<PAGE> 1
As filed with the Securities and Exchange Commission on October 4, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GLACIER BANCORP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6749 81-0468393
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer identification no.)
incorporation or organization) classification code number)
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P.O. BOX 27, 202 MAIN STREET, KALISPELL, MONTANA 59903-0027 (406) 756-4200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOHN S. MACMILLAN
Chairman of the Board, President and Chief Executive Officer
P.O. Box 27, 202 Main Street
Kalispell, Montana 59903-0027
(406) 756-4200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of communications to:
STEPHEN M. KLEIN, ESQ. STEPHEN J. SMITH, ESQ.
CHRISTI MUONEKE, ESQ. 431 First Avenue West
Graham & Dunn P.C. P.O. Box 759
1420 Fifth Avenue, 33rd Floor Kalispell, Montana 59903
Seattle, Washington 98101
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
The date of mailing of the enclosed Prospectus/Joint Proxy Statement
to stockholders of Missoula Bancshares, Inc.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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===============================================================================================================
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered(1) Per Share(2)(3) Offering Price(3) Fee(3)
===============================================================================================================
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Common Stock,
$.01 Par Value 1,200,000 $221.17 $10,983,294.74 $3,787.34
===============================================================================================================
</TABLE>
(1) Represents the estimated maximum number of shares of Glacier Bancorp,
Inc.'s common stock, $.01 par value ("Glacier Common Stock"), issuable in
exchange for the 49,661 shares of Missoula Bancshares, Inc.'s common
stock, $10.00 par value ("Bancshares Common Stock"), that are either
outstanding or subject to presently exercisable options, under the terms of
the Plan and Agreement of Merger described in this Registration Statement.
(2) Represents the maximum price per share of Glacier Common Stock issuable in
exchange for Bancshares Common Stock, based on the Merger exchange ratio.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as amended
("1933 Act"), on the basis of the per-share book value of the Bancshares
Common Stock as of September 30, 1996.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
FILES A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE 1933 ACT, OR UNTIL THIS REGISTRATION STATEMENT BECOMES EFFECTIVE ON SUCH
DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
<PAGE> 2
GLACIER BANCORP, INC.
CROSS REFERENCE SHEET
(SHOWING LOCATION OF INFORMATION REQUIRED BY FORM S-4)
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Item Prospectus Heading
---- ------------------
A. INFORMATION ABOUT THE TRANSACTION
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1. Forepart of Registration Statement and Outside Front Cover Page; Cross Reference Sheet; Outside Front Cover Page
Cover Page of Prospectus of Prospectus/Joint Proxy Statement
2. Inside Front and Outside Back Cover Pages of Prospectus Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges, and Summary; Stock Price and Dividend Information; Selected
Other Information Historical and Unaudited Pro Forma Financial Data; Equivalent
Per Common Share Data
4. Terms of the Transaction Summary; Equivalent Per Common Share Data; Background of
and Reasons for the Merger; The Merger; Unaudited Condensed
Pro Forma Combined Financial Statements; Description of
Glacier's Capital Stock and Comparison of Certain Rights
of Holders of Glacier and Bancshares Common Stock
5. Pro Forma Financial Information Selected Historical and Unaudited Pro Forma Financial Data;
Equivalent Per Common Share Data Condensed; Unaudited
Condensed Pro Forma Combined Financial Statements
6. Material Contracts with the Company Being Acquired Not Applicable
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Background of and Reasons for the Merger - Opinion of
Bancshares Financial Advisor - Opinion of Glacier Financial
Advisor; Certain Legal Matters; Experts
9. Disclosure of SEC Position on Indemnification for 1933 Not Applicable
Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants Not Applicable
11. Incorporation of Certain Information by Reference Not Applicable
12. Information with Respect to S-2 or S-3 Registrants Summary; Stock Price and Dividend Information; Selected
Historical and Unaudited Pro Forma Financial Data;
Equivalent Per Common Share Data; Background of and
Reasons for the Merger; The Merger; Unaudited
Pro Forma Combined Financial Statements; Information
Concerning Glacier; Supervision and Regulation,
Description of Glacier's Capital Stock and Comparison
of Certain Rights of Holders of Bancshares and
Glacier Common Stock; Glacier Financial Statements
13. Incorporation of Certain Information by Reference Incorporation of Certain Information by Reference
14. Information with Respect to Registrants Other Than S-3 Not Applicable
or S-2 Registrants
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-3 or S-2 Companies Not Applicable
</TABLE>
<PAGE> 3
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17. Information with Respect to Companies Other Than Summary; Stock Price and Dividend Information; Selected
S-3 or S-2 Companies Historical and Unaudited Pro Forma Financial Data;
Equivalent Per Common Share Data; Background of and Reasons for
the Merger; The Merger; Unaudited Condensed Pro Forma Combined
Financial Statements; Information Concerning Bancshares;
Bancshares Management's Discussion and Analysis of Financial
Condition and Results of Operations; Management of Bancshares;
Supervision and Regulation; Description of Glacier's Capital
Stock and Comparison of Certain Rights of Holders of Bancshares
and Glacier Common Stock; Bancshares Financial Statements
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are Summary; Special Meeting of Bancshares Stockholders;
to be Solicited Special Meeting of Glacier Stockholders; Background of and
Reasons for the Merger; The Merger; Information Concerning
Bancshares; Information Concerning Glacier; Comparison of
Certain Rights of Holders of Bancshares and Glacier Common
Stock
19. Information if Proxies, Consents or Authorizations are Not Applicable
Not to be Solicited or in an Exchange Offer
</TABLE>
<PAGE> 4
[Missoula Bancshares, Inc. Letterhead]
October ____, 1996
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Stockholders of Missoula Bancshares, Inc. ("Bancshares"), a Montana
corporation and the bank holding company for First Security Bank of Missoula
("Bank"). The Special Meeting will be held on Wednesday, November 13, 1996, at
12:00 p.m. local time, at Ruby's Reserve Street Inn, 4825 North Reserve Street,
Missoula, 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
August 9, 1996, between Glacier Bancorp, Inc. ("Glacier"), a Delaware
corporation and bank holding company, and Bancshares. The Merger Agreement
provides for the merger ("Merger") of Bancshares with and into Glacier, with
Glacier as the surviving corporation. Consequently, Bancshares' stockholders
would become stockholders of Glacier, and the Bank 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 Bancshares stockholder will receive
shares of Glacier Common Stock for each share of Bancshares Common Stock, $10.00
par value per share ("Bancshares Common Stock") owned, based on an exchange
formula detailed in the Prospectus/Joint Proxy Statement. The complete text of
the Merger Agreement appears as Appendix A 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 Bancshares 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 BANCSHARES 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 Bancshares 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 Douglas Lawrence, Bancshares' Secretary, at (406)
728-3115.
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,
Allen Fetscher William L. Bouchee
Chairman of the Board President and Chief Executive
Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 5
MISSOULA BANCSHARES, INC.
1704 DEARBORN
P.O. BOX 4506
MISSOULA, MONTANA 59806-4506
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 1996
TO THE STOCKHOLDERS OF MISSOULA BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that pursuant to call of its directors, a
Special Meeting ("Special Meeting") of Stockholders of Missoula Bancshares, Inc.
("Bancshares"), a Montana corporation and bank holding company, will be held on
Wednesday, November 13, 1996, at 12:00 p.m. local time, at Ruby's Reserve Street
Inn, 4825 North Reserve Street, Missoula, 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 August 9,
1996, between Bancshares and Glacier Bancorp, Inc. ("Glacier"), a Delaware
corporation and bank holding corporation, under the terms of which Bancshares
will merge with and into Glacier, as more fully described in the accompanying
Prospectus/Joint Proxy Statement. The Merger Agreement is attached as Appendix A
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 Bancshares Common Stock, $10.00 par value
per share, at 5:00 p.m. on October 1, 1996 (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 Bancshares Common Stock is
required for approval of the Merger Agreement. As of September 19, 1996, there
were 48,661 shares of Bancshares Common Stock outstanding.
Bancshares 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 C.
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 Bancshares Common Stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to Bancshares' 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,
Douglas Lawrence, Secretary
Missoula, Montana
October, 1996
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
BANCSHARES 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> 6
[Glacier Bancorp, Inc. Letterhead]
October __, 1996
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting ("Special
Meeting") of Stockholders of Glacier Bancorp, Inc. ("Glacier"), a Delaware
corporation and bank holding company, which will be held on November 13, 1996,
at 9:00 a.m. local time, at the Best Western Outlaw Inn, 1701 Highway 93 South,
Kalispell, Montana.
At the Special Meeting, you will be asked to consider and ratify a Plan
and Agreement of Merger ("Merger Agreement"), dated as of August 9, 1996,
between Glacier and Missoula Bancshares, Inc. ("Bancshares"), a Montana
corporation and bank holding company. The Merger Agreement provides for the
merger ("Merger") of Bancshares with and into Glacier, with Glacier as the
surviving entity. Consequently, Bancshares' stockholders would become
stockholders of Glacier. If the Merger is consummated, each Bancshares
stockholder will receive shares of Glacier Common Stock for each share of
Bancshares common stock, $10.00 par value per share ("Bancshares Common Stock")
owned, based on an exchange formula detailed in the Prospectus/Joint Proxy
Statement. The Merger is subject to various conditions which, with the other
terms of the Merger, are contained in the Merger Agreement and described in the
attached Joint Proxy Statement, which also serves as Glacier's Prospectus for
its common stock, $.01 par value per share ("Glacier Common Stock"), to be
issued in the Merger. The complete text of the Merger Agreement appears as
Appendix A to the Prospectus/Joint Proxy Statement.
Your Board of Directors has received an opinion from D.A. Davidson &
Co., a regional investment firm, to the effect that the consideration to be
received by Bancshares' stockholders in the Merger is fair from a financial
point of view. YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF GLACIER AND ITS STOCKHOLDERS, AND HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF
THE MERGER.
Approval of the Merger Agreement 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 Special Meeting, please call Michael J. Blodnick, Glacier's Secretary, at
(406) 756-4242. Regardless of the size of your holdings, it is important that
your shares be voted at the Special Meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL 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 SPECIAL 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 SPECIAL MEETING.
On behalf of your Board of Directors, I recommend that you vote FOR
approval of the Merger Agreement.
Sincerely,
John S. MacMillan
Chairman of the Board,
President and Chief Executive
Officer
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY FORM
<PAGE> 7
GLACIER BANCORP, INC.
P.O. BOX 27
202 MAIN STREET
KALISPELL, MONTANA 59903
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 1996
TO THE STOCKHOLDERS OF GLACIER BANCORP, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting ("Special Meeting") of
Stockholders of Glacier Bancorp, Inc. ("Glacier"), a Delaware corporation and
bank holding company, will be held on November 13, 1996, at 9:00 a.m. local
time, at the Best Western Outlaw Inn, 1701 Highway 93 South, Kalispell, 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 August 9,
1996, between Glacier and Missoula Bancshares, Inc. ("Bancshares"), a Montana
corporation and bank holding corporation, under the terms of which Bancshares
will merge with and into Glacier, as more fully described in the accompanying
Prospectus/Joint Proxy Statement. The Merger Agreement is attached as Appendix A
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 Glacier Common Stock, $.01 par value per
share ("Glacier Common Stock"), at the close of business on October 1, 1996 (the
record date for the Special Meeting), are entitled to notice of, and to vote at,
the Special Meeting or any adjournments or postponements thereof. The
affirmative vote of the holders of a majority of the outstanding shares of
Glacier Common Stock is required for approval of the Merger Agreement. As of
October 1, 1996, there were 3,374,283 shares of Glacier Common Stock
outstanding.
All stockholders are cordially invited to attend the Special Meeting
personally. Whether or not you are able to do so, it is important that you
complete, sign, date, and promptly return the accompanying proxy in the enclosed
postage-paid envelope in order to vote your shares of Glacier Common Stock.
Stockholders may revoke proxies previously submitted by completing a later-dated
proxy, by written revocation delivered to Glacier's secretary at or prior to the
Special Meeting, or by appearing and voting at the Special Meeting in person.
Attendance at the Special Meeting will not of itself revoke a previously
submitted proxy.
By Order of the Board of Directors,
Michael J. Blodnick, Secretary
Kalispell, Montana
October __, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN, AND WHETHER
OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING. APPROVAL OF THE MERGER REQUIRES
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF
GLACIER COMMON STOCK. IN ORDER TO ENSURE THAT THE REQUISITE VOTES ARE OBTAINED
AND THAT A QUORUM IS ATTAINED, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED
PROXY FORM.
<PAGE> 8
JOINT PROXY STATEMENT
MISSOULA BANCSHARES, INC. AND GLACIER BANCORP, INC.
PROSPECTUS
GLACIER BANCORP, INC. COMMON STOCK ($.01 PAR VALUE)
This Prospectus/Joint Proxy Statement is being furnished to holders of
shares of common stock, $10.00 par value ("Bancshares Common Stock"), of
Missoula Bancshares, Inc. ("Bancshares"), a Montana Corporation and bank holding
company, in connection with the solicitation of proxies by the Board of
Directors of Bancshares ("Bancshares Board") for use at the Special Meeting
("Bancshares Meeting") of Stockholders to be held on November 13, 1996, at 12:00
p.m. local time, at Ruby's Reserve Street Inn, 4825 Reserve Street, Missoula,
Montana and at any adjournments or postponements of the Bancshares Meeting. This
Prospectus/Joint Proxy Statement and the accompanying proxy forms are first
being mailed to the stockholders of Bancshares on October _, 1996.
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 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") of Glacier Stockholders to be held on November 13, 1996, and
at any adjournments or postponements of the Glacier Meeting. This
Prospectus/Joint Proxy Statement and the accompanying proxy forms are first
being mailed to the stockholders of Glacier on or about October _, 1996.
At the Meetings, the respective stockholders of Bancshares and Glacier
will vote upon a proposal to approve the merger ("Merger") of Bancshares with
and into Glacier, under the terms of the Plan and Agreement of Merger ("Merger
Agreement") dated as of August 9, 1996, between Glacier and Bancshares. The
Merger Agreement is hereby incorporated in this Prospectus/Joint Proxy Statement
by reference.
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. When the Merger becomes
effective, all outstanding shares of Bancshares Common Stock will be converted
into the right to receive shares of Glacier Common Stock. Cash will be paid in
lieu of fractional shares. Bancshares 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 Corporations Act ("MBCA"), Sections 35-1-826
through 35-1-839, a copy of which is included as Appendix C 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 of
certain other significant considerations in connection with the Merger, see "THE
MERGER -- Basic Terms of Merger; Dissenters' Rights of Appraisal; Conditions to
the Merger; and Interests of Certain Persons in the Merger."
THIS PROSPECTUS/JOINT PROXY STATEMENT DOES NOT COVER ANY RESALE OF THE
SECURITIES TO BE RECEIVED BY STOCKHOLDERS OF BANCSHARES UPON CONSUMMATION OF THE
MERGER, 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 ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS OR OTHER OBLIGATIONS OF A BANK AND ARE NOT
INSURED BY THE 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 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 October __, 1996.
<PAGE> 9
AVAILABLE INFORMATION
Glacier is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended ("1934 Act"). In accordance with the
1934 Act, Glacier files reports, proxy statements, and other information with
the SEC. Bancshares is not subject to the information and reporting requirements
of the 1934 Act.
Under the rules and regulations of the SEC, the solicitation of
stockholders to approve the Merger constitutes an offering of the Glacier Common
Stock to be issued in conjunction with the Merger. Glacier has filed the
Registration Statement with the SEC under the 1933 Act covering the Glacier
Common Stock to be issued in connection with the Merger. The Registration
Statement and the exhibits thereto, as well as the reports, proxy statements,
and other information filed with the SEC by 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. 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. As permitted by the rules and regulations of the SEC, this
Prospectus/Joint Proxy Statement omits certain information, exhibits, and
undertakings contained in the Registration Statement. Reference is made to the
Registration Statement and to the exhibits thereto for further information.
This Prospectus/Joint Proxy Statement constitutes part of the
Registration Statement (File No. 333-________) 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 Glacier with the SEC under the 1934
Act, a copy of each of which accompany this Prospectus/Joint Proxy Statement,
are incorporated by reference herein:
1. Glacier's Annual Report on Form 10-K for the year ended December 31,
1995 ("Glacier 1995 10-K");
2. Glacier's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1996 ("Glacier 1996 10-Qs");
3. Glacier's Proxy Statement for its 1996 Annual Meeting of
Stockholders ("Glacier 1996 Proxy"); and
4. Glacier's Current Report on Form 8-K dated August 9, 1996 ("Glacier
1996 8-K").
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 Bancshares Meeting of
Stockholders 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 Bancshares is relying
upon the accuracy of that information. All information contained in this
Prospectus/Joint Proxy Statement relating to Bancshares has been furnished by
Bancshares, 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 EITHER GLACIER OR BANCSHARES. 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 BANCSHARES, 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 OF CONTENTS
Page
GLOSSARY OF CERTAIN KEY TERMS.................................................
SUMMARY.......................................................................
Introduction.........................................................
Parties to the Merger................................................
Trading Market of the Common Stock...................................
The Special Stockholder Meetings.....................................
The Merger; Exchange Ratio...........................................
Effective Date of the Merger.........................................
Reasons for the Merger - Bancshares..................................
Opinion of Bancshares' Financial Advisor.............................
Recommendation of the Bancshares Board...............................
Reasons for the Merger - Glacier.....................................
Opinion of Glacier's Financial Advisor...............................
Recommendation of the Glacier Board..................................
Board of Directors and Management....................................
Conditions; Regulatory Approvals.....................................
Amendment or Termination.............................................
Federal Income Tax Consequences......................................
Accounting Treatment of the Merger...................................
Dissenters' Rights of Appraisal......................................
Interests of Certain Persons in the Merger...........................
Comparison of Certain Stockholder Rights.............................
Stock Option Agreement...............................................
STOCK PRICE AND DIVIDEND INFORMATION..........................................
Bancshares...........................................................
Glacier..............................................................
Recent Stock Price Data..............................................
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA....................
EQUIVALENT PER COMMON SHARE DATA..............................................
SPECIAL MEETING OF BANCSHARES STOCKHOLDERS....................................
Date, Time, Place and Purpose........................................
Shares Outstanding and Entitled to Vote; Record Date.................
Vote Required........................................................
Voting, Solicitation and Revocation of Proxies.......................
SPECIAL MEETING OF GLACIER STOCKHOLDERS.......................................
Date, Time, Place and Purpose........................................
Shares Outstanding and Entitled to Vote; Record Date.................
Vote Required........................................................
Voting, Solicitation, and Revocation of Proxies......................
<PAGE> 12
BACKGROUND OF AND REASONS FOR THE MERGER......................................
General..............................................................
Reasons for the Merger - Bancshares..................................
Opinion of Bancshares Financial Advisor .............................
Recommendation of the Bancshares Board...............................
Reasons For the Merger - Glacier.....................................
Opinion of Glacier Financial Advisor.................................
Recommendation of the Glacier Board..................................
THE MERGER....................................................................
General..............................................................
Basic Terms of the Merger............................................
Cash for Fractional Shares...........................................
Exchange of Stock Certificates.......................................
Directors and Executive Officers.....................................
Employee Benefit Plans...............................................
Mechanics of the Merger..............................................
Conduct Pending Consummation of the Merger...........................
Conditions to the Merger.............................................
Amendment of the Merger Agreement....................................
Termination of the Merger Agreement..................................
Interests of Certain Persons in the Merger...........................
Certain Federal Income Tax Consequences..............................
Accounting Treatment of the Merger...................................
Dissenters' Rights of Appraisal......................................
Resales of Stock by Bancshares Affiliates............................
No Solicitation......................................................
Stock Option Agreement...............................................
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS...................
INFORMATION CONCERNING GLACIER................................................
INFORMATION CONCERNING BANCSHARES.............................................
Business.............................................................
Competition..........................................................
Facilities...........................................................
Employees............................................................
Legal Proceedings....................................................
BANCSHARES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................................
Investment Securities................................................
Summary of Loan Loss Experience......................................
MANAGEMENT OF BANCSHARES......................................................
Directors and Executive Officers.....................................
Executive Compensation...............................................
Director Compensation................................................
<PAGE> 13
Committees of the Bancshares and Bank Boards.........................
Certain Transactions and Relationships...............................
Securities Ownership of Management and Certain Beneficial Owners.....
Other Principal Shareholders.........................................
Committees of the Board of Directors.................................
SUPERVISION AND REGULATION....................................................
Introduction.........................................................
The Holding Companies................................................
General..........................................................
Bank Holding Company Structure...................................
Savings and Loan Holding Company Structure.......................
Transactions with Affiliates.....................................
Regulation of Management.........................................
Commitments to Affiliated Institutions...........................
FIRREA...........................................................
Tie-In Arrangements..............................................
State Law Restrictions...........................................
Securities Registration and Reporting............................
The Subsidiaries.....................................................
General..........................................................
Loans -to-One Borrower...........................................
FDIC Insurance...................................................
Capital Requirements.............................................
Liquidity Requirements...........................................
QTL Test.........................................................
Restrictions on Capital Distributions............................
Federal Home Loan Bank System....................................
Federal Reserve System...........................................
Recent Federal Legislation.......................................
Regulatory Enforcement Authority.................................
DESCRIPTION OF GLACIER'S CAPITAL STOCK AND COMPARISON OF CERTAIN RIGHTS OF
HOLDERS OF BANCSHARES AND GLACIER COMMON STOCK............................
General..............................................................
Preferred Stock......................................................
Common Stock.........................................................
Dividend Rights......................................................
Voting Rights........................................................
Preemptive Rights....................................................
Liquidation Rights...................................................
Assessments..........................................................
Board of Directors...................................................
Indemnification and Limitation of Liability..........................
Amendment of Articles of Incorporation and Bylaws....................
Repurchase of Shares.................................................
Dissenters' Rights...................................................
Sales of Assets, Mergers and Share Exchanges - Voting................
Potential "Anti-Takeover" Provisions.................................
CERTAIN LEGAL MATTERS.........................................................
<PAGE> 14
EXPERTS..............................................................
OTHER MATTERS........................................................
APPENDIX A - Plan and Agreement of Merger
APPENDIX B - Stock Option Agreement
APPENDIX C - Sections 35-1-826 through 35-1-839 of the Montana Business
Corporation Act (Dissenters' Rights of Appraisal under
Montana Law)
APPENDIX D - Opinion of Columbia Financial Advisors, Inc.
APPENDIX E - Opinion of D.A. Davidson & Co.
<PAGE> 15
GLOSSARY OF CERTAIN KEY TERMS
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.
ACP....................... The average daily closing price of Glacier Common
Stock during the five trading days immediately
preceding the fifth business day before the
Effective Date.
BHCA...................... The Bank Holding Company Act of 1956, as amended.
BANCSHARES................ Missoula Bancshares, Inc., a Montana corporation
and a bank holding company.
BANCSHARES COMMON STOCK... Bancshares' Common Stock, $10.00 par value per
share.
BANCSHARES FINANCIAL
STATEMENTS ............... Bancshares' (i) audited consolidated
statements of financial condition as of
December 31, 1995 and 1994 and the
related audited consolidated statements
of operations, cash flows and
stockholders' equity for each of the
years ended December 31, 1995 and 1994,
and (ii) Bancshares' unaudited
consolidated statements of financial
condition as of the end of the most
recent fiscal quarter following December
31, 1995 but preceding August 9, 1996,
and the related unaudited statements of
operations, cash flows and stockholders'
equity for such quarters.
BANCSHARES MEETING........ Special meeting of Bancshares stockholders to be
held on November 13, 1996.
BANCSHARES RECORD DATE.... October 1, 1996.
BANK...................... First Security Bank of Missoula, Bancshares' sole
subsidiary.
BANK SUBSIDIARIES......... Glacier Bank, F.S.B., First National Bank of
Whitefish, and First National
Bank of Eureka, Glacier's subsidiary
banks.
BOARD..................... Board of Directors.
COLUMBIA FINANCIAL........ Columbia Financial Advisors, Inc., Bancshares'
financial advisors.
CLOSING................... The closing of the Merger transaction contemplated
in the Merger Agreement.
CODE...................... The Internal Revenue Code of 1986, as amended.
DGCL...................... The Delaware General Corporations Law.
D.A. DAVIDSON............. D.A. Davidson & Co., Glacier's financial advisor.
DISSENTING SHARES......... Those shares of Bancshares Common Stock with
respect to which Bancshares' stockholders have
perfected their dissenters' rights under Montana
law.
EFFECTIVE DATE............ The date Closing of the Merger will occur.
G-1
<PAGE> 16
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
Bancshares and the Bank on a consolidated basis as
of the last day of the month preceding the Effective
Date, determined in accordance with GAAP.
EXCHANGE AGENT............ The individual designated by Glacier and
Bancshares to handle the exchange of Bancshares
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.
GLACIER COMMON STOCK...... Glacier's Common Stock, $.01 par value per share.
GLACIER FINANCIAL
STATEMENTS................ Glacier's (i) audited consolidated statements
of financial condition as of December 31, 1995 and
1994, 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, 1995, and (ii)
unaudited consolidated statements of financial
condition as of the end of the most recent fiscal
quarter following December 31, 1995 but preceding
August 9, 1996 and the related unaudited statements
of operations, cash flows and stockholders' equity
for such quarters.
GLACIER MEETING........... Special meeting of Glacier stockholders to
be held on November 13, 1996.
GLACIER RECORD DATE....... October 1, 1996.
HOLA...................... Home Owner's Loan Act, as amended.
KPMG...................... KPMG Peat Marwick LLP, independent certified
public accountants.
MBCA...................... The Montana Business Corporations Act, as
amended.
MERGER.................... The merger of Bancshares with and into Glacier
in accordance with the Merger Agreement.
MERGER AGREEMENT.......... The Plan and Agreement of Merger, dated as of
August 9, 1996, between Glacier and Bancshares.
OPTION.................... Stock option granted by Bancshares to Glacier
in the Stock Option Agreement, dated August 9, 1996.
OTS....................... The Office of Thrift Supervision.
PROSPECTUS/JOINT
PROXY STATEMENT .......... This Prospectus/Joint Proxy Statement, filed with
the SEC by Glacier and Bancshares, and to be mailed
to Bancshares' stockholders, together with any
amendments and supplements.
G-2
<PAGE> 17
PURCHASE PRICE........... The aggregate number of shares of Glacier
Common Stock to be provided by Glacier to
Bancshares' stockholders in exchange for their
Bancshares Common Stock shares.
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.
REGULATORY APPROVALS...... The required regulatory approvals of the
transaction by the FRB and the OTS.
SEC....................... The Securities and Exchange Commission.
SAVINGS BANK.............. Glacier Bank, F.S.B.
STOCK OPTION AGREEMENT.... Stock Option Agreement between Glacier and
Bancshares, dated as of August 9, 1996.
TERMINATION DATE.......... April 30, 1997, the date after which each party
has the right to terminate the Merger Agreement, if
the Closing has not occurred by that date.
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 in its entirety 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
Glacier and Bancshares propose to merge under the terms of the Merger
Agreement. If the Merger Agreement is approved by the respective stockholders of
Glacier and Bancshares, Bancshares will merge with and into Glacier ("Merger").
Consequently, holders of Bancshares Common Stock would become stockholders of
Glacier, and First Security Bank of Missoula ("Bank"), which is presently a
subsidiary of Bancshares, would become a direct subsidiary of Glacier. After the
Merger is consummated, Bancshares stockholders will no longer own any stock in
Bancshares, and Bancshares will cease to exist.
The respective Boards of Directors ("Boards") of Glacier and Bancshares
have unanimously adopted the Merger Agreement and recommend, respectively, that
the stockholders of Glacier and Bancshares vote to approve the Merger Agreement.
Subject to approval of the Merger Agreement by the respective stockholders of
Glacier and Bancshares, receipt of required regulatory approvals, and
satisfaction of certain other conditions, Bancshares will merge with and into
Glacier. Bancshares' stockholders, other than those that 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 Bancshares Common Stock.
See "THE MERGER - Basic Terms of the Merger; Cash for Fractional Shares;
Dissenters' Rights of Appraisal."
PARTIES TO THE MERGER
Bancshares. Bancshares is a Montana corporation and a registered bank
holding company under the Bank Holding Company Act of 1956, as amended ("BHCA").
Bancshares was incorporated on August 4, 1993, and its business and activities
are conducted primarily through the Bank, its sole subsidiary. Bancshares owns
approximately 98.86% of the stock of the Bank, a state-chartered commercial bank
organized under Montana law on December 26, 1972. Bancshares has no significant
operations separate from the Bank.
As of June 30, 1996, the Bank had deposits of approximately $100
million and assets of approximately $110 million. Bancshares is headquartered in
Missoula, Montana, its executive offices are located at 1704 Dearborn Avenue,
Missoula, Montana 59806, and its telephone number is (406) 728-3115. For
additional information about Bancshares and its business, see "INFORMATION
CONCERNING BANCSHARES."
Glacier. Glacier is a Delaware corporation, a registered bank holding
company under the BHCA, and a savings and loan holding company within the
meaning of Section 10 of the Home Owners' Loan Act, as amended ("HOLA").
Glacier's date of incorporation is October 1, 1990, and its principal business
activities are conducted through three bank subsidiaries ("Bank Subsidiaries"),
as follows: (i) Glacier Bank, F.S.B. ("Savings Bank"), a federally-chartered
savings bank that has been in operation since 1955, (ii) First National Bank of
Whitefish, a national bank, and (iii) First National Bank of Eureka, also a
national bank. Glacier has one non-bank subsidiary, Community First Inc., a full
service brokerage firm. The deposits of each of the Bank Subsidiaries are
insured by the Federal Deposit Insurance Corporation ("FDIC").
<PAGE> 19
At August 31, 1996, the Bank Subsidiaries had facilities in a total of
13 locations in Montana, operating a total of 12 full-service branches 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."
TRADING MARKET
The Glacier Common Stock is quoted on The Nasdaq Stock 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.
Bancshares is not subject to the information and reporting requirements
of the 1934 Act and the Bancshares Common Stock is not actively traded, or
listed on any market system.
THE SPECIAL STOCKHOLDER MEETINGS
Bancshares. The Bancshares Meeting will be held on Wednesday, November
13, 1996, at 12:00 p.m. local time, at Ruby's Reserve Street Inn, 4825 North
Reserve Street, Missoula, Montana. The purpose of the Bancshares Meeting is to
vote on (i) approval of the Merger Agreement, and (ii) any other matters that
may properly come before the Bancshares Meeting.
Only shares of Bancshares Common Stock held of record on October 1,
1996 at 5:00 p.m. ("Bancshares Record Date") are entitled to notice of, and to
vote at, the Bancshares Meeting. The affirmative vote of at least two-thirds of
the shares of Bancshares Common Stock outstanding on the Bancshares Record Date
is required to approve the Merger Agreement. On the Bancshares Record Date,
there were 48,661 shares of Bancshares Common Stock outstanding, and the
directors and executive officers of Bancshares and the Bank were entitled to
vote an aggregate of 27,837 shares, representing approximately 57.21 percent of
the total Bancshares Common Stock outstanding on the Bancshares Record Date. For
additional information about the Bancshares Meeting, see "SPECIAL MEETING OF
BANCSHARES STOCKHOLDERS."
Glacier. The Glacier Meeting will be held on Wednesday November 13,
1996, at 9:00 a.m. local time, at the Best Western Outlaw Inn, 1701 Highway 93
South, Kalispell, Montana. The purpose of the Glacier Meeting is to consider and
vote on (i) approval of the Merger Agreement, and (ii) any other matters that
may properly come before the Glacier Meeting.
Only shares of Glacier Common Stock held of record as of October 1,
1996 ("Glacier Record Date") are entitled to notice of, and to vote at, the
Glacier Meeting. On the Glacier Record Date, there were 3,374,283 shares of
Glacier Common Stock outstanding. 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 Merger Agreement. As of the Glacier Record Date,
Glacier's executive officers and directors were entitled to vote an aggregate of
782,159 shares, which represents approximately 23.18 percent of the total number
of outstanding shares of Glacier Common Stock on the Glacier Record Date. For
additional information about the Glacier Meeting, see "SPECIAL MEETING OF
GLACIER STOCKHOLDERS."
-2-
<PAGE> 20
THE MERGER; EXCHANGE RATIO
In accordance with the Merger Agreement, on the Effective Date,
Bancshares will merge with and into Glacier, with Glacier as the surviving
corporation. After the Merger is consummated, each holder of shares of
Bancshares Common Stock, other than dissenting shares, will be entitled to
receive, in exchange for each share of Bancshares Common Stock held of record on
the Effective Date, the number of shares of Glacier Common Stock resulting from
a division of the Purchase Price by the aggregate number of shares of Bancshares
Common Stock issued and outstanding or subject to unexercised options, as of the
Effective Date.
The pricing formulas in the Merger Agreement are designed to result in
Bancshares stockholders receiving, in the aggregate, Glacier Common Stock with a
market value of between $21 million and $27 million, depending on the Average
Closing Price of Glacier Common Stock. Cash will be paid in lieu of issuing
fractional shares of Glacier Common Stock. Upon completion of the Merger,
stockholders of Bancshares will no longer own any stock in Bancshares. For more
detailed information concerning the Merger, the Merger exchange ratio, and how
Bancshares Stockholders may exchange certificates representing shares of
Bancshares Common Stock, see "THE MERGER -- Basic Terms of the Merger; Cash for
Fractional Shares; Exchange of Stock Certificates."
EFFECTIVE DATE
The parties presently expect to consummate the Merger on December 31,
1996, or during the first quarter of 1997, 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 "Effective Date." The Merger Agreement provides that if the Merger has not
been consummated by April 30, 1997, at any time after that date, the Board of
either Glacier or Bancshares may vote to abandon the Merger. See "THE MERGER --
Basic Terms of the Merger; Termination of the Merger Agreement."
REASONS FOR THE MERGER; RECOMMENDATION OF THE BANCSHARES BOARD
The Bancshares Board has unanimously determined that the Merger
Agreement is fair to and in the best interests of Bancshares and its
stockholders, and recommends that Bancshares' stockholders approve the Merger
Agreement. In making this determination, the Bancshares Board considered a
variety of factors, including the value of the Glacier Common Stock that the
stockholders of Bancshares will receive in exchange for their shares of
Bancshares Common Stock, the continued ability of the Bank to provide
competitive and comprehensive services in the markets in which it operates, and
the parties' shared belief in personalized community banking, which emphasizes
responsiveness to local markets and delivery of personalized services to
customers.
The Bancshares Board believes that the Merger will allow the Bank to
provide a wider array of products and services, while continuing to offer the
advantages of personalized community banking to Bancshares' current customers,
and will also allow Bancshares to realize a premium, thus enhancing stockholder
value. The Bancshares Board further anticipates that the Merger will provide
both Bancshares and the Bank with substantially greater financial and
technological resources, which will enable the Bank to compete more effectively
in its markets and better serve its customers and communities. Additionally,
Bancshares' stockholders would be able to obtain a premium over book value
for their shares of Bancshares Common Stock on a tax-deferred basis, while at
the same time enjoying the benefits of a more active trading market in the
Glacier Common Stock.
-3-
<PAGE> 21
THE BANCSHARES BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS
ADVISABLE AND IN THE BEST INTERESTS OF BANCSHARES AND ITS STOCKHOLDERS, AND
RECOMMENDS THAT BANCSHARES STOCKHOLDERS APPROVE THE MERGER AGREEMENT. For a more
detailed discussion of the factors considered by the Bancshares Board in
reaching its determination to approve the Merger Agreement, see "BACKGROUND OF
AND REASONS FOR THE MERGER."
REASONS FOR THE MERGER; RECOMMENDATION OF THE GLACIER BOARD
The Glacier Board has unanimously determined that the Merger is fair to
and in the best interests of Glacier's stockholders. In making this
determination, the Glacier Board considered a variety of factors, including:
(i) The Glacier Board's knowledge and review of the financial
condition, results of operations, and business operations and
prospects of the Bank;
(ii) The Glacier Board's belief that the acquisition of Bancshares
will expand Glacier's franchise in the western Montana market --
the Glacier Board noted that the Missoula economy, which has seen
substantial growth in recent years, presents an attractive market
for expansion -- after the acquisition of Bancshares, Glacier's
banking operations are expected to rank among the largest in
western Montana with over $500 million in assets, thus placing
Glacier in a leading position in this market;
(iii) The Glacier Board's judgment that Bancshares is a well-managed
company and will be a superior merger partner as a result of the
similarities of the two institutions in culture and commitment to
the Montana market, the excellent historical returns earned by
the Bank, and the prospects going forward for the Missoula
market; and
(iv) The Glacier Board's evaluation of the financial terms of the
Merger and their effect on the shareholders of Glacier, and the
Glacier Board's belief that such terms are fair to Glacier and
its stockholders.
THE GLACIER BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AS ADVISABLE AND
IN THE BEST INTERESTS OF GLACIER AND ITS STOCKHOLDERS, AND RECOMMENDS THAT THE
STOCKHOLDERS OF GLACIER 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."
OPINION OF BANCSHARES FINANCIAL ADVISOR
Columbia Financial Advisors, Inc. ("Columbia Financial"), Bancshares'
financial advisor, has delivered a written opinion to the Bancshares Board,
dated as of August 9, 1996, 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 Bancshares and its stockholders. A copy of Columbia Financial's
opinion setting forth the limits of its review, assumptions made, matters
considered and procedures followed is attached to this Prospectus/Joint Proxy
Statement as Appendix D and should be read in its entirety by Bancshares'
stockholders. See "BACKGROUND OF AND REASONS FOR THE MERGER -- Opinion of
Bancshares Financial Advisor."
-4-
<PAGE> 22
OPINION OF GLACIER FINANCIAL ADVISOR
D.A. Davidson & Co. ("D.A. Davidson"), Glacier's financial advisor, has
delivered a written opinion to the Glacier Board, dated August 9, 1996, to the
effect that the consideration to be paid to Bancshares in the Merger is fair,
from a financial perspective, to Glacier and its stockholders. A copy of D.A.
Davidson's opinion, updated to the date of this Prospectus/Joint Proxy Statement
and setting forth the limits of its review, assumptions made, other matters
considered and procedures followed, is attached to this Prospectus/Joint Proxy
Statement as Appendix E and should be read in its entirety by Glacier's
stockholders. See "BACKGROUND OF AND REASONS FOR THE MERGER -- Opinion of
Glacier Financial Advisor."
DIRECTORS AND EXECUTIVE OFFICERS
Upon consummation of the Merger, the Glacier Board will consist of
Glacier's current directors, in addition to William L. Bouchee and Allen
Fetscher, who are presently members of the Bancshares Board. Glacier has also
agreed to appoint Messrs. Bouchee and Fetscher to the Savings Bank Board
effective as of the Effective Date.
The respective executive officers of Glacier and the Bank in office
immediately before the Effective Date are expected to remain unchanged following
the Merger. On the Effective Date, the Bank Board will consist of all persons
who were directors of the Bank immediately before the Merger, plus the
additional Glacier directors to be designated by Glacier to serve on the Bank
Board. For more information on the anticipated composition of the respective
Boards and managements of Glacier and the Bank after the Merger, see "THE MERGER
- -- Directors and Executive Officers; Interests of Certain Persons in the
Merger."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger is conditioned on (i) approval of the Merger
Agreement by the holders of at least a majority of the outstanding shares of
Glacier Common Stock and by the holders of at least two-thirds of the
outstanding shares of Bancshares Common Stock; (ii) receipt of all necessary
approvals of the Merger by governmental regulatory agencies, including the FRB
and OTS; (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 filed the appropriate applications for approval of the
Merger with the FRB and the OTS.
AMENDMENT; TERMINATION
The Merger Agreement may be amended at any time before the Effective
Date upon approval of both the Glacier and Bancshares Boards. However, no
amendment reducing the amount or changing the form of any consideration to be
received by Bancshares' stockholders may be effected without the approval of
Bancshares' 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 Bancshares) (i) by the mutual majority votes of the Glacier and
Bancshares Boards, or (ii) unilaterally, by either of the Boards under certain
specified circumstances (including a failure to consummate the Merger by April
30, 1997). See "THE MERGER -- Amendment or Termination of the Merger Agreement."
-5-
<PAGE> 23
TAX TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon receipt by Glacier, and
delivery to Bancshares, 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
Bancshares Common Stock solely for shares of Glacier Common Stock; and (iii) the
payment of cash to a Bancshares 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 -- Certain Federal Income Tax Consequences."
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 Bancshares Common Stock have the right to dissent
from the Merger and, 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
Bancshares 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 C to this Prospectus/Joint
Proxy Statement.
Holders of Glacier Common Stock may vote against the Merger but will
not be entitled to receive the fair value of their shares in cash. Since Glacier
Common Stock is traded on The Nasdaq Stock Market, the DGCL does not provide
Glacier's stockholders with 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
Bank Board.
Certain members of Bancshares' management and the Bancshares Board may
be deemed to have interests in the Merger in addition to their interests as
stockholders of Bancshares generally, as a result of provisions in the Merger
Agreement relating to indemnification, employment agreements, and appointments
to the Glacier and Savings Bank Boards. These provisions are summarized below
and discussed in more detail in "THE MERGER -- Interests of Certain Persons in
the Merger."
As a condition to execution of the Merger Agreement, the Bank has
entered into employment agreements with three of its present executive officers
- -- Mr. Bouchee, Harold Fraser and Weymouth Symmes. Under the terms of the
respective employment agreements, Mr. Bouchee will continue to serve as the
Bank's President and Chief Executive Officer; Mr. Fraser will continue as the
Bank's Senior Vice-President, Loans; and Mr. Symmes will continue as the Bank's
Senior Vice-President and Real Estate Manager. Additionally, Glacier has agreed
to appoint Messrs. Bouchee and Fetscher to the Glacier and
-6-
<PAGE> 24
Savings Bank Boards, effective upon Closing. The directors and management of the
Bank are expected to remain in their respective positions with the Bank after
the Merger.
COMPARISON OF STOCKHOLDERS' RIGHTS
Stockholders of Bancshares who receive Glacier Common Stock shares in
the Merger in exchange for their shares of Bancshares 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 Bancshares' stockholders are determined under Bancshares' Articles of
Incorporation and Bylaws, and Montana law. For a discussion of certain material
differences in the rights of stockholders of Glacier and Bancshares, and an
explanation of certain possible antitakeover effects of certain provisions in
Glacier's Certificate of Incorporation and Bylaws, see "COMPARISON OF RIGHTS OF
HOLDERS OF GLACIER AND BANCSHARES COMMON STOCK."
STOCK OPTION AGREEMENT
As an inducement to Glacier to enter into the Merger Agreement,
Bancshares has granted an option ("Option") to Glacier, by agreement dated as of
August 9, 1996, to purchase up to approximately 19.9 percent of the
then-outstanding Bancshares Common Stock at a price equal to $271.00 per share.
Glacier may exercise the Option only upon (i) the occurrence of certain events
(none of which have occurred), and (ii) obtaining any regulatory approvals
necessary for the acquisition of the Bancshares Common Stock subject to the
Option. Glacier may transfer the Option only if an event occurs triggering
Glacier's right to exercise the Option. The events that may trigger Glacier's
right to exercise the Option are set forth in the Stock Option Agreement. See
"THE MERGER - Stock Option Agreement."
-7-
<PAGE> 25
STOCK PRICE AND DIVIDEND INFORMATION
GLACIER
The Glacier Common Stock trades on The Nasdaq Stock 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 June 30, 1996, there were approximately 665 holders of
record of the Glacier Common Stock.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
Cash Cash Cash
Dividends Dividends Dividends
Period Market Price Declared(1) Market Price Declared(1) Market Price Declared(1)
- ----------------------------------------------------------------------------------------------------------------------------
High Low High Low High Low
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1ST $20.45 $17.73 $0.15 $15.50 $13.64 $0.13 $17.09 $14.65 $0.09
QUARTER
- ----------------------------------------------------------------------------------------------------------------------------
2ND 22.27 19.09 0.16 17.73 14.87 0.14 15.21 13.15 0.10
QUARTER
- ----------------------------------------------------------------------------------------------------------------------------
3RD 25.25 20.25 0.16 20.00 16.14 0.14 16.12 14.26 0.10
QUARTER
- ----------------------------------------------------------------------------------------------------------------------------
4TH (2) (2) (2) $19.88 $16.82 $0.15 $15.70 $13.43 $0.20
QUARTER
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(1) A 10% stock dividend was paid in May each of 1996, 1995, and 1994.
(2) Through October __, 1996.
BANCSHARES
No broker makes a market in the Bancshares Common Stock, and the trades
that have occurred cannot be characterized as amounting to an established public
trading market. The Bancshares 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 Bancshares as its own transfer agent. Due to the limited
information available, the following data may not accurately reflect the actual
market value of the Bancshares Common Stock.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Number of Shares Stock Prices (2)(3)(4) Cash Dividends
Period Reported as Traded ------------ Paid
High Low
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996(1) 714 $286 $281 $0
- ---------------------------------------------------------------------------------------------
1995 0 0 0 0
- ---------------------------------------------------------------------------------------------
1994 1,337 150 150 0
- ---------------------------------------------------------------------------------------------
</TABLE>
- ----------------
(1) Through October __, 1996.
(2) The Bank was purchased by Bancshares on October 1, 1993, at a purchase
price per share of $102.39 plus 80(cent) organizational costs, for a total
of $103.19 per share. The purchase price per share was based on a multiple
of 1.5 times the book value of the Bank at the date of closing of the
purchase and sale transaction. Since then, the Bank has paid quarterly
dividends to Bancshares so that Bancshares may service its original debt of
$3 million, which was incurred in order to pay part of the purchase price
for the Bank's stock. To date, Bancshares has not declared or paid any
dividends on the Bancshares Common Stock, as Bancshares' policy has been
not to pay any dividends until its debt is paid in full.
(3) The Bank's quarterly dividends to Bancshares have ranged from $2.00 to
$6.00 per share, depending on the amount required for (i) repayment of
Bancshares' debt during the applicable period, and (ii) maintenance of
adequate capital at the Bank level.
(4) Bancshares has an agreement with each stockholder which restricts the sale
of the Bancshares Common Stock. Three stock transactions have taken place
since the stock of the Bank was initially purchased -- on September 7,
1994, 1,337 shares were
-8-
<PAGE> 26
issued upon exercise of a stock option for a price of $149.62 per share; on
July 18, 1996, 277 shares were issued at $270.53 per share, and on
September 13, 1996, 437 shares were issued at $286.04 per share. In
conjunction with the formation of Bancshares and for new employees
thereafter, senior officers are given an option to acquire Bancshares
Common Stock subject to the stockholder agreement. These issuances
represent purchases by two senior officers upon exercise of these options.
RECENT STOCK PRICE DATA
The following table sets forth the closing price per share of Glacier
Common Stock, as reported on The Nasdaq Stock Market, and of Bancshares Common
Stock, in addition to the equivalent per share price for Bancshares Common
Stock, on August 8, 1996 (the last full trading day prior to the public
announcement of the execution of the Merger Agreement) and on October __, 1996,
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
BANCSHARES COMMON STOCK ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES
OF GLACIER COMMON STOCK.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
CLOSING PRICE PER SHARE: August 8, 1996 October __, 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Glacier Common Stock $ 21.25 $____
- ----------------------------------------------------------------------------------------
Bancshares Common Stock(1) $270.53 $____
- ----------------------------------------------------------------------------------------
Bancshares Equivalent Pro Forma(2) $477.70 $____
- ----------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) There are no publicly available quotations of Bancshares Common Stock, and
the market prices per share as of August 8, and October __, 1996,
respectively (quoted above), represent the purchase prices known to
Bancshares' management to have been paid for the Bancshares Common Stock in
the last transaction prior to such dates.
(2) Giving effect for the Merger and computed by multiplying the closing price
per share of Glacier Common Stock by the Merger exchange ratio.
-9-
<PAGE> 27
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
and Bancshares, 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 are 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 and Bancshares 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 and
Bancshares believe to be necessary for a fair presentation of the data have been
included. The June 30, 1996 ratios have been annualized where necessary.
Dollar amounts are in thousands, except per share data.
-10-
<PAGE> 28
GLACIER BANCORP, INC.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
----------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income .......................... $ 15,476 13,691 28,784 23,100 21,649 19,159 17,197
Interest expense ......................... 7,310 6,159 13,223 9,526 9,177 9,054 9,388
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net interest income .................... 8,166 7,532 15,561 13,574 12,472 10,105 7,809
Provision for loan loss .................. 95 200 281 161 159 181 183
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net interest income after provision
for loan losses ...................... 8,071 7,332 15,280 13,413 12,313 9,924 7,626
Noninterest income ....................... 2,700 2,286 4,840 4,401 4,990 3,080 1,916
Noninterest expense ...................... 5,762 5,281 10,817 9,398 8,919 6,415 4,890
---------- ---------- ---------- ---------- ---------- ---------- ---------
Earnings before income taxes ........... 5,009 4,337 9,303 8,416 8,384 6,589 4,652
Income taxes ............................. 1,936 1,690 3,616 3,282 3,265 2,486 1,751
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net earnings ........................... $ 3,073 $ 2,647 5,687 5,134 5,119 4,103 2,901
========== ========== ========== ========== ========== ========== =========
PER SHARE DATA:
Net earnings per common share(1) ......... $ 0.92 0.78 1.69 1.53 1.55 1.28 0.91
Dividends declared per share(1) .......... 0.31 .26 0.55 0.49 0.42 0.36 0.30
Period end book value(1) ................. 11.45 10.45 11.25 9.83 8.98 7.87 7.05
Average common shares outstanding ........ 3,358,274 3,375,264 3,367,044 3,359,488 3,307,192 3,210,337 3,171,876
SUMMARY OF FINANCIAL CONDITION:
Total assets ............................. 408,467 358,842 388,058 339,831 288,047 268,084 197,179
Investment securities .................... 79,312 54,457 72,917 53,578 41,270 54,150 42,045
Loans receivable, net .................... 293,548 271,606 281,041 258,194 217,391 188,815 137,661
Total deposits ........................... 207,446 189,046 197,833 183,041 181,091 183,283 120,489
Total notes payable ...................... 152,219 125,378 141,519 115,593 69,720 51,667 48,245
Stockholders' equity ..................... 38,473 35,168 37,768 33,203 30,018 25,875 22,397
FINANCIAL RATIOS (PERCENTAGES):
Return on:
Average assets ......................... 1.54% 1.52% 1.58% 1.64% 1.81% 1.78% 1.58%
Beginning stockholders' equity ......... 16.27 15.94 17.13 17.10 19.78 18.32 14.19
Equity as a percentage of total ......... 9.42 9.80 9.73 9.77 10.42 9.65 11.36
assets
Dividend payout ratio .................... 33.88 33.15 32.29 31.91 27.23 27.79 33.27
Efficiency ratio ......................... 53.03 53.79 53.02 52.28 51.08 48.65 50.28
Net loans to total assets ................ 71.87 75.69 72.42 75.98 75.47 70.43 69.82
Net interest margin on average
earning assets ......................... 4.47 4.69 4.61 4.64 4.73 4.67 4.51
Interest rate spread ..................... 3.92 4.15 3.98 4.05 4.13 3.90 3.56
Nonperforming assets to total assets ..... 0.26 0.11 0.08 0.09 0.07 0.58 0.92
Allowance for loan loss to total .... 0.69 0.74 0.73 0.72 0.79 0.91 0.90
loans
Allowance for loan loss
to nonperforming assets ................ 197 500 656 636 878 112 69
</TABLE>
- -------------------
(1) Revised for stock splits and dividends.
-11-
<PAGE> 29
MISSOULA BANCSHARES, INC.
<TABLE>
<CAPTION>
Bancshares(1) Combined Bank
----------------------------------------- ------------ -------------
Six Months Ended
June 30, Years Ended December 31,
-------------------- --------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income ................................. $ 4,488 3,823 8,068 6,261 4,785 4,007 2,810
Interest expense (2) ............................ 1,682 1,268 2,846 1,970 1,536 1,487 1,384
------- -------- ------ ------ ------ ------ ------
Net interest income ........................... 2,806 2,555 5,222 4,291 3,249 2,520 1,426
Provision for loan loss ......................... 120 120 300 160 80 337 201
------- -------- ------ ------ ------ ------ ------
Net interest income
after provision
for loan losses ............................. 2,686 2,435 4,922 4,131 3,169 2,183 1,225
Noninterest income .............................. 1,267 1,282 2,752 2,333 2,426 1,720 975
Noninterest expense (3) ......................... 1,979 1,868 3,863 3,524 2,907 2,544 2,004
------- -------- ------ ------ ------ ------ ------
Earnings before income taxes .................. 1,974 1,849 3,811 2,940 2,688 1,359 196
Income taxes .................................... 819 747 1,523 1,185 984 449 44
------- -------- ------ ------ ------ ------ ------
Net earnings .................................. $ 1,155 1,102 2,288 1,755 1,704 910 152
======= ======== ====== ====== ====== ====== ======
PER SHARE DATA:
Net earnings .................................... $ 24.09 22.98 47.72 37.33 34.80 15.53 2.59
Dividends declared .............................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Period end book value ........................... 211.96 163.22 188.77 138.80 102.00 73.33 54.96
Average common shares outstanding ............... 47,947 47,947 47,947 47,010 46,610 58,610 58,610
SUMMARY OF FINANCIAL CONDITION:
Total assets .................................... 111,875 95,192 105,355 85,836 74,985 54,976 42,061
Investment securities ........................... 21,668 18,054 17,938 15,253 17,559 14,874 10,515
Loans receivable, net ........................... 77,125 65,002 72,222 59,709 48,966 34,288 26,040
Total deposits .................................. 99,942 84,748 93,752 75,681 66,524 50,531 38,632
Total notes payable ............................. 1,000 2,100 1,500 2,400 3,000 0 0
Stockholders' equity ............................ 10,163 7,826 9,051 6,655 4,754 4,298 3,221
FINANCIAL RATIOS (PERCENTAGES):
Return on:
Average assets ................................ 2.13% 2.44% 2.40% 2.16% 2.58% 1.88% 0.45%
Beginning stockholders' equity ................ 25.52 33.12 34.38 36.92 39.65 28.25 6.03
Equity as a percentage of total
assets ........................................ 9.08 8.22 8.59 7.75 6.34 7.82 7.66
Dividend payout ratio ........................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Efficiency ratio ................................ 48.59 48.68 48.44 53.20 51.22 60.00 83.47
Net loans to total assets ....................... 68.94 68.29 68.54 69.56 65.30 62.37 61.91
Net interest margin on average
earning assets ................................ 5.88 6.40 6.26 6.01 5.56 5.82 4.83
Interest rate spread ............................ 4.58 5.12 5.00 4.90 4.43 4.48 3.44
Nonperforming assets to total
assets ........................................ 0.33 0.53 0.24 .48 1.08 1.90 2.70
Allowance for loan loss to total
loans ......................................... 1.35 1.33 1.39 1.30 1.21 1.53 1.53
Allowance for loan losses to
non performing assets ......................... 291 173 408 189 72 51 36
</TABLE>
- ------
(1) Bancshares began operation as a holding company on October 1, 1993
when it acquired the Bank in a transaction accounted for as a purchase.
The combined amounts shown for 1993 include the full year of Bank
operations and the ownership for three months ended December 3, 1993;
prior period results reflect Bank operations on an unconsolidated basis.
(2) Reflects interest on notes payable, which under the Merger Agreement
must be paid in full before the Effective Date, for the six months
ended June 30, 1996 and 1995, of $43,000 and $103,000, respectively,
and for the years ended December 31, 1995, 1994, and 1993 of, $180,000,
$225,000, and $46,000, respectively.
(3) Includes goodwill amortization for the six months ended June 30, 1996
and 1995, of $64,000, and for the years ended December 31, 1995, 1994
and 1993, of $128,000, $128,000, and $32,000, respectively.
-12-
<PAGE> 30
PRO FORMA GLACIER BANCORP, INC. AND MISSOULA BANCSHARES, INC. COMBINED
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30 Years Ended December 31,
----------------------- -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Interest income ................ $ 19,964 17,514 36,852 29,361 26,434 23,166 20,007
Interest expense ............... 8,992 7,427 16,069 11,496 10,713 10,541 10,772
---------- --------- --------- --------- --------- --------- ---------
Net interest income .......... 10,972 10,087 20,783 17,865 15,721 12,625 9,235
Provision for loan loss ........ 215 320 581 321 239 518 384
---------- --------- --------- --------- --------- --------- ---------
Net interest income after
provision for loan losses .... 10,757 9,767 20,202 17,544 15,482 12,107 8,851
Noninterest income ............. 3,967 3,568 7,592 6,734 7,416 4,800 2,891
Noninterest expense ............ 7,741 7,149 14,680 12,922 11,826 8,959 6,894
---------- --------- --------- --------- --------- --------- ---------
Earnings before income taxes . 6,983 6,186 13,114 11,356 11,072 7,948 4,848
Income taxes ................... 2,755 2,437 5,139 4,467 4,249 2,935 1,795
---------- --------- --------- --------- --------- --------- ---------
Net earnings ................. $ 4,228 3,749 7,975 6,889 6,823 5,013 3,053
========== ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Net earnings per common share
(1) .............................. $ 0.94 0.83 1.78 1.54 1.54 1.16 0.71
Dividends declared per share (1) 0.31 0.26 0.55 0.49 0.42 0.36 0.30
Period end book value (1)....... 10.87 9.57 10.44 8.91 7.86 6.97 5.97
Average common shares
outstanding(2) ................ 4,474,553 4,491,543 4,483,323 4,475,767 4,423,471 4,326,616 4,288,155
SUMMARY OF FINANCIAL CONDITION:
Total assets ................... 520,342 454,034 493,433 425,667 363,032 323,060 239,240
Investment securities .......... 100,980 72,511 90,855 68,831 58,829 69,024 52,560
Loans receivable, net .......... 370,673 336,608 353,263 317,903 266,357 223,103 168,701
Total deposits ................. 307,388 273,794 291,585 258,722 247,615 233,814 159,121
Total notes payable ............ 153,219 127,478 143,019 117,993 72,720 51,667 48,245
Stockholders' equity ........... 48,636 42,994 46,819 39,858 34,772 30,173 25,618
FINANCIAL RATIOS (PERCENTAGES):
Return on:
Average assets ............... 1.67% 1.71% 1.75% 1.75% 1.96% 1.80% 1.41%
Beginning stockholders' equity 18.06 18.81 20.01 19.81 22.61 19.57 13.29
Equity as a percentage of total 9.35 9.47 9.49 9.36 9.58 9.34 10.71
assets
Dividend payout ratio .......... 32.81 31.15 30.66 31.68 27.33 30.65 42.73
Efficiency ratio ............... 51.82 52.35 51.74 52.53 51.11 51.411 56.85
Net loans to total assets ...... 71.24 74.14 71.59 74.68 73.37 69.06 68.43
Net interest margin on average
earning assets ............... 4.76 5.03 4.95 4.91 4.88 4.86 4.56
Nonperforming assets to total
assets ........................... 0.27 0.20 0.11 0.17 0.28 0.80 0.76
Allowance for loan loss to
</TABLE>
-13-
<PAGE> 31
<TABLE>
<CAPTION>
Six Months Ended
June 30 Years Ended December 31,
----------------------- -------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
total loans .................... 0.83 0.85 0.86 0.83 0.87 1.01 1.01
Allowance for loan losses
to nonperforming assets ...... 221 318 547 374 227 87 91
</TABLE>
- ---------------------
(1) Revised for stock splits and dividends.
(2) Includes shares to be issued to Bancshares' stockholders.
-14-
<PAGE> 32
EQUIVALENT PER COMMON SHARE DATA
<TABLE>
<CAPTION>
GLACIER BANCSHARES
Pro Forma
Combined Pro Forma
Historical Corporation Historical Equivalent(3)
<S> <C> <C> <C> <C>
BOOK VALUE PER SHARE (1)
June 30, 1996 $11.45 $10.87 $211.96 $241.56
December 31, 1995 11.25 10.44 188.77 232.00
December 31, 1994 9.83 8.91 138.80 198.00
December 31, 1993 8.98 7.86 102.00 174.67
EARNINGS PER SHARE (2)
June 30, 1996 0.92 0.94 24.09 20.89
December 31, 1995 1.69 1.78 47.72 39.56
December 31, 1994 1.53 1.54 37.33 34.22
December 31, 1993 1.55 1.52 34.80 33.78
CASH DIVIDENDS DECLARED PER SHARE
June 30, 1996 0.31 0.31 none 6.89
December 31, 1995 0.55 0.55 none 12.22
December 31, 1994 0.49 0.49 none 10.89
December 31, 1993 0.42 0.42 none 9.33
</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 years ended December 31 by the actual historical
and pro forma weighted average number of shares of common stock for the
period indicated.
(3) Calculated by multiplying the Pro Forma Combined Corporation amounts by the
exchange ratio.
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SPECIAL MEETING OF BANCSHARES STOCKHOLDERS
DATE, TIME, PLACE AND PURPOSE
The Bancshares Meeting will be held on Wednesday, November 13, 1996, at
12:00 p.m. local time, at Ruby's Reserve Street Inn, 4825 North Reserve Street,
Missoula, Montana. The purposes of the Bancshares 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 Bancshares Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The Bancshares Board has fixed 5:00 p.m. on October 1, 1996 as the
Bancshares Record Date for determining the holders of shares of Bancshares
Common Stock entitled to notice of and to vote at the Bancshares Meeting. At the
close of business on the Bancshares Record Date, there were 48,661 shares of
Bancshares Common Stock issued and outstanding held by approximately 46 holders
of record. Holders of record of Bancshares Common Stock on the Bancshares Record
Date are entitled to one vote per share, and are also entitled to exercise
dissenters' rights if certain procedures are followed. See "Dissenters' Rights
of Appraisal" and Appendix C.
VOTE REQUIRED
The affirmative vote of two-thirds of all shares of Bancshares Common
Stock outstanding on the Bancshares Record Date is required to approve the
Merger Agreement. Bancshares' stockholders are entitled to one vote for each
share of Bancshares Common Stock held. The presence of a majority of the
outstanding shares of Bancshares Common Stock in person or by proxy is necessary
to constitute a quorum of stockholders for the Bancshares 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 Bancshares 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 Bancshares Record Date, directors and executive officers of
Bancshares and the Bank, and their affiliates, owned and were entitled to vote
27,837 shares at the Bancshares Meeting, representing approximately 57.21
percent of the outstanding shares of Bancshares Common Stock. See "INFORMATION
CONCERNING BANCSHARES -- Security Ownership of Certain Beneficial Owners and
Management." Each director of Bancshares and the Bank has agreed to vote all
shares of Bancshares Common Stock held or controlled by him or her (a total of
27,837 shares, or approximately 57.21 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
Bancshares 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 Bancshares, 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 Bancshares
Common Stock held on the Bancshares Record Date.
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<PAGE> 34
The proxy for the Bancshares Meeting is being solicited on behalf of
the Bancshares Board. Bancshares 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 Bancshares may solicit
proxies personally. Bancshares 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.
SPECIAL MEETING OF GLACIER STOCKHOLDERS
DATE, TIME, PLACE AND PURPOSE
The Glacier Meeting will be held on Wednesday, November 13, 1996, at
9:00 a.m. local time, at the Best Western Outlaw Inn, 1701 Highway 93 South,
Kalispell, Montana. The purposes of the Glacier Meeting are as follows: (i) to
consider and vote upon approval of the Merger Agreement, and (ii) to act upon
other matters, if any, which properly come before the Glacier Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The Glacier Board has fixed the close of business on October 1, 1996,
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 3,374,283 shares of
Glacier Common Stock issued and outstanding held by approximately 680
holders of record. Holders of record of Glacier Common Stock on the 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
Merger Agreement. 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 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) 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 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 Glacier
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 Glacier Record Date, Glacier's directors and executive
officers and their affiliates owned and were entitled to vote 782,159 shares
at the Glacier Meeting, representing approximately 23.18 percent of the
outstanding shares of Glacier Common Stock on the Glacier Record Date. See
Glacier 1996 Proxy, under "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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 MERGER
AGREEMENT AND IN THE PROXY'S DISCRETION ON ANY OTHER MATTER COMING BEFORE THE
MEETING,
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<PAGE> 35
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 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
GENERAL
Since its formation in 1993, Bancshares has enjoyed progressive
earnings gains and strong asset growth in its Missoula, Montana market. Although
the Bancshares Board anticipated considering a sale of the company after the
Bank was experiencing good earnings and growth, they had not seriously pursued a
possible sale or merger. In early 1996, some Bancshares stockholders approaching
retirement expressed interest in obtaining liquidity for some of their
investment. The Bancshares Board and management, at that point, reassessed their
organization, their success to date, the lack of readily accessible liquidity
for the Bancshares stockholders, and the circumstances under which they might be
interested in, or required to consider, a possible merger.
In the first quarter of 1996, John MacMillan (Glacier's Chief Executive
Officer and Board Chairman) met with Mr. Bouchee (Bancshares' President and
Chief Executive Officer), at a banking conference. During a conversation between
Messrs. MacMillan and Bouchee, Mr. MacMillan expressed his company's interest in
a possible consolidation of the Companies, and requested to be notified if the
Bancshares Board at some point became interested in such a transaction.
Subsequently (in early May 1996), Mr. Bouchee contacted Mr. MacMillan to notify
him of the interest of some Bancshares' stockholders in creating some liquidity
for their holdings, and the parties decided to meet to discuss the possibilities
further. About two weeks later, a luncheon meeting was held that was attended by
Messrs. MacMillan and Bouchee, Michael Blodnick (Glacier's Executive Vice
President and Chief Operational Officer), and James Strosahl (Glacier's Senior
Vice President and Chief Financial Officer). Discussion at that meeting centered
on background information of the two companies, management values and
strategies, organizational philosophies, Bancshares market share, and
shareholder value. In the two weeks following the meeting, Mr. Strosahl prepared
some pro forma combined financial schedules, and had several telephone
discussions with Mr. Bouchee concerning relative values of both organizations
and the merits of merging the two in a tax-free, pooling-of-interests
transaction.
D. A. Davidson, Glacier's investment adviser, was then provided
preliminary information, and provided assistance in structuring a transaction.
At the end of May, a second meeting was held with the same participants to
discuss possible pricing and structure of a transaction, organizational and
employment issues, market liquidity of Glacier stock, and relative values to
shareholders. Following the meeting, Mr. Bouchee met with Bancshares insiders to
determine the level of interest in pursuing further discussions, and received
favorable feedback. In mid-June, another meeting was held, with the same
participants and legal counsel for both companies. At this meeting price
parameters were determined, regulatory and SEC issues were discussed, the need
for employment contracts with key officers of Bancshares was agreed upon, a
joint confidentiality agreement was executed, agreement to proceed with due
diligence on both organizations, the necessity of obtaining fairness opinions
for
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<PAGE> 36
both organizations from their financial advisers, and agreement to proceed with
formal negotiations towards a definitive merger agreement.
In mid-July, another meeting was held with the same participants, with
the addition of Mr. Fetscher, Bancshares Chairman. At that meeting the price was
agreed upon, the draft of the definitive merger agreement was reviewed, and
agreement to present the definitive agreement to the respective Boards, reached.
On August 9, both Boards held special meetings, attended by their respective
legal counsel and financial advisers, whereupon the definitive agreements were
approved and executed.
Glacier and Bancshares share a community banking philosophy and
strategy, which emphasizes 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
the Bank along with its present subsidiaries - Savings Bank, First National Bank
of Whitefish and First National Bank of Eureka -- as separate subsidiaries with
local management and directors that are involved in, and knowledgeable about,
the respective communities of the Bank Subsidiaries.
The parties believe that the Merger will enable the Bank 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 complementary -- the Bank is located in Missoula, Montana, with its
primary market area as Missoula County in western Montana. This market area is
contiguous to Glacier's primary market area, which includes the four northwest
Montana counties of Flathead, Lake, Lincoln and Glacier. The primary market
areas of both Glacier and the Bank are among the fastest growing areas in
Montana, according to the State's Bureau of Business and Economic Research.
The Bank's primary business focus involves attracting customer deposits
(principally checking and money market deposit accounts) and funding commercial,
consumer and commercial real estate loans. Glacier's primary business focus
involves attracting customers deposits (principally certificates of deposit,
negotiable orders of withdrawal and savings accounts) and using the deposits and
other borrowings to fund residential real estate and consumer loans.
Accordingly, the deposit and lending activities of the parties effectively
complement each other. In addition, each party offers certain customer services
not offered or actively pursued by the other. In particular, Glacier provides
trust services and, through its Community First, Inc. subsidiary, full service
brokerage activities. Conversely, the Bank engages in extensive Small Business
Administration and other commercial lending not emphasized by Glacier. As a
consequence, the parties anticipate that the Merger will enable them to offer
their respective customers a broader range of customer services.
The parties anticipate that the Merger will provide financial benefits
to shareholders through increased efficiencies and revenue enhancements,
particularly in the areas of loan participation, cross selling of complementary
products and services, and enhanced marketing efforts. Moreover, having banking
offices in multiple counties in western Montana is expected to enable the
parties to more effectively pursue their strategy of providing community banking
services to individuals and small and medium-sized businesses throughout the
geographic region.
REASONS FOR THE MERGER - BANCSHARES
The Bancshares Board believes that the terms of the Merger Agreement,
which are the product of "arms-length negotiations" between representatives of
Bancshares and Glacier, are fair and in the best interests of Bancshares and its
stockholders. In the course of reaching its determination, the Bancshares Board
consulted with legal counsel regarding the legal duties of the Bancshares Board,
as they relate to the Merger, the terms of
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<PAGE> 37
the Merger Agreement and the issues related thereto. The Bancshares Board also
consulted with its accountants regarding certain financial, tax and accounting
aspects of the transaction; and with its financial advisor regarding the
financial aspects and fairness of the transaction and with a representative of
the accounting firm of JCCS who conducted a "due diligence" investigation of
Glacier. Finally, the Bancshares Board consulted with senior management
regarding, among other things, operational and other due diligence matters.
At a special meeting of the Bancshares Board held on August 9, 1996,
the Bancshares Board unanimously determined that the Merger and Merger Agreement
are fair to, and in the best interests of, Bancshares and its stockholders, and
recommended the Merger Agreement be submitted to the stockholders for approval.
In addition to the overall objectives of enhancing stockholder value and
providing high quality community banking services in Missoula, the Bancshares
Board considered the fairness opinion of Columbia Financial, the report of JCCS,
consultants, the memorandum prepared by its Special Counsel, Stephen J. Smith,
and a number of additional factors, including the following:
- Bancshares' stockholder value would be significantly enhanced by
the value of Glacier's Common Stock being issued in the Merger;
- Glacier's stock is more actively traded on the open market than is
the stock of Bancshares, thus creating a more marketable and liquid
security for Bancshares' stockholders;
- The Merger is structured as a tax-deferred exchange of stock,
permitting Bancshares stockholders the opportunity to continue to
invest in a regional community banking and thrift organization
without immediate adverse tax consequences;
- Glacier's financial condition, businesses and prospects, and the
economic prospects of the markets served by both parties, appear to
be attractive;
- The combined organizations would enable the Bank to offer trust
services to its customers and larger and more diverse loans due to
higher lending limits and improved balance sheet liquidity;
- The combined organization is expected to provide increased
opportunities to the Bank's employees; and
- The structure of the Merger would allow the Bank to retain its name
and local identity, its Board and senior management team, thereby
enabling the Bank to continue to provide responsive, quality,
personalized community banking services to its customers.
The Bancshares Board did not ascribe relative or specific weights to any factor
in its evaluation of the Merger, but instead took all of these factors into
consideration.
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<PAGE> 38
OPINION OF BANCSHARES FINANCIAL ADVISOR
Columbia Financial has delivered a written opinion to the Bancshares
Board to the effect that, as of the date of this Prospectus/Joint Proxy
Statement, the consideration to be received by Bancshares Common Stock under the
terms of the Merger Agreement is fair to such stockholders from a financial
standpoint. The Exchange Ratio has been determined by Bancshares and Glacier
through negotiations. The Columbia Financial 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 Bancshares stockholder as to how
such stockholder should vote at the Bancshares Meeting.
Bancshares retained Columbia Financial as its exclusive financial
advisor under the terms of an engagement letter dated June 25, 1996 ("Engagement
Letter") in connection with the Merger. Columbia Financial is a regionally
recognized investment banking firm that is regularly engaged in the valuation of
businesses and securities in connection with mergers and acquisitions. The
Bancshares Board selected Columbia Financial to act as Bancshares' exclusive
financial advisor based on Columbia Financial's experience in mergers and
acquisitions and in securities valuation generally.
On August 9, 1996, Columbia Financial attended the special meeting of
the Bancshares Board and issued its opinion to the Bancshares 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 Bancshares and its
stockholders. THE FULL TEXT OF THE COLUMBIA FINANCIAL OPINION, WHICH SETS FORTH
THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITS ON ITS REVIEW, IS ATTACHED
HERETO AS APPENDIX D. THE SUMMARY OF THE COLUMBIA FINANCIAL OPINION IN THIS
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION. BANCSHARES STOCKHOLDERS ARE URGED TO READ THE ENTIRE
COLUMBIA FINANCIAL OPINION.
In rendering its opinion to Bancshares, Columbia Financial reviewed,
among other things, historical financial data of Bancshares, certain internal
financial data and assumptions of Bancshares prepared for financial planning and
budgeting purposes furnished by the management of Bancshares and, to the extent
publicly available, the financial terms of certain change of control
transactions involving Western community banks. Columbia Financial discussed
with Bancshares' management the financial condition, current operating results,
and business outlook for Bancshares. Columbia Financial discussed with Glacier's
management the financial condition, current operating results, and business
outlook for Glacier and Glacier's plans relating to Bancshares. In rendering its
opinion, Columbia Financial 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 Bancshares or Glacier nor was it furnished any such appraisals.
Bancshares did not impose any limitations on the scope of the Columbia Financial
investigation in arriving at its opinion.
Columbia Financial analyzed the total Purchase Price on a cash
equivalent fair market value basis using standard evaluation techniques (as
discussed below) including comparable sales multiples, discounted cash flow
analysis, and net asset value based on certain assumptions of projected growth,
earnings and dividends and a range of discount rates from 16 to 18 percent.
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 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
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<PAGE> 39
fails to account for the values attributable to the going concern such as the
interrelationship among Bancshares' assets and liabilities, customer relations,
market presence, image and reputation, staff expertise and depth, little weight
is given by Columbia Financial 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.
Columbia Financial maintains a substantial proprietary data base on
change of control transactions which have occurred with western community banks.
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 Bancshares, Columbia Financial focused on transactions
involving community banks with total assets greater than $100 million. Most of
the transactions had 100% common stock as the form of consideration and all took
place during 1988-1995 or were announced in 1996. Columbia Financial considered
the market approach and evaluated the total purchase price relative to
stockholders equity, earnings and assets.
Comparable Sales Multiples. Columbia Financial calculated a "Merger
Consideration-Adjusted Book Value" for Bancshares' June 30, 1996 stockholders
equity and an estimated December 31, 1996 stockholders equity. Both adjusted
book value numbers were adjusted for the price to stockholders equity ratios
based on a sample of 29 western banking institutions with assets above $100
million which sold between 1990 and 1996 and a sample of 10 western banking
institutions with total assets above $100 million which sold between 1988 and
1996 in Montana, Idaho, Wyoming, Eastern Washington and Eastern Oregon. In
Bancshares' case, assuming a Purchase Price of $23.7 million, the Purchase Price
to stockholders equity multiple for June 30, 1996 equaled 2.76 and an estimated
2.50 at December 31, 1996. In terms of the two samples the median multiples for
each set were 1.70 for the sample with 29 transactions and 1.79 for the smaller
sample of 10 transactions.
Transaction Value as a Percentage of Total Assets. Columbia Financial
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 $23.7 million results in a
transaction value as a percentage of total assets of 21.2% at June 30, 1996. The
median price as a percentage of total assets for the sample of 29 transactions
was 14%. The smaller sample of 10 transactions, adjusted for size and liquidity,
was 13.5%.
Purchase Price to Earnings (or Net Income). Columbia Financial also
calculated the price to earnings (or net income) multiple for the Bancshares
transaction as well as the two sample sets. The price to 1995 earnings multiple
for Bancshares is 10.4 times and the price to the 12 months prior to the
estimated Effective Date of December 31, 1996 is 9.9 times. Our two sample sets
resulted in price to earnings multiples of 11.8 for the sample set of 29
transactions and 11.3 for the smaller sample.
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.
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<PAGE> 40
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 Bancshares' estimates of
future growth and an appropriate capitalization or discount rate. Columbia
Financial's calculations were based on an analysis of the banking industry,
Bancshares' earnings estimates for 1996-2000, historical levels of growth and
earnings, and the competitive situation in Bancshares' 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 $21.9 million to $26.7 million.
When the net asset value, market value and investment value approaches
are subjectively weighed, using the appraiser's experience and judgment, it is
Columbia Financial's opinion that the proposed transaction is fair, from a
financial point of view.
Under the terms of the Engagement Letter, Bancshares will pay Columbia
Financial a fee of $25,000 for its services. In addition, Bancshares has agreed
to reimburse Columbia Financial for its reasonable out-of-pocket expenses,
including the fees and disbursements of its counsel, and to indemnify Columbia
Financial against certain liabilities.
RECOMMENDATION OF THE BANCSHARES BOARD
THE BANCSHARES' BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF BANCSHARES
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
REASONS FOR THE MERGER - GLACIER
At its special meeting on August 9, 1996, the Glacier Board determined
that the Merger and Merger Agreement are fair to and in the best interests of
Glacier and its stockholders. In considering the Merger, the Glacier Board
determined that the Merger would be consistent with Glacier's strategic intent
in expanding its community banking business. With Bancshares, Glacier can
potentially provide customers and stockholders with certain advantages of a
community banking organization as well as the larger banking organization.
Glacier determined that the Merger would advance Glacier's strategic
plan because of its belief that the Merger will combine two financially sound
institutions with complementary businesses and strategies, thereby creating a
stronger combined organization with greater size, flexibility, efficiency, and
profitability. The Glacier Board believes that (i) each institution is currently
well managed, (ii) the companies have compatible management philosophies and
strategic focuses, (iii) each institution will contribute complementary business
strengths resulting in a well meshed diversified institution, and (iv) the
strong capitalization of the combined organization will allow it to take
advantage of future acquisition opportunities. The Glacier Board also believes
that the Merger will allow the combined organization to compete effectively in
the rapidly changing marketplace of banking and financial services and to take
advantage of opportunities for growth and diversification in Montana.
In reaching its determination to adopt the Merger Agreement and
recommend its approval by the Glacier shareholders, the Glacier Board considered
a variety of factors, although it did not assign any relative or specific
weights to the factors considered. The factors considered included the
following:
- The Glacier Board's knowledge and review of the financial
condition, results of operation, and business operations and
prospects of Bancshares;
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<PAGE> 41
- The Glacier Board's analysis of the banking industry environment,
including the rapid consolidation and increasing regional
competition in the banking and financial services industries and
the need to respond proactively to industry trends;
- The Glacier Board's belief that the acquisition of Bancshares will
expand Glacier's franchise in the western Montana market. The
Glacier Board noted that the Missoula economy, which has seen
substantial growth in recent years, presents an attractive market
for expansion;
- The Glacier Board's judgment that Bancshares is a well-managed
company and will be a superior merger partner as a result of the
similarities of the two institutions in culture and commitment to
the Montana market, the superior historical returns earned by
Bancshares, and the prospects going forward for the Missoula
market;
- The Glacier Board's evaluation of the financial terms of the Merger
and their effect on the shareholders of Glacier and the Glacier
Board's belief that such terms are fair to Glacier and its
shareholders, based in part on the financial presentations of D.A.
Davidson regarding Bancshares and the expression of D.A. Davidson's
opinion as to the fairness to Glacier of the considerations to be
paid by Glacier in the Merger (see "BACKGROUND OF AND REASONS FOR
THE MERGER - Opinion of Glacier Financial Advisor");
- The Glacier Board's belief that the Merger is expected to be
immediately accretive to Glacier's earnings per share;
- The Glacier Board's belief that the Merger will allow for revenue
enhancement and operating synergies through the ability of the
combined entity to cross-sell products and services and diversify
its loan and deposit composition;
- The Glacier Board's belief that the Merger will increase Glacier's
market capitalization and liquidity of its shares;
- The expectation that the merger will be a tax-free transaction to
Glacier and will qualify for pooling-of-interests accounting
treatment (see "THE MERGER -- Federal Income Tax Consequences of
the Merger; Accounting Treating of the Merger"); and
- The Glacier Board's belief, after consultation with its legal
counsel, that the required regulatory approvals could be obtained
to consummate the Merger.
The foregoing discussion of the information and factors considered by
the Glacier Board is not intended to be exhaustive but is believed to encompass
all material factors considered by the Glacier Board. On the basis of the
foregoing factors, the Glacier Board concluded that the terms of the Merger are
fair to and in the best interests of Glacier and its shareholders.
OPINION OF GLACIER FINANCIAL ADVISOR
Glacier has retained the investment firm of D.A. Davidson to act as its
financial advisor in connection with the Merger. D.A. Davidson attended the
special meeting of the Glacier Board held on August 9, 1996, at which Glacier
Board approved the Merger Agreement.
D.A. Davidson has delivered its written opinions dated August 9, 1996,
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 paid
by Glacier in the Merger was fair to Glacier from a financial point of view.
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THE FULL TEXT OF D.A. DAVIDSON'S WRITTEN OPINION IS ATTACHED AS
APPENDIX E TO THE PROXY STATEMENT/JOINT PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO APPENDIX E. GLACIER STOCKHOLDERS ARE URGED TO READ THE
OPINION IN ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY D.A. DAVIDSON IN CONNECTION THEREWITH.
In arriving at its written opinions, D.A. Davidson (i) reviewed the
financial statements and related financial reports of Bancshares and its
subsidiary bank for the three fiscal years ended December 31, 1995 and for the
six months ended June 30, 1995 and 1996; (ii) reviewed Glacier's Annual Reports,
Forms 10-K and related financial information for the five fiscal years ended
December 31, 1995 and Glacier's Form 1O-Q for the period ending June 30, 1995
and 1996; (iii) reviewed certain other information, including financial
forecasts, relating to the respective businesses, earnings, assets and prospects
for Glacier and Bancshares furnished to it by Glacier and Bancshares; (iv)
conducted discussions with members of management of Glacier and Bancshares
concerning their respective businesses and prospects; (v) considered certain
financial and common stock performance information with respect to Glacier; (vi)
considered securities data for other publicly held companies in businesses
similar to those of Glacier and Bancshares; (vii) compared the proposed
financial terms of the transaction contemplated by the Merger with the financial
terms of certain other mergers and acquisitions which it deemed to be relevant;
(viii) considered the pro forma effect of the Merger on Glacier's capitalization
ratios, assets, loans, deposits, earnings, book value, and tangible book value
per share; (ix) reviewed the Merger Agreement; (x) 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 or reviewed by it for the purpose of its opinion.
D.A. Davidson also relied upon the management of Glacier and Bancshares as to
the reasonableness and achieveability 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 or Bancshares 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 Bancshares 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 opinions as to the fairness of the consideration to be paid by
Glacier in the Merger and that D.A. Davidson discussed with the Glacier Board of
Directors on August 9, 1996. D.A. Davidson arrived at its ultimate opinion based
on the results of all of 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.
Pro Forma Merger Analysis. D.A. Davidson analyzed certain pro forma
effects resulting from the Merger. The analysis indicated that the transaction
would result in earnings accretion per Glacier common stock share for the latest
twelve months ended June 30, 1996, of approximately 5.5%. The analysis also
indicated that on a pro forma basis, at June 30,1996, Glacier's total assets
would increase from $408 million to $520 million, its deposits would increase
from $207 million to $307 million, its stockholders' equity would increase from
$38 million to $49 million, its net earnings would increase from $6.1 million to
$8.6 million, its return on average assets would increase from 1.56% to 1.77%,
and its return on beginning equity would increase from 17.4% to 20.1%. D.A.
Davidson also observed that under the terms of the Merger, former stockholders
of Bancshares would own 24.9%, and current stockholders of Glacier would own
75.1%, 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 Bancshares and Glacier to the combined entity's pro forma
financial results for the twelve months ended June 30, 1996 and pro forma
financial condition at June 30, 1996 are as follows: 29.0% and 71.0%,
respectively, of earnings, 21.5% and 78.5%,
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respectively, of total assets, 32.5% and 67.5%, respectively, of total deposits,
and 20.8% and 79.2%, respectively, of stockholders' equity.
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 Bancshares could produce through 2000 and distribute
to stockholders ("dividendable net income"). In this analysis D.A. Davidson
assumed that Bancshares performed in accordance with the earnings growth rate
estimates provided to D.A. Davidson by the managements of Glacier and
Bancshares, and that Bancshares could pay out up to 100% of its net income with
the constraint that Bancshares' tangible equity to asset ratio be maintained at
a minimum 7% level. D.A. Davidson estimated the terminal value for the
Bancshares Common Stock at 9.0 times Bancshares' 2000 estimated net income. The
dividendable net income streams and terminal values were then discounted to
present values using differing discount rates (ranging from 14% to 16%) chosen
to reflect different assumptions regarding the required rates of return of
holders or prospective buyers of Glacier Common Stock. This discounted dividend
stream analysis indicated a reference range of between $24.3 million and $26.1
million in aggregate value, assuming the low end of management's estimated
earnings growth rates, and a reference range between $28.4 million and $30.6
million in aggregate value, assuming the high end of management's estimated
earnings growth rates. This analysis was based upon the projections and
assumptions of Glacier's and Bancshares' management. Management's projections
are based upon many factors and assumptions, many of which are beyond the
control of Glacier and Bancshares. 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 Glacier and
Bancshares with the following six publicly traded bank systems that it believed
to be appropriate for comparison: Norwest Corporation, First Bank System, U.S.
Bancorp, First Security Corporation, Zions Bancorporation, and Community First
Bankshares (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
ended June 30, 1996 earnings (actual) ("LTM earnings"), to estimated 1996
earnings, and to book value, tangible book value, assets, and deposits. D.A.
Davidson noted that the average price to LTM earnings of the Composite was
13.2x, the price to estimated 1996 earnings was 11.8x, the price to book value
was 2.26x, the price to tangible book value was 2.19x, the price to assets was
.176x, and the price to deposits was .258x. In applying these valuation
multiples to Bancshares, D.A. Davidson derived market values for Bancshares of
approximately $31.4 million, $29.6 million, $25.3 million, $20.8 million, $19.7
million, and $25.8 million, respectively. In calculating the above ratios, the
price to LTM earnings, book value, tangible book value, assets, and deposits
were derived from the most recent financial reports of the companies, and the
price to estimated 1996 earnings was derived from earnings estimates as
published by the Institutional Brokers Estimate Service.
In addition, D.A. Davidson examined an index of 35 regional bank
systems as of July, 1996 ("Regional Bank Index") and noted that the average
price to 1995 earnings (actual) was 12.5x, the price to estimated 1996 earnings
was 11.1x, the price to book value was 2.02x, and the price to assets was .161x.
In applying these multiples to Bancshares, D.A. Davidson derived values of $28.6
million, $27.9 million, $22.6 million, and $17.9 million, respectively.
D.A. Davidson noted that none of the companies included in the
Composite and the Regional Bank Index is identical to Bancshares, 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, as well as the market premiums paid in selected
acquisitions of public banks.
Dividend Paying Capacity Analysis. Another methodology applied by D.A.
Davidson in assessing the going concern value of Bancshares was the dividend
paying capacity analysis. Using this analysis, the value of a company is derived
by applying the dividend payout ratio (i.e., the ratio of dividends paid to net
income) and
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dividend yield (i.e., the annual dividends paid per share of common stock to the
market price per share) of comparable public companies to the earnings of the
subject company. As such, the dividend paying capacity of the company is
emphasized rather than the actual history of dividends paid. D.A. Davidson
established an average dividend payout ratio for publicly traded banks as of
July 30, 1996 of 35.7% and an average dividend yield of 3.2% (in each case based
upon the Regional Bank Index). By applying these figures to management's
estimate of earnings for the twelve months ending December 31, 1996, D.A.
Davidson imputed a value for Bancshares using the dividend paying capacity
analysis of approximately $28.0 million.
Analysis of Selected Bank Merger Transactions. D.A. Davidson reviewed
the pricing multiples paid in recently announced bank merger of acquisition
transactions as a basis for comparison of the financial terms offered Bancshares
in the Merger. D.A. Davidson noted that according to data compiled from SNL
Securities Corporation, 68 bank merger or acquisition transactions were
announced during the second quarter of 1996. The reported average valuation
multiples involved with these transactions were: price to latest twelve month
earnings of 19.8x, price to book of 1.94x, price to tangible book of 1.98x,
price to assets of .191x, and price to deposits of .225x. This analysis yielded
an average implied value based upon a broad compilation of recent bank merger
and acquisition transactions of approximately $26.3 million.
In addition to its analysis of pricing multiples paid in announced bank
merger and acquisition transactions generally, D.A. Davidson also examined three
merger transactions involving bank holding companies in the Rocky
Mountain/Pacific Northwest region of the U.S. which had characteristics relevant
to the Merger. Those merger transactions included First Interstate Bancsystem of
Montana, Inc.'s acquisition of Citizen's Bancshares, Inc., Community First
Bankshares' acquisition of Mountain Parks Financial Corp., and Washington
Mutual, Inc.'s acquisition of Enterprise Bank of Bellevue. D.A. Davidson noted
that the average valuation multiples involved with these transactions were:
price to latest twelve month earnings of 12.9x, price to book value of 2.31x,
price to tangible book value of 2.63x, price to assets of .215x, and price to
deposits of .250x. This analysis yielded an average implied value of Bancshares
of $26.1 million.
No company transaction used in the above analyses as a comparison is
identical to Bancshares or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which they are being compared. Mathematical
analysis (such as determining the average) is not, in itself, a meaningful
method of using comparable company data.
In connection with their opinion dated as of the date of this Proxy
Statement/Joint Prospectus, D.A. Davidson performed 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 of
Directors on August 9,1996. It does not purport to be a complete description of
the presentation by D.A. Davidson to Glacier's Board of Directors or of the
analyses performed by D.A. Davidson. The preparation of a fairness opinion is
not necessarily 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 selected 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 Bancshares. The analyses summarized above were prepared solely as part of
D.A. Davidson's analysis of the fairness of the consideration to be paid by
Glacier in the Merger and were provided to the Glacier Board in
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connection with the delivery of D.A. Davidson's opinions. The analyses do not
purport to be appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities may trade at the present
time or at any time in the future. In addition, as described above, D.A.
Davidson's opinion and presentation to the Glacier Board is just one of many
factors taken into consideration by the Glacier Board.
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 region. D.A. Davidson is a recognized regional
investment firm. D.A. Davidson, as 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. In the past, D.A. Davidson and its affiliates have provided certain
financial advisory and financing services to Glacier and have received customary
fees for the rendering of these services. In addition, D.A. Davidson publishes
investment research regarding Glacier and makes a market in its Common Stock.
Under the terms of a letter agreement dated January 19, 1996 between
D.A. Davidson and Glacier, Glacier will pay D.A. Davidson a fee upon closing of
the Merger of approximately $215,000. 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 THE GLACIER STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
GENERAL
The following description of certain aspects of the Merger does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement. Glacier and Bancshares 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 carefully.
BASIC TERMS OF THE MERGER
The Merger Agreement provides for the merger of Bancshares with and
into Glacier, with the result that Bancshares stockholders would become
stockholders of Glacier and the Bank would become a wholly owned, direct
subsidiary of Glacier. Bancshares would cease to exist after the Merger. While
Glacier and Bancshares 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."
The number of shares of Glacier Common Stock Glacier will issue in
exchange for each share of Bancshares Common Stock will be determined by an
exchange formula.
The negotiated "base" purchase price Glacier will pay for Bancshares is
an aggregate of 1,116,279 shares of Glacier Common Stock, assuming (i) at
Closing Bancshares owns all of the stock of the Bank, (ii) Bancshares has
tangible equity capital ("Equity Capital") at Closing of $9.5 million, and (iii)
the average market value of Glacier Common Stock over the five-trading-day
period ending on the sixth business day before the Effective Date is in the
range of $18.81 to $24.19. Based on these assumptions, and using a midpoint
price of $21.50 per share, the purchase price represents 2.526 times Bancshares'
tangible book value.
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The Merger Agreement provides for adjustments to the "base" purchase
price to account for variances from the three assumptions described above and to
arrive at the Purchase Price. If no variances occur, Glacier will issue
1,116,279 shares of Glacier Common Stock in the Merger. The following scenarios
each illustrate the operation of one of the adjustments provided for in the
Merger Agreement to account for variances. Each scenario, for purposes of that
illustration, assumes no variances from the other two assumptions have occurred.
Adjustment Based on Bancshares Ownership of the Bank. Bancshares
currently owns 71,992.6 (or 98.86%) of the issued and outstanding shares of the
Bank. If Bancshares does not own 100% of the Bank's stock at Closing, the number
of shares Glacier will issue will be reduced in proportion to the percentage of
Bank stock Bancshares has failed to acquire (in other words, Glacier is paying
for only the percentage of the Bank it will acquire through the Merger). For
example, if Bancshares is unsuccessful in acquiring the remaining 827.4 shares
of the Bank's common stock, from minority stockholders before
Closing, the purchase price will be reduced proportionately from 1,116,279, (the
number of shares Glacier would issue if Bancshares owned 100% of the stock of
the Bank) to 1,103,596 shares of Glacier Common Stock (representing 98.86% of
1,116,279 shares).
Adjustment Based On Bancshares' Equity Capital. If Bancshares' Equity
Capital at Closing is $9.5 million, no adjustment will be made to the purchase
price. If Bancshares' Equity Capital is BELOW $9.5 MILLION, then the exchange
value will be reduced by $2.526 for each $1.00 Bancshares' capital is below $9.5
million. For example, if Bancshares' Equity Capital fell short by $100,000 (or
$9.4 million at Closing), the aggregate number of shares to be issued would be
1,104,530 (calculated by dividing $2.526 x $100,000 by 21.50, and subtracting
that result (11,749) from 1,116,279). On the other hand, if Bancshares' Equity
Capital is ABOVE $9.5 MILLION, then the purchase price will increase by one
dollar for each dollar Bancshares' Equity Capital exceeds $9.5 million. For
example, if Bancshares' Equity Capital is $9.6 million, the aggregate number of
shares to be issued would be 1,120,930 (calculated by dividing $100,000 by
$21.50 then adding the result (4,651) to 1,116,279).
Adjustments Based On the Market Price of Glacier Common Stock. The
Merger Agreement provides for adjustments to the purchase price based on the
average daily closing price of Glacier Common Stock over a five-trading-day
period ending on the sixth business day before the Effective Date ("ACP"). The
purchase price of 1,116,279 shares of Glacier Common Stock is based, in part, on
the ACP being in a range from $18.81 to $24.19. The pricing structure in the
Merger Agreement is based on an assumed midpoint ACP of $21.50, or an aggregate
exchange value of approximately $24 million.
Floor and Ceiling Price. The parties have agreed to accept the risk of
fluctuations in the market price of Glacier's Common Stock within a range of
approximately 12.5% below or above the $21.50 midpoint. Accordingly, the Merger
Agreement sets a "floor price" of $18.81, at which the aggregate exchange value
would be approximately $21 million, and a "ceiling" price of $24.19, at which
the aggregate exchange value would be approximately $27 million. If the ACP of
Glacier Common Stock falls within this range and the other two assumptions are
met, the purchase price will not be adjusted.
If the ACP is BELOW $18.81, then Bancshares may terminate the Merger
Agreement unless Glacier agrees to "fill", or increase the number of shares it
will issue to Bancshares' stockholders, to provide Bancshares' stockholders with
the exchange value they would have received had the ACP been $18.81. For
example, if the ACP is $18, absent the floor price provisions, the exchange
value would fall to just over $20 million. However, under the Merger Agreement,
in order to avoid termination by Bancshares, Glacier would be required to issue
an additional 50,232 shares; so instead of issuing 1,116,279 shares, Glacier
would issue 1,166,512 shares. Accordingly, Bancshares' stockholders would
receive the "floor" exchange value of $21 million even though the ACP is only
$18 per share.
Conversely, if the ACP is ABOVE $24.19, then Glacier has the right to
terminate the Merger Agreement, unless Bancshares agrees to accept fewer shares
so that the aggregate exchange value does not exceed $27 million. For example,
if the ACP is $25.00, absent the ceiling price provisions, the exchange value
would rise to just over $27.9 million. However, under the Merger Agreement,
Glacier could terminate unless Bancshares agrees to a
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reduction in the number of shares Glacier will issue to 1,080,112, in order to
preserve the exchange value ceiling of $27 million (1,080,112 x $25 =
approximately $27 million). Accordingly, in order to avoid termination,
Bancshares would elect to allow Glacier to issue 36,167 fewer shares.
Exchange Ratio. Once the aggregate number of shares to be issued by
Glacier has been determined from the formulas described above, the exchange
ratio is computed. This is done by dividing the aggregate number of Glacier
shares to be issued in the Merger (i.e., the Purchase Price) by the number of
shares of Bancshares Common Stock outstanding or subject to unexercised options
at Closing. For instance if 1,103,596 (number assumes Bancshares owns only
98.86% of the Bank at Closing) shares of Glacier Common Stock are to be issued
and there are 48,661 shares of Bancshares Common Stock outstanding, plus 1,000
shares subject to unexercised options at Closing, the Exchange Ratio will be
22.22 and Bancshares' stockholders will each receive 22.22 shares of Glacier
Common Stock for each share of Bancshares Common Stock owned by the stockholder
at Closing.(1)
CASH FOR FRACTIONAL SHARES
Glacier will not issue certificates for fractional shares of Glacier
Common Stock. Each Bancshares 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 the ACP, and such Bancshares stockholder
will have no other rights with respect to such fractional shares or other
shares.
EXCHANGE OF STOCK CERTIFICATES
On and after the Effective Date, certificates representing Bancshares
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 Bancshares, of certificates that,
before the Effective Date, represented shares of Bancshares 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. Bancshares
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 Effective Date. No distributions or dividends paid upon
shares of Glacier Common Stock after Closing of the Merger will be paid to
holders of Bancshares 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 Bancshares Common Stock, at which
time any accumulated dividends and distributions since the Effective Date,
without interest, will be paid.
DIRECTORS AND EXECUTIVE OFFICERS AFTER THE MERGER
In connection with the Merger, Glacier intends to appoint Messrs.
Bouchee and Fetscher to the Glacier and Savings Bank Boards. Mr. Bouchee is
currently the Bank's President and Chief Executive Officer and Mr. Fetscher is
the current Chairman of the Bancshares Board. These appointments will be
effective on the Effective Date. Further, after the Merger becomes effective,
Mr. Bouchee will continue to serve as the Bank's President and Chief Executive
Officer; Mr. Fraser will retain his position as the Bank's Senior
Vice-President, Loans; while Mr. Symmes will stay on in his positions as the
Bank's Senior Vice-President and Real Estate Manager.
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(1) To the extent the number of shares to be received by a particular
stockholder of Bancshares results in a fractional share, Glacier will pay cash
in lieu of issuing fractional shares.
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The Bank Board before the Merger will remain the same after the Merger,
except that two additional directors (two of Glacier's current directors) will
be appointed by Glacier to the Bank Board. Consequently, on the Effective Date,
the Bank's Board will consist of all persons who were directors of the Bank
immediately before the Merger, plus two Glacier directors designated by Glacier.
The Bank's directors will serve until the 1997 annual meeting of the Bank's
stockholders or until their successors have been elected and qualified.
As a condition to the execution of the Merger Agreement, each member of
the respective Boards of Bancshares and the Bank entered into a Director
Noncompetition Agreement with Glacier, and Bancshares. Except under certain
limited circumstances, the Director Noncompetition Agreement prohibits these
directors from competing with Glacier in Missoula County, Montana, for the
lesser of (a) two years after the director's service as a director of
Bancshares, the Bank, Glacier, or any affiliate of Glacier, is terminated or (b)
three years from Closing of the Merger.
As a further condition to the execution of the Merger Agreement, the
Bank entered into employment agreements with Messrs. Bouchee, Fraser and Symmes,
and Glacier ratified these agreements. Messrs. Bouchee, Fraser, and Symmes will
continue as officers of the Bank under the terms and conditions of these
agreements.
EMPLOYEE BENEFIT PLANS
The Merger Agreement confirms Glacier's intention to allow the Bank's
employees who continue as employees of the Bank after the Merger to participate
in certain Glacier employee benefit plans, including Glacier's stock option
plans. Bancshares' 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. Bancshares will
terminate its Profit Sharing Plan as soon as practicable after Closing and
distribute the proceeds to the participants as appropriate.
MECHANICS OF THE MERGER
On the Effective Date, Bancshares will be merged with and into Glacier.
At that time, all business, assets, and liabilities formerly carried on or owned
by Bancshares will be transferred to and vested in Glacier. Bancshares will
cease to have a corporate existence separate from Glacier, and the Bank will be
a directly owned subsidiary of Glacier.
CONDUCT PENDING CONSUMMATION OF THE MERGER
The Merger Agreement provides that, until the Merger is effective,
Bancshares will, and will cause the Bank 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, Bancshares 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, (iii) disposing of assets or making material commitments, (iv)
incurring indebtedness greater than $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 a payment by the Bank of more than $25,000, (vii) settling securities if
the aggregate gain realized would exceed $50,000 or transferring securities
between portfolios, (viii) amending its Articles of Incorporation or Bylaws or
materially changing its policies, (ix) increasing its full-time employees above
65, (x) with certain exceptions, making capital expenditures of $10,000 per
project and $50,000 in the aggregate; and (xi) entering into transactions or
incurring any expenses that are not in the ordinary course of business.
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<PAGE> 49
CONDITIONS TO THE MERGER
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 April 30, 1997,
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 Bancshares
Common Stock and the holders of the shares of Glacier Common Stock approve the
transaction. In accordance with applicable Delaware and Montana corporate laws,
approval of the Merger requires the affirmative vote of (i) a majority of the
holders of all shares outstanding of Glacier Common Stock, and (ii) two-thirds
of the holders of all shares outstanding of Bancshares Common Stock. In
addition, approval of the Merger Agreement is required from the FRB and the OTS.
Applications are pending with both agencies. Although no assurance can be given,
the parties expect to receive both approvals 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 has occurred with respect to a party;
(c) each party's Board and stockholders have approved the Merger; (d) Glacier
has appointed, effective as of Closing, a Bancshares director to serve on
Glacier's board of directors; (e) the parties have provided one another with the
counsel, tax, accounting treatment, and fairness opinions required by the Merger
Agreement; (f) Bancshares has paid in full its $2.1 million note with American
Bank National Association and secured a release of all collateral pledged as
security for the note; (g) the SEC has declared the effectiveness of the
registration statement for the shares of Glacier common stock to be issued in
the Merger; (h) Bancshares and the Bank have met certain financial condition
requirements; (i) no action or proceeding has been commenced or is threatened by
any governmental agency to restrain or prohibit or invalidate the Merger; (j)
the aggregate of the cash to be paid to Bancshares stockholders in accordance
with the Merger Agreement will not exceed 10% of the value of the Glacier common
stock to be issued in the Merger; (k) the Bank has met a tangible equity capital
requirement of at least $9 million; and (l) all appropriate regulatory agencies
have approved the Merger.
Either Glacier or Bancshares 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 Bancshares may also grant extended
time to the other party to complete an obligation or condition.
AMENDMENT OR TERMINATION OF THE 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 Bancshares' stockholders, except
amendments which would reduce the amount or change the form of consideration
Bancshares stockholders will receive in the Merger transaction.
The Merger Agreement contains several provisions entitling either
Bancshares 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 April 30, 1997, then at
any time after that date, either Glacier or Bancshares 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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<PAGE> 50
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 Bancshares to Recommend Approval or Stock Option Becomes
Exercisable. Glacier may terminate the Merger Agreement before Bancshares
stockholders approve it if the Bancshares 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.
Failure of Glacier to Recommend Approval. Bancshares may terminate the
Merger Agreement before Glacier's stockholders approve it if the Glacier Board
fails to recommend (or adversely modifies, withdraws, or changes its
recommendation) approval of the Merger to its stockholders.
Decline in Value of Glacier Stock. Bancshares has certain rights, tied
to a reduction in value of Glacier Common Stock, to terminate the Merger
Agreement on the fifth or fourth business day before the Effective Date. These
termination rights are generally subject to Glacier's right to avoid termination
by increasing the number of Glacier shares Bancshares stockholders will receive
(the so-called "right to fill").
Increase in Value of Glacier Stock. Glacier has certain rights, tied to
an increase in value of Glacier Common Stock, to terminate the Merger Agreement
on the fifth or fourth business day before the Effective Date. These termination
rights are generally subject to Bancshares' right to avoid termination by
agreeing to a reduction in the consideration Bancshares' stockholders will
receive.
Acquisition of Glacier. Bancshares has certain rights to terminate the
Merger Agreement if before Closing Glacier agrees to merge with or sell
substantially all of its assets to another entity.
Impracticability. Either Glacier or Bancshares may terminate the Merger
Agreement upon written notice to the other parties if its Board determines, in
good faith and after due consultation with counsel, that the Merger is
inadvisable or impracticable by reason of the institution of litigation by the
federal government or the governments of Montana or Delaware to restrain or
invalidate the transactions contemplated by the Merger Agreement.
Discharge of Fiduciary Duties. The Bancshares Board may terminate the
Merger Agreement under certain circumstances following receipt by Bancshares of
(i) a written acquisition proposal from a third party, and (ii) a special
counsel opinion determining that the Bancshares Board must terminate the Merger
Agreement in order to discharge the directors' fiduciary obligations to
Bancshares and its stockholders.
Break-up Fees. If Bancshares terminates the Merger Agreement under
certain circumstances, it will pay Glacier $240,000 in liquidated damages. If
Glacier terminates the Merger Agreement under certain circumstances, it will pay
Bancshares $100,000 in liquidated damages.
Allocation of Costs Upon Termination. If the Merger Agreement is
terminated, Glacier and Bancshares will each pay their own out-of-pocket costs
incurred in connection with the transaction and, except for applicable break-up
fees, will have no other liability to the other party.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the Bancshares Board and management may be deemed to
have interests in the Merger, in addition to their interests as stockholders of
Bancshares. The Bancshares Board was aware of these factors and considered them,
among other matters, in approving the Merger Agreement and the transactions
contemplated thereby.
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<PAGE> 51
Employment Agreement. Glacier has ratified three employment agreements
entered into between the Bank and three of the Bank's current officers. The
employment agreements are each for a term of three years, beginning on the
Effective Date. The Bank may terminate the agreements at any time for Cause (as
defined in the employment agreements) without incurring any post-termination
obligations or penalties. If the Bank terminates the employment agreements
without Cause or terminates the employment agreements under certain
circumstances tied to a change in control of the Bank, Messrs. Bouchee, Fraser,
and Symmes will be entitled to severance benefits. Messrs. Bouchee, Fraser, and
Symmes are generally prohibited from competing with Glacier or the Bank in
Missoula County, Montana for the lesser of (i) two years after their employment
with the Bank and Glacier has terminated or (ii) three years from Closing.
Appointments to the Glacier Board. Glacier has also agreed to appoint
Messrs. Bouchee, currently the Bank's President and CEO, and Fetscher, currently
the Chairman of the Bank's Board, to the Glacier Board effective on Closing.
Also, the current directors of the Bank will continue to serve as directors
following the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a tax-free reorganization under
Section 368(a) of the Code for federal income tax purposes. Bancshares 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 Bancshares and Glacier.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH BELOW MAY NOT APPLY TO PARTICULAR
CATEGORIES OF HOLDERS OF BANCSHARES 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 Bancshares with and into Glacier will constitute
a tax-free reorganization.
2. No gain or loss will be recognized by either Bancshares or
Glacier as a result of the Merger.
3. The tax basis and holding period for the Bancshares 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 Bancshares.
4. No gain or loss will be recognized by holders of Bancshares
Common Stock upon the receipt of Glacier Common Stock in
exchange for Bancshares Common Stock in the Merger.
5. The tax basis of the Glacier Common Stock received in the
Merger by Bancshares stockholders will be the same as the tax
basis of the shares of Bancshares 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 Bancshares shares exchanged, provided that Bancshares
shares were held as capital assets at the time of the Merger.
6. Gain or loss will be recognized by Bancshares 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
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<PAGE> 52
be a capital gain or loss provided that the shares of
Bancshares Common Stock surrendered were capital assets at the
time of surrender, and will be long-term capital gain or loss
if such shares of Bancshares 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 Bancshares and Glacier are carried forward at their previously
recorded amounts, and operating results of Glacier and Bancshares 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.
DISSENTERS' RIGHTS OF APPRAISAL
Under Montana law (MBCA Section 35-1-826 through 35-1-839), a
stockholder of Bancshares 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 Bancshares' stockholder must (1) deliver to Bancshares
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 Bancshares approve the Merger and the Merger
Agreement, then Bancshares 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 Bancshares 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 Bancshares must receive the dissenting Bancshares'
stockholder's payment demand, and (5) be accompanied by a copy of MBCA Sections
35-1-826 through 35-1-839.
A Bancshares' 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/ her certificates in accordance with the
terms of the Dissenters' Notice. A Bancshares' 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 Bancshares 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 Bancshares'
stockholders approve the Merger and the Merger Agreement, and upon receipt of a
payment demand as described above, Bancshares will pay each
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<PAGE> 53
dissenter who has satisfied the statutory requirements, the amount that
Bancshares estimates to be the fair value of his/her shares, plus accrued
interest.
Bancshares payment to each dissenting Bancshares' stockholder will be
accompanied by: (1) Bancshares' 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 Bancshares' latest available interim financial statements, if
any; (2) a statement of Bancshares' 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 Bancshares' 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 STOCKHOLDER OF BANCSHARES 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 C. BANCSHARES
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.
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<PAGE> 54
RESALES OF STOCK RECEIVED IN THE MERGER BY BANCSHARES 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 Bancshares, who may be
deemed to be "affiliates" of Bancshares, 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 Glacier, under other applicable exemptions from the
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 Bancshares directors, officers, and affiliates of Bancshares 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
Bancshares 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 Bancshares.
NO SOLICITATION
Bancshares has agreed in the Merger Agreement that, except as required
by fiduciary duties under applicable law, neither Bancshares 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
Bancshares 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 Bancshares or
Glacier.
STOCK OPTION AGREEMENT
As a condition to Glacier's execution of the Merger Agreement, Glacier
and Bancshares have entered into a Stock Option Agreement, dated as of August 9,
1996, under which Bancshares grants to Glacier an option ("Option") to purchase
11,980 authorized but unissued shares of Bancshares Common Stock (representing
approximately 19.9% of Bancshares' issued and outstanding shares of common stock
after the Option shares are issued) at a per share price of $271. This Option
effectively makes acquisition of Bancshares by a party other than Glacier more
expensive (and therefore less likely) as there would be more shares of
Bancshares Common Stock outstanding.
Glacier may not exercise The Option unless and until certain
"Triggering Events" occur. These Triggering Events include (among other events):
-- Bancshares or its Board enters into or recommends to stockholders
an agreement that provides for any third party to (i) enter a
merger or similar transaction with Bancshares; (ii) acquire more
than 51% of Bancshares' assets; or (iii) acquire 10% or more of
Bancshares' stock;
-- A third party acquires 10% or more of Bancshares' voting shares
unless such ownership, when aggregated with other securities owned
by the third party, represents less than 25% of Bancshares' voting
shares and does not constitute "control" under federal
regulations; and
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<PAGE> 55
-- Bancshares stockholders fail to approve the Merger after a
third-party announces a proposal to (1) acquire 51% or more of
Bancshares' assets, (2) acquire securities representing 25% or
more of Bancshares' voting shares or (3) change the composition of
the Bancshares Board.
Glacier may assign the Option (subject to state and federal securities
laws) after a Triggering Event, but not before. The Stock Option Agreement
provides that the Option will terminate upon the earliest of the following
events: (i) April 30, 1997; (ii) the mutual agreement of the parties; (iii) the
passage of 31 days after regulatory approval for the Merger has been denied,
unless litigation or an appeal regarding such approval is in progress (if such
is the case, then the Option terminates on the earlier of April 30, 1997, or 31
days after such litigation or appeal is completed); (iv) the passage of 30 days
after termination of the Merger Agreement for reason other than material
noncompliance by Glacier; or (v) termination of the Merger Agreement resulting
from material noncompliance by Glacier.
The Option may be exercised despite termination of the Agreement if the
Option is assigned before the Agreement terminates. If such an assignment
occurs, the transferee has up to 31 days after the date of termination to
exercise the Option.
UNAUDITED CONDENSED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited condensed pro forma combined financial
statements give effect to the Merger of Glacier and Bancshares on a pooling of
interests basis. The unaudited pro forma combined balance sheet is presented on
the basis that the Merger took place on June 30, 1996. The unaudited condensed
pro forma combined statements of income are presented on the basis that the
Merger was consummated as of the beginning of the first period presented.
These unaudited condensed pro forma combined financial statements
should be read in conjunction with the historical financial statements and the
related notes thereto for Glacier and Bancshares included or incorporated into
this Prospectus/Joint Proxy Statement by reference. See the Bancshares Financial
Statements. For the Glacier Financial Statements, see "AVAILABLE INFORMATION"
and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
The unaudited condensed pro forma statements of income are not
necessarily indicative of operating results which would have been achieved had
the Merger been consummated as of the beginning of the first period presented
and should not be construed as representative of future results.
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<PAGE> 56
PRO FORMA COMBINED STATEMENTS OF FINANCIAL CONDITION
AS OF JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Adjustments Pro Forma
Glacier Bancshares (Note 2) Combined
--------- ---------- ------- --------
<S> <C> <C> <C> <C>
(dollars in thousands, except per share data)
ASSETS:
Cash on hand and in banks ............................ $ 15,804 6,326 22,130
Interest bearing cash deposits ....................... 860 710 1,570
--------- ------- -------
Cash and cash equivalents .......................... 16,664 7,036 0 23,700
Investment securities, available-for-sale ............ 65,320 13,894 79,214
Investment securities, held-to-maturity ............. 13,992 7,774 21,766
--------- ------- -------
Total investment securities ........................ 79,312 21,668 100,980
0
Loans receivable ..................................... 295,602 78,182 373,784
Allowance for loan losses ............................ (2,054) (1,057) (3,111)
--------- ------- -------
Total loans, net ................................... 293,548 77,125 0 370,673
Premises and equipment, net .......................... 7,788 2,612 10,400
Real estate and other assets owned, net .............. 36
36
Federal Home Loan Bank of Seattle stock, at cost ..... 7,728 310 8,038
Federal Reserve stock, at cost ....................... 90 190 280
Accrued interest receivable .......................... 2,698 832 3,530
Intangible assets .................................... 300 1,561 1,861
Deferred income taxes ................................ 330 (330) 0
Other assets ......................................... 303 211 514
--------- ------- -------
Total assets ....................................... $ 408,467 111,875 (330) 520,012
========= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits - interest bearing .......................... $ 177,021 70,919 247,940
Deposits - non-interest bearing ...................... 30,425 29,023 59,448
--------- ------- -------
Total Deposits ..................................... 207,446 99,942 0 307,388
Advances from Federal Home Loan Bank of Seattle ...... 120,892 0 120,892
Securities sold under agreements to repurchase ....... 21,778 0 21,778
Other borrowed funds ................................. 9,549 1,000 0 10,549
--------- ------- ------- -------
Total borrowed funds ............................... 152,219 1,000 0 153,219
Accrued interest payable ............................. 1,267 211 1,478
Current income taxes ................................. 305 29 334
Deferred income taxes ................................ 1,221 0 (330) 891
Minority interest .................................... 390 110 500
Other liabilities .................................... 7,146 420 7,566
--------- ------- ------- -------
Total liabilities .................................. 369,994 101,712 (330) 471,376
STOCKHOLDERS' EQUITY:
Common stock ......................................... 34 479 (468) 45
Paid-in capital ...................................... 29,369 4,016 468 33,853
Retained earnings .................................... 10,746 5,713 16,459
Treasury stock ....................................... (1,066) 0 (1,066)
Net unrealized losses on securities available-for-sale (610) (45) (655)
--------- ------- -------
Total stockholders' equity ......................... 38,473 10,163 0 48,636
--------- ------- ------- -------
Total liabilities and stockholders' equity ......... $ 408,467 111,875 (330) 520,012
========= ======= ======= =======
</TABLE>
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<PAGE> 57
PRO-FORMA COMBINED STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) PRO FORMA
COMBINED
GLACIER BANCSHARES (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans ................................. $ 7,370 676 8,046
Installment and other loans ........................ 4,922 3,146 8,068
Investment securities .............................. 3,184 666 3,850
--------- --------- ---------
TOTAL INTEREST INCOME ............................ 15,476 4,488 19,964
========== ========== ==========
INTEREST EXPENSE:
Deposits ........................................... 3,341 1,635 4,976
Advances and federal funds purchased ............... 3,489 4 3,493
Other borrowed money and securities sold
under agreements to repurchase ................... 480 43 523
--------- --------- ---------
TOTAL INTEREST EXPENSE ........................... 7,310 1,682 8,992
========= ========= =========
NET INTEREST INCOME .............................. 8,166 2,806 10,972
Provision for loan losses .......................... 95 120 215
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................ 8,071 2,686 10,757
NON-INTEREST INCOME:
Service charges and other fees ..................... 2,215 1,217 3,432
Gain (Loss) on sale of investments, net ............ 0 0 0
Other income ....................................... 485 50 535
--------- --------- ---------
TOTAL NON-INTEREST INCOME ........................ 2,700 1,267 3,967
========= ========= =========
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses 2,842 1,304 4,146
Occupancy and equipment expense .................... 558 227 785
FDIC insurance expense ............................. 180 1 181
Other expense ...................................... 2,146 433 2,579
Minority interest .................................. 36 14 50
--------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....................... 5,762 1,979 7,741
========= ========= =========
Earnings before income taxes ....................... 5,009 1,974 6,983
Federal and state income tax expense ............... 1,936 819 2,755
--------- --------- ---------
NET EARNINGS ..................................... $ 3,073 1,155 4,228
========= ========= =========
Average common shares outstanding .................. 3,358,274 1,116,279 4,475,553
Net earnings per share of common stock ............. $ 0.92 1.03 0.95
</TABLE>
-40-
<PAGE> 58
PRO-FORMA COMBINED STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands, except for per share data) PRO FORMA
COMBINED
GLACIER BANCSHARES (NOTE 2)
--------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans .................................. $ 7,168 711 7,879
Installment and other loans ........................ 4,316 2,675 6,991
Investment securities .............................. 2,207 437 2,644
--------- --------- ---------
TOTAL INTEREST INCOME ............................ 13,691 3,823 17,514
========== ========== ==========
INTEREST EXPENSE:
Deposits ........................................... 2,778 1,136 3,914
Advances and federal funds purchased ............... 2,766 29 2,795
Other borrowed money and securities sold
under agreements to repurchase ................... 615 103 718
--------- --------- ---------
TOTAL INTEREST EXPENSE ........................... 6,159 1,268 7,427
========= ========= =========
NET INTEREST INCOME .............................. 7,532 2,555 10,087
Provision for loan losses .......................... 200 120 320
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................ 7,332 2,435 9,767
NON-INTEREST INCOME:
Service charges and other fees ..................... 1,781 1,222 3,003
Gain (Loss) on sale of investments, net ............ 0 0 0
Other income ....................................... 505 60 565
--------- --------- ---------
TOTAL NON-INTEREST INCOME ........................ 2,286 1,282 3,568
========= ========= =========
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses 2,466 1,094 3,560
Occupancy and equipment expense .................... 570 207 777
FDIC insurance expense ............................. 211 84 211
Other expense ...................................... 1,992 474 2,550
Minority interest .................................. 42 9 51
--------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....................... 5,281 1,868 7,149
========= ========= =========
Earnings before income taxes ....................... 4,337 1,849 6,186
Federal and state income tax expense ............... 1,690 747 2,437
--------- --------- ---------
NET EARNINGS ..................................... $ 2,647 1,102 3,749
========= ========= =========
Average common shares outstanding (1) .............. 3,375,264 1,116,279 4,491,543
Net earnings per share of common stock ............. $ 0.78 0.99 0.83
</TABLE>
(1) Adjusted for 10% stock dividends paid in 1996.
-41-
<PAGE> 59
PRO-FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) PRO FORMA
COMBINED
GLACIER BANCSHARES (NOTE 2)
--------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans .................................. $ 14,584 1,511 16,095
Installment and other loans ........................ 9,214 5,506 14,720
Investment securities .............................. 4,986 1,051 6,037
--------- --------- ---------
TOTAL INTEREST INCOME ............................ 28,784 8,068 36,852
========= ========= =========
INTEREST EXPENSE:
Deposits ........................................... 5,983 2,636 8,619
Advances and federal funds purchased ............... 6,041 290 6,070
Other borrowed money and securities sold
under agreements to repurchase ................... 1,199 181 1,380
--------- --------- ---------
TOTAL INTEREST EXPENSE ........................... 13,223 2,846 16,069
========= ========= =========
NET INTEREST INCOME .............................. 15,561 5,222 20,783
Provision for loan losses .......................... 281 300 581
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................ 15,280 4,922 20,202
NON-INTEREST INCOME:
Service charges and other fees ..................... 3,949 2,674 6,623
Gain (Loss) on sale of investments, net ............ (6) 0 (6)
Other income ....................................... 897 78 975
--------- --------- ---------
TOTAL NON-INTEREST INCOME ........................ 4,840 2,752 7,592
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses 5,152 2,362 7,514
Occupancy and equipment expense .................... 1,116 413 1,529
FDIC insurance expense ............................. 380 87 467
Other expense ...................................... 4,081 977 5,058
Minority interest .................................. 88 24 112
--------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....................... 10,817 3,863 14,680
--------- --------- ---------
Earnings before income taxes ....................... 9,303 3,811 13,114
Federal and state income tax expense ............... 3,616 1,523 5,139
--------- --------- ---------
NET EARNINGS ..................................... $ 5,687 2,288 7,975
========= ========= =========
Average common shares outstanding (1) .............. 3,367,044 1,116,279 4,483,323
Net earnings per share of common stock ............. $ 1.69 2.05 1.78
</TABLE>
(1) Adjusted for 10% stock dividends paid in 1996.
-42-
<PAGE> 60
PRO-FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) PRO FORMA
COMBINED
GLACIER BANCSHARES (NOTE 2)
--------- ---------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans .................................. $ 12,317 1,304 13,621
Installment and other loans ........................ 6,993 3,904 10,897
Investment securities .............................. 3,790 1,053 4,843
--------- --------- ---------
TOTAL INTEREST INCOME ............................ 23,100 6,261 29,361
========= ========= =========
INTEREST EXPENSE:
Deposits ........................................... 5,148 1,699 6,847
Advances and federal funds purchased ............... 3,811 46 3,857
Other borrowed money and securities sold
under agreements to repurchase ................... 567 225 792
--------- --------- ---------
TOTAL INTEREST EXPENSE ........................... 9,526 1,970 11,496
========= ========= =========
NET INTEREST INCOME .............................. 13,574 4,291 17,865
Provision for loan losses .......................... 161 160 321
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................ 13,413 4,131 17,544
NON-INTEREST INCOME:
Service charges and other fees ..................... 3,546 2,303 5,849
Gain (Loss) on sale of investments, net ............ 0
(22) (22)
Other income ....................................... 855 52 907
--------- --------- ---------
TOTAL NON-INTEREST INCOME ........................ 4,401 2,333 6,734
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses 4,505 2,094 6,599
Occupancy and equipment expense .................... 885 358 1,243
FDIC insurance expense ............................. 415 146 561
Other expense ...................................... 3,508 899 4,407
Minority interest .................................. 85 27 121
--------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....................... 9,398 3,524 12,922
========= ========= =========
Earnings before income taxes ....................... 8,416 2,940 11,356
Federal and state income tax expense ............... 3,282 1,185 4,467
--------- --------- ---------
NET EARNINGS ..................................... $ 5,134 1,755 6,889
========= ========= =========
Average common shares outstanding (1) .............. 3,359,488 1,116,279 4,476,767
Net earnings per share of common stock ............. $ 1.53 1.57 1.54
</TABLE>
(1) Adjusted for 10% stock dividends paid in 1995 and 1996.
-43-
<PAGE> 61
PRO-FORMA COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
(dollars in thousands, except per share data) PRO FORMA
BANCSHARES COMBINED
GLACIER (NOTE 5) (NOTE 2)
--------- --------- ---------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans .................................. $ 11,356 974 12,330
Installment and other loans ........................ 6,014 2,835 8,849
Investment securities .............................. 4,279 976 5,255
--------- --------- ---------
TOTAL INTEREST INCOME ............................ 21,649 4,785 26,434
========= ========= =========
INTEREST EXPENSE:
Deposits ........................................... 5,784 1,490 7,274
Advances and federal funds purchased ............... 2,810 0 2,810
Other borrowed money and securities sold
under agreements to repurchase ................... 583 46 629
--------- --------- ---------
TOTAL INTEREST EXPENSE ........................... 9,177 1,536 10,713
========= ========= =========
NET INTEREST INCOME .............................. 12,472 3,249 15,721
Provision for loan losses .......................... 159 80 239
--------- --------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES ................................ 12,313 3,169 15,482
NON-INTEREST INCOME:
Service charges and other fees ..................... 4,018 2,356 6,374
Gain (Loss) on sale of investments, net ............ 68 0 68
Other income ....................................... 904 70 974
--------- --------- ---------
TOTAL NON-INTEREST INCOME ........................ 4,990 2,426 7,416
NON-INTEREST EXPENSE:
Compensation, employee benefits and related expenses 4,244 1,705 5,949
Occupancy and equipment expense .................... 881 282 1,173
FDIC insurance expense ............................. 366 118 484
Other expense ...................................... 3,355 751 4,106
Minority interest .................................. 73 20 93
--------- --------- ---------
TOTAL NON-INTEREST EXPENSE ....................... 8,919 2,907 11,826
Earnings before income taxes ....................... 8,384 2,688 11,072
Federal and state income tax expense ............... 3,265 984 4,249
--------- --------- ---------
NET EARNINGS ..................................... $ 5,119 1,704 6,823
========= ========= =========
Average common shares outstanding (1) .............. 3,307,192 1,116,279 4,423,471
Net earnings per share of common stock ............. $ 1.55 1.53 1.54
</TABLE>
(1) Adjusted for 10% stock dividends paid in 1994, 1995 and 1996.
-44-
<PAGE> 62
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
1. Intangibles. Intangible assets at June 30, 1996 are comprised of
unamortized goodwill at Bancshares of $1,561,000 which is being
amortized over 15 years at approximately $128,000 annually, and
$300,000 in mortgage servicing rights at Glacier, which are amortized
over the lives of the loans serviced.
2. Adjustments. The unaudited pro forma balance sheet reflects the
issuance of 1,116,279 shares of Glacier Common Stock to Bancshares'
stockholders. With the addition of these shares, the total shares
outstanding (based on 3,361,133 actual; outstanding shares of Glacier
at June 30, 1996), will be 4,477,412. This assumes the average closing
price of Glacier Common Stock for the five days prior to the effective
date of the Merger remains between $18.81 and $24.19. The equity
adjustment is the difference between the book values of the Bancshares
Common Stock to be canceled and the Glacier Common Stock to be issued.
The adjustment for deferred income taxes reclassifies the deferred tax
asset, netting against the deferred tax liability of Glacier. Under the
pooling-of-interests accounting method being used in connection with
the Merger, no adjustments are made to the pro forma statements of
operations.
3. Transaction Costs. Total costs to be incurred by Bancshares and Glacier
in connection with the Merger are estimated to be $500,000. These
costs, relating to legal, accounting, printing and other related
expenses, will be charged against net income of the combined
organization in the period incurred. The effect of the costs has not
been reflected in the Pro Forma Combined Financial Statements.
4. Earnings per Share. Earnings per share are based on the weighted
average common shares outstanding during the years. The shares used in
calculating earnings per share have been restated to reflect all stock
dividends paid. See "Equivalent Per Common Share Data."
5. Reflects nine months of pre-acquisition, and three months of
post-acquisition, with purchase accounting adjustments impact.
-45-
<PAGE> 63
INFORMATION CONCERNING GLACIER
Glacier is a corporation duly organized and validly existing under
Delaware law, and a registered bank holding company under the BHCA. Glacier is
also a savings and loan holding company within the meaning of Section 10 of
HOLA. Glacier is principal office is located in Kalispell, Montana, and
presently has four subsidiaries, three of which are 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 Savings Bank and Community First,
Inc.; (ii) approximately 94% of the outstanding common stock of First National
Bank of Whitefish; and (iii) approximately 93% of the outstanding common stock
of First National Bank of Eureka.
Glacier offers a broad range of community banking services throughout
the 13-office network located primarily in northwest Montana and Billings,
Montana. The business of the Bank Subsidiaries consists primarily of attracting
deposit accounts from the general public and originating residential,
installment and other loans. The Bank 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 Bancshares, as well as other financial service related
companies. Glacier has continued to invest significantly in management and other
resources to support its expansion.
Financial and other information regarding Glacier, including
information relating to Glacier's directors and executive officers, are set
forth in the Glacier 1995 10-K and 1996 10-Qs and the Glacier 1996 Proxy
incorporated by reference into this Prospectus/Joint Proxy Statement. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "AVAILABLE INFORMATION."
INFORMATION CONCERNING BANCSHARES
BUSINESS
Bancshares was organized under Montana law in 1993 for the purpose of
acquiring the stock of the Bank. Bancshares 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 the Bank.
The principal offices of Bancshares are located at the main office of
the Bank at 1704 Dearborn, Missoula, Montana.
The Bank is a state-chartered bank. It engages in commercial banking
activities from its main office located at 1704 Dearborn, Missoula, Montana, and
detached facilities in the City of Missoula. 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 Missoula
and the surrounding area. The Bank offers commercial banking services, primarily
to small and medium-sized businesses, professionals, and retail customers,
including commercial loans, accounts receivable, and inventory financing,
consumer installment loans, certificates of deposit, and personal savings and
checking accounts.
-46-
<PAGE> 64
The Bank is also extensively involved in the making, selling, and
servicing of residential real estate loans. A substantial portion of the
residential real estate loans are sold to typical traditional secondary market
purchasers.
The Bank's deposit accounts are insured by the FDIC. As of June 30,
1996, the Bank had deposits of approximately $100 million, and assets of
approximately $110 million.
Bancshares owns 98.864% of the Bank. Bancshares has no other bank or
nonbank subsidiaries.
The Bank's current management began with the Bank in April, 1991. The
Bank has carved out niches in the commercial real estate and installment loan
areas. In addition, for several years, the Bank has led lenders in the state of
Montana in dollars and numbers of Small Business Administration Loans
originated. Residential real estate mortgages originated by the Bank's real
estate department has traditionally led other residential real estate lenders in
the Missoula community month-by-month and in year-end totals.
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 the Bank's primary market area is characterized
by well-established branches of large banks with headquarters located outside
the primary market area and in some cases outside the State of Montana.
The Bank'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 the Bank. Competition for deposit funds also comes from issuers of
corporate and governmental securities, insurance companies, mutual funds, and
other financial intermediaries. Other than with respect to large certificates of
deposit, the Bank competes for deposits by offering a variety of deposit
accounts at rates generally competitive with similar financial institutions in
the area. The Bank's principal competitive advantage with respect to the larger
state-wide financial institutions is its status as a local community bank, with
an emphasis on personal service, offering products and services tailored to the
particular needs of the community.
In competing for deposits, the Bank 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.
The Bank's competition for loans comes primarily from the same
financial institutions with which the Bank competes for deposits. The Bank
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 interest rate levels, and loan demand. The
Bank 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 the Bank in that they have high public visibility
and are able to maintain advertising and marketing activity on a much larger
scale than the Bank can economically maintain. Because single borrower lending
limits imposed by
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<PAGE> 65
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 the Bank's legal lending
limits.
At present, there are four commercial banks (First Interstate Bank of
Commerce, Norwest Bank Montana, N.A., First Bank Montana, N.A., and Community
Bank), three thrifts (Western Federal Savings Bank, Security Bank FSB, and First
Federal Savings & Loan Association), and several credit unions operating in the
Bank's market area which offer most of the services offered by the Bank, and
which are in direct competition for the customers which the Bank seeks to
attract. Because of the experience and the reputation of management of the Bank
in its trade area and the business contacts of management and the directors,
management believes that the Bank is able to compete effectively for business
with its larger competitors.
FACILITIES
The principal offices of Bancshares and the Bank are located at the
Bank's main office at 1704 Dearborn, Missoula, Montana. Bancshares has no
facilities. The 1704 Dearborn building houses employee offices, a lobby with
four teller stations and a five-lane drive-in. The Bank also has two detached
facilities in Missoula, Montana, one of which is located at 541 East Broadway,
and the other at 3220 Great Northern Way. East Broadway takes deposits and has
little room for expansion. Great Northern Way is presently only taking deposits.
It is currently being remodeled at a cost of approximately $500,000 in order to
become a full-service unit. This detached facility is located in the rapidly
expanding northwest side of Missoula. The Bank has no ATM locations.
EMPLOYEES
Bancshares has no compensated employees. As of July, 1996, the Bank had
62.37 full time-equivalent (54 full time and 21 part time) employees. 15 of the
Bank's employees are officers of the Bank. Unlike most banks, the Bank has a
nine-person real estate department plus two contract loan processors. Employee
turnover has been relatively low.
LEGAL PROCEEDINGS
The Bank is from time to time a party to various legal proceedings
arising in the ordinary course of the Bank's business. Management believes that
there is no threatened or pending proceedings against Bancshares or the Bank
which, if determined adversely would have a material effect on the business or
financial position of either, respectively.
BANCSHARES MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of Bancshares' consolidated financial
condition and results of operations is intended to be read in conjunction with,
and is qualified in its entirety by reference to, the selected financial and
other data, the consolidated financial statements and related notes included
elsewhere in this Prospectus/Joint Proxy Statement.
General. The Bank's business consists primarily of attracting deposits
from the public and originating commercial, consumer, and real estate loans. The
Bank's net income is derived primarily from net interest income. The Bank
exceeded all of its regulatory capital requirements at June 30, 1996.
Six months ended June 30, 1996 and 1995
Overview. Total assets of $111.5 million as of June 30, 1996,
represents a 17.2% increase over total assets of $95.2 at June 30, 1995. Most of
the growth is a result of increases within the loan portfolio.
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<PAGE> 66
Net Income. For the six months ended June 30, 1996 and 1995,
Bancshares' net income was $1.155 million and $1.102 million respectively.
Income increased $53,000, or 4.8%, from 1995 to 1996. The increase in earnings
is due to net interest income increase of $251,000, resulting from asset growth.
The net interest income increase was partially offset by a $111,000 increase in
non-interest expenses, with compensation and benefits being the largest
increase. Earnings per share for the two periods were $24.09 and $22.98,
respectively.
Net Interest Income. During the six months ended June 30, 1996 and
1995, average interest earning assets increased from $79.840 million to $95.508
million, an increase of $15.668 million, or 19.6%. For the same periods, average
interest bearing liabilities increased from $56.916 million to $69.842 million,
an increase of $12.926 million, or 22.7%. During the same periods, the net
interest margins decreased from 6.4% to 5.9% of average earning assets,
reflecting the increased dependence on interest bearing liabilities to fund
asset growth. Net interest income increased $251,000, or 9.8%, to $2.806 million
on June 30, 1996, from $2.555 million on June 30, 1995. The yield on interest
earning assets declined from 9.6% for the six months ended June 30, 1995, to
9.4% for the six months ended June 30, 1996. For the same periods the yield on
interest bearing liabilities increased from 4.5 to 4.8%.
Non-interest Income. Non-interest income was approximately the same for
both six month periods.
Non-interest expense. Non-interest expense increased $111,000, or 5.9%,
from 1995 to 1996. The increase was primarily in compensation and benefits
expenses resulting from the significant asset growth exceeding 17%.
Years ended December 31, 1995 and 1994
Overview. Total assets of $105.4 million as of December 31, 1995
represents a 22.8% increase over total assets of $85.8 at December 31, 1994.
Most of the growth is a result of increases within the loan portfolio.
Net Income. For the years ended December 31, 1995 and 1994, Bancshares'
net income was $2.288 million and $1.755 million respectively. Income increased
$533,000, or 30.4%, from 1994 to 1995. The increase in earnings is due to net
interest income increase of $931,000, resulting from asset growth. The net
interest income increase was partially offset by a $317,000 increase in
non-interest expenses, with compensation and benefits being the largest
increase. Earnings per share for the two periods were $47.72 and $37.33,
respectively.
Net Interest Income. During the years ended December 31, 1995 and 1994,
average interest earning assets increased from $71.436 million to $83.458
million, an increase of $12.022 million, or 16.8%. For the same periods, average
interest bearing liabilities increased from $50.923 million to $60.954 million,
an increase of $10.031 million, or 19.7%. During the same periods, the net
interest margins increased from 6.0 to 6.3% of average earning assets,
reflecting the increase in net earning assets. Net interest income increased
$931,000, or 21.7%, to $5.222 million on December 31, 1995, from $4.291 million
on December 31, 1994. The yield on interest earning assets increased from 8.8%
for the year ended December 31, 1994, to 9.7% for the year ended December 31,
1995. For the same periods the yield on interest bearing liabilities increased
from 3.9 to 4.7%.
Non-interest Income. Non-interest income also increased from 1994 to
1995, $2.333 million to $2.752 million, or 18.0%. The largest portion of this
increase resulted from service changes and other fees.
Non-interest Expense. Non-interest expense increased $339,000, or 9.6%,
from 1994 to 1995. The increase was primarily in compensation and benefits
resulting from the significant asset growth of nearly 23%.
Allowance for Loan Losses. The allowance for loan losses represents
management's current estimate of amounts required to absorb losses on existing
loans. The allowance of $1.056 million at June 30, 1996 represents
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<PAGE> 67
1.35% of total loans, and 291% of nonperforming loans, which is up from $.877
million at June 30, 1995 which was 1.33% of loans, and 173% of nonperforming
loans. At December 31, 1995 the allowance was at $1.02 million, 1.39% of loans,
and 408% of nonperforming loans, which was up from $.784 million, 1.30% of
loans, and 189% of nonperforming loans at December 31, 1994. Determination of
the appropriate allowance level is based on, among other things, an analysis of
various factors including historical loss experience based on volumes and types
of loans, volumes and trends in delinquencies and non-accrual loans, results of
internal and independent external credit reviews, and anticipated economic
conditions in the Bank's market area. Based on this analysis, management
considers the allowance for possible loan losses to be adequate.
Credits deemed uncollectible are charged to the allowance. Provisions
for credit losses and recoveries on loans previously charged off are added to
the allowance. The following is an analysis of the activity in the allowance for
loan losses for the six months ended June 30, 1996, and the years ended December
31, 1995 and 1994.
<TABLE>
<CAPTION>
Six Months Year Ended December 31
Ended --------------------------
(dollars in thousands) June 30, 1996 1995 1994
------------- -------- --------
<S> <C> <C> <C>
Balance at the beginning of the period $ 1,016 784 600
Charge-offs:
Commercial (93) (62) (51)
Real estate -0- -0- -0-
Consumer (3) (47) (25)
-------- -------- --------
(96) (109) (76)
-------- -------- --------
Recoveries:
Commercial 6 29 70
Real estate -0- -0- -0-
Consumer 10 12 30
-------- -------- --------
Net (charge-offs) recoveries (80) (68) 24
Provision charged to operations 120 300 160
-------- -------- --------
Balance at end of period 1,056 1,016 784
======== ======== ========
Ratio of net (charge-offs) recoveries to
average loans outstanding during period (.11%) (.10%) .04%
======== ======== ========
Average loans outstanding $ 75,208 67,367 53,024
during the period
</TABLE>
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<PAGE> 68
INVESTMENT SECURITIES:
A comparison of the amortized cost and estimated fair value of
Bancshares' investment securities is as follows at:
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------
Gross Unrealized Estimated
(dollars in thousands) Amortized ---------------- Fair
Cost Gains Losses Value
--------- ------ ------ ---------
<S> <C> <C> <C> <C>
Held to Maturity
----------------
U.S. Government and Federal Agencies:
maturing within one year .................. $1,000 0 (5) 995
maturing one year through five years ...... 4,975 32 (14) 4,993
.State and Local Governments and other issues:
maturing within one year .................. 121 0 0 121
maturing one year through five years ...... 1,192 19 (1) 1,210
Mortgage-Backed Securities ...................... 667 9 0 676
------ ------ ------ ------
Total Held to Maturity Securities .... $7,955 60 (20) 7,995
------ ------ ------ ------
Available for Sale
------------------
U.S. Government and Federal Agencies: ........... $7,964 5 (13) 7,956
maturing within one year .................. 2,003 24 0 2,027
------ ------ ------ ------
Total Available for Sale Securities .. $9,967 29 (13) 9,983
====== ====== ====== ======
<CAPTION>
December 31, 1994
-------------------------------------------
Gross Unrealized Estimated
(dollars in thousands) Amortized ---------------- Fair
Cost Gains Losses Value
--------- ------ ------ ---------
<S> <C> <C> <C> <C>
Held to Maturity
----------------
U.S. Government and Federal Agencies:
maturing one year through five years ...... $5,960 0 (337) 5,623
State and Local Governments and other issues:
maturing within one year .................. 255 0 (2) 253
maturing one year through five years ...... 1,352 0 (40) 1,312
Mortgage-Backed Securities ...................... 796 0 (24) 772
------ ------ ------ ------
Total Held to Maturity Securities .... $8,363 0 (403) 7,960
====== ====== ====== ======
Available for Sale
------------------
U.S. Government and Federal Agencies:
maturing within one year .................. $4,969 0 (43) 4,926
maturing one year through five years ...... 2,012 0 (48) 1,964
Total Available for Sale Securities .. $6,981 0 (91) 6,890
====== ====== ====== ======
</TABLE>
Investment Activities. The Bank has adopted, as required, statement of
Financial Accounting Standards ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." This Statement requires investment
securities to be segregated as trading securities, held-to-maturity or
available-for-
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<PAGE> 69
sale based upon management's intent as to the ultimate disposition of each
security acquired. Investments classified as held-to-maturity are accounted for
at amortized cost, but an institution must have both the positive intent and the
ability to hold those securities to maturity. There are very limited
circumstances under which securities in the held-to-maturity category can be
sold without jeopardizing the cost basis of accounting for the remainder of the
securities in this category. Unrealized gains and losses on available-for-sale
securities are excluded from earnings and reported, net of federal income taxes,
as a separate component of stockholder's equity.
The Bank's investment policy is approved by its Board. It has been the
policy of the Bank to maintain relatively high levels of liquidity to meet loan
funding and deposit outflow requirements.
Loan Portfolio. The Bank's principal lending activity is the
origination of commercial, real estate and consumer loans. The Bank's policy is
to originate loans primarily in its local markets.
The Bank's loan underwriting policies focus on an assessment of each
borrower's ability to service and repay the debt, and the availability of
collateral which can be used to secure the loan. Depending on the nature of the
borrower and the purpose and amount of the loan, the Bank's loans may be secured
by a variety of collateral, including business assets, real estate and personal
assets. Many business loans may also be dependent upon the personal guarantees
of owners of the business. The Bank's loans are generally classified by the
ability of the borrower to repay and the principal asset pledged as collateral
to secure the loan.
The Bank's commercial loans consist primarily of revolving lines of
credit and business term loans. Real estate loans include term commercial and
residential, and commercial and residential construction loans. Most of the term
real estate loans have variable rates, which are tied to an index and change in
1 to 3 years or are loans that have five-year maturities. Consumer loans include
home equity, auto loans, and loans for other personal use.
In addition to interest earned on loans, the Bank receives fees for
originating loans and for providing loan commitments. Loans are originated
principally as a result of contact with and referrals from existing customers
and through the efforts of Bank staff.
Types of Loans. The following table sets forth the composition of the
Bank's loan portfolio by type of loan as of the date indicated. The composition
of loans at December 31 was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
(dollars in thousands) Amount Percent of Total Amount Percent of Total
------ ---------------- ------ ----------------
<S> <C> <C> <C> <C>
Commercial $35,476 48.4 $30,962 51.2
Consumer 20,271 27.7 14,073 23.3
Real Estate 17,491 23.9 15,458 25.5
------- ------ ------- ------
Total Gross Loans $73,238 100.00 $60,493 100.00
======= ====== ======= ======
</TABLE>
Loan Maturities and Sensitivities to Changes in Interest Rates. The
following table shows the maturity analysis of loans outstanding by type as of
June 30, 1996. In addition, the table shows the amount of all loans due within
and after one year, classified according to the sensitivity to change in
interest rates.
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<PAGE> 70
<TABLE>
<CAPTION>
Loans Within One Year One to Five Over Five Total
- ----- --------------- ----------- --------- -----
(dollars in thousands)
<S> <C> <C> <C> <C>
Commercial $17,268 14,612 10,693 42,573
Consumer 7,458 14,316 1,459 23,233
Real Estate 7,322 3,253 1,801 12,376
------- ------- ------- -------
TOTAL 32,048 32,181 13,953 78,182
======= ======= ======= =======
Fixed Rates $20,410 21,385 3,918 45,713
Floating Rates 11,638 10,796 10,035 32,469
------- ------- ------- -------
TOTAL 32,048 32,181 13,953 78,182
======= ======= ======= =======
</TABLE>
Loan Administration. With the Bank's primary lending focus on
commercial, real estate and consumer loans, risk is generally correlated with
the health of the business community. The risk is mitigated by monitoring the
financial condition of the Bank's customers, and by maintaining adequate
collateral margins. The Bank has adopted comprehensive lending policies that
provide detailed underwriting guidelines, as well as procedures for the
identification and monitoring of potential problem loans. The loan committee
meets regularly and reviews various reports pertaining to the performance,
quality and composition of the loan portfolio, as well as detailed credit
information regarding new loans extended during the period.
Non-Performing Loans. Accrual of interest on loans is discontinued when
reasonable doubt exists as to the collectibility of the loan or the unpaid
interest, or when payment of principal or interest is contractually 90 days past
due, unless the loan is well secured and in the process of collection. Upon such
discontinuance of the accruals, the loan is placed on non-accrual status and any
accrued but unpaid interest is charged against income in that same period.
Accrual of interest is resumed only when the borrower demonstrates an ability to
make scheduled payments of both principal and interest. At June 30, 1996,
non-accrual loans totaled $279,000 and loans past due at least 90 days were
$66,000. At June 30, 1995, non-accrual loans totaled $245,000 and none were past
due 90 days or more.
At June 30, 1996, there were no commitments to lend additional funds to
borrowers whose loans were classified as non-accrual. The Bank is not aware of
any loans which continue to accrue interest at June 30, 1996, that management
reasonably expects will have a materially negative impact on future operating
results. The Bank's management is not aware of any information concerning any
material loans, other than those discussed as non-performing above, that causes
them to have doubts as to the ability of the borrowers to comply with the terms
of the loans.
Asset and Liability Management. The Bank's results of operations are
largely dependent on net interest income. Interest income, including loan fees,
and interest expense are affected by general economic conditions, competition
and characteristics of the Bank's assets and liabilities.
Exposure to interest rate risk is primarily a function of differences
between the maturity and repricing schedules of assets (principally loans and
investment securities) and liabilities (principally deposits). Assets and
liabilities are described as interest sensitive for a given period of time when
they mature or can reprice within that period. The difference between the amount
of interest sensitive assets and interest sensitive liabilities is referred to
as the interest sensitivity "GAP" for any given period of time.
As a general rule, in periods of falling interest rates, banks with
positive interest sensitivity GAPs are more susceptible to a decline in net
interest income. In periods of rising interest rates, banks with negative
interest sensitivity GAPs are more likely to experience declines in net interest
income. The actual effect that rising and falling interest rates have on the
Bank's net interest income depends, however, not only on the interest
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<PAGE> 71
sensitivity GAP, but also the relative changes in interest rates that occur when
assets and liabilities are repriced, unscheduled repayments of loans, early
withdrawals of deposits and other factors.
As of June 30, 1996, the Bank had a negative interest sensitivity GAP.
Bank management attempts to limit exposure to interest rate risk by maintaining
a balance sheet posture such that net interest income is not significantly
affected by market fluctuations in interest rates.
Certain shortcomings are inherent in the interest sensitivity GAP
method of analysis presented in the following table. For example, although
certain assets and liabilities may have similar repricing characteristics, they
may react in different degrees to changes in market interest rate. Also, the
interest rates on certain types of assets and liabilities may fluctuate in
advance of changes in market interest rates, while interest rates on other types
may lag behind changes in market rates.
The following table sets forth the dollar amount of interest-sensitive
assets and interest sensitive liabilities at June 30, 1996, and the difference
between them for the maturity or repricing periods indicated.
<TABLE>
<CAPTION>
Within 1 Year One to Five Over Five Total
------------- ----------- --------- -----
<S> <C> <C> <C> <C>
(dollars in thousands)
Assets
Loans $ 32,048 32,181 13,953 78,182
Securities 11,537 10,060 71 21,668
Fed Funds Sold 710 0 0 710
FHLB/FRB Stock 500 0 0 500
-------- -------- -------- --------
Subtotal 44,795 42,241 14,024 101,060
-------- -------- -------- --------
Liabilities
Interest-Bearing Checking (7,984) (0) (0) (7,984)
Savings & Money Market (38,075) (0) (0) (38,075)
Time Deposits (16,925) (7,908) (27) (24,860)
Note Payable (1,000) (1,000)
-------- -------- -------- --------
Subtotal (63,984) (7,908) (27) (71,919
-------- -------- -------- --------
Interest Sensitivity Gap $(19,189) 34,333 13,997 29,141
======== ======== ======== ========
</TABLE>
Return on Equity and Assets. The consolidated return on equity is
calculated based on the equity at the beginning of the year for comparative
purposes. For the past years ended December 31, 1995, 1994, and 1993, the return
on equity was 34.38%, 36.92%, and 39.65%, respectively. Return on average assets
was 2.40%, 2.16%, and 2.58%, respectively. Return on average assets for the last
three years, compared to the Bank's nation-wide peer group of similar sized
banks, as reported in the Federal Reserve Banks Uniform Bank Performance Report,
was substantially better than the peer group averages. The peer group averages
for 1995, 1994, and 1993 were 1.37%, 1.27%, and 1.36%, respectively. The Bank
was ranked in the 98th percentile or higher with respect to its peer group for
each of these three years.
Liquidity and Sources of Funds. The Bank's primary sources of funds are
customer deposits, maturities of investment securities, loan repayments, net
income, sales of "available for sale" securities, and advances from the Federal
Home Loan Bank of Seattle (FHLB). A concerted effort has been made to attract
deposits in the market area it serves through competitive pricing and delivery
of quality products. Deposit growth has been very consistent over the last five
years, with an increase in total deposits of $55.120 million from December 31,
1991 to December 31, 1995, an increase of nearly 143%.
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<PAGE> 72
Management anticipates that the bank 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. FHLB borrowings may be used on a short-term
basis to compensate for reductions in other sources of funds. FHLB 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. Banking regulators have established "Minimum" and "Well
Capitalized" regulatory requirements to determine the capital adequacy of
financial institutions. As of December 31, 1995, Bank was considered "Well
Capitalized," and continues to meet all regulatory capital requirements.
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<PAGE> 73
MANAGEMENT OF BANCSHARES
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning all of the directors
and executive officers of Bancshares and the Bank, including the background,
business experience, and principal occupations, of each Bancshares director and
executive officer. Except as otherwise noted, the positions indicated are at
both Bancshares and the Bank.
Allen Fetscher, age 51, is a realtor and real estate developer. His
local business is called Associated Agency, Inc. He obtained a degree from the
University of Montana in business in 1969. Mr. Fetscher has been a director of
both the Bancshares Board and the Bank Board since 1993.
William L. Bouchee, age 55, is a banker and President of the Bank and
Bancshares Mr. Bouchee graduated from the University of Montana in 1963 with a
degree in finance. He has served on the Bank board since 1991 and the Bancshares
Board since 1993.
Earl M. Pruyn, age 72, is a local veterinarian and the owner of Pruyn
Veterinary Clinic. Mr. Pruyn graduated from the Washington State University
Veterinary School in 1949. He has been a Bank director since 1991 and a
Bancshares director since 1993.
David Theisen, age 55, is a land developer and recently semi-retired.
He is a graduate of the University of Nebraska. He has been a director of both
the Bancshares Board and the Bank Board since 1995.
Robert T. Wuttke, age 49, was an insurance agent and an owner of
Western States Insurance Agency of Missoula, Montana. He is now semi-retired and
will be living in Arizona. Wuttke obtained a degree in psychology from Dakota
Wesleyan University, South Dakota. He has been a Bank director since 1984.
Harold J. Fraser, age 54 is a banker and Senior Vice President of the
Bank. He is a business graduate of the University of Montana in 1964. Mr. Fraser
has been a Bank director since 1991.
Dale Mahlum, age 66, is semi-retired. He was a former owner of the
local Ace Hardware business and is now involved in a trailer/motor home park. He
is a graduate of the University of Montana. Mr. Mahlum has been a Bank director
since 1991.
Craig Langel, age 45, is a CPA and owns Langel and Associates along
with several Taco Bells. Mr. Langel is an accounting graduate of Montana State
University, in Bozeman, Montana. He has served as a Bank director since 1984.
Chris B. Swartley, age 47, is a lawyer with Datsopoulos, MacDonald, and
Lind, P.C. He represents Bancshares and the Bank. Mr. Swartley obtained his
undergraduate degree from the University of North Carolina in 1972 and his law
degree from the University of Montana. He has been a Bank director since 1984.
Bruce Budge, age 66, is an accounting professor at the University of
Montana and the Chairman of the Accounting and Finance Department. He obtained
his undergraduate degree from the University of Idaho and graduate degree from
the University of Minnesota. Mr. Budge has served on the Bank Board since 1991.
Douglas Lawrence, age 47, is a banker and Vice President and in charge
of operations at the Bank. He is also an officer of Bancshares. Mr. Lawrence
obtained his accounting degree from Carroll College, Helena, Montana, in 1971.
He has served on the Bancshares Board since 1993.
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<PAGE> 74
Patrick McDonald, age 56, is a banker and Vice President of the Bank.
He has also been a director of Bancshares since 1993. Mr. McDonald obtained his
business degree from the University of Montana in 1962.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the Bank
during the fiscal year ended December 31, 1995, to its President, the only
executive officer whose compensation exceeds $100,000.00.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Named Executive Officer Position Held Total Compensation(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
William L. Bouchee President $115,752
- --------------------------------------------------------------------------------
</TABLE>
- ------------------
(1) Includes salary, bonus, personal benefits of automobiles and annual
fees paid to directors for participation in Board meetings.
Bonus. The Bank has an informal plan that is implemented at a level
proposed by management and approved by the Bank Board. Both 1994 and 1995 have
been at 20% of salary and overtime. Following the Merger, bonuses will be
determined under Glacier's compensation plan.
Profit Sharing Plan. This plan is a non-standard profit sharing plan.
It was adopted by the Bank on October 27, 1992. Directors Allen Fetscher and
William L. Bouchee are the trustees. Annual contributions have been made since
its inception, however, the amount of the contributions (if any) are determined
by the Bank Board. Employees are not allowed to make personal contributions to
the plan. Funding by the Bank during the last two years has been at the maximum
15% of salary and wages. This plan will be terminated after the Merger is
consummated.
Stock Options. In 1996, as an inducement for employment, Bank officer
Barbara Callaghan was granted and has exercised an option to purchase $200,000
worth of Bancshares' stock (a total of 714 shares were exercised by Ms.
Callaghan). Duane Kechter purchased 1,337 shares of Bancshares in 1994 in
accordance with an option granted in 1994 as an inducement for employment.
William L. Bouchee has an option for 1,000 shares granted December 29, 1993 that
is at present unexercised.
DIRECTOR COMPENSATION
Directors receive a fee of $350 per month for each monthly meeting of
the Bank Board. Members of the Bancshares Board receive $150 for each board
meeting. Bank Audit Committee members receive $100 for each committee meeting.
Directors who sit on the Bank Loan Committee receive $50 per hour for time
attended. There are no other pay incentives or options to purchase stock.
BOARD COMMITTEES
The Bancshares Board has no committees. First Security has a Loan
Committee, Salary Committee, Audit Committee and Asset/Liability Committee.
Outside directors serving on the Loan Committee are paid $50 per hour. Audit
Committee members are paid $100 per meeting. No fee is paid to Salary and
Asset/Liability Committee members for meetings.
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<PAGE> 75
CERTAIN TRANSACTIONS AND RELATIONSHIPS
Except as set forth herein, none of the directors or executive officers
of the Bank have or have had any material interest in any transactions to which
the Bank was or is a party, outside of the ordinary course of the Bank's
business.
Certain directors and officers of the Bank, and the companies with
which they are associated, have had and are expected to continue to have banking
transactions with the Bank from time to time in the ordinary course of business.
Any loans and commitments to lend included in such transactions have been, and
will continue to be made, in accordance with all applicable laws and regulations
and on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons of
similar credit worthiness.
From time to time, the Bank enters into loan participation agreements
with other institutions and individuals in order to accommodate the credit
requests. The Bank is currently participating commercial loans for Messrs.
Langel and Wuttke, both of whom serve as directors of Bancshares. The aggregate
balances to those directors are $348,006 and $385,878 respectively. The
participated amounts are, respectively, $258,955 and $270,658. The Bank does not
consider such loan participations to constitute sales of assets for regulatory
purposes, and believes the terms of the respective loans and governing
agreements are substantially the same as those prevailing in other similar loans
and participation agreements at the time the loans were made and the
participation agreements executed. The Bank further believes that each of the
loans and participation agreements are in all respects fair to the Bank.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of September 25, 1996,
with respect to (i) each director and executive officer of Bancshares and the
Bank, and (ii) the shares owned by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Shares Percentage
Name Beneficially Owned(1) Outstanding
- ---- --------------------- -----------
<S> <C> <C>
Allen Fetscher 4,500 (1)(2)(3) 9.06
William L. Bouchee 4,953 (4) 9.98
Earl M. Pruyn 2,500 5.03
Dave Theisen 2,500 5.03
Robert T. Wuttke, Jr. 1,000 2.01
Harold J. Fraser 1,759 (3) 3.54
Dale Mahlum 1,000 2.01
Craig Langel 500 1.01
Chris B. Swartley 500 1.01
Doug Lawrence 3,435(3) 6.92
Patrick G. McDonald 6,190 12.47
------ -----
All Directors and Officers as a Group 28,837 58.07
====== =====
</TABLE>
- -------------------
(1) Beneficial ownership includes sole voting and investment power as to
the shares, unless otherwise indicated.
(2) Includes shares held as a custodian for a minor child or other member
of the named individual's household.
(3) Includes shares held by or jointly with spouse.
(4) Includes 1,000 shares per option dated September 29, 1993.
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<PAGE> 76
Options Granted in Last Fiscal Year. No officer received or exercised
any options in the 1995 fiscal year.
Aggregate Option Exercises and Fiscal Year-End Option Value Table. The
following table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1995, to the executive officer
named in the Summary Compensation Table. Also reported are the values for
"in-the-money" options, which represent the positive spread between the exercise
price of any such existing stock options and the year end price of Bancshares
Common Stock.
<TABLE>
<CAPTION>
Shares
Acquired Value Number of Unexercised Value of Unexercised
Name on Exercise Realized Options at Year End Options at Year End
------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William L. Bouchee -0- -0- -0- 1,000 -0-(1) $477,730(1)
</TABLE>
- --------------
(1) Based on a Merger exchange ratio of 22.22, and a Glacier Common Stock
price of $21.50.
OTHER PRINCIPAL STOCKHOLDERS
The following sets forth information as of September 25, 1996, with
respect to each person other than those included in the previous table known by
Bancshares and the Bank to have beneficial ownership of more than five percent
of the outstanding Bancshares Common Stock.
<TABLE>
<CAPTION>
No. of Shares Percentage
Name and Address Beneficially Owned (1) Outstanding
---------------- ---------------------- -----------
<S> <C> <C>
Kathryn A. Ogren 2,500 5.03
Missoula, MT 59801
Jack R. Henry 2,535 5.10
Missoula, MT 59802
Weymouth Symmes 2,751(2) 5.54
Missoula, MT 59801
Donald T. Trenary 2,487 5.01
Milltown, MT 59851
</TABLE>
- --------------------
(1) Beneficial ownership includes sole voting and investment power as to
the shares, unless otherwise indicated.
(2) Includes shares held by or jointly with spouse.
-59-
<PAGE> 77
SUPERVISION AND REGULATION
INTRODUCTION
The following generally refers to certain statutes and regulations
affecting the 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 operation of the banking industry, but
are not referenced below.
THE HOLDING COMPANIES
GENERAL
Glacier is a savings and loan holding company within the meaning of
Section 10 of the Home Owners' Loan Act ("HOLA"), due to its ownership of
Savings Bank. Thus, Glacier is registered with and subject to examination and
supervision by the OTS. Glacier is also a bank holding company, due to its
ownership of First National Bank of Whitefish and First National Bank of Eureka
(collectively, "National Banks"), and Bancshares is a bank holding company, due
to its ownership of the Bank, a Montana state-chartered commercial bank.
Accordingly, the BHCA governs and subjects each of Glacier, Bancshares, and
their respective subsidiaries to supervision and examination by the FRB. The
BHCA requires bank holding companies to file with the FRB annual reports of
their operations.
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 will continue to be phased in through next
year and may expand opportunities for bank holding companies (see below under
"Regulation of Banking Subsidiaries - Recent Federal Legislation - Interstate
Banking and Branching"). However, the impact that this legislation may have on
Glacier, Bancshares, and their subsidiaries is unclear at this time.
Bank holding companies must obtain the FRB's approval: (1) before
acquiring direct or indirect ownership or control of any voting shares of any
bank if, after such acquisition, it would own or control, directly or
indirectly, more than 5% of the voting shares of such bank; (2) before merging
or consolidating with another bank holding company; and (3) before acquiring
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 the 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 so closely related to
banking as to be a proper incident thereto. In making such determinations, the
FRB must weigh 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. For example,
the FRB has by regulation determined that certain activities are closely related
to banking within the meaning of the BHCA. These activities include operating a
mortgage company, finance company, credit card company, factoring company, trust
company or savings association; performing certain data processing operations;
providing limited securities brokerage services; acting as an investment or
financial advisor; acting as an insurance agent for certain types of
credit-related insurance; leasing personal property on a full-payout,
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<PAGE> 78
non-operating basis; providing tax planning and preparation services; operating
a collection agency; and providing certain courier service. The FRB also has
determined that certain other activities, including real estate brokerage and
syndication, land development, property management and underwriting of life
insurance not related to credit transactions, are not closely related to banking
and a proper incident thereto. In the future, the FRB may from time to time add
to or delete from the list of activities permissible for bank holding companies.
In connection with its acquisition of the National Banks in 1992,
Glacier divested its partnership interest in a general insurance agency held by
Community First, Inc., a wholly owned subsidiary of the Bank, because certain
activities of the insurance agency were impermissible for a bank holding company
under the BHCA.
Control Transactions. The Change in Bank Control Act of 1978, as
amended, prohibits a person or group of persons from acquiring "control" of a
bank holding company unless the FRB has been given 60 days' prior written notice
of the proposed acquisition, and within that time period the FRB has neither
issued a notice disapproving the proposed acquisition nor extended for up to
another 30 days the period during which such a disapproval may be issued. An
acquisition may be made before the disapproval period expires if the FRB issues
written notice of its intent not to disapprove the action. Under a rebuttable
presumption established by the FRB, the acquisition of 10% or more of a class of
voting stock of a bank holding company with a class of securities registered
under Section 12 of the Exchange Act would, under the circumstances set forth in
the presumption, constitute the acquisition of control. In addition, any
"company" would be required to obtain the approval of the FRB under the BHCA
before acquiring 25% (5% if the "company" is a bank holding company) or more of
the outstanding shares of the Company, or otherwise obtain control over the
Company.
SAVINGS AND LOAN HOLDING COMPANY STRUCTURE
HOLA prohibits a savings and loan holding company, directly or
indirectly, from (1) acquiring control (as defined) of another insured
association (or holding company thereof) without prior OTS approval; (2)
acquiring more than 5% of the voting shares of another insured association (or
holding company thereof) which is not a subsidiary, subject to certain
exceptions; or (3) acquiring through merger, consolidation or purchase of
assets, another savings association (whether or not it is insured by the Savings
Association Insurance Fund ("SAIF") administered by the FDIC, or holding company
thereof, or acquiring all or substantially all of the assets of such association
(or holding company thereof) without prior OTS approval. When an acquisition
would result in a savings and loan holding company controlling savings
associations located in different states, certain other restrictions apply. A
director or officer of a savings and loan holding company or person owning or
controlling more than 25% of such holding company's voting shares may not
acquire control of any non-subsidiary SAIF-insured association unless the OTS
approves the acquisition in advance. If the OTS approves such an acquisition,
any holding company controlled by such officer, director or person is subject to
the activities limitations that apply to multiple savings and loan holding
companies, described below, unless certain supervisory exceptions apply.
Unless and until Glacier acquires another savings association as a
separate subsidiary, Glacier will be a unitary savings and loan holding company.
Generally, no restrictions apply to the activities of a unitary savings and loan
holding company whose sole subsidiary complies with the qualified thrift lender
("QTL") test, described in more detail below.
If Glacier acquires another insured association as a separate
subsidiary, Glacier would then be a multiple savings and loan holding company
which is subject to limitations specified in HOLA on the types of business
activities in which it may engage, unless all savings association subsidiaries
satisfy the QTL test. In addition, if an insured institution subsidiary of a
unitary savings and loan holding company fails to meet the QTL test specified in
HOLA and its regulations at any time after August 9, 1990, such holding company
(1) then becomes subject to the activity restrictions applicable to multiple
savings and loan holding companies specified in HOLA, and (2) must register as a
bank holding company within one year of the failure of its subsidiary to qualify
or to requalify under the
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QTL test. Glacier registered as a bank holding company in 1992, in connection
with its acquisition of two national bank subsidiaries.
Under certain conditions, a savings and loan holding company may
acquire less than controlling or non-controlling interests in non-subsidiary
savings associations with OTS approval. Subject to certain limitations, a
savings and loan holding company may also purchase up to 15% of the shares of a
savings association in a qualified stock issuance. Any such acquisition is not
deemed a controlling interest. Only solvent associations that do not meet their
capital requirements may engage in a qualified stock issuance. In addition, a
savings and loan holding company or its subsidiaries may not acquire more than
5% in the aggregate of the voting stock of any non-subsidiary savings
association or savings association holding company. This 5% limitation does not
apply to certain types of acquisitions, including acquisitions as a bona fide
fiduciary, as an underwriter or in an account solely for trading purposes.
TRANSACTIONS WITH AFFILIATES
Glacier and its subsidiaries, and likewise Bancshares and its
subsidiaries, are deemed affiliates within the meaning of the Federal Reserve
Act, and transactions between affiliates are subject to certain restrictions.
These restrictions apply to Glacier and Bancshares and their subsidiaries
through the BHCA and HOLA, which provide that transactions between an insured
subsidiary of a holding company and its affiliates are subject to the
restrictions applicable to transactions between banks that are members of the
Federal Reserve System and their affiliates in accordance 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.
In addition to the restrictions in Sections 23A and 23B, three other
restrictions apply to savings banks, including those that are part of a holding
company organization. First, savings banks may not lend money or extend credit
to an affiliate unless that affiliate is engaged only in activities permissible
for a national bank. Second, savings banks may not purchase or invest in
affiliate securities except those of a subsidiary. Finally, the Director of the
OTS is granted authority to impose more stringent restrictions for reasons of
safety and soundness.
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 of another financial institution whose assets
exceed a specified amount or which has an office within a specified geographic
area.
COMMITMENTS TO AFFILIATED INSTITUTIONS
Under FRB policy, Glacier and Bancshares are expected to act as sources
of financial strength to their respective subsidiary banks and to commit
resources to support their respective subsidiary banks in circumstances when
they might not do so absent this policy. The legality and precise scope of this
policy is unclear, however, in light of recent judicial precedent.
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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, Bancshares and their subsidiaries, are prohibited from
engaging 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, Bancshares, 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.
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, Bancshares may be subject to certain limitations
and restrictions as provided under applicable Montana corporate law.
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 FDIC has authority to prohibit banks under
their supervision from engaging in what they consider to be an unsafe and
unsound practice in conducting their business.
The Savings Bank, as a federally-chartered savings association, is
subject to federal regulation and oversight by the OTS extending to all aspects
of its operations. The National Banks are subject to extensive regulation and
supervision by the OCC. The State Bank is subject to extensive regulation and
supervision by the Montana Department of Commerce's Banking and Financial
Institutions Division. Each of Glacier's and Bancshares' banking subsidiaries
are also subject to regulation and examination by the FDIC, which insures the
deposits of the Savings Bank, the National Banks, and the State Bank to the
maximum extent permitted by law and by requirements
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established by the FRB. In addition, the National Banks [and the State Bank] are
subject to regulation by the FRB as a result of their membership in the Federal
Reserve System, and the Savings Bank is subject to regulation incidental to its
membership in the Federal Home Loan Bank ("FHLB") System. The federal laws that
apply to Glacier's and Bancshares' 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 Bancshares' 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. However, this provision was subsequently
modified through legislation to allow federal regulatory agencies to implement
these standards through either guidelines or regulations. 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.
LOANS-TO-ONE BORROWER
Each of Glacier's and Bancshares' 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
August 31, 1996, each of Glacier's and Bancshares' 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 this system, depository institutions, such as
the National Banks and the State Bank, with deposits insured by the Bank
Insurance Fund ("BIF"), are required to pay an assessment to the BIF ranging
from $.0 to $.27 per $100 of deposits, based on the institution's risk
classification. Banks at the zero assessment rate will pay the statutory minimum
of $2,000 for deposit insurance. On the other hand, institutions, such as the
Savings Bank, with SAIF-insured deposits are required to pay an assessment
ranging from $.23 to $.31 per $100 of deposits, based on the institution's risk
classification.
The risk classification is based on the FDIC's assignment of the
institution to one of three capital groups and to one of three supervisory
subgroups. The capital groups are "well capitalized," "adequately capitalized,"
and "undercapitalized." The three supervisory subgroups are Group "A" (for
financially sound institutions with only a few minor weaknesses), Group "B" (for
those institutions with weaknesses which, if uncorrected, could cause
substantial deterioration of the institution and increase risk to the deposit
insurance fund), and Group "C" (for those institutions with a substantial
probability of loss to the fund absent effective corrective action).
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.
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CAPITAL REQUIREMENTS
Banks and Bank Holding Companies. The FRB, the FDIC, and the OCC 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 to ensure the
maintenance of adequate capital levels. In addition, banks are required to meet
certain guidelines concerning the maintenance of an adequate allowance for loan
and lease losses.
The FRB's, the FDIC's, and OCC's "risk-based" capital guidelines
establish a systematic, analytical framework that makes regulatory capital
requirements more sensitive to differences in risk profiles among banking
organizations, takes off-balance sheet exposures into explicit account in
assessing capital adequacy, and minimizes disincentives to holding liquid,
low-risk assets. The risk-based ratio is determined by allocating assets and
specified off-balance sheet commitments into several categories, with high
levels of capital being required for the categories perceived as representing
greater risk. The risk weights assigned to assets and credit equivalent amounts
of off-balance sheet items are based primarily on credit risk. Other types of
exposure, such as interest rate, liquidity and funding risks, as well as asset
quality problems, are not factored into the risk-based ratio. Such risks,
however, will be taken into account in determining a final assessment of an
organization's capital adequacy. Under these new regulations, banks were
required to achieve a minimum total risk-based capital ratio of 8% and a minimum
Tier 1 risk-based capital ratio of 4%.
The FRB, the FDIC, and the OCC 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 is expected to have well-diversified risk, including no undue
interest rate risk exposure, excellent asset quality, high liquidity and good
earnings, and in general, to be a strong banking organization without any
supervisory, financial or operational weaknesses or deficiencies. Any
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 (including
certain off-balance sheet items, such as stand-by letters of credit) 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.
Savings Banks. Federally insured savings associations, such as the
Savings Bank, must also maintain minimum levels of regulatory capital. Under
FIRREA, the OTS has established capital standards applicable to all savings
associations. These standards generally must be as stringent as comparable
capital requirements imposed on national banks. The OTS also is authorized to
impose capital requirements in excess of these standards on individual
associations on a case-by-case basis.
Savings associations must satisfy three different OTS capital
requirements. Under these standards, savings associations must maintain: (1)
"tangible" capital equal to at least 1.5% of adjusted total assets; (2) "core"
capital equal to at least 3% of adjusted total assets (however, savings
associations must generally have core capital equal to four percent of adjusted
total assets to be adequately capitalized for purposes of prompt corrective
action, discussed in more detail below); and (3) "supplementary" capital equal
to 8% of "risk-weighted" assets. The regulation
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defines core capital as common stockholders' equity (including retained
earnings), non-cumulative perpetual preferred stock and related surplus,
minority interests in the equity accounts of fully consolidated subsidiaries,
certain non-withdrawable accounts and pledged deposits and "qualifying
supervisory goodwill." Core capital is generally reduced by the amount of a
savings association's intangible assets, although limited exceptions to the
deduction of intangible assets are provided for purchased mortgage servicing
rights and certain other intangibles which currently are not significant to the
calculation of the Savings Bank's regulatory capital. Tangible capital is core
capital less all intangible assets, with a limited exception for purchased
mortgage servicing rights.
Both core and tangible capital are also reduced by an amount equal to a
savings association's debt and equity investments in subsidiaries engaged in
activities not permissible for national banks (other than subsidiaries engaged
in activities undertaken as agent for customers or in mortgage banking
activities and subsidiary depository institutions or their holding companies).
These requirements did not materially affect the regulatory capital of the
Savings Bank.
A savings association may include both core capital and supplementary
capital in the calculation of its total capital for purposes of the risk-based
capital requirements, as long as the amount of supplementary capital included
does not exceed the savings association's core capital. Supplementary capital
consists of certain capital instruments that do not qualify as core capital, and
general valuation loan and lease loss allowances up to a maximum of 1.25% of
risk-weighted assets. In determining the required amount of risk-based capital,
total assets, including certain off-balance sheet items, are multiplied by a
risk weight based on the risks inherent in the type of assets. For example, the
risk weights assigned by the OTS for certain principal categories of assets are
as follows:
(a) 0% for cash and securities issued by the United States Government
to the extent unconditionally backed by the full faith and credit
of the United States Government;
(b) 20% for securities (other than equity securities) issued by the
United States Government which are not unconditionally backed by
the full faith and credit of the United States Government;
(c) 20% for securities (other than equity securities) issued by
United States Government-sponsored agencies and high quality
mortgage-related securities, except for collateralized mortgage
obligation residual classes;
(d) 50% for qualifying residential construction loans, as defined by
OTS regulations; and
(e) 100% for most other loans and investments, including, without
limitation, consumer loans, commercial loans, home equity loans,
non-qualifying mortgage loans, residential construction loans,
and certain equity investments.
Off-balance sheet items also are adjusted to take into account certain risk
characteristics. The risk-based capital requirement is 8% of risk-weighted
assets.
In January, 1992, the OTS adopted an amendment to its core capital
requirement, establishing a minimum leverage capital ratio of 3% for savings
banks in the strongest financial and managerial condition. For all other savings
associations, the minimum core capital ratio will range from 4 to 5% or more, as
determined by the OTS on a case-by-case basis, based on the quality of the
institution's risk management systems and the level of overall risk in each
individual savings association as determined through the examination process.
Failure of the Savings Bank to maintain any required level of capital
would have a number of adverse consequences, including the imposition of
numerous restrictions on the institution's lending, investment, deposit and
borrowing activities, capital expenditures and compensation and employment
practices, as well as possible restrictions on growth of the institution. An
institution that lacks adequate capital or that fails to comply with a
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capital directive may be deemed to be in an unsafe and unsound condition. FIRREA
expands the grounds for appointment of a conservator or receiver for a savings
institution to include being in an unsafe and unsound condition to transact
business. Furthermore, under certain conditions, which include an institution's
lack of any tangible capital, the FDIC may seek to suspend an institution's
deposit insurance. Finally, FDICIA provides that a regulator may treat an
"unsafe or unsound" institution as if it were at a lower capital level, thus
subjecting the institution to greater restrictions on its activities.
Interest-Rate-Risk ("IRR") Component. FDICIA requires each federal
banking agency to revise its risk-based capital standards for insured
institutions to ensure that those standards 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. In August 1993, the OTS
added an IRR component to its risk-based capital standards, effective January 1,
1994. The IRR component is a dollar amount, equal to one-half the difference
between an institution's measured exposure and a normal level of exposure, that
is deducted from total capital for the purpose of calculating an institution's
risk-based capital requirement. An association's measured IRR is the change that
occurs in its Net Portfolio Value ("NPV") as a result of a 200 basis point
increase or decrease in interest rates (whichever leads to the lower NPV)
divided by the estimated economic value (present value) of its assets; NPV
equals the present value of expected cash inflows from existing assets less the
present value of expected cash outflows from existing liabilities, plus the
present value of net expected cash inflows from existing off-balance sheet
contracts. An institution with a measured IRR of less than 2% has a normal level
of IRR. Only institutions whose measured IRR exceeds 2% are required to maintain
an IRR component. An association must maintain capital of at least 8% of
risk-weighted assets, after the IRR component is deducted.
In August of 1995, the FRB, the FDIC, and the OCC (collectively,
"Agencies") adopted a joint final rule implementing the portion of Section 305
of FDICIA that requires the banking agencies to revise their risk-based capital
standards to ensure that those standards take adequate account of interest rate
risk. As of September 1, 1995, when evaluating the capital adequacy of a bank,
examiners from the Agencies consider exposure to declines in the economic value
of the bank's capital due to changes in interest rates. A bank may be required
to hold additional capital for interest rate risk if it has significant exposure
or a weak interest rate risk management process. Concurrent with the publication
of this final rule, the Agencies proposed for comment a joint policy statement
describing the process they will use to measure and assess a bank's interest
rate risk. This joint policy statement was superseded by an updated Joint Policy
Statement in June of 1996. Any impact the joint final rule and Joint Policy
Statement may have on the National Banks or the State Bank cannot be predicted
at this time.
In addition, the Agencies published a joint final rule on September 6,
1996, amending 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.
This final rule takes effect on January 1, 1997 and implements an amendment to
the Basle Capital Accord that sets forth a supervisory framework for measuring
market risk. The final rule effectively requires banks and bank holding
companies with significant exposure to market risk to measure that risk using
its own internal value-at-risk model, subject to the parameters of the final
rule, and to hold a sufficient amount of capital to support the institution's
risk exposure.
Institutions subject to this final rule must be in compliance with it
by January 1, 1998. This final 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. An institution's
trading activity is defined as the sum of its trading assets and trading
liabilities as reported in its most recent call report for a bank, or its most
recent Y-9C Report for a bank holding company. Total assets means quarter-end
total assets. The Agencies may require an institution not otherwise subject to
the final rule to comply with it for safety and soundness reasons and also may
exempt an institution otherwise subject to the final 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 which it
regulates. In September 1992, the federal banking agencies
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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 cent, 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 August 31, 1996, neither the Savings Bank, the
State Bank, nor the National Banks were subject to any regulatory order,
agreement, or directive to meet and maintain a specific capital level for any
capital measure.
LIQUIDITY REQUIREMENTS
All savings associations, such as the Savings Bank, must maintain an
average daily balance of liquid assets equal to a certain percentage of the sum
of its average daily balance of net withdrawable deposit accounts and borrowings
payable in one year or less. The liquidity requirement may vary from time to
time (between 4% and 10%) depending upon the economic conditions and savings
flows of all savings associations. At the present time, the required liquid
asset ratio is 5%.
Liquid assets for purposes of this ratio include specified short-term
assets (e.g., cash, certain time deposits, certain banker's acceptances and
short-term United States Government obligations), and long-term assets (e.g.,
United States Government obligations of more than one and less than five years
and state agency obligations with a minimum term of 18 months). Short-term
liquid assets currently must constitute at least 1% of an association's average
daily balance of net withdrawable deposit accounts and short-term borrowings
during the preceding calendar year. Monetary penalties may be imposed upon
associations for violations of liquidity requirements.
The National Banks follow the following liquidity guidelines:
Loans/available deposits Less than 90%
Investments/available deposits Less than 50%
Loans + Investments/available deposits Less than 120%
Fed Funds Purchase/total capital Less than 50%
Net liquid assets/net liabilities Greater than 15%
QTL TEST
In order to avoid certain restrictions on their operations, all savings
associations, such as the Savings Bank, must meet the QTL test, originally
established by Congress in the Competitive Equality Banking Act of 1987, and
amended by FIRREA in 1989; the OTS issued final regulations incorporating the
1989 amendments to the QTL test in March 1993. A savings association that does
not meet the QTL test must either convert to a bank charter or comply with the
following restrictions on its operations: (1) the association may not engage in
any new activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national
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bank; (2) the branching powers of the association are restricted to those of a
national bank; (3) the association will not be eligible to obtain any advances
from its FHLB without prior OTS approval; and (4) payment of dividends by the
association are subject to the rules governing payment of dividends by a
national bank. Three years following the date the association ceases to be a
QTL, it must cease all activity not permissible for a national bank and
immediately repay any outstanding FHLB advances (subject to safety and soundness
considerations).
Effective December 19, 1991, the definition of "Qualified Thrift
Investments" was amended in its entirety, and the QTL test was amended to
require that Qualified Thrift Investments represent 65% of portfolio assets,
rather than 60 and 70% of tangible assets as previously required before and
after July 1, 1991, respectively. The OTS regulations define portfolio assets as
total assets less intangibles, property used by a savings association in its
business and liquidity investments in an amount not exceeding 20% of assets.
Under the amended definition of Qualified Thrift Investments, liquidity
investments and the book value of property used in an association's business are
not considered Qualified Thrift Investments. In addition, Qualified Thrift
Investments do not include any intangible assets. Subject to a 20% of portfolio
assets limit, however, savings associations may treat as Qualified Thrift
Investments 200% of their investments in (1) loans to finance "starter homes;"
(2) loans for the construction, development or improvement of domestic
residential housing and community service facilities located within a
"credit-needy area;" and (3) loans to certain small businesses located within
credit-needy areas. A savings association that was not subject to sanctions for
failure to comply with a QTL test as of June 30, 1991, is deemed to initially
satisfy the revised test. A savings association that fails to maintain the QTL
status will be permitted to re-qualify one time, and if it fails the QTL test a
second time, it will become immediately subject to all penalties as if all time
limits on such penalties had expired.
On June 30, 1996, approximately 81% of the Savings Bank's assets were
invested in Qualified Thrift Investments, which exceeded the percentage required
to qualify the Savings Bank under the QTL test in effect at that time. Because
the Savings Bank was not subject to sanctions for failure to comply with the QTL
test as of June 30, 1991, it is deemed to satisfy the QTL test as in effect on
July 1, 1991 and will remain in compliance until its monthly average percentage
of Qualified Thrift Investments to portfolio assets falls below 65% in nine
months out of any 12-month period.
The National Banks and the State Bank are not subject to a QTL test
comparable to that which is applicable to savings associations.
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 Bancshares by the
Bank are a material source of Bancshares' cash flow. Various federal and state
statutory provisions limit the amount of dividends Glacier's and Bancshares'
banking subsidiaries are permitted to pay to Glacier and Bancshares,
respectively, without regulatory approval. FRB policy further limits the
circumstances under which bank holding companies may declare dividends. For
example, a bank holding company should not continue its existing rate of cash
dividends on its common stock unless its net income is sufficient to fully fund
each dividend and its prospective rate of earnings retention appears consistent
with its capital needs, asset qualify, and overall financial condition.
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, could 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.
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The Savings Bank. Generally, FDICIA prohibits an insured institution
from declaring any dividends, making any other capital distribution, or paying a
management fee to a controlling person if, following the distribution or
payment, the institution would be within any of the three undercapitalized
capital adequacy categories (see "Prompt Corrective Action," above). OTS
regulations govern capital distributions by savings associations, including
dividends, stock repurchases, cash-out mergers, capitalization of holding
companies in a reorganization and certain other transactions involving the
pay-out of capital, which the OTS may find to be subject to the capital
distribution regulations. Generally, these regulations create a safe harbor for
specified levels of capital distributions from associations meeting at least
their minimum capital requirements, so long as such associations notify the OTS
and receive no objection to the distribution from the OTS. Prior OTS approval is
required before making any capital distributions if the associations and/or
distributions do not qualify for the safe harbor.
Generally, Tier 1 associations, which are savings associations that
before and after the proposed distribution meet or exceed their fully phased-in
capital requirements, may make capital distributions during any calendar year up
to the amount that would reduce its surplus capital ratio to no less than
one-half of its surplus capital ratio at the beginning of the calendar year. The
"surplus capital ratio" is defined to mean the percentage by which the
association's ratio of total capital-to-assets exceeds the ratio of its fully
phased-in capital requirement to assets, and "fully phased-in capital
requirement" is defined to mean an association's capital requirement under the
statutory and regulatory standards applicable on December 31, 1994, as modified
to reflect any applicable individual minimum capital requirement imposed upon
the association. At December 31, 1995, the Savings Bank was a Tier 1 association
under the OTS capital distribution regulation. The amount of allowable
distributions was approximately $1,069,000 as of December 31, 1995.
Tier 2 associations, which are associations that before and after the
proposed distribution meet or exceed their current minimum tangible, core and
risk-based capital requirements, but do not meet January 1, 1995, capital
requirements, or are Tier I associations which have been placed into Tier II by
the OTS, may make capital distributions over the most recent four quarter period
up to a specified percentage of their net income during that four quarter
period, depending on how close the association is to meeting its fully phased-in
capital requirements. Tier 2 associations that meet the capital requirements in
effect on January 1, 1993, (including the 8% risk-based requirement and
then-applicable exclusions on non-permissible subsidiary investments and
goodwill) are permitted to make distributions totaling up to 75% of net income
over the four quarter period. Tier 2 associations that meet the January 1, 1991,
capital requirements (including the 7.2% risk-based requirement and the
then-applicable exclusions of non-permissible subsidiary investments and
goodwill) are permitted to make distributions totaling up to 50% of net income
over the four quarter period.
In order to make distributions under these safe harbors, Tier 1 and
Tier 2 associations must submit 30 days written notice to the OTS prior to
making the distribution. The OTS may object to the distribution during that
30-day period based on safety and soundness concerns. In addition, a Tier 1
association deemed to be in need of more than normal supervision by the OTS may
be downgraded to a Tier 2 or Tier 3 association as a result of such a
determination.
Tier 3 associations, which are associations that do not meet current
minimum capital requirements, or that have capital in excess of either their
fully phased-in capital requirement or minimum capital requirement but which
have been notified by the OTS that it will be treated as a Tier 3 association
because they are in need of more than normal supervision, cannot make any
capital distribution without obtaining OTS approval prior to making such
distributions.
Rules proposed by the OTS in December 1994 would revise and simplify
the OTS capital distribution regulations described above, by conforming the
rules to the prompt corrective action system. At this time, it is unclear
whether the OTS will adopt these proposed rules. If they are adopted, it is
impossible to predict the impact, if any, of these regulations on the Savings
Bank.
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The National Banks. Under the National Bank Act, national banks, such
as the National Banks, may not pay dividends without advance approval of the OCC
if the total of all dividends declared by any such bank in any calendar year
will exceed the sum of its net profits (as defined by statute) for that year
plus its retained profits for the preceding two calendar years, less any
required transfers to surplus. The National Bank Act also prohibits national
banks from paying dividends that would be in an amount greater than net profits
then on hand (as defined by statute) after deducting losses and bad debts (as
defined by statute). The amount available for dividend distribution by the
National Banks as of December 31, 1995, was approximately $1,080,000.
The State Bank. 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 the 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.
FEDERAL HOME LOAN BANK SYSTEM
All of Glacier's and Bancshares' banking subsidiaries 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
Bancshares 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, 1995, Glacier's banking subsidiaries had $7.1 million in FHLB
stock, which was sufficient to comply with this requirement. On December 31,
1995, the Bank had $258,000 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, 1995 and 1994, totaled $413,000
and $315,000, respectively. Dividends paid to the State Bank for the years ended
December 31, 1995 and 1994, totaled $8,100 and none, 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, 1995, each of
Glacier's and Bancshares' 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 Bancshares' banking subsidiaries.
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RECENT FEDERAL LEGISLATION
Federal Taxation. Glacier and the Savings Bank will report their income
on a calendar year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Savings Bank's reserves for bad
debts discussed below. The following discussion of tax matter is intended only
as a summary and does not purport to be a comprehensive description of the tax
rules applicable to Glacier or the Savings Bank.
Tax Bad Debt Reserves. For taxable years beginning before January 1,
1996, savings institutions such as the Savings Bank which met certain
definitional tests primarily relating to their assets and the nature of their
business ("qualifying thrifts") were permitted to establish a reserve for bad
debts and to make annual additions thereto, which additions may, within
specified formula limits, have been deducted in arriving at their taxable
income. The Savings Bank's deduction with respect to "qualifying loans," which
are generally loans secured by certain interests in real property, may have been
computed using an amount based on the Savings Bank's actual loss experience, or
a percentage equal to 8% of the Savings Bank's taxable income, computed with
certain modifications and reduced by the amount of any permitted additions to
the nonqualifying reserve. The Savings Bank's deduction with respect to
nonqualifying loans was computed under the experience method, which essentially
allows a deduction based on the Savings Bank's actual loss experience over a
period of several years. Each year the Savings Bank selected the most favorable
way to calculate the deduction attributable to an addition to the tax bad debt
reserve.
Recently enacted federal legislation repeals the reserve method of
accounting for bad debt reserves for tax years beginning after December 31,
1995. As a result, savings associations are no longer able to calculate their
deduction for bad debts using the percentage-of-taxable-income method. Instead,
savings associations are required to compute their deduction based on specific
charge-offs during the taxable year or, if the savings association or its
controlled group had assets of less than $500 million, based on actual loss
experience over a period of years. This legislation also requires savings
associations to recapture into income over a six-year period their post-1987
additions to their bad debt tax reserves, thereby generating additional tax
liability. At June 30, 1996, the Savings Bank's post-1987 reserves were
approximately $2.4 million. The recapture may be suspended for up to two years
if, during those years, the institution satisfies a residential loan
requirement. The Savings Bank anticipates that it will meet the residential loan
requirement for the taxable year ending December 31, 1996.
Under prior law, if the Savings Bank failed to satisfy the qualifying
thrift definitional tests in any taxable year, it would be unable to make
additions to its bad debt reserve. In addition, the Savings Bank would be
required to deduct bad debts as they occur and would additionally be required to
recapture its bad debt reserve deductions ratably over a multi-year period. At
June 30, 1996, the Savings Bank's total bad debt reserve for tax purposes was
approximately $3.6+ million. Under the recently enacted federal legislation, a
savings association will not be required to recapture its pre-1988 bad debt
reserves if it ceases to meet the qualifying thrift definitional tests.
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 will be phased in through next
year and individual states have authority to "opt out" of certain of these
provisions. The Interstate Act currently allows states 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. Beginning September 29, 1995, subject to certain state laws,
such as age and contingency laws, bank holding companies may purchase banks in
any state. Additionally, subject to certain state laws, such as age and
contingency laws, beginning June 1, 1997, banks will be 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.
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Regulatory Improvement. In 1994, Congress enacted the Community
Development and Regulatory Improvement Act ("Regulatory Improvement Act"), which
among other things, is intended to relieve the regulatory burden on financial
institutions. Certain regulatory procedures are streamlined and certain
regulatory compliance requirements are eased.
At this time, the full impact that the Interstate Act and the
Regulatory Improvement Act might have on Glacier and its subsidiaries is
impossible to predict.
REGULATORY ENFORCEMENT AUTHORITY
The enforcement powers available to federal banking regulators are
substantial and include, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties, as defined. In general, enforcement actions must be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions, or inactions, may provide the basis for enforcement action, including
misleading or untimely reports filed with regulatory authorities. Applicable law
also requires public disclosure of final enforcement actions by the federal
banking agencies.
DESCRIPTION OF GLACIER'S CAPITAL STOCK AND
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
BANCSHARES AND GLACIER 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 Bancshares' stockholders who become stockholders of Glacier
through the Merger. The rights of Bancshares stockholders are currently governed
by the MBCA, as amended, and by Bancshares' Articles of Incorporation and
Bylaws. The following is a brief summary of certain differences between the
rights, respectively, of Bancshares 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 Articles of Incorporation, Glacier's authorized capital stock
consists of 12,500,000 common stock shares with a $.01 per share par value, and
7,500,000 preferred stock shares with a $.01 per share par value.
Bancshares' authorized capital stock consists of 250,000 common stock
shares with a $10.00 per share par value and 50,000 preferred stock shares with
a $50.00 per share par value.
The following is a more detailed description of Glacier's and
Bancshares' capital stock.
PREFERRED STOCK
As of October 1, 1996, neither Glacier nor Bancshares had any 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. Likewise, the
Bancshares Board is authorized, without further stockholder action, to issue
preferred stock shares with such designations, preferences and rights as the
Bancshares Board may determine.
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COMMON STOCK
As of October 1, 1996, there were 3,363,297 shares of Glacier Common
Stock issued and outstanding, in addition to options for the purchase of 217,284
shares of Glacier Common Stock under Glacier's employee and director stock
option plans.
As of October 1, 1996, there were 48,661 shares of Bancshares Common
Stock issued and outstanding, in addition to options for the purchase of 1,000
shares of Bancshares Common Stock under Bancshares' stock options.
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.
Dividends may be paid on Bancshares Common Stock as and when declared
by the Bancshares Board out of funds legally available for the payment of
dividends. The Bancshares Board may issue preferred stock that is entitled to
such dividend rights as the Bancshares Board may determine, including priority
over the common stock in the payment of dividends. The ability of Bancshares to
pay dividends basically depends on the amount of dividends paid to it by its
subsidiary. Accordingly, the dividend restrictions imposed on its subsidiary by
statute or regulation effectively may limit the amount of dividends Bancshares
can pay (See "SUPERVISION AND REGULATION -- The Bank Subsidiaries; Dividend
Restrictions"). Under the MBCA, the Bancshares Board is barred from making any
dividend payment if, after giving effect to such payment, Bancshares is either
unable to pay its debts as they become due in the usual course of business or
Bancshares' total assets would be less than the sum of its total liabilities, as
more fully provided in MBCA Section 35-1-712(3).
VOTING RIGHTS
All voting rights are currently vested in the holders of Glacier Common
Stock and Bancshares Common Stock, respectively, with each share being entitled
to one vote.
Glacier's Bylaws and Bancshares' Articles of Incorporation provide that
stockholders do not have cumulative voting rights in the election of directors.
The Glacier and Bancshares Boards are each authorized to determine the voting
rights of any preferred stock that may be issued.
PREEMPTIVE RIGHTS
Neither Glacier's stockholders nor Bancshares' stockholders have
preemptive rights to subscribe to any additional securities that may be issued.
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.
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Similarly, Bancshares Common Stock holders are entitled to share, pro
rata, Bancshares' remaining assets after provision for liabilities, if
Bancshares is liquidated. The Bancshares Board is authorized to determine the
liquidation rights of any preferred stock that may be issued, including priority
over the liquidation rights of holders of Bancshares Common Stock.
ASSESSMENTS
All outstanding shares of Bancshares Common Stock and of Glacier Common
Stock are fully paid and nonassessable.
BOARD OF DIRECTORS
Glacier's Certificate of Incorporation provide 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 seven 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.
Bancshares' Bylaws provide that each member of its Board serves for a
one-year term and until the director's successor is elected and qualified. Under
Bancshares' Bylaws, its Board must consist of at least five, but no more than
nine directors; the Bancshares Board sets the exact number by resolution. Under
the MBCA, the Board of Directors may not increase or decrease the size of the
Board by more than 30% of the number of directors last approved by the
stockholders. Currently, the Bancshares Board has six directors. Bancshares'
stockholders, by an affirmative majority vote, may remove any director from
office, with or without cause, before his or her term expires.
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.
Bancshares' Articles of Incorporation provide that the personal
liability of Bancshares' directors will be limited or eliminated to the fullest
extent permitted under the MBCA, except for (i) acts or omissions not made in
good faith or which involve intentional misconduct or a knowing violation of
law, (ii) unlawful distributions as prescribed in MBCA Section 35-1-713, or
(iii) any transaction from which the director derived an improper personal
benefit. This limitation or elimination of director's liability will continue
despite the subsequent amendment or repeal of the Articles' liability limitation
provisions.
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Also under its Articles of Incorporation, Bancshares is authorized to
indemnify its directors, officers or former directors and officers, or any
person who served at Bancshares' request as a director or officer of another
business entity. Bancshares' Bylaws provide these persons will be indemnified
against expenses (including attorney's fees), judgments, fines and settlement
amounts actually and reasonably incurred in connection with the defense of any
action, suit or proceeding (other than actions by or in the right of Bancshares)
in which they are, or are threatened to be made, a party by reason of being, or
having been, a director or officer. To be entitled to indemnification, the
person must have acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, Bancshares' best interests. In connection
with criminal matters, the person claiming indemnification must have had no
reasonable cause to believe that his or her conduct was illegal.
In threatened, pending or completed actions brought by or in the right
of Bancshares, a person entitled to indemnification will be indemnified against
expenses (including attorneys' fees), actually and reasonably incurred by him or
her in connection with the action's defense or settlement. Again, the person
must have acted in good faith and in a manner he or she reasonably believed was
in the best interests of Bancshares. No indemnification is available if the
person claiming indemnification is adjudged negligent or liable for misconduct
in the performance of his or her duties to Bancshares, unless the court
determines that the person is fairly and reasonably entitled to indemnification.
Under its Articles, Bancshares is authorized, to the fullest extent
permitted by the MBCA, to enter into agreements with its directors and former
directors to advance expenses and litigation costs without making any prior
determination of the director's good faith or reasonable beliefs with regard to
the lawfulness of his or her activity. Under its Bylaws, Bancshares may advance
funds to a person claiming indemnification if authorized by the Board of
Directors, and if the person undertakes to repay advanced funds unless it is
ultimately determined that the person should be indemnified by Bancshares.
Indemnification rights and procedures are set forth in more detail in
Bancshares' Bylaws.
AMENDMENT OF CHARTER 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, under 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 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 Montana law and Bancshares' Articles of Incorporation,
Bancshares' stockholders may amend Bancshares' Articles of Incorporation by an
affirmative vote of the shares entitled to vote on the matter, following
recommendation of the amendment to the stockholders by the Bancshares Board. The
Bancshares Board may make the amendments listed in MBCA Section 35-1-226 to the
Articles of Incorporation without stockholder approval. Either the stockholders
or the Board may amend Bancshares' Bylaws.
REPURCHASE OF SHARES
Under Delaware and Montana law, a corporation may acquire shares of its
own stock. Therefore, both Glacier and Bancshares may repurchase shares of their
own capital stock.
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DISSENTERS' RIGHTS
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 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.
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 the proposed merger.
SALES OF ASSETS, MERGERS AND SHARE EXCHANGES - VOTING
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. Bancshares' Articles of
Incorporation contain no provisions pertaining to stockholder approval of
mergers and share exchanges.
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.
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
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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 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.
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<PAGE> 96
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.
CERTAIN LEGAL MATTERS
The validity of the Glacier Common Stock to be issued in the Merger
will be passed upon for Glacier by its counsel, Graham & Dunn, Seattle/Tacoma,
Washington. Graham & Dunn also will give an opinion concerning certain tax
matters related to the Merger.
EXPERTS
The consolidated financial statements of Glacier as of December 31,
1995 and 1994, and for each of the years in the three-year period ended December
31, 1995, have been incorporated by reference into 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. KPMG's report refers to a change in the method of accounting for
investment securities.
The consolidated financial statements of Bancshares as of December 31,
1995 and 1994 and for the years 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 reports
with respect thereto, and on the authority of such as experts in accounting and
auditing. KPMG's report refers to a change in the method of accounting for
investment securities.
OTHER MATTERS
Neither the Bancshares Board nor the Glacier Board is aware of any
business to come before the parties' respective parties' Special Stockholder
Meetings, other than those matters described above in this Prospectus/Joint
Proxy Statement. However, if any other matters should properly come before any
of the Special 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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<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation--a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with the defense or settlement of such actions, and the statute
requires court approval before there can be any indemnification where the person
seeking indemnification has been found liable to the corporation. The statute
provides that it is not exclusive of other indemnification that may be granted
by a corporation's charter, bylaws, disinterested director vote, stockholder
vote, agreement or otherwise.
Article VI of Glacier's Bylaws requires the indemnification of any
person made or threatened to be made party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director,
officer or employee of the Registrant or any predecessor of the Registrant, or
is or was serving at the request of the Registrant or any predecessor of the
Registrant as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines, excise taxes and amounts paid in
settlement in connection with such action, suit or proceeding to the fullest
extent authorized under Section 145 of the DGCL; provided however, that the
Registrant will not be liable for any amounts due in connection with a
settlement of any action, suit or proceeding effected without the Registrant's
prior written consent, or any action, suit or proceeding initiated by any person
seeking indemnification pursuant to the Bylaws without the prior written consent
of the Registrant.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability for (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) payments of unlawful dividends or unlawful
stock repurchases or redemptions, or (iv) any transaction from which the
director derived an improper personal benefit.
Article 8 of Glacier's Certificate of Incorporation provides that the
personal liability of the Registrant's directors and officers for monetary
damages shall be eliminated to the fullest extent permitted by the DGCL as it
exists or may thereafter be in effect. Any amendment to, modification or repeal
of such Article 8 shall not adversely affect the rights provided thereby with
respect to any claim, issue or matter in any proceeding that is based in any
respect on any alleged action or failure to act prior to any such amendment,
modification or repeal.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits are listed on the accompanying "Exhibit Index".
(b) Financial Statement Schedules.
(c) The opinion of the financial advisors are set forth as Appendices D
and E to this Prospectus/Joint Proxy Statement
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
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<PAGE> 98
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to;
(i) Include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed information on the plan of
distribution;
(2) For determining liability under the 1933 Act, to treat each such
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(b) To advise all directors and officers that insofar as indemnification
for liabilities arising under the 1933 Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the Effective Date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 99
SIGNATURES
Pursuant to the requirements of the 1933 Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kalispell, State of
Montana on October 4, 1996.
GLACIER BANCORP, INC.
By: /s/ John S. MacMillan
-----------------------------------------
John S. MacMillan, Chairman of the Board,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints John S. MacMillan, Michael J. Blodnick and James H. Strosahl, and each
of them, with full power of substitution and full power to act without the
other, as his true and lawful attorney-in-fact and agent to act in his name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file any and all
amendments to this Registration Statement, including any and all post-effective
amendments.
Pursuant to the requirements of the 1933 Act, this Power of Attorney has
been signed by the following persons in the capacities indicated, on the 4th day
of October, 1996.
SIGNATURE TITLE
--------- -----
/s/ John S. MacMillan Chairman of the Board, President and
- ----------------------------- Chief Executive Officer and Director
John S. MacMillan (Principal Executive Officer)
/s/ James H. Strosahl Treasurer and Chief Financial Officer
- ----------------------------- (Principal Financial and Accounting
James H. Strosahl Officer)
/s/ Michael J. Blodnick Executive Vice President, Chief Operating
- ----------------------------- Officer and Board Secretary
Michael J. Blodnick
/s/ L. Peter Larson Director
- -----------------------------
L. Peter Larson
/s/ Darrell R. (Bill) Martin Director
- -----------------------------
Darrell R. (Bill) Martin
/s/ F. Charles Mercord Director
- -----------------------------
F. Charles Mercord
/s/ Everit A. Sliter Director
- -----------------------------
Everit A. Sliter
/s/ Harold A. Tutvedt Director
- -----------------------------
Harold A. Tutvedt
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<PAGE> 100
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1 Plan and Agreement of Merger between Glacier and Bancshares
dated as of August 9, 1996, (included in this Registration
Statement as Appendix A to the Prospectus/Joint Proxy
Statement).
5.1 Form of Opinion of Graham & Dunn as to the legality of
securities.
8.1 Form of Opinion of Graham & Dunn as to federal income tax
consequences.
10.1 Stock Option Agreement between Glacier and Bancshares dated
as of August 9, 1996 (included in this Registration
Statement as Appendix B to the Prospectus/Joint Proxy
Statement).
10.2 Employment Agreement between the Bank and William L.
Bouchee, dated as of August 9, 1996.
10.3 Employment Agreement between the Bank and Harold Frasier,
dated as of August 9, 1996.
10.4 Employment Agreement between the Bank and Weymouth Symmes,
dated as of August 9, 1996.
10.5 Form of Noncompetition Agreement among Glacier, Bancshares
and each respective director of Bancshares, dated as of
August 9, 1996.
23.1 Consent of Graham & Dunn (contained in its opinion filed as
Exhibit 5.1).
23.2 Consent of Graham & Dunn as to its tax opinion (contained in
its opinion filed as Exhibit 8.1).
23.3 Consent of KPMG, Glacier's and Bancshare's independent
auditors.
23.4 Consent of Columbia Financial (contained in its opinion
included in this Registration Statement as Appendix D to the
Prospectus/Joint Proxy Statement).
23.5 Consent of D.A. Davidson (contained in its opinion included
in this Registration Statement as Appendix E to the
Prospectus/Joint Proxy Statement).
24.1 Power of Attorney (included in the signature page of this
Registration Statement) and certified resolutions of the
Glacier Board.
99.1 Opinion of Columbia Financial (included as Appendix D to the
Prospectus/Joint Proxy Statement).
99.2 Opinion of D.A. Davidson (included as Appendix E to the
Prospectus/Joint Proxy Statement).
99.3 Form of proxy to be mailed to the stockholders of
Bancshares.
99.4 Form of proxy to be mailed to the stockholders of Glacier.
99.5 Rule 438 Consent of William L. Bouchee.
99.6 Rule 438 Consent of Allen Fetscher.
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<PAGE> 101
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Glacier Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial condition
of Missoula Bancshares, Inc. and subsidiary as of December 31, 1995 and 1994 and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of Missoula Bancshares, Inc. and subsidiary's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Missoula Bancshares,
Inc. and subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
As discussed in note 3 to the consolidated financial statements, the Company
changed its method of accounting for investments in debt and equity securities
in 1994 to adopt the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities".
/s/ KPMG Peat Marwick LLP
Billings, Montana
August 30, 1996
<PAGE> 102
MISSOULA BANCSHARES, INC.
INDEPENDENT AUDITOR'S REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
<PAGE> 103
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
- ------------------------------------------------------------------------- 1996 --------------------
(dollars in thousands) (Unaudited) 1995 1994
- ------------------------------------------------------------------------- ----------- ------- ------
<S> <C> <C> <C>
ASSETS:
Cash on hand and in banks .......................................... $ 6,326 5,612 5,218
Federal funds sold ................................................. 710 3,640 0
-------- ------- ------
Cash and cash equivalents ..................................... 7,036 9,252 5,218
Investment securities, available-for-sale .......................... 13,894 9,983 6,890
Investment securities, held-to-maturity ............................ 7,774 7,955 8,363
Loans receivable, net .............................................. 77,125 72,222 59,709
Premises and equipment, net ........................................ 2,612 2,603 2,667
Federal Home Loan Bank of Seattle stock, at cost ................... 310 258 0
Federal Reserve Bank stock, at cost ................................ 190 164 134
Accrued interest receivable ........................................ 832 731 633
Goodwill ........................................................... 1,561 1,627 1,754
Deferred income taxes .............................................. 330 291 254
Other assets ....................................................... 211 289 214
-------- ------- ------
$111,875 105,375 85,836
======== ======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits - interest bearing ........................................ $ 70,919 66,265 51,743
Deposits - non-interest bearing .................................... 29,023 27,487 23,938
Federal funds purchased ............................................ 0 0 680
Notes payable ...................................................... 1,000 1,500 2,400
Accrued interest payable ........................................... 211 188 106
Advance payments by borrowers for taxes and insurance .............. 68 65 81
Current income taxes ............................................... 29 535 0
Minority interest .................................................. 110 102 85
Other liabilities .................................................. 352 182 148
-------- ------- ------
Total liabilities ............................................. 101,712 96,324 79,181
Stockholders' equity
Preferred stock, $50 par value per share. Authorized 50,000
shares; none issued ............................................... 0 0 0
Common stock, $10 par value per share. Authorized 250,000 shares;
issued and outstanding 47,947 shares at December 31, 1995 and 1994 479 479 479
Additional paid-in capital ......................................... 4,016 4,005 3,959
Retained earnings .................................................. 5,713 4,558 2,270
Net unrealized gains (losses) on securities available-for-sale ..... (45) 9 (53)
-------- ------- ------
Total stockholders' equity .................................... 10,163 9,051 6,655
-------- ------- ------
$111,875 105,375 85,836
======== ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 104
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months ended Years ended
June 30, December 31,
- -------------------------------------------- ------------------------ ---------------
(dollars in thousands except per share data) 1996 1995 1995 1994
- -------------------------------------------- ----------- ----------- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Real estate loans .................... $ 676 711 1,511 1,304
Commercial loans ..................... 2,034 1,796 3,691 2,856
Installment and other loans .......... 1,112 879 1,815 1,048
Investment securities ................ 666 437 1,051 1,053
------ ----- ----- -----
TOTAL INTEREST INCOME .............. 4,488 3,823 8,068 6,261
------ ----- ----- -----
INTEREST EXPENSE:
Deposits ............................. 1,635 1,136 2,636 1,699
Federal funds purchased .............. 4 29 29 46
Notes payable ........................ 43 103 181 225
------ ----- ----- -----
TOTAL INTEREST EXPENSE ............. 1,682 1,268 2,846 1,970
------ ----- ----- -----
NET INTEREST INCOME ................ 2,806 2,555 5,222 4,291
Provision for loan losses ............ 120 120 300 160
------ ----- ----- -----
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES .................. 2,686 2,435 4,922 4,131
NON-INTEREST INCOME:
Service charges and other fees ....... 512 483 1,015 899
Fees on loans sold and other loan fees 705 739 1,659 1,404
Other income ......................... 50 60 78 52
------ ----- ----- -----
TOTAL NON-INTEREST INCOME .......... 1,267 1,282 2,752 2,355
NON-INTEREST EXPENSE:
Compensation, employee benefits
and related expenses ........... 1,304 1,094 2,362 2,094
Occupancy expense .................... 227 207 413 358
Other expense ........................ 434 558 1,064 1,045
Loss on sale of investments, net ..... 0 0 0 22
Minority interest .................... 14 9 24 27
------ ----- ----- -----
TOTAL NON-INTEREST EXPENSE ......... 1,979 1,868 3,863 3,546
------ ----- ----- -----
Earnings before income taxes ......... 1,974 1,849 3,811 2,940
Federal and state income
tax expense ...................... 819 747 1,523 1,185
------ ----- ----- -----
NET EARNINGS ....................... $1,155 1,102 2,288 1,755
====== ===== ===== =====
Net earnings per share of common stock $24.09 22.98 47.72 37.33
====== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 105
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended Years ended
June 30, December 31,
-------------------------- ---------------
(dollars in thousands) 1996 1995 1995 1994
----------- ----------- ---- ----
OPERATING ACTIVITIES: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Earnings ........................................................ $ 1,155 1,102 2,288 1,755
Adjustments to reconcile Net Earnings to Net
Cash Provided by Operating Activities:
Provision for loan losses ......................................... 120 120 300 160
Depreciation of premises and equipment ............................ 100 93 190 156
Amortization of goodwill .......................................... 64 64 128 128
Loss on sale of investments and other real estate owned ........... 0 0 0 22
Amortization of investment securities premiums and discounts, net . 38 19 14 8
Net decrease in deferred income taxes ............................. (16) (53) (80) (52)
Net increase in interest receivable ............................... (101) (217) (98) (157)
Net increase in interest payable .................................. 23 25 82 18
Net increase (decrease) in current income taxes ................... (506) 86 588 (193)
Net (increase) decrease in other assets ........................... 77 76 (138) 5
Net increase (decrease) in minority interest and other liabilities 179 276 51 (127)
Deferred compensation expense ..................................... 11 0 46 0
-------- ----- ----- -----
NET CASH PROVIDED BY OPERATING ACTIVITIES ...................... 1,144 1,591 3,371 1,723
-------- ----- ----- -----
INVESTING ACTIVITIES:
Proceeds from sales, maturities and prepayments of investment
securities available-for-sale ................................... $ 10,975 3,000 5,000 9,947
Purchases of investment securities available-for-sale ............... (15,000) (1,000) (8,003) (6,927)
Proceeds from maturities and prepayments of investment
securities held-to-maturity ..................................... 181 137 408 3,518
Purchases of investment securities held-to-maturity ................. 0 0 0 (4,563)
Principal collected on installment and commercial loans ............. 10,622 12,108 28,655 24,418
Installment and commercial loans originated or acquired ............. (27,701) (25,036) (49,436) (43,664)
Proceeds from sales of commercial loans ............................. 6,997 8,176 10,001 6,779
Principal collections on mortgage loans ............................. 4,848 1,800 6,742 13,235
Mortgage loans originated or acquired ............................... (26,087) (17,715) (41,977) (47,718)
Proceeds from sales of mortgage loans ............................... 26,298 15,094 33,202 34,192
Net proceeds from sales of real estate owned ........................ 0 0 10 403
Net purchase of FRB and FHLB stock .................................. (78) (30) (288) (30)
Net addition of premises and equipment .............................. (109) (88) (126) (968)
-------- ----- ----- -----
NET CASH USED BY INVESTING ACTIVITIES .......................... (9,054) (3,554) (15,812) (11,378)
-------- ----- ----- -----
FINANCING ACTIVITIES:
Net increase in deposits ............................................ $ 6,191 9,067 18,071 9,158
Net decrease in notes payable ....................................... (500) (300) (900) (600)
Net increase (decrease) in advance payments from
borrowers for taxes and insurance ................................. 3 22 (16) 7
Net increase (decrease) in federal funds purchased .................. 0 (680) (680) 680
Proceeds from common stock issued ................................... 0 0 0 199
-------- ----- ----- -----
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 5,694 8,109 16,475 9,444
-------- ----- ----- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............ (2,216) 6,146 4,034 (211)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 9,252 5,218 5,218 5,429
-------- ----- ----- -----
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 7,036 11,364 9,252 5,218
======== ====== ===== =====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for: Interest .................. $ 1,659 1,243 2,764 1,952
Income taxes .............. $ 1,325 661 935 1,294
</TABLE>
<PAGE> 106
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994, AND UNAUDITED SIX MONTHS ENDED
JUNE 30, 1996.
<TABLE>
<CAPTION>
Net
Common Stock Additional unrealized Total
- ------------------------------------------- ------------------ paid-in Retained gains(losses) stockholders'
(dollars in thousands) Shares Amount capital earnings on securities equity
- ------------------------------------------- ------ ------ ---------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 .............. 46,610 $466 $3,773 $ 515 $ 0 $ 4,754
Effect of change in accounting
for investment securities as of
January 1, 1994 ....................... -- -- -- -- 122 122
Decrease in net unrealized gains
on available-for-sale securities ..... -- -- -- -- (175) (175)
Additional shares issued .................. 1,337 13 186 -- -- 199
Net earnings, year ended
December 31, 1994 .................... -- -- -- 1,755 -- 1,755
------ ---- ------ ------ ----- -------
Balance at December 31, 1994 .............. 47,947 $479 $3,959 $2,270 $ (53) $ 6,655
Increase in options earned ................ -- -- 46 -- -- 46
Increase in net unrealized gains
on available-for-sale securities ..... -- -- -- -- 62 62
Net earnings, year ended December 31, 1995 -- -- -- 2,288 -- 2,288
------ ---- ------ ------ ----- -------
Balance at December 31, 1995 .............. 47,947 $479 $4,005 $4,558 $ 9 $ 9,051
***(The following amounts are unaudited)***
Increase in options earned ................ 11 11
Decrease in net unrealized gains
on available-for-sale securities ..... -- -- -- -- (54) (54)
Net earnings, six months ended
June 30, 1996 ........................ -- -- -- 1,155 -- 1,155
------ ---- ------ ------ ----- -------
Balance at June 30, 1996 .................. 47,947 $479 $4,016 $5,713 $ (45) $10,163
====== ==== ====== ====== ===== =======
</TABLE>
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) GENERAL
Missoula Bancshares, Inc. (the "Company"), a Montana corporation organized in
1993, is a bank holding company which provides a full range of banking services
to individual and corporate customers primarily in Missoula County through its
subsidiary bank First Security Bank of Missoula ("First Security"). First
Security is subject to competition from other financial service providers. First
Security is also subject to the regulations of certain government agencies and
undergoes periodic examinations by those regulatory authorities.
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 the 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 those 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 First Security's allowance for
loan losses. Such agencies may require First Security 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
First Security. All significant intercompany 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, and federal funds sold with
original maturities of three months or less. As used throughout this report,
cash and cash equivalents combines "cash," and "federal funds sold".
(d) INVESTMENT SECURITIES
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115
"Accounting for Certain Investments in Debt and Equity Securities," which
addresses the accounting for investments in equity securities that have a
readily determined fair value and for all investments in debt securities, as of
January 1, 1994. In accordance with SFAS No. 115, investment securities for
which the Company has the positive intent and ability to hold are classified as
held-to-maturity and are stated at cost, adjusted for amortization of premiums
and accretion of discounts on purchases. Such premiums and discounts are
amortized on a method which approximates the level-yield interest method.
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. Securities held principally for the purpose of selling them in the near
term are classified as trading securities and are reported at fair market value,
with realized gains and losses included in income. The Company does not purchase
any investments for trading purposes. The cost of any investment, if sold, is
determined by specific identification.
<PAGE> 108
(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 are amortized over the expected life of loans using methods that
approximate the interest method.
(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) LOAN ORIGINATION FEES
SFAS No. 91 provides for the deferral of loan origination fees and direct loan
origination costs with those amounts recognized over the lives of the related
loans as an adjustment of the loan's yield using a method which approximates the
level-yield method. First Security has elected to record such fees on a cash
basis. Management has evaluated the effect of this method on the consolidated
earnings and financial condition and concluded such effect to not be materially
different than recognition of fees as an adjustment of yield.
(h) ALLOWANCE FOR LOSSES
The allowance for loan losses is increased by charges to income and decreased by
chargeoffs (net of recoveries). 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.
In 1995, the Company adopted the provisions of SFAS Statement No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS Statement No. 118,
"Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures," (collectively, the Statements). The Statements provide guidance
for establishing an allowance for losses on specific loans which are deemed to
be impaired and apply only to specific impaired loans. Groups of small balance
homogeneous basis 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.
The Company's adoption of the Statements did not have a material impact on the
Company's financial position or results of operations. During 1995 the amount of
impaired loans was not material.
<PAGE> 109
(i) 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 five to thirty-nine years, of the various classes of assets
from their respective dates of acquisition.
(j) 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.
(k) STOCK INVESTMENTS
The Company holds stock in the Federal Home Loan Bank (FHLB) and stock in the
Federal Reserve Bank (FRB). These investments are carried at cost.
(l) GOODWILL
Goodwill is being amortized against income using the straight-line method over
15 years.
(m) 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.
(n) FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board has issued three Statements of
Financial Accounting Standards which the Company will be required to adopt. SFAS
No. 121 pertains to the accounting for impairment of long-lived assets and
long-lived assets to be disposed of. SFAS No. 123 pertains to accounting for
stock-based compensation. SFAS No. 125 pertains, among other things, to the
accounting for mortgage servicing rights and assets subject to prepayment. The
Company is currently evaluating these standards as they relate to its
operations. Adoption of the statements is not expected to have a material impact
on the Company's consolidated financial position and results of operations.
<PAGE> 110
2. CASH ON HAND AND IN BANKS:
First Security Bank is required to maintain an average reserve balance with the
Federal Reserve Bank, or maintain such reserve in the form of cash. The amount
of this required reserve balance was approximately $250,000 and $150,000 at
December 31, 1995 and 1994, respectively, and was met by maintaining cash and an
average reserve balance with the Federal Reserve Bank in excess of this amount.
<PAGE> 111
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, 1995 Amortized ------------------ Fair
(dollars in thousands) Cost Gains Losses Value
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing within one year .............. $1,000 0 (5) 995
maturing one year through five years .. 4,975 32 (14) 4,993
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year .............. 121 0 0 121
maturing one year through five years .. 1,192 19 (1) 1,210
MORTGAGE-BACKED SECURITIES .................. 667 9 0 676
------ -- --- -----
TOTAL HELD-TO-MATURITY SECURITIES . $7,955 60 (20) 7,995
====== == === =====
AVAILABLE-FOR-SALE
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing within one year .............. $7,964 5 (13) 7,956
maturing one year through five years .. 2,003 24 0 2,027
------ -- --- -----
TOTAL AVAILABLE-FOR-SALE SECURITIES $9,967 29 (13) 9,983
====== == === =====
<CAPTION>
Gross Unrealized Estimated
DECEMBER 31, 1994 Amortized ---------------- Fair
(dollars in thousands) Cost Gains Losses Value
---------- ----- ------ ----------
<S> <C> <C> <C> <C>
HELD-TO-MATURITY
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing one year through five years .. $5,960 0 (337) 5,623
STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES:
maturing within one year .............. 255 0 (2) 253
maturing one year through five years .. 1,352 0 (40) 1,312
MORTGAGE-BACKED SECURITIES .................. 796 0 (24) 772
------ - ---- -----
TOTAL HELD-TO-MATURITY SECURITIES . $8,363 0 (403) 7,960
====== = ==== =====
AVAILABLE-FOR-SALE
U.S. GOVERNMENT AND FEDERAL AGENCIES:
maturing within one year .............. $4,969 0 (43) 4,926
maturing one year through five years .. 2,012 0 (48) 1,964
------ - ---- -----
TOTAL AVAILABLE-FOR-SALE SECURITIES $6,981 0 (91) 6,890
====== = ==== =====
</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.
SFAS No. 119 "Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments" addresses the reporting in financial statements of
derivative financial instruments, including off-balance-sheet agreements such as
interest rate swaps, options, and futures. The Company has not entered into any
such agreements. 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.
Gross proceeds from sales of investment securities available-for-sale for the
year ended December 31, 1994 were $ 6,468,750 resulting in gross gains of
$19,408 and gross losses of $41,190. There were no sales of investment
securities during the year ended December 31, 1995.
At December 31, 1995 and 1994, the Company had investment securities with book
values of approximately $6,515,000 pledged as security for deposits of local
government units.
<PAGE> 112
4. LOANS RECEIVABLE:
The following is a summary of loans receivable at:
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------- --------------------
(dollars in thousands) 1995 1994
- ----------------------------------------- ------- ------
<S> <C> <C>
REAL ESTATE LOANS AND CONTRACTS:
First mortgage and trust deed loans $ 4,596 4,257
Construction ....................... 9,732 8,598
FHA and VA loans ................... 72 1,008
Loans held for sale ................ 3,091 1,595
------- ------
17,491 15,458
COMMERCIAL LOANS:
Secured by real estate ............. 15,796 13,320
Other commercial loans ............. 19,680 17,642
------- ------
35,476 30,962
INSTALLMENT AND OTHER LOANS:
Consumer loans ..................... 20,066 14,073
Outstanding balances on credit cards 205 0
------- ------
20,271 14,073
LESS:
Allowance for losses ............... (1,016) (784)
------- ------
$72,222 59,709
======= ======
</TABLE>
SUMMARY OF ACTIVITY IN ALLOWANCE FOR LOSSES ON LOANS:
<TABLE>
<CAPTION>
Years ended December 31,
- ---------------------------------------- ------------------------
(dollars in thousands) 1995 1994
- ---------------------------------------- ------- -------
<S> <C> <C>
Balance, beginning of period $ 784 600
Net (charge offs) recoveries (68) 24
Provision .............................. 300 160
------ ---
Balance, end of period ................. $1,016 784
====== ===
</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 9.80%, and 9.50% at December 31,
1995 and 1994, respectively.
THE COMPANY HAD OUTSTANDING COMMITMENTS AS FOLLOWS:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------- --------------------
(dollars in thousands) 1995 1994
- --------------------------------------- ------- -------
<S> <C> <C>
Letters of credit $ 1,094 1,346
Commercial loans ...................... 11,611 12,372
Consumer loans ........................ 742 0
------- ------
$13,447 13,718
======= ======
</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. These
instruments involve, to varying degrees, elements of credit, interest rate,
liquidity and market risk in excess of the amounts recognized in the
consolidated statements of financial condition.
Letters of credit are written conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Most commitments
extend for no more than one year. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. Generally, these commitments are collateralized.
<PAGE> 113
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case by case basis. The amount of collateral obtained by
the Company upon extension of credit, if deemed necessary, is based on
management's evaluation of the counter- party. Collateral held varies but may
include personal property, residential real property and income-producing
commercial properties.
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.
<TABLE>
<CAPTION>
December 31,
--------------------------
LOANS SOLD TO OTHERS AND SERVICED BY THE COMPANY 1995 1994
------- ------
<S> <C> <C>
$43,072 33,548
======= ======
<CAPTION>
ACCRUED INTEREST RECEIVABLE:
December 31,
- -------------------------------------------- -----------------------
(dollars in thousands) 1995 1994
- -------------------------------------------- ---- ----
<S> <C> <C>
Investment securities ................. $196 214
Loans receivable ...................... 535 419
---- ---
$731 633
==== ===
</TABLE>
<PAGE> 114
5. PREMISES AND EQUIPMENT:
Office properties and equipment consist of the following at:
<TABLE>
<CAPTION>
December 31,
- --------------------------------------------- -------------------
(dollars in thousands) 1995 1994
- --------------------------------------------- ------ -----
<S> <C> <C>
Land ........................................ $ 527 527
Office buildings and construction in progress 2,081 2,093
Furniture, fixtures and equipment ........... 967 829
Accumulated depreciation .................... (972) (782)
------ -----
$2,603 2,667
====== =====
</TABLE>
<PAGE> 115
6. DEPOSITS:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------
1995 1994
----------------------------------------- ------------------
- ----------------------------------------------- Weighted
(dollars in thousands) Average Rate Amount Percent Amount Percent
- ----------------------------------------------- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Demand accounts 0.0% $27,487 29.3% 23,938 31.6%
------- ----- ------ -----
Interest bearing demand accounts .............. 2.5% 8,994 9.6% 9,596 12.7%
Savings accounts .............................. 3.0% 4,055 4.3% 4,070 5.4%
Money market demand accounts .................. 4.8% 30,867 32.9% 23,049 30.4%
Certificate accounts:
3.01% to 4.00% ........................... 59 0.0% 3,607 4.8%
4.01% to 5.00% ........................... 446 0.5% 9,087 12.0%
5.01% to 6.00% ........................... 9,176 9.8% 1,689 2.2%
6.01% to 7.00% ........................... 11,409 12.2% 493 0.7%
7.01% to 8.00% ........................... 1,116 1.2% 3 0.0%
8.01% to 9.00% ........................... 78 0.1% 82 0.1%
9.01% to 10.00% .......................... 65 0.1% 67 0.1%
------- ----- ------- -----
Total certificate accounts ........ 6.2% 22,349 23.9% 15,028 19.9%
------- ----- ------- -----
Total interest bearing deposits ............... 4.8% 66,265 70.7% 51,743 68.4%
------- ----- ------- -----
Total deposits ................................ 3.4% $93,752 100.0% 75,681 100.0%
======= ===== ======= =====
Deposits with a balance in excess of $100,000 . $25,958 $19,566
</TABLE>
At December 31, 1995, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
Years ending December 31,
- ------------------------ ------- ------------------------------------------------------
(dollars in thousands) Total 1996 1997 1998 1999 Thereafter
- ------------------------ ------- ------ ----- ----- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
3.01% to 4.00% .... $ 59 59 0 0 0 0
4.01% to 5.00% .... 446 304 142 0 0 0
5.01% to 6.00% .... 9,176 8,001 1,126 44 5 0
6.01% to 7.00% .... 11,409 5,532 820 2,153 618 2,286
7.01% to 8.00% .... 1,116 0 0 1,116 0 0
8.01% to 9.00% .... 78 78 0 0 0 0
9.01% to 10.00% ... 65 65 0 0 0 0
10.01% to 11.00% .. 0 0 0 0 0 0
------- ------ ----- ----- --- -----
$22,349 14,039 2,088 3,313 623 2,286
======= ====== ===== ===== === =====
</TABLE>
Interest expense on deposits is summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
- ------------------------------------------ ------------------------
(dollars in thousands) 1995 1994
- ------------------------------------------ ------ -----
<S> <C> <C>
Interest bearing demand accounts ......... $ 225 248
Money market demand accounts ............. 1,226 760
Certificate accounts ..................... 1,052 569
Savings accounts ......................... 133 122
------ -----
$2,636 1,699
====== =====
</TABLE>
<PAGE> 116
7. NOTES PAYABLE:
During 1993 the Company borrowed funds from Norwest Bank of Minneapolis
(Norwest) to purchase the bank stock of First Security. The original note amount
was $3,000,000, with interest at .25% over Norwest prime. Principal payments of
$300,000 were due annually beginning December 31, 1994.
During June 1995 the Company executed a term note with American Bank N. A. Saint
Paul, Minnesota (American) in the amount of $2,100,000 replacing the loan with
Norwest. The note calls for annual principal payments of $300,000 commencing
March 31, 1996 and each March 31 thereafter until March 31, 2002, the maturity
date. Interest accrues at three month LIBOR plus 215 basis points. The note has
been prepaid to a balance of $1,500,000 at December 31, 1995.
During June 1995 the Company obtained from American a revolving loan of
$2,000,000, with interest at the prime rate, and a maturity date of June 1,
1996. There have been no advances on this loan.
Both loans are secured with 71,992 of the 72,820 shares of common stock issued
and outstanding of First Security.
<PAGE> 117
8. 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 Company's compliance with those guidelines as of December 31,
1995.
<TABLE>
<CAPTION>
Tier I (Core) Capital Tier II (Total) Capital Leverage Capital
- --------------------------------------------- --------------------- ----------------------- ---------------------
(dollars in thousands) $ % $ % $ %
- --------------------------------------------- ---------- ------ --------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
GAAP Capital ................................ $ 9,051 $ 9,051 $ 9,051
Goodwill .................................... (1,627) (1,627) (1,627)
Net unrealized gains on securities
available-for-sale ..................... (9) (9) (9)
General loan valuation allowance ............ -- 979 --
------- ------- --------
Regulatory capital computed ................. $ 7,415 $ 8,394 $ 7,415
======= ======= ========
Risk weighted assets ........................ $78,259 $78,259
======= =======
Total assets ................................ $105,375
========
Regulatory capital as % of assets ........... 9.47% 10.59% 7.04%
Regulatory "well capitalized" requirement ... 6.00% 10.00% 5.00%
---- ----- ----
Excess over "well capitalized" requirement .. 3.47% 0.59% 2.04%
==== ===== ====
</TABLE>
The primary source of revenue for the Company is dividends from First Security.
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, 1995, the First Security's capital measures exceed the highest 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%.
The Company 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> 118
9. FEDERAL AND STATE INCOME TAXES:
The following is a summary of consolidated income tax expense for:
<TABLE>
<CAPTION>
Years ended December 31,
- ------------------------------------------------------- ------------------------
(dollars in thousands) 1995 1994
- ------------------------------------------------------- ------ -----
<S> <C> <C>
Current:
Federal .......................................... $1,297 998
State ............................................ 306 239
------ -----
Total current tax expense .................. 1,603 1,237
------ -----
Deferred:
Federal .......................................... (66) (43)
State ............................................ (14) (9)
------ -----
Total deferred tax benefit ................. (80) (52)
------ -----
Total income tax expense ........ $1,523 1,185
====== =====
</TABLE>
Federal and state income tax expense differs from that computed at the statutory
corporate tax rate as follows for:
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------
1995 1994
---- ----
<S> <C> <C>
Federal statutory rate ....................... 34.0% 34.0%
State taxes, net of federal income tax benefit 4.5% 4.5%
Other, net ................................... 1.5% 1.8%
---- ----
40.0% 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) 1995 1994
- ------------------------------------------------------ ----- ----
<S> <C> <C>
Deferred tax assets:
Allowance for losses on loans ..................... $ 396 307
Available-for-sale securities fair value adjustment 0 37
Other ............................................. 5 11
----- ----
Total gross deferred tax assets ............ $ 401 355
----- ----
Deferred tax liabilities:
Fixed assets, due to differences in depreciation .. (83) (72)
Available-for-sale securities fair value adjustment (7) 0
Other ............................................. (20) (29)
----- ----
Total gross deferred tax liabilities ...... (110) (101)
----- ----
Net deferred tax asset .................... $ 291 254
===== ====
</TABLE>
There was no valuation allowance at December 31, 1995 or 1994 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> 119
10. EMPLOYEE BENEFIT PLANS:
The Company has a discretionary noncontributory profit sharing plan covering
substantially all employees. The Company follows the policy of funding the
profit sharing plan contributions as accrued. The total plan expense for the
years ended December 31, 1995 and 1994 was approximately $235,000 and $212,000
respectively.
The Company also has a discretionary bonus plan which is approved annually by
the Board of Directors. For each of the years ended December 31, 1995 and 1994
the bonus was 20% of salary and wages for all employees, and the total plan
expense was $263,000 and $239,000, respectively.
<PAGE> 120
11. EARNINGS PER SHARE:
Earnings per common share was computed by dividing net income by the weighted
average number of shares of common stock outstanding during the year. Stock
options are considered common stock equivalents, but are excluded from earnings
per share computations due to immateriality.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------
1995 1994
------ ------
<S> <C> <C>
Weighted average common shares ..... 47,947 47,010
</TABLE>
<PAGE> 121
12. STOCK GRANT:
In September 1993, the Company granted 1,000 shares of common stock to a senior
officer to be issued on or after September 1998 at the election of the officer.
In the event the officer is no longer an employee, the shares vest on a prorata
basis over 60 months based on months employed since issuance. The related
compensation expense, based on the fair value of the common stock at the date of
the grant, is being charged to expense over the service period with a
corresponding credit to additional paid-in capital.
<PAGE> 122
13. PARENT COMPANY INFORMATION (CONDENSED):
The following condensed financial information is the unconsolidated (Parent
Company Only) information for Missoula Bancshares, Inc:
<TABLE>
<CAPTION>
STATEMENTS OF FINANCIAL CONDITION December 31,
--------------------------------- ------------
(dollars in thousands) 1995 1994
---------------------- ---- ----
<S> <C> <C>
ASSETS:
Cash and cash equivalents ........................................ $ 44 291
Other assets ..................................................... 40 93
Goodwill ......................................................... 1,627 1,754
Preferred stock investment in subsidiary ......................... 0 1,000
Investment in subsidiary ......................................... 8,840 5,917
------- -----
$10,551 9,055
======= =====
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable .................................................... $ 1,500 2,400
Common stock ..................................................... 479 479
Additional paid-in capital ....................................... 4,005 3,959
Retained earnings ................................................ 4,558 2,270
Net unrealized gains (losses) on securities available-for-sale ... 9 (53)
------- -----
Total stockholders' equity .............................. 9,051 6,655
------- -----
$10,551 9,055
======= =====
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS Years ended December 31,
------------------------ ------------------------
(dollars in thousands) 1995 1994
---------------------- ---- ----
<S> <C> <C>
REVENUES
Dividends from subsidiary ...................................... $ 714 552
Other income ................................................... 9 18
------ -----
Total revenues ............................................ 723 570
------ -----
EXPENSES
Interest expense ............................................... 180 225
Employee compensation and benefits ............................. 50 3
Goodwill amortization .......................................... 128 128
Other operating expenses ....................................... 14 15
------ -----
Total expenses ............................................ 372 371
------ -----
Income before income tax benefit and equity in undistributed
income of subsidiary ..................................... 351 199
Income tax benefit ............................................. (75) (77)
------ -----
Income before equity in undistributed income of subsidiary ..... 426 276
Equity in undistributed income of subsidiary ................... 1,862 1,479
------ -----
NET INCOME ........................................................ $2,288 1,755
====== =====
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS Years ended December 31,
------------------------ ------------------------
(dollars in thousands) 1995 1994
---------------------- ---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income .......................................... $ 2,288 1,755
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Goodwill amortization ............................... 128 128
Deferred compensation expense ....................... 46 0
Undistributed earnings of subsidiary ................ (1,862) (1,479)
Net decrease (increase) in other assets ............. 53 (70)
------- ------
Net cash provided by operating activities .............. 653 334
------- ------
FINANCING ACTIVITIES
Principal reductions on notes payable ............... (900) (600)
Proceeds from stock issued .......................... 0 200
------- ------
Net cash used by financing activities .................. (900) (400)
------- ------
Net decrease in cash and cash equivalents .............. (247) (66)
Cash and cash equivalents at beginning of period ....... 291 357
------- ------
Cash and cash equivalents at end of period ............. $ 44 291
======= ======
</TABLE>
<PAGE> 124
14. 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, 1995
-----------------
(dollars in thousands) Amount Fair Value
---------------------- ------ ----------
<S> <C> <C>
FINANCIAL ASSETS:
Cash on hand and in banks ................... $ 5,612 5,612
Interest bearing cash deposits .............. 3,640 3,640
Investment securities ....................... 17,938 17,978
Loans ....................................... 72,222 72,152
FHLB and FRB stock .......................... 422 422
FINANCIAL LIABILITIES:
Deposits .................................... $93,752 93,815
Notes payable ............................... 1,500 1,500
</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 and FRB 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. Notes payable have variable
interest rates 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> 125
15. COMMITMENTS:
At December 31, 1995, the Company had entered into various construction
contracts for renovation and expansion of the Company's facilities. The major
contracts are estimated to aggregate approximately $500,000 and are expected to
be completed by December 1, 1996. As of December 31, 1995 no costs had been
incurred on these contracts.
<PAGE> 126
16. SUBSEQUENT EVENT:
On August 9, 1996, the Company entered into a definitive agreement to merge with
Glacier Bancorp, Inc. (Glacier). The agreement provides that, upon consummation
of the merger, stockholders of the Company will receive 1,116,279 shares of
Glacier common stock in exchange for all of the shares of the Company. This
exchange contemplates the Company owning 100 percent of the shares of First
Security as of the merger date. If the average closing price of Glacier common
stock for the five days prior to the effective date of the merger remains
between $18.81 and $24.19, the exchange ratio is fixed. If the average closing
price moves outside of these parameters, the parties have the right to
renegotiate the terms. While it is anticipated that the merger will be completed
in late 1996, the acquisition is subject to certain conditions, including the
approval of Glacier's shareholders. If completed, the merger will be accounted
for using the pooling-of-interests method. Transactions accounted for as a
pooling-of-interests reflect the assets, liabilities, stockholders' equity, and
results of operations of the separate entities as though the entities had been
combined as of the earliest date reported.
At the annual shareholder's meeting on February 27, 1996, approval to grant to a
prospective officer the right to purchase Company stock at a price of 1.5 times
the book value of First Security, contingent on her being employed by First
Security, was obtained. The total amount of the purchase would not exceed
$200,000. In July 1996, 277 shares were purchased at $270.53 per share, and in
September 1996 an additional 437 shares were purchased at $286.04 per share,
fully exercising the grant.
<PAGE> 127
APPENDIX A
================================================================================
PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
MISSOULA BANCSHARES, INC.
================================================================================
DATED AS OF AUGUST 9, 1996
<PAGE> 128
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. TERMS OF TRANSACTION...................................... 3
1.1. Transaction................................................... 3
1.2. Merger........................................................ 3
1.2.1. Closing..................................... 3
1.2.2. The Bank.................................... 3
1.2.3. Effect on Glacier Common Stock.............. 4
1.3. Consideration................................................. 4
1.3.1. Purchase Price.............................. 4
1.3.2. Period For Calculating Purchase Price....... 5
1.3.3. Exchange Ratio.............................. 5
1.3.4. Change in Equity Capital.................... 5
1.3.5. No Fractional Shares........................ 6
1.3.6. Options..................................... 6
1.3.7. Certificates................................ 6
1.4. Payment to Dissenting Stockholders............................ 8
1.5. Alternative Structures........................................ 8
1.6. Letter of Transmittal......................................... 9
1.7. Undelivered Certificates...................................... 9
1.8. Stock Option Agreement........................................ 9
1.9. Expenses of Exchange Agent.................................... 9
SECTION 2. CLOSING OF THE TRANSACTION................................ 9
2.1. Closing....................................................... 9
2.2. Events of Closing............................................. 10
2.3. Place of Closing.............................................. 10
SECTION 3. REPRESENTATIONS AND WARRANTIES............................ 10
3.1. Representations and Warranties of Glacier
and Bancshares................................................ 10
3.1.1. Corporate Organization and Qualification.... 10
3.1.2. Subsidiaries................................ 10
3.1.3. Capital Stock............................... 11
3.1.4. Corporate Authority......................... 14
3.1.5. Reports and Financial Statements............ 14
3.1.6. Absence of Certain Events and Changes....... 17
3.1.7. Material Agreements......................... 17
3.1.8. Knowledge as to Conditions.................. 18
3.1.9. Brokers and Finders......................... 18
3.2. Bancshares' Additional Representations
and Warranties................................................ 18
3.2.1. Loan and Lease Losses....................... 18
3.2.2. No Stock Option Plans....................... 18
</TABLE>
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<PAGE> 129
<TABLE>
<S> <C> <C>
3.2.3. Governmental Filings; No Violations......... 18
3.2.4. Asset Classification........................ 19
3.2.5. Properties.................................. 20
3.2.6. Anti-takeover Provisions.................... 20
3.2.7. Compliance with Laws........................ 20
3.2.8. Litigation.................................. 21
3.2.9. Taxes....................................... 22
3.2.10. Insurance................................... 23
3.2.11. Labor Matters............................... 24
3.2.12. Employee Benefits........................... 24
3.2.13. Environmental Matters....................... 27
3.3. Exceptions to Representations and Warranties.................. 29
3.3.1. Disclosure of Exceptions.................... 29
3.3.2. Nature of Exceptions........................ 30
SECTION 4. CONDUCT AND TRANSACTIONS BEFORE CLOSING................... 30
4.1. Conduct of Bancshares' Business Before Closing................ 30
4.1.1. Availability of Bancshares' Books,
Records and Properties..................... 30
4.1.2. Ordinary and Usual Course................... 30
4.1.3. Conduct Regarding Representations
and Warranties.............................. 33
4.1.4. Maintenance of Properties................... 33
4.1.5. Preservation of Business Organization....... 33
4.1.6. Senior Management........................... 34
4.1.7. Compensation................................ 34
4.1.8. Update of Financial Statements.............. 34
4.1.9. No Solicitation............................. 35
4.1.10. Title Policies.............................. 35
4.1.11. Review of Loans............................. 35
4.2. Registration Statement........................................ 35
4.2.1. Preparation of Registration Statement....... 35
4.2.2. Submission to Stockholders.................. 36
4.3. Accounting Treatment.......................................... 37
4.3.1. Pooling of Interests........................ 37
4.3.2. Affiliate List.............................. 37
4.3.3. Restrictive Legend.......................... 37
4.3.4. Retention of Certificates................... 38
4.4. Submission to Regulatory Authorities.......................... 38
4.5. Announcements................................................. 38
4.6. Consents...................................................... 38
4.7. Further Actions............................................... 38
4.8. Notice........................................................ 38
4.9. Confidentiality............................................... 39
4.10. Update of Financial Statements................................ 39
4.11. Availability of Glacier's Books, Records and
</TABLE>
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<PAGE> 130
<TABLE>
<S> <C> <C>
Properties................................................... 39
SECTION 5. APPROVALS AND CONDITIONS.................................. 40
5.1. Required Approvals............................................ 40
5.2. Conditions to Glacier's Obligations........................... 40
5.2.1. Representations and Warranties.............. 40
5.2.2. Compliance.................................. 40
5.2.3. Equity Capital Requirement.................. 40
5.2.4. Payment of Note and Release of Pledge....... 40
5.2.5. No Material Adverse Effect.................. 41
5.2.6. Financial Condition......................... 41
5.2.7. No Change in Loan Review.................... 41
5.2.8. No Governmental Proceedings................. 41
5.2.9. Approval by Counsel......................... 41
5.2.10. Receipt of Title Policy..................... 42
5.2.11. Corporate and Stockholder Action............ 42
5.2.12. Tax Opinion................................. 42
5.2.13. Opinion of Counsel.......................... 42
5.2.14. Cash Paid................................... 43
5.2.15. Affiliate Letters........................... 44
5.2.16. Registration Statement...................... 44
5.2.17. Consents.................................... 44
5.2.18. Fairness Opinions........................... 44
5.2.19. Accounting Treatment........................ 44
5.2.20. Solicitation of Employees................... 44
5.2.21. Other Matters............................... 45
5.3. Conditions to Bancshares' Obligations......................... 45
5.3.1. Representations and Warranties.............. 45
5.3.2. Compliance.................................. 45
5.3.3. No Material Adverse Effect.................. 45
5.3.4. No Governmental Proceedings................. 45
5.3.5. Corporate and Stockholder Action............ 45
5.3.6. Tax Opinion................................. 45
5.3.7. Opinion of Counsel.......................... 46
5.3.8. Fairness Opinion............................ 47
5.3.9. Cash Paid................................... 47
5.3.10. Registration Statement...................... 47
5.3.11. Bancshares Directors to Serve on
Glacier and Glacier Bank Boards............. 47
5.3.12. Approval by Counsel......................... 47
5.3.13. Other Matters............................... 47
SECTION 6. DIRECTORS, OFFICERS AND EMPLOYEES......................... 48
6.1. Directors..................................................... 48
6.2. Director Appointed............................................ 48
6.3. Employment Agreement.......................................... 48
6.4. Employees..................................................... 48
6.5. Employee Benefit Issues....................................... 48
6.5.1. Comparability of Benefits................... 48
</TABLE>
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<PAGE> 131
<TABLE>
<S> <C> <C>
6.5.2. Termination and Transfer/Merger of Plans.... 48
6.5.3. No Contract Created......................... 49
6.6. Indemnification............................................... 49
6.6.1. Indemnification............................. 49
6.6.2. Claims for Indemnification.................. 49
6.6.3. Assumption of Indemnification Obligation.... 50
6.6.4. Enforcement................................. 50
SECTION 7. TERMINATION OF AGREEMENT AND ABANDONMENT
OF TRANSACTION............................................ 50
7.1. Termination by Reason of Lapse of Time........................ 50
7.2. Other Grounds for Termination................................. 50
7.2.1. Mutual Consent.............................. 50
7.2.2. Bancshares' Conditions Not Met.............. 50
7.2.3. Bancshares Fails to Recommend
Stockholder Approval or Option
Becomes Exercisable......................... 51
7.2.4. Glacier Fails to Recommend Stockholder
Approval.................................... 51
7.2.5. Conditions of Glacier Not Met............... 51
7.2.6. Impracticability............................ 51
7.2.7. Discharge of Fiduciary Obligations.......... 51
7.2.8. Acquisition of Glacier...................... 51
7.2.9. Decline in Value of Glacier Stock........... 52
7.2.10. Increase in Value of Glacier Stock.......... 52
7.2.11. Certain Definitions......................... 53
7.3. Break-up Fees................................................. 54
7.3.1. Bancshares' Liability....................... 54
7.3.2. Glacier's Liability......................... 54
7.4. Cost Allocation Upon Termination.............................. 54
SECTION 8. MISCELLANEOUS............................................. 54
8.1. Notices....................................................... 54
8.2. Waivers and Extensions........................................ 55
8.3. General Interpretation........................................ 55
8.4. Construction and Execution in Counterparts.................... 56
8.5. Survival of Representations, Warranties,
and Covenants................................................. 56
8.6. Attorneys' Fees and Costs..................................... 56
8.7. Arbitration................................................... 56
8.8. Governing Law and Venue....................................... 57
8.9. Severability.................................................. 57
SECTION 9. AMENDMENTS................................................ 57
</TABLE>
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<PAGE> 132
EXHIBITS AND SCHEDULES:
EXHIBIT A Form Affiliate Letter
EXHIBIT B Director Passive Interests in Competing Businesses
SCHEDULE 1 Exceptions to Representations and Warranties
SCHEDULE 2 Offices
SCHEDULE 3 Subsidiaries
SCHEDULE 4 Glacier Stock Plans and Bancshares' Stock Options
SCHEDULE 5 Material Contracts
SCHEDULE 6 Bancshares' Required Third Party Consents
SCHEDULE 7 Asset Classification List
SCHEDULE 8 Bancshares' Property Encumbrances
SCHEDULE 9 Bancshares' and the Bank's Offices and Branches
SCHEDULE 10 Bancshares' Compliance with Laws
SCHEDULE 11 Bancshares' Litigation Disclosure
SCHEDULE 12 Bancshares' and The Bank's Insurance Policies
SCHEDULE 13 Bancshares' Employee Benefit Plans
EXHIBITS AND SCHEDULES NOT INCLUDED WITH THIS FILING, BUT WILL BE MADE AVAILABLE
UPON REQUEST
-5-
<PAGE> 133
INDEX OF
DEFINITIONS
<TABLE>
<CAPTION>
TERMS SECTION
<S> <C>
Agreement Intro. Paragraph
Asset Classification 3.2.4
Average Closing Price 7.2.11.(a)
Bancshares Intro. Paragraph
Bancshares/Bank Financial Statements 3.1.5.(d)(4)
Bancshares Common Stock 3.1.3.(b)(1)
Bancshares Options 1.3.6
Bank Recital A
Bank Common Stock 1.3.1
BHCA Recital A
Closing 1.2.1
Continuing Corporation Recital B.1
Continuing Corporation Shares 4.2.1
Continuing Corporation Common Stock 1.3.3
Compensation Plans 3.2.12.(b)
Continuing Employees 6.4
Contracts 3.2.3.(b)
Determination Date 7.2.9.(a)
Dissenting Shares 1.4
Effective Date 2.1
Employees 3.2.12.(b)
Environmental Laws 3.2.13.(a)(2)
Equity Capital 1.3.1.(a)
ERISA 3.2.12
ERISA Affiliate 3.2.12.(d)
Exchange Act 3.1.5.(b)
Exchange Agent 1.3.7.(a)
Exchange Ratio 1.3.3
Executive Officer 3.1.8
</TABLE>
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<PAGE> 134
<TABLE>
<CAPTION>
TERMS SECTION
<S> <C>
FDIA 3.1.2.(b)
FDIC 3.1.2.(b)
Federal Reserve Board Recital D
Financial Statements 3.1.5.(d)(1)
GAAP 1.3.1.(a)
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 Stock Plans 3.1.3.(a)(2)
Governmental Entity 3.2.3.(a)
Hazardous Substances 3.2.13.(a)(3)
Indemnified Party 6.6.1
IRC Recital I
Joint Prospectus/Proxy Statement 4.2.1.(a)
Liens 3.1.3.(a)(6)
Material Adverse Effect 3.1.6
Merger Recital B
Modified Purchase Price 7.2.11.(b)
Pension Plan 3.2.12.(c)
Plan or Plans 3.2.12.(a)
Property 4.1.10
Purchase Price 1.3.1
Registration Statement 4.2.1.(a)
Regulatory Approvals Recital D
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 G
Subject Property 3.2.13.(a)(1)
</TABLE>
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<PAGE> 135
<TABLE>
<CAPTION>
TERMS SECTION
<S> <C>
Subsequent Bancshares/Bank Financial Statements 3.1.5.(d)(5)
Subsequent Glacier Financial Statements 3.1.5.(d)(3)
Tax 3.2.9
Termination Date 2.1
Transaction 1.1
</TABLE>
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<PAGE> 136
PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC.
AND
MISSOULA BANCSHARES, INC.
This Plan and Agreement of Merger ("Agreement"), dated as of August 9,
1996, is between GLACIER BANCORP, INC. ("Glacier"), a Delaware corporation and
MISSOULA BANCSHARES, INC. ("Bancshares"), a Montana corporation.
PREAMBLE
Glacier's and Bancshares' management believe, respectively, that the
merger of Bancshares with and into Glacier, on the terms and conditions set
forth in this Agreement, is in the best interests of Glacier's and Bancshares'
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 section 10 of
the Home Owners' 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 Community First,
Inc.; (2) 93% of the outstanding common stock of First National Bank of
Whitefish; and (3) 93% of the outstanding common stock of First
National Bank of Eureka. Bancshares is a corporation duly organized and
validly existing under Montana law and is a registered bank holding
company under the BHCA. Bancshares' principal office is located in
Missoula, Montana. Bancshares owns 98.864% of the outstanding shares of
common stock of First Security Bank of Missoula ("Bank"), a Montana
state-chartered, commercial bank.
B. THE MERGER. On the Effective Date, the following will occur:
1. Bancshares will merge with and into Glacier ("Merger") and
Glacier will be the surviving corporation under the name Glacier
Bancorp, Inc. ("Continuing Corporation").
2. Except as otherwise provided in this Agreement, the outstanding
shares of Bancshares Common Stock will be converted into the
right to receive shares of Continuing Corporation Common Stock.
C. BOARD APPROVALS. Glacier's and Bancshares' respective boards of
directors have approved this Agreement and authorized its execution and
delivery.
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<PAGE> 137
D. OTHER APPROVALS. The Merger is subject to:
1. satisfaction of the conditions described in this Agreement;
2. approval by Glacier's stockholders;
3. approval by Bancshares' stockholders;
4. approval or acquiescence, as appropriate, by (a) the Board of
Governors of the Federal Reserve System ("Federal Reserve Board")
and (b) the Office of Thrift Supervision ("OTS") (collectively,
"Regulatory Approvals").
E. EMPLOYMENT AGREEMENTS/WAIVERS. The Bank has entered into employment
agreements, effective as of the Effective Date, with the following
officers of the Bank: (1) William L. Bouchee, President and Chief
Executive Officer; (2) Harold Fraser, Senior Vice-President, Loans; and
(3) Weymouth Symmes, Vice President, Loans and Real Estate Loan
Officer.
F. DIRECTOR NONCOMPETITION AGREEMENT. Each Director of Bancshares' and the
Bank's boards of directors has signed a Director Noncompetition
Agreement. These noncompetition agreements will take effect on the
Effective Date.
G. STOCK OPTION AGREEMENT. As an inducement to and condition of Glacier's
execution of this Agreement, Bancshares has approved the grant of an
option to Glacier under the Stock Option Agreement, as provided in
Subsection 1.8.
H. FAIRNESS OPINION. Bancshares has received from Columbia Financial
Advisors, Inc. and delivered to Glacier an opinion to the effect that
the financial terms of the Transaction are financially fair to
Bancshares' stockholders. Under the terms of this Agreement, Columbia
Financial Advisors, Inc. will update this fairness opinion immediately
before Bancshares mails the Joint Prospectus/Proxy Statement to its
stockholders and immediately before Closing.
I. 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").
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<PAGE> 138
AGREEMENT
In consideration of the promises set forth in this Agreement, Glacier
and Bancshares agree as follows:
SECTION 1.
TERMS OF TRANSACTION
1.1. TRANSACTION. Subject to the terms and conditions set forth in this
Agreement and in the other documents referred to in this Agreement,
Bancshares will merge with and into Glacier in the Merger. The term
"Transaction" means the Merger transaction contemplated by this
Agreement, subject to any modifications Glacier elects in accordance
with Subsection 1.5.
1.2. MERGER. On the Effective Date, Bancshares 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, SectionSection 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
in effect immediately before the Effective Date. The Continuing
Corporation's name will be Glacier 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.
1.2.1. CLOSING. Closing of the Transaction will take place in
accordance with Section 2 ("Closing"). Except for Dissenting
Shares, all shares of Bancshares Common Stock issued and
outstanding immediately before Closing will be converted into the
right to receive the consideration described in Subsection 1.3 at
Closing, by virtue of the Merger and Delaware and Montana
corporate law, without any action on the holder's part.
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. 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
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<PAGE> 139
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. Subject to Subsections 7.2.9 and 7.2.10,
the aggregate number of shares to be issued by Glacier in the
Transaction ("Purchase Price") will be calculated on the Effective
Date in accordance with one of the formulas set forth in
Subsections (a), (b) or (c) of this Subsection 1.3.1, whichever
applies.
(a) If the tangible equity capital (defined as common stock,
paid in capital, retained earnings, plus (or minus) net
unrealized gain (or loss) on available for sale securities
and minus goodwill) of Bancshares and the Bank on a
consolidated basis ("Equity Capital") as of the last day of
the month preceding the Effective Date (or on the Effective
Date if the Effective Date is on the last day of a month),
determined in accordance with generally accepted accounting
principals, consistently applied ("GAAP"), is equal to
$9,500,000, then:
P = 1,116,279 X (A/B)
(b) If Equity Capital as of the last day of the month preceding
the Effective Date (or on the Effective Date if the
Effective Date is on the last day of a month), determined
in accordance with GAAP, is less than $9,500,000, then:
P = 1,116,279 - (9,500,000 - C) X 2.526 X (A/B)
-----------------------
21.50
(c) If Equity Capital as of the last day of the month preceding
the Effective Date (or on the Effective Date if the
Effective Date is on the last day of a month), determined
in accordance with GAAP, is greater than $9,500,000, then:
P = 1,116,279 + (C - 9,500,000) X (A/B)
---------------
21.50
(d) For purposes of the formulas set forth in this Subsection
1.3.1 and in Subsection 7.2.11.(b), the following apply:
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<PAGE> 140
(1) "A" is the number of shares of common stock of the
Bank, par value $25 ("Bank Common Stock") owned by
Bancshares on the Effective Date.
(2) "B" is the total number of shares of Bank Common Stock
issued and outstanding on the Effective Date.
(3) "C" is Equity Capital as of the last day of the month
preceding the Effective Date (or on the Effective Date
if the Effective Date is on the last day of a month),
determined in accordance with GAAP, rounded to the
nearest $1000 (rounding up if the higher $1000 is
within $500, otherwise rounding down).
(4) "P" is the Purchase Price. P will be rounded to the
nearest integer, rounding down if the number to the
right of the decimal is four or less or up if it is
five or more.
1.3.2. PERIOD FOR CALCULATING PURCHASE PRICE. If the Effective
Date is the last day of a month or within five business days of
the last day of a month, the parties will cooperate to complete
the post-Closing calculation of the Purchase Price or the Modified
Purchase Price (whichever applies) within five business days
following the Effective Date.
1.3.3. EXCHANGE RATIO. Subject to the terms, conditions, and
limitations set forth in this Agreement, holders of Bancshares
Common Stock will be entitled to exchange their Bancshares Common
Stock for shares of Continuing Corporation Common Stock, upon
surrender of the holder's certificate or certificates in
accordance with Subsection 1.3.7. Each share of Bancshares Common
Stock held of record on the Effective Date (including shares
acquired through exercise of Bancshares Options before the
Effective Date), will entitle the holder to receive that number
(rounded to 2 decimals, rounding down if the third decimal is four
or less or up if it is five or more) of newly issued, fully paid
and nonassessable shares of Continuing Corporation Common Stock
calculated by dividing the Purchase Price or the Modified Purchase
Price, whichever applies, by the aggregate number of shares of
Bancshares Common Stock that on the Effective Date are either (a)
issued and outstanding or (b) subject to unexercised Bancshares
Options ("Exchange Ratio").
1.3.4. CHANGE IN EQUITY CAPITAL. If, after the date of this
Agreement but before the Effective Date, Glacier's or Bancshares'
Common Stock issued and
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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 of
Glacier or Bancshares, as the case may be, then, as appropriate,
the parties will make the proportionate adjustment to the Exchange
Ratio.
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 Bancshares
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 the Average Closing
Price. Such fractional share interest will not include the right
to vote or receive dividends or any interest on dividends.
1.3.6. OPTIONS. For purposes of this Agreement, the term
"Bancshares Options" means options to acquire an aggregate of up
to 1750 shares of Bancshares Common Stock (of which, options for
up to 750 shares must, by the option terms, be exercised at least
90 days before the Effective Date or those options will expire),
which options were issued and unexercised on the date of this
Agreement. The holder of the 1000 Bancshares Options not subject
to the pre-Closing exercise requirement will be entitled to
receive, in exchange for his Bancshares Options which remain
unexercised on the Effective Date, options to purchase that number
of Continuing Corporation Common Stock shares he would have been
entitled under Subsection 1.3.3 if he had exercised the Bancshares
Options immediately before Closing. All such options will be
subject to the same terms as the Bancshares Options exchanged in
accordance with this Subsection 1.3.6.
1.3.7. CERTIFICATES.
(a) Surrender of Certificates. Each certificate evidencing
Bancshares Common 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 Continuing Corporation Common Stock or cash in
accordance with the provisions of this Subsection 1.3,
until the Bancshares stockholder surrenders the certificate
to an agent designated by Glacier and Bancshares to effect
the exchange of Bancshares Common Stock for Continuing
Corporation Common Stock or cash ("Exchange Agent"),
together with a properly completed
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and executed form of transmittal letter. Until any such
certificate evidencing Bancshares Common Stock is so
surrendered, the holder of such Bancshares Common Stock
will not have any right to receive any certificates
evidencing Continuing Corporation Common Stock or cash in
lieu of fractional shares.
(b) Issuance of Certificates in Other Names. If any certificate
evidencing Continuing Corporation Common Stock is to be
issued in a name other than that in which the
certificate(s) for Bancshares Common Stock surrendered in
exchange is registered, the person requesting this exchange
must first: (1) establish to the Exchange Agent's
satisfaction the right to receive the certificate
evidencing Continuing Corporation Common Stock and (2)
either pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of such
certificate in a name other than the registered holder of
the certificate surrendered or establish to the
satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
(c) Lost, Stolen, and Destroyed Certificates. If the Exchange
Agent receives: (1) satisfactory evidence of Bancshares
Common Stock ownership represented by a missing certificate
and (2) any indemnification assurances that the Exchange
Agent may require from persons claiming such ownership,
then the Exchange Agent will be authorized to issue
Continuing Corporation Common Stock for any Bancshares
Common Stock certificate that has been lost, stolen or
destroyed.
(d) Rights to Dividends and Distributions. After the Effective
Date, no holder of a certificate evidencing shares of
Bancshares Common Stock 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 (1) is
entitled to receive Continuing Corporation Common Stock and
(2) has surrendered his or her certificates evidencing
shares of Bancshares Common Stock in exchange for
Continuing Corporation Common Stock certificates. This
surrender of certificates will not deprive the holder of
any dividends or distributions that the holder is entitled
to receive for a date
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before this surrender as a record holder of Bancshares
Common Stock. When the holder surrenders his or her
certificates, the holder will receive the amount, without
interest, of any cash dividends and any other distributions
distributed after the Effective Date on the whole number of
shares of Continuing Corporation Common Stock the holder's
Bancshares Common Stock was converted into at the Effective
Date.
(e) Checks in Other Names. If any check for cash in lieu of
fractional shares is to be issued in a name other than the
name that the Bancshares Common Stock certificate
surrendered in exchange for cash is registered in, the
person requesting the exchange must establish the right to
receive this cash.
1.4. PAYMENT TO DISSENTING STOCKHOLDERS. For purposes of this
Agreement, "Dissenting Shares" means those shares of Bancshares Common
Stock as to which stockholders have properly taken all steps necessary
to perfect their dissenters' rights under MBCA SectionSection 35-1-826
through 35-1-839. Each outstanding Dissenting Share of Bancshares
Common Stock will be converted at Closing into the rights provided
under those sections.
1.5. ALTERNATIVE STRUCTURES. Subject to the conditions set forth below
and Del. Corp. Stat. Section 251(d), 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 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 Bancshares and
its stockholders will not be adversely affected. If Glacier elects an
alternative structure under this Subsection 1.5, Bancshares 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 Bancshares in connection with any such changes, if those expenses
would not have been incurred by Bancshares absent Glacier's election
under this Subsection 1.5.
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1.6. LETTER OF TRANSMITTAL. Glacier will prepare a transmittal letter
form reasonably acceptable to Bancshares for use by stockholders
holding Bancshares Common Stock. Certificates representing shares of
Bancshares 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 Bancshares
stockholders.
1.7. UNDELIVERED CERTIFICATES. If outstanding certificates for
Bancshares Common stock are not surrendered or the payment for them is
not claimed before such 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
Bancshares 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 Bancshares Common Stock.
1.8. STOCK OPTION AGREEMENT. As a condition to the execution of this
Agreement, Glacier and Bancshares will sign a Stock Option Agreement of
even date with this Agreement.
1.9. EXPENSES OF EXCHANGE AGENT. Glacier will pay all expenses incurred
by the Exchange Agent under this Agreement and all expenses associated
with mailing the transmittal letters to Bancshares stockholders as
required by Subsection 1.6
SECTION 2.
CLOSING OF THE TRANSACTION
2.1. CLOSING. Closing will occur on the Effective Date. If Closing does
not occur on or before April 30, 1997 ("Termination Date"), either
Glacier or Bancshares may terminate this Agreement in accordance with
Section 7. Unless Glacier and Bancshares agree upon another date, the
Effective Date will be the later of December 31, 1996 and the date five
business 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.
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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 Bancshares agree otherwise,
the Closing will occur at Glacier's main office, 202 Main Street,
Kalispell, Montana at 10:00 a.m. on the Effective Date.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF GLACIER AND BANCSHARES. Subject
to Subsection 3.3 and except as expressly set forth in Schedule 1,
Glacier represents and warrants to Bancshares, and Bancshares
represents and warrants 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 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 the percent of
its stock-ownership of these subsidiaries, as of the date
of this Agreement.
(b) Each of its depository institution subsidiaries is an
"insured depository institution," as defined in the Federal
Deposit Insurance Act ("FDIA") and applicable
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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 national or state
bank, a corporation, or a federally chartered savings bank;
(2) duly organized and validly existing under the either
federal, Montana, or Delaware law; 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 and warrants:
(1) 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"), 3,363,297 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 217,284 Glacier Common Stock shares (subject to
adjustment on the terms set forth in the Glacier Stock
Plans) are outstanding under the stock option plans
identified in Schedule 4 ("Glacier Stock Plans");
(3) the number of Glacier Common Stock shares issued and
outstanding or subject to unexercised options or other
binding commitments to issue Glacier Common Stock
shares will not exceed 3,582,581 plus options for up to
100,000 Glacier Common Stock shares to be awarded by
Glacier in 1997 in accordance with its existing stock
option plans.
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(4) 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;
(5) all outstanding shares of Glacier Common Stock have
been duly authorized and validly issued and are fully
paid and nonassessable;
(6) 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
(7) except as set forth in this Agreement or in the Glacier
Stock Plans, no shares of capital stock of Glacier are
authorized, issued or outstanding, and 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) Bancshares. Bancshares represents and warrants:
(1) Bancshares' authorized capital stock consists of (i)
250,000 shares of common stock, par value $10 per share
("Bancshares Common Stock"), 48,224 shares of which are
issued and outstanding and (ii) 50,000 shares of
preferred stock, par value $50 per share, none of which
are issued or outstanding;
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(2) options or rights to acquire not more than an aggregate
of 1750 Bancshares Common Stock shares are outstanding
as of the date of this Agreement, and options to
acquire 750 of the 1750 Bancshares Common Stock shares
subject to options will, by the option terms, expire if
not exercised at least 90 days before the Effective
Date;
(3) Bancshares has no Bancshares Common Stock shares
reserved for issuance;
(4) all outstanding Bancshares 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
Bancshares' subsidiaries owned by Bancshares or a
subsidiary of Bancshares have been duly authorized and
validly issued and are fully paid and nonassessable,
except to the extent of any assessment required by the
Montana Bank Act Section 32-1-506, and at Closing will
be owned by Bancshares or a subsidiary of Bancshares
free and clear of all Liens; and
(6) except as set forth in this Agreement, no shares of
Bancshares' capital stock are authorized, issued or
outstanding, and there are no preemptive rights or any
outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or
commitments of Bancshares or any of its subsidiaries of
any character relating to the issued or unissued
capital stock or other equity securities of Bancshares
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 358,610
Bank Common Stock shares, 72,820 shares of which are
issued and outstanding;
(8) it owns 71,992.6 of the 72,820 total shares of Bank
Common Stock outstanding, and such shares are free and
clear of all
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encumbrances, except for the pledge to secure the Term
Note referred to in Subsection 5.2.4.
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 only to the approval by
its stockholders of the plan of Merger contained in this
Agreement to the extent required by Del. Corp.
Stat.Section252 and MBCASection35-1-819, to consummate the
transactions contemplated by this Agreement.
(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, 1993, 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 OTS, (3) the FDIC, and (4) any other
applicable federal or state banking, insurance, securities,
or other regulatory authorities. Each of these reports and
statements, 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
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respect to periods since January 1, 1993, 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) in all material respects 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, 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 GAAP, except
as may be noted in these statements and, in the case of the
Bank, except accounting for loan fees
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procedures, as disclosed in Schedule 1. For purposes of
this Agreement:
(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
Bancshares' case, the Bancshares/Bank Financial
Statements (or for periods ending on a date following
the date of this Agreement, the Subsequent
Bancshares/Bank Financial Statements).
(2) "Glacier Financial Statements" means Glacier's (i)
audited consolidated statements of financial condition
as of December 31, 1995, and the related audited
statements of income, cashflows and changes in
stockholders' equity for the year ended December 31,
1995; and (ii) unaudited consolidated statements of
financial condition as of the end of each fiscal
quarter following December 31, 1995 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 balance
sheets and related statements of income and
stockholders' equity for each of Glacier's fiscal
quarters ending after the date of this Agreement and
before Closing.
(4) "Bancshares/Bank Financial Statements" means (i)
Bancshares' consolidated statements of financial
condition as of December 31, 1995 and 1994 (unaudited
as of execution of this Agreement, audited as of
Closing), and the related statements of income,
cashflows
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and changes in stockholders' equity for each of the
years ended December 31, 1995 and 1994 (unaudited as of
execution of this Agreement, audited as of Closing);
and (ii) Bancshares' unaudited consolidated statements
of financial condition as of the end of each fiscal
quarter following December 31, 1995 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 Bancshares/Bank Financial Statements" means
balance sheets and related statements of income and
stockholders' equity for each of Bancshares' and the
Bank's fiscal quarters ending after the date of this
Agreement and before Closing.
3.1.6. ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed
in its Financial Statements and Reports, since December 31, 1995:
(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 Stock Plans 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.
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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 5.2.12.
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. BANCSHARES' ADDITIONAL REPRESENTATIONS AND WARRANTIES. Subject to
Subsection 3.3 and except as expressly set forth in Schedule 1,
Bancshares represents and warrants to Glacier, the following:
3.2.1. LOAN AND LEASE LOSSES. Its Executive Officers know of no
reason why the provision for loan and lease losses shown in the
consolidated balance sheet included in the Financial Statements
for the period ended December 31, 1995, was not adequate as of
that date to provide for estimable and probable losses, net of
recoveries relating to loans previously charged off, inherent in
its loan portfolio.
3.2.2. NO STOCK OPTION PLANS. Neither it nor the Bank has adopted
any stock option plans or granted any options or rights to acquire
any shares of Bank Common Stock or Bancshares Common Stock, except
as listed in Schedule 4.
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
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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
material breach or violation of, or a default under, its
certificate of incorporation or bylaws, or the comparable
governing instruments of any of its subsidiaries; or (2) a
material 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 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 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 a list, accurate and complete in all
material respects as of June 30, 1996, except as otherwise
expressly noted in Schedule 7, and 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
credit or other assets that were paid off or charged off
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by it or its subsidiaries before the date of this
Agreement.
3.2.5. PROPERTIES.
(a) Except as disclosed or reserved against in its Financial
Statements or in Schedule 8, 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) to all of the material
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 9 lists all its and its subsidiaries' existing
branches and offices and all new branches or offices it or
any of its subsidiaries' has applied for.
(d) Bancshares has provided to Glacier copies of existing title
policies held in its or the Bank's files, and no
exceptions, reservations, or encumbrances have arisen or
been created since the date of issuance of those policies.
3.2.6. 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 certificates of
incorporation or bylaws.
3.2.7. COMPLIANCE WITH LAWS. Except as disclosed in Schedule 10,
it and each of its subsidiaries:
(a) is in compliance, in the conduct of its business, with all
applicable federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders or
decrees, including the Bank Secrecy
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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 other applicable
fair lending laws or other laws relating to discrimination;
(b) has all permits, licenses, certificates of authority,
orders, and approvals of, and has 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 it or such subsidiary to carry on its business as
it is presently conducted;
(c) has received since January 1, 1992, no notification or
communication from any Governmental Entity (including any
bank, insurance and securities regulatory authorities) or
its staff (1) asserting that it or any of its subsidiaries
is not in compliance 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) is not required to notify any federal banking agency before
adding directors to its board of directors or employing
senior executives.
3.2.8. LITIGATION. Except as disclosed in its Financial Statements
or in Schedule 11, 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
other fair lending law or other law relating to
discrimination); and
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(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.
3.2.9. TAXES. For purposes of this Subsection 3.2.9, "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 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;
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(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).
3.2.10. 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 12 lists all
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directors' and officers' liability insurance policies and other
material insurance policies maintained by it or its subsidiaries.
3.2.11. 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 material 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.
3.2.12. 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 Bancshares or the Bank, as the case
may be.
(b) Schedule 13 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 material
employment or severance contracts and (3) all other
material 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.
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(c) All of its 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 of
its Plans, 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
its 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 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 material
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
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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 material contributions it or any of its subsidiaries
are or were required to make under the terms of any of its
Plans have been timely made or have been reflected in its
Financial Statements. Neither any of its 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 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.
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(g) Except as disclosed in its Financial Statements, neither
it nor its subsidiaries have any obligations for retiree
health and life benefits.
(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
material increase in benefits under any Compensation Plan
or (3) payment of any severance or similar compensation
under any Compensation Plan.
3.2.13. ENVIRONMENTAL MATTERS.
(a) For purposes of this Subsection 3.2.13, 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,
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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 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 such Environmental Laws.
(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 Environmental Law or the
terms and conditions of any permit, license,
authority, settlement, agreement, decree or other
obligation arising under any Environmental Law;
(2) the handling, storage, use, transportation, removal
or disposal of Hazardous Substances;
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(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
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
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
Environmental Law.
3.3. EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.
3.3.1. DISCLOSURE OF EXCEPTIONS. Each exception set forth in a
Schedule is disclosed only for purposes of the representations and
warranties 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
or warranty being found untrue or incorrect under the
standard established by this Subsection 3.3; and
(b) the mere inclusion of an exception in a Schedule is not an
admission by a party that such exception represents a
material fact,
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event or circumstance or would result in a Material
Adverse Effect with respect to that party.
3.3.2. NATURE OF EXCEPTIONS. No representation or warranty
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 or warranty due to the following: the existence of
any fact, circumstance, or event if that fact, circumstance, or
event, individually or taken together with all similar facts,
circumstances, or events, would not, or, in the case of Subsection
3.2.8, 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 BANCSHARES' BUSINESS BEFORE CLOSING. Before Closing,
Bancshares promises as follows:
4.1.1. AVAILABILITY OF BANCSHARES' BOOKS, RECORDS AND PROPERTIES.
(a) Bancshares will make Bancshares', 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. Bancshares will, and will
cause its subsidiaries to, cooperate fully in any such
inspection, audit, or direct verification procedures, and
Bancshares will, and will cause its subsidiaries to, make
available all information reasonably required by or on
behalf of Glacier.
(b) At Glacier's request, Bancshares will request any third
parties involved in the preparation or review of the
Bancshares/Bank Financial Statements or Subsequent
Bancshares/Bank 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. Bancshares will, and will cause
the Bank to, conduct its business only in the ordinary and usual
course and, without the prior
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written consent of Glacier, will not, and will not allow the Bank
to, do any of the following:
(a) effect any stock split or other recapitalization with
respect to Bancshares Common Stock or the Bank's capital
stock (but Bancshares may before Closing in consultation
with Glacier acquire shares of Bank Common Stock from the
Bank's minority shareholders by exchanging Bancshares
Common Stock shares for the Bank Common Stock shares);
issue, pledge or encumber in any way any shares of
Bancshares' or the Bank's capital stock; or grant any
option or other right to shares of Bancshares' or the
Bank's capital stock (except issuances of Bancshares Common
Stock upon exercise of the Bancshares Options granted
before the date of this Agreement);
(b) declare or pay any dividend, or make any other
distribution, either directly or indirectly, with respect
to Bancshares Common Stock (except for dividends from the
Bank to Bancshares to support the operations of Bancshares
which are consistent with past practices and except as may
be necessary to pay Bancshares' debt to American Bank
National Association before Closing, as required by
Subsection 5.2.4);
(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
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Glacier with at least 30 days' advance written notice
before it acquires the interest;
(f) except as otherwise required to comply with Bancshares'
board of directors' fiduciary duty to stockholders, enter
into or recommend the adoption by Bancshares' stockholders
of any agreement involving a possible merger or other
business combination or asset sale by Bancshares not
involving the Transaction;
(g) enter into or terminate any contracts (including real
property leases) with 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 or bylaws or convert its charter or form
of entity;
(l) implement or adopt any material changes in its operations
policies or procedures, including
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loan loss reserve policies, unless the changes are
necessary or advisable, on the advise 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 Bancshares and the Bank above 65;
(o) other than expenses reasonably related to the pending
renovation at the Bank's North Reserve office and 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 expenses reasonably
related to (1) completion of the Transaction, which
expenses are estimated not to exceed $100,000 (excluding
any premium paid by Bancshares to obtain an extended
coverage endorsement on its current Officers and Directors
Errors and Omissions insurance policy) or (2) satisfaction
of the conditions described in Subsection 5.2.4; 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 AND WARRANTIES.
Bancshares will not do or cause to be done anything that would
cause any representation or warranty in Subsection 3.1 or 3.2 to
be untrue or inaccurate if made at Closing, except as otherwise
contemplated or required by this Agreement or consented to in
writing by Glacier.
4.1.4. MAINTENANCE OF PROPERTIES. Bancshares 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. Bancshares will, and
will cause the Bank to, use all reasonable efforts to:
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(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. Bancshares will, and will require the
Bank to, consult with Glacier before making any change with
respect to present management personnel having the rank of
vice-president or higher.
4.1.7. COMPENSATION. Bancshares will not, and will not allow the
Bank to, permit any increase in the current or deferred
compensation payable or to become payable by Bancshares to any of
its directors, officers, employees, agents or consultants other
than normal increments in compensation in accordance with
Bancshares' past practices with respect to the timing and amounts
of such increments. Nothing in this Subsection 4.1.7 prohibits the
Bank from paying customary year-end bonuses for 1996 to its
employees in accordance with past practices, as long as each bonus
paid does not exceed 20% of the receiving employee's annual
salary. Without the prior written approval of Glacier, Bancshares
will not, and will not allow the Bank to, commit to, execute or
deliver any employment agreement with any party not terminable
upon two weeks' notice and without expense.
4.1.8. UPDATE OF FINANCIAL STATEMENTS. Bancshares will deliver
Subsequent Bancshares/Bank Financial Statements to Glacier by the
earlier of: (1) 5 days after Bancshares or the Bank has prepared
and issued them or (2) 60 days from year-end for year-end
statements and 30 days from the end of the quarter for quarterly
statements. The Subsequent Bancshares/Bank Financial Statements:
(a) will be prepared from the books and records of Bancshares
and the Bank;
(b) will present fairly the financial position and operating
results of Bancshares 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
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(d) will reflect all Bancshares' 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 Bancshares 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 Bancshares
or its subsidiaries or enter into discussions concerning any such
acquisition, except as otherwise required to comply with the
fiduciary responsibilities of Bancshares' board of directors. No
such party will make available to any person not affiliated with
Bancshares 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, Bancshares will
provide Glacier with title reports issued by a title insurance
company reasonably satisfactory to Glacier, showing unencumbered
fee simple title or vendee's interest to all real Property owned
by Bancshares or the Bank, other than other real estate owned, and
unencumbered leasehold interests in all real Property leased by
Bancshares or the Bank, and containing only such exceptions,
reservations and encumbrances as may be consented to in writing by
Glacier or may be consistent with Subsection 3.2.5. For purposes
of this Agreement, "Property" includes any property that
Bancshares or the Bank has owned or leased.
4.1.11. REVIEW OF LOANS. Bancshares 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 loans through Closing to update the examination. At
Glacier's reasonable request, Bancshares 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 on Form S-4 ("Registration
Statement") will be filed by Glacier with the SEC under
the Securities Act for registration of the shares of
Continuing Corporation Common Stock to be issued to
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Bancshares Stockholders under this Agreement in connection
with the Transaction ("Continuing Corporation Shares"), and
the parties will prepare a related joint prospectus/proxy
statement ("Joint Prospectus/Proxy Statement") to be mailed
together with any amendments and supplements to Glacier's
and Bancshares' stockholders.
(b) The parties will cooperate with each other in preparing the
Registration Statement and Joint Prospectus/Proxy
Statement, and will use their best efforts to: (1) file the
Registration Statement with the SEC within 45 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 Joint Prospectus/Proxy Statement.
(c) Nothing will be included in the Registration Statement or
the Joint 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.
4.2.2. SUBMISSION TO STOCKHOLDERS.
(a) Glacier and Bancshares will submit the Joint
Prospectus/Proxy Statement to, and will use their best
efforts in good faith to obtain the prompt approval of the
Joint Prospectus/Proxy Statement by, all applicable
regulatory authorities. The parties will provide each other
with copies of such submissions for review.
(b) Glacier and Bancshares will each promptly take the action
necessary in accordance with applicable law and their
respective Certificates of Incorporation and Bylaws to each
convene a stockholders meeting to consider the approval of
this Agreement and to authorize the transactions
contemplated by this Agreement. These stockholders meetings
will be held on the earliest practical date after the date
the Joint Prospectus/Proxy Statement may first be sent to
Glacier's and Bancshares' stockholders without objection by
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applicable governmental authorities; but each party will
have at least 30 days to solicit proxies. Except as
otherwise required to comply with the fiduciary
responsibilities of their respective boards of directors,
each party's board of directors and each party's officers,
respectively, will recommend approval of the Transaction to
that party'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 Bancshares 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 Section 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 Bancshares for purposes of the SEC's ASR 135 and other rules
and releases related to "pooling of interests" accounting
treatment. Within thirty days following the date this Agreement is
signed, Bancshares will deliver to Glacier, after consultation
with legal counsel, a list of names and addresses of Bancshares'
"affiliates" with respect to the Transaction within the meaning of
SEC ASR 135. By the Effective Date, Bancshares 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 shares of Bancshares Common Stock to be received by an
"affiliate" so as to preclude their transfer or disposition in
violation of the affiliate letters, to instruct its transfer agent
not to permit the transfer of those shares, and to take any other
steps reasonably necessary to ensure compliance with the SEC's ASR
135 and other rules and releases related to "pooling of interests"
accounting treatment.
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4.3.4. RETENTION OF CERTIFICATES. Except as otherwise permitted in
Exhibit A, before 30 days prior to the Effective Date, all stock
certificates evidencing ownership of Bancshares Common Stock by
"affiliates" will be delivered to Bancshares. Bancshares (before
the Effective Date) and Glacier (after the Effective Date) will
retain those certificates, and subsequently the certificates of
Glacier Common Stock 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
Bancshares' review. These applications are expected to include:
(a) an application to the Federal Reserve;
(b) an application to the OTS; and
(c) any filings required under the Montana Bank Act or the
MBCA.
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 Bancshares 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. The proper officers of Glacier and Bancshares,
respectively, in the name and on behalf of those respective parties,
will use their best efforts in good faith to make all such
arrangements, do or cause to be done all such acts and things, and
execute and deliver all such certificates and other instruments and
documents as may be reasonably necessary or appropriate in order to
consummate the Transaction as promptly as practicable.
4.8. NOTICE. Bancshares 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 Bancshares
or the Bank;
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(b) the commencement of any proceeding against Bancshares by or
before any court or governmental agency, individually or in
the aggregate, that might have a Material Adverse Effect
with respect to Bancshares or the Bank; or
(c) any acquisition of an ownership or leasehold interest in
Property.
4.9. CONFIDENTIALITY. Glacier and Bancshares each will, and Bancshares
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 receiving 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 Bancshares will, and Bancshares 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 deliver Subsequent
Glacier Financial Statements to Bancshares by the earlier of: (1) 5
days after Glacier prepares and issues them or (2) 60 days from
year-end for year-end statements and 30 days from 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;
(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 Bancshares true and correct copies of: (1) its
Certificate of Incorporation and Bylaws and (2) minutes of the meetings
of its stockholders and its board of directors. At Bancshares'
reasonable
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request, Glacier will also provide Bancshares with copies of: (1)
reports filed with the SEC or banking regulators and (2) Glacier's
stock option 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 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 AND WARRANTIES. Bancshares' representations
and warranties in this Agreement and in any certificate or other
instrument delivered in connection with this Agreement will be
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 will be true in all material respects as of that earlier
date). These representations and warranties will have the same
force and effect as if they had been made at Closing. Bancshares
will have delivered to Glacier its certificate, executed by a duly
authorized officer of Bancshares and dated as of Closing, stating
that these representations and warranties comply with this
Subsection 5.2.1.
5.2.2. COMPLIANCE. Bancshares will have performed and complied
with all material terms, covenants and conditions of this
Agreement. Bancshares will have delivered to Glacier its
certificate, executed by a duly authorized officer of Bancshares
and dated as of Closing, stating that Bancshares is in compliance
with this Subsection 5.2.2.
5.2.3. EQUITY CAPITAL REQUIREMENT. Equity Capital on the Effective
Date, determined in accordance with GAAP, will be at least $9
million. Bancshares' certificate referred to in Subsection 5.2.2
will confirm that this condition is satisfied.
5.2.4. PAYMENT OF NOTE AND RELEASE OF PLEDGE. Bancshares will have
(1) satisfied in full its obligations under the Term Note, dated
June 20, 1995, entered into between Bancshares and American Bank
National Association in the original principal amount of
$2,100,000, with a remaining payoff balance of approximately $1
million as of the date of this Agreement; (2) obtained full
release of the collateral pledged as security for this Term Note;
and (3) provided Glacier with evidence satisfactory to it and its
counsel
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that the Term Note has been satisfied and the collateral released
as required by this Subsection 5.2.4.
5.2.5. NO MATERIAL ADVERSE EFFECT. No material damage, destruction
or loss (whether or not covered by insurance) has occurred, and no
other event, individually or in the aggregate, having or
potentially having a Material Adverse Effect with respect to
Bancshares or the Bank has occurred. Bancshares' certificate
referred to in Subsection 5.2.2 will state that the conditions
identified in this Subsection 5.2.5 are satisfied.
5.2.6. FINANCIAL CONDITION. The following will be true, and
Bancshares' certificate referred to in Subsection 5.2.2 will so
state:
(a) the Bank's allowance for possible loan and lease losses at
December 31, 1996, and at Closing will be adequate to
absorb the Bank's anticipated loan and lease losses (taking
into account any recommendations made by Bancshares'
certified public accountants);
(b) the reserves set aside for the contingent liabilities
reflected in the Subsequent Bancshares/Bank Financial
Statements will be adequate to absorb all reasonably
anticipated losses; and
(c) by November 1, 1996, Bancshares has provided Glacier with
audited Bancshares/Bank Financial Statements audited by
KPMG Peat Marwick LLP, and the audit has revealed no
required adjustment to the unaudited Bancshares/Bank
Financial Statements that would have a Material Adverse
Effect upon Bancshares or the Bank.
5.2.7. NO CHANGE IN LOAN REVIEW. Bancshares will have 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.
5.2.8. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding will
have been commenced or threatened by any governmental agency to
restrain or prohibit or invalidate the Transaction.
5.2.9. APPROVAL BY COUNSEL. All actions, proceedings, instruments,
and documents required in connection with this Agreement, the
Transaction, and all other related
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legal matters will have been approved by Glacier's counsel.
5.2.10. RECEIPT OF TITLE POLICY. Glacier will have received the
title insurance report or reports required by Subsection 4.1.10.
5.2.11. CORPORATE AND STOCKHOLDER ACTION. Bancshares' board of
directors and Glacier's and Bancshares' stockholders will each
have approved the Transaction.
5.2.12. TAX OPINION. Glacier will, at Glacier's expense, obtain
from Graham & Dunn, P.C., and deliver to Bancshares, an opinion
addressed to Bancshares and in form and substance reasonably
satisfactory to Bancshares and its counsel, to the effect that
consummation of the Transaction will not result in a taxable event
for Bancshares 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), Bancshares' stockholders who,
in accordance with Section 1, exchange their Bancshares
Common Stock shares solely for Continuing Corporation
Common Stock shares will not recognize gain or loss on the
exchange.
(c) Cash payments to Bancshares' 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.
5.2.13. OPINION OF COUNSEL. Bancshares will obtain from Stephen J.
Smith, attorney at law, and deliver to Glacier an opinion of
counsel, addressed to Glacier, to the effect that:
(a) Bancshares 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) Bancshares has the corporate power and authority to
execute, deliver, and perform this Agreement;
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(d) the execution, delivery, and performance of this Agreement
have been duly authorized by all necessary corporate
action on the part of Bancshares, and this Agreement
constitutes Bancshares' 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;
(e) all issued and outstanding shares of Bancshares' and the
Bank's capital stock have been duly authorized and are
validly issued, fully paid, non-assessable, free of
preemptive or similar rights arising by operation of law
or otherwise, and have been issued in compliance with all
applicable federal and applicable state securities laws;
(f) all Bancshares Options have been duly authorized and
validly granted;
(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, individually or in the aggregate, have a material
adverse effect on Bancshares' or the Bank's business,
operations, properties, assets, or condition or prevent
consummation of the Transaction;
(h) execution of this Agreement and consummation of the
Transaction will not violate Bancshares' or the Bank's
articles of incorporation or bylaws or the terms of any
material contract or other obligation entered into before
the date of this opinion by Bancshares or the Bank; and
(i) Counsel's opinion will be governed by and interpreted in
accordance with the Legal Opinion Accord of the ABA
section of Business Law (1991), together with the related
commentary, as published in The Business Lawyer, Volume
47, No. 1, and any amendments or modifications thereto.
5.2.14. CASH PAID. The aggregate of the cash paid for fractional
shares and Dissenting Shares to holders of Bancshares Common Stock
under this Agreement and
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applicable law will not exceed 10% of the value of the Continuing
Corporation Common Stock issued upon Closing.
5.2.15. AFFILIATE LETTERS. Glacier will have received the
affiliate list and letters specified in Subsection 4.3.2.
5.2.16. REGISTRATION STATEMENT. The Registration Statement, as it
may have been amended, required in connection with the shares of
Continuing Corporation Common Stock to be issued to stockholders
under Subsection 1.3, and as described in Subsection 4.2, will
have become effective, and no stop order suspending the
effectiveness of such Registration Statement will have been issued
or will remain in effect, and no proceedings for that purpose will
have been initiated or threatened by the SEC the basis for which
remains in effect.
5.2.17. CONSENTS. Bancshares will have obtained the consents as
indicated in Schedule 6.
5.2.18. FAIRNESS OPINIONS. Glacier will have received (1) from
Columbia Financial Advisors, Inc., two updated fairness opinions
(to be delivered by Bancshares to Glacier at Bancshares' expense),
one dated immediately before Bancshares mails the Joint
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 Bancshares'
stockholders and (2) from D.A. Davidson & Company, a fairness
opinion, dated immediately before Glacier mails the Joint
Prospectus/Proxy Statement to its stockholders, to the effect that
the financial terms of the Transaction are financially fair to
Glacier's stockholders. Glacier will provide Bancshares'
investment advisor with such information as it may reasonably
request in order to render its opinion.
5.2.19. ACCOUNTING TREATMENT. It will have 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 and Bancshares will have received
letters to such effect from KPMG Peat Marwick LLP, certified
public accountants.
5.2.20. SOLICITATION OF EMPLOYEES. Neither any member of
Bancshares' board of directors nor any entity with which any such
director is affiliated will have solicited any employee of
Bancshares or Glacier with the intention of causing the employee
to terminate his or her employment with Bancshares or Glacier, as
the case may be.
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5.2.21. OTHER MATTERS. Glacier will have received such other
opinions, certificates, and documents as Glacier may reasonably
request in connection with this Agreement and the Transaction.
5.3. CONDITIONS TO BANCSHARES' OBLIGATIONS. All Bancshares' obligations
under this Agreement are subject to satisfaction of the following
conditions at or before Closing:
5.3.1. REPRESENTATIONS AND WARRANTIES. Glacier's representations
and warranties in this Agreement and in any certificate or other
instrument delivered in connection with this Agreement will be
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 will be true in all material respects as of that earlier
date). These representations and warranties will have the same
force and effect as if they had been made at Closing. Glacier will
have delivered to Bancshares its certificate, executed by a duly
authorized officer of Glacier and dated as of Closing, stating
that these representations and warranties comply with this
Subsection 5.3.1.
5.3.2. COMPLIANCE. Glacier will have performed and complied with
all terms, covenants and conditions of this Agreement. Glacier
will have delivered to Bancshares 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 material damage,
destruction or loss (whether or not covered by insurance) has
occurred, and no other event, individually or in the aggregate,
having or potentially having a Material Adverse Effect with
respect to Glacier has occurred. Glacier's certificate referred to
in Subsection 5.3.2 will state that the conditions identified in
this Subsection 5.3.3 are satisfied.
5.3.4. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding will
have 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 Glacier's and Bancshares' stockholders will have
approved the Transaction.
5.3.6. TAX OPINION. The tax opinion specified in Subsection
5.2.12 will have been delivered to Bancshares.
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5.3.7. OPINION OF COUNSEL. Glacier will obtain from Graham & Dunn,
P.C. and deliver to Bancshares an opinion, addressed to
Bancshares, 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;
(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, reorganization, moratorium, or
similar laws generally affecting the enforcement of the
rights of creditors and by generally applicable principles
of equity;
(d) the Continuing Corporation Shares have been duly authorized
and, when issued as contemplated by this Agreement, will be
validly issued, fully paid and nonassessable;
(e) the Registration Statement became effective under the
Securities Act on ____________, 1996, 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) the shares of Glacier's capital stock to be issued in the
Transaction will be duly authorized, validly issued, fully
paid, non-assessable, free of preemptive or similar rights
arising by operation of law or otherwise, and will be
issued in compliance with all applicable federal and
applicable state securities laws;
(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, individually or in the aggregate, have a material
adverse effect on Glacier's business, operations,
properties, assets, or condition
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or prevent consummation of the Transaction; and
(h) Counsel's opinion will be governed by and interpreted in
accordance with the Legal Opinion Accord of the ABA
section of Business Law (1991), together with the related
commentary, as published in The Business Lawyer, Volume
47, No. 1, and any amendments or modifications thereto.
5.3.8. FAIRNESS OPINION. Bancshares will have received from
Columbia Financial Advisors, Inc., two updated fairness opinions,
one dated immediately before Bancshares mails the Joint
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 Bancshares'
stockholders.
5.3.9. CASH PAID. The aggregate of the cash paid to holders of
Bancshares Common Stock under this Agreement and applicable law
will not exceed 10% of the value of the Continuing Corporation
Common Stock issued upon Closing.
5.3.10. REGISTRATION STATEMENT. The Registration Statement, as it
may have been amended, required in connection with the shares of
Continuing Corporation Common Stock to be issued to stockholders
under Subsection 1.3, and as described in Subsection 4.2, will
have become effective, and no stop order suspending the
effectiveness of such Registration Statement will have been issued
or will remain in effect, and no proceedings for that purpose will
have been initiated or threatened by the SEC the basis for which
remains in effect.
5.3.11. BANCSHARES DIRECTORS TO SERVE ON GLACIER AND GLACIER BANK
BOARDS. Glacier will have appointed, effective as of Closing,
William L. Bouchee and Allen Fetscher to serve on Glacier's and
Glacier Bank, F.S.B.'s boards 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
will have been approved by counsel for Bancshares and the Bank.
5.3.13. OTHER MATTERS. Bancshares will have received such other
opinions, certificates, and documents as Bancshares may reasonably
request in connection with this Agreement and the Transaction.
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SECTION 6.
DIRECTORS, OFFICERS AND EMPLOYEES
6.1. DIRECTORS. As a condition to the execution of this Agreement,
Bancshares will cause each member of Bancshares' and the Bank's board
of directors to enter into a written noncompetition agreement on or
before the date this Agreement is signed. These noncompetition
agreements will take effect on the Effective Date.
6.2. DIRECTOR APPOINTED. On the Effective Date, Glacier will cause
William L. Bouchee and Allen Fetscher to be elected or appointed to
Glacier's and Glacier Bank, F.S.B.'s boards of directors to serve until
their successors are 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. As a condition to the execution of this
Agreement, William L. Bouchee, Harold Fraser, and Weymouth Symmes will
make themselves available to continue as officers of the Bank, in
accordance with the terms and conditions set forth in employment
agreements of even date with this Agreement, all effective as of the
Effective Date.
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
on the later of January 1, 1997 and the Effective Date. 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 Bancshares
its present intention to provide Continuing Employees with
employee benefit programs which, in the aggregate, are generally
not less favorable than those being provided to Glacier employees.
6.5.2. TERMINATION AND TRANSFER/MERGER OF PLANS. Before Closing,
Bancshares will terminate its Profit Sharing Plan and distribute
the proceeds from the Profit Sharing Plan to the participants as
appropriate. As soon as practicable after Closing, any other
employee benefit plans of Bancshares or the Bank will be
terminated and the interests of Bancshares' employees in those
plans
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will be transferred or merged into Glacier's employee benefit
plans.
6.5.3. NO CONTRACT CREATED. Except as provided in Subsection 6.3,
Nothing in this Agreement gives any Bancshares employee a right to
continuing employment.
6.6. INDEMNIFICATION.
6.6.1. INDEMNIFICATION. For a period of three years, from and
after the Effective Date, Glacier will indemnify, defend, and hold
harmless the present and former directors, officers, and employees
of Bancshares and its subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or
before the Effective Date and which arose out of legitimate
business of Bancshares. This indemnification will be to the
fullest extent that Bancshares would have been permitted under
Montana law and its Certificate of Incorporation or Bylaws in
effect on the date of this Agreement to indemnify such Indemnified
Party. Glacier will advance expenses as incurred to the fullest
extent permitted under applicable law, so long as the person to
whom expenses are advanced provides an undertaking to repay such
advances, if it is ultimately determined that such person is not
entitled to indemnification. In the event of a disagreement with
respect to whether an Indemnified Party's conduct complies with
the standards set forth herein, or whether such Indemnified
Party's conduct may be indemnified under Montana law and the
standards, if any, set forth in Bancshares' Certificate of
Incorporation and Bylaws, the parties will submit the issue for
disposition to an independent counsel mutually agreed upon between
Glacier and the Indemnified Party.
6.6.2. CLAIMS FOR INDEMNIFICATION. Any Indemnified Party wishing
to claim indemnification under Subsection 6.6.1, upon learning of
such claim, must notify Glacier of such claim within 10 days.
Glacier's obligations under Subsection 6.6.1 will be reduced by
any expenses or obligations caused to Glacier by untimely notice.
In the event of any such claim (whether arising before or after
the Effective Date), Glacier will have the right to assume the
defense thereof. Glacier will have the right to approve counsel
for all Indemnified Parties; the Indemnified Parties will
cooperate in the defense of any such matter. Glacier will not be
liable for any settlement effected without its prior written
consent.
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6.6.3. ASSUMPTION OF INDEMNIFICATION OBLIGATION. If Glacier or any
of its successors or assigns consolidates with or merges into any
other entity and is not the continuing or surviving entity of the
consolidation or merger or transfers all or substantially all of
its assets to any entity, then and in each case, proper provision
must be made so that the successors and assigns of Glacier will
assume the obligations set forth in this Section 6.6.
6.6.4. ENFORCEMENT. If a dispute arises over the indemnity
contained herein, the substantially losing party will pay the
costs and attorney's fees of the substantially prevailing party.
The rights of each Indemnified Party in this Section 6.6 are in
addition to any other rights the Indemnified Party may have under
Bancshares' Certificate of Incorporation or Bylaws or under
applicable Montana law.
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 Bancshares 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 Merger by the Termination Date
is not due to a breach by the party seeking termination of any
of its obligations, representations or warranties under 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 Bancshares' stockholders,
unless otherwise provided) as follows:
7.2.1. MUTUAL CONSENT. By mutual consent of Bancshares and
Glacier, if the boards of directors of each party agrees to
terminate by a majority vote of its members.
7.2.2. BANCSHARES' CONDITIONS NOT MET. By Glacier's board of
directors if, by April 30, 1997, any condition
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set forth in Subsections 5.1 or 5.2 has not been satisfied.
7.2.3. BANCSHARES FAILS TO RECOMMEND STOCKHOLDER APPROVAL OR
OPTION BECOMES EXERCISABLE. By Glacier's board of directors (a)
before Bancshares' stockholders approve the Transaction, if
Bancshares' 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 Bancshares to Glacier under the Stock Option
Agreement becomes exercisable by Glacier, unless Glacier exercises
the Stock Option Agreement.
7.2.4. GLACIER FAILS TO RECOMMEND STOCKHOLDER APPROVAL. By
Bancshares' board of directors before Glacier's stockholders
approve the Transaction, if Glacier'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 Bancshares its recommendation to stockholders to
approve the Transaction.
7.2.5. CONDITIONS OF GLACIER NOT MET. By Bancshares' board of
directors if, by April 30, 1997, any condition set forth in
Subsections 5.1 or 5.3 has not been satisfied.
7.2.6. IMPRACTICABILITY. By either Glacier or Bancshares, upon
written notice given to the other party, if the party seeking
termination under this Subsection 7.2.6'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
governments of either the State of Delaware or the State of
Montana to restrain or invalidate the Transaction or this
Agreement.
7.2.7. DISCHARGE OF FIDUCIARY OBLIGATIONS. By Bancshares' board of
directors, if after Bancshares has received both a written
proposal for an acquisition of the shares or assets of Bancshares
and a written opinion from special counsel concluding termination
of the Agreement is necessary under this Subsection 7.2.7,
Bancshares' board of directors reasonably concludes that
termination of the Agreement is necessary in order for the board
of directors to discharge their fiduciary obligations to
Bancshares' stockholders.
7.2.8. ACQUISITION OF GLACIER. By Bancshares' board of directors,
if before Closing, Glacier agrees to, or announces its intention
to merge with, consolidate with,
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or sell all or substantially all of its assets, or sell the stock
or the assets of all of its subsidiaries, to another person,
company, or entity, including a bank holding company,
state-chartered bank, national bank, federal or state savings
bank, or savings and loan association.
7.2.9. DECLINE IN VALUE OF GLACIER STOCK. By Bancshares' board of
directors, in accordance with the following provisions:
(a) Subject to Subsection 7.2.9.(b), if the Average Closing
Price is less than $18.81.
(b) If Bancshares exercises its termination right under
Subsection 7.2.9.(a), it will give immediate written
notice to Glacier. If Glacier does not receive this
written notice by the fourth business day preceding the
Effective Date, this termination right expires and this
Agreement remains in effect in accordance with its terms.
If Bancshares properly exercises this termination right,
Glacier will have a two-business-day period beginning on
the day Glacier receives Bancshares' termination notice,
during which Glacier, by majority vote of its board of
directors, may elect to increase the consideration to be
received by Bancshares stockholders by using the Modified
Purchase Price to calculate the Exchange Ratio in place of
the Purchase Price. If Glacier so elects within the
two-business-day period, it will give immediate written
notice to Bancshares, and no termination will have
occurred under this Subsection 7.2.9, and this Agreement
will remain in effect in accordance with its terms (except
for the substitution of the Modified Purchase Price for
the Purchase Price).
7.2.10. INCREASE IN VALUE OF GLACIER STOCK. By Glaciers' board of
directors, in accordance with the following provisions:
(a) Subject to Subsection 7.2.10.(b), if the Average Closing
Price is more than $24.19.
(b) If Glacier exercises its termination right under
Subsection 7.2.10.(a), it will give immediate written
notice to Bancshares. If Bancshares does not receive this
written notice by the fourth business day preceding the
Effective Date, this termination right expires and this
Agreement remains in effect in accordance with its terms.
If Glacier
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properly exercises this termination right, Bancshares will
have a two-business-day period beginning on the day
Bancshares receives Glacier's termination notice, during
which Bancshares, by majority vote of its board of
directors, may elect to agree to decrease the
consideration to be received by Bancshares stockholders
and allow use of the Modified Purchase Price to calculate
the Exchange Ratio in place of the Purchase Price. If
Bancshares so elects within the two-business-day period,
it will give immediate written notice to Glacier, and no
termination will have occurred under this Subsection
7.2.10, and this Agreement will remain in effect in
accordance with its terms (except for the substitution of
the Modified Purchase Price for the Purchase Price).
7.2.11. CERTAIN DEFINITIONS. For purposes of Subsections 7.2.9 and
7.2.10, the terms listed below have the following meanings:
(a) Average Closing Price. "Average Closing Price" means the
average daily closing price of Glacier Common Stock during
the five trading days immediately preceding the fifth
business day before the Effective Date.
(b) Modified Purchase Price. The Modified Purchase Price will
be calculated in accordance with the formulas listed in
Subsections (1) and (2) of this Subsection 7.2.11.(b),
whichever applies. For purposes of this Subsection
7.2.11.(b), "MP" is the Modified Purchase Price and "ACP"
is the Average Closing Price. MP will be rounded to 2
decimals, rounding down if the number to the right of the
decimal is four or less or up if it is five or more.
(1) If the Average Closing Price is less than $18.81,
then:
MP = P X 18.81
---------
ACP
(2) If the Average Closing Price is greater than $24.19,
then:
MP = P X 24.19
---------
ACP
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7.3. BREAK-UP FEES.
7.3.1. BANCSHARES' LIABILITY. Due to expenses, direct and
indirect, incurred by Glacier in negotiating and executing this
Agreement and in taking steps to effect Transaction, Bancshares
will be liable to Glacier for $240,000 if (1) this Agreement
terminates because Bancshares does not use all reasonable efforts
to consummate the Transaction in accordance with the terms of this
Agreement; (2) Bancshares terminates this Agreement for any reason
other than the grounds for termination set forth in Subsections
7.1 (as long as 7.1(c) is true as to Bancshares), 7.2.1, 7.2.5,
7.2.6, or 7.2.9; or (3) Glacier terminates this Agreement under
Subsections 7.1 (but only if 7.1(c) is not true as to Bancshares),
7.2.2 or 7.2.3. If this $240,000 break-up fee becomes payable, it
will be payable on Glacier's demand and must be paid by Bancshares
within 3 days of the date Glacier makes the demand. Glacier's
rights under the Stock Option Agreement are in addition to this
Subsection 7.3.1, and this Subsection 7.3.1 does not limit or
restrict these rights or the circumstances under which Glacier may
exercise the Option.
7.3.2. GLACIER'S LIABILITY. Due to expenses, direct and indirect,
incurred by Bancshares in negotiating and executing this Agreement
and in taking steps to effect Transaction, Glacier will be liable
to Bancshares for $100,000 if (1) this Agreement terminates
because Glacier does not use all reasonable efforts to consummate
the Transaction in accordance with the terms of this Agreement, or
(2) Glacier terminates this Agreement for any reason other than
the grounds for termination set forth in Subsections 7.1 (as long
as 7.1(c) is true as to Glacier), 7.2.1, 7.2.2, 7.2.3, 7.2.6, or
7.2.10. If this $100,000 break-up fee becomes payable, it will be
payable on Bancshares' demand and must be paid by Glacier within 3
days of the date Bancshares makes the demand.
7.4. COST ALLOCATION UPON TERMINATION. In connection with the
termination of this Agreement under this Section 7, except as provided
in Subsection 7.3, Glacier and Bancshares 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,
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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
Bancshares Missoula Bancshares, Inc.
P.O. Box 4506
Missoula, MT 59806-4506
Attn: William L. Bouchee
with a copy to: Stephen J. Smith, Esq.
Attorney at Law
431 First Avenue West
P.O. Box 759
Kalispell, MT 59903
and Stephen J. Smith, of Counsel
Schwabe, Williamson, & Wyatt, P.C.,
1211 Southwest Fifth Avenue
Portland, Oregon 97204
8.2. WAIVERS AND EXTENSIONS. Subject to Section 9, Glacier or
Bancshares 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
and warranties 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
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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, WARRANTIES, AND COVENANTS. Except for
Subsection 4.9 (confidentiality), Subsection 7.3 (break-up fees) and
Subsection 7.4 (expense allocation), the representations, warranties
and covenants in this Agreement will not survive Closing or termination
of this Agreement.
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
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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 Bancshares, subject to the restrictions
set forth in Del. Corp. Stat. Section 251(d), 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 Bancshares'
stockholders have approved this Agreement, the parties' boards of directors may
not without Bancshares 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 Bancshares 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 August 9, 1996:
GLACIER BANCORP, INC.
By /s/ John S. MacMillan
------------------------------
Name: John S. MacMillan
Title: President and CEO
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MISSOULA BANCSHARES, INC.
By /s/ William L. Bouchee
------------------------------
Name: William L. Bouchee
Title: President and CEO
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<PAGE> 194
STATE OF MONTANA )
) ss.
COUNTY OF FLATHEAD )
On this 9th day of August, 1996, before me personally appeared John S.
MacMillan, to me known to be the 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 or she 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 )
On this 9th day of August, 1996, before me personally appeared William
L. Bouchee, to me known to be the President and Chief Executive Officer of
MISSOULA BANCSHARES, 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 or she 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 .
-------------
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The undersigned, all being officers or shareholders of either or
members of the board of directors of either Missoula Bancshares, Inc.
("Bancshares") or First Security Bank of Missoula ("Bank"), hereby consent to
the Plan and Agreement of Merger ("Agreement"), dated as of August 9, 1996,
between Glacier Bancorp, Inc. and Bancshares, 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 advise of counsel, to support and recommend the
Agreement's adoption by the other stockholders of Bancshares.
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 Bancshares from the date of
the Agreement through the meeting of the stockholders of Bancshares 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/ William L. Bouchee /s/ Bruce Budge
- -------------------------------- -------------------------------
William L. Bouchee Bruce Budge
Director of Bancshares and Bank Director of Bank
/s/ Patrick McDonald /s/ Douglas Lawrence
- -------------------------------- -------------------------------
Patrick McDonald Douglas Lawrence
Director of Bancshares Director of Bancshares
/s/ Allen Fetscher /s/ Harold Fraser
- -------------------------------- -------------------------------
Allen Fetscher Harold Fraser
Director of Bancshares and Bank Director of Bank
/s/ Craig A. Langel /s/ Dale Mahlum
- -------------------------------- -------------------------------
Craig A. Langel Dale Mahlum
Director of Bank Director of Bank
/s/ Earl Pruyn /s/ Christopher B. Swartley
- -------------------------------- -------------------------------
Earl Pruyn Christopher B. Swartley
Director of Bancshares and Bank Director of Bank
/s/ David Thiesen /s/ Robert T. Wuttke
- -------------------------------- -------------------------------
David Thiesen Robert T. Wuttke
Director of Bancshares and Bank Director of Bank
/s/ Kathy Ogren /s/ Weymouth Symmes
- -------------------------------- -------------------------------
Kathy Ogren Weymouth Symmes
Shareholder of Bancshares Bank Vice-President and Real
Estate Manager
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APPENDIX B
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of August 9, 1996,
is between MISSOULA BANCSHARES, INC. ("Bancshares"), a Montana corporation, and
GLACIER BANCORP, INC. ("Glacier"), a Delaware corporation.
Bancshares 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 Bancshares 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, Bancshares irrevocably grants an option ("Option") to
Glacier to purchase an aggregate of 11,980 authorized but unissued
shares of Bancshares' Common Stock, $10 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 $271 ("Option
Price"), which was the estimated fair market value of the Common Stock
at June 30, 1996.
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) Bancshares or its board of directors enters into an agreement or
recommends to Bancshares shareholders an agreement (other than the
Merger Agreement) pursuant to which any entity, person or group,
within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended ("Exchange Act") (any of the foregoing in
this Section 2.2, a "Person"), would: (i) merge or consolidate
with, acquire 51% or more of the assets or liabilities of, or
enter into any similar transaction with Bancshares, or (ii)
purchase or otherwise acquire (including by merger, consolidation,
share exchange or any similar transaction) securities representing
10% or more of the voting shares of Bancshares;
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(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 Bancshares) acquires the
beneficial ownership or the right to acquire beneficial ownership
of securities which, when aggregated with other such securities
owned by such Person, represents 10% or more of the voting shares
of Bancshares (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 Bancshares 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 Bancshares 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 Bancshares a proposal to
(i) acquire Bancshares (by merger, consolidation, the purchase of
51% or more of its assets or liabilities or any other similar
transaction, (ii) purchase or otherwise acquire securities
representing 25% or more of the voting shares of Bancshares or
(iii) change the composition of the board of directors of
Bancshares.
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 Bancshares complying with its fiduciary duties.
Notwithstanding the foregoing, the Option may not be exercised if
either (i) 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 (ii) 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 Bancshares is failing to perform or
observe its covenants or conditions under the Merger Agreement.
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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 Bancshares 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 Bancshares, and (c) Bancshares
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 Bancshares. Bancshares
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 Bancshares, has been
duly executed by a duly authorized officer of Bancshares and
constitutes a valid and binding obligation of Bancshares. No
shareholder approval by Bancshares shareholders is required by
applicable law or otherwise before the exercise of the Option in
whole or in part.
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(b) Option Shares. Bancshares 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 Bancshares.
(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 Bancshares or any agreement,
instrument, judgment, decree, law, rule or order applicable to
Bancshares or any subsidiary of Bancshares or to which Bancshares
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,
Bancshares 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 Bancshares as follows:
(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
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under any term of the articles 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, Bancshares
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 Bancshares 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 is bind on and inures to the benefit
of the parties and the successors of each. 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. Bancshares 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. Bancshares agrees that if for any reason Glacier or any
transferee will have exercised its rights under this Agreement and
Bancshares 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 Bancshares 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
obligations under this Agreement, then Bancshares will be entitled to
specific performance and injunctive and other equitable relief. This
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provision is without prejudice to any other rights that Bancshares 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 Bancshares 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 Bancshares or, except as provided in this Agreement, to
any notice of any meetings of shareholders or any other proceedings of
Bancshares.
13. Miscellaneous.
(a) Termination. This Agreement and the Option, to the extent not
previously exercised, will terminate upon the earliest of (i)
April 30, 1997; (ii) the mutual agreement of the parties to this
Agreement; (iii) 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, Bancshares 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 (1) April 30, 1997, or (2) 31 days
after the completion of the litigation and appeal procedure; (iv)
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 (v) 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
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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, 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 Bancshares to:
Missoula Bancshares, Inc.
P.O. Box 4506
Missoula, MT 59806-4506
Attn: William L. Bouchee
With a copy to:
Stephen J. Smith, Esq.
Attorney at Law
431 First Avenue West
P.O. Box 759
Kalispell, MT 59903
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
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(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.
(g) Effects of Headings. The section headings in this Agreement are
for convenience only and do not affect the interpretation or
meaning of its provisions.
Dated August 9, 1996:
GLACIER BANCORP, INC.
BY /s/ John S. MacMillan
-------------------------------
John S. MacMillan
Its: President and CEO
MISSOULA BANCSHARES, INC.
By: /s/ William L. Bouchee
-------------------------------
William L. Bouchee
Its: President and CEO
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APPENDIX C
"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
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(ii) the corporation is a subsidiary that is merged with its parent
corporation under 35-1-818;
(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
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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:
(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
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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 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
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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
(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:
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(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, 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
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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 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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APPENDIX D
October 4, 1996
Board of Directors
Missoula Bancshares, Inc.
1704 Dearborn
Missoula, Montana 59806
Members of the Board:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of Missoula Bancshares, Inc. and its
subsidiary, First Security Bank of Missoula ("MBI" or the "Company"), of the
consideration to be received by such shareholders pursuant to the terms of the
Merger Agreement and Plan of Merger, dated August 9, 1996 (the "Agreement"),
between MBI and Glacier Bancorp, Inc. ("GBCI").
In connection with the proposed merger transaction (the "Merger")
whereby MBI will be merged into GBCI each issued and outstanding share and
option of the Company 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 MBI, 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 22.53943
shares of GBCI common stock if the five-day average of the closing prices of
GBCI common stock five days prior to the closing date is above $18.81 and less
than $24.19 (the Merger "Consideration"), except for fractional shares which
will receive a proportional amount of cash.
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 Consideration
to be received by holders of the shares from GBCI pursuant to the Merger, CFAI
has advised Washington and Oregon
<PAGE> 212
Board of Directors
Missoula Bancshares, Inc.
October 4, 1996
Page 2
community banks regarding fairness of capital transactions. MBI has agreed to
pay CFAI a fee for this opinion letter.
In connection with rendering this opinion, we have, among other things:
(i) reviewed the Agreement; (ii) reviewed MBI's financial information for the
twelve months ended December 31, 1995 and the six months ended June 30,1996;
(iii) reviewed certain internal financial analyses and certain other forecasts
for the Company prepared by and reviewed with the management of the Company;
(iv) conducted interviews with senior management of the Company regarding the
past and current business operations, results thereof, financial condition and
future prospects of the Company; (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, 1995 and financial
information for the 6 months ended June 30, 1996 including the Form 10-KSB 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 the
Company 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 the
Company. 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 MBI.
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 MBI pursuant to the Agreement is fair, from a financial point of
view, to the shareholders of MBI.
<PAGE> 213
Board of Directors
Missoula Bancshares, Inc.
October 4, 1996
Page 3
We hereby consent to the reference to our firm in the proxy statement
or prospectus related to the merger transaction and to the inclusion of our
opinion as an exhibit to the proxy statement or prospectus related to the merger
transaction.
Very truly yours,
COLUMBIA FINANCIAL ADVISORS, INC.
By: /s/ Robert J. Rogowski
-------------------------------
Robert J. Rogowski
Principal
<PAGE> 214
APPENDIX E
October 4, 1996
Board of Directors
Glacier Bancorp, Inc.
202 Main Street
Kalispell, MT 59901
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 August 9, 1996 (the "Merger Agreement"),
between Glacier and Missoula Bancshares, Inc. ("Bancshares"). The Merger
Agreement provides for the merger (the "Merger") of Bancshares with and into
Glacier pursuant to which 100% of the outstanding shares of Bancshares will be
exchanged for shares of common stock of Glacier, as provided in the Merger
Agreement.
In arriving at our opinion, we have reviewed various financial and operating
information relating to Bancshares, including without limitation historical
financial reports of Bancshares and its subsidiaries, reports filed with bank
regulatory agencies, internal operating reports and analyses, asset quality
evaluations, and related information. We have also examined economic analyses
of and forecasts for Bancshares' market area and publicly available information
regarding other banking institutions operating in such market area. We have
also held discussions with Bancshares' management regarding the business,
recent operating results, and future prospects for Bancshares and its
subsidiary.
We have also considered financial and stock market data for Glacier, the pro
forma impact of the Merger on Glacier, and the views of Glacier management
concerning the financial, 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 Bancshares and
Glacier. We have also assumed the reasonableness of and relied upon the
estimates and judgments of management of Bancshares and Glacier 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 Bancshares or Glacier, 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.
<PAGE> 215
Board of Directors
Glacier Bancorp, Inc.
October 4, 1996
Page 5
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.
It is understood that this letter is intended solely for the benefit and use of
the Board of Directors of Glacier in its consideration of the Merger and is not
to be used for or characterized as serving any other purpose.
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.
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our
opinion as an exhibit to the proxy statement or prospectus related to the
merger transaction.
Very truly yours,
/s/ D.A. Davidson & Co.
D.A. Davidson & Co.
2
<PAGE> 1
EXHIBIT 5.1
STEPHEN M. KLEIN
(206) 340-9648
October 4, 1996
Board of Directors
Glacier Bancorp, Inc.
202 Main Street
Kalispell, Montana 59903
RE: ISSUANCE OF SECURITIES BY GLACIER BANCORP, INC. IN CONNECTION
WITH THE ACQUISITION OF SHARES OF MISSOULA BANCSHARES, INC.
Gentlemen:
As you know, we are acting as counsel for Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company ("Glacier"), in
connection with the registration under the Securities Act of 1933, as amended
("Act"), of a maximum of 1,200,000 shares of Glacier's common stock, $.01 par
value ("Shares"). A Registration Statement on Form S-4 ("Registration
Statement") is being filed with the Securities and Exchange Commission ("SEC")
under the Act with respect to the offering of the Shares pursuant to the
proposed acquisition of Missoula Bancshares, Inc. ("Bancshares"), a Montana
corporation and bank holding company.
In connection with the offering of the Shares, we have examined: (a)
the Plan and Agreement of Merger ("Merger Agreement") between Glacier and
Bancshares dated as of August 9, 1996, attached as Appendix A to the
Prospectus/Joint Proxy Statement included in the Registration Statement; (b) the
Registration Statement; and (c) such other documents as we have deemed necessary
to form the opinion expressed below. As to various questions of fact material to
such opinion, where relevant facts were not independently established, we have
relied upon statements of officers of Glacier.
Based and relying solely upon the foregoing, we advise you that in our
opinion, the Shares, or any portion thereof, when issued pursuant to the Merger
Agreement after the Registration Statement has become effective under the Act,
will be legally issued under the laws of the State of Delaware and will be fully
paid and nonassessable.
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement and to the legal reference to this firm under the
caption "Certain Legal Matters" as having passed upon the validity of the
Shares. This consent shall not be construed to cause us to
<PAGE> 2
Board of Directors
Glacier Bancorp, Inc.
October 4, 1996
Page 2
be in the category of persons whose consent is required to be filed pursuant to
Section 7 of the Act, or the rules and regulations of the SEC promulgated under
the Act.
This opinion has been prepared solely for your use in connection with
the Registration Statement and, in that regard, may also be relied upon by the
shareholders of Bancshares.
Very truly yours,
GRAHAM & DUNN P.C.
<PAGE> 1
EXHIBIT 8.1
THOMAS H. NELSON
(206) 340-9654
October 4, 1996
Glacier Bancorp, Inc. Missoula Bancshares, Inc.
202 Main Street 1704 Dearborn
Kalispell, Montana 59903 Missoula, Montana 59801
Re: Holding Company Merger / Tax Consequences
Ladies and Gentlemen:
This letter responds to your request for our opinion as to certain of
the federal income tax consequences of the proposed merger (the "Merger") of
Missoula Bancshares, Inc. ("Missoula") into Glacier Bancorp, Inc. ("Glacier").
We have acted as legal counsel to Missoula and Glacier in connection
with the Merger. For the purpose of rendering this opinion, we have examined and
relied upon originals, certified copies, or copies otherwise identified to our
satisfaction as being true copies of the originals of the following documents,
including all exhibits and schedules attached to them:
(a) The Plan and Agreement of Merger, dated as of August 9, 1996,
between Glacier and Missoula (the "Merger Agreement");
(b) Form S-4 Registration Statement of Glacier filed with the
Securities and Exchange Commission on [October 4, 1996];
(c) The Proxy Statement of Missoula (included as part of the
Registration Statement);
(d) The factual representations set forth in a letter from Glacier
and Missoula, dated ___________________, 1996; and
(e) Such other documents, instruments, records and information
pertaining to the Merger as we have deemed necessary for
rendering our opinion.
We have assumed, without independent investigation or review, the
accuracy and completeness of the facts and representations and warranties
contained in those documents or otherwise made known to us, and that the Merger
will be effected in accordance with the terms of the Merger Agreement.
<PAGE> 2
Glacier Bancorp, Inc.
Missoula Gancshares, Inc.
October 4, 1996
Page 2
In connection with the Merger and pursuant to the Merger Agreement,
each share of Missoula voting common stock will be exchanged for that number of
shares of Glacier voting common stock based on the exchange rate established in
the Merger Agreement. No fractional shares will be involved. Missoula
shareholders who perfect their dissenters rights under state law will be paid
the cash value for their Missoula shares. Such payments will be made by Missoula
without reimbursement by Glacier. Upon the consummation of the Merger, Glacier
will continue the historic business of Missoula.
Based upon our review of the facts described above and our analysis of
the law, and subject to the qualifications and limitations set forth herein, and
the completion of the transactions described in the matter contemplated, it is
our opinion that:
1. The merger of Missoula into Glacier solely for Glacier voting common
stock, as described above, will constitute a reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code, as
amended (the "Code"). Missoula and Glacier will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Missoula shareholders upon the
receipt of Glacier voting common stock solely in exchange for their
shares of Missoula stock, pursuant to Section 354(a)(1) of the Code.
3. The basis of the shares of Glacier voting common stock received by
Missoula shareholders will be the same as the basis of the Missoula
stock surrendered in exchange therefor, pursuant to Section 358(a)(1)
of the Code.
4. The holding period of the shares of Glacier voting common stock
received by Missoula shareholders will include the holding period
during which the Missoula stock surrendered in exchange therefor was
held, provided that the shares of Missoula stock were held as a capital
asset in the hands of the exchanging shareholders on the date of the
exchange, pursuant to Section 1223(1) of the Code.
5. Where cash is received by any dissenting shareholder of Missoula in
exchange for the surrender of all of such shareholder's Missoula stock,
the cash will be treated as received by the shareholder as a
distribution in redemption of his or her VB stock, subject to the
provisions and limitation of Section 302 of the Code.
6. No gain or loss will be recognized by Missoula upon the transfer of its
assets to Glacier, pursuant to Sections 361 and 357(a) of the Code.
7. The basis of the assets of Missoula acquired by Glacier will be the
same as the basis of Missoula in the assets immediately before the
Merger, pursuant to Section 362(b) of the Code.
<PAGE> 3
Glacier Bancorp, Inc.
Missoula Gancshares, Inc.
October 4, 1996
Page 3
8. The holding period of the assets acquired by Glacier will include the
period such assets were held by Missoula, pursuant to Section 1223(2)
of the Code.
9. No gain or loss will be recognized by Glacier upon the receipt by
Glacier of the assets of Missoula, as described above.
Our opinion represents only our best legal judgment as to the probable
federal income tax consequences of the transaction described, based upon
existing law. Our opinion is not intended to be a conclusive statement as to all
of the tax consequences of the transaction and is expressly limited to the
matters addressed. Further, our opinion is not binding upon the Internal Revenue
Service (the "IRS") or any court and has no official status of any kind, and no
private ruling regarding the matters discussed has been or will be requested
from the IRS. The IRS has ruled in a number of private rulings that transactions
substantially identical to the Merger result in tax consequences consistent with
those described in this opinion. Although such rulings do not constitute
authority on which we can rely in expressing our opinion, such rulings generally
do reflect the position of the IRS. Each shareholder, however, is urged to
consult with his or her own tax advisor with respect to their individual tax
situation. Our opinion is intended solely for the benefit of Glacier, the
shareholders of Glacier and the shareholders of Missoula, and may not be relied
upon for any other purpose or by any other person or entity or made available to
any other person or entity without our prior written consent.
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement and to the legal reference to this firm under the
caption "Certain Legal Matters" concerning certain tax matters relating to the
Merger. This consent shall not be construed to cause us to be in the category of
persons whose consent is required to be filed pursuant to Section 7 of the Act,
or the rules and regulations of the SEC promulgated under the Act.
Very truly yours,
GRAHAM & DUNN
<PAGE> 1
EXHIBIT 10.2
FIRST SECURITY BANK OF MISSOULA
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), signed August 9, 1996, between
FIRST SECURITY BANK OF MISSOULA ("Bank") and WILLIAM L. BOUCHEE ("Bouchee") and
ratified by GLACIER BANCORP, INC., takes effect on the effective date of the
Merger ("Effective Date").
RECITALS
A. Glacier Bancorp, Inc. ("Glacier") has entered into a Plan and Agreement
of Merger ("Merger Agreement") with Missoula Bancshares, Inc.
("Bancshares") under which Bancshares will merge with and into Glacier
("Merger"). Bancshares presently owns approximately 99% of the
outstanding shares of common stock of the Bank. Immediately following
the Merger, the Bank will be a subsidiary of Glacier.
B. Before the Merger, Bouchee has served as President and CEO of the Bank.
C. Glacier and the Bank desire Bouchee to continue his employment at the
Bank under the terms and conditions of this Agreement.
D. Bouchee desires to continue his employment at the Bank under the terms
and conditions of this Agreement.
AGREEMENT
In consideration of the promises set forth in this Agreement, the
parties agree as follows.
1. EMPLOYMENT. The Bank agrees to employ Bouchee and Bouchee accepts
employment by the Bank on the terms and conditions set forth in this Agreement.
Bouchee's title will be President and Chief Executive Officer of the Bank.
During the Term of this Agreement, Bouchee will serve as a director of the Bank
and, if elected by Glacier's shareholders, will also serve as a director of
Glacier. Glacier will nominate Bouchee at shareholder meetings where directors
are elected to serve as a director of Glacier throughout the term of this
Agreement.
2. EFFECTIVE DATE AND TERM.
(a) Effective Date. This Agreement is effective as of the Effective
Date.
(b) Term. The term of this Agreement ("Term") is three years,
beginning on the Effective Date.
(c) Abandonment or Termination of the Merger. This Agreement is void
if the Merger Agreement is terminated in accordance with its
terms.
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<PAGE> 2
3. DUTIES. The Bank will employ Bouchee as its President and Chief
Executive Officer. Bouchee will faithfully and diligently perform his assigned
duties, which are as follows:
(a) Bank Performance. Bouchee will be responsible for all aspects of
the Bank's performance, including without limitation, directing
that daily operational and managerial matters are performed in a
manner consistent with Glacier's and the Bank's policies.
(b) Development and Preservation of Business. Bouchee will be
responsible for the development and preservation of banking
relationships and other business development efforts (including
appropriate civic and community activities) in Missoula County,
Montana.
(c) Report to Board. Bouchee will report directly to the Bank's board
of directors and to the Chief Executive Officer of Glacier. The
Bank's board of directors may, from time to time, modify
Bouchee's title or add, delete, or modify Bouchee's performance
responsibilities to accommodate management succession, as well as
any other management objectives of the Bank or of Glacier.
Bouchee will assume any additional positions, duties, and
responsibilities as may reasonably be requested of him with or
without additional compensation, as appropriate and consistent
with Sections (a) and (b) of this Agreement.
4. EXTENT OF SERVICES. Bouchee will devote all of his working time,
attention and skill to the duties and responsibilities set forth in Section . To
the extent that such activities do not interfere with his duties under Section
3, Bouchee may participate in other businesses as a passive investor, but (a)
Bouchee may not actively participate in the operation or management of those
businesses, and (b) Bouchee may not, without the Bank's prior written consent,
make or maintain any investment in a business with which the Bank and/or Glacier
has an existing competitive or commercial relationship.
5. SALARY. Initially, Bouchee will receive a salary of $97,440 per year,
to be paid monthly in accordance with the Bank's regular payroll schedule.
Subject to the Bank's annual review of Bouchee's compensation, in connection
with the advice and recommendations of the Chief Executive Officer of Glacier,
Bouchee's annual salary will be increased to $102,312 on January 1, 1998 and to
$107,424 on January 1, 1999.
6. INCENTIVE COMPENSATION. Each year during the Term, the Bank's
board of directors, subject to ratification by Glacier's board of
directors, will determine the amount of bonus to be paid by the Bank
to Bouchee for that year. In making this determination, the Bank's
board of directors will consider factors such as Bouchee's
performance of his duties and the safety, soundness and
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<PAGE> 3
profitability of the Bank. Bouchee's bonus will reflect Bouchee's contribution
to the performance of the Bank during the year, also taking into account the
nature and extent of incentive bonuses paid to comparable senior officers at
Glacier. This bonus will be paid to Bouchee no later than January 31 of the year
following the year in which the bonus is earned by Bouchee.
7. INCOME DEFERRAL. Bouchee will be eligible to participate in any program
available to the Bank's and Glacier's senior management for income deferral, for
the purpose of deferring receipt of any or all of the compensation he may become
entitled to under this Agreement.
8. VACATION AND BENEFITS.
(a) Vacation and Holidays. Bouchee will receive the greater of (1)
four weeks of paid vacation each year or (2) the vacation
benefits set forth in Glacier's schedule for senior employees
with Bouchee's years of service with the Bank, in addition to all
holidays observed by the Bank. Each year, Bouchee may carry over
only up to two weeks of unused vacation. Any unused vacation time
in excess of two weeks will not accumulate or carry over from one
calendar year to the next.
(b) Benefits. Bouchee will be entitled to participate in any group
life insurance, disability, health and accident insurance plans,
profit sharing and pension plans and in other employee fringe
benefit programs the Bank or Glacier may have in effect from time
to time for its similarly situated employees, in accordance with
and subject to any policies adopted by the Bank's or Glacier's
board of directors with respect to the plans or programs,
including without limitation, any incentive or employee stock
option plan, deferred compensation plan, 401(k) plan, and
Supplemental Executive Retirement Plan (SERP). Neither the Bank
nor Glacier through this Agreement obligates itself to make any
particular benefits available to its employees.
(c) Business Expenses. The Bank will reimburse Bouchee for ordinary
and necessary expenses (including, without limitation, travel,
entertainment, and similar expenses) incurred in performing and
promoting the Bank's business. These will include continuation of
the following benefits as in effect on the date this Agreement
was signed: (1) Country Club membership and dues, (2) University
of Montana Grizzly Athletic Association membership dues and
tickets at the Golden Grizzly level, and (3) use of a vehicle
provided by the Bank. Bouchee will present from time to time
itemized accounts of these expenses, subject to any limits of
Bank policy or the rules and regulations of the Internal Revenue
Service.
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<PAGE> 4
9. TERMINATION OF EMPLOYMENT.
(a) Termination By Bank for Cause. If the Bank terminates Bouchee's
employment for Cause (defined below) before this Agreement
terminates the Bank will pay Bouchee the salary earned and
expenses reimbursable under this Agreement incurred through the
date of his termination. Bouchee will have no right to receive
compensation or other benefits for any period after termination
under this Section .
(b) Other Termination By Bank. If the Bank terminates Bouchee's
employment without Cause before this Agreement terminates, or
Bouchee terminates his employment for Good Reason (defined
below), the Bank will pay Bouchee for the remainder of the Term
the compensation and other benefits he would have been entitled
to if his employment had not terminated.
(c) Death or Disability. This Agreement terminates (1) if Bouchee
dies or (2) if Bouchee is unable to perform his duties and
obligations under this Agreement for a period of 90 days as a
result of a physical or mental disability arising at any time
during the term of this Agreement, unless with reasonable
accommodation Bouchee could continue to perform his duties under
this Agreement and making these accommodations would not require
the Bank to expend any funds. If termination occurs under this
Section , Bouchee or his estate will be entitled to receive all
compensation and benefits earned and expenses reimbursable
through the date Bouchee's employment terminated.
(d) Termination Related to a Change in Control.
(1) Termination by Bank. If the Bank, or its successor in
interest by merger, or its transferee in the event of a
purchase in an assumption transaction, (for reasons other
than Bouchee's death, disability, or Cause) (1) terminates
Bouchee's employment within one year following a Change in
Control (as defined below) or (2) terminates Bouchee's
employment before the Change in Control but on or after the
date that any party either announces or is required by law
to announce any prospective Change in Control transaction
and a Change in Control occurs within six months after the
termination, the Bank will provide Bouchee with the payment
and benefits described in Section (3).
(2) Termination by Bouchee. If Bouchee terminates Bouchee's
employment, with or without Good Reason, within one year
following a Change in Control, the
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<PAGE> 5
Bank will provide Bouchee with the payment and benefits
described in Section (3).
(3) Payments. If Section (1) or (2) is triggered as described in
those Sections, the Bank will: (i) pay Bouchee a single
payment in an amount equal to Bouchee's annual salary
(determined as of the day before the date Bouchee's
employment was terminated) and (ii) maintain and provide for
one-year following Bouchee's termination, at no cost to
Bouchee, the benefits described in Section to which Bouchee
is entitled (determined as of the day before the date of
such termination); but if Bouchee's participation in any
such benefit is thereafter barred or not feasible, or
discontinued or materially reduced, the Bank will arrange to
provide Bouchee with either benefits substantially similar
to those benefits or a cash payment of substantially similar
value in lieu of the benefits.
(e) Limitations on Payments Related to Change in Control. The
following apply notwithstanding any other provision of this
Agreement:
(1) the total of the payments and benefits described in Section
(3) will be less than the amount that would cause them to be
a "parachute payment" within the meaning of Section
280G(b)(2)(A) of the Internal Revenue Code;
(2) the payments and benefits described in Section (3) will be
reduced by any compensation (in the form of cash or other
benefits) received by Bouchee from the Bank or its successor
after the Change in Control; and
(3) Bouchee's right to receive the payments and benefits
described in Section (3) terminates (i) immediately, if
before the Change in Control transaction closes, Bouchee
terminates his employment without Good Reason or the Bank
terminates Bouchee's employment for Cause, or (ii) one year
after a Change in Control occurs.
(f) Return of Bank Property. If and when Bouchee ceases, for any
reason, to be employed by the Bank, Bouchee must return to the
Bank all keys, pass cards, identification cards and any other
property of the Bank or Glacier. At the same time, Bouchee also
must return to the Bank all originals and copies (whether in hard
copy, electronic or other form) of any documents, drawings,
notes, memoranda, designs, devices, diskettes, tapes, manuals,
and specifications which constitute proprietary information or
material of the Bank or Glacier. The obligations in this
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<PAGE> 6
paragraph include the return of documents and other materials
which may be in his desk at work, in his car, in place of
residence, or in any other location under his control.
(g) Cause. "Cause" means any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Bouchee's duties;
(ii) Conviction of a crime in connection with his duties;
(iii) Conduct demonstrably and significantly harmful to
the Bank, as reasonably determined on the advice of legal
counsel by the Bank's board of directors; or
(iv) Permanent disability, meaning a physical or mental
impairment which renders Bouchee incapable of
substantially performing the duties required under this
Agreement, and which is expected to continue rendering
Bouchee so incapable for the reasonably foreseeable
future.
(h) Good Reason. "Good Reason" means only any one or more of the
following:
(i) Reduction of Bouchee's salary or reduction or
elimination of any compensation or benefit plan
benefitting Bouchee, unless the reduction or elimination
is generally applicable to substantially all Bank
employees (or employees of a successor or controlling
entity of the Bank) formerly benefitted;
(ii) The assignment to Bouchee without his consent of any
authority or duties materially inconsistent with Bouchee's
position as of the date of this Agreement; or
(iii) A relocation or transfer of Bouchee's principal
place of employment that would require Bouchee to commute
on a regular basis more than 10 miles each way from
Missoula.
(i) Change in Control. "Change in Control" means a change "in the
ownership or effective control" or "in the ownership of a
substantial portion of the assets" of the Bank, within the
meaning of section 280G of the Internal Revenue Code.
10. CONFIDENTIALITY. Bouchee will not, after the date this Agreement was
signed, including during and after its Term, use for his own purposes or
disclose to any other person or entity any confidential business information
concerning the Bank or Glacier or
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<PAGE> 7
their business operations, unless (1) the Bank or Glacier consents to the use or
disclosure of their respective confidential information; (2) the use or
disclosure is consistent with Bouchee's duties under this Agreement or (3)
disclosure is required by law or court order. For purposes of this Agreement,
confidential business information includes, without limitation, trade secrets
(as defined under the Montana Uniform Trade Secrets Act, Montana Code Section
30-14- 402), various confidential information concerning all aspects of current
and future operations, nonpublic information on investment management practices,
marketing plans, pricing structure and technology of either the Bank or Glacier.
Bouchee will also treat the terms of this Agreement as confidential business
information.
11. NONCOMPETITION. During the Term and the terms of any extensions or
renewals of this Agreement and for a period equal to the lesser of (a) two years
after Bouchee's employment with the Bank and Glacier has terminated or (b) three
years from Closing of the Merger, Bouchee will not, directly or indirectly, as a
shareholder, director, officer, employee, partner, agent, consultant, lessor,
creditor or otherwise:
(a) provide management, supervisory or other similar services to any
person or entity engaged in any business in Missoula County,
Montana which is competitive with the business of the Bank or
Glacier as conducted during the term of this Agreement or as
conducted as of the date of termination of employment;
(b) persuade or entice, or attempt to persuade or entice, any
employee of the Bank or Glacier to terminate his/her employment
with the Bank or Glacier; or
(c) persuade or entice or attempt to persuade or entice, any person
or entity to terminate, cancel, rescind or revoke its business or
contractual relationships with the Bank or Glacier.
12. ENFORCEMENT.
(a) The Bank and Bouchee stipulate that, in light of all of the facts
and circumstances of the relationship between Bouchee and the
Bank, the agreements referred to in Sections and (including
without limitation their scope, duration and geographic extent)
are fair and reasonably necessary for the protection of the
Bank's and Glacier's confidential information, goodwill and other
protectable interests. If a court of competent jurisdiction
should decline to enforce any of those covenants and agreements,
Bouchee and the Bank request the court to reform these provisions
to restrict Bouchee's use of confidential information and
Bouchee's ability to compete with the Bank and Glacier to the
maximum extent, in time, scope of activities, and geography, the
court finds enforceable.
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<PAGE> 8
(b) Bouchee acknowledges the Bank and Glacier will suffer immediate
and irreparable harm that will not be compensable by damages
alone if Bouchee repudiates or breaches any of the provisions of
Sections or or threatens or attempts to do so. For this reason,
under these circumstances, the Bank, in addition to and without
limitation of any other rights, remedies or damages available to
it at law or in equity, will be entitled to obtain temporary,
preliminary and permanent injunctions in order to prevent or
restrain the breach, and the Bank will not be required to post a
bond as a condition for the granting of this relief.
13. COVENANTS. Bouchee specifically acknowledges the receipt of adequate
consideration for the covenants contained in Sections and and that the Bank is
entitled to require him to comply with these Sections. These Sections will
survive termination of this Agreement. Bouchee represents that if his employment
is terminated, whether voluntarily or involuntarily, Bouchee has experience and
capabilities sufficient to enable Bouchee to obtain employment in areas which do
not violate this Agreement and that the Bank's enforcement of a remedy by way of
injunction will not prevent Bouchee from earning a livelihood.
14. ARBITRATION.
(a) 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.
(b) Governing Law. All proceedings will be held at a place designated
by the arbitrator in Flathead County, Montana. The arbitrator, in
rendering a decision as to any state law claims, will apply
Montana law.
(c) Exception to Arbitration. Notwithstanding the above, if Bouchee
violates Section or , the Bank will have the
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<PAGE> 9
right to initiate the court proceedings described in Section , in
lieu of an arbitration proceeding under this Section 14.
15. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties concerning its
subject matter and supersedes all prior agreements,
correspondence, representations, or understandings between the
parties relating to its subject matter.
(b) Binding Effect. This Agreement will bind and inure to the benefit
of the Bank's, Glacier's and Bouchee's heirs, legal
representatives, successors and assigns.
(c) Litigation Expenses. If either party successfully seeks to
enforce any provision of this Agreement or to collect any amount
claimed to be due under it, this party will be entitled to
reimbursement from the other party for any and all of its
out-of-pocket expenses and costs including, without limitation,
reasonable attorneys' fees and costs incurred in connection with
the enforcement or collection.
(d) Waiver. Any waiver by a party of its rights under this Agreement
must be written and signed by the party waiving its rights. A
party's waiver of the other party's breach of any provision of
this Agreement will not operate as a waiver of any other breach
by the breaching party.
(e) Assignment. The services to be rendered by Bouchee under this
Agreement are unique and personal. Accordingly, Bouchee may not
assign any of his rights or duties under this Agreement.
(f) Amendment. This Agreement may be modified only through a written
instrument signed by both parties.
(g) Severability. The provisions of this Agreement are severable. The
invalidity of any provision will not affect the validity of other
provisions of this Agreement.
(h) 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.
(i) Counterparts. This Agreement 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.
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<PAGE> 10
Signed August 9, 1996:
THE FIRST SECURITY BANK OF MISSOULA:
By: /s/ Allen Fetscher
Its: Chairman of the Board
WILLIAM L. BOUCHEE:
/s/ William L. Bouchee
Ratified August 9, 1996
GLACIER BANCORP, INC.
By: /s/ John S. MacMillan
Its: President and CEO
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<PAGE> 1
EXHIBIT 10.3
FIRST SECURITY BANK OF MISSOULA
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), signed August 9, 1996, between
FIRST SECURITY BANK OF MISSOULA ("Bank") and HAROLD FRASER ("Fraser") and
ratified by GLACIER BANCORP, INC., takes effect on the effective date of the
Merger ("Effective Date").
RECITALS
A. Glacier Bancorp, Inc. ("Glacier") has entered into a Plan and Agreement
of Merger ("Merger Agreement") with Missoula Bancshares, Inc.
("Bancshares") under which Bancshares will merge with and into Glacier
("Merger"). Bancshares presently owns approximately 99% of the
outstanding shares of common stock of the Bank. Immediately following
the Merger, the Bank will be a subsidiary of Glacier.
B. Before the Merger, Fraser has served as the Bank's Senior Vice-
President.
C. Glacier and the Bank desire Fraser to continue his employment at the
Bank under the terms and conditions of this Agreement.
D. Fraser desires to continue his employment at the Bank under the terms
and conditions of this Agreement.
AGREEMENT
In consideration of the promises set forth in this Agreement, the
parties agree as follows.
1. EMPLOYMENT. The Bank agrees to employ Fraser and Fraser accepts
employment by the Bank on the terms and conditions set forth in this Agreement.
Fraser's title will be Senior Vice-President, Loans.
2. EFFECTIVE DATE AND TERM.
(a) Effective Date. This Agreement is effective as of the Effective
Date.
(b) Term. The term of this Agreement ("Term") is three years,
beginning on the Effective Date.
(c) Abandonment or Termination of the Merger. This Agreement is void
if the Merger Agreement is terminated in accordance with its
terms.
3. DUTIES. The Bank will employ Fraser as its Senior Vice-President,
Loans. Fraser will faithfully and diligently perform his assigned duties, which
are as follows:
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(a) Performance of Loan Department. Fraser will be responsible for
the Bank's loan functions, including development of loan
policies, and all aspects of the performance of the Bank's
commercial loan department, including without limitation,
directing that daily operational and managerial matters are
performed in a manner consistent with Glacier's and the Bank's
policies.
(b) Development and Preservation of Business. Fraser will be
responsible for the development and preservation of banking
relationships and other business development efforts (including
appropriate civic and community activities) in Missoula County,
Montana.
(c) Report to Chief Executive Officer and Board. Fraser will report
directly to the Bank's Chief Executive Officer. Fraser will also
report to the Bank's board of directors upon their request.
(d) Modification of Duties. The Bank's board of directors may, from
time to time, modify Fraser's title or add, delete, or modify
Fraser's performance responsibilities to accommodate management
succession, as well as any other management objectives of the
Bank or of Glacier. Fraser will assume any additional positions,
duties, and responsibilities as may reasonably be requested of
him with or without additional compensation, as appropriate and
consistent with Sections 3(a) and 3(b) of this Agreement.
4. EXTENT OF SERVICES. Fraser will devote all of his working time,
attention and skill to the duties and responsibilities set forth in Section 3.
To the extent that such activities do not interfere with his duties under
Section 3, Fraser may participate in other businesses as a passive investor, but
(a) Fraser may not actively participate in the operation or management of those
businesses, and (b) Fraser may not, without the Bank's prior written consent,
make or maintain any investment in a business with which the Bank and/or Glacier
has an existing competitive or commercial relationship.
5. SALARY. Initially, Fraser will receive a salary of $73,716 per year, to
be paid monthly in accordance with the Bank's regular payroll schedule. Subject
to the Bank's annual review of Fraser's compensation, in connection with the
advice and recommendations of the Chief Executive Officer of Glacier, Fraser's
annual salary will be increased to $77,400 on January 1, 1998 and to $81,264 on
January 1, 1999.
6. INCENTIVE COMPENSATION. Each year during the Term, the Bank's board of
directors, subject to ratification by Glacier's board of directors, will
determine the amount of bonus to be paid by the Bank to Fraser for that year. In
making this determination, the Bank's board of directors will consider factors
such as Fraser's
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<PAGE> 3
performance of his duties and the safety, soundness and profitability of the
Bank. Fraser's bonus will reflect Fraser's contribution to the performance of
the Bank during the year, also taking into account the nature and extent of
incentive bonuses paid to comparable senior officers at Glacier. This bonus will
be paid to Fraser no later than January 31 of the year following the year in
which the bonus is earned by Fraser.
7. INCOME DEFERRAL. Fraser will be eligible to participate in any program
available to the Bank's and Glacier's senior management for income deferral, for
the purpose of deferring receipt of any or all of the compensation he may become
entitled to under this Agreement.
8. VACATION AND BENEFITS.
(a) Vacation and Holidays. Fraser will receive the greater of (1)
four weeks of paid vacation each year or (2) the vacation
benefits set forth in Glacier's schedule for senior employees
with Fraser's years of service with the Bank, in addition to all
holidays observed by the Bank. Each year, Fraser may carry over
only up to two weeks of unused vacation. Any unused vacation time
in excess of two weeks will not accumulate or carry over from one
calendar year to the next.
(b) Benefits. Fraser will be entitled to participate in any group
life insurance, disability, health and accident insurance plans,
profit sharing and pension plans and in other employee fringe
benefit programs the Bank or Glacier may have in effect from time
to time for its similarly situated employees, in accordance with
and subject to any policies adopted by the Bank's or Glacier's
board of directors with respect to the plans or programs,
including without limitation, any incentive or employee stock
option plan, deferred compensation plan, 401(k) plan, and
Supplemental Executive Retirement Plan (SERP). Neither the Bank
nor Glacier through this Agreement obligates itself to make any
particular benefits available to its employees.
(c) Business Expenses. The Bank will reimburse Fraser for ordinary
and necessary expenses (including, without limitation, travel,
entertainment, and similar expenses) incurred in performing and
promoting the Bank's business. Fraser will present from time to
time itemized accounts of these expenses, subject to any limits
of Bank policy or the rules and regulations of the Internal
Revenue Service. The Bank will continue to provide Fraser with
University of Montana Grizzly Athletic Association membership
dues and tickets at the Golden Grizzly level, as in effect on the
date this Agreement was signed. The Bank will also pay Fraser's
membership and dues at a country club approved by Glacier (which
approval will not be unreasonably withheld) in Seeley Lake.
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<PAGE> 4
9. TERMINATION OF EMPLOYMENT.
(a) Termination By Bank for Cause. If the Bank terminates Fraser's
employment for Cause (defined below) before this Agreement
terminates the Bank will pay Fraser the salary earned and
expenses reimbursable under this Agreement incurred through the
date of his termination. Fraser will have no right to receive
compensation or other benefits for any period after termination
under this Section 9.(a).
(b) Other Termination By Bank. If the Bank terminates Fraser's
employment without Cause before this Agreement terminates, or
Fraser terminates his employment for Good Reason (defined below),
the Bank will pay Fraser for the remainder of the Term the
compensation and other benefits he would have been entitled to if
his employment had not terminated.
(c) Death or Disability. This Agreement terminates (1) if Fraser dies
or (2) if Fraser is unable to perform his duties and obligations
under this Agreement for a period of 90 days as a result of a
physical or mental disability arising at any time during the term
of this Agreement, unless with reasonable accommodation Fraser
could continue to perform his duties under this Agreement and
making these accommodations would not require the Bank to expend
any funds. If termination occurs under this Section 9.(c), Fraser
or his estate will be entitled to receive all compensation and
benefits earned and expenses reimbursable through the date
Fraser's employment terminated.
(d) Termination Related to a Change in Control.
(1) Termination by Bank. If the Bank, or its successor in
interest by merger, or its transferee in the event of a
purchase in an assumption transaction, (for reasons other
than Fraser's death, disability, or Cause) (1) terminates
Fraser's employment within one year following a Change in
Control (as defined below) or (2) terminates Fraser's
employment before the Change in Control but on or after the
date that any party either announces or is required by law
to announce any prospective Change in Control transaction
and a Change in Control occurs within six months after the
termination, the Bank will provide Fraser with the payment
and benefits described in Section 9.(d)(3).
(2) Termination by Fraser. If Fraser terminates Fraser's
employment, with or without Good Reason, within one year
following a Change in Control, the Bank will provide Fraser
with the payment and benefits described in Section 9.(d)(3).
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<PAGE> 5
(3) Payments. If Section 9.(d)(1) or (2) is triggered as
described in those Sections, the Bank will: (i) pay Fraser a
single payment in an amount equal to Fraser's annual salary
(determined as of the day before the date Fraser's
employment was terminated) and (ii) maintain and provide for
one-year following Fraser's termination, at no cost to
Fraser, the benefits described in Section 8.(b) to which
Fraser is entitled (determined as of the day before the date
of such termination); but if Fraser's participation in any
such benefit is thereafter barred or not feasible, or
discontinued or materially reduced, the Bank will arrange to
provide Fraser with either benefits substantially similar to
those benefits or a cash payment of substantially similar
value in lieu of the benefits.
(e) Limitations on Payments Related to Change in Control. The
following apply notwithstanding any other provision of this
Agreement:
(1) the total of the payments and benefits described in Section
9.(d)(3) will be less than the amount that would cause it to
be a "parachute payment" within the meaning of Section
280G(b)(2)(A) of the Internal Revenue Code;
(2) the payments and benefits described in Section 9.(d)(3) will
be reduced by any compensation (in the form of cash or other
benefits) received by Fraser from the Bank or its successor
after the Change in Control; and
(3) Fraser's right to receive the payments and benefits
described in Section 9.(d)(3) terminates (i) immediately, if
before the Change in Control transaction closes, Fraser
terminates his employment without Good Reason or the Bank
terminates Fraser's employment for Cause, or (ii) one year
after a Change in Control occurs.
(f) Return of Bank Property. If and when Fraser ceases, for any
reason, to be employed by the Bank, Fraser must return to the
Bank all keys, pass cards, identification cards and any other
property of the Bank or Glacier. At the same time, Fraser also
must return to the Bank all originals and copies (whether in hard
copy, electronic or other form) of any documents, drawings,
notes, memoranda, designs, devices, diskettes, tapes, manuals,
and specifications which constitute proprietary information or
material of the Bank or Glacier. The obligations in this
paragraph include the return of documents and other materials
which may be in his desk at work, in his car, in
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<PAGE> 6
place of residence, or in any other location under his control.
(g) Cause. "Cause" means any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Fraser's duties;
(ii) Conviction of a crime in connection with his duties;
(iii) Conduct demonstrably and significantly harmful to
the Bank as reasonably determined on the advice of legal
counsel by the Bank's board of directors; or
(iv) Permanent disability, meaning a physical or mental
impairment which renders Fraser incapable of substantially
performing the duties required under this Agreement, and
which is expected to continue rendering Fraser so
incapable for the reasonably foreseeable future.
(h) Good Reason. "Good Reason" means only any one or more of the
following:
(i) Reduction of Fraser's salary or reduction or
elimination of any compensation or benefit plan
benefitting Fraser, unless the reduction or elimination is
generally applicable to substantially all Bank employees
(or employees of a successor or controlling entity of the
Bank) formerly benefitted;
(ii) The assignment to Fraser without his consent of any
authority or duties materially inconsistent with Fraser's
position as of the date of this Agreement; or
(iii) A relocation or transfer of Fraser's principal place
of employment that would require Fraser to commute on a
regular basis more than 10 miles each way from Missoula.
(i) Change in Control. "Change in Control" means a change "in the
ownership or effective control" or "in the ownership of a
substantial portion of the assets" of the Bank, within the
meaning of section 280G of the Internal Revenue Code.
10. CONFIDENTIALITY. Fraser will not, after the date this Agreement was
signed, including during and after its Term, use for his own purposes or
disclose to any other person or entity any confidential business information
concerning the Bank or Glacier or their business operations, unless (1) the Bank
or Glacier consents to the use or disclosure of their respective confidential
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<PAGE> 7
information; (2) the use or disclosure is consistent with Fraser's duties under
this Agreement or (3) disclosure is required by law or court order. For purposes
of this Agreement, confidential business information includes, without
limitation, trade secrets (as defined under the Montana Uniform Trade Secrets
Act, Montana Code Section 30-14- 402), various confidential information
concerning all aspects of current and future operations, nonpublic information
on investment management practices, marketing plans, pricing structure and
technology of either the Bank or Glacier. Fraser will also treat the terms of
this Agreement as confidential business information.
11. NONCOMPETITION. During the Term and the terms of any extensions or
renewals of this Agreement and for a period equal to the lesser of (a) two years
after Fraser's employment with the Bank and Glacier has terminated or (b) three
years from Closing of the Merger, Fraser will not, directly or indirectly, as a
shareholder, director, officer, employee, partner, agent, consultant, lessor,
creditor or otherwise:
(a) provide management, supervisory or other similar services to any
person or entity engaged in any business in Missoula County,
Montana which is competitive with the business of the Bank or
Glacier as conducted during the term of this Agreement or as
conducted as of the date of termination of employment;
(b) persuade or entice, or attempt to persuade or entice, any
employee of the Bank or Glacier to terminate his/her employment
with the Bank or Glacier; or
(c) persuade or entice or attempt to persuade or entice, any person
or entity to terminate, cancel, rescind or revoke its business or
contractual relationships with the Bank or Glacier.
12. ENFORCEMENT.
(a) The Bank and Fraser stipulate that, in light of all of the facts
and circumstances of the relationship between Fraser and the
Bank, the agreements referred to in Sections 10 and 11 (including
without limitation their scope, duration and geographic extent)
are fair and reasonably necessary for the protection of the
Bank's and Glacier's confidential information, goodwill and other
protectable interests. If a court of competent jurisdiction
should decline to enforce any of those covenants and agreements,
Fraser and the Bank request the court to reform these provisions
to restrict Fraser's use of confidential information and Fraser's
ability to compete with the Bank and Glacier to the maximum
extent, in time, scope of activities, and geography, the court
finds enforceable.
(b) Fraser acknowledges the Bank and Glacier will suffer immediate
and irreparable harm that will not be
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<PAGE> 8
compensable by damages alone if Fraser repudiates or breaches any
of the provisions of Sections 10 or 11 or threatens or attempts
to do so. For this reason, under these circumstances, the Bank,
in addition to and without limitation of any other rights,
remedies or damages available to it at law or in equity, will be
entitled to obtain temporary, preliminary and permanent
injunctions in order to prevent or restrain the breach, and the
Bank will not be required to post a bond as a condition for the
granting of this relief.
13. COVENANTS. Fraser specifically acknowledges the receipt of adequate
consideration for the covenants contained in Sections 10 and 11 and that the
Bank is entitled to require him to comply with these Sections. These Sections
will survive termination of this Agreement. Fraser represents that if his
employment is terminated, whether voluntarily or involuntarily, Fraser has
experience and capabilities sufficient to enable Fraser to obtain employment in
areas which do not violate this Agreement and that the Bank's enforcement of a
remedy by way of injunction will not prevent Fraser from earning a livelihood.
14. ARBITRATION.
(a) 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.
(b) Governing Law. All proceedings will be held at a place designated
by the arbitrator in Flathead County, Montana. The arbitrator, in
rendering a decision as to any state law claims, will apply
Montana law.
(c) Exception to Arbitration. Notwithstanding the above, if Fraser
violates Section 10 or 11, the Bank will have the right to
initiate the court proceedings described in
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<PAGE> 9
Section 12, in lieu of an arbitration proceeding under this
Section 14.
15. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties concerning its
subject matter and supersedes all prior agreements,
correspondence, representations, or understandings between the
parties relating to its subject matter.
(b) Binding Effect. This Agreement will bind and inure to the benefit
of the Bank's, Glacier's, and Fraser's heirs, legal
representatives, successors and assigns.
(c) Litigation Expenses. If either party successfully seeks to
enforce any provision of this Agreement or to collect any amount
claimed to be due under it, this party will be entitled to
reimbursement from the other party for any and all of its
out-of-pocket expenses and costs including, without limitation,
reasonable attorneys' fees and costs incurred in connection with
the enforcement or collection.
(d) Waiver. Any waiver by a party of its rights under this Agreement
must be written and signed by the party waiving its rights. A
party's waiver of the other party's breach of any provision of
this Agreement will not operate as a waiver of any other breach
by the breaching party.
(e) Assignment. The services to be rendered by Fraser under this
Agreement are unique and personal. Accordingly, Fraser may not
assign any of his rights or duties under this Agreement.
(f) Amendment. This Agreement may be modified only through a written
instrument signed by both parties.
(g) Severability. The provisions of this Agreement are severable. The
invalidity of any provision will not affect the validity of other
provisions of this Agreement.
(h) 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.
(i) Counterparts. This Agreement 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.
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Signed August 9, 1996:
THE FIRST SECURITY BANK OF MISSOULA:
By: /s/ William L. Bouchee
Its: President and CEO
HAROLD FRASER:
/s/ Harold Fraser
Ratified August 9, 1996
GLACIER BANCORP, INC.
By: /s/ John S. MacMillan
Its: President and CEO
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EXHIBIT 10.4
FIRST SECURITY BANK OF MISSOULA
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), signed August 9, 1996, between
FIRST SECURITY BANK OF MISSOULA ("Bank") and WEYMOUTH SYMMES ("Symmes") and
ratified by GLACIER BANCORP, INC., takes effect on the effective date of the
Merger ("Effective Date").
RECITALS
A. Glacier Bancorp, Inc. ("Glacier") has entered into a Plan and Agreement
of Merger ("Merger Agreement") with Missoula Bancshares, Inc.
("Bancshares") under which Bancshares will merge with and into Glacier
("Merger"). Bancshares presently owns approximately 99% of the
outstanding shares of common stock of the Bank. Immediately following
the Merger, the Bank will be a subsidiary of Glacier.
B. Before the Merger, Symmes has served as Vice-President and Real Estate
Manager of the Bank.
C. Glacier and the Bank desire Symmes to continue his employment at the
Bank under the terms and conditions of this Agreement.
D. Symmes desires to continue his employment at the Bank under the terms
and conditions of this Agreement.
AGREEMENT
In consideration of the promises set forth in this Agreement, the
parties agree as follows.
1. EMPLOYMENT. The Bank agrees to employ Symmes and Symmes accepts
employment by the Bank on the terms and conditions set forth in this Agreement.
Symmes' title will be Senior Vice-President and Real Estate Manager.
2. EFFECTIVE DATE AND TERM.
(a) Effective Date. This Agreement is effective as of the Effective
Date.
(b) Term. The term of this Agreement ("Term") is three years,
beginning on the Effective Date.
(c) Abandonment or Termination of the Merger. This Agreement is void
if the Merger Agreement is terminated in accordance with its
terms.
3. DUTIES. The Bank will employ Symmes as its Senior Vice-President and
Real Estate Manager. Symmes will faithfully and diligently perform his assigned
duties, which are as follows:
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(a) Performance of Real Estate Department. Symmes will be responsible
for the Bank's real estate loan functions and all aspects of the
performance of the Bank's real estate loan department, including
without limitation, directing that daily operational and
managerial matters are performed in a manner consistent with
Glacier's and the Bank's policies.
(b) Development and Preservation of Business. Symmes will be
responsible for the development and preservation of banking
relationships and other business development efforts (including
appropriate civic and community activities) in Missoula County,
Montana.
(c) Report to Chief Executive Officer and Board. Symmes will report
directly to the Bank's Chief Executive Officer. Symmes will also
report to the Bank's board of directors upon their request.
(d) Modification of Duties. The Bank's board of directors may, from
time to time, modify Symmes' title or add, delete, or modify
Symmes' performance responsibilities to accommodate management
succession, as well as any other management objectives of the
Bank or of Glacier. Symmes will assume any additional positions,
duties, and responsibilities as may reasonably be requested of
him with or without additional compensation, as appropriate and
consistent with Sections 3(a) and 3(b) of this Agreement.
4. EXTENT OF SERVICES. Symmes will devote all of his working time,
attention and skill to the duties and responsibilities set forth in Section 3.
To the extent that such activities do not interfere with his duties under
Section 3, Symmes may participate in other businesses as a passive investor, but
(a) Symmes may not actively participate in the operation or management of those
businesses, and (b) Symmes may not, without the Bank's prior written consent,
make or maintain any investment in a business with which the Bank and/or Glacier
has an existing competitive or commercial relationship.
5. SALARY. Initially, Symmes will receive a salary of $62,376 per year, to
be paid monthly in accordance with the Bank's regular payroll schedule. Subject
to the Bank's annual review of Symmes' compensation, in connection with the
advice and recommendations of the Chief Executive Officer of Glacier, Symmes'
annual salary will be increased to $65,496 on January 1, 1998 and to $68,772 on
January 1, 1999.
6. INCENTIVE COMPENSATION. Each year during the Term, the Bank's board of
directors, subject to ratification by Glacier's board of directors, will
determine the amount of bonus to be paid by the Bank to Symmes for that year. In
making this determination, the Bank's board of directors will consider factors
such as Symmes' performance
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<PAGE> 3
of his duties and the safety, soundness and profitability of the Bank. Symmes'
bonus will reflect Symmes' contribution to the performance of the Bank during
the year, also taking into account the nature and extent of incentive bonuses
paid to comparable senior officers at Glacier. This bonus will be paid to Symmes
no later than January 31 of the year following the year in which the bonus is
earned by Symmes.
7. INCOME DEFERRAL. Symmes will be eligible to participate in any program
available to the Bank's and Glacier's senior management for income deferral, for
the purpose of deferring receipt of any or all of the compensation he may become
entitled to under this Agreement.
8. VACATION AND BENEFITS.
(a) Vacation and Holidays. Symmes will receive the greater of (1)
four weeks of paid vacation each year or (2) the vacation
benefits set forth in Glacier's schedule for senior employees
with Symmes' years of service with the Bank, in addition to all
holidays observed by the Bank. Each year, Symmes may carry over
only up to two weeks of unused vacation. Any unused vacation time
in excess of two weeks will not accumulate or carry over from one
calendar year to the next.
(b) Benefits. Symmes will be entitled to participate in any group
life insurance, disability, health and accident insurance plans,
profit sharing and pension plans and in other employee fringe
benefit programs the Bank or Glacier may have in effect from time
to time for its similarly situated employees, in accordance with
and subject to any policies adopted by the Bank's or Glacier's
board of directors with respect to the plans or programs,
including without limitation, any incentive or employee stock
option plan, deferred compensation plan, 401(k) plan, and
Supplemental Executive Retirement Plan (SERP). Neither the Bank
nor Glacier through this Agreement obligates itself to make any
particular benefits available to its employees.
(c) Business Expenses. The Bank will reimburse Symmes for ordinary
and necessary expenses (including, without limitation, travel,
entertainment, and similar expenses) incurred in performing and
promoting the Bank's business. Symmes will present from time to
time itemized accounts of these expenses, subject to any limits
of Bank policy or the rules and regulations of the Internal
Revenue Service. The Bank will continue to provide Symmes with
University of Montana Grizzly Athletic Association membership
dues and tickets at the Golden Grizzly level, as in effect on the
date this Agreement was signed. The Bank will also pay Symmes'
membership and dues at Missoula Country Club.
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<PAGE> 4
9. TERMINATION OF EMPLOYMENT.
(a) Termination By Bank for Cause. If the Bank terminates Symmes'
employment for Cause (defined below) before this Agreement
terminates the Bank will pay Symmes the salary earned and
expenses reimbursable under this Agreement incurred through the
date of his termination. Symmes will have no right to receive
compensation or other benefits for any period after termination
under this Section 9.(a).
(b) Other Termination By Bank. If the Bank terminates Symmes'
employment without Cause before this Agreement terminates, or
Symmes terminates his employment for Good Reason (defined below),
the Bank will pay Symmes for the remainder of the Term the
compensation and other benefits he would have been entitled to if
his employment had not terminated.
(c) Death or Disability. This Agreement terminates (1) if Symmes dies
or (2) if Symmes is unable to perform his duties and obligations
under this Agreement for a period of 90 days as a result of a
physical or mental disability arising at any time during the term
of this Agreement, unless with reasonable accommodation Symmes
could continue to perform his duties under this Agreement and
making these accommodations would not require the Bank to expend
any funds. If termination occurs under this Section 9.(c), Symmes
or his estate will be entitled to receive all compensation and
benefits earned and expenses reimbursable through the date
Symmes' employment terminated.
(d) Termination Related to a Change in Control.
(1) Termination by Bank. If the Bank, or its successor in
interest by merger, or its transferee in the event of a
purchase in an assumption transaction, (for reasons other
than Symmes' death, disability, or Cause) (1) terminates
Symmes' employment within one year following a Change in
Control (as defined below) or (2) terminates Symmes'
employment before the Change in Control but on or after the
date that any party either announces or is required by law
to announce any prospective Change in Control transaction
and a Change in Control occurs within six months after the
termination, the Bank will provide Symmes with the payment
and benefits described in Section 9.(d)(3).
(2) Termination by Symmes. If Symmes terminates Symmes'
employment, with or without Good Reason, within one year
following a Change in Control, the Bank will provide Symmes
with the payment and benefits described in Section 9.(d)(3).
-4-
<PAGE> 5
(3) Payments. If Section 9.(d)(1) or (2) is triggered as
described in those Sections, the Bank will: (i) pay Symmes a
single payment in an amount equal to Symmes' annual salary
(determined as of the day before the date Symmes' employment
was terminated) and (ii) maintain and provide for one-year
following Symmes' termination, at no cost to Symmes, the
benefits described in Section 8.(b) to which Symmes is
entitled (determined as of the day before the date of such
termination); but if Symmes' participation in any such
benefit is thereafter barred or not feasible, or
discontinued or materially reduced, the Bank will arrange to
provide Symmes with either benefits substantially similar to
those benefits or a cash payment of substantially similar
value in lieu of the benefits.
(e) Limitations on Payments Related to Change in Control. The
following apply notwithstanding any other provision of this
Agreement:
(1) the total of the payments and benefits described in Section
9.(d)(3) will be less than the amount that would cause it to
be a "parachute payment" within the meaning of Section
280G(b)(2)(A) of the Internal Revenue Code;
(2) the payments and benefits described in Section 9.(d)(3) will
be reduced by any compensation (in the form of cash or other
benefits) received by Symmes from the Bank or its successor
after the Change in Control; and
(3) Symmes' right to receive the payments and benefits described
in Section 9.(d)(3) terminates (i) immediately, if before
the Change in Control transaction closes, Symmes terminates
his employment without Good Reason or the Bank terminates
Symmes' employment for Cause, or (ii) one year after a
Change in Control occurs.
(f) Return of Bank Property. If and when Symmes ceases, for any
reason, to be employed by the Bank, Symmes must return to the
Bank all keys, pass cards, identification cards and any other
property of the Bank or Glacier. At the same time, Symmes also
must return to the Bank all originals and copies (whether in hard
copy, electronic or other form) of any documents, drawings,
notes, memoranda, designs, devices, diskettes, tapes, manuals,
and specifications which constitute proprietary information or
material of the Bank or Glacier. The obligations in this
paragraph include the return of documents and other materials
which may be in his desk at work, in his car, in
-5-
<PAGE> 6
place of residence, or in any other location under his control.
(g) Cause. "Cause" means any one or more of the following:
(i) Willful misfeasance or gross negligence in the
performance of Symmes' duties;
(ii) Conviction of a crime in connection with his duties;
(iii) Conduct demonstrably and significantly harmful to
the Bank, as reasonably determined on the advice of legal
counsel by the Bank's board of directors; or
(iv) Permanent disability, meaning a physical or mental
impairment which renders Symmes incapable of substantially
performing the duties required under this Agreement, and
which is expected to continue rendering Symmes so
incapable for the reasonably foreseeable future.
(h) Good Reason. "Good Reason" means only any one or more of the
following:
(i) Reduction of Symmes' salary or reduction or
elimination of any compensation or benefit plan
benefitting Symmes, unless the reduction or elimination is
generally applicable to substantially all Bank employees
(or employees of a successor or controlling entity of the
Bank) formerly benefitted;
(ii) The assignment to Symmes without his consent of any
authority or duties materially inconsistent with Symmes'
position as of the date of this Agreement; or
(iii) A relocation or transfer of Symmes' principal place
of employment that would require Symmes to commute on a
regular basis more than 10 miles each way from Missoula.
(i) Change in Control. "Change in Control" means a change "in the
ownership or effective control" or "in the ownership of a
substantial portion of the assets" of the Bank, within the
meaning of section 280G of the Internal Revenue Code.
10. CONFIDENTIALITY. Symmes will not, after the date this Agreement was
signed, including during and after its Term, use for his own purposes or
disclose to any other person or entity any confidential business information
concerning the Bank or Glacier or their business operations, unless (1) the Bank
or Glacier consents to the use or disclosure of their respective confidential
information; (2) the use or disclosure is consistent with Symmes'
-6-
<PAGE> 7
duties under this Agreement or (3) disclosure is required by law or court order.
For purposes of this Agreement, confidential business information includes,
without limitation, trade secrets (as defined under the Montana Uniform Trade
Secrets Act, Montana Code Section 30-14-402), various confidential information
concerning all aspects of current and future operations, nonpublic information
on investment management practices, marketing plans, pricing structure and
technology of either the Bank or Glacier. Symmes will also treat the terms of
this Agreement as confidential business information.
11. NONCOMPETITION. During the Term and the terms of any extensions or
renewals of this Agreement and for a period equal to the lesser of (a) two years
after Symmes' employment with the Bank and Glacier has terminated or (b) three
years from Closing of the Merger, Symmes will not, directly or indirectly, as a
shareholder, director, officer, employee, partner, agent, consultant, lessor,
creditor or otherwise:
(a) provide management, supervisory or other similar services to any
person or entity engaged in any business in Missoula County,
Montana which is competitive with the business of the Bank or
Glacier as conducted during the term of this Agreement or as
conducted as of the date of termination of employment;
(b) persuade or entice, or attempt to persuade or entice, any
employee of the Bank or Glacier to terminate his/her employment
with the Bank or Glacier; or
(c) persuade or entice or attempt to persuade or entice, any person
or entity to terminate, cancel, rescind or revoke its business or
contractual relationships with the Bank or Glacier.
12. ENFORCEMENT.
(a) The Bank and Symmes stipulate that, in light of all of the facts
and circumstances of the relationship between Symmes and the
Bank, the agreements referred to in Sections 10 and 11 (including
without limitation their scope, duration and geographic extent)
are fair and reasonably necessary for the protection of the
Bank's and Glacier's confidential information, goodwill and other
protectable interests. If a court of competent jurisdiction
should decline to enforce any of those covenants and agreements,
Symmes and the Bank request the court to reform these provisions
to restrict Symmes' use of confidential information and Symmes'
ability to compete with the Bank and Glacier to the maximum
extent, in time, scope of activities, and geography, the court
finds enforceable.
(b) Symmes acknowledges the Bank and Glacier will suffer immediate
and irreparable harm that will not be compensable by damages
alone if Symmes repudiates or
-7-
<PAGE> 8
breaches any of the provisions of Sections 10 or 11 or threatens
or attempts to do so. For this reason, under these circumstances,
the Bank, in addition to and without limitation of any other
rights, remedies or damages available to it at law or in equity,
will be entitled to obtain temporary, preliminary and permanent
injunctions in order to prevent or restrain the breach, and the
Bank will not be required to post a bond as a condition for the
granting of this relief.
13. COVENANTS. Symmes specifically acknowledges the receipt of adequate
consideration for the covenants contained in Sections 10 and 11 and that the
Bank is entitled to require him to comply with these Sections. These Sections
will survive termination of this Agreement. Symmes represents that if his
employment is terminated, whether voluntarily or involuntarily, Symmes has
experience and capabilities sufficient to enable Symmes to obtain employment in
areas which do not violate this Agreement and that the Bank's enforcement of a
remedy by way of injunction will not prevent Symmes from earning a livelihood.
14. ARBITRATION.
(a) 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.
(b) Governing Law. All proceedings will be held at a place designated
by the arbitrator in Flathead County, Montana. The arbitrator, in
rendering a decision as to any state law claims, will apply
Montana law.
(c) Exception to Arbitration. Notwithstanding the above, if Symmes
violates Section 10 or 11, the Bank will have the right to
initiate the court proceedings described in Section 12, in lieu
of an arbitration proceeding under this Section 14.
-8-
<PAGE> 9
15. MISCELLANEOUS PROVISIONS.
(a) Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties concerning its
subject matter and supersedes all prior agreements,
correspondence, representations, or understandings between the
parties relating to its subject matter.
(b) Binding Effect. This Agreement will bind and inure to the benefit
of the Bank's, Glacier's and Symmes' heirs, legal
representatives, successors and assigns.
(c) Litigation Expenses. If either party successfully seeks to
enforce any provision of this Agreement or to collect any amount
claimed to be due under it, this party will be entitled to
reimbursement from the other party for any and all of its
out-of-pocket expenses and costs including, without limitation,
reasonable attorneys' fees and costs incurred in connection with
the enforcement or collection.
(d) Waiver. Any waiver by a party of its rights under this Agreement
must be written and signed by the party waiving its rights. A
party's waiver of the other party's breach of any provision of
this Agreement will not operate as a waiver of any other breach
by the breaching party.
(e) Assignment. The services to be rendered by Symmes under this
Agreement are unique and personal. Accordingly, Symmes may not
assign any of his rights or duties under this Agreement.
(f) Amendment. This Agreement may be modified only through a written
instrument signed by both parties.
(g) Severability. The provisions of this Agreement are severable. The
invalidity of any provision will not affect the validity of other
provisions of this Agreement.
(h) 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.
(i) Counterparts. This Agreement 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.
[SIGNATURES ON NEXT PAGE]
-9-
<PAGE> 10
Signed August 9, 1996:
THE FIRST SECURITY BANK OF MISSOULA:
By: /s/ William L. Bouchee
Its: President and CEO
WEYMOUTH SYMMES:
/s/ Weymouth Symmes
Ratified August 9, 1996
GLACIER BANCORP, INC.
By: /s/ John S. MacMillan
Its: President and CEO
-10-
<PAGE> 1
EXHIBIT 10.5
DIRECTOR AND OFFICER NONCOMPETITION AGREEMENT
This Director and Officer Noncompetition Agreement ("Director
Agreement"), dated as of August 9, 1996, is between GLACIER BANCORP, INC.
("Glacier"), MISSOULA BANCSHARES, INC. ("Bancshares"), and the undersigned, each
of whom is a Director or officer ("Director") of Bancshares or First Security
Bank of Missoula ("Bank").
RECITALS
A. Glacier and Bancshares have entered into a Plan and Agreement of Merger
("Merger Agreement"), dated as of August 9, 1996, under which
Bancshares will merge with and into Glacier.
B. Glacier's obligations to consummate the transactions contemplated by
the Merger Agreement are conditioned on their receipt of noncompetition
agreements from all directors of Bancshares and the Bank.
C. Glacier, Bancshares, and Director believe that the future success and
profitability of the Bank require that existing directors of Bancshares
and the Bank be available to continue to serve as directors of the Bank
and not be affiliated in any substantial way with a Competing Business
for a reasonable period of time after Closing.
AGREEMENT
In consideration of Glacier's performance under the Merger Agreement,
Director agrees as follows:
1. DEFINITIONS. Defined terms used but not defined in this Director
Agreement, have the meaning assigned to those terms in the Merger
Agreement. For purposes of this "Director Agreement" the following
definitions also apply:
(a) Competing Business. "Competing Business" means any financial
institution or trust company that competes within the Covered
Area with Glacier, Bancshares, or the Bank, or any of their
subsidiaries or affiliates.
(b) Covered Area. Missoula County in the State of Montana.
(c) Term. The Term of this Director Agreement is the lesser of: (1)
two years after the Director's service as a director of
Bancshares, the Bank, Glacier, or any affiliate of Glacier is
terminated or (2) three years from Closing.
2. AVAILABILITY. Director will be available to serve, at Glacier's
request, as a director of the Bank for a period of at least one year
after Closing.
<PAGE> 2
3. PARTICIPATION IN COMPETING BUSINESS. Except as provided in Section 6
and as specified in Exhibit B to the Merger Agreement, during the Term
of this Director Agreement, Director will not become involved, directly
or indirectly, as a stockholder, member, partner, director, officer,
manager, consultant, agent or representative of a Competing Business.
After the date of this Director Agreement, Director will not increase
or expand any passive investment interests of Director listed in
Exhibit B to the Merger Agreement.
4. CONFIDENTIAL INFORMATION. During and after the Term of this Director
Agreement, Director will not disclose any confidential information of
Glacier, Bancshares, or the Bank, or any of their subsidiaries or
affiliates, obtained by the Director while serving as a director the
Bank.
5. EMPLOYMENT OUTSIDE COVERED AREA. Nothing in this Director Agreement
prevents the Director from accepting employment outside the Covered
Area from a Competing Business, if, during the Term, the Director: (a)
will not act as an employee or other representative or agent of the
Competing Business within the Covered Area and (b) will have no
responsibilities for the Competing Business' operations within the
Covered Area.
6. PASSIVE INTEREST. Nothing in this Director Agreement prevents the
Director from owning 2% or less of any class of security of a Competing
Business.
7. REMEDIES. Any breach of this Agreement by Director entitles Glacier and
Bancshares, together with their successors and assigns, to injunctive
relief and/or specific performance, as well as to any other legal or
equitable remedies they may be entitled to.
8. POST-MERGER TERMINATION. This Director Agreement automatically
terminates if, after the Merger, any person, company or other entity
purchases or otherwise acquires (including by merger, consolidation, or
share exchange) securities representing 51% or more of the voting
shares of Glacier or acquires all or substantially all of the assets of
Glacier and its subsidiaries.
9. GOVERNING LAW, ENFORCEABILITY, AND VENUE. This Director Agreement is
governed by Montana law. If any court determines that the restrictions
set forth in this Director Agreement are unenforceable, the maximum
restrictions, term, scope or geographical area that is enforceable will
be substituted in place of the unenforceable provisions. The parties
must bring any legal proceeding arising out of this Agreement in
Flathead County, Montana.
10. COUNTERPARTS. The parties may execute this Agreement in one or more
counterparts. All the counterparts will be construed together and will
constitute one Agreement.
<PAGE> 3
SIGNED as of August 9, 1996:
Director:
/s/ William L. Bouchee /s/ Bruce Budge
- -------------------------- -----------------------------
William L. Bouchee Bruce Budge
/s/ Patrick McDonald /s/ Douglas Lawrence
- -------------------------- -----------------------------
Patrick McDonald Douglas Lawrence
/s/ Allen Fetscher /s/ Harold Fraser
- -------------------------- -----------------------------
Allen Fetscher Harold Fraser
/s/ Craig A. Langel /s/ Dale Mahlum
- -------------------------- -----------------------------
Craig A. Langel Dale Mahlum
/s/ Earl Pruyn /s/ Christopher B. Swartley
- -------------------------- -----------------------------
Earl Pruyn Christopher B. Swartley
/s/ David Thiesen /s/ Robert T. Wuttke
- -------------------------- -----------------------------
David Thiesen Robert T. Wuttke
/s/ Weymouth Symmes
- --------------------------
Weymouth Symmes
GLACIER BANCORP, INC.
By /s/ John S. MacMillan
-----------------------
Name: John S. MacMillan
Title: President and CEO
MISSOULA BANCSHARES, INC.
By /s/ William L. Bouchee
-----------------------
Name: William L. Bouchee
Title: President and CEO
<PAGE> 1
EXHIBIT 23.3
The Board of Directors
Glacier Bancorp, Inc.:
We consent to the use of our reports included herein (and incorporated herein by
reference) and to the reference to our firm under the heading "Experts" in the
prospectus. Our reports refer to a change in the method of accounting for
investments securities.
/s/ KPMG Peat Marwick LLP
Billings, Montana
September 30, 1996
<PAGE> 1
EXHIBIT 99.3
MISSOULA BANCSHARES, INC.
REVOCABLE PROXY
SPECIAL MEETING OF STOCKHOLDERS
WEDNESDAY NOVEMBER 13, 1996
PLEASE SIGN AND RETURN IMMEDIATELY
The undersigned hereby appoints WILLIAM L. BOUCHEE and DOUGLAS
LAWRENCE, and each of them (with full power to act alone) as Proxies, with full
power of substitution, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Missoula Bancshares, Inc.
("Bancshares"), a Montana corporation and bank holding company, held of record
by the undersigned on October 1, 1996, at the Special Meeting ("Special
Meeting") of Stockholders to be held on Wednesday November 13, 1996 at 12:00
p.m. local time, at Ruby's Reserve Street Inn, 4825 North Reserve Street,
Missoula, Montana, and at any adjournments of the Special Meeting.
1. MERGER AGREEMENT. A proposal to approve
the merger of Bancshares with and into FOR AGAINST ABSTAIN
Glacier Bancorp, Inc. ("Glacier"), a / / / / / /
Delaware corporation and bank holding
company, as more fully set forth in
the Plan and Agreement of Merger dated
as of August 9, 1996, and described in
the accompanying Prospectus/Joint Proxy
Statement.
2. OTHER BUSINESS. Whatever other business
may properly be brought before the
Special Meeting or any adjournment
thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" AND WILL BE VOTED "FOR" THE
PROPOSITIONS LISTED UNLESS AUTHORITY IS WITHHELD OR A VOTE AGAINST OR
AN ABSTENTION IS SPECIFIED, IN WHICH CASE THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATION SO MADE.
Bancshares' management knows of no other matters that may properly be,
or which are likely to be, brought before the Special Meeting. However, if any
other matters are properly presented at the Special Meeting, this proxy will be
voted in accordance with the recommendations of management.
Your Board of Directors recommends a vote "FOR" the listed propositions.
_____________________________, 1996
__________________________________________________
__________________________________________________
__________________________________________________
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF
MORE THAN ONE TRUSTEE, OR IF JOINT OWNERS, ALL
MUST SIGN.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
<PAGE> 2
MISSOULA BANCSHARESP, INC.
REVOCABLE PROXY
If the undersigned (i) is present and elects to vote at the Special
Meeting or at any adjournment of thereof, and (ii) notifies the Secretary of
Bancshares at the Special Meeting of his or her decision to terminate this
proxy, then the power of said attorneys and proxies will be terminated and have
no further force or effect.
The undersigned acknowledges receipt from Bancshares prior to the
execution of this proxy, of the Notice of the Special Meeting, contained in the
Prospectus/Joint Proxy Statement dated October __, 1996.
Dated: _____________________, 1996
_____________________________________ ____________________________
PRINTED NAME OF STOCKHOLDER PRINTED NAME OF STOCKHOLDER
_____________________________________ ____________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
_____________________________________ ____________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 1
EXHIBIT 99.4
GLACIER BANCORP, INC.
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
WEDNESDAY NOVEMBER 13, 1996
PLEASE SIGN AND RETURN IMMEDIATELY
The undersigned hereby appoints JOHN S. MACMILLAN and MICHAEL J.
BLODNICK, and each of them (with full power to act alone) as Proxies, with full
power of substitution, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Glacier Bancorp, Inc.
("Glacier"), a Delaware corporation and bank holding company held of record by
the undersigned on October 1, 1996, at the Special Meeting ("Special Meeting")
of Stockholders to be held on Wednesday November 13, 1996 at 9:00 a.m. local
time, at the Best Western Outlaw Inn, 1701 Highway 93 South, Kalispell, Montana,
and at any adjournments of the Special Meeting.
1. MERGER AGREEMENT. A proposal to approve
the merger of Glacier and Missoula FOR AGAINST ABSTAIN
Bancshares, Inc. ("Bancshares"), a / / / / / /
Montana corporation and bank holding
company, under the terms of which
Bancshares would be merged with and into
Glacier, as more fully set forth in the
Agreement and Plan of Merger dated as of
August 9, 1996, and described in the
accompanying Prospectus/Joint Proxy
Statement.
2. OTHER BUSINESS. Whatever other business may
properly be brought before the Special
Meeting or any adjournment thereof.
THIS PROXY CONFERS AUTHORITY TO VOTE "FOR" AND WILL BE VOTED "FOR" THE
PROPOSITIONS LISTED UNLESS AUTHORITY IS WITHHELD OR A VOTE AGAINST OR
AN ABSTENTION IS SPECIFIED, IN WHICH CASE THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATION SO MADE.
Glacier's management knows of no other matters that may properly be, or
which are likely to be, brought before the Special Meeting. However, if any
other matters are properly presented at the Special Meeting, this Proxy will be
voted in accordance with the recommendations of management.
The Board of Directors recommends a vote "FOR" the listed propositions.
_______________________________, 1996
__________________________________________________
__________________________________________________
WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF
MORE THAN ONE TRUSTEE OR OWNER, ALL MUST SIGN THE
PROXY.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
<PAGE> 2
GLACIER BANCORP, INC.
REVOCABLE PROXY
If the undersigned (i) is present and elects to vote at the Special
Meeting or at any adjournment of thereof, and (ii) notifies the Secretary of
Glacier at the Special Meeting of his or her decision to terminate this proxy,
then the power of said attorneys and proxies will be terminated and have no
further force or effect.
The undersigned acknowledges receipt from Glacier prior to the
execution of this proxy, of the Notice of the Special Meeting, contained in the
Prospectus/Joint Proxy Statement dated October __, 1996.
Dated: _____________________, 1996
_________________________________ ________________________________
PRINTED NAME OF STOCKHOLDER PRINTED NAME OF STOCKHOLDER
_________________________________ ________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 1
EXHIBIT 99.5
RULE 438 CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as
amended, the undersigned hereby consents to being named as a prospective
director of Glacier Bancorp, Inc. ("Glacier") in the Registration Statement on
Form S-4 filed by Glacier with the Securities and Exchange Commission on October
4, 1996.
/s/ William L. Bouchee
------------------------------
William L. Bouchee
September 25, 1996
------------------------------
Dated Signed
<PAGE> 1
EXHIBIT 99.6
RULE 438 CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as
amended, the undersigned hereby consents to being named as a prospective
director of Glacier Bancorp, Inc. ("Glacier") in the Registration Statement on
Form S-4 filed by Glacier with the Securities and Exchange Commission on October
4, 1996.
/s/ Allen Fetscher
------------------------------
Allen Fetscher
September 25, 1996
------------------------------
Dated Signed
