-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QJcXSI4lvUwlM7Tig8tl2juiYUSvdlaIgOnvEqEnEMSP7hauaQcl56tKyxdpHoX/ DN2NMG3QG0hP05mLy6cEGg== 0000950124-05-003129.txt : 20050510 0000950124-05-003129.hdr.sgml : 20050510 20050509203828 ACCESSION NUMBER: 0000950124-05-003129 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050510 DATE AS OF CHANGE: 20050509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLACIER BANCORP INC CENTRAL INDEX KEY: 0000868671 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 810519541 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18911 FILM NUMBER: 05813666 BUSINESS ADDRESS: STREET 1: 49 COMMONS LOOP STREET 2: . CITY: KALISPELL STATE: MT ZIP: 59901 BUSINESS PHONE: 4067564200 MAIL ADDRESS: STREET 1: 49 COMMONS LOOP STREET 2: . CITY: KALISPELL STATE: MT ZIP: 59901 10-Q 1 v08749e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2005 [ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _________________ COMMISSION FILE 0-18911 GLACIER BANCORP, INC. --------------------- (Exact name of registrant as specified in its charter) MONTANA 81-0519541 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 49 Commons Loop, Kalispell, Montana 59901 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (406) 756-4200 - -------------------------------------------------------------------------------- Not Applicable - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] The number of shares of Registrant's common stock outstanding on April 29, 2005 was 31,223,730. No preferred shares are issued or outstanding. GLACIER BANCORP, INC. QUARTERLY REPORT ON FORM 10-Q INDEX
Page # ------ PART I. FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Statements of Financial Condition - March 31, 2005, December 31, 2004 and March 31, 2004 (unaudited)...... 3 Condensed Consolidated Statements of Operations - Three months ended March 31, 2005 and 2004 (unaudited)................ 4 Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income - Year ended December 31, 2004 and three months ended March 31, 2005 (unaudited)............................... 5 Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2005 and 2004 (unaudited)................ 6 Notes to Condensed Consolidated Financial Statements (unaudited)...... 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 19 Item 3 - Quantitative and Qualitative Disclosure about Market Risk............. 25 Item 4 - Controls and Procedures............................................... 25 PART II. OTHER INFORMATION....................................................... 25 Item 1 - Legal Proceedings..................................................... 25 Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds........... 25 Item 3 - Defaults Upon Senior Securities....................................... 25 Item 4 - Submission of Matters to a Vote of Security Holders.................. 26 Item 5 - Other Information..................................................... 26 Item 6 - Exhibits.............................................................. 26 Signatures..................................................................... 26
GLACIER BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
- -------------------------------------------------------------------------- ------------ ------------ ------------ (UNAUDITED - dollars in thousands, except per share data) MARCH 31, December 31, March 31, - -------------------------------------------------------------------------- 2005 2004 2004 ------------ ------------ ------------ ASSETS: Cash on hand and in banks ............................................ $ 82,600 79,300 53,213 Fed funds sold ....................................................... 14,751 -- -- Interest bearing cash deposits ....................................... 8,208 13,007 27,432 ------------ ------------ ------------ Cash and cash equivalents ......................................... 105,559 92,307 80,645 Investment securities, available-for-sale ............................ 1,148,153 1,085,626 1,157,527 Loans receivable, net ................................................ 1,860,295 1,687,329 1,449,535 Loans held for sale .................................................. 19,637 14,476 16,609 Premises and equipment, net .......................................... 63,720 55,732 52,936 Real estate and other assets owned, net .............................. 2,003 2,016 516 Accrued interest receivable .......................................... 16,151 15,637 14,187 Core deposit intangible, net ......................................... 7,102 4,939 5,571 Goodwill ............................................................. 60,189 37,376 36,951 Other assets ......................................................... 23,631 15,299 14,564 ------------ ------------ ------------ $ 3,306,440 3,010,737 2,829,041 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Non-interest bearing deposits ........................................ $ 528,038 460,059 366,277 Interest bearing deposits ............................................ 1,448,643 1,269,649 1,225,169 Advances from Federal Home Loan Bank of Seattle ...................... 858,961 818,933 801,679 Securities sold under agreements to repurchase ....................... 79,148 76,158 63,453 Other borrowed funds ................................................. 5,834 5,057 5,122 Accrued interest payable ............................................. 6,048 4,864 5,080 Deferred tax liability ............................................... 4,782 8,392 10,983 Subordinated debentures .............................................. 80,000 80,000 80,000 Other liabilities .................................................... 21,537 17,441 18,377 ------------ ------------ ------------ Total liabilities ................................................. 3,032,991 2,740,553 2,576,140 ------------ ------------ ------------ Preferred shares, 1,000,000 shares authorized. None outstanding ...... -- -- -- Common stock, $.01 par value per share. 62,500,000 shares authorized 309 307 306 Paid-in capital ...................................................... 229,496 227,552 225,536 Retained earnings - substantially restricted ......................... 43,467 36,391 14,888 Accumulated other comprehensive income ............................... 177 5,934 12,171 ------------ ------------ ------------ Total stockholders' equity ........................................ 273,449 270,184 252,901 ------------ ------------ ------------ $ 3,306,440 3,010,737 2,829,041 ============ ============ ============ Number of shares outstanding ......................................... 30,853,644 30,686,763 30,563,383 Book value per share ................................................. $ 8.86 8.80 8.27
See accompanying notes to condensed consolidated financial statements. 3 GLACIER BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------- ---------------------------- (UNAUDITED - dollars in thousands, except per share data) THREE MONTHS ENDED MARCH 31, - -------------------------------------------------------------- ---------------------------- 2005 2004 ------------ ------------ INTEREST INCOME: Real estate loans ........................................ $ 6,615 5,281 Commercial loans ......................................... 16,524 13,223 Consumer and other loans ................................. 5,730 4,836 Investment securities and other .......................... 11,638 12,125 ------------ ------------ Total interest income .............................. 40,507 35,465 ------------ ------------ INTEREST EXPENSE: Deposits ................................................. 4,069 3,483 Federal Home Loan Bank of Seattle advances ............... 5,243 4,445 Securities sold under agreements to repurchase ........... 398 157 Subordinated debentures .................................. 1,555 962 Other borrowed funds ..................................... 786 29 ------------ ------------ Total interest expense ............................. 12,051 9,076 ------------ ------------ NET INTEREST INCOME .......................................... 28,456 26,389 Provision for loan losses ................................ 1,490 830 ------------ ------------ Net interest income after provision for loan losses.. 26,966 25,559 ------------ ------------ NON-INTEREST INCOME: Service charges and other fees ........................... 5,204 4,073 Miscellaneous loan fees and charges ...................... 1,278 1,019 Gains on sale of loans ................................... 2,092 1,771 Loss on sale of investments .............................. (30) -- Other income ............................................. 564 548 ------------ ------------ Total non-interest income ........................... 9,108 7,411 ------------ ------------ NON-INTEREST EXPENSE: Compensation, employee benefits and related expenses .............................. 10,944 9,806 Occupancy and equipment expense .......................... 2,855 2,631 Outsourced data processing expense ....................... 232 413 Core deposit intangibles amortization .................... 283 294 Other expenses ........................................... 4,760 4,282 ------------ ------------ Total non-interest expense .......................... 19,074 17,426 ------------ ------------ EARNINGS BEFORE INCOME TAXES ................................. 17,000 15,544 Federal and state income tax expense ..................... 5,480 4,934 ------------ ------------ NET EARNINGS ................................................. $ 11,520 10,610 ============ ============ Basic earnings per share ..................................... $ 0.37 0.35 Diluted earnings per share ................................... $ 0.37 0.34 Dividends declared per share ................................. $ 0.14 0.13 Return on average assets (annualized) ........................ 1.50% 1.55% Return on average equity (annualized) ........................ 17.06% 17.28% Average outstanding shares - basic ........................... 30,764,368 30,433,091 Average outstanding shares - diluted ......................... 31,305,788 30,960,836
See accompanying notes to condensed consolidated financial statements. 4 GLACIER BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME Year ended December 31, 2004 and Three months ended March 31, 2005
Retained Accumulated Common Stock earnings other comp- - --------------------------------------------------------- --------------------------- Paid-in substantially rehensive (UNAUDITED - dollars in thousands, except per share data) Shares Amount capital restricted income - --------------------------------------------------------- ------------ ------------ ------------ ------------- ------------ Balance at December 31, 2003 ........................... 30,254,173 $ 303 222,527 8,393 6,616 Comprehensive income: Net earnings ....................................... -- -- -- 44,616 -- Unrealized loss on securities, net of reclassification adjustment ...................... -- -- -- -- (682) Total comprehensive income .............................. Cash dividends declared ($.54 per share) ................ -- -- -- (16,618) -- Stock options exercised ................................. 521,653 5 5,434 -- -- Repurchase and retirement of stock ...................... (89,063) (1) (1,804) -- -- Acquisition of fractional shares ........................ -- -- (9) -- -- Tax benefit from stock related compensation ............. -- -- 1,404 -- -- ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2004 ............................ 30,686,763 $ 307 227,552 36,391 5,934 Comprehensive income: Net earnings ....................................... -- -- -- 11,520 -- Unrealized loss on securities, net of reclassification adjustment and taxes............. -- -- -- -- (5,757) Total comprehensive income............................... Cash dividends declared ($.14 per share) ................ -- -- -- (4,444) -- Stock options exercised ................................. 166,881 2 1,944 -- -- ------------ ------------ ------------ ------------ ------------ Balance at March 31, 2005 ............................... 30,853,644 $ 309 229,496 43,467 177 ============ ============ ============ ============ ============
Total stock- - --------------------------------------------------------- holders' (UNAUDITED - dollars in thousands, except per share data) equity - --------------------------------------------------------- ------------ Balance at December 31, 2003 ........................... 237,839 Comprehensive income: Net earnings ....................................... 44,616 Unrealized loss on securities, net of reclassification adjustment ...................... (682) ------------ Total comprehensive income .............................. 43,934 ------------ Cash dividends declared ($.54 per share) ................ (16,618) Stock options exercised ................................. 5,439 Repurchase and retirement of stock ...................... (1,805) Acquisition of fractional shares ........................ (9) Tax benefit from stock related compensation ............. 1,404 ------------ Balance at December 31, 2004 ............................ 270,184 Comprehensive income: Net earnings ....................................... 11,520 Unrealized loss on securities, net of reclassification adjustment and taxes............. (5,757) ------------ Total comprehensive income............................... 5,763 ------------ Cash dividends declared ($.14 per share) ................ (4,444) Stock options exercised ................................. 1,946 ------------ Balance at March 31, 2005 ............................... 273,449 ============
See accompanying notes to condensed consolidated financial statements. 5 GLACIER BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------- ---------------------------- (UNAUDITED - dollars in thousands) THREE MONTHS ENDED MARCH 31, - ----------------------------------------------------------------------- ---------------------------- 2005 2004 ------------- ------------- OPERATING ACTIVITIES : Net cash provided by operating activities ....................... $ 9,034 20,178 ------------ ------------ INVESTING ACTIVITIES: Proceeds from sales, maturities and prepayments of investments available-for-sale .............................. 153,703 57,513 Purchases of investments available-for-sale ..................... (103,175) (110,191) Principal collected on installment and commercial loans ......... 142,784 138,037 Installment and commercial loans originated or acquired ......... (212,076) (175,943) Principal collections on mortgage loans ......................... 80,378 57,666 Mortgage loans originated or acquired ........................... (97,864) (56,735) Net purchase of FHLB and FRB stock .............................. (14) (886) Acquisition of First National Bank - West ....................... (18,139) -- Net addition of premises and equipment .......................... (4,899) (826) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES ...................... (59,302) (91,365) ------------ ------------ FINANCING ACTIVITIES: Net increase (decrease) in deposits ............................. 22,223 (6,179) Net increase in FHLB advances and other borrowed funds .......... 40,805 21,489 Net increase in securities sold under repurchase agreements ..... 2,990 6,485 Proceeds from issuance of subordinated debentures ............... -- 45,000 Cash dividends paid ............................................. (4,444) (4,115) Proceeds from exercise of stock options and other stock issued .. 1,946 3,012 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES ................... 63,520 65,692 ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........ 13,252 (5,495) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ................ 92,307 86,140 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 105,559 80,645 ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for: Interest .............. $ 11,098 8,349 Income taxes .......... $ -- 100
See accompanying notes to condensed consolidated financial statements. 6 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) Basis of Presentation In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of Glacier Bancorp Inc.'s (the "Company") financial condition as of March 31, 2005, December 31, 2004, and March 31, 2004, stockholders' equity for the three months ended March 31, 2005 and the year ended December 31, 2004, the results of operations for the three months ended March 31, 2005 and 2004, and cash flows for the three months ended March 31, 2005 and 2004. The accompanying condensed consolidated financial statements do not include all of the information and footnotes required by the accounting principals generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results anticipated for the year ending December 31, 2005. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation. 2) Organizational Structure The Company, headquartered in Kalispell, Montana, is a Montana corporation incorporated in 2004 as a successor corporation to the Delaware corporation incorporated in 1990. The Company is the parent company for eight wholly owned banking subsidiaries: Glacier Bank ("Glacier"), First Security Bank of Missoula ("First Security"), Western Security Bank ("Western"), Big Sky Western Bank ("Big Sky"), Valley Bank of Helena ("Valley"), and Glacier Bank of Whitefish ("Whitefish"), all located in Montana, Mountain West Bank ("Mountain West") which is located in Idaho, Utah, and Washington, and First National Bank - West ("First National") located in Wyoming. In addition, the Company formed two subsidiaries, Glacier Capital Trust I ("Glacier Trust I"), and Glacier Capital Trust II ("Glacier Trust II"), for the purpose of issuing trust preferred securities. The Company does not have any off-balance sheet entities. The following abbreviated organizational chart illustrates the various relationships:
------------------------------ Glacier Bancorp, Inc. (Parent Holding Company) ------------------------------ | - ----------------------------------------------------------------------------------------------------------------------- Glacier Bank Mountain West Bank | First Security Bank Western Security Bank (Commercial bank) (Commercial bank) | of Missoula (Commercial bank) | (Commercial bank) - -------------------------- ----------------- | --------------------- --------------------- | - ----------------------------------------------------------------------------------------------------------------------- First National Bank - West Big Sky | Valley Bank Glacier Bank (Commercial bank) Western Bank | of Helena of Whitefish (Commercial bank) | (Commercial bank) (Commercial bank) - --------------------------- ----------------- | --------------------- --------------------- | ----------------------------------------------------------- Glacier Capital Glacier Capital Trust I Trust II ------------------------ ------------------------
7 3) Ratios Returns on average assets and average equity were calculated based on daily averages. 4) Dividends Declared On April 26, 2005, the Board of Directors declared a five-for-four stock split payable May 26, 2005 to shareholders of record on May 10, 2005, and all share and per share amounts have been restated to reflect the effects of the stock split. On March 11, 2005, the Board of Directors declared a $.14 per share quarterly cash dividend payable on April 21, 2005 to stockholders of record on April 12, 2005. 5) Computation of Earnings Per Share Basic earnings per common share is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period presented. Diluted earnings per share is computed by including the net increase in shares if dilutive outstanding stock options were exercised, using the treasury stock method. The following schedule contains the data used in the calculation of basic and diluted earnings per share:
Three Three months ended months ended March 31, 2005 March 31, 2004 -------------- -------------- Net earnings available to common stockholders ...................... $ 11,520,000 10,610,000 Average outstanding shares - basic ... 30,764,368 30,433,091 Add: Dilutive stock options .......... 541,420 527,745 ------------ ------------ Average outstanding shares - diluted.. 31,305,788 30,960,836 ============ ============ Basic earnings per share ............. $ 0.37 0.35 ============ ============ Diluted earnings per share ........... $ 0.37 0.34 ============ ============
There were approximately 591,250 and 0 shares excluded from the diluted share calculation as of March 31, 2005, and 2004, respectively, due to the option exercise price exceeding the market price. 8 6) Stock Based Compensation The exercise price of all options granted has been equal to the fair market value of the underlying stock at the date of grant and, accordingly, no compensation cost has been recognized for stock options in the financial statements. Had the company determined compensation cost based on the fair value of the option itself at the grant date for its stock options and earnings per share under FASB Statement 123, Accounting for Stock-Based Compensation, the Company's net income would have been reduced to the pro forma amounts indicated below:
Three months ended March 31, ---------------------------- 2005 2004 ---------- ---------- Net earnings (in thousands): As reported $ 11,520 10,610 Compensation cost (207) (123) -------- -------- Pro forma 11,313 10,487 ======== ======== Basic earnings per share: As reported 0.37 0.35 Compensation cost -- (0.01) -------- -------- Pro forma 0.37 0.34 ======== ======== Diluted earnings per share: As reported 0.37 0.34 Compensation cost (0.01) -- -------- -------- Pro forma 0.36 0.34 ======== ========
In December, 2004, FASB Statement 123R was issued, which supersedes and replaces FASB Statement 123. FASB 123R requires recognition of compensation cost related to share-based payment plans to be recognized in the financial statements based on the fair value of the equity or liability instruments issued. The Company will adopt the statement at the earliest required adoption date. 9 7) Investments A comparison of the amortized cost and estimated fair value of the Company's investment securities, available for sale, is as follows: INVESTMENTS AS OF MARCH 31, 2005
- --------------------------------------------- (Dollars in thousands) Estimated - --------------------------------------------- Weighted Amortized Gross Unrealized Fair U.S. GOVERNMENT AND FEDERAL AGENCIES: Yield Cost Gains Losses Value ---------- ---------- ---------- ---------- ---------- maturing within one year .................. 2.51% 7,028 -- (2) 7,026 maturing five years through ten years ..... 5.03% 362 5 -- 367 maturing after ten years .................. 3.33% 449 2 (1) 450 ---------- ---------- ---------- ---------- 2.67% 7,839 7 (3) 7,843 ---------- ---------- ---------- ---------- STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES: maturing within one year .................. 4.22% 1,163 5 -- 1,168 maturing one year through five years ...... 4.61% 2,890 50 (6) 2,934 maturing five years through ten years ..... 4.66% 8,047 328 (11) 8,364 maturing after ten years .................. 5.09% 290,963 10,245 (1,261) 299,947 ---------- ---------- ---------- ---------- 5.07% 303,063 10,628 (1,278) 312,413 ---------- ---------- ---------- ---------- MORTGAGE-BACKED SECURITIES .................. 4.69% 85,645 679 (1,165) 85,159 REAL ESTATE MORTGAGE INVESTMENT CONDUITS .... 4.14% 693,624 598 (9,023) 685,199 FHLMC AND FNMA STOCK ........................ 5.74% 7,593 -- (152) 7,441 FHLB AND FRB STOCK, AT COST ................. 2.15% 50,098 -- -- 50,098 ---------- ---------- ---------- ---------- TOTAL INVESTMENTS ...................... 4.34% $1,147,862 11,912 (11,621) 1,148,153 ========== ========== ========== ==========
INVESTMENTS AS OF DECEMBER 31, 2004
- --------------------------------------------- Estimated (Dollars in thousands) Weighted Amortized Gross Unrealized Fair - --------------------------------------------- Yield Cost Gains Losses Value ---------- ---------- ---------- ---------- ---------- maturing within one year .................. 1.29% $ 251 -- -- 251 maturing five years through ten years ..... 4.62% 350 6 -- 356 maturing after ten years .................. 3.08% 481 2 (1) 482 ---------- ---------- ---------- ---------- 3.16% 1,082 8 (1) 1,089 ---------- ---------- ---------- ---------- STATE AND LOCAL GOVERNMENTS AND OTHER ISSUES: maturing within one year .................. 5.30% 518 8 -- 526 maturing one year through five years ...... 5.37% 1,205 64 -- 1,269 maturing five years through ten years ..... 4.69% 6,514 324 -- 6,838 maturing after ten years .................. 5.13% 292,102 12,971 (1,098) 303,975 ---------- ---------- ---------- ---------- 5.12% 300,339 13,367 (1,098) 312,608 ---------- ---------- ---------- ---------- MORTGAGE-BACKED SECURITIES .................. 4.99% 56,629 919 (503) 57,045 REAL ESTATE MORTGAGE INVESTMENT CONDUITS .... 3.77% 660,389 1,624 (4,469) 657,544 FHLMC AND FNMA STOCK ........................ 5.74% 7,593 -- (56) 7,537 FHLB AND FRB STOCK, AT COST ................. 3.22% 49,803 -- -- 49,803 ---------- ---------- ---------- ---------- TOTAL INVESTMENTS ...................... 4.20% $1,075,835 15,918 (6,127) 1,085,626 ========== ========== ========== ==========
10 Interest income includes tax-exempt interest for the three months ended March 31, 2005 and 2004 of $3,467,000 and $3,465,000, respectively. Gross proceeds from sales of investment securities for the three months ended March 31, 2005 and 2004 were $98,929,000 and $0 respectively, resulting in gross gains of approximately $421,000 and $0 and gross losses of approximately $451,000 and $0, respectively. The cost of any investment sold is determined by specific identification. 8) Loans The following table summarizes the Company's loan portfolio:
TYPE OF LOAN At At At (Dollars in Thousands) 3/31/2005 12/31/2004 3/31/2004 ---------------------------- ---------------------------- ---------------------------- Amount Percent Amount Percent Amount Percent ------------- ------------- ------------- ------------- ------------- ------------- Real Estate Loans: Residential first mortgage loans $ 417,906 22.2% $ 382,750 22.5% $ 303,918 20.7% Loans held for sale ............ 19,637 1.1% 14,476 0.9% 16,609 1.1% ------------ ------------ ------------ ------------ ------------ ------------ Total ...................... 437,543 23.3% 397,226 23.4% 320,527 21.8% Commercial Loans: Real estate .................... 560,645 29.8% 526,455 30.9% 497,059 33.9% Other commercial loans ......... 530,588 28.2% 466,582 27.4% 378,133 25.8% ------------ ------------ ------------ ------------ ------------ ------------ Total ...................... 1,091,233 58.0% 993,037 58.3% 875,192 59.7% Consumer and Other Loans: Consumer loans ................. 129,200 6.9% 95,663 5.6% 94,310 6.4% Home equity loans .............. 258,797 13.8% 248,684 14.6% 206,608 14.1% ------------ ------------ ------------ ------------ ------------ ------------ Total ...................... 387,997 20.7% 344,347 20.2% 300,918 20.5% Net deferred loan fees, premiums and discounts ............. (7,040) -0.4% (6,313) -0.3% (5,924) -0.3% Allowance for Losses ........... (29,801) -1.6% (26,492) -1.6% (24,569) -1.7% ------------ ------------ ------------ ------------ ------------ ------------ Net Loans ........................... $ 1,879,932 100.0% $ 1,701,805 100.0% $ 1,466,144 100.0% ============ ============ ============ ============ ============ ============
11 The following table sets forth information regarding the Company's non-performing assets at the dates indicated:
NONPERFORMING ASSETS (Dollars in Thousands) At At At 3/31/2005 12/31/2004 3/31/2004 ------------ ------------ ------------ Non-accrual loans: Real estate loans .................... $ 25 847 1,191 Commercial loans ..................... 5,679 4,792 8,287 Consumer and other loans ............. 342 311 409 ------------ ------------ ------------ Total .............................. $ 6,046 5,950 9,887 Accruing Loans 90 days or more overdue: Real estate loans .................... 110 179 249 Commercial loans ..................... 792 1,067 701 Consumer and other loans ............. 215 396 288 ------------ ------------ ------------ Total .............................. $ 1,117 1,642 1,238 Real estate and other assets owned, net 2,003 2,016 516 ------------ ------------ ------------ Total non-performing assets .............. $ 9,166 9,608 11,641 ============ ============ ============ As a percentage of total assets ........ 0.27% 0.32% 0.42% Interest Income (1) ...................... $ 97 372 154
- ---------- (1) This is the amount of interest that would have been recorded on loans accounted for on a non-accrual basis for the three months ended March 31, 2005 and 2004 and the year ended December 31, 2004, if such loans had been current for the entire period. The following table illustrates the loan loss experience:
ALLOWANCE FOR LOAN LOSS Three months ended Year ended Three months ended March 31, December 31, March 31, (Dollars in Thousands) .............. 2005 2004 2004 ------------ ------------ ------------ Balance at beginning of period ......... $ 26,492 23,990 23,990 Charge offs: Real estate loans .................... (31) (419) (137) Commercial loans ..................... (255) (1,150) (140) Consumer and other loans ............. (115) (776) (166) ------------ ------------ ------------ Total charge offs ................... $ (401) (2,345) (443) ------------ ------------ ------------ Recoveries: Real estate loans .................... 56 171 42 Commercial loans ..................... 60 120 24 Consumer and other loans ............. 72 361 126 ------------ ------------ ------------ Total recoveries .................... $ 188 652 192 ------------ ------------ ------------ Chargeoffs, net of recoveries ......... (213) (1,693) (251) Acquisition (1) ....................... 2,032 -- -- Provision ............................. 1,490 4,195 830 ------------ ------------ ------------ Balance at end of period ............... $ 29,801 26,492 24,569 ============ ============ ============ Ratio of net charge offs to average loans outstanding during the period.. 0.01% 0.10% 0.02%
- ---------- (1) Acquisition of First National Bank-West 12 The following table summarizes the allocation of the allowance for loan losses:
March 31, 2005 December 31, 2004 March 31, 2004 -------------------------- -------------------------- -------------------------- Percent Percent Percent of loans in of loans in of loans in (Dollars in thousands) Allowance category Allowance category Allowance category - -------------------------- ------------ ------------ ------------ ------------ ------------ ------------ Real estate loans ........ $ 2,987 22.8% 2,693 22.9% 2,154 21.2% Commercial real estate ... 9,699 29.3% 9,222 30.3% 7,650 33.3% Other commercial ......... 11,513 27.7% 9,836 26.9% 10,339 25.3% Consumer and other loans.. 5,602 20.2% 4,741 19.9% 4,426 20.2% ------------ ------------ ------------ ------------ ------------ ------------ Totals ................ $ 29,801 100.0% 26,492 100.0% 24,569 100.0% ============ ============ ============ ============ ============ ============
The Company acquired the following loans during 2005 for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.
------------------------------- March 31, (Dollars in thousands) 2005 ------------------------------- ------------ Contractually required payments receivable at acquisition: Commercial Loans ........ $ 1,842 Cash flows expected to be collected at acquisition ... 1,668 Basis in acquired loans at acquisition ................ 1,200
13 9) Intangible Assets The following table sets forth information regarding the Company's core deposit intangibles and mortgage servicing rights as of March 31, 2005:
- ----------------------------------------------- Core Deposit Mortgage (Dollars in thousands) Intangible Servicing Rights (1) Total - ----------------------------------------------- ------------- -------------------- ------------ Gross carrying value ...................... $ 12,716 Accumulated Amortization .................. (5,614) ------------ Net carrying value ........................ $ 7,102 1,210 8,312 ============ WEIGHTED-AVERAGE AMORTIZATION PERIOD (Period in years) ......................... 10.0 9.6 9.9 AGGREGATE AMORTIZATION EXPENSE For the three months ended March 31, 2005.. $ 283 67 350 ESTIMATED AMORTIZATION EXPENSE For the year ended December 31, 2005 ...... $ 1,287 129 1,416 For the year ended December 31, 2006 ...... 1,248 82 1,330 For the year ended December 31, 2007 ...... 1,183 79 1,262 For the year ended December 31, 2008 ...... 1,126 77 1,203 For the year ended December 31, 2009 ...... 1,030 74 1,104
- ---------- (1) The mortgage servicing rights are included in other assets and the gross carrying value and accumulated amortization are not readily available. On February 28, 2005, the Company acquired First National Bank-West in Evanston, Wyoming, which resulted in additional core deposit intangible of $2,446,000. The acquisition also resulted in additional goodwill of $22,813,000. 10) Deposits The following table illustrates the amounts outstanding for deposits greater than $100,000 at March 31, 2005, according to the time remaining to maturity:
--------------------------- Certificates Non-Maturity (Dollars in thousands) of Deposit Deposits Totals --------------------------- ------------ ------------ ------------ Within three months ....... $ 57,295 726,690 783,985 Three to six months ....... 33,967 -- 33,967 Seven to twelve months .... 21,729 -- 21,729 Over twelve months ........ 31,352 -- 31,352 ------------ ------------ ------------ Totals ................. $ 144,343 726,690 871,033 ============ ============ ============
14 11) Advances and Other Borrowings The following chart illustrates the average balances and the maximum outstanding month-end balances for Federal Home Loan Bank of Seattle (FHLB) advances and repurchase agreements:
As of and As of and As of and for the three for the for the three (Dollars in thousands) months ended year ended months ended March 31, 2005 December 31, 2004 March 31, 2004 -------------- ----------------- -------------- FHLB Advances: Amount outstanding at end of period.... $858,961 818,933 801,679 Average balance ....................... $739,928 791,245 815,825 Maximum outstanding at any month-end... $858,961 862,136 830,855 Weighted average interest rate ........ 2.87% 2.34% 2.19% Repurchase Agreements: Amount outstanding at end of period.... $ 79,148 76,158 63,453 Average balance ....................... $ 80,970 69,480 63,271 Maximum outstanding at any month-end... $ 79,148 80,265 67,558 Weighted average interest rate ........ 2.06% 1.25% 1.00%
12) Stockholders' Equity The Federal Reserve Board has adopted capital adequacy guidelines that are used to assess the adequacy of capital in supervising a bank holding company. The following table illustrates the Federal Reserve Board's capital adequacy guidelines and the Company's compliance with those guidelines as of March 31, 2005.
CONSOLIDATED Tier 1 (Core) Tier 2 (Total) Leverage (Dollars in thousands) Capital Capital Capital ----------- ----------- ----------- GAAP Capital ............................. $ 273,449 273,449 273,449 Less: Goodwill and intangibles .......... (67,291) (67,291) (67,291) Accumulated other comprehensive Unrealized gain on AFS securities (177) (177) (177) Other adjustments .................... (151) (151) (151) Plus: Allowance for loan losses ......... -- 27,762 -- Subordinated debentures .............. 80,000 80,000 80,000 ----------- ----------- ----------- Regulatory capital computed .............. $ 285,830 313,592 285,830 =========== =========== =========== Risk weighted assets ..................... $ 2,220,982 2,220,982 =========== =========== Total average assets ..................... $ 3,227,116 =========== Capital as % of defined assets ........... 12.87% 14.12% 8.86% Regulatory "well capitalized" requirement 6.00% 10.00% 5.00% ----------- ----------- ----------- Excess over "well capitalized" requirement 6.87% 4.12% 3.86% =========== =========== ===========
15 13) Comprehensive Earnings The Company's only component of other comprehensive earnings is the unrealized gains and losses on available-for-sale securities.
For the three months ended March 31, ---------------------- Dollars in thousands 2005 2004 -------- -------- Net earnings ........................................... $ 11,520 10,610 Unrealized holding (loss) gain arising during the period (9,530) 9,169 Tax benefit (expense) ................................. 3,755 (3,614) -------- -------- Net after tax .............................. (5,775) 5,555 Reclassification adjustment for losses included in net income .............................. 30 -- Tax benefit ............................................ (12) -- -------- -------- Net after tax .............................. 18 -- Net unrealized (loss) gain on securities ... (5,757) 5,555 -------- -------- Total comprehensive earnings ........... $ 5,763 16,165 ======== ========
14) Segment Information The Company evaluates segment performance internally based on individual bank charters, and thus the operating segments are so defined. The following schedule provides selected financial data for the Company's operating segments. Centrally provided services to the Banks are allocated based on estimated usage of those services. The operating segment identified as "Other" includes the Parent, non-bank units, and eliminations of transactions between segments.
Three months ended and as of March 31, 2005 --------------------------------------------------------- Mountain First First (Dollars in thousands) Glacier West Security Western National --------- --------- --------- --------- --------- Revenues from external customers $ 10,335 12,168 9,075 6,371 1,144 Intersegment revenues 145 -- 5 -- -- Expenses (7,741) (9,572) (6,413) (4,871) (883) Intercompany eliminations -- -- -- -- -- --------- --------- --------- --------- --------- Net income $ 2,739 2,596 2,667 1,500 261 ========= ========= ========= ========= ========= Total Assets $ 685,498 659,006 617,048 443,633 272,335 ========= ========= ========= ========= =========
Total Big Sky Valley Whitefish Other Consolidated --------- --------- --------- --------- ------------ Revenues from external customers 4,089 3,779 2,953 (299) 49,615 Intersegment revenues -- 34 -- 14,842 15,026 Expenses (3,004) (2,844) (1,999) (768) (38,095) Intercompany eliminations -- -- -- (15,026) (15,026) --------- --------- --------- --------- ---------- Net income 1,085 969 954 (1,251) 11,520 ========= ========= ========= ========= ========== Total Assets 257,217 241,496 162,727 (32,520) 3,306,440 ========= ========= ========= ========= ==========
16
Three months ended and as of March 31, 2004 --------------------------------------------------------- Mountain First Big (Dollars in thousands) Glacier West Security Western Sky --------- --------- --------- --------- --------- Revenues from external customers $ 9,335 9,224 8,820 6,344 3,412 Intersegment revenues 68 -- 4 2 -- Expenses (6,719) (7,605) (5,997) (4,618) (2,518) Intercompany eliminations -- -- -- -- -- --------- --------- --------- --------- --------- Net income $ 2,684 1,619 2,827 1,728 894 ========= ========= ========= ========= ========= Total Assets $ 603,740 558,012 598,702 449,044 214,116 ========= ========= ========= ========= =========
Total Valley Whitefish Other Consolidated --------- --------- --------- ------------ Revenues from external customers 3,387 2,261 93 42,876 Intersegment revenues 36 -- 13,137 13,247 Expenses (2,525) (1,602) (682) (32,266) Intercompany eliminations -- -- (13,247) (13,247) --------- --------- --------- ------------ Net income 898 659 (699) 10,610 ========= ========= ========= ============ Total Assets 220,461 155,173 29,793 2,829,041 ========= ========= ========= ============
15) Rate/Volume Analysis Net interest income can be evaluated from the perspective of relative dollars of change in each period.
Three Months Ended March 31, (Dollars in Thousands) 2005 vs. 2004 Increase (Decrease) due to: --------------------------------- INTEREST INCOME Volume Rate Net ------- ------- ------- Real Estate Loans .......... $ 1,665 (331) 1,334 Commercial Loans ........... 2,661 640 3,301 Consumer and Other Loans ... 1,027 (133) 894 Investment Securities ...... (62) (425) (487) ------- ------- ------- Total Interest Income 5,291 (249) 5,042 INTEREST EXPENSE NOW Accounts ............... 17 20 37 Savings Accounts ........... 18 29 47 Money Market Accounts ...... 93 361 454 Certificates of Deposit .... 15 33 48 FHLB Advances .............. (413) 1,211 798 Other Borrowings and Repurchase Agreements .... 1,887 (296) 1,591 ------- ------- ------- Total Interest Expense 1,617 1,358 2,975 ------- ------- ------- NET INTEREST INCOME ........ $ 3,674 (1,607) 2,067 ======= ======= =======
Interest income and interest expense, which are the components of net interest income, are shown in the following table on the basis of the amount of any increases (or decreases) attributable to changes in the dollar levels of the Company's interest-earning assets and interest-bearing liabilities ("Volume") and the yields earned and rates paid on such assets and liabilities ("Rate"). The change in interest income and interest expense attributable to changes in both volume and rates has been allocated proportionately to the change due to volume and the change due to rate. 17 16) Average Balance Sheet The following schedule provides (i) the total dollar amount of interest and dividend income of the Company for earning assets and the resultant average yield; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rate; (iii) net interest and dividend income; (iv) interest rate spread; and (v) net interest margin. Non-accrual loans are included in the average balance of the loans.
AVERAGE BALANCE SHEET For the Three months ended 3-31-05 For the Three months ended 3-31-04 ---------------------------------- ---------------------------------- (Dollars in Thousands) Interest Average Interest Average Average and Yield/ Average and Yield/ ASSETS Balance Dividends Rate Balance Dividends Rate ----------- --------- ------- ----------- --------- ------- Real Estate Loans $ 410,478 6,615 6.45% $ 312,096 5,281 6.77% Commercial Loans 1,032,198 16,524 6.49% 859,587 13,223 6.19% Consumer and Other Loans 359,451 5,730 6.46% 296,506 4,836 6.56% ----------- --------- ----------- --------- Total Loans 1,802,127 28,869 6.50% 1,468,189 23,340 6.39% Tax -Exempt Investment Securities (1) 282,164 3,467 4.92% 281,218 3,465 4.93% Investment Securities 827,503 8,171 3.95% 834,147 8,660 4.15% ----------- --------- ----------- --------- Total Earning Assets 2,911,794 40,507 5.56% 2,583,554 35,465 5.49% --------- --------- Non-Earning Assets 201,859 178,411 ----------- ----------- TOTAL ASSETS $ 3,113,653 $ 2,761,965 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY NOW Accounts $ 283,159 150 0.21% $ 246,298 113 0.18% Savings Accounts 178,570 155 0.35% 152,943 108 0.28% Money Market Accounts 431,992 1,310 1.23% 389,865 857 0.88% Certificates of Deposit 435,033 2,454 2.29% 432,271 2,405 2.24% FHLB Advances 739,928 5,243 2.87% 815,825 4,445 2.19% Repurchase Agreements and Other Borrowed Funds 283,010 2,739 3.92% 106,994 1,148 4.31% ----------- --------- ----------- --------- Total Interest Bearing Liabilities 2,351,692 12,051 2.08% 2,144,196 9,076 1.70% --------- --------- Non-interest Bearing Deposits 459,311 343,350 Other Liabilities 28,732 27,464 ----------- ----------- Total Liabilities 2,839,735 2,515,010 ----------- ----------- Common Stock 308 305 Paid-In Capital 227,932 223,680 Retained Earnings 39,948 13,567 Accumulated Other Comprehensive Earnings 5,730 9,403 ----------- ----------- Total Stockholders' Equity 273,918 246,955 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,113,653 $ 2,761,965 =========== =========== Net Interest Income $ 28,456 $ 26,389 ========= ========= Net Interest Spread 3.48% 3.79% Net Interest Margin on average earning assets 3.96% 4.11% Return on Average Assets 1.50% 1.55% Return on Average Equity 17.06% 17.28%
(1) Excludes tax effect on non-taxable investment security income 18 17) Acquisitions On February, 28, 2005 the Company completed the acquisition of First National Bank - West, Evanston, Wyoming, ("FNB") with total assets of $241 million, loans of $90 million, and deposits of $225 million. This bank has seven locations in western Wyoming and became the eighth subsidiary bank of the Company and the first to be located in the state of Wyoming. A portion of the purchase price was allocated to core deposit intangible of $2,446,000 and goodwill of $22,813,000. The acquisition of Citizens Bank Holding Company and its subsidiary bank Citizens Community Bank, Pocatello, Idaho, with assets of approximately $115 million, was completed after the close of business on March 31, 2005. This bank operates from three banking offices in Pocatello and Idaho Falls, and a loan production office in Rexburg, Idaho. As of April 1, 2005 this bank became the ninth subsidiary bank of the Company. Mountain West Bank of Coeur d'Alene entered into a purchase and sale agreement with Zions First National Bank to acquire the Zions branch in Bonners Ferry, Idaho with total deposits of approximately $23 million. Subject to regulatory approval the transaction is expected to close on May 20, 2005. Acquisitions are accounted for under the purchase method of accounting. Accordingly, the assets and liabilities of acquired branches and banks are recorded by the Company at their respective fair values at the date of the acquisition and the results of operations are included with those of the Company from the date of acquisition forward. The excess of the Company's purchase price over the net fair value of the assets acquired and liabilities assumed, including identifiable intangible assets, is recorded as goodwill. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Recent acquisition On February, 28, 2005 the Company completed the acquisition of First National Bank - West, Evanston, Wyoming, ("FNB"), accordingly, results of operations and financial condition include FNB from that date forward. Financial Condition This section discusses the changes in Statement of Financial Condition items from March 31, 2004 and December 31, 2004, to March 31, 2005.
$ Change $ Change from from March 31, December 31, March 31, December 31, March 31, ASSETS ($ IN THOUSANDS) 2005 2004 2004 2004 2004 - -------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Cash on hand and in banks ........................ $ 82,600 79,300 53,213 3,300 29,387 Investment securities, interest bearing deposits, FHLB stock, and FRB stock, and fed funds ...... 1,171,112 1,098,633 1,184,959 72,479 (13,847) Loans: Real estate ................................... 433,901 393,141 316,227 40,760 117,674 Commercial .................................... 1,087,989 991,081 873,743 96,908 214,246 Consumer ...................................... 387,843 344,075 300,743 43,768 87,100 ----------- ----------- ----------- ----------- ----------- Total loans ................................ 1,909,733 1,728,297 1,490,713 181,436 419,020 Allowance for loan losses ..................... (29,801) (26,492) (24,569) (3,309) (5,232) ----------- ----------- ----------- ----------- ----------- Total loans net of allowance for loan losses 1,879,932 1,701,805 1,466,144 178,127 413,788 ----------- ----------- ----------- ----------- ----------- Other assets ..................................... 172,796 130,999 124,725 41,797 48,071 ----------- ----------- ----------- ----------- ----------- Total Assets .................................. $ 3,306,440 3,010,737 2,829,041 295,703 477,399 =========== =========== =========== =========== ===========
19
$ Change excluding FNB acquisition from December 31, ASSETS (UNAUDITED - $ IN THOUSANDS) 2004 ---------------- Cash on hand and in banks ........................ $ (12,997) Investments, interest bearing deposits, FHLB stock, and FRB stock, and Fed Funds ...... (23,596) Loans: Real estate ................................... 24,659 Commercial .................................... 48,353 Consumer ...................................... 18,231 ---------------- Total loans ................................ 91,243 Allowance for loan losses ..................... (1,261) ---------------- Total loans net of allowance for losses .... 89,982 ---------------- Other assets ..................................... 10,853 ---------------- Total Assets .................................. $ 64,242 ================
At March 31, 2005 total assets were $3.306 billion, which is $477 million greater than the March 31, 2004 assets of $2.829 billion, an increase of 17 percent, and $296 million greater than the December 31, 2004 balance, an increase of 10 percent. Asset growth without FNB was $246 million, or 9 percent over the prior year. Total loans have increased $419 million from March 31, 2004, an increase of 28 percent, with the growth occurring in all loan categories. Commercial loans increased $214 million, or 25 percent, real estate loans gained $118 million, or 37 percent, and consumer loans grew by $87 million, or 29 percent. Without the FNB additions, loans increased $329 million from a year ago, a 22 percent increase. Loan volume continues to be very strong with loans increasing $91 million, without the FNB acquisition, during the first quarter, which has historically been a slow quarter for loan growth. During the same quarter last year loans increased by $36 million. Investment securities, including interest bearing deposits in other financial institutions, and federal funds sold, have decreased $14 million from March 31, 2004. Without the addition of FNB, investments would have declined $110 million from March 31, 2004. Cash flow from investment maturities, principal reductions, and proceeds from sale of securities is now being used to fund the significant growth in loans. Without the FNB additions, investments have decreased $24 million since December 31, 2004. The Company typically sells a majority of long-term mortgage loans originated, retaining servicing only on loans sold to certain lenders. The sale of loans in the secondary mortgage market reduces the Company's risk of holding long-term, fixed rate loans in the loan portfolio. Mortgage loans sold for the three months ended March 31, 2005 and 2004 were $59 million and $67 million, respectively. The Company has also been active in generating commercial SBA loans. A portion of some of those loans is sold to other investors. The amount of loans sold and serviced for others at March 31, 2005 was approximately $196 million. 20
$ Change $ Change from from March 31, December 31, March 31, December 31, March 31, LIABILITIES ($ IN THOUSANDS) 2005 2004 2004 2004 2004 ---------- ---------- ---------- ---------- ---------- Non-interest bearing deposits ........ $ 528,038 460,059 366,277 67,979 161,761 Interest bearing deposits ............ 1,448,643 1,269,649 1,225,169 178,994 223,474 Advances from Federal Home Loan Bank . 858,961 818,933 801,679 40,028 57,282 Securities sold under agreements to repurchase and other borrowed funds 84,982 81,215 68,575 3,767 16,407 Other liabilities .................... 32,367 30,697 34,440 1,670 (2,073) Subordinated debentures .............. 80,000 80,000 80,000 -- -- ---------- ---------- ---------- ---------- ---------- Total liabilities ............... $3,032,991 2,740,553 2,576,140 292,438 456,851 ========== ========== ========== ========== ==========
$ Change excluding FNB acquisition from December 31, LIABILITIES (UNAUDITED - $ IN THOUSANDS) 2004 ---------------- Non-interest bearing deposits ................. $ 15,584 Interest bearing deposits ..................... 8,741 Advances from Federal Home Loan Bank .......... 40,028 Securities sold under agreements to repurchase and other borrowed funds ........ (4,380) Other liabilities ............................. 1,004 -------- Total liabilities ........................ $ 60,977 ========
Non-interest bearing deposits have increased $162 million, or 44 percent, since March 31, 2004 and $292 million, or 11 percent, since December 31, 2004. Without the FNB additions, the increase was $109 million, or 30 percent, since March 31, 2004. This continues to be a primary focus of our banks and the programs we have initiated this past year continue to gain momentum. Total deposits have increased $385 million from March 31, 2004, or 24 percent. Without the FNB deposits, the increase was $163 million. This growth in deposits, a low cost stable funding source, gives us increased flexibility in managing our asset mix. Federal Home Loan Bank advances increased $57 million and repurchase agreements and other borrowed funds increased $16 million from March 31, 2004 as we continue to take advantage of these cost effective and flexible funding sources. Liquidity and Capital Resources The objective of liquidity management is to maintain cash flows adequate to meet current and future needs for credit demand, deposit withdrawals, maturing liabilities and corporate operating expenses. The principal source of the Company's cash revenues is the dividends received from the Company's banking subsidiaries. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and bank holding companies from paying dividends which would constitute an unsafe or unsound banking practice. The subsidiaries source of funds is generated by deposits, principal and interest payments on loans, sale of loans and securities, short and long-term borrowings, and net income. In addition, seven of the eight banking subsidiaries are members of the FHLB. As of March 31, 2005, the Company had $1.136 billion of available FHLB line of which $859 million was utilized. Accordingly, management of the Company has a wide range of versatility in managing the liquidity and asset/liability mix for each individual institution as well as the Company as a whole. During the first quarter of 2005, all eight financial institutions maintained liquidity and regulatory capital levels in excess of regulatory requirements and operational needs. 21 Commitments In the normal course of business, there are various outstanding commitments to extend credit, such as letters of credit and un-advanced loan commitments, which are not reflected in the accompanying condensed consolidated financial statements. Management does not anticipate any material losses as a result of these transactions.
$ Change $ Change from from STOCKHOLDERS' EQUITY March 31, December 31, March 31, December 31, March 31, ($ IN THOUSANDS EXCEPT PER SHARE DATA) 2005 2004 2004 2004 2004 ----------- ----------- ----------- ----------- ----------- Common equity .......................... $ 273,272 264,250 240,730 9,022 32,542 Net unrealized gain on securities ...... 177 5,934 12,171 (5,757) (11,994) ----------- ----------- ----------- ----------- ----------- Total stockholders' equity .......... $ 273,449 270,184 252,901 3,265 20,548 =========== =========== =========== =========== =========== Stockholders' equity to total assets ... 8.27% 8.97% 8.94% Book value per common share ............ $ 8.86 8.80 8.27 0.06 0.59 Market price per share at end of quarter $ 24.40 27.23 20.64 (2.83) 3.76
Total equity and book value per share amounts have increased substantially from the prior year, primarily the result of earnings retention, and stock options exercised. Accumulated other comprehensive income, representing net unrealized gains on securities available for sale, decreased $12 million from March 31, 2004 and $6 million from year end 2004. The decline is primarily a function of interest rate changes.
March 31, December 31, March 31, CREDIT QUALITY INFORMATION ($ IN THOUSANDS) 2005 2004 2004 ---------- ---------- ---------- Allowance for loan losses ........................... $ 29,801 26,492 24,569 Non-performing assets ............................... $ 9,166 9,608 11,641 Allowance as a percentage of non performing assets .. 325% 276% 211% Non-performing assets as a percentage of total assets 0.27% 0.32% 0.42% Allowance as a percentage of total loans ............ 1.56% 1.53% 1.65% Net charge-offs as a percentage of loans ............ 0.01% 0.10% 0.02%
Allowance for Loan Loss and Non-Performing Assets Non-performing assets as a percentage of total assets at March 31, 2005 were at ..27 percent, a decrease from .42 percent at March 31, 2004 and .32 percent at December 31, 2004. This compares favorably to the Federal Reserve Bank Peer Group average of .45 percent at December 31, 2004, the most recent information available. The allowance for loan losses was 325 percent of non-performing assets at March 31, 2005, compared to 211 percent a year ago. The allowance, without the addition of FNB, has increased $3.184 million, or 13 percent, from a year ago. Including FNB the increase is $5.232 million, or 21 percent. The allowance of $29.801 million, is 1.56 percent of March 31, 2005 total loans outstanding, down slightly from the 1.65 percent a year ago. The first quarter provision for loan losses expense was $1.490 million, an increase of $660 thousand from the same quarter in 2004. The additional expense relates to the growth in loans and the inherent risk associated with the size and risk characteristics of loans originated over the past twelve months. 22 RESULTS OF OPERATIONS - THE THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2004. First National Bank-West was acquired on February 28, 2005 and became the Company's eight subsidiary. The Ione, Washington branch was acquired by Mountain West on June 4, 2004. Accordingly, results of operations and financial condition for the acquisitions are included from the acquisition dates forward. The Company reported net quarterly earnings of $11.520 million, an increase of $.9 million, or 9 percent, over the $10.610 million for the first quarter of 2004. Diluted earnings per share for the quarter of $.37, is an increase of 9 percent over the per share earnings of $.34 for the same quarter of 2004. Return on average assets and return on average equity for the quarter were 1.50 percent and 17.06 percent, respectively, which compares with prior year returns for the first quarter of 1.55 percent and 17.28 percent. REVENUE SUMMARY ($ IN THOUSANDS)
Three months ended March 31, ------------------------------------------------ 2005 2004 $ change % change ------- ------- -------- -------- Net interest income ......................... $28,456 26,389 2,067 7.8% Non-interest income Service charges, loan fees, and other fees 6,482 5,092 1,390 27.3% Gain on sale of loans .................... 2,092 1,771 321 18.1% Other income ............................. 534 548 (14) -2.6% ------- ------- ------- Total non-interest income ............. 9,108 7,411 1,697 22.9% ------- ------- ------- $37,564 33,800 3,764 11.1% ======= ======= ======= Tax equivalent net interest margin .......... 4.08% 4.29% ======= =======
Net Interest Income Net interest income for the quarter increased $2.067 million, or 8 percent, over the same period in 2004, and $616 thousand from the fourth quarter of 2004. Total interest income increased $5.042 million, or 14 percent, while total interest expense was $2.975 million, or 33 percent higher. The increase in interest expense is primarily attributable to the increase in the subordinated debentures issued in March 2004 for the trust preferred securities, the increased level of FHLB advances and other borrowings, and increases in short term interest rates during 2004 and 2005. The Federal Reserve Bank has increased targeted fed funds rates seven times, 175 basis points, in the last twelve months. The net interest margin as a percentage of earning assets, on a tax equivalent basis, was 4.08 percent which was below the 4.29 percent result for the first quarter of 2004. The margin for the first quarter decreased from the 4.16 percent experienced for the fourth quarter of 2004. The interest margin for FNB is approximately 20 basis points lower than the average of the other seven banks which lowered the ratio. Also having a negative impact on the first quarter interest margin was the reduction of FHLB dividends for the 2005 quarter. Dividends received were $255 thousand less than the same quarter last year. Non-interest Income Fee income increased $1.390 million, or 27 percent, over the same period last year, driven primarily by an increased number of loan and deposit accounts and additional customer services offered. Gain on sale of loans increased $321 thousand from the first quarter of last year. Loan origination activity for housing construction and purchases remains strong in our markets and has offset much of the reduction in refinance activity experienced last year. 23 NON-INTEREST EXPENSE SUMMARY ($ IN THOUSANDS)
Three months ended March 31, -------------------------------------------- 2005 2004 $ change % change ------- ------- ------- ------- Compensation and employee benefits . $10,944 9,806 1,138 11.6% Occupancy and equipment expense .... 2,855 2,631 224 8.5% Outsourced data processing expense . 232 413 (181) -43.8% Core deposit intangible amortization 283 294 (11) -3.7% Other expenses ..................... 4,760 4,282 478 11.2% ------- ------- ------- ------- Total non-interest expense ... $19,074 17,426 1,648 9.5% ======= ======= ======= =======
Non-interest Expense Non-interest expense increased by $1.648 million, or 9 percent, from the same quarter of 2004. Compensation and benefit expense increased $1.138 million, or 12 percent from the first quarter of 2004, with additional bank branches, normal compensation increases for job performance and increased cost for benefits accounting for the majority of the increase. The number of full-time-equivalent employees has increased from 832 to 952, a 14 percent increase, since March 31, 2004. Occupancy and equipment expense increased $224 thousand, or 9 percent, reflecting the cost of the additional locations and facility upgrades. Other expenses increased $478 thousand, or 11 percent, primarily from audit costs from compliance with Sarbanes-Oxley rules, additional marketing expenses, and costs associated with new branch offices. The efficiency ratio (non-interest expense/net interest income + non-interest income) was 51 percent for the 2005 quarter, which is an improvement from the 52 percent for the 2004 quarter. Critical Accounting Policies Companies apply certain critical accounting policies requiring management to make subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain. The Company considers its only critical accounting policy to be the allowance for loan losses. The allowance for loan losses is established through a provision for loan losses charged against earnings. The balance of allowance for loan loss is maintained at the amount management believes will be adequate to absorb known and inherent losses in the loan portfolio. The appropriate balance of allowance for loan losses is determined by applying estimated loss factors to the credit exposure from outstanding loans. Estimated loss factors are based on subjective measurements including management's assessment of the internal risk classifications, changes in the nature of the loan portfolio, industry concentrations and the impact of current local, regional and national economic factors on the quality of the loan portfolio. Changes in these estimates and assumptions are reasonably possible and may have a material impact on the Company's consolidated financial statements, results of operations and liquidity. Effect of inflation and changing prices Generally accepted accounting principles require the measurement of financial position and operating results in terms of historical dollars, without consideration for change in relative purchasing power over time due to inflation. Virtually all assets of a financial institution are monetary in nature; therefore, interest rates generally have a more significant impact on a company's performance than does the effect of inflation. Forward Looking Statements This Form 10-Q includes forward looking statements, which describe management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of the Company's style of banking and the strength of the local economies in which it operates. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in the Company's public filings, factors that may cause actual 24 results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on the Company than expected and adversely affect the company's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new banks and/or branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which the Company is engaged. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company believes that there have not been any material changes in information about the Company's market risk that was provided in the Form 10-K report for the year ended December 31, 2004. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as required by Exchange Act Rules 240.13a-15(b) and 15d-14(c)) as of the date of this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's current disclosure controls and procedures are effective and timely, providing them with material information relating to the Company required to be disclosed in the reports we file or submit under the Exchange Act. Changes in Internal Controls There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter 2005, to which this report relates that have materially affected, or are reasonably likely to materially affect the Company's internal controls over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no pending material legal proceedings to which the registrant or its subsidiaries are a party. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS (a) Not Applicable (b) Not Applicable (c) Not Applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) Not Applicable (b) Not Applicable 25 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS (a) Not Applicable (b) Not Applicable (c) Not Applicable (d) Not Applicable ITEM 5. OTHER INFORMATION (a) Not Applicable (b) Not Applicable ITEM 6. EXHIBITS Exhibit 3.1 - Articles of Incorporation for Glacier Bancorp, Inc., as amended Exhibit 10.1 - Glacier Bancorp, Inc. 2005 Stock Incentive Plan Exhibit 10.2 - Form of Stock Option Agreement Exhibit 10.3 - Form of Restricted Stock Purchase Agreement Exhibit 31.1 - Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 Exhibit 31.2 - Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 Exhibit 32 - Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GLACIER BANCORP, INC. May 5, 2005 /s/ Michael J. Blodnick ----------------------- Michael J. Blodnick President/CEO May 5, 2005 /s/ James H. Strosahl --------------------- James H. Strosahl Executive Vice President/CFO 26 EX-3.1 2 v08749exv3w1.txt EXHIBIT 3.1 EXHIBIT 3.1 ARTICLES OF INCORPORATION (WITH ALL AMENDMENTS) OF GLACIER BANCORP, INC. ARTICLE 1. NAME. The name of the corporation is Glacier Bancorp, Inc. (hereinafter referred to as the "Corporation"). ARTICLE 2. REGISTERED OFFICE AND REGISTERED AGENT. The address of the registered office of the Corporation is 49 Commons Loop, Kalispell, Montana 59901. The name of the registered agent at such address is Michael J. Blodnick. ARTICLE 3. NATURE OF BUSINESS. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Montana Business Corporation Act ("MBCA"). ARTICLE 4. CAPITAL STOCK. The total number of shares of capital stock which the Corporation has authority to issue is 79,125,000, of which 1,000,000 shall be serial preferred stock, $0.01 par value per share (hereinafter the "Preferred Stock"), and 78,125,000 shall be common stock, $0.01 par value per share (hereinafter the "Common Stock"). The Board of Directors is hereby expressly authorized, by resolution or resolutions to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock. Before any shares of any such series are issued, the Board of Directors shall fix, and hereby is expressly empowered to fix, by resolution or resolutions, the following provisions of the shares thereof: (a) the designation of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof; (b) whether the shares of such series shall have voting rights, in addition to any voting rights provided by law, and, if so, the terms of such voting rights, which may be general or limited; (c) the dividends, if any, payable on such series, whether any such dividends shall be cumulative, and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of this class; (d) whether the shares of such series shall be subject to redemption by the Corporation, and, if so, the times, prices and other conditions of such redemption; (e) the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in, the voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets, of the Corporation; (f) whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other corporate purposes and the terms and provisions relative to the operation thereof; (g) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of this class or any other securities, and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange; (h) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or shares of stock of any other class or any other series of this class; (i) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock, including additional shares of such series or of any other series of this class or of any other class; and (j) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof. The powers, preferences and relative, participating, optional and other special rights, of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall accrue and/or be cumulative. ARTICLE 5. INCORPORATOR. The name and mailing address of the sole incorporator is as follows:
Name Address - ------------------- --------------------- Michael J. Blodnick Glacier Bancorp, Inc. 49 Commons Loop Kalispell, Montana 59901
ARTICLE 6. PREEMPTIVE RIGHTS. No holder of the capital stock of the Corporation shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever of the Corporation, or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of a dividend. ARTICLE 7. DIRECTORS. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors. Except as otherwise fixed pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors, the number of directors shall be determined by a vote of the majority of the Board of Directors, provided that no decrease shall have the effect of shortening the term of any incumbent director. Notwithstanding anything to the contrary contained in these Articles of Incorporation, the number of directors may not be less than seven (7) or more than seventeen (17). A. Classification and Term. So long as the Board of Directors has at least nine (9) members, the Board of Directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be divided into three classes as nearly equal in number as possible, with one class to be elected annually. The term of office of the initial directors shall be as follows: the term of directors of the first class shall expire at the first annual meeting of shareholders after their election; the term of office of the directors of the second class shall expire at the second annual meeting of shareholders after their election; and the term of office of the third class shall expire at the third annual meeting of shareholders after their election; and, as to directors of each class, when their respective successors are elected and qualified. At each annual meeting of shareholders, directors elected to succeed those whose terms are expiring shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders and when their respective successors are elected and qualified. Shareholders of the Corporation shall not be permitted to cumulate their votes for the election of directors. B. Vacancies. Except as otherwise fixed pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, 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 shall hold office for the remainder of the term to which the director has been selected and until such director's successor shall have been elected and qualified. When the number of directors is changed, the Board of Directors shall determine the class or classes to which the increased or decreased number of directors shall be apportioned; provided that no decrease in the number of directors shall shorten the term of any incumbent director. C. Removal. Subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect directors, any director (including persons elected by directors to fill vacancies in the Board of Directors) may be removed from office only for cause at a duly constituted meeting of shareholders called expressly for such purpose. ARTICLE 8. LIABILITY OF DIRECTORS AND OFFICERS. 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 as it exists on the effective date of these Articles of Incorporation or as such law may be thereafter in effect. No amendment, modification or repeal of this Article 8 shall adversely affect the rights provided hereby with respect to any claim, issue or matter in any proceeding that is based in any respect on any alleged action or failure to act prior to such amendment, modification or repeal. ARTICLE 9. CERTAIN BUSINESS COMBINATIONS. 9.1 VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. A. Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law, any other provision of these Articles of Incorporation, the Bylaws of the Corporation, any agreement with a national securities exchange or otherwise, and except as otherwise expressly provided in Article 9.2 of this Article 9: (1) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested Shareholder (as hereinafter defined) or (ii) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or (2) any sale, lease, license, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $500,000 or more; or (3) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder; or (4) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or (5) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class (it being understood that for purposes of this Article 9, each share of the Voting Stock shall have the number of votes granted to it pursuant to Article 4 of these Articles of Incorporation). Such affirmative vote shall be required notwithstanding that no vote may be required, or that a lesser percentage may be specified, by law, any other provision of these Articles of Incorporation, the Bylaws of the Corporation, any agreement with any national securities exchange or otherwise. B. Definition of "Business Combination." The term "Business Combination" as used in this Article 9 shall mean any transaction which is referred to in any one or more of clauses (1) through (5) of paragraph A of this Article 9.1. 9.2 WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of Article 9.1 shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as may be required by law, any other provision of these Articles of Incorporation, the Bylaws of the Corporation, any agreement with a national securities exchange or otherwise, if all of the conditions specified in either of the following paragraphs A or B are met: A. Approval by Disinterested Directors. The Business Combination shall have been approved by a majority of the Disinterested Directors (as hereinafter defined). B. Price and Procedural Requirements. All of the following conditions shall have been met: (1) The aggregate amount of the cash and the Fair Market Value as of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of Common Stock acquired by it (i) within the five-year period immediately prior to the first public announcement of the terms of the proposed Business Combination (the "Announcement Date") or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher; and (b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article 9 as the "Determination Date"), whichever is higher. (2) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (2) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of such class of Voting Stock acquired by it (i) within the five-year period immediately prior to the Announcement Date or (ii) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and (c) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary. (3) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of Voting Stock. If the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The price determined in accordance with clauses (1) and (2) of this paragraph (B) shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (4) After such Interested Shareholder has proposed such a Business Combination and prior to the consummation of such Business Combination; (a) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding Preferred Stock of the Corporation; (b) there shall have been (i) no reduction in the quarterly rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Disinterested Directors, and (ii) an increase in such quarterly rate of dividends paid on such Common Stock as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Disinterested Directors; and (c) such Interested Shareholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (5) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended (or any subsequent provisions replacing such) (hereinafter referred to as the "Act"), and the rules and regulations of the Securities and Exchange Commission thereunder shall be mailed to the shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to the Act.) (6) The holders of all outstanding shares of Voting Stock not beneficially owned by the Interested Shareholder prior to the consummation of any Business Combination shall be entitled to receive in such Business Combination cash or other consideration for their shares of such Voting Stock in compliance with clauses (1), (2) and (3) of paragraph B of this Article 9.2 (provided, however, that the failure of any such holders who are exercising their statutory rights to dissent from such Business Combination and receive payment of the fair value of their shares to exchange their shares in such Business Combination shall not be deemed to have prevented the condition set forth in this clause (6) from being satisfied). 9.3 CERTAIN DEFINITIONS. For the purposes of this Article 9 the following shall be deemed to have the meanings specified below: A. The term "person" shall mean any individual, firm, corporation or other entity. B. The term "Interested Shareholder" shall mean any person (other than the Corporation or any Subsidiary) who or which: (1) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the then outstanding Voting Stock; or (2) is an Affiliate of the Corporation and at any time within the five-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (3) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the five-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended (or any subsequent provisions replacing such). C. A person shall be deemed a "beneficial owner" of any Voting Stock: (1) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (2) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (3) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. D. For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Article 9.3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C of this Article 9.3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. The terms "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in rule 12b-2 of the General Rules and Regulations under the Act, as in effect on the effective date of these Articles of Incorporation. F. The term "Subsidiary" shall mean any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Article 9.3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Corporation. G. The term "Fair Market Value" shall mean: (1) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Act on which such stock is listed or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith, in each case with respect to any class of such stock, appropriately adjusted for any dividend or distribution in shares of such stock or any subdivision or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock; and (2) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. H. In the event of any Business Combination in which the Corporation is the survivor, the phrase "consideration other than cash to be received" as used in clauses (1) and (2) of paragraph B of Article 9.2 shall include the shares of Common Stock and/or the shares of any other eligible outstanding Voting Stock retained by the holders of such shares. I. The term "Disinterested Director" shall mean any member of the Board of Directors of the Corporation who is unaffiliated with the Interested Shareholder and who was a member of the Board of Directors prior to the Determination Date, and any successor of a Disinterested Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Disinterested Director by a majority of the total number of Disinterested Directors then on the Board of Directors. J. References to "highest per share price" shall in each case with respect to any class of stock reflect an appropriate adjustment for any dividend or distribution in shares of such stock or subdivision or reclassification of outstanding shares of such stock into a greater number of shares of such stock or any combination or reclassification of outstanding shares of such stock into a smaller number of shares of such stock. 9.4 POWERS OF THE BOARD OF DIRECTORS. A majority of the Board of Directors of the Corporation shall have the power and duty to decide for the purpose of this Article 9, on the basis of information known to them after reasonable inquiry, whether a person is an Interested Shareholder. Once the Board of Directors has made a determination pursuant to the preceding sentence that a person is an Interested Shareholder, a majority of the number of Directors of the Corporation who would qualify as Disinterested Directors shall have the power and duty to interpret all of the terms and provisions of this Article 9, and to determine on the basis of information known to them after reasonable inquiry all facts necessary to ascertain compliance with this Article 9, including, without limitation: (A) the number of shares of Voting Stock beneficially owned by any person, (B) whether a person is an Affiliate or Associate of another, (C) whether the assets which are the subject of any Business Combination have an aggregate Fair Market Value of $500,000 or more and (D) whether all of the applicable conditions set forth in paragraph B of Article 9.2 have been met with respect to any Business Combination. Any determination pursuant to this Article 9.4 made in good faith shall be binding and conclusive on all parties. 9.5 NO EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED SHAREHOLDERS. Nothing contained in this Article 9 shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. 9.6 AMENDMENT, REPEAL, ETC. Notwithstanding any other provisions of these Articles of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact that a lesser percentage may be specified by these Articles of Incorporation or the Bylaws of the Corporation), the affirmative vote of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provisions inconsistent with this Article 9. ARTICLE 10. SHAREHOLDER APPROVAL OF PLAN OF MERGER OR SHARE EXCHANGE. A majority of all votes entitled to be cast by each voting group is sufficient to approve any plan of merger or share exchange requiring approval of the Corporation's shareholders pursuant to Section 35-1-815 of the MBCA (as such statute exists on the effective date of these Articles of Incorporation or as it may be thereafter in effect); provided that, notwithstanding anything contained in these Articles of Incorporation to the contrary, any transaction with an Interested Party shall be approved in the manner specified in Article 9. ARTICLE 11. AMENDMENT. The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in the manner now or hereafter prescribed by law, and all rights conferred upon shareholders herein are granted subject to this reservation; provided that, notwithstanding anything contained in these Articles of Incorporation to the contrary, Article 9 shall be amended in the manner specified in Article 9.6. EX-10.1 3 v08749exv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN 1. ESTABLISHMENT, PURPOSE, AND TYPES OF AWARDS Glacier Bancorp, Inc. (the "Company") hereby establishes this equity-based incentive compensation plan to be known as the "Glacier Bancorp, Inc. 2005 Stock Incentive Plan" (hereinafter referred to as the "Plan"), in order to provide incentives and awards to select employees and directors of the Company and its Affiliates. The Plan permits the granting of the following types of awards ("Awards"), according to the Sections of the Plan listed here: Section 6 Options Section 7 Share Appreciation Rights Section 8 Restricted Shares, Restricted Share Units, and Unrestricted Shares Section 9 Deferred Share Units Section 10 Performance Awards
The Plan is not intended to affect and shall not affect any stock options, equity-based compensation, or other benefits that the Company or its Affiliates may have provided, or may separately provide in the future pursuant to any agreement, plan, or program that is independent of this Plan. 2. DEFINED TERMS Terms in the Plan that begin with an initial capital letter have the defined meaning set forth in APPENDIX A, unless defined elsewhere in this Plan or the context of their use clearly indicates a different meaning. 3. SHARES SUBJECT TO THE PLAN Subject to the provisions of Section 13 of the Plan, the maximum number of Shares that the Company may issue for all Awards is 2,500,000 Shares, provided that the Company shall not issue more than 1,700,000 Shares pursuant to Awards in a form other than Options and SARs, and shall not make additional awards under the Glacier Bancorp, Inc. 1995 Employee Stock Option Plan. For all Awards, the Shares issued pursuant to the Plan may be authorized but unissued Shares, or Shares that the Company has reacquired or otherwise holds in treasury. Shares that are subject to an Award that for any reason expires, is forfeited, is cancelled, or becomes unexercisable, and Shares that are for any other reason not paid or delivered under the Plan shall again, except to the extent prohibited by Applicable Law, be available for subsequent Awards under the Plan. Notwithstanding the foregoing, but subject to adjustments pursuant to Section 13 below, the number of Shares that are available for ISO Awards shall be determined, to the extent required under applicable tax laws, by reducing the number of Shares designated in the preceding paragraph by the number of Shares issued pursuant to Awards, provided that any Shares that are issued under the Plan and forfeited back to the Plan shall be available for issuance pursuant to future ISO Awards. 4. ADMINISTRATION (a) General. The Committee shall administer the Plan in accordance with its terms, provided that the Board may act in lieu of the Committee on any matter. The Committee shall hold meetings at such times and places as it may determine and shall make such rules and regulations for the conduct of its business as it deems advisable. In the absence of a duly appointed Committee or if the Board otherwise chooses to act in lieu of the Committee, the Board shall function as the Committee for all purposes of the Plan. (b) Committee Composition. The Board shall appoint the members of the Committee. If and to the extent permitted by Applicable Law, the Committee may authorize one or more Reporting Persons (or other officers) to make Awards to Eligible Persons who are not Reporting Persons (or other officers whom the Committee has specifically authorized to make Awards). The Board may at any time appoint additional members to the Committee, remove and replace members of the Committee with or without Cause, and fill vacancies on the Committee however caused. (c) Powers of the Committee. Subject to the provisions of the Plan, the Committee shall have the authority, in its sole discretion: (i) to determine Eligible Persons to whom Awards shall be granted from time to time and the number of Shares, units, or SARs to be covered by each Award; (ii) to determine, from time to time, the Fair Market Value of Shares; (iii) to determine, and to set forth in Award Agreements, the terms and conditions of all Awards, including any applicable exercise or purchase price, the installments and conditions under which an Award shall become vested (which may be based on performance), terminated, expired, cancelled, or replaced, and the circumstances for vesting acceleration or waiver of forfeiture restrictions, and other restrictions and limitations; (iv) to approve the forms of Award Agreements and all other documents, notices and certificates in connection therewith which need not be identical either as to type of Award or among Participants; (v) to construe and interpret the terms of the Plan and any Award Agreement, to determine the meaning of their terms, and to prescribe, amend, and rescind rules and procedures relating to the Plan and its administration; and (vi) in order to fulfill the purposes of the Plan and without amending the Plan, modify, cancel, or waive the Company's rights with respect to any Awards, to adjust or to modify Award Agreements for changes in Applicable Law, and to recognize differences in foreign law, tax policies, or customs; and (vii) to make all other interpretations and to take all other actions that the Committee may consider necessary or advisable to administer the Plan or to effectuate its purposes. Subject to Applicable Law and the restrictions set forth in the Plan, the Committee may delegate administrative functions to individuals who are Reporting Persons, officers, or Employees of the Company or its Affiliates. (d) Deference to Committee Determinations. The Committee shall have the discretion to interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion it deems to be appropriate in its sole discretion, and to make any findings of fact needed in the administration of the Plan or Award Agreements. The Committee's prior exercise of its discretionary authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee's interpretation and construction of any provision of the Plan, or of any Award or Award Agreement, shall be final, binding, and conclusive. The validity of any such interpretation, construction, decision or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious. (e) No Liability; Indemnification. Neither the Board nor any Committee member, nor any Person acting at the direction of the Board or the Committee, shall be liable for any act, omission, interpretation, construction or determination made in good faith with respect to the Plan, any Award or any Award Agreement. The Company and its Affiliates shall pay or reimburse any member of the Committee, as well as any Director, Employee, or Consultant who takes action in connection with the Plan, for all expenses incurred with respect to the Plan, and to the full extent allowable under Applicable Law shall indemnify each and every one of them for any claims, liabilities, and costs (including reasonable attorney's fees) arising out of their good faith performance of duties under the Plan. The Company and its Affiliates may obtain liability insurance for this purpose. 5. ELIGIBILITY (a) General Rule. The Committee may grant ISOs only to Employees (including officers who are Employees) of the Company or an Affiliate that is a "parent corporation" or "subsidiary corporation" within the meaning of Section 424 of the Code, and may grant all other Awards to any Eligible Person. A Participant who has been granted an Award may be granted an additional Award or Awards if the Committee shall so determine, if such person is otherwise an Eligible Person and if otherwise in accordance with the terms of the Plan. (b) Grant of Awards. Subject to the express provisions of the Plan, the Committee shall determine from the class of Eligible Persons those individuals to whom Awards under the Plan may be granted, the number of Shares subject to each Award, the price (if any) to be paid for the Shares or the Award and, in the case of Performance Awards, in addition to the matters addressed in Section 10 below, the specific objectives, goals and performance criteria that further define the Performance Award. Each Award shall be evidenced by an Award Agreement signed by the Company and, if required by the Committee, by the Participant. The Award Agreement shall set forth the material terms and conditions of the Award established by the Committee. (c) Limits on Awards. During the term of the Plan, no Participant may receive Options and SARs that relate to more than 300,000 Shares. The Committee will adjust this limitation pursuant to Section 13 below. (d) Replacement Awards. Subject to Applicable Laws (including any associated Shareholder approval requirements), the Committee may, in its sole discretion and upon such terms as it deems appropriate, require as a condition of the grant of an Award to a Participant that the Participant surrender for cancellation some or all of the Awards that have previously been granted to the Participant under this Plan or otherwise. An Award that is conditioned upon such surrender may or may not be the same type of Award, may cover the same (or a lesser or greater) number of Shares as such surrendered Award, may have other terms that are determined without regard to the terms or conditions of such surrendered Award, and may contain any other terms that the Committee deems appropriate. In the case of Options, these other terms may not involve an Exercise Price that is lower than the Exercise Price of the surrendered Option unless the Company's shareholders approve the grant itself or the program under which the grant is made pursuant to the Plan. 6. OPTION AWARDS (a) Types; Documentation. The Committee may in its discretion grant ISOs to any Employee and Non-ISOs to any Eligible Person, and shall evidence any such grants in an Award Agreement that is delivered to the Participant. Each Option shall be designated in the Award Agreement as an ISO or a Non-ISO, and the same Award Agreement may grant both types of Options. At the sole discretion of the Committee, any Option may be exercisable, in whole or in part, immediately upon the grant thereof, or only after the occurrence of a specified event, or only in installments, which installments may vary. Options granted under the Plan may contain such terms and provisions not inconsistent with the Plan that the Committee shall deem advisable in its sole and absolute discretion. (b) ISO $100,000 Limitation. To the extent that the aggregate Fair Market Value of Shares with respect to which Options designated as ISOs first become exercisable by a Participant in any calendar year (under this Plan and any other plan of the Company or any Affiliate) exceeds $100,000, such excess Options shall be treated as Non-ISOs. For purposes of determining whether the $100,000 limit is exceeded, the Fair Market Value of the Shares subject to an ISO shall be determined as of the Grant Date. In reducing the number of Options treated as ISOs to meet the $100,000 limit, the most recently granted Options shall be reduced first. In the event that Section 422 of the Code is amended to alter the limitation set forth therein, the limitation of this Section 6(b) shall be automatically adjusted accordingly. (c) Term of Options. Each Award Agreement shall specify a term at the end of which the Option automatically expires, subject to earlier termination provisions contained in Section 6(h) hereof; provided, that, the term of any Option may not exceed ten years from the Grant Date. In the case of an ISO granted to an Employee who is a Ten Percent Holder on the Grant Date, the term of the ISO shall not exceed five years from the Grant Date. (d) Exercise Price. The exercise price of an Option shall be determined by the Committee in its discretion and shall be set forth in the Award Agreement, provided that (i) if an ISO is granted to an Employee who on the Grant Date is a Ten Percent Holder, the per Share exercise price shall not be less than 110% of the Fair Market Value per Share on the Grant Date, and (ii) for all other Options, such per Share exercise price shall not be less than 100% of the Fair Market Value per Share on the Grant Date. (e) Exercise of Option. The Committee shall in its sole discretion determine the times, circumstances, and conditions under which an Option shall be exercisable, and shall set them forth in the Award Agreement. The Committee shall have the discretion to determine whether and to what extent the vesting of Options shall be tolled during any unpaid leave of absence; provided, however, that in the absence of such determination, vesting of Options shall be tolled during any such leave approved by the Company. (f) Minimum Exercise Requirements. An Option may not be exercised for a fraction of a Share. The Committee may require in an Award Agreement that an Option be exercised as to a minimum number of Shares, provided that such requirement shall not prevent a Participant from purchasing the full number of Shares as to which the Option is then exercisable. (g) Methods of Exercise. Prior to its expiration pursuant to the terms of the applicable Award Agreement, each Option may be exercised, in whole or in part (provided that the Company shall not be required to issue fractional shares), by delivery of written notice of exercise to the secretary of the Company accompanied by the full exercise price of the Shares being purchased. In the case of an ISO, the Committee shall determine the acceptable methods of payment on the Grant Date and it shall be included in the applicable Award Agreement. The methods of payment that the Committee may in its discretion accept or commit to accept in an Award Agreement include: (i) cash or check payable to the Company (in U.S. dollars); (ii) other Shares that (A) are owned by the Participant who is purchasing Shares pursuant to an Option, (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which the Option is being exercised, (C) were not acquired by such Participant pursuant to the exercise of an Option, unless such Shares have been owned by such Participant for at least six months or such other period as the Committee may determine, (D) are all, at the time of such surrender, free and clear of any and all claims, pledges, liens and encumbrances, or any restrictions which would in any manner restrict the transfer of such shares to or by the Company (other than such restrictions as may have existed prior to an issuance of such Shares by the Company to such Participant), and (E) are duly endorsed for transfer to the Company; (iii) a cashless exercise program that the Committee may approve, from time to time in its discretion, pursuant to which a Participant may concurrently provide irrevocable instructions (A) to such Participant's broker or dealer to effect the immediate sale of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the exercise price of the Option plus all applicable taxes required to be withheld by the Company by reason of such exercise, and (B) to the Company to deliver the certificates for the purchased Shares directly to such broker or dealer in order to complete the sale; or (iv) any combination of the foregoing methods of payment. The Company shall not be required to deliver Shares pursuant to the exercise of an Option until payment of the full exercise price therefore is received by the Company. (h) Termination of Continuous Service. The Committee may establish and set forth in the applicable Award Agreement the terms and conditions on which an Option shall remain exercisable, if at all, following termination of a Participant's Continuous Service. The Committee may waive or modify these provisions at any time. To the extent that a Participant is not entitled to exercise an Option at the date of his or her termination of Continuous Service, or if the Participant (or other person entitled to exercise the Option) does not exercise the Option to the extent so entitled within the time specified in the Award Agreement or below (as applicable), the Option shall terminate and the Shares underlying the unexercised portion of the Option shall revert to the Plan and become available for future Awards. In no event may any Option be exercised after the expiration of the Option term as set forth in the Award Agreement. The following provisions shall apply to the extent an Award Agreement does not specify the terms and conditions upon which an Option shall terminate when there is a termination of a Participant's Continuous Service: (i) Termination other than Upon Disability or Death or for Cause. In the event of termination of a Participant's Continuous Service (other than as a result of Participant's death, disability, retirement or termination for Cause), the Participant shall have the right to exercise an Option at any time within 90 days following such termination to the extent the Participant was entitled to exercise such Option at the date of such termination. (ii) Disability. In the event of termination of a Participant's Continuous Service as a result of his or her being Disabled, the Participant shall have the right to exercise an Option at any time within one year following such termination to the extent the Participant was entitled to exercise such Option at the date of such termination. (iii) Retirement. In the event of termination of a Participant's Continuous Service as a result of Participant's retirement, the Participant shall have the right to exercise the Option at any time within six months following such termination to the extent the Participant was entitled to exercise such Option at the date of such termination. (iv) Death. In the event of the death of a Participant during the period of Continuous Service since the Grant Date of an Option, or within thirty days following termination of the Participant's Continuous Service, the Option may be exercised, at any time within one year following the date of the Participant's death, by the Participant's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the right to exercise the Option had vested at the date of death or, if earlier, the date the Participant's Continuous Service terminated. (v) Cause. If the Committee determines that a Participant's Continuous Service terminated due to Cause, the Participant shall immediately forfeit the right to exercise any Option, and it shall be considered immediately null and void. (i) Reverse Vesting. The Committee in its sole and absolute discretion may allow a Participant to exercise unvested Options, in which case the Shares then issued shall be Restricted Shares having analogous vesting restrictions to the unvested Options. 7. SHARE APPRECIATE RIGHTS (SARs) (a) Grants. The Committee may in its discretion grant Share Appreciation Rights to any Eligible Person, in any of the following forms: (i) SARs related to Options. The Committee may grant SARs either concurrently with the grant of an Option or with respect to an outstanding Option, in which case the SAR shall extend to all or a portion of the Shares covered by the related Option. An SAR shall entitle the Participant who holds the related Option, upon exercise of the SAR and surrender of the related Option, or portion thereof, to the extent the SAR and related Option each were previously unexercised, to receive payment of an amount determined pursuant to Section 7(e) below. Any SAR granted in connection with an ISO will contain such terms as may be required to comply with the provisions of Section 422 of the Code and the regulations promulgated thereunder. (ii) SARs Independent of Options. The Committee may grant SARs which are independent of any Option subject to such conditions as the Committee may in its discretion determine, which conditions will be set forth in the applicable Award Agreement. (iii) Limited SARs. The Committee may grant SARs exercisable only upon or in respect of a Change in Control or any other specified event, and such limited SARs may relate to or operate in tandem or combination with or substitution for Options or other SARs, or on a stand-alone basis, and may be payable in cash or Shares based on the spread between the exercise price of the SAR, and (A) a price based upon or equal to the Fair Market Value of the Shares during a specified period, at a specified time within a specified period before, after or including the date of such event, or (B) a price related to consideration payable to Company's shareholders generally in connection with the event. (b) Exercise Price. The per Share exercise price of an SAR shall be determined in the sole discretion of the Committee, shall be set forth in the applicable Award Agreement, and shall be no less than 100% of the Fair Market Value of one Share. The exercise price of an SAR related to an Option shall be the same as the exercise price of the related Option. The exercise price of an SAR shall be subject to the special rules on pricing contained in Sections 6(d) and 6(j) hereof. (c) Exercise of SARs. Unless the Award Agreement otherwise provides, an SAR related to an Option will be exercisable at such time or times, and to the extent, that the related Option will be exercisable; provided that the Award Agreement shall not, without the approval of the shareholders of the Company, provide for a vesting period for the exercise of the SAR that is more favorable to the Participant than the exercise period for the related Option. An SAR may not have a term exceeding ten years from its Grant Date. An SAR granted independently of any other Award will be exercisable pursuant to the terms of the Award Agreement, but shall not, without the approval of the shareholders of the Company, provide for a vesting period for the exercise of the SAR that is more favorable to the Participant than the exercise period for the related Option. Whether an SAR is related to an Option or is granted independently, the SAR may only be exercised when the Fair Market Value of the Shares underlying the SAR exceeds the exercise price of the SAR. (d) Effect on Available Shares. All SARs are to be settled in shares of the Company's stock and shall be counted in full against the number of shares available for award under the Plan, regardless of the number of exercise gain shares issued upon settlement of the SARs. (e) Payment. Upon exercise of an SAR related to an Option and the attendant surrender of an exercisable portion of any related Award, the Participant will be entitled to receive payment of an amount determined by multiplying - (i) the excess of the Fair Market Value of a Share on the date of exercise of the SAR over the exercise price per Share of the SAR, by (ii) the number of Shares with respect to which the SAR has been exercised. Notwithstanding the foregoing, an SAR granted independently of an Option (i) may limit the amount payable to the Participant to a percentage, specified in the Award Agreement but not exceeding one-hundred percent (100%), of the amount determined pursuant to the preceding sentence, and (ii) shall be subject to any payment or other restrictions that the Committee may at any time impose in its discretion, including restrictions intended to conform the SARs with Section 409A of the Code. (f) Form and Terms of Payment. Subject to Applicable Law, the Committee may, in its sole discretion, settle the amount determined under Section 7(e) above solely in cash, solely in Shares (valued at their Fair Market Value on the date of exercise of the SAR), or partly in cash and partly in Shares. In any event, cash shall be paid in lieu of fractional Shares. Absent a contrary determination by the Committee, all SARs shall be settled in cash as soon as practicable after exercise. Notwithstanding the foregoing, the Committee may, in an Award Agreement, determine the maximum amount of cash or Shares or combination thereof that may be delivered upon exercise of an SAR. (g) Termination of Employment or Consulting Relationship. The Committee shall establish and set forth in the applicable Award Agreement the terms and conditions on which an SAR shall remain exercisable, if at all, following termination of a Participant's Continuous Service. The provisions of Section 6(h) above shall apply to the extent an Award Agreement does not specify the terms and conditions upon which an SAR shall terminate when there is a termination of a Participant's Continuous Service. 8. RESTRICTED SHARES, RESTRICTED SHARE UNITS, AND UNRESTRICTED SHARES (a) Grants. The Committee may in its discretion grant restricted shares ("Restricted Shares") to any Eligible Person and shall evidence such grant in an Award Agreement that is delivered to the Participant and that sets forth the number of Restricted Shares, the purchase price for such Restricted Shares (if any), and the terms upon which the Restricted Shares may become vested. In addition, the Company may in its discretion grant the right to receive Shares after certain vesting requirements are met ("Restricted Share Units") to any Eligible Person and shall evidence such grant in an Award Agreement that is delivered to the Participant which sets forth the number of Shares (or formula, that may be based on future performance or conditions, for determining the number of Shares) that the Participant shall be entitled to receive upon vesting and the terms upon which the Shares subject to a Restricted Share Unit may become vested. The Committee may condition any Award of Restricted Shares or Restricted Share Units to a Participant on receiving from the Participant such further assurances and documents as the Committee may require to enforce the restrictions. In addition, the Committee may grant Awards hereunder in the form of unrestricted shares ("Unrestricted Shares"), which shall vest in full upon the date of grant or such other date as the Committee may determine or which the Committee may issue pursuant to any program under which one or more Eligible Persons (selected by the Committee in its discretion) elect to receive Unrestricted Shares in lieu of cash bonuses that would otherwise be paid. (b) Vesting and Forfeiture. The Committee shall set forth in an Award Agreement granting Restricted Shares or Restricted Share Units, the terms and conditions under which the Participant's interest in the Restricted Shares or the Shares subject to Restricted Share Units will become vested and non-forfeitable. Except as set forth in the applicable Award Agreement or the Committee otherwise determines, upon termination of a Participant's Continuous Service for any other reason, the Participant shall forfeit his or her Restricted Shares and Restricted Share Units; provided that if a Participant purchases the Restricted Shares and forfeits them for any reason, the Company shall return the purchase price to the Participant only if and to the extent set forth in an Award Agreement. (c) Issuance of Restricted Shares Prior to Vesting. The Company shall issue stock certificates that evidence Restricted Shares pending the lapse of applicable restrictions, and that bear a legend making appropriate reference to such restrictions. Except as set forth in the applicable Award Agreement or the Committee otherwise determines, the Company or a third party that the Company designates shall hold such Restricted Shares and any dividends that accrue with respect to Restricted Shares pursuant to Section 8(e) below. (d) Issuance of Shares upon Vesting. As soon as practicable after vesting of a Participant's Restricted Shares (or Shares underlying Restricted Share Units) and the Participant's satisfaction of applicable tax withholding requirements, the Company shall release to the Participant, free from the vesting restrictions, one Share for each vested Restricted Share (or issue one Share free of the vesting restriction for each vested Restricted Share Unit), unless an Award Agreement provides otherwise. No fractional shares shall be distributed, and cash shall be paid in lieu thereof. (e) Dividends Payable on Vesting. Whenever Shares are released to a Participant under Section 8(d) above pursuant to the vesting of Restricted Shares or the Shares underlying Restricted Share Units are issued to a Participant pursuant to Section 8(d) above, such Participant shall receive (unless otherwise provided in the Award Agreement), with respect to each Share released or issued, an amount equal to any cash dividends (plus, in the discretion of the Committee, simple interest at a rate as the Committee may determine) and a number of Shares equal to any stock dividends, which were declared and paid to the holders of Shares between the Grant Date and the date such Share is released or issued. (f) Section 83(b) Elections. A Participant may make an election under Section 83(b) of the Code (the "Section 83(b) Election") with respect to Restricted Shares. If a Participant who has received Restricted Share Units provides the Committee with written notice of his or her intention to make Section 83(b) Election with respect to the Shares subject to such Restricted Share Units, the Committee may in its discretion convert the Participant's Restricted Share Units into Restricted Shares, on a one-for-one basis, in full satisfaction of the Participant's Restricted Share Unit Award. The Participant may then make a Section 83(b) Election with respect to those Restricted Shares. Shares with respect to which a Participant makes a Section 83(b) Election shall not be eligible for deferral pursuant to Section 9 below. (g) Deferral Elections. At any time within the thirty-day period (or other shorter or longer period that the Committee selects) in which a Participant who is a member of a select group of management or highly compensated employees (within the meaning of the Code) receives an Award of either Restricted Shares or Restricted Share Units, the Committee may permit the Participant to irrevocably elect, on a form provided by and acceptable to the Committee, to defer the receipt of all or a percentage of the Shares that would otherwise be transferred to the Participant upon the vesting of such Award. If the Participant makes this election, the Shares subject to the election, and any associated dividends and interest, shall be credited to an account established pursuant to Section 9 hereof on the date such Shares would otherwise have been released or issued to the Participant pursuant to Section 8(d) above. 9. DEFERRED SHARE UNITS (a) Elections to Defer. The Committee may permit any Eligible Person who is a Director, Consultant or member of a select group of management or highly compensated employees (within the meaning of the Code) to irrevocably elect, on a form provided by and acceptable to the Committee (the "Election Form"), to forego the receipt of cash or other compensation (including the Shares deliverable pursuant to any Award other than Restricted Shares for which a Section 83(b) Election has been made), and in lieu thereof to have the Company credit to an internal Plan account (the "Account") a number of deferred share units ("Deferred Share Units") having a Fair Market Value equal to the Shares and other compensation deferred. These credits will be made at the end of each calendar month during which compensation is deferred. Each Election Form shall take effect on the first day of the next calendar year (or on the first day of the next calendar month in the case of an initial election by a Participant who is first eligible to defer hereunder) after its delivery to the Company, subject to Section 8(g) regarding deferral of Restricted Shares and Restricted Share Units and to Section 10(e) regarding deferral of Performance Awards, unless the Company sends the Participant a written notice explaining why the Election Form is invalid within five business days after the Company receives it. Notwithstanding the foregoing sentence: (i) Election Forms shall be ineffective with respect to any compensation that a Participant earns before the date on which the Company receives the Election Form, and (ii) the Committee may unilaterally make awards in the form of Deferred Share Units, regardless of whether or not the Participant foregoes other compensation. (b) Vesting. Unless an Award Agreement expressly provides otherwise, each Participant shall be 100% vested at all times in any Shares subject to Deferred Share Units. (c) Issuances of Shares. The Company shall provide a Participant with one Share for each Deferred Share Unit in five substantially equal annual installments that are issued before the last day of each of the five calendar years that end after the date on which the Participant's Continuous Service terminates, unless - (i) the Participant has properly elected a different form of distribution, on a form approved by the Committee, that permits the Participant to select any combination of a lump sum and annual installments that are completed within ten years following termination of the Participant's Continuous Service, and (ii) the Company received the Participant's distribution election form at the time the Participant elects to defer the receipt of cash or other compensation pursuant to Section 9(a), provided that such election may be changed through any subsequent election that (i) is delivered to the Administrator at least one year before the date on which distributions are otherwise scheduled to commence pursuant to the Participant's election, and (ii) defers the commencement of distributions by at least five years from the originally scheduled commencement date. Fractional shares shall not be issued, and instead shall be paid out in cash. (d) Crediting of Dividends. Whenever Shares are issued to a Participant pursuant to Section 9(c) above, such Participant shall also be entitled to receive, with respect to each Share issued, a cash amount equal to any cash dividends (plus simple interest at a rate of five percent per annum, or such other reasonable rate as the Committee may determine), and a number of Shares equal to any stock dividends which were declared and paid to the holders of Shares between the Grant Date and the date such Share is issued. (e) Emergency Withdrawals. In the event a Participant suffers an unforeseeable emergency within the contemplation of this Section and Section 409A of the Code, the Participant may apply to the Company for an immediate distribution of all or a portion of the Participant's Deferred Share Units. The unforeseeable emergency must result from a sudden and unexpected illness or accident of the Participant, the Participant's spouse, or a dependent (within the meaning of Section 152(a) of the Code) of the Participant, casualty loss of the Participant's property, or other similar extraordinary and unforeseeable conditions beyond the control of the Participant. Examples of purposes which are not considered unforeseeable emergencies include post-secondary school expenses or the desire to purchase a residence. In no event will a distribution be made to the extent the unforeseeable emergency could be relieved through reimbursement or compensation by insurance or otherwise, or by liquidation of the Participant's nonessential assets to the extent such liquidation would not itself cause a severe financial hardship. The amount of any distribution hereunder shall be limited to the amount necessary to relieve the Participant's unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution. The Committee shall determine whether a Participant has a qualifying unforeseeable emergency and the amount which qualifies for distribution, if any. The Committee may require evidence of the purpose and amount of the need, and may establish such application or other procedures as it deems appropriate. (f) Unsecured Rights to Deferred Compensation. A Participant's right to Deferred Share Units shall at all times constitute an unsecured promise of the Company to pay benefits as they come due. The right of the Participant or the Participant's duly-authorized transferee to receive benefits hereunder shall be solely an unsecured claim against the general assets of the Company. Neither the Participant nor the Participant's duly-authorized transferee shall have any claim against or rights in any specific assets, shares, or other funds of the Company. 10. PERFORMANCE AWARDS (a) Performance Units. Subject to the limitations set forth in paragraph (c) hereof, the Committee may in its discretion grant Performance Units to any Eligible Person and shall evidence such grant in an Award Agreement that is delivered to the Participant which sets forth the terms and conditions of the Award. (b) Performance Compensation Awards. Subject to the limitations set forth in paragraph (c) hereof, the Committee may, at the time of grant of a Performance Unit, designate such Award as a "Performance Compensation Award" in order that such Award constitutes "qualified performance-based compensation" under Code Section 162(m), in which event the Committee shall have the power to grant such Performance Compensation Award upon terms and conditions that qualify it as "qualified performance-based compensation" within the meaning of Code Section 162(m). With respect to each such Performance Compensation Award, the Committee shall establish, in writing within the time required under Code Section 162(m), a "Performance Period," "Performance Measure(s)", and "Performance Formula(e)" (each such term being hereinafter defined). A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that the Performance Measure(s) for such Award is achieved and the Performance Formula(e) as applied against such Performance Measure(s) determines that all or some portion of such Participant's Award has been earned for the Performance Period. As soon as practicable after the close of each Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Measure(s) for the Performance Period have been achieved and, if so, determine and certify in writing the amount of the Performance Compensation Award to be paid to the Participant and, in so doing, may use negative discretion to decrease, but not increase, the amount of the Award otherwise payable to the Participant based upon such performance. (c) Limitations on Awards. The maximum Performance Unit Award and the maximum Performance Compensation Award that any one Participant may receive for any one Performance Period shall not together exceed 30,000 Shares and $1,000,000 in cash. The Committee shall have the discretion to provide in any Award Agreement that any amounts earned in excess of these limitations will either be credited as Deferred Share Units, or as deferred cash compensation under a separate plan of the Company (provided in the latter case that such deferred compensation either bears a reasonable rate of interest or has a value based on one or more predetermined actual investments). Any amounts for which payment to the Participant is deferred pursuant to the preceding sentence shall be paid to the Participant in a future year or years not earlier than, and only to the extent that, the Participant is either not receiving compensation in excess of these limits for a Performance Period, or is not subject to the restrictions set forth under Section 162(b) of the Code. (d) Definitions. (i) "Performance Formula" means, for a Performance Period, one or more objective formulas or standards established by the Committee for purposes of determining whether or the extent to which an Award has been earned based on the level of performance attained or to be attained with respect to one or more Performance Measure(s). Performance Formulae may vary from Performance Period to Performance Period and from Participant to Participant and may be established on a stand-alone basis, in tandem or in the alternative. (ii) "Performance Measure" means one or more of the following selected by the Committee to measure Company, Affiliate, and/or business unit performance for a Performance Period, whether in absolute or relative terms (including, without limitation, terms relative to a peer group or index): basic, diluted, or adjusted earnings per share; sales or revenue; earnings before interest, taxes, and other adjustments (in total or on a per share basis); basic or adjusted net income; returns on equity, assets, capital, revenue or similar measure; economic value added; working capital; total shareholder return; and product development, product market share, research, licensing, litigation, human resources, information services, mergers, acquisitions, sales of assets of Affiliates or business units. Each such measure shall be, to the extent applicable, determined in accordance with generally accepted accounting principles as consistently applied by the Company (or such other standard applied by the Committee) and, if so determined by the Committee, and in the case of a Performance Compensation Award, to the extent permitted under Code Section 162(m), adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles. Performance Measures may vary from Performance Period to Performance Period and from Participant to Participant, and may be established on a stand-alone basis, in tandem or in the alternative. (iii) "Performance Period" means one or more periods of time (of not less than one fiscal year of the Company), as the Committee may designate, over which the attainment of one or more Performance Measure(s) will be measured for the purpose of determining a Participant's rights in respect of an Award. (e) Deferral Elections. At any time prior to the date that is at least six months before the close of a Performance Period (or shorter or longer period that the Committee selects) with respect to an Award of either Performance Units or Performance Compensation, the Committee may permit a Participant who is a member of a select group of management or highly compensated employees (within the meaning of the Code) to irrevocably elect, on a form provided by and acceptable to the Committee, to defer the receipt of all or a percentage of the cash or Shares that would otherwise be transferred to the Participant upon the vesting of such Award. If the Participant makes this election, the cash or Shares subject to the election, and any associated interest and dividends, shall be credited to an account established pursuant to Section 9 hereof on the date such cash or Shares would otherwise have been released or issued to the Participant pursuant to Section 10(a) or Section 10(b) above. 11. TAXES (a) General. As a condition to the issuance or distribution of Shares pursuant to the Plan, the Participant (or in the case of the Participant's death, the person who succeeds to the Participant's rights) shall make such arrangements as the Company may require for the satisfaction of any applicable federal, state, local or foreign withholding tax obligations that may arise in connection with the Award and the issuance of Shares. The Company shall not be required to issue any Shares until such obligations are satisfied. If the Committee allows the withholding or surrender of Shares to satisfy a Participant's tax withholding obligations, the Committee shall not allow Shares to be withheld in an amount that exceeds the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes. (b) Default Rule for Employees. In the absence of any other arrangement, an Employee shall be deemed to have directed the Company to withhold or collect from his or her cash compensation an amount sufficient to satisfy such tax obligations from the next payroll payment otherwise payable after the date of the exercise of an Award. (c) Special Rules. In the case of a Participant other than an Employee (or in the case of an Employee where the next payroll payment is not sufficient to satisfy such tax obligations, with respect to any remaining tax obligations), in the absence of any other arrangement and to the extent permitted under Applicable Law, the Participant shall be deemed to have elected to have the Company withhold from the Shares or cash to be issued pursuant to an Award that number of Shares having a Fair Market Value determined as of the applicable Tax Date (as defined below) or cash equal to the amount required to be withheld. For purposes of this Section 11, the Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined under the Applicable Law (the "Tax Date"). (d) Surrender of Shares. If permitted by the Committee, in its discretion, a Participant may satisfy the minimum applicable tax withholding and employment tax obligations associated with an Award by surrendering Shares to the Company (including Shares that would otherwise be issued pursuant to the Award) that have a Fair Market Value determined as of the applicable Tax Date equal to the amount required to be withheld. In the case of Shares previously acquired from the Company that are surrendered under this Section 11, such Shares must have been owned by the Participant for more than six months on the date of surrender (or such longer period of time the Company may in its discretion require). (e) Income Taxes and Deferred Compensation. Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including any taxes arising under Section 409A of the Code), and the Company shall not have any obligation to indemnify or otherwise hold any Participant harmless from any or all of such taxes. The Administrator shall have the discretion to organize any deferral program, to require deferral election forms, and to grant or to unilaterally modify any Award in a manner that (i) conforms with the requirements of Section 409A of the Code with respect to compensation that is deferred and that vests after December 31, 2004, (ii) that voids any Participant election to the extent it would violate Section 409A of the Code, and (iii) for any distribution election that would violate Section 409A of the Code, to make distributions pursuant to the Award at the earliest to occur of a distribution event that is allowable under Section 409A of the Code or any distribution event that is both allowable under Section 409A of the Code and is elected by the Participant, subject to any valid second election to defer, provided that the Administrator permits second elections to defer in accordance with Section 409A(a)(4)(C). The Administrator shall have the sole discretion to interpret the requirements of the Code, including Section 409A, for purposes of the Plan and all Awards. 12. NON-TRANSFERABILITY OF AWARDS (a) General. Except as set forth in this Section 12, or as otherwise approved by the Committee, Awards may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution. The designation of a beneficiary by a Participant will not constitute a transfer. An Award may be exercised, during the lifetime of the holder of an Award, only by such holder, the duly-authorized legal representative of a Participant who is Disabled, or a transferee permitted by this Section 12. (b) Limited Transferability Rights. Notwithstanding anything else in this Section 12, the Committee may in its discretion provide in an Award Agreement that an Award other than an ISO may be transferred, on such terms and conditions as the Committee deems appropriate, either (i) by instrument to the Participant's "Immediate Family" (as defined below), (ii) by instrument to an inter vivos or testamentary trust (or other entity) in which the Award is to be passed to the Participant's designated beneficiaries, or (iii) by gift to charitable institutions. Any transferee of the Participant's rights shall succeed and be subject to all of the terms of this Award Agreement and the Plan. "Immediate Family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER TRANSACTIONS (a) Changes in Capitalization. The Committee shall equitably adjust the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan upon cancellation, forfeiture, or expiration of an Award, as well as the price per Share covered by each such outstanding Award, to reflect any increase or decrease in the number of issued Shares resulting from a stock-split, reverse stock-split, stock dividend, combination, recapitalization or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company. In the event of any such transaction or event, the Committee may provide in substitution for any or all outstanding Options under the Plan such alternative consideration (including securities of any surviving entity) as it may in good faith determine to be equitable under the circumstances and may require in connection therewith the surrender of all Options so replaced. In any case, such substitution of securities shall not require the consent of any person who is granted Options pursuant to the Plan. Except as expressly provided herein, or in an Award Agreement, if the Company issues for consideration shares of stock of any class or securities convertible into shares of stock of any class, the issuance shall not affect, and no adjustment by reason thereof shall be required to be made with respect to the number or price of Shares subject to any award. (b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company other than as part of a Change of Control, each Award will terminate immediately prior to the consummation of such action, subject to the ability of the Committee to exercise any discretion authorized in the case of a Change in Control. (c) Change in Control. In the event of a Change in Control, the Committee may in its sole and absolute discretion and authority, without obtaining the approval or consent of the Company's shareholders or any Participant with respect to his or her outstanding Awards, take one or more of the following actions: (i) arrange for or otherwise provide that each outstanding Award shall be assumed or a substantially similar award shall be substituted by a successor corporation or a parent or subsidiary of such successor corporation (the "Successor Corporation"); (ii) accelerate the vesting of Awards so that Awards shall vest (and, to the extent applicable, become exercisable) as to the Shares that otherwise would have been unvested and provide that repurchase rights of the Company with respect to Shares issued upon exercise of an Award shall lapse as to the Shares subject to such repurchase right; (iii) arrange or otherwise provide for the payment of cash or other consideration to Participants in exchange for the satisfaction and cancellation of outstanding Awards; or (iv) make such other modifications, adjustments or amendments to outstanding Awards or this Plan as the Committee deems necessary or appropriate, subject however to the terms of Section 15(a) below. Notwithstanding the above, in the event a Participant holding an Award assumed or substituted by the Successor Corporation in a Change in Control is Involuntarily Terminated by the Successor Corporation in connection with, or within 12 months following consummation of, the Change in Control, then any assumed or substituted Award held by the terminated Participant at the time of termination shall accelerate and become fully vested (and exercisable in full in the case of Options and SARs), and any repurchase right applicable to any Shares shall lapse in full, unless an Award Agreement provides for a more restrictive acceleration or vesting schedule or more restrictive limitations on the lapse of repurchase rights or otherwise places additional restrictions, limitations and conditions on an Award. The acceleration of vesting and lapse of repurchase rights provided for in the previous sentence shall occur immediately prior to the effective date of the Participant's termination, unless an Award Agreement provides otherwise. (d) Certain Distributions. In the event of any distribution to the Company's shareholders of securities of any other entity or other assets (other than dividends payable in cash or stock of the Company) without receipt of consideration by the Company, the Committee may, in its discretion, appropriately adjust the price per Share covered by each outstanding Award to reflect the effect of such distribution. 14. TIME OF GRANTING AWARDS. The date of grant ("Grant Date") of an Award shall be the date on which the Committee makes the determination granting such Award or such other date as is determined by the Committee, provided that in the case of an ISO, the Grant Date shall be the later of the date on which the Committee makes the determination granting such ISO or the date of commencement of the Participant's employment relationship with the Company. 15. MODIFICATION OF AWARDS AND SUBSTITUTION OF OPTIONS. (a) Modification, Extension, and Renewal of Awards. Within the limitations of the Plan, the Committee may modify an Award to accelerate the rate at which an Option or SAR may be exercised (including without limitation permitting an Option or SAR to be exercised in full without regard to the installment or vesting provisions of the applicable Award Agreement or whether the Option or SAR is at the time exercisable, to the extent it has not previously been exercised), to accelerate the vesting of any Award, to extend or renew outstanding Awards or to accept the cancellation of outstanding Awards to the extent not previously exercised. However, the Committee may not cancel an outstanding option that is underwater for the purpose of reissuing the option to the participant at a lower exercise price or granting a replacement award of a different type. Notwithstanding the foregoing provision, no modification of an outstanding Award shall materially and adversely affect such Participant's rights thereunder, unless either the Participant provides written consent or there is an express Plan provision permitting the Committee to act unilaterally to make the modification. (b) Substitution of Options. Notwithstanding any inconsistent provisions or limits under the Plan, in the event the Company or an Affiliate acquires (whether by purchase, merger or otherwise) all or substantially all of outstanding capital stock or assets of another corporation or in the event of any reorganization or other transaction qualifying under Section 424 of the Code, the Committee may, in accordance with the provisions of that Section, substitute Options for options under the plan of the acquired company provided (i) the excess of the aggregate fair market value of the shares subject to an option immediately after the substitution over the aggregate option price of such shares is not more than the similar excess immediately before such substitution and (ii) the new option does not give persons additional benefits, including any extension of the exercise period. 16. TERM OF PLAN. The Plan shall continue in effect for a term of ten (10) years from its effective date as determined under Section 20 below, unless the Plan is sooner terminated under Section 17 below. 17. AMENDMENT AND TERMINATION OF THE PLAN. (a) Authority to Amend or Terminate. Subject to Applicable Laws, the Board may from time to time amend, alter, suspend, discontinue, or terminate the Plan. (b) Effect of Amendment or Termination. No amendment, suspension, or termination of the Plan shall materially and adversely affect Awards already granted unless either it relates to an adjustment pursuant to Section 13 above, or it is otherwise mutually agreed between the Participant and the Committee, which agreement must be in writing and signed by the Participant and the Company. Notwithstanding the foregoing, the Committee may amend the Plan to eliminate provisions which are no longer necessary as a result of changes in tax or securities laws or regulations, or in the interpretation thereof. 18. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with Applicable Law, with such compliance determined by the Company in consultation with its legal counsel. 19. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Neither the Company nor the Committee shall, without shareholder approval, allow for a repricing within the meaning of the federal securities laws applicable to proxy statement disclosures. 20. EFFECTIVE DATE. This Plan shall become effective on the date of its approval by the Board; provided that this Plan shall be submitted to the Company's shareholders for approval, and if not approved by the shareholders in accordance with Applicable Laws (as determined by the Committee in its discretion) within one year from the date of approval by the Board, this Plan and any Awards shall be null, void, and of no force and effect. Awards granted under this Plan before approval of this Plan by the shareholders shall be granted subject to such approval, and no Shares shall be distributed before such approval. 21. CONTROLLING LAW. All disputes relating to or arising from the Plan shall be governed by the internal substantive laws (and not the laws of conflicts of laws) of the State of Montana, to the extent not preempted by United States federal law. If any provision of this Plan is held by a court of competent jurisdiction to be invalid and unenforceable, the remaining provisions shall continue to be fully effective. 22. LAWS AND REGULATIONS. (a) U.S. Securities Laws. This Plan, the grant of Awards, and the exercise of Options and SARs under this Plan, and the obligation of the Company to sell or deliver any of its securities (including, without limitation, Options, Restricted Shares, Restricted Share Units, Deferred Share Units, and Shares) under this Plan shall be subject to all Applicable Law. In the event that the Shares are not registered under the Securities Act of 1933, as amended (the "Act"), or any applicable state securities laws prior to the delivery of such Shares, the Company may require, as a condition to the issuance thereof, that the persons to whom Shares are to be issued represent and warrant in writing to the Company that such Shares are being acquired by him or her for investment for his or her own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Act, and a legend to that effect may be placed on the certificates representing the Shares. (b) Other Jurisdictions. To facilitate the making of any grant of an Award under this Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Affiliate outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Company may adopt rules and procedures relating to the operation and administration of this Plan to accommodate the specific requirements of local laws and procedures of particular countries. Without limiting the foregoing, the Company is specifically authorized to adopt rules and procedures regarding the conversion of local currency, taxes, withholding procedures and handling of stock certificates which vary with the customs and requirements of particular countries. The Company may adopt sub-plans and establish escrow accounts and trusts as may be appropriate or applicable to particular locations and countries. 23. NO SHAREHOLDER RIGHTS. Neither a Participant nor any transferee of a Participant shall have any rights as a shareholder of the Company with respect to any Shares underlying any Award until the date of issuance of a share certificate to a Participant or a transferee of a Participant for such Shares in accordance with the Company's governing instruments and Applicable Law. Prior to the issuance of Shares pursuant to an Award, a Participant shall not have the right to vote or to receive dividends or any other rights as a shareholder with respect to the Shares underlying the Award, notwithstanding its exercise in the case of Options and SARs. No adjustment will be made for a dividend or other right that is determined based on a record date prior to the date the stock certificate is issued, except as otherwise specifically provided for in this Plan. 24. NO EMPLOYMENT RIGHTS. The Plan shall not confer upon any Participant any right to continue an employment, service or consulting relationship with the Company, nor shall it affect in any way a Participant's right or the Company's right to terminate the Participant's employment, service, or consulting relationship at any time, with or without Cause. GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN ------------ APPENDIX A: DEFINITIONS ------------ As used in the Plan, the following definitions shall apply: "AFFILIATE" means, with respect to any Person (as defined below), any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, "control," when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person or the power to elect directors, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," "controlling" and "controlled" have meanings correlative to the foregoing. "APPLICABLE LAW" means the legal requirements relating to the administration of options and share-based plans under applicable U.S. federal and state laws, the Code, any applicable stock exchange or automated quotation system rules or regulations, and the applicable laws of any other country or jurisdiction where Awards are granted, as such laws, rules, regulations and requirements shall be in place from time to time. "AWARD" means any award made pursuant to the Plan, including awards made in the form of an Option, an SAR, a Restricted Share, a Restricted Share Unit, an Unrestricted Share, a Deferred Share Unit and a Performance Award, or any combination thereof, whether alternative or cumulative, authorized by and granted under this Plan. "AWARD AGREEMENT" means any written document setting forth the terms of an Award that has been authorized by the Committee. The Committee shall determine the form or forms of documents to be used, and may change them from time to time for any reason. "BOARD" means the Board of Directors of the Company. "CAUSE" for termination of a Participant's Continuous Service will exist if the Participant is terminated from employment or other service with the Company or an Affiliate for any of the following reasons: (i) the Participant's willful failure to substantially perform his or her duties and responsibilities to the Company or deliberate violation of a material Company policy; (ii) the Participant's commission of any material act or acts of fraud, embezzlement, dishonesty, or other willful misconduct; (iii) the Participant's material unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company; or (iv) Participant's willful and material breach of any of his or her obligations under any written agreement or covenant with the Company. The Committee shall in its discretion determine whether or not a Participant is being terminated for Cause. The Committee's determination shall, unless arbitrary and capricious, be final and binding on the Participant, the Company, and all other affected persons. The foregoing definition does not in any way limit the Company's ability to terminate a Participant's employment or consulting relationship at any time, and the term "Company" will be interpreted herein to include any Affiliate or successor thereto, if appropriate. "CHANGE IN CONTROL" means any of the following: (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in paragraph (III)(B) below; (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's shareholders was approved or recommended by the affirmative vote of a majority of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended ("Continuing Directors"); (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than a merger or consolidation in which (A) the Company's shareholders receive or retain voting common stock in the Company or the surviving or resulting corporation in such transaction on the same pro rata basis as their relative percentage ownership of Company common stock immediately preceding such transaction and a majority of the entire Board of the Company are or continue to be Continuing Directors following such transaction, or (B) the Company's shareholders receive voting common stock in the corporation which becomes the public parent of the Company or its successor in such transaction on the same pro rata basis as their relative percentage ownership of Company common stock immediately preceding such transaction and a majority of the entire Board of such parent corporation are Continuing Directors immediately following such transaction; (IV) the sale of any one or more Company subsidiaries, businesses or assets not in the ordinary course of business and pursuant to a shareholder approved plan for the complete liquidation or dissolution of the Company; or (V) there is consummated any sale of assets, businesses or subsidiaries of the Company which, at the time of the consummation of the sale, (x) together represent 50% or more of the total book value of the Company's assets on a consolidated basis or (y) generated 50% or more of the Company's pre-tax income on a consolidated basis in either of the two fully completed fiscal years of the Company immediately preceding the year in which the Change in Control occurs; provided, however, that, in either case, any such sale shall not constitute a Change in Control if such sale constitutes a Rule 13e-3 transaction and at least 60% of the combined voting power of the voting securities of the purchasing entity are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale. Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions. "CODE" means the U.S. Internal Revenue Code of 1986, as amended. "COMMITTEE" means one or more committees or subcommittees of the Board appointed by the Board to administer the Plan in accordance with Section 4 above. With respect to any decision involving an Award intended to satisfy the requirements of Section 162(m) of the Code, the Committee shall consist of two or more Directors of the Company who are "outside directors" within the meaning of Section 162(m) of the Code. With respect to any decision relating to a Reporting Person, the Committee shall consist of two or more Directors who are disinterested within the meaning of Rule 16b-3. "COMPANY" means Glacier Bancorp, Inc., a Montana corporation; provided, however, that in the event the Company reincorporates to another jurisdiction, all references to the term "Company" shall refer to the Company in such new jurisdiction. "CONSULTANT" means any person, including an advisor, who is engaged by the Company or any Affiliate to render services and is compensated for such services. "CONTINUOUS SERVICE" means the absence of any interruption or termination of service as an Employee, Director, or Consultant. Continuous Service shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; (iv) changes in status from Director to advisory director or emeritus status; or (iv) in the case of transfers between locations of the Company or between the Company, its Affiliates or their respective successors. Changes in status between service as an Employee, Director, and a Consultant will not constitute an interruption of Continuous Service. "DEFERRED SHARE UNITS" mean Awards pursuant to Section 9 of the Plan. "DIRECTOR" means a member of the Board, or a member of the board of directors of an Affiliate. "DISABLED" means a condition under which a Participant -- (a) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (b) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, received income replacement benefits for a period of not less than 3 months under an accident or health plan covering employees of the Company. "ELIGIBLE PERSON" means any Consultant, Director or Employee and includes non-Employees to whom an offer of employment has been extended. "EMPLOYEE" means any person whom the Company or any Affiliate classifies as an employee (including an officer) for employment tax purposes. The payment by the Company of a director's fee to a Director shall not be sufficient to constitute "employment" of such Director by the Company. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" means, as of any date (the "Determination Date") means: (i) the closing price of a Share on the New York Stock Exchange or the American Stock Exchange (collectively, the "Exchange"), on the Determination Date, or, if shares were not traded on the Determination Date, then on the nearest preceding trading day during which a sale occurred; or (ii) if such stock is not traded on the Exchange but is quoted on NASDAQ or a successor quotation system, (A) the last sales price (if the stock is then listed as a National Market Issue under The Nasdaq National Market System) or (B) the mean between the closing representative bid and asked prices (in all other cases) for the stock on the Determination Date as reported by NASDAQ or such successor quotation system; or (iii) if such stock is not traded on the Exchange or quoted on NASDAQ but is otherwise traded in the over-the-counter, the mean between the representative bid and asked prices on the Determination Date; or (iv) if subsections (i)-(iii) do not apply, the fair market value established in good faith by the Board. "GRANT DATE" has the meaning set forth in Section 14 of the Plan. "INCENTIVE SHARE OPTION OR ISO" hereinafter means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable Award Agreement. "INVOLUNTARY TERMINATION" means termination of a Participant's Continuous Service under the following circumstances occurring on or after a Change in Control: (i) termination without Cause by the Company or an Affiliate or successor thereto, as appropriate; or (ii) voluntary termination by the Participant within 60 days following (A) a material reduction in the Participant's job responsibilities, provided that neither a mere change in title alone nor reassignment to a substantially similar position shall constitute a material reduction in job responsibilities; (B) an involuntary relocation of the Participant's work site to a facility or location more than 50 miles from the Participant's principal work site at the time of the Change in Control; or (C) a material reduction in Participant's total compensation other than as part of an reduction by the same percentage amount in the compensation of all other similarly-situated Employees, Directors or Consultants. "NON-ISO" means an Option not intended to qualify as an ISO, as designated in the applicable Award Agreement. "OPTION" means any stock option granted pursuant to Section 6 of the Plan. "PARTICIPANT" means any holder of one or more Awards, or the Shares issuable or issued upon exercise of such Awards, under the Plan. "PERFORMANCE AWARDS" mean Performance Units and Performance Compensation Awards granted pursuant to Section 10. "PERFORMANCE COMPENSATION AWARDS" mean Awards granted pursuant to Section 10(b) of the Plan. "PERFORMANCE UNIT" means Awards granted pursuant to Section 10(a) of the Plan which may be paid in cash, in Shares, or such combination of cash and Shares as the Committee in its sole discretion shall determine. "PERSON" means any natural person, association, trust, business trust, cooperative, corporation, general partnership, joint venture, joint-stock company, limited partnership, limited liability company, real estate investment trust, regulatory body, governmental agency or instrumentality, unincorporated organization or organizational entity. "PLAN" means this Glacier Bancorp, Inc. 2005 Stock Incentive Plan. "REPORTING PERSON" means an officer, Director, or greater than ten percent shareholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act. "RESTRICTED SHARES" mean Shares subject to restrictions imposed pursuant to Section 8 of the Plan. "RESTRICTED SHARE UNITS" mean Awards pursuant to Section 8 of the Plan. "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as amended from time to time, or any successor provision. "SAR" OR "SHARE APPRECIATION RIGHT" means Awards granted pursuant to Section 7 of the Plan. "SHARE" means a share of common stock of the Company, as adjusted in accordance with Section 13 of the Plan. "TEN PERCENT HOLDER" means a person who owns stock representing more than ten percent (10%) of the combined voting power of all classes of stock of the Company or any Affiliate. "UNRESTRICTED SHARES" mean Shares awarded pursuant to Section 8 of the Plan. GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN As approved by the Board of Directors on __________ __, 200__ and by the shareholders on _________ __, 200__ EX-10.2 4 v08749exv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN ---------------------------- STOCK OPTION AWARD AGREEMENT ---------------------------- AWARD NO.________ You (the "Participant") are hereby awarded the following stock option (the "Option") to purchase Shares of Glacier Bancorp, Inc. (the "Company"), subject to the terms and conditions set forth in this Stock Option Award Agreement (the "Award Agreement") and in the Glacier Bancorp, Inc. 2005 Employee Incentive Plan (the "Plan"), which is attached hereto as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, before exercising this Option. By executing this Award Agreement, you agree to be bound by all of the Plan's terms and conditions as if they had been set out verbatim in this Award Agreement. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the "Board") of Glacier Bancorp, Inc. (the "Company") or any Committee appointed by the Board to administer the Plan, and shall (in the absence of manifest bad faith or fraud) be final, conclusive and binding on all parties, including you and your successors in interest. Capitalized terms are defined in the Plan or in this Award Agreement. 1. VARIABLE TERMS. This Option shall have, and be interpreted according to, the following terms, subject to the provisions of the Plan in all instances: Name of Participant: ____________________________ Type of Stock Option: [ ] Incentive Stock Option (ISO)(1) [ ] Non-Incentive Stock Option(2) Number of Shares subject to Option: ____________________________ Option Exercise Price per Share: ____________________________ Grant Date: ____________________________ Expiration Date: [ ] ____ years after Grant Date [ ] 10 years after Grant Date Vesting Schedule: (Establishes the Participant's rights to exercise this Option with respect to the Number of Shares stated above.) [ ] ___% on Grant Date. [ ] ___% on each of the first __(#) annual (_quarterly/__monthly) anniversary dates of the Participant's Continuous Service after the Grant Date. - ---------------- (1) If an ISO is awarded to a person owning more than 10% of the voting power of all classes of stock of the Company or of any Subsidiary, then the term of the Option cannot exceed 5 years and the exercise price must be at least 110% of the Fair Market Value (100% for any other employee who is receiving ISO awards). (2) The exercise price of a non-ISO must be at least 50% of the Fair Market Value. 2. TERM OF OPTION. The term of the Option will expire at 5:00 p.m. (E.D.T. or E.S.T., as applicable) on the Expiration Date. 3. MANNER OF EXERCISE. The Option shall be exercised in the manner set forth in the Plan. The amount of Shares for which the Option may be exercised is cumulative; that is, if you fail to exercise the Option for all of the Shares vested under the Option during any period set forth above, then any Shares subject to the Option that are not exercised during such period may be exercised during any subsequent period, until the expiration or termination of the Option pursuant to Sections 2 and 5 of this Award Agreement and the terms of the Plan. Fractional Shares may not be purchased. 4. SPECIAL ISO PROVISIONS. If designated as an ISO, this Option shall be treated as an ISO to the extent allowable under Section 422 of the Code, and shall otherwise be treated as a Non-ISO. If you sell or otherwise dispose of Shares acquired upon the exercise of an ISO within 1 year from the date such Shares were acquired or 2 years from the Grant Date, you agree to deliver a written report to the Company within 10 days following the sale or other disposition of such Shares detailing the net proceeds of such sale or disposition. 5. LONG-TERM CONSIDERATION FOR AWARD. The Participant recognizes and agrees that the Company's key consideration in granting this Option is securing the long-term commitment of the Participant to serve as a [INCLUDE JOB TITLE OR DESCRIPTION OF THE PARTICIPANT] who will advance and promote the Company's business interests and objectives. Accordingly, the Participant agrees to the following as a material and indivisible part of the consideration associated with this Award: (a) Fiduciary Duty. During his or her employment with the Company the Participant shall devote his or her full energies, abilities, attention and business time to the performance of his or her job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, his or her performance of such responsibilities. (b) Confidential Information. The Participant recognizes that by virtue of his or her employment with the Company, he or she will be granted otherwise prohibited access to confidential information and proprietary data which are not known, and not readily accessible to the Company's competitors. This information (the "Confidential Information") includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers' particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. The Participant recognizes that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, the Participant agrees that he or she shall not, at any time during or after his or her employment with the Company, divulge such Confidential Information or make use of it for his or her own purposes or the purposes of any person or entity other than the Company. (c) Non-Solicitation of Customers. The Participant recognizes that by virtue of his or her employment with the Company he or she will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during his or her employment. The Participant understands and agrees that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. The Participant further agrees that during his or her employment with the Company the Participant will not engage in any conduct which could in any way jeopardize or disturb any of the Company's customer relationships. The Participant also recognizes the Company's legitimate interest in protecting, for a reasonable period of time after his or her employment with the Company, the Company's customers. Accordingly, the Participant agrees that, for a period beginning on the date hereof and ending one (1) year after termination of Participant's employment with the Company, regardless of the reason for such termination, the Participant shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company. (d) Non-Solicitation of Employees. The Participant recognizes the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, the Participant agrees that, for a period beginning on the date hereof and ending two (2) years after termination of Participant's employment with the Company, regardless of the reason for such termination, the Participant shall not, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company. (e) Survival of Commitments; Potential Recapture of Award and Proceeds. The Participant acknowledges and agrees that the terms and conditions of this Section 5 regarding confidentiality and non-solicitation shall survive both (i) the termination of Participant's employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. The Participant acknowledges and agrees that the grant of Options in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if the Participant either violates the terms of this Section or succeeds for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award): (i) declaration that the Award is null and void and of no further force or effect; (ii) recapture of any cash paid or Shares issued to the Participant, or any designee or beneficiary of the Participant, pursuant to the Award; (iii) recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by the Participant, or any designee or beneficiary of the Participant. The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief. (f) Acknowledgement. The Participant acknowledges and agrees that his or her adherence to the foregoing requirements will not prevent him or her from engaging in his or her chosen occupation and earning a satisfactory livelihood following the termination of his or her employment with the Company. 6. TERMINATION OF CONTINUOUS SERVICE. If your Continuous Service with the Company is terminated for any reason, this Option shall terminate on the date on which you cease to have any right to exercise the Option pursuant to the terms and conditions set forth in Section 6 of the Plan. 7. OCCURRENCE OF A CHANGE IN CORPORATE CONTROL. Notwithstanding Section 13(c) of the Plan, if this Option is assumed or substituted by a Successor Corporation in a Change in Control, and your employment is Involuntarily Terminated by the Successor Corporation in connection with, or within 12 months following consummation of, the Change in Control, then your right to exercise this Option shall not become fully vested and exercisable unless the Committee provides you with written notice that the Committee has decided, in its sole and absolute discretion, to accelerate such vesting. 8. DESIGNATION OF BENEFICIARY. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a beneficiary (the "Beneficiary") to his or her interest in the Option awarded hereby. You shall designate the Beneficiary by completing and executing a designation of beneficiary agreement substantially in the form attached hereto as Exhibit C (the "Designation of Beneficiary") and delivering an executed copy of the Designation of Beneficiary to the Company. 9. NOTICES. Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed. 10. BINDING EFFECT. Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees, and assigns. 11. MODIFICATIONS. This Award Agreement may be modified or amended at any time, provided that you must consent in writing to any modification that adversely alters or impairs any rights or obligations under this Option. 12. HEADINGS. Section and other headings contained in this Award Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope or intent of this Award Agreement or any provision hereof. 13. SEVERABILITY. Every provision of this Award Agreement and of the Plan is intended to be severable. If any term hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity or legality of the remaining terms of this Award Agreement. 14. GOVERNING LAW. The laws of the State of Montana shall govern the validity of this Award Agreement, the construction of its terms, and the interpretation of the rights and duties of the parties hereto. 15. COUNTERPARTS. This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 16. PLAN GOVERNS. By signing this Award Agreement, you acknowledge that you have received a copy of the Plan and that your Award Agreement is subject to all the provisions contained in the Plan, the provisions of which are made a part of this Award Agreement and your Award is subject to all interpretations, amendments, rules and regulations which from time to time may be promulgated and adopted pursuant to the Plan. In the event of a conflict between the provisions of this Award Agreement and those of the Plan, the provisions of the Plan shall control. 17. RESTRICTIONS ON TRANSFER. This Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee. Notwithstanding the foregoing, the Participant may transfer this Option (i) by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section 17, or (ii) by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of the Participant (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of the Participant): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. Any transferee of the Participant's rights shall succeed and be subject to all of the terms of this Award Agreement and the Plan. 18. TAXES. By signing this Award Agreement, you acknowledge that you shall be solely responsible for the satisfaction of any taxes that may arise (including taxes arising under Sections 409A or 4999 of the Code), and that neither the Company nor the Administrator shall have any obligation whatsoever to pay such taxes. BY YOUR SIGNATURE BELOW, along with the signature of the Company's representative, you and the Company agree that the Option is awarded under and governed by the terms and conditions of this Award Agreement and the Plan. GLACIER BANCORP, INC. By: ____________________________________ Name: Title: PARTICIPANT The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan. By: ____________________________________ Name of Participant: _______________ GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT A PLAN DOCUMENT GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT B PLAN PROSPECTUS GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT C DESIGNATION OF BENEFICIARY In connection with the STOCK OPTION AWARD AGREEMENT (the "Award Agreement") entered into on _______________, 200_ between Glacier Bancorp, Inc. (the "Company") and _______________, an individual residing at _______________ (the "Participant"), you hereby designate the person specified below as the beneficiary of the Participant's interest in a stock option to purchase________ Shares (as defined in the 2005 Stock Incentive Plan) of the Company awarded pursuant to the Award Agreement. This designation shall remain in effect until revoked in writing by the Participant. Name of Beneficiary: _____________________________ Address: _____________________________ _____________________________ _____________________________ Social Security No.: _____________________________ You understand that this designation operates to entitle the above-named beneficiary to the rights conferred by the Award Agreement from the date this form is delivered to the Company until such date as this designation is revoked in writing by you, including by delivery to the Company of a written designation of beneficiary executed by you on a later date. Date:___________________ By:___________________ [Participant Name] Sworn to before me this ____ day of ____________, 200_ ________________________________ Notary Public County of _____________________ State of _____________________ EX-10.3 5 v08749exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN -------------------------------- RESTRICTED SHARES AWARD AGREEMENT -------------------------------- AWARD NO. __________ DATE __________ You are hereby awarded Restricted Shares subject to the terms and conditions set forth in this Restricted Shares Award Agreement ("Award Agreement"), and in the Glacier Bancorp, Inc. 2005 Stock Incentive Plan (the "Plan"), which is attached hereto as Exhibit A. A summary of the Plan appears in its Prospectus, which is attached as Exhibit B. You should carefully review these documents, and consult with your personal financial advisor, in order to fully understand the implications of this Award, including your tax alternatives and their consequences. By executing this Award Agreement, you agree to be bound by all of the Plan's terms and conditions as if they had been set out verbatim in this Award Agreement. In addition, you recognize and agree that all determinations, interpretations, or other actions respecting the Plan and this Award Agreement will be made by the Board of Directors (the "Board") of Glacier Bancorp, Inc. (the "Company") or the Committee pursuant to Section 4(c) of the Plan, and that such determinations, interpretations or other actions are (in the absence of manifest bad faith or fraud) final, conclusive and binding upon all parties, including you, your heirs, and representatives. Capitalized terms are defined in the Plan or in this Award Agreement. 1. SPECIFIC TERMS. Your Restricted Shares have the following terms: Name of Participant Number of Shares Subject to Award Agreement Purchase Price per Share (if applicable) Not applicable. Award Date Vesting Your Restricted Shares under this Award Agreement shall vest at the rate of _____ on _____ __, 20__ , _____ on ______ ___, 20___and the remaining _____ on _____ __, 20__; subject in each case to acceleration as provided in the Plan, to the shareholder approval condition set forth in Section 7 below, and to your Continuous Service with the Company not ending before the vesting date Lifetime Transfer Allowed. 2. DIVIDENDS. Any cash dividends on your Restricted Shares will be held by the Company (unsegregated as part of its general assets) until the period of forfeiture lapses (and forfeited if the underlying Shares are forfeited), and paid over to you as soon as practicable after such period lapses (if not forfeited). 3. INVESTMENT PURPOSES. You acknowledge that you are acquiring your Restricted Shares for investment purposes only and without any present intention of selling or distributing them. 4. ISSUANCE OF RESTRICTED SHARES. Until all vesting restrictions lapse, any certificates that you receive for Restricted Shares will include a legend stating that they are subject to the restrictions set forth in the Plan and this Award Agreement. 5. LAPSE OF VESTING RESTRICTIONS. As vesting restrictions lapse, the Company shall cause certificates for Shares to be issued and delivered to you, with such legends and restrictions that the Committee determines to be appropriate. Certificates shall not be delivered to you unless you have made arrangements satisfactory to the Committee to satisfy tax-withholding obligations. 6. LONG-TERM CONSIDERATION FOR AWARD. The Participant recognizes and agrees that the Company's key consideration in granting this Option is securing the long-term commitment of the Participant to serve as a trusted executive officer who will advance and promote the Company's business interests and objectives. Accordingly, the Participant agrees to the following as material and indivisible consideration for this Award: (a) Fiduciary Duty. During his or her employment with the Company the Participant shall devote his or her full energies, abilities, attention and business time to the performance of his or her job responsibilities and shall not engage in any activity which conflicts or interferes with, or in any way compromises, his or her performance of such responsibilities. (b) Confidential Information. The Participant recognizes that by virtue of his or her employment with the Company, he or she will be granted otherwise prohibited access to confidential information and proprietary data which are not known to the Company's competitors. This information (the "Confidential Information") includes, but is not limited to, current and prospective customers; the identity of key contacts at such customers; customers' particularized preferences and needs; marketing strategies and plans; financial data; personnel data; compensation data; proprietary procedures and processes; and other unique and specialized practices, programs and plans of the Company and its customers and prospective customers. The Participant recognizes that this Confidential Information constitutes a valuable property of the Company, developed over a significant period of time and at substantial expense. Accordingly, the Participant agrees that he or she shall not, at any time during or after his or her employment with the Company, divulge such Confidential Information or make use of it for his or her own purposes or the purposes of any person or entity other than the Company. (c) Non-Solicitation of Customers. The Participant recognizes that by virtue of his or her employment with the Company he or she will be introduced to and involved in the solicitation and servicing of existing customers of the Company and new customers obtained by the Company during his or her employment. The Participant understands and agrees that all efforts expended in soliciting and servicing such customers shall be for the permanent benefit of the Company. The Participant further agrees that during his or her employment with the Company the Participant will not engage in any conduct which could in any way jeopardize or disturb any of the Company's customer relationships. The Participant also recognizes the Company's legitimate interest in protecting, for a reasonable period of time after his or her employment with the Company, the Company's customers. Accordingly, the Participant agrees that, for a period beginning on the date hereof and ending one (1) year after termination of Participant's employment with the Company, regardless of the reason for such termination, the Participant shall not, directly or indirectly, without the prior written consent of the Chairman of the Company, market, offer, sell or otherwise furnish any products or services similar to, or otherwise competitive with, those offered by the Company to any customer of the Company. (d) Non-Solicitation of Employees. The Participant recognizes the substantial expenditure of time and effort which the Company devotes to the recruitment, hiring, orientation, training and retention of its employees. Accordingly, the Participant agrees that, for a period beginning on the date hereof and ending two (2) years after termination of Participant's employment with the Company, regardless of the reason for such termination, the Participant shall not, directly or indirectly, for himself or herself or on behalf of any other person or entity, solicit, offer employment to, hire or otherwise retain the services of any employee of the Company. (e) Survival of Commitments; Potential Recapture of Award and Proceeds. The Participant acknowledges and agrees that the terms and conditions of this Section 6 regarding confidentiality and non-solicitation shall survive both (i) the termination of Participant's employment with the Company for any reason, and (ii) the termination of the Plan, for any reason. The Participant acknowledges and agrees that the grant of Restricted Shares in this Award Agreement is just and adequate consideration for the survival of the restrictions set forth herein, and that the Company may pursue any or all of the following remedies if the Participant either violates the terms of this Section or succeeds for any reason in invalidating any part of it (it being understood that the invalidity of any term hereof would result in a failure of consideration for the Award): (i) declaration that the Award is null and void and of no further force or effect; (ii) recapture of any cash paid or Shares issued to the Participant, or any designee or beneficiary of the Participant, pursuant to the Award; (iii) recapture of the proceeds, plus reasonable interest, with respect to any Shares that are both issued pursuant to this Award and sold or otherwise disposed of by the Participant, or any designee or beneficiary of the Participant. The remedies provided above are not intended to be exclusive, and the Company may seek such other remedies as are provided by law, including equitable relief. (f) Acknowledgement. The Participant acknowledges and agrees that his or her adherence to the foregoing requirements will not prevent him or her from engaging in his or her chosen occupation and earning a satisfactory livelihood following the termination of his or her employment with the Company. 7. SECTION 83(b) ELECTION NOTICE. If you make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the Shares underlying your Restricted Shares (a "Section 83(b) election"), you agree to provide a copy of such election to the Company within 10 days after filing that election with the Internal Revenue Service. Exhibit C contains a suggested form of Section 83(b) election. 8. SHAREHOLDER APPROVAL CONDITION. Notwithstanding anything to the contrary contained herein or in the Plan and pursuant to Section 20 of the Plan, this Award Agreement is expressly conditioned on the Plan being approved by the shareholders of the Company. Accordingly, no Shares shall be delivered hereunder until such approval has been obtained, and this Award Agreement shall become null, void, and of no force or effect if such approval is not received within the period set forth in Section 20 of the Plan. 9. TRANSFER. This Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee. 10. DESIGNATION OF BENEFICIARY. Notwithstanding anything to the contrary contained herein or in the Plan, following the execution of this Award Agreement, you may expressly designate a beneficiary (the "Beneficiary") to your interest, if any, in the Restricted Shares awarded hereby. You shall designate the Beneficiary by completing and executing a designation of beneficiary agreement substantially in the form attached hereto as Exhibit D (the "Designation of Beneficiary") and delivering an executed copy of the Designation of Beneficiary to the Company. 11. NOTICES. Any notice or communication required or permitted by any provision of this Award Agreement to be given to you shall be in writing and shall be delivered personally or sent by certified mail, return receipt requested, addressed to you at the last address that the Company had for you on its records. Each party may, from time to time, by notice to the other party hereto, specify a new address for delivery of notices relating to this Award Agreement. Any such notice shall be deemed to be given as of the date such notice is personally delivered or properly mailed. 12. BINDING EFFECT. Except as otherwise provided in this Award Agreement or in the Plan, every covenant, term, and provision of this Award Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees, and assigns. 13. MODIFICATIONS. This Award Agreement may be modified or amended at any time by the Committee, provided that your consent must be obtained for any modification that adversely alters or impairs any rights or obligations under this Award Agreement, unless there is an express Plan provision permitting the Committee to act unilaterally to make the modification. 14. HEADINGS. Headings shall be ignored in interpreting this Award Agreement. 15. SEVERABILITY. Every provision of this Award Agreement and the Plan is intended to be severable, and any illegal or invalid term shall not affect the validity or legality of the remaining terms. 16. GOVERNING LAW. This Award Agreement shall be interpreted, administered and otherwise subject to the laws of the State of Montana (disregarding any choice-of-law provisions). 17. COUNTERPARTS. This Award Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute the same instrument. 18. RESTRICTIONS ON TRANSFER. This Award Agreement may not be sold, pledged, or otherwise transferred without the prior written consent of the Committee. Notwithstanding the foregoing, the Participant may transfer this Award (i) by instrument to an inter vivos or testamentary trust (or other entity) in which each beneficiary is a permissible gift recipient, as such is set forth in subsection (ii) of this Section 16, or (ii) by gift to charitable institutions or by gift or transfer for consideration to any of the following relatives of the Participant (or to an inter vivos trust, testamentary trust or other entity primarily for the benefit of the following relatives of the Participant): any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, domestic partner, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. Any transferee of the Participant's rights shall succeed and be subject to all of the terms of this Award Agreement and the Plan. 0 1 BY YOUR SIGNATURE BELOW, along with the signature of the Company's representative, you and the Company agree that the Restricted Shares are awarded under and governed by the terms and conditions of this Award Agreement and the Plan. 2 GLACIER BANCORP, INC. By: ____________________________________ Name: Title: PARTICIPANT The undersigned Participant hereby accepts the terms of this Award Agreement and the Plan. By: ____________________________________ Name of Participant: ______________ GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT A PLAN DOCUMENT GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT B PLAN PROSPECTUS GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT C SECTION 83(b) ELECTION FORM Attached is an Internal Revenue Code Section 83(b) Election Form. IF YOU WISH TO MAKE A SECTION 83(B) ELECTION, YOU MUST DO SO WITHIN 30 DAYS AFTER THE DATE THE RESTRICTED SHARES COVERED BY THE ELECTION WERE TRANSFERRED TO YOU. In order to make the election, you must completely fill out the attached form and file one copy with the Internal Revenue Service office where you file your tax return. In addition, one copy of the statement also must be submitted with your income tax return for the taxable year in which you make this election. Finally, you also must submit a copy of the election form to the Company within 10 days after filing that election with the Internal Revenue Service. A Section 83(b) election normally cannot be revoked. GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN -------------------------------------------------------------- ELECTION TO INCLUDE VALUE OF RESTRICTED SHARES IN GROSS INCOME IN YEAR OF TRANSFER UNDER INTERNAL REVENUE CODE SECTION 83(b) -------------------------------------------------------------- Pursuant to Section 83(b) of the Internal Revenue Code, I hereby elect within 30 days after receiving the property described herein to be taxed immediately on its value specified in item 5 below. 1. My General Information: Name: __________________________________ Address: ________________________________ S.S.N. ________________________________ or T.I.N.: ___________________________ 2. Description of the property with respect to which I am making this election: ____________________ shares of ___________ stock of Glacier Bancorp, Inc. (the "Restricted Shares"). 3. The Restricted Shares were transferred to me on ______________ ___, 20__. This election relates to the 20____ calendar taxable year. 4. The Restricted Shares are subject to the following restrictions: The Restricted Shares are forfeitable until they is are earned in accordance with Section 8 of the Glacier Bancorp, Inc. 2005 Stock Incentive Plan ("Plan") Restricted Shares Award Agreement ("Award Agreement") or other Award Agreement or Plan provisions. The Restricted Shares generally are not transferable until my interest becomes vested and nonforfeitable, pursuant to the Award Agreement and the Plan. 5. Fair market value: The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms never will lapse) of the Restricted Shares with respect to which I am making this election is $_____ per share. 6. Amount paid for Restricted Shares: The amount I paid for the Restricted Shares is $____ per share. 7. Furnishing statement to employer: A copy of this statement has been furnished to my employer, ______________. If the transferor of the Restricted Shares is not my employer, that entity also has been furnished with a copy of this statement. 8. Award Agreement or Plan not affected: Nothing contained herein shall be held to change any of the terms or conditions of the Award Agreement or the Plan. Dated: ____________ __, 200_. _________________________ Taxpayer GLACIER BANCORP, INC. 2005 STOCK INCENTIVE PLAN EXHIBIT D DESIGNATION OF BENEFICIARY In connection with the RESTRICTED SHARE AWARD AGREEMENT (the "Award Agreement") entered into on _______________, 200_ between Glacier Bancorp, Inc. (the "Company") and _______________, an individual residing at _______________ (the "Recipient"), the Recipient hereby designates the person specified below as the beneficiary of the Recipient's interest in Restricted Shares (as defined in the 2004 Employee Incentive Plan of the Company awarded pursuant to the Award Agreement. This designation shall remain in effect until revoked in writing by the Recipient. Name of Beneficiary: ___________________________ Address: ___________________________ ___________________________ ___________________________ Social Security No.: ___________________________ The Recipient understands that this designation operates to entitle the above-named beneficiary to the rights conferred by the Award Agreement from the date this form is delivered to the Company until such date as this designation is revoked in writing by the Recipient, including by delivery to the Company of a written designation of beneficiary executed by the Recipient on a later date. Date: ____________________________ By: ____________________________ [Recipient Name] Sworn to before me this ____ day of ____________, 200_ ______________________________ Notary Public County of ____________________ State of ____________________ EX-31.1 6 v08749exv31w1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATIONS I, Michael J. Blodnick, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Glacier Bancorp, Inc 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 5, 2005 /s/ Michael J. Blodnick ------------------------ Michael J. Blodnick President/CEO EX-31.2 7 v08749exv31w2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATIONS I, James H. Strosahl, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Glacier Bancorp, Inc 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. May 5, 2005 /s/ James H. Strosahl ---------------------- James H. Strosahl Executive Vice President/CFO EX-32 8 v08749exv32.txt EXHIBIT 32 EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Glacier Bancorp, Inc. (the "Company") on form 10-Q for the period ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Michael J. Blodnick, President and Chief Executive Officer, and James H. Strosahl, Executive Vice President and Chief Financial Officer, of Glacier Bancorp, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. May 5, 2005 /s/ Michael J. Blodnick ------------------------ Michael J. Blodnick President/CEO /s/ James H. Strosahl ---------------------- James H. Strosahl Executive Vice President/CFO -----END PRIVACY-ENHANCED MESSAGE-----