Conversely, if the average closing price of Glacier stock (i) is less than $37.39$34.97 and the price of Glacier common stock has underperformed the KBW Regional Banking Index by more than 15 percentage points or (ii) is less than $35.19, Heritage$32.91, SBC may terminate the merger agreement, unless Glacier elects to increase on aper-share basis the number of shares of Glacier common stock, or in Glacier’s discretion, an amount of cash, so that the value of the total merger consideration is equal to $161.56 (if pursuant to (i) above) or $152.76 (if pursuant to (ii) above)as follows, in order to avoid termination of the merger agreement.agreement:
If the termination is because the Glacier average closing price is less than $34.97 and the price of Glacier common stock has underperformed the KBW Regional Bank Index by more than 15 percentage points, Glacier may elect to adjust theper-share stock consideration (or in Glacier’s discretion theper-share cash consideration, or a combination thereof) such that the total value of Glacier common stock to be issued in the merger, plus any additional cash consideration, is equal to the result of (i) the number of shares of SBC stock outstanding at the effective time of the merger, multiplied by (ii) 0.3706, multiplied by (iii) $34.97.
Cash Portion of Merger Consideration
$12.001.69 in cash, subject to adjustment as follows: If the “HB“SBC Closing Capital” as determined in accordance with the merger agreement is less than the minimum required, which is $99,117,206,$63,611,000, subject to adjustment as provided in the merger agreement, the cash portion of each unit will be reduced on a pro rata basis based on the amount of such deficiency.
If the HBSBC Closing Capital is in excess of $99,117,206,$63,611,000, subject to adjustment as provided in the merger agreement, HeritageSBC may, prior to the merger, declare and pay a special dividend to its shareholders in the aggregate amount of such excess.
“HBSBC Closing Capital” is defined in the merger agreement and is equal to an amount, estimated as of the closing of the merger, of Heritage’sSBC’s capital stock, surplus and retained earnings determined in accordance with generally accepted accounting principles (“GAAP”) on a consolidated basis, net of goodwill and other intangible assets, calculated in the same manner in which Heritage’sSBC’s consolidated tangible equity capital at December 31, 2018 and June 30, 2019 was calculated, after giving effect to adjustments, calculated in accordance with GAAP, for accumulated other comprehensive income or loss as reported on Heritage’sSBC’s balance sheet.
The amount of the HB Closing Capital requirement ($99,117,206) will be increased by the amount of HB Closing Capital attributable to the exercise of Heritage stock options after December 31, 2018, if any.
The HBSBC Closing Capital may be adjusted based on the estimated final amount of transaction-related expenses to be incurred by Heritage,SBC, as determined and agreed upon between HeritageSBC and Glacier in accordance with the merger agreement. To the extent that such final transaction-related expenses do not equal $10,600,000,$5,487,323, the amount of such difference, on anafter-tax basis, will be reflected as apro-forma adjustment to the HBSBC Closing Capital, reducing or increasing, as the case may be, the HBSBC Closing Capital.
Assuming for purposes of illustration only that(i) there is no reduction of the cash portion of the merger consideration, and(ii) the average closing price of Glacier common stock immediately prior to the closing of the merger is $40.66$[] (which was the closing price of Glacier common stock on May 24,[], 2019), HeritageSBC shareholders would receive consideration with a value equal to $174.64,$[], consisting of $12.00$1.69 in cash and 4.000.3706 shares of Glacier common stock (valued at $162.64)$[]) for each share of HeritageSBC common stock.
Fractional Shares
No fractional shares of Glacier common stock will be issued to any holder of HeritageSBC 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 provided in the merger agreement. No interest will be paid or accrued on cash payable in lieu of fractional shares of Glacier common stock.
Heritage Stock Options
As of the date of the merger agreement, Heritage had outstanding options to purchase 228,342 shares of Heritage common stock. Holders of outstanding and exercisable stock options under Heritage’s stock option plans will have until the 15th calendar day prior to the closing of the merger to exercise such options. Holders who exercise such options will receive shares of Heritage common stock that will be converted into the right to receive the merger consideration payable with respect to all outstanding shares of Heritage common stock upon the closing of the merger.
Each Heritage stock option that remains outstanding and unexercised at the closing of the merger (whether vested or unvested) (“Unexercised Option”) will be converted into a fully vested option to purchase Glacier common stock, with adjustments made to the number of shares and exercise price as provided in the merger agreement. Such stock option holders will also be entitled to receive a cash payment equal, on aper-share basis, to the amount, if any, paid by Heritage to its shareholders in a special dividend as described under “— Cash Portion of Merger Agreement” above. Any such cash payment (a “Per Share Dividend Equivalent”) would be made by Heritage prior to the closing of the merger.
The number of net option shares to which the Per Share Dividend Equivalent will be eligible to be paid will be calculated by dividing (A) the product obtained by multiplying (i) the excess of theper-share value of the merger consideration over theper-share exercise price of the shares of Heritage common stock held under the Unexercised Option by (ii) the number of shares of Heritage common stock held under the Unexercised Option by (B) theper-share value of the merger consideration.
Effective Date of the Merger
Subject to the satisfaction or waiver of 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 be the date the merger becomes effective under the Montana Business Corporation Act and the NevadaArizona Revised Statutes, Chapter 92A.Statutes. Subject to the foregoing and the possible adjustment of the closing date as discussed under “— Closing Date” below, it is currently anticipated that the merger will be consummated during the thirdfourth quarter of 2019.
Letter of Transmittal
Within five business days following the effective date of the merger, Glacier’s exchange agent will send a letter of transmittal to each holder of record of HeritageSBC common stock. This mailing will contain instructions on how to surrender HeritageSBC common stock certificates or other evidence of ownership in exchange for the merger consideration that the holder is entitled to receive under the merger agreement.
With the exception of any proposed dissenting shares, each HeritageSBC stock certificate will, from and after the effective date of the merger, be deemed to represent and evidence only the right to receive the merger consideration payable with respect to such certificate. HeritageSBC shareholders must provide properly completed and executed letters of transmittal in order to effect the exchange of their shares of HeritageSBC common stock for(i) evidence of issuance in book entry form, or upon the written request of the holder, stock certificates, representing Glacier common stock,(ii) a check, or, at the election of the SBC shareholder, a wire transfer (but only of the amount of cash included in that shareholder’s merger consideration exceeds $100,000) in the amount of the cash portion of the merger consideration, and/or(iii) a check representing the amount of cash in lieu of fractional shares, if any.
Lost, Stolen or Destroyed Certificates
If a certificate for HeritageSBC common stock has been lost, stolen or destroyed, the exchange agent will be authorized to issue or pay the holder’s merger consideration, if the holder provides Glacier with(i) satisfactory evidence that the holder owns the HeritageSBC common stock and that the certificate is lost, stolen or destroyed,(ii) any affidavit or security Glacier may require (including any bond that may be required by the exchange agent in accordance with its policies), and(iii) any reasonable additional assurances that Glacier or Glacier’s exchange agent may require, which may include indemnification of Glacier if the lost, stolen or destroyed certificates are subsequently presented.
Voting AgreementAgreements
Heritage’sSBC’s directors and executive officers (in their individual capacities as HeritageSBC shareholders) and acertain significant shareholdershareholders have entered into a voting agreement,agreements, dated as of April 3,September 30, 2019. In the voting agreement,agreements, each person agrees, among other things, to vote the shares of HeritageSBC common stock that he or she is entitled to vote and that he or she owns or controls in favor of the merger agreement. As of the record date, hereof, the persons who have entered into the voting agreementagreements are entitled to vote a total of 843,828[] shares of HeritageSBC common stock, representing approximately 61.6%[]% of all outstanding shares of HeritageSBC common stock. Accordingly, shareholder approval of the merger agreement is assured. The voting agreementagreements also providesprovide that the HeritageSBC shares covered by such agreement will be voted in favor of any proposal to adjourn the special meeting if there are not sufficient votes to approve the merger agreement. Any such vote to adjourn, if necessary, would occur at the special meeting.
Dissenters’ Rights
Under Nevada law, Heritagethe Arizona Business Corporation Act (“ABCA”), SBC shareholders have the right to dissent from the merger and to receive payment in cash for the “fair value” of their shares of HeritageSBC common stock.
HeritageSBC shareholders electing to exercise dissenters’ rights must comply with the provisions of the Nevada Revised Statutes, NRS 92A.300 through NRS 92A.500applicable Arizona laws in order to perfect their rights. The following is intended only as a brief summary of the material provisions of the procedures that a Heritagean SBC shareholder must follow in order to dissent from the merger and perfect dissenters’ rights.This summary, however,is not a complete statement of all applicable requirements and is qualified in its entirety by reference to the applicable Nevada statutes,Arizona dissenters’ rights laws, the full text of which is set forth in Appendix B to this document.
A shareholder who wishes to assertexercise dissenters’ rights must:
before Heritage shareholders vote on the merger agreement, deliver to HeritageSBC before the special meeting written notice of the shareholder’s intent to demand payment for the shareholder’s shares if the merger is completed, and
not vote or permit to be voted, any of such shareholder’s shares in favor of the merger.
A shareholder wishing to deliver a notice asserting dissenters’ rights should hand-deliverhand deliver or mail the notice to the following address:
Heritage BancorpState Bank Corp.
2330 South Virginia Street1771 McCulloch Boulevard
Reno, Nevada 89502Lake Havasu City, Arizona 86403
ATTN: Hawley MacLean,Karen Gibbs, Corporate Secretary
A shareholder who wishes to exercise dissenters’ rights generally must dissent with respect to all of the shares the shareholder owns.owns or over which the shareholder has the power to direct the vote. However, if a record shareholder is a nominee for several beneficial shareholders, some of whom wish to dissent and some of whom do not, then the record holder may dissent with respect to all the shares beneficially owned by any one person by notifying HeritageSBC in writing of the name and address of each person on whose behalf the record shareholderowner asserts dissenters’ rights. A beneficial shareholder may assert dissenters’ rights directly by submitting to HeritageSBC the record shareholder’s written consent to the dissent not later than the time the beneficial shareholder asserts dissenter’s rights, and by dissenting with respect to all the shares of which suchthe shareholder is the beneficial shareholder or over which suchthe shareholder has the power to direct the vote.
A shareholder who does not, prior to the Heritage shareholder vote on the merger agreement,special shareholders meeting, deliver to HeritageSBC a written notice of the shareholder’s intent to demand payment for the “fair value” of the shares will lose the right to exercise dissenters’ rights. In addition, any shareholder electing to exercise dissenters’ rights must either vote against the merger or abstain from voting.
If the merger is completed, Glacier (as the surviving corporation) will, within 10 days after the effective date of the merger, deliver a written notice to all HeritageSBC shareholders who properly gave notice of their intent to exercise dissenters’ rights. The notice will, among other things:
state an address at which Glacier will receivewhere the payment demandsdemand must be sent and where and when certificates for certificated shares must be deposited;
inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received;
supply a form for demanding payment;payment that includes the date of the first announcement of the terms of the merger and that requires that the person asserting dissenters’ rights certify whether or not the person acquired beneficial ownership of the shares before that date.
set a date by which Glacier must receive the payment demand, and by which certificatesdate must be deposited at the address indicated in the dissenters’ notice, which dates will be betweenleast 30 andbut not more than 60 days after the date the notice is delivered;
providestate Glacier’s estimate of the “fair value” for the shares and include specified financial and other information related to the estimate; and
be accompanied by a copy of the dissenters’ rights provisions of NRS 92A.300the ABCA, Sections10-1320 through 92A.500.10-1331.
A shareholder wishing to exercise dissenters’ rightssent a notice as described above must filedemand payment, certify whether the payment demand withinshareholder acquired beneficial ownership of the prescribed time period and deliver share certificatesshares before the date the terms of the merger were first announced as requiredset forth in the notice, and deposit the shareholder’s certificates in accordance with the terms of the notice. Failure to do so will cause thatA shareholder to lose hiswho demands payment and deposits the shareholder’s certificates retains all other rights of a shareholder until these rights are canceled or her dissenters’ rights.modified.
A shareholder who does not demand payment or does not deposit the shareholder’s certificates if required, each by the date set in the notice, is not entitled to payment for the shareholders shares.
The ABCA provides that Glacier (as the surviving corporation) must pay any dissenter who has complied with the requirements summarized in the previous paragraphs may nevertheless decline to exercise dissenters’ rights and withdraw from the appraisal process by notifying Glacier by the date set forth in the written notice provided by Glacier following consummation of the merger. If the shareholder does not withdraw from the appraisal process by the specified date, he or she may not do so thereafter unless Glacier consents to such withdrawal in writing.
Within 30 days after receipt of a demand for payment, Glacier will pay each dissenter with properly perfected dissenters’ rights Glacier’s estimate ofabove the “fair value” of the shareholder’s shares plus accrued interest from the effective date of the merger. The payment will be accompanied by specified financial information as required by NRS 92A.460 and a statement as to Glacier’s estimate of the fair value of the shares and the interest payable with respect to the shares.
With respect to a dissenter who did not beneficially own shares of HeritageSBC prior to the public announcement of the merger, Glacier is not required to make the payment until the dissenter has agreed to accept the payment in full satisfaction of the dissenter’s demands or demand appraisal under NRS 92A.460.
“Fairdemands. “Fair value” is defined in MRS 92A.320 asmeans the value of the Heritage shares immediately before the effective date of the merger, excluding any appreciation or depreciation in anticipation of the merger unless exclusion would beis inequitable. The “fair value” may be less than, equal to, or greater than the value of the consideration that a Heritagean SBC shareholder would be entitled to receive under the merger agreement. The rateInvestment banker opinions as to the fairness, from a financial point of interest will beview, of the rate of interest providedconsideration payable in a transaction such as the merger are not opinions as to, and do not address, “fair value” under applicable law.the ABCA.
Within 30 days of Glacier’s payment (or offer of payment in the case of shares acquired after public announcement of the merger) to a dissenting shareholder, a dissenter dissatisfied with Glacier’s estimate of the fair value of the shares may notify Glacier of the dissenter’s own estimate of the fair value and demand payment of that amount. If Glacier does not accept the dissenter’s estimate and the parties do not otherwise settle on a fair value, then Glacier must, within 60 days of receiving the estimate and demand, petition a court to determine the fair value of the shares and accrued interest.value.
In view of the complexity of the NevadaArizona statutes governing dissenters’ rights, HeritageSBC shareholders who wish to dissent from the merger and pursue dissenters’dissenter’s rights should consult their legal advisors.
The failure of a Heritagean SBC shareholder to comply strictly with the NevadaArizona statutory requirements will result in a loss of dissenters’ rights. A copy of the relevant statutory provisions is attached as Appendix B. You should refer to Appendix B for a complete statement concerning dissenters’ rights and the foregoing summary of such rights is qualified in its entirety by reference to Appendix B.
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 customary conditions must be satisfied, or specified 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.
Additionally, either Glacier or HeritageSBC 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 HeritageSBC may waive any conditions applicable to its obligations, except those that are required by law (such as receipt of regulatory approvals and HeritageSBC shareholder approval). Either Glacier or HeritageSBC may also grant extended time to the other party to complete an obligation or condition.
Covenants
The merger agreement contains numerous agreements between the parties regarding the handling of various matters before the merger. These agreements include:
for Heritage,SBC, a general obligation to conduct business in the ordinary course, consistent with past practice in compliance with applicable laws and to generally maintain and preserve intact its, properties, business, management and compensation structure;
actions that HeritageSBC must refrain from taking, and certain actions that the HeritageSBC must take, during the period between the date of the merger agreement and the closing with regard to a number of matters outside the ordinary course of business;
agreements by both parties to cooperate in the preparation and submission of proxy materials, regulatory applications and for Glacier to make certain filings and notices;
agreement by SBC to convene a shareholders’ meeting and submit the merger agreement for consideration at such meeting and, subject to certain limitations (described below under“No-Shop”/Board Recommendation Provisions), solicit approval of the merger agreement from its shareholders and recommend that shareholders approve the merger agreement;
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agreements by the parties that they will provide notice to each other of certain events, including notice by either party of the occurrence of any event that could be expected to have a material adverse effect; and
agreements by the parties to use commercially reasonably efforts to permit the consummation of the merger to occur on July 31, 2019not later than April 30, 2020 (subject to any delays resulting from SEC review or bank regulatory processing).
“No-Shop”/Board Recommendation Provisions
The merger agreement provides that, as of the signing of the merger agreement, HeritageSBC and Heritagethe Bank must cease any existing activities, discussions or negotiations with any parties with respect to a third-party acquisition proposal and, except as otherwise permitted under the merger agreement, HeritageSBC and Heritagethe Bank may not, and must direct and use their best efforts to cause their directors, officers, employees, agents and representatives not to:
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initiate, solicit or encourage or take any other action to facilitate inquiries or proposals regarding, or the making of any proposal or offer with respect to, a third-party acquisition;
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engage in any negotiations or discussions with any person concerning a third-party acquisition;
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provide any confidential information to any person in connection with any third-party acquisition; or
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otherwise facilitate any effort or attempt to make or implement a third-party acquisition.
Notwithstanding the immediately preceding provision, before Heritage’sSBCs shareholders approve the merger, if HeritageSBC receives a written unsolicited acquisition proposal and its board of directors determines in good faith that (a) the proposal constitutes or is reasonably expectedlikely to result in a superior proposal and (b) the board’s fiduciary duties require HeritageSBC to engage in negotiations with, provide confidential information to, or have any discussions with, a person in connection with such proposal, then HeritageSBC may do so to the extent the board determines it is required bythat failure to take such actions would result in a breach of the board’sdirectors’ fiduciary duties; provided that,duties under applicable law. In such event, prior to providing any confidential information, HeritageSBC must enter into a confidentiality agreement with the person on terms no lessat least as favorable to Heritage thanSBC as its confidentiality agreement with Glacier. HeritageSBC must notify Glacier of any unsolicited acquisition proposal it receives.
Before Heritage’s shareholders approveThe merger agreement provides that the merger, theSBC board of directors in responsewill recommend approval of the merger agreement to an unsolicitedSBC’s shareholders, and will not withdraw, modify or qualify its recommendation unless SBC receives a superior proposal may, change its recommendation to Heritage’s shareholders if,and the SBC board of directors determines, in good faith and after consultingconsultation with its legal counsel, it determines in good faith that it would be inconsistent with its fiduciary duties not to changewithdraw, modify or qualify its recommendation.
Representations and Warranties
HeritageSBC and Glacier have made certain customary representations and warranties to each other in the merger agreement relating to their businesses. The representations and warranties contained in the merger agreement were made only for purposes of such agreement and are made as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed to by the parties, including being qualified by disclosures between the parties. These representations and warranties may have been made to allocate risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to standards of materiality that differ from the standard of materiality that an investor may apply when reviewing statements of factual information.
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 special meeting of the shareholders of Heritage.SBC. To the extent permitted under applicable law, the parties may make any amendment or supplement without further approval of HeritageSBC shareholders. However, after HeritageSBC shareholder approval, any amendment that would change the form or reduce the amount of consideration that HeritageSBC shareholders will receive in the merger would require further approval from HeritageSBC shareholders.
Termination of the Merger Agreement
The merger agreement contains several provisions entitling either Glacier or HeritageSBC to terminate the merger agreement under certain circumstances. The following briefly describes these provisions:
Lapse of Time. If the merger has not been consummated on or before NovemberApril 30, 2019,2020, then at any time after that date, either Glacier or HeritageSBC may terminate the merger agreement and the merger if(i) the terminating party’s board of directors decides to terminate by a majority vote of all 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. However, if as of NovemberApril 30, 2019,2020, all required regulatory approvals have not been obtained, then the deadline for consummation of the merger will be extended to on or before JanuaryJuly 31, 2020, if Glacier notifies HeritageSBC in writing on or prior to NovemberApril 30, 20192020 of its election to extend such date.
Glacier Average Closing Price Greater than $50.59$47.31. 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 greater than $50.59.
$47.31. If Glacier provides written notice of its intent to terminate the merger agreement because the Glacier average closing price is greater than $50.59, Heritage$47.31, SBC may elect, within three business days of its receipt of such notice, to accept a decrease in the total number of Glacier shares, such that the value of per share consideration issuedcalculated in the merger will equal $202.36 (based on the Glacier average closing price).manner described above under “—Merger Consideration – Stock Portion of Merger Consideration.”
If HeritageSBC makes the election to accept such decrease in the number of Glacier shares to be issued, no termination of the merger agreement will occur, and the merger agreement will remain in effect in accordance with its terms, except that the total number of Glacier shares to be issued in the merger would decrease. As a result, the amount of Glacier common stock exchanged for each share of HeritageSBC common stock would decrease. In prior merger transactions with similar adjustment rights, Glacier has exercised its right to terminate the merger agreement, and the seller in such prior merger transactions elected to accept a decrease in the number of Glacier shares issued in the merger.
Glacier Average Closing Price Less than $37.39Specified Amounts. HeritageSBC may provide written notice to Glacier of its intent to terminate the merger agreement because the Glacier average closing price is(a) (i)less than $37.39$34.97and(ii) the price of Glacier common stock, during a period defined in the merger agreement, underperformed the KBW Regional Banking Index by more than 15 percentage points, or(b) less than $35.19.$32.91.
If HeritageSBC has provided notice of its intent to terminate the merger agreement because either of the Glacier average closing price is below $37.39 and the price of Glacier common stockforegoing events has underperformed the KBW Regional Banking Index by more than 15 percentage points,occurred, Glacier may elect, within three business days of its receipt of such notice, to increase the number of Glacier shares to be issued in the merger, or in Glacier’s sole discretion, pay additional cash consideration, or a combination of additional Glacier shares and cash, such that the value of the per share merger consideration equals $161.56 (based on the Glacier average closing price).
If Heritage has provided notice of its intent to terminate the merger agreement because the Glacier average closing price is below $35.19, then Glacier may elect, within three business days of its receipt of such notice, to increase the number of Glacier shares to be issuedcalculated in the merger, or in Glacier’s sole discretion, pay cash consideration, or a combinationmanner described above under “—Merger Consideration – Stock Portion of additional Glacier shares and cash, such that the Total Consideration Value Per Share equals $152.76 (based on the Glacier average closing price).Merger Consideration.”
If Glacier elects to increase the total number of shares issuable in the merger or pay cash consideration (or a combination of additional shares and cash), no termination of the merger agreement will occur, and the merger agreement will remain in effect in accordance with its terms, except as the consideration has been adjusted.
Mutual Consent. The parties may terminate the merger agreement at any time before closing, whether before or after approval by HeritageSBC shareholders, by mutual consent if the board of directors of each party agrees to terminate by a majority vote of all of its members.
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 Representation or 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 of the representations, warranties, 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 if the HeritageSBC Board(i) 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 or not the HeritageSBC Board recommends approval of the merger to its shareholders, Glacier or HeritageSBC may terminate the merger agreement if HeritageSBC shareholders electdo not to approve the merger.
Dissenting Shares. Glacier may terminate the merger agreement if holders of 10% or more of the outstanding HeritageSBC shares have properly given notice of their intent to assert dissenters’ rights under Nevada law.Arizona law, provided that SBC will be provided an opportunity not to exceed 10 days from notice to reduce the percentage of proposed dissenting shares to below 10% prior to any termination.
Superior Proposal – Termination by HeritageSBC. HeritageSBC may terminate the merger agreement if its board of directors determines in good faith that HeritageSBC has received a “Superior Proposal” (as defined in the merger agreement). This right is subject to the requirement that HeritageSBC may terminate the merger agreement only if HeritageSBC(i) has not breached its covenants regarding the initiation or solicitation of acquisition proposals from third parties and submission of the merger agreement to HeritageSBC shareholders;(ii) immediatelypromptly following the delivery of such notice of termination to Glacier, HeritageSBC enters into a definitive acquisition agreement relating to such Superior Proposal,(iii) HeritageSBC has provided Glacier with at least five days’ prior written notice (the “Notice Period”) that the HeritageSBC Board is prepared to accept a Superior Proposal and has given Glacier, if it so elects, an opportunity to amend the terms of the merger agreement during the Notice Period (and negotiated with Glacier in good faith with respect to such terms)terms during the Notice Period) in such a manner as would enable the HeritageSBC Board to proceed with the merger and(iv) simultaneously upon entering into such definitive acquisition agreement relating to the Superior Proposal, it delivers to Glacier thebreak-up fee described below.
Superior Proposal – Termination by Glacier. Glacier may terminate the merger agreement if an “Acquisition Event” (as defined in the merger agreement) has occurred.
Break-Up Fee
If the merger agreement is terminated because(i) the HeritageSBC Board fails to recommend shareholder approval of the merger agreement or modifies, or withdraws or changes its recommendation in a manner adverse to Glacier; or(ii) HeritageSBC terminates the merger agreement after receiving a Superior Proposal and Glacier declines the opportunity to amend the terms of the merger agreement to enable the HeritageSBC Board to proceed with the merger; or(iii) Glacier terminates the merger agreement if an Acquisition Event has occurred, then HeritageSBC will immediately pay Glacier abreak-up fee of $10,000,000.$6,000,000.
In addition, if the merger agreement is terminated(i) by Glacier for Heritage’sSBC’s breach of specified covenants set forth in the merger agreement or(ii) by Glacier due to the merger agreement not being approved by the HeritageSBC shareholders,and within 18 months after any such termination, HeritageSBC or Heritagethe Bank enters into an agreement for, or publicly announces its intention to engage in, an Acquisition Event, or an Acquisition Event occurs, then HeritageSBC will promptly following such entry, announcement, or occurrence pay Glacier thebreak-up fee of $10,000,000.$6,000,000.
Allocation of Costs Upon Termination
If the merger agreement is terminated (except under circumstances that would require the payment of abreak-up fee) Glacier and HeritageSBC will each pay their ownout-of-pocket expenses incurred in connection with the transaction.
Conduct Pending the Merger
The merger agreement provides that, until the merger is effective, HeritageSBC will conduct its business only in the ordinary and usual course. In that regard, the merger agreement provides that, unless Glacier otherwise consents in writing, and except as required by applicable regulatory authorities, HeritageSBC and Heritagethe Bank will refrain from engaging in specified significant activities.
Bank Management and Operations After the Merger
Immediately following the merger of HeritageSBC with and into Glacier, Heritagethe Bank will be merged with and into Glacier Bank. The former branches of the Bank will be combined with Glacier Bank’s existing branches in Arizona, which will then operate as a division of Glacier and Glacier Bank (the “Division”). As described below under “Interests of HeritageSBC Directors and Executive Officers in the Merger,” certain executive officersBrian Riley President and Chief Executive Officer of Heritage Bank haveSBC, has entered into an employment agreementsagreement with Glacier and Glacier Bank, effective upon closing of the merger, pursuant to which theyhe will serve as executive officersPresident and Chief Executive Officer of Heritage Bank, a newly created division of Glacier Bank.the Division.
Employee Benefit Plans
The merger agreement confirms Glacier’s intent that Glacier’s and Glacier Bank’s current personnel policies will apply to any employees of HeritageSBC or the Bank 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 and/or Glacier Bank. Current employees’ prior service with HeritageSBC and/or Heritagethe Bank will constitute prior service with Glacier for purposes of determining eligibility and vesting under benefit plans of Glacier and Glacier Bank. Any current employees of SBC or the Bank (a) who are not entitled to severance, change in control, or other payments at or in connection with closing of the merger and are not offered a position by Glacier or retained by Glacier Bank following the closing of the merger will receive severance payments in accordance with Glacier Bank’s severance policy in effect at the closing on the basis of the number of years of prior service with SBC and the Bank, at the expense of Glacier.
Interests of HeritageSBC Directors and Executive Officers in the Merger
Certain members of the HeritageSBC and/or Heritage Bank Board and executive management may be deemed to have interests in the merger, in addition to their interests as shareholders of HeritageSBC generally. The HeritageSBC Board was aware of these factors and considered them, among other things, in approving the merger agreement.
Change in Control Agreements
HeritageSBC and Heritagethe Bank previously entered into employment agreements or severance agreements with certain executive officers of Heritage and Heritage BankSBC and the directors of HeritageBank that providedprovide for benefits payable in the event of a change in control of Heritage or termination of employment following a change in control of Heritage.SBC. The employment agreement with Stanley C. Wilmoth,Brian Riley, President and CEO,Chief Executive Officer, and the change in controlseverance agreements with all directors, provide for payments in connection with the closing of a transaction resulting in a change in control, while the employment or change in control agreements with other executive officersPeter Hill, Executive Vice President and Chief Credit Officer, Craig Wenner, Executive Vice President and Chief Financial Officer, and Randall Austin, Executive Vice President and Chief Operating Officer, provide that if the executive’s employment is terminated without Cause or by the executive with Good Reason (as such terms are defined in the respective agreements) within a specified period following a change in control, the executive would be entitled to alump-sum severance payment. Thelump-sum severance payment for Mr. Riley would be equal to the sum of (i) 36 times his monthly base salary plus (ii) the incentive compensation paid to him during the 36 months prior to his termination of employment. Thelump-sum severance payment for each of Messrs. Hill, Wenner and Austin would be equal to 12 times the executive’s monthly base salary. Additionally, the Bank has previously entered on a severance agreement with Karen Gibbs, Senior Vice President and Manager of Human Resources, providing for benefits payable in the event of a termination of employment without Cause following a change in control, in the form of a severance payment equal to 12 times Ms. Gibbs’ monthly base salary, payable in normal semi-monthly payroll payments.
The payments or payment agreements described below will satisfy the rights to payments that such executive officers and directors would beare entitled to receive pursuant to their respective prior employment or change in controlseverance agreements.
Closing Payment Agreement
Glacier, Glacier Bank, SBC and the Bank have entered into an agreement (the “Closing Payment Agreement”) with Brian Riley, which supersedes his prior employment agreement with respect to the change in control severance benefits provided for in that agreement. The Closing Payment Agreement is effective on (and conditioned upon) the closing of the merger. The Closing Payment Agreement provides that if Mr. Riley remains employed with SBC and the Bank through the closing date of the merger, he will receive alump-sum cash payment of up to $1,565,750 less applicable tax withholdings, which is equal to the amount of severance benefits payable pursuant to the terms of Mr. Riley’s prior employment agreement. The Closing Payment Agreement provides, however, that if such amount, together with any other payments or rights to which Mr. Riley may be entitled to receive, would constitute an “excess parachute payment” under applicable provisions of the Internal Revenue Code, payments pursuant to the Closing Payment Agreement will be reduced to the extent necessary to ensure that no portion of such payments will be subject to the excise tax imposed on excess parachute payments (this is referred to as a “Section 280G Cutback”).
Post-Closing Payment Agreements
Heritage and HeritageGlacier Bank has entered into agreements (“Closing(the “Post-Closing Payment Agreements”) with certain executivesMessrs. Hill, Wenner and Austin and with Ms. Gibbs. The Post-Closing Agreements are effective on (and conditioned upon) the closing of Heritage and/or Heritage Bank.the merger. As described above, each of such executives was a party to a prior employmentseverance agreement that provided for the payment of benefits uponin the event of a change in control of HeritageSBC or Heritagethe Bank in certain circumstances. The Closing Payment Agreements satisfy all of the executives’ rights to payment under the previous employment agreements. In the case of Messrs. Traficanti and Carrick, the payments constitute retention payments and in exchange they are terminating their existing employment agreements. The terms of the Closing Payment Agreements are essentially identical except for the amounts to be received by the respective executives. On the effective date of the merger, the executives will be entitled to receivelump-sum cash payments in the following amounts: Mr. Wilmoth, $1,285,000; Mr. Traficanti, $500,000; and Steven Carrick, SVP/Branch Operations Manager, $100,000.
Post-Closing Payment Agreement
Glacier Bank has entered into an agreement (the “Post-Closing Payment Agreement”) with Lisa Milke, Chief Financial Officer of Heritage Bank. Ms. Milke was a party to a prior change in control agreement that provided for payments on a change in control. TheEach Post-Closing Payment Agreement whichprovides that the executive will be effective uponserve as an employee of Glacier Bank following the closing of the merger will satisfy all of Ms. Milke’s rights to payment under the previous change in control agreement. Ms. Milke’s employment will continueand continuing until the earlier to occur of the
last 30thday of the month following the date of systems conversion of Heritagedate for the Bank’s information systems or December 31, 2020 (the “Retention Date”). During such term, the executive will be paid for continuing services based on his or her annualized base salary with the Bank as of the closing date of the merger.
Effective uponon the Retention Date, unless the parties otherwise agree, Ms. Milke’sthe executive’s position will be eliminated, and within 60 days followingprovided the Retention Date, sheexecutive has remained continuously employed through such date, the executive will be entitled to receive alump-sum cash amountpayment of $400,000. In addition,$215,000 to Mr. Hill; $205,000 to Mr. Wenner; $200,000 to Mr. Austin, and $130,000 to Ms. Milke will beGibbs (in the case of Ms. Gibbs, paid a total of $150,000 in two installments of $100,000 on the first anniversary of the termination of employmentover 12 months corresponding to normal payroll payments), less applicable taxes and $50,000 on the second anniversary of the termination of her employment. Ms. Milke has agreed not to compete with Glacier Bank or solicit its customers for periods of one and two years following the Retention Date, respectively.
Director Closing Payment Agreements
Heritage and Heritage Bank have previously entered into change in control agreements (“Director CIC Agreements”) with each of the directors of Heritage and Heritage Bank, providing for change in control payments based upon the respective board and committee fees received by such directors during the prior 12 month period. Heritage and Heritage Bank have entered into agreements with each such director in order to fully satisfy such director’s rights to receive payments under such prior Director CIC Agreements (“Director Closing Payment Agreements”). The Director Closing Payment Agreements are essentially identical, and provide for payments oflump-sum cash payments at closingwithholdings, in full satisfaction of theall payment obligations of Heritage and Heritage Bank under the Director CIC Agreements.executive’s prior severance agreements. The amounts payable underPost-Closing Agreements provide, however, that payments pursuant such Directoragreements are subject to potential Section 280G Cutbacks as described above with respect to Mr. Riley’s Closing Payment Agreements areAgreement.
If Glacier Bank terminates the executive’s employment before the Retention Date without Cause (as defined in amounts ranging from $108,000the agreement), the executive’s right to $166,380 per director.receive the payments described above will be accelerated.
Employment AgreementsAgreement with Glacier Bank
Stanley C. Wilmoth
Glacier Bank has entered into an employment agreement with Stanley C. Wilmoth,Brian Riley, currently President and Chief Executive Officer of Heritage Bank,SBC, regarding employment by Glacier Bank following the merger. Mr. WilmothRiley will serve as President and Chief Executive Officer of Heritage Bank of Nevada, a newly created division of Glacier Bank.the Division. The employment agreement is effective on (and conditioned upon) the closing of the merger and continues until December 31, 2022. The employment agreement provides forthat Mr. Riley will receive an annualized base salary of $530,000 (which is his current salary),$410,000, subject to increasepossible increases in the sole discretion of Glacier Bank’s or Glacier’s board of directors based on performance and additional duties and responsibilities, if any. Additionally, directors.
Mr. WilmothRiley will also be eligible for incentive bonusesa retention bonus in the aggregate amount of $155,000,$170,000, of which $130,000 will be paid on December 31, 2020, and $25,000$40,000 will be paid on December 31, 2021, provided that he remains employed through each such date.
Mr. Wilmoth will also be eligible for retention bonuses in the aggregate amount of $560,000, with $75,000 payable on December 31, 2019, $185,000 payable on December 31, 2020, $150,000 payable on December 31, 2021, and $150,000 payable on December 31, 2022, provided that he remains employedby Glacier Bank through each such date. In the event that Mr. Wilmoth’sRiley’s employment is terminated by Glacier Bank without Cause or Mr. WilmothRiley terminates his employment with Good Reason (as such terms are defined in the employment agreement), his entitlement to any unpaid retention bonus(es) will be accelerated.accelerated and paid in a single lump sum.
If Mr. Wilmoth remains employed by Glacier Bank until December 31, 2022, he will be eligible for an additional bonus in the amount of $200,000, of which $100,000 will be payable on December 31, 2023, and $100,000 of which will be payable on December 31, 2024. If Glacier Bank terminates Mr. Wilmoth’s employment for Cause or he terminates his employment without Good Reason, or during or after his employment Mr. Wilmoth’s fails to comply with specified provisions of theThe employment agreement regardingnon-competition, any unpaid payment will be forfeited. If Glacier Bank terminates Mr. Wilmoth’s employment without Cause or Mr. Wilmoth terminates his employment with Good Reason, or in the eventprovides that within 30 days of his death, prior to the end of the term of the employment agreement, these payments will be paid $100,000 on the first anniversary of his termination and $100,000 on the second anniversary, subject to forfeiture if he fails to comply with thenon-competition provisions of the employment agreement.
Following the closing of the merger, Glacier will grant to Mr. Wilmoth will receiveRiley a restricted stock unit award under Glacier’s stock incentiveequity compensation plan in the amount of $100,000. The award will vestone-third on each of the second, third and fourth anniversaries of$225,000 (“RSU Award”). If Mr. Riley’s employment terminates for any reason prior to the closing of the merger. In the event ofmerger, no RSU Award will be granted. The RSU Award will vest on December 31, 2022. If Mr. Wilmoth’s termination ofRiley’s employment is terminated for any reason, except as a result of death or disability, the right to receive any unvested portion of the awardRSU Award will be forfeited. In the event of Mr. Riley becoming disabled or his death, unvested units of the RSU Award will vest immediately.
Mr. WilmothRiley will be eligible to participate in Glacier’s profit sharing plan, Glacier Bank’s Bank President annual cash bonus program, and Glacier’s long-term incentive program.
Mr. Riley will be also be entitled to participate in any group life insurance, disability, health and accident insurance plans, and any other employee fringe benefit plansbenefits that Glacier or Glacier Bank may have in effect from time to time for its similarly situated employees.
If Mr. Wilmoth’sRiley’s employment is terminated for Cause or he terminates his employment without Good Reason, Glacier Bank will pay him the annualized base salary earned and expenses reimbursable incurred through the date of termination.
If Mr. Wilmoth’sRiley’s employment is terminated without Cause or he terminates his employment for Good Reason, contingent upon his execution of a release of claims and his continued compliance with thenon-competition provisions of the employment agreement, Glacier Bank will pay Mr. Wilmoth, in addition to any unpaid retention bonuses, an amounta lump sum payment equal to the amount of annualized base salary remaining to be paid during the unexpired term of the employment agreement, payable in equal monthly installments over a period of one year.plus any unpaid retention bonuses as described above.
The employment agreement provides that during Mr. Wilmoth’sRiley’s employment and for a periodthe greater of the remaining term of the employment agreement or one year after termination of employment, Mr. WilmothRiley will not provide the samecompete with Glacier or similar services as he performed on behalf of Glacier Bank to any person or entity engaged in any competing businessthe financial services industry within specified counties in Nevada, nor serve in any capacity with any such person or entity.Arizona.
The employment agreement provides that during his employment and for a period of two years following anyafter termination of employment, Mr. WilmothRiley will not solicit, recruit persuade or entice, or attempt to solicit, recruit or entice, any employee of Glacier or Glacier Bank to terminate his or her employment with Glacier or Glacier Bank, or any other person or entity to terminate, cancel, rescind or revoke its business or contractual relationships with Glacier or Glacier Bank. Additionally, during his employment and for a period of two years followingafter termination of employment,employment. Mr. WilmothRiley will not solicit or attempt to solicit, divert or take away from Glacier Bank or Glacier Bank any person or entity that is a current customer of Glacier Bank or Glacier Bank and to whom Mr. Wilmoth,Riley, directly or indirectly, provided services, contracted with, or solicited business on behalf of Glacier, BankGlacier Bank. SBC or Glacierthe Bank within 12 months prior to the termination of Mr. Wilmoth’sRiley’s employment.
Thomas N. TraficantiAccelerated Vesting of Restricted Stock Awards
Glacier Bank has entered into an employment agreement with Thomas Traficanti, currently Chief Credit OfficerThe directors and certain executive officers of Heritage, governing employment by Glacier Bank following the closingSBC have previously received restricted stock awards that vest over time. The vesting of the merger. Mr. Traficanti will serve as Chief Credit Officer of Heritage Bank of Nevada, a division of Glacier Bank. The employment agreement is effective on (and conditioned upon) the closing of the merger and continues until December 31, 2022. The employment agreement provides for an annualized base salary of $290,000 (which is his current salary), subject to increase in the discretion of Glacier Bank’s or Glacier’s board of directors based on performance and additional duties and responsibilities, if any. Additionally, Mr. Traficantisuch awards will be eligible for incentive bonuses in the aggregate amount of $66,000, of which $35,000 will be paid on December 31, 2020 and $16,000 will be paid on December 31, 2021, $11,000 will be paid on December 31, 2022, and $4,000 will be paid on December 31, 2023, provided that he remains employed through each such date.
Following the closing of the merger, Mr. Traficanti will receive a restricted stock unit award under Glacier’s stock incentive plan in the amount of $60,000. The award will vestone-third on each of the second, third and fourth anniversariesaccelerated by virtue of the closing of the merger. InThe amounts of such unvested restricted stock awards that will vest upon the event of Mr. Traficant’s termination of employment for any reason except death or disability, the right to receive any unvested portionclosing of the awardmerger assuming a closing in 2019 are: Messrs. Anderson, Baker, Casson and Nexsen, 300 shares per person; Mr. Fain, 200 shares; and Messrs. Riley, Wenner, Austin and Hill, 1,001 shares per person. The directors and executive officers who hold restricted stock awards will be forfeited.receive the same consideration for their shares of restricted stock as will other shareholders of SBC.
Mr. Traficanti will be entitled toDeferred Compensation Plan
Messrs. Riley, Hill, Wenner and Austin each participate in a deferred compensation plan sponsored by SBC (the “DCP”). Pursuant to the Glacier profit sharing plan, Glacier Bank’s annual cash bonus program, Glacier’s long-term incentive plan,DCP, upon the closing of the merger, any group life insurance, disability, health and accident insurance plans,thenun-vested employee contributions credited to the DCP on behalf of the executive officers, and any other employee fringe benefit plans that Glacierearnings or Glacier Bank may have in effect from timeappreciation with respect to time for its similarly situated employees.
If Mr. Traficanti’s employment is terminated for Cause or he terminates his employment without Good Reason, Glacier Banksuch credited amounts, will pay him the annualized base salary earnedautomatically and expenses reimbursable incurred through the date of termination.
If Mr. Traficanti’s employment is terminated without Cause or he terminates his employment for Good Reason, contingent upon his execution of a release of claims and his continued compliance with thenon-competition provisions of the employment agreement, Glacier Bank will pay Mr. Wilmoth, infully vest. In addition, to any unpaid retention bonuses, an amount equal to the amount of annualized base salary remainingaggregate balance credited to each executive’s account under the DCP will be paid duringto the termexecutive in a lump sum as of the agreement, payable in equal monthly installments over a perioddate of one year.the closing of the merger. The aggregate account balances for the executives under the DCP as of September 30, 2019, are as follows: $69,105 for Mr. Riley; $25,537 for Mr. Hill; $36,470 for Mr.Wenner; and $35,866 for Mr. Austin.
Mr. Traficanti’s employment agreement contains provision regardingnon-competition andnon-solicitation identical to those described above with respect to Mr. Wilmoth’s employment agreement.
Employment Letter Agreements
Glacier Bank has entered into letter agreements (“Letter Agreements”) with Steven Carrick, SVP/Branch Operations Manager, Mark McKibben, VP/Commercial Loan Officer, and Denise Kline, SVP/Human Resources. The Letter Agreements among other things provide for continued employment by Glacier Bank following the merger, at salaries consistent with the respective current levels of compensation of such officers.
Stock Ownership
As of the record date, of the special meeting, HeritageSBC directors, executive officers and their spouses beneficially own 755,748owned [] shares of HeritageSBC common stock.stock, which does not include [] shares of restricted stock that will vest at the closing of the merger as described above. The directors and executive officers of HeritageSBC will receive the same consideration in the merger for their shares as will other shareholders of Heritage.
Stock Options
As described under “—Treatment of Heritage Stock Options” above, Heritage stock options (whether vested or unvested) that are outstanding and unexercised at the closing of the merger will vest and be converted into vested options to purchase Glacier common stock, and holders of such stock options will also be entitled to receive a Per Share Dividend Equivalent payment with respect to shares of Heritage common stock subject to such options. At May 24, 2019, Heritage’s directors and executive officer held an aggregate total of 39,850 outstanding unvested stock options.SBC.
Indemnification of Directors and Officers; Insurance
The merger agreement provides that Glacier will, for a period ofsix years following the closing of the merger, indemnify the present and former directors and officers of HeritageSBC and Heritagethe Bank 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, Heritage’sSBC’s articles or Heritagethe Bank’s articles or Heritage’sSBC’s bylaws or Heritagethe Bank’s bylaws, as applicable.
The merger agreement also provides that Glacier will use commercially reasonable efforts to cause to be maintained in effect for a period of six years following the effective date of the merger, director and officer liability insurance with respect to claims arising from facts or events that occurred before the effective date of the merger. Prior to the effective date of the merger and in lieu of the foregoing, Glacier agrees to use commercially reasonable efforts to purchase, with HeritageSBC’s cooperation, a policy providing substantially such coverage and fully pay for such policy prior to the effective date of the merger.
Additional Agreements
Voting AgreementAgreements
As described above under “—Voting Agreement,Agreements,” each of the directors and executive officers of Heritage andSBC have entered into a voting agreement, dated as of April 3,September 30, 2019. Pursuant to the voting agreements,agreement, each signing person agrees to vote the shares of HeritageSBC common stock that he or she is entitled to vote and that he or she owns or controls in favor of the merger.
HeritageSBC DirectorNon-Competition Agreement
Each member of the HeritageSBC Board has entered into anon-competition agreement with Glacier, Glacier Bank, HeritageSBC and Heritagethe Bank, which agreement confirms and extendsestablishes certain obligations of each director not to compete with Heritage, HeritageGlacier or Glacier Bank or successors underfollowing the director’s existing change in control agreements with Heritage.merger. Except under certain limited circumstances, thenon-competition agreement generally prohibits such directors from becoming involved in any substantial way in a business that competes with Glacierdepository financial institution, wealth management company, trust company or any of Glacier’s subsidiaries, divisions or affiliatesholding thereof within specified counties in Nevada.TheArizona.The agreement also prohibits the solicitation of Glacier’s employees or customers. The term of thenon-competition agreement commences upon the effective date of the merger and continues until the later to occur of(i)two years followingafter the later of(i) effective date of the merger, or(ii) if applicable, one year after the termination of any service by such director as a post-merger member of an advisory board for the division.Division.
Regulatory Requirements
Closing of the merger is subject to approval or waiver by the appropriate banking regulatory authorities, including the Federal Reserve, theFederal Deposit Insurance Corporation, andthe Board of Governors of the Federal Reserve System, the Commissioner of the Montana Division of Banking and Financial Institutions, and the State of NevadaArizona Department of BusinessFinancial Institutions. The U.S. Department of Justice is able to provide input into the approval process of federal banking agencies to challenge the merger on antitrust grounds. Glacier and Industry, Financial Institutions Division.SBC have filed or will file all required applications and waiver requests to obtain the regulatory approvals and waivers ornon-objections necessary to consummate the merger. Glacier and SBC cannot predict whether the required regulatory approvals and waivers ornon-objections will be obtained, when they will be received or whether they will be subject to any conditions.
Material U.S. Federal Income Tax Consequences of the Merger
This section generally describes the anticipated material U.S. federal income tax consequences of the merger of HeritageSBC with and into Glacier, to U.S. holders (as defined below) of HeritageSBC common stock who exchange shares of HeritageSBC common stock for shares of Glacier common stock pursuant to the merger. The summary is based on the Internal Revenue Code, applicable Treasury Regulations, judicial decisions and administrative rulings and practice, all in effect as of the date hereof, and all of which are subject to change, possibly with retroactive effect. The summary does not address any tax consequences of the merger under state, local or foreign laws, or any federal laws other than those pertaining to income tax.
For purposes of this discussion, a “U.S. holder” is a beneficial owner of HeritageSBC common stock who for U.S. federal income tax purposes is:
an individual citizen or resident of the United States;
a corporation, or an entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state or political subdivision thereof;
a trust that (1) is subject to (A) the primary supervision of a court within the United States and (B) the control of one or more U.S. persons or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes; or
an estate that is subject to U.S. federal income tax on its income regardless of its source.
If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds HeritageSBC common stock, the tax treatment of a partner generally will depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding HeritageSBC common stock, you should consult your tax advisor about the consequences of the merger to you.
This discussion addresses only those HeritageSBC shareholders that hold their HeritageSBC common stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code, and does not address all the U.S. federal income tax consequences that may be relevant to particular HeritageSBC shareholders in light of their individual circumstances or to HeritageSBC shareholders that are subject to special rules, including, without limitation:
banks and other financial institutions;
pass-through entities or investors in pass-through entities;
persons who are subject to alternative minimum tax;
insurance companies;
tax-exempt organizations;
dealers or brokers in securities, commodities, or currencies;
traders in securities that elect to use a mark to market method of accounting;
persons who exercise dissenters’ rights;
persons who hold HeritageSBC common stock as part of a straddle, hedge, constructive sale or conversion transaction;
certain expatriates or persons that have a functional currency other than the United States dollar;
retirement plans, individual retirement accounts, or other tax deferred accounts;
mutual funds;
regulated investment companies;
real estate investment trusts;
foreign persons; and
shareholders who acquired their shares of HeritageSBC common stock through the exercise of an employee stock option or otherwise as compensation or through atax-qualified retirement plan.
In addition, the discussion does not address any alternative minimum tax or any state, local ornon-U.S. tax consequences of the merger.
It is a condition to the respective obligations of Glacier and HeritageSBC to complete the merger that each party will have obtained from its counsel an opinion addressed to the effect that the merger will for U.S. federal income tax purposes qualify as a “reorganization” within the meaning of Internal Revenue Code Section 368(a). The opinions will assume that the merger will be completed according to the terms of the merger agreement and that the parties will report the transaction in a manner consistent with the opinion. The opinions will rely on the facts as stated in the merger agreement, the Registration Statement on FormS-4 (of which this proxy statement/prospectus is a part) and certain other documents. The opinions will be based on facts and representations contained in representation letters provided by Glacier and HeritageSBC to be delivered at the time of closing and based on customary factual assumptions. If any such assumption is or becomes inaccurate, the U.S. federal income tax consequences of the merger could be adversely affected. The opinions will be based on statutory, regulatory and judicial authority existing as of the date of the opinion, any if which may be changed at any time with retroactive effect. An opinion of counsel represent such counsel’s best legal judgement, but the opinion is not binding on the Internal Revenue Service or the courts. Neither Glacier nor HeritageSBC has requested and neither intends to request any ruling from the Internal Revenue Service as to the U.S. federal income tax consequences of the merger. Consequently, no assurance can be given that the Internal Revenue Service will not assert, or that a court will not sustain, a position contrary to any of the tax consequences described below or any of the tax consequences described in the opinions. Accordingly, each HeritageSBC shareholder should consult his or her tax advisor with respect to the particular tax consequences of the merger to such holder.
Tax Consequences of the Merger Generally to Holders of HeritageSBC Common Stock.If the merger of HeritageSBC with and into Glacier is a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, the tax consequences of the merger to U.S. holders of HeritageSBC common stock are as follows (except with respect to any cash received instead of fractional share interests in Glacier common stock, as discussed in the section entitled “Cash Received Instead of a Fractional Share of Glacier Common Stock”):
HeritageSBC shareholders will exchange their HeritageSBC common stock for a combination of Glacier common stock and cash in the merger. Accordingly, holders of HeritageSBC common stock will recognize gain (but not loss) in an amount equal to the lesser of (1) the amount by which the sum of the fair market value of the Glacier common stock and cash received by the holder of HeritageSBC common stock exceeds such holder’s cost basis in its HeritageSBC common stock, and (2) the amount of cash received by such holder of HeritageSBC common stock in exchange for such holder’s HeritageSBC common stock;
A HeritageAn SBC shareholder’s aggregate tax basis in the Glacier common stock received in the merger will be equal to the shareholder’s aggregate tax basis in such shareholder’s HeritageSBC common stock surrendered, decreased by the amount of any cash received (if any) and increased by the amount of any gain recognized (if any); and
The holding period of Glacier common stock received in an exchange for shares of HeritageSBC common stock will include the holding period of the HeritageSBC common stock for which it is exchanged.
If a U.S. holder of HeritageSBC common stock acquired different blocks of HeritageSBC common stock at different times or at different prices, any gain or loss will be determined separately with respect to each block of HeritageSBC common stock and such holder’s basis and holding period in his, her or its shares of Glacier common stock may be determined with reference to each block of HeritageSBC common stock. Any such holders should consult their tax advisors regarding the manner in which cash and Glacier common stock received in the exchange should be allocated among different blocks of HeritageSBC common stock and with respect to identifying the bases or holding periods of the particular shares of Glacier common stock received in the merger.
Gain that a U.S. holder of HeritageSBC common stock recognizes in connection with the merger generally will constitute capital gain and will constitute long-term capital gain if such holder has held (or is treated as having held) his, her or its HeritageSBC common stock for more than one year as of the date of the merger. Long-term capital gain ofnon-corporate holders of HeritageSBC common stock is generally taxed at preferential rates. In addition, such gain recognized by individuals, trusts and estates may also be subject to the 3.8% Unearned Income Medicare Contribution Tax on net investment income. Holders of HeritageSBC common stock that are individuals, estates, or trusts should consult their tax advisors regarding the applicability of the 3.8% Unearned Income Medicare Contribution Tax to the disposition of their shares pursuant to the merger. In some cases, if a holder actually or constructively owns Glacier stock other than Glacier stock received pursuant to the merger, the recognized gain could be treated as having the effect of a distribution of a dividend under the tests set forth in Internal Revenue Code Section 302, in which case such gain would be treated as dividend income. A dividend from Glacier would generally be treated as a “qualified dividend” and, as such, taxed at the same rates applicable to long-term capital gains so long as the requisite holding period is met. Because the possibility of dividend treatment depends primarily upon each holder’s particular circumstances, including the application of the constructive ownership rules, holders of HeritageSBC common stock should consult their tax advisors regarding the application of the foregoing rules to their particular circumstances.
Cash Received Instead of a Fractional Share of Glacier Common Stock.A holder of HeritageSBC common stock who receives cash instead of a fractional share of Glacier common stock will generally be treated as having received the fractional share pursuant to the merger and then as having that fractional share of Glacier common stock redeemed for cash. The deemed redemption will generally be treated as a sale or exchange and, as a result, a holder of HeritageSBC common stock will generally recognize gain or loss equal to the difference between the amount of cash received in lieu of the fractional share and the basis in his, her or its fractional share interest as set forth above. Except as described above, this gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, the holding period for such shares is greater than one year. The deductibility of capital losses is subject to limitations.
Payment of Dividend. If Heritage’sSBC’s capital prior to closing of the merger is in excess of a specified minimum amount, HeritageSBC may in its discretion declare and pay a special distribution to holders of its common stock in the amount of such excess. HeritageSBC intends to treat that special distribution as a distribution in respect of HeritageSBC common stock. The Internal Revenue Service may take
a contrary position, and to the extent the Internal Revenue Service were to prevail, the amount paid as the special cash dividend would be treated as additional cash received in connection with the merger, and not as a distribution as described in the succeeding sentence. If the distribution is treated as a distribution with respect to HeritageSBC common stock, it will be taxable to the extent it exceeds such holder’s basis in his, her or its shares of HeritageSBC common stock. Any amount that exceeds such holder’s basis in his, her or its HeritageSBC common stock will be treated as gain from the sale or exchange of property (which will generally be capital gain, and will be long-term capital gain if, as of the date of the distribution, the holding period for the shares is greater than one year) and will reduce the holder’s basis in his, her or its HeritageSBC common stock.
Backup Withholding and Information Reporting.Payments of cash made to a holder of HeritageSBC common stock may, under certain circumstances, be subject to information reporting and backup withholding at a current rate of 24%, unless the holder provides proof of an applicable exemption satisfactory to Glacier and the exchange agent or furnishes its taxpayer identification number, and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from cash payments made to a holder of HeritageSBC common stock under the backup withholding rules are not additional tax and will be allowed as a refund or credit against the holder’s U.S. federal income tax liability, if any, provided the required information is furnished to the Internal Revenue Service.
The preceding discussion is intended only as a summary of the material U.S. federal income tax consequences of the merger to U.S, holders of HeritageSBC common stock. It is not a complete analysis or discussion of all potential tax effects that may be important to you. Thus, you are strongly encouraged to consult your tax advisor as to the specific tax consequences resulting from the merger, including tax return reporting requirements, the applicability and effect of U.S. federal, state, local, and other tax laws and the effect of any proposed changes in the tax laws.
Accounting Treatment of the Merger
The acquisition of HeritageSBC will be accounted for using the acquisition method of accounting by Glacier under accounting principles generally accepted in the United States of America. Accordingly, using the acquisition method of accounting, the assets and liabilities of HeritageSBC 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 will be 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 HeritageSBC 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.
INFORMATION CONCERNING HERITAGE BANCORPSTATE BANK CORP.
General
HeritageSBC is an Arizona corporation and a Nevada corporation formed in 2003 for the purpose of acquiring the stock of Heritage Bank and becoming theregistered bank holding company for Heritageunder the BHC Act. It was incorporated in 2004 and is the bank holding company of the Bank. HeritageSBC has no substantial operations separate or apart from Heritagethe Bank. HeritageThe Bank is a national banking association, organized under the law of the United States of America,an Arizona state-chartered bank, which commenced operations in 1995.1991 and is regulated primarily by the Arizona Department of Financial Institutions and the Federal Deposit Insurance Corporation.
The Bank’s principal offices of Heritage areoffice is located at 2330 South Virginia Street, Reno Nevada 89502. Heritagein Lake Havasu City, Arizona and the Bank maintains branch offices in Reno (fourLake Havasu City (two branches), CarsonKingman (two branches), Prescott (two branches), Prescott Valley, Phoenix, Bullhead City, Sparks, and Gardnerville,Cottonwood, all in Nevada.Arizona.
As of March 31,June 30, 2019, HeritageSBC had total assets of approximately $840.8$678.6 million, total gross loans of approximately $589.5$413.6 million, total deposits of approximately $723.0$592.0 million and approximately $106.4$70.5 million of shareholders’ equity.
Market Area
Heritage’sSBC’s principal market area consists of Reno, NevadaMohave, Yavapai and surrounding countiesin Northern Nevada.Maricopa Counties in Arizona.
Lending Activities
HeritageThe Bank’s principal business is to accept deposits from the public and to make loans and other investments. To develop business, Heritagethe 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 Heritagethe Bank. HeritageThe Bank offers a variety of traditional loan products to its customers, primarily individual consumers and small tomedium-sized businesses. For businesses, Heritagethe Bank 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. HeritageThe Bank also offers mortgage loans, home equity loans, automobile loans and various other consumer installment loans.
At March 31,June 30, 2019, Heritagethe Bank’s total gross loan portfolio was approximately $589.5$413.6 million, representing approximately 70%61% of itsSBC’s total assets. As of such date, Heritagethe Bank’s loan portfolio primarily consisted of 5.7%14%one- to four-family residential real estate secured loans, 78.6%57% commercial real estate secured loans (excluding construction and land development loans), 10.0%10% real estate construction and land development loans, 5% multi-family loans, 8% commercial loans, and 5.1% commercial loans.6% consumer and other.
Deposit and Banking Services
Customers of Heritagethe Bank are provided with a full complement of traditional banking and deposit products. HeritageThe Bank is engaged in substantially all of the business operations customarily conducted by independent financial institutions in Nevada,Arizona, including the acceptance of checking accounts, savings accounts, money market accounts and a variety of certificates of deposit accounts.
HeritageThe Bank conducts a substantial amount of business with individuals, as well as with small tomedium-sized businesses. The primary sources of core deposits are residents of Heritagethe Bank’s primary market area and businesses and their employees located in that area. HeritageThe Bank also obtains deposits through personal solicitation by its officers and directors and through local advertising. For the convenience of its customers, HeritageThe Bank offersdrive-through banking facilities, internet and telephone
banking, check/ATM cards, direct deposit, night depositories, personalized checks, and merchant bank card processing. HeritageThe 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.
HeritageSBC Summary Financial Information
The following selected financial information at and for the fiscal years ended December 31, 2018, 2017 and 2016, at March 31, 2019 and at and for the three months ended March 31, 2019 and 2018 is derived from financial statements of Heritage.SBC. Historical data as of March 31,June 30, 2019 and for the threesix months ended March 31,June 30, 2019 and 2018 are based upon unaudited financial statements and include, in the opinion of HeritageSBC management, all normal recurring adjustments considered necessary to present fairly the results of operations and financial condition of Heritage.SBC.
HeritageSBC
Balance Sheet
$000’s
| March 31, 2019 | Year Ended December 31, | |||||||||||||||
| 2018 | 2017 | 2016 | ||||||||||||||
Cash and Due from Banks | 113,435 | 93,309 | 137,890 | 91,296 | ||||||||||||
Federal Funds Sold | 87 | 33 | 2,066 | 843 | ||||||||||||
Investment Securities(1) | 114,707 | 117,966 | 117,512 | 109,709 | ||||||||||||
Gross Loans | 589,458 | 599,268 | 546,938 | 516,904 | ||||||||||||
Allowance for Loan Loss | (7,499 | ) | (7,495 | ) | (8,014 | ) | (8,694 | ) | ||||||||
Net Loans | 581,958 | 588,129 | 535,747 | 505,630 | ||||||||||||
Premises & Fixed Assets | 9,697 | 9,691 | 10,202 | 10,643 | ||||||||||||
Other Assets | 20,885 | 20,824 | 19,851 | 21,274 | ||||||||||||
Total Assets | 840,769 | 829,951 | 823,268 | 739,395 | ||||||||||||
Deposits | 722,955 | 719,158 | 728,619 | 652,380 | ||||||||||||
Trust Preferred Securities | 5,155 | 5,155 | 5,155 | 5,155 | ||||||||||||
Other Liabilities | 6,280 | 5,128 | 4,647 | 4,398 | ||||||||||||
Total Liabilities | 734,390 | 729,441 | 738,421 | 661,933 | ||||||||||||
Equity | 106,379 | 100,510 | 84,847 | 77,462 | ||||||||||||
Total Liabilities and Shareholders’ Equity | 840,769 | 829,951 | 823,268 | 739,395 | ||||||||||||
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| 2019 | 2018 | 2017 | 2016 | |||||||||||||
Cash and Due from Banks | $ | 50,101 | $ | 26,129 | $ | 25,503 | $ | 63,407 | ||||||||
Investment Securities | $ | 176,068 | $ | 179,586 | $ | 206,138 | $ | 147,576 | ||||||||
Gross Loans | $ | 413,636 | $ | 409,639 | $ | 351,350 | $ | 329,079 | ||||||||
Allowance for Loan Loss | $ | (4,546 | ) | $ | (3,824 | ) | $ | (3,306 | ) | $ | (3,058 | ) | ||||
Net Loans | $ | 409,090 | $ | 405,815 | $ | 348,044 | $ | 326,021 | ||||||||
Premises & Fixed Assets | $ | 15,093 | $ | 14,315 | $ | 14,561 | $ | 15,071 | ||||||||
Other Assets | $ | 28,218 | $ | 29,492 | $ | 26,391 | $ | 31,092 | ||||||||
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Total Assets | $ | 678,570 | $ | 655,337 | $ | 620,637 | $ | 583,167 | ||||||||
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Deposits | $ | 591,989 | $ | 557,832 | $ | 549,396 | $ | 516,498 | ||||||||
Securities Sold Under Repurchase Agreements | $ | 6,260 | $ | 5,001 | $ | 3,616 | $ | 4,188 | ||||||||
Federal Home Loan Bank Advances | $ | — | $ | 18,000 | $ | — | $ | — | ||||||||
Subordinated Debentures | $ | 6,806 | $ | 7,045 | $ | 7,360 | $ | 7,336 | ||||||||
Other Liabilities | $ | 3,001 | $ | 3,085 | $ | 1,608 | $ | 1,366 | ||||||||
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Total Liabilities | $ | 608,056 | $ | 590,963 | $ | 561,980 | $ | 529,388 | ||||||||
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Shareholders’ Equity | $ | 70,514 | $ | 64,374 | $ | 58,657 | $ | 53,779 | ||||||||
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Total Liabilities and Shareholders’ Equity | $ | 678,570 | $ | 655,337 | $ | 620,637 | $ | 583,167 | ||||||||
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HeritageSBC
Income Statement
$000’s, Except Per Share
| March 31, | Year Ended December 31, | Six Months Ended June 30, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2018 | 2017 | 2016 | 2019 | 2018 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
Interest Income | 9,637 | 8,361 | 35,883 | 31,906 | 28,557 | $ | 13,904 | $ | 12,074 | $ | 25,285 | $ | 22,754 | $ | 16,897 | |||||||||||||||||||||||||
Interest Expense | 730 | 539 | 2,284 | 1,329 | 1,147 | $ | 1,737 | $ | 683 | $ | 1,669 | $ | 1,137 | $ | 1,051 | |||||||||||||||||||||||||
Net Interest Income | 8,907 | 7,822 | 33,599 | 30,577 | 27,410 | $ | 12,167 | $ | 11,391 | $ | 23,616 | $ | 21,617 | $ | 15,846 | |||||||||||||||||||||||||
Loan Loss Provision | — | — | (750 | ) | (575 | ) | (171 | ) | $ | 350 | $ | 193 | $ | 490 | $ | (290 | ) | $ | — | |||||||||||||||||||||
Non-interest Income | 572 | 622 | 2,782 | 2,731 | 3,227 | $ | 2,662 | $ | 2,772 | $ | 5,644 | $ | 5,205 | $ | 3,650 | |||||||||||||||||||||||||
Non-interest Expense | 3,461 | 3,430 | 13,903 | 13,318 | 13,043 | $ | 9,290 | $ | 8,757 | $ | 17,907 | $ | 17,208 | $ | 13,391 | |||||||||||||||||||||||||
Pre-Tax Income | 6,018 | 5,014 | 23,228 | 20,565 | 17,765 | $ | 5,189 | $ | 5,213 | $ | 10,863 | $ | 9,904 | $ | 6,105 | |||||||||||||||||||||||||
Taxes | 1,211 | 784 | 4,617 | 8,534 | 5,731 | $ | 1,112 | $ | 1,227 | $ | 2,282 | $ | 3,610 | $ | 2,330 | |||||||||||||||||||||||||
Net Income | 4,807 | 4,230 | 18,611 | 12,031 | 12,034 | $ | 4,077 | $ | 3,986 | $ | 8,581 | $ | 6,294 | $ | 3,775 | |||||||||||||||||||||||||
Basic Earnings Per Share | $ | 0.50 | $ | 0.49 | $ | 1.06 | $ | 0.78 | $ | 0.56 | ||||||||||||||||||||||||||||||
Diluted Earnings Per Share | $ | 0.50 | $ | 0.49 | $ | 1.06 | $ | 0.78 | $ | 0.56 | ||||||||||||||||||||||||||||||
Competition
HeritageSBC 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-basednon-bank lenders, government agencies and certain othernon-financial institutions, including retail stores, which may offer more favorable financing alternatives than Heritage.SBC.
HeritageSBC also competes with companies located outside of its primary market that provide financial services to persons within its primary market. Some of Heritage’sSBC’s current and potential competitors have larger customer bases, greater brand recognition, and significantly greater financial, marketing and other resources than HeritageSBC and some of them are not subject to the same degree of regulation as Heritage.SBC.
Employees
As of March 31,June 30, 2019, HeritageSBC and the Bank had 65116 full-time and 1712 part-time employees. HeritageSBC believes that it has a good working relationship with its employees and the employees are not represented by a collective bargaining agreement.
Properties
Heritage’sSBC’s principal office is located in Reno, Nevada.Lake Havasu City, Arizona. In addition to its principal office, HeritageSBC operates, through Heritagethe Bank,branch offices in Reno (fourLake Havasu City (two branches), CarsonKingman (two branches), Phoenix, Bullhead City, SparksPrescott Valley, and Gardnerville, Nevada.Cottonwood, all in Arizona. All properties and buildings are owned, except the Damonte branch in Reno and the Carson City branch,located In Phoenix, which areis leased.
Legal Proceedings
From time to time, litigation arises in the normal conduct of Heritage’sSBC’s business. Heritage,SBC, however, is not currently involved in any litigation that management of HeritageSBC 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 HeritageSBC
The following table shows, as of May 24,September 30, 2019, the beneficial ownership of HeritageSBC common stock by(i) each person known by HeritageSBC to be the beneficial owner of more than 5% of Heritage’sSBC’s outstanding common stock,(ii) each of Heritage’sSBC’s directors and executive officers; and(iii) all of Heritage’sSBC’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. The table below excludes 5,404 unvested restricted shares.
Name | Shares Beneficially Owned(1) | Percentage of Class | ||||||
Directors and Executive Officers | ||||||||
Neva Benton | 221,032 | (2) | 16.17 | % | ||||
Robert A. Cashell, Jr. | 75,459 | (3) | 5.52 | |||||
John Cowee | 55,200 | 4.04 | ||||||
Russell H. Ernst | 29,042 | (4) | 2.12 | |||||
Ruth Ann Kelly | 17,464 | (5) | 1.28 | |||||
Hawley MacLean | 64,938 | (6) | 4.75 | |||||
Thomas A. McKennie | 60,428 | 4.42 | ||||||
Connie J. Raszler | 56,712 | (7) | 4.15 | |||||
Walter A. Roskoski, Jr. | 28,548 | (8) | 2.09 | |||||
Stanley Wilmoth | 84,100 | (9) | 6.15 | |||||
Thomas Traficanti | 15,100 | (10) | 1.10 | |||||
Lisa Milke | 10,400 | (11) | * | |||||
Steven Carrick | 21,050 | (12) | 1.54 | |||||
Sheryl Malick | 4,000 | (13) | * | |||||
Denise Kline | 7,525 | (14) | * | |||||
Robin Page | 4,750 | (15) | * | |||||
All Directors and Officers as a group | 755,748 | 55.28 | ||||||
5% Owners | ||||||||
Richard Schield | 88,080 | (16) | 6.44 | |||||
Name | Shares Beneficially Owned(1) | Percentage of Class | ||||||
Directors and Executive Officers | ||||||||
Jason R. Anderson (1) | 82,074 | 1.01 | % | |||||
James E. Baker (2) | 369,940 | 4.57 | ||||||
Charles Casson (3) | 118,578 | 1.47 | ||||||
Brad Fain (4) | 126,600 | 1.56 | ||||||
Mark S. Nexsen (5) | 25,300 | 0.31 | ||||||
Brian M. Riley (6) | 146,906 | 1.82 | ||||||
Randy L. Austin (7) | 16,899 | 0.21 | ||||||
Peter Hill (8) | 16,972 | 0.21 | ||||||
Craig Wenner | 55,044 | 0.68 | ||||||
All Directors and Officers as a group | 958,013 | 11.84 | % | |||||
5% Owners | ||||||||
Ben Andre (9) | 483,624 | 6.00 | % | |||||
Don Nelson, MD (10) | 619,306 | 7.65 | % | |||||
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| 2 | Includes 366,322 shares held jointly with his wife. |
| 3 | Includes 117,278 shares held jointly with his wife. |
| 4 | Includes 126,500 shares in a family trust where Mr. Fain is a beneficiary. |
| 5 | Includes 8,000 shares held jointly with his wife and 16,000 held in a retirement account. |
| 6 | Includes 67,675 shares held jointly with his wife, 10,000 shares held in a family trust |
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DESCRIPTION OF GLACIER’S CAPITAL STOCK
Glacier’s authorized capital stock consists of 117,187,500 shares of common stock, $0.01par 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 HeritageSBC Common Stock” below.
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
GLACIER AND HERITAGESBC COMMON STOCK
Montana law, Glacier’s articles and Glacier’s bylaws govern the rights of Glacier’s shareholders and will govern the rights of Heritage’sSBC’s shareholders, who will become shareholders of Glacier as a result of the merger. The rights of Heritage’sSBC’s shareholders are currently governed by NevadaArizona law, Heritage’sSBC’s articles and Heritage’sSBC’s bylaws. The following is a brief summary of certain differences between the rights of Glacier and HeritageSBC shareholders. This summary is not intended to provide a comprehensive discussion of each company’s governing documents. This summary is qualified by the documents referenced and the laws of Montana and Nevada.Arizona. See also “Where You Can Find More Information.”
General
Under Glacier’s articles, 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.
Under Heritage’sSBC’s articles, Heritage’sSBC’s authorized capital stock consists of 5,000,00020,000,000 shares of common stock, $0.01 par value per share, and 500,000 shares ofnon-voting preferred stock, $0.01no par value per share.
Common Stock
As of March 31,[], 2019, there were 84,588,199[] shares of Glacier common stock issued and outstanding, in addition to 180,291[] shares of unvested restricted stock awards and 26,167[] outstanding stock options under Glacier’s employee and directorequity compensation plans.
As of March 31,[], 2019, there were 1,194,677[] shares of HeritageSBC common stock issued and outstanding, and 228,342 outstanding stock options.[] of which were unvested restricted share awarded under SBC’s equity compensation plan.
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.
As ofSBC’s articles do not provide for the date of this proxy statement/prospectus, Heritage had no sharesauthorization or issuance of preferred stock issued. The Heritage board of directors is authorized, without further shareholder action, to issue preferred stock shares with such designations, preferences and rights as the Heritage board of directors may determine.stock.
Dividend Rights
Dividends may be paid on Glacier common stock as and when declared by the Glacier board of directors out of funds legally available for the payment of dividends. The Glacier board of directors may issue preferred stock that is entitled to such dividend rights as the board of directors may determine, including priority over the common stock in the payment of dividends.
The ability of Glacier to pay dividends 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.
The ability of HeritageSBC to pay dividends to its shareholders, and the ability of Heritagethe Bank to pay dividends to Heritage,SBC is limited under state and federal laws applicable to banks and bank holding companies. SBC’s payment of dividends is generally subject to the same considerations described above with respect to Glacier.
Voting Rights
All voting rights are currently vested in the holders of Glacier common stock and HeritageSBC common stock, with each share being entitled to one vote.
Both Glacier hasand SBC have issued shares of restricted stock pursuant to itstheir respective equity compensation plans, which do not have voting rights prior to vesting.
Glacier’s articles provide that shareholders do not have cumulative voting rights in the election of directors.
Heritage’sSBC’s articles do not provide shareholders with cumulative voting rights in the election of directors.
Required Vote for Authorization of Certain Actions
In accordance with the MBCA,Montana Business Corporation Act (“MBCA”), atwo-thirds vote is generally required for approval of mergers or share exchanges, expectexcept as otherwise provided in Glacier’s articles of incorporation (see “Potential ‘Anti-Takeover’ Provisions,” below).
Under NevadaArizona law, a plan of merger, interest exchange, conversion, domestication or share exchangedivision generally must be approved by a majority of the voting power of a company’s shareholders entitled to vote on the plan, unless a greater vote is otherwise required by NevadaArizona law or a company’s articles of incorporation (see “Potential ‘Anti-Takeover’ Provisions,” below). Heritage’sincorporation. SBC’s articles have no higher vote requirement for the approval of a plan of merger, interest exchange, conversion, domestication or share exchange.division.
Board Vacancies
Glacier’s articles of incorporation state that any vacancy occurring in the board of directors, including any vacancy created by reason of an increase in the number of directors, may be filled by a majority vote of the directors then in office, whether or not a quorum is present, or by a sole remaining director, and any director so chosen will hold office until the next annual meeting of shareholders and until such director’s successor shall have been elected and qualified.
Heritage’sSBC’s bylaws state that vacancies and newly created directorships resulting from any vacancy occurringincrease in the boardauthorized number of directors may be filled by the affirmative vote of the majority of the remaining directors then in office, though not less than a quorum. Aquorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election or until their successors are duly elected to fill a vacancy will be elected for the unexpired term of the predecessor in office.and qualified, unless sooner displaced.
Removal of Directors
Glacier’s articles of incorporation state that a director may be removed from office only for cause at a duly constituted meeting of shareholders called expressly for such purpose.
Heritage’s bylaws stateUnder Arizona law, the shareholders of a corporation may remove one or more directors with or without cause unless the corporation’s articles of incorporation provide that a directordirectors may be removed from office at any time byonly for cause. Neither SBC’s articles nor SBC’s bylaws address the vote or written consentremoval of stockholders representing not let thantwo-thirds of the issued and outstanding stock entitled to vote.directors.
Preemptive Rights
Neither Glacier’s nor Heritage’sSBC’s shareholders have preemptive rights to subscribe to any additional securities that may be issued.
Liquidation Rights
If Glacier is liquidated, the holders of Glacier common stock are entitled to share, on a pro rata basis, Glacier’s remaining assets after provision for liabilities. The Glacier board of directors is authorized to determine the liquidation rights of any preferred stock that may be issued.
If Heritage is liquidated, the holders of Heritage common stock are entitled to share, on a pro rata basis, Heritage’s remaining assets after provision for liabilities.
Assessments
All outstanding shares of Glacier common stock are, and the shares to be issued in the merger will be, fully paid and nonassessable. All outstanding shares of HeritageSBC 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. Other amendments to a corporation’s articles of incorporation must be recommended to the shareholders by the board of directors, unless the board determines that because of a conflict of interest or other special circumstances it should make no recommendation, and must be approved by a majority of all votes entitled to be cast by each voting group that has a right to vote on the amendment.
The Glacier board of directors may, by a majority vote, amend Glacier’s bylaws. Glacier’s bylaws also may be amended by the holders of a majority of votes cast at an annual or special meeting of shareholders.
Under Nevada law, a proposed
The provisions pf the ABCA regarding the amendment toof a corporation’s articles of incorporation requires a resolution adopted by the board of directors and the affirmative voteare substantially similar to those of the shareholders holding shares in the corporation entitling themMBCA described above. Authority to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the articles of incorporation. Heritage’s articles do not provide for such greater proportion of voting power for any amendments thereto. Nevada law further provides that if any such amendment would alter or change any preference or other right given to any class or series of outstanding shares, in addition to the affirmative vote required, the vote of the holders of a majority of the voting power of each class or series, is required unless the articles of incorporation specifically deny the right to vote on such an amendment.
The Heritage board may alter,make, amend, or repeal Heritage’s currentSBC’s bylaws or adopt new bylaws.is vested in the SBC Board.
Glacier’s articles provide that the number of directors may not be less than 7 or more than 17. Glacier’s board currently consists of 10 members, all of whom serve annual terms.
Heritage’sSBC’s bylaws provide that the number of directors may not be fewer than 5 nor more than 25.11. The Heritage boardSBC Board currently consists of 10 members.6 members, all of whom serve annual terms.
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 actions brought against a director or officer in the name of the corporation, commonly referred to as a derivative action.
Glacier’s articles provide that the personal liability of directors and officers for monetary damages shall be eliminated to the fullest extent permitted by the MBCA.
Heritage’s articles provide thatUnder the ABCA, indemnification of directors and officers is authorized to cover judgments, amounts paid in settlement, and expenses arising out of proceedings where the director or officer acted in good faith and in or not opposed to the extentbest 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, Arizona law requires indemnification if the director or officer prevails in a director, officer, employees or agent of Heritage has been successfulproceeding, whether on the merits or otherwise in defense of any action, suit or proceeding referred to in specified sections of Nevada law, or in defense of any claim, issue or matter therein, such person must be indemnified by Heritage against expenses actually and reasonably incurred by such person in connection with the defense. Heritage’sotherwise. Neither SBC’s articles nor SBC’s bylaws provide for mandatoryaddress indemnification of directors officers, employees or agents to the extent permitted by applicable Nevada law.and officers.
Heritage’sSBC’s articles provide that no director officer or shareholder shall have any personal liabilitybe liable to Heritagethe corporation or its shareholdersstockholders for money damages for breachany action taken or any failure to take any action as a director, except liability for (a) financial benefits to which the director was not entitled; (b) intentional infliction of fiduciary duty except with respect to(i) actsharm on the corporation or omissions which involve intentional misconduct, fraud or a knowingits shareholders; (c) violation of law, or(ii) distributions to Heritage shareholders inthe Arizona statute imposing liability for unlawful distributions; and (d) any intentional violation of applicable Nevadacriminal law.
Potential “Anti-Takeover” Provisions
Glacier’s articles 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.
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 such shareholder to obtain control, or selling authorized but unissued shares to friendly third parties).
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 is favored by a majority of Glacier’s shareholders.
The Nevada Revised Statute has a “Combination with Interested Stockholders” sectionSBC’s articles do not contain provisions that is applicablecould potentially deter any potentially unfriendly offer or other efforts to Nevada corporation unless they have “opted out.” It states that a Nevada corporation may not engage in any combination with an “interested stockholder” for a periodobtain control of two years following the date that the stockholder became an “interested stockholder” unless (a) prior to the person becoming an “interested stockholder” the board approved either the proposed combination or the transaction which resulted in the stockholder becoming an “interested stockholder” or (b) the proposed combination is approved by the board and 60% of the voting power of the then outstanding shares not beneficially owned by the “interested stockholder.”
The “Combination with Interested Stockholders” section further provides that, after the two year period, a Nevada corporation may not engage in any combination with an “interested stockholder” unless (a) prior to the person becoming an “interested stockholder” the board approved either the proposed combination or the transaction which resulted in the stockholder becoming an “interested stockholder,” (b) the proposed combination is approved by the board and a majority of the voting power of the then outstanding shares not beneficially owned by the “interested stockholder” or (c) certain price and procedural requirements are satisfied.
Heritage’s has not opted out of the “Combination with Interested Stockholders” section of the Nevada Revised Statute.SBC.
The validity of the Glacier common stock to be issued in the merger will be passed upon for Glacier by its special counsel, Moore, Cockrell, Goicoechea & Johnson, P.C., Kalispell, Montana.
The consolidated financial statements of Glacier Bancorp, Inc. as of December 31, 2018 and 2017 and for each of the years in the three-year period ended December 31, 2018 have been incorporated by reference herein and in the registration statement in reliance upon the reports of BKD, LLP, independent registered public accounting firm, and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Glacier
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. These documents contain important information about Glacier and its finances:
| • | Annual Report onForm10-K for the year ended December 31, 2018; |
| • | Quarterly |
| • | Proxy Statement for Glacier’s2019 Annual Meeting of Shareholders; |
| • | Current Reports on Form8-K filedJanuary 17, 2019, |
| • | The description of Glacier’s common stock contained in the Current Report onForm8-K filed with the SEC on October 31, 2012, and any amendments or reports filed for the purpose of updating such description. |
In addition, Glacier is 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 Heritage,SBC, provided, however, that Glacier is not incorporating by reference any information furnished (but not filed), except as otherwise specified therein.
Glacier files annual, quarterly and special reports, proxy statements and other business and financial information with the SEC. You may obtain the information incorporated by reference and any other materials Glacier may file with the SEC without charge by following the instructions in the section entitled “References to Additional Information” in the forepart of this document.
HeritageSBC
HeritageSBC does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”), is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and accordingly does not file documents or reports with the SEC.
If you have questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus, would like copies of Heritage’sSBC’s articles of incorporation or bylaws, or would like copies of Heritage’sSBC’s historical consolidated financial statements or need help voting your shares, please contact:
Heritage BancorpState Bank Corp.
2330 South Virginia Street1771 McCulloch Boulevard
Reno, Nevada 89502Lake Havasu City, Arizona 86403
ATTN: Stanley Wilmoth, President and Chief Executive OfficerKaren Gibbs, Corporate Secretary
(775)(928)321-4110302-5165
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 June 4,[], 2019. You should not assume that information contained in this proxy statement/prospectus is accurate as of any other date, and neither the mailing of this proxy statement/prospectus to HeritageSBC shareholders nor the issuance of Glacier common stock in the merger will create any implication to the contrary.
TABLE OF CONTENTS
A-i
TABLE OF CONTENTS
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ARTICLE 5 | APPROVALS AND CONDITIONS | A-46 | ||||
5.1 | Required Approvals | A-46 | ||||
5.2 | Conditions to Obligations of GBCI | A-46 | ||||
5.3 | Conditions to Obligations of SBC | A-48 | ||||
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6.3 | Indemnification of | A-50 | ||||
ARTICLE | A-51 | |||||
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7.3 | Termination Due to GBCI Average Closing Price Less Than $34.97 | A-52 | ||||
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8.1 | Notices | A-55 | ||||
8.2 | Waivers and Extensions | A-56 | ||||
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8.7 | Governing Law and | A-57 | ||||
8.8 | Severability | A-57 | ||||
8.9 | No Assignment | A-57 | ||||
8.10 | Specific Performance | A-58 | ||||
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A-ii
TABLE OF CONTENTS
List of Schedules and Exhibits
EXHIBITS:
PLAN AND AGREEMENT OF MERGER AMONG GLACIER BANCORP, INC., GLACIER BANK,
This Plan and Agreement of Merger (the “Agreement”), dated as of PREAMBLE The boards of directors of GBCI and Capitalized terms used in this Agreement but not immediately defined are used with the meanings given under the heading “Definitions” below. RECITALS A.The Parties. (1) 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. (2) Glacier Bank is a duly organized and validly existing Montana state-chartered bank and a wholly owned subsidiary of GBCI. Glacier Bank maintains its principal office in Kalispell, Montana, and currently operates (3) (4) The Bank is B.The Transactions. On the Effective Date, C.Board Approvals. The respective boards of directors of GBCI, Glacier Bank, D.
AGREEMENT In consideration of the mutual agreements set forth in this Agreement, GBCI, Glacier Bank, DEFINITIONS The following capitalized terms used in this Agreement will have the following meanings: “ABCA” means the Arizona Business Corporations Act, as amended. “Acquisition Event” means any of the following: (a) a merger, consolidation, share exchange, or similar transaction involving
A - 2 “Acquisition Proposal” has the meaning assigned to such term in Section 4.1.10. “Agreement” “ALLL” means allowance for possible loan and lease losses. “Anticipated Closing Date” has the meaning set forth in Section 4.12. “Appraisal Laws” means “Asset Classification” has the meaning assigned to such term in Section 3.1.14(a). “Bank” has the meaning assigned to it in the first paragraph, as supplemented by the first sentence of Recital A(4). “Bank Financial Statements” means the Bank’s (a) unaudited balance sheets as of December 31, 2016, 2017, and 2018, and the related statements of income, cash flows and changes in shareholder’s equity for each of the years then ended, and (b) unaudited balance sheets as of June 30, 2019, and the related statements of income, and changes in shareholders’ equity for the six months then ended, together with the Subsequent Bank Financial Statements. “Bank Merger” has the meaning assigned to such term in Recital B. “Bank Merger Agreement” means the bank merger agreement by and between Glacier Bank and the Bank to be entered “ “BHC Act” has the meaning assigned to such term in Recital A(1). “Break-Up Fee” has the meaning assigned to such term in Section 7.5. “Business Day” means any day other than a Saturday, Sunday, legal holiday or a day on which banking institutions located in the State of Montana are required by law to remain closed. “Certificate” has the meaning assigned to such term in Section “Claim” has the meaning set forth in Section 8.5. “Closing” means the closing of the Merger contemplated by this Agreement, as more fully specified in Section 2.2. “Closing Capital Differential” means the positive or negative differential between the A - 3 “Closing Capital Requirement” means “Compensation Plans” has the meaning assigned to such term in Section
“Daily Closing Price” for any Trading Day means the daily closing price per share of GBCI Common Stock on the NASDAQ Global Select Market, as reported on the website “Determination Date” means the tenth day immediately preceding the Effective Date. “Disclosure Schedule” has the meaning assigned to such term in Section 3.1. “Dissenting Shares” means the shares of “Effective Date” means the date on which the Effective Time occurs. “Effective Time” means the time the Merger becomes effective under the MBCA and “Employees” has the meaning assigned to such term in Section 3.1.17(b). “Environmental Laws” has the meaning assigned to such term in Section 3.1.6(a)(ii). “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder. “ERISA Affiliate” means, with respect to any Person, any other entity that is considered one employer with such Person under Section 4001 of ERISA or IRC Section 414. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. “Exchange Agent” means American Stock Transfer & Trust Company, “Exchange Fund” has the meaning assigned to such term in Section
“Execution Date” means the date of this Agreement. “Executive Officers” means, (a) with respect to GBCI and/or Glacier Bank Randall M. Chesler, Ronald J. Copher, and Donald J. Chery, and (b) with respect to “Fairness Opinion” has the meaning assigned to such term in Section 3.1.19. A - 4 “FDIC” means the Federal Deposit Insurance Corporation. “Federal Reserve” means the Board of Governors of the Federal Reserve System. “Final Transaction Related Expenses” has the meaning assigned to such term in Section 4.13. “GAAP” means United States generally accepted accounting principles. “GBCI” has the meaning assigned to it in the first paragraph, as supplemented by the first sentence of Recital A(1). “GBCI 401(k) Plan” means the Glacier Bancorp, Inc., Profit Sharing and 401(k) Plan, as amended. “GBCI Average Closing Price” means the average Daily Closing Price of GBCI Common Stock for the 20 Trading Days immediately preceding the Determination Date. “GBCI Common Stock” means the shares of GBCI common stock, $0.01 par value per share, issued and outstanding from time to time. “GBCI Contracts” has the meaning assigned to such term in Section 3.2.2. “GBCI Financial Statements” means GBCI’s (a) audited consolidated balance sheets as of December 31, 2016, 2017, and 2018, and the related audited consolidated statements of income, cash flows, and changes in shareholders’ equity for each of the years then “GBCI Preferred Stock” means the shares of GBCI preferred stock, $0.01 par value per share. “GBCI Regulatory Reports” has the meaning assigned to such term in Section 3.2.4(a). “GBCI SEC Reports” has the meaning assigned to such term in Section 3.2.4(b). “GBCI Shares” means the shares of GBCI Common Stock to be issued to the holders of “Governmental Authority” means any federal, state, local ornon-U.S. government or subdivision thereof or any other governmental, administrative, judicial, taxing, arbitral, legislative, executive, regulatory or self-regulatory authority, instrumentality, agency, commission or body. A - 5 “Hazardous Substances” has the meaning assigned to such term in Section 3.1.6(a)(iii).
“Independent Accountants” has the meaning assigned to such term in Section 4.12. “IRC” means the Internal Revenue Code of 1986, as amended. “Knowledge” or any similar knowledge qualification in this Agreement has the following meanings: (a) “Laws” has the meaning assigned to such term in Section 3.1.2. “Lease” means all leases, subleases, licenses, concessions, and other agreements (written or oral) under which “Leased Real Estate” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real property, including approved and unopened branch offices,off-premises ATM locations and other facilities, held by “Letter of Transmittal” has the meaning assigned to such term in Section “Liens” means, collectively, liens, pledges, security interests, claims, preemptive or subscriptive rights or other encumbrances or restrictions of any kind. “Material Adverse Effect” with respect to a Person means an effect that: (a) is materially adverse to the business, financial condition, results of operations or prospects of the Person and its Subsidiaries taken as a whole; or (b) materially 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; provided, however, that Material Adverse Effect shall not be deemed to include the impact of any (i) changes in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Authorities or other changes affecting depository institutions generally, including changes to GAAP or regulatory accounting requirements, A - 6 changes to valuation policies and practices in connection with the Transactions or restructuring charges taken in connection with the Transactions, in each case in accordance with GAAP; (iv) any modifications or changes made by “Material Contract” has the meaning assigned to such term in Section 3.1.9(a). “Maximum Transaction Expense Amount” means “MBCA” means the Montana Business Corporations Act, as amended. “Merger” has the meaning assigned to such term in Recital B. “Merger Consideration” means the consideration per share payable under this Agreement as contemplated by Section 1.2.2. “Montana Commissioner” means the Commissioner of the Montana Division of Banking and Financial Institutions. “
“Objection Notice” has the meaning assigned to such term in Section 4.1.11.
“Outside Date” has the meaning assigned to such term in Section 7.1. “Owned Real Estate” means all land, together with all buildings, structures, fixtures, and improvements located thereon and all easements, rights of way, and appurtenances relating thereto, including approved and unopened branch offices,off-premises ATM locations and other facilities, owned by “Pension Plan” has the meaning assigned to such term in Section 3.1.17(c). “Per Share Cash Consideration” means
“Per Share Stock Consideration” means A - 7 effects a stock dividend, reclassification, recapitalization,split-up, combination, exchange of shares, or similar transaction between the Execution Date and the Effective Date, the Per Share Stock Consideration will be adjusted accordingly. “Per Share Stock Consideration Value” means the product obtained by multiplying (a) the Per Share Stock Consideration by (b) the GBCI Average Closing Price. “Permitted Exceptions” has the meaning assigned to such term in Section 4.1.11. “Person” includes an individual, corporation, partnership, association, limited liability company, bank, trust or unincorporated organization. “Plan” has the meaning assigned to such term in Section 3.1.17(a). “Post-Signing Return” has the meaning assigned to such term in Section 4.11.2. “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, whether tangible or intangible. “Proposed Dissenting Shares” means those shares of “Prospectus/Proxy Statement” has the meaning assigned to such term in Section 4.2.1(a). “Real Property” has the meaning assigned to such term in Section 3.1.5(c). “Registration Statement” has the meaning assigned to such term in Section 4.2.1(a). “Requisite Regulatory Approvals” has the meaning assigned to such term in Section 4.3. “Response Notice” has the meaning assigned to such term in Section 4.1.11. “SBC” has the meaning assigned to it in the first paragraph, as supplemented by the first sentence of Recital A(3). “SBC 401(k) Plan” means the State Bank of Arizona 401(k) Plan. “SBC Capital” means SBC’s capital stock, surplus and retained earnings determined in accordance with GAAP on a consolidated basis, net of goodwill and other intangible assets, calculated in the same manner in which SBC’s consolidated tangible equity capital at December 31, 2018, and June 30, 2019, was calculated, after giving effect to adjustments, calculated in accordance with GAAP, for accumulated other comprehensive income or loss as reported on SBC’s or the Bank’s balance sheet and after taking into account any A - 8 additional adjustments as agreed. For purposes of determining SBC Closing Capital, purchase accounting adjustments and the Final Transaction Related Expenses of up to the Maximum Transaction Expense Amount will not be taken into account. To the extent Final Transaction Related Expenses exceed the Maximum Transaction Expense Amount, the difference, on anafter-tax basis (applying an effective tax rate of 21.0 percent to the extent a particular item is deductible under applicable Tax laws), will be treated as a reduction of SBC Capital for purposes of determining SBC Closing Capital (regardless of whether such amounts are required to be expensed in accordance with GAAP). “SBC Closing Capital” has the meaning assigned to such term in Section 4.12. “SBC Financial Statements” means SBC’s (a) audited consolidated balance sheets as of December 31, 2016, 2017 and 2018, and the related statements of income, cash flows and changes in shareholders’ equity for each of the years then ended; and (b) unaudited financial statements as of June 30, 2019, and the related statements of income, cash flows and changes in shareholders’ equity for each of the periods then ended, together with the Subsequent SBC Financial Statements. “SBC Indebtedness” means that certain term loan in the original principal amount of $7,500,000 payable to Bell Bank. “SBC Meeting” has the meaning assigned in Section 4.2.2. “SBC Reports” has the meaning assigned to such term in Section 3.1.4(c). “SBC Securities” has the meaning assigned in Section 3.1.3(d). “SBC Stock” means the shares of SBC common stock, no par value per share, issued and outstanding from time to time. “SEC” means the United States Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder. “Securities Laws” has the meaning assigned to such term in Section 3.1.4(b). “Subject Property” has the meaning assigned to such term in Section 3.1.6(a)(i). “Subsequent Bank Financial Statements” means the Bank’s unaudited balance sheets and related unaudited statements of income and changes in shareholder’s equity for each month after the Execution Date and before Closing or the Termination Date, as the case may be, prepared in accordance with Section 4.1.8. “Subsequent A - 9 “Subsidiary” with respect to any party to this Agreement means any Person in which such party, directly or indirectly, (a) owns or controls at least a majority of the outstanding capital stock or voting power of its outstanding securities or (b) has the power to appoint a general partner, manager or managing member or others performing similar functions. “Superior Proposal” means, with respect to “Takeover Laws” and “Takeover Provisions” each has the meaning assigned to such terms in Section 3.1.18(b). “Taxes” means all federal, state, local,non-U.S. and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments, or charges imposed by a Governmental Authority in the nature of a tax of any kind whatsoever, together with any interest, additions, or penalties with respect thereto and any interest in respect of such additions or penalties. “Tax Returns” means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with or provided to any taxing authority in respect of Taxes, including any schedule or attachment thereto, and including any amendment thereof. “Termination Date” means the date on which termination of this Agreement takes place under Article 7, if any. “Third-Party Consents” has the meaning assigned to such term in Section 3.1.9(b). “Third-Party Notices” has the meaning assigned to such term in Section 3.1.9(b). “Title Companies” has the meaning assigned to such term in Section 4.1.11. “Total
A - 10 “Trading Day” means a day on which GBCI Common Stock is traded on the NASDAQ Global Select Market. “
“Transactions” has the meaning assigned to such term in Recital B. “Treasury Regulations” means any Treasury Regulations (including temporary regulations) promulgated by the United States Department of the Treasury with respect to the IRC, as amended. TERMS OF TRANSACTION 1.1Effect of Merger. Upon Closing of the Merger, pursuant to the provisions of the MBCA and 1.2Merger Consideration. Subject to the provisions of this Agreement, including Section 1.3, as of the Effective Date: 1.2.1Outstanding GBCI Common Stock. The shares of GBCI Common Stock issued and outstanding immediately prior to the Effective Time will remain as issued and outstanding. 1.2.2Outstanding 1.3No Fractional Shares. No fractional shares of GBCI Common Stock will be issued in the Merger. In lieu of fractional shares, if any, each holder of A - 11 cash equal to the product of such fractional share multiplied by the GBCI Average Closing Price. Such fractional share interests will not include the right to vote or receive dividends or any interest on dividends.
A - 12 1.5.4 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
1.6 Withholding Rights. Each of the parties and the Exchange Agent, as applicable, shall be entitled to deduct and withhold from the Merger Consideration (and any other consideration otherwise payable pursuant to this Agreement or deemed paid for tax purposes), such amounts as it may be required to deduct and withhold with respect to such payments under the IRC, and the rules and regulations promulgated thereunder, or any provision of state, local or foreign Law. Any such amounts so deducted and withheld shall be paid over to the applicable Governmental Authority in accordance with applicable Law and shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made. A - 13 1.7 Absence of Control. It is the intent of the parties to this Agreement that neither GBCI nor Glacier Bank by reason of this Agreement shall be deemed (until consummation of the transactions contemplated herein) to control, directly or indirectly, SBC or the Bank and neither GBCI nor Glacier Bank shall exercise or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of SBC or the Bank. CLOSING OF TRANSACTION 2.1Effective Date. The Merger shall be consummated at the Effective Time by the filing with and acceptance by the Montana Secretary of State and the 2.2Events of Closing. Subject to the terms and conditions of this Agreement, unless otherwise agreed, the Merger shall be effective as of the firstmonth-end occurring not less than 2.3Manner and Time of Closing. The Closing will take place remotely via the electronic exchange of documents and signatures on such date as the A - 14 REPRESENTATIONS AND WARRANTIES 3.1Representations and Warranties of 3.1.1Organization and Good Standing. (a) conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on (b) The Bank is duly organized, validly existing, and in good standing as a
A - 15 3.1.2No Breach or Violation. Assuming the approval described in Section 5.3.8 is obtained and all Requisite Regulatory Approvals are made and/or obtained, as applicable, the execution, delivery and performance of this Agreement does not and will not, and the consummation of the Transactions will not, constitute or result in: (a) a material breach or violation of, or a material default under, the articles of incorporation or bylaws of 3.1.3Capital Stock. (a) The authorized capital stock of (b) The authorized capital stock of the Bank consists of (c)Schedule 3.1.3 sets forth a true and complete list of all Subsidiaries of (d) Except as set forth inSchedule 3.1.3 participation or similar rights, preemptive rights, anti-dilutive rights, rights of first refusal or similar rights or other agreements or commitments of any nature relating to the acquisition of, or A - 16 agreements, proxies or other agreements or understandings in effect to which (e) All outstanding shares of 3.1.4Reports and Financial Statements; Investments. (a) Since January 1, 2016, each of (b) (c) The reports and other documents referred to in and regulations as of their respective dates, A - 17 (d) Each of (e) (f) Since January 1, 2016, neither (g) The books and records of (h)Schedule 3.1.4(h) lists all investments (except investments in 3.1.5Properties. (a) A - 18 (b)Schedule 3.1.5(b) contains a true and complete list of all Leases (including all amendments, extensions, renewals, guaranties, and other agreements with respect thereto) as of the Execution Date for each Leased Real Estate (including the date and name of the parties to such Lease document). (c) The Owned Real Estate identified inSchedule 3.1.5(a) and the Leased Real Estate identified inSchedule 3.1.5(b)comprise all of the real property used (d) (e) A - 19 (f)Schedule 3.1.5(f) lists all of the Bank’s existing branches and offices, alloff-site ATMs, and all new branches or offices that the Bank has applied to establish or purchase, along with the estimated cost to establish or purchase those new branches. 3.1.6Environmental Matters. (a) For purposes of this Agreement, the following definitions apply: (i) ”Subject Property” with respect to (ii) ”Environmental Laws” means all federal, state and local environmental, health, and safety laws, regulations, orders, authorizations, common law and agency requirements relating to: (A) the protection or restoration of the environment, health and safety as it relates to exposures to Hazardous Substances or natural resource damages, (B) the handling, use, transportation, treatment, storage, presence, disposal, release or threatened release of, or exposure to, any Hazardous Substance, or (C) noise, odor, wetlands, indoor air quality, pollution, contamination or any injury or threat of injury to persons or property from exposure to any Hazardous Substance, including without limitation the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Water Act, and the Federal Clean Air Act, each as amended, and including their respective state counterparts. (iii) ”Hazardous Substances” means any substance, material or waste that is (A) defined as a “hazardous substance,” “pollutant or contaminant,” or “hazardous waste” or otherwise regulated pursuant to any Environmental Law, or (B) petroleum or a petroleum product orby-product, asbestos-containing material, lead-containing paint or plumbing, or any other substance defined as “hazardous,” “dangerous,” or “toxic” under any Environmental Law. (b) To the Knowledge of A - 20 (c) None of the following exists, and to the Knowledge of (i) an asserted liability of (ii) the handling, storage, use, transportation, removal, release or disposal of Hazardous Substances; (iii) 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 (iv) personal injuries or damage to the Subject Property related to or arising out of the release, use or disposal of Hazardous Substances. (d) To the Knowledge of (e) To the Knowledge of (f) To the Knowledge of A - 21 3.1.7Taxes. (a)Tax Returns and Payment of Taxes. (b)Availability of Tax Returns. (c)Withholding. (d)Liens. There are no Liens for Taxes upon the assets of (e)Tax Deficiencies and Audits. No deficiency for any amount of Taxes which has been proposed, asserted or assessed in writing by any taxing authority against proceedings ongoing or pending with respect to any Taxes of (f)Tax Jurisdictions. No written claim by any taxing authority in a jurisdiction in which neither A - 22 (g)Tax Rulings. None of (h)Consolidated Groups, Transferee Liability and Tax Agreements. None of (i)Change in Accounting Method. (j)Post-Closing Tax Items. (k)Ownership Changes. Without regard to this Agreement, (l)U.S. Real Property Holding Corporation. (m)IRC Section 355. (n)Reportable Transactions. A - 23 (o)IRC Section 6662. (p)IRC Section 280G. Except as set forth inSchedule 3.1.7(p), (q)Tax Attributes.Schedule 3.1.7(q) sets forth the following information with respect to each of 3.1.8Regulatory Matters. (a) Since January 1, (b) (c) Each of A - 24 (d) 3.1.9Material Contracts. (a) Except for arrangements which may be made after the date and in accordance with the terms of this Agreement, (i) contains anon-compete or client or customernon-solicit requirement or any other provisions that materially restricts the conduct of, or the manner of conducting, any line of business of (ii) obligates (iii) grants any right of first refusal, right of first offer or similar right with respect to any assets, rights, or Properties of (iv) limits the payment of dividends by (v) relates to a joint venture, partnership, limited liability company agreement or other similar agreement or arrangement with any third party, or to the formation, creation or operation, management or control of any partnership or joint venture with any third parties; (vi) provides for payments to be made by A - 25 (vii) provides for indemnification by (viii) is a consulting agreement or data processing, software programming or licensing contract involving the payment of more than $50,000 per annum (other than any such contracts which are terminable by (ix) involves capital expenditures in excess of $50,000 per project or series of related projects, or $100,000 in the aggregate; (x) (xi) would prevent, materially delay or materially impede (xii) contains a put, call or similar right pursuant to which (xiii) is otherwise not entered into in the ordinary course of the business of (b) (i) Each Material Contract is a valid and legally binding agreement of A - 26 3.1.10Compliance. Each of 3.1.11Litigation. No material litigation, arbitration, proceeding or controversy before any Governmental Authority is pending on behalf of 3.1.12No Material Adverse Effect. Since December 31, 2018, (a) 3.1.13Shareholder List. 3.1.14Asset Classification. (a)Schedule 3.1.14 sets forth a list, accurate and complete, as of December 31, 2018, 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 (b) No amounts of the Bank’s loans, extensions of credit or other assets that have been classified or criticized by any representative of any Governmental Authority as “Other Assets Especially Mentioned,” “Substandard,” “Doubtful,” “Loss,” or words of similar effect as of December 31, 2018, 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 3.1.15Insurance. A - 27 the transactions contemplated by, this Agreement).Schedule 3.1.15 lists all material insurance policies maintained by 3.1.16Labor Matters. (a) (b) than for salary or wages for time worked and benefits earned prior to the date of such termination). 3.1.17Employee Benefits. (a) For purposes of this Agreement, “Plan,” or “Plans,” individually or collectively, means any “employee benefit plan,” as defined in Section 3(3) of ERISA, maintained by (b)Schedule 3.1.17 sets forth a list, as of the Execution Date, of (i) all Plans, stock purchase plans, restricted stock and stock option plans, and other deferred compensation arrangements, and (ii) all other material employee benefit plans, programs, policies, agreements, collective bargaining agreements, or other arrangements providing for compensation, severance, incentives, bonuses, performance awards, or other compensation, or A - 28 for fringe, retirement, death, disability or medical benefits or other employee benefits or remuneration of any kind, whether written or unwritten, funded or unfunded that is (c) All of the Compensation Plans have been maintained, and are in material compliance (both in form and operation) with any applicable laws, including ERISA. Each Plan that is an “employee pension benefit plan” within the meaning of ERISA Section 3(2) (“Pension Plan”) and that is intended to be qualified under IRC Section 401(a), has either received a favorable determination letter from the Internal Revenue Service or consists of a master, prototype, or volume submitter plan which has received an opinion or advisory letter from the Internal Revenue Service upon which been submitted to the Internal Revenue Service for a favorable determination letter within the latest applicable remedial amendment period. No litigation, audit, or investigation relating to (d) All contributions required to be made under the terms of any Compensation Plans have been timely made and, if material, have been reflected in the (e) Except as required by IRC Section 4980B, (f) No provision of the documents governing any Compensation Plan contains restrictions on the rights of A - 29 (g) Except as disclosed inSchedule 3.1.17, the Transactions will not result in (i) vesting, acceleration, or increase of any amounts payable under any Compensation Plan, (ii) any increase in benefits under any Compensation Plan, (iii) payment of any severance,true-up, change in control, or similar payments or compensation or any forgiveness of any indebtedness under any Compensation Plan, or (iv) result in an “excess parachute payment” within the meaning of IRC Section 280G(b), or any payment that will not be fully deductible by GBCI. All payments set forth inSchedule 3.1.17 have been properly accrued in accordance with GAAP. (h) Except as disclosed inSchedule 3.1.17, (i) All required reports and descriptions (including Form 5500 annual reports, summary annual reports, and summary plan descriptions) have been timely filed and/or distributed in accordance with the applicable requirements of ERISA and the IRC with respect to each Plan. (j) Each Compensation Plan that is subject to IRC Section 409A has been operated in compliance with, and is in documentary compliance with, such section and all applicable regulations and regulatory guidance (including, without limitation, proposed regulations, notices, and rulings). 3.1.18Required Vote; Takeover Laws. (a) The affirmative vote of the holders of a majority of the outstanding shares of (b) 3.1.19Fairness Opinion. Prior to the execution of this Agreement, A - 30 3.1.20Broker’s or Finder’s Fees. Except for the fees of D.A. Davidson & Co. to obtain the Fairness Opinion and for advisory services relating to the Transactions pursuant to an agreement that has been disclosed to GBCI, no agent, broker, Person or firm acting on behalf of 3.1.21
3.2Representations and Warranties of GBCI and Glacier Bank. Except as disclosed in a Schedule to this Agreement, each of GBCI and Glacier Bank represents and warrants to 3.2.1Organization 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 corporate power and authority to own and operate its Properties and to carry on its businesses as now conducted. GBCI is duly licensed or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified or to be in good standing would not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on GBCI. Each of its Subsidiaries is either a commercial bank, a statutory trust or a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite power and authority to own and operate its Properties and to carry on its businesses as now conducted. 3.2.2Corporate Authority. Its execution, delivery and performance (assuming all Requisite Regulatory Approvals are duly made and/or obtained) of this Agreement does not and will not, and its consummation (assuming all Requisite Regulatory Approvals are duly made and/or obtained) of the Transactions will not, constitute or result in: (a) a material breach or violation of, or a material default under, its articles of incorporation or bylaws; (b) 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 material agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation by which it is bound or to which it is a party (collectively, the “GBCI Contracts”), other than any breach, violation, default, acceleration, or creation of a Lien that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on GBCI; (c) a material violation of any law, rule, ordinance or regulation or judgment, decree, order, award, or governmental ornon-governmental permit or license to which it is subject; or (d) any material change in the rights or obligations of any party under any of the GBCI Contracts. No other corporate proceedings or action is required to be taken by it relating to the performance by it of this Agreement or the consummation of the Transaction. A - 31 3.2.3Capital Stock. The authorized capital stock of GBCI consists of 1,000,000 shares of GBCI Preferred Stock and 117,187,500 shares of GBCI Common Stock. No shares of GBCI Preferred Stock are outstanding, and as of 3.2.4Reports and Financial Statements. (a)Regulatory Filing of Reports. Since January 1, 2016, GBCI and each of its Subsidiaries has filed all reports and statements, together with any required amendments to these reports and statements (collectively, the “GBCI Regulatory Reports”), that they were required to file with or furnish to (i) the Federal Reserve, (ii) the FDIC, and (iii) any other (b)SEC Reports. GBCI has filed all reports, schedules, registration statements, prospectuses, and other documents, together with all amendments thereto, required to be filed with the SEC since (c)Financial Statements. Each of GBCI’s balance sheets included in the GBCI Financial Statements have been prepared in conformity with GAAP and fairly presents in all material respects (or, in the case of GBCI Financial Statements for periods ending on a date following the Execution Date, will fairly present) the financial position of GBCI and its Subsidiaries as of the date of A - 32 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. 3.2.5Financing and Shares Available. GBCI has, and at the Effective Time will have, (a) sufficient cash and cash equivalents on hand to pay the cash component of the Merger Consideration, cash in lieu of fractional shares, 3.2.6Regulatory Matters. (a) 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 that continue to be effective on or after the Execution Date at the request of any Governmental Authority, nor has it been advised by such Governmental Authority that they are contemplating issuing or requesting any such order, agreement, memorandum or similar document or undertaking. (b) To GBCI’s Knowledge, as of the date of this Agreement, there is no fact or circumstance that would reasonably be expected to result in any of the Requisite Regulatory Approvals not being received in order to permit consummation of the Transactions on a timely basis. 3.2.7Litigation. Except as disclosed in GBCI Regulatory Reports or GBCI SEC Reports, A - 33 3.2.8No Material Adverse Effect. Since December 31, 2018, (a) GBCI and its Subsidiaries have conducted their respective businesses only in the ordinary and usual course of business, and (b) there has not been any change in the financial condition of GBCI (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. 3.2.9Taxes. All material Tax Returns and reports required by law to be filed by GBCI and its Subsidiaries have been duly filed, and all Taxes upon GBCI or any of its Subsidiaries or upon any of their respective properties, assets, income or franchises that are shown as due and payable on such Tax Returns have been paid. The federal income portion of such taxes have been paid in full as indicated in the federal income tax returns of GBCI and its Subsidiaries for the past three 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 income 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. 3.2.10 Completeness of Representations. No representation or warranty made by or with respect to GBCI or its Subsidiaries in this Agreement (or in the Schedules to this Agreement) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in this Agreement (or in such Schedules) or in such representation or warranty not misleading. ADDITIONAL AGREEMENTS 4.1Conduct of 4.1.1Availability of Books, Records, and Properties. (a) Upon reasonable prior written notice to A - 34 (b) Upon prior written reasonable request by GBCI, 4.1.2Ordinary and Usual Course. Without the prior written consent of GBCI (which consent shall not be unreasonably withheld, conditioned or delayed under subparagraphs (d), (f), (h), (i), (k), (l), (o) and (a) issue, sell, or otherwise permit to become outstanding, or dispose of or encumber or pledge, or authorize or propose the creation of, any additional (b) directly or indirectly adjust, split, combine, redeem, reclassify, purchase, or otherwise acquire, any (c) other than (i) as permitted by this Agreement or (ii) as otherwise consistent with past practices with respect to timing and amounts, declare or pay any dividend, or make any other distribution, either directly or indirectly, with respect to (d) solicit or accept deposit accounts of a different type from accounts previously accepted by the Bank or at rates materially in excess of prevailing interest rates, or incur, or increase the principal amount of, any indebtedness for borrowed money (excluding Fed Funds and Federal Home Loan Bank borrowings); (e) 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 the Bank, or offer or make a new loan or extension of credit (other than with respect to commitments existing as of the date hereof) in an amount greater than (f) make any negative provisions to the Bank’s ALLL without prior consultation with GBCI; (g) fail to maintain an adequate reserve for loan and lease losses (determined in accordance with GAAP and existing regulatory guidance); A - 35 (h) amend its articles of incorporation, bylaws, or other formation agreements, or convert its charter or form of entity; (i) 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; (j) implement or adopt any change in its accounting principles, practices or methods, other than as may be required (i) by GAAP, (ii) for Tax purposes, (iii) by Law, or (iv) to take advantage of any beneficial Tax or accounting methods; (k) enter into, amend, renew, or terminate any contracts calling for a payment by any of them of more than (l) acquire, sell, transfer, assign, encumber, or otherwise dispose of any material assets having a value greater than $100,000; (m) acquire an ownership interest (except other real estate owned or other ownership interest acquired through foreclosure with a value not exceeding $400,000) or leasehold interest in any real property other than the Real Property and in the case of any acquisition of an ownership interest (whether or not less than $400,000), no such ownership shall be acquired without making an appropriate environmental evaluation in advance of obtaining such interest and providing to GBCI such evaluation at least 30 days in advance of such acquisition; (n) (i) 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 (o) other than in accordance with binding commitments existing on the Execution Date, make any capital expenditures in excess of $50,000 per project or series of related projects or $100,000 in the (p) enter into any other material transaction or make any material expenditure or commitment other than in the ordinary (q) take any action which would materially and adversely affect or delay their ability or the ability of GBCI to obtain any necessary approvals, consents or waivers of any Governmental Authority required for the Transactions or to perform in all material respects their respective covenants and agreements under this Agreement. A - 36 4.1.3 (a) Take all action necessary to satisfy any contractual notice or similar requirements under, and use their respective commercially reasonable efforts to obtain any consents required by, the Material Contracts arising from the Transactions, or that will arise out of completion of the Transactions. (b) Except as otherwise provided in this Agreement and as permitted by applicable Law, (i) terminate or suspend by all necessary and appropriate actions of the boards of directors of (c) Take such corporate or other actions as may be reasonably requested by GBCI in connection with the termination of the (d) Satisfy the notice and consent requirements under IRC Section 101(j) with respect to any Bank-owned life insurance policies or similar plans and related agreements. A - 37 (e) Cooperate with, and support using commercially reasonable efforts, Glacier Bank in its efforts to secure post-Closing employment or similar agreements with key Employees as may be reasonably identified by Glacier Bank on such terms as Glacier Bank and such key Employees may agree. (f) Take such
4.1.4Maintenance of Properties. 4.1.5Preservation of Business Organization. Each of 4.1.6Senior Management. Except as otherwise provided in this Agreement and excluding resignations, without prior consultation with GBCI, 4.1.7Compensation. 4.1.8Updates of Financial Statements. A - 38 extent then applicable; and 4.1.9Update Schedules. From the Execution Date until Closing, 4.1.10Acquisition Proposal. sought to be initiated or continued with A - 39 4.1.11Status of Title. 4.1.12Directors’ and Officers’ Liability. Before the Effective Date, 4.1.13Review of Loans. 4.1.14Continuing Representation and Warranties. Neither A - 40 4.2Registration Statement; 4.2.1Preparation of Registration Statement. (a) GBCI will use its commercially reasonable efforts to prepare and file a Registration Statement onForm S-4 (together with any amendments or supplements, the “Registration Statement”) with the SEC within 45 days after the Execution Date for registration of the GBCI Shares to be issued in the Merger, and the parties will prepare a related prospectus/proxy statement (the “Prospectus/Proxy Statement”) to be mailed, together with any amendments and supplements thereto, to (b) The parties will cooperate with each other in preparing the Registration Statement and Prospectus/Proxy Statement, and will use their commercially reasonable efforts to obtain the clearance of the SEC, if required, any appropriate state securities regulators and any other required regulatory approvals, to issue the Prospectus/Proxy Statement. (c) Nothing will be included in the Registration Statement or the Prospectus/Proxy Statement or any proxy solicitation materials with respect to any party to this Agreement unless approved by that party, which approval will not be unreasonably withheld, conditioned, or delayed. When the Registration Statement becomes effective, and at all times subsequent to such effectiveness (up to and including the date of the (d) 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. A - 41 4.2.2Submission to Shareholders. 4.3Submission to Regulatory Authorities. GBCI will use its commercially reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, and to obtain all permits, approvals, consents, authorizations, waivers, clearances, and orders of Governmental
A - 42 4.4Public Announcements. Subject to advice of legal counsel with respect to legal requirements relating to public disclosure of matters related to this Agreement and its subject matter, 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 4.5Consents. Each party to this Agreement will use its commercially reasonable efforts to obtain the timely consent or approval of any other Person whose consent or approval is necessary or appropriate in order to permit GBCI or 4.6Transition. During the period from the Execution Date to the Effective Time, 4.7Notice of Certain Events; Cooperation. GBCI and A - 43 4.8Confidentiality. 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 (a) is required by Law to be disclosed, (b) becomes available to such party from other sources not bound by a confidentiality obligation, (c) 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 this Agreement or the Transaction, or (d) 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 remain bound by the terms of the confidentiality agreement dated 4.9Listing. GBCI shall cause to be filed with the Nasdaq Stock Market such notices of issuance or related forms as may be necessary or appropriate in connection with issuance of the GBCI Shares in the Merger. 4.10Blue Sky Filings. GBCI will use its reasonable best efforts to obtain, prior to the mailing of the Registration Statement, any necessary state securities laws or “Blue Sky” permits and approvals. 4.11.1Tax Treatment. Neither GBCI and its Subsidiaries nor 4.11.2Tax Returns. During the period from the date of this Agreement to the Effective Time, A - 44 4.12 4.13Transaction Related Expenses. No earlier than the 15th Business Day prior to Closing nor later than the 10th Business Day before such Closing, 4.14Payment of Dividend; Adjustment to Cash Consideration. 4.14.1Payment ofDividend. If the A - 45 4.14.2Adjustment to Cash Consideration. If the 4.15Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each party will use its commercially reasonable 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 on 4.16GBCI Common Stock Issuable in Merger. The shares of GBCI Common Stock to be issued pursuant to this Agreement, when issued in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid andnon-assessable and subject to no preemptive rights. APPROVALS AND CONDITIONS 5.1Required Approvals. The obligations of the parties to this Agreement are subject to the 5.2Conditions to Obligations of GBCI. All obligations of GBCI pursuant to this Agreement are subject to satisfaction of the following conditions at or before Closing: 5.2.1Representations and Warranties. The representations and warranties of
A - 46 5.2.2 Compliance. SBC will have performed and complied, and will have caused the Bank to perform and comply, in all material respects with all terms, covenants and conditions of this Agreement on or before Closing. SBC will have delivered to GBCI a certificate to that effect, executed by a duly authorized officer of SBC and dated as of Closing. 5.2.3 Continued Effectiveness of Agreements. (a) Agreements entered into as described in Recital E shall continue in full force and effect. (b) The individuals listed onSchedule 5.2.3(b) shall have entered into agreements with GBCI or Glacier Bank as described in Recital F and such agreements shall continue in full force and effect. 5.2.4 Closing Capital and Financial Statements. SBC will have delivered to GBCI the financial information set forth in Section 4.12, and the parties will have agreed upon the amount of SBC Closing Capital pursuant to the terms of Section 4.12. 5.2.5 Transaction Related Expenses. SBC will have delivered to GBCI the information set forth in Section 4.13 and the parties will have agreed upon the amount of Final Transaction Related Expenses pursuant to the terms of Section 4.13. 5.2.6 Dissenting Shares. Proposed Dissenting Shares must not represent more than 10 percent of the outstanding shares of SBC Stock. 5.2.7 No Material Adverse Effect. Since June 30, 2019, (a) and since the Execution Date, 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 SBC or (b) the commencement of any proceeding against SBC or the Bank that, individually or in the aggregate, is reasonably expected to have a Material Adverse Effect with respect to SBC. 5.2.8 Financial Condition. In the opinion of the Executive Officers of SBC and the Bank, the Bank’s ALLL is adequate to absorb the Bank’s anticipated loan losses. 5.2.9 No Governmental Proceedings. No Governmental Authority will have commenced, any action or proceeding to restrain or invalidate the Merger and no Governmental Authority will have enacted, issued, promulgated, enforced, or entered any applicable Law, judgment, decree or order (whether temporary, preliminary or permanent) which has the effect of making illegal or preventing the consummation of the Transactions. A - 47 5.2.10 Tax Opinion. GBCI will have obtained from Miller Nash Graham & Dunn, LLP and delivered to SBC, an opinion addressed to GBCI (subject to reasonable limitations, conditions and assumptions) to the effect that on the basis of facts, representations and assumptions set forth in such opinion, the Merger will be a reorganization within the meaning of IRC Section 368(a). 5.2.11 Corporate and Shareholder Action. The shareholders of SBC shall have approved this Agreement and the Merger by the requisite vote under Arizona law and SBC’s Articles of Incorporation and Bylaws, as applicable. 5.2.12 Resignation of Directors. The directors of SBC and the Bank will have tendered their written resignations from the respective board of directors of SBC and the Bank, to be effective upon consummation of the Merger or the Bank Merger, as applicable. 5.2.13 Fairness Opinion. SBC will have received the Fairness Opinion, and such Fairness Opinion shall not have been modified or withdrawn. 5.2.14 Registration Statement. The Registration Statement, as it may have been amended, required in connection with the issuance of the GBCI Shares, and as described in Section 4.2, will have become effective, and no stop order suspending the effectiveness of such Registration Statement will have been issued or remain in effect, and no proceedings for that purpose will have been initiated or threatened by the SEC, the basis for which still exists. 5.2.15 No Change in Loan Review. SBC will have 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 will have revealed a change in either: (a) the information set forth inSchedule 3.1.14 or (b) information revealed during GBCI’s previous examinations of the Bank’s loans, in either case which change constitutes a Material Adverse Effect. 5.2.16 Payment of SBC Indebtedness. SBC shall have satisfied in full the requirements of Section 4.1.3(g). 5.3 Conditions to Obligations of SBC. All obligations of SBC 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 Glacier Bank contained in this Agreement or in any certificate or other instrument delivered in connection with this Agreement that are not qualified as to materiality will be true and correct in all material respects at Closing (other than the representations and warranties contained in Sections 3.2.1, 3.2.2(a), and the first sentence of Section 3.2.3, which will be true and correct in all respects at Closing subject in the case of the first sentence of Section 3.2.3 to de minimis variations in an amount not to exceed 100,000 shares), and the representations and warranties of GBCI and Glacier Bank contained in this Agreement or in any certificate or other instrument delivered in connection with this Agreement that are qualified as to materiality will be true and correct at Closing, all with the same force and effect as though such representations and warranties had been made on and as of Closing (except to the extent that such representations and warranties are by their express provisions made as of a specified date, in A - 48 which case such representations and warranties will be true and correct, or true and correct in all material respects, as the case may be, as of such date). GBCI and Glacier Bank will have delivered to 5.3.2Compliance. GBCI and Glacier Bank will have performed and complied, in all material respects, with all terms, covenants and conditions of this Agreement on or before Closing. GBCI and Glacier Bank will have delivered to 5.3.3No Governmental Proceedings. No Governmental Authority will have commenced any action or proceeding 5.3.4No Material Adverse Effect. Since 5.3.5Registration Statement. The Registration Statement will have become effective as specified in Section 5.3.6Tax Opinion. 5.3.7Payments to the Exchange Agent. GBCI will have deposited the Exchange Fund with the Exchange Agent. 5.3.8Approval of A - 49 DIRECTORS, OFFICERS AND EMPLOYEES 6.1Director, Executive Officer and Shareholder Agreements. As a condition to the execution of this Agreement, the directors, executive officers, and principal shareholders described in Recital E have entered into the written agreements described in Recital E on or before the Execution Date. Such agreements will take effect at the Effective Date unless otherwise noted in the applicable agreement. 6.2.1Comparability of Benefits. GBCI’s and Glacier Bank’s personnel policies will apply to any current Employees who are retained after the Effective Time. 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 and/or Glacier Bank in accordance with and subject to the terms of such plans. 6.2.2Treatment of Past Service. For purposes of such participation, current Employees’ prior service with 6.2.3No Contract Created. Nothing in this Agreement will give any Employee a right to employment or continuing employment. 6.2.4Severance Eligibility. Any current Employees (a) who are not entitled to severance, change in control, or other payments at or in connection with Closing under the Compensation Plans set forth inSchedule 3.1.17 or otherwise and (b) are not offered a position by GBCI or retained by Glacier Bank following the Closing will receive severance payments in accordance with Glacier Bank’s severance policy in effect at the Closing on the basis of the number of years of prior service with A - 50 6.3Indemnification of Directors and Executive Officers. For a period of six years from and after the Effective Date, GBCI will indemnify and defend each present and former director and officer of TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION 7.1Termination by Reason of Lapse of Time. If Closing does not occur on or before 7.1.1 the terminating party’s board of directors decides to terminate by a majority vote of all of its members; and 7.1.2 the terminating party delivers to the other party written notice that its board of directors has voted in favor of termination; provided that, if as of such Outside Date, the condition to Closing set forth in Section 5.1 shall not have been satisfied, then the Outside Date will be extended to on or before 7.2Termination Due to GBCI Average Closing Price Greater Than 7.2.1GBCI’s Right to Terminate. By specific action of its board of directors, GBCI may terminate this Agreement and the Merger by written notice to A - 51 7.2.2 7.2.3 Effect of SBC Election. If 7.3Termination Due to GBCI Average Closing Price Less Than 7.3.1 7.3.2GBCI’s Right to Adjust Consideration. If (a) In the event of a termination pursuant to Section 7.3.1(a), adjust the Per Share Stock Consideration (or in GBCI’s discretion Per Share Cash Consideration, or a combination thereof) such that the (b) In the event of a termination by A - 52 7.3.3Effect of GBCI Election. If GBCI makes such election to increase the Per Share Stock Consideration or Per Share Cash Consideration (or a combination thereof) pursuant to Section 7.3.2, no termination will occur pursuant to Section 7.3.1, and this Agreement will remain in effect according to its terms (except as the Per Share Stock Consideration and/or Per Share Cash Consideration has been adjusted). 7.4Other 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 7.4.1Mutual Consent. By mutual consent of 7.4.2No Regulatory Approvals. By 7.4.3Breach of Representation. By 7.4.4Breach of Covenant. By A - 53 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 30 days following written notice to the party committing such breach, or which breach, by its nature, cannot be cured prior to the end of such30-day period. 7.4.5Failure 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 (a) 7.4.6Dissenting Shares. By GBCI, if holders of more than 10 percent 7.4.7Superior Proposal—Termination by 7.4.8Superior Proposal—Termination by GBCI. By GBCI upon written notice to 7.5Break-Up Fee. If this Agreement is terminated pursuant to Section 7.4.5(a), Section 7.4.7, or Section 7.4.8, then A - 54 7.6Cost AllocationUpon Termination; Limitations;Break-Up Fee as Liquidated Damages. In connection with the termination of this Agreement under this Article, except as provided in Section 7.5, each party will pay its ownout-of-pocket costs incurred in connection with this Agreement and will have no liability to the other parties arising from such termination, except that in the event of a termination under Section 7.4.3 or Section 7.4.4 in a circumstance in which noBreak-Up Fee is paid, no party will be relieved from any liability arising out of the underlying breach by reason of such termination. The parties acknowledge and agree that the agreements contained in Section 7.5 are an integral part of the MISCELLANEOUS 8.1Notices. Any notice, request, instruction or other document to be given under this Agreement will be in writing and will be delivered personally, sent electronic mail or sent by registered or certified mail or overnight Federal Express service, postage prepaid, addressed as follows:
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or to such other address or Person as any party may designate by written notice to the other given under this Section 8.1. 8.2Waivers and Extensions. Subject to Article 9, any party may grant waivers or extensions to the other parties, but only through a written instrument executed by the President and/or CEO of the party granting the waiver or extension. Waivers or extensions that do not comply with the preceding sentence are not effective. In accordance with this Section 8.2, a party may extend the time for the performance of any of the obligations or other acts of any other party, and may waive: 8.2.1 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; 8.2.2 compliance with any of the covenants of any other party; and 8.2.3 any other party’s performance of any obligations under this Agreement and any other condition precedent set out in Article 5. 8.3Construction and Execution in Counterparts. Except as otherwise expressly provided in this Agreement, this Agreement: (a) 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; (b) 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; (c) is deemed to include all amendments to this Agreement, each of which is made a part of this Agreement by this reference; and (d) may be executed in one or more counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same document. 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. 8.4Survival of Representations, Warranties, and Covenants. Except as set forth below, the representations, warranties, agreements and covenants set forth in this Agreement will not survive the Effective Time or termination of this Agreement, except that (a) Section 4.8 (Confidentiality), Section 7.5(Break-Up Fee), Section 7.6 (Cost Allocation Upon Termination), and Sections 8.3 through 8.8 will survive termination; and (b) the covenants and other agreements in this Agreement that impose duties or obligations on the parties following the Effective Time, including without limitation Section 6.2 (Employee Benefit Issues) and Section 6.3 (Indemnification), will survive the Effective Time. Except as specifically set forth in the preceding sentences, none of the representations, warranties, agreements or covenants contained in this Agreement shall survive the Effective Time, and neither GBCI, Glacier Bank, A - 56 8.5Attorneys’ Fees and Costs. In the event of any dispute, claim, arbitration or litigation arising out of or in connection with, or relating to, this Agreement or any breach or alleged breach of this Agreement (“Claim”), the substantially prevailing party on any such Claim will be entitled to reimbursement from the other party of its costs and expenses, including reasonable attorneys’ fees. 8.6Arbitration. At either party’s request, the parties must submit any Claim to arbitration under the American Arbitration Association’s Commercial Arbitration Rules then in effect (or under any other form of arbitration mutually acceptable to the parties); provided that a party shall not be prevented from seeking injunctive relief in accordance with Sections 8.7 and 8.10 below to enforce this Agreement. A single arbitrator agreed on by the parties will conduct any arbitration. If the parties cannot agree on a single arbitrator within 15 days after service of the demand for arbitration, Claims shall be heard by a panel of three arbitrators, selected as follows: each party shall select one person to act as arbitrator and the two selected shall select a third arbitrator within ten days of their appointment; if the arbitrators selected by the parties fail to select or are unable to agree on the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The arbitration decision is final (except as otherwise specifically provided by law) and binds the parties, and either party may request any court having jurisdiction to enter a judgment and to enforce the arbitrator’s decision. The arbitrator will provide the parties with a written decision naming the substantially prevailing party in the action. Any arbitration or related proceedings will take place in Kalispell, Montana. 8.7Governing Law and Venue. This Agreement will be governed by and construed in accordance with the laws of the State of Montana, except to the extent that federal law may govern certain matters. Subject to the arbitration provisions set forth in Section 8.6, the parties must bring any legal proceeding arising out of this Agreement in the federal district courts of the Missoula Division for the State of Montana. Each party consents to and submits to the jurisdiction of any such federal court. 8.8Severability. 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. 8.9No 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. A - 57 8.10Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity. 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 [signatures on next page] A - 58 This Plan and Agreement of Merger is dated as of the date first written above.
[Signature Page to Plan and Agreement of Merger] Parties to Recital E Directors
Executive Officers
Shareholders
Ben Andre Form of Transaction-Related Expenses Exhibit
As provided in the Plan and Agreement of Merger, to the extent Final Transaction Related Expenses exceed the Maximum Transaction Expense Amount, the difference, on anafter-tax basis (applying an effective tax rate of 21.0 percent to the extent a particular item is deductible under applicable Tax laws), will be treated as a reduction of
Article 1 –
Article 2 –
Sections10-1330 and10-1331 Article 1 – Dissent and Payment for Shares 10-1301.Definitions In this article, unless the context otherwise 1. “Beneficial shareholder” means the
7. “Shareholder” means the
3. Consummation of a sale or exchange of all or substantially all of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to a court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale. 4. An amendment of the articles of incorporation that materially and adversely affects rights in respect of a dissenter’s shares (a) Alters or abolishes a preferential right of the shares. (b) Creates, alters or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase, of the shares. (c) Alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities. (d) Excludes or limits the right of the shares to vote on any matter or to cumulate votes other than a limitation by dilution through issuance of shares or other securities with similar voting rights. (e) Reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired
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7. Consummation of a plan of domestication if the shareholder does not receive interests in the foreign domesticated entity that have terms as favorable to the shareholder in all material respects and that represent at least the same percentage interest of the total voting rights 8. Consummation of a plan of conversion if the shareholder does not receive interests in the converted entity that have terms as
D. Unless the articles of incorporation of the corporation
10-1303.Dissent by nominees and
B - 3 B. A beneficial 1. The beneficial
1. Deliver to
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10-1323.Duty to
C. A
10-1324.Share restrictions A. The
B. The
1. The
4. A statement of the dissenter’s 5. A copy of this article. 10-1326.Failure to take action A. If the corporation does not B. If after returning deposited certificates and releasing transfer restrictions, the corporation takes the proposed action, it shall send a new dissenters’ notice under section10-1322 and shall repeat the payment
B - 6 10-1327.After-acquired shares A. A
1. The dissenter believes that the amount paid under section10-1325 or offered under section10-1327 is less than the fair value of the dissenter’s shares or that the interest due is incorrectly calculated. 2. The corporation fails to make payment under section10-1325 within sixty days after the date set for demanding payment. 3. The corporation, having failed to take the proposed action, does not return the deposited certificates or does not release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment. B. A dissenter waives the right to demand payment
B - 7 B. The corporation shall commence the proceeding in the
B - 8 2. Against the dissenter and in favor of the corporation if the court finds that the fair value does not materially exceed the amount offered by the corporation pursuant to
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Board of Directors
Members of the Board: We understand that Capitalized terms used herein without definition have the respective meanings ascribed to them in the Agreement. You have requested our opinion as to the fairness, from a financial point of view, In connection with preparing our opinion, we have reviewed, among other things:
Investment Banking 611 Anton Boulevard • Suite 600 • Costa Mesa, CA 92626 • (714) 327-8800 • FAX (714) 327-8700 www.dadavidson.com/Investment-Banking C - 1
In connection with our engagement, we have been authorized to solicit, and have solicited expressions of interest from parties with respect to a sale of In arriving at our opinion, we have, with your consent, assumed and relied upon the accuracy and completeness of all information that was publicly available or supplied or otherwise made available to, discussed with or reviewed by or for us. We have not independently verified (nor have we assumed responsibility for independently verifying) such information or its accuracy or completeness. We have relied on the assurances of management of With respect to the financial projections and We are not experts in the evaluation of loan and lease portfolios, classified loans or other real estate owned or in assessing the adequacy of the allowance for loan losses with respect thereto, and we did not make an independent evaluation or appraisal thereof, or of any other specific assets, the collateral C - 2 securing assets or the liabilities (contingent or otherwise) of We have assumed that all of the representations and warranties contained in the Agreement and all related agreements are true and correct in all respects material to our analysis, and that the We have assumed in all respects material to our analysis that Our opinion is limited to the fairness, from a financial point of view, of the Merger Consideration to be paid to the holders of We do not express We do not express We have not evaluated the solvency or fair value of C - 3 We have acted as Please be advised that during the two years preceding the date of this letter, neither we nor our affiliates have Please be advised that during In the ordinary course of our business, D.A. Davidson & Co. and its affiliates may actively trade or hold securities of This fairness opinion was reviewed and approved by a D.A. Davidson & Co. Fairness Opinion Committee. This opinion is solely for the information of the Board of Directors of Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. Events occurring after the date hereof may affect this opinion and the assumptions used in preparing it, and we do not assume any obligation to update, revise or reaffirm this opinion. Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration to be paid to the holders of
C - 4 PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Sections35-1-451 through35-1-459 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. Glacier’s articles 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.
(a) The exhibits are listed below under the caption “Exhibit Index.” (b) Financial Statement Schedules. None.
(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 (i) (ii)
(iii) II - 1 (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To (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) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: (i) any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) the portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. (d) (1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. (2) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (d)(1) immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act of 1933 and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) 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 or not 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. II - 2 (d) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (e) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II - EXHIBIT INDEX
II Pursuant to the requirements of the Securities Act of 1933, 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
Each person whose individual signature appears below hereby authorizes and appoints Randall M. Chesler and Ron J. Copher, and each of them, with full power of substitution and full power to act without the other, as his true and lawfulattorney-in-fact and agent to act in his name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Registration Statement, including any and all post-effective amendments. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on FormS-4 has been signed by the following persons in the capacities indicated, on the dates indicated.
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