Filed Pursuant to Rule 424(b)(3)

Registration No. 333-134153

 

 

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

 

Dear Citizens Development Company Shareholders:

 

The boards of directors of Citizens Development Company and Glacier Bancorp, Inc. have agreed on a merger of Citizens into Glacier. When the merger occurs, the current subsidiary banks of Citizens will operate as subsidiaries of Glacier.

 

Under the terms of the Plan and Agreement of Merger, dated April 20, 2006, between Glacier and Citizens, Glacier will pay a total of $77 million (less any specified excess transaction fees, and plus a possible “earnings adjustment” based on Citizens’ adjusted after-tax earnings from July 1, 2006 to the effective date of the merger), in cash and in Glacier common stock. The Merger Agreement provides that the portion of the merger consideration payable in Glacier common stock will be fixed at 40% of the total merger consideration and the portion payable in cash will be fixed at 60% of the total merger consideration. However, individual Citizens’ shareholders will be allowed to choose whether to exchange their Citizens shares entirely for shares of Glacier stock, or for a combination of Glacier stock and cash. Those electing to receive all stock will receive the number of Glacier shares having a market value equal to the value of their Citizens shares, based on the market value of Glacier stock during a five-day trading period shortly before closing. The exact percentage of cash and Glacier common stock to be received by Citizens shareholders electing a combination of cash and stock will not be known until the effective date of the merger. However, under reasonable assumptions, it is anticipated that those electing a combination of stock and cash will receive approximately 35% to 40% of the purchase price in shares of Glacier stock and approximately 60% to 65% of the purchase price in cash. A form for making your election is enclosed.

 

The number of shares of Glacier common stock that will be exchanged for shares of Citizens common stock will not be determined until five days prior to the merger. As explained in more detail in this document, whether you elect to receive Glacier common stock or a combination of stock and cash for your shares, the value of the consideration that you receive as of the completion date will be substantially the same, based on the average Glacier common stock price used to calculate the merger consideration.

 

In the merger, assuming that the base merger consideration of $77 million is not decreased by the amount of any excess transaction fees or increased by the amount of any earnings adjustment, Citizens shareholders will receive $163.32, in cash and/or Glacier common stock, per Citizens share. Based on the same assumptions, Citizens shareholders will own approximately 3.08% of Glacier’s outstanding common stock following the merger.

 

Your board of directors believes that the terms of the merger are fair and in the best interest of Citizens and its shareholders. In reaching this decision, the board considered numerous factors as described in the attached proxy statement/prospectus.

 

The merger cannot be completed unless you approve it. Approval requires the affirmative vote of at least two thirds (662/3%) of each of the Class A and Class B shares entitled to be cast at a special meeting of Citizens shareholders called to consider the merger. We will hold a special shareholders’ meeting to vote on the merger proposal. The Citizens special shareholders’ meeting will be held on Wednesday, June 28, 2006, at 4:00 p.m. local time, at First Citizens Bank of Billings, 2812 First Avenue North, Billings, Montana. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed form of proxy.

 

On behalf of the Citizens board of directors, I recommend that you vote FOR approval of the merger.

 

Dean Comes
President and Chief Executive Officer

 

None of the Federal Deposit Insurance Corporation, Securities and Exchange Commission, nor any state securities commission has approved the securities to be issued by Glacier or determined if this proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of Glacier common stock to be issued in the merger are not savings or deposit accounts or other obligations of a bank and are not insured by the Federal Deposit Insurance Corporation, the Bank Insurance Fund or any other governmental agency. Such shares are not guaranteed by Glacier or Citizens and are subject to investment risk, including the possible loss of principal.          

 

 

This proxy statement/prospectus is dated May 25, 2006, and is first being

mailed to Citizens shareholders on May 26, 2006.

CITIZENS DEVELOPMENT COMPANY
2812 1^STAvenue North, Suite 324

Billings, Montana 59101

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD JUNE 28, 2006

 

TO THE SHAREHOLDERS OF CITIZENS DEVELOPMENT COMPANY:

 

A special meeting of shareholders of Citizens Development Company will be held on June 28, 2006, at 4:00 p.m. local time, at the offices of First Citizens Bank of Billings, 2812 First Avenue North, Billings, 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, dated as of April 20, 2006, among Glacier Bancorp, Inc. and Citizens, under the terms of which Citizens will merge with and into a newly-formed subsidiary of Glacier, as more fully described in the accompanying proxy statement/prospectus. The Merger Agreement is attached as Appendix A to the proxy statement/prospectus that accompanies this notice.

 

2. OTHER MATTERS.  If necessary, to consider and act upon a proposal to adjourn the meeting to permit us to solicit additional proxies in the event that we do not have sufficient votes to approve the merger as of the date of the meeting.

 

Holders of record of Citizens common stock at the close of business on May 24, 2006, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of it. The affirmative vote of the holders of at least two thirds (662/3%) of each of the Class A and Class B shares entitled to be cast, voting as separate groups, at the Citizens special meeting is required for approval of the Merger Agreement. As of May 24, 2006, there were 43,151.33 shares of Class A common stock and 428,321.82 shares of Class B common stock, outstanding and entitled to vote at the special meeting.

 

Citizens shareholders have the right to dissent from the merger and obtain payment of the fair value of their Citizens shares under the applicable provisions of Montana law. A copy of the applicable statutes regarding dissenters’ rights is attached as Appendix B to the accompanying proxy statement/prospectus. For details of your dissenters’ rights and how to exercise them, please see the discussion under the heading “The Merger — Dissenters’ Rights of Appraisal.”

 

The board of directors of Citizens has determined that the Merger Agreement is fair to and in the best interests of Citizens and its shareholders and recommends that you vote FOR approval of the Merger Agreement.

 

By Order of the Board of Directors,

 

Jason Hinch, Secretary

 

Billings, Montana

May 25, 2006

 

 

 

REFERENCES TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates important business and financial information about Glacier from documents that are not included in or delivered with this document.

 

You can obtain documents incorporated by reference into this proxy statement/prospectus by requesting them in writing or by telephone from Glacier at the following address:

 

Glacier Bancorp, Inc.

49 Commons Loop

Kalispell, Montana 59901

ATTN: James H. Strosahl, Corporate Secretary

Telephone: (406) 751-4702

 

You will not be charged for the documents that you request. If you would like to request documents, please do so by June 13, 2006 in order to receive them before the Citizens special shareholders’ meeting.

 

See “Where You Can Find More Information About Glacier.”

TABLE OF CONTENTS

 

 

What is the purpose of this proxy statement/prospectus?

 

This document serves as both a proxy statement of Citizens Development Company and a prospectus of Glacier Bancorp, Inc. As a proxy statement, it is being provided to you by Citizens because the board of directors of Citizens is soliciting your proxy to vote to approve the proposed merger of Citizens with and into Glacier. After the merger, Glacier will own the subsidiary banks of Citizens, which are referred to in this document as the “Citizens Banks.” As a prospectus, it is being provided to you by Glacier because Glacier is offering you shares of its common stock as partial consideration for your Citizens shares.

 

What will Citizens shareholders receive in the merger?

 

Under the terms of the Plan and Agreement of Merger, dated as of April 20, 2006, by and between Glacier and Citizens, Glacier will pay cash and issue shares of its common stock in exchange for all outstanding shares of Citizens common stock. The Merger Agreement provides that the total merger consideration will be $77 million, plus a possible “earnings adjustment” in an amount equal to the amount of Citizens’ adjusted after tax-earnings from July 1, 2006 to the effective date of the merger. The total merger consideration may be reduced, if applicable, by the amount of any excess Citizens “transaction fees” as defined in the Merger Agreement. The total amount of stock that Glacier will be required to issue in the merger is fixed at 40% of the total merger consideration.

 

Based on the 471,473.15 Citizens’ shares that are currently outstanding, and assuming the $77 million purchase price is not increased for the earnings adjustment or the decreased for excess transaction fees, the purchase price per Citizens share will be $163.32.

 

What will I receive in the merger?

 

Under the Merger Agreement, unless you provide a notice of dissent, you may elect to receive for your shares either:

 

 

Both the Stock Election and the Combination Elections are subject to the allocation procedures described in this document. As a result, the mix of cash and Glacier common stock that you receive will not be known until five days prior to the effective date of the merger. See “The Merger — Allocation” for a more detailed discussion of allocation procedures under the Merger Agreement.

 

What happens if I elect to receive Glacier stock in the merger?

 

If you make a Stock Election, you will receive shares of Glacier common stock in payment for your shares of Citizens. The exact number of Glacier shares that you will receive for each Citizens share will not be determined until five days prior to the closing of the merger, when the value of the Glacier stock is established as provided in the Merger Agreement.

 

What happens if I elect to receive a combination of Glacier stock and cash in the merger?

 

If you make a Combination Election, you will receive Glacier stock for that portion of your shares that will cause the total Glacier shares issued in the merger to equal 40% of the total merger consideration, (after taking into account the shares to be issued to those making Stock Elections), with the balance of your shares paid in cash. The percentage mix of cash and Glacier common stock will not be known until the effective date of the merger. However, under reasonable assumptions, it is anticipated that those making a Combination Election will receive 35% to 40% of the purchase price in shares of Glacier stock and 60% to 65% in cash. See “The Merger — Allocation.”

What is the amount of cash and/or the number of shares of Glacier common stock that I will receive for my shares of Citizens common stock?

 

The total merger consideration will not be determined until the effective date of the merger, because such consideration may be subject to the “earnings adjustment” described in this document, and the amount of any such earnings adjustment cannot be calculated until the effective date. The total merger consideration is also subject to possible reduction in the event of certain excess transaction fees as defined in the Merger Agreement. Additionally, the actual aggregate number of shares of Glacier common stock to be issued in the merger will not be determined until the fifth business day immediately prior to the effective date of the merger. As a result, the actual amount of cash and/or number of shares of Glacier common stock that you will receive for each of your Citizens shares will not be determined until shortly after the effective date of the merger. Those amounts will be determined based on a formula set forth in the Merger Agreement and described in this document, and once they are determined, those amounts will be made available on Glacier’s website at www.glacierbancorp.com.

 

Will the value of the per share consideration that I receive be substantially equivalent regardless of which election I make?

 

Yes. The formula that will be used to calculate the consideration is intended to substantially equalize the value of the consideration to be received for each share of Citizens common stock in the merger, as measured during the valuation period ending on the determination date, regardless of whether you make a Stock Election or a Combination Election. As the value of Glacier stock fluctuates with its trading price, however, the value of the Glacier stock you receive for a Citizens share likely will not be the exact same as the cash to be paid per share on any given day after the fifth business day preceding the merger (that is, after the Glacier value per share for the merger is established, as described elsewhere in this document).

 

What are the tax consequences of the merger to me?

 

We expect that for United States federal income tax purposes, the exchange of shares of Citizens common stock solely for shares of Glacier common stock generally will not cause you to recognize any taxable gain or loss. We also expect that if you receive a combination of cash and stock in exchange for your Citizens shares, you will be required to recognize any gain to the extent cash is received in the merger, and you will not be entitled to recognize any loss realized. If you receive solely cash in the merger, which will occur only if you exercise dissenters’ rights, you will recognize any gain or loss realized on the disposition of your Citizens shares. We urge you to consult your tax adviser to fully understand the tax consequences of the merger to you. Tax matters are very complicated and in many cases tax consequences of the merger will depend on your particular facts and circumstances.

 

Will the shares of Glacier that I receive in the merger be freely transferable?

 

The Glacier common stock issued in the merger will be transferable free of restrictions under federal and state securities laws, except for shares of Glacier common stock received by persons who are deemed to be “affiliates” of Citizens as defined under applicable federal securities laws. See “The Merger —  Stock Resales by Citizens Affiliates.”

 

How do I elect the form of consideration I prefer to receive?

 

A green election form with instructions for making your election as to the form of consideration you prefer to receive in the merger accompanies this proxy statement/prospectus. To make your election, you must submit a green election form to Glacier’s exchange agent before 5:00 p.m. Mountain Time on July 13, 2006, which is the tenth (10^th) business day after the date of the Citizens special meeting. The election procedures are described under “The Merger — Election Procedure.” Note that you must enclose your Citizens stock certificate(s) with the green election form.

 

What is the deadline for receipt of my election form?

 

The green election forms must be received by the exchange agent by 5:00 p.m., Mountain Time, on July 13, 2006.

May I change my election once it has been submitted?

 

Yes. You may change your election so long as your new election is received by the exchange agent prior to 5:00 p.m. on July 13, 2006. To change your election, you must send the exchange agent a written notice revoking any election previously submitted. You may at that time provide a new election.

 

What happens if I do not make an election prior to the deadline?

 

If you fail to submit a valid green election form to the exchange agent prior to 5:00 p.m. Mountain Time on July 13, 2006, then you will be deemed to have made a Combination Election.

 

When and where will the special meeting take place?

 

Citizens will hold a special meeting of its shareholders on Wednesday, June 28, 2006, at 4:00 p.m., at the offices of First Citizens Bank of Billings, 2812 First Avenue North, Billings, Montana.

 

How do I vote?

 

To vote, please indicate on the enclosed proxy card how you want to vote and then sign, date, and mail your proxy card in the enclosed white envelope as soon as possible so that your shares will be represented at the special meeting.

 

Why is my vote important?

 

If you fail to vote, that will have the same effect as voting against approval of the Merger Agreement. Approval of the Merger Agreement requires the affirmative vote of at least two thirds (662/3%) of the Class A and Class B shares of Citizens common stock outstanding and entitled to vote at the special meeting. The directors of Citizens, the Presidents of the Citizens Banks, the John T. Vucurevich Living Trust (the “Trust”), the John T. Vucurevich Foundation (the “Foundation”) and the Presidents of the subsidiary banks of Citizens’ affiliated bank holding companies who are not also Citizens directors (collectively, the “Voting Agreement Shareholders”), beneficially own and have the right to vote 403,021.40 shares, representing 85.48% of the shares entitled to be voted at the meeting (constituting 79.5% of the outstanding Class A shares, and 86.1% of the outstanding Class B shares), and they have each agreed to vote for the merger.

 

What happens if I return my proxy but do not indicate how to vote my shares?

 

If you sign and return your proxy card, but do not provide instructions on how to vote your shares, your shares will be voted “FOR” approval of the Merger Agreement.

 

Can I change my vote after I have mailed my signed proxy card?

 

Yes. You may change your vote at any time before your proxy is voted at the special meeting. If your shares are held in your own name, you may change your vote as follows:

 

 

If you choose either the first or second method above, you must submit your notice of revocation or your new proxy card to Citizens’ secretary prior to the special meeting.

 

Who may vote at the meeting?

 

The board of directors of Citizens has set May 24, 2006, as the record date for the meeting. If you were the owner of Citizens common stock at the close of business on May 24, 2006, you may vote at the meeting.

When will the merger occur?

 

We presently expect to complete the merger during the third quarter of 2006. The merger will occur after approval of the shareholders of Citizens is obtained and after the merger has received regulatory approval and the other conditions to the merger are satisfied or waived. Glacier and Citizens are working toward completing the merger as quickly as possible.

 

How soon after the merger is completed can I expect to receive my cash or Glacier common stock?

 

Glacier will work with its exchange agent to distribute consideration payable in the merger as promptly as practicable following the completion of the merger.

 

What do I need to do now?

 

We encourage you to read this proxy statement/prospectus in its entirety. Important information is presented in greater detail elsewhere in this document and documents governing the merger are attached as appendices to this proxy statement/prospectus. In addition, much of the business and financial information about Glacier that may be important to you is incorporated by reference into this document from documents separately filed by Glacier with the Securities and Exchange Commission (“SEC”). This means that important disclosure obligations to you are satisfied by referring you to one or more documents separately filed with the SEC.

 

 

What if I choose not to read the incorporated documents?

 

Information contained in a document that is incorporated by reference is part of this proxy statement/prospectus, unless it is superseded by information contained directly in this proxy statement/prospectus or in documents filed with the SEC after the date of this proxy statement/prospectus. Information that is incorporated from another document is considered to have been disclosed to you whether or not you choose to read the document.

 

What risks should I consider?

 

You should review carefully our discussion of “Risk Factors.” You should also review the factors considered by the Citizens board of directors in approving the Merger Agreement. See “The Merger — Background of the Merger” and “Reasons for the Merger — Citizens.”

 

Who can help answer my questions?

 

If you have questions about the merger, the meeting, or your proxy, or if you need additional copies of this document or a proxy card, you should contact:

 

Marcy Mutch
Citizens Development Company
2812 1^st Avenue North, Suite 324
Billings, Montana 59101
(406) 247-4269
e-mail: mmutch@cdc-ubc.com

 

This proxy statement/prospectus does not cover any resale of the securities to be received by shareholders of Citizens upon consummation of the proposed merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any such resale.

 

The date of this proxy statement/prospectus is May 25, 2006.

 

SUMMARY

	•	all Glacier common stock (a “Stock Election”), or
	•	a combination of cash and Glacier common stock (a “Combination Election”).

	•	approval of the Merger Agreement by shareholders holding at least two thirds (662/3%) of the outstanding shares of Citizens Class A and Class B common stock that are outstanding and entitled to vote;
	•	approval of the merger by federal and state regulatory authorities;
	•	accuracy of the other party’s representations in the Merger Agreement; and
	•	compliance by the other party with all material terms, covenants and conditions of the Merger Agreement.

 

In addition to the other information contained in or incorporated by reference into this document, including the matters addressed under the caption “Cautionary Note Regarding Forward-Looking Statements,” you should consider the matters described below carefully in determining whether to approve the Merger Agreement and the transactions contemplated by the Merger Agreement.

 

The Merger Agreement limits Citizens’ ability to pursue other transactions and provides for the payment of a break up fee if Citizens does so.

 

While the Merger Agreement is in effect and subject to very narrow exceptions, Citizens and its directors, officers and agents are prohibited from initiating or encouraging inquiries with respect to alternative acquisition proposals. The prohibition limits Citizens’ ability to seek offers that may be superior from a financial point of view from other possible acquirers. If Citizens receives an unsolicited proposal from a third party that is superior from a financial point of view to that made by Glacier and the Merger Agreement is terminated, Citizens may be required to pay a $2.25 million break-up fee. This fee makes it less likely that a third party will make an alternative acquisition proposal.

 

Under certain conditions, the Merger Agreement requires Citizens to pay a termination fee.

 

Under certain circumstances, Glacier can terminate the Merger Agreement and require Citizens to pay a termination fee of $250,000.

 

Because the market price of Glacier common stock may fluctuate, you cannot be sure of the number of shares of Glacier common stock that you will receive.

 

At the time of the Citizens special meeting, you will not be able to determine the number of shares of Glacier common stock you would receive upon completion of the merger. Fluctuations in Glacier’s stock price will impact how much Glacier common stock you own relative to existing Glacier shareholders. Your relative portion will be less the higher Glacier’s stock price, and more the lower Glacier’s stock price. We urge you to obtain current market quotations for Glacier common stock.

 

The percentage mix of stock and cash to be received by Citizens shareholders making Combination Elections will not be determined until closing.

 

If you make a Combination Election, you will receive Glacier stock for that portion of your shares that will cause the total Glacier shares issued in the merger to equal 40% of the total merger consideration (after taking into account the shares to be issued to those making Stock Elections), with the balance of your shares paid in cash. However, the number of Citizens shareholders who will make Stock Elections are currently unknown. Accordingly, the percentage of Glacier common stock and cash that you will receive if you make a Combination Election cannot be determined until the effectiveness of the merger. For a detailed description of the allocation procedures, please see the discussion under the heading “The Merger — Allocation”

 

Combining our two companies may be more difficult, costly or time-consuming than we expect.

 

Glacier and Citizens have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of the ongoing business of the Citizens Banks or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the merger. As with any merger of banking institutions, there also may be disruptions that cause us to lose customers or cause customers to take their deposits out of former Citizens Banks.

 

Unanticipated costs relating to the merger could reduce Glacier’s future earnings per share.

 

Glacier believes that it has reasonably estimated the likely costs of integrating the operations of Citizens into Glacier, and the incremental costs of operating as a combined company. However, it is possible that unexpected transaction costs or future operating expenses, as well as other types of unanticipated adverse developments, could

have a material adverse effect on the results of operations and financial condition of Glacier after the merger. If the merger is completed and unexpected costs are incurred, the merger could have a significant dilutive effect on Glacier’s earnings per share, meaning earnings per share could be less than if the merger had not been completed.

 

Glacier may grow through future acquisitions, which could, in some circumstances, adversely affect net income.

 

Glacier anticipates engaging in selected acquisitions of financial institutions and assets in the future. There are risks associated with Glacier’s acquisition strategy that could adversely impact net income. These risks include, among others, incorrectly assessing the asset quality of a particular institution being acquired, encountering greater than anticipated costs of incorporating acquired businesses into Glacier, and being unable to profitably deploy funds acquired in an acquisition. Furthermore, we can give you no assurance about the extent to which Glacier can continue to grow through acquisitions.

 

In the future, Glacier may issue capital stock in connection with additional acquisitions. These acquisitions and related issuances of stock may have a dilutive effect on earnings per share and ownership. Glacier does not currently have any definitive understandings or agreements for any acquisitions that involve the issuance of Glacier capital stock. However, as noted above, Glacier anticipates that it will continue to expand by acquisition in the future.

 

Glacier has various anti-takeover measures that could impede a takeover of Glacier.

 

Glacier has various anti-takeover measures in place, some of which are listed elsewhere in this document. Any one or more of these measures may impede the takeover of Glacier without the approval of the Glacier board of directors and may prevent you from taking part in a transaction in which you could realize a premium over the current market price of Glacier common stock. See “Comparison of Certain Rights of Holders of Glacier and Citizens Common Stock.”

 

This document, including information included or incorporated by reference in this document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, (i) statements about the benefits of the merger, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) statements about our respective plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Glacier’s and Citizens’ control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

 

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements:

 

 

 

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Glacier’s reports filed with the SEC.

 

All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Glacier or Citizens or any person acting on behalf of Glacier or Citizens are expressly qualified in their entirety by the cautionary statements above. Neither Glacier nor Citizens undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

The following selected financial information for the fiscal years ended December 31, 2005, 2004, 2003, 2002 and 2001 is derived from audited consolidated financial statements of Glacier. The financial information of and for the three months ended March 31, 2006 and 2005 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Glacier considers necessary for fair presentation of the financial results of operations for such periods. The operating results for the three months ended March 31, 2006 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2006. The financial data below should be read in conjunction with the financial statements and notes thereto, incorporated by reference in this proxy statement/prospectus. See “Where You Can Find More Information About Glacier.”

 

GLACIER BANCORP, INC. AND SUBSIDIARIES
SELECTED CONDENSED CONSOLIDATED AND OTHER FINANCIAL INFORMATION

 

 

 

 

The table set below presents the historical earnings, book value and cash dividends per share as of March 31, 2006, and the three months then ended, and as of December 31, 2005, and the year then ended, for Glacier, together with the pro forma amounts after giving effect to the merger. This data should be read in conjunction with the Glacier financial statements and other financial information included elsewhere in this document or incorporated into this document by reference. The pro forma data are not necessarily indicative of future operating results or financial position.

 

The table below also presents the closing prices per share for Glacier and Citizens common stock, respectively, on the day prior to the announcement of the merger together with the pro forma equivalent market value of Citizens shares after giving effect to the merger. The pro forma equivalent per share data for Citizens is calculated by multiplying the historical per share data for Glacier by the implied exchange ratio of 5.201 used to calculate the merger consideration. The pro forma information provided below assumes that the total merger consideration equals $77 million, and is not (i) decreased by the amount of any excess transaction fees, or (ii) increased by the amount of any earnings adjustment, both as described elsewhere in this document. See the discussion under the heading “Comparative Stock Price and Dividend Information” on the next page for important information about the limited trading in stock of Citizens and the effect that may have on the reliability of the share price data. The pro forma combined and pro forma equivalent information provided below does not reflect the effect of the proposed issuance by Glacier of up to 1 million additional shares of common stock in the underwritten public stock offering described under “Summary” above.

 

 

Glacier Common Stock

 

Glacier common stock is quoted on the Nasdaq National Market under the symbol “GBCI.” The following table sets forth for the periods indicated:

 

 

 

 

 

At May 8, 2006, the 32,337,527 outstanding shares of Glacier common stock were held by approximately 10,932 holders of record.

 

Citizens Common Stock

 

Citizens common stock is not quoted on a stock exchange or market and no broker makes a market in the stock. Stock transfer records maintained by Citizens indicate that there have been very infrequent transactions in Citizens’ stock, other than purchases and sales to certain qualified individuals made in accordance with the Citizens Shareholders Agreement. Other sales and purchases of shares of Citizens common stock are privately negotiated, and Citizens is often not aware of the price for those transactions. Citizens is aware of no transfers of Citizens common stock between independent parties (persons not subject to the Citizens Shareholder Agreement) since 1995. Consequently, no trading price date is available which would accurately reflect the actual market value of the shares.

 

At May 8, 2006, the 471,473.15 outstanding shares of Citizens Class A and Class B common stock were held by approximately 66 holders of record.

 

Date, Time, Place

 

The Citizens special meeting of shareholders will be held on Wednesday, June 28, 2006, at 4:00 p.m. local time, at the offices of the First Citizens Bank of Billings, 2812 First Avenue North, Billings, Montana.

 

As described below under “Vote Required,” approval of the Merger Agreement requires the affirmative vote of at least two thirds (662/3%) of the shares of each of the Citizens Class A and Class B common stock that are outstanding and entitled to vote on the record date, each class voting separately as a group. If there are not sufficient votes represented at

the special meeting, either in person or by proxy, to approve the Merger Agreement, or if a quorum is not present, Citizens may adjourn or postpone the meeting in order to permit further solicitation of proxies by Citizens. The persons appointed as proxies on the form accompanying this document are authorized to vote to approve such adjournment or postponement, unless the proxy appointing them instructs them to vote against approval of the Merger Agreement.

 

Purpose

 

At the special meeting, Citizens shareholders will:

 

 

Record Date; Shares Outstanding and Entitled to Vote

 

The Citizens board of directors has fixed 5:00 p.m. on May 24, 2006 as the record date for determining the holders of shares of Citizens common stock entitled to notice of and to vote at the special meeting. At the close of business on the Citizens record date, there were 471,473.15 total shares of Class A and Class B common stock issued and outstanding held by approximately 66 holders of record. Holders of record of Citizens common stock on the record date are entitled to one vote per share, and are also entitled to exercise dissenters’ rights if certain procedures are followed. See “The Merger — Dissenters’ Rights of Appraisal” and Appendix B.

 

The Voting Agreement Shareholders have agreed to vote all Citizens shares held or controlled by him or it in favor of approval of the merger. A total of 403,021.40 outstanding shares, or approximately 85.48% of the outstanding shares of Citizens common stock, are covered by this voting agreement. This percentage represents more than the two-thirds (662/3%) vote of each of the Class A common stock and the Class B common stock required to approve the merger. See “The Merger — Voting Agreement.”

 

Vote Required

 

The affirmative vote of at least two thirds (662/3%) of the shares of Citizens Class A and Class B common stock outstanding and entitled to vote on the record date, each voting separately as a group, is required to approve the merger. At least fifty percent (50%) of the total outstanding shares of Class A and Class B Citizens common stock must be present, either in person or by proxy, in order to constitute a quorum for the meeting. For this purpose, abstentions and broker nonvotes (that is, 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 actually 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 Citizens common stock. As a result, abstentions and broker nonvotes will have the same effect as votes against approval of the Merger Agreement.

 

Voting, Solicitation, and Revocation of Proxies

 

If the enclosed proxy card is duly executed and received in time for the special meeting, it will be voted in accordance with the instructions given. If the proxy card is duly executed and received but 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 and in the proxy’s discretion on any other matter coming before the meeting. Any proxy given by a shareholder may be revoked before its exercise by:

 

 

Citizens is soliciting the proxy for the special meeting on behalf of the Citizens board of directors. Citizens will bear the cost of solicitation of proxies from its shareholders. In addition to using the mails, Citizens may solicit proxies by personal interview, telephone, and facsimile. 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. Citizens does not expect to pay any compensation for the solicitation of proxies. However, Citizens 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 the Merger

 

Citizens was formed in 1968. In 1976, John T. Vucurevich acquired majority ownership of Citizens. In 1998, Mr. Vucurevich transferred his majority ownership in Citizens, together with his ownership interests in two other bank holding companies, to the Trust. The Trust provided for the transfer at the time of Mr. Vucurevich’s death of substantially all of Mr. Vucurevich’s banking interests to the Foundation. The trustee of the Trust is advised by a board of advisors with regard to all activities related to bank holding company stock owned by the Trust, including the Trust’s ownership of Citizens. Similarly, the trustee of the Foundation is advised by a board of advisors with regard to activities related to bank holding company stocks owned by the Foundation, including Citizens. Subsequent to Mr. Vucurevich’s death in June of 2005, the board of advisors of the Trust and of the Foundation reviewed and discussed alternatives relating to the transfer of Trust assets to the Foundation and the disposition and use of those assets. In November of 2005, both the Foundation and the Trust concluded that the most prudent alternative would be to pursue a sale of Citizens in order to realize the full value for the Trust’s ownership interest in Citizens and to diversify and enhance the liquidity of the Foundation’s overall assets once it had received a final distribution of the Trust’s assets.

 

In November of 2005, the Trust and the Foundation informed the Citizens board of directors of their decision, and the board agreed to move forward with the sale of Citizens. In November of 2005, Citizens solicited proposals from investment banking firms to provide advisory services in connection with the sale process. In December of 2005, Citizens hired D.A. Davidson & Co. (“Davidson”) to serve as its investment banking advisor.

 

In January and February of 2006, Davidson conducted due diligence, met with Citizens management, prepared financial analyses, and assisted management in drafting an informational memorandum and identifying and qualifying prospective acquirers.

 

From February 14 to February 28, 2006, Davidson contacted prospective acquirers, received signed confidentiality agreements from such parties, provided interested parties with the informational memorandum, and assisted Citizens management in providing supplemental information.

 

On March 10, 2006, the board of directors of Glacier met and authorized management to submit a preliminary proposal for the merger of Citizens into Glacier, substantially on the terms subsequently reflected in the Merger Agreement.

 

On March 10, 2006, Davidson received preliminary proposals and indications of interest from prospective acquirers, including Glacier. From March 13 to March 15, 2006, Davidson had follow-on discussions with several of the interested parties to discuss and clarify or confirm various aspects of their proposals.

 

On March 16, 2006, the board of directors and professional advisors and counsel to Citizens and the Trust met to review and consider the various proposals. The Board reviewed and discussed their fiduciary duties to the shareholders and other stakeholders of Citizens, the process undertaken to date, the terms of the various proposals, and in particular, the terms and related considerations of the top three proposals. The board determined that the proposal from Glacier was most favorable to Citizens, and instructed Davidson to contact Glacier to further negotiate the mix of stock and cash (to provide more cash to the Citizens shareholders), and to request that the

Glacier shares to be delivered in the merger would be registered shares. After discussion and negotiation, Glacier agreed to provide 60% of the merger consideration in cash, and further agreed to register the Glacier shares to be issued to Citizens shareholders in the merger. The Citizens board informed Glacier that the Company would move forward under the revised terms and requested that Glacier provide an updated term sheet reflecting the revised terms. On the morning of March 17, 2006, the board of directors of Citizens and the board of advisors to the trustees of the Trust separately met and adopted resolutions formally approving of entering into the updated term sheet with Glacier.

 

From March 17 to April 18, 2006, Glacier and its advisors conducted due diligence, performed independent loan reviews at the Citizens Banks, conducted a financial audit of the Citizens balance sheet, and delivered and negotiated drafts of the Merger Agreement and related documents and agreements.

 

From March 22 to March 28, 2006, Citizens solicited proposals from experienced financial advisory and investment banking firms for the delivery and support of an independent opinion as the fairness of the merger to the Citizens shareholders, from a financial point of view. On March 29, 2006, Citizens selected Hovde Financial, Inc. (“Hovde”) to provide services related to the support and delivery of the fairness opinion. From March 29 to April 18, 2006, Hovde conducted due diligence reviews, prepared financial analyses, evaluated information related to other bank merger transactions and publicly traded banks, reviewed the Merger Agreement, and prepared a presentation of its findings.

 

On April 18, 2006, Hovde presented its analyses and findings to the board of directors of Citizens, comparing the value to be received by Citizens shareholders in the merger to valuations under other comparable transactions and valuation methodologies, and providing information concerning the valuation, performance, and trading characteristics of Glacier shares. Hovde advised the board of its opinion that the merger is fair to Citizens shareholders, from a financial point of view, and delivered its formal written opinion to that effect.

 

On April 19, 2006, the board of directors of Glacier met to consider approval of the merger. Matters discussed included the fiduciary duties of the directors, the results of due diligence reviews, the terms of the Merger Agreement and related documents, the pro forma financial impact and strategic implications of the merger, and the timing and process for consummation of the merger. After due consideration of these matters, the Glacier board approved the merger by unanimous vote.

 

On the morning of April 19, 2006, the board of advisors to the trustee of the Trust and the board of advisors to the trustee of the Foundation met and adopted resolutions formally approving the proposed merger and approving the execution of the Merger Agreement.

 

On April 20, 2006, the board of directors of Citizens met to consider approval of the merger with Glacier. Matters discussed included the fiduciary duties of the directors, the process undertaken to date, the terms of the Merger Agreement, the conditions to closing, the termination and break-up fee arrangements, the form of consideration to be received, the analyses and findings of Hovde, the process required before closing, and the implications of the merger to Citizens shareholders, employees, and customers. After due consideration of these matters, the Citizens board approved the merger by unanimous vote.

 

Glacier and Citizens executed the Merger Agreement and related documents on the afternoon of April 20, 2006. After the close of business on April 20, 2006, the parties issued a joint press release announcing the execution of the Merger Agreement.

 

Reasons For The Merger — Citizens

 

The Citizens board of directors believes the merger is in the best interests of Citizens and the Citizens shareholders. The Citizens board of directors unanimously recommends that Citizens shareholders vote for the approval of the Merger Agreement and the consummation of the transaction contemplated by that Merger Agreement.

In reaching its determination to approve the Merger Agreement, the Citizens board of directors consulted with its management and its financial and legal advisors, and considered a number of factors. Following is a description of each of the material factors that Citizens board of directors believes favor the merger:

 

 

In the course of its deliberations regarding the merger, the Citizens board of directors also considered the following information, which the board of directors determined did not outweigh the benefits to Citizens and its shareholders expected to be generated by the merger:

 

 

 

The foregoing discussion of the information considered by the Citizens board of directors is not intended to be exhaustive but includes all of the material factors considered by the board of directors. In reaching its determination to approve and recommend the merger, the Citizens board of directors did not assign any relative or specific weights to the factors considered in reaching that determination and individual directors may have given differing weights to different factors. Given the above, the Citizens board of directors determined that the Merger Agreement is in the best interests of Citizens and its shareholders and unanimously approved the merger.

 

Opinion of Financial Advisor to Citizens

 

Hovde has delivered to the Board of Directors of Citizens its opinion that, based upon and subject to the various considerations set forth in its written opinion dated April 18, 2006, the total transaction consideration to be paid to the shareholders of Citizens is fair from a financial point of view as of such date. In requesting Hovde’s advice and opinion, no limitations were imposed by Citizens upon Hovde with respect to the investigations made or procedures followed by it in rendering its opinion. The full text of the opinion of Hovde, dated April 18, 2006, which describes the procedures followed, assumptions made, matters considered and limitations on the review undertaken, is attached to this document as Appendix C. Citizens shareholders should read this opinion in its entirety.

 

Hovde is a nationally recognized investment banking firm and, as part of its investment banking business, is continually engaged in the valuation of financial institutions in connection with mergers and acquisitions, private placements and valuations for other purposes. As a specialist in securities of financial institutions, Hovde has experience in, and knowledge of, banks, thrifts and bank and thrift holding companies. The Board of Directors of Citizens selected Hovde to act as its financial advisor in connection with the merger on the basis of the firm’s reputation and expertise in transactions such as the merger.

 

Hovde received a fee from Citizens for performing a financial analysis of the merger and rendering a written opinion to the Board of Directors of Citizens as to the fairness, from a financial point of view, of the merger to the shareholders of Citizens. Hovde received all of such fee subsequent to its presentation of its fairness opinion and analysis to the Board of Directors of Citizens. Citizens has also agreed to indemnify Hovde Financial against any claims, losses and expenses arising out of the merger or Hovde’s engagement that did not arise from Hovde’s gross negligence or willful misconduct.

Hovde’s opinion is directed only to the fairness, from a financial point of view, of the total transaction consideration, and, as such, does not constitute a recommendation to any shareholder of Citizens as to how the shareholder should vote at the Citizens shareholder meeting. The summary of the opinion of Hovde set forth below is qualified in its entirety by reference to the full text of the opinion.

 

The following is a summary of the analyses performed by Hovde in connection with its fairness opinion. Certain of these analyses were confirmed in a presentation to the Board of Directors of Citizens by Hovde. The summary set forth below does not purport to be a complete description of either the analyses performed by Hovde in rendering its opinion or the presentation delivered by Hovde to the Board of Directors of Citizens, but it does summarize all of the material analyses performed and presented by Hovde.

 

The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances. In arriving at its opinion, Hovde did not attribute any particular weight to any analysis and factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Hovde may have given various analyses more or less weight than other analyses. Accordingly, Hovde believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, without considering all factors and analyses, could create an incomplete view of the process underlying the analyses set forth in its report to the Citizens board of directors and its fairness opinion.

 

In performing its analyses, Hovde made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Citizens and Glacier. The analyses performed by Hovde are not necessarily indicative of actual value or actual future results, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as part of Hovde’s analysis of the fairness of the transaction consideration, from a financial point of view, to Citizens shareholders. The analyses do not purport to be an appraisal 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. Hovde’s opinion does not address the relative merits of the merger as compared to any other business combination in which Citizens might engage. In addition, as described above, Hovde’s opinion to the Citizens board of directors was one of many factors taken into consideration by the Citizens board of directors in making its determination to approve the Merger Agreement.

 

During the course of its engagement, and as a basis for arriving at its opinion, Hovde reviewed and analyzed material bearing upon the financial and operating conditions of Citizens and Glacier and material prepared in connection with the merger, including, among other things, the following:

 

 

Hovde conducted meetings and had discussions with members of the senior managements of Citizens and Glacier for purposes of reviewing the future prospects of Citizens and Glacier. Hovde also took into account its experience in other transactions, as well as its knowledge of the commercial banking industry and its general experience in securities valuations.

 

In rendering its opinion, Hovde assumed, without independent verification, the accuracy and completeness of the financial and other information and relied upon the accuracy of the representations of the parties contained in the Merger Agreement. Hovde also assumed that the financial forecasts furnished to or discussed with Hovde by Citizens and Glacier were reasonably prepared and reflected the best currently available estimates and judgments of

the senior managements of Citizens and Glacier as to the future financial performance of Citizens and Glacier. Hovde has not made any independent evaluation or appraisal of any properties, assets or liabilities of Citizens or Glacier. Hovde assumed and relied upon the accuracy and completeness of the publicly available and other non-public financial information provided to it by Citizens and Glacier, relied upon the representations and warranties of Citizens and Glacier made pursuant to the Merger Agreement, and did not independently attempt to verify any of such information.

 

Analysis of Selected Mergers.  As part of its analysis, Hovde reviewed two groups of comparable merger transactions. The first peer group included transactions, which have occurred since January 1, 1995, that involved target banks in the Inland Northwestern United States (MT, ID, WY) that had total assets greater than $50.0 million (the “Inland Northwestern Merger Group”). This Inland Northwestern Merger Group consisted of the following 17 transactions:

 

Hovde also reviewed comparable mergers involving target banks in the State of Montana that had total assets greater than $30.0 million (the “Montana Merger Group”). This Montana Merger Group consisted of the following 15 transactions:

 

 

Hovde calculated the medians and averages of the following relevant transaction ratios in the Inland Northwestern Merger Group and the Montana Merger Group: The multiple of the offer value to the acquired company’s earnings for the twelve months preceding the announcement date of the transaction; the tangible book value premium to core deposits; and the multiple of the offer value to the acquired company’s book value. Hovde compared these multiples with the corresponding multiples for the merger, valuing the total consideration that would be received pursuant to the Merger Agreement at $77.0 million (approximately 40% of the consideration in the form of Glacier’s stock, and approximately 60% in cash for Citizens common stock). In calculating the multiples for the merger, Hovde used Citizens’ earnings for the 12 months ended December 31, 2005, and Citizens’ book value, and total deposits as of December 31, 2005. The results of this analysis are as follows:

 

 

Discounted Cash Flow Analysis.  Hovde estimated the present value of all shares of Citizens common stock by estimating the value of Citizens’ estimated future earnings stream beginning in 2006. Reflecting Citizens’ internal projections and Hovde estimates, Hovde assumed net income in 2006, 2007, 2008, 2009, and 2010 of $4.0 million, $5.9 million, $6.3 million, $6.7 million, and $7.2 million, respectively. Net income in 2006 reflects an after-tax charge of $1.4 million to loan loss reserve levels, thus directly impacting initially projected earnings. The present value of these earnings was calculated based on a range of discount rates between 12.0% and 15.0%. In order to derive the terminal value of Citizens’ earnings stream beyond 2010, Hovde assumed a terminal value based on a multiple of between 13.0x and 17.0x applied to free cash flows in 2010. The present value of this terminal amount was then calculated based on the range of discount rates mentioned above. These rates and values were chosen to reflect different assumptions regarding the required rates of return of holders or prospective buyers of Citizens’ common stock. This analysis and its underlying assumptions yielded a range of value for all the shares of

Citizens’ stock of approximately $60.1 million (at a 12.0% discount rate and a 13.0x terminal multiple) to $67.3 million (at a 15.0% discount rate and a 17.0x terminal multiple) with a midpoint of $64.0 (using a 13.5% discount rate and a 15.0x terminal multiple), compared to total merger consideration of $77.0 million.

 

Comparable Company Analysis.  Using publicly available information, Hovde compared the financial performance and stock market valuation of Glacier with the following publicly traded Northwestern banking institutions with assets as of December 31, 2005 or March 31, 2006 (depending on availability of financial information):

 

 

Indications of such financial performance and stock market valuation included profitability measures, earnings composition, operating and performance metrics, loan portfolio compositions, deposit compositions, yield and cost analysis, capital adequacy, asset quality, and reserve adequacy, all based on financial information as of December 31, 2005 or March 31, 2006 (depending on availability of financial information) and, where relevant, closing stock market information as of April 13, 2006. Selected market information for Glacier and the group of comparable companies that was analyzed is provided below.

 

 

 

Based upon the foregoing analyses and other investigations and assumptions set forth in its opinion, without giving specific weightings to any one factor or comparison, Hovde determined that the transaction consideration was fair from a financial point of view to Citizens shareholders.

 

Recommendation of the Citizens Board

 

The Citizens board of directors unanimously recommends that its shareholders vote for approval of the Merger Agreement.

 

The following is a brief description of the material aspects of the merger. There are other aspects of the merger that are not discussed below, but that are contained in the Merger Agreement. You are being asked to approve the merger in accordance with the terms of the Merger Agreement, and you are urged to read the Merger Agreement carefully. The Merger Agreement is attached to this proxy statement/prospectus as Appendix A.

 

Basic Terms of the Merger

 

The Merger Agreement provides for the merger of Citizens with and into a newly formed wholly-owned subsidiary of Glacier. Following the merger, the Citizens Banks will become subsidiaries of Glacier. Following an initial transition period after the merger, Glacier anticipates that the Citizens Banks will be merged into currently existing Glacier banks, based on the geographical location of such banks.

 

In the merger, Citizens shareholders will receive either Glacier common stock or a combination of Glacier common stock and cash for their Citizens common stock, as described below.

 

While Glacier and Citizens believe that they will receive the necessary regulatory approvals for the merger, there can be no assurance that such approvals will be received or, if received, as to the timing of such approvals or as to the ability to obtain such approvals on satisfactory terms. See “— Conditions to the Completion of the Merger” and “— Regulatory Requirements.”

 

Merger Consideration

 

The Merger Agreement provides that as of the effective date of the merger, each share of Citizens common stock issued and outstanding immediately prior to the effective date will be converted into the right to receive either Glacier common stock or a combination of Glacier common stock and cash, in each case as described below. Under the Merger Agreement, Glacier will pay a total of $77.0 million, less that amount of any excess transaction fees, and plus the amount of any “Earnings Adjustment,” both as described below. This amount (less specified transaction fees) is referred to in the Merger Agreement as the “Total Consideration.” The Merger Agreement provides that the dollar value of the Glacier common stock to be issued in the merger will be fixed at 40% of the Total Consideration.

 

The base merger consideration of $77.0 million will be increased by the amount of an Earnings Adjustment, which is defined in the Merger Agreement as an amount equal to the dollar amount of Citizens’ consolidated adjusted after-tax earnings, excluding extraordinary expenses, from July 1, 2006 to the end of the month immediately preceding the effective date of the merger, plus an additional per diem payment, in the event the effective date occurs mid month, equal to the number of days in the period from the month end immediately preceding the effective date until the effective date, multiplied by the average daily earnings for Citizens from January 1, 2006 to the most recently reported month end prior to the effective date of the merger.

 

The base merger consideration of $77.0 million will be decreased by the amount that Citizens’ transaction fees exceeds $810,000. “Transaction fees” for this purpose are defined as all cost and expenses incurred by Citizens or owed or paid by Citizens, to investment advisors, independent accountants (up to a limit of $40,000), legal counsel, printers, and other professional advisors in connection with the preparation, execution and execution of the Merger Agreement and the consummation of the merger.

 

Each Citizens shareholder will have the right to elect to convert such shareholder’s Citizens common stock into (i) shares of Glacier common stock, or (ii) a combination of shares of Glacier common stock and cash. See “— Election Procedure.”

 

The value of the consideration (whether stock or cash) that a Citizens shareholder will receive for each share of Citizens stock is referred to in the Merger Agreement as the “per share consideration.” Per share consideration is the dollar amount obtained by dividing the Total Consideration by the number of outstanding Citizens shares on April 20, 2006, the date the Merger Agreement was executed.

 

The amount of cash that a Citizens shareholder will receive for each share of his or her Citizens stock is referred to in the Merger Agreement as the “per share cash consideration,” which is defined as cash in an amount equal to the per share consideration.

The amount of Glacier common stock that a Citizens shareholder will receive for each share of Citizens stock is referred to in the Merger Agreement as the “per share stock consideration.” The per share stock consideration is defined as the number of shares of Glacier stock equal to the quotient obtained by dividing the per share consideration by the “average closing price” of Glacier common stock. The average closing price (as defined in the Merger Agreement) of Glacier common stock will be determined during a five-day period ending on the fifth day prior to the effective date of the merger. As a result, the per share stock consideration cannot be determined until the fifth day immediately prior to the effective date of the merger.

 

The formula described above is intended to substantially equalize the value of the consideration to be received for each share of Citizens common stock in the merger as measured during the valuation period, regardless of whether a Citizens shareholder elects to receive all Glacier common stock or a combination of Glacier common stock and cash. This equalization mechanism was deemed to be desirable because the value of Glacier common stock will fluctuate. In order to best ensure that the value of the consideration for each share of Citizens common stock is as equal as possible upon receipt by Citizens shareholders, regardless of the form of the consideration, the per share stock consideration is based on the average closing price.

 

The following hypothetical example is provided for illustration purposes only, and does not reflect the actual amounts that will be payable in the merger. The example assumes that (i) the Total Consideration payable under the Merger Agreement is $77 million, and has not been increased by the amount of any earnings adjustment, or decreased by the amount of any excess transaction fees, (ii) the average closing price of Glacier common stock, as determined under the Merger Agreement, is $31.00, (iii) and that there were 471,473.15 outstanding shares of Citizens stock on the execution date of the Merger Agreement, and (iv) that as a result of the allocation procedures described below under “Allocation,” a Citizens shareholder making a Combination Election receives 64% cash and 36% Glacier common stock:

 

Assuming a Citizens shareholder owns 100 shares of Citizens common stock, and makes:

 

 

If the price of Glacier common stock (based on the average closing price) increases, then the number of shares of Glacier common stock received for each share of Citizens would decrease. If the price of Glacier common stock decreases, the number of shares being exchanged for Glacier common stock would increase. For example, if the average closing price during the valuation period is $34.00 (approximately 10% higher than the assumed average closing price shown in the example above), then a Citizens shareholder receiving stock would receive approximately 4.80 shares of Glacier common stock per Citizens share, although the value per share of Citizens common stock would remain at $163.32 per share. Similarly, if the average closing price during the valuation period is $27.00 (approximately 10% lower than the assumed average closing price shown in the example above), then a Citizens shareholder receiving stock would receive approximately 6.05 shares of Glacier common stock per Citizens share, although the value per share of Citizens common stock would remain at $163.32 per share.

 

No assurance can be given that the current fair market value of Glacier common stock will be equivalent to the fair market value of Glacier common stock on the date that stock is received by a Citizens shareholder or at any other time. The fair market value of Glacier common stock received by a Citizens shareholder may be greater or less than the current fair market value of Glacier common stock due to numerous market factors.

 

Citizens may terminate the Merger Agreement if the Glacier average closing price is greater than $34.88 per share, unless Glacier elects to adjust the per share stock consideration. Glacier may terminate the Merger Agreement if the Glacier average closing price is less than $27.13 per share, unless Citizens agrees to accept an adjustment in the per share stock consideration. See “— Termination of the Merger Agreement.”

 

The terms of the merger were determined by Glacier and Citizens on the basis of arms-length negotiations.

Election Procedure

 

Subject to the allocation mechanism described in the next section, each Citizens shareholder will have the right to elect to receive with respect to such shareholder’s shares of Citizens common stock:

 

 

Stock Election.   A shareholder who makes a Stock Election will receive shares of Glacier common stock in exchange for his or her shares of Citizens stock.

 

Combination Election.   A shareholder who elects the Combination Election will receive a combination of Glacier common stock and cash. The exact percentages of Glacier common stock and cash that will be received under a Combination Election will be determined as described under “— Allocation” below.

 

No-Election Shares.   Shareholders who indicate that they have no preference as to whether they receive cash or a combination of Glacier common stock and cash, and shareholders who do not make a valid election, will be deemed to have made a Combination Election. See “— Allocation” below.

 

Proposed Dissenting Shares.   If a Citizens shareholder provides notice of dissent to Citizens in accordance with the Montana Business Corporation Act, such shareholder will have the rights provided by applicable Montana law, as described under “Dissenters’ Rights of Appraisal” below.

 

Election Form.   A green election form accompanies this proxy statement/prospectus. The green election form allows the holder to make the Stock Election or the Combination Election, or to indicate that the holder makes no election. Citizens and Glacier will make available election forms to persons who become holders of Citizens common stock between the record date for the Citizens special meeting and the close of business on the day prior to the election deadline.

 

Holders of Citizens common stock who wish to elect the type of merger consideration they will receive in the merger should carefully review and follow the instructions set forth in the green election form. Shareholders of Citizens who have not made a valid election prior to the election deadline, which is 5:00 p.m., Mountain Time, on July 13, 2006, will be deemed to have made a Combination Election.

 

To make an election, a holder of Citizens common stock must submit a properly completed election form so that it is actually received by the exchange agent at or prior to the election deadline in accordance with the instructions on the election form.

 

An election may be revoked or changed by the person submitting the election form prior to the election deadline. The exchange agent will have reasonable discretion to determine whether any election, revocation or change has been properly or timely made and to disregard immaterial defects in the election forms, and any good faith decisions of Glacier regarding these matters will be binding and conclusive. Neither Glacier or Citizens nor the exchange agent will be under any obligation to notify any person of any defects in an election form.

 

You must surrender your Citizens stock certificates together with the green election form. The green election form contains instructions on how to surrender shares of Citizens common stock in exchange for the merger consideration the holder is entitled to receive under the Merger Agreement.

 

All shares of Glacier common stock issued to the holders of Citizens common stock pursuant to the merger will be deemed issued as of the effective date. Until you surrender your Citizens stock certificates for exchange, you will accrue, but will not be paid, any dividends or other distributions declared after the effective date with respect to Glacier common stock into which any of your shares may have been converted. When you surrender your certificates, Glacier will pay any unpaid dividends or other distributions, as well as any merger consideration payable in cash, without interest. After the effective time, there will be no transfers on the stock transfer books of Citizens of any shares of Citizens common stock. If certificates representing shares of Citizens common stock are presented for transfer after the completion of the merger, they will be cancelled and exchanged for the merger consideration into which the shares of Citizens common stock represented by those certificates shall have been converted.

If a certificate for Citizens common stock has been lost, stolen or destroyed, the exchange agent will issue the consideration properly payable under the Merger Agreement upon receipt of appropriate evidence as to that loss, theft or destruction, appropriate evidence as to the ownership of that certificate by the claimant, and reasonable assurances, such as a bond or indemnity, satisfactory to Glacier in consultation with Citizens, and appropriate and customary identification.

 

Allocation

 

Pursuant to the terms of the Merger Agreement, the amount of Glacier common stock that will be issued in the merger is fixed at the dollar amount that is equal to 40% of the Total Consideration payable in the merger. Shares of Glacier common stock will be allocated first to Citizens shareholders making Stock Elections. Since the Trust has informed Glacier and Citizens that it intends to make a Combination Election, and since the Citizens shares owned by shareholders other than the Trust account for only approximately 20% of the outstanding Citizens shares, the practical effects of the allocation procedures set forth in the Merger Agreement are as follows:

 

Stock Elections.   Shareholders who elect the Stock Election will receive Glacier common stock (in an amount equal to the per share stock consideration) in respect of their shares of Citizens common stock.

 

Combination Elections.   The Merger Agreement provides that Citizens shares as to which a Combination Election has been made will be converted, on a pro rata basis, after giving effect to the allocation of Stock Election shares described above, such that holders of those shares will receive (i) shares of Glacier common stock (in an amount equal to the per share stock consideration) for that portion of their shares that would cause the total dollar value of Glacier common stock issued in the merger to equal 40% of the Total Consideration, and (ii) cash (in the amount of the per share cash consideration) for the balance of their shares.

 

The allocation described above will be computed by the exchange agent as soon as practicable after the election deadline and may, if necessary, be computed after the completion of the merger in accordance with the Merger Agreement.

 

The Merger Agreement provides that any cash remaining after the allocation of the allocation to Stock Election and Combination Election shares as described above will be held or applied by the Exchange Agent for the payment of dissenting shares and fractional shares. The amount of cash paid for shares of Citizens stock, including proposed dissenting shares, may not exceed 60% of the Total Consideration.

 

Because the federal income tax consequences of receiving cash, Glacier common stock, or both cash and Glacier common stock will differ, Citizens shareholders are urged to read carefully the information set forth under the caption “— Federal Income Tax Consequences of the Merger” and to consult their own tax advisors for a full understanding of the merger’s tax consequences to them. In addition, because the stock consideration can fluctuate in value from the final stock price calculated during the valuation period, the economic value per share received by Citizens shareholders who receive the stock consideration may, as of the date of receipt by them, be more or less than the amount of cash consideration per share received by Citizens shareholders who receive cash consideration.

 

Fractional Shares

 

No fractional shares of Glacier common stock will be issued to any holder of Citizens common stock in the merger. For each fractional share that would otherwise be issued, Glacier will pay cash in an amount equal to the fraction multiplied by the average closing price of Glacier common stock during the valuation period. No interest will be paid or accrued on cash payable in lieu of fractional shares of Glacier common stock.

 

Effective Date of the Merger

 

Subject to the conditions to the obligations of the parties to complete the merger as set forth in the Merger Agreement, the effective date of the merger will occur as soon as practicable after such conditions have been satisfied or waived. Subject to the foregoing, it is currently anticipated that the merger will be consummated during the third quarter of 2006. Either Glacier or Citizens may, subject to certain conditions, terminate the Merger Agreement if the effective date does not occur on or before October 31, 2006.

Federal Income Tax Consequences of the Merger

 

The following is a discussion of the material federal income tax consequences of the merger that are generally applicable to holders of Citizens common stock who are citizens of, reside in or are organized under the laws of the United States. This discussion is based on currently existing provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing regulations thereunder (including final, temporary or proposed regulations) and current administrative rulings and court decisions, all of which are subject to change. Any such change, which may or may not be retroactive, could alter the tax consequences described herein. The following discussion is intended only as a general summary of the material federal income tax consequences of the merger and is not a complete analysis or listing of all potential tax effects relevant to a decision on whether to vote in favor of approval of the Merger Agreement.

 

This discussion assumes that the Citizens shareholders hold their shares of Citizens common stock as a capital asset within the meaning of section 1221 of the Code. Further, the discussion does not address all aspects of federal income taxation that may be relevant to Citizens shareholders in light of their particular circumstances or that may be applicable to them if they are subject to special treatment under the Code, including, without limitation, shareholders who are subject to such special treatment because they are:

 

 

Consummation of the merger is conditioned upon the receipt by Citizens of the opinion of Graham & Dunn PC, counsel to Glacier, dated as of the effective date of the merger, substantially to the effect that, on the basis of facts, representations and assumptions set forth or referred to in the opinion, which are consistent with the state of facts existing as of the effective date of the merger, the merger will be treated for United States federal income tax purposes as a reorganization within the meaning of section 368(a) of the Code. The tax opinions to be delivered in connection with the merger are not binding on the Internal Revenue Service (“IRS”) or the courts, and neither Citizens nor Glacier intends to request a ruling from the IRS with respect to the United States federal income tax consequences of the merger.

 

Assuming consummation of the merger on the basis of facts, representations and assumptions as set forth in the opinion referred to above, the United States federal income tax consequences of the merger to a holder generally will depend on whether the holder exchanges such shareholder’s Citizens common stock for cash, Glacier common stock or a combination of cash and Glacier common stock.

 

Exchange Solely for Glacier Common Stock.   If pursuant to the merger a holder exchanges all of its shares of Citizens common stock solely for shares of Glacier common stock, the holder will not recognize any gain or loss except in respect of cash received in lieu of any fractional share of Glacier common stock (as discussed below). The aggregate adjusted tax basis of the shares of Glacier common stock received in the merger will be equal to the aggregate adjusted tax basis of the shares of Citizens common stock surrendered for the Glacier common stock (reduced by the tax basis allocable to any fractional share of Glacier common stock for which cash is received), and the holding period of the Glacier common stock will include the period during which the shares of Citizens common stock were held. If a holder has differing bases or holding periods in respect of its shares of Citizens common stock, the holder should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Glacier common stock received in the exchange.

 

Exchange for Glacier Common Stock and Cash.   If pursuant to the merger a holder exchanges all of its shares of Citizens common stock for a combination of Glacier common stock and cash, the holder will generally recognize

gain (but not loss) in an amount equal to the lesser of (1) the amount of gain realized (i.e., the excess of the sum of the amount of cash, excluding any cash received in lieu of fractional shares, and the fair market value of the Glacier common stock received pursuant to the merger over the holder’s adjusted tax basis in its shares of Citizens common stock surrendered) or (2) the amount of cash (excluding any cash received in lieu of fractional shares) received pursuant to the merger. For this purpose, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange, and a loss realized on one block of shares may not be used to offset a gain realized on another block of shares with a different holding period. Any recognized gain will generally be long-term capital gain if the holder’s holding period with respect to the Citizens common stock surrendered is more than one year. If, however, the cash received has the effect of the distribution of a dividend, the gain would be treated as a dividend to the extent of the holder’s ratable share of accumulated earnings and profits as calculated for federal income tax purposes. See “— Possible Treatment of Cash as a Dividend” below.

 

The aggregate tax basis of Glacier common stock received by a holder that exchanges its shares of Citizens common stock for a combination of Glacier common stock and cash pursuant to the merger will be equal to the aggregate adjusted tax basis of the shares of Citizens common stock surrendered for Glacier common stock and cash, reduced by the amount of cash received by the holder pursuant to the merger (other than cash received in lieu of a fractional share), and increased by the amount of gain (including any portion of the gain that is treated as a dividend as described below), if any, recognized by the holder on the exchange (other than gain recognized as a result of cash received in lieu of a fractional share). The holding period of the Glacier common stock will include the holding period of the shares of Citizens common stock surrendered. If a holder has differing bases or holding periods in respect of its shares of Citizens common stock, the holder should consult its tax advisor prior to the exchange with regard to identifying the bases or holding periods of the particular shares of Glacier common stock received in the exchange.

 

Possible Treatment of Cash as a Dividend.   In general, the determination of whether the gain recognized in the exchange will be treated as capital gain or has the effect of a distribution of a dividend depends upon whether and to what extent the exchange reduces the holder’s deemed percentage stock ownership of Glacier. For purposes of this determination, the holder is treated as if it first exchanged all of its shares of Citizens common stock solely for Glacier common stock and Glacier then immediately redeemed (the “deemed redemption”) a portion of the Glacier common stock in exchange for the cash the holder actually received. The gain recognized in the exchange followed by a deemed redemption will be treated as capital gain if the deemed redemption is (1) substantially disproportionate with respect to the holder, or (2) not essentially equivalent to a dividend.

 

The deemed redemption, generally, will be substantially disproportionate with respect to a holder if the holder owns, actually and constructively, (i) less than 50% of the total combined voting power of all classes of Glacier stock entitled to vote and (ii) less than 80% of the percentage of Glacier stock the holder actually and constructively owned before the deemed redemption. Whether the deemed redemption is not essentially equivalent to a dividend with respect to a holder will depend upon the particular circumstances of the holder. At a minimum, however, in order for the deemed redemption to be not essentially equivalent to a dividend, the deemed redemption must result in a meaningful reduction in the holder’s actual and constructive percentage stock ownership of Glacier. In general, that determination requires a comparison of (1) the percentage of the outstanding stock of Glacier the holder is deemed to actually and constructively own immediately before the deemed redemption and (2) the percentage of the outstanding stock of Glacier the holder actually and constructively owns immediately after the deemed redemption. In determining whether the deemed redemption is substantially disproportionate or not essentially equivalent to a dividend, a holder is deemed to own stock actually owned and, in some cases, constructively owned, by certain family members, by certain estates and trusts of which the holder is a beneficiary, and by certain affiliated entities. As these rules are complex, each holder that may be subject to these rules should consult its tax advisor. The Internal Revenue Service has ruled that a relatively minor reduction in the percentage stock ownership of a minority shareholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs is a meaningful reduction.

 

Cash Received in Lieu of a Fractional Share.   Cash received by a holder of Citizens common stock in lieu of a fractional share of Glacier common stock generally will be treated as received in redemption of the fractional share, and gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of the holder’s aggregate adjusted tax basis of the share of Citizens

common stock surrendered allocable to the fractional share. Such gain or loss generally will be long-term capital gain or loss if the holding period for such shares of Citizens common stock is more than one year.

 

Dissenting Shareholders.   Holders of Citizens common stock who dissent with respect to the merger, as discussed in “Dissenters’ Rights,” and who receive cash in respect of their shares of Citizens common stock, and who own such shares as a capital asset and who do not actually or constructively own shares of Glacier after the merger, will recognize gain or loss in an amount equal to the difference between the amount of cash received in the exchange and the holder’s aggregate tax basis in his or her shares of Citizens common stock. The gain or loss will be long-term capital gain or loss if the shares of Citizens were held for more than one year.

 

Backup Withholding.   Non-corporate shareholders of Citizens may be subject to information reporting and backup withholding on any cash payments they receive. Shareholders will not be subject to backup withholding, however, if they:

 

 

Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a shareholder’s federal income tax liability, provided he or she furnishes the required information to the IRS.

 

Reporting Requirements.   Shareholders who receive Glacier common stock as a result of the merger will be required to retain records pertaining to the merger and each shareholder will be required to file with such holder’s federal income tax return for the year in which the merger takes place a statement setting forth certain facts relating to the merger. Citizens shareholders will be responsible for the preparation of their own tax returns.

 

Graham & Dunn PC has delivered an opinion to the foregoing effect to Glacier. The opinion has been filed as an exhibit to the registration statement of which this proxy statement/prospectus is a part. The foregoing is only a summary of the tax consequences of the merger as described in the opinion. The opinion is based on assumptions and on representations made by officers of Glacier and Citizens to Graham & Dunn PC, and contains qualifications appropriate to the subject matter.

 

An opinion of counsel only represents counsel’s best legal judgment, and has no binding effect or official status of any kind. No assurance can be given that contrary positions will not be taken by the Internal Revenue Service or a court considering the issues. Neither Citizens nor Glacier has requested or will request a ruling from the IRS with regard to the federal income tax consequences of the merger.

 

The foregoing is a general summary of the material federal income tax consequences of the merger to Citizens shareholders, without regard to the particular facts and circumstances of each shareholder’s tax situation and status. In addition, there may be relevant state, local, foreign or other tax consequences, none of which is described above. Because certain tax consequences of the merger may vary depending on the particular circumstances of each shareholder, each Citizens shareholder should consult its own tax advisor regarding its specific tax situation and status, including the specific application of state, local and foreign laws to such shareholder and the possible effect of changes in federal and other tax laws.

 

Voting Agreement

 

The Voting Agreement Shareholders have entered into a Voting Agreement, dated as of April 20, 2006 (the “Voting Agreement”). In the Voting Agreement, the Voting Agreement Shareholders agree, among other things, to vote the shares of Citizens common stock that he or it owns or controls in favor of the merger. The persons or entities that have entered into this Voting Agreement are entitled to vote a total of 403,021.40 outstanding shares of Citizens common stock, which is approximately 85.48% of the total shares outstanding (79.5% of the total shares of Class A common stock outstanding, and 86.1% of the total shares of Class B common stock outstanding).

Dissenters’ Rights of Appraisal

 

Under Montana law, Citizens shareholders have the right to dissent from the merger and to receive payment in cash for the “fair value” of their shares of Citizens common stock.

 

Citizens shareholders electing to exercise dissenters’ rights must comply with the provisions of the Montana appraisal laws in order to perfect their rights. The following is intended as a brief summary of the material provisions of the procedures that a Citizens shareholder must follow in order to dissent from the merger and perfect dissenters’ rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to the Montana appraisal laws, the full text of which is set forth in Appendix B to this document.

 

A shareholder who wishes to assert dissenters’ rights must:

 

 

A shareholder wishing to deliver a notice asserting dissenters’ rights should hand deliver or mail the notice to the following address:

 

Citizens Development Company
2812 1^st Avenue North, Suite 324
Billings, Montana 59101
ATTN: Marcy Mutch

 

A shareholder who wishes to exercise dissenters’ rights generally must dissent with respect to all of the shares the shareholder owns or over which the shareholder has the power to direct the vote. However, if a record shareholder is a nominee for several beneficial shareholders, some of whom wish to dissent and some of whom do not, then the record holder may dissent with respect to all the shares beneficially owned by any one person by notifying Citizens in writing of the name and address of each person on whose behalf the record shareholder asserts dissenters’ rights. A beneficial shareholder may assert dissenters’ rights directly by submitting to Citizens the record shareholder’s written consent and by dissenting with respect to all the shares of which the shareholder is the beneficial shareholder over which the shareholder has power to direct the vote.

 

A shareholder who does not, prior to the special shareholders meeting, deliver to Citizens a written notice of the shareholder’s intent to demand payment for the “fair value” of the shares will lose the right to exercise dissenters’ rights. In addition, any shareholder electing to exercise dissenters’ rights must either vote against the merger or abstain from voting.

 

If the merger is completed, Glacier (as the surviving corporation) will, within 10 days after the effective date of the merger, deliver a written notice to all Citizens shareholders who properly gave notice of their intent to exercise dissenters’ rights. The notice will, among other things:

 

 

A shareholder wishing to exercise dissenters’ rights must at that time file the payment demand and deliver share certificates as required in the notice. Failure to do so will cause that person to lose their dissenters’ rights.

 

A shareholder who has complied with the requirements summarized in the previous paragraph may nevertheless decline to exercise dissenters’ rights and withdraw from the appraisal process by notifying Citizens by the

date set forth in the written notice provided by Glacier following consummation of the merger. If the shareholder does not withdraw from the appraisal process by the specified date, he or she may not do so thereafter unless Glacier consents to such withdrawal in writing.

 

Upon completion of the merger or receipt of the payment demand, whichever is later, Glacier will pay each dissenter with properly perfected dissenters’ rights Glacier’s estimate of the “fair value” of the shareholder’s shares, plus accrued interest from the effective date of the merger. With respect to a dissenter who did not beneficially own shares of Citizens prior to the public announcement of the merger, Glacier is not required to make the payment until the dissenter has agreed to accept the payment in full satisfaction of the dissenter’s demands. “Fair value” means the value of the shares immediately before the effective date of the merger. The rate of interest is required to be the average rate then being paid by Citizens on its principal bank loans, or if Citizens has no loans from other banks, at a rate that is fair and equitable under all the circumstances.

 

Within 30 days of Glacier’s payment (or offer of payment in the case of shares acquired after public announcement of the merger) to a dissenting shareholder, a dissenter dissatisfied with Glacier’s estimate of the fair value may notify Glacier of the dissenter’s own estimate of the fair value and demand payment of that amount. If Glacier does not accept the dissenter’s estimate and the parties do not otherwise settle on a fair value, then Glacier must, within 60 days of receiving the estimate and demand, petition a court to determine the fair value.

 

In view of the complexity of the Montana statutes governing dissenters’ rights of appraisal, Citizens shareholders who wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.

 

The failure of a Citizens shareholder 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 B. You 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 that appendix.

 

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.

 

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 party of conditions applicable to them. Some of these conditions, applicable to the respective obligations of both Glacier and Citizens, are as follows:

 

 

In addition to the above, the obligations of Glacier under the Merger Agreement are subject to conditions that include the following:

 

 

Additionally, either Glacier or Citizens may terminate the merger if certain conditions applicable to the other party are not satisfied or waived. Those conditions are discussed below under “— Termination of the Merger Agreement.”

 

Either Glacier or Citizens may waive any of the other party’s conditions, except those that are required by law (such as receipt of regulatory and Citizens shareholder approval). Either Glacier or Citizens may also grant extended time to the other party to complete an obligation or condition.

 

Amendment of the Merger Agreement

 

The Merger Agreement may be amended upon authorization of the boards of directors of the parties, whether before or after the Citizens special meeting of the shareholders. To the extent permitted under applicable law, the parties may make any amendment or supplement without further approval of Citizens shareholders. However, after shareholder approval, any amendments that would reduce the amount or change the form of consideration Citizens shareholders will receive in the merger or the allocation of the cash percentage and stock percentage would require further Citizens shareholder approval.

 

Termination of the Merger Agreement

 

The Merger Agreement contains several provisions entitling either Glacier or Citizens to terminate the Merger Agreement under certain circumstances. The following briefly describes these provisions:

 

Lapse of Time.   If the merger has not closed by October 31, 2006, then at any time after that date, the board of directors of either Glacier or Citizens may terminate the Merger Agreement.

 

Glacier Average Closing Price Greater than $34.88.   Citizens may terminate the Merger Agreement if the Glacier average closing price (as defined in the Merger Agreement) is greater than $34.88.

 

If Citizens provides written notice of its intent to terminate the Merger Agreement because the Glacier average closing price is greater than $34.88, Glacier may elect, within two business days of its receipt of such notice, to adjust the per share stock consideration through the issuance of additional shares of Glacier common stock, such that the per share stock consideration equals the number of share of Glacier common stock that a Citizens shareholder would have received if the Glacier average closing price had been $34.88. If this election is made by Glacier, no termination of the Merger Agreement will occur and the Merger Agreement will remain in effect according to its terms, except that the per share stock consideration will have been adjusted.

Glacier Average Closing Price Less than $27.13.   Glacier may terminate the Merger Agreement in the Glacier average closing price (as defined in the Merger Agreement) is less than $27.13.

 

If Glacier provides written notice of its intent to terminate the Merger Agreement because the Glacier average closing price is less than $27.13, Citizens may elect, within two business days of its receipt of such notice, to accept an adjustment to the per share stock consideration through the issuance of fewer shares of Glacier common stock, such that the per share stock consideration equals the number of shares of Glacier common stock that a Citizens shareholder would have received in the Glacier average closing price had been $27.13. If this election is made by Citizens, no termination of the Merger Agreement will occur and the Merger Agreement will remain in effect according to its terms, except that that the per share stock consideration will have been adjusted.

 

Mutual Consent.   The parties may terminate the Merger Agreement at any time before closing, whether before or after approval by Citizens shareholders, by mutual consent.

 

No Regulatory Approvals.   Either party may terminate the Merger Agreement if the regulatory approvals required to be obtained are denied, or if any such approval is conditioned on a substantial deviation from the transactions contemplated by the Merger Agreement, subject to certain rights granted in the Merger Agreement to appeal the denial of such regulatory approval.

 

Breach of Warranty.   Either party may terminate the Merger Agreement (so long as the terminating party is not then in material breach of any of its representations, warranties, covenants or other agreements in the Merger Agreement) if there has been a material breach of any of the representations or warranties set forth in the Merger Agreement on the part of the other party, which breach is not cured within 30 days following written notice to such party, or which breach cannot, by its nature, be cured prior to the closing of the merger.

 

Breach of Covenant.   Either party may terminate the Merger Agreement (so long as the terminating party is not then in material breach of any of its representations, warranties, covenants or agreements in the Merger Agreement) if there has been a material breach of any covenants or agreements set forth in the Merger Agreement by the other party, which is not cured within 30 days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the closing of the merger.

 

Failure to Recommend or Obtain Shareholder Approval.   Glacier may terminate the Merger Agreement (so long as it is not then in material breach of any of its representations, warranties, covenants or agreements in the Merger Agreement), if (i) the Citizens board of directors fails to recommend to its shareholders approval of the merger, or (ii) modifies, withdraws or changes in a manner adverse to Glacier its recommendation to shareholders to approve the merger. Additionally, regardless of whether the Citizens board of directors recommends approval of the merger to its shareholders, Glacier may terminate the Merger Agreement if Citizens shareholders elect not to approve the merger.

 

Impracticability.   Either party may terminate the Merger Agreement upon written notice to the other party if the board of directors of the party seeking termination has determined in its sole judgment, made in good faith and after due consideration and consultation with counsel, that the merger has become inadvisable or impracticable by reason of actions taken by the federal government or the government of the State of Montana to restrain or invalidate the merger or the Merger Agreement.

 

Potential Dissenting Shares.   Glacier may terminate the Merger Agreement if holders of 10% or more of the outstanding shares of Citizens common stock are proposed dissenting shares (as defined in the Merger Agreement).

 

Superior Proposal.   Citizens may terminate the Merger Agreement if its board of directors determines in good faith that Citizens has received a “Superior Proposal” as defined in the Merger Agreement. This right is subject to the requirement that Citizens may terminate the Merger Agreement only if Citizens (i) has not breached its covenants regarding the initiation or solicitation of acquisition proposals from third parties; and (ii) subsequent to delivering the notice of termination to Glacier, Citizens intends to enter into a letter of intent, acquisition agreement or similar agreement relating to such Superior Proposal, and (iii) Citizens has provided Glacier with at least five business days prior notice that Citizens intends to accept a Superior Proposal and

given Glacier, if it so elects, an opportunity to amend the terms of the Merger Agreement (negotiated in good faith between Glacier and Citizens) in such a manner as would enable Citizens to proceed with the merger.

 

Termination Fees

 

Subject to certain exceptions, Citizens will pay Glacier a termination fee of $250,000 if Glacier terminates the Merger Agreement based on a Citizens breach of its representations or breach of its covenants. Glacier will pay Citizens a termination fee of $250,000 if Citizens terminates the Merger Agreement based on a Glacier breach of its representations or breach of its warranties.

 

Break-Up Fee

 

If the Merger Agreement is terminated (i) because the Citizens board of directors fails to recommend shareholder approval of the Merger Agreement; or (ii) Citizens terminates the Merger Agreement after receiving a Superior Proposal (as defined in the Merger Agreement) and Glacier declines the opportunity to amend the terms of the Merger Agreement to enable Citizens’ Board to proceed with the merger; or (iii) Glacier terminates the Merger Agreement after Citizens’ receipt of a Superior Proposal followed by an immediate acquisition event, then Citizens will immediately pay Glacier a break-up fee of $2.25 million. If the Merger Agreement is terminated by Glacier due to Citizens’ receipt of a Superior Proposal and prior to or within six months after such termination, Citizens or the Citizens Banks enter into an agreement, or publicly announce an intention, to engage in an acquisition event, or within 12 months after such termination an acquisition event has occurred, then Citizens will promptly pay to Glacier the break-up fee in the amount of $2.25 million.

 

Allocation of Costs Upon Termination

 

If the Merger Agreement is terminated (except under circumstances that would require the payment of a termination fee or break-up fee) Glacier and Citizens will each pay their own out-of-pocket expenses incurred in connection with the transaction and, except for any applicable termination or break-up fees, will have no other liability to the other party.

 

Conduct Pending the Merger

 

The Merger Agreement provides that, until the merger is effective, Citizens and each Citizens Bank will conduct their respective businesses only in the ordinary and usual course. The Merger Agreement also provides that, unless Glacier otherwise consents in writing, and except as required by applicable regulatory authorities, Citizens and each Citizens Bank will refrain from engaging in various activities such as:

 

 

 

Citizens Bank Management and Operations After the Merger

 

Upon the effectiveness of the merger, Citizens will merge with and into a newly formed, wholly-owned subsidiary of Glacier (the “Holding Subsidiary”), and each of the Citizens Banks will become subsidiaries of Glacier by virtue of being subsidiaries of the Holding Subsidiary. For an initial period following the merger (the “Transition Period”), the various Citizens Banks will operate under their current names and with their current boards of directors and executive officers.

 

Following the Transition Period, the various former Citizens Banks will be merged with and into currently existing Glacier subsidiary banks, based upon geographic location (the “Bank Mergers”). Upon the closing of the Bank Mergers, the former Citizens Banks will operate as divisions of the Glacier subsidiary banks into which they have merged. As described under “— Interests of Certain Persons in the Merger — Employment Agreements” below, each of the current Presidents of the various Citizens Banks have entered into employment agreements under which they will continue to serve as President during the Transition Period, and will serve in a senior management role following the Bank Mergers.

 

Employee Benefit Plans

 

The Merger Agreement provides that Glacier and Citizens intend, as soon as practicable after the merger, to transfer the accrued benefits of employees of Citizens and the Citizens Banks under Citizens’ Pension Plan that are intended to be qualified under Section 401(a) of the Internal Revenue Code to a similar plan maintained by Glacier. Citizens’ other existing benefit plans will be terminated. If the employment of any persons who are Citizens Bank employees is terminated within three months of the closing of the Bank Mergers as a result of the consolidation of staff functions, such persons will be entitled to receive the severance payment specified in Glacier’s severance plan for employees as then in effect.

 

Interests of Certain Persons in the Merger

 

Certain members of the Citizens board of directors and management may be deemed to have interests in the merger, in addition to their interests as shareholders of Citizens generally. The Citizens board of directors was aware of these factors and considered them, among other things, in approving the Merger Agreement.

 

Stock Ownership.  The Voting Agreement Shareholders beneficially owned, as of the record date for the special meeting, a total number of shares of Citizens common stock representing approximately 85.48% of all outstanding Citizens shares. The Voting Agreement Shareholders of Citizens will receive the same consideration in the merger for their shares as other shareholders of Citizens.

 

Voting Agreements.  The Voting Agreement Shareholders of Citizens have entered into a Voting Agreement, dated as of the same date as the Merger Agreement. Pursuant to this agreement, each Voting Agreement Shareholder

agrees to vote the shares of Citizens common stock that he owns or controls in favor of the merger. The persons or entities that have entered into this agreement are entitled to vote a total of 403,021.40 outstanding shares of Citizens common stock, which is approximately 85.48% of the total shares outstanding.

 

Employment Agreements.  Each of the Citizens Banks have entered into an employment agreement, ratified by Glacier, with its current President (Mr. Bob Whalen of Citizens State Bank of Hamilton; Mr. Jason Hinch of First Citizens Bank of Billings; Mr. Dean Comes of First National Bank of Lewiston; Mr. Bob Sizemore of Western Bank of Chinook, N.A.; and Mr. Scott Weaver of First Citizens Bank, N.A.). Each employment agreement provides that following the merger, the relevant Citizens Bank will operate as a subsidiary of the Holding Subsidiary during the Transition Period, and that following the Transition Period, the relevant former Citizens Bank will merge with and into an existing Glacier subsidiary bank in the Bank Mergers, and thereafter operate as a division of such Glacier subsidiary bank.

 

Each employment agreement provides that during the Transition Period the named executive will serve as President of the relevant former Citizens Bank, and that after the Transition Period, the named executive’s title will be determined by the board of directors of the Glacier subsidiary into which the relevant former Citizens Bank merged.

 

Each of the employment agreements provides that if the employment of the named executive is terminated without cause (as defined in the agreement) or if the named executive resigns with good reason (as defined in the agreement), the relevant employing bank will pay to the named executive a lump sum payment based on the named executive’s monthly base salary and the terms of the agreement.

 

Each of the employment agreements provide that during the term of employment and for a one year after the named executive’s employment has ended, the named executive will not provide management, supervisory or other similar services to any person or entity engaged in any business within the County in which the employing bank is located, that is competitive with the business of the employing bank or Glacier.

 

Each of the employment agreements provides for an initial annual salary, with subsequent salary increases subject to the employing bank’s annual review of the named executive’s compensation and performance. The initial annual salaries for the Citizens Banks Presidents range from $86,000 to $120,000.

 

Citizens Director Non-Competition Agreement.  All members of the board of directors of Citizens (except Messrs. Dean Comes and Jason Hinch, who are subject to an employment agreement) have entered into a non-competition agreement with Glacier. Except under certain limited circumstances, the non-competition agreement prohibits directors from competing with Glacier, the Citizens Banks that will become Glacier subsidiaries following the merger, and their successors within the State of Montana. The term of the non-competition agreement commences upon the effective date of the merger and continues for two years.

 

Citizens Principal Shareholder Non-Competition Agreement.  The Trust, the Foundation and the Presidents of the subsidiary banks of Citizens affiliated bank holding companies who are not also Citizens directors have entered into a non-competition agreement with Glacier. Except under certain limited circumstances, the non-competition agreement prohibits such principal shareholders from competing with Glacier, the Citizens Banks that will become Glacier subsidiaries following the merger, and their successors, within Yellowstone, Ravalli, Fergus, Blaine and Flathead Counties in Montana. The term of the non-competition agreement commences on the effective date of the merger and continues for two years.

 

Stay Bonuses.  Certain Citizens employees and Presidents and other senior officers of the Citizens Banks will receive stay bonuses in the aggregate amount of $1.2 million (of which $700,000 in the aggregate will be paid to the Presidents of the Citizens Banks) immediately prior to the consummation of the merger.

 

Potential Conflict of Interest of Citizens’ Investment Banking Advisor.  Citizens’ investment banking advisor in the merger, Davidson, has conflicts or potential conflicts of interest as a result of the fact that Davidson has advised Glacier on previous bank acquisition transactions and public or private securities offerings, currently makes a market in and provides investment research coverage of Glacier’s common stock and is expected to serve as an underwriter of shares of Glacier’s common stock that may be issued by Glacier in connection with the merger. Davidson advised the Citizens board of directors of such conflicts or potential conflicts of interest and further

advised the board, and the board determined, to obtain an independent opinion as to the fairness of the merger to Citizens shareholders, from a financial point of view.

 

Indemnification of Directors and Officers; Insurance.  The Merger Agreement provides that Glacier will, for a period of four years following the closing of the merger, indemnify the present and former directors and officers of Citizens and the Citizens Banks against liabilities or costs that may arise in the future, incurred in connection with claims or actions arising out of or pertaining to matters that existed or occurred prior to the effective date of the merger. The scope of this indemnification is to the fullest extent that such persons would have been entitled to indemnification under Montana law or the articles of incorporation or bylaws of Citizens and/or the Citizens Banks.

 

The Merger Agreement also provides that for a period of four years following the closing of the merger, Glacier will use reasonable efforts to cause to be maintained in effect, director and officer liability insurance substantially similar to that maintained by Glacier with respect to claims arising from facts or events that occurred before the effective date of the merger.

 

Accounting Treatment of the Merger

 

The acquisition of Citizens will be accounted for using the purchase method of accounting by Glacier under generally accepted accounting principles. Accordingly, using the purchase method of accounting, the assets and liabilities of Citizens will be recorded by Glacier at their respective fair values at the time of the merger. The excess of Glacier’s purchase price over the net fair value of assets acquired including identifiable intangible assets and liabilities assumed is recorded as goodwill. Goodwill will be periodically assessed for impairment but no less frequently than on an annual basis. Prior period financial statements are not restated and results of operation of Citizens will be included in Glacier’s consolidated statement of operations after the date of the merger. The intangible assets will be amortized against the combined company’s earnings following completion of the merger.

 

Stock Resales by Citizens Affiliates

 

The Glacier common stock to be issued in the merger will be transferable free of restrictions under the Securities Act of 1933 (“1933 Act”), except for shares received by persons, including directors and executive officers of Citizens, who may be deemed to be “affiliates” of Citizens, as that term is defined in the rules under the 1933 Act. 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. Glacier will obtain customary agreements with all Citizens directors, officers, and affiliates of Citizens, under which such persons will represent that they will not dispose of their shares of Glacier received in the merger or the shares of capital stock of Citizens or Glacier held by them before the merger, except in compliance with the 1933 Act and the rules and regulations promulgated under the 1933 Act. This proxy statement/prospectus does not cover any resales of the Glacier common stock received by affiliates of Citizens.

 

Business

 

Citizens is a Billings, Montana-based bank holding company that owns the five separately chartered community banks throughout Montana. Citizens was founded in 1968 and the Citizens Banks have been in existence from 35 up to 100 years. Consequently, Citizens enjoys excellent banking office locations, solid market positions, and a strong and loyal customer base. Approximately 82% of Citizens is owned by the Trust, with the balance owned primarily by current and former officers and directors of Citizens and Citizens Banks. With only three full-time employees at the holding company level (whose services are partially allocated to affiliated banking groups in South Dakota and Wisconsin), management of Citizens is very de-centralized, with significant autonomy provided to each of the Citizens Banks. Citizens believes this approach reflects a genuine community banking philosophy, with decisions and relationships based at the local level.

Citizens Banks’ Products, Services and Markets

 

The Citizens Banks provide traditional commercial and retail banking services to businesses, agricultural producers, and individuals in the markets they serve. The Citizens Banks include:

 

 

Citizens Summary Financial Information

 

The following selected financial information for the fiscal years ended December 31, 2005, 2004 and 2003 is derived from unaudited consolidated financial statements of Citizens.

 

Citizens Balance Sheet

 

 

Citizens Income Statement

 

 

Competition

 

The markets in which the Citizens Banks operate are highly competitive. The banks compete with other financial institutions and providers of financial services, including banks, savings institutions, credit unions,

government agencies, finance companies, and brokerage firms. Many of these competitors have substantially greater resources than the Citizens Banks.

 

Competition for the Citizens Banks varies by local or regional market conditions. Principal competitors for FCB-Billings include First Interstate Bank, Wells Fargo, US Bank, Western Security Bank, Stockman Bank of Montana, Yellowstone Bank, and Rocky Mountain Bank. Principal competitors for FNB-Lewistown include Wells Fargo, Basin State Bank, Western Security Bank, Farmers State Bank of Denton, Fergus County Federal Credit Union, and the Farm Credit Service. Principal competitors for CSB-Hamilton include Farmers State Bank, Ravalli County Bank, Rocky Mountain Bank, First Interstate Bank, and Sterling Savings Bank. Principal competitors for FCB-Columbia Falls include Glacier Bank, First Interstate Bank, Wells Fargo, Valley Bank of Kalispell, Three Rivers Bank of Montana, Flathead Bank of Bigfork, and Mountain West Bank. Principal competitors for WB-Chinook include Bank of Bridger, Wells Fargo, Independence Bank, and the Farm Credit Service.

 

Facilities

 

The Citizens Banks provide services from eleven banking offices in Billings, Laurel, Lewistown, Hamilton, Corvallis, Columbia Falls, Kalispell, and Chinook.

 

FCB-Billings has five branches: a large downtown facility, a Billings Heights branch, a west Billings branch, an in-store branch in a County Market grocery store (also in west Billings), and a full service branch in Laurel. All of the FCB-Billings branches are owned, except the County Market branch which is on a year-to-year lease. FNB-Lewistown operates out of one leased location in a prime location in downtown Lewistown. CSB-Hamilton has one large branch in downtown Hamilton and one branch in Corvallis, both of which are owned locations. FCB-Columbia Falls has two branches, one in downtown Columbia Falls and a location in north Kalispell, both of which are owned. WB-Chinook has one owned location in Chinook.

 

Employees

 

As of March 31, 2006, Citizens and the Citizens Banks had 163 employees, of which 141 are full-time equivalent employees. None of the employees are covered by a collective bargaining agreement. Management believes relations with its employees are good.

 

Legal Proceedings.

 

Citizens is not a party to any pending or threatened proceedings. Certain subsidiary banks currently are, and from time to time may continue to be, a party to various legal actions in the ordinary course of business. Two such actions are now pending. FCB-Billings and WB-Chinook are currently defendants in these actions. Management believes that resolving the matters will not have a material adverse impact on either bank’s financial position or operations.

Security Ownership of Management and Certain Beneficial Owners

 

The following tables set forth information as of March 31, 2006, regarding the shares of Citizens common stock beneficially owned by (i) each person (other than executive officers or directors whose stock ownership is listed below), known by Citizens to own beneficially more than 5% of Citizens’ Class A and Class B common stock, (ii) each director of Citizens, (iii) all directors and executive officers of Citizens as a group. For purposes of the following table, persons serving as Presidents of the Citizens Banks are included as executive officers. Except as noted below, each holder has sole voting and investment power with respect to shares of Citizens common stock listed as owned by such person or entity.

 

Principal Shareholders

 

 

Directors and Executive Officers

 

 

 

 

Glacier’s authorized capital stock consists of 78,125,000 shares of common stock, $0.01 par value per share, and 1,000,000 shares of preferred stock, $0.01 par value per share. As of the date of this proxy statement/prospectus, Glacier had no shares of preferred stock issued. The Glacier board of directors is authorized, without further shareholder action, to issue preferred stock shares with such designations, preferences and rights as the Glacier board of directors may determine.

Glacier common stock is listed for trading on the Nasdaq National Market under the symbol “GBCI.”

 

Glacier’s shareholders do not have preemptive rights to subscribe to any additional securities that may be issued. Each share of Glacier common stock has the same relative rights and is identical in all respects to every other share of Glacier common stock. 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.

 

For additional information concerning Glacier’s capital stock, see “Comparison Of Certain Rights Of Holders Of Glacier And Citizens Common Stock.”

 

Montana law and Glacier’s Articles of Incorporation and Bylaws govern the rights of Glacier shareholders and will govern the rights of Citizens shareholders who become shareholders of Glacier as a result of the merger. The rights of Citizens shareholders are currently governed by Montana law and by Citizens’ Articles of Incorporation and Bylaws. The following is a brief summary of certain differences between the rights of Glacier and Citizens shareholders. This summary does not purport to be complete and is qualified by the documents referenced. See also “Where You Can Find More Information About Glacier.”

 

General

 

Under its Articles of Incorporation, Glacier’s authorized capital stock consists of 78,125,000 shares of common stock, $0.01 par value per share, and 1,000,000 shares of preferred stock, $0.01 par value per share. No shares of preferred stock are currently outstanding.

 

Under its Articles of Incorporation, Citizens’ authorized capital consists of 500,000 shares of Class A common stock, no par value per share, and 500,000 shares of Class B common stock, no par value per share.

 

The following is a more detailed description of Glacier’s and Citizens’ capital stock.

 

Common Stock

 

As of March 31, 2006, there were 32,314,112 shares of Glacier common stock issued and outstanding, in addition to options for the purchase of 2,164,521shares of Glacier common stock under Glacier’s employee and director stock option plans.

 

As of March 31, 2006, there were 43,151.33 shares of Citizens Class A common stock and 428,321.82 Class B common stock issued and outstanding.

 

Preferred Stock

 

As of the date of this proxy statement/prospectus, Glacier had no shares of preferred stock issued. The Glacier board of directors is authorized, without further shareholder action, to issue preferred stock shares with such designations, preferences and rights as the Glacier board of directors may determine.

 

Dividend Rights

 

Dividends may be paid on Glacier common stock as and when declared by the Glacier board of directors out of funds legally available for the payment of dividends. The Glacier board of directors may issue preferred stock that is entitled to such dividend rights as the board of directors 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. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and bank holding companies from paying dividends in a manner that would constitute an unsafe or unsound banking practice. In addition, a bank may not pay cash dividends if doing so would reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. State laws also limit a

bank’s ability to pay dividends. Accordingly, the dividend restrictions imposed on the subsidiaries by statute or regulation effectively may limit the amount of dividends Glacier can pay.

 

Dividends may be paid on Citizens common stock as and when declared by the Citizens board of directors out of funds legally available for the payment of dividends. The ability of Citizens to pay dividends is essentially subject to the same factors applicable to Glacier, as discussed above.

 

Voting Rights

 

All voting rights are currently vested in the holders of Glacier common stock. The Class A shares of Citizens common stock have voting rights, with each share being entitled to one vote. The Class B shares of Citizens common stock are non-voting shares, except for matters related to certain extraordinary events including, without limitation, a merger or consolidation involving Citizens, in which case each Class B share is entitled to one vote.

 

The Articles of Incorporation of Glacier provide that shareholders do not have cumulative voting rights in the election of directors. Citizens shareholders do not have cumulative voting rights for the election of directors.

 

Preemptive Rights

 

Glacier’s and Citizens shareholders do not 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 of directors is authorized to determine the liquidation rights of any preferred stock that may be issued.

 

If Citizens is liquidated, the holders of Citizens common stock are entitled to share, on a pro rata basis, Citizens’ remaining assets after provision for liabilities.

 

All outstanding shares of both Glacier and Citizens common stock are, and the shares to be issued in the merger will be, fully paid and nonassessable.

 

Amendment of Articles of Incorporation and Bylaws

 

The Montana Business Corporation Act (“MBCA”) authorizes a corporation’s board of directors to make various changes of an administrative nature to its articles of incorporation, including increasing the number of outstanding shares in proportion to a stock split or stock divided in the corporation’s own shares. Other amendments to a corporation’s articles of incorporation must be recommended to the shareholders by the board of directors, unless the board determines that because of a conflict of interest or other special circumstances it should make no recommendation, and must be approved by a majority of all votes entitled to be cast by each voting group that has a right to vote on the amendment. The Glacier board of directors may, by a majority vote, amend Glacier’s bylaws.

 

The bylaws of Citizens may be amended by a vote of shareholders representing two thirds of all of the stock issued and outstanding.

 

Approval of Certain Transactions

 

The MBCA does not contain any “anti-takeover” provisions imposing specific requirements or restrictions on transactions between a corporation and significant shareholders. Glacier’s articles of incorporation contain a provision requiring that specified transactions with an “interested shareholder” be approved by 80% of the voting power of the then outstanding shares unless it is (i) approved by Glacier’s board of directors, or (ii) certain price and procedural requirements are satisfied. An “interested shareholder” is broadly defined to include the right, directly or indirectly, to acquire or to control the voting or disposition of 10% or more of Glacier’s voting stock. The Citizens articles of incorporation do not contain any provisions relating to transactions with significant or interested shareholders.

Board of Directors — Number of Directors and Staggered Board

 

Glacier’s articles of incorporation provide that the number of directors may not be less than seven (7) or more than seventeen (17). The articles further provide that the board must generally be staggered if there are nine (9) or more members. Glacier’s board currently consists of nine (9) members, each of whom has a staggered three-year term. The Citizens bylaws provide that there will be five (5) directors who hold office until the next annual meeting of the shareholders and until successors have been elected and qualified.

 

Indemnification and Limitation of Liability

 

Under the MBCA, indemnification of directors and officers is authorized to cover judgments, amounts paid in settlement, and expenses arising out of actions where the director or officer acted in good faith and in or not opposed to the best interests of the corporation, and in criminal cases, where the director or officer had no reasonable cause to believe that his or her conduct was unlawful. Unless limited by the corporation’s articles of incorporation, Montana law requires indemnification if the director or officer is wholly successful on the merits of the action. Glacier’s bylaws provide that Glacier shall indemnify its directors and officers to the fullest extent not prohibited by law, including indemnification for payments in settlement of actions brought against a director or officer in the name if the corporation, commonly referred to as a derivative action. Under the MBCA, any indemnification of a director in a derivative action must be reported to shareholders in writing prior to the next annual meeting of shareholders.

 

Neither Citizens articles of incorporation nor bylaws provide for indemnification or limitation on liability for officers and directors. As such, the provisions of the MBCA govern the indemnification of directors and officers by Citizens.

 

Restriction of Transfer of Shares

 

Glacier’s articles and bylaws do not provide any specific limitations on its ability to transfer shares, nor require the company’s shares to bear a restrictive legend. The Presidents of the Citizens Banks, the Presidents of affiliated banks of Citizens, Citizens and its affiliated bank holding companies, United Bancorporation and Midwest Bancorporation, have entered into an Amended and Restated Shareholders Agreement dated February 2, 2004, as amended by that certain Amendment No. 1 to Amended and Restated Shareholders Agreement dated February 9, 2006 (the “Citizens Shareholders Agreement.”) The Citizens Shareholders Agreement with respect to Citizens and the shares of Citizens owned by the shareholder parties to the Citizens Shareholders Agreement will terminate on the effective date of the merger.

 

Potential “Anti-Takeover” Provisions

 

Glacier’s articles of incorporation include certain provisions that could make more difficult the acquisition of Glacier by means of a tender offer, a proxy contest, merger or otherwise. These provisions include: (i) a “staggered board,” whereby only one-third of the members of the board of directors are elected in any particular year; and (ii) a requirement that any “Business Combination” (as defined in the articles of incorporation) be approved by the affirmative vote of not less than 80% of the voting power of the then outstanding shares unless it is either approved by the board of directors or certain price and procedural requirements are satisfied.

 

In addition, the authorization of preferred stock, which is intended primarily as a financing tool and not as a defensive measure against takeovers, may potentially be used by management to make more difficult uninvited attempts to acquire control of Glacier (for example, by diluting the ownership interest of a substantial shareholder, increasing the amount of consideration necessary for shareholder to obtain control, or selling authorized but unissued shares to friendly third parties).

 

The staggered board structure of the board of directors, the “supermajority” approval requirement for certain business transactions, and the availability of Glacier’s preferred stock for issuance without shareholder approval, may have the effect of lengthening the time required for a person to acquire control of Glacier through a tender offer, proxy contest or otherwise, and may deter any potentially unfriendly offers or other efforts to obtain control of Glacier. This could deprive Glacier’s shareholders of opportunities to realize a premium for their Glacier common stock, even in circumstances where such action was favored by a majority of Glacier’s shareholders.

 

The validity of the Glacier common stock to be issued in the merger will be passed upon for Glacier by its special counsel, Christensen, Moore, Cockrell, Cummings & Axelberg, P.C., Kalispell, Montana.

 

The consolidated financial statements of Glacier Bancorp, Inc. as of December 31, 2005 and the year then ended have been incorporated by reference herein and in the registration statement in reliance upon the report of BKD, LLP, independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing.

 

The consolidated statement of financial condition of Glacier Bancorp, Inc. as of December 31, 2004 and the related consolidated statements of operations, stockholders’ equity and comprehensive income, and cash flows for each of the years in the two-year period ended December 31, 2004, have been incorporated by reference herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered accounting firm, and upon the authority of said firm as experts in accounting and auditing.

 

Glacier files annual, quarterly and current reports, proxy statements, and other information with the SEC. You may read and copy any reports, statements, or other information that Glacier files at the SEC’s public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Glacier’s SEC filings are also available to the public on the SEC Internet site (http://www.sec.gov). As described below, you may also obtain the documents that Glacier is incorporating by reference into this proxy statement/prospectus from Glacier.

 

Glacier has filed a Registration Statement on Form S-4 to register with the SEC the shares of Glacier common stock to be issued to Citizens shareholders in the merger. This proxy statement/prospectus is part of that Registration Statement and constitutes a prospectus of Glacier in addition to being a proxy statement of Citizens for the Citizens special shareholders meeting. As allowed by SEC rules, this proxy statement/prospectus does not contain all of the information that you can find in the Registration Statement or the exhibits to the Registration Statement.

 

The SEC allows Glacier to “incorporate by reference” information into this proxy statement/prospectus, which means that Glacier can disclose important information to you by referring you to another document filed separately by Glacier with the SEC. The information incorporated by reference is deemed to be part of this proxy statement/prospectus, except for any information superseded by any information in this proxy statement/prospectus. This proxy statement/prospectus incorporates by reference the documents set forth below that Glacier has previously filed with the SEC (other than current reports furnished under Item 9 or Item 12 of Form 8-K). These documents contain important information about Glacier and its finances:

 

 

Glacier is also incorporating by reference additional documents that Glacier files with the SEC between the date of this proxy statement/prospectus and the date of the special meeting of Citizens shareholders (other than current reports furnished under Item 9 or Item 12 of Form 8-K).

You can obtain the documents that are incorporated by reference through Glacier or the SEC. You can obtain the documents from the SEC, as described above. These documents are also available from Glacier without charge, excluding exhibits unless Glacier has specifically incorporated such exhibits by reference in this proxy statement/prospectus. You may obtain documents incorporated by reference in this proxy statement/prospectus by requesting them from Glacier at 49 Commons Loop, Kalispell, Montana 59901, telephone number (406) 751-4703, ATTN: James H. Strosahl, Corporate Secretary. If you would like to request documents from Glacier, please do so by June 13, 2006 to receive them before the Citizens special shareholders meeting. Certain reports can also be found on Glacier’s website at www.glacierbancorp.com.

 

Glacier has supplied all of the information concerning it contained in this proxy statement/prospectus, and Citizens has supplied all of the information concerning it.

 

You should rely only on the information contained or incorporated by reference in this proxy statement/prospectus in deciding how to vote on the merger. We have not authorized anyone to provide you with information other than what is contained in this proxy statement/prospectus. This proxy statement/prospectus is dated May 25, 2006. You should not assume that information contained in this proxy statement/prospectus is accurate as of any other date, and neither the mailing of this proxy statement/prospectus to Citizens shareholders nor the issuance of Glacier common stock in the merger will create any implication to the contrary.

 

 

PLAN AND AGREEMENT OF MERGER

BETWEEN

GLACIER BANCORP, INC.

AND

CITIZENS DEVELOPMENT COMPANY

 

DATED AS OF APRIL 20, 2006

 

 

TABLE OF CONTENTS

 

LIST OF SCHEDULES AND EXHIBITS

 

 

PLAN AND AGREEMENT OF MERGER
BETWEEN
GLACIER BANCORP, INC. AND CITIZENS DEVELOPMENT COMPANY

 

This Plan and Agreement of Merger (the “Agreement”), dated as of April 20, 2006, is made by and between GLACIER BANCORP, INC. (“Glacier”), acting on its own behalf and on behalf of a Montana corporation to be formed by Glacier pursuant to this Agreement (“Holdings”), and CITIZENS DEVELOPMENT COMPANY (“CDC”).

 

PREAMBLE

 

The management and boards of directors of Glacier and CDC believe that the proposed Merger, to be accomplished in the manner set forth in this Agreement, is in the best interests of the respective corporations and their shareholders.

 

RECITALS

 

A. The Parties and Certain Subsidiaries.

 

(1) Glacier is a corporation duly organized and validly existing under Montana law and is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (“BHC Act”). Glacier’s principal office is located in Kalispell, Montana.

 

(2) Among its wholly owned subsidiaries, Glacier owns all of the outstanding common stock of the following banks: Western Security Bank, a Montana state-chartered bank with its principal office in Billings, Montana (“Western Security”); Glacier Bank, a Montana state-chartered bank with its principal office in Kalispell, Montana (“Glacier Bank”); and First Security Bank of Missoula, a Montana state-chartered bank with its principal office in Missoula, Montana (“First Security”).

 

(3) Holdings is a corporation to be formed by Glacier under applicable Montana and federal law for purposes of effecting the Merger as described in this Agreement. Upon its formation, Holdings will be a wholly owned subsidiary of Glacier.

 

(4) CDC is a corporation duly organized and validly existing under Montana law and is a registered bank holding company under the BHC Act. CDC’s principal office is located in Billings, Montana.

 

(5) CDC owns all of the outstanding capital stock of Citizens State Bank, a Montana state-chartered bank with its principal office in Hamilton, Montana (“CSB-Hamilton”), and more than 80% of the outstanding capital stock of the following banks: First Citizens Bank of Billings, a Montana state-chartered bank with its principal office in Billings, Montana (“FCB-Billings”); First National Bank of Lewistown, a national banking association with its principal office in Lewistown, Montana (“FNB-Lewistown”); Western Bank of Chinook, N.A., a national banking association with its principal office in Chinook, Montana (“WB-Chinook”); and First Citizens Bank, N.A., a national banking association with its principal office in Columbia Falls, Montana (“FCB-Columbia Falls”).

 

B. The Transaction.

 

(1) Promptly following execution of this Agreement, Glacier will cause the formation of Holdings as a wholly owned subsidiary of Glacier.

 

(2) On the Effective Date, (i) CDC will merge with and into Holdings, with Holdings surviving as a wholly owned subsidiary of Glacier; and (ii) CSB-Hamilton, FCB-Billings, FNB-Lewistown, WB-Chinook and FCB-Columbia Falls (collectively, the “CDC Banks”) will become subsidiaries of Holdings.

 

(3) Glacier and CDC anticipate that for an initial transition period following the Effective Date, the CDC Banks will operate as subsidiaries of Holdings. Following such transition period, it is expected that (i) each of FCB-Billings, FNB-Lewistown and WB-Chinook will merge with and into Western Security, with Western Security surviving as a wholly owned subsidiary of Glacier, (ii) FCB-Columbia Falls will merge with and into Glacier Bank, with Glacier Bank surviving as a wholly owned subsidiary of Glacier, (iii) CSB-Hamilton will merge with and into

First Security, with First Security surviving as a wholly owned subsidiary of Glacier, and (iv) Holdings will be merged with and into Glacier or otherwise dissolved (each of (i) through (iv), a “CDC Bank Merger”).

 

C. Board Approvals.  The respective boards of directors of Glacier and CDC have approved this Agreement and authorized its execution and delivery.

 

D. Other Approvals.  The Merger is subject to:

 

(1) Satisfaction of the conditions described in this Agreement;

 

(2) Approval by CDC’s shareholders; and

 

(3) Approval or acquiescence, as appropriate, by the Board of Governors of the Federal Reserve System (“Federal Reserve”) and any other agencies having jurisdiction over the Merger.

 

E. Employment Agreements.  Each CDC Bank has entered into or anticipates entering into an employment agreement with such CDC Bank’s President, which agreement will take effect as of the Effective Date.

 

F. Controlling Shareholder, Director and Executive Officer Agreements.  In connection with the parties’ execution of this Agreement, the Trust, the Foundation, and each Executive Officer and director of CDC and the CDC Bank Executive Officers (the “Approving Persons”) have entered into agreements, the forms of which have been approved by Glacier, pursuant to which, among other things, each agrees to vote such holder’s shares of CDC capital stock in favor of the actions contemplated by this Agreement and to refrain from competing with Glacier and/or the CDC Banks and their respective successors for a period of time.

 

G. CDC Shareholder Agreement.  Certain shareholders of CDC are parties to an Amended and Restated Shareholders Agreement, dated February 2, 2004, as amended February 9, 2006, which agreement will be terminated with respect to CDC in connection with the Merger.

 

H. Intention of the Parties — Tax Treatment.  The parties intend for the Merger to qualify, for federal income tax purposes, as a tax-free reorganization under IRC Section 368(a), and the parties hereto hereby adopt this Agreement as a plan of reorganization within the meaning of Sections 1.368-2(g) and as required under 1.368-3(a) of the United States Treasury Regulations.

 

I. Transfer of CDC Common Stock from the Trust to the Foundation.   The Foundation may apply to the Federal Reserve Bank of Minneapolis for approval to become a bank holding company, which status would result from the proposed transfer of the CDC Common Stock currently owned by the Trust to the Foundation (the “Foundation Transfer”).

 

AGREEMENT

 

In consideration of the mutual agreements set forth in this Agreement, Glacier and CDC agree as follows:

 

DEFINITIONS

 

The following capitalized terms used in this Agreement will have the following meanings:

 

“Acquisition Event” means any of the following: (i) a merger, consolidation or similar transaction involving CDC or any successor, (ii) a purchase, lease or other acquisition in one or a series of related transactions of assets of CDC or any of its Subsidiaries representing 25% or more of the consolidated assets of CDC and its Subsidiaries, or (iii) a purchase or other acquisition (including by way of merger, consolidation, share exchange or any similar transaction) in one or a series of related transactions of beneficial ownership of securities representing 50% or more of the voting power of CDC or its Subsidiaries (except for the Foundation Transfer), in each case with or by a person or entity other than Glacier or one of its Subsidiaries.

 

“Acquisition Proposal” has the meaning assigned to such term in Section 4.1.11.

 

“Agreement” means this Plan and Agreement of Merger.

 

“ALLL” means allowance for possible loan and lease losses.

“Approving Persons” has the meaning assigned to such term in Recital F.

 

“Asset Classification” has the meaning assigned to such term in Section 3.1.16.

 

“Average Daily Earnings” has the meaning assigned to such term in Section 1.2.3.

 

“Base Consideration” means $77 million.

 

“BHC Act” has the meaning assigned to such term in Recital A.

 

“Break-Up Fee” has the meaning assigned to such term in Section 7.7.

 

“Business Day” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions located in the State of Montana are required by law to remain closed.

 

“CDC” is Citizens Development Company, a Montana corporation that has its principal place of business in Billings, Montana, and that is a bank holding company registered pursuant to the BHC Act.

 

“CDC Banks” has the meaning assigned to such term in Recital B.

 

“CDC Bank Merger” has the meaning assigned to such term in Recital B.

 

“CDC Common Stock” means the shares of CDC Class A common stock, no par value, and the shares of CDC Class B common stock, no par value, issued and outstanding from time to time.

 

“CDC Contract” has the meaning assigned to such term in Section 3.1.2.

 

“CDC Financial Statements” means CDC’s (i) audited consolidated balance sheet as of February 28, 2006; (ii) unaudited consolidated balance sheet as of the end of each fiscal quarter following December 31, 2005 but preceding the Execution Date, and the related unaudited consolidated statements of income, cash flows and changes in shareholders’ equity for each such quarter; and (iii) unaudited consolidated balance sheets and related consolidated statements of income and shareholders’ equity for each of the fiscal quarters ending after the Execution Date and before Closing or the Termination Date, as the case may be.

 

“CDC Meeting” has the meaning assigned in Section 4.2.2.

 

“CDC Transaction Fees” has the meaning assigned to such term in Section 5.2.3.

 

“Certificate” has the meaning assigned to such term in Section 1.7.1.

 

“Closing” means the closing of the Merger contemplated by this Agreement, as more fully specified in Section 2.2.

 

“Combination Election Shares” has the meaning assigned to such term in Section 1.3.2.

 

“Commissioner” means the Commissioner of the Division of Banking and Financial Institutions for the State of Montana.

 

“Compensation Plans” has the meaning assigned to such term in Section 3.1.20.

 

“CSB-Hamilton” has the meaning assigned to such term in Recital A(5).

 

“Daily Sales Price” for any Trading Day means the daily closing price per share of Glacier Common Stock on the NASDAQ Global Market, as reported on the website www.nasdaq.com.

 

“Determination Date” means the fifth (5th) Business Day immediately preceding the Effective Date.

 

“Determination Period” means the five (5) Trading Day period immediately preceding the Determination Date.

 

“Distribution” has the meaning assigned to such term in Section 4.1.3.

 

“Earnings Adjustment” has the meaning assigned to such term in Section 1.2.3.

 

“Effective Date” means the date on which the Merger takes place, as more fully specified in Section 2.1.

“Election Deadline” has the meaning assigned to such term in Section 1.3.2.

 

“Election Form” has the meaning assigned to such term in Section 1.3.1.

 

“Employees” has the meaning assigned to such term in Section 3.1.20.

 

“Environmental Laws” has the meaning assigned to such term in Section 3.1.7.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means, with respect to CDC, any other entity that is considered one employer with CDC under Section 4001 of ERISA or Section 414 of the IRC.

 

“Excess Transaction Fees” has the meaning assigned to such term in Section 1.2.4.

 

“Exchange Act” has the meaning assigned to such term in Section 3.1.5.

 

“Exchange Agent” means American Stock Transfer and Trust Co.

 

“Exchange Fund” has the meaning assigned to such term in Section 1.6.

 

“Execution Date” means the date of this Agreement.

 

“Executive Officers,” with respect to Glacier, means Michael J. Blodnick and James H. Strosahl.

 

“Executive Officers,” means, (i) with respect to CDC, its President, and (ii) with respect to each CDC Bank, the President of such CDC Bank.

 

“Extraordinary Expenses” has the meaning assigned to such term in Section 1.2.3.

 

“FCB-Billings” has the meaning assigned to such term in Recital A(5).

 

“FCB-Columbia Falls” has the meaning assigned to such term in Recital A(5).

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

“Federal Reserve” means the Board of Governors of the Federal Reserve System.

 

“First Security” has the meaning assigned to such term in Recital A(2).

 

“FNB-Lewistown” has the meaning assigned to such term in Recital A(5).

 

“Foundation” means the John T. Vucurevich Foundation.

 

“Foundation Transfer” has the meaning assigned to such term in Recital I.

 

“GAAP” means United States generally accepted accounting principles.

 

“Glacier” is Glacier Bancorp, Inc., a Montana corporation that has its principal place of business in Kalispell, Montana, and that is a bank holding company registered pursuant to the BHC Act.

 

“Glacier Average Closing Price” means the average Daily Sales Price of Glacier Common Stock for the Determination Period.

 

“Glacier Bank” has the meaning assigned to such term in Recital A(2).

 

“Glacier Common Stock” means the shares of Glacier common stock, $0.01 par value per share, issued and outstanding from time to time.

 

“Glacier Contract” has the meaning assigned to such term in Section 3.2.2.

 

“Glacier Financial Statements” means Glacier’s (i) audited consolidated balance sheets as of December 31, 2005, 2004 and 2003 and the related audited consolidated statements of income, cash flows and changes in shareholders’ equity for each of the years ended December 31, 2005, 2004 and 2003; (ii) unaudited consolidated balance sheet as of the end of each fiscal quarter following December 31, 2005 but preceding the Execution Date, and the related unaudited consolidated statements of income, cash flows and changes in shareholders’ equity for each such quarter; and (iii) unaudited consolidated balance sheets and related consolidated statements of income

and shareholders’ equity for each of the fiscal quarters ending after the Execution Date and before Closing or the Termination Date, as the case may be.

 

“Glacier Shares” means the shares of Glacier Common Stock to be issued to the holders of CDC Common Stock as Merger Consideration in accordance with Section 1.2.2.

 

“Hazardous Substances” has the meaning assigned to such item in Section 3.1.7.

 

“Holdings” is a Montana corporation that will be formed after the Execution Date as a wholly owned subsidiary of Glacier for purposes of effecting the Merger pursuant to this Agreement.

 

“Interim Earnings Period” has the meaning assigned to such term in Section 1.2.3.

 

“IRC” means the Internal Revenue Code of 1986, as amended.

 

“Knowledge” has the following meanings: (i) CDC will be deemed to have “Knowledge” of a particular fact or matter if any Executive Officer of CDC or a CDC Bank has actual knowledge of such fact or matter or if any such person could reasonably be expected to discover or otherwise become aware of such fact or matter in the course of making a reasonable inquiry into such areas of CDC’s and the CDC Banks’ business that are under such individual’s general area of responsibility; and (ii) Glacier will be deemed to have “Knowledge” of a particular fact or matter if any Executive Officer of Glacier has actual knowledge of such fact or matter or if any such person could reasonably be expected to discover or otherwise become aware of such fact or matter in the course of making a reasonable inquiry into such areas of Glacier’s business that are under such individual’s general area of responsibility.

 

“Leased Real Property” means the real properties subject to Leases as identified in Schedule 3.1.6.

 

“Leases” means the terms and conditions governing the leasehold interests in the Leased Real Property as identified in Schedule 3.1.6 to this Agreement.

 

“Liens” means, collectively, liens, pledges, security interests, claims, proxies, preemptive or subscriptive rights or other encumbrances or restrictions of any kind.

 

“Material Adverse Effect” with respect to a Person means an effect that: (i) is materially adverse to the business, financial condition, results of operations or prospects of the Person and its Subsidiaries taken as a whole; (ii) significantly and adversely affects the ability of the Person to consummate the Merger on or by the Termination Date or to perform its material obligations under this Agreement; or (iii) enables any Person to prevent the consummation of the Merger on or by the Termination Date.

 

“MBCA” means the Montana Business Corporations Act, as amended.

 

“Merger” means the merger of CDC with and into Holdings or, if Glacier so elects, the merger of CDC with and into Glacier.