As filed with the Securities and Exchange Commission on March 6, 2007
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 of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification no.)
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 PETER G. WEINSTOCK
WILLIAM E. BARTHOLDT PAM GATES O'QUINN
Graham & Dunn PC Jenkens & Gilchrist, P.C.
Pier 70 1445 Ross Avenue, Suite 3700
2910 Alaskan Way, Suite 300 Dallas, Texas 75202-2799
Seattle, Washington 98121-1128 Telephone: (214) 855-4500
Telephone: (206) 340-9615 Facsimile: (214) 855-4300
Facsimile: (206) 340-9599
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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 North Side State Bank of Rock Springs.
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 890,000 N/A $9,959,460 $305.76
=========================================================================================
(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 North Side State Bank of Rock Springs
("North Side") by Glacier.
(2) Calculated in accordance with Rule 457(f) under the Securities Act of 1933,
the proposed maximum offering price of $9,959,460 is computed by
subtracting $9,000,000 (the estimated cash to be paid by Glacier) from the
product of (A) $18,959.46, the per-share book value of North Side common
stock on February 28, 2007, times (B) 1,000 (the maximum number of shares
of North Side 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 NORTH SIDE STATE BANK OF ROCK SPRINGS GLACIER BANCORP, INC.
MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT
Dear North Side State Bank of Rock Springs Shareholders:
The boards of directors of North Side State Bank of Rock Springs, Wyo. and
Glacier Bancorp, Inc. have agreed on a merger of North Side with 1st Bank, a
wholly-owned subsidiary of Glacier. When the merger occurs, the resulting bank
will operate under the name 1st Bank as a wholly owned subsidiary of Glacier.
Under the terms of the Plan and Agreement of Merger, dated January 22,
2007, Glacier will pay to North Side shareholders, shares of Glacier common
stock having a fixed total value of $19,000,000, plus a cash payment equal to
the amount by which North Side's "closing tangible equity" (as defined in the
Merger Agreement) exceeds $10,000,000. It is currently anticipated that the cash
payment will be approximately $9,000,000.
Each outstanding share of North Side common stock will be exchanged for a
"unit" comprised of Glacier common stock and cash. The number of shares of
Glacier common stock that will be exchanged for shares of North Side, as well as
the amount of cash payable by Glacier, will not be determined until five days
prior to the merger. Assuming for purposes of illustration only that the cash
payment made by Glacier is $9,000,000, North Side shareholders will receive
$28,000 in a combination of cash and Glacier common stock per North Side share.
Assuming, again for purposes of illustration only, that the value of Glacier as
determined under the merger agreement is $_____, which was the closing price of
Glacier common stock on _______, 2007, North Side shareholders will own
approximately __% 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 North Side 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 North Side's outstanding common stock. We will hold a special shareholders'
meeting to vote on the merger proposal. THE NORTH SIDE SPECIAL SHAREHOLDERS'
MEETING WILL BE HELD ON ___________, ___________, 2007, AT ______ __.M. LOCAL
TIME, AT THE MAIN OFFICE OF NORTH SIDE, LOCATED AT 601 NORTH FRONT STREET, ROCK
SPRINGS, WYOMING. 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 North Side board of directors, I recommend that you vote
FOR approval of the merger.
----------------------------------------
Christian N. Bunning
President
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 FEDERAL DEPOSIT INSURANCE FUND OR ANY
OTHER GOVERNMENTAL AGENCY. SUCH SHARES ARE NOT GUARANTEED BY GLACIER OR NORTH
SIDE AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
This proxy statement/prospectus is dated March __, 2007, and is first being
mailed to North Side shareholders on March __, 2007.
NORTH SIDE STATE BANK OF ROCK SPRINGS, WYO.
601 NORTH FRONT STREET
ROCK SPRINGS, WYOMING 82901-5350
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ___________, 2007
TO THE SHAREHOLDERS OF NORTH SIDE STATE BANK OF ROCK SPRINGS:
A special meeting of shareholders of North Side State Bank of Rock Springs,
Wyo. will be held on __________, 2007, at _____ __.m. local time, at the main
office of North Side, located at 601 North Front Street, Rock Springs, Wyoming.
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 January 22, 2007, among Glacier
Bancorp, Inc., North Side and 1st Bank, a subsidiary of Glacier, under the
terms of which North Side will merge with and into 1st Bank, 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 North Side common stock at the close of business on
_________, 2007, 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 North Side's outstanding common stock is required for approval of the
merger agreement. As of _________, 2007 [RECORD DATE], there were 1,000 shares
of North Side common stock outstanding and entitled to vote at the special
meeting.
North Side shareholders have the right to dissent from the merger and
obtain payment of the value of their North Side shares under applicable
provisions of Wyoming law. A copy of these 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 NORTH SIDE HAS DETERMINED THAT THE MERGER
AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF NORTH SIDE 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,
----------------------------------------
Paula J. Wonnacott, Secretary
Rock Springs, Wyoming
March ___, 2007
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 __________, 2007 in order to receive
them before the North Side special shareholders' meeting.
See "Where You Can Find More Information About Glacier" at page __.
TABLE OF CONTENTS
PAGE
----
QUESTIONS AND ANSWERS ABOUT THIS DOCUMENT AND THE MERGER................. 1
SUMMARY.................................................................. 4
RISK FACTORS............................................................. 10
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS..................... 11
SELECTED HISTORICAL FINANCIAL INFORMATION OF GLACIER..................... 12
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION......................... 13
NORTH SIDE SPECIAL SHAREHOLDERS' MEETING................................. 15
BACKGROUND OF AND REASONS FOR THE MERGER................................. 16
THE MERGER............................................................... 24
INFORMATION CONCERNING NORTH SIDE........................................ 37
DESCRIPTION OF GLACIER'S CAPITAL STOCK................................... 41
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF GLACIER AND NORTH SIDE
COMMON STOCK.......................................................... 41
CERTAIN LEGAL MATTERS.................................................... 44
EXPERTS.................................................................. 44
WHERE YOU CAN FIND MORE INFORMATION ABOUT GLACIER........................ 45
Appendix A - Plan and Agreement of Merger
Appendix B - Section 13-4-110 of Wyoming Statutes, Regarding Dissenter's Rights
Appendix C - Opinion of Sheshunoff & Co. Investment Banking, Financial Advisor
to North Side
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 North Side State Bank of
Rock Springs and a prospectus of Glacier Bancorp, Inc. As a proxy statement, it
is being provided to you by North Side because the board of directors of North
Side is soliciting your proxy to vote to approve the proposed merger of North
Side with and into 1st Bank. After the merger, the resulting bank 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 part of the
consideration for your North Side shares.
WHAT WILL NORTH SIDE SHAREHOLDERS RECEIVE IN THE MERGER?
Under the terms of the Plan and Agreement of Merger, dated as of January
22, 2007, by and among Glacier, 1st Bank and North Side, Glacier will issue
shares of its common stock and pay cash in exchange for all outstanding shares
of North Side common stock. The Glacier common stock to be issued will have a
value of $19,000,000, with the exact number of shares based on Glacier's average
closing trading price on the NASDAQ Global Select Market during a 10-trading day
period prior to the closing of the merger. The total cash to be paid by Glacier
will be an amount determined by subtracting $10,000,000 from the "North Side
Closing Capital" as defined in the merger agreement. The amount of total cash
will be established prior to the closing of the merger.
WHAT WILL I RECEIVE IN THE MERGER?
In the merger, each share of North Side common stock will be converted into
the right to receive a "unit" consisting of a combination of Glacier common
stock and cash. As described immediately below, the exact number of shares of
Glacier common stock and the exact amount of cash that will comprise each "unit"
will not be determined until shortly prior to the closing of the merger. The
value of the Glacier shares to be issued in the merger is fixed at $19,000,000
(determined in accordance with the merger agreement); assuming for purposes of
illustration only that the cash portion of the merger consideration is
$9,000,000, North Side shareholders will receive $28,000 in a combination of
cash and Glacier common stock per North Side share.
WHAT IS THE AMOUNT OF CASH AND THE NUMBER OF SHARES OF GLACIER COMMON STOCK IN
THE "UNITS" THAT I WILL RECEIVE FOR MY SHARES OF NORTH SIDE COMMON STOCK?
The actual aggregate number of shares of Glacier common stock to be issued
in the merger will not be determined until the fifth calendar day immediately
prior to the effective date of the merger. Similarly, the cash portion of
Glacier's purchase price under the merger agreement will be based on North
Side's "Closing Capital," which will not be determined until the fifth calendar
day immediately prior to the effective date of the merger. As a result, the
actual number of shares of Glacier common stock and the actual amount of cash
that you will receive for each of your North Side shares will not be determined
until shortly before the closing of the merger. Those amounts will be determined
based on formulas 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.
WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
We expect that for United States federal income tax purposes, North Side
shareholders who exchange their shares of North Side common stock for shares of
Glacier common stock and cash pursuant to the merger will recognize gain (but
not loss) on the exchange 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 shareholder's
adjusted tax basis in its shares of North Side common stock surrendered) or (2)
the amount of cash (excluding any cash received in lieu of fractional shares)
received pursuant to the merger. We urge you to consult your tax adviser to
1
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
North Side as defined under applicable federal securities laws. See "The Merger
- Stock Resales by North Side Affiliates."
WHEN AND WHERE WILL THE SPECIAL MEETING TAKE PLACE?
North Side will hold a special meeting of its shareholders on __________,
_______, 2007, at _______ ___.m., at the main offices of North Side, located at
601 North Front Street, Rock Springs, Wyoming.
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 North Side's outstanding common stock. The directors of North Side
beneficially own and have the right to vote 101.5 shares, representing 10.15% 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.
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 North Side's secretary prior to
the vote.
WHO MAY VOTE AT THE MEETING?
The board of directors of North Side has set ________, 2007, as the record
date for the meeting. If you were the owner of North Side common stock at the
close of business on ______, 2007, you may vote at the meeting.
2
WHEN WILL THE MERGER OCCUR?
We presently expect to complete the merger during the second quarter of
2007. The merger will occur after approval of the shareholders of North Side is
obtained and after the merger has received regulatory approval and the other
conditions to the merger are satisfied or waived. Glacier and North Side 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
ENVELOPE AS SOON AS POSSIBLE so that your shares can be voted at North
Side's special meeting of shareholders.
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 North Side board of directors in
approving the merger agreement. See "Background of 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:
Mr. William Fabian
North Side State Bank of Rock Springs
601 North Front Street
Rock Springs, Wyoming 82901-5350
(307) 362-5601
e-mail: bill.nssb@onewest.net
This proxy statement/prospectus does not cover any resale of the securities
to be received by shareholders of North Side 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 MARCH __, 2007.
3
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.
INFORMATION ABOUT GLACIER AND NORTH SIDE
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 86 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 twelve wholly-owned subsidiary
commercial banks: Glacier Bank of Kalispell, First Security Bank of Missoula;
Glacier Bank of Whitefish, Valley Bank of Helena, Big Sky Western Bank of
Bozeman, Western Security Bank of Billings, First National Bank of Lewistown,
Western Bank of Chinook, N.A., all located in Montana; Mountain West Bank,
located in Idaho with two branches in Utah and two branches in Washington; 1st
Bank, located in Evanston, Wyoming; Citizens Community Bank, located in
Pocatello, Idaho; and First National Bank of Morgan, Utah. Glacier is also the
holding company of four financing subsidiaries.
As of December 31, 2006, Glacier had total assets of approximately $4.5
billion, total net loans receivable and loans held for sale of approximately
$3.2 billion, total deposits of approximately $3.2 billion and approximately
$456 million in shareholders' equity. Glacier common stock trades on The NASDAQ
Global Select Market under the symbol "GBCI."
Financial and other information regarding Glacier is set forth in Glacier's
annual report on Form 10-K for the year ending December 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 that are incorporated by reference into this proxy
statement/prospectus. See "Where You Can Find More Information About Glacier."
NORTH SIDE STATE BANK OF ROCK SPRINGS
601 North Front Street
Rock Springs, Wyoming 82901-5350
(307) 362-5601
North Side is a state-chartered bank located in Rock Springs, Wyoming,
where it was established in 1912. North Side offers a wide range of banking
products and services, including transaction and savings deposits, commercial,
consumer and real estate loans, and mortgage origination services. North Side
serves individuals, small to medium-sized businesses, community organizations
and public entities.
4
As of December 31, 2006, North Side had total assets of approximately $122
million, total net loans receivable of approximately $38 million, total deposits
of approximately $103 million and approximately $19 million in shareholders'
equity.
For additional information, see "Information Concerning North Side."
NORTH SIDE WILL MERGE INTO A SUBSIDIARY OF GLACIER
The merger agreement provides for the merger of North Side with and into
1st Bank, a wholly owned subsidiary of Glacier. In the merger, your shares of
North Side common stock will be exchanged for a combination of shares of Glacier
common stock and cash. After the merger, you will no longer own shares of North
Side.
The merger agreement is attached as APPENDIX A to this document. We
encourage you to read the merger agreement in its entirety.
NORTH SIDE SPECIAL MEETING
The special meeting of shareholders of North Side will be held at its main
office, located at 601 North Front Street, Rock Springs, Wyoming, on ________,
______, 2007 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 North Side special meeting if you owned
North Side common stock at the close of business on _________, 2007, the record
date. As of that date there were 1,000 shares of North Side 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 NORTH SIDE'S OUTSTANDING COMMON
STOCK
In order to approve the merger agreement, at least two thirds (66 2/3%) of
the outstanding shares of North Side 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 North Side
beneficially owned 101.5 shares, or 10.15%, of North Side's outstanding common
stock. The North Side directors have agreed to vote their shares in favor of
approval of the merger agreement.
NORTH SIDE REASONS FOR THE MERGER
North Side'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 North Side'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 North
Side's philosophy;
- the historical and prospective business of North Side:
- the likely impact of the merger on the employees and customers of
North Side;
- the strategic goals of North Side and North Side's financial condition
and prospects;
5
- the fact that Glacier's common stock is widely held and has an active
trading market; whereas, North Side's stock is illiquid and is not
publicly traded;
- the likelihood that the merger would provide the North Side
shareholders with an attractive premium over North Side's stand-alone
value; and
- the competitive and regulatory environment for North Side and
community banks generally.
North Side's board of directors also took into account advice of its financial
advisors, Sheshunoff & Co. Investment Banking, which issued an opinion that the
consideration to be received by North Side's common shareholders in the merger
is fair, from a financial point of view. See "Background of and Reasons for the
Merger - Reasons for the Merger" and "- Opinion of Financial Advisor to North
Side" and APPENDIX C "Fairness Opinion of Sheshunoff & Co. Investment Banking."
WHAT NORTH SIDE 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 North Side common stock outstanding as of the
date of the merger agreement.
If you do not provide notice of dissent, you will receive, for each share
of North Side common stock that you own, a "unit" consisting of a combination of
Glacier common stock and cash, without interest.
The total merger consideration that Glacier will pay for the shares of
North Side will be determined as follows:
- Stock Portion: Glacier will issue shares of its common stock having a
total value of $19,000,000. The exact number of shares to be issued
will be determined by dividing $19,000,000 by the average closing
price of Glacier's common stock during a 10 trading-day period
immediately preceding the fifth calendar day prior to the closing of
the merger.
- Cash Portion: Glacier will pay cash in an amount determined by
subtracting $10,000,000 from the amount of the "North Side Closing
Capital," as defined in the merger agreement, on the fifth calendar
day prior to the closing of the merger. Generally speaking, the "North
Side Closing Capital" means North Side's capital stock, surplus and
retained earnings, after giving effect to specified costs, payments,
expenses and other adjustments.
The merger agreement provides that the amount of consideration to be
received for each share of North Side common stock will be determined by
dividing the total consideration payable by 1,000, which is the number of shares
of North Side common stock outstanding at the close of business on the date the
merger agreement was executed.
The actual aggregate number of shares of Glacier common stock to be issued
in the merger, and the actual aggregate amount of cash to be paid, cannot be
determined until the fifth calendar day prior to the effective date of the
merger. Accordingly, the actual amount of Glacier common stock and cash that you
will receive for each of your North Side shares will not be determined until
shortly before the closing of the merger.
As described under "The Merger - Termination of the Merger Agreement," the
merger agreement provides that the merger may be terminated by either North Side
or Glacier if the Glacier average closing price is above or below specified
amounts, unless North Side or Glacier, as the case may be, elects to adjust the
total number of shares of Glacier common stock to be issued in the stock portion
of the merger consideration.
6
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither North Side 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, North Side shareholders who exchange their shares of North Side common
stock for shares of Glacier common stock and cash pursuant to the merger will
recognize gain (but not loss) on the exchange 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 shareholder's adjusted tax basis in its shares of North Side common stock
surrendered) or (2) the amount of cash (excluding any cash received in lieu of
fractional shares) received pursuant to the merger. 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.
NORTH SIDE SHAREHOLDERS HAVE DISSENTERS' RIGHTS
Under Wyoming law, North Side shareholders have the right to dissent from
the merger and receive cash for the value of their shares of North Side common
stock. A shareholder electing to dissent must strictly comply with all the
procedures required by the Wyoming statutes. These procedures are described
later in this document, and a copy of the relevant provisions is attached as
APPENDIX B.
THE NORTH SIDE BOARD OF DIRECTORS RECOMMENDS SHAREHOLDER APPROVAL OF THE MERGER
The North Side board of directors believes that the merger is in the best
interests of the North Side shareholders and has unanimously approved the merger
agreement. The North Side board of directors recommends that North Side
shareholders vote "FOR" approval of the merger agreement.
NORTH SIDE FINANCIAL ADVISOR SAYS THE MERGER CONSIDERATION IS FAIR TO NORTH SIDE
SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW
Sheshunoff & Co. Investment Banking has served as financial advisor to
North Side in connection with the merger and has given an opinion to North
Side's board of directors that, as of January 17, 2007, the consideration that
North Side's shareholders will receive for their North Side shares in the merger
is fair, from a financial point of view, to North Side shareholders. A copy of
the opinion delivered by Shesunoff & Co. Investment Banking is attached to this
document as APPENDIX C. North Side shareholders should read the opinion
carefully to understand the assumptions made, matters considered and limitations
of the review undertaken by Sheshunoff & Co. Investment Banking in providing its
opinion. The opinion is more fully described under the heading "Opinion of
Financial Advisor to North Side" below. North Side agreed to pay Sheshunoff &
Co. Investment Banking a fee for its services and indemnify it against certain
liabilities arising out of the merger or its engagement.
NORTH SIDE'S OFFICERS AND DIRECTORS HAVE INTERESTS IN THE MERGER THAT ARE
DIFFERENT FROM OR IN ADDITION TO THEIR INTERESTS AS SHAREHOLDERS
Certain members of North Side's management have interests in the merger
that are different from, or in addition to, their interests as North Side
shareholders. These interests arise out of provisions in the merger agreement
relating to indemnification of directors, certain bonuses to be paid to
directors of North Side and, in the case of William Fabian, North Side's Chief
Executive Officer and a North Side director, an employment agreement that will
take effect upon consummation of the merger. See "The Merger - Interests of
Certain Persons in the Merger."
The North Side board of directors was aware of these interests and took
them into account in its decision to approve the merger agreement.
7
THE MERGER IS EXPECTED TO OCCUR IN THE SECOND QUARTER OF 2007
Currently, we anticipate that the merger will occur in the second quarter
of 2007. 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 North Side'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 North Side may
terminate the merger either before or after the North Side 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 Board of Governors of the Federal
Reserve System and the Wyoming Division of Banking. 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.
EITHER NORTH SIDE OR GLACIER, AS THE CASE MAY BE, MUST PAY A TERMINATION FEE
UNDER CERTAIN CIRCUMSTANCES
The merger agreement provides that North Side must pay Glacier a
termination fee of $200,000 if Glacier terminates the merger agreement due to a
breach by North Side of its representations or covenants.
The merger agreement also provides that Glacier must pay North Side a
termination fee of $200,000 if North Side terminates the merger agreement due to
a breach by Glacier of its representations or covenants. See "The Merger -
Termination Fees."
NORTH SIDE MUST PAY GLACIER A BREAK-UP FEE UNDER CERTAIN CIRCUMSTANCES
Under the merger agreement, North Side must pay Glacier a break-up fee of
$950,000, if the merger agreement is terminated due to the failure of the North
Side 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
North Side.
North Side 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 North Side. See "The Merger - Break-up Fee."
8
NORTH SIDE SHAREHOLDERS WILL HAVE DIFFERENT RIGHTS AFTER THE MERGER
The rights of North Side shareholders are governed by Wyoming law, as well
as by North Side's articles of incorporation and bylaws. After completion of the
merger, the rights of the former North Side 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 North Side's articles of
incorporation and bylaws, there are some substantive and procedural differences
that will affect the rights of North Side shareholders. See "Comparison of
Certain Rights of Holders of Glacier and North Side Common Stock."
9
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 NORTH SIDE'S ABILITY TO PURSUE OTHER TRANSACTIONS
AND PROVIDES FOR THE PAYMENT OF A BREAK UP FEE IF NORTH SIDE DOES SO.
While the merger agreement is in effect and subject to very narrow
exceptions, North Side and its directors, officers and agents are prohibited
from initiating or encouraging inquiries with respect to alternative acquisition
proposals. The prohibition limits North Side's ability to seek offers that may
be superior from a financial point of view from other possible acquirers. If
North Side 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, North Side may be required to pay a $950,000 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 NORTH SIDE TO PAY A
TERMINATION FEE.
Under certain circumstances (generally involving North Side's breach of its
representations and covenants in the merger agreement), Glacier can terminate
the merger agreement and require North Side 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 North Side 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 will 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.
COMBINING OUR TWO COMPANIES MAY BE MORE DIFFICULT, COSTLY OR TIME-CONSUMING THAN
WE EXPECT.
Glacier and North Side 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 North Side or inconsistencies in standards, controls,
procedures and policies that adversely affect our ability to maintain
relationships with customers and employees or to achieve the anticipated
benefits of the merger. As with any merger of banking institutions, there also
may be disruptions that cause us to lose customers or cause customers to take
their deposits out of North Side.
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 North Side into Glacier, and the incremental costs
of operating as a combined company. However, it is possible that unexpected
transaction costs or future operating expenses, as well as other types of
unanticipated adverse developments, could have a material adverse effect on the
results of operations and financial condition of Glacier after the merger. If
the merger is completed and unexpected costs are incurred, the merger could have
a significant dilutive effect on Glacier's earnings per share, meaning earnings
per share could be less than if the merger had not been completed.
10
GLACIER MAY GROW THROUGH FUTURE ACQUISITIONS, WHICH COULD, IN SOME
CIRCUMSTANCES, ADVERSELY AFFECT NET INCOME.
Glacier has historically grown in part through acquisitions of other
financial institutions and assets, and anticipates that it will engage in
selected acquisitions 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, Glacier 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 the percentage ownership of
current shareholders.
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 North Side 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 North Side'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:
- 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;
11
- 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 North Side or
any person acting on behalf of Glacier or North Side are expressly qualified in
their entirety by the cautionary statements above. Neither Glacier nor North
Side 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, 2006, 2005, 2004, 2003 and 2002 is derived from audited
consolidated financial statements of Glacier. 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."
AT OR FOR THE FISCAL YEARS ENDED DECEMBER 31
--------------------------------------------------------------
2006 2005 2004 2003 2002
---------- ---------- ---------- ---------- ----------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
SUMMARY OF OPERATIONS
Interest income $ 253,326 $ 189,985 $ 147,285 $ 130,830 $ 133,989
Interest expense 95,038 59,978 39,892 38,478 47,522
---------- ---------- ---------- ---------- ----------
Net interest income 158,288 130,007 107,393 92,352 86,467
Provision for loan losses 5,192 6,023 4,195 3,809 5,745
---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 153,096 123,984 103,198 88,543 80,722
Noninterest income 51,842 44,626 34,565 33,562 25,917
Noninterest expenses 112,550 90,926 72,133 65,944 57,813
---------- ---------- ---------- ---------- ----------
Pre-tax net income 92,388 77,684 65,630 56,161 48,826
Taxes 31,257 25,311 21,014 18,153 16,424
---------- ---------- ---------- ---------- ----------
Net income 61,131 52,373 44,616 38,008 32,402
========== ========== ========== ========== ==========
Basic earnings per share* $ 1.23 $ 1.12 $ 0.97 $ 0.84 $ 0.73
Diluted earnings per share* $ 1.21 $ 1.09 $ 0.96 $ 0.83 $ 0.72
Cash dividends per share* $ 0.45 $ 0.40 $ 0.36 $ 0.32 $ 0.26
STATEMENT OF FINANCIAL CONDITIONS:
Total assets $4,467,739 $3,706,344 $3,010,737 $2,739,633 $2,281,344
Net loans receivable and LHFS 3,165,524 2,397,187 1,701,805 1,430,365 1,300,653
Total deposits 3,207,533 2,534,712 1,729,708 1,597,625 1,459,923
Total borrowings 646,508 719,413 900,148 842,280 544,953
Shareholder's equity 456,143 333,239 270,184 237,839 212,249
Book value per share* $ 8.72 $ 6.91 $ 5.87 $ 5.24 $ 4.76
KEY OPERATING RATIOS:
12
AT OR FOR THE FISCAL YEARS ENDED DECEMBER 31
--------------------------------------------------------------
2006 2005 2004 2003 2002
---------- ---------- ---------- ---------- ----------
Return on average assets 1.52% 1.52% 1.54% 1.53% 1.50%
Average equity to average assets 9.52% 8.61% 8.75% 9.10% 9.08%
Net interest margin(1) 4.35% 4.20% 4.15% 4.20% 4.51%
Non-performing over assets .19% 0.26% 0.32% 0.48% 0.51%
Dividend payout ratio 36.59% 35.93% 37.36% 38.07% 35.45%
(1) Calculated on a tax equivalent basis.
* Revised for stock splits and dividends.
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
GLACIER COMMON STOCK
Glacier common stock is quoted on The NASDAQ Global Select 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 Global Select Market, and
- dividends per share on Glacier common stock.
CASH
DIVIDENDS
HIGH* LOW* DECLARED
------ ------ ---------
2005
First quarter .......................... $18.65 $15.73 $0.09
Second quarter ......................... $17.59 $14.05 $0.10
Third quarter .......................... $20.93 $17.27 $0.10
Fourth quarter ......................... $22.33 $18.67 $0.11
2006
First quarter .......................... $21.81 $19.72 $0.11
Second quarter ......................... $21.20 $18.69 $0.11
Third quarter .......................... $23.24 $18.55 $0.11
Fourth quarter ......................... $25.25 $21.99 $0.12
2007
First quarter (through _____, 2007) .... $ $ $
----------
* Adjusted for stock splits and stock dividends.
At February 23, 2007, the 52,621,832 outstanding shares of Glacier common
stock were held by approximately 1,973 holders of record.
NORTH SIDE COMMON STOCK
North Side's common stock is not quoted on a stock exchange or market and
no broker makes a market in the stock. If North Side were to remain independent,
management of North Side does not expect that a market for North Side common
stock would develop. Stock transfer records maintained by North Side indicate
that there have been infrequent transactions in North Side's stock other than
occasional gift transactions. Other sales and purchases of shares of North Side
common stock are privately negotiated, and North Side is often not aware of the
price for those transactions. North Side is aware of no transfers of North Side
common stock since January 31, 2006. Consequently, no trading price date is
available which would accurately reflect the actual market value of
13
the shares.
At February 26, 2007, the 1,000 outstanding shares of North Side common
stock were held by approximately 136 holders of record.
The timing and amount of dividends paid by North Side is subject to
determination by the board of directors of North Side, in its sole discretion,
and depends upon earnings, cash requirements and its financial condition,
applicable government regulations and other factors deemed relevant by the North
Side board of directors. North Side has not historically paid quarterly cash
dividends, but rather annual cash dividends. In December 2005, North Side
declared and paid a dividend of $850.00 per share. In December 2006, North Side
declared and paid a dividend of $1,000.00 per share.
14
NORTH SIDE SPECIAL SHAREHOLDERS' MEETING
DATE, TIME, PLACE
The North Side special meeting of shareholders will be held on ________,
_______, 2007, at ____ ___.m. local time, at the main offices of North Side
located at 601 North Front Street, Rock Springs, Wyoming.
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
North Side'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, North Side may adjourn or
postpone the meeting in order to permit further solicitation of proxies by North
Side. 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, North Side 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 North Side board of directors has fixed 5:00 p.m. on _________, 2007 as
the record date for determining the holders of shares of North Side common stock
entitled to notice of and to vote at the special meeting. At the close of
business on the North Side record date, there were 1,000 shares of common stock
issued and outstanding and held by approximately ___ holders of record. Holders
of record of North Side 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 North Side have agreed to vote all shares held or
controlled by him or her in favor of approval of the merger. A total of 101.5
outstanding shares, or 10.15% of the outstanding shares of North Side common
stock, are covered by the 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 North Side's outstanding common stock is required to approve the
merger. At least fifty percent (50%) of the total outstanding shares of North
Side common stock must be present, either in person or by proxy, in order to
constitute a quorum for the meeting. For purposes of determining a quorum,
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 North Side common stock. AS A RESULT, ABSTENTIONS AND
BROKER NONVOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST APPROVAL OF THE
MERGER AGREEMENT.
15
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 HOLDER'S DISCRETION
ON ANY OTHER MATTER PROPERLY COMING BEFORE THE MEETING. Any proxy given by a
shareholder may be revoked before its exercise by:
- written notice to the Secretary of North Side;
- a later-dated proxy; or
- appearing and voting at the special meeting in person.
North Side is soliciting the proxy for the special meeting on behalf of the
North Side board of directors. North Side will bear the cost of solicitation of
proxies from its shareholders. In addition to using the mails, North Side 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. North Side does not expect to
pay any compensation for the solicitation of proxies. However, North Side 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
On an ongoing basis, North Side's board of directors has reviewed and
assessed the various business trends and conditions impacting North Side and
financial institutions generally, particularly those with its primary business
focus in our community and the surrounding area. The board of directors also has
evaluated various strategic alternatives available to North Side.
The North Side board of directors contacted Sheshunoff & Co. Investment
Banking in 2006 regarding their interest in evaluating the strategic
alternatives available to the Bank, including a potential sale of North Side.
Following the invitation of the board of directors of North Side, Sheshunoff &
Co. Investment Banking made a presentation to the North Side board of directors
regarding the possible value of North Side in the bank merger and acquisition
marketplace, trends of consolidation and increased competition in the financial
services industry, and merger and acquisition activity on a regional basis.
At the direction of our board, Sheshunoff & Co. Investment Banking began
contacting selected potential interested parties regarding the potential
acquisition of North Side. Of the parties contacted, four entered into
confidentiality agreements and received confidential disclosure materials
regarding North Side.
North Side received indications of interest from two interested parties;
the other parties declined to submit acquisition proposals. Our board, with
assistance from Sheshunoff & Co. Investment Banking and our legal advisors,
evaluated the indications of interest. Sheshunoff & Co. Investment Banking had
further negotiations with Glacier, the highest bidder in terms of aggregate
merger consideration, which negotiations resulted in an increase in the proposed
merger consideration. North Side's board of directors then authorized Sheshunoff
& Co. Investment Banking to invite Glacier to perform due diligence on North
Side. As Glacier was completing its due diligence review, the North Side board
of directors authorized legal counsel to begin negotiating the legal terms of an
acquisition transaction with counsel for Glacier. Glacier provided North Side
with a formal offer letter, which the North Side board of directors unanimously
recommended accepting.
16
Glacier and North Side board of directors continued to negotiate the terms
of a proposed definitive agreement. A the conclusion of the discussions, our
board of directors voted unanimously to approve the reorganization agreement,
the merger described therein and the transaction contemplated thereby.
Glacier and North Side executed the merger agreement and related documents
on January 22, 2007. After the close of business on January 22, 2007, the
parties issued a joint press release announcing the execution of the merger
agreement.
REASONS FOR THE MERGER - NORTH SIDE
At a special meeting held on January 17, 2007, the North Side board of
directors determined that the terms of the merger agreement were in the best
interests of North Side and its shareholders. In the course of reaching its
decision to approve the merger agreement, the North Side board of directors
consulted with Sheshunoff & Co. Investment Banking, its financial advisor, and
Jenkens & Gilchrist, P.C., its legal counsel. In reaching its final
determination, North Side's board of directors considered a number of factors
including, without limitation, the following:
- the terms of the merger agreement and the form of the consideration,
and the historical trading ranges for Glacier common stock;
- the alternatives of North Side's 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 North Side operates;
- information concerning Glacier's financial condition and results of
operations as well as the likelihood that Glacier would be able to
obtain regulatory approval for the merger;
- 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 Sheshunoff & Co. Investment Banking that the
consideration to be received by North Side'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 North
Side's philosophy;
- the expectation that North Side 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 North Side
and community banks generally and North Side's prospects as an
independent bank;
- Glacier's agreement to provide a severance policy for North Side
employees who do not continue as Glacier employees under which
employees terminated in certain instances may be eligible to receive
severance pay;
17
- the determination that a business combination with Glacier would
extend North Side's lending capabilities and increase the range of
financial products and services available to North Side'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;
- that the "break-up" fee provisions in the merger agreement could have
the effect of discouraging superior proposals for a business
combination between North Side and third parties;
- the possible disruption to North Side'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 North Side's
business; and
- the restrictions contained in the merger agreement on the operation of
North Side's business during the period between signing of the merger
agreement and completion of the merger, as well as the other covenants
and agreements of North Side contained in the merger agreement.
The foregoing discussion of the information and factors considered by the
North Side board of directors is not intended to be exhaustive. In reaching its
determination to approve and recommend the transaction, the North Side 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 Sheshunoff & Co. Investment Banking referred to above,
the North Side board of directors unanimously approved and adopted the merger
agreement and the merger with Glacier as being in the best interests of North
Side and its shareholders.
OPINION OF FINANCIAL ADVISOR TO NORTH SIDE
North Side retained Sheshunoff & Co. Investment Banking ("Sheshunoff") to
provide its opinion as to the fairness from a financial viewpoint of the merger
consideration to the North Side shareholders. As part of its investment banking
business, Sheshunoff is regularly engaged in the valuation of securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. North Side's board of directors retained Sheshunoff based
upon its experience as a financial advisor in mergers and acquisitions of
financial institutions and its knowledge of financial institutions.
On January 17, 2007, Sheshunoff rendered its fairness opinion to North
Side's board of directors that, as of such date, the merger consideration was
fair, from a financial point of view, to the shareholders of North Side. The
full text of the fairness opinion which sets forth, among other things,
assumptions made, procedures followed, matters considered, and limitations on
the review undertaken, is attached as APPENDIX C to this proxy
statement/prospectus. You are urged to read Sheshunoff's fairness opinion
carefully and in its entirety. The fairness opinion is addressed to North Side's
board of directors and does not constitute a recommendation to any North Side
shareholder as to how he or she should vote at the special meeting of North
Side's shareholders.
In connection with the fairness opinion, Sheshunoff:
- Reviewed a draft of the merger agreement;
- Reviewed North Side's audited financial statements for the period
ending December 31, 2005 and unaudited financial statements for the
period ending December 31, 2006;
18
- Evaluated North Side's consolidated results based upon a review of its
regulatory reports for the five-years ending December 31, 2001 through
December 31, 2005 and for the 9 months ended September 30, 2006;
- Reviewed publicly available financial statements and other business
and financial information of Glacier;
- Conducted conversations regarding recent and projected financial
performance of North Side with respective members of executive
management;
- Compared North Side's recent operating results with those of certain
other banks in the Western Region of the United States that have
recently been acquired;
- Compared North Side's recent operating results with those of certain
other banks in the United States that have recently been acquired;
- Compared the pricing multiples for North Side in the merger to those
of certain other banks in the Western Region of the United States that
have recently been acquired;
- Compared the pricing multiples for North Side in the merger to those
of certain other banks in the United States that have recently been
acquired;
- Analyzed the present value of the after-tax cash flows North Side
could produce through the year 2011 based on projections provided by
North Side's management;
- Reviewed the potential pro forma impact of the merger on the combined
company's results and certain financial performance measures of North
Side and Glacier;
- Reviewed the historical stock price data and trading volume of
Glacier's common stock;
- Compared the historical stock price data and trading volume of
Glacier's common stock with that of certain other comparable publicly
traded companies;
- Compared certain financial characteristics and performance measures of
Glacier with that of certain other comparable publicly traded
companies;
- Compared the historical stock price performance of Glacier's common
stock with that of selected indices Sheshunoff deemed relevant; and
- Performed such other analyses as Sheshunoff deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff did not assume any responsibility for
independent verification of such information. Sheshunoff assumed that internal
confidential financial projections provided by North Side were reasonably
prepared reflecting the best currently available estimates and judgments of the
future financial performance of North Side, and did not independently verify the
validity of such assumptions.
Sheshunoff did not make any independent evaluation or appraisal of the
assets or liabilities of North Side or Glacier nor was Sheshunoff furnished with
any such appraisals. Sheshunoff did not examine any individual loan files of
North Side or Glacier. Sheshunoff is not an expert in the evaluation of loan
portfolios for the purposes of assessing the adequacy of the allowance for
losses with respect thereto and has assumed that such allowances were, in the
aggregate, adequate to cover such losses.
19
The fairness opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to Sheshunoff as
of January 17, 2007.
In rendering the fairness opinion, Sheshunoff performed a variety of
financial analyses. The preparation of an opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances.
Consequently, the fairness opinion is not readily susceptible to partial
analysis or summary description. Moreover, the evaluation of fairness, from a
financial point of view, of the merger consideration is to some extent
subjective, based on the experience and judgment of Sheshunoff, and not merely
the result of mathematical analysis of financial data. Sheshunoff did not
attribute particular weight to any analysis or factor considered by it.
Accordingly, notwithstanding the separate factors summarized below, Sheshunoff
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying its opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be
Sheshunoff's view of the actual value of North Side, Glacier or the combined
entity.
In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of North Side or Glacier. The
analyses performed by Sheshunoff are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. In addition, Sheshunoff's analyses should not be
viewed as determinative of the opinion of the board of directors or the
management of North Side with respect to the value of North Side or Glacier or
to the fairness of the merger consideration.
The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion. The discussion utilizes financial information
concerning North Side and Glacier as of June 30, 2006 and for Glacier and
certain publicly traded companies as of September 30, 2006.
Pursuant to the merger agreement, Glacier has agreed to exchange shares of
Glacier common shares with a value of $19 million for all of the outstanding
shares of North Side common stock, which constitutes the stock portion of the
merger consideration. The shareholders will also receive cash equal to the
amount of North Side capital in excess of $10 million computed in accordance
with the merger agreement, which constitutes the cash portion of the merger
consideration. Utilizing management's best estimates of income, expenses and
other adjustments to determine the North Side Closing Capital as set forth in
the merger agreement, the cash portion of the merger consideration was estimated
to be $8.475 million. The total estimated merger consideration was $27.475
million or $27,475 per share of North Side common stock, assuming 1,000 shares
of North Side common stock outstanding. The merger consideration may be higher
or lower as of the Effective Date based upon the terms of the merger agreement.
For the purposes of its analyses, Sheshunoff utilized a price of $23.91 per
share for Glacier's common stock. Dividing this price into the stock portion of
the merger consideration of $19 million yields 794,647 shares of Glacier stock
to be issued in the merger. Dividing the 794,647 shares of Glacier common stock
to be received by the number of outstanding shares of North Side common stock
produces an exchange ratio of 794.6466 Glacier shares for each North Side share
outstanding.
North Side Discounted Cash Flow Analysis. Using discounted cash flow
analysis, Sheshunoff estimated the present value of the future after-tax cash
flow streams that North Side could produce on a stand-alone basis through the
year 2011 under various circumstances, assuming that it performed in accordance
with the projections provided by North Side's management.
Sheshunoff estimated the terminal value for North Side at the end of 2011
by capitalizing the final period projected earnings using a discount rate that
is the quotient of (1) the assumed annual long-term growth rate of the earnings
of North Side of 5.0% plus 1% and (2) the difference between a range of required
rates of return and the assumed annual long-term growth rate of earnings in (1)
above. Sheshunoff discounted the annual cash flow
20
streams (defined as all earnings in excess of that required to maintain a
tangible equity to asset ratio of 7.0%) and the terminal values using discount
rates ranging from 12.0% to 14.0%. The discount range was chosen to reflect
different assumptions regarding the required rates of return of North Side and
the inherent risk surrounding the underlying projections. This discounted cash
flow analysis indicated a range of values per share of $13,651.76 to $17,441.49
as shown in the table below compared to the estimated merger consideration of
$27,475.00 per share.
DISCOUNT RATE
------------------------------------
14.0% 13.0% 12.0%
---------- ---------- ----------
Present value (in thousands) $ 13,652 $ 15,308 $ 17,441
Present value (per share) $13,651.76 $15,308.42 $17,441.49
Analysis of Selected Transactions: Sheshunoff performed an analysis of
premiums paid in selected recently announced acquisitions of banking
organizations with comparable characteristics to the merger. The comparable
transactions consisted of a group of selected transactions for banks in the
states of Wyoming, Utah, South Dakota, Nebraska, Montana, Idaho and Colorado for
which pricing data were available. These comparable transactions consisted of 21
mergers and acquisitions of banks with assets between $200 million and $600
million that were announced between July 1, 2004 and January 19, 2007. The
analysis yielded multiples of the purchase prices in these transactions as shown
below:
PRICE/ PRICE/
PRICE/ PRICE/ LTM PRICE/ DEPOSITS
BOOK (X) TG BOOK (X) EARNINGS(X) ASSETS (%) (%)
-------- ----------- ----------- ---------- --------
Maximum 2.77 3.77 42.9 28.8 34.3
Minimum 1.11 1.11 6.2 12.7 16.7
Median 1.79 1.88 16.7 17.9 21.8
Glacier* 1.46 1.46 26.0 22.6 26.8
* Assumes merger consideration of $27.475 million or $27,475.00 per share.
The median pricing multiples to assets and deposits in the comparable
transactions were lower than those in the merger. The median price to book
multiple and the median price to tangible book ratio were lower. It was noted
that the equity to asset and tangible equity to asset ratios for North Side were
much higher than those for the comparable transactions. The price to last
twelve-month earnings (LTM earnings) multiples for the comparable transactions
were lower than the merger.
Contribution Analysis: Sheshunoff reviewed the relative contributions of
North Side and Glacier to the combined company based on regulatory data as of
December 31, 2006 for North Side and GAAP financial data as of September 30,
2006 for Glacier. The balance sheet items for GBCI are September 30, 2006
period-end balances and the income statement items are for the last-twelve
months ending September 30, 2006. Sheshunoff compared the pro forma ownership
interests of North Side and Glacier of 1.5% and 98.5%, respectively, to: (1)
total assets of 2.9% and 97.1%, respectively; (2) total loans of 1.3% and 98.7%,
respectively; (3) total deposits of 3.5% and 96.5%, respectively; (4) total
equity of 4.4% and 95.6%, respectively; (5) total tangible equity of 5.6% and
94.4%, respectively; (6) non-interest income of 1.2% and 98.8%, respectively;
(7) non-interest expense of 2.7% and 97.3%, respectively; and (8) 2006 earnings
of 1.8% and 98.2% respectively. The contribution analysis shows that the
ownership of North Side shareholders in the combined company is less than the
contribution of equity and tangible equity and many of the other items.
Approximately 31% of the total consideration to be received by the North Side
shareholders is in the form of cash that reduces the amount of stock the
shareholders would have received if the total consideration had been all stock.
Some of Glacier's items were likely affected by its 2006 acquisitions. The
contributions are shown in the table following.
21
($000S) ASSETS % LOANS % DEPOSITS %
---------- ----- ---------- ----- ----------- -----
North Side State Bank $ 121,530 2.9% $ 37,849 1.3% $ 102,525 3.5%
Glacier Bancorp, Inc. 4,126,696 97.1% 2,815,049 98.7% 2,851,335 96.5%
---------- ----- ---------- ----- ---------- -----
Combined Company $4,248,226 100.0% $2,852,898 100.0% $2,953,860 100.0%
---------- ----- ---------- ----- ---------- -----
EQUITY % TG. EQUITY % EARNINGS %
-------- ----- ---------- ----- -------- -----
North Side State Bank $ 18,772 4.4% $ 18,772 5.6% $ 1,056 1.8%
Glacier Bancorp, Inc. 411,010 95.6% 313,516 94.4% 58,289 98.2%
-------- ----- -------- ----- ------ -----
Combined Company $429,782 100.0% $332,288 100.0% $59,345 100.0%
-------- ----- -------- ----- ------ -----
NON- NON-
INTEREST INTEREST SHARES
INC % EXP % (ACTUAL) %
--------- ----- -------- ----- ---------- -----
North Side State Bank $ 607 1.2% $ 2,900 2.7% 794,647 1.5%
Glacier Bancorp, Inc. 48,945 98.8% 105,576 97.3% 50,766,276 98.5%
------- ----- -------- ----- ---------- -----
Combined Company $49,552 100.0% $108,476 100.0% 51,560,923 100.0%
------- ----- -------- ----- ---------- -----
Pro Forma Financial Impact: Sheshunoff analyzed the pro forma impact of the
merger on estimated earnings per share for calendar year 2006 and 2007 and the
book value as of September 30, 2006, based on the projections provided by North
Side management for North Side on a stand-alone basis assuming no synergies
resulting from the merger. The analysis indicated that the earnings per share
accretion (on a cash basis) to estimated earnings per share on a stand-alone
basis was $357.59 per share or 33.9% in 2006 and $410.91 per share or 34.9% in
2007. The analysis further indicated the dilution to September 30, 2006 North
Side book value per share after reducing book value by the estimated cash per
share to paid from North Side's closing equity to be $2,944.42 per share or
28.6% in 2006.
Comparable Company Analysis: Sheshunoff compared the operating and market
results of Glacier to the results of other publicly traded banking companies.
The comparable publicly traded companies were selected primarily on the basis of
two criteria: geographic location and total asset size. The geographic location
of the companies was the Western Region of the United States (defined by SNL
Financial LC). Glacier was compared to banks with total assets between $2
billion and $5 billion. The data for the following table were based on
regulatory information provided by SNL Financial and are as September 30, 2006.
Some of the ratios presented are proprietary to SNL Financial and may not
strictly conform to the common industry determination.
Peer Group
Glacier Median
------- ----------
Net Interest Margin 4.62% 4.82%
Efficiency Ratio 52.0% 49.2%
Return on Average Assets 1.53% 1.50%
Return on Average Equity 16.7% 15.0%
Equity to Asset Ratio 9.96% 10.68%
Tangible Equity to Tangible Asset Ratio 7.78% 7.00%
Ratio of Non-performing Assets to Total Assets 0.18% 0.33%
Ratio of Non-performing Loans to Total Loans 0.24% 0.40%
Ratio of Loan Loss Reserves to Loans 1.50% 1.31%
Ratio of Loan Loss Reserves to Non-performing Assets 584% 302%
Glacier completed two bank acquisitions with total assets of about $500 million
during 2006. The
22
acquisition of Citizens Development closed in October 2006. The comparative
ratios for Glacier reflect the effects of these transactions.
Glacier's performance as measured by its return on average assets was
similar to its peers while its return on average equity was somewhat higher than
that of its peers. Glacier's asset quality, as measured by its ratio of
non-performing assets to total assets and its ratio of non-performing loans to
total loans, was better than the peer group medians. Its ratios of loan loss
reserves to loans and of loan loss reserves to non-performing assets were higher
than the peer group medians, indicating better coverage of risk assets.
Glacier's capital level was generally similar to its peers with the equity to
asset ratio being slightly lower than the peer group but the tangible equity to
asset ratio being above that of its peers.
Sheshunoff compared Glacier's trading results to its peers. The results are
contained in the following table. The data for the following table were based on
publicly available GAAP financial information and market data provided by SNL
Financial and are as of September 30, 2006.
Peer Group
Glacier Median
------- ----------
Market Price as a Multiple of Stated Book Value (times) 2.80x 2.27x
Market Price as a Multiple of Stated Tangible Book Value (times) 4.10x 3.22x
Price as a Multiple of LTM Earnings (times) 20.2x 16.9x
Market Price as a Percent of Assets 28.6% 22.1%
Dividend Yield per Share 1.97% 1.41%
Dividend Payout per Share 36.9% 24.2%
Glacier's price-to-book multiples as measured by its market price as a
multiple of stated book value and its market price to stated tangible book value
were higher than the comparable peer group medians. Glacier's and market price
to assets ratios was also higher than that for its peers. Glacier's
price-to-earnings multiple as shown in the price as a multiple of last 12 months
earnings through September 30, 2006 was higher than its peers. Glacier's
dividend yield and dividend payout ratio were higher than its peers.
Sheshunoff compared selected stock market results of Glacier to the
publicly available corresponding data of other composites that Sheshunoff deemed
to be relevant, including (1) the SNL index for all publicly traded banks in the
United States, and (2) the SNL index of banks with assets between $1 billion and
$5 billion in the United States. Glacier's common stock price underperformed the
selected indices for the period from January 2006 until October 2006. For the
period from October 2006 through the end of 2006, Glacier's stock price
outperformed both of the selected indices. Since beginning of 2007, Glacier's
stock performance has been below the SNL index for all publicly traded banks but
above the SNL index of banks with assets between $1 billion and $5 billion.
No company or transaction used in the comparable company and comparable
transaction analysis is identical to North Side, Glacier or Glacier as the
surviving corporation in the merger. Accordingly, an analysis of the results of
the foregoing necessarily involves complex considerations and judgments
concerning differences in financial and operational characteristics of North
Side and Glacier and other factors that could affect the public trading value of
the companies to which they are being compared. Mathematical analysis (such as
determining the average or median) is not in and of itself a meaningful method
of using comparable transaction data or comparable company data.
Pursuant to its engagement letter with North Side, Sheshunoff will receive
a fee of 1.25% of the total consideration estimated to be approximately $343,000
contingent upon the closing of the merger. In addition, North Side agreed to
reimburse Sheshunoff for its reasonable out-of-pocket expenses. North Side also
agreed to indemnify and hold harmless Sheshunoff and its officers and employees
against certain liabilities in connection
23
with its services under the engagement letter, except for liabilities resulting
from the negligence, violation of law or regulation or bad faith of Sheshunoff
or any matter for which Sheshunoff may have strict liability.
The fairness opinion is directed only to the question of whether the merger
consideration is fair from a financial perspective and does not constitute a
recommendation to any North Side shareholder to vote in favor of the merger. No
limitations were imposed on Sheshunoff regarding the scope of its investigation
or otherwise by North Side.
Based on the results of the various analyses described above, Sheshunoff
concluded that the merger consideration to be paid by Glacier pursuant to the
merger is fair to North Side shareholders, from a financial point of view.
RECOMMENDATION OF THE NORTH SIDE BOARD
The board of directors of North Side has concluded that the proposed merger
as described in the merger agreement is in the best interest of North Side and
its shareholders. The board of directors believes that the present banking
climate offers an opportune time for shareholders of North Side to exchange
their shares for Glacier common stock and cash at an attractive price. AFTER
CAREFULLY CONSIDERING THE PROPOSED MERGER, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF NORTH SIDE 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 North Side with and into
1st Bank, a currently existing subsidiary of Glacier. When the merger occurs,
the resulting bank will operate as a wholly-owned subsidiary of Glacier.
In the merger, North Side shareholders will receive a combination of
Glacier common stock and cash for their North Side common stock, as described
below.
While Glacier and North Side 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."
Immediately following the merger, the resulting bank (1st Bank)
intends to pay a cash dividend to Glacier in an amount equal to the amount of
cash paid by Glacier to North Side shareholders.
MERGER CONSIDERATION
The merger agreement provides that as of the effective date of the merger,
each share of North Side common stock will be converted into the right to
receive a combination of Glacier common stock and cash, as described below.
The total merger consideration consists of a stock portion and a cash
portion, which will be determined in the following manner:
24
Stock Portion of Merger Consideration
The total stock consideration payable by Glacier is equal to the number of
shares of Glacier common stock, rounded to the nearest thousandth, obtained by
dividing $19,000,000 by the "Glacier Average Closing Price."
The "Glacier Average Closing Price" is the average daily closing price per
share of Glacier common stock, as reported on the NASDAQ Global Select Market,
during the 10 trading-day period immediately preceding the fifth calendar day
prior to the effective date of the merger.
Cash Portion of Merger Consideration
The total cash consideration payable by Glacier is determined by
subtracting $10,000,000 from the amount of the "North Side Closing Capital" as
of the fifth calendar day prior to the effective date of the merger. The "North
Side Closing Capital" is defined in the merger agreement as North Side's capital
stock, surplus and retained earnings, determined in accordance with generally
accepted accounting principles:
- after giving effect to the amount, whether or not yet paid, of all
North Side "Transaction Fees" (as defined in the merger agreement), of
specified bonuses payable to North Side directors, and any bonuses or
other distributions to be made to North Side employees at or prior to
the closing of the merger;
- after giving effect to the amount required to fully fund North Side's
Pension Plan for Employees;
- after excluding the impact of any increase in the North Side allowance
for possible loan and lease losses or charge-offs or other reserves
reasonably required by Glacier, between the date of the merger
agreement and the date of closing;
- without giving any effect to accumulated other comprehensive income or
loss as reported on North Side's balance sheet; and
- after excluding goodwill or other intangibles.
The value of the consideration (in stock and cash) that a North Side
shareholder will receive for each share of North Side 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 1,000,
which is the number of outstanding North Side shares on January 22, 2007, the
date the merger agreement was executed.
North Side may terminate the merger agreement if the Glacier average
closing price is greater than $26.33 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 $21.55, unless North Side agrees
to accept an adjustment in the per share stock consideration. See "--Termination
of the Merger Agreement."
Letter of Transmittal. Prior to the closing of the merger, the exchange
agent will send a letter of transmittal to each person who was a North Side
shareholder at the effective time of the merger. This mailing will contain
instructions on how to surrender shares of North Side 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 North Side
common stock pursuant to the merger will be deemed issued as of the effective
date. Until you surrender your North Side 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
25
consideration payable in cash, without interest. After the effective time, there
will be no transfers on the stock transfer books of North Side of any shares of
North Side common stock. If certificates representing shares of North Side
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 North Side common stock represented by those certificates shall have
been converted.
If a certificate for North Side 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 North Side, and
appropriate and customary identification.
FRACTIONAL SHARES
No fractional shares of Glacier common stock will be issued to any holder
of North Side 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 Glacier Average Closing Price, calculated as described above
under "--Stock Portion of Merger Consideration." 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 second quarter of 2007. Either Glacier or North
Side may, subject to certain conditions, terminate the merger agreement if the
effective date does not occur on or before July 31, 2007.
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 North
Side 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 North Side shareholders hold their shares
of North Side 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 North Side 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;
- S corporations or other pass-through entities;
- non-United States persons;
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- North Side 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
- North Side shareholders who received their North Side 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 North Side
and Glacier 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 North Side nor Glacier intends to request a ruling from the IRS with
respect to the United States federal income tax consequences of the merger.
If upon the consummation of the merger a holder exchanges all of its shares
of North Side 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 (including any fractional
shares deemed received and exchanged for cash) received pursuant to the merger
over the holder's adjusted tax basis in its shares of North Side 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 North Side 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 North Side common stock for a combination of Glacier
common stock and cash pursuant to the merger (before reduction for the basis in
any fraction shares deemed received and exchanged for cash) will be equal to the
aggregate adjusted tax basis of the shares of North Side 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 North Side
common stock surrendered. If a holder has differing bases or holding periods in
respect of its shares of North Side 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 North Side 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.
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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
North Side common stock in lieu of a fractional share of Glacier common stock
generally will be treated as received in redemption of the fractional share, and
gain or loss generally will be recognized based on the difference between the
amount of cash received in lieu of the fractional share and the portion of the
holder's aggregate adjusted tax basis of the share of North Side 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 North
Side common stock is more than one year.
Dissenting Shareholders. Holders of North Side common stock who dissent
with respect to the merger, as discussed in "Dissenters' Rights," and who
receive cash in respect of their shares of North Side 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 North Side common
stock. The gain or loss will be long-term capital gain or loss if the shares of
North Side were held for more than one year.
Backup Withholding. Non-corporate shareholders of North Side 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 under
penalty of perjury 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. North Side shareholders will be
responsible for the preparation of their own tax returns.
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Graham & Dunn PC has delivered an opinion to the foregoing effect to
Glacier and North Side. 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 North Side 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 North Side 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 NORTH SIDE 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 NORTH SIDE SHAREHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR
REGARDING ITS SPECIFIC TAX SITUATION AND STATUS, INCLUDING THE SPECIFIC
APPLICATION OF STATE, LOCAL AND FOREIGN LAWS TO SUCH SHAREHOLDER AND THE
POSSIBLE EFFECT OF CHANGES IN FEDERAL AND OTHER TAX LAWS.
VOTING AGREEMENT
The directors of North Side have entered into a Voting Agreement, dated as
of January 22, 2007. In the Voting Agreement, the directors agree, among other
things, to vote the shares of North Side 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 101.5 outstanding shares of North Side
common stock, which is 10.15% of the total shares outstanding.
DISSENTERS' RIGHTS OF APPRAISAL
Under provisions of Wyoming law, North Side shareholders have the right to
dissent from the merger and to receive payment in cash of the "fair market
value" of their shares of North Side 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.
North Side shareholders electing to exercise dissenters' rights must comply
with the applicable provisions of Wyoming law in order to perfect their rights.
The following is intended as a brief summary of the material provisions of the
procedures that a North Side shareholder must follow in order to dissent from
the merger and perfect dissenters' rights. THIS SUMMARY, HOWEVER, IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE APPLICABLE PROVISIONS OF THE SECTION
13-4-110 OF THE WYOMING STATUTES, THE FULL TEXT OF WHICH ARE SET FORTH IN
APPENDIX B TO THIS DOCUMENT.
Section 13-4-110 provides that the owner of shares in a state bank which
were voted against a merger to result in a state bank are entitled to receive
their fair market value in cash, if and when the merger becomes effective, upon
written demand, made to the resulting state bank, at any time within thirty (30)
days after the effective date of the merger, accompanied by the surrender of the
stock certificates.
The value of the shares shall be determined, as of the date of the
shareholders' meeting approving the merger, by three appraisers, one to be
selected by the owners of two-thirds of the dissenting shares involved, one by
the board of directors of the resulting bank, and the third by the two so
chosen. The valuation agreed upon by any two appraisers shall govern. If the
appraisal is not completed within ninety (90) days after the merger
29
becomes effective, the state banking commissioner shall cause an appraisal to be
made. The expenses of appraisal shall be paid by the resulting bank.
THE FAILURE OF A NORTH SIDE SHAREHOLDER TO COMPLY STRICTLY WITH THE
APPLICABLE REQUIREMENTS OF WYOMING LAW WILL RESULT IN A LOSS OF HIS OR HER
DISSENTER'S 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 North Side, are as follows:
- approval of the merger by North Side 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 and North Side'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 shareholders of North Side
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.
In addition to the above, the obligations of Glacier under the merger
agreement are subject to conditions that include the following:
- North Side 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 management of North Side, North Side's
allowance for loan and lease losses, as adjusted for any increases or
charge-offs reasonably required by Glacier, is adequate to absorb
North Side's anticipated loan losses;
- That the North Side Closing Capital (as defined in the merger
agreement) will not be less that $10,000,000 at the closing of the
merger; and
30
- That the aggregate deposits of North Side, excluding certificates of
deposit (or equivalents) of $100,000 or more and brokered deposits, is
not less than $80 million at the closing of the merger.
Additionally, either Glacier or North Side 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 North Side may waive any of the other party's conditions,
except those that are required by law (such as receipt of regulatory and North
Side shareholder approval). Either Glacier or North Side 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 North Side special meeting
of the shareholders. To the extent permitted under applicable law, the parties
may make any amendment or supplement without further approval of North Side
shareholders. However, after shareholder approval, any amendments that would
reduce the amount or change the form of consideration North Side shareholders
will receive in the merger or the allocation of the cash percentage and stock
percentage would require further North Side shareholder approval.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement contains several provisions entitling either Glacier
or North Side to terminate the merger agreement under certain circumstances. The
following briefly describes these provisions:
Lapse of Time. If the merger has not been consummated by July 31, 2007,
then at any time after that date, the board of directors of either Glacier or
North Side may terminate the merger agreement.
Glacier Average Closing Price Greater than $26.33. By specific action of
its board of directors, North Side may terminate the merger agreement if the
Glacier average closing price (as defined in the merger agreement) is greater
than $26.33.
If North Side provides written notice of its intent to terminate the merger
agreement because the Glacier average closing price is greater than $26.33,
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 North Side shareholder
would have received if the Glacier average closing price had been $26.33. 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 $21.55. By specific action of its
board of directors, Glacier may terminate the merger agreement if the Glacier
average closing price (as defined in the merger agreement) is less than $21.55.
If Glacier provides written notice of its intent to terminate the merger
agreement because the Glacier average closing price is less than $21.55, North
Side 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 North
Side shareholder would have received in the Glacier average closing price had
been $21.55. If this election is made by North Side, 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.
31
Mutual Consent. The parties may terminate the merger agreement at any time
before closing, whether before or after approval by North Side 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 North Side board of directors fails to recommend to its shareholders
approval of the merger, or (ii) modifies, withdraws or changes in a manner
adverse to Glacier its recommendation to shareholders to approve the merger.
Additionally, regardless of whether the North Side board of directors recommends
approval of the merger to its shareholders, Glacier may terminate the merger
agreement if North Side 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 Wyoming 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 North Side common stock are
proposed dissenting shares (as defined in the merger agreement).
Superior Proposal. North Side may terminate the merger agreement if its
board of directors determines in good faith that North Side has received a
"Superior Proposal" as defined in the merger agreement. This right is subject to
the requirement that North Side may terminate the merger agreement only if North
Side (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, North Side intends to enter into a letter
of intent, acquisition agreement or similar agreement relating to such Superior
Proposal, and (iii) North Side has provided Glacier with at least five business
days prior notice that North Side 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 North Side) in such a
manner as would enable North Side to proceed with the merger.
TERMINATION FEES
Subject to certain exceptions, North Side will pay Glacier a termination
fee of $200,000 if Glacier terminates the merger agreement based on a North Side
breach of its representations or breach of its covenants. Glacier will pay North
Side a termination fee of $200,000 if North Side terminates the merger agreement
based on a Glacier breach of its representations or breach of its covenants.
BREAK-UP FEE
If the merger agreement is terminated because (i) the North Side board of
directors fails to recommend shareholder approval of the merger agreement; or
(ii) North Side 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
32
the merger agreement to enable North Side's board of directors to proceed with
the merger; or (iii) Glacier terminates the merger agreement after North Side's
receipt of a superior proposal followed by an immediate acquisition event (as
defined), then North Side will immediately pay Glacier a break-up fee of
$950,000. If the merger agreement is terminated by Glacier due to North Side's
receipt of a superior proposal and the merger agreement and merger are not
approved at the shareholders' meeting and prior to or within six months after
such termination, North Side 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 North Side will promptly pay
to Glacier the break-up fee in the amount of $950,000.
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
North Side will each pay their own out-of-pocket expenses incurred in connection
with the transaction and, except for any applicable termination or break-up
fees, will have no other liability to the other party.
CONDUCT PENDING THE MERGER
The merger agreement provides that, until the merger is effective, North
Side will conduct its business 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, North Side will refrain
from engaging in various activities such as:
- effecting any stock split or other recapitalization with respect to
North Side, or pledge or encumber any shares of North Side stock or
grant any options for such stock;
- 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, with specified exceptions;
- soliciting or accepting deposit accounts of a different type than
previously accepted by North Side 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 North Side, 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;
33
- 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;
- other than in accordance with binding existing commitments, 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.
NORTH SIDE MANAGEMENT AND OPERATIONS AFTER THE MERGER
Following the merger, the North Side board of directors will consist of the
current directors of 1st Bank, with the addition of a representative from the
Rock Springs community to be agreed by the parties.
As described below under "Interests of Certain Persons in the Merger," Mr.
William Fabian, North Side's Chief Operating Officer, will be employed by 1st
Bank for a period following the merger, and will be responsible for the
operations of the office at the current North Side location and certain
transitional matters. North Side's management following the merger will
otherwise consist of the current management of 1st Bank.
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 North
Side 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 North Side prior to the merger will
constitute prior service with Glacier for purposes of determining eligibility
and vesting.
Severance Payments. As provided in the merger agreement, except for North
Side employees for whom other specific arrangements have been made, if the
employment of an individual who was a North Side employee as of the date of
execution of the merger agreement is terminated prior to December 31, 2007, such
employee will be entitled to receive the severance payment specified in
Glacier's Severance Plan for Employees, as well as an amount equal to the
holiday bonus that such employee received in 2006, pro rated for the partial
year, if applicable.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of the North Side board of directors and management may be
deemed to have interests in the merger, in addition to their interests as
shareholders of North Side generally. The North Side board of directors was
aware of these factors and considered them, among other things, in approving the
merger agreement.
Stock Ownership. The North Side directors beneficially owned, as of the
record date for the special meeting, 101.5 shares of North Side common stock,
representing 10.15% of all outstanding North Side shares. The directors of North
Side will receive the same consideration in the merger for their shares as other
shareholders of North Side.
Voting Agreements. The directors of North Side have entered into a Voting
Agreement, dated as of the same date as the merger agreement. Pursuant to the
voting agreement, each director agrees to vote the shares of North Side common
stock that he or she owns or controls in favor of the merger. The 101.5 shares
owned or controlled by the directors equal 10.15% of North Side's outstanding
shares.
34
Employment Agreement. William Fabian, North Side's Chief Executive Officer
and a director of North Side, has entered into an employment agreement, ratified
by Glacier, with 1st Bank. The term of the agreement begins on the effective
date of the merger and expires on January 1, 2008. The employment agreement
provides that Mr. Fabian will be responsible for the operations of the former
North Side office and will assist with data conversion and other transition
matters.
The employment agreement provides for an annualized salary of $116,750.
Additionally, provided that Mr. Fabian has fulfilled his obligations under the
employment agreement, he will be entitled to receive, within 15 days following
the expiration of the term of the agreement, a lump sum payment of $165,000.
The employment agreement provides that if the employment of Mr. Fabian is
terminated without cause (as defined in the agreement) or if Mr. Fabian resigns
with good reason (as defined in the agreement), 1st Bank will pay him a lump sum
payment equal to (i) the amount of salary that he would have otherwise received
for the remainder of 2007, plus (ii) $165,000.
The employment agreement provides that during the term of employment and
for a two year period after Mr. Fabian's employment has ended, Mr. Fabian will
not provide management, supervisory or other similar services to any person or
entity engaged in any business within Sweetwater County, Wyoming, which is
competitive with the business of 1st Bank or Glacier.
North Side Director Bonuses. North Side intends to pay bonuses, in the
aggregate amount of $17,000, to its outside directors as of January 22, 2007 in
connection with consummation of the merger. The board of directors of North Side
determined that the director bonuses were appropriate in exchange for the
directors' execution of the non-competition agreement required by Glacier. As
summarized under "THE MERGER - Merger Consideration" above, the merger agreement
provides that the "North Side Closing Capital" will be reduced by, among other
specified costs, fees and payments, the amount of the bonuses to be paid to
North Side directors. The aggregate cash consideration to be received by North
Side shareholders in the merger will thus be reduced to the extent of the
director bonuses.
North Side Director Non-Competition Agreement. All members of the board of
directors of North Side have entered into a non-competition agreement with
Glacier and 1st Bank. Except under certain limited circumstances, the
non-competition agreement prohibits directors from competing with Glacier and
1st Bank within Sweetwater County, Wyoming. The term of the non-competition
agreement commences upon the effective date of the merger and continues for two
years.
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 North
Side 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 applicable law and the articles of
incorporation or bylaws of North Side.
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 Commissioner of the Wyoming Department of Audit, Division of
Banking.
35
ACCOUNTING TREATMENT OF THE MERGER
The acquisition of North Side 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 North Side will be recorded by Glacier
at their respective fair values at the time of the merger. The excess of
Glacier's purchase price over the net fair value of assets acquired including
identifiable intangible assets and liabilities assumed is recorded as goodwill.
Goodwill will be periodically assessed for impairment but no less frequently
than on an annual basis. Prior period financial statements are not restated and
results of operation of North Side 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 NORTH SIDE 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 North
Side, who may be deemed to be "affiliates" of North Side, 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 North Side directors, officers, and affiliates of North
Side, 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
North Side 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 North Side.
36
INFORMATION CONCERNING NORTH SIDE
GENERAL
North Side State Bank of Rock Springs was chartered under Wyoming law in
August 1912. As of December 31, 2006, North Side had total assets of
approximately $121.5 million, total loans of approximately $38.49 million, total
deposits of approximately $102.5 million and approximately $18.77 million of
shareholders' equity.
MARKET AREA
North Side provides a full range of banking, mortgage and lending services
to retail and commercial customers through its location in Rock Springs,
Wyoming. Along with steady asset, loan and deposit growth, consistent core
earnings and low net charge-offs have historically characterized North Side's
financial performance. North Side's primary market area consists of the City of
Rock Springs, Wyoming, including the neighboring municipalities of Green River,
Farson, Eden Valley, Superior, Point of Rocks, and surrounding agricultural
areas. This market area is generally characterized as an area circumscribed by a
circle, the radius of which is approximately fifty (50) miles and the locus of
which is North Side's main office.
LENDING ACTIVITIES
North Side's principal business is to accept deposits from the public and
to make loans and other investments. The primary source of income generated by
North Side 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. North Side offers a variety of
traditional loan products to its customers, primarily individual consumers and
small to medium-sized businesses. For businesses, North Side 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. North Side
offers consumers residential mortgage loans, home equity loans, automobile loans
and various other consumer installment loans.
At December 31, 2006, North Side's consolidated total loan portfolio was
$38.49 million, representing approximately 31.67% of its total assets. As of
such date, North Side's loan portfolio consisted of 50.89% 1-4 family real
estate secured loans, 16.29% commercial real estate secured loans (excluding
construction and land development loans), 3.53% real estate construction and
land development loans, 20.86% commercial loans, 1.38% installment or consumer
loans and 7.05% farm and agriculture loans.
DEPOSIT AND BANKING SERVICES
Customers of North Side 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 Wyoming, including the acceptance of checking accounts, savings accounts,
money market accounts and a variety of certificates of deposit accounts.
North Side 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
North Side's primary market area and businesses and their employees located in
that area. North Side also obtains deposits through personal solicitation by the
bank's officers and directors and through local advertising. For the convenience
of its customers, North Side 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' checks, domestic wire
transfers, account research, stop payments, and telephone and internet based
transfers between accounts.
37
NORTH SIDE SUMMARY FINANCIAL INFORMATION
The following selected financial information for the fiscal years ended
December 31, 2005 and 2004 are derived from audited financial statements of
North Side, and the financial information the fiscal year ended December 31,
2006 is unaudited:
NORTH SIDE STATE BANK OF ROCK SPRINGS.
BALANCE SHEET
YEAR ENDED DECEMBER 31,
---------------------------
2006 2005 2004
------- ------- -------
Cash and Cash Equivalents 10,752 8,347 5,398
Fed Funds 3,600 11,400 11,000
Securities 65,345 59,933 61,852
Gross Loans 38,488 33,486 32,410
Allowance for Loan Loss 639 (643) (694)
------- ------- -------
NET LOANS 37,849 32,843 31,716
Premises & Fixed Assets 2,204 2,272 2,341
Other Assets 1,796 1,483 1,071
------- ------- -------
TOTAL ASSETS 121,546 116,278 113,378
======= ======= =======
Deposits 102,528 97,830 94,379
Fed Funds & Repos N/A N/A N/A
Borrowings N/A N/A N/A
Other Liabilities 246 173 133
------- ------- -------
TOTAL LIABILITIES 102,774 116,278 113,378
Equity 18,772 18,275 18,866
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDER EQUITY 121,546 116,278 113,378
======= ======= =======
NORTH SIDE STATE BANK OF ROCK SPRINGS
INCOME STATEMENT
YEAR ENDED
DECEMBER 31,
---------------------
2006 2005 2004
----- ----- -----
Interest Income 5,425 4,590 4,333
Interest Expense 1,541 824 553
Net Interest Income 3,884 3,766 3,780
Loan Loss Provision N/A N/A N/A
Non-interest Income 608 310 297
Non-interest Expense 2,900 2,809 2,670
Pre-Tax Income 1,591 1,267 1,407
Taxes 535 441 476
----- ----- -----
NET INCOME 1,056 826 931
===== ===== =====
38
COMPETITION
North Side 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 North Side.
North Side also competes with companies located outside of its primary
market that provide financial services to persons within this market. Some of
North Side's current and potential competitors have larger customer bases,
greater brand recognition, and significantly greater financial, marketing and
other resources than North Side and some of them are not subject to the same
degree of regulation as North Side.
EMPLOYEES
As of December 31, 2006, North Side had 28 full-time and no part-time
employees. North Side believes that it has a good relationship with its
employees and the employees are not represented by a collective bargaining
agreement.
PROPERTIES
North Side operates from one location in Rock Springs, Wyoming. The bank is
located at 601 North Front Street, Rock Springs, Wyoming. The bank provides two
ATMs at its location and one additional ATM elsewhere in Rock Springs.
LEGAL PROCEEDINGS
From time to time, litigation arises in the normal conduct of North Side's
business. However, North Side is not currently involved in any litigation that
management of North Side 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.
SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS, MANAGEMENT AND DIRECTORS OF NORTH
SIDE
The following table shows, as of February 26, 2007, the beneficial
ownership of North Side common stock by (i) each person known by North Side to
be the beneficial owner more than 5% of North Side's outstanding common stock,
(ii) each of North Side's directors and executive officers; and (iii) all of
North Side'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 PERCENTAGE
NAME(1) BENEFICIALLY OWNED(2) OF CLASS(3)
------- --------------------- -----------
DIRECTORS AND EXECUTIVE OFFICERS
Chris N. Bunning 56.534 5.6534%
William G. Fabian 30.000 3.0000%
Michael F. Chadey 4.000 0.4000%
John R. Bunning 1.000 0.1000%
Robert A. Zueck 5.000 0.5000%
39
SHARES PERCENTAGE
NAME(1) BENEFICIALLY OWNED(2) OF CLASS(3)
------- --------------------- -----------
Paula J. Wonnacott 1.000 0.1000%
Anthony J. Bassani 24.375 2.4375%
ALL DIRECTORS AND EXECUTIVE OFFICERS 121.909 12.1909%
AS A GROUP (7 PERSONS)
FIVE PERCENT SHAREHOLDERS (NON-DIRECTOR)
Velma Wonnacott 72 7.2000%
RELATED PARTY TRANSACTIONS
Certain directors and executive officers of North Side, and their related
interests, had loans outstanding in the aggregate amounts of approximately
$2,542,132 at December 31, 2006. 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 persons not affiliated with North Side 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.
40
DESCRIPTION OF GLACIER'S CAPITAL STOCK
Glacier's authorized capital stock consists of 117,187,500 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 Global Select
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 North Side Common
Stock."
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
GLACIER AND NORTH SIDE COMMON STOCK
Montana law and Glacier's articles of incorporation and bylaws govern the
rights of Glacier shareholders and will govern the rights of North Side
shareholders, who will become shareholders of Glacier as a result of the merger.
The rights of North Side shareholders are currently governed by Wyoming law and
by North Side's articles of incorporation and bylaws. The following is a brief
summary of certain differences between the rights of Glacier and North Side
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 117,187,500 of common stock, $0.01 par value per share, and
1,000,000 shares of preferred stock, $0.01 par value per share. No shares of
preferred stock are currently outstanding.
Under its articles of incorporation, North Side's authorized capital
consists of 1,000 shares of common stock, $100 par value per share.
The following is a more detailed description of Glacier's and North Side's
capital stock.
COMMON STOCK
As of February 23, 2007, there were 52,621,832 shares of Glacier common
stock issued and outstanding, in addition to options for the purchase of
3,177,571 shares of Glacier common stock under Glacier's employee and director
stock option plans.
As of February 26, 2007, there were 1,000 shares of North Side 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.
41
North Side's authorized capital includes preferred stock. At the date of
this proxy statement/prospectus, North Side has no shares of preferred stock
issued.
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 North Side common stock as and when declared by
the North Side board of directors out funds legally available for the payment of
dividends.
VOTING RIGHTS
All voting rights are currently vested in the holders of Glacier common
stock and North Side 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. The articles of
incorporation of North Side provide that shareholders have cumulative voting
rights in the election of directors.
PREEMPTIVE RIGHTS
Glacier's shareholders do not have preemptive rights to subscribe to any
additional securities that may be issued. The articles of incorporation of North
Side provide that shareholders have preemptive rights to subscribe to additional
securities that may be issued.
LIQUIDATION RIGHTS
If Glacier is liquidated, the holders of Glacier common stock are entitled
to share, on a pro rata basis, Glacier's remaining assets after provision for
liabilities. The Glacier board of directors is authorized to determine the
liquidation rights of any preferred stock that may be issued.
If North Side is liquidated, the holders of North Side common stock are
entitled to share, on a pro rata basis, North Side'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 North
Side's common stock are fully paid and nonassessable.
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
42
recommendation, and must be approved by a majority of all votes entitled to be
cast by each voting group that has a right to vote on the amendment. The Glacier
board of directors may, by a majority vote, amend Glacier's bylaws.
The Wyoming Business Corporation Act authorizes a corporation's board of
directors to make various changes of an administrative nature to its articles of
incorporation, including extending the length of time that the corporation will
be in existence. Other amendments to a corporation's articles of incorporation
must be voted on by the corporation's shareholders and must be approved by a
majority of the votes entitled to be cast on the amendment by any voting group
with respect to which the amendment would create dissenters' rights and by a
majority of the shares present and voted at a meeting at which a quorum exists
on other matters. The bylaws of North Side require that any amendment to the
bylaws must be adopted by a majority vote of the issued and outstanding shares.
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.
North Side's articles of incorporation do not 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.
North Side's articles of incorporation provide that the number of directors
may not be less than five (5) or more than seven (7). The board of directors of
North Side currently consists of seven (7) members, each of whom is currently
serving an annual term.
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 North Side 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.
43
RESTRICTION ON TRANSFER OF SHARES
Neither Glacier's nor North Side'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.
EXPERTS
The consolidated financial statements of Glacier Bancorp, Inc. as of
December 31, 2006 and 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 statements of operations, stockholders' equity and
comprehensive income, and cash flows for the year 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.
44
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 North Side 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 North Side for the North Side 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, 2006;
- Proxy Statement for Glacier's 2006 Annual Meeting of Shareholders; and
- Current Reports on Form 8-K filed January 11, 2007; January 22, 2007;
and February 2, 2007.
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 North Side shareholders (other than
current reports furnished under Item 9 or Item 12 of Form 8-K).
YOU CAN OBTAIN THE DOCUMENTS THAT ARE INCORPORATED BY REFERENCE THROUGH
GLACIER OR THE SEC. YOU CAN OBTAIN THE DOCUMENTS FROM THE SEC, AS DESCRIBED
ABOVE. THESE DOCUMENTS ARE ALSO AVAILABLE FROM GLACIER WITHOUT CHARGE, EXCLUDING
EXHIBITS UNLESS GLACIER HAS SPECIFICALLY INCORPORATED SUCH EXHIBITS BY REFERENCE
IN THIS PROXY STATEMENT/PROSPECTUS. YOU MAY OBTAIN DOCUMENTS INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS BY REQUESTING THEM FROM GLACIER AT
49 COMMONS LOOP, KALISPELL, MONTANA 59901, TELEPHONE NUMBER (406) 751-4703,
ATTN: JAMES H. STROSAHL, CORPORATE SECRETARY. IF YOU WOULD LIKE TO REQUEST
DOCUMENTS FROM GLACIER, PLEASE DO SO BY ________, 2007 TO RECEIVE THEM BEFORE
THE NORTH SIDE 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 North Side 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 March __, 2007. You should not assume that
information contained in this proxy statement/prospectus is
45
accurate as of any other date, and neither the mailing of this proxy
statement/prospectus to North Side shareholders nor the issuance of Glacier
common stock in the merger will create any implication to the contrary.
46
APPENDIX A
================================================================================
PLAN AND AGREEMENT OF MERGER
AMONG
NORTH SIDE STATE BANK OF ROCK SPRINGS, WYO.,
1ST BANK,
AND
GLACIER BANCORP, INC.
================================================================================
DATED AS OF JANUARY 22, 2007
PLAN AND AGREEMENT OF MERGER
AMONG
NORTH SIDE STATE BANK OF ROCK SPRINGS, WYO.,
1ST BANK,
AND
GLACIER BANCORP, INC.
This Plan and Agreement of Merger (the "Agreement"), dated as of January
22, 2007, is made by and among NORTH SIDE STATE BANK OF ROCK SPRINGS, WYO.
("North Side"), 1st BANK, and GLACIER BANCORP, INC. ("GBCI").
PREAMBLE
The management and boards of directors of North Side, 1st Bank and GBCI
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) North Side is a state banking corporation organized and validly
existing under the laws of the State of Wyoming, with its principal
office located in Rock Springs, Wyoming.
(2) 1st Bank is a state banking corporation organized and validly existing
under the laws of the State of Wyoming, with its principal office
located in Evanston, Wyoming. 1st Bank is a wholly-owned subsidiary of
GBCI.
(3) 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.
B. THE TRANSACTION. In accordance with the terms and conditions of this
Agreement and Sections 13-4-104 through 13-4-111 of the Wyoming Statutes,
North Side will merge with and into 1st Bank (the "Merger"), the separate
legal existence of North Side will cease, and North Side and 1st Bank will
become a single state banking corporation under the name "1st Bank" (the
"Combined Bank"). The Combined Bank will continue to be governed by the
laws of the State of Wyoming. Outstanding shares of North Side Common Stock
will be exchanged for shares of GBCI Common Stock as set forth in Section
1.2.
C. BOARD APPROVALS. The respective boards of directors of North Side, 1st Bank
and GBCI have approved this Agreement and authorized its execution and
delivery.
D. OTHER APPROVALS. The Merger is subject to:
(1) Satisfaction of the conditions described in this Agreement;
(2) Approval by North Side's shareholders; and
(3) Approval or acquiescence, as appropriate, by (a) the Board of
Governors of the Federal Reserve System ("Federal Reserve"), (b) the
Commissioner of the Wyoming Department
1
of Audit, Division of Banking ("Wyoming Division"), and (c) any other
agencies having jurisdiction over the Merger (collectively, the
"Regulatory Approvals").
E. DIRECTOR AGREEMENTS. In connection with the parties' execution of this
Agreement, each director of North Side 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 North Side Common Stock
in favor of the actions contemplated by this Agreement and to refrain from
competing with GBCI and/or the Combined Bank and their respective
successors for a period of time.
F. EMPLOYMENT AGREEMENT. 1st Bank has entered into an employment agreement
with William Fabian, which agreement will take effect on the Effective
Date.
G. 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,
North Side, 1st Bank and GBCI agree as follows:
DEFINITIONS
The following capitalized terms used in this Agreement will have the
following meanings:
"1st Bank Common Stock" means the shares of 1st Bank common stock, $100.00
par value per share, issued and outstanding from time to time.
"Acquisition Event" means any of the following: (i) a merger, consolidation
or similar transaction involving North Side or any successor, (ii) a purchase,
lease or other acquisition in one or a series of related transactions of assets
of North Side representing 25% or more of the assets of North Side, 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 North Side 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.
"BHC Act" has the meaning assigned to such term in Recital A.
"Break-Up Fee" has the meaning assigned to such term in Section 7.7.
"Business Day" means any day other than a Saturday, Sunday, legal holiday
or a day on which banking institutions located in the State of Wyoming are
required by law to remain closed.
2
"Certificate" has the meaning assigned to such term in Section 1.6.1.
"Closing" means the closing of the Merger contemplated by this Agreement,
as more fully specified in Section 2.2.
"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 fifth (5th) 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.
"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 North Side, any other entity that
is considered one employer with North Side 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.
"Exchange Fund" has the meaning assigned to such term in Section 1.5.
"Execution Date" means the date of this Agreement.
"Executive Officers," with respect to 1st Bank, mean Michael Seppala and
Michael J. Blodnick.
"Executive Officers," with respect to GBCI, mean Michael J. Blodnick, James
H. Strosahl and Ron J. Copher.
"Executive Officers," with respect to North Side, mean Chris N. Bunning and
William G. Fabian.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System.
"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.
3
"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) the Subsequent GBCI
Financial Statements.
"GBCI Shares" means the shares of GBCI Common Stock to be issued to the
holders of North Side 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.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Knowledge" with respect to any party hereto means the actual knowledge of
the Executive Officers.
"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 or results of
operations 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; provided, however, that Material
Adverse Effect shall not be deemed to include the impact of (i) changes in
banking and similar laws of general applicability or interpretations thereof by
governmental authorities or other changes affecting depository institutions
generally that do not have a materially more adverse effect on such party than
that experienced by similarly situated financial services companies, including
changes in general economic conditions and changes in prevailing interest and
deposit rates that do not have a materially more adverse effect on such party
than that experienced by similarly situated financial services companies, (ii)
any modifications or changes to valuation policies and practices in connection
with the Merger or restructuring charges taken in connection with the Merger, in
each case in accordance with GAAP, (iii) changes resulting from expenses (such
as legal, accounting and investment bankers' fees) incurred in connection with
this Agreement or the transactions contemplated herein or (iv) actions or
omissions of a party that have been waived in accordance with Section 8.2
hereof.
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"Merger" means the merger of North Side with and into 1st Bank.
"Merger Consideration" means the aggregate of the Per Share Consideration
issuable pursuant to the Merger.
"North Side" is North Side State Bank of Rock Springs, Wyo., a state
banking corporation organized and validly existing under the laws of the State
of Wyoming, with its principal office located in Rock Springs, Wyoming.
"North Side Closing Capital" means North Side's capital stock, surplus and
retained earnings as of the Determination Date, determined in accordance with
GAAP, applied on a consistent basis for financial institutions: (i) after giving
effect to the amount, whether or not yet paid, of all North Side Transaction
Fees, the North Side Director Bonuses, and any bonuses or other distributions to
be made to North Side employees at or prior to Closing; (ii) after giving effect
to the amount required to fully fund the North Side Defined Benefit Plan; (iii)
after excluding the impact of any increase in ALLL or charge-offs or other
reserves reasonably required by GBCI, upon concurrence from BKD, LLP, between
the date of this Agreement and Closing; (iv) without giving any effect to
accumulated other comprehensive income or loss as reported on the North Side
balance sheet; and (v) after excluding goodwill or other intangibles.
"North Side Common Stock" means the shares of North Side common stock, par
value $1.00 per share, issued and outstanding from time to time.
"North Side Contract" has the meaning assigned to such term in Section
3.1.2.
"North Side Defined Benefit Plan" means the Pension Plan for the Employees
of North Side State Bank of Rock Springs, Wyoming (12/1/95).
"North Side Director Bonuses" means the amount to be paid to the North Side
Directors as set forth on Schedule 4.1.7.
"North Side Financial Statements" means North Side'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) the Subsequent North Side
Financial Statements.
"North Side Meeting" has the meaning assigned in Section 4.2.2.
"North Side Preferred Stock" means 3,000 shares of Class A Preferred Stock,
par value $50.00 per share; and 1,000 shares of Class B Preferred Stock, par
value $100.00 per share.
"North Side Transaction Fees" means all costs and expenses, including
completion fees, incurred by North Side or owed or paid by North Side 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.
"Pension Plan" has the meaning assigned to such term in Section 3.1.20.
"Person" includes an individual, corporation, partnership, association,
limited liability company, trust or unincorporated organization.
5
"Per Share Cash Consideration" means the quotient, rounded to the nearest
hundredth, obtained by dividing the Total Cash Consideration by 1,000 (the
number of shares of North Side Common Stock outstanding as of the close of
business on the Execution Date).
"Per Share Consideration" means the sum of the Per Share Cash Consideration
and the Per Share Stock Consideration.
"Per Share Stock Consideration" means the number of GBCI Shares equal to
the quotient, rounded to the nearest ten-thousandth, obtained by dividing the
Total Stock Consideration by 1,000 (the number of shares of North Side Common
Stock outstanding as of the close of business on the Execution Date).
"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 North Side, Real Property.
"Proposed Dissenting Shares" means those shares of North Side Common Stock
as to which shareholders have properly given notice of their intent to assert
appraisal rights pursuant to Section 13-4-110 of the Wyoming Statutes.
"Prospectus/Proxy Statement" means the Prospectus/Proxy Statement referred
to in Section 4.2.1, to be provided to all shareholders of North Side in
connection with their consideration and approval of the Merger.
"Real Property" means any real property that North Side 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.
"Sheshunoff" is Sheshunoff & Co. Investment Banking.
"Subject Property" has the meaning assigned to such term in Section 3.1.7.
"Subsequent GBCI Financial Statements" means GBCI Financial Statements for
the fiscal year ended December 31, 2006, and for each fiscal quarter ending
after the Execution Date and prior to Closing.
"Subsequent North Side Financial Statements" means North Side Financial
Statements for the fiscal year ended December 31, 2006, and for each month
ending after the Execution Date and prior to Closing.
6
"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 North Side, (ii) a sale, lease, exchange, transfer, or
other disposition of at least 25% of the assets of North Side, 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 North Side 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 North Side 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 July 31, 2007.
"Termination Fee" has the meaning assigned to such term in Section 7.5.
"Title Companies" has the meaning assigned to such term in Section 4.1.11.
"Total Cash Consideration" means the amount determined by subtracting
$10,000,000 from the North Side Closing Capital.
"Total Stock Consideration" means the number of GBCI Shares, rounded to the
nearest thousandth, obtained by dividing (i) $19 million by (ii) the GBCI
Average Closing Price, subject to the adjustments, if any, set forth in Sections
7.2.2 and 7.3.2.
"Wyoming Division" means the Wyoming Department of Audit, Division of
Banking.
SECTION 1.
TERMS OF TRANSACTION
1.1 EFFECT OF MERGER. Upon the Effective Date of the Merger:
1.1.1 OFFICES. The offices of the Combined Bank will be the main offices
and the established and authorized branches of each of North Side and
1st Bank immediately prior to the Effective Date. The main office of
1st Bank will be the main office of the Combined Bank. The location of
each office of the Combined Bank is set forth on Appendix A.
1.1.2 CAPITAL; CORPORATE DOCUMENTS. The authorized number of shares
(10,000) and par value per share ($100.00) of the Combined Bank will
be those of 1st Bank immediately prior to the Effective Date, and the
capital of the Combined Bank will be equal to the combined capital of
North Side and 1st Bank immediately prior to the Effective Date. The
articles of incorporation and the bylaws of the Combined Bank will be
the articles of incorporation and bylaws of 1st Bank in effect
immediately prior to the Effective Date.
1.1.3 RIGHTS AND LIABILITIES. All rights, franchises and interests of each
of North Side and 1st 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
7
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 North Side
and 1st Bank immediately prior to the Effective Date, 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 1st Bank directors and (ii) a
representative from the Rock Springs area to be agreed to by the
parties. The name and residence of each director of 1st Bank are set
forth on Appendix B.
1.1.5 OFFICERS. The officers of the Combined Bank after Closing will be the
officers of 1st Bank immediately prior to the Merger, subject to the
authority of the Combined Bank's board of directors to select or
remove officers. The name and residence of each executive officer of
the Combined Bank are set forth on Appendix C.
1.2 MERGER CONSIDERATION. Subject to the provisions of this Agreement, on the
Effective Date:
1.2.1 OUTSTANDING GBCI AND 1ST BANK COMMON STOCK. The shares of GBCI Common
Stock and 1st Bank 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 and 1st Bank,
respectively.
1.2.2 OUTSTANDING NORTH SIDE COMMON STOCK. Each share of North Side 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 the Per Share Consideration.
1.2.3 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 North Side 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 North Side, as the
case may be, then, as appropriate, a proportionate adjustment will be
made to the Per Share Consideration.
1.3 NO FRACTIONAL SHARES. No fractional shares of GBCI Common Stock will be
issued. In lieu of fractional shares, if any, each holder of North Side
Common Stock who is otherwise entitled to receive a fractional share of
GBCI Common Stock will not receive the Per Share Consideration for such
fractional share and will instead 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.
1.4 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 13-4-110 of the
Wyoming Statutes, unless and until such holder fails to perfect or
effectively
8
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.
1.5 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 North Side Common
Stock, for exchange in accordance with this Section 1.5, (i) certificates
representing the GBCI Shares; (ii) the Total 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."
1.6 CERTIFICATES.
1.6.1 LETTER OF TRANSMITTAL. At a time agreed to by the parties prior to
the Effective Date, GBCI will mail or cause the Exchange Agent to mail
to each holder of record of a certificate evidencing North Side Common
Stock shares (a "Certificate") a form letter of transmittal in a form
reasonably acceptable to counsel for North Side (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 1.6.2.
1.6.2 SURRENDER OF CERTIFICATES. Subject to Section 1.4, 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 North Side Common Stock shares converted in accordance with
the provisions of Section 1.2.2. Following the Effective Date, holders
of Certificates will exchange their Certificates in accordance with
instructions provided by the Exchange Agent pursuant to Section 1.6.1
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) the
amount of cash consideration to be received by the holder; and/or
(iii) 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. The
amounts to be received pursuant to clauses (ii) and (iii) above may,
at the holder's discretion, be paid by cashiers or certified check,
wire transfer or direct deposit to an account at the Combined Bank;
provided, however, such amount will be paid pursuant to cashiers or
certified check unless otherwise specified by the holder.
1.6.3 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.
1.6.4 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
North Side
9
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.
1.6.5 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 1.6.4) 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 North Side 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 North Side Common Stock was
converted at the Effective Date.
1.6.6 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.
1.6.7 AFFILIATES. Certificates that are surrendered for exchange by any
person constituting an "affiliate" of North Side 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.
1.6.8 UNDELIVERED CERTIFICATES. Any portion of the Exchange Fund that
remains unclaimed by shareholders of North Side 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 North Side Common Stock
who have not, prior to such time, complied with the provisions of this
Section 1.6 will, 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 North Side Common Stock held
by such holder as determined pursuant to this Agreement, in each case,
without any interest. Neither GBCI nor North Side will be liable to
any holder of North Side Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
1.7 ALTERNATIVE TRANSACTION STRUCTURE. Subject to the conditions set forth
below, GBCI and North Side may elect to consummate the Merger by means
other than those specified in this Section 1. If the parties so elect, any
means, procedures or amendments necessary or desirable to consummate the
Merger, in the opinion of counsel to the parties, will supercede any
conflicting, undesirable or unnecessary provisions of this Agreement. But,
unless this Agreement is amended in accordance with Section 9, the
following conditions will apply: (a) the aggregate type and amount of
consideration set forth in Section 1 will not be modified; and (b) the tax
consequences to the North Side shareholders will not be adversely affected.
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SECTION 2.
CLOSING OF TRANSACTION
2.1 EFFECTIVE DATE. The Merger will become effective upon the date and time
specified in the Certificate of Merger issued by the Wyoming Division and
filed with the Wyoming Secretary of State pursuant to Section 13-4-108 of
the Wyoming Statutes (the "Effective Date"). Unless GBCI and North Side
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 NORTH SIDE. North Side represents and
warrants to GBCI that, except as disclosed in a Schedule to this Agreement:
3.1.1 ORGANIZATION AND GOOD STANDING. North Side is a state banking
corporation duly organized, validly existing and in good standing
under the laws of the State of Wyoming, and has all requisite power
and authority to own and operate its properties and to carry on its
businesses as now conducted. North Side operates solely from its main
office, located in Rock Springs, Wyoming and does not have any branch
offices, including any approved or unopened offices.
3.1.2 CORPORATE AUTHORITY. The execution, delivery and performance by North
Side of this Agreement does not and will not, and the consummation by
North Side of the Merger will not, constitute or result in: (i) a
breach or violation of, or a default under, its articles of
incorporation 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 "North Side 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 it is subject; or (iv) any change in the
rights or obligations of any party under any of the North Side
Contracts. Schedule 3.1.2 contains a list of all consents North Side
must obtain from third parties under any North Side Contracts before
consummation of the Merger.
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3.1.3 CAPITAL STOCK.
(i) The authorized capital stock of North Side consists of 1,000
shares of North Side Common Stock, par value $1.00 per share;
3,000 shares of Class A Preferred Stock, par value $50.00 per
share; and 1,000 shares of Class B Preferred Stock, par value
$100.00 per share. A total of 1,000 shares of North Side 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 13-4-203 of the Wyoming Statutes. No
shares of North Side Preferred Stock are issued and outstanding.
(ii) No unissued shares of common stock or any other securities of
North Side are subject to any warrants, options, conversion
privileges, rights or commitments of any character, kind or
nature. North Side 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. North Side has no Subsidiaries.
3.1.5 REPORTS AND FINANCIAL STATEMENTS.
(i) Filing of Reports. Since January 1, 2003, North Side has filed
all reports and statements, together with any required amendments
to these reports and statements, that they were required to file
with the FDIC, Wyoming Division 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. North Side 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"), FDIC securities 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, 2003, 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.
(iv) Financial Statements. Each of North Side's balance sheets
included in the North Side Financial Statements fairly presents
(or, in the case of North Side Financial
12
Statements for periods ending on a date following the Execution
Date, will fairly present) the financial position of North Side
as of the date of the balance sheet. Each of the statements of
income, cash flows and shareholders' equity included in the North
Side Financial Statements fairly presents (or, for Subsequent
North Side Financial Statements, will fairly present) the results
of operations, shareholders' equity and cash flows, as the case
may be, of North Side 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) North Side 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
North Side Financial Statements or in Schedule 3.1.6, North Side
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 North Side Financial Statements as being owned
or leased by it as of the Execution Date. 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 North Side'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) North Side 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 North Side means (i) all
real property at which its business has been conducted, and
any property where under 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.
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(2) "Environmental Laws" means any federal, state or local law,
regulation, order, decree, judgment, judicial opinion, or
any agreement between North Side 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 North Side for
general office purposes will not be deemed to be Hazardous
Substances for the purposes of this Agreement.
(ii) Except as disclosed in Schedule 3.1.7, North Side 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 violation of such Environmental Laws that would
have a Material Adverse Effect on North Side.
(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, notices of investigations, notices of
non-compliance, information requests or notices of potential
responsibility or proceedings involving North Side or any Subject
Property relating to:
(1) an asserted liability of North Side 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.
(iv) 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, North Side does not own, possess
or control any PCBs,
14
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) Except as disclosed in Schedule 3.1.7, no part of the Subject
Property has been or to the actual knowledge of the Executive
Officers is scheduled for investigation or monitoring under any
applicable Environmental Law.
(vi) Except as disclosed in Schedule 3.1.7, to North Side's Knowledge
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
North Side have been duly filed, and all taxes, assessments, fees and
other government charges upon North Side or upon any of its
properties, assets, income or franchises that are due and payable have
been paid; notwithstanding the preceding, however, with respect to
state and local taxes (other than income taxes) this representation
and warranty will be deemed accurate so long as there is no material
amount that has not been paid or accrued. The federal income portion
of such taxes have been paid in full as indicated in the tax returns
of North Side 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 North
Side 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,
North Side is not in 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), which violation is reasonably likely to result in a
material adverse effect on North Side. Except as set forth on Schedule
3.1.9, North Side 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 North Side Financial Statements is, and that
which will be stated in the Subsequent North Side Financial Statements
prior to Closing will be, in both cases as adjusted for any increases
in ALLL or charge-offs reasonably required by GBCI upon concurrence by
BKD, LLP adequate to absorb its anticipated loan losses.
15
3.1.11 MATERIAL AGREEMENTS.
(i) Except for arrangements made after the date and in accordance
with the terms of this Agreement, North Side 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) North Side is not in default under any material contract,
agreement, commitment, arrangement, lease, insurance policy or
other instrument.
3.1.12 COMPLIANCE WITH LAWS. North Side 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 North Side 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 North
Side. To North Side's Knowledge, 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) North Side
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
North Side.
3.1.15 COMPLETENESS OF REPRESENTATIONS. No representation or warranty made
by or with respect to North Side in this Agreement (as modified by the
Schedules to this Agreement) contains any untrue statement of a
material fact.
3.1.16 ASSET CLASSIFICATION.
(i) Schedule 3.1.16 sets forth a list, accurate and complete, as of
January 18, 2007, 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 North Side that have been
criticized or classified by any internal audit conducted by North
Side, 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 credit or other assets that were paid off or
charged off by North Side before the date of this Agreement.
16
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 North Side,
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. North Side 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 North Side.
3.1.19 LABOR MATTERS. North Side 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. North Side is
not the subject of any proceeding: (1) asserting that it has committed
an unfair labor practice or (2) seeking to compel it to bargain with
any labor organization as to wages or conditions of employment. To
North Side's Knowledge, no strike involving North Side 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 North Side. Except for the
North Side Defined Benefit Plan and as disclosed in Schedule
3.1.20, North Side 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 North Side (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), has either received a favorable determination letter from
the Internal Revenue
17
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 North Side may rely, and
North Side 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. North
Side 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 North Side is or was required to make
under the terms of any of its Plans have been timely made or have
been reflected in the North Side 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 North Side 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 North Side Financial Statements or in
Schedule 3.1.20, North Side does not have any obligations for
retiree health and life benefits, other than for the continuation
of health coverage required to be continued under IRC 4980B
("COBRA").
(vi) Except as disclosed in Schedule 3.1.20, no provision of the
documents governing any Plan contains restrictions on the rights
of North Side to amend or terminate any Plan without incurring
liability under the Plan other than normal liabilities for
benefits.
(vii) Except as disclosed in the North Side Financial Statements or
otherwise disclosed in this Agreement or in Schedule 3.1.20,
neither the Merger nor any termination of the Compensation Plans
will 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, North Side 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
Sheshunoff, no agent, broker, person or firm acting on behalf of North
Side, 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 and 1st Bank represent and warrant to North Side:
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
18
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 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
and 1st Bank of this Agreement does not and will not, and the
consummation 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 117,187,500
shares of GBCI Common Stock, par value $0.01 per share, and
1,000,000 shares of serial preferred stock, par value $0.01 per
share. A total of 52,302,820 shares of GBCI Common Stock were
issued and outstanding as of December 31, 2006, all of which were
validly issued and are fully paid and nonassessable. As of
December 31, 2006, options to acquire 2,742,245 shares of GBCI
Common Stock have been granted and were outstanding. Between
December 31, 2006 and the Execution Date, no shares of GBCI
Common Stock or options to purchase shares of GBCI Common Stock
have been issued. No shares of GBCI preferred stock are issued or
outstanding.
(ii) 1st Bank's authorized capital stock consists of 10,000 shares of
common stock, par value $100.00 per share, of which 10,000 shares
currently are issued and outstanding, all of which are validly
issued to GBCI, fully paid and nonassessable, except to the
extent of any assessment required under Section 13-4-203 of the
Wyoming Statutes.
(iii) No unissued shares of common stock or any other securities of
GBCI or 1st Bank 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 and 1st
Bank have not issued and are 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, 2003, 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
19
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
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
Subsequent GBCI Financial Statements, 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 SHARES AVAILABLE. GBCI has, and at the Effective Date will have, 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
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) that is reasonably
likely to hinder or delay the consummation of the Merger or to result
in a civil money penalty or other regulatory enforcement action.
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. None of the GBCI or 1st Bank Executive
Officers know of any reason why the approvals, consents and waivers of
governmental authorities referred to in Section 5.1 cannot be
obtained.
20
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 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 (as
modified by the Schedules to this Agreement) contains any untrue
statement of a material fact.
SECTION 4.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
4.1 CONDUCT OF NORTH SIDE'S BUSINESSES PRIOR TO CLOSING. North Side 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 North Side, subject to applicable law, the
books, records, properties, contracts and documents of North Side
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; provided, however, that GBCI will conduct any such
inquiries in a manner reasonably intended to be the least
disruptive as possible to North Side's operations. North Side
will cooperate fully in such inspection and audit (subject to the
need to continue to operate North Side in the ordinary course of
business), and make available all information reasonably
requested by or on behalf of GBCI.
21
(ii) Upon request by GBCI, North Side will request that any third
parties involved in the preparation or review of the North Side
Financial Statements or North Side 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 or suggested by the
FDIC or Wyoming Division (so long as GBCI receives prior written
notice of such required action), North Side 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
North Side Common Stock, pledge or encumber in any way any shares
of its capital stock; or grant any option for shares of its
capital stock;
(ii) declare or pay any dividend, or make any other distribution,
either directly or indirectly, with respect to North Side 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; provided, however,
that North Side may sell or otherwise dispose of any of its
remaining Morgan Silver Dollars held as of the date of this
Agreement;
(iv) solicit or accept deposit accounts of a different type from
accounts previously accepted by North Side 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 North Side, 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 North Side'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 entered into in the ordinary course of business,
consistent with past practices;
(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
22
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 North Side's
compliance with applicable laws, regulations, or regulatory
policies;
(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; in either case 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 North Side's request for consultation
within three (3) Business Days after GBCI's receipt of written
information about the proposed securities transaction;
(xi) amend its articles of incorporation, 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 1st 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. North Side 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; provided, however, North Side will
not be deemed in breach of this provision if, upon advice of counsel,
it reasonably responds to an action taken by a third party.
23
4.1.4 MAINTENANCE OF PROPERTIES. North Side 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. North Side will use all
reasonable efforts to:
(i) 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 and consistent with the limitations inherent in Section
4.1.7 below.
(ii) Preserve the goodwill of suppliers, customers and others with
whom North Side has business relations.
4.1.6 SENIOR MANAGEMENT. Except as otherwise provided in this Agreement and
excluding resignations, without prior consultation with GBCI, North
Side will not make any change with respect to present management
personnel having the rank of vice-president or higher.
4.1.7 COMPENSATION. Except as disclosed in Schedule 4.1.7, North Side will
not permit any increase in the current or deferred compensation
payable or to become payable by North Side to any of its directors,
officers, employees, agents or consultants other than normal
increments in compensation in accordance with North Side's established
policies with respect to the timing and amounts of such increments.
Without the prior written approval of GBCI, North Side 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. North Side 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 North Side Financial
Statements:
(i) will be prepared from the books and records of North Side;
(ii) will present fairly the financial position and operating results
of North Side 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 and the instructions for preparation of Call Reports,
to the extent then applicable; and
(iv) will reflect all liabilities, contingent or otherwise, of North
Side 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 unfunded loan commitments, letters of credit, and
off-balance sheet arrangements pursuant to which North Side is
required to allocate risk-based capital that are not recorded on
the Subsequent North Side Financial Statements will be disclosed
in writing to GBCI.
4.1.9 UPDATE SCHEDULES. From the date of this Agreement until Closing,
North Side will promptly revise and supplement the Schedules to this
Agreement prepared by or on
24
behalf of North Side 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 North Side's
representations or warranties contained in this Agreement.
4.1.10 ACQUISITION PROPOSAL. North Side agrees that it will not, and North
Side will direct and use its best efforts to cause its directors,
officers, 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 North
Side) with respect to an Acquisition Event (any such proposal or 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. North Side 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. North Side 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. North Side 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
North Side.
4.1.11 STATUS OF TITLE/LEASEHOLD INTERESTS. North Side will provide GBCI,
at GBCI's expense, 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 North
Side delivers all of the title reports to GBCI for its review, GBCI
will inform North Side in writing whether, and in what manner, it
objects to any of the exceptions to title shown on any of the title
reports. North Side will, within 20 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. North Side 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 and at GBCI's expense, North Side 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 North Side, 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, North
Side 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 6.3 and known to North
Side, or circumstances reasonably deemed by GBCI to be likely to give
rise thereto, in accordance with terms and conditions of the
applicable policies.
25
4.1.13 REVIEW OF LOANS. North Side will permit GBCI to have continued
access to North Side's loans through Closing to update its examination
of North Side's credit quality and the adequacy of North Side's ALLL.
At GBCI's reasonable request, North Side will provide GBCI with
current reports updating the information set forth in Schedule 3.1.16.
All such reviews and inquiries will be conducted in a manner
reasonably intended to be the least disruptive as possible to North
Side's operations.
4.1.14 CONDUCT OF GBCI'S BUSINESS BEFORE CLOSING. GBCI will:
(i) provide North Side with prompt written notice of any events,
individually or in the aggregate, that could have a Material
Adverse Effect with respect to GBCI or that could be reasonably
likely to delay or hinder consummation of the Merger;
(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 GAAP as
such accounting principles and practices have been consistently
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 North Side'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 North Side 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 North Side
relating to North Side, (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
26
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. North Side will pay all
costs associated with its review and preparation of the
Registration Statement and the Prospectus/Proxy Statement. GBCI
and North Side will each pay half of the costs associated with
the printing of the Prospectus/Proxy Statement, and North Side
will pay for all of the costs associated with the mailing of the
Prospectus/Proxy Statement to its shareholders and any other
direct costs incurred by it in connection with the
Prospectus/Proxy Statement.
4.2.2 SUBMISSION TO SHAREHOLDERS.
(i) To the extent required by law, GBCI and/or North Side 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) North Side will promptly take the actions necessary in accordance
with applicable law and its articles of incorporation and bylaws
to convene a shareholders' meeting to consider the approval of
this Agreement and to authorize the transactions contemplated by
this Agreement, including, without limitation, the Merger (such
meeting and any adjournment or postponement thereof, the "North
Side Meeting"). The North Side Meeting will be held on the
earliest practical date after the date the Prospectus/Proxy
Statement may first be sent to North Side's shareholders without
objection by applicable governmental authorities. Except as
otherwise required to comply with the fiduciary responsibilities
of the board of directors, North Side's board of directors and
officers will recommend approval of the Merger to North Side's
shareholders.
4.3 AFFILIATE LETTERS.
4.3.1 AFFILIATE LIST. Certain persons may be deemed "affiliates" of North
Side under Rule 145 of the Securities Act. Set forth in Schedule 4.3.1
is a list of names and addresses of North Side'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, North Side 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 I, 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.
27
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 30 days following the Execution
Date. GBCI will provide copies of such applications for review by North
Side prior to their submission to the applicable regulatory authorities.
Further, GBCI will provide to North Side copies of all correspondence with
applicable regulatory authorities. These applications are expected to
include:
(i) A bank holding company application or waiver request to the
Federal Reserve and related filings with respect to the Merger.
(ii) A bank merger application to the Federal Reserve and the Wyoming
Division and related filings with respect to the Merger.
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 statements concerning the
Merger will occur upon, and be determined by, the mutual consent of North
Side 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, 1st Bank and North Side 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 or that may reasonably be expected to delay or hinder the
consummation of the Merger.
(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 or that may reasonably be expected to delay or hinder the
consummation of the Merger.
(iii) In the case of North Side, 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
28
(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
documents obtained from them including all abstracts, summaries or copies
of such documentation, 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 North Side 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 May 31, 2007.
4.13 NASDAQ LISTING. GBCI will take or cause to be taken any steps necessary to
list on the NASDAQ Global Market the GBCI shares to be issued in the
Merger.
4.14 DATA PROCESSING CONTRACT. Provided that GBCI and North Side have entered
into an indemnity agreement in form and substance reasonably acceptable to
each party pursuant to which GBCI will indemnify North Side for any damages
suffered as a result of the actions contemplated by this Section 4.14, so
long as North Side has taken reasonable actions to mitigate any such
damages, then no later than March 15, 2007, the parties will cooperate and
each use their best efforts to (i) provide written notice to Fidelity
National Financial, Inc. ("Fidelity") of North Side's intent, subject to
consummation of the Merger, to not extend the term of the Data Processing
Services Order, dated September 20, 2002, and all related agreements; and
(ii) negotiate the continued provision of data processing services to North
Side from Fidelity through the time that North Side and 1st Bank integrate
their data processing functions.
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 reasonable opinion of
GBCI, would deprive GBCI of the material economic or business benefits of
the Merger.
5.2 CONDITIONS TO OBLIGATIONS OF GBCI AND 1ST BANK. All obligations of GBCI and
1st Bank 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
North Side contained in this Agreement or in any certificate 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 North Side
contained in this Agreement or in any certificate 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
29
(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). North Side will have delivered to GBCI a certificate to that
effect, executed by a duly authorized officer of North Side and dated
as of Closing.
5.2.2 COMPLIANCE. North Side will have performed and complied in all
material respects with all terms and covenants of this Agreement on or
before Closing. North Side will have delivered to GBCI a certificate
to that effect, executed by a duly authorized officer of North Side
and dated as of Closing.
5.2.3 TRANSACTION FEES STATEMENTS. North Side has delivered to GBCI a
statement, in a form reasonably satisfactory to GBCI (provided that
such information will not include any attorney/client privileged
communication), from each third party to whom North Side has paid or
owes North Side 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. North Side has
delivered to GBCI its certificate, executed by a duly authorized
officer of North Side and dated as of Closing, stating the total North
Side Transaction Fees and certifying that North Side 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 North Side.
5.2.5 FINANCIAL CONDITION. The following will be true and the certificate
of North Side referred to in Section 5.2.2 will so state:
(i) North Side's ALLL, in the opinion of North Side management and as
adjusted for any increases or charge-offs reasonably required by
GBCI upon concurrence from BKD, LLP is adequate to absorb
anticipated loan losses.
(ii) The North Side Closing Capital will not be less than $10 million
at Closing.
(iii) The aggregate deposits of North Side, excluding (1) certificates
of deposit (or equivalents) of $100,000 or more and (2) brokered
deposits, will not be less than $80 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 North Side has delivered to GBCI a
legal opinion, in the form set forth on Exhibit II, and subject to
reasonable limitations, conditions and assumptions.
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:
(i) The Board of Directors of North Side; and
30
(ii) The shareholders of North Side.
5.2.10 TAX OPINION. GBCI has, at GBCI's expense, obtained from Graham &
Dunn PC and delivered to North Side, an opinion addressed to North
Side and GBCI (in form and substance reasonably satisfactory to North
Side and its counsel, and subject to reasonable limitations,
conditions and assumptions) substantially to the effect that, so long
as the Total Stock Consideration equals or exceeds 45% of the Merger
Consideration:
(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).
(ii) No gain or loss will be recognized by GBCI, 1st Bank or North
Side by reason of the Merger.
(iii) A holder of North Side Common Stock who receives solely cash in
exchange for his, her or its shares of North Side Common Stock,
and who owns those shares as a capital asset and does not
actually or constructively own shares of GBCI Common Stock after
the Merger, will recognize capital 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 its shares
of North Side Common Stock. The gain or loss will be long-term
capital gain or loss if the shares of North Side Common Stock
were held for more than one year.
(iv) A holder of North Side Common Stock who receives both GBCI Common
Stock and cash consideration in exchange for his, her or its
shares of North Side Common Stock will generally 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 North Side 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 North Side Common Stock
were held for more than one year.
The exchange will be "substantially disproportionate" with
respect to a holder of North Side 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 all its
shares of North Side Common Stock were first exchanged in the
Merger for shares of GBCI Common Stock, and a portion of those
shares of GBCI Common Stock were then redeemed for the cash
actually received in the Merger.
Whether the exchange will be "not essentially equivalent to a
dividend" with respect to a holder of North Side Common Stock
will depend on the holder's particular facts and circumstances.
31
5.2.11 AFFILIATE LETTERS. GBCI has received the affiliate list and letters
specified in Section 4.3.1.
5.2.12 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.
5.2.13 NO CHANGE IN LOAN REVIEW. North Side 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 North Side's loans.
5.2.14 NORTH SIDE DEFINED BENEFIT PLAN. The North Side Defined Benefit Plan
has been fully funded as determined by Milliman and terminated; all
notices required to be given under applicable law in connection
therewith have been given; any termination fees and/or withdrawal fees
assessed by the insurer have been paid; a request for a determination
letter has been delivered to the Internal Revenue Service; and North
Side has addressed, to GBCI's reasonable satisfaction, any issues
which have been identified that may affect the qualification of the
North Side Defined Benefit Plan under IRC 401(a).
5.3 CONDITIONS TO OBLIGATIONS OF NORTH SIDE. All obligations of North Side
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 and 1st Bank contained in this Agreement or in any certificate
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 and 1st Bank
contained in this Agreement or in any certificate 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 and 1st Bank will have delivered to
North Side a certificate to that effect, executed by a duly authorized
officer of GBCI and dated as of Closing.
5.3.2 COMPLIANCE. GBCI and 1st Bank will have performed and complied with
all terms and covenants of this Agreement on or before Closing. GBCI
and 1st Bank will have delivered to North Side 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
32
event, individually or in the aggregate, constituting a Material
Adverse Effect with respect to GBCI or 1st Bank.
5.3.5 TAX OPINION. The tax opinion specified in Section 5.2.10 has been
delivered to North Side.
5.3.6 CORPORATE ACTION. Each of the following will have approved the
Merger:
(i) The Boards of Directors of GBCI and 1st Bank; and
(ii) GBCI, as sole shareholder of 1st Bank.
5.3.7 REGISTRATION STATEMENT. The Registration Statement will have become
effective as specified in Section 5.2.12.
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 NORTH SIDE SHAREHOLDERS. The shareholders of North Side
will have approved the Merger.
5.3.11 FAIRNESS OPINION. North Side shall have received and delivered a
copy to GBCI of a fairness opinion from Sheshunoff dated not more than
five days prior to the date of the Prospectus/Proxy Statement to the
effect that, in the opinion of such firm, the terms of the Merger are
fair to the shareholders of North Side from a financial point of view.
5.3.12 FORM S-4. The conditions for use of a registration statement on SEC
Form S-4 set forth in the General Instructions on Form S-4 have been
or will be satisfied with respect to GBCI and the Registration
Statement.
SECTION 6.
DIRECTORS, OFFICERS AND EMPLOYEES
6.1 DIRECTORS. As a condition to the execution of this Agreement, each member
of North Side'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 EMPLOYEE BENEFIT ISSUES.
6.2.1 COMPARABILITY OF BENEFITS. GBCI intends that its current personnel
policies will apply to any current employees of North Side 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. GBCI intends
that as soon as practicable after consummation of the Merger, any
remaining North Side benefit plans will be terminated.
6.2.2 TREATMENT OF PAST SERVICE. For purposes of participation in GBCI's
plans, current employees' prior service with the North Side will
constitute prior service with GBCI for
33
purposes of determining eligibility and vesting (including but not
limited to vacation time).
6.2.3 SEVERANCE PAYMENTS. Except for North Side employees for whom other
specific arrangements have been made, if the employment of an
individual who is a North Side employee as of the Execution Date is
terminated prior to December 31, 2007, such employee will be entitled
to receive (i) the severance payment specified in GBCI's Severance
Plan for Employees, as in effect at the time of such termination; and
(ii) an amount equal to the holiday bonus that such employee received
in 2006, pro rated for the partial year, if applicable.
6.2.4 NO CONTRACT CREATED. Nothing in this Agreement will give any employee
a right to continuing employment or create any rights or causes of
action pursuant to any GBCI benefit plans.
6.3 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 North Side 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 North Side is currently permitted to indemnify (and advance
expenses to) its directors and officers under applicable state and federal
law and under its articles of incorporation 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 North Side's articles of incorporation 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 North Side 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 $26.33.
7.2.1 NORTH SIDE'S RIGHT TO TERMINATE. By specific action of its board of
directors, North Side may terminate this Agreement and the Merger by
written notice to GBCI on the Business Day immediately following the
Determination Date, if the GBCI Average
34
Closing Price is greater than $26.33. (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 North Side 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 North Side 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 North Side 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 $26.33.
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 $21.55.
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 North Side on the Business Day immediately following the
Determination Date, if the GBCI Average Closing Price is less than
$21.55. (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 NORTH SIDE'S RIGHT TO ADJUST CONSIDERATION. If GBCI provides written
notice to North Side in accordance with Section 7.3.1, then within two
Business Days following North Side's receipt of such notice, North
Side 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 $21.55.
If North Side 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).
7.4 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 North Side's shareholders, unless otherwise
provided) as follows:
7.4.1 MUTUAL CONSENT. By mutual consent of North Side and GBCI, if the
board of directors of each party agrees to terminate by a majority
vote of its members.
35
7.4.2 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 7.4.2 during
such period of time.
7.4.3 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 7.4.3 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
North Side) or Section 5.3.1 (in the case of a breach of a
representation or warranty by GBCI or 1st Bank). In the event of
termination pursuant to this Section 7.4.3, the terminating party will
be entitled to receive from the other party the Termination Fee.
7.4.4 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 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 7.4.4, 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
North Side's inability (after good faith effort) to remove exceptions
to title as provided for in that section.
7.4.5 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) North Side'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 North Side's Board of Directors recommends to
its shareholders the approval of the Merger, North Side's shareholders
elect not to approve the Merger.
36
7.4.6 IMPRACTICABILITY. By either GBCI or North Side, upon written notice
given to the other party, if the board of directors of the party
seeking termination under this Section 7.4.6 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 Wyoming to restrain or invalidate the
Merger or this Agreement.
7.4.7 DISSENTING SHARES. By GBCI, if holders of 10% or more of the
outstanding shares of North Side Common Stock are Proposed Dissenting
Shares.
7.4.8 SUPERIOR PROPOSAL - TERMINATION BY NORTH SIDE. By the board of
directors of North Side 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 North Side
may not terminate this Agreement pursuant to this Section 7.4.8 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
North Side 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 North Side'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.
7.4.9 SUPERIOR PROPOSAL - TERMINATION BY GBCI. By GBCI upon written notice
to North Side if (A) (i) an Acquisition Event will have occurred or
(ii) a third party will have made a proposal to North Side or its
shareholders to engage in or entered into an agreement with respect to
an Acquisition Event, and (B) this Agreement and the Merger are not
approved at the North Side Meeting.
7.5 TERMINATION FEE PAYABLE BY NORTH SIDE. Due to expenses, direct and
indirect, incurred by GBCI in negotiating and executing this Agreement and
in taking steps to effect the Merger, North Side will pay to GBCI $200,000
(the "Termination Fee") if GBCI terminates this Agreement pursuant to
Sections 7.4.3 (breach of representation) or 7.4.4 (breach of covenant). If
the Termination Fee becomes payable pursuant to this Section 7.5, it will
be payable on GBCI's demand and must be paid by North Side within three
Business Days following the date of GBCI's demand.
7.6 TERMINATION FEE PAYABLE BY GBCI. Due to expenses, direct and indirect,
incurred by North Side in negotiating and executing this Agreement and in
taking steps to effect the Merger, GBCI will pay to North Side the
Termination Fee if North Side terminates this Agreement pursuant to
Sections 7.4.3 (breach of representation) or 7.4.4 (breach of covenant). If
the Termination Fee becomes payable pursuant to this Section 7.6, it will
be payable on North Side's demand and must be paid by GBCI within three
Business Days following the date of North Side's demand.
7.7 BREAK-UP FEE. If (a) this Agreement is terminated pursuant to Section
7.4.5(i) (Failure to Recommend Shareholder Approval), Section 7.4.8
(Superior Proposal - Termination by North Side), or Section 7.4.9(i)
(Superior Proposal - Termination by GBCI - Immediate Acquisition Event),
then the Break-Up Fee to be paid to GBCI pursuant to Section 7.4.8 will be
$950,000 (the "Break-Up Fee"). If this Agreement is terminated pursuant to
Section 7.4.9(ii) (Superior Proposal
37
- Termination by GBCI -Subsequent Acquisition Event) and prior to or within
six months after such termination, North Side 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 North Side will promptly pay to GBCI the Break-Up Fee.
7.8 COST ALLOCATION UPON TERMINATION. In connection with the termination of
this Agreement under this Section 7, except as provided in Sections 7.5 and
7.6, GBCI and North Side 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:
GBCI or 1st Bank: 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.
North Side: North Side State Bank of Rock Springs, Wyo.
601 North Front Street
Rock Springs, WY 82901-5350
Attn: Christian N. Bunning
President
with a copy to: Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3700
Dallas, TX 75202-2799
Attn: Peter G. Weinstock, 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 North Side 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
38
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 7.5 and
7.6 (Termination-Related Fees), Section 7.7 (Break-Up Fee), Section 7.8
(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
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 North Side 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
39
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 Uinta
County, Wyoming.
8.7 GOVERNING LAW AND VENUE. This Agreement will be governed by and construed
in accordance with the laws of the State of Wyoming, except to the extent
that federal law may govern certain matters. The parties must bring any
legal proceeding arising out of this Agreement in Uinta County, Wyoming.
Each party consents to and submits to the jurisdiction of any local state
or federal court located in Uinta County, Wyoming.
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 North Side Meeting; provided,
however, except as set forth in Section 1.7, after approval by North Side's
shareholders, no amendment will be made changing the form or reducing the amount
of consideration to be received by the shareholders of North Side without the
further approval of such shareholders. All amendments, modifications, extensions
and waivers must be in writing and signed by the party agreeing to the
amendment, modification, extension or waiver.
[signatures on following pages]
40
This Plan and Agreement of Merger is dated as of the 22nd day of January, 2007.
GLACIER BANCORP, INC.
By: /s/ Michael J. Blodnick
------------------------------------
Michael J. Blodnick, President and
CEO
1ST BANK
By: /s/ Michael Seppala
------------------------------------
Michael Seppala, President
NORTH SIDE STATE BANK OF ROCK SPRINGS,
WYO.
By: /s/ Christian N. Bunning
------------------------------------
Christian N. Bunning, President
41
STATE OF WYOMING )
) ss.
COUNTY OF SWEETWATER )
On this 19th day of January, 2007, before me personally appeared Christian
N. Bunning, to me known to be the President of NORTH SIDE STATE BANK OF ROCK
SPRINGS, WYO., a corporation that executed the foregoing instrument, who
acknowledged said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes mentioned there, and who stated on oath
that he was authorized to execute said instrument, and that the seal affixed (if
any) was the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to this
document as of the day and year first written above.
/s/ Susan E. Armstrong
----------------------------------------
NOTARY PUBLIC in and for the State of
Wyoming, residing at 1374 James Drive,
Rock Springs, WY
My Commission expires: October 2, 2007
42
STATE OF WYOMING )
) ss.
COUNTY OF UINTA )
On this 22nd day of January, 2007, before me personally appeared Michael
Seppala, to me known to be the President of 1ST BANK, a corporation that
executed the foregoing instrument, who acknowledged said instrument to be the
free and voluntary act and deed of said corporation, for the uses and purposes
mentioned there, and who stated on oath that he was authorized to execute said
instrument, and that the seal affixed (if any) was the official seal of said
corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to this
document as of the day and year first written above.
/s/ Edith Brown
----------------------------------------
NOTARY PUBLIC in and for the State of
Wyoming, residing at Evanston, WY
My Commission expires: 4-29-2008
43
STATE OF MONTANA )
) ss.
COUNTY OF FLATHEAD )
On this 22nd day of January, 2007, before me personally appeared Michael J.
Blodnick, to me known to be the President and CEO of GLACIER BANCORP, INC., a
corporation that executed the foregoing instrument, who acknowledged said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes mentioned there, and who stated on oath that he was
authorized to execute said instrument, and that the seal affixed (if any) was
the official seal of said corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to this
document as of the day and year first written above.
/s/ LeeAnn Wardinsky
----------------------------------------
NOTARY PUBLIC in and for the State of
Montana, residing at Kalispell
My Commission expires: 7-21-2007
44
TABLE OF CONTENTS
PAGE
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SECTION 1. TERMS OF TRANSACTION.......................................... 7
1.1 Effect of Merger................................................. 7
1.2 Merger Consideration............................................. 8
1.3 No Fractional Shares............................................. 8
1.4 Payment to Dissenting Shareholders............................... 8
1.5 Deposit of Cash and Shares....................................... 9
1.6 Certificates..................................................... 9
1.7 Alternative Transaction Structure+/-............................. 10
SECTION 2. CLOSING OF TRANSACTION........................................ 11
2.1 Effective Date................................................... 11
2.2 Events of Closing................................................ 11
2.3 Place and Time of Closing........................................ 11
SECTION 3. REPRESENTATIONS AND WARRANTIES................................ 11
3.1 Representations and Warranties of North Side..................... 11
3.2 Representations and Warranties of GBCI........................... 18
SECTION 4. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING..................... 21
4.1 Conduct of North Side's Businesses Prior to Closing.............. 21
4.2 Registration Statement........................................... 26
4.3 Affiliate Letters................................................ 27
4.4 Submission to Regulatory Authorities............................. 28
4.5 Public Announcements............................................. 28
4.6 Consents......................................................... 28
4.7 Further Actions.................................................. 28
4.8 Notice........................................................... 28
4.9 Confidentiality.................................................. 28
4.10 Blue Sky Filings................................................. 29
4.11 Tax Treatment.................................................... 29
4.12 Best Efforts..................................................... 29
4.13 NASDAQ Listing................................................... 29
4.14 Data Processing Contract......................................... 29
SECTION 5. APPROVALS AND CONDITIONS...................................... 29
5.1 Required Approvals............................................... 29
5.2 Conditions to Obligations of GBCI and 1st Bank................... 29
5.3 Conditions to Obligations of North Side.......................... 32
SECTION 6. DIRECTORS, OFFICERS AND EMPLOYEES............................. 33
6.1 Directors........................................................ 33
6.2 Employee Benefit Issues.......................................... 33
6.3 Indemnification of Directors and Officers........................ 34
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SECTION 7. TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION....... 34
7.1 Termination by Reason of Lapse of Time........................... 34
7.2 Termination Due To GBCI Average Closing Price Greater Than
$26.33........................................................... 34
7.3 Termination Due To GBCI Average Closing Price Less than $21.55... 35
7.4 Other Grounds for Termination.................................... 35
7.5 Termination Fee Payable By North Side............................ 37
7.6 Termination Fee Payable By GBCI.................................. 37
7.7 Break-Up Fee..................................................... 37
7.8 Cost Allocation Upon Termination................................. 38
SECTION 8. MISCELLANEOUS................................................. 38
8.1 Notices.......................................................... 38
8.2 Waivers and Extensions........................................... 38
8.3 Construction and Execution in Counterparts....................... 39
8.4 Survival of Representations, Warranties, and Covenants........... 39
8.5 Attorneys' Fees and Costs........................................ 39
8.6 Arbitration...................................................... 39
8.7 Governing Law and Venue.......................................... 40
8.8 Severability..................................................... 40
8.9 No Assignment.................................................... 40
SECTION 9. AMENDMENTS.................................................... 40
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LIST OF APPENDICES, SCHEDULES AND EXHIBITS
APPENDICES:
Appendix A Combined Bank Offices
Appendix B Combined Bank Directors
Appendix C Combined Bank Executive Officers
SCHEDULES:
Schedule 3.1.2 Third Party Consents Required by North Side
Schedule 3.1.6 North Side Properties
Schedule 3.1.7 North Side Environmental Matters
Schedule 3.1.9 North Side Regulatory Actions
Schedule 3.1.11 North Side Material Contracts
Schedule 3.1.16 Asset Classifications
Schedule 3.1.17 North Side Litigation
Schedule 3.1.18 North Side Insurance Policies
Schedule 3.1.20 North Side Benefit Plans
Schedule 4.1.7 Payment to Directors
Schedule 4.3.1 North Side Rule 145 Affiliates
EXHIBITS:
Exhibit I Form of Affiliate Letter
Exhibit II Opinion of North Side Legal Counsel
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APPENDIX B
WYOMING STATUTES TITLE 13, CHAPTER 4, ARTICLE 1
SECTION 13-4-110: DISSENTING SHAREHOLDERS
(a) The owner of shares of a state bank which were voted against a merger
to result in a state bank, or against the conversion of a state bank
into a national bank, are entitled to receive their fair value in
cash, if and when the merger or conversion becomes effective, upon
written demand, made to the resulting state or national bank at any
time within thirty (30) days after the effective date of the merger or
conversion accompanied by the surrender of the stock certificates. The
value of the shares shall be determined, as of the date of the
stockholders' meeting approving the merger or conversion, by three (3)
appraisers, one (1) to be selected by the owners of two-thirds (2/3)
of the dissenting shares involved, one (1) by the board of directors
of the resulting state or national bank, and the third by the two (2)
so chosen. The valuation agreed upon by any two (2) appraisers shall
govern. If the appraisal is not completed within ninety (90) days
after the merger or conversion becomes effective the state banking
commissioner shall cause an appraisal to be made.
(b) The expenses of appraisal shall be paid by the resulting bank.
(c) The resulting state or national bank may fix an amount which it
considers to be not more than the fair market value of the shares of a
merging or the converting bank at the time of the stockholders'
meeting approving the merger or conversion, which it will pay
dissenting shareholders of the bank entitled to payment in cash. The
amount due under the accepted offer or under the appraisal shall
constitute a debt of the resulting bank.
[LOGO OF ALEX SHESUNOFF & CO.]
APPENDIX C
January 17, 2007
Board of Directors
North Side State Bank
601 North Front Street
Rock Springs, Wyoming 82902
Members of the Board:
You have requested Sheshunoff & Co. Investment Banking, LP ("Sheshunoff") to
render its opinion as to the fairness, from a financial point of view, to the
shareholders of the outstanding shares of common stock of North Side State Bank,
Rock Springs, Wyoming ("North Side") of the Merger Consideration, as defined
below, in the proposed merger between North Side and Glacier Bancorp, Inc, a
Montana corporation, based in Kalispell, Montana (the "Company").
Pursuant to the Agreement and Plan of Merger dated on or about January 17, 2007
between the parties (the "Merger Agreement"), the Company has agreed to exchange
cash and stock in the amount of approximately $27.475 million for all of the
outstanding shares of common stock of North Side (the "Merger Consideration").
The stock portion of the Merger Consideration is limited to $19.0 million of the
total Merger Consideration, and the cash portion is all North Side Closing
Capital, as defined in the Merger Agreement, above $10,000,000.
Pursuant to the Merger Agreement, North Side will be merged with and into a
subsidiary bank of the Company with the separate corporate existence of North
Side ceasing. The Company shall survive and continue to exist as a Montana
corporation.
Sheshunoff is regularly engaged in the valuation of securities in connection
with mergers and acquisitions and valuations for estate, corporate and other
purposes. Sheshunoff is experienced in these activities and has performed
assignments similar in nature to that requested by North Side on other
occasions.
In connection with its opinion, Sheshunoff, among other things:
1. Reviewed a draft of the Merger Agreement;
2. Reviewed North Side's audited financial statements for the year ending
December 31, 2005;
3. Evaluated North Side's consolidated results based upon a review of its
regulatory reports for the five-years ending December 31, 2001 through
December 31, 2005 and for the nine months ending September 30, 2006;
4. Evaluated North Side's consolidated results based upon a review of its
general ledger as of December 31, 2006;
2801 VIA FORTUNA, SUITE 625, AUSTIN, TX 78746
PHONE 800.279.2241 - FAX 512.472.8953 - ASHESHUNOFF.COM
North Side State Bank
January 17, 2007
Page 2
5. Reviewed publicly available financial statements and other business
and financial information regarding the Company;
6. Conducted conversations regarding recent and projected financial
performance of North Side with respective members of executive
management;
7. Compared Company's recent operating results and pricing multiples with
those of certain other publicly traded banks in the Western Region of
the United States;
8. Compared North Side's recent operating results with those of certain
other banks in Colorado, Idaho, Montana, Nebraska, South Dakota, Utah
and Wyoming that have recently been acquired;
9. Compared the Merger Consideration pricing multiples for North Side in
the Merger to those of certain other banks in Colorado, Idaho,
Montana, Nebraska, South Dakota, Utah and Wyoming that have recently
been acquired;
10. Analyzed the present value of the after-tax cash flows North Side
could produce through the year 2011 based on projections provided by
North Side's management;
11. Reviewed the potential pro forma impact of the Merger on the combined
company's results and certain financial performance measures of North
Side and the Company;
12. Reviewed the historical stock price data and trading volume of the
Company's common stock; and
13. Performed such other analyses as Sheshunoff deemed appropriate.
Sheshunoff assumed and relied upon, without independent verification, the
accuracy and completeness of the information provided to it by North Side for
the purposes of this opinion. Sheshunoff assumed that any projections provided
by North Side were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of North Side management. In addition, where
appropriate, Sheshunoff relied upon publicly available information that it
believes to be reliable, accurate, and complete; however, Sheshunoff cannot
guarantee the reliability, accuracy, or completeness of any such publicly
available information.
Sheshunoff did not make an independent evaluation of the assets or liabilities
of North Side or the Company, nor was it furnished with any such appraisals.
Sheshunoff is not an expert in the evaluation of loan portfolios for the
purposes of assessing the adequacy of the allowance for loan and lease losses
and assumed that such allowances for North Side and the Company, respectively,
are, in the aggregate, adequate to cover such losses.
Sheshunoff assumed that all required regulatory and third-party approvals will
be received in a timely fashion and without any conditions or requirements that
could adversely affect North Side, the Company, the Merger or the Company's
operations following the Merger. Sheshunoff has also assumed that the executed
Merger Agreement will conform in all material respects to the latest draft dated
January 12, 2007 of the Merger Agreement as provided to Sheshunoff.
North Side State Bank
January 17, 2007
Page 3
Sheshunoff's opinion is necessarily based on economic, market, and other
conditions as they existed on the date hereof, and the information made
available to it as the date hereof. Events occurring after the date hereof could
materially affect the assumptions used in preparing this opinion and the
resulting conclusion. North Side's management has informed Sheshunoff that it
knows of no additional information that would have a material effect on the
opinion. Other than for the proxy statement and at the Effective Time as defined
in the Merger Agreement, Sheshunoff is not obligated to update, revise, or
affirm this opinion.
Sheshunoff's opinion is not an appraisal or opinion of value but is limited to
the fairness of the Merger Consideration, from a financial point of view, to all
shareholders of North Side common stock. Sheshunoff expresses no opinion on the
underlying decision by North Side to engage in the Merger or the relative merits
of the Merger as compared to the other transactions or business strategies that
might be available to North Side. Moreover, this letter and the opinion
expressed herein do not constitute a recommendation to any shareholder as to any
approval of the Merger or the Merger Agreement.
It is understood that this opinion is for the information of the Board of
Directors of North Side and may not be used for any other purpose without
Sheshunoff's prior written consent, except as may be required by law or by a
court of competent jurisdiction and except that this opinion may be included in
its entirety in any filing, if required, with respect to the Merger with the
Securities and Exchange Commission or in proxy statement sent to North Side
shareholders.
Based on the foregoing and such other matters Sheshunoff has deemed relevant, it
is of the opinion, as of the date hereof, that the Merger Consideration to be
received by the North Side shareholders pursuant to the Merger is fair, from a
financial point of view.
Very truly yours,
/S/ Alex Sheshunoff & Co.
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING, LP
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;
(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.
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(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.
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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 March 5, 2007.
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
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James M. English, Director
By: /s/ Allen J. Fetscher
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Allen J. Fetscher, Director
By: /s/ Jon W. Hippler
------------------------------------
Jon W. Hippler, Director
By: /s/ Craig A. Langel
------------------------------------
Craig A Langel, Director
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By /s/ L. Peter Larson
------------------------------------
L. Peter Larson, Director
By: /s/ Douglas J. McBride
------------------------------------
Douglas J. McBride, Director
By: /s/ John W. Murdoch
------------------------------------
John W. Murdoch, Director
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
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2 Plan and Agreement of Merger dated as of January 22, 2007, by and
among Glacier Bancorp, Inc., 1st Bank and North Side State Bank of
Rock Springs, Wyo. (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 Form of Director Voting Agreement.
10.2 Form of Director Non-Competition Agreement.
10.3 Employment Agreement for William Fabian.
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 Sheshunoff & Co. Investment Banking, North Side'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 North Side.
99.3 Opinion of Financial Advisor to North Side (contained in Appendix
C to the proxy statement/prospectus which is included in the
registration statement).
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