As filed with the Securities and Exchange Commission on June 29, 2006
Registration No. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLACIER BANCORP, INC.
(Exact name of registrant as specified in its charter)
MONTANA 6022 81-0519541
(State or other jurisdiction (Primary standard industrial (I.R.S. employer
of incorporation classification code number) identification no.)
or organization)
49 COMMONS LOOP, KALISPELL, MONTANA 59901 (406) 756-4200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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MICHAEL J. BLODNICK
President and Chief Executive Officer
49 Commons Loop
Kalispell, Montana 59901
(406) 756-4200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of communications to:
STEPHEN M. KLEIN KEVIN KELLY
KIMBERLY F. STEPHAN TENNYSON GREBENAR
Graham & Dunn PC Rothgerber, Johnson & Lyons LLP
Pier 70 One Tabor Center, Suite 3000
2910 Alaskan Way, Suite 300 1200 Seventeenth Street
Seattle, Washington 98121-1128 Denver, Colorado 80202-5855
Telephone: (206) 340-9615 Telephone: (303) 628-9514
Facsimile: (206) 340-9599 Facsimile: (303) 623-9222
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
The date of mailing of the enclosed proxy statement/prospectus to shareholders
of First National Bank of Morgan.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
=====================================================================================
Title of Each Proposed Maximum Proposed Maximum Amount of
Class of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered(1) Per Share Offering Price(2) Fee(2)
-------------------------------------------------------------------------------------
Common Stock,
$0.01 Par Value 400,000 N/A [$642,000] $0.00
=====================================================================================
(1) Represents the maximum number of shares of common stock, $0.01 par value
per share estimated to be issuable by Glacier Bancorp, Inc ("Glacier") upon
consummation of the acquisition of First National Bank of Morgan ("First
National") by Glacier.
(2) Calculated in accordance with Rule 457(f) under the Securities Act of 1933,
the proposed maximum offering price of [$642,000] is computed by
subtracting $10,000,000 (the cash to be paid by Glacier) from the product
of (A) $1,871.60, the per-share book value of First National common stock
on March 31, 2006, times (B) 5,000 (the maximum number of shares of First
National common stock expected to be exchanged for the common stock being
registered).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
PROXY STATEMENT PROSPECTUS OF
OF FIRST NATIONAL BANK OF MORGAN GLACIER BANCORP, INC.
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
Dear First National Bank of Morgan Shareholders:
The boards of directors of First National Bank of Morgan and Glacier
Bancorp, Inc. have agreed on a merger of First National and a to-be-formed
subsidiary of Glacier. When the merger occurs, First National will operate as a
wholly owned subsidiary of Glacier.
Under the terms of the Plan and Agreement of Merger, dated May 31, 2006,
Glacier will pay a total of $20 million in cash and Glacier common stock. This
aggregate consideration amount is subject to adjustment as a result of any
excess First National transaction fees or a shortfall in the amount of First
National capital required at closing of the merger, as well as for a decline in
the trading price of both Glacier common stock and the average price of the
common stock of certain other publicly traded financial institutions. The merger
agreement provides that approximately 50% of the aggregate merger consideration
will be payable in Glacier common stock and approximately 50% will be payable in
cash. However, individual First National shareholders will be allowed to choose
whether to exchange their First National shares entirely for shares of Glacier
stock, entirely for cash, or for a combination of Glacier stock and cash.
Because the total amount of cash and total value of stock is fixed, you may
receive a combination of cash and stock that differs from your election, if too
many First National shareholders elect to receive one form of consideration over
the other. A FORM FOR MAKING YOUR ELECTION IS ENCLOSED.
The number of shares of Glacier common stock that will be exchanged for
shares of First National common stock will not be determined until ten days
prior to the merger. As explained in more detail in this document, whether you
elect to receive Glacier common stock, cash 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 $20 million
is not decreased in connection with an overall stock market price decline or for
excess transaction fees or shortfall in the amount of capital required at
closing, First National shareholders will receive $4,000, in cash and/or Glacier
common stock, per First National share. Based on the same assumptions, First
National shareholders will own approximately 1% 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 First National 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 the holders of at least two thirds (66 2/3%) of the shares
of First National's outstanding common stock. We will hold a special
shareholders' meeting to vote on the merger proposal. THE FIRST NATIONAL SPECIAL
SHAREHOLDERS' MEETING WILL BE HELD ON ___________, ___________, 2006, AT ______
__.M. LOCAL TIME, AT ________________________, _______, UTAH. 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. IF YOU DO NOT VOTE YOUR SHARES, IT WILL
HAVE THE SAME EFFECT AS VOTING AGAINST THE MERGER.
On behalf of the First National board of directors, I recommend that you
vote FOR approval of the merger.
---------------------------------------
Stanton R. Nielsen
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 FIRST NATIONAL
AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
----------
This proxy statement/prospectus is dated _____________, 2006,
and is first being mailed to First National shareholders on _____________, 2006.
FIRST NATIONAL BANK OF MORGAN
120 NORTH STATE STREET
MORGAN, UTAH 84050
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ___________, 2006
TO THE SHAREHOLDERS OF FIRST NATIONAL BANK OF MORGAN:
A special meeting of shareholders of First National Bank of Morgan will be
held on __________, 2006, at _____ __.m. local time, at ___________________,
_________________. 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 May 31, 2006, among Glacier Bancorp,
Inc., First National and New First National Bank of Morgan, a subsidiary of
Glacier to be formed, under the terms of which First National will merge
with and into New First National, 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 First National common stock at the close of business
on _________, 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
(66 2/3%) of the shares of First National's outstanding common stock is required
for approval of the merger agreement. As of _________, 2006 [record date], there
were 5,000 shares of First National common stock outstanding and entitled to
vote at the special meeting.
First National shareholders have the right to dissent from the merger and
obtain payment of the value of their First National shares under the applicable
provisions of the National Bank Act. A copy of the applicable provisions
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."
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the special
meeting, please complete, sign, date and promptly return the accompanying proxy
using the enclosed envelope. If for any reason you should desire to revoke your
proxy, you may do so at any time before it is voted at the meeting. IF YOU DO
NOT VOTE YOUR SHARES, IT WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE MERGER.
THE BOARD OF DIRECTORS OF FIRST NATIONAL HAS DETERMINED THAT THE MERGER
AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF FIRST NATIONAL AND ITS
SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND ANY CERTIFICATES FOR YOUR STOCK AT THIS TIME. YOU WILL
RECEIVE INSTRUCTIONS ON HOW TO EXCHANGE YOUR CERTIFICATES SOON AFTER THE MERGER
IS CONSUMMATED.
By Order of the Board of Directors,
---------------------------------------
Stanton R. Nielsen, Secretary
Morgan, Utah
___________, 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 __________, 2006 in order to receive
them before the First National special shareholders' meeting.
See "Where You Can Find More Information About Glacier."
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER................. 2
SUMMARY.................................................................. 7
RISK FACTORS............................................................. 12
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS..................... 14
SELECTED HISTORICAL FINANCIAL INFORMATION OF GLACIER..................... 15
HISTORICAL AND PRO FORMA PER SHARE DATA.................................. 17
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION......................... 18
FIRST NATIONAL SPECIAL SHAREHOLDERS' MEETING............................. 20
BACKGROUND OF AND REASONS FOR THE MERGER................................. 21
THE MERGER............................................................... 29
INFORMATION CONCERNING FIRST NATIONAL.................................... 47
DESCRIPTION OF GLACIER'S CAPITAL STOCK................................... 51
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER AND FIRST
NATIONAL COMMON STOCK................................................. 51
CERTAIN LEGAL MATTERS.................................................... 54
EXPERTS.................................................................. 55
WHERE YOU CAN FIND MORE INFORMATION ABOUT GLACIER........................ 55
Appendix A - Plan and Agreement of Merger
Appendix B - Applicable Provisions of Section 215a of the National Bank Act
Regarding Dissenter's Rights
Appendix C - Opinion of Hovde Financial, Inc., Financial Advisor to First
National Bank of Morgan
i
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER
WHAT IS THE PURPOSE OF THIS PROXY STATEMENT/PROSPECTUS?
This document serves as both a proxy statement of First National Bank of
Morgan and a prospectus of Glacier Bancorp, Inc. As a proxy statement, it is
being provided to you by First National because the board of directors of First
National is soliciting your proxy to vote to approve the proposed merger of
First National with and into New First National Bank of Morgan. After the
merger, the surviving First National will be wholly owned by Glacier. 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 First National
shares.
WHAT WILL FIRST NATIONAL SHAREHOLDERS RECEIVE IN THE MERGER?
Under the terms of the Plan and Agreement of Merger, dated as of May 31,
2006, by and between Glacier and First National, Glacier will pay cash and issue
shares of its common stock in exchange for all outstanding shares of First
National common stock. The merger agreement provides that the total merger
consideration will be $20 million. The total merger consideration may be
reduced, if applicable, in connection with any excess First National transaction
fees or if First National's capital at closing is below a specified level. In
addition, the total stock consideration may be reduced if there is a decline in
both the price of Glacier's common stock and the average prices for the common
stock of certain other publicly traded financial institutions.
Based on the 5,000 First National's shares that are currently outstanding,
and assuming the $20 million purchase price is not decreased as set forth in the
preceding paragraph, the purchase price per First National share will be $4,000.
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:
- all cash,
- all Glacier common stock, or
- a combination of cash and Glacier common stock that you select in 10%
increments.
All elections are subject to the allocation procedures described in this
document, if too many shareholders elect one form of consideration over the
other. As a result, you may not receive the form of merger consideration that
you elect. See "The Merger - Allocation" for a more detailed discussion of
allocation procedures under the merger agreement.
WHAT HAPPENS IF I ELECT TO RECEIVE CASH IN THE MERGER AND FIRST NATIONAL
SHAREHOLDERS ELECT TO RECEIVE MORE CASH THAN IS PERMITTED UNDER THE MERGER
AGREEMENT?
The total amount of cash to be paid by Glacier in the merger is fixed. If
First National shareholders elect to receive more cash than is permitted by the
merger agreement, your election to receive cash may be adjusted so as not to
exceed the limitations set forth in the merger agreement. In that event, you may
receive some stock despite your cash election. Glacier will first allocate stock
in the merger to First National shares for which no valid election has been
received in an effort to both honor elections and not exceed the total cash to
be paid by Glacier. However, if there are insufficient amounts of no-electing
First National shares to which excess Glacier common stock may be allocated, it
will be necessary to adjust elections. For a detailed description of the
allocation procedures, please see the discussion under the heading "The Merger -
Allocation."
2
WHAT HAPPENS IF I ELECT TO RECEIVE STOCK IN THE MERGER AND FIRST NATIONAL
SHAREHOLDERS ELECT TO RECEIVE MORE STOCK THAN IS PERMITTED UNDER THE MERGER
AGREEMENT?
As in the case of excess cash elections by First National shareholders,
adjustments to shareholder elections may be necessary to ensure that the total
Glacier shares to be issued in the merger do not exceed the fixed amount. If you
elect to receive stock and too many other shareholders elect stock, your
election may be adjusted so as not to exceed the limitations set forth in the
merger agreement and, consequently, you may receive cash despite your stock
election. Again, Glacier will first allocate cash to no-electing shares in an
attempt to honor elections made by shareholders. However, there may not be
sufficient amounts of no-electing shares to meet applicable limits on the
issuance of stock by Glacier. In that case, you may receive cash for some of
your shares for which you elected stock, which will likely result in the
recognition of gain or loss on a portion of your First National shares and be a
taxable event to you. Please see "The Merger - Federal Income Tax Consequences
of the Merger" for a discussion of the tax consequences of the receipt of cash
in the merger.
WHAT IS THE AMOUNT OF CASH AND/OR THE NUMBER OF SHARES OF GLACIER COMMON STOCK
THAT I WILL RECEIVE FOR MY SHARES OF FIRST NATIONAL COMMON STOCK?
The total merger consideration will not be determined until the effective
date of the merger, because such consideration is subject to possible reduction
in the event of certain excess transaction fees or if First National's closing
capital is below the specified amount, or there is a decline in both the market
price for Glacier common stock and the common stock for a peer group of
comparable financial institutions. Additionally, the actual aggregate number of
shares of Glacier common stock to be issued in the merger will not be determined
until the tenth calendar 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 First National
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.
IS THE VALUE OF THE PER SHARE CONSIDERATION THAT I RECEIVE EXPECTED TO 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 First National common stock in the merger, as measured during
the valuation period ending on the determination date, regardless of whether you
elect to receive cash or stock. However, as the value of Glacier stock
fluctuates with its trading price, the value of the Glacier stock you receive
for a First National share likely will not be the exact same as the cash to be
paid per share on any given day after the tenth calendar day preceding the
merger (that is, after the Glacier value per share for the merger is
established, as described elsewhere in this document).
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 _______,
2006, which is the tenth (10th) business day after the date of the First
National special meeting. The election procedures are described under "The
Merger - Election Procedure."
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 __________, 2006.
3
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 __________, 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 _________, 2006, then you will be deemed to
have made no election and will be issued either shares of Glacier common stock
or cash for your shares, depending on the elections made by other shareholders.
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 First National 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 First National 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, you will recognize
any gain or loss realized on the disposition of your First National 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
First National as defined under applicable federal securities laws. See "The
Merger - Stock Resales by First National Affiliates."
WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
First National will hold a special meeting of its shareholders on
__________, _______, 2006, at _______ ___.m., at ___________________,
___________________, ______, Utah.
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 the holders of at least two thirds (66 2/3%) of the shares
of First National's outstanding common stock. The directors of First National
beneficially own and have the right to vote 1,560 shares, representing 31.2% of
the shares entitled to be voted at the meeting, 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.
4
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:
- You may send a written notice stating that you would like to revoke
your proxy and provide new instructions on how to vote;
- You may complete and submit a later-dated proxy card; or
- You may attend the meeting and vote in person. If you intend to vote
in person and your shares are held by a broker, you should contact
your broker for instructions.
If you choose either the first or second method above, you must submit your
notice of revocation or your new proxy card to First National's secretary prior
to the special meeting.
WHO MAY VOTE AT THE MEETING?
The board of directors of First National has set ________, 2006, as the
record date for the meeting. If you were the owner of First National common
stock at the close of business on ______, 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 First National
is obtained and after the merger has received regulatory approval and the other
conditions to the merger are satisfied or waived. Glacier and First National 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.
- Following review of this proxy statement/prospectus, PLEASE COMPLETE,
SIGN, AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
WHITE ENVELOPE AS SOON AS POSSIBLE so that your shares can be voted at
First National's special meeting of shareholders.
- Additionally, PLEASE COMPLETE, SIGN AND DATE THE GREEN ELECTION FORM,
AND RETURN IT IN THE ENCLOSED GREEN ENVELOPE, to Glacier's exchange
agent before the close of business on _________, 2006.
5
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 First National board of directors in
approving the merger agreement. See "Background and Reasons for the Merger."
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:
Stanton R. Nielsen
First National Bank of Morgan
120 North State Street
Morgan, Utah 84050
(801) 829-3402
e-mail: stanton@morgan1st.com
This proxy statement/prospectus does not cover any resale of the securities
to be received by shareholders of First National 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 ___________, 2006.
6
SUMMARY
This summary, together with the preceding section entitled "Questions and
Answers about this Document and the Merger," highlights selected information
about this proxy statement/prospectus. We urge you to read carefully the entire
proxy statement/prospectus and any other documents to which we refer to fully
understand the merger. The merger agreement is attached as APPENDIX A to this
proxy statement/prospectus. Each item in the summary refers to the page in this
proxy statement/prospectus where that subject is discussed in more detail.
INFORMATION ABOUT GLACIER AND FIRST NATIONAL
GLACIER BANCORP, INC.
49 Commons Loop
Kalispell, Montana 59901
(406) 756-4200
Glacier, headquartered in Kalispell, Montana, is a Montana corporation,
initially incorporated in Delaware in 1990, and subsequently incorporated under
Montana law in 2004. Glacier is a regional multi-bank holding company providing
commercial banking services from over 70 banking offices throughout Montana,
Idaho, Wyoming, Utah and Washington. Glacier offers a wide range of banking
products and services, including transaction and savings deposits, commercial,
consumer and real estate loans, mortgage origination services, and retail
brokerage services. Glacier serves individuals, small to medium-sized
businesses, community organizations and public entities.
Glacier is the parent holding company of nine wholly owned subsidiary
commercial banks: Glacier Bank; Mountain West Bank; First Security Bank of
Missoula; Western Security Bank; First National Bank - West; Big Sky Western
Bank; Valley Bank of Helena; Glacier Bank of Whitefish; and Citizens Community
Bank. Glacier is also the holding company of three financing subsidiaries.
As of March 31, 2006, Glacier had total assets of approximately $3.8
billion, total net loans receivable and loans held for sale of approximately
$2.5 billion, total deposits of approximately $2.7 billion and approximately
$344.4 million in shareholders' equity. Glacier common stock trades on The
NASDAQ Stock Market under the symbol "GBCI."
On April 20, 2006, Glacier announced that it had entered into a merger
agreement with Citizens Development Company, headquartered in Billings, Montana,
pursuant to which, if consummated, shares of Citizens will be converted into the
right to receive shares of Glacier common stock and cash in an aggregate amount
of $77 million.
On June 6, 2006, Glacier filed a registration statement to issue shares of
its common stock. Prior to consummation of the merger, Glacier intends to sell
approximately one million shares in an underwritten offering.
Financial and other information regarding Glacier is set forth in Glacier's
annual report on Form 10-K for the year ending December 31, 2005, and the
quarterly report on Form 10-Q for the quarter ending March 31, 2006. Information
regarding Glacier's executive officers and directors, as well as additional
information, including executive compensation, certain relationships and related
transactions, is set forth or incorporated by reference in Glacier's annual
report on Form 10-K for the year ending December 31, 2005 and Glacier's proxy
statement for its 2006 annual meeting of shareholders, and the Forms 8-K filed
by Glacier and incorporated by reference into this proxy statement/prospectus.
See "Where You Can Find More Information About Glacier."
FIRST NATIONAL BANK OF MORGAN
120 North State Street
Morgan, Utah
(801) 829-3402
7
First National, headquartered in Morgan, Utah, is a national banking
association, chartered in 1903. First National provides commercial banking
services from its main office in Morgan, Utah, and its branch location in
Mountain Green, Utah. First National offers a wide range of banking products and
services, including transaction and savings deposits, commercial, consumer and
real estate loans, and mortgage origination services. First National serves
individuals, small to medium-sized businesses, community organizations and
public entities.
As of March 31, 2006, First National had total assets of approximately $70
million, total net loans receivable of approximately $44 million, total deposits
of approximately $61 million and approximately $9 million in shareholders'
equity.
FIRST NATIONAL WILL MERGE INTO A TO-BE-FORMED SUBSIDIARY OF GLACIER
The merger agreement provides for the merger of First National with and
into a to-be-formed wholly owned subsidiary of Glacier. In the merger, your
shares of First National common stock will be exchanged for cash, shares of
Glacier common stock or a combination of cash and Glacier common stock. After
the merger, you will no longer own shares of First National.
The merger agreement is attached as APPENDIX A to this document. We
encourage you to read the merger agreement in its entirety.
FIRST NATIONAL SPECIAL MEETING
The special meeting of shareholders of First National will be held at
_____________, ______________, _______, Utah, on ________, ______, 2006 at ____
__.m., local time. At the meeting you will be asked to consider and vote upon a
proposal to approve the merger agreement and consider and act upon such other
matters as may properly come before the meeting or any adjournment of the
meeting.
You will be entitled to vote at the First National special meeting if you
owned First National common stock at the close of business on _________, 2006.
As of that date there were 5,000 shares of First National common stock entitled
to be voted at the special meeting.
APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF
AT LEAST TWO THIRDS (66 2/3%) OF THE SHARES OF FIRST NATIONAL'S OUTSTANDING
COMMON STOCK
In order to approve the merger agreement, at least two thirds (66 2/3%) of
the outstanding shares of First National common stock must be voted at the
special meeting in favor of approval. Glacier's shareholders do not have to vote
on the transaction.
As of the record date for the meeting, the directors of First National
beneficially owned 1,560 shares, or 31.2%, of First National's outstanding
common stock. The First National directors have agreed to vote their shares in
favor of approval of the merger agreement.
FIRST NATIONAL REASONS FOR THE MERGER
First National's board of directors believes that the merger is in your
best interest. The board considered a number of factors in deciding to approve
and recommend the terms of the merger agreement to you. These factors included
the following:
- the value and form of the consideration to be received by First
National's shareholders in the merger;
- Glacier's operating philosophy as a community-oriented bank holding
company with a customer service focus, which is consistent with First
National's philosophy;
- the likely impact of the merger on the employees and customers of
First National;
8
- the fact that Glacier's common stock is widely held and has an active
trading market; whereas, First National's stock is illiquid and is not
publicly traded; and
- the competitive and regulatory environment for First National and
community banks generally.
First National's board of directors also took into account advice of its
financial advisors, Hovde Financial, Inc, which issued an opinion that the
consideration to be received by First National's common shareholders in the
merger is fair, from a financial point of view. See "Background and Reasons for
the Merger - Reasons for the Merger" and "- Opinion of Hovde Financial" and
APPENDIX C "Fairness Opinion of Hovde Financial, Inc."
WHAT FIRST NATIONAL SHAREHOLDERS WILL RECEIVE IN THE MERGER
Under the merger agreement, Glacier will issue shares of its common stock
and pay cash for all shares of First National common stock outstanding as of the
date of the merger agreement. The total merger consideration that Glacier will
pay will be $20 million, less the amount of any specified excess transaction
fees and subject to a reduction of $2.00 for each $1.00 that First National's
capital at closing is below a specified level. In addition, the number of
Glacier shares to be received by First National shareholders may be reduced in
the event that stock prices decline for both Glacier and an index group of its
peers. The total merger consideration will be paid in approximately 50% cash and
50% shares of Glacier common stock.
If you do not provide notice of dissent, you may elect to receive in
exchange for your shares of First National common stock either (1) all cash,
without interest, (2) all shares of Glacier common stock, or (3) a combination
of cash, without interest, and shares of Glacier common stock. In any case, the
percentage of Glacier common stock and cash that you receive will be subject to
the allocation procedures described in this document.
The total merger consideration that Glacier will pay for the shares of
First National shares will be equal to (i) $20 million, less (ii) $2.00 for each
$1.00 that First National's capital at closing is below $9.0 million and (iii)
$1.00 for each $1.00 that First National's transaction fees, as defined, exceed
$100,000, so long as no capital shortfall pricing adjustment has been made that
includes such excess transaction fees. The merger agreement further provides
that if Glacier's average closing price is below $25.50 and Glacier's stock has
not declined relative to an index group of comparable institutions, then the
number of Glacier shares to be received by First National shareholders will be
locked at the number of shares that would have been issued had the Glacier
average closing price been $25.50.
The actual aggregate number of shares of Glacier common stock to be issued
in the merger cannot be determined until the tenth calendar day immediately
prior to the effective date of the merger. The actual amount of cash and/or
Glacier common stock that you will receive for each of your First National
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 under the heading "The Merger - Merger
Consideration." The formula is intended to substantially equalize the value of
the consideration to be received for each share of First National common stock,
as measured during the valuation period ending on the determination date,
regardless of whether you elect to receive cash, Glacier shares or a combination
of cash and Glacier shares.
The actual amounts received will depend on (i) the total merger
consideration payable by Glacier under the merger agreement and (ii) the average
closing price of Glacier common stock as of the determination date. Actual
values of Glacier common stock received will depend on the market price of
Glacier common stock at the time of the merger.
The allocation of cash and Glacier stock that you will receive, regardless
of your election, will be subject to the allocation procedures described under
the heading "The Merger - Allocation."
9
YOU MAY ELECT TO RECEIVE CASH, STOCK OR A COMBINATION OF STOCK AND CASH
In the merger, if you do not vote against the merger or provide a notice of
dissent, you may elect to receive in exchange for your First National shares any
of the following:
- all cash,
- all Glacier common stock, or
- a combination of cash and Glacier common stock that you select in 10%
increments.
If you perfect your dissenters' rights, you will receive cash for your
shares as provided under the applicable provisions of the National Bank Act. See
"The Merger - Dissenters' Rights of Appraisal" and "The Merger - Allocation."
With this proxy statement/prospectus, you are receiving a green election
form with instructions for making your election as to the form of consideration
that you prefer to receive in the merger. The available elections, election
procedures and deadline for making elections are described under the heading
"The Merger - Election Procedure." If you fail to submit a valid green election
form by the election deadline, you will be deemed to have made "no election,"
and will receive any possible mix of Glacier common stock or cash in the merger,
depending upon the elections made by First National shareholders who do timely
return their election forms.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither First National nor Glacier is required to complete the merger
unless each of them receives a legal opinion of Glacier's counsel that the
merger will be treated as a "reorganization" for federal income tax purposes.
Assuming such opinion is received, we expect that for United States federal
income tax purposes, First National shareholders generally will not recognize
any gain or loss on the conversion of shares of First National common stock into
shares of Glacier common stock (although the receipt of any cash will be a
taxable event). This tax treatment may not apply to some First National
shareholders. Determining the actual tax consequences of the merger to you may
be complex. They will depend on your specific situation and on factors not
within our control. You should consult your own tax advisor for a full
understanding of the merger's tax consequences to you.
FIRST NATIONAL SHAREHOLDERS HAVE DISSENTERS' RIGHTS
Under the National Bank Act, First National shareholders have the right to
dissent from the merger and receive cash for the value of their shares of First
National common stock. A shareholder electing to dissent must strictly comply
with all the procedures required by the National Bank Act. These procedures are
described later in this document, and a copy of the relevant provisions of the
National Bank Act is attached as APPENDIX B.
THE FIRST NATIONAL BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER APPROVAL OF THE
MERGER
The First National board of directors believes that the merger is in the
best interests of the First National shareholders and has unanimously approved
the merger agreement. The First National board of directors recommends that
First National shareholders vote "FOR" approval of the merger agreement.
FIRST NATIONAL FINANCIAL ADVISOR SAYS THE MERGER CONSIDERATION IS FAIR TO FIRST
NATIONAL SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW
Hovde Financial, Inc. has served as financial advisor to First National in
connection with the merger and has given an opinion to First National's board of
directors that, as of May 31, 2006, the consideration that First National
shareholders will receive for their First National shares in the merger is fair,
from a financial point of
10
view, to First National shareholders. A copy of the opinion delivered by Hovde
Financial is attached to this document as APPENDIX C. First National
shareholders should read the opinion carefully to understand the assumptions
made, matters considered and limitations of the review undertaken by Hovde
Financial in providing its opinion. The opinion is more fully described under
the heading "Opinion of Financial Advisor to First National" below. First
National agreed to pay Hovde Financial a fee for its services and indemnify
Hovde Financial against certain liabilities arising out of the merger or Hovde
Financial's engagement.
FIRST NATIONAL OFFICERS AND DIRECTORS HAVE INTERESTS IN THE MERGER THAT ARE
DIFFERENT FROM OR IN ADDITION TO THEIR INTERESTS AS SHAREHOLDERS
Certain members of First National management have interests in the merger
that are different from, or in addition to, their interests as First National
shareholders. These interests arise out of provisions in the merger agreement
relating to indemnification of directors and change in control bonus payments
and severance payments for employees, and, in the case of Stan Nielsen, First
National's president, and David Alexander, First National's executive vice
president, employment agreements that will take effect upon consummation of the
merger. See "The Merger--Interests of Certain Persons in the Merger."
The First National board of directors was aware of these interests and took
them into account in its decision to approve the merger agreement.
THE MERGER IS EXPECTED TO OCCUR IN THE THIRD QUARTER OF 2006
Currently, we anticipate that the merger will occur in the third quarter of
2006. However, we cannot assure you when or if the merger will occur.
COMPLETION OF THE MERGER IS SUBJECT TO SATISFACTION OR WAIVER OF CERTAIN
CONDITIONS
Completion of the merger is subject to the satisfaction or waiver of
certain conditions including, among others:
- approval of the merger agreement by holders of at least two thirds (66
2/3%) of the shares of First National's outstanding common stock;
- 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.
The merger agreement provides that either Glacier or First National may
terminate the merger either before or after the First National special meeting,
under certain circumstances. Among other things, the merger may be terminated
under certain circumstances if the average closing price of Glacier common stock
during the valuation period either exceeds or is lower than specified amounts.
See "The Merger -Termination of the Merger Agreement."
WE MAY NOT COMPLETE THE MERGER WITHOUT ALL REQUIRED REGULATORY APPROVALS
The merger must be approved by the Federal Reserve and the Office of the
Comptroller of the Currency (OCC). We have filed applications with these
regulatory bodies seeking such approval. We expect to obtain all such regulatory
approvals, although we cannot be certain if or when we will obtain them.
11
EITHER FIRST NATIONAL OR GLACIER, AS THE CASE MAY BE, MUST PAY A TERMINATION FEE
UNDER CERTAIN CIRCUMSTANCES
The merger agreement provides that First National must pay Glacier a
termination fee of $200,000 if Glacier terminates the merger agreement due to a
breach by First National of its representations or covenants, or if the First
National board of directors does not recommend approval of the merger to First
National shareholders.
The merger agreement also provides that Glacier must pay First National a
termination fee of $200,000 if First National terminates the merger agreement
due to a breach by Glacier of its representations or covenants. See "The Merger
- Termination Fees."
FIRST NATIONAL MUST PAY GLACIER A BREAK-UP FEE UNDER CERTAIN CIRCUMSTANCES
Under the merger agreement, First National must pay Glacier a break-up fee
of $1.0 million, if the merger agreement is terminated due to the failure of the
First National board of directors to recommend approval of the merger to its
shareholders, or due to the receipt of a superior acquisition proposal which is
acted upon by First National.
First National agreed to pay the break-up fee under the circumstances
described above in order to induce Glacier to enter into the merger agreement.
This arrangement could have the effect of discouraging other companies from
trying to acquire First National. See "The Merger - Break-up Fee."
FIRST NATIONAL SHAREHOLDERS WILL HAVE DIFFERENT RIGHTS AFTER THE MERGER
The rights of First National shareholders are governed by the National Bank
Act, as well as First National's articles of association and bylaws. After
completion of the merger, the rights of the former First National shareholders
receiving Glacier common stock in the merger will be governed by Montana law,
and by Glacier's articles of incorporation and bylaws. Although Glacier's
articles of incorporation and bylaws are similar in many ways to First
National's articles of association and bylaws, there are some substantive and
procedural differences that will affect the rights of First National
shareholders. See "Comparison of Certain Rights of Holders of Glacier and First
National Common Stock."
GLACIER INTENDS TO CONDUCT AN UNDERWRITTEN COMMON STOCK OFFERING PRIOR TO
CONSUMMATION OF THE MERGER
Glacier has registered and intends to sell, prior to the closing of the
merger and in an underwritten offering, approximately one million shares of its
common stock, including any underwriter's over-allotment. The occurrence of this
offering is not a condition to the closing of the merger. The proceeds of the
offering will strengthen Glacier's tangible and regulatory capital position,
particularly in light of the significant amount of cash being paid in connection
with the merger and in connection with Glacier's pending acquisition of Citizens
Development Company.
RISK FACTORS
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 FIRST NATIONAL'S ABILITY TO PURSUE OTHER
TRANSACTIONS AND PROVIDES FOR THE PAYMENT OF A BREAK UP FEE IF FIRST NATIONAL
DOES SO.
While the merger agreement is in effect and subject to very narrow
exceptions, First National and its directors, officers and agents are prohibited
from initiating or encouraging inquiries with respect to alternative
12
acquisition proposals. The prohibition limits First National's ability to seek
offers that may be superior from a financial point of view from other possible
acquirers. If First National 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, First National may be required to pay a $1.0
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 FIRST NATIONAL TO PAY A
TERMINATION FEE.
Under certain circumstances, Glacier can terminate the merger agreement and
require First National to pay a termination fee of $200,000.
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 First National 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. You
will receive fewer shares of Glacier common stock if Glacier's stock price
increases. You will receive more shares of Glacier common stock if Glacier's
stock price decreases. We urge you to obtain current market quotations for
Glacier common stock.
YOU MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THAT YOU ELECT.
The merger agreement provides that the aggregate consideration to be
received by First National shareholders in the merger will be issued in
approximately 50% cash and 50% stock. If elections are made by First National
shareholders that would result in more or less aggregate cash or Glacier common
stock being issued than these amounts, then certain First National shareholders
will have the form of consideration that they elected reduced by a pro rata
amount and will receive a portion of their consideration in the form that they
did not elect. For a detailed description of the allocation procedures, please
see the discussion under the heading "The Merger - Allocation."
Accordingly, there is a risk that you will receive a portion of the merger
consideration in the form that you do not elect, which could result in, among
other things, tax consequences that differ from those that would have resulted
had you received the form of consideration you elected (including with respect
to the recognition of taxable gain to the extent cash is received). See "The
Merger - Federal Income Tax Consequences of the Merger."
COMBINING OUR TWO COMPANIES MAY BE MORE DIFFICULT, COSTLY OR TIME-CONSUMING THAN
WE EXPECT.
Glacier and First National 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 First National 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. In addition, First National is operating under a formal
regulatory enforcement agreement with the OCC, and compliance with this
enforcement action may require greater expenditures of time and resources than
anticipated by the parties. 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 First National.
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 First National 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
13
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 HAS OTHER TRANSACTIONS PENDING.
On April 20, 2006, Glacier entered into a merger agreement with Citizens
Development Company, located in Billings, Montana, pursuant to which Glacier
will pay aggregate consideration of $77 million and will acquire Citizens' five
subsidiary banks. In addition, Glacier has filed a registration statement and
intends to sell approximately 1 million shares of its common stock in a public
offering. Both of these transactions are larger in amount than this merger, and
could distract resources of Glacier from this transaction, thereby resulting in
possible delays in consummating the merger.
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. With the exception
of its agreement with Citizens Development Company, 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 First National Common Stock."
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
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 First National's 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:
14
- our business may not be integrated successfully, or such integration
may take longer to accomplish than expected;
- the anticipated growth opportunities and cost savings from the merger
may not be fully realized or may take longer to realize than expected;
- operating costs, customer losses and business disruption following the
merger, including adverse developments in relationships with
employees, may be greater than expected;
- adverse governmental or regulatory policies may be enacted;
- the interest rate environment may change, causing margins to compress
and adversely affecting net interest income;
- the risks associated with continued diversification of assets and
potential adverse changes in credit quality;
- increased loan delinquency rates;
- competition from other financial services companies in our markets;
and
- the risk of an economic slowdown adversely affecting credit quality
and loan originations.
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 First National
or any person acting on behalf of Glacier or First National are expressly
qualified in their entirety by the cautionary statements above. Neither Glacier
nor First National 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.
SELECTED HISTORICAL FINANCIAL INFORMATION OF GLACIER
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."
15
GLACIER BANCORP, INC. AND SUBSIDIARIES
SELECTED CONDENSED CONSOLIDATED AND OTHER FINANCIAL INFORMATION
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
At or for the Three
Months Ended March 31 At or for the Fiscal Years Ended December 31
----------------------- --------------------------------------------------------------
2006 2005 2005 2004 2003 2002 2001
---------- ---------- ---------- ---------- ---------- ---------- ----------
SUMMARY OF OPERATIONS
Interest income $ 55,952 $ 40,507 $ 189,985 $ 147,285 $ 130,830 $ 133,989 $ 137,920
Interest expense 19,644 12,051 59,978 39,892 38,478 47,522 65,546
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income 36,308 28,456 130,007 107,393 92,352 86,467 72,374
Provision for loan losses 1,165 1,490 6,023 4,195 3,809 5,745 4,525
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 35,143 26,966 123,984 103,198 88,543 80,722 67,849
Noninterest income 11,156 9,108 44,626 34,565 33,562 25,917 23,251
Noninterest expenses 25,827 19,074 90,926 72,133 65,944 57,813 57,385
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pre-tax net income 20,472 17,000 77,684 65,630 56,161 48,826 33,715
Taxes 6,843 5,480 25,311 21,014 18,153 16,424 12,026
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income 13,629 11,520 52,373 44,616 38,008 32,402 21,689
========== ========== ========== ========== ========== ========== ==========
Basic earnings per share $ 0.42 $ 0.37 $ 1.67 $ 1.46 $ 1.26 $ 1.10 $ 0.80
Diluted earnings per share $ 0.42 $ 0.37 $ 1.64 $ 1.43 $ 1.24 $ 1.08 $ 0.78
Cash dividends per share $ 0.16 $ 0.14 $ 0.60 $ 0.54 $ 0.48 $ 0.39 $ 0.35
STATEMENT OF FINANCIAL CONDITION:
Total assets $3,800,158 $3,306,440 $3,706,344 $3,010,737 $2,739,633 $2,281,344 $2,085,747
Net loans receivable and LHFS 2,527,432 1,879,932 2,397,187 1,701,805 1,430,365 1,300,653 1,322,327
Total deposits 2,693,399 1,976,681 2,534,712 1,729,708 1,597,625 1,459,923 1,446,064
Total borrowings 640,190 943,943 719,413 900,148 842,280 544,953 399,880
Shareholder's equity 344,391 273,449 333,239 270,184 237,839 212,249 176,983
Book value per share $ 10.66 $ 8.86 $ 10.36 $ 8.80 $ 7.86 $ 7.14 $ 6.11
KEY OPERATING RATIOS:
Return on average assets 1.48% 1.50% 1.52% 1.54% 1.53% 1.50% 1.10%
Return on average shareholders' equity 16.21% 17.06% 17.62% 17.61% 16.82% 16.57% 13.49%
Average equity to average assets 9.12% 8.80% 8.61% 8.75% 9.10% 9.08% 8.26%
Net interest margin(1) 4.32% 4.08% 4.20% 4.15% 4.20% 4.51% 4.08%
Non-performing over assets 0.27% 0.27% 0.26% 0.32% 0.48% 0.51% 0.53%
Dividend payout ratio 38.10% 37.84% 35.93% 37.36% 38.07% 35.45% 43.48%
(1) Calculated on a tax equivalent basis.
16
HISTORICAL AND PRO FORMA PER SHARE DATA
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
First National common stock, respectively, on the day prior to the announcement
of the merger, and as of _________, 2006, the most recent practicable trading
date prior to the printing of this document, together with the pro forma
equivalent market value of First National shares after giving effect to the
merger. The pro forma equivalent per share data for First National is calculated
by multiplying the historical per share data for Glacier by the implied exchange
ratio of 133.3333 used to calculate the merger consideration. The pro forma
information provided below assumes that the total merger consideration equals
$20 million, and is not (i) decreased by the amount of any excess transaction
fees or in connection with First National's capital at closing being below a
specified level or (ii) reduced if there is a decline in both the price of
Glacier's common stock and the overall prices for the common stock of certain
other publicly traded financial institutions, 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 First National 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, or of up to 1.3 million shares
of common stock in the Citizens Development Company transaction, both as
described under "Summary" above.
Glacier First National
----------------------- -----------------------
Pro Forma Pro Forma
Historical Combined Historical Equivalent
---------- ---------- ---------- ----------
Basic earnings per share:
Year ended December 31, 2005 $ 1.67 $ 1.71 $ 222.20 $ 222.66
Three months ended March 31, 2006 $ 0.42 $ 0.43 $ 55.00 $ 56.00
Diluted earnings per share:
Year ended December 31, 2005 $ 1.64 $ 1.68 $ 222.20 $ 218.66
Three months ended March 31, 2006 $ 0.42 $ 0.42 $ 55.00 $ 56.00
Book value per share at:
December 31, 2005 $10.36 $10.64 $1,843.40 $1,381.30
March 31, 2006 $10.66 $10.95 $1,871.80 $1,421.30
Cash dividends per share declared:
Year ended December 31, 2005 $ 0.60 $ 0.62 $ 104.00 $ 80.00
Three months ended March 31, 2006 $ 0.16 $ 0.16 $ 25.00 $ 21.33
Market value per share at May 31, 2006 $29.26 $ N/A $ N/A $3,901.24
Market value per share at ______, 2006 $_____ $ N/A $ N/A $________
17
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
GLACIER COMMON STOCK
Glacier common stock is quoted on The NASDAQ Stock Market under the symbol
"GBCI." The following table sets forth for the periods indicated:
- the high and low sale prices for Glacier common stock as reported on
The NASDAQ Stock Market, and
- dividends per share on Glacier common stock.
CASH
DIVIDENDS
HIGH* LOW* DECLARED
------ ------ ---------
2004
First quarter ........................ $21.63 $18.88 $0.13
Second quarter ....................... $22.60 $19.59 $0.13
Third quarter ........................ $24.28 $20.60 $0.14
Fourth quarter ....................... $28.71 $23.12 $0.14
2005
First quarter ........................ $27.98 $23.59 $0.14
Second quarter ....................... $26.39 $21.07 $0.15
Third quarter ........................ $31.40 $25.91 $0.15
Fourth quarter ....................... $33.50 $28.00 $0.16
2006
First quarter ........................ $32.71 $29.58 $0.16
Second quarter ....................... $_____ $_____ $____
Third quarter (through _____, 2006) .. $_____ $_____ $____
* Adjusted for stock splits and stock dividends
At __________, 2006, the __________ outstanding shares of Glacier common
stock were held by approximately ________ holders of record.
FIRST NATIONAL COMMON STOCK
First National's common stock is not quoted on a stock exchange or market
and no broker makes a market in the stock. If First National were to remain
independent, management of First National does not expect that a market for
First National common stock would develop. Stock transfer records maintained by
First National indicate that there have been very infrequent transactions in
First National's stock other than occasional gift transactions. Other sales and
purchases of shares of First National common stock are privately negotiated, and
First National is often not aware of the price for those transactions. Other
than occasional gift transactions, First National is aware of no transfers of
First National common stock since July 1997. Consequently, no trading price date
is available which would accurately reflect the actual market value of the
shares.
At ________, 2006, the 5,000 outstanding shares of First National common
stock were held by approximately [62] holders of record.
The timing and amount of dividends paid by First National is subject to
determination by the board of directors of First National, in its sole
discretion, and depends upon earnings, cash requirements and the financial
condition of the bank, applicable government regulations and other factors
deemed relevant by the First National
18
board of directors. The following table sets forth the dividends per share on
First National common stock for the periods indicated.
CASH
DIVIDENDS
DECLARED
---------
2004
First quarter......................... $23.00
Second quarter........................ $23.00
Third quarter......................... $23.00
Fourth quarter........................ $30.00
2005
First quarter......................... $23.00
Second quarter........................ $23.00
Third quarter......................... $23.00
Fourth quarter........................ $35.00
2006
First quarter......................... $25.00
Second quarter........................ $25.00
Third quarter (through _____, 2006)... $_____
19
FIRST NATIONAL SPECIAL SHAREHOLDERS' MEETING
DATE, TIME, PLACE
The First National special meeting of shareholders will be held on
________, _______, 2006, at ____ ___.m. local time, at _______________,
_____________, __________, Utah.
As described below under "Vote Required," approval of the merger agreement
requires the affirmative vote of at least two thirds (66 2/3%) of the shares of
First National's outstanding common stock. 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, First National may adjourn or
postpone the meeting in order to permit further solicitation of proxies by First
National. 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, First National shareholders will:
- consider and vote on a proposal to approve the merger, and
- if necessary, consider and act upon a proposal to adjourn the special
meeting to allow additional time to solicit proxies
RECORD DATE; SHARES OUTSTANDING AND ENTITLED TO VOTE
The First National board of directors has fixed 5:00 p.m. on _________,
2006 as the record date for determining the holders of shares of First National
common stock entitled to notice of and to vote at the special meeting. At the
close of business on the First National record date, there were 5,000 shares of
common stock issued and outstanding and held by approximately [62] holders of
record. Holders of record of First National 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 directors of First National have agreed to vote all shares held or
controlled by him or her in favor of approval of the merger. A total of 1,560
outstanding shares, or 31.2% of the outstanding shares of First National common
stock, are covered by this voting agreement. See "The Merger - Voting
Agreement."
VOTE REQUIRED
The affirmative vote of the holders of at least two thirds (66 2/3%) of the
shares of First National's outstanding common stock is required to approve the
merger. At least fifty percent (50%) of the total outstanding shares of First
National 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 First National common stock. AS A RESULT, ABSTENTIONS
AND BROKER NONVOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE
MERGER AGREEMENT.
20
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:
- written notice to the Secretary of First National;
- a later-dated proxy; or
- appearing and voting at the special meeting in person.
First National is soliciting the proxy for the special meeting on behalf of
the First National board of directors. First National will bear the cost of
solicitation of proxies from its shareholders. In addition to using the mails,
First National 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. First
National does not expect to pay any compensation for the solicitation of
proxies. However, First National will, upon request, pay the standard charges
and expenses of banks, brokerage houses, other institutions, nominees, and
fiduciaries for forwarding proxy materials to and obtaining proxies from their
principals.
BACKGROUND OF AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
During the normal course of its business, the management and Board of
Directors of First National has periodically reviewed and assessed the strategic
options of First National. Consistent with its fiduciary obligations to its
shareholders, First National has considered strategic options including
strategies to grow and enhance First National's business through internal and
external means. Those discussions have included analyses of the financial
institution merger market on a national and regional basis, the potential value
of the First National franchise based on current merger market fundamentals and
the potential market value of the First National stock assuming the execution of
its current business plan under various scenarios. The board of directors and
management of First National also routinely have discussed the increasing level
of net interest margin compression, competition, continuing consolidation,
regulatory burden and related costs and other developments in the financial
services industry.
The board of directors and management's review of the strategic options of
First National intensified as a result of the formal written agreement entered
between First National and the OCC on July 19, 2005, as well as First National's
on-going efforts to comply with the terms of the written agreement. In light of
the regulatory issues identified in the written agreement and the expenses
associated with compliance with the written agreement, in February 2006 the
board of directors of First National engaged the investment banking firm of
Hovde Financial, Inc. to assist and advise it in exploring a strategic business
combination transaction while maintaining the option of remaining an independent
entity.
Hovde Financial continued to evaluate the merger market available to First
National and identified a list of institutions that might be interested in
pursuing a business combination with the Bank. Hovde Financial informed the
Board of their views of the different levels of pricing that could be offered
for First National. After considering all the information presented, it was
determined by the Board that it was in the best interest of First National and
its shareholders to authorize Hovde Financial to approach various potential
acquirers to determine the level of interest there may be in acquiring First
National.
21
Confidentiality agreements were signed by eight potential acquirers.
Representatives from Hovde Financial worked with First National to prepare
marketing materials that were sent out to each party who signed a
confidentiality agreement. Hovde Financial had conversations with the potential
acquirers over the next several weeks and advised all potential acquirers to
submit non-binding expressions of interest. Two companies submitted written
non-binding expressions of interest conditioned on a number of factors,
including the ability to conduct due diligence. Two additional companies that
signed confidentiality agreements, including Glacier, submitted a verbal
indication of interest with similar conditions.
On April 11, 2006, First National's Board of Directors met to consider the
proposals. In evaluating the partnership opportunities, the Board considered the
price offered, operating and proposed integration structure and its impact on
First National's customers and employees, and reinvestment opportunity for First
National's shareholders. Following discussions with representatives from Hovde
Financial, on topics including the price, mixture, and integration plans of each
party, the Board of Directors concluded that the Glacier offer was superior to
the others. The Board asked for a formal term sheet to be submitted by Glacier
with the general terms and intentions for the purchase of First National. On
April 20, 2006 the term sheet was executed by First National President and CEO,
Stanton Nielsen, and the Board authorized Glacier to conduct further due
diligence on First National and for management to commence negotiating the
merger agreement.
Between April 20, 2006 and May 25, 2006, while due diligence was being
conducted by Glacier, legal counsel to Glacier and First National drafted
definitive documentation with respect to the proposed merger which documentation
was negotiated between Glacier and First National and their respective advisors
and agreed to be in substantially final form on May 25, 2006.
On May 31, 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 of the merger, expansion
opportunities available to First National, 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 May 31, 2006, the Board of Directors of First National met to consider
approval of the merger agreement with Glacier. The Board of Directors discussed
their fiduciary duty to the shareholders of First National, questions about the
merger agreement, the form of consideration to be received by the shareholders
of First National, the break-up fee, potential price adjustments, caps and
collars, the current stock price of Glacier and its dividend history, and the
implications to First National, its shareholders, employees and customers. Also
discussed were the reasons for completing the merger and the implications to
First National if First National Bank of Morgan continued without an affiliation
with Glacier. The Board of Directors took into consideration the presentation
made by Hovde Financial then voted unanimously to approve the merger.
Glacier and First National executed the merger agreement and related
documents on May 31, 2006. After the close of business on May 31, 2006, the
parties issued a joint press release announcing the execution of the merger
agreement.
REASONS FOR THE MERGER - FIRST NATIONAL
At a special meeting held on May 31, 2006, the First National board of
directors determined that the terms of the merger agreement were in the best
interests of First National and its shareholders. In the course of reaching its
decision to approve the merger agreement, the First National board of directors
consulted with Hovde Financial, its financial advisor, and Rothgerber Johnson &
Lyons LLP, its legal counsel. In reaching its final determination, First
National's board of directors considered a number of factors including, without
limitation, the following:
22
- the terms of the of the merger agreement, including the total dollar
amount of the consideration being paid, the form of the consideration,
the ability of First National shareholders to elect Glacier common
stock, cash or a combination of stock and cash, and the historical
trading ranges for Glacier common stock;
- the alternatives of First National continuing as an independent
community bank or combining with other potential merger partners
versus the determination that the merger with Glacier presented the
best opportunity for maximizing shareholder value and serving the
banking needs of the communities in which First National operates;
- information concerning Glacier's financial condition, results of
operations and business prospects as well as Glacier's demonstrated
ability of completing bank acquisitions on the terms and within the
timeframes initially agreed upon by the parties;
- the financial terms of recent business combinations in the financial
services industry and a comparison of the multiples of selected
combinations with the terms of the proposed acquisition by with
Glacier;
- the opinion of Hovde Financial, Inc. that the consideration to be
received by First National's shareholders in the merger is fair from a
financial point of view;
- Glacier's operating philosophy as a community-oriented bank holding
company with a customer service focus, which is consistent with First
National's philosophy;
- the expectation that First National shareholders would have the
opportunity to continue to participate in the growth of the combined
company and would also greatly benefit from the significantly greater
liquidity of the trading market for Glacier common stock;
- that Glacier has historically paid cash dividends on its common stock;
- the effects of the regulatory and market pressures facing First
National and community banks generally and First National's limited
economies of scale;
- Glacier's plans to maintain First National as a separately chartered
banking subsidiary of Glacier under the name "First National Bank of
Morgan" with an emphasis on local decision making;
- Glacier's agreement that all of the all current members of First
National's board of directors and officers would continue as directors
and officers of First National;
- Glacier's agreement to provide a severance policy for First National
employees who do not continue as Glacier employees under which
employees terminated in certain instances may be eligible to receive
one or two years of severance pay and medical benefits, depending upon
their position with First National;
- the determination that a business combination with Glacier would
extend First National's lending capabilities and increase the range of
financial products and services available to First National's
customers;
- the broad experience of Glacier's management team and its particular
experience in managing subsidiary banks that have an emphasis on local
decision making and authority;
- the likelihood of the merger being approved by applicable regulatory
authorities without undue conditions or delay;
23
- that the "break-up" fee provisions in the merger agreement could have
the effect of discouraging superior proposals for a business
combination between First National and third parties;
- the potential adjustments to the aggregate purchase price in
connection with changes in First National's capital as well as
positive or negative changes in Glacier's stock price;
- the possible disruption to First National's business that may result
from the announcement of the merger and the resulting distraction of
management's attention from the day-to-day operations of the bank's
business; and
- the restrictions contained in the merger agreement on the operation of
First National's business during the period between signing of the
merger agreement and completion of the merger.
The foregoing discussion of the information and factors considered by the
First National board of directors is not intended to be exhaustive, but is
believed to include all material factors considered by the First National board.
In reaching its determination to approve and recommend the transaction, the
First National board based its recommendation on the totality of the information
presented to it and did not assign any relative or specific weights to the
factors considered in reaching that determination. Individual directors may have
given differing weights to different factors. After deliberating with respect to
the merger transaction with Glacier, considering, among other things, the
matters discussed above and the opinion of Hovde Financial referred to above,
the First National board of directors unanimously approved and adopted the
merger agreement and the merger with Glacier as being in the best interests of
First National and its shareholders.
OPINION OF FINANCIAL ADVISOR TO FIRST NATIONAL
Hovde Financial has delivered to the Board of Directors of First National
its opinion that, based upon and subject to the various considerations set forth
in its written opinion dated May 31, 2006, the total transaction consideration
to be paid to the shareholders of First National is fair from a financial point
of view as of such date. In requesting Hovde Financial's advice and opinion, no
limitations were imposed by First National upon Hovde Financial with respect to
the investigations made or procedures followed by it in rendering its opinion.
THE FULL TEXT OF THE OPINION OF HOVDE FINANCIAL, DATED MAY 31, 2006, WHICH
DESCRIBES THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX C. FIRST NATIONAL SHAREHOLDERS SHOULD READ THIS
OPINION IN ITS ENTIRETY.
Hovde Financial 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 Financial has experience in, and knowledge of,
banks, thrifts and bank and thrift holding companies. First National's board of
directors selected Hovde Financial 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 Financial will receive a fee from First National for performing a
financial analysis of the merger and rendering a written opinion to the Board of
Directors of First National as to the fairness, from a financial point of view,
of the merger to First National's shareholders. Hovde Financial will receive all
of such fee after Hovde Financial's presentation of its fairness opinion and
analysis to the Board of Directors of First National.
Hovde Financial'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 First National shareholder as to how
the shareholder should vote at the First National shareholder meeting. The
summary of the opinion of Hovde Financial set forth in this proxy statement is
qualified in its entirety by reference to the full text of the opinion.
24
The following is a summary of the analyses performed by Hovde Financial in
connection with its fairness opinion. Certain of these analyses were confirmed
in a presentation to the First National board by Hovde Financial. The summary
set forth below does not purport to be a complete description of either the
analyses performed by Hovde Financial in rendering its opinion or the
presentation delivered by Hovde Financial to the First National board, but it
does summarize all of the material analyses performed and presented by Hovde
Financial.
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 Financial 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 Financial may have
given various analyses more or less weight than other analyses. Accordingly,
Hovde Financial 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 First National
board and its fairness opinion.
In performing its analyses, Hovde Financial made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of First National and
Glacier. The analyses performed by Hovde Financial 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 Financial's analysis of the fairness of the
transaction consideration, from a financial point of view, to First National
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
Financial's opinion does not address the relative merits of the merger as
compared to any other business combination in which First National might engage.
In addition, as described above, Hovde Financial's opinion to the First National
board was one of many factors taken into consideration by the First National
board 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 Financial reviewed and analyzed material bearing upon the
financial and operating conditions of First National and Glacier and material
prepared in connection with the merger, including, among other things, the
following:
- the merger agreement;
- certain historical publicly available information concerning First
National and Glacier;
- the nature and terms of recent merger transactions; and
- financial and other information provided to Hovde Financial by the
management of First National
Hovde Financial conducted meetings and had discussions with members of
senior management of First National for purposes of reviewing the future
prospects of First National. Hovde Financial 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 Financial 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 Financial also assumed that the
financial forecasts furnished to or discussed with Hovde Financial by First
National were reasonably prepared and reflected the best currently available
estimates and judgments of senior management of First National as to the future
financial performance of First National. Hovde Financial has not made any
independent evaluation or appraisal of any properties, assets or liabilities of
First National. Hovde Financial assumed and relied upon the accuracy and
completeness of
25
the publicly available and other non-public financial information provided to it
by First National and Glacier, relied upon the representations and warranties of
First National 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 Financial
reviewed two groups of comparable merger transactions. The first peer group
included transactions, which have occurred since January 1, 2005, that involved
banks in the United States that had total assets between $50.0 million and
$150.0 million where the consideration mixture included both stock and cash (the
"United States Merger Group"). This United States Merger Group consisted of the
following 15 transactions:
BUYER SELLER
----- ------
Kentucky Bancshares Inc. (KY) Peoples Bancorp Sandy Hook (KY)
Community Bank Shares of IN (IN) Bancshares Inc. (IN)
First Fed Financial Services (MHC) Clover Leaf Financial Corp. (IL)
West Coast Bancorp (OR) Mid-Valley Bank (OR)
Heritage Financial Corp. (WA) Western Washington Bancorp (WA)
IBT Bancorp Inc. (MI) Farwell State Savings Bank (MI)
GB&T Bancshares Inc. (GA) Mountain Bancshares Inc. (GA)
Texas United Bancshares Inc. (TX) Northwest Bancshares Inc. (TX)
Orrstown Financial Services (PA) First National Bank of Newport (PA)
CCB Corporation (MO) Acquisition Corporation (KS)
German American Bancorp (IN) Stone City Bancshares Inc. (IN)
Gwinnett Commercial Group Inc. (GA) Buford Banking Group Inc. (GA)
CTB Financial Corporation (LA) First United Bank (LA)
Venture Financial Group (WA) Washington Commercial Bancorp (WA)
Franklin Bank Corp. (TX) Elgin Bank of Texas (TX)
Hovde Financial also reviewed comparable mergers involving banks in the
Rocky Mountain and Southwestern regions of the United States that had total
assets less than $150.0 million and which have occurred since January 1, 2002
(the "Western US Merger Group"). This Western US Merger Group consisted of the
following 13 transactions:
BUYER SELLER
----- ------
First State Bancorp (NM) New Mexico Financial Corp. (NM)
Centennial Bank Holdings Inc. (CO) Foothills Bank (CO)
Investor Group Rock Springs American Bancorp Inc. (WY)
Glacier Bancorp Inc. (MT) Citizens Bank Holding Company (ID)
Bank of Choice Holding Company (CO) Palisades Bancshares Inc. (CO)
Intermountain Community Bancorp (ID) Snake River Bancorp (ID)
Pine River Bank Corporation (CO) First NB of Lake City & Creede (CO)
Marquette Financial Companies (MN) Valley Bancorp, Inc. (AZ)
Glacier Bancorp Inc. (MT) Pend Oreille Bancorp (ID)
First National Bancorp Inc. (MT) Montana First National Bancorp (MT)
First Interstate Bancsystem (MT) Silver Run Bancorp Inc. (MT)
FBOP Corp. (IL) American Home Loan Corp. (AZ)
Community Bankshares, Inc. (CO) Rocky Ford Financial Inc. (CO)
Hovde Financial calculated the medians and averages of the following
relevant transaction ratios in the United States Merger Group and the Western US
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.
26
Hovde Financial compared these multiples with the corresponding multiples for
the merger, valuing the total consideration that would be received pursuant to
the merger agreement at $20.0 million ($10.0 million in consideration in the
form of Glacier's stock, $10.0 million in cash for First National common stock),
or $4,000.00 per First National common share. In calculating the multiples for
the merger, Hovde Financial used First National's earnings for the 12 months
ended March 31, 2006, and First National's balance sheet information as of March
31, 2006. The results of this analysis are as follows:
Offer Value to
---------------------------------
Ratio of
Tangible
12 months Book Value
Preceding Premium to Book
Earnings Core Deposits Value
(x) (%) (%)
--------- ------------- -----
First National Bank of Morgan 17.9 20.8 213.7
United States Merger Group median 20.8 17.9 222.9
United States Merger Group average 19.8 16.9 219.1
Western US Merger Group median 19.4 11.7 174.6
Western US Merger Group average 18.9 12.9 190.6
Discounted Cash Flow Analysis. Hovde Financial estimated the present value
of all shares of First National common stock by estimating the value of First
National's estimated future earnings stream beginning in 2006. Reflecting First
National's internal projections and Hovde Financial estimates, Hovde Financial
assumed net income in 2006, 2007, 2008, 2009, and 2010 of $1.2 million, $1.3
million, $1.5 million, $1.5 million, and $1.7 million, respectively. The present
value of these earnings was calculated based on a range of discount rates
between 12.5% and 15.5%. In order to derive the terminal value of First
National's earnings stream beyond 2010, Hovde Financial assumed a terminal value
based on a multiple of between 14.0x and 18.0x 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 First National's common stock. This analysis and its
underlying assumptions yielded a range of value for all the shares of First
National's stock of approximately $15.7 million (at a 12.5% discount rate and a
14.0x terminal multiple) to $17.2 million (at a 15.5% discount rate and a 18.0x
terminal multiple) with a midpoint of $16.5 million (using a 14.0% discount rate
and a 16.0x terminal multiple), compared to total Merger Consideration of $20.0
million.
Financial Implications to First National Shareholders. Hovde Financial
prepared an analysis of the financial implications of Glacier's offer to a
holder of First National common stock. This analysis indicated that on a pro
forma equivalent basis, assuming an exchange ratio of 133.3333 ($4,000 per First
National share / $30.00 Glacier stock price) for the stock consideration portion
of the total consideration and excluding any potential revenue enhancement
opportunities, a stockholder of First National would achieve approximately 2.8%
accretion in cash earnings per share and approximately 0.0% accretion in GAAP
earnings per share, a decrease in book value per share of approximately 28.5%, a
decrease in tangible book value per share of approximately 42.3% as a result of
the consummation of the merger. The table below summarizes the results discussed
above:
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Per Share:
-------------------------------------------------
2006E Cash 2006E GAAP Tangible
Earnings Earnings Book Value Book Value
---------- ---------- ---------- ----------
First National
standalone $240.00 $240.00 $1,991.80 $ 1991.80
First National Pro
Forma* $246.67 $240.00 $1,424.63 $1,149.33
% Accretion --
Dilution 2.8% 0.0% -28.5% -42.3%
* Based on an exchange ratio of 133.3333 and implied stock consideration of
100.0% of the total consideration.
Comparable Company Analysis. Using publicly available information, Hovde
Financial compared the financial performance and stock market valuation of
Glacier with the following publicly traded Northwestern United States bank
institutions with assets as of March 31, 2006:
COMPANY NAME (TICKER) ASSETS ($mm)
--------------------- ------------
America West Bancorporation (AWBC) 1,338,017
Banner Corporation (BANR) 3,121,957
Cascade Bancorp (CACB) 1,350,663
Cascade Financial Corporation (CASB) 1,246,509
Columbia Banking System, Inc. (COLB) 2,460,453
Frontier Financial Corporation (FTBK) 3,016,851
Horizon Financial Corporation (HRZB) 1,116,728
PremierWest Bancorp (PRWT) 940,188
Umpqua Holdings Corporation (UMPQ) 5,475,844
West Coast Bancorp (WCBO) 2,030,182
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 March 31, 2006 and, where relevant, closing stock
market information as of May 26, 2006. Selected market information for Glacier
and the group of comparable companies that was analyzed is provided below.
PRICE/ PRICE/ PRICE/ DIV. MKT. INSIDE
STOCK TBV BOOK LTM YIELD CAP OWNERSHIP
PRICE (%) (%) EPS (X) (%) ($M) (%)
------ ------ ------ ------- ----- ----- ---------
Glacier Comparable $29.75 373.0 279.1 17.6 2.15 962.0 5.68
Company Average 295.0 240.6 19.0 1.52 525.2 8.02
28
TANGIBLE NET NPAS/
EQUITY INTEREST EFFICIENCY AVERAGE RESERVES/NPAS
ROAE (%) ROAA (%) RATIO (%) MARGIN (%) RATIO (%) ASSETS (%) (%)
-------- -------- --------- ---------- ---------- ---------- -------------
Glacier Comparable 15.98 1.46 6.94 4.13 51.82 0.27 385.97
Company Average 13.79 1.35 8.10 4.91 57.00 0.25 433.04
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 Financial determined that the transaction consideration was
fair from a financial point of view to First National shareholders.
RECOMMENDATION OF THE FIRST NATIONAL BOARD
The board of directors of First National has concluded that the proposed
merger as described in the merger agreement is in the best interest of First
National and its shareholders. The board of directors believes that the present
banking climate offers an opportune time for shareholders of First National to
exchange their shares for Glacier common stock and/or cash at an attractive
price. AFTER CAREFULLY CONSIDERING THE PROPOSED MERGER, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF FIRST NATIONAL VOTE "FOR" THE
APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
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 First National with and
into a newly formed subsidiary of Glacier. When the merger occurs, First
National will operate as a wholly owned subsidiary of Glacier.
In the merger, First National shareholders will receive either cash,
Glacier common stock or a combination of Glacier common stock and cash for their
First National common stock, as described below.
While Glacier and First National 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 Merger" and "--Regulatory Requirements."
MERGER CONSIDERATION
The merger agreement provides that as of the effective date of the merger,
each share of First National common stock issued and outstanding immediately
prior to the effective date will be converted into the right to receive any of
Glacier common stock, cash, 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 $20.0 million, less certain reductions in connection with any excess
transaction fees or if First National's capital at closing is less than a
certain amount,
29
both as described below. In addition, the aggregate stock consideration may be
reduced in the event that of stock price declines for both Glacier and an index
of comparable institutions, also as described below.
The base merger consideration of $20.0 million will be decreased by $2.00
for each $1.00 that First National's capital at closing is less than $9.0
million. "Capital" for this purpose is defined as First National's capital
stock, surplus and retained earnings (i) after giving effect to the payment of
transaction fees and the completion fee payable to Hovde Financial; (ii) after
excluding the impact of any increase in loan loss provisions reasonably required
by Glacier; and (iii) after excluding the effect of any payments or accruals for
the purpose of making change in control bonus payments to employees.
"Transaction fees" are defined as all cost and expenses incurred by First
National or owed or paid by First National to investment advisors, independent
accountants, 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, but excluding the Hovde Financial completion
fee. The Hovde Financial "completion fee" of $320,000 is established pursuant to
the terms of Hovde Financial's engagement with First National, and will be
payable upon consummation of the merger.
The base merger consideration will also be decreased by $1.00 for each
$1.00 that First National's transaction fees, as defined in the previous
paragraph, exceed $100,000. This adjustment will be made so long as there will
not be a duplicative reduction to the base consideration, in that the excess
transaction fees may also cause a capital shortfall adjustment, as described in
the previous paragraph.
Finally, if Glacier's average closing price is below $25.50 and Glacier's
stock price has not declined relative to an index group of comparable
institutions, then the base merger consideration will be adjusted so that the
number of Glacier shares received by First National shareholders will be fixed
at the number of shares the First National shareholders would have received had
Glacier's average closing price been $25.50. Assuming this adjustment occurs,
First National may terminate the merger agreement if the Glacier average closing
price is less than $22.50 per share. See "--Termination of the Merger
Agreement."
Each First National shareholder will have the right to elect to convert
such shareholder's First National common stock into (i) cash, (ii) shares of
Glacier common stock, or (iii) a combination of shares of Glacier common stock
and cash in increments of 10% as specified by the shareholder. See "--Election
Procedure."
The value of the consideration (whether stock or cash) that a First
National shareholder will receive for each share of First National 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 First National shares on May 31, 2006, the date the
merger agreement was executed.
The amount of cash that a First National shareholder will receive for each
share of his or her First National 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 First National shareholder will
receive for each share of First National 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
ten-day period ending on the tenth calendar day 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 First National common
stock in the merger as measured during the valuation period, regardless of
whether a First National shareholder elects to receive cash, 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 First National common stock is as equal as possible upon receipt
by First National
30
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 $20 million, and has not decreased in connection with First
National's capital being below the specified level or as the result of any
excess transaction fees, (ii) the average closing price of Glacier common stock,
as determined under the merger agreement, is $______ [use price as of recent
practicable date prior to printing], and (iii) that there were 5,000 outstanding
shares of First National stock on the execution date of the merger agreement:
Assuming a First National shareholder owns 100 shares of First National
common stock, and makes:
- an all cash election, such shareholder would receive $400,000 in cash;
- an all stock election, such shareholder would receive _____ shares of
Glacier common stock (and $_____ in cash in lieu of a fractional
share) having a total value (based on Glacier's assumed average
closing price) of $_________; or
- a combination election of 50% cash and 50% stock, such shareholder
would receive _____ shares of Glacier common stock and cash of $______
(including $______ cash in lieu of a fractional share), which together
with the stock would have a total value of $_________.
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 First National 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 $_____ (approximately 10% higher than the assumed average closing price shown
in the example above), then a First National shareholder receiving stock would
receive approximately _____ shares of Glacier common stock per First National
share, although the value per share of First National common stock would remain
at $4,000 per share. Similarly, if the average closing price during the
valuation period is $______ (approximately 10% lower than the assumed average
closing price shown in the example above), then a First National shareholder
receiving stock would receive approximately ______ shares of Glacier common
stock per First National share, although the value per share of First National
common stock would remain at $4,000 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 FIRST NATIONAL SHAREHOLDER OR AT ANY
OTHER TIME. THE FAIR MARKET VALUE OF GLACIER COMMON STOCK RECEIVED BY A FIRST
NATIONAL SHAREHOLDER MAY BE GREATER OR LESS THAN THE CURRENT FAIR MARKET VALUE
OF GLACIER COMMON STOCK DUE TO NUMEROUS MARKET FACTORS.
First National may terminate the merger agreement if the Glacier average
closing price is greater than $34.50 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 $25.50 and Glacier's stock price
has declined relevant to an index group of comparable institutions, unless First
National agrees to accept an adjustment in the per share stock consideration.
See "--Termination of the Merger Agreement."
ELECTION PROCEDURE
Subject to the allocation mechanism described in the next section, each
First National shareholder will have the right to elect to receive with respect
to such shareholder's shares of First National common stock:
31
- all cash;
- all Glacier common stock; or
- a combination of Glacier common stock and cash in 10% increments.
Cash Election. A shareholder who elects to receive all cash will receive
cash in exchange for his or her shares of First National common stock ("cash
election shares"), subject to the allocation mechanism described below in the
event shareholders elect to receive too much cash.
Stock Election. A shareholder who elects to receive all stock will receive
shares of Glacier common stock in exchange for his or her shares of First
National common stock ("stock election shares"), subject to the allocation
mechanism described below in the event shareholders elect to receive too much
stock.
Combination Election. A shareholder who elects to receive a combination of
cash and Glacier common stock will receive (i) cash with respect to that portion
of the holder's shares of First National common stock equal to any whole
percentage specified by such holder that is a multiple of 10% (e.g., 10%, 20%,
30%) ("combination cash shares"); and (ii) stock with respect to the remaining
shares of First National common stock held by such holder ("combination stock
shares"). All combination elections will be subject to the allocation mechanism
described 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 "no election" and will receive any combination of cash, Glacier shares or a
combination of cash or Glacier shares, depending upon what elections are made by
the other First National shareholders.
Proposed Dissenting Shares. If a First National shareholder provides notice
of dissent to First National or votes against the merger in accordance with the
relevant provisions of the National Bank Act, such shareholder will have the
rights provided by applicable federal 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 an all
cash election, an all stock election, or a combination election, or to indicate
that the holder makes no election. First National and Glacier will make
available election forms to persons who become holders of First National common
stock between the record date for the First National special meeting and the
close of business on the day prior to the election deadline.
Holders of First National 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 First
National who have not made a valid election prior to the election deadline,
which is 5:00 p.m., Mountain Time, on _______, 2006, will be deemed to have made
"no-election."
To make an election, a holder of First National 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. None of Glacier, First National or the exchange agent
will be under any obligation to notify any person of any defects in an election
form.
32
Letter of Transmittal. Soon after the completion of the merger, the
exchange agent will send a letter of transmittal to each person who was a First
National shareholder at the effective time of the merger. This mailing will
contain instructions on how to surrender shares of First National common stock
in exchange for the merger consideration that the holder is entitled to receive
under the merger agreement.
All shares of Glacier common stock issued to the holders of First National
common stock pursuant to the merger will be deemed issued as of the effective
date. Until you surrender your First National 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 First
National of any shares of First National common stock. If certificates
representing shares of First National 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 First National common stock
represented by those certificates shall have been converted.
If a certificate for First National 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 First National, and
appropriate and customary identification.
ALLOCATION
Pursuant to the terms of the merger agreement, the consideration is fixed
so that approximately 50% of the aggregate merger consideration will be paid in
cash and approximately 50% will be paid in shares of Glacier common stock.
Therefore, all elections are subject to adjustment to preserve these limitations
on the amount of cash to be paid and the number of shares of Glacier common
stock to be issued in the merger. As a result, even if you make the all cash
election or the all stock election, you may nevertheless receive a mix of cash
and stock. If you make a combination election, you may not receive the exact
combination of cash and stock that you selected.
Oversubscription of the Cash Consideration. If the total amount of cash
that would be payable to First National shareholders who make all cash elections
and combination elections would be greater than the maximum total cash
consideration, the following allocation mechanism will be used:
- all stock election shares, combination stock shares and no-election
shares will be converted into the right to receive Glacier common
stock;
- the exchange agent will then select from among the cash election
shares and the combination cash shares, on a pro rata basis, a
sufficient number of shares such that the aggregate cash amount that
will be paid in the merger equals as closely as possible the maximum
cash consideration; and
- all shares selected by the exchange agent through the pro rata
selection process will be converted into the right to receive Glacier
common stock.
Oversubscription of the Stock Consideration. If the total shares of Glacier
common stock that would be issued to First National shareholders who make all
stock elections and combination elections would be greater than the maximum
total stock consideration, the following allocation mechanism will be used:
- all cash election shares, combination cash shares and no-election
shares will be converted into the right to receive cash;
- the exchange agent will then select from the stock election shares and
the combination stock shares, on a pro rata basis, a sufficient number
of shares such that the aggregate shares of Glacier common
33
stock that will be issued equals as closely as possible the maximum
total stock consideration; and
- all shares selected by the exchange agent through the pro rata
selection process will be converted into the right to receive cash.
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.
Because the federal income tax consequences of receiving cash, Glacier
common stock, or both cash and Glacier common stock will differ, First National
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 First National 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 First National shareholders
who receive cash consideration.
FRACTIONAL SHARES
No fractional shares of Glacier common stock will be issued to any holder
of First National 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 First
National may, subject to certain conditions, terminate the merger agreement if
the effective date does not occur on or before November 15, 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 First
National 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 First National shareholders hold their
shares of First National 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 First National 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:
- financial institutions, mutual funds, dealers in securities or
insurance companies;
- tax-exempt organizations;
34
- S corporations or other pass-through entities;
- non-United States persons;
- First National shareholders whose shares are qualified small business
stock for purposes of section 1202 of the Code or who may be subject
to the alternative minimum tax provisions of the Code; or
- First National shareholders who received their First National common
stock through the exercise of employee stock options or otherwise as
compensation or through a tax-qualified retirement plan.
Consummation of the merger is conditioned upon the receipt by First
National 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 First
National 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 First National common stock
for cash, Glacier common stock or a combination of cash and Glacier common
stock.
Exchange Solely for Cash. If pursuant to the merger a holder exchanges all
of its shares of First National common stock solely for cash, the holder will
recognize gain or loss equal to the difference between the amount of cash
received and its adjusted tax basis in the shares of First National common stock
surrendered. The gain or loss will be long-term capital gain or loss if the
holder's holding period with respect to the First National common stock
surrendered is more than one year. Notwithstanding the foregoing, if a holder
exchanges all of its shares of First National common stock solely for cash and
either (1) is deemed to constructively own shares of Glacier common stock that
were exchanged for shares of First National common stock or (2) actually owns
shares of Glacier common stock, cash received by the holder may be taxed as a
dividend rather than as a capital gain. The consequence to such holders may be
similar to the consequences described below under the heading "--Exchange for
Glacier Common Stock and Cash."
Exchange Solely for Glacier Common Stock. If pursuant to the merger a
holder exchanges all of its shares of First National 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 First National 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 First National common stock were held. If a holder has
differing bases or holding periods in respect of its shares of First National
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 First National 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
35
its shares of First National 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 First National 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 First National 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 First National 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 First National common stock
surrendered. If a holder has differing bases or holding periods in respect of
its shares of First National 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 First National 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
First National common stock in lieu of a fractional share of Glacier common
stock generally will be treated as received in redemption of the
36
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
First National 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 First National common stock is more than one year.
Dissenting Shareholders. Holders of First National common stock who dissent
with respect to the merger, as discussed in "Dissenters' Rights," and who
receive cash in respect of their shares of First National 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 First National common
stock. The gain or loss will be long-term capital gain or loss if the shares of
First National were held for more than one year.
Backup Withholding. Non-corporate shareholders of First National 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:
- furnish a correct taxpayer identification number and certify that they
are not subject to backup withholding on the substitute Form W-9 or
successor form included in the election form/letter of transmittal
they will receive; or
- are otherwise exempt from backup withholding.
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. First National 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 First National 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 First National 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 FIRST NATIONAL 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 FIRST NATIONAL 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.
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VOTING AGREEMENT
The directors of First National have entered into a Voting Agreement, dated
as of May 31, 2006. In the Voting Agreement, the directors agree, among other
things, to vote the shares of First National common stock that he or she owns or
controls in favor of the merger. The directors who have entered into this Voting
Agreement are entitled to vote a total of 1,560 outstanding shares of First
National common stock, which is 31.2% of the total shares outstanding.
DISSENTERS' RIGHTS OF APPRAISAL
Under provisions of the National Bank Act, First National shareholders have
the right to dissent from the merger and to receive payment in cash for the
"value" of their shares of First National common stock.
FAILURE OF A SHAREHOLDER TO COMPLY STRICTLY WITH THE STATUTORY REQUIREMENTS
WILL RESULT IN LOSS OF HIS OR HER DISSENTER'S RIGHTS. No advice can be given as
to the ultimate value that an appraiser may place upon the shares held by those
who choose to dissent. Accordingly, we strongly encourage you to consult with a
knowledgeable professional advisor before exercising your dissenters' rights.
First National shareholders electing to exercise dissenters' rights must
comply with the applicable provisions of the National Bank Act in order to
perfect their rights. The following is intended as a brief summary of the
material provisions of the procedures that a First National 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 APPLICABLE PROVISIONS OF THE
NATIONAL BANK ACT, THE FULL TEXT OF WHICH ARE SET FORTH IN APPENDIX B TO THIS
DOCUMENT.
A shareholder who wishes to assert dissenters' rights must:
- deliver to First National before the special meeting written notice of
the shareholders' intent to demand payment for the shareholder's
shares in the merger is completed, or
- not vote in favor of the merger.
A shareholder wishing to deliver a notice asserting dissenters' rights
prior to the special meeting should hand deliver or mail the notice to the
following address:
First National Bank of Morgan
120 North State Street
Morgan, Utah 84050
ATTN: Stanton R. Nielsen
Under applicable law, a dissenting shareholder who votes against the merger
agreement at the special meeting or who has given notice in writing to First
National at or prior to the meeting that he or she dissents from the merger,
shall be entitled to receive in cash the value of the shares of First National
stock held by the shareholder, if and when the merger is consummated, upon
written request made to First National at any time before 30 days after the date
of consummation of the merger, accompanied by the surrender of the shareholder's
First National stock certificate(s).
Failure to strictly comply with each of the foregoing requirements will
result in the loss of such shareholder's right to receive cash for his or her
shares of First National stock.
The value of a dissenting shareholder's shares of First National stock will
be determined, as of the date on which the special meeting, is held by a
committee of three persons, one to be selected by the vote of the holders of the
majority of First National stock who are entitled to receive the value of their
shares, one by the board of directors of the First National, and the third by
the other two so chosen. The valuation agreed upon by
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any two of the three chosen appraisers will govern; but, if such value is not
satisfactory to any dissenting shareholder who has properly requested payment,
then such shareholder may, within five days after being notified of the
appraised value of his or her shares, appeal to the OCC, who will cause a
reappraisal to be made, which reappraisal will be final and binding as to the
value of such shareholder's shares.
If, within 90 days following the date of consummation of the merger, for
any reason one or more of the appraisers is not selected as set forth above, the
OCC will, upon written request of any interested party, cause an appraisal to be
made which will be final and binding on all parties. The expenses of the OCC in
making the reappraisal or appraisal, as the case may be, will be paid by First
National. Any shareholder of First National who votes against the merger
agreement or who gives written notice at or prior to the special meeting to the
presiding officer of the meeting that he or she dissents, will be notified in
writing of the date of the consummation of the merger.
The appraisal of the shares of dissenting shareholders, as determined by
the applicable provision of the National Bank Act relating to the merger of
national or state banks into national banks (12 U.S.C. 215a), is governed by the
provisions of subsections (b), (c) and (d) of 12 U.S.C. 215a. See APPENDIX B for
the full text of 12 U.S.C. 215a(b), (c) and (d).
THE FAILURE OF A FIRST NATIONAL SHAREHOLDER TO COMPLY STRICTLY WITH THE
APPLICABLE NATIONAL BANK ACT 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 First National, are as follows:
- approval of the merger by First National shareholders;
- accuracy of the other party's representations in the merger agreement
and any certificate or other instrument delivered in connection with
the merger agreement;
- compliance by the other party of all material terms, covenants, and
conditions of the merger agreement;
- that there shall have been no damage, destruction, or loss, or other
event or sequence of events, that has had or potentially may have a
material adverse effect with respect to the other party;
- that no action or proceeding has been commenced or threatened by any
governmental agency to restrain or prohibit or invalidate the merger;
- Glacier's receipt of a tax opinion from Graham & Dunn PC; and
- the registration statement filed with the SEC, required to register
the Glacier common stock to be issued to certain shareholders of First
National when the merger has become effective, and no stop-order
suspending such effectiveness has been issued and no proceedings for
that purpose have been initiated or threatened by the SEC.
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In addition to the above, the obligations of Glacier under the merger
agreement are subject to conditions that include the following:
- First National's has delivered a statement regarding the amount of
transaction fees (as defined in the merger agreement) and that such
transaction fees are in compliance with the terms of the merger
agreement;
- That in the opinion of the executive officers of First National and
Glacier, First National's allowance for loan and lease losses, as
adjusted for specified required increases or charge-offs, is adequate
to absorb First National's anticipated loan losses;
- That after giving effect to the payment of all First National's
transaction fees (but excluding the impact of specified required
increases in ALLL or charge offs or other receivables and of payments
or accruals related to change in control bonus payments), the capital
of First National is not less than $8.5 million at the closing of the
merger;
- That the aggregate deposits of First National, excluding certificates
of deposit (or equivalents) of $100,000 or more and brokered deposits,
is not less than $47 million at the closing of the merger;
- That the aggregate amount of cash to be paid for possible dissenting
shares of First National common stock will not exceed 10% of the cash
value of the total merger consideration; and
- That Michael Blodnick, president and CEO of Glacier, be appointed to
the First National board of directors.
Additionally, either Glacier or First National 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 First National may waive any of the other party's
conditions, except those that are required by law (such as receipt of regulatory
and First National shareholder approval). Either Glacier or First National 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 First National special
meeting of the shareholders. To the extent permitted under applicable law, the
parties may make any amendment or supplement without further approval of First
National shareholders. However, after shareholder approval, any amendments that
would reduce the amount or change the form of consideration First National
shareholders will receive in the merger or the allocation of the cash percentage
and stock percentage would require further First National shareholder approval.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement contains several provisions entitling either Glacier
or First National to terminate the merger agreement under certain circumstances.
The following briefly describes these provisions:
Lapse of Time. If the merger has not closed by November 15, 2006, then at
any time after that date, the board of directors of either Glacier or First
National may terminate the merger agreement.
Glacier Average Closing Price Greater than $34.50 By specific action of its
board of directors, First National may terminate the merger agreement if the
Glacier average closing price (as defined in the merger agreement) is greater
than $34.50.
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If First National provides written notice of its intent to terminate the
merger agreement because the Glacier average closing price is greater than
$34.50, 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 First
National shareholder would have received if the Glacier average closing price
had been $34.50. 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 $25.50 and Glacier Underperforms
Peer Group. By specific action of its board of directors, Glacier may terminate
the merger agreement if both of the following are true with respect to Glacier's
common stock:
- the Glacier average closing price (as defined in the merger agreement)
is less than $25.50; and
- the number obtained by dividing the Glacier average closing price by
$30.00 is less than the number obtained (i) dividing the "final index
value" by 984.55, which is the designated "initial index value" and
(ii) then multiplying the quotient by 0.85. The "final index value" is
defined in the merger agreement as the average daily value during the
determination period (as defined in the merger agreement) of the
companies that comprise the SNL $1 Billion to $5 Billion peer group.
If Glacier provides written notice of its intent to terminate the merger
agreement because the Glacier average closing price is less than $25.50 and
Glacier has underperformed its peer group, First National 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 First National shareholder would have received in
the Glacier average closing price had been $25.50. If this election is made by
First National, 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.
Glacier Average Closing Price Less than $22.50. By specific action of its
board of directors, First National may terminate the merger agreement if the
Glacier average closing price (as defined in the merger agreement) is less than
$22.50, and the merger consideration has been adjusted so that the number of
Glacier shares received by First National shareholders is fixed at the number of
shares the First National shareholders would have received had Glacier's average
closing price been $25.50.
Mutual Consent. The parties may terminate the merger agreement at any time
before closing, whether before or after approval by First National 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 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 First National 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
41
approve the merger. Additionally, regardless of whether the First National board
of directors recommends approval of the merger to its shareholders, Glacier may
terminate the merger agreement if First National 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 First National common stock
are proposed dissenting shares (as defined in the merger agreement).
Superior Proposal. First National may terminate the merger agreement if its
board of directors determines in good faith that First National has received a
"Superior Proposal" as defined in the merger agreement. This right is subject to
the requirement that First National may terminate the merger agreement only if
First National (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, First National intends to enter
into a letter of intent, acquisition agreement or similar agreement relating to
such Superior Proposal, and (iii) First National has provided Glacier with at
least five business days prior notice that First National 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
First National) in such a manner as would enable First National to proceed with
the merger.
TERMINATION FEES
Subject to certain exceptions, First National will pay Glacier a
termination fee of $200,000 if Glacier terminates the merger agreement based on
a First National breach of its representations or breach of its covenants.
Glacier will pay First National a termination fee of $200,000 if First National
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 because (i) the First National board
of directors fails to recommend shareholder approval of the merger agreement; or
(ii) First National 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 First
National's board of directors to proceed with the merger; or (iii) Glacier
terminates the merger agreement after First National's receipt of a superior
proposal followed by an immediate acquisition event (as defined), then First
National will immediately pay Glacier a break-up fee of $1.0 million. If the
merger agreement is terminated by Glacier due to First National's receipt of a
superior proposal and prior to or within six months after such termination,
First National enters into an agreement, or publicly announces an intention, to
engage in an acquisition event, or within 12 months after such termination an
acquisition event has occurred, then First National will promptly pay to Glacier
the break-up fee in the amount of $1.0 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
First National 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.
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CONDUCT PENDING THE MERGER
The merger agreement provides that, until the merger is effective, First
National and each First National 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, First National and each First National Bank
will refrain from engaging in various activities such as:
- effecting any stock split or other recapitalization with respect to
First National, or pledge or encumber any shares of First National
stock or grant any options for such stock;
- other than regular quarterly dividends (not to exceed $125,000 per
quarter) to be paid on June 30, 2006, and September 30, 2006 (so long
as the merger has not yet been consummated), declaring or paying any
dividends, or making any other distributions;
- acquiring, selling, transferring assigning or encumbering or otherwise
disposing of assets or making any commitment other than in the
ordinary course of business;
- soliciting or accepting deposit accounts of a different type than
previously accepted by First National or at rates materially in excess
of prevailing interest rates, or, with specified exceptions, incurring
any indebtedness for borrowed money;
- offering or making loans or other extensions of credit of a different
type, or applying different underwriting standards, from those
previously offered or applied by First National, or offering or making
a loan or extension of credit in an amount greater than $750,000
without prior consultation with Glacier;
- with specified exceptions, acquiring an ownership or leasehold
interest in real property without conducting an appropriate
environmental evaluation;
- with specified exceptions, entering into, renewing, amending or
terminating any contracts calling for a payment of more than $10,000,
with a term of one year or more;
- with specified exceptions, entering into or amending any contract
calling for a payment of more than $25,000, unless the contract may be
terminated without cause or penalty upon 30 days notice or less;
- with specified exceptions, entering into any personal services
contract;
- selling any securities other than in the ordinary course of business,
or selling any securities even in the ordinary course of business if
the aggregate gain realized from all sales after the date of execution
of the merger agreement would exceed $25,000, or transferring
investment securities between portfolios;
- amending or materially changing its operations, policies or
procedures;
- with specified exceptions, making capital expenditures in excess of
$10,000 per project or related series of projects or $25,000 in the
aggregate;
- entering into transactions or making any expenditures other than in
the ordinary course of business except for expenses reasonably related
to the completion of the merger.
FIRST NATIONAL BANK MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the merger, the First National board of directors will consist of
the First National directors immediately before the merger, with the addition of
Michael Blodnick, the President and Chief Executive Officer of Glacier.
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First National's executive officers immediately before the merger will
remain unchanged immediately following the merger.
Although First National will be a wholly owned subsidiary of Glacier after
the merger, Glacier intends to operate it independently, under the name "First
National Bank of Morgan."
EMPLOYEE BENEFIT PLANS
General. The merger agreement confirms Glacier's intent that Glacier's
current personnel policies and benefits will apply to any employees of First
National who remain employed following the closing of the merger. Such employees
will be eligible to participate in all of the benefit plans of Glacier that are
generally available to similarly situated employees of Glacier. For purposes of
participation in such plans, service with First National prior to the merger
will constitute prior service with Glacier for purposes of determining
eligibility and vesting.
Change in Control Stay Bonus Payments. As provided in the merger agreement,
"stay bonuses" will be awarded to persons who were First National employees as
of the execution date of the merger agreement and who maintain their employment
through consummation of the merger. Officers of First National will receive
payments ranging from 100% to 200% of their most recent year's W-2 compensation,
and other employees will receive payments equal to 10% of their most recent
year's W-2 compensation.
Change in Control Severance Plan. As provided in the merger agreement,
persons who are employees of First National upon consummation of the merger
(other than Stan Nielsen and David Alexander) who are terminated "without cause"
or resign for "good reason," each as defined, during the one to two year period
following the merger will receive lump sum payments equal to the amount of
compensation that they otherwise would have received for the remainder of the
period.
Termination of Benefit Plans. The merger agreement provides that on June
30, 2006, First National will make its annual contribution for 2006 to its
profit sharing plan, and that no accruals or contributions will be made after
June 30, 2006. Glacier and First National intend, as soon as practicable after
the merger, to transfer the accrued benefits of First National employees under
the profit sharing plan to a similar plan maintained by Glacier. First
National's other existing benefit plans will be terminated.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the First National board of directors and management may
be deemed to have interests in the merger, in addition to their interests as
shareholders of First National generally. The First National board of directors
was aware of these factors and considered them, among other things, in approving
the merger agreement.
Stock Ownership. The First National directors beneficially owned, as of the
record date for the special meeting, 1,560 shares of First National common
stock, representing 31.2% of all outstanding First National shares. The
directors of First National will receive the same consideration in the merger
for their shares as other shareholders of First National.
Voting Agreements. The directors of First National have entered into a
Voting Agreement, dated as of the same date as the merger agreement. Pursuant to
this agreement, each director agrees to vote the shares of First National common
stock that he or she owns or controls in favor of the merger. The 1,560 shares
owned or controlled by the directors equal 31.2% of First National's outstanding
shares.
Employment Agreements. Stan Nielsen, First National's President and CEO,
and David Alexander, First National's Executive Vice President, have each
entered into an employment agreement, ratified by Glacier, with First National.
Each of the employment agreements provides that the executive will maintain his
current title and responsibilities following the merger.
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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),
First National will pay to the named executive a lump sum payment equal to one
times such executive's current base salary.
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 Morgan, Summit
and/or Weber Counties, Utah.
Each of the employment agreements provides for an initial annual salary for
the remainder of 2006 and for 2007, with subsequent salary increases subject to
the employing bank's annual review of the named executive's compensation and
performance. The initial annual salary for the remainder of 2006 will be $77,160
for Stan Nielsen and $65,160 for David Alexander. Stan Nielsen will receive a
bonus of $23,000 in January 2007, and David Alexander will receive $17,000 at
that time.
First National Director Non-Competition Agreement. All members of the board
of directors of First National (except Stan Nielsen, who is subject to the
non-compete provision in his 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 and First National within Morgan, Summit and/or Weber Counties,
Utah. The term of the non-competition agreement commences upon the effective
date of the merger and continues for three years.
Stay Bonuses. As provided in the merger agreement, certain First National
employees will receive stay bonuses in the aggregate amount of approximately
$510,000 immediately following consummation of the merger. Stan Nielsen will
receive a payment equal to 200% of his total 2005 W-2 compensation, or
approximately $180,000, and David Alexander will receive an amount equal to 150%
of his total 2005 W-2 compensation, or approximately $120,000.
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 First
National 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 the National Bank Act or the articles of
association or bylaws of First National.
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.
REGULATORY REQUIREMENTS
Closing of the merger is subject to approval by the appropriate banking
regulatory authorities, including the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of the Currency.
ACCOUNTING TREATMENT OF THE MERGER
The acquisition of First National will be accounted for using the purchase
method of accounting by Glacier under accounting principles generally accepted
in the United States of America. Accordingly, using the purchase method of
accounting, the assets and liabilities of First National 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
45
statements are not restated and results of operation of First National will be
included in Glacier's consolidated statement of operations after the date of the
merger. The identifiable intangible assets with finite lives, other than
goodwill, will be amortized against the combined company's earnings following
completion of the merger.
STOCK RESALES BY FIRST NATIONAL 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 First
National, who may be deemed to be "affiliates" of First National, 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 has obtained customary
agreements with all First National directors, officers, and affiliates of First
National, 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
First National 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 First National.
46
INFORMATION CONCERNING FIRST NATIONAL
GENERAL
First National Bank of Morgan was chartered under the National Banking Act
in September 1903. First National is regulated by the OCC and the FDIC. As of
December 31, 2005, First National had total assets of approximately $68.4
million, total loans of approximately $47.7 million, total deposits of
approximately $59.0 million and approximately $9.2 million of shareholders'
equity.
MARKET AREA
First National provides a full range of banking, mortgage and lending
services to retail and commercial customers through its two locations in Morgan
County, Utah. Along with steady asset, loan and deposit growth, consistent core
earnings and low net charge-offs have historically characterized First
National's financial performance. First National's primary market area consists
of a three county area in the Wasatch Mountain region of Utah consisting of
Morgan, Summit and Weber counties. This market area is generally characterized
as one of the strongest growth markets in Utah with a strong base of economic
activities including manufacturing, construction, recreation, real estate
development, ranching and agriculture, government, transportation and retail.
LENDING ACTIVITIES
First National's principal business is to accept deposits from the public
and to make loans and other investments. The primary source of income generated
by First National is the interest earned from both its loan and investment
portfolios. To develop business, the bank relies to a great extent on the
personalized approach of its officers and directors, who have extensive business
and personal contacts in the communities served by the bank. First National
offers a variety of traditional loan products to its customers, primarily
individual consumers and small to medium-sized businesses. For businesses, First
National provides term loans, lines of credit, loans for working capital, loans
for business expansion and the purchase of equipment and machinery, construction
and land development loans for builders and developers and commercial real
estate loans. First National offers consumers residential mortgage loans, home
equity loans, automobile loans and various other consumer installment loans.
At December 31, 2005, First National's consolidated total loan portfolio
was $47.7 million, representing approximately 69.7% of its total assets. As of
such date, First National's loan portfolio consisted of 31.1% 1-4 family real
estate secured loans, 16.7% commercial real estate secured loans (excluding
construction and land development loans), 20.4% real estate construction and
land development loans, 10.5% commercial loans, 13.3% installment or consumer
loans and 6.4% farm and agriculture loans.
DEPOSIT AND BANKING SERVICES
Customers of First National are provided with a full complement of
traditional banking and deposit products. The bank is engaged in substantially
all of the business operations customarily conducted by independent financial
institutions in Utah, including the acceptance of checking accounts, savings
accounts, money market accounts and a variety of certificates of deposit
accounts.
First National does a substantial amount of business with individuals, as
well as with customers in small to medium-sized commercial, industrial and
agriculture businesses. The primary sources of core deposits are residents of
First National's primary market area and businesses and their employees located
in that area. First National also obtains deposits through personal solicitation
by the bank's officers and directors and through local advertising. For the
convenience of its customers, First National offers drive-through banking
facilities, automated teller machines, internet banking, direct deposit, night
depositories, personalized checks, merchant bank card processing and safe
deposit boxes. The bank's services also include cashier's checks, travelers'
47
checks, domestic wire transfers, account research, stop payments, and telephone
and internet based transfers between accounts.
FIRST NATIONAL SUMMARY FINANCIAL INFORMATION
The following selected financial information for the fiscal years ended
December 31, 2005, 2004 and 2003 is derived from unaudited financial statements
of First National:
FIRST NATIONAL BANK OF MORGAN
BALANCE SHEET
YEAR ENDED DECEMBER 31,
---------------------------------------
2003 2004 2005
----------- ----------- -----------
Cash and Cash Equivalents $ 5,528,769 $ 1,805,546 $ 4,363,490
Fed Funds 3,703,802 5,135,844 3,540,496
Securities 11,509,822 11,564,119 11,201,888
Gross Loans 40,371,480 47,937,873 47,702,711
Allowance for Loan Loss 404,390 391,857 495,140
----------- ----------- -----------
NET LOANS 39,967,090 47,546,016 47,207,571
=========== =========== ===========
Premises & Fixed Assets 1,449,106 1,928,794 1,880,865
OREO 0 0 0
Other Assets 746,407 631,267 197,948
----------- ----------- -----------
TOTAL ASSETS $62,904,996 $68,611,586 $68,392,258
=========== =========== ===========
Deposits $54,504,464 $59,783,288 $59,027,305
Fed Funds & Repos 0 0 0
Borrowings 0 0 0
Other Liabilities 135,022 155,688 147,637
----------- ----------- -----------
TOTAL LIABILITIES 54,639,486 59,938,976 59,174,942
=========== =========== ===========
Equity 8,265,510 8,672,610 9,217,316
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY $62,904,996 $68,611,586 $68,392,258
=========== =========== ===========
FIRST NATIONAL BANK OF MORGAN
INCOME STATEMENT
YEAR ENDED DECEMBER 31,
------------------------------------
2003 2004 2005
---------- ---------- ----------
Interest Income $3,293,694 $3,414,742 $4,016,789
Interest Expense 828,334 693,933 980,008
Net Interest Income 2,465,360 2,720,809 3,036,781
Loan Loss Provision 10,000 60,000 103,511
Non-interest Income 513,323 469,714 467,769
Non-interest Expense 1,443,633 1,724,793 1,710,779
Gains (losses) on Securities Sales 0 0 0
Pre-Tax Income 1,525,050 1,405,730 1,690,260
Taxes 526,688 468,379 579,500
---------- ---------- ----------
NET INCOME $ 998,362 $ 937,351 $1,110,760
========== ========== ==========
48
COMPETITION
First National experiences competition in both lending and attracting funds
from other commercial banks, savings banks, savings and loan associations,
credit unions, finance companies, pension trusts, mutual funds, insurance
companies, mortgage bankers and brokers, brokerage and investment banking firms,
asset-based non-bank lenders, government agencies and certain other
non-financial institutions, including retail stores, which may offer more
favorable financing alternatives than First National.
First National also competes with companies located outside of its primary
market that provide financial services to persons within this market. Some of
First National's current and potential competitors have larger customer bases,
greater brand recognition, and significantly greater financial, marketing and
other resources than First National and some of them are not subject to the same
degree of regulation as First National.
EMPLOYEES
As of June 1, 2006, First National had, in the aggregate, 15 full-time and
9 part-time employees. First National believes that it has a good relationship
with its employees and the employees are not represented by a collective
bargaining agreement.
PROPERTIES
First National operates from two locations in Morgan County, Utah. The main
branch is located at 120 North State Street in Morgan, Utah, which is a full
service facility that was most recently remodeled in 2004. The Morgan branch is
a two level building consisting of approximately 9,600 square feet, has three
full service drive-up lanes and one ATM drive-up lane. The Mountain Green branch
is located at 5015 W. Old Highway Rd., which is a full service facility that was
opened in its current location in August 2000. The Mountain Green branch is a
one story building consisting of approximately 3,500 square feet, has two full
service drive-up lanes and one ATM drive-up lane. Both the Morgan and Mountain
Green branches are owned by First National.
LEGAL PROCEEDINGS
From time to time, litigation arises in the normal conduct of First
National's business. However, First National is not currently involved in any
litigation that management of First National believes, either individually or in
the aggregate, could reasonably be expected to have a material adverse effect on
its business, financial condition or results of operations.
49
SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS, MANAGEMENT AND DIRECTORS OF FIRST
NATIONAL
The following table shows, as of June 12, 2006, the beneficial ownership of
First National common stock by (i) each person known by First National to be the
beneficial owner more than 5% of First National's outstanding common stock, (ii)
each of First National directors and executive officers; and (iii) all of First
National's directors and officers as a group. Except as otherwise noted in the
footnotes to the table, each individual has sole investment and voting power
with respect to the shares of common stock set forth.
SHARES
BENEFICIALLY PERCENTAGE OF
NAME(1) OWNED(2) CLASS(3)
------- ------------ -------------
FIVE PERCENT SHAREHOLDERS
Avon T. Francis
2245 E. 7150 S.
Salt Lake City, Utah 84121 250 5.0%
Jay W. Francis
10 E. 1800 S.
Bountiful, Utah 84010 430 8.6%
Shirley F. Nielsen
1911 E. 3780 S.
Salt Lake City, Utah 84106 282 5.6%
DIRECTORS AND EXECUTIVE OFFICERS
David Alexander, Sr. Vice President 0 *
Melba F. Brimley, Director 376 7.5%
A. Kirk Francis, Director 36 *
George N. Francis, Director 230 4.6%
Grant Francis, Director 500 10.0%
Phillip N. Francis, Director 187 3.7%
Stanton R. Nielsen, Director, President and CEO 111(4) 2.2%
Richard K. Sommers, Director 120 2.4%
ALL DIRECTORS AND EXECUTIVE OFFICERS
AS A GROUP (8 PERSONS) 1,560 31.2%
* Denotes less than 1% ownership.
(1) The address for each of the directors and executive officers named in the
above table is: c/o First National Bank of Morgan, 120 N. State Street,
Morgan, Utah, 84050.
(2) The information set forth in this table with respect to First National
common stock ownership reflects "beneficial ownership" as determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. "Beneficial ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or both.
(3) The percentages are based upon 5,000 shares outstanding. There are no
options, warrants or other rights outstanding to acquire any shares of
First National common stock.
(4) Includes 24 shares of common stock owned by Stanton Reed Nielsen, Mr.
Nielsen's son.
50
RELATED PARTY TRANSACTIONS
Certain directors and executive officers of First National and its
subsidiaries, and their related interests, had loans outstanding in the
aggregate amounts of approximately $89,000 at December 31, 2005. These loans
were made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the same time
for comparable transactions with other person not affiliated with First National
or its subsidiaries and did not involve more than normal risks of collectibility
or present other unfavorable features. The prohibitions on certain extensions of
credit to directors and executive officers contained in the Sarbanes-Oxley Act
do not apply to any of these loans.
DESCRIPTION OF GLACIER'S CAPITAL STOCK
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 Stock 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 First National Common
Stock."
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
GLACIER AND FIRST NATIONAL COMMON STOCK
Montana law and Glacier's articles of incorporation and bylaws govern the
rights of Glacier shareholders and will govern the rights of First National
shareholders who become shareholders of Glacier as a result of the merger. The
rights of First National shareholders are currently governed by the National
Bank Act and by First National's articles of association and bylaws. The
following is a brief summary of certain differences between the rights of
Glacier and First National 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 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 association, First National's authorized capital
consists of 5,000 shares of common stock, $10.00 par value per share.
The following is a more detailed description of Glacier's and First
National's capital stock.
51
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 2,164,521
shares of Glacier common stock under Glacier's employee and director stock
option plans.
As of March 31, 2006, there were 5,000 shares of First National 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.
First National's authorized capital does not include preferred stock.
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 First National common stock as and when declared
by the First National board of directors out of undivided profits, except that
the approval of the Comptroller of the Currency shall be required if the total
of all dividends declared by such association in any calendar year shall exceed
the total of its net income of that year combined with its retained net income
of the preceding two years, less any required transfers to surplus.
VOTING RIGHTS
All voting rights are currently vested in the holders of Glacier common
stock and First National common stock, with each share being entitled to one
vote.
The articles of incorporation of Glacier provide that shareholders do not
have cumulative voting rights in the election of directors. Pursuant to the
National Bank Act, First National shareholders do have cumulative voting rights
for the election of directors.
PREEMPTIVE RIGHTS
Glacier's shareholders do not have preemptive rights to subscribe to any
additional securities that may be issued. First National's shareholders do have
preemptive rights to subscribe to any additional shares of common stock that may
be issued.
52
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 First National is liquidated, the holders of First National common stock
are entitled to share, on a pro rata basis, First National's remaining assets
after provision for liabilities.
All outstanding shares of Glacier common stock are, and the shares to be
issued in the merger will be, fully paid and nonassessable. Shares of First
National's common stock are assessable in the manner and to the extent provided
in the National Bank Act.
AMENDMENT OF ARTICLES 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.
Pursuant to the National Bank Act and First National's articles of
association, all amendments to the articles of association must be approved by a
vote of the holders of a majority of the voting shares of the stock of the
association. First National's bylaws may be amended by a majority of the
directors.
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.
Neither the National Bank Act nor First National's articles of association
contain any anti-takeover provisions.
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.
First National's articles of association provide that the number of
directors may not be less than five (5) or more than twenty-five (25). The board
of directors for First National currently consists of seven (7) members, each of
whom is currently serving an annual term.
53
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.
The articles of First National provide for indemnification for certain
expenses and costs in suits to which such person is made or threatened to be
made a party because such person was a director or officer of the corporation,
except for actions finally adjudged to have been gross negligence, willful
misconduct or criminal acts.
RESTRICTION ON TRANSFER OF SHARES
Neither Glacier's nor First National's articles or bylaws provide any
specific limitations on its ability to transfer shares, nor require the
company's shares to bear a restrictive legend.
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) the "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.
CERTAIN LEGAL MATTERS
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. Graham & Dunn PC, Seattle,
Washington, Glacier's corporate counsel, has provided an opinion concerning
certain tax matters related to the merger.
54
EXPERTS
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 public accounting firm, and upon the
authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION ABOUT GLACIER
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 First National
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 First National for the First National 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:
- Annual Report on Form 10-K for the year ended December 31, 2005;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2006;
- Proxy Statement for Glacier's 2006 Annual Meeting of Shareholders; and
- Current Reports on Form 8-K filed February 2, 2006; February 3, 2006;
April 12, 2006; April 21, 2006; April 24, 2006; April 28, 2006; and
June 1, 2006.
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 First National shareholders (other than
current reports furnished under Item 9 or Item 12 of Form 8-K).
55
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 ________, 2006 TO RECEIVE THEM BEFORE
THE FIRST NATIONAL 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 First National 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 ___________, 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 First
National shareholders nor the issuance of Glacier common stock in the merger
will create any implication to the contrary.
56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 35-1-451 through 35-1-459 of the Montana Business Corporation Act
("MBCA") contain specific provisions relating to indemnification of directors
and officers of Montana corporations. In general, the statute provides that (i)
a corporation must indemnify a director or officer who is wholly successful in
his defense of a proceeding to which he is a party because of his status as
such, unless limited by the articles of incorporation, and (ii) a corporation
may indemnify a director or officer if he is not wholly successful in such
defense, if it is determined as provided in the statute that the director meets
a certain standard of conduct, provided that when a director is liable to the
corporation, the corporation may not indemnify him. The statute also permits a
director or officer of a corporation who is a party to a proceeding to apply to
the courts for indemnification or advance of expenses, unless the articles of
incorporation provide otherwise, and the court may order indemnification or
advancement of expenses under certain circumstances set forth in the statute.
The statute further provides that a corporation may in its articles of
incorporation or bylaws or by resolution provide indemnification in addition to
that provided by statute, subject to certain conditions set forth in the
statute.
The articles of incorporation of Glacier provide, among other things, that
the personal liability of the directors and officers of the corporation for
monetary damages shall be eliminated to the fullest extent permitted by the
MBCA. Glacier's bylaws provide that the corporation 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 of the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits are listed on the accompanying "Exhibit Index".
(b) Financial Statement Schedules. None.
(c) The opinion of the financial advisor is set forth as APPENDIX C to
this proxy statement/prospectus
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to;
(i) Include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) Include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-1
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof..
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the Effective Date of the registration statement through the
date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
SIGNATURES
Pursuant to the requirements of the 1933 Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Kalispell, State of
Montana, on June 28, 2006.
GLACIER BANCORP, INC.
By: /s/ Michael J. Blodnick
------------------------------------
Michael J. Blodnick President and
Chief Executive Officer
Each person whose individual signature appears below hereby authorizes and
appoints Michael J. Blodnick and James H. Strosahl, and each of them, with full
power of substitution and full power to act without the other, as his true and
lawful attorney-in-fact and agent to act in his name, place and stead and to
execute in the name and on behalf of each person, individually and in each
capacity stated below, and to file any and all amendments to this Registration
Statement, including any and all post-effective amendments.
SIGNATURE AND TITLE
By: /s/ Michael J. Blodnick
------------------------------------
Michael J. Blodnick, President and
Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ James H. Strosahl
------------------------------------
James H. Strosahl,
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ Everit A. Sliter
------------------------------------
Everit A. Sliter, Chairman of the
Board and Director
By: /s/ James M. English
------------------------------------
James M. English, Director
By: /s/ Allen J. Fetscher
------------------------------------
Allen J. Fetscher, Director
By: /s/ Jon W. Hippler
------------------------------------
Jon W. Hippler, Director
II-3
By: /s/ Craig A. Langel
------------------------------------
Craig A Langel, Director
By /s/ L. Peter Larson
------------------------------------
L. Peter Larson, Director
By: /s/ John S. MacMillan
------------------------------------
John S. MacMillan, Director
By: /s/ John W. Murdoch
------------------------------------
John W. Murdoch, Director
II-4
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
2 Plan and Agreement of Merger dated as of May 31, 2006, by and
between Glacier Bancorp, Inc. and First National Bank of Morgan
(contained in Appendix A to the proxy statement/prospectus which
is included in the registration statement).
5 Opinion of Christensen, Moore, Cockrell, Cummings & Axelberg,
P.C., regarding legality of securities.
8 Opinion of Graham & Dunn PC regarding federal income tax matters.
10.1 Director Voting Agreement.
10.2 Director Non-Competition Agreement.
10.3 Employment Agreement for Stanton R. Nielsen.
10.4 Employment Agreement for David R. Alexander.
23.1 Consent of Christensen, Moore, Cockrell, Cummings & Axelberg, P.C.
(contained in its opinion filed as Exhibit 5).
23.2 Consent of Graham & Dunn PC as to its tax opinion (contained in
its opinion filed as Exhibit 8).
23.3 Consent of BKD, LLP, Glacier Bancorp's independent registered
public accounting firm.
23.4 Consent of KPMG LLP, Glacier Bancorp's former independent
registered public accounting firm.
23.5 Consent of Hovde Financial, Inc., First National's financial
adviser.
24 Power of Attorney (contained on the signature page of the
registration statement).
99.1 Form of proxy to be mailed to shareholders of First National.
99.2 Form of election form to be mailed to shareholders of First
National.
99.3 Opinion of Financial Advisor to First National (contained in
Appendix C to the proxy statement/prospectus which is included in
the registration statement).
II-5
Appendix A
================================================================================
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST NATIONAL BANK OF MORGAN,
NEW FIRST NATIONAL BANK OF MORGAN (UPON FORMATION)
AND
GLACIER BANCORP, INC.
================================================================================
DATED AS OF MAY 31, 2006
TABLE OF CONTENTS
PAGE
-------
SECTION 1. TERMS OF TRANSACTION....................................... xi
1.1 Effect of Merger.............................................. xi
1.2 Merger Consideration.......................................... xi
1.3 Conversion Election Procedures and Allocation................. xii
1.4 No Fractional Shares.......................................... xiv
1.5 Payment to Dissenting Shareholders............................ xiv
1.6 Deposit of Cash and Shares.................................... xiv
1.7 Certificates.................................................. xiv
SECTION 2. CLOSING OF TRANSACTION..................................... xvi
2.1 Effective Date................................................ xvi
2.2 Events of Closing............................................. xvi
2.3 Place and Time of Closing..................................... xvi
SECTION 3. REPRESENTATIONS AND WARRANTIES............................. xvi
3.1 Representations and Warranties of FNBM........................ xvi
3.2 Representations and Warranties of GBCI........................ xxiii
SECTION 4. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING.................. xxvi
4.1 Conduct of FNBM's Businesses Prior to Closing................. xxvi
4.2 Registration Statement........................................ xxxi
4.3 Affiliate Letters............................................. xxxii
4.4 Submission to Regulatory Authorities.......................... xxxii
4.5 Public Announcements.......................................... xxxii
4.6 Consents...................................................... xxxiii
4.7 Further Actions............................................... xxxiii
4.8 Notice........................................................ xxxiii
4.9 Confidentiality............................................... xxxiii
4.10 Blue Sky Filings.............................................. xxxiii
4.11 Tax Treatment................................................. xxxiii
4.12 Best Efforts.................................................. xxxiii
4.13 GBCI Assistance with Regulatory Compliance.................... xxxiii
4.14 New Bank as Party to Agreement................................ xxxiv
SECTION 5. APPROVALS AND CONDITIONS................................... xxxiv
5.1 Required Approvals............................................ xxxiv
5.2 Conditions to Obligations of GBCI............................. xxxiv
5.3 Conditions to Obligations of FNBM............................. xxxvii
SECTION 6. DIRECTORS, OFFICERS AND EMPLOYEES.......................... xxxviii
6.1 Directors..................................................... xxxviii
i
6.2 Officer's Employment Contract................................. xxxviii
6.3 Employee Benefit Issues....................................... xxxviii
6.4 Indemnification of Directors and Officers..................... xxxix
SECTION 7. TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION.... xxxix
7.1 Termination by Reason of Lapse of Time........................ xxxix
7.2 Termination Due To GBCI Average Closing Price Greater
Than $34.50................................................... xxxix
7.3 Termination Due To GBCI Average Closing Price Less than
$25.50 and Glacier Underperforms Market....................... xl
7.4 Termination in the Event of GBCI Average Closing Price less
than $22.50 and Overall Market Decline Adjustment............. xli
7.5 Other Grounds for Termination................................. xli
7.6 Termination Fee Payable By FNBM............................... xlii
7.7 Termination Fee Payable By GBCI............................... xliii
7.8 Break-Up Fee.................................................. xliii
7.9 Cost Allocation Upon Termination.............................. xliii
SECTION 8. MISCELLANEOUS.............................................. xliii
8.1 Notices....................................................... xliii
8.2 Waivers and Extensions........................................ xliv
8.3 Construction and Execution in Counterparts.................... xliv
8.4 Survival of Representations, Warranties, and Covenants........ xliv
8.5 Attorneys' Fees and Costs..................................... xlv
8.6 Arbitration................................................... xlv
8.7 Governing Law and Venue....................................... xlv
8.8 Severability.................................................. xlv
8.9 No Assignment................................................. xlv
SECTION 9. AMENDMENTS................................................. xlv
ii
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES:
Schedule 3.1.1 FNBM Offices
Schedule 3.1.2 Third Party Consents Required by FNBM
Schedule 3.1.6 FNBM Properties
Schedule 3.1.7 FNBM Environmental Matters
Schedule 3.1.9 FNBM Regulatory Actions
Schedule 3.1.11 FNBM Material Contracts
Schedule 3.1.16 Asset Classifications
Schedule 3.1.17 FNBM Litigation
Schedule 3.1.18 FNBM Insurance Policies
Schedule 3.1.20 FNBM Benefit Plans
Schedule 4.3.1 FNBM Rule 145 Affiliates
EXHIBITS:
Exhibit A Form of Affiliate Letter
Exhibit B Opinion of FNBM Legal Counsel
Exhibit C FNBM Employee Stay Bonus Payments
Exhibit D Severance Plan for FNBM Employees
iii
PLAN AND AGREEMENT OF MERGER
AMONG
FIRST NATIONAL BANK OF MORGAN,
NEW FIRST NATIONAL BANK OF MORGAN (IN FORMATION),
AND
GLACIER BANCORP, INC.
This Plan and Agreement of Merger (the "Agreement"), dated as of May 31,
2006, is made by and between FIRST NATIONAL BANK OF MORGAN ("FNBM") and GLACIER
BANCORP, INC. ("GBCI"), acting on its own behalf and on behalf of a national
banking association to be formed by GBCI pursuant to this Agreement ("New
Bank").
PREAMBLE
The management and boards of directors of GBCI and FNBM 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. The parties to the proposed transaction are as follows:
(1) FNBM is a national banking association organized and validly existing
under the laws of the United States, with its principal office located
in Morgan, Utah.
(2) GBCI 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"). GBCI's principal
office is located in Kalispell, Montana.
(3) New Bank will be organized by persons designated by GBCI who will,
following execution of this Agreement by FNBM and GBCI, apply for
approval from the Office of the Comptroller of the Currency ("OCC") to
become an interim national banking association. Upon receipt of such
approval, New Bank will become a body corporate and will execute this
Agreement, thereby becoming a party hereto and ratifying all prior
actions taken on its behalf by GBCI. All of the capital stock of New
Bank will be subscribed for solely by GBCI, and the consideration for
such stock will be paid in before the Effective Date.
B. THE TRANSACTION. In accordance with the terms and conditions of this
Agreement and Section 215a of the National Bank Act (12 USC Section 215a),
FNBM will merge with and into New Bank (the "Merger"), the separate legal
existence of FNBM will cease, and FNBM and New Bank will become a single
national banking association under the name "First National Bank of Morgan"
(the "Combined Bank"). The Combined Bank will continue to be governed by
the laws of the United States and the regulations of the OCC. Outstanding
shares of FNBM Common Stock will be exchanged for a combination of cash and
shares of GBCI Common Stock as set forth in Section 1.2. The Merger is not
and shall not be deemed to be a consolidation under Section 215 of the
National Bank Act.
C. BOARD APPROVALS. The respective boards of directors of GBCI and FNBM have
approved this Agreement and authorized its execution and delivery.
iv
D. OTHER APPROVALS. The Merger is subject to:
(1) Satisfaction of the conditions described in this Agreement;
(2) Approval by FNBM's shareholders; and
(3) Approval or acquiescence, as appropriate, by (a) the Board of
Governors of the Federal Reserve System ("Federal Reserve"), (b) the
OCC, and (c) any other agencies having jurisdiction over the Merger
(collectively, the "Regulatory Approvals").
E. EMPLOYMENT AGREEMENTS. FNBM has entered into employment agreements with
each of Stanton R. Nielsen and David R. Alexander, which agreements will
take effect as of the Effective Date.
F. DIRECTOR AGREEMENTS. In connection with the parties' execution of this
Agreement, each director of FNBM has entered into agreements, the forms of
which have been approved by GBCI, pursuant to which, among other things,
each agrees to vote such holder's shares of FNBM Common Stock in favor of
the actions contemplated by this Agreement and to refrain from competing
with GBCI and/or FNBM and their respective successors for a period of time.
G. FAIRNESS OPINION. FNBM has received from Hovde Financial, Inc. ("Hovde")
and delivered to GBCI an opinion to the effect that from a financial point
of view, the Merger is fair to FNBM's shareholders.
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.
AGREEMENT
In consideration of the mutual agreements set forth in this Agreement, GBCI
and FNBM 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 FNBM or any successor, (ii) a purchase, lease
or other acquisition in one or a series of related transactions of assets of
FNBM representing 25% or more of the assets of FNBM, 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 FNBM with or by a person or entity other than GBCI or one of its
Subsidiaries.
"Acquisition Proposal" has the meaning assigned to such term in Section
4.1.10.
"Agreement" means this Plan and Agreement of Merger.
"ALLL" means allowance for possible loan and lease losses.
"Asset Classification" has the meaning assigned to such term in Section
3.1.16.
v
"BHC Act" has the meaning assigned to such term in Recital A.
"Break-Up Fee" has the meaning assigned to such term in Section 7.8.
"Business Day" means any day other than a Saturday, Sunday, legal holiday
or a day on which banking institutions located in the State of Utah are required
by law to remain closed.
"Cash Designated Shares" has the meaning assigned to such term in Section
1.3.5.
"Cash Election Shares" has the meaning assigned to such term in Section
1.3.2.
"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 Cash Shares" has the meaning assigned to such term in Section
1.3.2.
"Combination Stock Shares" has the meaning assigned to such term in Section
1.3.2.
"Combined Bank" has the meaning assigned in Recital B.
"Compensation Plans" has the meaning assigned to such term in Section
3.1.20.
"Daily Sales Price" for any Trading Day means the daily closing price per
share of GBCI Common Stock on the NASDAQ Global Market, as reported on the
website www.nasdaq.com.
"Determination Date" means the tenth (10th) calendar day immediately
preceding the Effective Date.
"Determination Period" means the ten (10) Trading Day period immediately
preceding the Determination Date.
"Effective Date" has the meaning assigned to such term 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 FNBM, any other entity that is
considered one employer with FNBM under Section 4001 of ERISA or Section 414 of
the IRC.
"Exchange Act" has the meaning assigned to such term in Section 3.1.5.
"Exchange Agent" means American Stock Transfer and Trust Co.
vi
"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 GBCI, means Michael J. Blodnick and
James H. Strosahl.
"Executive Officers," with respect to FNBM, means Stanton Nielsen and David
Alexander.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"Final Index Value" means the average daily value, as reported on the
website www.snl.com, of the Index Group during the Determination Period.
"FNBM" is First National Bank of Morgan, a national banking association
that has its principal place of business in Morgan, Utah.
"FNBM Capital" means FNBM's capital stock, surplus and retained earnings
determined in accordance with GAAP, applied on a consistent basis for financial
institutions: (i) after giving effect to the payment of all FNBM Transaction
Fees and the Hovde Completion Fee, (ii) after excluding the impact of any
increase in ALLL or charge-offs or other reserves reasonably required by BKD,
LLP or GBCI between the date of this Agreement and Closing); (iii) without
giving any effect to accumulated other comprehensive income or loss as reported
on the FNBM balance sheet, and (iv) after excluding the effect of any accruals
or payments to be made pursuant to Section 6.3.3.
"FNBM Common Stock" means the shares of FNBM common stock, par value $10.00
per share, issued and outstanding from time to time.
"FNBM Contract" has the meaning assigned to such term in Section 3.1.2.
"FNBM Financial Statements" means FNBM's (i) balance sheets as of December
31, 2005, 2004 and 2003 and the related statements of income, cash flows and
changes in shareholders' equity for each of the years ended December 31, 2005,
2004 and 2003; (ii) unaudited balance sheet as of the end of each fiscal quarter
following December 31, 2005 but preceding the Execution Date, and the related
unaudited statements of income, cash flows and changes in shareholders' equity
for each such quarter; and (iii) unaudited balance sheets and related 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.
"FNBM Meeting" has the meaning assigned in Section 4.2.2.
"FNBM Transaction Fees" means all costs and expenses incurred by FNBM or
owed or paid by FNBM to investment advisors, independent accountants, legal
counsel, printers and other professional advisors in connection with the
preparation, negotiation and execution of this Agreement and related documents
and the consummation of the Merger, but excluding the Hovde Completion Fee.
"GAAP" means United States generally accepted accounting principles.
"GBCI" 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.
vii
"GBCI Average Closing Price" means the average Daily Sales Price of GBCI
Common Stock for the Determination Period.
"GBCI Common Stock" means the shares of GBCI common stock, $0.01 par value
per share, issued and outstanding from time to time.
"GBCI Contract" has the meaning assigned to such term in Section 3.2.2.
"GBCI Financial Statements" means GBCI'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.
"GBCI Shares" means the shares of GBCI Common Stock to be issued to the
holders of FNBM Common Stock as Merger Consideration in accordance with Section
1.2.2.
"Hazardous Substances" has the meaning assigned to such term in Section
3.1.7.
"Hovde" is Hovde Financial, Inc.
"Hovde Completion Fee" means that certain fee payable to Hovde pursuant to
the Hovde Engagement Letter upon completion of the Merger.
"Hovde Engagement Letter" means that certain engagement letter dated March
1, 2006 between FNBM and Hovde.
"Index Group" means the companies included in the SNL $1 Billion to $5
Billion Peer Group.
"Initial Index Value" means 984.55.
"IRC" means the Internal Revenue Code of 1986, as amended.
"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.
"Merger" means the merger of FNBM with and into New Bank.
viii
"Merger Consideration" means the sum of the Total Cash Consideration and
the value of the Total Stock Consideration issuable pursuant to the Merger.
"No Election Shares" has the meaning assigned to such term in Section
1.3.2.
"OCC" means the Office of the Comptroller of the Currency.
"Overall Market Decline Adjustment" has the meaning assigned to such term
in Section 1.2.3.
"Pension Plan" has the meaning assigned to such term in Section 3.1.20.
"Per Share Cash Consideration" means cash in an amount equal to the Per
Share Consideration.
"Per Share Consideration" means the quotient, rounded to the nearest
ten-thousandth, obtained by dividing the Merger Consideration by the number of
shares of FNBM Common Stock outstanding as of the close of business on the
Execution Date.
"Per Share Stock Consideration" means the number of GBCI Shares equal to
the quotient, rounded to the nearest ten-thousandth, obtained by dividing the
Per Share Consideration by the GBCI Average Closing Price.
"Person" includes an individual, corporation, partnership, association,
limited liability company, trust or unincorporated organization.
"Plan" has the meaning assigned to such term in Section 3.1.20.
"Properties," with respect to any party to this Agreement, means properties
or other assets owned or leased by such party or any of its Subsidiaries
including, with respect to FNBM, Real Property.
"Proposed Dissenting Shares" means those shares of FNBM Common Stock as to
which shareholders have properly given notice of their intent to assert
appraisal rights pursuant to Section 215a(b) of the National Bank Act (12 USC
Section 215a(b)).
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement referred
to in Section 4.2.1, to be provided to all shareholders of FNBM in connection
with their consideration and approval of the Merger.
"Real Property" means any real property that FNBM owns in fee title, other
than "other real estate owned."
"Registration Statement" has the meaning assigned to such term in Section
4.2.1.
"Regulatory Approvals" has the meaning assigned to such term in Recital D.
"Reports" has the meaning assigned to such term in Section 3.1.5.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" has the meaning assigned to such term in Section 3.1.5.
"Securities Laws" has the meaning assigned to such term in Section 3.1.5.
ix
"Stock Designated Shares" has the meaning assigned to such term in Section
1.3.5.
"Stock Election Shares" has the meaning assigned to such term in Section
1.3.2.
"Subject Property" has the meaning assigned to such term in Section 3.1.7.
"Subsequent FNBM Financial Statements" means FNBM Financial Statements for
each month ending after the Execution Date and prior to Closing.
"Subsidiary" with respect to any party to this Agreement means any Person
in which such party owns the majority of outstanding capital stock or voting
power.
"Superior Proposal" means any Acquisition Proposal made by a Person other
than GBCI or its Subsidiary (A) that is for (i) a merger, reorganization,
consolidation, share exchange, business combination, recapitalization or similar
transaction involving FNBM, (ii) a sale, lease, exchange, transfer, or other
disposition of at least 25% of the assets of FNBM, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition,
directly or indirectly, by a person of beneficial ownership of 50% or more of
the FNBM Common Stock, whether by merger, consolidation, share exchange,
business combination, tender, or exchange offer or otherwise, and (B) that is
otherwise on terms which the Board of Directors of FNBM in good faith concludes
(after consultation with its financial advisors and outside counsel), taking
into account, among other things, all legal, financial, regulatory, and other
aspects of the proposal and the Person making the proposal, (x) would, if
consummated, result in a transaction that is more favorable to its shareholders
(in their capacities as shareholders), from a financial point of view, than the
transactions contemplated by this Agreement, and (y) is reasonably probable of
being completed.
"Termination Date" means November 15, 2006.
"Termination Fee" has the meaning assigned to such term in Section 7.6.
"Title Companies" has the meaning assigned to such term in Section 4.1.11.
"Total Cash Consideration" means $10 million; provided, however, (i) that
if the FNBM Capital as of the Closing Date is less than $9.0 million, then the
Total Cash Consideration will be reduced by one dollar ($1.00) for each dollar
($1.00) that the FNBM Capital is below $9.0 million; and (ii) that if the FNBM
Transaction Fees exceed $100,000, and no adjustment is made pursuant to the
foregoing clause (i) that includes such excess, then the Total Cash
Consideration will be reduced by fifty cents ($0.50) for each dollar ($1.00)
that the FNBM Transaction Fees exceed $100,000.
"Total Stock Consideration" means the number of Glacier Shares, rounded to
the nearest thousandth, obtained by dividing (i) $10 million by (ii) the Glacier
Average Closing Price, subject to the adjustments, if any, set forth in Sections
1.2.3, 7.2.2 and 7.3.2; provided, however, (a) that if the FNBM Capital as of
the Closing Date is less than $9.0 million, then the $10 million in the
foregoing clause (i) will be reduced by an amount equal to one dollar ($1.00)
for each dollar ($1.00) that the FNBM Capital is below $9.0 million; and (b)
that if the FNBM Transaction Fees exceed $100,000, and no adjustment is made
pursuant to the foregoing clause (i) that includes such excess, then the $10
million in the foregoing clause (i) will be reduced by fifty cents ($0.50) for
each dollar ($1.00) that the FNBM Transaction Fees exceed $100,000.
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SECTION 1.
TERMS OF TRANSACTION
1.1 EFFECT OF MERGER. Upon the Effective Date of the Merger:
1.1.1 OFFICES. The main office and the established and authorized branches
of the Combined Bank will be the main office and the established and
authorized branches of FNBM immediately prior to the Effective Date.
1.1.2 CAPITAL; CORPORATE DOCUMENTS. The authorized number of shares and par
value per share of the Combined Bank will be those of FNBM immediately
prior to the Effective Date, and the capital of the Combined Bank will
be equal to the combined capital of FNBM and New Bank immediately
prior to the Effective Date. The articles of association and the
bylaws of the Combined Bank will be the articles of association and
bylaws of FNBM in effect immediately before the Effective Date.
1.1.3 RIGHTS AND LIABILITIES. All rights, franchises and interests of each
of FNBM and New Bank in and to every type of property (real, personal
and mixed) and choses in action will be transferred to and vested in
the Combined Bank by virtue of the Merger without any deed or other
transfer. The Combined Bank, on the Effective Date and without any
order or other action on the part of any court or otherwise, will hold
and enjoy all rights of property, franchises, and interests in the
same manner and to the same extent as such rights, franchises and
interests were held or enjoyed by each of FNBM and New Bank
immediately prior to the Effective Date, subject to the conditions of
the National Bank Act, and the Combined Bank will be responsible and
liable for all the liabilities, obligations and penalties of each of
the banks so merged.
1.1.4 BOARD OF DIRECTORS. The initial board of directors of the Combined
Bank will consist of (i) the current FNBM directors and (ii) Michael
J. Blodnick.
1.1.5 OFFICERS. The officers of the Combined Bank after Closing will be the
officers of FNBM immediately before the Merger, subject to the
authority of the Combined Bank's board of directors to select or
remove officers.
1.2 MERGER CONSIDERATION. Subject to the provisions of this Agreement, on the
Effective Date:
1.2.1 OUTSTANDING GBCI COMMON STOCK. The shares of GBCI Common Stock issued
and outstanding immediately prior to the Effective Date will, on and
after the Effective Date, remain as issued and outstanding shares of
GBCI.
1.2.2 OUTSTANDING FNBM COMMON STOCK. Each share of FNBM Common Stock issued
and outstanding immediately prior to the Execution Date, except for
Proposed Dissenting Shares, will automatically and without any action
on the part of the holder of such share be converted into and
represent the right to receive from GBCI any of GBCI Shares, cash, or
a combination of GBCI Shares and cash in accordance with the
provisions of Section 1.3.2.
1.2.3 OVERALL MARKET DECLINE ADJUSTMENT. Subject to the provisions of
Section 7.4, in the event that
(i) the GBCI Average Closing Price is less than $25.50, and
xi
(ii) The number obtained by dividing the GBCI Average Closing Price by
$30.00 is equal to or greater than the number obtained by (a)
dividing the Final Index Value by the Initial Index Value and
then (b) multiplying the quotient so obtained by 0.85; then
the Merger Consideration will be adjusted so that the Total Stock
Consideration equals the number of Glacier Shares that would have
been issued had the GBCI Average Closing Price been $25.50 (the
"Overall Market Decline Adjustment").
If GBCI declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or
similar transaction between the Execution Date and the
Determination Date, the price for the GBCI Common Stock will be
appropriately adjusted for the purpose of applying this Section
1.2.3.
1.2.4 CHANGE IN EQUITY CAPITAL. If, after the date of this Agreement but
before the Effective Date, the number of shares of GBCI Common Stock
or FNBM Common Stock issued and outstanding increases or decreases in
number or is changed into or exchanged for a different kind or number
of securities, through a recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in
capitalization (not including, in the case of GBCI, increases in
number due to issuances of shares (i) in connection with a stock
offering or business combination or (ii) upon exercise of any
outstanding options or warrants) of GBCI or FNBM, as the case may be,
then, as appropriate, a proportionate adjustment will be made to the
Per Share Consideration.
1.3 CONVERSION ELECTION PROCEDURES AND ALLOCATION.
1.3.1 ELECTION FORM. An election form and other appropriate and customary
transmittal materials (which will specify that delivery will be
effected, and risk of loss and title to the certificates theretofore
representing shares of FNBM Common Stock will pass, only upon proper
delivery of such certificates to the Exchange Agent) in such form as
GBCI and FNBM will mutually agree (the "Election Form") will be mailed
with the Prospectus/Proxy Statement on the date of mailing of the
Prospectus/Proxy Statement to each holder of record of FNBM Common
Stock as of the close of business on the record date for the FNBM
Meeting.
1.3.2 ELECTION OPTIONS. Each Election Form will permit the holder (or the
beneficial owner through appropriate and customary documentation and
instructions) to elect to receive (i) the Per Share Stock
Consideration in respect of all of such holder's FNBM Common Stock
("Stock Election Shares"); (ii) the Per Share Cash Consideration in
respect to all of such holder's FNBM Common Stock ("Cash Election
Shares"); or (iii) the Per Share Stock Consideration in respect to
that portion of such holder's shares of FNBM Common Stock equal to any
whole percentage specified by such holder that is a multiple of 10%
(e.g., 10%, 20%, 30%), rounded to the nearest whole share (the
"Combination Stock Shares"), and the Per Share Cash Consideration in
respect of that percentage specified by such holder that is a multiple
of 10%, rounded to the nearest whole share (the "Combination Cash
Shares"); provided, that the percentages of shares of FNBM Common
Stock exchanged for the Per Share Stock Consideration and the Per
Share Cash Consideration will total 100%. Any FNBM Common Stock with
respect to which the Exchange Agent has not received an effective,
properly completed Election Form on or before 5:00 p.m., Mountain
Time, on the tenth (10th) Business Day following the FNBM
xii
Meeting (or such other time and date as GBCI and FNBM may mutually
agree) (the "Election Deadline") will be deemed to be "No Election
Shares."
1.3.3 AVAILABILITY OF FORMS/INFORMATION. GBCI will make available one or
more Election Forms as may reasonably be requested from time to time
by all persons who become holders (or beneficial owners) of FNBM
Common Stock between the record date for the FNBM Meeting and the
close of business on the Business Day prior to the Election Deadline,
and FNBM will provide to the Exchange Agent all information reasonably
necessary for it to perform as specified herein.
1.3.4 EFFECTIVE ELECTIONS. Any election will have been properly made only
if the Exchange Agent will have actually received a properly completed
Election Form by the Election Deadline. Any Election Form may be
revoked or changed by the person submitting such Election Form at or
prior to the Election Deadline. In the event an Election Form is
revoked prior to the Election Deadline, the shares of FNBM Common
Stock represented by such Election Form will become No Election
Shares. Subject to the terms of this Agreement and of the Election
Form, 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 GBCI regarding such matters will be
binding and conclusive. Neither GBCI nor the Exchange Agent will be
under any obligation to notify any person of any defect in an Election
Form. To the extent the holder of Proposed Dissenting Shares submits
an Election Form to the Exchange Agent, such holder's election will
have no effect, the Exchange Agent will disregard such Election Form,
and the Proposed Dissenting Shares will be converted in accordance
with Section 1.5.
1.3.5 ALLOCATION OF GBCI SHARES AND CASH. Within five Business Days after
the later of the Election Deadline or the Effective Date, GBCI will
cause the Exchange Agent to effect the allocation among the holders of
FNBM Common Stock of rights to receive GBCI Shares or cash in the
Merger in accordance with the Election Forms as follows:
(i) Cash Election Shares and Combination Cash Shares Exceed Total
Cash Consideration. If the aggregate cash amount that would be
paid upon the conversion in the Merger of the Cash Election
Shares and the Combination Cash Shares is greater than the Total
Cash Consideration, then:
(a) all Stock Election Shares, Combination Stock Shares, and No
Election Shares will be converted into the right to receive
the Per Share Stock Consideration; and
(b) the Exchange Agent will then select from the Cash Election
Shares and the Combination Cash Shares, on a pro rata basis,
a sufficient number of shares (the "Stock Designated
Shares") such that the aggregate cash amount that will be
paid in the Merger equals as closely as practicable the
Total Cash Consideration, and all Stock Designated Shares
will be converted into the right to receive the Per Share
Stock Consideration.
(ii) Stock Election Shares and Combination Stock Shares Exceed Total
Stock Consideration. If the Glacier Shares that would be issued
upon conversion in the Merger of the Stock Election Shares and
the Combination Stock Shares exceed the Total Stock
Consideration, then:
xiii
(a) all Cash Election Shares, Combination Cash Shares, and No
Election Shares will be converted into the right to receive
the Per Share Cash Consideration; and
(b) the Exchange Agent will then select from the Stock Election
Shares and the Combination Stock Shares, on a pro rata
basis, a sufficient number of shares (the "Cash Designated
Shares") such that the aggregate Glacier Shares that will be
issued in the Merger equals as closely as practicable the
Total Stock Consideration, and all Cash Designated Shares
will be converted into the right to receive the Per Share
Cash Consideration.
1.4 NO FRACTIONAL SHARES. No fractional shares of GBCI Common Stock will be
issued. In lieu of fractional shares, if any, each holder of FNBM Common
Stock who is otherwise entitled to receive a fractional share of GBCI
Common Stock will receive an amount of cash equal to the product of such
fractional share times the GBCI Average Closing Price. Such fractional
share interests will not include the right to vote or receive dividends or
any interest on dividends.
1.5 PAYMENT TO DISSENTING SHAREHOLDERS. Proposed Dissenting Shares will not be
converted into or represent the right to receive any of the Merger
Consideration, and holders of Proposed Dissenting Shares will be entitled
only to such rights of appraisal as are provided by Section 215a(b) of the
National Bank Act (12 USC Section 215a(b)), unless and until such holder
fails to perfect or effectively withdraws or otherwise loses his, her or
its right to appraisal. If after the Effective Date any such holder fails
to perfect or effectively withdraws or loses his, her or its right to
appraisal, such shares of Proposed Dissenting Shares will be treated as if
they had been converted at the Effective Date into the right to receive
such holder's portion of the Merger Consideration, and such shares will be
deemed Cash Election Shares.
1.6 DEPOSIT OF CASH AND SHARES. On or before the Effective Date, GBCI will
deposit, or will cause to be deposited, with the Exchange Agent, for the
benefit of the holders of certificates representing FNBM Common Stock, for
exchange in accordance with this Section 1.6, (i) certificates representing
the GBCI Shares; (ii) the aggregate cash consideration for payment of the
Per Share Cash Consideration; and (iii) the cash in lieu of fractional
shares to be paid in accordance with Section 1.3. Such cash and
certificates for GBCI Shares, together with any dividends or distributions
with respect thereto, are referred to in this Agreement as the "Exchange
Fund."
1.7 CERTIFICATES.
1.7.1 LETTER OF TRANSMITTAL. Within three (3) Business Days after the
Effective Date, GBCI will mail or cause the Exchange Agent to mail to
each holder of record of a certificate evidencing FNBM Common Stock
shares (a "Certificate") a form letter of transmittal (which will
specify that delivery will be effected, and risk of loss and title to
the Certificates will pass, only upon delivery of the Certificates to
the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in accordance with Section 1.7.2.
1.7.2 SURRENDER OF CERTIFICATES. Subject to Section 1.5, each Certificate
will, from and after the Effective Date, be deemed for all corporate
purposes to represent and evidence only the right to receive the
Merger Consideration (or to receive the cash for fractional shares) to
which the FNBM Common Stock shares converted in accordance with the
provisions of Section 1.3.5. Following the Effective Date, holders of
Certificates will exchange their
xiv
Certificates in accordance with instructions provided by the Exchange
Agent pursuant to Section 1.7.1 and together with a properly completed
and executed form of transmittal letter in order to effect their
exchange for, as applicable, (i) certificates representing GBCI Common
Stock; (ii) a check representing any cash consideration to be received
pursuant to Section 1.2.2; and/or (iii) a check representing the
amount of cash in lieu of fractional shares, if any. Until a
Certificate is so surrendered, the holder will not be entitled to
receive his, her or its portion of the Merger Consideration.
1.7.3 ISSUANCE OF CERTIFICATES IN OTHER NAMES. Any person requesting that
any certificate evidencing GBCI Shares be issued in a name other than
the name in which the surrendered Certificate is registered must: (i)
establish to the Exchange Agent's satisfaction the right to receive
the certificate evidencing GBCI Shares and (ii) either pay to the
Exchange Agent any applicable transfer or other taxes or establish to
the Exchange Agent's satisfaction that all applicable taxes have been
paid or are not required.
1.7.4 LOST, STOLEN, AND DESTROYED CERTIFICATES. With respect to a
Certificate that has been lost, stolen or destroyed, the Exchange
Agent will be authorized to issue or pay the holder's portion of the
Merger Consideration in exchange thereof, if the holder provides the
Exchange Agent with: (i) satisfactory evidence that the holder owns
FNBM Common Stock and that the certificate representing this ownership
is lost, stolen, or destroyed, (ii) any appropriate affidavit or
security the Exchange Agent may require, and (iii) any reasonable
assurances that the Exchange Agent or GBCI may require.
1.7.5 RIGHTS TO DIVIDENDS AND DISTRIBUTIONS. After the Effective Date, no
holder of any Certificate will be entitled to receive any dividends or
other distributions otherwise payable to holders of record of GBCI
Common Stock on any date after the Effective Date, unless the holder
(i) is entitled by this Agreement to receive a certificate
representing GBCI Common Stock and (ii) has surrendered in accordance
with this Agreement his, her or its Certificates (or has met the
requirements of Section 1.7.4) in exchange for certificates
representing GBCI Shares. Surrender of Certificates will not deprive
the holder of any dividends or distributions that the holder is
entitled to receive as a record holder of FNBM Common Stock on a date
before the Effective Date. When the holder surrenders his, her or its
Certificates in exchange for GBCI Shares, the holder will receive the
amount, without interest, of any cash dividends and any other
distributions distributed after the Effective Date on the whole number
of GBCI Shares into which the holder's FNBM Common Stock was converted
at the Effective Date.
1.7.6 CHECKS IN OTHER NAMES. Any person requesting that a check for cash to
be received in the Merger or cash in lieu of fractional shares be
issued in a name other than the name in which the Certificate
surrendered in exchange for the cash is registered, must establish to
the Exchange Agent's satisfaction the right to receive this cash.
1.7.7 AFFILIATES. Certificates that are surrendered for exchange by any
person constituting an "affiliate" of FNBM for purposes of Rule 145
under the Securities Act will not be exchanged for certificates
representing GBCI Shares until GBCI has received a written agreement
from such person as specified in Section 4.3.1.
1.7.8 UNDELIVERED CERTIFICATES. Any portion of the Exchange Fund that
remains unclaimed by shareholders of FNBM on a date that is six months
after the Effective Date may be paid to GBCI, at GBCI's election. To
the extent so paid, holders of FNBM Common Stock who have not, prior
to such time, complied with the provisions of this Section 1.7 will,
xv
from such time forward, look only to GBCI for payment of the Merger
Consideration, the cash in lieu of fractional shares, and/or unpaid
dividends and distributions on the GBCI Shares deliverable with
respect to each share of FNBM Common Stock held by such holder as
determined pursuant to this Agreement, in each case, without any
interest. Neither GBCI nor FNBM will be liable to any holder of FNBM
Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
SECTION 2.
CLOSING OF TRANSACTION
2.1 EFFECTIVE DATE. The Merger will become effective upon the date and time
that certification of the Merger is made by the OCC (the "Effective Date").
Unless GBCI and FNBM agree upon a different date, the parties will use
their best efforts to cause the Effective Date to occur on the date of
Closing. If the Effective Date does not occur on or prior to the
Termination Date and the parties do not mutually agree in writing to extend
the Termination Date, either party may terminate this Agreement in
accordance with Section 7.1.
2.2 EVENTS OF CLOSING. Unless the parties agree on a later date, Closing will
occur within five (5) Business Days after fulfillment or waiver of each
condition precedent set forth in, and the granting of each approval (and
expiration of any waiting period) covered by Section 5. At the Closing, all
properly executed documents required by this Agreement will be delivered to
the proper party, in form consistent with this Agreement. If any party
fails to deliver a required document at the Closing or otherwise defaults
under this Agreement on or prior to the Effective Date, then the Merger
will not occur unless the adversely affected party waives the default.
2.3 PLACE AND TIME OF CLOSING. The Closing will take place at the office of
Glacier Bancorp, Inc., 49 Commons Loop, Kalispell, Montana 59901, or such
other place as the parties agree, at 9:00 a.m. Mountain Time, or such other
time as the parties agree.
SECTION 3.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF FNBM. FNBM represents and warrants to
GBCI that, except as disclosed in a Schedule to this Agreement:
3.1.1 ORGANIZATION AND GOOD STANDING. FNBM is a national banking
association duly organized, validly existing and in good standing
under the laws of the United States, and has all requisite power and
authority to own and operate its properties and to carry on its
businesses as now conducted. The locations of all offices, including
approved and unopened offices, are listed in Schedule 3.1.1.
3.1.2 CORPORATE AUTHORITY. The execution, delivery and performance by FNBM
of this Agreement does not and will not, and the consummation by FNBM
of the Merger will not, constitute or result in: (i) a breach or
violation of, or a default under, its articles of association or
bylaws; (ii) a breach or violation of, or a default under, or the
acceleration of or the creation of a Lien (with or without the giving
of notice, the lapse of time or both) under, any provision of any
agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation by which it is bound or to which it is a party
(collectively, the "FNBM Contracts"); or (iii) a material violation of
any law, rule, ordinance or regulation or judgment, decree, order,
award, or governmental or non-
xvi
governmental permit or license to which it is subject; or (iv) any
change in the rights or obligations of any party under any of the FNBM
Contracts. Schedule 3.1.2 contains a list of all consents FNBM must
obtain from third parties under any FNBM Contracts before consummation
of the Merger.
3.1.3 CAPITAL STOCK.
(i) The authorized capital stock of FNBM consists of 5,000 shares of
FNBM Common Stock, par value $10.00 per share. A total of 5,000
shares of FNBM Common Stock are issued and outstanding as of the
date of this Agreement, all of which were validly issued and are
fully paid and nonassessable, except to the extent of any
assessment required under Section 55 of the National Bank Act (12
USC Section 55).
(ii) No unissued shares of common stock or any other securities of
FNBM are subject to any warrants, options, conversion privileges,
rights or commitments of any character, kind or nature. FNBM has
not issued and is not obligated to issue any additional shares of
common stock or any other security to any other person.
3.1.4 SUBSIDIARIES. FNBM has no Subsidiaries.
3.1.5 REPORTS AND FINANCIAL STATEMENTS.
(i) Filing of Reports. Since January 1, 2002, FNBM has filed all
reports and statements, together with any required amendments to
these reports and statements, that they were required to file
with the OCC and any other applicable federal or state banking,
insurance, securities, or other regulatory authorities. Each of
these reports and statements, including the related financial
statements and exhibits, complied as to form in all material
respects with all applicable statutes, rules and regulations as
of their respective dates.
(ii) Delivery to Other Party of Reports. FNBM has delivered or
otherwise made available to GBCI a copy of each and any
registration statement, offering circular, report, definitive
proxy statement or information statement (collectively, its
"Reports") under the Securities Act of 1933, as amended
("Securities Act"), the Securities Exchange Act of 1934, as
amended ("Exchange Act"), OCC regulations, and state securities
and "Blue Sky" laws (collectively, the "Securities Laws") filed,
used or circulated by it with respect to periods since January 1,
2002, through the Execution Date.
(iii) Compliance with Securities Laws. As of their respective dates
(and without giving effect to any amendments or modifications
filed after the Execution Date), each of the Reports, including
the related financial statements, exhibits and schedules, filed,
used or circulated before the Execution Date complied (and each
of the Reports filed after the Execution Date, will comply) in
all material respects with applicable Securities Laws, and did
not (or in the case of reports, statements, or circulars filed
after the Execution Date, will not) contain any untrue statement
of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
xvii
(iv) Financial Statements. Each of FNBM's balance sheets included in
the FNBM Financial Statements fairly presents (or, in the case of
FNBM Financial Statements for periods ending on a date following
the Execution Date, will fairly present) the financial position
of FNBM as of the date of the balance sheet. Each of the
statements of income, cash flows and shareholders' equity
included in the FNBM Financial Statements fairly presents (or,
for periods ending on a date following the Execution Date, will
fairly present) the results of operations, shareholders' equity
and cash flows, as the case may be, of FNBM for the periods set
forth in these statements (subject, in the case of unaudited
statements, to normal year-end audit adjustments), in each case
in accordance with GAAP, except as may be noted in these
statements.
3.1.6 PROPERTIES.
(i) FNBM is not a party to any real property lease, whether as
landlord, tenant, guarantor or otherwise, except as disclosed in
Schedule 3.1.6. Except as disclosed or reserved against in the
FNBM Financial Statements or in Schedule 3.1.6, FNBM has good and
marketable title, free and clear of all Liens (other than Liens
for taxes not yet delinquent or pledges to secure deposits and
other security provided in the ordinary course of business
including, without limitation, security for Federal Home Loan
Bank borrowings, federal funds and repurchase agreements) to all
of the properties and assets, tangible or intangible, reflected
in the FNBM Financial Statements as being owned or leased by it
as of the Execution Date. To the knowledge of FNBM's Executive
Officers, except as disclosed in Schedule 3.1.6, all buildings
and structures on the Real Property and the equipment located
thereon are in all material respects in good operating condition
and repair (ordinary wear and tear excepted) and conform in all
material respects to all applicable laws, ordinances and
regulations.
(ii) All buildings and all fixtures, equipment and other property and
assets that are material to FNBM's business are owned by it or
are held under leases or subleases by it, enforceable in
accordance with their respective terms (except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally or by general
equitable principles).
(iii) Schedule 3.1.1 lists all of its existing branches and offices
and all new branches or offices that FNBM has applied to
establish or purchase, along with the estimated cost to establish
or purchase those new branches.
(iv) FNBM has provided to GBCI copies of existing title policies, if
any, held in its files relating to the Real Property, and no
exceptions, reservations, or encumbrances have arisen or been
created since the date of issuance of those policies (other than
Liens for taxes not yet delinquent).
3.1.7 ENVIRONMENTAL MATTERS.
(i) For purposes of this Section 3.1.7, the following definitions
apply:
(1) "Subject Property" with respect to a party means (i) all
real property at which its business has been conducted, and
any property where under
xviii
any Environmental Law it is deemed to be the owner or
operator of the property; (ii) any facility in which it is
the owner or operator of the facility; and (iii) all other
real property that, for purposes of any Environmental Law,
it otherwise could be deemed to be an owner or operator of
or as otherwise having control over.
(2) "Environmental Laws" means any federal, state or local law,
regulation, order, decree, judgment, judicial opinion, or
any agreement between FNBM and any Governmental Entity
presently in effect relating to: (i) the manufacture,
generation, transport, use, treatment, storage, recycling,
disposal, release, threatened release or presence of
Hazardous Substances, or (ii) the protection of human health
or the environment.
(3) "Hazardous Substances" means any substance, material or
waste that is (a) defined as a "hazardous substance" in 42
USC Section 9601(14), (b) defined as a "pollutant or
contaminant" in 33 USC Section 1362(6), (c) defined as a
"hazardous waste" in 42 USC Section 6903(5), or (d)
petroleum or a petroleum product or any other substance
defined as "hazardous," "dangerous" or "toxic" under any
federal or state law or regulation enacted for the
protection of human health or the environment; provided,
however, that supplies and materials used by FNBM for
general office purposes will not be deemed to be Hazardous
Substances for the purposes of this Agreement.
(ii) To the knowledge of FNBM's Executive Officers, except as
disclosed in Schedule 3.1.7, FNBM and the Subject Property are,
and have been, in material compliance with all applicable
Environmental Laws, and no circumstances exist that would result
in a material violation of such Environmental Laws.
(iii) Except as disclosed in Schedule 3.1.7, none of the following
exists, and to the knowledge of the Executive Officers, no
reasonable basis for any of the following exists: pending or
threatened claims, actions, investigations, notices of
non-compliance, information requests or notices of potential
responsibility or proceedings involving FNBM or any Subject
Property relating to:
(1) an asserted liability of FNBM or any prior owner, occupier
or user of Subject Property under any applicable
Environmental Law or the terms and conditions of any permit,
license, authority, settlement, agreement, decree or other
obligation arising under any applicable Environmental Law;
(2) the handling, storage, use, transportation, removal or
disposal of Hazardous Substances;
(3) the actual or threatened discharge, release or emission of
Hazardous Substances from, on or under or within Subject
Property into the air, water, surface water, ground water,
land surface or subsurface strata; or
(4) personal injuries or damage to the Subject Property related
to or arising out of the release of Hazardous Substances.
xix
(iv) To the knowledge of FNBM's Executive Officers, except as
disclosed in Schedule 3.1.7, no storage tanks underground or
otherwise are present on the Subject Property or, if present,
none of such tanks are leaking and each of them is in full
compliance with all applicable Environmental Laws. With respect
to any Subject Property, except as permitted by applicable
Environmental Laws, FNBM does not own, possess or control any
PCBs, PCB-contaminated fluids, wastes or equipment, or any
material amount of asbestos or asbestos-containing material. No
Hazardous Substances have been used, handled, stored, discharged,
released or emitted, or are threatened to be discharged, released
or emitted, at or on any Subject Property, except in compliance
with applicable Environmental Laws.
(v) To the knowledge of FNBM's Executive Officers, except as
disclosed in Schedule 3.1.7, no part of the Subject Property has
been or is scheduled for investigation or monitoring under any
applicable Environmental Law.
(vi) To the knowledge of FNBM's Executive Officers, except as
disclosed in Schedule 3.1.7, no condition from, on or under the
Subject Property exists with respect to the Subject Property that
would require remediation under applicable Environmental Laws.
3.1.8 TAXES. All tax returns and reports required by law to be filed by
FNBM have been duly filed, and all taxes, assessments, fees and other
government charges upon FNBM or upon any of its properties, assets,
income or franchises that are due and payable have been paid. The
federal income portion of such taxes have been paid in full as
indicated in the tax returns of FNBM for the past five years or
adequate provision has been made for any such taxes on its balance
sheet in accordance with GAAP. No material objections to returns or
claims for additional taxes are being asserted with respect to federal
or state tax returns of FNBM for any prior years, except for such
audits, objections or claims which are being contested in good faith,
by appropriate proceedings and with establishment of appropriate
reserves, and which have been disclosed in writing to the other
parties to this Agreement. Except as specified in the foregoing
sentence, in the past five years, there has been no past audit,
objection to returns, or claim for additional taxes.
3.1.9 ABSENCE OF REGULATORY ACTION. Except as disclosed in Schedule 3.1.9,
FNBM is not in material violation of any statute, rule or governmental
regulation applicable to it (including, without limitation, the
Community Reinvestment Act, Bank Secrecy Act, Truth in Lending Act,
Equal Credit Opportunity Act, and statutes, rules and regulations
governing the reporting of taxpayer identification numbers of its
customers). Except as set forth on Schedule 3.1.9, FNBM is not a party
to any cease and desist order, written agreement or memorandum of
understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a
recipient of any extraordinary supervisory letter from, or has adopted
any board resolutions at the request of, federal or state regulatory
authorities, nor have they been advised by such authorities that they
are contemplating issuing or requesting any such order, agreement,
memorandum or similar document or undertaking.
3.1.10 ALLOWANCE FOR LOAN LOSSES. In the opinion of its management, the
ALLL shown in the latest FNBM Financial Statements is, and that which
will be stated in the Subsequent FNBM Financial Statements prior to
Closing will be, in both cases as adjusted for any increases in ALLL
or charge-offs reasonably required by BKD, LLP or GBCI, adequate to
absorb its anticipated loan losses.
xx
3.1.11 MATERIAL AGREEMENTS.
(i) Except for arrangements made after the date and in accordance
with the terms of this Agreement, FNBM is not bound by any
material contract (as defined in Item 601(b)(10) of Regulation
S-K under the Securities Act) that: (1) is to be performed after
the date of this Agreement and (2) has not been set forth in
Schedule 3.1.11.
(ii) FNBM is not in default under any contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument.
3.1.12 COMPLIANCE WITH LAWS. FNBM has all permits, licenses, certificates
of authority, orders, and approvals of, and has made all filings,
applications, and registrations with, federal, state, local, and
foreign governmental or regulatory bodies that are required in order
to permit FNBM to carry on its business as it is presently conducted,
the absence of which, individually or in the aggregate, can reasonably
be expected to have a Material Adverse Effect on FNBM. All such
material permits, licenses, certificates of authority, orders and
approvals are in full force and effect, and no suspension or
cancellation of any of them is threatened.
3.1.13 KNOWLEDGE AS TO CONDITIONS. Except as set forth in Schedule 3.1.9,
neither Executive Officer knows of any reason why the approvals,
consents and waivers of governmental authorities referred to in
Section 5.1 cannot be obtained.
3.1.14 NO MATERIAL ADVERSE EFFECT. Since December 31, 2005, (i) FNBM has
conducted its business only in the ordinary and usual course of
business, and (ii) there has not been any change in the financial
condition (which includes, without limitation, the condition of
assets, franchises, results of operations and prospects) that has had
or may reasonably be expected to have a Material Adverse Effect on
FNBM.
3.1.15 COMPLETENESS OF REPRESENTATIONS. No representation or warranty made
by or with respect to FNBM in this Agreement (or in the Schedules to
this Agreement) contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained in this Agreement (or in such Schedules) or in such
representation or warranty not misleading.
3.1.16 ASSET CLASSIFICATION.
(i) Schedule 3.1.16 sets forth a list, accurate and complete, as of
May 30, 2006 except as otherwise expressly noted, and separated
by category of classification or criticism ("Asset
Classification"), of the aggregate amounts of loans, extensions
of credit and other assets of FNBM that have been criticized or
classified by any internal audit conducted by FNBM, taking into
account any assets that have been criticized or classified by any
governmental or regulatory authority.
(ii) Except as shown in Schedule 3.1.16, no amounts of its loans,
extensions of credit or other assets that have been classified or
criticized by any representative of any governmental entity as
"Other Assets Especially Mentioned," "Substandard," "Doubtful,"
"Loss" or words of similar effect are excluded from the amounts
disclosed in the Asset Classification, other than amounts of
loans, extensions of
xxi
credit or other assets that were paid off or charged off by FNBM
before the date of this Agreement.
3.1.17 LITIGATION. Except as disclosed in Schedule 3.1.17, no material
litigation, proceeding or controversy before any court or governmental
agency is pending (other than routine foreclosure proceedings), and
there is no pending claim, action or proceeding against FNBM, which is
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on it or to materially hinder or delay
consummation of the Merger, and, to the knowledge of the Executive
Officers, no such litigation, proceeding, controversy, claim or action
has been threatened or is contemplated.
3.1.18 INSURANCE. FNBM has taken all requisite action (including the making
of claims and the giving of notices) under its directors' and
officers' liability insurance policy or policies in order to preserve
all rights under such policies with respect to all matters known to it
(other than matters arising in connection with, and the transactions
contemplated by, this Agreement). Schedule 3.1.18 lists all directors'
and officers' liability insurance policies and other material
insurance policies maintained by FNBM.
3.1.19 LABOR MATTERS. FNBM is not a party to, or bound by, any collective
bargaining agreement, contract, or other agreement or understanding
with a labor union or labor organization. FNBM is not the subject of
any proceeding: (1) asserting that they have committed an unfair labor
practice or (2) seeking to compel them to bargain with any labor
organization as to wages or conditions of employment. No strike
involving FNBM is pending or threatened. To the knowledge of the
Executive Officers, there has not been any activity involving its
employees seeking to certify a collective bargaining unit or engaging
in any other organizational activity.
3.1.20 EMPLOYEE BENEFITS.
(i) For purposes of this Agreement, "Plan" or "Plans", individually
or collectively, means any "employee benefit plan," as defined in
Section 3(3) of ERISA, maintained by FNBM. FNBM is not now nor
has ever been a contributing employer to or sponsor of a
multiemployer plan or a single employer plan subject to Title IV
of ERISA.
(ii) Schedule 3.1.20 sets forth a list, as of the Execution Date, of
(a) all Plans, stock purchase plans, restricted stock and stock
option plans, and other deferred compensation arrangements, and
(b) all other material employee benefit plans that cover
employees or former employees of FNBM (its "Compensation Plans").
True and complete copies of the Compensation Plans (and, as
applicable, copies of summary plan descriptions, governmental
filings (on Form 5500 series or otherwise), actuarial reports and
reports under Financial Accounting Standards Board Statement No.
106 relating to such Compensation Plans) covering its current
employees ("Employees"), including Plans and related amendments,
have been made available to GBCI.
(iii) All of its Plans covering Employees (other than "multi-employer
plans" within the meaning of ERISA Sections 3(37) or 4001(a)(3)),
to the extent subject to ERISA, are in substantial compliance
with ERISA. Each of its Plans that is an "employee pension
benefit plan" within the meaning of ERISA Section 3(2) ("Pension
Plan") and that is intended to be qualified under IRC Section
401(a),
xxii
has either received a favorable determination letter from the
Internal Revenue Service or consists of a master, prototype, or
volume submitter plan which has received an opinion or advisory
letter from the Internal Revenue Service upon which FNBM may
rely, and FNBM is not aware of any circumstances likely to result
in revocation of any such favorable determination letter. No
litigation relating to its Plans is pending or threatened. FNBM
has not engaged in a transaction with respect to any Plan that
could subject it to a tax or penalty imposed by either IRC
Section 4975 or ERISA Section 502(i) in an amount that would be
material.
(iv) All material contributions FNBM is or was required to make under
the terms of any of its Plans have been timely made or have been
reflected in the FNBM Financial Statements. Neither any of its
Pension Plans nor any single-employer plan of any of its ERISA
Affiliates has an "accumulated funding deficiency" (whether or
not waived) within the meaning of IRC Section 412 or ERISA
Section 302. Neither FNBM nor its ERISA Affiliates has provided,
or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate under IRC Sections
401(a)(29) or 412(f)(3) or ERISA Sections 306, 307 or 4204.
(v) Except as disclosed in the FNBM Financial Statements or in
Schedule 3.1.20, FNBM does not have any obligations for retiree
health and life benefits.
(vi) No provision of the documents governing any Plan contains
restrictions on the rights of FNBM to amend or terminate any Plan
without incurring liability under the Plan other than normal
liabilities for benefits.
(vii) Except as disclosed in the FNBM Financial Statements or
otherwise disclosed in this Agreement or in Schedule 3.1.20, the
Merger will not result in (a) vesting, acceleration, or increase
of any amounts payable under any Compensation Plan, (b) any
material increase in benefits under any Compensation Plan or (c)
payment of any severance or similar compensation under any
Compensation Plan.
(viii) Except as disclosed in Schedule 3.1.20, FNBM does not maintain
any executive supplemental retirement plans or similar
arrangements.
3.1.21 BROKER'S OR FINDER'S FEES. Except for the fees payable to Hovde
pursuant to the Hovde Engagement Letter, no agent, broker, person or
firm acting on behalf of FNBM, or under its authority, is or will be
entitled to any commission, broker's, finder's or financial advisory
fee in connection with the Merger.
3.2 REPRESENTATIONS AND WARRANTIES OF GBCI. Except as disclosed in a schedule
to this Agreement, GBCI represents and warrants to FNBM:
3.2.1 ORGANIZATION AND GOOD STANDING. GBCI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Montana, is a registered bank holding company pursuant to the BHC Act,
and has all requisite power and authority to own and operate its
properties and to carry on its businesses as now conducted. Each of
its Subsidiaries is either a commercial bank, a statutory trust or a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of
xxiii
organization and has all requisite power and authority to own and
operate its Properties and to carry on its businesses as now
conducted.
3.2.2 CORPORATE AUTHORITY. The execution, delivery and performance by GBCI
of this Agreement does not and will not, and the consummation by New
Bank of the Merger will not, constitute or result in: (i) a breach or
violation of, or a default under, either of their articles of
incorporation or association or bylaws; (ii) a breach or violation of,
or a default under, or the acceleration of or the creation of a Lien
(with or without the giving of notice, the lapse of time or both)
under any provision of any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation by which either of them is
bound or to which either of them is a party (collectively, the "GBCI
Contracts"); or (iii) a material violation of any law, rule, ordinance
or regulation or judgment, decree, order, award, or governmental or
non-governmental permit or license to which either of them is subject;
or (iv) any change in the rights or obligations of any party under any
of the GBCI Contracts.
3.2.3 CAPITAL STOCK.
(i) The authorized capital stock of GBCI consists of 78,125,000
shares of GBCI Common Stock, par value $0.01 per share. A total
of 32,375,031 shares of GBCI Common Stock were issued and
outstanding as of May 23, 2006, all of which were validly issued
and are fully paid and nonassessable. As of May 23, 2006, options
to acquire 2,106,429 shares of GBCI Common Stock have been
granted and are outstanding.
(ii) No unissued shares of common stock or any other securities of
GBCI are subject to any warrants, options, conversion privileges,
rights or commitments of any character, kind or nature, except as
set forth in GBCI's Reports, and GBCI has not issued and is not
obligated to issue any additional shares of common stock or any
other security to any other person, except as so disclosed.
3.2.4 REPORTS AND FINANCIAL STATEMENTS.
(i) Filing of Reports. Since January 1, 2002, GBCI and each of its
Subsidiaries has filed all reports and statements, together with
any required amendments to these reports and statements, that
they were and will be required to file with (1) the SEC, (2) the
Federal Reserve, (3) the FDIC, (4) the OCC, and (5) any other
applicable federal or state banking, insurance, securities, or
other regulatory authorities. Each of these reports and
statements, including the related financial statements and
exhibits, complied as to form in all material respects with all
applicable statutes, rules and regulations as of their respective
dates.
(ii) Compliance with Securities Laws. As of their respective dates
(and without giving effect to any amendments or modifications
filed after the Execution Date), each of the Reports, including
the related financial statements, exhibits and schedules, filed,
used or circulated before the Execution Date complied (and each
of the Reports filed after the Execution Date will comply) in all
material respects with applicable Securities Laws, and did not
(or, in the case of reports, statements, or circulars filed after
the Execution Date, will not) contain any untrue statement of a
material fact or omit to state a material fact required to be
xxiv
stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not
misleading.
(iii) Financial Statements. Each of GBCI's balance sheets included in
the GBCI Financial Statements fairly presents (or, in the case of
GBCI Financial Statements for periods ending on a date following
the Execution Date, will fairly present) the financial position
of GBCI and its Subsidiaries as of the date of the balance sheet.
Each of the statements of income, cash flows and shareholders'
equity included in the GBCI Financial Statements fairly presents
(or, in the case of GBCI Financial Statements to be prepared and
filed with the SEC pursuant to GBCI's reporting obligations under
the Exchange Act for periods ending on a date following the
Execution Date, will fairly present) the results of operations,
shareholders' equity and cash flows, as the case may be, of GBCI
and its Subsidiaries for the periods set forth in these
statements, in each case in accordance with GAAP, except as may
be noted in these statements.
3.2.5 FINANCING AND SHARES AVAILABLE. GBCI has, and at the Effective Date
will have, (i) sufficient cash and cash equivalents on hand to pay the
cash component of the Merger Consideration, cash in lieu of fractional
shares, and any amounts payable to holders of Proposed Dissenting
Shares; and (ii) a sufficient number of shares of common stock
authorized and available to issue the GBCI Shares.
3.2.6 ABSENCE OF REGULATORY ACTION. Neither GBCI nor any of its
Subsidiaries is, to the knowledge of the Executive Officers, in
material violation of any statute, rule or governmental regulation
applicable to them (including, without limitation, the Community
Reinvestment Act, Bank Secrecy Act, Truth in Lending Act, Equal Credit
Opportunity Act, and statutes, rules and regulations governing the
reporting of taxpayer identification numbers of its customers).
Neither GBCI nor any of its Subsidiaries is a party to any cease and
desist order, written agreement or memorandum of understanding with,
or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board
resolutions at the request of, federal or state regulatory
authorities, nor has it been advised by such authorities that they are
contemplating issuing or requesting any such order, agreement,
memorandum or similar document or undertaking.
3.2.7 KNOWLEDGE AS TO CONDITIONS. Neither Executive Officer knows of any
reason why the approvals, consents and waivers of governmental
authorities referred to in Section 5.1 cannot be obtained.
3.2.8 LITIGATION. Except as disclosed in GBCI's Reports, no material
litigation, proceeding or controversy before any court or governmental
agency is pending, and there is no pending claim, action or proceeding
against GBCI or any of its Subsidiaries, which is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on
them or to materially hinder or delay consummation of the Merger.
3.2.9 TAXES. All tax returns and reports required by law to be filed by
GBCI and its Subsidiaries have been duly filed, and all taxes,
assessments, fees and other government charges upon GBCI or any of its
Subsidiaries or upon any of their respective properties, assets,
income or franchises that are due and payable have been paid. The
federal income portion of such taxes have been paid in full as
indicated in the tax returns of GBCI and its Subsidiaries for the past
five years or adequate provision has been made for any such
xxv
taxes on its balance sheet in accordance with GAAP. No material
objections to returns or claims for additional taxes are being
asserted with respect to federal or state tax returns of GBCI and its
Subsidiaries for any prior years, except for such audits, objections
or claims which are being contested in good faith, by appropriate
proceedings and with establishment of appropriate reserves, and which
have been disclosed in writing to the other parties to this Agreement.
Except as specified in the foregoing sentence, in the past five years,
there has been no past audit, objection to returns, or claim for
additional taxes.
3.2.10 NO MATERIAL ADVERSE EFFECT. Since December 31, 2005, (i) GBCI and
its Subsidiaries have conducted their respective businesses only in
the ordinary and usual course of business, and (ii) there has not been
any change in the financial condition (which includes, without
limitation, the condition of assets, franchises, results of operations
and prospects) that has had or may reasonably be expected to have a
Material Adverse Effect on GBCI or any of its Subsidiaries.
3.2.11 COMPLETENESS OF REPRESENTATIONS. No representation or warranty made
by or with respect to GBCI or its Subsidiaries in this Agreement (or
in the Schedules to this Agreement) contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained in this Agreement (or in such Schedules) or in
such representation or warranty not misleading.
SECTION 4.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
4.1 CONDUCT OF FNBM'S BUSINESSES PRIOR TO CLOSING. FNBM covenants that, from
the date of this Agreement and prior to Closing:
4.1.1 AVAILABILITY OF BOOKS, RECORDS AND PROPERTIES.
(i) With prior notice to FNBM, subject to applicable law, the books,
records, properties, contracts and documents of FNBM will be
available at all reasonable times to GBCI and its counsel,
accountants and other representatives. Such items will be open
for inspection, audit and direct verification of loan or deposit
balances, collateral receipts and such other transactions or
documentation as GBCI deems reasonably relevant to the
Transaction. FNBM will cooperate fully in such inspection and
audit, and make available all information reasonably requested by
or on behalf of GBCI.
(ii) Upon request by GBCI, FNBM will request that any third parties
involved in the preparation or review of the FNBM Financial
Statements or FNBM Subsequent Financial Statements disclose to
GBCI the work papers or any similar materials related to such
financial statements.
4.1.2 ORDINARY AND USUAL COURSE. Without prior written consent of GBCI,
subject to applicable law and except as required by the OCC (so long
as GBCI receives prior written notice of such required action), FNBM
will conduct its business only in the ordinary and usual course and
will not do any of the following:
(i) effect any stock split or other recapitalization with respect to
FNBM Common Stock, pledge or encumber in any way any shares of
its capital stock; or grant any option for shares of its capital
stock;
xxvi
(ii) other than quarterly cash dividends to be paid to FNBM
shareholders of record on June 30, 2006 and September 30, 2006
(so long as the Effective Date has not yet occurred) consistent
with past practice and not in excess of the amount of the
quarterly dividend paid to FNBM shareholders on March 31, 2006,
declare or pay any dividend, or make any other distribution,
either directly or indirectly, with respect to FNBM Common Stock;
(iii) acquire, sell, transfer, assign, encumber or otherwise dispose
of any material assets or make any material commitment other than
in the ordinary and usual course of business;
(iv) solicit or accept deposit accounts of a different type from
accounts previously accepted by FNBM or at rates materially in
excess of prevailing interest rates, or incur any indebtedness
for borrowed money (excluding Fed Funds and Federal Home Loan
Bank borrowings);
(v) offer or make loans or other extensions of credit of a different
type, or apply different underwriting standards, from those
previously offered or applied by FNBM, or offer or make a loan or
extension of credit (including renewals of loans to existing
customers) in an amount greater than $750,000 without prior
consultation with GBCI; which consultation will not be
unreasonably withheld or delayed and will be deemed provided if
GBCI has not responded to FNBM's request for consultation within
three (3) Business Days after GBCI's receipt of a loan package
concerning the loan at issue;
(vi) acquire an ownership interest or a leasehold interest in any real
property, except those disclosed in Schedule 3.1.6, without
making an appropriate environmental evaluation in advance of
obtaining such interest and without providing to GBCI such
evaluation and at least 30 days' advance notice;
(vii) enter into, renew, or terminate any contracts calling for a
payment of more than $10,000 (including real property leases and
data or item processing agreements) with or for a term of
one-year or more, except for its contracts of deposit and
agreements to lend money not otherwise restricted under this
Agreement and (1) entered into in the ordinary course of
business, consistent with past practices, and (2) providing for
not less (in the case of loans) or more (in the case of deposits)
than prevailing market rates of interest;
(viii) enter into or amend any contract (other than contracts for
deposits or agreements to lend money not otherwise restricted by
this Agreement) calling for a payment of more than $25,000,
unless the contract may be terminated without cause or penalty
upon 30 days notice or less;
(ix) enter into any personal services contract with any person or firm
outside the ordinary course of business, except contracts,
agreements, or arrangements for legal, accounting, consulting,
investment advisory, or tax services entered into to directly
facilitate the Merger or to ensure or continue FNBM's compliance
with applicable laws, regulations, or regulatory policies (after
taking into account and considering the assistance to be provided
by GBCI pursuant to Section 4.13);
xxvii
(x) (A) sell any securities, whether held for investment or sale,
other than in the ordinary course of business or sell any
securities, whether held for investment or sale, even in the
ordinary course of business, if the aggregate gain or loss
realized from all sales after the Execution Date would be more
than $25,000 or (B) transfer any investment securities between
portfolios of securities available for sale and portfolios of
securities to be held to maturity;
(xi) amend its articles of association, bylaws, or other formation
agreements, or convert its charter or form of entity;
(xii) implement or adopt any material changes in its operations,
policies, or procedures, including loan loss reserve policies,
unless the changes are requested by GBCI or are necessary or
advisable, on the advice of legal counsel, to comply with
applicable laws, regulations, or regulatory policies;
(xiii) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required (1) by GAAP,
(2) for tax purposes, or (3) to take advantage of any beneficial
tax or accounting methods;
(xiv) other than in accordance with binding commitments existing on
the Execution Date and that have been disclosed to GBCI, make any
capital expenditures in excess of $10,000 per project or related
series of projects or $25,000 in the aggregate;
(xv) enter into any other transaction or make any expenditure other
than in the ordinary and usual course of its business except for
expenses reasonably related to completion of the Merger; or
(xvi) take any action which would materially and adversely affect or
delay its ability or the ability of GBCI and New Bank to obtain
any necessary approvals, consents or waivers of any governmental
authority required for the Merger or to perform their respective
covenants and agreements under this Agreement.
4.1.3 CONTINUING REPRESENTATION AND WARRANTY. FNBM will not do or cause to
be done anything that would cause any representation or warranty in
Section 3.1 to be untrue or inaccurate if made at Closing, except as
otherwise contemplated or required by this Agreement or consented to
in writing by GBCI.
4.1.4 MAINTENANCE OF PROPERTIES. FNBM will in all material respects
maintain its properties and equipment (and related insurance or its
equivalent) in accordance with good business practice.
4.1.5 PRESERVATION OF BUSINESS ORGANIZATION. FNBM will use its
commercially-reasonable efforts to:
(i) Preserve its business organization.
(ii) Retain the services of management and employees consistent with
such program for consolidation of redundant employment positions
resulting from the Merger as will be developed in cooperation
with GBCI.
xxviii
(iii) Preserve the goodwill of suppliers, customers and others with
whom FNBM has business relations.
4.1.6 SENIOR MANAGEMENT. Except as otherwise provided in this Agreement and
excluding resignations, without prior consultation with GBCI, FNBM
will not (i) make any change with respect to present management
personnel having the rank of vice-president or higher; or (ii) promote
any employee of FNBM to any position held by a Senior Executive, as
defined in Exhibit D.
4.1.7 COMPENSATION. FNBM will not permit any increase in the current or
deferred compensation payable or to become payable by FNBM to any of
its directors, officers, employees, agents or consultants other than
normal increments in compensation in accordance with FNBM's
established policies with respect to the timing and amounts of such
increments. Without the prior written approval of GBCI, FNBM will not
commit to, execute or deliver any employment agreement with any party
not terminable without expense with two weeks notice.
4.1.8 UPDATE OF FINANCIAL STATEMENTS. FNBM will deliver unaudited balance
sheets and related statements of income and shareholders' equity for
each month ending after the Execution Date and before Closing or the
Termination Date, as the case may be, within 15 days after each such
month-end. The Subsequent FNBM Financial Statements:
(i) will be prepared from the books and records of FNBM;
(ii) will present fairly the financial position and operating results
of FNBM at the times indicated and for the periods covered;
(iii) will be prepared in accordance with GAAP (except for the absence
of notes and exceptions from GAAP identified in Section 3.1.5)
and with the regulations promulgated by applicable regulatory
authorities, to the extent then applicable; and
(iv) will reflect all liabilities, contingent or otherwise, of FNBM on
the respective dates and for the respective periods covered,
except for liabilities: (1) not required to be so reflected in
accordance with GAAP or (2) not significant in amount. All
contingent liabilities not recorded on the Subsequent FNBM
Financial Statements will be disclosed in writing to GBCI.
4.1.9 UPDATE SCHEDULES. From the date of this Agreement until Closing, FNBM
will promptly revise and supplement the Schedules to this Agreement
prepared by or on behalf of FNBM to ensure that such Schedules remain
accurate and complete. Notwithstanding anything to the contrary
contained herein, supplementation of such Schedules following the
execution of this Agreement will not be deemed a modification of
FNBM's representations or warranties contained in this Agreement.
4.1.10 ACQUISITION PROPOSAL. FNBM agrees that it will not, and FNBM will
direct and use its best efforts to cause its directors, officers,
employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it) to not,
initiate, solicit, encourage or take any other action to facilitate
any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to shareholders of FNBM)
with respect to an Acquisition Event (any such proposal or
xxix
offer being hereinafter referred to as an "Acquisition Proposal") or,
except to the extent legally required for the discharge by the board
of directors of its fiduciary duties as advised in writing by such
board's counsel, engage in any negotiations concerning, or provide any
confidential information or data to any Person relating to, an
Acquisition Proposal, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal. FNBM will immediately cease
and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any
of the foregoing. FNBM will take the necessary steps to inform the
appropriate individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 4.1.10. FNBM will
notify GBCI immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such
negotiations are sought to be initiated or continued with FNBM.
4.1.11 STATUS OF TITLE/LEASEHOLD INTERESTS. FNBM will provide GBCI, no
later than 30 days after the Execution Date, title reports for the
Real Property issued by title insurance companies reasonably
satisfactory to the parties (the "Title Companies"). These title
reports must show the current status of title to the Real Property.
Within 15 days after the date on which FNBM delivers all of the title
reports to GBCI for its review, GBCI will inform FNBM in writing
whether, and in what manner, it objects to any of the exceptions to
title shown on any of the title reports. FNBM will, within 10 days of
the date on which it receives the written notice of objection from
GBCI, inform GBCI if there are any objections that it is unable to
remove at or prior to Closing. FNBM will not, however, be obligated to
remove exceptions that are non-monetary exceptions that do not
interfere with the use of the properties as bank branch locations. At
Closing, if requested by GBCI, FNBM will cause the Title Companies to
provide GBCI with standard coverage title insurance policies issued
with respect to each of the Properties, in an amount commensurate with
the value of each such Property as agreed upon by GBCI and FNBM, dated
as of the Effective Date, insuring that each such Real Property is
unencumbered by any Liens, other than Liens for taxes not yet
delinquent and other exceptions to title as set forth in the title
reports as approved by GBCI.
4.1.12 DIRECTORS' AND OFFICERS' LIABILITY. Before the Effective Date, FNBM
will notify its directors' and officers' liability insurers of the
Merger and of all pending or threatened claims, actions, suits,
proceedings or investigations asserted or claimed against any Person
entitled to indemnification pursuant to Section 6.4 and known to FNBM,
or circumstances reasonably deemed by GBCI to be likely to give rise
thereto, in accordance with terms and conditions of the applicable
policies.
4.1.13 REVIEW OF LOANS. FNBM will permit GBCI to conduct an examination of
FNBM's loans to determine credit quality and the adequacy of FNBM's
ALLL. GBCI will have continued access to such loans through Closing to
update the examination. At GBCI's reasonable request, FNBM will
provide GBCI with current reports updating the information set forth
in Schedule 3.1.16.
4.1.14 CONDUCT OF GBCI'S BUSINESS BEFORE CLOSING. GBCI will:
(i) provide FNBM with prompt written notice of any events,
individually or in the aggregate, that could have a Material
Adverse Effect with respect to GBCI;
xxx
(ii) conduct, and cause its Subsidiaries to conduct, their respective
businesses in compliance with all material obligations and duties
imposed on them by applicable federal and state laws; and
(iii) maintain all books and records of it and its Subsidiaries,
including all financial statements, in accordance with such
accounting principles and practices consistent with those used
for the GBCI Financial Statements, except for changes in such
principles and practices required under GAAP.
4.2 REGISTRATION STATEMENT.
4.2.1 PREPARATION OF REGISTRATION STATEMENT.
(i) A Registration Statement on Form S-4 (together with any
amendments or supplements, the "Registration Statement") will be
filed by GBCI with the SEC under the Securities Act for
registration of the GBCI Shares to be issued in the Merger, and
the parties will prepare a related prospectus/proxy statement
("Prospectus/Proxy Statement") to be mailed, together with any
amendments and supplements thereto, to FNBM's shareholders.
(ii) The parties will cooperate with each other in preparing the
Registration Statement and Prospectus/Proxy Statement, and will
use their best efforts to obtain the clearance of the SEC, any
appropriate state securities regulators and any other required
regulatory approvals, to issue the Prospectus/Proxy Statement.
(iii) Nothing will be included in the Registration Statement or the
Prospectus/Proxy Statement or any proxy solicitation materials
with respect to any party to this Agreement unless approved by
that party, which approval will not be unreasonably withheld.
When the Registration Statement becomes effective, and at all
times subsequent to such effectiveness (up to and including the
date of the FNBM Meeting), all information set forth in the
Registration Statement that is or to be furnished by or on behalf
of GBCI relating to GBCI and by or on behalf of FNBM relating to
FNBM, (1) will comply in all material respects with the
provisions of the Securities Act and any other applicable
statutory or regulatory requirements, and (2) will not contain
any untrue statement of a material fact or omit to state a
material fact that is required to be stated or necessary to make
the statements in the Registration Statement not misleading;
provided, however, that in no event will any party be liable for
any untrue statement of a material fact or omission to state a
material fact in the Registration Statement where such statement
or omission, as the case may be, was made in reliance upon, and
in conformity with, written information concerning another party
furnished by or on behalf of such other party specifically for
use in the Registration Statement.
(iv) GBCI will pay all fees and costs associated with the preparation
by GBCI's counsel (and other professional advisors) and the
filing of the Registration Statement. FNBM will pay all costs
associated with its review and preparation of the Registration
Statement and the Prospectus/Proxy Statement. FNBM will pay the
costs associated with the printing and mailing of the
Prospectus/Proxy Statement to its shareholders and any other
direct costs incurred by it in connection with the
Prospectus/Proxy Statement.
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4.2.2 SUBMISSION TO SHAREHOLDERS.
(i) GBCI and FNBM will submit the Prospectus/Proxy Statement to, and
will use their best efforts in good faith to obtain the prompt
approval of the Prospectus/Proxy Statement by, all applicable
regulatory authorities. The parties will provide each other with
copies of such submissions for review.
(ii) FNBM will promptly take the actions necessary in accordance with
applicable law and its articles of association and bylaws to
convene a shareholders' meeting to consider the approval of this
Agreement and to authorize the transactions contemplated by this
Agreement (such meeting and any adjournment or postponement
thereof, the "FNBM Meeting"). The FNBM Meeting will be held on
the earliest practical date after the date the Prospectus/Proxy
Statement may first be sent to FNBM's shareholders without
objection by applicable governmental authorities. Except as
otherwise required to comply with the fiduciary responsibilities
of the board of directors, FNBM's board of directors and officers
will recommend approval of the Merger to FNBM's shareholders.
4.3 AFFILIATE LETTERS.
4.3.1 AFFILIATE LIST. Certain persons may be deemed "affiliates" of FNBM
under Rule 145 of the Securities Act. Set forth in Schedule 4.3.1 is a
list of names and addresses of FNBM's "affiliates" with respect to the
Merger within the meaning of Rule 145. Before the date that the
Registration Statement is filed with the SEC, FNBM will deliver, or
cause to be delivered, to GBCI a letter, dated as of the date of its
delivery and in the form attached as Exhibit A, from each of these
"affiliates" and from any additional person who becomes an "affiliate"
before the Effective Date and after the Execution Date of this
Agreement.
4.3.2 RESTRICTIVE LEGENDS. GBCI will place a restrictive legend on all
certificates representing GBCI Shares to be received by an "affiliate"
so as to preclude their transfer or disposition in violation of the
affiliate letters. GBCI will also instruct its transfer agent not to
permit the transfer of those shares and to take any other steps
reasonably necessary to ensure compliance with Rule 145.
4.4 SUBMISSION TO REGULATORY AUTHORITIES. Representatives of GBCI will prepare
and file with applicable regulatory agencies, applications for approvals,
waivers or other actions deemed necessary or desirable, in the opinion of
counsel, in order to consummate the Merger. GBCI will use its best efforts
to file such regulatory applications within 45 days following the Execution
Date. GBCI will provide copies of such applications for review by FNBM
prior to their submission to the applicable regulatory authorities. These
applications are expected to include:
(i) An application or waiver request to the Federal Reserve and
related filings regarding the Merger.
(ii) An application to the OCC and related filings and coordination
with respect to the Merger and the formation of New Bank.
4.5 PUBLIC ANNOUNCEMENTS. Subject to written advice of legal counsel with
respect to legal requirements relating to public disclosure of matters
related to the subject matter of this Agreement, the timing and content of
any announcements, press releases or other public
xxxii
statements concerning the Merger will occur upon, and be determined by, the
mutual consent of FNBM and GBCI.
4.6 CONSENTS. Each party to this Agreement will use its best efforts to obtain
the timely consent or approval of any Person whose consent or approval is
required in order to permit GBCI, New Bank and FNBM to consummate the
Merger.
4.7 FURTHER ACTIONS. The parties to this Agreement will use their best efforts
in good faith to make all such arrangements, do or cause to be done all
such acts and things, and execute and deliver all such certificates and
other instruments and documents as may be reasonably necessary or
appropriate in order to consummate the Merger promptly.
4.8 NOTICE. The parties will provide each other with prompt written notice of:
(i) Any events that, individually or in the aggregate, can reasonably
be expected to have a Material Adverse Effect with respect to
them.
(ii) The commencement of any proceeding against any one or more of
them by or before any court or governmental agency that,
individually or in the aggregate, can reasonably be expected to
have a Material Adverse Effect with respect to any one or more of
them.
(iii) In the case of FNBM, the acquisition of an ownership or
leasehold interest in any real property (except as disclosed in
Schedule 3.1.6), as specified in Section 4.1.2.
4.9 CONFIDENTIALITY. Subject to the requirements of law, each party will keep
confidential, and will exercise its best efforts to cause its
representatives to keep confidential, all information and documents
obtained pursuant to this Agreement unless such information (i) is required
by law to be disclosed, (ii) becomes available to such party from other
sources not bound by a confidentiality obligation, (iii) is disclosed with
prior written approval of the party to which such information pertains or
is disclosed in a legal action between the parties relating to the Merger,
or (iv) is or becomes public without fault of the subject party. If this
Agreement is terminated or the Merger otherwise fails to be consummated,
each party to this Agreement will promptly (i) return to the other all
confidential documents obtained from them and (ii) not use or disclose any
nonpublic information obtained under this Agreement or in connection with
the Merger.
4.10 BLUE SKY FILINGS. GBCI will use its best efforts to obtain, prior to the
effective date of the Registration Statement, any necessary state
securities laws or "Blue Sky" permits and approvals.
4.11 TAX TREATMENT. Neither GBCI and its Subsidiaries nor FNBM will take or
cause to be taken any action that would or could reasonably be expected to
prevent the Merger from qualifying as a reorganization under Section 368(a)
of the Code.
4.12 BEST EFFORTS. Subject to the terms and conditions of this Agreement, each
party will use its reasonable best efforts in good faith to take, or cause
to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or desirable, or advisable under applicable laws, so as
to permit consummation of the Merger by September 30, 2006.
4.13 GBCI ASSISTANCE WITH REGULATORY COMPLIANCE. Between the Execution Date and
the Effective Date, GBCI will use reasonable efforts to provide FNBM such
assistance and cooperation as may
xxxiii
be reasonably requested by FNBM related to FNBM's compliance with
applicable laws, regulations, or regulatory policies, including those
matters set forth on Schedule 3.1.9. It is anticipated that such assistance
and cooperation of GBCI will include causing GBCI employees experienced in
regulatory compliance matters to assist FNBM in implementing necessary
policies and procedures, causing such employees to assist FNBM in complying
with policies, procedures and regulatory requirements and causing those
employees to assist FNBM in communications with the OCC regarding
compliance with applicable laws, regulations, or regulatory policies.
Notwithstanding the provisions of this Section 4.13, the parties
acknowledge that it is ultimately the responsibility of FNBM and its
management to address regulatory compliance concerns.
4.14 NEW BANK AS PARTY TO AGREEMENT. It is intended that the New Bank, upon its
formation, will become a party to this Agreement by executing the addendum
to the signature page. Such action will require approval by the New Bank's
board of directors, but will not require further approval by the board of
directors of GBCI or FNBM.
SECTION 5.
APPROVALS AND CONDITIONS
5.1 REQUIRED APPROVALS. The obligations of the parties to this Agreement are
subject to the Regulatory Approvals; provided, however, that no such
consent or approval will have imposed any condition or requirement not
normally imposed in such transactions that, in the opinion of GBCI, would
deprive GBCI of the material economic or business benefits of the Merger.
5.2 CONDITIONS TO OBLIGATIONS OF GBCI. All obligations of GBCI pursuant to this
Agreement are subject to satisfaction of the following conditions at or
before Closing:
5.2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
FNBM contained in this Agreement or in any certificate or other
instrument delivered in connection with this Agreement that are not
qualified as to materiality will be true and correct in all material
respects at Closing, and the representations and warranties of FNBM
contained in this Agreement or in any certificate or other instrument
delivered in connection with this Agreement that are qualified as to
materiality will be true and correct at Closing, all with the same
force and effect as though such representations and warranties had
been made on and as of Closing (except to the extent that such
representations and warranties are by their express provisions made as
of a specified date, in which case such representations and warranties
will be true and correct in all material respects or true and correct,
as the case may be, as of such date). FNBM will have delivered to GBCI
a certificate to that effect, executed by a duly authorized officer of
FNBM and dated as of Closing.
5.2.2 COMPLIANCE. FNBM will have performed and complied in all material
respects with all terms, covenants and conditions of this Agreement on
or before Closing. FNBM will have delivered to GBCI a certificate to
that effect, executed by a duly authorized officer of FNBM and dated
as of Closing.
5.2.3 TRANSACTION FEES STATEMENTS. FNBM has delivered to GBCI a statement,
in a form reasonably satisfactory to GBCI, from each third party to
whom FNBM has paid or owes FNBM Transaction Fees. Each statement must
set forth the total costs and expenses paid or owing to the third
party in connection with the consummation of the Merger. FNBM has
delivered to GBCI its certificate, executed by a duly authorized
officer of FNBM and
xxxiv
dated as of Closing, stating the total FNBM Transaction Fees and
certifying that FNBM is in compliance with this Section 5.2.3.
5.2.4 NO MATERIAL ADVERSE EFFECT. Since December 31, 2005, there will have
been no material damage, destruction or loss (whether or not covered
by insurance) and no other event, individually or in the aggregate,
constituting a Material Adverse Effect with respect to FNBM.
5.2.5 FINANCIAL CONDITION. The following will be true and the certificate
of FNBM referred to in Section 5.2.2 will so state:
(i) FNBM's ALLL, in the opinion of FNBM and GBCI management and as
adjusted for any increases or charge-offs reasonably required by
BKD, LLP or GBCI, is adequate to absorb anticipated loan losses.
(ii) The FNBM Capital will not be less than $8.5 million at Closing.
(iii) The aggregate deposits of FNBM, excluding (1) certificates of
deposit (or equivalents) of $100,000 or more and (2) brokered
deposits, will not be less than $47 million at Closing.
5.2.6 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding will have been
commenced or threatened by any governmental agency to restrain or
prohibit or invalidate the Merger.
5.2.7 OPINION OF COUNSEL. Counsel to FNBM has delivered to GBCI a legal
opinion, containing the opinions set forth in Exhibit B to this
Agreement and with reasonable and customary assumptions and
limitations.
5.2.8 REAL PROPERTY MATTERS. If requested, GBCI has received the
irrevocable commitments by the Title Companies to issue the policies
required under Section 4.1.11.
5.2.9 CORPORATE AND SHAREHOLDER ACTION. Each of the following will have
approved the Merger:
(a) The Board of Directors of FNBM; and
(b) The shareholders of FNBM.
5.2.10 APPOINTMENT TO BOARD OF DIRECTORS. FNBM's board of directors will
have appointed Michael J. Blodnick to serve as a director of FNBM, to
be effective upon consummation of the Merger.
5.2.11 TAX OPINION. GBCI has, at GBCI's expense, obtained from Graham &
Dunn PC and delivered to FNBM, an opinion addressed to FNBM and GBCI
(in form and substance reasonably satisfactory to FNBM and its
counsel, and subject to reasonable limitations, conditions and
assumptions) substantially to the effect that:
(i) The Merger will qualify as a reorganization within the meaning of
IRC Section 368(a)(1)(A) and will qualify as a "forward
triangular merger" under IRC Section 368(a)(2)(D).
xxxv
(ii) No gain or loss will be recognized by GBCI, New Bank or FNBM by
reason of the Merger.
(iii) Holders of FNBM Common Stock who receive solely GBCI Common
Stock in exchange for their shares of FNBM Common Stock pursuant
to the Merger will not recognize gain or loss on the exchange. If
any such stockholders receive cash in lieu of a fractional share
interest in FNBM Common Stock, such stockholders will be treated
as having received a fractional share of GBCI Common Stock in the
Merger and having immediately exchanged that fractional share for
cash in a taxable redemption by GBCI.
(iv) Holders of FNBM Common Stock who receive solely cash in exchange
for their shares of FNBM Common Stock, and who own those shares
as capital assets and who do not actually or constructively own
shares of GBCI after the Merger, will recognize capital gain or
loss. The amount of such gain or loss will be equal to the
difference between the amount of cash received and the
stockholder's aggregate tax basis for such shares of FNBM Common
Stock. The gain or loss will be long-term capital gain or loss if
such shares of FNBM Common Stock were held for more than one
year.
(v) A holder of FNBM Common Stock who receives both GBCI Common Stock
and cash consideration in exchange for his, her or its shares of
FNBM Common Stock will recognize gain, but not loss, to the
extent of the lesser of the gain realized by such stockholder in
the exchange or the amount of cash received by such stockholder
in the exchange. Any gain recognized by a stockholder who owns
his, her or its shares of FNBM Common Stock as capital assets
will be treated as capital gain if the exchange is, with respect
to the holder, either "substantially disproportionate" or "not
essentially equivalent to a dividend," each within the meaning of
Code Section 302(b). The gain will be long-term capital gain if
the shares of FNBM Common Stock were held for more than one year.
The exchange will be "substantially disproportionate" with
respect to a holder of FNBM Common Stock if, immediately after
the Merger, the holder owns, actually and constructively, less
than 50% of the total combined voting power of all classes of
GBCI Common Stock entitled to vote and less than 80% of the
percentage of GBCI Common Stock actually and constructively owned
by the holder immediately before the Merger. For purposes of the
foregoing determination, the holder is treated as if (i) all its
shares of FNBM Common Stock were first exchanged in the Merger
for shares of GBCI Common Stock, and (ii) a portion of those
shares of GBCI Common Stock were then redeemed for the cash
actually received in the Merger ("hypothetical exchange and
redemption").
Whether the exchange will be "not essentially equivalent to a
dividend" with respect to a holder of FNBM Common Stock will
depend on the holder's particular facts and circumstances.
5.2.12 AFFILIATE LETTERS. GBCI has received the affiliate list and letters
specified in Section 4.3.1.
xxxvi
5.2.13 REGISTRATION STATEMENT. The Registration Statement, as it may have
been amended, required in connection with the GBCI Shares, and as
described in Section 4.2, has become effective, and no stop order
suspending the effectiveness of such Registration Statement has been
issued or remains in effect, and no proceedings for that purpose have
been initiated or threatened by the SEC, the basis for which still
exists.
5.2.14 NO CHANGE IN LOAN REVIEW. FNBM has provided to GBCI the reports
reasonably requested by GBCI under Section 4.1.13, and neither these
reports nor any examinations conducted by GBCI under Section 4.1.13
reveal a change in either: (i) the information set forth in Schedule
3.1.16 or (ii) information revealed during GBCI's previous
examinations of FNBM's loans.
5.3 CONDITIONS TO OBLIGATIONS OF FNBM. All obligations of FNBM pursuant to this
Agreement are subject to satisfaction of the following conditions at or
before Closing:
5.3.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
GBCI contained in this Agreement or in any certificate or other
instrument delivered in connection with this Agreement that are not
qualified as to materiality will be true and correct in all material
respects at Closing, and the representations and warranties of GBCI
contained in this Agreement or in any certificate or other instrument
delivered in connection with this Agreement that are qualified as to
materiality will be true and correct at Closing, all with the same
force and effect as though such representations and warranties had
been made on and as of Closing (except to the extent that such
representations and warranties are by their express provisions made as
of a specified date, in which case such representations and warranties
will be true and correct in all material respects or true and correct,
as the case may be, as of such date). GBCI will have delivered to FNBM
a certificate to that effect, executed by a duly authorized officer of
GBCI and dated as of Closing.
5.3.2 COMPLIANCE. GBCI will have performed and complied with all terms,
covenants and conditions of this Agreement on or before Closing. GBCI
will have delivered to FNBM a certificate to that effect, executed by
a duly authorized officer of GBCI and dated as of Closing.
5.3.3 NO GOVERNMENTAL PROCEEDINGS. No action or proceeding will have been
commenced or threatened by any governmental agency to restrain or
prohibit or invalidate the Merger.
5.3.4 NO MATERIAL ADVERSE EFFECT. Since December 31, 2005, there will have
been no material damage, destruction or loss (whether or not covered
by insurance) and no other event, individually or in the aggregate,
constituting a Material Adverse Effect with respect to GBCI.
5.3.5 TAX OPINION. The tax opinion specified in Section 5.2.11 has been
delivered to FNBM.
5.3.6 CORPORATE ACTION. Each of the following will have approved the
Merger:
(i) The Boards of Directors of GBCI and New Bank; and
(ii) GBCI, as sole shareholder of New Bank.
xxxvii
5.3.7 REGISTRATION STATEMENT. The Registration Statement will have become
effective as specified in Section 5.2.13.
5.3.8 BLUE SKY FILINGS. GBCI has received the state securities laws or
"Blue Sky" permits and approvals specified in Section 4.10.
5.3.9 PAYMENTS TO THE EXCHANGE AGENT. GBCI will have deposited the Merger
Consideration with the Exchange Agent.
5.3.10 APPROVAL OF FNBM SHAREHOLDERS. The shareholders of FNBM will have
approved the Merger.
SECTION 6.
DIRECTORS, OFFICERS AND EMPLOYEES
6.1 DIRECTORS. As a condition to the execution of this Agreement, each member
of FNBM's board of directors has entered into the written agreements
described in Recital F. Such agreements will take effect at the Effective
Date unless otherwise noted in the applicable agreement.
6.2 OFFICER'S EMPLOYMENT CONTRACT. At the Effective Date, the Employment
Agreements described in Recital E will take effect.
6.3 EMPLOYEE BENEFIT ISSUES.
6.3.1 COMPARABILITY OF BENEFITS. GBCI intends that its current personnel
policies will apply to any current employees of FNBM who are retained
after the Effective Date. Such retained employees will be eligible to
participate in all of the benefit plans of GBCI that are generally
available to similarly situated employees of GBCI in accordance with
and subject to the terms of such plans, including the ability of GBCI
employees to roll over employee loans from FNBM's 401(k) retirement
plan to GBCI's 401(k) retirement plan. GBCI intends that as soon as
practicable after consummation of the Merger, FNBM's existing benefit
plans will be terminated.
6.3.2 TREATMENT OF PAST SERVICE. For purposes of such participation,
current employees' prior service with the FNBM will constitute prior
service with GBCI for purposes of determining eligibility and vesting
(including but not limited to vacation time).
6.3.3 STAY BONUS PAYMENTS. On the tenth (10th) day following the Effective
Date, GBCI will cause the Combined Bank to pay the bonuses, in the
amounts and on the terms set forth on Exhibit C, to each employee of
FNBM who was continually employed by FNBM for the period beginning on
the Execution Date and ending on the Effective Date.
6.3.4 SEVERANCE PAYMENTS. If the employment of an individual who is a FNBM
employee as of the Execution Date is terminated after the Effective
Date other than for "cause" (as defined in Exhibit D), or if such an
individual terminates his or her employment after the Effective Date
for "good reason" (as defined in Exhibit D), the Severance Plan for
FNBM Employees set forth on Exhibit D will govern and such individual
will be entitled to receive the severance payments and benefits
specified in the Severance Plan.
6.3.5 FNBM REGULAR BONUS PLAN. For the fiscal year ending December 31,
2006, each FNBM employee and FNBM director (other than Stanton Nielsen
and David Alexander,
xxxviii
each of whose 2006 bonus payment is addressed in his Employment
Agreement) will be eligible to receive a cash bonus pursuant to FNBM's
bonus criteria in effect as of the Execution Date, the timing of such
payment to be consistent with prior years and past practice.
Commencing in 2007, FNBM employees who remain employed by the Combined
Bank will be eligible for such bonus plan(s) as may be adopted by the
board of directors of the Combined Bank and approved by GBCI. Nothing
in this Section 6.3.5 will be construed as guaranteeing specific bonus
payments for individual employees.
6.3.6 FNBM PROFIT SHARING PLAN. On or about June 30, 2006, FNBM will make
its annual contribution to the FNBM Profit Sharing Plan for fiscal
year 2006 in an amount consistent with prior years and past practice.
After such annual contribution is made, no further amounts will be
accrued for or paid under the FNBM Profit Sharing Plan.
6.3.7 NO CONTRACT CREATED. Except as provided in Section 6.2, nothing in
this Agreement will give any employee a right to continuing
employment.
6.4 INDEMNIFICATION OF DIRECTORS AND OFFICERS. For a period of four (4) years
from and after the Effective Date, GBCI will indemnify and defend each
present and former director and officer of FNBM from and against any and
all claims, losses, liabilities, judgments, fines, damages, costs, and
expenses (including reasonable attorneys' fees) incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative, or investigative, arising out of actions or
omissions accruing at or prior to the Effective Date, including, without
limitation, the Merger contemplated by this Agreement, to the fullest
extent that FNBM is currently permitted to indemnify (and advance expenses
to) its directors and officers under applicable law and under its articles
of association or bylaws in effect at the date of this Agreement. Any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standard set forth under FNBM's
articles of association or bylaws will be made by independent counsel
(which will not be counsel that otherwise provides any services to GBCI or
any of its Subsidiaries) selected by GBCI and reasonably acceptable to such
officer or director. For a period of four (4) years after the Effective
Date, GBCI will use reasonable efforts to cause to be maintained in effect
(with reputable and financially sound insurers) director and officer
liability insurance substantially similar to that maintained by GBCI with
respect to claims arising from facts or events that occurred before the
Effective Date.
SECTION 7.
TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION
7.1 TERMINATION BY REASON OF LAPSE OF TIME. If Closing does not occur on or
before the Termination Date, either GBCI or FNBM may terminate this
Agreement and the Merger if both of the following conditions are satisfied:
(i) the terminating party's board of directors decides to terminate by a
majority vote of its members; and
(ii) the terminating party delivers to the other party written notice that
its board of directors has voted in favor of termination.
7.2 TERMINATION DUE TO GBCI AVERAGE CLOSING PRICE GREATER THAN $34.50.
7.2.1 FNBM'S RIGHT TO TERMINATE. By specific action of its board of
directors, FNBM may terminate this Agreement and the Merger by written
notice to GBCI on the Business Day
xxxix
immediately following the Determination Date, if the GBCI Average
Closing Price is greater than $34.50. (If GBCI declares or effects a
stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the
Execution Date and the Determination Date, the price for the GBCI
Common Stock will be appropriately adjusted for the purpose of
applying this Section 7.2.1).
If FNBM elects to exercise its termination right pursuant to this
Section 7.2.1, the provisions of Section 7.2.2 will apply.
7.2.2 GBCI'S RIGHT TO ADJUST CONSIDERATION. If FNBM provides written notice
to GBCI in accordance with Section 7.2.1, then within two Business
Days following GBCI's receipt of such notice, GBCI may elect by
written notice to FNBM to adjust the Total Stock Consideration through
the issuance of additional GBCI Shares in an amount such that the
Total Stock Consideration equals the number of shares of GBCI Common
Stock that would have been issued had the GBCI Average Closing Price
been $34.50.
If GBCI makes such election to increase the number of GBCI Shares, no
termination will occur pursuant to Section 7.2.1, and this Agreement
will remain in effect according to its terms (except as the Total
Stock Consideration has been adjusted).
7.3 TERMINATION DUE TO GBCI AVERAGE CLOSING PRICE LESS THAN $25.50 AND GLACIER
UNDERPERFORMS MARKET.
7.3.1 GBCI'S RIGHT TO TERMINATE. By specific action of its board of
directors, GBCI may terminate this Agreement and the Merger by written
notice to FNBM on the Business Day immediately following the
Determination Date, if
(i) the GBCI Average Closing Price is less than $25.50; and
(ii) The number obtained by dividing the GBCI Average Closing Price by
$30.00 is less than the number obtained by (a) dividing the Final
Index Value by the Initial Index Value and then (b) multiplying
the quotient so obtained by 0.85.
If GBCI declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or
similar transaction between the Execution Date and the
Determination Date, the price for the GBCI Common Stock will be
appropriately adjusted for the purpose of applying this Section
7.3.
If GBCI elects to exercise its termination right pursuant to this
Section 7.3.1, the provisions of Section 7.3.2 will apply.
7.3.2 FNBM'S RIGHT TO ADJUST CONSIDERATION. If GBCI provides written notice
to FNBM in accordance with Section 7.3.1, then within two Business
Days following FNBM's receipt of such notice, FNBM may elect by
written notice to GBCI to accept an adjustment to the Total Stock
Consideration through the issuance of fewer GBCI Shares such that the
Total Stock Consideration equals the number of shares of GBCI Common
Stock that would have been issued had the GBCI Average Closing Price
been $25.50.
If FNBM makes such election to accept such decrease in the number of
GBCI Shares, no termination will occur pursuant to Section 7.3.1, and
this Agreement will remain in effect according to its terms (except as
the Total Stock Consideration has been adjusted).
xl
7.4 TERMINATION IN THE EVENT OF GBCI AVERAGE CLOSING PRICE LESS THAN $22.50 AND
OVERALL MARKET DECLINE ADJUSTMENT. By specific action of its board of
directors, FNBM may terminate this Agreement and the Merger by written
notice to GBCI on the Business Day immediately following the Determination
Date, if (i) the GBCI Average Closing Price is less than $22.50 and (ii) an
Overall Market Decline Adjustment has occurred. (If GBCI declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the
Execution Date and the Determination Date, the price for the GBCI Common
Stock will be appropriately adjusted for the purpose of applying this
Section 7.4).
7.5 OTHER GROUNDS FOR TERMINATION. This Agreement and the Merger may be
terminated at any time before Closing (whether before or after applicable
approval of this Agreement by FNBM's shareholders, unless otherwise
provided) as follows:
7.5.1 MUTUAL CONSENT. By mutual consent of FNBM and GBCI, if the board of
directors of each party agrees to terminate by a majority vote of its
members.
7.5.2 NO REGULATORY APPROVALS. By either party, if the regulatory approvals
required by Section 5.1 are denied (or if any such required approval
is conditioned on a substantial deviation from the Merger); provided,
however, that either party will have fifteen (15) Business Days
following receipt of such denial to appeal the decision, and if such
appeal is timely made, either party will have sixty (60) days to
prosecute diligently and overturn such denial, and such other party
may not terminate this Agreement pursuant to this Section 7.5.2 during
such period of time.
7.5.3 BREACH OF REPRESENTATION. By either party (provided that the
terminating party is not then in material breach of any of its
representations, warranties, agreements or covenants in this Agreement
if they are not qualified as to materiality and is not then in breach
of any of its representations, warranties, agreements or covenants in
this Agreement if they are qualified as to materiality) if there has
been a material breach of any of the representations or warranties set
forth in this Agreement that are not qualified as to materiality or a
breach of any of the representations or warranties set forth in this
Agreement that are qualified as to materiality on the part of the
other party, which breach is not cured within thirty days following
written notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the end of such thirty day
period; provided, however, that neither party will have the right to
terminate this Agreement pursuant to this Section 7.5.3 unless the
breach of such representation or warranty, together with any other
such breaches, would entitle the party receiving such representation
not to consummate the transactions contemplated hereby under Section
5.2.1 (in the case of a breach of a representation or warranty by
FNBM) or Section 5.3.1 (in the case of a breach of a representation or
warranty by GBCI). In the event of termination pursuant to this
Section 7.5.3, the terminating party will be entitled to receive from
the other party the Termination Fee.
7.5.4 BREACH OF COVENANT. By either party (provided that the terminating
party is not then in material breach of any of its representations,
warranties, agreements or covenants in this Agreement if they are not
qualified as to materiality and is not then in breach of any of its
representations, warranties, agreements or covenants in this Agreement
if they are qualified as to materiality) if there has been a material
breach of any of the covenants or agreements set forth in this
Agreement that are not qualified as to materiality or a breach of any
of the covenants or agreements set forth in this Agreement that are
qualified as to materiality on the part of the other party, which
breach is not cured within thirty days
xli
following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the end of such thirty
day period. In the event of termination pursuant to this Section
7.5.4, the terminating party will be entitled to receive from the
other party the Termination Fee; provided, however, that GBCI will not
be entitled to collect the Termination Fee in the event of a breach of
Section 4.1.11 caused by FNBM's inability (after good faith effort) to
remove exceptions to title as provided for in that section.
7.5.5 FAILURE TO RECOMMEND OR OBTAIN SHAREHOLDER APPROVAL. By GBCI
(provided that GBCI is not then in material breach of any of its
representations, warranties, covenants or other agreements in this
Agreement), if (i) FNBM's Board of Directors (a) fails to recommend to
its shareholders the approval of the Merger or (b) modifies, withdraws
or changes in a manner adverse to GBCI its recommendation to
shareholders to approve the Merger; or (ii) regardless of whether
FNBM's Board of Directors recommends to its shareholders the approval
of the Merger, FNBM's shareholders elect not to approve the Merger.
7.5.6 IMPRACTICABILITY. By either GBCI or FNBM, upon written notice given
to the other party, if the board of directors of the party seeking
termination under this Section 7.5.6 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 Utah to restrain or invalidate the
Merger or this Agreement.
7.5.7 DISSENTING SHARES. By GBCI, if holders of 10% or more of the
outstanding shares of FNBM Common Stock are Proposed Dissenting
Shares.
7.5.8 SUPERIOR PROPOSAL - TERMINATION BY FNBM. By the board of directors of
FNBM upon written notice to GBCI if such board of directors has in
good faith determined that a Takeover Proposal constitutes a Superior
Proposal; provided, however, that FNBM may not terminate this
Agreement pursuant to this Section 7.5.8 unless (i) it has not
breached Section 4.1.10, (ii) subsequent to delivering such notice of
termination, it intends to enter into a letter of intent, acquisition
agreement or similar agreement relating to such Superior Proposal,
(iii) it has provided GBCI at least five (5) days' prior written
notice advising GBCI that the board of directors of FNBM is prepared
to accept a Superior Proposal and has given GBCI, if it so elects, an
opportunity to amend the terms of this Agreement (and negotiated with
GBCI in good faith with respect to such terms) in such a manner as
would enable FNBM's board of directors to proceed with the Merger, and
(iv) simultaneously upon entering into such letter of intent,
acquisition agreement or similar agreement relating to such Superior
Proposal referred to in clause (ii), it delivers to GBCI the Break-Up
Fee.
7.5.9 SUPERIOR PROPOSAL - TERMINATION BY GBCI. By GBCI upon written notice
to FNBM if (i) an Acquisition Event will have occurred or (ii) a third
party will have made a proposal to FNBM or its shareholders to engage
in or entered into an agreement with respect to an Acquisition Event,
and this Agreement and the Merger are not approved at the FNBM
Meeting.
7.6 TERMINATION FEE PAYABLE BY FNBM. Due to expenses, direct and indirect,
incurred by GBCI in negotiating and executing this Agreement and in taking
steps to effect the Merger, FNBM will pay to GBCI $200,000 (the
"Termination Fee") if GBCI terminates this Agreement pursuant to
xlii
Sections 7.5.3 (breach of representation) or 7.5.4 (breach of covenant). If
the Termination Fee becomes payable pursuant to this Section 7.6, it will
be payable on GBCI's demand and must be paid by FNBM within three Business
Days following the date of GBCI's demand.
7.7 TERMINATION FEE PAYABLE BY GBCI. Due to expenses, direct and indirect,
incurred by FNBM in negotiating and executing this Agreement and in taking
steps to effect the Merger, GBCI will pay to FNBM the Termination Fee if
FNBM terminates this Agreement pursuant to Sections 7.5.3 (breach of
representation) or 7.5.4 (breach of covenant). If the Termination Fee
becomes payable pursuant to this Section 7.7, it will be payable on FNBM's
demand and must be paid by GBCI within three Business Days following the
date of FNBM's demand.
7.8 BREAK-UP FEE. If (a) this Agreement is terminated pursuant to Section
7.5.5(i) (Failure to Recommend Shareholder Approval), Section 7.5.8
(Superior Proposal - Termination by FNBM), or Section 7.5.9(i) (Superior
Proposal - Termination by GBCI - Immediate Acquisition Event), then FNBM
will immediately pay to GBCI $1 million (the "Break-Up Fee"). If this
Agreement is terminated pursuant to Section 7.5.9(ii) (Superior Proposal -
Termination by GBCI -Subsequent Acquisition Event) and prior to or within
six months after such termination, FNBM enters into an agreement, or
publicly announces an intention, to engage in an Acquisition Event, or
within twelve months after such termination an Acquisition Event will have
occurred, then FNBM will promptly pay to GBCI the Break-Up Fee.
7.9 COST ALLOCATION UPON TERMINATION. In connection with the termination of
this Agreement under this Section 7, except as provided in Sections 7.6 and
7.7, GBCI and FNBM will each pay its own out-of-pocket costs incurred in
connection with this Agreement and will have no other liability to the
other party. The parties agree that the agreements herein with respect to
the Termination are integral parts of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty.
SECTION 8.
MISCELLANEOUS
8.1 NOTICES. Any notice, request, instruction or other document to be given
under this Agreement will be in writing and will be delivered personally or
sent by registered or certified mail or overnight Federal Express service,
postage prepaid, addressed as follows:
Glacier: Glacier Bancorp, Inc.
49 Commons Loop
Kalispell, Montana 59901
Attn: Michael J. Blodnick
President and CEO
with a copy to: Graham & Dunn PC
Pier 70
2801 Alaskan Way Suite 300
Seattle, Washington 98121-1128
Attn: Stephen M. Klein, Esq.
Kimberly F. Stephan, Esq.
xliii
FNBM: First National Bank of Morgan
120 North State Street
Morgan, Utah 84050
Attn: Stanton Nielsen
President
with a copy to: Rothgerber, Johnson & Lyons LLP
One Tabor Center, Suite 3000
1200 Seventeenth Street
Denver, Colorado 80202-5855
Attn: Kevin Kelly, Esq.
Tennyson Grebenar, Esq.
or to such other address or person as any party may designate by written
notice to the other given under this Section.
8.2 WAIVERS AND EXTENSIONS. Subject to Section 9, GBCI or FNBM may grant
waivers or extensions to the other party, but only through a written
instrument executed by the President and/or CEO of the party granting the
waiver or extension. Waivers or extensions that do not comply with the
preceding sentence are not effective. In accordance with this Section 8.2,
a party may extend the time for the performance of any of the obligations
or other acts of any other party, and may waive:
(a) any inaccuracies of any other party in the representations and
warranties contained in this Agreement or in any document delivered in
connection with this Agreement;
(b) compliance with any of the covenants of any other party; and
(c) any other party's performance of any obligations under this Agreement
and any other condition precedent set out in Section 5.
8.3 CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise expressly
provided in this Agreement, this Agreement: (i) covers the entire
understanding of the Parties, and no modification or amendment of its terms
or conditions will be effective unless in writing and signed by the Parties
or their respective duly authorized agents; (ii) will not be interpreted by
reference to any of the titles or headings to the Sections or Subsections
of this Agreement, which have been inserted for convenience only and are
not deemed a substantive part of this Agreement; (iii) is deemed to include
all amendments to this Agreement, each of which is made a part of this
Agreement by this reference; and (iv) may be executed in one or more
counterparts, each of which will be deemed an original, but all of which
taken together will constitute one and the same document. References in
this Agreement to Recitals, Sections, Subsections or Schedules are
references to the Recitals, Sections, Subsections and Schedules of and to
this Agreement unless expressly stated otherwise.
8.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. Except as set forth
below, the representations, warranties, agreements and covenants set forth
in this Agreement will not survive Closing or termination of this
Agreement, except that (i) Section 4.9 (Confidentiality), Sections 7.6 and
7.7 (Termination-Related Fees), Section 7.8 (Break-Up Fee), Section 7.9
(Cost Allocation Upon Termination), and Sections 8.3 through 8.8 will
survive termination; and (ii) the covenants and other agreements in this
Agreement that impose duties or obligations on the parties following
xliv
Closing, including Section 6.3 (Employee Benefit Issues) and Section 6.4
(Indemnification), will survive Closing. Except as specifically set forth
in the preceding sentences, none of the representations, warranties,
agreements or covenants contained in this Agreement will survive Closing,
and neither GBCI nor FNBM will have any rights or remedies after Closing
with respect to any breach of any such representations, warranties,
agreements or covenants.
8.5 ATTORNEYS' FEES AND COSTS. In the event of any dispute or litigation with
respect to the terms and conditions or enforcement of rights or obligations
arising by reason of this Agreement or the Merger, the substantially
prevailing party in any such litigation will be entitled to reimbursement
from the other party of its costs and expenses, including reasonable
attorneys' fees.
8.6 ARBITRATION. At either party's request, the parties must submit any
dispute, controversy or claim arising out of or in connection with, or
relating to, this Agreement or any breach or alleged breach of this
Agreement, to arbitration under the American Arbitration Association's
rules then in effect (or under any other form of arbitration mutually
acceptable to the parties). A single arbitrator agreed on by the parties
will conduct the arbitration. If the parties cannot agree on a single
arbitrator, each party must select one arbitrator and those two arbitrators
will select a third arbitrator. This third arbitrator will hear the
dispute. The arbitrator's decision is final (except as otherwise
specifically provided by law) and binds the parties, and either party may
request any court having jurisdiction to enter a judgment and to enforce
the arbitrator's decision. The arbitrator will provide the parties with a
written decision naming the substantially prevailing party in the action.
This prevailing party is entitled to reimbursement from the other party for
its costs and expenses, including reasonable attorneys' fees. Any
arbitration or related proceedings will take place in Salt Lake County,
Utah.
8.7 GOVERNING LAW AND VENUE. This Agreement will be governed by and construed
in accordance with the laws of the State of Utah, except to the extent that
federal law may govern certain matters. The parties must bring any legal
proceeding arising out of this Agreement in Salt Lake County, Utah. Each
party consents to and submits to the jurisdiction of any local state or
federal court located in Salt Lake County, Utah.
8.8 SEVERABILITY. If a court determines that any term of this Agreement is
invalid or unenforceable under applicable law, the remainder of this
Agreement will not be affected thereby, and each remaining term will
continue to be valid and enforceable to the fullest extent permitted by
law.
8.9 NO ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned by any of the parties
(whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except as
otherwise expressly provided, this Agreement (including the documents and
instruments referred to in this Agreement) is not intended to confer upon
any person other than the parties any rights or remedies under this
Agreement.
SECTION 9.
AMENDMENTS
Subject to applicable law, this Agreement and the form of any attached
Exhibit or Schedule may be amended upon authorization of the boards of directors
of the parties, whether before or after the FNBM Meeting; provided, however,
that after approval by FNBM's shareholders, no amendment will be made changing
the form or reducing the amount of consideration to be received by the
shareholders of FNBM without the further approval of such shareholders. All
amendments, modifications, extensions
xlv
and waivers must be in writing and signed by the party agreeing to the
amendment, modification, extension or waiver.
[signatures on following pages]
xlvi
This Plan and Agreement of Merger is dated as of the 31st day of May, 2006.
GLACIER BANCORP, INC.
By: /s/ Michael J. Blodnick
------------------------------------
Michael J. Blodnick, President and
CEO
FIRST NATIONAL BANK OF MORGAN
By: /s/ Stanton Nielsen
------------------------------------
Stanton Nielsen, President
xlvii
ADDENDUM TO BE SIGNED UPON FORMATION OF NEW FIRST NATIONAL BANK OF MORGAN:
This Plan and Agreement of Merger is ratified and entered into as of the _____
day of _____________, 2006.
NEW FIRST NATIONAL BANK OF MORGAN
By:
------------------------------------
Its:
-----------------------------------
xlviii
Appendix B
DISSENTERS' RIGHTS UNDER NATIONAL BANK ACT
(12 USC 215A)
(b) Dissenting shareholders
If a merger shall be voted for at the called meetings by the necessary
majorities of the shareholders of each association or State bank
participating in the plan of merger, and thereafter the merger shall be
approved by the Comptroller, any shareholder of any association or State
bank to be merged into the receiving association who has voted against such
merger at the meeting of the association or bank of which he is a
stockholder, or has given notice in writing at or prior to such meeting to
the presiding officer that he dissents from the plan of merger, shall be
entitled to receive the value of the share so held by him when such merger
shall be approved by the Comptroller upon written request made to the
receiving association at any time before thirty days after the date of
consummation of the merger, accompanied by the surrender of his stock
certificates.
(c) Valuation of shares
The value of the shares of any dissenting shareholder shall be
ascertained, as of the effective date of the merger, by an appraisal made
by a committee of three persons, composed of
(1) one selected by the vote of the holders of the majority of the stock,
the owners of which are entitled to payment in cash;
(2) one selected by the directors of the receiving association; and
(3) one selected by the two so selected. The valuation agreed upon by any
two of the three appraisers shall govern. If the value so fixed shall not
be satisfactory to any dissenting shareholder who has requested payment,
that shareholder may, within five days after being notified of the
appraised value of his shares, appeal to the Comptroller, who shall cause a
reappraisal to be made which shall be final and binding as to the value of
the shares of the appellant.
(d) Application to shareholders of merging associations: appraisal by
Comptroller; expenses of receiving association; sale and resale of shares; State
appraisal and merger law
If, within ninety days from the date of consummation of the merger,
for any reason one or more of the appraisers is not selected as herein
provided, or the appraisers fail to determine the value of such shares, the
Comptroller shall upon written request of any interested party cause an
appraisal to be made which shall be final and binding on all parties. The
expenses of the Comptroller in making the reappraisal or the appraisal, as
the case may be, shall be paid by the receiving association. The value of
the shares ascertained shall be promptly paid to the dissenting
shareholders by the receiving association. The shares of stock of the
receiving association which would have been delivered to such dissenting
shareholders had they not requested payment shall be sold by the receiving
association at an advertised public auction, and the receiving association
shall have the right to purchase any of such shares at such public auction,
if it is the highest bidder therefor, for the purpose of reselling such
shares within thirty days thereafter to such
person or persons and at such price not less than par as its board of
directors by resolution may determine. If the shares are sold at public
auction at a price greater than the amount paid to the dissenting
shareholders, the excess in such sale price shall be paid to such
dissenting shareholders. The appraisal of such shares of stock in any State
bank shall be determined in the manner prescribed by the law of the State
in such cases, rather than as provided in this section, if such provision
is made in the State law; and no such merger shall be in contravention of
the law of the State under which such bank is incorporated. The provisions
of this subsection shall apply only to shareholders of (and stock owned by
them in) a bank or association being merged into the receiving association.
Appendix C
(HOVDE FINANCIAL LOGO)
May 31, 2006
Board of Directors
First National Bank of Morgan
120 North State Street
Morgan, UT 84050
Dear Members of the Board:
We understand that First National Bank of Morgan ("FNBM"), a national
banking association organized under the laws of the United States, with its
principal office located in Morgan, UT, and Glacier Bancorp, Inc. ("GBCI"), a
Montana corporation registered as a bank holding company under the Bank Holding
Company Act of 1956, as amended, on its own behalf and on behalf of a national
banking association to be formed by GBCI as its wholly owned subsidiary ("New
Bank"), are about to enter into a Plan and Agreement of Merger (the
"Agreement"), to be dated on or about May 31, 2006, pursuant to which FNBM will
merge with and into New Bank, the separate legal existence of FNBM will cease,
and FNBM and New Bank will become a single national banking association under
the name "First National Bank of Morgan", which will be a wholly owned
subsidiary of GBCI (the "Merger"). In connection with the Merger, in accordance
with the provisions of, and subject to certain adjustments provided for in, the
Agreement, on the Effective Date, all of the FNBM Common Stock issued and
outstanding immediately prior to the Execution Date, except for Proposed
Dissenting Shares, will, in the aggregate, automatically and without any action
on the part of the holders thereof be converted into and represent the right to
receive from GBCI: (i) Ten Million Dollars ($10,000,000), plus (ii) the number
of GBCI Shares, rounded to the nearest thousandth, obtained by dividing (x) Ten
Million Dollars ($10,000,000) by (y) the Glacier Average Closing
Price(collectively, subject to any applicable adjustments, the "Merger
Consideration"). Capitalized terms used, but not otherwise defined, herein shall
have the same meaning ascribed to them in the Agreement. In connection with the
Merger and the Agreement, you have requested our opinion as to the fairness,
from a financial point of view, of the Merger Consideration to be paid to the
shareholders of FNBM.
Hovde Financial, Inc. ("Hovde"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bidding, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes.
www.hovde.com
1824 Jefferson Place, NW 1629 Colonial Parkway 222 N. Sepulveda Boulevard #1306 3908 S. Ocean Boulevard, Suite M122
Washington, DC 20036 Inverness, IL 60067 El Segundo, CA 90245 Highland Beach, FL 33487
Telephone 202.775.8109 Telephone 847.991.6622 Telephone 310-535-0030 Telephone 561.279.7199
Facsimile 202.293.5287 Facsimile 847.991.5928 Facsimile 310-535-9203 Facsimile 561.278.5856
Board of Directors
May 31, 2006
Page 2 of 4
We were retained by FNBM to act as its financial advisor in connection with
the Agreement and the Merger. We will receive compensation from FNBM in
connection with our services, a significant portion of which is contingent upon
the consummation of the Merger. Additionally, FNBM has agreed to indemnify us
for certain liabilities arising out of our engagement.
During the course of our engagement and for the purposes of the opinion set
forth herein, we have:
(i) reviewed the Agreement and all attachments thereto;
(ii) reviewed certain historical publicly available business and financial
information concerning FNBM and GBCI;
(iii) reviewed certain internal financial statements and other financial
and operating data concerning FNBM;
(iv) held discussions with members of the senior management of FNBM and
GBCI for the purpose of reviewing the future prospects of FNBM and
GBCI, including financial forecasts related to the respective
businesses, earnings, assets, liabilities and the amount and timing of
cost savings (the "Synergies") expected to be achieved as a result of
the Merger;
(v) reviewed historical market prices and trading volumes of GBCI Common
Stock;
(vi) reviewed the terms of recent merger and acquisition transactions, to
the extent publicly available, involving banks and bank holding
companies that we considered relevant;
(vii) analyzed the pro forma impact of the Merger on the combined company's
earnings per share, consolidated capitalization and financial ratios;
and
(viii) performed such other analyses and considered such other factors as
we have deemed appropriate.
We also took into account our assessment of general economic, market and
financial conditions and our experience in other transactions as well as our
knowledge of the banking industry and our general experience in securities
valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by
FNBM and GBCI and in the discussions with the managements of FNBM and GBCI. In
that regard, we have assumed that the financial forecasts, including, without
Board of Directors
May 31, 2006
Page 3 of 4
limitation, the Synergies and projections regarding under-performing and
nonperforming assets and net charge-offs have been reasonably prepared on a
basis reflecting the best currently available information and judgments and
estimates of FNBM and GBCI and that such forecasts will be realized in the
amounts and at the times contemplated thereby. We are not experts in the
evaluation of loan and lease portfolios for purposes of assessing the adequacy
of the allowances for losses with respect thereto and have assumed that such
allowances made by the subsidiaries of FNBM and GBCI are in the aggregate
adequate to cover such losses. We were not retained to and did not conduct a
physical inspection of any of the properties or facilities of FNBM, GBCI or
their respective subsidiaries. In addition, we have not reviewed individual
credit files nor have we made an independent evaluation or appraisal of the
assets and liabilities of FNBM, GBCI or any of their respective subsidiaries and
we were not furnished with any such evaluations or appraisals.
We have assumed that the Merger will be consummated substantially in
accordance with the terms set forth in the Agreement. We have further assumed
that the Merger will be accounted for as a purchase under generally accepted
accounting principles. We have assumed that the Merger is, and will be, in
compliance with all laws and regulations that are applicable to FNBM, GBCI and
their subsidiaries. In rendering this opinion, we have assumed that there are no
factors that would impede any necessary regulatory or governmental approval of
the Merger and we have further assumed that, in the course of obtaining the
necessary regulatory and governmental approvals, no restriction will be imposed
on GBCI or the surviving corporations that would have a material adverse effect
on the surviving corporations or the contemplated benefits of the Merger. We
have also assumed that no change in applicable law or regulation would occur
that would cause a material adverse change in the prospects or operations of
GBCI or any of the surviving corporations after the Merger.
Our opinion is based solely upon the information available to us and the
economic, market and other circumstances, as they exist as of the date hereof.
Events occurring and information that becomes available after the date hereof
could materially affect the assumptions and analyses used in preparing this
opinion. We have not undertaken to reaffirm or revise this opinion or otherwise
comment upon any events occurring or information that becomes available after
the date hereof, except as otherwise agreed in our engagement letter.
We are not expressing any opinion herein as to the prices at which GBCI
Shares issued in the Merger may trade if and when they are issued or at any
future time, nor does our opinion constitute a recommendation to any holder of
FNBM Common Stock as to how such holder should vote with respect to the
Agreement at any meeting of holders of the FNBM Common Stock.
This letter is solely for the information of the Board of Directors of FNBM
and is not to be used, circulated, quoted or otherwise referred to for any other
purpose, nor is it to be filed with, included in or referred to in whole or in
part in any registration statement, proxy statement or any other document,
except in each case in accordance with our prior written consent which shall not
be unreasonably withheld; provided, however, that we hereby consent to the
inclusion and reference to
Board of Directors
May 31, 2006
Page 4 of 4
this letter in any registration statement, proxy statement, information
statement or tender offer document to be delivered to the holders of FNBM Common
Stock in connection with the Merger if and only if this letter is quoted in full
or attached as an exhibit to such document and this letter has not been
withdrawn prior to the date of such document.
Subject to the foregoing and based on our experience as investment bankers,
our activities and assumptions as described above, and other factors we have
deemed relevant, we are of the opinion as of the date hereof that the Merger
Consideration to be paid to the shareholders of FNBM pursuant to the Agreement
is fair, from a financial point of view.
Sincerely,
/s/ Hovde Financial, Inc.
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HOVDE FINANCIAL, INC.