experts referred to in Subsection 5.2.14.
3.1.9 BROKERS AND FINDERS. Neither it, its Subsidiaries, nor any of
their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage
fees, commissions or finder's fees in connection with the
transactions contemplated in this Agreement.
3.2 HUB'S ADDITIONAL REPRESENTATIONS. Subject to Subsection 3.3 and except
as expressly set forth in Schedule 1, HUB represents to Glacier, the
following:
3.2.1 LOAN AND LEASE LOSSES. Its Executive Officers know of no reason
why the allowance for loan and lease losses shown in the
consolidated balance sheets included in the Financial Statements
for the periods ended December 31, 1996, March 31, 1997, June
30, 1997, and September 30, 1997 was not adequate as of those
dates, respectively, to
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provide for estimable and probable losses, net of recoveries
relating to loans not previously charged off, inherent in its
loan portfolio.
3.2.2 NO STOCK OPTION PLANS. Neither it nor any of its Subsidiaries
has adopted any stock option plans or granted any options or
rights to acquire any shares of Bank Common Stock, HUB Common
Stock, or capital stock or other ownership interest of any HUB
Subsidiary.
3.2.3 GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Filings. Other than the Regulatory Approvals, and other
than as required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, the Securities
Act, the Exchange Act, state securities and "Blue Sky"
laws, no notices, reports or other filings are required
to be made by it with, nor are any consents,
registrations, approvals, permits or authorizations
required to be obtained by it from, any governmental or
regulatory authority, agency, court, commission or other
entity, domestic or foreign ("Governmental Entity"), in
connection with the execution, delivery or performance
of this Agreement by it and the consummation by it of
the Transaction.
(b) Violations. The execution, delivery and performance of
this Agreement does not and will not, and the
consummation by it of the Transaction will not,
constitute or result in: (1) a breach or violation of,
or a default under, its articles of incorporation or
bylaws, or the comparable governing instruments of any
of its Subsidiaries; (2) a breach or violation of, or a
default under, or the acceleration of or the creation of
a Lien (with or without the giving of notice, the lapse
of time or both) under, any provision of any agreement,
lease, contract, note, mortgage, indenture, arrangement
or other obligation ("Contracts") of it or any of its
Subsidiaries; or (3) a violation of any law, rule,
ordinance or regulation or judgment, decree, order,
award, or governmental or non-governmental permit or
license to which it or any of its Subsidiaries is
subject; or (4) any change in the rights or obligations
of any party under any of the Contracts. Schedule 6
contains a list of all consents it or its Subsidiaries
must obtain from third parties under any Contracts
before consummation of the Transaction.
3.2.4 ASSET CLASSIFICATION.
(a) Schedule 7 sets forth an accurate and complete list as
of September 30, 1997, except as otherwise expressly
noted in Schedule 7, separated by category of
classification or criticism ("Asset Classification"), of
the aggregate amounts of loans, extensions of credit and
other assets of it and its Subsidiaries that have been
criticized or classified by any Governmental Entity, by
any outside auditor, or by any internal audit.
(b) Except as shown on Schedule 7, no amounts of loans,
extensions of credit or other assets that have been
classified or criticized by any representative of any
Governmental Entity as "Other Assets Especially
Mentioned," "Substandard," "Doubtful," "Loss" or words
of similar effect are excluded from the amounts
disclosed in the Asset Classification, other than
amounts of loans, extensions of
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credit or other assets that were paid off or charged off
by it or its Subsidiaries before the date of this
Agreement.
3.2.5 INVESTMENTS. Schedule 8 lists all investments (except
investments in securities issued by federal state or local
government or any subdivision or agency thereof and investments
in Subsidiaries) made by it or any of its Subsidiaries in an
amount greater than $25,000 or which represent an ownership
interest of more than 5% in any corporation, company,
partnership, or other entity. All investments comply with all
applicable laws and regulations.
3.2.6 PROPERTIES.
(a) Except as disclosed or reserved against in its Financial
Statements or in Schedule 9, it and its Subsidiaries
have good and marketable title, free and clear of all
Liens (other than Liens for current taxes not yet
delinquent or pledges to secure deposits or liens
securing Federal Home Loan Bank borrowings) to all of
the properties and assets, tangible or intangible,
reflected in its Reports as being owned by it or its
Subsidiaries as of the date of this Agreement.
(b) To the knowledge of its Executive Officers, all
buildings and all fixtures, equipment and other property
and assets that are material to its business on a
consolidated basis and are held under leases or
subleases by it or its Subsidiaries are held under valid
leases or subleases, enforceable in accordance with
their respective terms (except as may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights
generally or by general equity principles).
(c) Schedule 10 lists all its and its Subsidiaries' existing
branches and offices and all new branches or offices it
or any of its Subsidiaries' has applied to establish or
purchase, along with the cost to establish or purchase
those branches.
(d) HUB has provided to Glacier copies of existing title
policies held in its or the Bank's files and relating to
properties owned or leased by HUB or the Bank, and no
exceptions, reservations, or encumbrances have arisen or
been created since the date of issuance of those
policies.
3.2.7 ANTI-TAKEOVER PROVISIONS. It and each of its Subsidiaries have
taken all necessary action to exempt the Transaction, this
Agreement, and the Stock Option Agreement from (a) all
applicable Montana State law anti-takeover provisions, if any,
and (b) any takeover-related provisions of its or the Bank's
articles of incorporation or bylaws.
3.2.8 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 11, it
and each of its Subsidiaries:
(a) are in compliance, in the conduct of their business,
with all applicable federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees, including the Bank Secrecy
Act, the Truth in Lending Act, the Equal Credit
Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act and
all applicable fair lending laws or other laws relating
to discrimination;
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(b) have all permits, licenses, certificates of authority,
orders, and approvals of, and have made all filings,
applications, and registrations with, federal, state,
local, and foreign governmental or regulatory bodies
(including the Federal Reserve) that are required in
order to permit them to carry on their business as it is
presently conducted;
(c) have received since January 1, 1994, no notification or
communication from any Governmental Entity (including
any bank, insurance and securities regulatory
authorities) or its staff (1) asserting a failure to
comply with any of the statutes, regulations or
ordinances that such Governmental Entity enforces, (2)
threatening to revoke any license, franchise, permit or
governmental authorization, or (3) threatening or
contemplating revocation or limitation of, or that would
have the effect of revoking or limiting, FDIC deposit
insurance (nor, to the knowledge of its Executive
Officers, do any grounds for any of the foregoing
exist); and
(d) are not required to notify any federal banking agency
before adding directors to its board of directors or
employing senior executives (except notifications
required as a result of the Transaction).
3.2.9 LITIGATION. Except as disclosed in its Financial Statements or
in Schedule 12, before the date of this Agreement:
(a) no criminal or administrative investigations or
hearings, before or by any Governmental Entity, or
civil, criminal or administrative actions, suits, claims
or proceedings, before or by any person (including any
Governmental Entity) are pending or, to the knowledge of
its Executive Officers, threatened, against it or any of
its Subsidiaries (including under the Truth in Lending
Act, the Equal Credit Opportunity Act, the Fair Housing
Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act, or any fair lending law or other law
relating to discrimination); and
(b) neither it nor any of its Subsidiaries (nor any officer,
director, controlling person or property of it or any of
its Subsidiaries) is a party to or is subject to any
order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or
similar submission to, any Governmental Entity charged
with the supervision or regulation of depository
institutions or engaged in the insurance of deposits
(including the FDIC) or the supervision or regulation of
it or of its Subsidiaries, and neither it nor any of its
Subsidiaries has been advised by any such Governmental
Entity that such Governmental Entity is contemplating
issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding,
commitment letter or similar submission.
3.2.10 TAXES. For purposes of this Subsection 3.2.10, "Tax" includes
any tax or similar governmental charge, impost, or levy
(including income taxes, franchise taxes, transfer taxes or
fees, stamp taxes, sales taxes, use taxes, excise taxes, ad
valorem taxes, withholding taxes, worker's compensation, payroll
taxes, unemployment insurance, social security, minimum taxes,
or windfall profits taxes), together with any related
liabilities, penalties, fines, additions to tax, or interest,
imposed by the United States or
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any state, county, provincial, local or foreign government or
subdivision or agency of the United States.
(a) All federal, state and local Tax returns, including all
information returns, it and its Subsidiaries are
required to file have been timely filed or requests for
extensions have been timely filed. If any extensions
were filed, they have been or will be granted by Closing
and will not have expired. All filed returns are
complete and accurate in all material respects.
(b) Except as disclosed in its Financial Statements:
(1) all taxes attributable to it or any of its
Subsidiaries that are or were due or payable
(without regard to whether such taxes have been
assessed) have been paid in full or have been
adequately provided for in its Financial
Statements in accordance with GAAP;
(2) adequate provision in accordance with GAAP has
been made in its Financial Statements relating
to all Taxes for the periods covered by such
Financial Statements that were not yet due and
payable as of the date of this Agreement,
regardless of whether the liability for such
Taxes is disputed;
(3) as of the date of this Agreement and except as
disclosed in its Financial Statements, there is
no outstanding audit examination, deficiency,
refund litigation or outstanding waiver or
agreement extending the applicable statute of
limitations for the assessment or collection of
any Taxes for any period with respect to any
Taxes of it or its Subsidiaries;
(4) all Taxes with respect to completed and settled
examinations or concluded litigation relating to
it or any of its Subsidiaries have been paid in
full or have been recorded on its Financial
Statements (in accordance with GAAP);
(5) neither it nor any of its Subsidiaries is a
party to a Tax sharing or similar agreement or
any agreement under which it or any of its
Subsidiaries has indemnified any party (other
than it or one of its Subsidiaries) with respect
to Taxes; and
(6) the proper and accurate amounts have been
withheld from all employees (and timely paid to
the appropriate Governmental Entity or set aside
in an account for these purposes) for all
periods through the Effective Date in compliance
with all Tax withholding provisions of
applicable federal, state, local and foreign
laws (including income, social security and
employment tax withholding for all types of
compensation).
3.2.11 INSURANCE. It and each of its Subsidiaries has taken all
requisite action (including the making of claims and the giving
of notices) under its directors' and officers' liability
insurance policy or policies in order to preserve all rights
under such policies with respect to all matters known to it
(other than matters arising in connection with, and the
transactions contemplated by, this Agreement). Schedule 13 lists
all directors' and
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officers' liability insurance policies and other insurance
policies maintained by it or its Subsidiaries.
3.2.12 LABOR MATTERS. Neither it nor any of its Subsidiaries is a
party to, or is bound by, any collective bargaining agreement,
contract or other agreement or understanding with any labor
union or labor organization. Neither it nor any of its
Subsidiaries is the subject of any proceeding: (1) asserting
that it or any of its Subsidiaries has committed an unfair labor
practice or (2) seeking to compel it or any of its Subsidiaries
to bargain with any labor organization as to wages or conditions
of employment. No strike involving it or any of its Subsidiaries
is pending or, to the knowledge of its Executive Officers,
threatened. Its Executive Officers are not aware of any activity
involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in any other
organizational activity.
3.2.13 EMPLOYEE BENEFITS.
(a) For purposes of this Agreement "Plan" or "Plans",
individually or collectively, means any "employee
benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974,
("ERISA"), as amended, maintained by HUB or any of its
Subsidiaries, as the case may be.
(b) Schedule 14 sets forth a list, as of the date of this
Agreement, of (1) all bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, (2) all
employment or severance contracts and (3) all other
employee benefit plans that cover employees or former
employees of it and its Subsidiaries (its "Compensation
Plans"). True and complete copies of the Compensation
Plans (and, as applicable, copies of summary plan
descriptions, governmental filings (on Form 5500 series
or otherwise), actuarial reports and reports under
Financial Accounting Standards Board Statement No. 106
relating to such Compensation Plans) covering current or
former employees or directors of it or its Subsidiaries
(its "Employees"), including Plans and related
amendments, have been made available to the other party
to this Agreement.
(c) All Plans covering Employees (other than "multi-employer
plans" within the meaning of ERISA Sections 3(37) or
4001(a)(3)), to the extent subject to ERISA, are in
substantial compliance with ERISA. Each Plan, that is an
"employee pension benefit plan" within the meaning of
ERISA Section 3(2) ("Pension Plan") and that is intended
to be qualified under IRC Section 401(a), has received a
favorable determination letter from the Internal Revenue
Service, and it is not aware of any circumstances likely
to result in revocation of any such favorable
determination letter. No litigation relating to Plans is
pending or, to the knowledge of its Executive Officers,
threatened. Neither it nor any of its Subsidiaries has
engaged in a transaction with respect to any Plan that,
assuming the taxable period of such transaction expired
as of the date of this Agreement, could subject it or
any of its Subsidiaries to a Tax or penalty imposed by
either IRC Section 4975 or ERISA Section 502(i).
(d) No liability under Subtitle C or D of Title IV or ERISA
(other than payment of applicable premiums) has been or
is expected to be incurred by it or any of its
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Subsidiaries with respect to any ongoing, frozen or
terminated "single-employer plan," within the meaning of
ERISA Section 4001(a)(15), currently or formerly
maintained by any of them, or the single-employer plan
of any entity that is considered one employer with it
under ERISA Section 4001 or IRC Section 414 (an "ERISA
Affiliate"). It and its Subsidiaries and ERISA
Affiliates have not incurred and do not expect to incur
any withdrawal liability with respect to a multiemployer
plan under Subtitle I of Title IV of ERISA (regardless
of whether based on contributions of ERISA Affiliates).
Neither it, its Subsidiaries nor any of its ERISA
Affiliates has been notified by any multiemployer plan
to which it or any of its Subsidiaries or ERISA
Affiliates is contributing, or may be obligated to
contribute, that such multiemployer plan is currently in
reorganization or insolvency under and within the
meaning of ERISA Sections 4241 or 4245 or that such
multiemployer plan intends to terminate or has been
terminated under ERISA Section 4041A. No notice of a
"reportable event" within the meaning of ERISA Section
4043, for which the 30-day reporting requirement has not
been waived, has been required to be filed for any of
its Pension Plans or by any of its ERISA Affiliates
within the 12-month period ending on the date of this
Agreement. Neither it, its Subsidiaries nor any of their
respective ERISA Affiliates has incurred or is aware of
any facts that are reasonably likely to result in any
liability under ERISA Sections 4069 or 4204.
(e) All contributions it or any of its Subsidiaries are or
were required to make under the terms of any Plans have
been timely made or have been reflected in its Financial
Statements. Neither any of its or its Subsidiaries'
Pension Plans nor any single-employer plan of any of its
ERISA Affiliates has an "accumulated funding deficiency"
(whether or not waived) within the meaning of IRC
Section 412 or ERISA Section 302. Neither it nor any of
its Subsidiaries or its ERISA Affiliates has provided,
or is required to provide, security to any Pension Plan
or to any single-employer plan of an ERISA Affiliate
under IRC Section 401(a)(29), IRC Section 412(f)(3), or
ERISA Sections 306, 307 or 4204.
(f) Under each of its, its Subsidiaries, and its ERISA
Affiliates' Pension Plans that is a single-employer
plan, as of the last day of the most recent plan year
ended before the date of this Agreement, the actuarially
determined present value of all "benefit liabilities"
within the meaning of ERISA Section 4001(a)(16) (as
determined on the basis of the actuarial assumptions
contained in the Pension Plan's most recent actuarial
valuation), did not exceed the then-current value of the
assets of such Pension Plan, and to the knowledge of its
Executive Officers, there has been no change in the
financial condition of such Pension Plan since the last
day of the most recent plan year that reasonably could
be expected to change such conclusion. There would be no
withdrawal liability of it and its Subsidiaries under
each Plan that is a multi-employer plan to which it, its
Subsidiaries or its ERISA Affiliates has contributed
during the preceding 12 months, if such withdrawal
liability were determined as if a "complete withdrawal,"
within the meaning of ERISA Section 4203, had occurred
as of the date of this Agreement.
(g) Except as disclosed in its Financial Statements, neither
it nor its Subsidiaries have any obligations for retiree
health and life benefits.
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(h) No restrictions exist on the rights of it or its
Subsidiaries to amend or terminate any Plan without
incurring liability under the Plan in addition to normal
liabilities for benefits.
(i) Except as disclosed in its Financial Statements or as
provided in a Schedule to this Agreement, the
transactions contemplated by this Agreement and the
Stock Plans will not result in: (1) vesting,
acceleration, or increase of any amounts payable under
any Compensation Plan, (2) any increase in benefits
under any Compensation Plan or (3) payment of any
severance or similar compensation under any Compensation
Plan.
3.2.14 ENVIRONMENTAL MATTERS.
(a) For purposes of this Subsection 3.2.14, the following
definitions apply:
(1) "Subject Property" with respect to a party means
(i) all real property at which the businesses of
it or its Subsidiaries have been conducted, all
property in which it or its Subsidiaries holds a
security or other interest (including a
fiduciary interest), and any property where
under any Environmental Law it or any of its
Subsidiaries is deemed to be the owner or
operator of the property; (ii) any facility in
which it or its Subsidiaries participates in the
management, including participating in the
management of the owner or operator of the
property; and (iii) all other real property
that, for purposes of any Environmental Law, it
or any of its Subsidiaries otherwise could be
deemed to be an owner or operator of or as
otherwise having control over.
(2) "Environmental Laws" means any federal, state,
local or foreign law, regulation, agency policy,
order, decree, judgment, judicial opinion, or
any agreement with any Governmental Entity,
presently in effect or subsequently adopted
relating to: (i) the manufacture, generation,
transport, use, treatment, storage, recycling,
disposal, release, threatened release or
presence of Hazardous Substances, or (ii) the
preservation, restoration or protection of the
environment, natural resources or human health.
(3) "Hazardous Substances" means any hazardous or
toxic substance, material or waste that is
regulated by any local governmental authority,
any state government or the United States
Government, including any material or substance
that is (a) defined as a "hazardous substance"
in 42 USC Section 9601(14), (b) defined as a
"pollutant or contaminant" in 42 USC Section
9604(a)(2), or (c) defined as a "hazardous
waste" in 42 USC Section 6903(5).
(b) To the knowledge of its Executive Officers, it and each
of its Subsidiaries and the Subject Property are, and
have been, in compliance with all applicable
Environmental Laws, and no circumstances exist that with
the passage of time or the giving of notice would be
reasonably likely to result in noncompliance with any
Environmental Laws.
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(c) To the knowledge of its Executive Officers, none of the
following, and no reasonable basis for any of the
following, exists: pending or threatened claims,
actions, investigations, notices of non-compliance,
information requests or notices of potential
responsibility or proceedings involving it or any of its
Subsidiaries or any Subject Property, relating to:
(1) an asserted liability of it or any of its
Subsidiaries or any prior owner, occupier or
user of Subject Property under any applicable
Environmental Law or the terms and conditions of
any permit, license, authority, settlement,
agreement, decree or other obligation arising
under any applicable Environmental Law;
(2) the handling, storage, use, transportation,
removal or disposal of Hazardous Substances;
(3) the actual or threatened discharge, release or
emission of Hazardous Substances from, on or
under or within Subject Property into the air,
water, surface water, ground water, land surface
or subsurface strata; or
(4) personal injuries or damage to property related
to or arising out of exposure to Hazardous
Substances.
(d) To the knowledge of its Executive Officers: no storage
tanks underground or otherwise are present on the
Subject Property or, if present, none of such tanks are
leaking and each of them is in full compliance with all
applicable Environmental Laws. With respect to any
Subject Property, it and its Subsidiaries do not own,
possess or control any PCBs, PCB-contaminated fluids,
wastes or equipment, or any asbestos or
asbestos-containing material. No Hazardous Substances
have been used, handled, stored, discharged, released or
emitted, or are threatened to be discharged, released or
emitted, at or on any Subject Property, except for those
types and quantities of Hazardous Substances typically
used in an office environment and that have not created
conditions requiring remediation under any applicable
Environmental Law.
(e) To the knowledge of its Executive Officers and except
for the investigation or monitoring by the Environmental
Protection Agency or similar state agencies in the
ordinary course, no part of the Subject Property has
been or is scheduled for investigation or monitoring
under any applicable Environmental Law.
3.3 EXCEPTIONS TO REPRESENTATIONS.
3.3.1 DISCLOSURE OF EXCEPTIONS. Each exception set forth in a
Schedule is disclosed only for purposes of the representations
referenced in that exception; but the following conditions
apply:
(a) no exception is required to be set forth in a Schedule
if its absence would not result in the related
representation being found untrue or incorrect under the
standard established by Subsection 3.3.2; and
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(b) the mere inclusion of an exception in a Schedule is not
an admission by a party that the exception represents a
material fact, material set of facts, or material event
or would result in a Material Adverse Effect with
respect to that party.
3.3.2 NATURE OF EXCEPTIONS. No representation contained in Subsection
3.1 or 3.2 will be found untrue or incorrect and no party to
this Agreement will have breached a representation due to the
following: the existence of any fact, set of facts, or event, if
the fact or event individually or taken together with other
facts or events would not, or, in the case of Subsection 3.2.9,
is not reasonably likely to, have a Material Adverse Effect with
respect to such party.
SECTION 4
CONDUCT AND TRANSACTIONS
BEFORE CLOSING
4.1 CONDUCT OF HUB'S BUSINESS BEFORE CLOSING. Before Closing, HUB promises
as follows:
4.1.1 AVAILABILITY OF HUB'S BOOKS, RECORDS AND PROPERTIES.
(a) Except as prohibited by applicable law HUB will make
its, and cause its Subsidiaries to make their, books,
records, properties, contracts and documents available
at all reasonable times to Glacier and its counsel,
accountants and other representatives. These items will
be open for inspection, audit and direct verification
of: (1) loan or deposit balances, (2) collateral
receipts and (3) any other transactions or documentation
Glacier may find reasonably relevant to the Transaction.
HUB will, and will cause its Subsidiaries to, cooperate
fully in any such inspection, audit, or direct
verification procedures, and HUB will, and will cause
its Subsidiaries to, make available all information
reasonably required by or on behalf of Glacier.
(b) At Glacier's request, HUB will request any third parties
involved in the preparation or review of the HUB
Financial Statements or Subsequent HUB Financial
Statements to disclose to Glacier the work papers or any
similar materials related to these financial statements.
4.1.2 ORDINARY AND USUAL COURSE. HUB will, and will cause its
Subsidiaries to, conduct business only in the ordinary and usual
course and, without the prior written consent of Glacier, will
not, and will not allow its Subsidiaries to, do any of the
following:
(a) effect any stock split or other recapitalization with
respect to HUB Common Stock or the capital stock of a
HUB Subsidiary, or issue, pledge, redeem, or encumber in
any way any shares of HUB's or a HUB Subsidiary's
capital stock; or grant any option or other right to
shares of HUB's or a HUB Subsidiary's capital stock;
(b) declare or pay any dividend, or make any other
distribution, either directly or indirectly, with
respect to HUB Common Stock or the capital stock of any
HUB Subsidiary, except (1) dividends from the Bank to
HUB to support the operations of HUB which are
consistent with past practices or required to pay
Transaction Fees, and (2) HUB's regular quarterly
dividends to its shareholders consistent
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with past practices and not in an amount exceeding $6
per HUB Common Stock share;
(c) acquire, sell, transfer, assign, encumber or otherwise
dispose of assets or make any commitment with respect to
its assets other than in the ordinary and usual course
of business;
(d) solicit or accept deposit accounts of a different type
from accounts previously accepted by it or at rates
materially in excess of rates previously paid by it,
except to reflect changes in prevailing interest rates,
or incur any indebtedness greater than $25,000 (except
for borrowings from the Federal Home Loan Bank in the
ordinary course of business and consistent with past
practices);
(e) acquire an ownership interest or a leasehold interest in
any Property or any other real property, whether by
foreclosure or otherwise, without: (1) making an
appropriate environmental evaluation in advance of
obtaining the interest and providing the evaluation to
Glacier and (2) providing Glacier with at least 30 days'
advance written notice before it acquires the interest;
(f) enter into or recommend the adoption by HUB's
stockholders of any agreement involving a possible
merger or other business combination or asset sale by
HUB not involving the Transaction;
(g) enter into, renew, or terminate any contracts (including
real property leases and data or item processing
agreements) with or for a term of one-year or more,
except for the Bank's contracts of deposit and
agreements to lend money not otherwise restricted under
this Agreement and (1) entered into in the ordinary
course of business, (2) consistent with past practices,
and (3) providing for not less (in the case of loans) or
more (in the case of deposits) than prevailing market
rates of interest;
(h) enter into or amend any contract (other than contracts
for deposits at the Bank or agreements to lend money not
otherwise restricted by this Agreement) calling for a
payment by it of more than $25,000, unless the contract
may be terminated without cause or penalty upon 30 days
notice or less;
(i) enter into any personal services contract with any
person or firm, except contracts, agreements, or
arrangements for legal, accounting, investment advisory,
or tax services entered into directly to facilitate the
Transaction;
(j) (1) sell any securities, whether held for investment or
sale, other than in the ordinary course of business or
sell any securities, whether held for investment or
sale, even in the ordinary course of business, if the
aggregate gain realized from all sales after the date of
this Agreement would be more than $50,000 or (2)
transfer any investment securities between portfolios of
securities available for sale and portfolios of
securities to be held to maturity;
(k) amend its articles of incorporation, bylaws, or other
formation agreements, or convert its charter or form of
entity;
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(l) implement or adopt any material changes in its
operations, policies, or procedures, including loan loss
reserve policies, unless the changes are requested by
Glacier or are necessary or advisable, on the advice of
legal counsel, to comply with applicable laws,
regulations, or regulatory policies;
(m) implement or adopt any change in its accounting
principles, practices or methods, other than as may be
required (1) by GAAP, (2) for tax purposes, or (3) to
take advantage of any beneficial tax or accounting
methods;
(n) increase the combined number of full-time or equivalent
employees of HUB and its Subsidiaries above 47;
(o) other than in accordance with binding commitments
existing on the date of this Agreement, make any capital
expenditures in excess of $10,000 per project or related
series of projects or $50,000 in the aggregate, except
for the Transaction Fees; or
(p) enter into any other transaction or make any expenditure
other than in the ordinary and usual course of its
business and made or entered into in a manner consistent
with its well-established practices or as required by
this Agreement.
4.1.3 CONDUCT REGARDING REPRESENTATIONS. HUB will not do or cause to
be done anything that would cause any representation in
Subsection 3.1 or 3.2 to be inaccurate if made at Closing,
except as otherwise required by this Agreement or consented to
in writing by Glacier.
4.1.4 MAINTENANCE OF PROPERTIES. HUB will, and will cause the Bank
to, maintain its properties and equipment (and related insurance
or its equivalent) in accordance with good business practice.
4.1.5 PRESERVATION OF BUSINESS ORGANIZATION. HUB will, and will cause
the Bank to, use all reasonable efforts to:
(a) preserve its business organization;
(b) retain the services of present management; and
(c) preserve the goodwill of suppliers, customers, and
others with whom it has business relationships.
4.1.6 SENIOR MANAGEMENT. HUB will, and will require the Bank to,
obtain Glacier's approval before making any change, including
hiring of replacements, with respect to present management
personnel having the rank of vice-president or higher.
4.1.7 COMPENSATION AND EMPLOYMENT AGREEMENTS. HUB will not, and will
not allow the Bank to, permit any increase in the current or
deferred compensation payable or to become payable by HUB to any
of its directors, officers, employees, agents, or consultants
other than normal increments in compensation in accordance with
HUB's past practices with respect to the timing and amounts of
such increments. Without the prior written approval of Glacier,
HUB will not, and will not allow the Bank to, commit to, execute
or deliver any employment agreement with any party not
terminable upon two
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weeks' notice (or 30 days' notice, if such minimum notice is
required under Montana law) and without expense.
4.1.8 UPDATE OF FINANCIAL STATEMENTS. HUB will promptly deliver its
Financial Statements to Glacier. HUB will deliver Subsequent HUB
Financial Statements to Glacier by the earlier of: (1) 5 days
after HUB or the Bank has prepared and issued them or (2) 60
days after year-end for year-end statements (except that audited
Financial Statements to be included in the Registration
Statement will be delivered to Glacier no later than ten days
before Glacier files the Registration Statement with the SEC)
and 30 days after the end of the quarter for quarterly
statements. The Subsequent HUB Financial Statements:
(a) will be prepared from the books and records of HUB and
the Bank;
(b) will present fairly the financial position and operating
results of HUB and the Bank at the times indicated and
for the periods covered;
(c) will be prepared in accordance with GAAP (except for the
absence of notes) and with the regulations promulgated
by applicable regulatory authorities, to the extent then
applicable, subject to normal year-end adjustments; and
(d) will reflect all HUB's and the Bank's liabilities,
contingent or otherwise, on the respective dates and for
the respective periods covered, except for liabilities:
(1) not required to be so reflected in accordance with
GAAP or (2) not significant in amount.
4.1.9 NO SOLICITATION. Neither HUB nor any of its officers or
directors, directly or indirectly, will solicit, encourage,
entertain, or facilitate any other proposals or inquiries for an
acquisition of the shares or assets of HUB or its Subsidiaries
or enter into discussions concerning any such acquisition,
except as otherwise required to comply with the fiduciary
responsibilities of HUB's board of directors. No such party will
make available to any person not affiliated with HUB or Glacier
any information about its business or organization that is not
either routinely made available to the public generally or
required by law.
4.1.10 TITLE POLICIES. At Glacier's request, HUB will provide Glacier
with title reports issued by a title insurance company
reasonably satisfactory to Glacier. These title reports must
show marketable fee simple title or vendee's interest to all
real Property owned by HUB or any of its Subsidiaries and
marketable leasehold interests in all real Property leased by
HUB or any of its Subsidiaries, and these title reports may
contain only such exceptions, reservations, and encumbrances as
may be consented to in writing by Glacier, which consent Glacier
may not unreasonably withhold. At Closing, HUB will provide
Glacier with update endorsements, dated as of the Effective
Date, to the title policies for each Property owned by it or any
of its Subsidiaries. For purposes of this Agreement, "Property"
includes any property that HUB or any of its Subsidiaries owns
or leases, other than other real estate owned. Expenses incurred
by HUB under this Subsection 4.1.10 will not be deemed
Transaction Fees.
4.1.11 REVIEW OF LOANS. HUB will, and will cause the Bank to, permit
Glacier to conduct an examination of the Bank's loans to
determine credit quality and the adequacy of the Bank's
allowance for loan losses. Glacier will have continued access to
the Bank's
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loans through Closing to update the examination. At Glacier's
reasonable request, HUB and the Bank will provide Glacier with
current reports updating the information set forth in Schedule
7.
4.2 REGISTRATION STATEMENT.
4.2.1 PREPARATION OF REGISTRATION STATEMENT.
(a) A Registration Statement ("Registration Statement") will
be filed by Glacier with the SEC under the Securities
Act for registration of the Glacier Shares; and the
parties will prepare a related prospectus/proxy
statement ("Prospectus/Proxy Statement") to be mailed
together with any amendments and supplements to HUB's
stockholders.
(b) The parties will cooperate with each other in preparing
the Registration Statement and Prospectus/Proxy
Statement, and will use their best efforts to: (1) file
the Registration Statement with the SEC within 60 days
following the date on which this Agreement is executed,
and (2) obtain the clearance of the SEC, any appropriate
state securities regulators and any other required
regulatory approvals, to issue the Prospectus/Proxy
Statement.
(c) Nothing will be included in the Registration Statement
or the Prospectus/Proxy Statement or any proxy
solicitation materials with respect to any party to this
Agreement unless approved by that party, which approval
will not be unreasonably withheld.
(d) Glacier will pay all costs associated with the
preparation by Glacier's counsel and filing of the
Registration Statement. HUB will pay all costs
associated with (1) preparation of financial statements
or other sections of the Registration Statement and the
Prospectus/Proxy Statement by its employees,
accountants, financial advisors, or agents, and (2)
review by HUB's counsel of the Registration Statement
and the Prospectus/Proxy Statement. HUB will pay the
costs associated with the printing and mailing of the
Prospectus/Proxy Statement to its stockholders and any
other direct costs incurred by it in connection with the
Prospectus/Proxy Statement.
4.2.2 SUBMISSION TO STOCKHOLDERS.
(a) Glacier and HUB will submit the Prospectus/Proxy
Statement to, and will use their best efforts in good
faith to obtain the prompt approval of the
Prospectus/Proxy Statement by, all applicable regulatory
authorities. The parties will provide each other with
copies of such submissions for review.
(b) HUB will promptly take the actions necessary in
accordance with applicable law and its Articles of
Incorporation and Bylaws to convene a stockholders'
meeting to consider the approval of this Agreement and
to authorize the transactions contemplated by this
Agreement. This stockholders' meeting will be held on
the earliest practical date after the date the
Prospectus/Proxy Statement may first be sent to HUB's
stockholders without objection by applicable
governmental authorities; but HUB will have at least 30
calendar days to solicit proxies. HUB's
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board of directors and officers will recommend approval
of the Transaction to HUB's stockholders.
4.3 ACCOUNTING TREATMENT.
4.3.1 POOLING OF INTERESTS. The parties intend the Merger to be
treated as a "pooling of interests" for accounting purposes.
From the date of this Agreement through the Effective Date,
neither Glacier nor HUB nor any of their respective Subsidiaries
or other affiliates (a) will knowingly take any action or enter
into any contract, agreement, commitment or arrangement that
would jeopardize the treatment of the Merger as a "pooling of
interests;" or (b) will knowingly fail to take any action that
would preserve the treatment of the Merger as a "pooling of
interests." No action or omission by either party will
constitute a breach of this Subsection 4.3.1 if the action is
permitted or required under this Agreement or is made with the
other party's written consent.
4.3.2 AFFILIATE LIST. Certain persons may be deemed "affiliates" of
HUB under Securities Act Rule 145, the SEC's Accounting Series
Releases ("ASR") 130 and 135, or other rules and releases
related to "pooling of interests" accounting treatment. Within
thirty days following the date this Agreement is signed, HUB
will deliver to Glacier, after consultation with legal counsel,
a list of names and addresses of HUB's "affiliates" with respect
to the Transaction within the meaning of Rule 145 or ASR 130 and
135. By the Effective Date, HUB will deliver, or cause to be
delivered, to Glacier a letter from each of these "affiliates,"
and any additional person who becomes an "affiliate" before the
Effective Date and after the date of the list, dated as of the
date of its delivery and in the form attached as Exhibit A.
4.3.3 RESTRICTIVE LEGEND. Glacier may place a restrictive legend on
all Glacier shares to be received by an "affiliate," so as to
preclude their transfer or disposition in violation of the
affiliate letters. Glacier may also instruct its transfer agent
not to permit the transfer of those shares and may take any
other steps reasonably necessary to ensure compliance with the
Securities Act Rule 145 or the SEC's ASR 130 and 135 or other
rules and releases related to "pooling of interests" accounting
treatment.
4.3.4 RETENTION OF CERTIFICATES. Except as otherwise permitted in
Exhibit A, by a date at least 30 days before the Effective Date,
all stock certificates evidencing ownership of HUB Common Stock
by "affiliates" will be delivered to HUB. HUB (before the
Effective Date) and Glacier (after the Effective Date) will
retain those certificates, and subsequently the certificates
representing Glacier shares for which they are exchanged, until
financial results covering at least 30 days of combined
operations of the Continuing Corporation have been published, at
which time the certificates will be released.
4.4 SUBMISSION TO REGULATORY AUTHORITIES. Representatives of Glacier, at
Glacier's expense, will prepare and file with applicable regulatory
agencies, applications for approvals, waivers or other actions their
counsel finds necessary or desirable in order to consummate the
Transaction. Glacier will provide copies of these applications for HUB's
review. These applications and filings are expected to include:
(a) an application to the Federal Reserve; and
(b) any filings required under the MBCA or the Montana Bank Act;
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4.5 ANNOUNCEMENTS. The parties will cooperate and consult with each other
in the development and distribution of all news releases and other
public information disclosures with respect to this Agreement or the
Transaction, unless otherwise required by law.
4.6 CONSENTS. Glacier and HUB will use their best efforts to obtain the
consent or approval of any person, organization or other entity whose
consent or approval is required in order to consummate the Transaction.
4.7 FURTHER ACTIONS. Glacier and HUB, respectively, in the name and on
behalf of those respective parties, will use their best efforts in good
faith to make all arrangements, do or cause to be done all acts and
things, and execute and deliver all certificates and other instruments
and documents reasonably necessary or appropriate in order to consummate
the Transaction as promptly as practicable.
4.8 NOTICE. HUB will provide Glacier with prompt written notice of the
following:
(a) any events, individually or in the aggregate, that could have a
Material Adverse Effect with respect to HUB or the Bank;
(b) the commencement of any proceeding against HUB, the Bank, or any
of their Subsidiaries or affiliates, by or before any court or
governmental agency that, individually or in the aggregate,
might have a Material Adverse Effect with respect to HUB or the
Bank; or
(c) any acquisition of an ownership or leasehold interest in real
property, other than an acquisition in good faith of real
property to satisfy a debt previously contracted for.
4.9 CONFIDENTIALITY. Glacier and HUB each will, and HUB will cause the Bank
to, hold in confidence all nonpublic information obtained from the other
in connection with the Transaction, other than information that: (1) is
required by law to be disclosed; (2) is otherwise available on a
nonconfidential basis; (3) has become public without fault of the
disclosing party; or (4) is necessary to the defense of one of the
parties in a legal or administrative action brought against that party
by the other party. If the Transaction is not completed, Glacier and HUB
will, and HUB will cause the Bank to: (1) each return to the others all
confidential documents obtained from them and (2) not use any nonpublic
information obtained under this Agreement or in connection with the
Transaction.
4.10 UPDATE OF FINANCIAL STATEMENTS. Glacier will promptly deliver its
Financial Statements to HUB. Glacier will deliver Subsequent Glacier
Financial Statements to HUB by the earlier of: (1) 5 days after Glacier
prepares and issues them or (2) 60 days after year-end for year-end
statements and 30 days after the end of the quarter for quarterly
statements. The Subsequent Glacier Financial Statements will:
(a) be prepared from the books and records of Glacier;
(b) present fairly the financial position and operating results of
Glacier at the times indicated and for the periods covered;
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(c) be prepared in accordance with GAAP (except for the absence of
notes) and with the regulations promulgated by applicable
regulatory authorities, to the extent then applicable, subject
to normal year-end adjustments; and
(d) reflect all liabilities, contingent or otherwise, of Glacier on
the respective dates and for the respective periods covered,
except for liabilities not required to be so reflected in
accordance with GAAP or not significant in amount.
4.11 AVAILABILITY OF GLACIER'S BOOKS, RECORDS AND PROPERTIES. Glacier will
make available to HUB true and correct copies of its Certificate of
Incorporation and Bylaws. At HUB's reasonable request, Glacier will also
provide HUB with copies of: (1) reports filed with the SEC or banking
regulators and (2) the Glacier Stock Plans.
SECTION 5
APPROVALS AND CONDITIONS
5.1 REQUIRED APPROVALS. The obligations of the parties to this Agreement are
subject to the approval of the Agreement and the Transaction by all
appropriate regulatory agencies having jurisdiction with respect to the
Transaction.
5.2 CONDITIONS TO GLACIER'S OBLIGATIONS. All Glacier's obligations under
this Agreement are subject to satisfaction of the following conditions
at or before Closing:
5.2.1 REPRESENTATIONS. HUB's representations in this Agreement and in
any certificate or other instrument delivered in connection with
this Agreement are true and correct in all material respects at
Closing (except to the extent that they expressly relate to an
earlier date, in which case they are true in all material
respects as of that earlier date). These representations have
the same force and effect as if they had been made at Closing.
HUB has delivered to Glacier its certificate, executed by a duly
authorized officer of HUB and dated as of Closing, stating that
these representations comply with this Subsection 5.2.1.
5.2.2 COMPLIANCE. HUB has performed and complied with all material
terms, covenants and conditions of this Agreement. HUB has
delivered to Glacier its certificate, executed by a duly
authorized officer of HUB and dated as of Closing, stating that
HUB is in compliance with this Subsection 5.2.2.
5.2.3 EQUITY CAPITAL REQUIREMENT. The Tangible Equity Capital,
determined in accordance with GAAP, of HUB and the Bank on a
consolidated basis as of the Effective Date is at least $5.9
million. HUB's certificate referred to in Subsection 5.2.2 must
confirm that this condition is satisfied. Tangible Equity
Capital means common stock, paid in capital, retained earnings,
plus (or minus) net unrealized gain (or loss) on available for
sale securities and minus goodwill and any other intangible
assets.
5.2.4 TRANSACTION FEES STATEMENTS. HUB has delivered to Glacier a
statement, in a form reasonably satisfactory to Glacier, from
each third party to whom HUB has paid or owes Transaction Fees.
Each statement must set forth the total costs and expenses paid
or owing to the third party in connection with the Transaction's
consummation. HUB has delivered to Glacier its certificate,
executed by a duly authorized officer of HUB and
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dated as of Closing, stating the total Transaction Fees incurred
by HUB and certifying that HUB is in compliance with Subsection
1.3.3 and this Subsection 5.2.4.
5.2.5 AUDIT REPORT. HUB has delivered (no later than ten days before
Glacier filed the Registration Statement with the SEC) to
Glacier the completed and certified audit report of KPMG Peat
Marwick LLP , its independent certified public accountants, with
respect to HUB's audited consolidated statements of financial
condition as of December 31, 1997, and the related audited
statements of income, cashflows and changes in stockholders'
equity for the year ended December 31, 1997.
5.2.6 PLAN OF EXCHANGE EXECUTED. The Bank and HUB have used all
reasonable efforts to carry out the Plan of Exchange, unless
Glacier has determined that the Plan of Exchange would
jeopardize the Merger's treatment as a pooling of interests for
accounting purposes.
5.2.7 NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss
(whether or not covered by insurance) or other event or sequence
of events has occurred which, individually or in the aggregate,
has had or potentially may have a Material Adverse Effect with
respect to HUB or the Bank. HUB's certificate referred to in
Subsection 5.2.2 states that the conditions identified in this
Subsection 5.2.7 are satisfied.
5.2.8 FINANCIAL CONDITION. The following are true, and HUB's
certificate referred to in Subsection 5.2.2 confirms the truth
of the following:
(a) HUB's consolidated allowance for possible loan and lease
losses at Closing was and is adequate to absorb the
anticipated loan and lease losses (taking into account
any recommendations made by HUB's certified public
accountants);
(b) the reserves set aside for the contingent liabilities
reflected in the Subsequent HUB Financial Statements are
adequate to absorb all reasonably anticipated losses;
(c) the Bank's deposits at Closing, excluding brokered
deposits and jumbo certificates of deposit, total at
least $45 million; and
(d) HUB has provided Glacier with the audited HUB Financial
Statements required by this Agreement, and the audit has
revealed no required adjustment to previously unaudited
HUB Financial Statements that would have a Material
Adverse Effect upon HUB or the Bank.
5.2.9 NO CHANGE IN LOAN REVIEW. HUB has provided to Glacier the
reports reasonably requested by Glacier under Subsection 4.1.11,
and neither these reports nor any examinations conducted by
Glacier under Subsection 4.1.11 reveal a material adverse change
in either: (1) the information set forth in Schedule 7 or (2)
information revealed during Glacier's previous examinations of
the Bank's loans.
5.2.10 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
commenced or threatened by any governmental agency to restrain
or prohibit or invalidate the Transaction.
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5.2.11 APPROVAL BY COUNSEL. All actions, proceedings, instruments, and
documents required in connection with this Agreement, the
Transaction, and all other related legal matters have been
approved by Glacier's counsel.
5.2.12 RECEIPT OF TITLE POLICY. Glacier has received all title
insurance reports requested under Subsection 4.1.10, and HUB has
delivered to Glacier the update endorsements required by
Subsection 4.1.10.
5.2.13 CORPORATE AND STOCKHOLDER ACTION. HUB's board of directors and
HUB's stockholders have each approved the Transaction.
5.2.14 TAX OPINION. Glacier has, at Glacier's expense, obtained from
Graham & Dunn, P.C. and delivered to HUB, an opinion addressed
to HUB and in form and substance reasonably satisfactory to HUB
and its counsel, to the effect that consummation of the
Transaction will not result in a taxable event for HUB or
Glacier, and otherwise will have each of the effects specified
below:
(a) The Transaction will qualify as a reorganization within
the meaning of IRC Section 368(a)(1)(A).
(b) Under IRC Section 354(a)(i), HUB's stockholders who, in
accordance with Section 1, exchange their HUB Common
Stock shares solely for Continuing Corporation Common
Stock shares will not recognize gain or loss on the
exchange.
(c) Cash payments to HUB's stockholders in lieu of a
fractional share of Continuing Corporation Common Stock
will be treated as distributions in redemption of the
fractional share interest, subject to the limitations of
IRC Section 302.
5.2.15 OPINION OF COUNSEL. HUB has obtained from Holland & Hart LLP,
subject to customary qualifications and assumptions, and
delivered to Glacier an opinion of counsel, addressed to
Glacier, to the effect that:
(a) HUB is a corporation validly existing and in good
standing under Montana law;
(b) the Bank is a Montana state-chartered commercial bank
validly existing and in good standing under Montana law;
(c) HUB has the corporate power and authority to execute,
deliver, and perform this Agreement;
(d) the execution, delivery, and performance of this
Agreement have been duly authorized by all necessary
corporate action on the part of HUB, and this Agreement
constitutes HUB's legal, binding, and valid obligation,
enforceable in accordance with its terms, except to the
extent that enforcement (but not validity) may be
limited by bankruptcy, insolvency, fraudulent
conveyances reorganization, moratorium, or similar laws
generally affecting the enforcement of the rights of
creditors and by generally applicable principles of
equity;
(e) all issued and outstanding shares of HUB's and the
Bank's capital stock have been duly authorized and are
validly issued, fully paid, non-assessable (except
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as to assessments required under the Montana Bank Act),
free of preemptive or similar rights arising by
operation of law, under applicable corporate statutes or
under HUB's or the Bank's bylaws or articles of
incorporation, and have been issued in compliance with
all applicable federal and applicable state securities
laws;
(f) Neither HUB nor the Bank have any written stock option
or other plans or agreements granting options or other
rights to acquire HUB Common Stock or Bank Common Stock,
and to counsel's knowledge, no options or other rights
to acquire HUB Common Stock or Bank Common Stock are
outstanding;
(g) counsel has no knowledge of any pending or threatened
claims, actions, suits or legal or equitable proceedings
before any governmental agency which, in counsel's
opinion would be, individually or in the aggregate,
reasonably likely to result in liability in excess of
$25,000 or prevent consummation of the Transaction; and
(h) execution of this Agreement and consummation of the
Transaction will not violate (1) any applicable statutes
or regulations, (2) HUB's or the Bank's articles of
incorporation or bylaws, or (3) the terms of any
material contract or other obligation entered into
before the date of this opinion by HUB or the Bank.
5.2.16 CASH PAID. The aggregate of the cash paid for fractional shares
and Dissenting Shares to holders of HUB Common Stock under this
Agreement and applicable law will not exceed 10% of the Purchase
Price, as it may be adjusted under this Agreement.
5.2.17 AFFILIATE LETTERS. Glacier has received the affiliate list and
letters specified in Subsection 4.3.2.
5.2.18 REGISTRATION STATEMENT. The Registration Statement, as it may
have been amended, required in connection with the Glacier
shares to be issued to stockholders under Subsection 1.3, and as
described in Subsection 4.2, has become effective, and no stop
order suspending the effectiveness of the Registration Statement
has been issued or remains in effect, and no proceedings for
that purpose have been initiated or threatened by the SEC the
basis for which still exists.
5.2.19 CONSENTS. HUB has obtained the consents as indicated in
Schedule 6.
5.2.20 FAIRNESS OPINIONS. HUB has received from Columbia, two updated
fairness opinions (to be delivered by HUB to Glacier at HUB's
expense), one dated immediately before HUB mails the
Prospectus/Proxy Statement to its stockholders and the other
dated immediately before Closing, to the effect that the
financial terms of the Transaction are financially fair to HUB's
stockholders. Glacier and HUB will each provide the other's
investment advisor with any information reasonably requested for
the purpose of issuing a fairness opinion.
5.2.21 ACCOUNTING TREATMENT. It has been determined to Glacier's
satisfaction that the Transaction will be treated for accounting
purposes as a "pooling of interests" in accordance with APB
Opinion No. 16, and Glacier has received a letter to this effect
from KPMG Peat Marwick LLP, certified public accountants.
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5.2.22 SOLICITATION OF EMPLOYEES. Neither any member of HUB's board of
directors nor any entity with which any such director is
affiliated has solicited any employee of HUB or Glacier with the
intention of causing the employee to terminate her employment
with HUB or Glacier, as the case may be.
5.2.23 OTHER MATTERS. Glacier has received any other opinions,
certificates, and documents that Glacier reasonably requests in
connection with this Agreement and the Transaction.
5.3 CONDITIONS TO HUB'S OBLIGATIONS. All HUB's obligations under this
Agreement are subject to satisfaction of the following conditions at or
before Closing:
5.3.1 REPRESENTATIONS. Glacier's representations in this Agreement
and in any certificate or other instrument delivered in
connection with this Agreement are true and correct in all
material respects at Closing (except to the extent that they
expressly relate to an earlier date, in which case they are true
in all material respects as of that earlier date). These
representations have the same force and effect as if they had
been made at Closing. Glacier has delivered to HUB its
certificate, executed by a duly authorized officer of Glacier
and dated as of Closing, stating that these representations
comply with this Subsection 5.3.1.
5.3.2 COMPLIANCE. Glacier has performed and complied with all terms,
covenants and conditions of this Agreement. Glacier has
delivered to HUB its certificate, executed by a duly authorized
officer of Glacier and dated as of Closing, stating that Glacier
is in compliance with this Subsection 5.3.2.
5.3.3 NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss
(whether or not covered by insurance) or other event or sequence
of events has occurred which, individually or in the aggregate,
has had or potentially may have a Material Adverse Effect with
respect to Glacier. Glacier's certificate referred to in
Subsection 5.3.2 states that the conditions identified in this
Subsection 5.3.3 are satisfied.
5.3.4 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
commenced or threatened by any governmental agency to restrain
or prohibit or invalidate the Transaction.
5.3.5 CORPORATE AND STOCKHOLDER ACTION. Glacier's board of directors
and HUB's stockholders have each approved the Transaction.
5.3.6 TAX OPINION. The tax opinion specified in Subsection 5.2.14 has
been delivered to HUB.
5.3.7 OPINION OF COUNSEL. Glacier has obtained from Graham & Dunn,
P.C., subject to customary qualifications and assumptions, and
delivered to HUB an opinion, addressed to HUB, to the effect
that:
(a) Glacier is a corporation validly existing and in good
standing under Delaware law;
(b) Glacier has the corporate power and authority to
execute, deliver, and perform this Agreement;
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(c) the execution, delivery, and performance of this
Agreement have been duly authorized by all necessary
corporate action on Glacier's part, and this Agreement
constitutes Glacier's legal, binding, and valid
obligation, enforceable in accordance with its terms,
except to the extent that enforcement (but not validity)
may be limited by bankruptcy, insolvency, fraudulent
conveyances reorganization, moratorium, or similar laws
generally affecting the enforcement of the rights of
creditors and by generally applicable principles of
equity;
(d) the Glacier Shares have been duly authorized and, when
issued as contemplated by this Agreement, will be
validly issued, fully paid and nonassessable, and free
of preemptive or similar rights arising under applicable
corporate statutes or under Glacier's bylaws or
certificate of incorporation;
(e) the Registration Statement became effective under the
Securities Act on ____________, 1998, and, to the best
of counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been
instituted or threatened by the Securities and Exchange
Commission;
(f) counsel has no knowledge of any pending or threatened
claims, actions, suits or legal or equitable proceedings
before any governmental agency which, in counsel's
opinion would be, individually or in the aggregate,
reasonably likely to result in liability in excess
$50,000 or prevent consummation of the Transaction; and
(g) all required federal regulatory approvals have been
obtained.
5.3.8 FAIRNESS OPINION. HUB has received from Columbia, two updated
fairness opinions, one dated immediately before HUB mails the
Prospectus/Proxy Statement to its stockholders and the other
dated immediately before Closing, to the effect that the
financial terms of the Transaction are financially fair to HUB's
stockholders.
5.3.9 CASH PAID. The aggregate of the cash paid to holders of HUB
Common Stock under this Agreement and applicable law will not
exceed 10% of the Purchase Price, as it may be adjusted under
this Agreement.
5.3.10 REGISTRATION STATEMENT. The Registration Statement, as it may
have been amended, required in connection with the Glacier
shares to be issued to stockholders under Subsection 1.3, and as
described in Subsection 4.2, has become effective, and no stop
order suspending the effectiveness of such Registration
Statement has been issued or remains in effect, and no
proceedings for that purpose have been initiated or threatened
by the SEC the basis for which still exists.
5.3.11 DIRECTOR APPOINTMENT. Effective as of Closing, Glacier has
appointed Fred J. Flanders to serve on Glacier's board of
directors.
5.3.12 APPROVAL BY COUNSEL. All actions, proceedings, instruments, and
documents required in connection with this Agreement, the
Transaction, and all other related legal matters have been
approved by counsel for HUB and the Bank.
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SECTION 6
DIRECTORS, OFFICERS AND EMPLOYEES
6.1 DIRECTORS. As a condition to the execution of this Agreement, each
member of HUB's and the Bank's boards of directors have entered into a
written noncompetition agreement with Glacier, HUB, and the Bank, on or
before the date this Agreement is signed. These noncompetition
agreements will take effect on the Effective Date.
6.2 DIRECTOR APPOINTMENT. Effective as of the Effective Date, Glacier will
elect or appoint Fred J. Flanders to Glacier's board of directors to
serve until his successor is elected and qualified. Nothing in this
Subsection 6.2 or this Agreement restricts in any way any rights of the
Glacier's stockholders and directors at any time after the Effective
Date to nominate, elect, select, or remove Glacier's directors.
6.3 EMPLOYMENT AGREEMENT. Glacier has entered into an employment agreement,
effective as of the Effective Date, with Fred J. Flanders, the Bank's
current President and CEO. As part of the employment agreement, Mr.
Flanders waives all rights he may have under any previous employment
agreements with HUB or the Bank.
6.4 EMPLOYEES. Glacier presently intends to allow the Bank's employees who
are employed with the Bank following the Transaction ("Continuing
Employees") to participate in certain employee benefit plans in which
employees of Glacier currently participate. Glacier intends to grant
Continuing Employees credit for prior service with the Bank for purposes
of determining eligibility and vesting, but Continuing Employees will
not receive this credit for purposes of determining benefit accruals.
Benefits for Continuing Employees will begin accruing under Glacier's
plans as soon as practicable and no later than January 1, 1999. This
expression of intent is not a contract with the Bank's employees and
will not be construed to create a contract or employment right with the
Bank's employees.
6.5 EMPLOYEE BENEFIT ISSUES.
6.5.1 COMPARABILITY OF BENEFITS. Glacier confirms to HUB its present
intention to provide Continuing Employees with employee benefit
programs which, in the aggregate, are generally competitive with
employee benefit programs offered by financial institutions of
comparable size located in Glacier's market area.
6.5.2 TERMINATION AND TRANSFER/MERGER OF PLANS. As soon as practicable
after Closing, all employee benefit plans of HUB and its
Subsidiaries will be terminated and the interests of Continuing
Employees in those plans will be transferred or merged into
Glacier's employee benefit plans.
6.5.3 NO CONTRACT CREATED. Nothing in this Agreement gives any
employee of HUB or its Subsidiaries a right to continuing
employment.
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SECTION 7
TERMINATION OF AGREEMENT AND
ABANDONMENT OF TRANSACTION
7.1 Termination by Reason of Lapse of Time. If Closing does not occur before
the Termination Date, either Glacier or HUB may terminate this Agreement
and the Transaction if all of the following conditions are present:
(a) the terminating party's board of directors decides to terminate
by a majority vote of its members;
(b) the terminating party delivers to the other party written notice
that its board of directors has voted in favor of termination;
and
(c) the failure to consummate the Transaction by the Termination
Date is not due to a breach by the party seeking termination of
any of its obligations, covenants, or representations in this
Agreement.
7.2 OTHER GROUNDS FOR TERMINATION. This Agreement and the Transaction may be
terminated at any time before Closing (whether before or after
applicable approval of this Agreement by HUB's stockholders, unless
otherwise provided) as follows:
7.2.1 MUTUAL CONSENT. By mutual consent of HUB and Glacier, if the
boards of directors of each party agrees to terminate by a
majority vote of its members.
7.2.2 HUB'S CONDITIONS NOT MET. By Glacier's board of directors if, by
August 31, 1998, any condition set forth in Subsections 5.1 or
5.2 has not been satisfied.
7.2.3 GLACIER'S CONDITIONS NOT MET. By HUB's board of directors if, by
August 31, 1998, any condition set forth in Subsections 5.1 or
5.3 has not been satisfied.
7.2.4 HUB FAILS TO RECOMMEND STOCKHOLDER APPROVAL OR OPTION BECOME
EXERCISABLE. By Glacier's board of directors (a) before HUB's
stockholders approve the Transaction, if HUB's board of
directors: (1) fails to recommend to its stockholders the
approval of the Transaction or (2) modifies, withdraws or
changes in a manner adverse to Glacier its recommendation to
stockholders to approve the Transaction; or (b) the option
granted by HUB to Glacier under the Stock Option Agreement
becomes exercisable by Glacier, unless Glacier exercises its
rights under the Stock Option Agreement.
7.2.5 IMPRACTICABILITY. By either Glacier or HUB, upon written notice
given to the other party, if the party seeking termination under
this Subsection 7.2.5's board of directors has determined in its
sole judgment, made in good faith and after due consideration
and consultation with counsel, that the Transaction has become
inadvisable or impracticable by reason of the institution of
litigation by the federal government or the government of the
State of Montana to restrain or invalidate the Transaction or
this Agreement.
7.3 HUB TERMINATION FEE. HUB acknowledges that Glacier has incurred
expenses, direct and indirect, in negotiating and executing this
Agreement and in taking steps to effect Transaction. Accordingly, HUB
will pay to Glacier $250,000, if (1) this Agreement terminates because
HUB does not use all reasonable efforts to consummate the Transaction in
accordance with the terms of this Agreement; (2) HUB terminates this
Agreement for any reason other than the
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grounds for termination set forth in Subsections 7.1, 7.2.1, 7.2.3 or
7.2.5; or (3) Glacier terminates this Agreement under Subsections 7.2.2
(other than for failure of a condition set forth in Subsections 5.1,
5.2.10, 5.2.11, 5.2.14, 5.2.18, 5.2.20, 5.2.21, and 5.2.23, unless the
failure of any of those conditions is due to HUB's fault) or 7.2.4. If
this termination fee becomes payable, it will be payable on Glacier's
demand and must be paid by HUB within 3 business days of the date
Glacier makes the demand. Glacier's rights under the Stock Option
Agreement are in addition to this Subsection 7.3, and this Subsection
7.3 does not limit or restrict these rights or the circumstances under
which Glacier may exercise the Option.
7.4 GLACIER TERMINATION FEE. Due to expenses, direct and indirect, incurred
by HUB in negotiating and executing this Agreement and in taking steps
to effect the Transaction, Glacier will pay to HUB $100,000 if (1) this
Agreement terminates because Glacier does not use all reasonable efforts
to consumate the Transaction in accordance with the terms of this
Agreement (2) Glacier terminates this Agreement for any reason other
than the grounds for termination set forth in Subsections 7.1, 7.2.2,
7.2.4, or 7.2.5, or (3) HUB terminates this Agreement under Subsection
7.2.3 (other than for failure of a condition set forth in 5.1, 5.3.4,
5.3.5, 5.3.6, 5.3.8, 5.3.9, 5.3.10, and 5.3.12, unless the failure of
any of those conditions is due to Glacier's fault). If this termination
fee becomes payable, it will be payable on HUB's demand and must be paid
by Glacier within three business days of the date HUB makes the demand.
7.5 COST ALLOCATION UPON TERMINATION. In connection with the termination of
this Agreement under this Section 7, except as provided in Subsection
7.3 and 7.4, Glacier and HUB will each pay their own out-of-pocket costs
incurred in connection with this Agreement, and will have no other
liability to the other party. But, termination of this Agreement does
not affect Glacier's rights under the Stock Option Agreement or the
circumstances under which Glacier may exercise the Option.
SECTION 8
MISCELLANEOUS
8.1 NOTICES. Any notice, request, instruction or other document given under
this Agreement must be in writing and must either be delivered
personally or via facsimile transmission or be sent by registered or
certified mail, postage prepaid, and addressed as follows (or to any
other address or person representing any party as designated by that
party through written notice to the other party):
Glacier Glacier Bancorp, Inc.
P.O. Box 27
202 Main Street
Kalispell, MT 59903-0027
Attn: John S. MacMillan
with a copy to: Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
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HUB HUB Financial Corporation
P.O. Box 5269
3030 N. Montana Ave.
Helena, MT 59601-0551
Attn: Thomas F. Dowling
with a copy to: David R. Chisholm, Esq.
Holland & Hart LLP
Suite 1500, First Interstate Center
401 North 31st Street
P.O. Box 639
Billings, MT 59101
8.2 WAIVERS AND EXTENSIONS. Subject to Section 9, Glacier or HUB may grant
waivers or extensions to the other party, but only through a written
instrument executed by the Chief Executive Officer of the party granting
the waiver or extension. Waivers or extensions which do not comply with
the preceding sentence are not effective. In accordance with this
Section 8.2, a party may extend the time for the performance of any of
the obligations or other acts of any other party, and may waive:
(a) any inaccuracies of any other party in the representations
contained in this Agreement or in any document delivered in
connection with this Agreement;
(b) compliance with any of the covenants of any other party; and
(c) any other party's performance of any obligations under this
Agreement and any other condition precedent set out in Section
5.
8.3 GENERAL INTERPRETATION. Except as otherwise expressly provided in this
Agreement or unless the context clearly requires otherwise: (1) the
defined terms defined in this Agreement include the plural as well as
the singular and (2) references in this Agreement to Sections,
Subsections, Schedules, and Exhibits refer to Sections and Subsections
of and Schedules and Exhibits to this Agreement. Whenever the words
"include", "includes", or "including" are used in this Agreement, the
parties intend them to be interpreted as if they are followed by the
words "without limitation." All pronouns used in this Agreement include
the masculine, feminine and neuter gender, as the context requires. All
accounting terms used in this Agreement that are not expressly defined
in this Agreement have the respective meanings given to them in
accordance with GAAP.
8.4 CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise
expressly provided in this Agreement, this Agreement: (1) contains the
parties' entire understanding, and no modification or amendment of its
terms or conditions will be effective unless in writing and signed by
the parties, or their respective duly authorized agents; (2) will not be
interpreted by reference to any of the titles or headings to the
Sections or Subsections, which have been inserted for convenience only
and are not deemed a substantive part of this Agreement; (3) includes
all amendments to this Agreement, each of which is made a part of this
Agreement by this reference; and (4) may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
taken together will constitute one and the same document.
8.5 SURVIVAL OF REPRESENTATIONS AND COVENANTS. The representations and
covenants in this Agreement will not survive Closing or termination of
this Agreement, except that (1) Subsection
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4.9 (confidentiality), Subsection 7.3 (termination fee), and Subsection
7.5 (expense allocation) will survive termination and Closing, and (2)
the covenants in this Agreement that impose duties or obligations on the
parties following Closing will survive Closing.
8.6 ATTORNEYS' FEES AND COSTS. In the event of any dispute or litigation
with respect to the terms and conditions or enforcement of rights or
obligations arising by reason of this Agreement or the Transaction, the
prevailing party in any such litigation will be entitled to
reimbursement from the other party for its costs and expenses, including
reasonable judicial and extra-judicial attorneys' fees, expenses and
disbursements, and fees, costs and expenses relating to any mediation or
appeal.
8.7 ARBITRATION. At either party's request, the parties must submit any
dispute, controversy or claim arising out of or in connection with, or
relating to, this Agreement or any breach or alleged breach of this
Agreement, to arbitration under the American Arbitration Association's
rules then in effect (or under any other form of arbitration mutually
acceptable to the parties). A single arbitrator agreed on by the parties
will conduct the arbitration. If the parties cannot agree on a single
arbitrator, each party must select one arbitrator and those two
arbitrators will select a third arbitrator. This third arbitrator will
hear the dispute. The arbitrator's decision is final (except as
otherwise specifically provided by law) and binds the parties, and
either party may request any court having jurisdiction to enter a
judgment and to enforce the arbitrator's decision. The arbitrator will
provide the parties with a written decision naming the substantially
prevailing party in the action. This prevailing party is entitled to
reimbursement from the other party for its costs and expenses, including
reasonable attorneys' fees.
8.8 GOVERNING LAW AND VENUE. This Agreement will be governed by and
construed in accordance with Montana law, except to the extent that
certain matters may be governed by federal law. The parties must bring
any legal proceeding arising out of this Agreement in Flathead County,
Montana.
8.9 SEVERABILITY. If a court determines that any term of this Agreement is
invalid or unenforceable under applicable law, the remainder of this
Agreement is not affected, and each remaining term is valid and
enforceable to the fullest extent permitted by law.
SECTION 9
AMENDMENTS
At any time before the Effective Date, whether before or after the
parties have obtained any applicable stockholder approvals of the Transaction,
the boards of directors of Glacier and HUB may: (1) amend or modify this
Agreement or any attached Exhibit or Schedule and (2) grant waivers or time
extensions in accordance with Subsection 8.2. But, after HUB's stockholders have
approved this Agreement, the parties' boards of directors may not without HUB
stockholder approval amend or waive any provision of this Agreement if the
amendment or waiver would reduce the amount or change the form of consideration
HUB stockholders will receive in the Transaction. All amendments, modifications,
extensions and waivers must be in writing and signed by the party agreeing to
the amendment, modification, extension or waiver. Failure by any party to insist
on strict compliance by the other party with any of its obligations, agreements
or conditions under this Agreement, does not,without a writing, operate as a
waiver or estoppel with respect to that or any other obligation, agreement, or
condition.
Signed as of December 30, 1997:
39
<PAGE> 156
GLACIER BANCORP, INC., INC.
By /s/ John S. MacMillan
-----------------------------------
Name: John S. MacMillan
Title: Chairman, President and CEO
HUB FINANCIAL CORPORATION
By /s/ THOMAS F. DOWLING
-----------------------------------
Name: Thomas F. Dowling
Title: President and CEO
40
<PAGE> 157
STATE OF MONTANA )
) ss.
COUNTY OF FLATHEAD )
On this 30th day of December, 1997, before me personally appeared John
S. MacMillan, to me known to be the Chairman of the Board, President and Chief
Executive Officer of GLACIER BANCORP, INC., the corporation that executed the
foregoing instrument, who acknowledged said instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes mentioned
there, and who stated on oath that he was authorized to execute said instrument,
and that the seal affixed (if any) was the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
/s/
-----------------------------------
NOTARY PUBLIC in and for the State
of Montana, residing at___________.
Title:____________________________.
My commission expires:____________.
STATE OF MONTANA )
) ss.
COUNTY OF LEWIS AND CLARK )
On this 30th day of December, 1997, before me personally appeared Thomas
F. Dowling, to me known to be the President and Chief Executive Officer of HUB
FINANCIAL CORPORATION, the corporation that executed the foregoing instrument,
who acknowledged said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes mentioned there, and who stated on
oath that he was authorized to execute said instrument, and that the seal
affixed (if any) was the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
/s/
-----------------------------------
NOTARY PUBLIC in and for the State
of Montana, residing at___________.
Title:____________________________.
My commission expires:____________.
41
<PAGE> 158
The undersigned, all being officers or members of the board of directors
of either HUB Financial Corporation ("HUB") or Valley Bank of Helena ("Bank"),
hereby consent to the Plan and Agreement of Merger ("Agreement"), dated as of
December 30, 1997, between Glacier Bancorp, Inc., Inc. and HUB, and individually
and as a group agree to vote in favor of the Agreement the shares of capital
stock each beneficially owns and, subject to the good faith exercise of their
fiduciary duties in accordance with the advice of counsel, to support and
recommend the Agreement's adoption by the other stockholders of HUB.
Except as otherwise required by law, the undersigned hereby,
individually and as a group, further agree to refrain from (a) negotiating or
accepting any offer of merger, consolidation, or acquisition of any of the
shares or all or substantially all of the assets of HUB from the date of the
Agreement through the meeting of the stockholders of HUB at which the
transactions contemplated by the Agreement will be considered, and (b) any other
actions or omissions inconsistent with the transactions contemplated by the
Agreement.
/s/ THOMAS F. DOWLING /s/ FRED J. FLANDERS
- ------------------------------------- -----------------------------------
Thomas F. Dowling Fred J. Flanders
Chairman of HUB and Director of Bank Director of Bank
/s/ ROBERT J. PECCIA /s/ DR. HARRISON D. HANSON
- ------------------------------------- -----------------------------------
Robert J. Peccia Dr. Harris D. Hanson
Vice Chairman of HUB and Director of Bank Director of Bank
/s/ JAMES H. FOLEY /s/ JEROME T. LOENDORF
- ------------------------------------- -----------------------------------
James H. Foley Jerome T. Loendorf
Chairman of Bank Director of Bank
/s/ JAMES T. HARRISON, JR. /s/ DR. GARY L. MIHELISH
- ------------------------------------- -----------------------------------
James T. Harrison, Jr. Dr. Gary L. Mihelish
Director of Bank Director of Bank
/s/ JOSEPH G. LOENDORF /s/ JOAN POSTON
- ------------------------------------- -----------------------------------
Joseph G. Loendorf Joan Poston
Director of HUB Director of Bank
/s/ MARY D. MUNGER /s/ JOHN J. POSTON
- ------------------------------------- -----------------------------------
Mary D. Munger John P. Poston
Director of Bank Director of Bank
42
<PAGE> 159
APPENDIX B
FIRST AMENDMENT OF PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
HUB FINANCIAL CORPORATION
This First Amendment of Plan and Agreement of Merger (the "Amendment")
is made and entered into as of June 30, 1998, by and between GLACIER BANCORP,
INC. ("Glacier"), a Delaware Corporation and HUB FINANCIAL CORPORATION ("HUB"),
a Montana corporation.
RECITALS
A. Glacier and HUB entered into a Plan and Agreement of Merger dated as
of December 30, 1997 (the "Agreement") pursuant to which (i) HUB will be merged
with and into Glacier under the corporate title Glacier Bancorp, Inc. (the
"Continuing Corporation"), and (ii) except as provided in the Agreement, the
outstanding shares of HUB common stock will be converted into common stock
shares of the Continuing Corporation.
B. Subsequent to the signing of the Agreement, Glacier discovered
certain technical issues associated with its capital stock, including the
existence of fewer authorized shares than previously believed. Because the
technical issues have created uncertainty about the validity of certain
outstanding shares of Glacier common stock, Glacier intends to complete a
curative transaction (the "Curative Transaction") whereby Glacier will be merged
with and into a newly formed subsidiary, GB, Inc. under the corporate title
Glacier Bancorp, Inc. (the "New Glacier"). New Glacier will have a corporate
existence identical to that of Glacier, except New Glacier will have a larger
number of authorized shares. After the Curative Transaction, New Glacier will be
the successor in interest to all of the rights and liabilities of Glacier under
the Agreement.
C. GB, Inc. was incorporated in Delaware on March 24, 1998. In order to
proceed with the Curative Transaction, a Registration Statement was filed with
the SEC on April 24, 1998. The SEC reviewed the Registration Statement, and
amendments thereto were filed on June 2, 1998, and June 4, 1998. On June 5,
1998, the SEC approved the Registration Statement; subsequently, a joint Proxy
and Notice of Annual Meeting dated June 5, 1998 was mailed to Glacier
shareholders. It is anticipated that Glacier shareholders will approve the
Curative Transaction at Glacier's annual meeting to be held July 8, 1998.
Assuming shareholder approval, the Curative Transaction should be consummated no
later than July 15, 1998.
D. Because of the technical issues involving Glacier's capital stock and
the effects of the Curative Transaction, Glacier and HUB now wish to amend the
terms of the
1
<PAGE> 160
Agreement as set forth in this Amendment. In addition, the merger of HUB with
and into Glacier will now be subject to approval by New Glacier's shareholders.
E. It is the intent of Glacier and HUB that following the Curative
Transaction, New Glacier shall assume all of Glacier's obligations and be
assigned all of Glacier's rights under the Agreement and the Plan of Exchange.
F. By execution of this Amendment, the parties hereto authorize
amendment of the Agreement and Plan of Share Exchange dated as of December 30,
1997 between Glacier and Valley Bank of Helena.
G. Unless otherwise defined in this Amendment, capitalized terms used in
this Amendment have the meanings assigned to them in the Agreement.
TERMS OF AMENDMENT
In consideration of the foregoing, Glacier and HUB agree as follows:
1. Except as otherwise specifically stated by reference to "Old
Glacier," the term "Glacier" as used throughout the Agreement shall mean "New
Glacier" following the merger of Glacier with and into GB, Inc.
2. Subsection 1.3.3 of the Agreement is amended to increase HUB's
expense limitation from $100,000 to $110,000.
3. Subsection 3.1.3 (a) of the Agreement is amended by deleting
paragraphs (1) and (4) and inserting the following paragraphs in place thereof:
(1) before the Effective Date, Glacier's authorized capital stock
shall consist of 16 million shares divided into two classes: (i)
15 million shares of common stock, par value $.01 per share
("Glacier Common Stock"), 6,943,534 of which shall be issued and
outstanding and (ii) 1 million shares of blank-check preferred
stock, par value $.01 per share, none of which shall be
outstanding ("Glacier Preferred Stock");
(4) before the Effective Date, all outstanding shares of Glacier
common stock shall be duly authorized and validly issued and
shall be fully paid and nonassessable;
Subsection 3.1.3 (a) of the Agreement is further amended by adding the
following new paragraphs after the text of paragraph (6):
(7) The Curative Transaction has not, and will not, have an adverse
effect on either (a) the intended accounting and federal income
tax treatment of the Merger as described in Recital J or Section
4.3.1 of the Agreement; or (b) the ability of Glacier to obtain
the
2
<PAGE> 161
opinions or letters set forth in Sections 5.2.14, 5.2.21 and
5.3.7 of the Agreement.
(8) Glacier has obtained from Duane, Morris & Heckscher, L.L.P.,
subject to customary qualifications and assumptions, an opinion
to the effect that, for federal income tax purposes, no gain or
loss will be recognized by Glacier as a result of the Curative
Transaction.
4. Subsection 3.1.4 (a) of the Agreement is amended to read as follows:
It has the requisite corporate power and authority and has taken
all corporate action necessary in order to execute and deliver
this Agreement and complete the Transaction, subject only to the
approval by its stockholders of the Plan of Merger contained
in this Agreement to the extent required by MBCA Sections
35-1-815 and 35-1-819 and Del. Corp. Stat., Title 8, Section
252.
5. Subsection 3.1.5 (c) of the Agreement is amended by adding the phrase
"Except as set forth in Schedule 1," to the beginning of such subsection.
6. Section 4 of the Agreement is amended by adding the following new
section immediately after the text of Section 4.11 of the Agreement:
4.12 CONSUMMATION OF CURATIVE TRANSACTION. Prior to closing, Glacier
will consummate a merger with and into its newly formed
subsidiary, GB, Inc., consistent with the Agreement and Plan of
Merger dated as of March 25, 1998 between Glacier and GB, Inc.
7. Subsection 5.3.5 of the Agreement is amended to read as follows:
The boards of directors and stockholders of both Glacier and HUB
have approved the Transaction.
8. Section 5.3 of the Agreement is amended by adding the following new
subsections immediately after the text of Subsection 5.3.12 of the Agreement:
5.3.13 OPINION OF DELAWARE COUNSEL. Glacier has obtained from
Duane, Morris & Heckscher, L.L.P., subject to customary
qualifications and assumptions delivered to Glacier and
addressed to Glacier (and reasonably acceptable to HUB),
an opinion to the effect that:
(a) New Glacier is a corporation validly existing
and in good standing under Delaware law;
(b) The issued and outstanding common stock of New
Glacier has been validly issued, and is fully
paid and nonassessable and consists of
authorized capital stock of 16 million shares
divided into two classes: (i) 15 million shares
of common
3
<PAGE> 162
stock, par value $.01 per share, of which
6,833,693 shares were issued and outstanding
immediately following the effective date of the
Curative Transaction; and (ii) 1 million shares
of blank-check preferred stock, par value $.01
per share, of which no shares were issued and
outstanding immediately following the effective
date of the Curative Transaction.
(c) New Glacier has, by effect of the merger of GB,
Inc. and Old Glacier, succeeded to all the
assets of Old Glacier and is subject to the
liabilities and obligations of Old Glacier,
including the Old Glacier obligations under the
Agreement and the Plan of Exchange.
(d) The Curative Transaction was duly authorized by
all necessary corporate action of Old Glacier
and GB, Inc. and has been consummated in
accordance with the Delaware General Corporation
Laws, and the Certificates of Incorporation and
bylaws of Old Glacier and GB, Inc.
(e) Counsel has no knowledge of any pending or
threatened claims, actions, suits or legal or
equitable proceedings before any court or
governmental agency (other than the Delaware
declaratory judgment action filed by Glacier on
March 9, 1998, seeking a declaration that the
Curative Transaction complies with Delaware
law), asserting, in whole or in part, the
invalidity of (i) the Curative Transaction, (ii)
the shares of New Glacier capital stock issued
as a result of the Curative Transaction, or
(iii) any corporate authority, or action taken,
in respect of the Curative Transaction.
5.3.14 ABSENCE OF LITIGATION. No suit or other proceeding shall
be pending, or to the knowledge of Glacier, threatened,
which asserts, in whole or in part, the invalidity of
the Curative Transaction or of the shares of capital
stock issued in the Curative Transaction or of any
corporate authority or action taken in respect to the
Curative Transaction.
5.3.15 CONSUMMATION OF CURATIVE TRANSACTION. Glacier shall have
delivered to HUB a Certificate of Merger issued by the
Delaware Secretary of State, which certificate shall
evidence consummation of the Curative Transaction.
4
<PAGE> 163
9. Section 7.2 of the Agreement is amended by deleting Subsections 7.2.2
and 7.2.3 and inserting the following subsections in place thereof:
7.2.2 HUB'S CONDITIONS NOT MET. By Glacier's board of
directors if, by October 31, 1998, any condition set
forth in Subsections 5.1 or 5.2 has not been satisfied.
7.2.3 GLACIER'S CONDITIONS NOT MET. By HUB's board of
directors if, by October 31, 1998, any condition set
forth in Subsections 5.1 or 5.3 has not been satisfied.
10. Section 7.4 of the Agreement is amended to increase Glacier's
termination fee from $100,000 to $110,000.
11. Section 8 of the Agreement is amended by adding the following new
section immediately after the text of Section 8.9 of the Agreement:
8.10 SUCCESSORS AND ASSIGNS. The terms of this Agreement
shall be binding and shall apply will full force and
effect GB, Inc., as successor in interest to Glacier.
12. Schedule 1 of the Agreement is amended to read as set forth on the
attachment to this Amendment.
13. Except as expressly set forth in this Amendment, the execution,
delivery, and performance of this Amendment will not operate as a waiver or
amendment of any right, power, or remedy of the parties under the Agreement.
14. Except as otherwise expressly set forth in this Amendment, all of
the terms, conditions, and covenants of the Agreement remain in full force and
effect.
15. This Amendment may be executed and delivered in separate
counterparts, all of which taken together will constitute one and the same
instrument. Each party to this Amendment may accomplish such execution and
delivery by signing a counterpart of this Amendment and sending such counterpart
by facsimile to the other parties. Upon the request of any party, the other
parties will deliver an executed original of this Amendment; provided, however,
that the failure to deliver such original will not affect the validity,
enforceability, and/or binding effect of this Amendment.
[Signatures appear on next page]
5
<PAGE> 164
This Amendment has been executed and delivered by duly authorized
officers of Glacier and HUB, and acknowledged and consented to by GB, Inc., as
of the date above written.
GLACIER BANCORP, INC.
By /s/ JOHN S. MACMILLAN
-----------------------------------
Name: John S. MacMillan
Title: Chairman, President and CEO
HUB FINANCIAL CORPORATION
By /s/ THOMAS F. DOWLING
-----------------------------------
Name: Thomas F. Dowling
Title: President and CEO
CONSENT AND ACKNOWLEDGEMENT
The undersigned, GB, Inc., a Delaware corporation, acknowledges and
accepts each of the foregoing amendments and agrees to be bound by the terms of
the Agreement and the Amendment following the undersigned's merger with Glacier.
GB, INC.
By: /s/ JOHN S. MACMILLAN
-----------------------------------
Name: John S. MacMillan
Title: President
6
<PAGE> 165
PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
HUB FINANCIAL CORPORATION
SCHEDULE 1
EXCEPTIONS TO REPRESENTATIONS
Subsequent to the signing of the Agreement, Glacier discovered certain
technical issues associated with its capital stock, including the existence of
fewer authorized shares than previously believed. As a result of such technical
issues, certain of Glacier's Reports prior to consummation of the Curative
Transaction may have contained inaccuracies regarding Glacier's authorized
capital stock.
As discussed in the Recitals to this Amendment, Glacier is currently
completing the Curative Transaction, the terms of which were fully disclosed to
Glacier shareholders in a Notice of Annual Meeting / Proxy Statement dated June
5, 1998. Based on advice of counsel, Glacier believes that any inaccuracies in
the Reports will be effectively corrected by consummation of the Curative
Transaction.
7
<PAGE> 166
APPENDIX C
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Agreement"), is effective
as of December 30, 1997, by and between Glacier Bancorp, Inc., a Delaware
corporation ("Glacier") and Valley Bank of Helena, a Montana state-chartered
commercial bank with its principal place of business at Helena. Montana (the
"Bank").
RECITALS
A. Glacier is a Delaware corporation and bank holding company registered
under the Bank Holding Company Act of 1956, as amended. HUB Financial
Corporation ("HUB") is a Montana corporation and bank holding company registered
under the Bank Holding Company Act of 1956, as amended. HUB currently owns
approximately 86.5 percent of the issued and outstanding common stock of Bank.
B. Glacier and HUB have entered a Plan and Agreement of Merger providing
for the merger of HUB with and into Glacier (the "Merger Agreement" and the
"Merger"). Pursuant to the Merger Agreement. holders of HUB common stock will be
entitled to receive certain shares of Glacier common stock as more particularly
provided in the Merger Agreement.
C. Glacier desires to acquire the shares of Bank common stock issued and
outstanding and not owned as of record by HUB (the "Minority Stock") in a
transaction immediately following the Merger and to issue and exchange Glacier
common stock for each share of Minority Stock (the "Exchange") on the terms,
conditions and covenants of this Agreement.
D. Except as otherwise defined herein, capitalized terms used herein
shall be accorded the meaning given such terms in the Merger Agreement.
IN CONSIDERATION OF THE ABOVE, the parties agree as follows:
1. SHARE EXCHANGE
1.1. Plan of Share Exchange. On the Effective Date (as defined and
provided for in this Agreement), all shares of Minority Stock shall be exchanged
for, as more particularly provided for and limited by the terms of this
Agreement, Continuing Corporation Common Stock. At and after the Effective Date,
Minority Stock and certificates representing shares of Minority Stock shall be
deemed for all purposes to evidence solely the right to receive Continuing
Corporation Common Stock, and the holders of Minority Stock shall, subject to
any dissenters' rights any holder may have, possess no right to vote, receive
dividends or distributions or any other consideration in respect of the Minority
Stock.
1.2. Consideration.
1.2.1. Purchase Price. Except as otherwise provided in this
Agreement, the aggregate consideration holders of Minority Stock will be
entitled to receive from Glacier
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<PAGE> 167
in connection with the Exchange (the "Bank Purchase Price") will be that
number of shares of Continuing Corporation Common Stock calculated by
multiplying 620,000 by the number equal to one (1) minus HUB's fractional
ownership of Bank common stock at closing of the Merger as determined
under Subsection 1.3.1 of the Merger Agreement.
1.2.2. Exchange Ratio. The number of shares of Continuing
Corporation Common Stock each holder of Minority Stock will receive in
exchange for each share of Minority Stock will be determined according to
a ratio (the "Bank Exchange Ratio") computed as follows: in exchange for
each share of Minority Stock held of record on the Effective Date, the
holder will receive that number (rounded to two decimals, rounding down
if the third decimal is four or less or up if it is five or more) of
Continuing Corporation Common Stock calculated by dividing the Bank
Purchase Price by the aggregate number of shares of Minority Stock that
on the Effective Date are issued and outstanding. The shares of
Continuing Corporation Common Stock to be issued under this Agreement in
connection with the Exchange are referred to as the "Glacier Shares".
1.2.3. No Fractional Shares. The Continuing Corporation will not
issue fractional shares of Continuing Corporation Common Stock. In lieu
of fractional shares, if any, each holder of Minority Stock who is
otherwise entitled to receive a fractional share of Continuing
Corporation Common Stock in the Exchange will receive an amount of cash
equal to the product of such fraction times the fair market value of a
share of Glacier common stock at Closing,. Such fractional share interest
will not include the right to vote or receive dividends or any interest
on dividends.
1.2.4. Certificates.
(a) Surrender of Certificates. Each certificate evidencing
Minority Stock (other than Dissenting Shares) will, on and after
the Effective Date, be deemed for all corporate purposes to
represent and evidence only the right to receive a certificate
representing the Glacier Shares (or to receive the cash for
fractional shares) to which the Minority Stock shares are
exchanged in the Exchange in accordance with the provisions of
Section 1.2. Following the Effective Date, Minority Stockholders
may exchange certificates representing Minority Stock by
surrendering them to the agent (the "Exchange Agent") designated
by HUB and Glacier under the Mercer Agreement to effect the
exchange of such certificate or certificates representing Glacier
Shares (or for cash in lieu of fractional shares) in accordance
with any instructions provided by the Exchange Agent and in
accordance with the letter of transmittal described in Section
1.4. Until a holder's certificate evidencing Minority Stock is so
surrendered for transfer, the holder will not have the right to
receive any certificates evidencing Glacier Shares or cash in lieu
of fractional shares.
(b) Issuance of Certificates in Other Names. Any person
requesting that any certificate evidencing Glacier Shares be
issued in a name other than the name in which the surrendered
Minority Stock certificate is registered must:
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<PAGE> 168
(i) establish to the Exchange Agent's satisfaction
the right to receive the certificate evidencing Glacier
Shares, and
(ii) either pay to the Exchange Agent any applicable
transfer or other taxes or establish to the Exchange
Agent's satisfaction that all applicable taxes have been
paid or are not required.
(c) Lost, Stolen and Destroyed Certificates. The Exchange
Agent will be authorized to issue a certificate representing
Glacier Shares in exchange for a Minority Stock certificate that
has been lost, stolen or destroyed, if the holder provides the
Exchange Agent with:
(i) satisfactory evidence that the holder owns
Minority Stock and that the certificate representing this
ownership is lost, stolen or destroyed,
(ii) any appropriate affidavit the Exchange Agent
may reasonably require, and
(iii) any indemnification assurances that the
Exchange Agent may reasonably require.
(d) Rights to Dividends and Distributions. After the
Effective Date, no holder of a certificate evidencing Minority
Stock shares will be entitled to receive any dividends or other
distributions otherwise payable to holders of record of Continuing
Corporation Common Stock on any date after the Effective Date,
unless the holder:
(i) is entitled by this Agreement to receive a
certificate representing Glacier Shares, and
(ii) has surrendered in accordance with this
Agreement her Minority Stock certificates (or met the
requirements of Section 1.2.4(c)) in exchange for
certificates representing Glacier Shares. Surrender of
Minority Stock certificates will not deprive the holder of
any dividends or distributions that the holder is entitled
to receive as a record holder of Bank common stock on a
date before the Effective Date. When the holder surrenders
her Minority Stock certificates, the holder will receive
the amount, without interest, of any cash dividends and any
other distributions distributed on or after the Effective
Date on the whole number of shares of Glacier Shares into
which the holder's Minority Stock was exchanged at the
Effective Date.
(e) Checks in Other Names. Any person requesting that a
check for cash in lieu of fractional shares be issued in a name
other than the name the Minority Stock certificates surrendered in
exchange for the cash is registered in must establish to the
Exchange Agent's satisfaction the right to receive the cash.
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<PAGE> 169
1.3. Payment to Dissenting Stockholders. For purposes of this Agreement,
"Dissenting Shares" means those shares of Minority Stock as to which
stockholders have properly taken all steps necessary to perfect their
dissenters' rights under Montana Business Corporation Act (the "MBCA")
Sections 35-1-826 through 35-1-839. Each outstanding Dissenting Share of
Minority Stock will be converted, at Closing, into the rights provided under
those sections of the MBCA. Holders of Dissenting Shares will receive from the
Bank the consideration they are entitled to under the MBCA.
1.4. Letter of Transmittal. Glacier will prepare a transmittal form
reasonably acceptable to Bank for use by stockholders holding Minority Stock.
Certificates representing shares of Minority Stock must be delivered for payment
or exchange in the manner provided in the transmittal letter form. On or about
the Effective Date, Glacier will mail the transmittal letter form to Minority
Stockholders.
1.5. Undelivered Certificates. If outstanding certificates for Minority
Stock are not surrendered or the payment for them is not claimed before these
payments would escheat or become the property of any governmental unit or
agency, the unclaimed items will, to the extent permitted by abandoned property
or other applicable law, become the property of the Continuing Corporation (and
to the extent not in its possession will be paid over to the Continuing
Corporation) free and clear of all claims or interests of any person previously
entitled to such items. But, neither the Continuing Corporation nor either party
to this Agreement will be liable to any holder of Minority Stock for any amount
paid to any governmental unit or agency having jurisdiction over any such
unclaimed items under the abandoned property or other applicable law of the
jurisdiction and the Continuing Corporation will pay no interest on amounts owed
to stockholders for shares of Minority Stock.
2. CLOSING OF THE TRANSACTION
2.1. Closing. Closing of the Exchange ("Closing") will occur on the
Effective Date and immediately following the Closing of the Merger as provided
in the Mercer Agreement.
2.2. Events of Closing. On the Effective Date, all properly executed
documents required by this Agreement will be delivered to the proper party in
form consistent with this Agreement and Articles of Share Exchange will be
delivered and filed as required under the MBCA. If any party fails to deliver a
required document on the Effective Date or otherwise defaults under this
Agreement on or before the Effective Date, then the Exchange will not occur
unless the adversely affected party waives the default.
2.3. Place of Closing. Unless Glacier and Bank agree otherwise, Closing
will occur on the Effective Date at the time and place set for closing of the
Merger under the Merger Agreement.
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<PAGE> 170
3. REPRESENTATIONS
3.1. Representations of Glacier. The representations of Glacier made and
set forth in the Merger Agreement for the benefit of HUB are herein restated and
made for the benefit of Bank pursuant to this Agreement.
3.2. Representations of Bank. Bank represents to Glacier the following:
3.2.1. Bank is a Montana corporation duly organized and validly
existing under the laws of the State of Montana and its activities
do not require it to be qualified in any jurisdiction other than
Montana.
3.2.2. Bank has the requisite corporate power and authority to own
or lease its properties and assets and to carry on its business as it is
now being conducted.
3.2.3. Bank has the requisite corporate power and authority and
has taken all corporate action necessary in order to execute and deliver
this Agreement, subject only to the approval of Bank stockholders of the
Agreement and the Exchange to the extent required by the MBCA.
3.2.4. This Agreement is a valid and legally binding agreement of
Bank, enforceable in accordance with the terms of this Agreement.
3.2.5. The representations made by HUB in the Mercer Agreement
with respect to the Bank are true in all respects.
4. CONDUCT AND TRANSACTIONS BEFORE CLOSING
4.1. Conduct of Bank Business Prior to Closing. Bank hereby accepts and
agrees to the requirements of the conduct of its business prior to Closing as
the same are set forth with respect to the Bank in Section 4 of the Merger
Agreement.
4.2. Preparation of Registration Statement. The Registration Statement
will provide for the registration of the Glacier Shares to be issued under this
Agreement with respect to the Exchange.
4.3. Regulatory Approvals. Glacier will promptly seek the approvals of
state and federal banking, regulators having jurisdiction to approve of or
consent to the Exchange under this Agreement (the "Regulatory Approvals").
4.4. Submission to Shareholders. Bank will promptly take the actions
necessary in accordance with applicable law and its Articles of Incorporation
and Bylaws to convene a stockholders meeting to consider the approval of this
Agreement and to authorize the transaction contemplated by this Agreement. The
stockholders meeting will be held in conjunction with or promptly following the
meeting of HUB stockholders convened with respect to the Merger Agreement and
the Merger.
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4.5. Bank Cooperation With HUB. Bank shall cooperate with HUB in the
performance of HUB's obligations under the Merger Agreement to the extent such
obligations relate to the conduct of the business of the Bank or to the extent
HUB has undertaken an obligation to cause Bank to take or refrain from taking
certain actions.
5. CONDITIONS TO CONSUMMATION
5.1. Consummation of the Exchange under this Agreement and each of the
obligations of Bank and Glacier hereunder is expressly conditional upon:
(a) the consummation of the Merger under the Merger
Agreement;
(b) the receipt by Glacier of all Regulatory Approvals
necessary or convenient for the consummation of the Exchange;
(c) the receipt by Glacier, at Glacier's expense, obtained
from Graham & Dunn, P.C. and delivered to Bank, an opinion
addressed to Bank and in form and substance reasonably
satisfactory to Bank and its counsel, to the effect that the
consummation of the Exchange will not result in a taxable event
for Bank or Glacier, and otherwise will have each of the effects
specified below:
(i) the Exchange will qualify as a reorganization
within the meaning of Internal Revenue Code
Section 368(a)(1)(B);
(ii) under IRC Section 354, Bank stockholders who,
in accordance with this Agreement, exchange their Minority
Stock solely for Continuing Corporation Common Stock shares
will not recognize gain or loss on the exchange; and
(iii) cash payments to Bank stockholders in lieu of
a fractional share of Continuing Corporation Common Stock
will be treated as distributions in redemption of the
fractional share interest, subject to the limitations of
IRC Section 302.
(d) Bank has obtained from Holland & Hart LLP and delivered
to Glacier an opinion of counsel, subject to customary
qualifications and assumptions, addressed to Glacier, to the
effect that:
(i) the Bank has the corporate power and authority
to execute, deliver and perform this Agreement, and
(ii) the execution, delivery and performance of this
Agreement will be authorized by all necessary corporate
action on the part of Bank and may be limited by
bankruptcy, insolvency, reorganization, moratorium, or
similar laws generally affecting the enforcement of the
rights of creditors and by Generally applicable principles
of equity, and
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(iii) the Agreement constitutes the Bank's valid,
legal and binding obligation and is enforceable in
accordance with its terms and is in compliance with
corporate and banking laws applicable to the Bank.
(e) Glacier has obtained from Graham &, Dunn, P.C. and
delivered to Bank an opinion, addressed to Bank, to the effect
that:
(i) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary
corporate action on Glacier's part, and this Agreement
constitutes Glacier's legal, binding and valid obligation,
enforceable in accordance with its terms, except to the
extent that enforcement (but not validity) may be limited
by bankruptcy, insolvency, reorganization, moratorium or
similar laws generally affecting the enforcement of the
rights of creditors and by generally applicable principles
of equity;
(ii) The Glacier Shares have been duly authorized
and, when issued as contemplated by this Agreement, will be
validly issued, fully paid and nonassessable, free of any
preemptive or similar rights arising under applicable
corporate statutes or under Glacier's Bylaws or certificate
of incorporation;
(iii) The Registration Statement became effective
under the Securities Act on ________ 1998, and, to the best
of counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
threatened by the Securities and Exchange Commission; and
(iv) Glacier has the corporate power and authority
to execute, deliver and perform this Agreement.
(f) The Bank has received an opinion from Columbia
Financial Advisors, Inc. at such times as Bank may deem
appropriate, but in any event dated immediately prior to Closing,
and to the effect that the financial terms of the Exchange are
financially fair to holders of Minority Stock.
5.2. Glacier's consummation of the Exchange under this Agreement and each
of its obligations is expressly conditional upon the following:
(a) Bank has conformed and complied with all material
terms, covenants and conditions of this Agreement unless waived by
Glacier.
(b) The Bank Board of Directors and Bank shareholders have
each approved the Exchange and this Agreement.
(c) No act or event shall have occurred the effect of
which, upon consummation of the Exchange, would adversely affect
the ability of Glacier
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to account for the Merger as a "pooling of interests" as
contemplated by the Merger Agreement.
5.3. Bank's consummation of the Exchange and each of the obligations is
expressly conditional upon the following:
(a) Glacier has conformed and complied with all material
terms, covenants and conditions of this Agreement unless waived by
the Bank.
6. TERMINATION
6.1. Termination. This Agreement shall be terminated (a) without further
action by or on behalf of Glacier or Bank upon the termination of the Merger
Agreement by either party or for any reason or no reason under the Merger
Agreement, and (b) by written notice of either party upon the material failure
of any condition under Section 5.l. If this Agreement is terminated as provided
by this Section 6.1, such termination shall be without liability of any party,
or any shareholder, director, officer, employee, agent, consultant or
representative of such party, to any other party to this Agreement. No
termination or breakup fee or other payment or liability will result from or
become due by reason of any termination of this Agreement pursuant to this
Section 6.1. This Agreement may be terminated by Glacier and Bank by the mutual
written consent of Glacier and Bank by the action of their respective Boards of
Directors or authorized officers.
7. MISCELLANEOUS
7.1. Notices. Any notice, request, instruction or other document given
under this Agreement must be in writing and must either be delivered personally
or via facsimile transmission or be sent by registered or certified mail,
postage prepaid, and addressed as follows (or to any other address or person
representing any party as designated by that party through written notice to the
other party):
If to Glacier:
Glacier Bancorp, Inc.
202 Main Street
P. 0. Box 27
Kalispell, MT 59903-0027
Attention: John S. MacMillan
with a copy to:
Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
If to Bank:
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Valley Bank of Helena
3030 North Montana Avenue
P. O. Box 5269
Helena, MT 59601-0551
Attention: Fred J. Flanders
with a copy to:
David R. Chisholm, Esq.
Holland & Hart LLP
Suite 1500, 401 North 31st Street
P. 0. Box 639
Billings, MT 59103-0639
7.2. Waivers and Extensions. Subject to Section 8, Glacier or Bank may
grant waivers or extensions to the other party, but only through a written
instrument executed by the Chief Executive Officer of the party granting the
waiver or extension. Waivers or extensions which do not comply with the
preceding sentence are not effective. In accordance with this Section 7.2, a
party may extend the time for the performance of any of the obligations or other
acts of any other party, and may waive:
(a) any inaccuracies of any other party in the
representations contained in this Agreement or the Merger
Agreement or in any document delivered in connection with this
Agreement or the Merger Agreement;
(b) compliance with any of the covenants of any other
party: and
(c) any other party's performance of any obligations under
this Agreement.
7.3. General Interpretation. Except as otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the defined
terms defined in this Agreement include the plural as well as the singular.
Whenever the words "include", "includes", or "including" are used in this
Agreement, the parties intend them to be interpreted as if they are followed by
the words "without limitation". All pronouns used in this Agreement include the
masculine, feminine and neuter gender, as the context requires. All accounting
terms used in this Agreement that are not expressly defined in this Agreement
have the respective meanings given to them in accordance with GAAP.
7.4. Construction and Execution in Counterparts. Except as otherwise
expressly provided in this Agreement, this Agreement:
(a) contains the parties' entire understanding, and no
modification or amendment of its terms or conditions will be
effective unless in writing and signed by the parties, or their
respective duly authorized agents;
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(b) will not be interpreted by reference to any of the
titles or headings to the sections or subsections, which have been
inserted for convenience only and are not deemed a substantive
part of this Agreement;
(c) includes all amendments to this Agreement, each of
which is made a part of this Agreement by this reference; and
(d) may be executed in one or more counterparts, each of
which will be deemed an original, but all of which taken together
will constitute one and the same document.
7.5. Attorneys' Fees and Costs. In the event of any dispute or litigation
with respect to the terms and conditions or enforcement of rights or obligations
arising by reason of this Agreement or the transaction, the prevailing party in
any such litigation will be entitled to reimbursement from the other party for
its costs and expenses, including reasonable judicial and extra-judicial
attorneys' fees, expenses and disbursements, and fees, costs and expenses
relating to any mediation or appeal.
7.6. Arbitration. At either party's request, the parties must submit any
dispute, controversy or claim arising out of or in connection with, or relating
to, this Agreement or any breach or alleged breach of this Agreement, to
arbitration under the American Arbitration Association's rules when in effect
(or under any other form of arbitration mutually acceptable to the parties). A
single arbitrator agreed on by the parties will conduct the arbitration. If the
parties cannot agree on a single arbitrator, each party must select one
arbitrator and those two arbitrators will select a third arbitrator. This third
arbitrator will hear the dispute. The arbitrator's decision is final (except as
otherwise specifically provided by law) and binds the parties, and either party
may request any court having jurisdiction to enter a judgment and to enforce the
arbitrator's decision. The arbitrator will provide the parties with a written
decision naming the substantially prevailing party in the action. This
prevailing party is entitled to reimbursement from the other party for its costs
and expenses, including reasonable attorneys' fees.
7.7. Governing Law and Venue. This Agreement will be governed by and
construed in accordance with Montana law, except to the extent that certain
matters may be governed by federal law. The parties must bring any legal
proceeding arising out of this Agreement in Flathead County, Montana.
7.8. Severability. If a court determines that any term of this Agreement
is invalid or unenforceable under applicable law, the remainder of this
Agreement is not affected, and each remaining term is valid and enforceable to
the fullest extent permitted by law.
8. AMENDMENTS
8.1. At any time before the Effective Date, whether before or after the
parties have obtained any applicable stockholder approvals of the transaction,
the Boards of Directors of Glacier and Bank may:
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(a) amend or modify this Agreement or any attached Exhibit
or Schedule, and
(b) grant waivers or time extensions in accordance with
Subsection 7.2.
But, after Bank's stockholders have approved this Agreement, the parties' Boards
of Directors may not without Bank stockholder approval amend or waive any
provision of this Agreement if the amendment or waiver would reduce the amount
or chance the form of consideration Bank stockholders will receive in the
transaction. All amendments, modification, extensions and waivers must be in
writing and signed by the party agreeing to the amendment, modification,
extension of waiver. Failure by any party to insist on strict compliance by the
other party with any of its obligations, agreements or conditions under this
Agreement, does not, without a writing, operate as a waiver or estoppel with
respect to that or any other obligation, agreement, or condition.
IN WITNESS WHEREOF, Glacier Bancorp, Inc. and Valley Bank of Helena have
caused this Agreement to be executed on the date first written above by their
duly authorized representatives.
GLACIER BANCORP, INC.
By: /s/ JOHN S. MACMILLAN
-----------------------------------
John S. MacMillan
Its: Chairman, President and CEO
VALLEY BANK OF HELENA
By: /s/ FRED J. FLANDERS
-----------------------------------
Fred J. Flanders
Its: President
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APPENDIX D
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of December 30, 1997,
is between HUB FINANCIAL CORPORATION ("HUB"), a Montana corporation, and GLACIER
BANCORP, INC. ("Glacier"), a Delaware corporation.
HUB and Glacier have executed a Plan and Agreement of Merger ("Merger
Agreement"), of even date with this Agreement, which would result in the merger
of HUB with and into Glacier ("Merger").
By negotiating and executing the Merger Agreement and by taking actions
necessary or appropriate to effect the transactions contemplated by the Merger
Agreement, Glacier has incurred and will incur substantial direct and indirect
costs (including, without limitation, the costs of management and employee time)
and will forgo the pursuit of certain alternative investments and transactions.
THEREFORE, in consideration of the promises set forth in this Agreement
and in the Merger Agreement, the parties agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this
Agreement, HUB irrevocably grants an option ("Option") to Glacier to
purchase an aggregate of 2,302 authorized but unissued shares of HUB's
Common Stock, no par value ("Common Stock") (which if issued, and
assuming exercise of outstanding options to acquire the Common Stock,
would represent approximately 19.9% of total stock issued and
outstanding), at a per share price of $781 ("Option Price"), which was
the estimated fair market value of the Common Stock at September 30,
1997.
2. Exercise of Option. Subject to the provisions of this Section 2.2 and of
Section 13.13(a) of this Agreement, this Option may be exercised by
Glacier or any transferee as set forth in Section 5.5 of this Agreement,
in whole or in part, at any time, or from time to time in any of the
following circumstances:
(a) HUB or its board of directors enters into an agreement or
recommends to HUB shareholders an agreement (other than the Merger
Agreement) under which any entity, person or group (collectively
"Person"), within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"),
would: (1) merge or consolidate with, acquire 51% or more of the
assets or liabilities of, or enter into any similar transaction
with HUB, or (2) purchase or otherwise acquire (including by
merger, consolidation, share exchange or any similar transaction)
securities representing 10% or more of HUB's voting shares of HUB
(other than an exchange of Common Stock for shares of Valley Bank
of Helena common stock not owned by HUB on the date this Agreement
was signed, is such exchange is reasonably acceptable to Glacier);
(b) any Person (other than Glacier or any of its subsidiaries and
other than any Person owning as of the date of this Agreement 10%
or more of the voting shares of HUB) acquires the beneficial
ownership or the right to acquire beneficial ownership of
securities which, when aggregated with other such
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securities owned by such Person, represents 10% or more of the
voting shares of HUB (the term "beneficial ownership" for purposes
of this Agreement has the meaning set forth in Section 13(d) of
the Exchange Act, and the regulations promulgated under the
Exchange Act); notwithstanding the foregoing, the Option will not
be exercisable in the circumstances described above in this
subsection (b)(b) if a Person acquires the beneficial ownership of
securities which, when aggregated with other such securities owned
by such Person, represents 10% or more, but less than 25%, of the
voting shares of HUB and the transaction does not result in, and
is not presumed to constitute, "control" as defined under Section
7(j) of the Federal Deposit Insurance Act or 12 CFR Part 303.4;
(c) failure of the board of directors of HUB to recommend, or
withdrawal by the board of directors of a prior
recommendation of, the Merger to the shareholders; or
(d) failure of the shareholders to approve the Merger by the
required affirmative vote at a meeting of the shareholders,
after any Person (other than Glacier or a subsidiary of
Glacier) announces publicly or communicates, in writing, to
HUB a proposal to (1) acquire HUB (by merger,
consolidation, the purchase of 51% or more of its assets or
liabilities or any other similar transaction, (2) purchase
or otherwise acquire securities representing 25% or more of
the voting shares of HUB or (3) change the composition of
the board of directors of HUB.
It is understood and agreed that the Option will become exercisable on
the occurrence of any of the above-described circumstances even though
the circumstance occurred as a result, in part or in whole, of the board
of HUB complying with its fiduciary duties.
Notwithstanding the foregoing, the Option may not be exercised if either
(1) any applicable and required governmental approvals have not been
obtained with respect to such exercise or if such exercise would violate
any applicable regulatory restrictions, or (2) at the time of exercise,
Glacier is failing in any material respect to perform or observe its
covenants or conditions under the Merger Agreement, unless the reason for
such failure is that HUB is failing to perform or observe its covenants
or conditions under the Merger Agreement.
3. Notice, Time and Place of Exercise. Each time that Glacier or any
transferee wishes to exercise any portion of the Option, Glacier or such
transferee will give written notice of its intention to exercise the
Option specifying the number of shares as to which the Option is being
exercised ("Option Shares") and the place and date for the closing of the
exercise (which date may not be later than ten business days from the
date such notice is mailed). If any law, regulation or other restriction
will not permit such exercise to be consummated during this ten-day
period, the date for the closing of such exercise will be within five
days following the cessation of the restriction on consummation.
4. Payment and Delivery of Certificate(s). At any closing for an exercise of
the Option or any portion thereof, (a) Glacier and HUB will each deliver
to the other certificates as to the accuracy, as of the closing date, of
their respective representations and warranties under this Agreement, (b)
Glacier or the transferees will pay the aggregate purchase price for the
shares of Common Stock to be purchased by delivery of a certified or bank
cashier's check in immediately available funds payable to the order of
HUB, and (c)
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HUB will deliver to Glacier or the transferees a certificate or
certificates representing the shares so purchased.
5. Transferability of the Option and Option Shares. Before the Option, or a
portion of the Option, becomes exercisable in accordance with the
provisions of Section 2.2 of this Agreement, neither the Option nor any
portion of the Option will be transferable. If any of the events or
circumstances set forth in Sections 2.2(a) through (d) above occur,
Glacier may freely transfer, subject to applicable federal and state
securities laws, the Option or any portion of the Option, or any of the
Option Shares.
For purposes of this Agreement, a merger or consolidation of Glacier
(whether or not Glacier is the surviving entity) or an acquisition of
Glacier will not be deemed a transfer.
6. Representations, Warranties and Covenants of HUB. HUB represents and
warrants to Glacier as follows:
(a) Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of HUB, has been duly
executed by a duly authorized officer of HUB and constitutes a
valid and binding obligation of HUB. No shareholder approval by
HUB shareholders is required by applicable law or otherwise before
the exercise of the Option in whole or in part.
(b) Option Shares. HUB has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue and, at
all times from the date of this Agreement to such time as the
obligation to deliver shares under this Agreement terminates, will
have reserved for issuance, at the closing(s) upon exercise of the
Option, or any portion of the Option, the Option Shares (subject
to adjustment, as provided in Section 8.8 below), all of which,
upon issuance under this Agreement, will be duly and validly
issued, fully paid and nonassessable, and will be delivered free
and clear of all claims, liens, encumbrances and security
interests, including any preemptive right of any of the
shareholders of HUB.
(c) No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or
constitute a default under any term of the articles of
incorporation or bylaws of HUB or any agreement, instrument,
judgment, decree, law, rule or order applicable to HUB or any
subsidiary of HUB or to which HUB or any such subsidiary is a
party.
(d) Notification of Record Date. At any time from and after the date
of this Agreement until the Option is no longer exercisable, HUB
will give Glacier or any transferee 30 days prior written notice
before setting the record date for determining the holders of
record of the Common Stock entitled 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 the Common Stock.
7. Representations, Warranties and Covenants of Glacier. Glacier represents
and warrants to HUB as follows:
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(a) Due Authorization. This Agreement has been duly authorized
by all necessary corporate action on the part of Glacier,
has been duly executed by a duly authorized officer of
Glacier and constitutes a valid and binding obligation of
Glacier.
(b) Transfers of Common Stock. No shares of Common Stock
acquired upon exercise of the Option will be transferred
except in a transaction registered or exempt from
registration under any applicable securities laws.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated by it will violate or result in any violation
of or be in conflict with or constitute a default under any
term of the certificate of incorporation or bylaws of
Glacier or any agreement, instrument, judgment, decree,
law, rule or order applicable to Glacier or any subsidiary
of Glacier or to which Glacier or any such subsidiary is a
party.
8. Adjustment Upon Changes in Capitalization. In the event of any change in
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, exchanges of shares or the like, the
number and kind of shares or securities subject to the Option and the
purchase price per share of Common Stock will be appropriately adjusted.
If, before the Option terminates or is exercised, HUB is acquired by
another party, consolidates with or merges into another corporation or
liquidates, Glacier or any transferee will thereafter receive, upon
exercise of the Option, the securities or properties to which a holder of
the number of shares of Common Stock then deliverable upon the exercise
thereof would have been entitled upon such acquisition, consolidation,
merger or liquidation, and HUB will take all steps in connection with
such acquisition, consolidation, merger or liquidation as may be
necessary to assure that the provisions of this agreement will thereafter
be applicable, as nearly as reasonably may be practicable, in relation to
any securities or property thereafter deliverable upon exercise of the
Option.
9. Nonassignability. This Agreement binds and inures to the benefit of the
parties and their successors. This Agreement is not assignable by either
party, but Glacier may transfer the Option, the Option Shares or any
portion of the Option or Option Shares in accordance with Section 5.5. A
merger or consolidation of Glacier (whether or not Glacier is the
surviving entity) or an acquisition of Glacier will not be deemed an
assignment or transfer.
10. Regulatory Restrictions. HUB will use its best efforts to obtain or to
cooperate with Glacier or any transferee in obtaining all necessary
regulatory consents, approvals, waivers or other action (whether
regulatory, corporate or other) to permit the acquisition of any or all
Option Shares by Glacier or any transferee.
11. Remedies. HUB agrees that if for any reason Glacier or any transferee
will have exercised its rights under this Agreement and HUB will have
failed to issue the Option Shares to be issued upon such exercise or to
perform its other obligations under this Agreement, unless such action
would violate any applicable law or regulation by which HUB is bound,
then Glacier or any transferee will be entitled to specific performance
and injunctive and other equitable relief. Glacier agrees that if it
fails to perform any of its
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obligations under this Agreement, then HUB will be entitled to specific
performance and injunctive and other equitable relief. This provision is
without prejudice to any other rights that HUB or Glacier or any
transferee may have against the other party for any failure to perform
its obligations under this Agreement.
12. No Rights as Shareholder. This Option, before it is exercised, will not
entitle its holder to any rights as a shareholder of HUB at law or in
equity. Specifically, this Option, before it is exercised, will not
entitle the holder to vote on any matter presented to the shareholders of
HUB or, except as provided in this Agreement, to any notice of any
meetings of shareholders or any other proceedings of HUB.
13. Miscellaneous.
(a) Termination. This Agreement and the Option, to the extent not
previously exercised, will terminate upon the earliest of (1)
August 31, 1998; (2) the mutual agreement of the parties to this
Agreement; (3) 31 days after the date on which any application for
regulatory approval for the Merger has been denied, but if before
the expiration of the 31-day period, HUB or Glacier is engaged in
litigation or an appeal procedure relating to an attempt to obtain
approval of the Merger, this Agreement will not terminate until
the earlier of (i) August 31, 1998, or (ii) 31 days after the
completion of the litigation and appeal procedure; (4) the 30th
day following the termination of the Merger Agreement for any
reason other than a material noncompliance or default by Glacier
with respect to its obligations under it; or (5) the date of
termination of the Merger Agreement if the termination is due to a
material noncompliance or default by Glacier with respect to its
obligations under it; but if the Option has been exercised, in
whole or in part, before the termination of this Agreement, then
the exercise will close under Section 4.4 of this Agreement, even
though that closing date is after the termination of this
Agreement; and if the Option is sold before the termination of
this Agreement, the Option may be exercised by the transferee at
any time within 31 days after the date of termination even though
such exercise or the closing of such exercise occurs after the
termination of this Agreement.
(b) Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a
written agreement executed by the parties.
(c) Severability of Terms. Any provision of this Agreement that is
invalid, illegal or unenforceable is ineffective only to the
extent of the invalidity, illegality or unenforceability without
affecting in any way the remaining provisions or rendering any
other provisions of this Agreement invalid, illegal or
unenforceable. Without limiting the generality of the foregoing,
if the right of Glacier or any transferee to exercise the Option
in full for the total number of shares of Common Stock or other
securities or property issuable upon the exercise of the Option is
limited by applicable law, or otherwise, Glacier or any transferee
may, nevertheless, exercise the Option to the fullest extent
permissible.
(d) Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and must be
given (and will be deemed to have been duly received if so given)
by delivery, by cable, telecopies or telex,
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or by registered or certified mail, postage prepaid, return
receipt requested, to the respective parties at the addresses
below, or to such other address as either party may furnish to the
other in writing. Change of address notices will be effective upon
receipt.
If to HUB to:
HUB Financial Corporation
P.O. Box 5269
Helena, MT 59903-0027
Attn: Fred J. Flanders
With a copy to:
David R. Chisholm, Esq.
Holland & Hart LLP
Suite 1500, First Interstate Center
401 North 31st Street
P.O. Box 639
Billings, MT 59101
If to Glacier, to:
Glacier Bancorp, Inc.
P.O. Box 27
202 Main Street
Kalispell, MT 59903-0027
Attn: John S. MacMillan
With a copy to:
Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
(e) Governing Law. The parties intend this Agreement and the Option,
in all respects, including all matters of construction, validity
and performance, to be governed by the laws of the State of
Montana, without giving effect to conflicts of law principles.
(f) Counterparts. This Agreement may be executed in several
counterparts, each of which is an original, and all of which
together constitute one and the same agreement.
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(g) Effects of Headings. The section headings in this Agreement are
for convenience only and do not affect the meaning of its
provisions.
Dated December 30, 1997:
GLACIER BANCORP, INC.
BY /s/ JOHN S. MACMILLAN
---------------------------------
John S. MacMillan
Its:President and CEO
HUB FINANCIAL CORPORATION
By /s/ THOMAS F. DOWLING
---------------------------------
Thomas F. Dowling
Its:President and CEO
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APPENDIX E
July 16, 1998
Board of Directors
Hub Financial Corporation
3030 N. Montana Avenue
Helena, Montana 59604
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of Hub Financial Corporation ("Hub") of the
consideration to be received by such shareholders pursuant to the terms of the
Plan and Agreement of Merger, dated December 30, 1997, (the "Agreement") between
Hub and Glacier Bancorp, Inc. ("GBCI").
In connection with the proposed merger transaction (the "Merger")
whereby Hub will merge into GBCI, each issued and outstanding share and option
of Hub common stock (along with its associated rights) at the effective time of
the Merger (other than (i) shares of holders of which are exercising appraisal
rights pursuant to applicable law and (ii) shares held directly by or indirectly
by Hub or any subsidiary thereof other than shares held in a fiduciary capacity
or in satisfaction of a debt previously contracted) shall be converted into the
right to receive 57.87 of GBCI shares, except for fractional shares which will
receive a proportional amount of cash (the "Merger Consideration"). As of July
15, 1998, the estimated value of GBCI common stock is approximately $1,548.72
per share of Hub common stock.
Columbia Financial Advisors, Inc. ("CFAI"), as a part of its investment
banking services, is periodically engaged in the valuation of banks and advises
the directors, officers and shareholders of both public and private banks and
thrift institutions with respect to the fairness, from a financial point of
view, of the consideration to be received in transactions such as that proposed
by the Agreement. With particular regard to our qualifications for rendering an
opinion as to the fairness, from a financial point of view, of the Merger
Consideration to be received by holders of the shares from GBCI pursuant to the
Merger, CFAI has advised Montana, Washington and Oregon community banks
regarding fairness of capital transactions. Hub has agreed to pay CFAI a fee for
this opinion letter.
1
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Board of Directors
Hub Financial Corporation
July 16, 1998
In connection with rendering this opinion, we have, among other things:
(I) reviewed the Agreement; (ii) reviewed Hub's financial information for the
twelve months ended December 31, 1997 and the three months ended March 31, 1998;
(iii) reviewed certain internal financial analyses and certain other forecasts
for Hub prepared by and reviewed with the management of Hub; (iv) conducted
interviews with senior management of Hub regarding the past and current business
operations, results thereof, financial condition and future prospects of Hub;
(v) reviewed the current market environment generally and the banking and thrift
environment in particular; (vi) reviewed the prices paid in certain recent
mergers and acquisitions in the banking and thrift industries on a regional
basis; (vii) reviewed GBCI's audited financial information for the fiscal year
ended December 31, 1997 and financial information for the three months ended
March 31, 1998 including the Form 10-K and the Form 10-Q filed with the U.S.
Securities and Exchange Commission; (ix) reviewed the price ranges and dividend
history for GBCI common stock; (x) and reviewed such other information, studies
and analyses and performed such other investigations and took into account such
other matters as we deemed appropriate.
In conducting our review and arriving at our opinion, we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not independently verified such information nor
have we undertaken an independent appraisal of the assets or liabilities of Hub
or GBCI. With respect to the financial forecasts referred to above, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgment of the senior management of Hub. This
opinion is necessarily based upon circumstances and conditions as they exist and
can be evaluated as of the date of this letter. We have not been authorized to
solicit and did not solicit other entities for purposes of a business
combination with Hub.
This opinion is based upon the information available to us and facts and
circumstances as they exist and are subject to evaluation on the date hereof. We
are not expressing any opinion herein as to the prices at which shares of GBCI
common stock have traded or may trade at any future date.
This opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the Merger.
In reliance upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration to be received by the
shareholders of Hub pursuant to the Agreement is fair, from a financial point of
view, to the shareholders of Hub.
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Board of Directors
Hub Financial Corporation
July 16, 1998
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the Merger and to the inclusion of our opinion as an
exhibit to the proxy statement or prospectus related to the Merger.
Very truly yours,
COLUMBIA FINANCIAL ADVISORS, INC.
By: /s/ Robert J. Rogowski
------------------------------
Robert J. Rogowski
Principal
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APPENDIX F
July 16, 1998
Board of Directors
Valley Bank of Helena
3030 N. Montana Avenue
Helena, Montana 59604
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders Valley Bank of Helena ("Valley") of the
consideration to be received by minority shareholders of Valley pursuant to the
terms of the Agreement and Plan of Share Exchange Merger, dated December 30,
1997, (the "Agreement") between Valley and Glacier Bancorp, Inc. ("GBCI").
In connection with the proposed merger transaction (the "Merger")
whereby Hub Financial Corporation ("Hub") will merge into GBCI, pursuant to
terms of a Plan and Agreement of Merger dated December 30, 1997 between Hub and
GBCI, each issued and outstanding share and option of Valley common stock (along
with its associated rights) at the effective time of the Merger (other than (i)
shares of holders of which are exercising appraisal rights pursuant to
applicable law and (ii) shares held directly by or indirectly by Valley, its
parent company or any subsidiary thereof other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall be converted
into the right to receive 56.36 of GBCI shares, except for fractional shares
which will receive a proportional amount of cash (the "Merger Consideration").
As of July 15, 1998, the estimated value of GBCI common stock is approximately
$1,557.04 per share of Valley common stock.
Columbia Financial Advisors, Inc. ("CFAI"), as a part of its investment
banking services, is periodically engaged in the valuation of banks and advises
the directors, officers and shareholders of both public and private banks and
thrift institutions with respect to the fairness, from a financial point of
view, of the consideration to be received in transactions such as that proposed
by the Agreement. With particular regard to our qualifications for rendering an
opinion as to the fairness, from a financial point of view, of the Merger
Consideration to be received by holders of the shares from GBCI pursuant to the
Merger, CFAI has advised Montana, Washington and Oregon community banks
regarding fairness of capital transactions. The Bank has agreed to pay CFAI a
fee for this opinion letter.
1
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Board of Directors
Valley Bank of Helena
July 16, 1998
In connection with rendering this opinion, we have, among other things:
(I) reviewed the Agreement; (ii) reviewed Hub's and Valley's financial
information for the twelve months ended December 31, 1997 and three months ended
March 31, 1998; (iii) reviewed certain internal financial analyses and certain
other forecasts for Valley prepared by and reviewed with the management of
Valley; (iv) conducted interviews with senior management of Valley regarding the
past and current business operations, results thereof, financial condition and
future prospects of Valley; (v) reviewed the current market environment
generally and the banking and thrift environment in particular; (vi) reviewed
the prices paid in certain recent mergers and acquisitions in the banking and
thrift industries on a regional basis; (vii) reviewed GBCI's audited financial
information for the fiscal year ended December 31, 1997 and financial
information for the three months ended March 31, 1998 including the Form 10-K
and the Form 10-Q filed with the U.S. Securities and Exchange Commission; (ix)
reviewed the price ranges and dividend history for GBCI common stock; (x) and
reviewed such other information, studies and analyses and performed such other
investigations and took into account such other matters as we deemed
appropriate.
In conducting our review and arriving at our opinion, we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not independently verified such information nor
have we undertaken an independent appraisal of the assets or liabilities of
Valley or GBCI. With respect to the financial forecasts referred to above, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgment of the senior management of
Valley. This opinion is necessarily based upon circumstances and conditions as
they exist and can be evaluated as of the date of this letter. We have not been
authorized to solicit and did not solicit other entities for purposes of a
business combination with Hub.
This opinion is based upon the information available to us and facts and
circumstances as they exist and are subject to evaluation on the date hereof. We
are not expressing any opinion herein as to the prices at which shares of GBCI
common stock have traded or may trade at any future date.
This opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the Merger.
In reliance upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Merger Consideration to be received by the
shareholders of Valley pursuant to the Agreement is fair, from a financial point
of view, to the shareholders of Valley.
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Board of Directors
Valley Bank of Helena
July 16, 1998
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the Merger and to the inclusion of our opinion as an
exhibit to the proxy statement or prospectus related to the Merger.
Very truly yours,
COLUMBIA FINANCIAL ADVISORS, INC.
By: /s/ Robert J. Rogowski
------------------------------
Robert J. Rogowski
Principal
<PAGE> 190
APPENDIX G
July 16, 1998
Board of Directors
Glacier Bancorp, Inc.
202 Main Street
P.O. Box 27
Kalispell, MT 59903-0027
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the shareholders of Glacier Bancorp, Inc.
("Glacier") of the consideration to be delivered by Glacier pursuant to the
terms of the Plan and Agreement of Merger, dated as of December 30, 1997 (the
"Merger Agreement"), between Glacier and HUB Financial Corporation ("HUB") and
the Plan of Exchange, dated as of December 30, 1997 (the "Exchange Agreement"),
between Glacier and minority shareholders of Valley Bank of Helena (the
"Minority Shareholders"). HUB currently owns approximately 86.5% of the stock of
Valley Bank of Helena ("Valley") and the Minority Shareholders own approximately
13.5% of the stock of Valley. The Merger Agreement provides for the merger (the
"Merger") of HUB with and into Glacier pursuant to which HUB shareholders will
receive shares of Glacier common stock equal to 620,000 multiplied by HUB's
percentage ownership of Valley at the time of closing in exchange for 100% of
the outstanding shares of HUB. The Exchange Agreement provides for the exchange
(the "Exchange") of the Minority Shareholders' interests in Valley for shares of
Glacier common stock equal to 620,000 multiplied by the Minority Shareholders'
percentage ownership of Valley in exchange for 100% of the outstanding shares of
Valley held by the Minority Shareholders. Hereafter the Merger and Exchange
will, on a combined basis, be referred to as "the Merger" and HUB and Valley
Bank of Helena will, on a consolidated basis, be referred to as "HUB."
In arriving at our opinion, we have reviewed various financial and
operating information relating to Glacier and HUB including, without limitation,
historical financial reports of Glacier and HUB, reports filed with bank
regulatory agencies, internal operating reports and analyses, and related
information. We have also examined economic analyses of and forecasts for
Glacier and HUB's market area and publicly available information regarding other
banking institutions operating in such market area. We have also held
discussions with Glacier and HUB's management regarding the business, recent
operating results, and future prospects for Glacier and HUB.
We have also considered financial and stock market data for Glacier, the
pro forma impact of the Merger on Glacier, and the views of management
concerning the financial,
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Board of Directors
July 16, 1998
Page 2
operational and strategic benefits and implications of the Merger. We have
additionally examined and considered financial and stock market data for similar
public companies, the publicly available financial terms of certain other
similar business combinations, and other analyses and considerations which we
deemed relevant.
In conducting our review and arriving at our opinion, we have relied,
without independent investigation, upon the accuracy and completeness of all
financial and other information publicly available or provided to us by Glacier
and HUB. We have also assumed the reasonableness of and relied upon the
estimates and judgments of management of Glacier and HUB as to the future
business and financial prospects. We have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Glacier or
HUB, nor have we been furnished with any such evaluations or appraisals. Our
opinion is necessarily based upon economic, market, financial and other
conditions as they exist and can be evaluated on the date hereof and the
information provided to us through the date hereof.
D.A. Davidson & Co. is engaged in the valuation of companies and their
securities in the course of its business as an investment firm. In the ordinary
course of our business, we publish investment research regarding Glacier and
make a market in its common stock. For our services in connection with the
Merger, including rendering this opinion, we will receive a fee from Glacier.
This letter is intended for the benefit and use of the Board of
Directors of Glacier in evaluating the Merger and is not intended to be and does
not constitute a recommendation to any shareholder as to how such shareholder
should vote with respect to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the consideration to be delivered by Glacier in the Merger is
fair, from a financial point of view, to the shareholders of Glacier.
Very truly yours,
/s/ D.A. DAVIDSON & CO.
D.A. Davidson & Co.
<PAGE> 192
APPENDIX H
"DISSENTERS RIGHTS"
35-1-826. Definitions. As used in 35-1-826 through 35-1-839, the
following definitions apply:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" includes the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under 35-1-827 and who exercises that right when and in the
manner required by 35-1-829 through 35-1-837.
(4) "Fair value", with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment at the average rate currently paid by the
corporation on its principal bank loans or, if the corporation has no loans, at
a rate that is fair and equitable under all the circumstances.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial shareholder to the
extent of the rights granted by a nominee certificate on file with a
corporation.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
35-1-827. Right to dissent. (1) A shareholder is entitled to dissent
from and obtain payment of the fair value of the shareholder's shares in the
event of any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by 35-1-815 or the
articles of incorporation and the shareholder is entitled to vote on the merger;
or
(ii) the corporation is a subsidiary that is merged with its parent
corporation under 35-
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1-818;
(b) consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired if the shareholder is
entitled to vote on the plan;
(c) consummation of a sale or exchange of all or substantially all of
the property of the corporation other than in the usual and regular course of
business if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution but not including a sale pursuant to court order
or a sale for cash pursuant to a plan by which all or substantially all of the
net proceeds of the sale will be distributed to the shareholders within 1 year
after the date of sale;
(d) an amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) alters or abolishes a preferential right of the shares;
(ii) creates, alters, or abolishes a right in respect of redemption,
including a provision with respect to a sinking fund for the redemption or
repurchase of the shares;
(iii) alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(iv) excludes or limits the right of the shares to be voted on any
matter or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(v) reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share created is to be acquired for cash under
35-1-621; or
(e) any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and to obtain payment for their shares.
(2) A shareholder entitled to dissent and to obtain payment for shares
under 35-1-826 through 35-1-839 may not challenge the corporate action creating
the shareholder's entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
35-1-828. Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
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(a) he submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(b) he does so with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
35-1-829. Notice of dissenters' rights. (1) If a proposed corporate
action creating dissenters' rights under 35-1-827 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under 35-1-826 through 35-1-839 and
must be accompanied by a copy of 35-1-826 through 35-1-839.
(2) If a corporate action creating dissenters' rights under 35-1-827 is
taken without a vote of shareholders, the corporation shall give written
notification to all shareholders entitled to assert dissenters' rights that the
action was taken and shall send them the dissenters' notice described in
35-1-831.
35-1-830. Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under 35-1-827 is submitted to a vote at a
shareholders' meeting, a shareholder who wishes to assert dissenters' rights:
(a) shall deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) may not vote his shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection
(1)(a) is not entitled to payment for his shares under 35-1-826 through
35-1-839.
35-1-831. Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under 35-1-827 is authorized at a shareholders' meeting, the
corporation shall deliver a written dissenters' notice to all shareholders who
satisfied the requirements of 35-1-830.
(2) The dissenters' notice must be sent no later than 10 days after the
corporate action was taken and must:
(a) state where the payment demand must be sent and where and when
certificates for certified shares must be deposited;
(b) inform shareholders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment is received;
(c) supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires the person asserting dissenters' rights to
certify whether or not he acquired
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beneficial ownership of the shares before that date;
(d) set a date by which the corporation must receive the payment demand,
which may not be fewer than 30 nor more than 60 days after the date the required
notice under subsection (1) is delivered; and
(e) be accompanied by a copy of 35-1-826 through 35-1-839.
35-1-832. Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in 35-1-831 shall demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date required
to be set forth in the dissenters' notice pursuant to 35-1-831(2)(c), and
deposit his certificates in accordance with the terms of the notice.
(2) The shareholder who demands payment and deposits his certificates
under subsection (1) retains all other rights of a shareholder until these
rights are canceled or modified by taking of the proposed corporate action.
(3) A shareholder who does not demand payment or deposit his
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under 35-1-826 through 35-1-839.
35-1-833. Share restrictions. (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is taken or the restrictions are
released under 35-1-835.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
35-1-834. Payment. (1) Except as provided in 35-1-836, as soon as the
proposed corporate action is taken or upon receipt of a payment demand, the
corporation shall pay each dissenter who complied with 35-1-832 the amount the
corporation estimates to be the fair value of the dissenter's shares plus
accrued interest.
(2) The payment must be accompanied by:
(a) the corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income statement
for that year, a statement of changes in shareholders' equity for that year, and
the latest available interim financial statements, if any;
(b) a statement of the corporation's estimate of the fair value of the
shares;
(c) an explanation of how the interest was calculated;
(d) a statement of the dissenter's right to demand payment under
35-1-837; and
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(e) a copy of 35-1-826 through 35-1-839.
35-1-835. Failure to take action. (1) If the corporation does not take
the proposed action within 60 days after the date set for demanding payment and
depositing certificates, the corporation shall return the deposited certificates
and release the transfer restrictions imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under 35-1-831 and repeat the payment demand procedure.
35-1-836. After-acquired shares. (1) A corporation may elect to withhold
payment required by 35-1-834 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the dissenters'
notice as the date of the first announcement to news media or to shareholders of
the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1), after taking the proposed corporate action, the corporation
shall estimate the fair value of the shares plus accrued interest and shall pay
this amount to each dissenter who agrees to accept it in full satisfaction of
his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
35-1-837.
35-1-837. Procedure if shareholder dissatisfied with payment or offer.
(1) A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and the amount of interest
due and may demand payment of the dissenter's estimate, less any payment under
35-1-834, or reject the corporation's offer under 35-1-836 and demand payment of
the fair value of the dissenter's shares and the interest due if:
(a) the dissenter believes that the amount paid under 35-1-834 or
offered under 35-1-836 is less than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated;
(b) the corporation fails to make payment under 35-1-834 within 60 days
after the date set for demanding payment; or
(c) the corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within 60 days after the date set for demanding
payment.
(2) A dissenter waives the right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (1)
within 30 days after the corporation made or offered payment for his shares.
35-1-838. Court action. (1) If a demand for payment under 35-1-837
remains unsettled,
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the corporation shall commence a proceeding within 60 days after receiving the
payment demand and shall petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the district court
of the county where a corporation's principal office or, if its principal office
is not located in this state, where its registered office is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters whose demands remain
unsettled, whether or not residents of this state, parties to the proceeding as
in an action against their shares, and all parties must be served with a copy of
the petition. Nonresidents may be served by certified mail or by publication as
provided by law.
(4) The jurisdiction of the district court in which the proceeding is
commenced under subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraisers have the powers described in the
order appointing them or in any amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding is entitled to
judgment:
(a) for the amount, if any, by which the court finds the fair value of
the dissenter's shares plus interest exceeds the amount paid by the corporation;
or
(b) for the fair value plus accrued interest of his after-acquired
shares for which the corporation elected to withhold payment under 35-1-836.
35-1-839. Court costs and attorney fees. (1) The court in an appraisal
proceeding commenced under 35-1-838 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except that
the court may assess costs against all or some of the dissenters, in amounts the
court finds equitable, to the extent the court finds dissenters acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
35-1-837.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of 35-1-829 through 35-1-837; or
(b) against either the corporation or a dissenter, in favor of any other
party, if the
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court finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
provided by 35-1-826 through 35-1-839.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated and that the
fees for those services should not be assessed against the corporation, the
court may award the counsel reasonable attorney fees to be paid out of the
amounts awarded the dissenters who were benefited.
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