-----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, Gsm/6nLcuUn68cw9rJXxL3GO/8hz5H3uvBbrNl4rEHpgDLJKa4WIq84HKrxG+gs7 MELHaVBjmNpPxvGQXwCr/Q== 0000912057-96-022878.txt : 19961016 0000912057-96-022878.hdr.sgml : 19961016 ACCESSION NUMBER: 0000912057-96-022878 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961001 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961015 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST INTERSTATE BANCSYSTEM OF MONTANA INC CENTRAL INDEX KEY: 0000860413 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 810331430 STATE OF INCORPORATION: MT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-64304 FILM NUMBER: 96643796 BUSINESS ADDRESS: STREET 1: P O BOX 30918 STREET 2: 401 NO 31ST STREET CITY: BILLINGS STATE: MT ZIP: 59116-0918 BUSINESS PHONE: 4062555300 8-K 1 8-K Securities and Exchange Commission Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (date of earliest event reported) October 1, 1996 ------------------ First Interstate BancSystem of Montana, Inc. ---------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Montana 333-3250 81-0331430 ---------------------------------------------------------------------- (State or other jurisdiction (Commission IRS Employer of incorporation or File No.) Identification No. organization P.O. Box 30918, 401 North 31st Street, Billings, MT 59116-0918 ----------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 406/255-5300 -------------------- Not applicable ------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 1 Item 2. ACQUISITION OR DISPOSITION OF ASSETS On October 1, 1996, First Interstate BancSystem of Montana, Inc. completed the purchase of all of the outstanding stock of First Interstate Bank of Montana, N.A. which has offices in the Montana communities of Kalispell, Great Falls, and Cut Bank, and all of the outstanding stock of First Interstate Bank of Wyoming, N.A. which has offices in the Wyoming communities of Casper, Riverton, and Laramie. Total assets of the banks acquired were approximately $550 million. The banks were purchased from Wells Fargo & Company for a total cash purchase price of $72,000,000, subject to adjustment, up or down, to the extent the historical net book value of the banks acquired at closing, excluding net income tax assets and seller's "push down" purchase accounting adjustments are greater or less than $35,832,433. Such purchase price adjustment is to be computed and settled between the parties 30 days subsequent to the closing on October 1, 1996. For accounting purposes, the acquisition will be accounted for as a purchase. Adjustments to the fair value of the net assets acquired will be "pushed down" to the respective banks acquired. Although the acquisition will be accomplished through the purchase of stock, the transaction will be treated as a purchase of assets and assumption of liabilities for income tax purposes. The purchase was funded through a combination of $20 million perpetual preferred stock, $20 million subordinated debentures and $31 million additional senior term debt. Additional financing and acquisition costs of approximately $2,129,000 were funded from working capital. Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial statements of businesses acquired. As of the date hereof, it is impractical for the Company to provide the required financial statements of the businesses acquired. The Company will file the required financial statements of the acquired businesses under cover of Form 8-K/A as soon as practicable, but not later than 60 days after the date of filing hereof. (b) Pro forma financial information As of the date hereof, it is impractical for the Company to provide the required pro forma financial information. The Company will file the required pro forma financial information under cover of Form 8-K/A as soon as practicable, but not later than 60 days after the date of filing hereof. 2 (c) Exhibits 2.1 Stock Purchase Agreement dated May 24, 1996 between First Interstate BancSystem of Montana, Inc. and Wells Fargo & Company. 3.1.1 Articles of Amendment to Restated Articles of Incorporation dated September 19, 1996. 3.1.2 Articles of Amendment to Restated Articles of Incorporation dated September 19, 1996. 4.4 Preferred Stock Purchase Agreement dated September 26, 1996 between First Interstate BancSystem of Montana, Inc. and First Security Corporation. 10.3 Loan Agreement dated October 1, 1996 between First Interstate BancSystem of Montana, Inc., as borrower, and First Security Bank, NA, Colorado National Bank, NA and Wells Fargo Bank, NA. 10-13 Note Purchase Agreement dated August 30, 1996 between First Interstate BancSystem of Montana, Inc. and the Montana Board of Investments. 27 As of the date hereof, it is impractical for the Company to provide the required Financial Data Schedules of the businesses acquired. The Company will file the required Financial Data Schedules of the acquired businesses under cover of Form 8-K/A as soon as practicable, but not later than 60 days after the date of filing hereof. SIGNATURE 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, on October 10, 1996. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By: /s/ Terrill R. Moore --------------------------------- Terrill R. Moore Senior Vice President and Chief Financial Officer 3 EX-2.1 2 STOCK PURCHASE AGREEMENT ________________________ STOCK PURCHASE AGREEMENT ________________________ dated as of the 24th day of May, 1996 by and between FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. AND WELLS FARGO & COMPANY for the outstanding capital stock of FIRST INTERSTATE BANK OF MONTANA, N.A. and FIRST INTERSTATE BANK OF WYOMING, N.A. TABLE OF CONTENTS RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 B. SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 C. BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 D. SALE AND PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 E. APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE I - Sale and Purchase of Shares. . . . . . . . . . . . . . . . . . . 2 1.1 SALE AND PURCHASE OF SHARES. . . . . . . . . . . . . . . . . . . . 2 1.2 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3 EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE II - Representations and Warranties. . . . . . . . . . . . . . . . . 4 2.1 REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . 4 2.2 REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . 14 2.3 RIGHT TO CURE. . . . . . . . . . . . . . . . . . . . . . . . . . . .16 2.4 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 17 2.5 NO OTHER REPRESENTATIONS OR WARRANTIES . . . . . . . . . . . . . . 17 ARTICLE III - Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.1 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME . . . . . . . . . . 18 3.2 ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 20 3.3 REASONABLE EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . 21 3.4 NOTICE OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . . 21 3.5 NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.6 USE OF BANK INFORMATION. . . . . . . . . . . . . . . . . . . . . . .22 3.7 PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.8 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.9 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 3.10 RIGHT TO CURE. . . . . . . . . . . . . . . . . . . . . . . . . . . .26 ARTICLE IV - Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE SALE . . . . . 26 4.2 CONDITIONS TO OBLIGATION OF SELLER . . . . . . . . . . . . . . . . 27 4.3 CONDITIONS TO OBLIGATION OF BUYER. . . . . . . . . . . . . . . . . 28 ARTICLE V - Termination, Amendment and Waiver. . . . . . . . . . . . . . . . 29 5.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.2 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 29 5.3 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VI - Franchise Agreements and Name . . . . . . . . . . . . . . . . . 30 6.1 CONTINUED USE OF FIRST INTERSTATE NAME, LOGO AND TRADEMARK . . . . 30 6.2 MUTUAL RELEASE OF ALL CLAIMS . . . . . . . . . . . . . . . . . . . 30 6.3 SEPARATE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 30 6.4 NON-COMPETITION. . . . . . . . . . . . . . . . . . . . . . . . . . 30 6.5 RESOLUTIONS OF CERTAIN RELATIONSHIPS . . . . . . . . . . . . . . . 31 ARTICLE VII - Post-Effective Time Provisions . . . . . . . . . . . . . . . . 32 7.1 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.2 LIMIT ON INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 32 ii 7.3 NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.4 SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 7.5 CONTROL DISBURSEMENT ACCOUNTS. . . . . . . . . . . . . . . . . . . .32 7.6 DATA PROCESSING SERVICES . . . . . . . . . . . . . . . . . . . . . .33 7.7 TRANSFER OF BANK BOOKS, RECORDS AND INFORMATION. . . . . . . . . . .33 ARTICLE VIII - Transferred Employees . . . . . . . . . . . . . . . . . . . . .33 8.1 TRANSFERRED EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . .33 ARTICLE IX - General Provisions. . . . . . . . . . . . . . . . . . . . . . . 36 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 36 9.2 INTERPRETATION OF CERTAIN TERMS. . . . . . . . . . . . . . . . . . 36 9.3 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.4 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 9.5 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 9.6 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.7 ENTIRE AGREEMENT; INTERPRETATION . . . . . . . . . . . . . . . . . 38 9.8 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.9 NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . 38 9.10 AMENDMENT: WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . 38 9.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.12 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.13 TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 iii INDEX OF DEFINED TERMS Defined Term Section - ------------ ------- "Asset Classification" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(i) "Bank Common Stock". . . . . . . . . . . . . . . . . . . . . . . . . . Recital C "Bank Property" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(r)(ii) "Banks" . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital C; 9.2(a) "BHC Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital A "Book Value of Shareholder's Equity" . . . . . . . . . . . . . . . . . 1.2(b)(i) "Business" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(r)(i) "Buyer". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(c) "California State Section 338(h)(10) Election" . . . . . . . . . . . . 3.9(b)(i) "Call Reports" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(h)(ii) "Closing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4(a) "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q)(ii) "Compensation Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q) "Confidentiality Agreement". . . . . . . . . . . . . . . . . . . . . . . .3.2(b) "Contracts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(g)(ii) "Control Disbursement Accounts". . . . . . . . . . . . . . . . . . . . . . . 7.5 "Customer Information" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 "Dividends". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(c) "Effective Time" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 iv "Employees" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q)(i) "Encumbrances" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(d)(ii) "Environmental Law" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(r)(i) "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q)(i) "ERISA Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q)(i) "Executive Officer". . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(d) "Fair Lending Laws" . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(l)(i) "FDI Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(b) "FDIC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(b) "Fed". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)(iii) "Fed Application". . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)(ii) "Final Settlement Payment" . . . . . . . . . . . . . . . . . . . . . .3.9(e)(ii) "Financing". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(a)(i) "Franchise Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 "FRB Approval" . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital E "Governmental Entities". . . . . . . . . . . . . . . . . . . . . . . . . 2.1(f) "Hazardous Substances" . . . . . . . . . . . . . . . . . . . . . . . . 2.1(r)(i) "Insurance Policies" . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(o) "Intercompany Agreements". . . . . . . . . . . . . . . . . . . . . . 2.1(s)(iii) "License Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 "Losses" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . .2.4(b) "OCC". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2(c) v "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.1(c) "Plans" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(q)(i) "Post-Closing Tax Period". . . . . . . . . . . . . . . . . . . . . . . 3.9(c)(i) "Pre-Closing Tax Period" . . . . . . . . . . . . . . . . . . . . . . 3.9(c)(ii) "Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.2(a) "Representatives" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2(a) "Sale" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 "Section 338(h)(10) Election". . . . . . . . . . . . . . . . . . . . . . 3.9(a) "Securities Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(e) "Seller" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2(b) "Service Contracts'. . . . . . . . . . . . . . . . . . . . . . . . . 2.1(s)(iv) "Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recital D "State or Other Pre-Closing Tax Period". . . . . . . . . . . . . . . . 3.9(c)(i) "Tax" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1(n)(i) "Tax Sharing Agreement". . . . . . . . . . . . . . . . . . . . . . . . . 3.9(g) "Termination Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4(a) "Transferred Employees". . . . . . . . . . . . . . . . . . . . . . . . . 8.1(a) "Wyoming Commissioner" . . . . . . . . . . . . . . . . . . . . . . . Recital E vi STOCK PURCHASE AGREEMENT, dated as of the 24th day of May, 1996, (this "Agreement"), by and between FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. ("Buyer") and WELLS FARGO & COMPANY ("Seller"). RECITALS A. BUYER. Buyer has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Montana, with its principal executive offices located in Billings, Montana. Buyer is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the "BHC Act"). B. SELLER. Seller has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Delaware, with its principal executive offices located in San Francisco, California. Seller is a bank holding company registered under the BHC Act. C. BANKS. First Interstate Bank of Montana, N.A. and First Interstate Bank of Wyoming, N.A. ("Banks") are validly existing national banking associations organized under the laws of the United States, with their principal executive offices located in Kalispell, Montana and Casper, Wyoming, respectively. The Montana Bank has 664,608 authorized shares of common stock, par value $10.00 per share, and the Wyoming Bank has 11,751 authorized shares, par value $100.00 per share ("Bank Common Stock") (no other class or series of capital stock being authorized). Seller is the sole record and beneficial owner of all of the issued and outstanding shares of Bank Common Stock. D. SALE AND PURCHASE. At the Effective Time (as defined in Section 1.3), Seller intends to sell to Buyer and Buyer intends to buy from Seller all of the shares of Bank Common Stock then issued and outstanding (the "Shares"). E. APPROVALS. The Boards of Directors of Buyer and Seller (at meetings duly called and held) have determined that this Agreement and the transactions contemplated hereby are in the best interests of Buyer and Seller, respectively. The sale and purchase of the Shares contemplated hereby are subject to the prior approval of the Board of Governors of the Federal Reserve System under Section 3 of the BHC Act (the "FRB Approval") and the state banking commissioner of the State of Wyoming (the "Wyoming Commissioner"), among other conditions specified herein. NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: 1 ARTICLE I SALE AND PURCHASE OF SHARES 1.1 SALE AND PURCHASE OF SHARES. Subject to the terms and conditions set forth in this Agreement, Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, at the Effective Time, the Shares, free and clear of all Encumbrances (as defined in Section 2.1 (d)) (the "Sale"). 1.2 PURCHASE PRICE. (a) AGGREGATE PURCHASE PRICE. Subject to adjustments required under (b) below, the purchase price for the Shares (the "Purchase Price") shall be $72,000,000.00. (b) TECHNICAL ADJUSTMENTS. The Purchase Price shall be increased or decreased, as appropriate, on or before the 30th calendar day following the Effective Time by an amount equal to the amount by which the Book Value of Shareholder's Equity (as defined below) differs from the amount of such item required by Section 3.1(b)(i) of this Agreement. Any adjustments made pursuant to this subsection 1.2(b) shall be either (1) normal recurring accounting adjustments customarily made by the Banks following the end of an applicable accounting period; or (2) adjustments necessary for the correction of variances from generally accepted accounting principles or errors in the preparation of financial statements prepared or used for purposes of consummating the transactions contemplated by this Agreement; or (3) subject to 1.2(c) below, adjustments caused by a deficiency or overage in the Dividends (as later defined). (i) Seller shall, on or before the 20th calendar day following the Effective Time, provide to Buyer such financial statements and information prepared by Seller or Banks and used or useful in the calculation of the Book Value of Shareholder's Equity of the Banks as of the Effective Time. As used in this Agreement, the term "Book Value of Shareholder's Equity" shall mean the total of capital stock, surplus and undivided profits together with the tax-effected valuation reserve under FASB 115, determined in accordance with generally accepted accounting principles; PROVIDED, HOWEVER, (A) in calculating the Book Value of Shareholder's Equity, no effect shall be given to purchase accounting adjustments made by Seller after March 31, 1996, and (B) accounts related to current taxes payable and deferred tax liabilities shall be added and any balances in accounts relating to current taxes receivable or deferred tax assets shall be subtracted. (ii) Either Buyer or Seller may request an adjustment to Purchase Price by providing a written notice to the other party setting forth the amount of any proposed adjustment and the reasons for such adjustment. 2 (c) DIVIDENDS. Seller shall cause Banks to declare and pay prior to the Effective Time dividends, reasonably estimated to reduce the Book Value of Shareholder's Equity at the Effective Time to the amount identified in Section 3.1(b)(i) (the "Dividends"). If the Dividends are subject to the approval of the Comptroller of the Currency (the "OCC") and the OCC declines to authorize the Dividends, in whole or in part, then the Purchase Price will be increased by an amount equal to the unpaid Dividends; PROVIDED, HOWEVER, the increase in Purchase Price shall not exceed $1,000,000.00. (d) DISPUTE RESOLUTION. Any disputes as to adjustments made pursuant to this Section 1.2 shall be resolved by KPMG Peat Marwick LLP ("PEAT"). The parties acknowledge that PEAT is the principal accountant for both Buyer and Seller. The parties jointly and severally waive any claim of conflict of interest as to the involvement of PEAT in the dispute resolution process and agree that PEAT's determination shall be final and binding upon the parties. 1.3 EFFECTIVE TIME. Buyer and Seller each will use reasonable efforts to cause the Sale to become effective at 11:59 p.m. Mountain time on the last day of the month in which occurs satisfaction or waiver of the last of the conditions specified in Section 4.1. Notwithstanding the foregoing, Buyer and Seller may cause the Sale to become effective on such earlier or later day or time following the satisfaction or waiver of such conditions as they may agree in writing. The date and time when the Sale shall become effective are herein referred to as the "Effective Time". 1.4 CLOSING. (a) TIME AND PLACE. The closing of the Sale (the "Closing") shall take place at the offices of Seller or such other place as the parties may agree upon at 10:00 a.m., Pacific time, on the next business day following the date on which the Effective Time occurs. (b) DELIVERIES BY SELLER. At the Closing, Seller shall deliver, or cause to be delivered, to Buyer the following: (i) Certificates evidencing the Shares, duly endorsed in blank or accompanied by stock powers duly executed in blank in proper form for transfer; and (ii) The certificates to be delivered pursuant to Section 4.3(a) and (b); and (iii) The opinion of counsel to be delivered pursuant to Section 4.3(c); (iv) Evidence of the removal or resignations of directors pursuant to Section 4.3(d). 3 (c) DELIVERY BY BUYER. At the Closing, Buyer shall deliver, or cause to be delivered, to Seller the following: (i) The Purchase Price by wire transfer in immediately available funds to an account designated by Seller; and (ii) The certificates to be delivered pursuant to Section 4.2(a) and (b); and (iii) The opinion of counsel to be delivered pursuant to Section 4.2(c). ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Subject to Section 2.3 and except as set forth in the relevant Schedules, Seller hereby represents and warrants to Buyer as of the date of this Agreement and as of the Effective Time: (a) RECITALS TRUE. The statements of fact set forth in Recitals B, C and E of this Agreement with respect to Seller are true. (b) ORGANIZATION AND QUALIFICATION OF BANKS. Banks have the requisite corporate power and authority to own or lease their properties and assets and to carry on their business as it is now being conducted and are duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where the properties owned, leased or operated or the business conducted by it require such qualification. Banks are an "insured depository institution" as defined in the Federal Depository Insurance Act, as amended (the "FDI Act"), and applicable regulations thereunder, having its deposits insured by the Federal Deposit Insurance Corporation (the "FDIC"), subject to applicable FDIC coverage limitations. Seller has made available to Buyer a complete and correct copy of the articles of association and bylaws of Banks and each of Banks' respective subsidiaries, each as amended to date and currently in full force and effect. (c) SUBSIDIARIES. Schedule 2.1(c) lists all of the subsidiaries of Banks and the amount and percent of Seller's stock ownership, thereof; except as so listed, neither Banks nor any of their subsidiaries own any stock, partnership, joint venture or limited liability company interest or any other equity security issued by any other corporation, organization or other entity (collectively, together with any individual, a "Person") other than in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith. Each of Banks' subsidiaries is a corporation in good standing under the laws of the jurisdiction in which such subsidiary is incorporated and is duly qualified to do business and in 4 good standing in each jurisdiction where the properties owned, leased or operated, or the business conducted, by such subsidiary require such qualification. Each of Banks' subsidiaries has the requisite corporate power and authority to own or lease its properties and assets and to carry on its business as it is now being conducted. (d) CAPITAL STOCK. (i) All of the issued and outstanding shares of capital stock of Banks and each subsidiary of Banks have been duly authorized and are validly issued, fully paid and nonassessable. (ii) Seller has good and marketable title to the Shares, free and clear of all liens, pledges, security interests, claims, proxies, subscriptive rights or other encumbrances or restrictions of any kind (collectively, "Encumbrances"). Banks or a subsidiary of Banks are the sole record and beneficial owners of the shares of capital stock of each subsidiary of Banks, free and clear of all Encumbrances. There are no outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of Seller, Banks or any of their subsidiaries of any character relating to the issued or unissued capital stock or other securities of Banks or any of their subsidiaries (including, without limitation, those relating to the issuance, sale, purchase, redemption, conversion, exchange, redemption, voting or transfer thereof), nor are there any stock appreciation, phantom or similar rights based upon the book value or other attribute of Banks' capital stock. (e) CORPORATE AUTHORITY. Seller has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this Agreement, and this Agreement is a valid and legally binding agreement of it enforceable in accordance with the terms hereof. (f) GOVERNMENTAL FILINGS. Except as disclosed in Schedule 2.1(f), other than the FRB Approval, the approval of the Wyoming Commissioner as may be required under Wyoming law, and the OCC, no notices, reports or other filings are required to be made by Seller with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Seller from, any domestic or foreign governmental or regulatory authority, agency, court, commission or other entity (collectively, "Governmental Entities"), in connection with the execution, delivery or performance of this Agreement by Seller and the consummation by it of the transactions contemplated hereby. (g) NO CONFLICTS. The execution, delivery and performance of this Agreement by Seller do not and will not, and (upon receipt of the FRB Approval and the expiration of any related waiting period) the consummation by it of any of the 5 transactions contemplated hereby will not, with or without the giving of notice, the lapse of time or both: (i) Conflict with or violate Seller's certificate of incorporation or bylaws, Banks' articles of association or bylaws or the comparable governing instruments of any of Banks' subsidiaries; (ii) Except as set forth on Schedule 2.1(g)(ii), violate or breach, or constitute or result in a default under, any agreement, lease, contract, note, mortgage, indenture, arrangement or other obligation (collectively, "Contracts") of Seller, Banks or any of Banks' subsidiaries; (iii) Except as disclosed in Schedule 2.1(g)(iii), conflict with, violate or breach any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which Seller, Banks or any of Banks' subsidiaries are subject; or (iv) Except as set forth on Schedule 2.1(g)(iv), result in any acceleration of, or change in, the rights or obligations of any party under any Contracts of Seller, Banks or any of Banks' subsidiaries. (h) REPORTS AND FINANCIAL STATEMENTS. (i) With respect to periods since December 31, 1994, Banks and each of their subsidiaries have filed all reports and statements, together with any amendments required to be filed with respect thereto, that they were required to file with (A) the OCC, (B) the FDIC and (C) any other applicable federal or state banking, insurance or other regulatory authorities, and, as of their respective dates (and, in the case of reports or statements filed prior to the date hereof, without giving effect to any amendments or modifications filed after the date of this Agreement), such reports and statements, including the financial statements and exhibits thereto, complied (or will comply, in the case of reports or statements filed after the date of this Agreement) with all applicable statutes, rules and regulations. (ii) Seller has delivered to Buyer each Consolidated Report of Condition (including Domestic and Foreign Subsidiaries) filed by Banks with the OCC with respect to periods since January 1, 1996, and will promptly deliver each such report filed after the date hereof (collectively, the "Call Reports"). (iii) Except as disclosed in Schedule 2.1(h)(iii), each of Banks' consolidated balance sheets included in their Call Reports fairly presents (or, in the case of Call Reports prepared after the date of this Agreement, 6 will fairly present) the consolidated financial position of Banks and their subsidiaries as of the date of such balance sheet and each of the consolidated income statements and statement of changes in equity capital included in their Call Reports fairly presents (or, in the case of Call Reports prepared after the date of this Agreement, will fairly present) the consolidated results of operations and retained earnings, as the case may be, of Banks and their subsidiaries for the periods set forth therein in each case in accordance with the regulatory accounting principles consistently applied during the periods involved, except as may be noted therein and except for normal adjustments made at year end only. (iv) The financial information provided to Buyer by Seller and identified on Schedule 2.1(h)(iv) was true and correct (A) as of the date stated with respect to such financial information, or (B) if no date is stated, then as of the date the information was provided to Buyer. (v) Except as set forth on Schedule 2.1(h)(v), Banks have no liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise, and whether or not required to be shown on a balance sheet prepared in accordance with regulatory accounting principles, except as are shown or reflected in the Call Reports. (vi) The aggregate Banks' allowance for loan and lease losses of the Banks shall, as of the Effective Time, be the amount set forth on Schedule 2.1(h)(vi). (i) ASSET CLASSIFICATION. Schedule 2.1(i) sets forth a list, accurate and complete in all respects, of the aggregate amounts of loans, extensions of credit and individual loans or extensions of credit and other assets of the respective Bank and its subsidiaries with a principal balance in excess of $250,000.00 that have been criticized or classified as of March 31, 1996, by the respective Bank, separated by category of classification or criticism (the "Asset Classification"); and no amounts of loans, extensions of credit or other assets that have been classified or criticized as of the date hereof by a representative of any Governmental Entity as "Other Loans Especially Mentioned", "Substandard", "Doubtful", "Loss" or words of similar import are excluded from the amounts disclosed in the Asset Classification, other than amounts of loans, extensions of credit or other assets that were charged off by it or its subsidiaries prior to the date hereof. (j) ABSENCE OF CERTAIN EVENTS AND CHANGES. Since the date of the most recent Call Report filed by Banks before the date of this Agreement, Banks and their subsidiaries have conducted their respective businesses only in the ordinary and usual course of such businesses and, without giving effect to Section 2.4(a)(i) or to Section 2.4(b), there has not been any change or development affecting the business of the Banks. 7 (k) PROPERTIES. Except as disclosed or reserved against in its Call Reports or as disclosed in Schedule 2.1(k), Banks and their subsidiaries have good and marketable title, free and clear of all Encumbrances (other than Encumbrances for current taxes not yet delinquent or pledges to secure deposits) to all of the properties and assets, tangible or intangible, reflected in their Call Reports as being owned by them or their subsidiaries as of the dates thereof. All buildings and all fixtures, equipment and other property and assets that relate to Banks' business on a consolidated basis are held under leases or subleases by them or their subsidiaries are held under valid leases or subleases enforceable in accordance with their respective terms (except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally or by general equity principles). (l) COMPLIANCE WITH LAWS. Banks and each of their subsidiaries: (i) Except as disclosed in Schedule 2.1(l)(i), are in compliance, in the conduct of their business, with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the National Bank Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable fair lending laws or other laws relating to discrimination (collectively, the "Fair Lending Laws"); (ii) Except as disclosed in Schedule 2.1(l)(ii) have all permits, licenses, certificates of authority, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities, that are required in order to permit them or such subsidiary to carry on their business as it is presently conducted; (iii) Have not received notification or communication from any Governmental Entity (including the OCC and any other bank, insurance and securities regulatory authorities) or the staff thereof, which remains in effect (A) asserting that it or any of its subsidiaries is not in compliance with any of the statutes, regulations or ordinances that such Governmental Entity enforces; (B) threatening to revoke any license, franchise, permit or governmental authorization; or (C) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance; (iv) Are not required to give prior notice to any federal banking agency of the proposed addition of any individual to its board of directors or the employment of an individual as a senior executive; 8 (v) Are not subject to the limitations on acceptance of deposits set forth in Section 29 of the FDI Act; and (vi) With respect to Banks, have been assigned a rating of "satisfactory record of meeting community credit needs" or higher in its most recent examination under Section 4 of the Community Reinvestment Act (no subsidiary of Banks being an "insured depository" as defined in the FDI Act). (m) LITIGATION. Except as set forth on Schedule 2.1(m), there are no criminal or administrative investigations or hearings of, before or by any Governmental Entity, or civil, criminal or administrative actions, suits, claims or proceedings of, before or by any Person (including any Governmental Entity) pending or, to the knowledge of Seller's Executive Officers, threatened, against Banks or any of their subsidiaries (including, without limitation, under any of the Fair Lending Laws) and neither Seller nor any of its subsidiaries (nor any officer, director, controlling person or property of it or any of its subsidiaries) is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, any Governmental Entity charged with the supervision or regulation of depository institutions or engaged in the insurance of deposits (including, without limitation, the OCC and the FDIC) or the supervision or regulation of Banks or any of their subsidiaries and neither Seller nor any of its subsidiaries has been advised by any such Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter or similar submission. (n) TAXES. (i) The term "Tax" includes any tax or similar governmental charge, impost or levy (including, without limitation, income taxes, franchise taxes, transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad valorem taxes, withholding taxes, employee withholding taxes, worker's compensation, payroll taxes, unemployment insurance, social security, minimum taxes or windfall profits taxes), together with any related liabilities, penalties, fines, additions to tax or interest, imposed by the United States or any state, county, provincial, local or foreign government or subdivisions or agency thereof. (ii) Each Bank has timely filed or will file (or, where appropriate, its respective parent has timely filed or will file) all required tax returns and has paid all Taxes due, payable or owed for all periods for which returns are required to be filed, other than Taxes contested in good faith. Schedule 2.1(n) attached hereto lists the date or dates through which the 9 Internal Revenue Service and any other governmental entity have examined the United States federal income tax returns and state or local income or franchise tax returns of each Bank. Except as set forth on Schedule 2.1(n)(ii) attached hereto, (a) no governmental entity has, during the past three years, examined or is in the process of examining any Tax returns of either Bank, (b) no governmental entity has proposed any deficiency, assessment, or claim for Taxes against either Bank; and (c) neither Seller nor either Bank has requested nor been granted any extension of the time for filing any tax return. (o) INSURANCE. Schedule 2.1(o) lists each insurance policy maintained by Banks, their respective subsidiaries or by Seller or a Seller affiliate with respect to Banks or their subsidiaries (the "Insurance Policies"). All such policies are in full force and effect and none of Banks, their subsidiaries or Seller are in default with respect to their obligations under the Insurance Policies. (p) LABOR MATTERS. Neither Banks nor any of their subsidiaries are a party to, or are bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor are Banks or any of their subsidiaries the subject of any proceeding asserting that they or any such subsidiary have committed an unfair labor practice or seeking to compel it or such subsidiary to bargain with any labor organization as to wages or conditions of employment, nor is there any strike involving Banks or any of their subsidiaries pending or, to the knowledge of Seller's or Banks' Executive Officers, threatened, nor are Seller's or Banks' Executive Officers aware of any activity involving Banks' or any of their subsidiaries' employees seeking to certify a collective bargaining unit or engaging in any other organizational activity. (q) EMPLOYEE BENEFITS. (i) Schedule 2.1(q) sets forth, as of the date of this Agreement, a true and complete list of each employee benefit plan, arrangement or agreement (the "Plans") that covers employees or former employees (the "Employees") of Banks and their subsidiaries or any trade or business, whether or not incorporated (an "ERISA Affiliate"), all of which together with the Banks would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). True and complete copies of the Plans have been made available to Buyer. (ii) All of Banks' and their ERISA Affiliates' employee benefit Plans, within the meaning of Section 3(3) of ERISA, covering Employees have been operated and administered in all respects in accordance with applicable laws, including but not limited to ERISA and the Internal Revenue Code (the "Code") and each of the Plans which is an "employee 10 pension benefit plan" within the meaning of Section 3(2) of ERISA and which is intended to be "qualified" under Section 401(a) of the Code is so qualified. There are no pending, threatened or anticipated claims (other than routine claims for benefits) by, or on behalf of or against any of the Plans or any trusts related thereto. Since January 1, 1994, neither Banks nor an ERISA Affiliate have engaged in a transaction in connection with which Banks or an ERISA Affiliate could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code. (iii) All required contributions which are due from Banks have either been made or properly accrued and no Plan has an accumulated or waived funding deficiency within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. Neither the Seller or an ERISA Affiliate has incurred, directly or indirectly, any liability (including material contingent liability) to or on account of a Plan pursuant to Title IV of ERISA. No proceedings have been instituted to terminate any Plan that is subject to Title IV of ERISA. A "reportable event", as such term is defined in Section 4043(b) of ERISA has occurred with respect to each of the Plans that is subject to Title IV of ERISA which, due to the merger of First Interstate Bancorp with and into Seller, are now sponsored by the Seller's controlled group. No condition exists which would result in any liability to Seller with respect to any Plan. The current value of the assets of each of the Plans that is subject to Title IV of ERISA, based upon the actuarial assumptions (to the extent reasonable) presently used by such Plan, exceeds the present value of the accrued benefits under such Plan. Neither Banks or any of their subsidiaries has any actual or potential liability for any complete or partial withdrawal within the meaning of Sections 4201, 4203 or 4205 of ERISA (and there would be no such liability assuming a complete or partial withdrawal from all the Plans at the Effective Time) with respect to any Plan. (iv) With respect to each Plan which is subject to Title IV of ERISA, the present value of accrued benefits under such Plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such accrued benefits. No liability under Title IV of ERISA has been incurred by Banks or an ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a risk to Banks or any ERISA Affiliate of incurring a liability thereunder. A "reportable event," as such term is defined in Section 4043(b) of ERISA has occurred with respect to each of the Plans that is subject to Title IV of ERISA which, due to the merger of First Interstate Bancorp with and into Seller, are now sponsored by the Seller's controlled group. No Plan is a 11 "multi-employer pension plan," as such term is defined in Section 3(37) of ERISA. All contributions or other amounts payable by Banks as of the Effective Time with respect to each Plan in respect of current or prior plan years have been paid or accrued in accordance with generally accepted accounting practices and Section 412 of the Code. (v) Neither Banks or their subsidiaries have any actual or potential liability for benefits after separation from employment of any employee other than (A) as provided for in Article VIII of this Agreement or (B) health care continuation benefits described in Section 4980B of the Internal Revenue Code or ERISA Title I, Subtitle B, Part G. (vi) No employee of Banks or their subsidiaries is absent due to (A) a disability that currently entitles the employee to benefits under any long-term disability policy provided by Seller or Banks or (B) military service. (r) ENVIRONMENTAL MATTERS. (i) For purposes of this Section 2.1(r), the following terms shall have the indicated meaning: "BUSINESS" means the business conducted by Banks and their subsidiaries. "ENVIRONMENTAL LAW" means any law, regulation, order or decree relating to Hazardous Substances or the protection of the environment. "HAZARDOUS SUBSTANCES" means substances which are listed or classified pursuant to any Environmental Law, including any petroleum products or byproducts, polychlorinated biphenyls ("PCBs"), radioactive materials or radon gas. (ii) Except as disclosed in Schedule 2.1(r)(ii), Banks and each of their subsidiaries, and each property owned by the Banks or their subsidiaries (collectively, "Bank Property"), are in compliance with applicable Environmental Laws. (iii) There are no pending claims, actions, or proceedings involving Banks or any of their subsidiaries relating to: A. An asserted liability of Banks or any of their subsidiaries under any Environmental Law or the terms and conditions of any permit, license, authority, settlement, agreement, decree or other obligation pursuant to any Environmental Law; 12 B. The handling, storage, use, transportation, removal or disposal of Hazardous Substances; C. The discharge, release or emission of Hazardous Substances from, on or under or within Bank Property into the air, water, surface water, ground water, land surface or subsurface strata; or D. Personal injuries or damage to property caused by a release of Hazardous Substances. (iv) Except as disclosed on Schedule 2.1(r)(iv), to the knowledge of Sellers' and Banks' Executive Officers, no Hazardous Substances have been used, handled, stored, released or emitted by Banks or one of their subsidiaries at or on any Bank Property except in compliance with applicable Environmental Laws and as would not be reasonably expected to create conditions requiring remediation under any Environmental Law. (v) No part of any Bank Property is scheduled for investigation or monitoring pursuant to any Environmental Law. (s) MATERIAL AGREEMENTS. (i) Except for this Agreement or as disclosed in Schedule 2.1(s)(i), neither Banks nor any of their subsidiaries (A) is a party to any written or oral contract for the employment of any officer, individual employee or other person on a full-time or consulting basis, or relating to severance pay for any such person, (B) is a party to any written or oral agreement or understanding to repurchase assets previously sold (or to indemnify or otherwise compensate the purchaser in respect of such assets), except for securities sold under a repurchase agreement that has been entered into in the ordinary course of business for normal funding purposes and that provides a repurchase date 30 days or less after the purchase date, (C) is a party to any (1) contract or group related contracts with the same party for the purchase or sale of products or services under which the undelivered balance of such products and services has a purchase price in excess of $50,000.00 for any individual contract or $100,000.00 for any group of related contracts in the aggregate, (2) other agreement that was not entered into in the ordinary course of business or (D) has any commitments for capital expenditures in excess of $100,000.00. (ii) None of Banks nor any of their subsidiaries is in default under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument. 13 (iii) Schedule 2.1(s)(iii) sets forth each contract, agreement or obligation by, between or among Banks, or either of them, and Seller or any indirect or direct subsidiary of Seller; excluding, however, (A) contracts, agreements or obligations by and between Banks and their respective subsidiaries, (B) loan participations purchased or sold and otherwise reflected on the Banks' books and records, and (C) all Tax Sharing Agreements referred to in Section 3.9(g) (collectively the "Intercompany Agreements"). (iv) Schedule 2.1(s)(iv) sets forth each contract, agreement or other arrangement to which Banks are not a party but pursuant to which Banks receive services necessary to the business of the Banks or under which Banks are obligated to make payments (the "Service Contracts"). (t) KNOWLEDGE AS TO CONDITIONS. Sellers' and Banks' Executive Officers know of no reason why the FRB Approval and, to the extent necessary, any other approvals, authorizations, filings, registrations and notices should not be obtained without the imposition of any condition or restriction described in the proviso to Section 4.1(a). (u) BROKERS AND FINDERS. None of Seller, its subsidiaries or any of their officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated herein. (v) ADMINISTRATION OF FIDUCIARY OBLIGATIONS. Except as disclosed on Schedule 2.1(v), Banks and their respective subsidiaries (i) have each properly administered all accounts for which it acts as a fiduciary, including, but not limited to, accounts for which it serves as trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable state and federal law and regulation; and (ii) have maintained true and correct accountings which properly and accurately reflect the assets of such fiduciary accounts; and (iii) have not committed any breach of trust with respect to any such fiduciary account. 2.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Subject to Section 2.4, as of the date of this Agreement and as of the Effective Time and except as set forth in Buyer's Schedules, Buyer hereby represents and warrants to Seller that: (a) RECITALS TRUE. The statements of fact set forth in Recitals A and E of this Agreement with respect to Buyer are true. (b) CORPORATE AUTHORITY. Buyer has the requisite corporate power and authority and has taken all corporate action necessary in order to execute and deliver this 14 Agreement, and this Agreement is a valid and legally binding agreement of it enforceable in accordance with the terms hereof. (c) GOVERNMENTAL FINDINGS. Other than the FRB Approval and approval by the Wyoming Commissioner, no notices, reports or other filings are required to be made by Buyer with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Buyer from any Governmental Entity in connection with the execution, delivery or performance of this Agreement by Buyer and the consummation by it of the transactions contemplated hereby. (d) NO CONFLICTS. The execution, delivery and performance of this Agreement by Buyer do not and will not, and (upon receipt of the FRB Approval and approval of the Wyoming Commissioner, the expiration of any related waiting period) the consummation by it of any of the transactions contemplated hereby will not, with or without the giving of notice, the lapse of time or both: (i) Conflict with or violate Buyer's certificate of incorporation or bylaws; (ii) Violate or breach, or constitute or result in a default under, any Contracts of Buyer; (iii) Conflict with, violate or breach any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which Buyer is subject; or (iv) Result in any acceleration of, change in the rights or obligations of any party under any Contracts of Buyer. (e) SECURITIES ACT. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2.11 of the Securities Act of 1933, as amended (the "Securities Act") or in any manner that would be in violation of the Securities Act. Buyer has not, directly or indirectly, offered the Shares to anyone or solicited any offer to buy the Shares from anyone, so as to bring such offer and sale of the Shares by Buyer within the registration requirements of the Securities Act. Buyer will not sell, convey, transfer or offer for sale any of the Shares except upon compliance with the Securities Act and any applicable state securities laws or pursuant to any exemption therefrom. (f) FINANCING. Prior to September 1, 1996 (and without regard to the provisions of Section 2.3), Buyer will have obtained commitments for debt and/or equity financing sufficient to pay the Purchase Price and to purchase the Shares on the terms and conditions of this Agreement, which commitments shall be subject only to conditions reasonably acceptable to Seller. 15 (g) LITIGATION. There are no criminal or administrative investigations or hearings of, before or by any Governmental Entity, or civil, criminal or administrative actions, suits, claims or proceedings of, before or by any Person (including any Governmental Entity) pending or, to the knowledge of its Executive Officers, threatened against Buyer or any of its subsidiaries (including, without limitation, under any of the Fair Lending Laws); and neither Buyer nor any of its subsidiaries (nor any officer, director, controlling person or property of it or any of its subsidiaries) is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, any Governmental Entity charged with the supervision or regulation of depository institutions or engaged in the insurance of deposits (including, without limitation, the OCC and the FDIC) or the supervision or regulation of it or any of its subsidiaries, and neither Buyer nor any of its subsidiaries has been advised by any such Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, commitment letter or similar submission. (h) BROKERS AND FINDERS. None of Buyer, its subsidiaries or any of their offices, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated herein. (i) KNOWLEDGE AS TO CONDITIONS. Buyer's Executive Officers know of no reason why the FRB Approval and the approval of the Wyoming Commissioner and, to the extent necessary, any other approvals, authorizations, filings, registrations and notices should not be obtained without the imposition of any condition or restriction described in the proviso to Section 4.1(a). (j) CRA RATING. Buyer and each of Buyer's subsidiary banks have been assigned a rating of "satisfactory record meeting community credit needs" in its most recent examination under Section 4 of the Community Reinvestment Act. 2.3 RIGHT TO CURE. Seller and Buyer shall each have the right, but not the obligation, to cure a breach of any representation or warranty contained in this Article II. Any breach must be cured within 30 days from the date the curing party learns of the breach or is advised in writing by the other party that a breach of a representation or warranty has occurred. Any breach which cannot be cured within 30 days may nonetheless be cured after the expiration of the 30-day period; PROVIDED, HOWEVER, that reasonable efforts to cure the breach have been commenced within the 30-day period and, PROVIDED further, that the breach has been cured prior to December 2, 1996. Neither party shall have the right to terminate this Agreement pursuant to the provisions of Article V on account of a breach of any representation or warranty which has been cured in accordance with the provisions of this Section 2.3. 16 2.4 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES. (a) On or prior to the date hereof, Buyer has delivered to Seller and Seller has delivered to Buyer the Schedules setting forth, among other things, exceptions to any or all of its representations and warranties in this Article II; PROVIDED, that (i) no such exception is required to be set forth in a Schedule if its absence would not result in the related representation or warranty being deemed untrue or incorrect under the standard established by Section 2.4(b) and (ii) the mere inclusion of any exception in a Schedule shall not be deemed an admission by a party that such exception represents a material fact, event or circumstance or would result in a Material Adverse Effect and (iii) the delivery by either party of a corrected or amended Schedule after the date of this Agreement shall not have the effect of curing or correcting any prior breach or other failure of any representation or warranty made by such party. (b) No representation or warranty of Buyer or Seller contained in this Article II shall be deemed untrue or incorrect, and no party hereto shall be deemed to have breached a representation or warranty, as a consequence of the existence of any fact, circumstance or event if such fact, circumstance or event, individually or taken together with all similar facts, circumstances or events, would not have a Material Adverse Effect. As used in this Agreement, the term "Material Adverse Effect" means an effect which (i) is materially adverse to the business, financial condition, results of operations or prospects of Buyer, Seller or the Banks or the respective individual Bank and its subsidiaries as the context may dictate, (ii) significantly and adversely affects the ability of Buyer or Seller, as the context may dictate, to consummate the transactions contemplated hereby or to perform its material obligations hereunder, or (iii) enables any Person to prevent the consummation of the transactions contemplated hereby; PROVIDED, HOWEVER, that any effect resulting from (A) actions or omissions of Buyer or Seller taken with the prior consent of the other party in contemplation of the transactions provided for herein or (B) circumstances affecting the banking industry in Montana and Wyoming generally shall be deemed not to be a Material Adverse Effect. 2.5 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the representations and warranties contained in this Article II, none of Buyer, Seller or any other Person makes any other express or implied representation or warranty on behalf of or with respect to Buyer or Seller, and Buyer and Seller hereby disclaim any such representation or warranty, whether by Buyer, Seller or any other Person, with respect to the execution and delivery of this Agreement, the consummation of the transactions contemplated herein, Buyer or Seller (notwithstanding the delivery of disclosure to the other party hereto or any other Person of any documentation or other information by Buyer, Seller or any other Person with respect to any one or more of the foregoing). 17 ARTICLE III COVENANTS 3.1 CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME. Seller agrees that, from and after the date hereof until the Effective Time, except insofar as Buyer shall otherwise consent in writing (such consent not to be unreasonably withheld) or except as otherwise expressly contemplated by this Agreement or set forth in Schedules provided to Buyer: (a) It shall cause Banks to use all reasonable efforts to (i) in all material respects, operate their business only in the ordinary course; (ii) preserve intact their business organization; (iii) maintain their properties in sufficient operating condition and repair to enable them to operate in all material respects their business in the manner in which they are currently operated; and (iv) keep and maintain the Insurance Policies in full force and effect. (b) Banks shall not: (i) Declare, set aside or pay any dividends payable in cash, property or otherwise with respect to the Shares which have the effect of reducing at the Effective Time the Book Value of Shareholder's Equity (as defined in Section 1.2(b)(i) below $19,272,886.00 for First Interstate Bank of Montana, N.A. and below $16,559,547.00 for First Interstate Bank of Wyoming, N.A.; (ii) Take any action the effect of which is to reduce the aggregate Banks' allowance for loan and lease losses to an amount, as of the Effective Time, less than the amount set forth on Schedule 2.1(h)(vi) or to reduce the Montana Bank loan loss reserve below $2,000,000.00; (iii) Issue, sell or deliver any shares of their capital stock or issue or sell any securities convertible into, or options with respect to, or warrants to purchase or other rights to subscribe to or acquire, any shares of their capital stock; (iv) Effect any recapitalization, reclassification, stock dividend, stock split or like exchange in capitalization; (v) Amend their articles of association or bylaws; (vi) Merge or consolidate with or, except as a result of foreclosure or repossession in the ordinary course of banking business, acquire substantially all of the assets or make any material investment in the stock or securities of any other Person or close any banking offices existing as of the date of this Agreement; 18 (vii) Sell, transfer, lease or encumber a material amount of assets except in the ordinary course of business other than (A) the sale and transfer of student loans held by Banks to Seller or an affiliate of Seller prior to the Effective Time at a reasonable arm's-length value, and (B) transfer of Control Disbursement Accounts (as defined in and contemplated by Section 7.5); (viii) Grant to any director, officer, employee or consultant any material increase in compensation or benefits; (ix) Grant any severance or termination pay to, or enter into or amend any employment or severance agreement with, any Person, other than termination pay paid in the ordinary course of business to officers or employees; (x) Adopt any new or amend any existing Compensation Plans (including, without limitation, profit sharing, bonus, director and officer incentive compensation, retirement, medical, hospitalization, life or other insurance plans, agreements and commitments), except for amendments or modifications necessary to comply with applicable law; (xi) Incur any material amount of indebtedness other than in the ordinary course of business consistent with past practice; PROVIDED, HOWEVER, Banks shall not engage in any hedging practices, derivatives speculation or other similar activities); (xii) Make any change in accounting principles, charge-off policies, loan loss reserve policies, or methods from those currently employed, except as required by generally accepted accounting principles or applicable regulatory requirements or fail to take any action appropriate under such policies, including, without limitation, to charge-off loans or make provisions to the loan loss reserves; (xiii) Grant any mortgage or security interest in, or make any pledge of, or permit any Encumbrance to be placed on, any material amount of its assets or properties other than in the ordinary course of business; (xiv) Take any action that is intended or may reasonably be expected to result in a breach or violation of any of the representations and warranties contained in this Agreement or would cause any condition to the transactions contemplated hereby not to be satisfied, except, in every case, as may be required by law; (xv) Accelerate, terminate or cancel any material contract, lease or license other than in the ordinary course of business; or 19 (xvi) Agree or commit to do any of the foregoing. 3.2 ACCESS TO INFORMATION. (a) From the date hereof until a date 75 days following the Closing, upon reasonable notice, Seller shall, and shall cause its employees, auditors and agents (collectively, its "Representatives") and the Representatives of the Banks to, (i) afford Representatives of the Buyer reasonable access, during normal business hours, to the offices, properties of the Banks and books and records of Banks and of Seller (to the extent such books and records relate to Banks), and (ii) furnish to Representatives of Buyer such additional financial and operating data and other information regarding the assets, properties, goodwill and business of the Banks as Buyer may from time to time reasonably request; PROVIDED, HOWEVER, that such investigation shall not unreasonably interfere with any of the businesses or operations of Seller, Banks or any of their subsidiaries. (b) Without limiting or modifying any of the terms, provisions, and conditions of a Confidentiality Agreement between the parties dated April 18, 1996 and amended May 2, 1996 ("Confidentiality Agreement"), the terms of which are incorporated herein by reference, each of Buyer and Seller agree that it will not, and will cause its Representatives and the Representatives of its subsidiaries not to, use any nonpublic information obtained from the other party in connection with or relating to this Agreement, the investigation leading up to its execution or the transactions contemplated hereby (including, without limitation, by Buyer pursuant to Section 3.2(a)) for any purpose unrelated to the consummation of the transactions contemplated by this Agreement. Pending consummation of the transactions herein contemplated, each of Buyer and Seller agrees that it will keep confidential, and will cause its and its subsidiaries' Representatives to keep confidential, all nonpublic information and documents so obtained from the other party; PROVIDED, that the obligation to keep such information or documents confidential shall not apply to (i) any information or document that (A) was already in Buyer's or Seller's possession prior to the disclosure thereof by the other party, (B) was then generally known to the public, (C) became known to the public through no fault of Buyer or Seller, as the case may be, or (D) was disclosed to Buyer or Seller, as the case may be, by a third party not bound by an obligation of confidentiality or (ii) disclosure (A) required by law, governmental or regulatory authority, (B) reasonably necessary for seeking and obtaining regulatory approval of the transactions contemplated by this Agreement, and (C) subject to the reasonable consent of Seller, disclosure by Buyer in connection with solicitation and issuance of debt or equity instruments in furtherance of the transactions contemplated by this Agreement. Upon any termination of this Agreement, each party will collect and deliver to the other party all nonpublic documents obtained by it or any of its or its subsidiaries' Representatives then in their possession (other than documents of the type described in the proviso to the preceding sentence) and any copies thereof and destroy or cause to be destroyed 20 all notes, memoranda or other documents in the possession of it or its subsidiaries' Representatives containing or reflecting any nonpublic information obtained from the other party (other than information of the type described in the proviso to the preceding sentence), except to the extent that any such information may be embodied in minutes of the meetings of such party's Board of Directors or in filings, reports or submissions to or with any Governmental Entity. Promptly after any such termination, each of Buyer and Seller shall deliver to the other a certificate signed on its behalf by a senior officer to the effect of its compliance with the agreements of it set forth in the preceding sentence. Any information received by either party under, or prior to the execution of, this Agreement and accorded confidentiality shall not be used by such party to the competitive detriment of the party providing such information. The provisions of this Section 3.2(b) and the Confidentiality Agreement shall survive the termination of this Agreement. (c) Seller acknowledges Buyer is required to cause an audit of the Banks to be conducted pursuant to Regulation SX Section 210.3-05 and agrees to accommodate Buyer and Buyer's agents in the provision of information, books and records for the conduct of the required audit. 3.3 REASONABLE EFFORTS. Subject to the terms and conditions of this Agreement and applicable law, each of the parties shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement as soon as practicable, including such actions or things as any other party may reasonably request in order to cause any of the conditions to such other party's obligation to consummate such transactions specified in Article IV of this Agreement to be fully satisfied. Without limiting the foregoing, the parties shall (and shall cause their respective officers, employees, agents, attorneys, accountants and representatives to) consult and fully cooperate with and provide assistance to each other in (i) promptly obtaining all necessary consents, approvals, waivers, licenses, permits, authorizations, registrations, qualifications or other permission or action by, and giving all necessary notices to and making all necessary filings with and applications and submissions to, any Governmental Entity or other Person as soon as reasonably practicable; (ii) providing all such information about such party, its subsidiaries and its officers, directors, partners and affiliates and making all applications and filings as may be necessary or reasonably required in connection with any of the foregoing; and (iii) in general, consummating and making effective the transactions contemplated hereby; PROVIDED, HOWEVER, Buyer shall be solely responsible for the preparation and filing of applications seeking regulatory approval for the transaction contemplated by this Agreement, and Seller shall be solely responsible for obtaining OCC approval of the Dividends. 3.4 NOTICE OF CERTAIN MATTERS. Each of Buyer and Seller will give prompt notice to the other of the occurrence or failure to occur of any fact, event or circumstance that would or is reasonably likely to result in (i) a Material Adverse Effect, (ii) any of the representations or warranties of such party contained herein being untrue or inaccurate when made (subject to Section 2.4), (iii) a material breach of any of the covenants or agreements of such party contained 21 herein, (iv) the failure of a condition to consummation set forth in Article IV, or (v) any Schedule or amended Schedule being or becoming inaccurate or incorrect. 3.5 NO SOLICITATION. The Seller shall not, and shall not authorize or permit Banks or any of their respective Representatives to, directly or indirectly, (a) encourage or solicit (including by way of furnishing nonpublic information), or take any other action to facilitate, any inquiry or proposal from any Person (other than Buyer) concerning any merger, consolidation, sale of substantial assets, sale of shares of capital stock or subsidiaries, or (b) entertain, agree to, endorse or participate in any discussions or negotiations or provide third parties with nonpublic information relating to any such inquiry or proposal. Seller agrees to notify Buyer promptly upon receipt of any such inquiry or proposal. 3.6 USE OF BANK INFORMATION. From and after the date of this Agreement, Seller shall not use, or allow any affiliate of Seller or any officer, employee or agent of Seller or a Seller affiliate to use, in any manner, Banks' customer lists or customer information maintained in or generated or derived from Banks' books and records (the "Customer Information") in the solicitation of Banks' customers, including, without limitation, in the creation or maintenance of advertising lists, customer profiles or direct mailings. Nothing in this Section 3.6 shall be construed to prohibit the use of Customer Information prior to the Effective Time by Seller, Seller affiliates or Banks for the purpose of retaining or soliciting by or for Banks the business and relationships between the respective Bank and its customers. 3.7 PUBLICITY. Buyer and Seller shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and prior to making any filings with any Governmental Entity with respect thereto. 3.8 BENEFIT PLANS. Seller shall maintain all employee benefit plans, policies, procedures, and programs, including the Plans, for the benefit of the Banks' employees until the Effective Time consistent and in accordance with Seller's past practices and all applicable contractual, statutory, and regulatory requirements. To the extent required, Seller shall continue to make all employer contributions under any employee benefit plan, including the Plans, so that at the Effective Time there will be no monetary deficiency, underfunding, penalty, or other assessment against Seller, Buyer, Banks and/or such employee benefit plans. 3.9 TAX MATTERS. (a) I.R.C. Section 338(h)(10) ELECTION. Seller agrees, if requested by Buyer, to join with Buyer in making an election under Section 338(h)(10) of the Internal Revenue Code (and, except as provided in Section 3.9(b) below, any corresponding elections under state, local or foreign tax laws) (collectively a "Section 338(h)(10) Election") with respect to the purchase and sale of the stock of the Banks under this Agreement. (i) Seller will pay any Tax attributable to the making of the Section 338(h)(10) Election and will indemnify Buyer against any loss, cost or expense arising out or related to the failure to pay such Tax. 22 (ii) Buyer shall be responsible for preparing all forms as may be necessary or appropriate to make a Section 338(h)(10) Election. Seller agrees to take, in a timely manner, all reasonable actions necessary or appropriate to effect a Section 338(h)(10) Election; (iii) For purposes of making a Section 338(h)(10) Election, Buyer shall allocate the purchase price to the assets of each of the Banks, which allocation shall be made by Buyer subject to the approval of Seller, which approval shall not be unreasonably withheld, in accordance with the requirements of applicable federal or state law. Seller and Buyer shall be bound by such allocation for purposes of any Section 338(h)(10) Election. (b) CALIFORNIA STATE Section 338 ELECTIONS. (i) At the request of Seller, Buyer agrees to join with Seller in making elections for the sales of the Shares of each Bank to Buyer to be treated as sales of assets for California franchise tax purposes, under the provisions of California Revenue and Taxation Code Sections which correspond to Sections 338(g) and 338(h)(10) of the Code (collectively a "California State Section 338(h)(10) Election") with respect to the sale and purchase of the Shares. (ii) Seller shall be responsible for preparing all forms as may be necessary or appropriate to make the California State Section 338(h)(10) Elections. Buyer agrees to take, in a timely manner, all reasonable actions necessary or appropriate to effect such election. (iii) For purpose of making the California State Section 338(h)(10) Election, the purchase price shall be allocated in accordance with Section 3.9(a)(iii) above (regardless of whether a Section 338(h)(10) Election is made pursuant to Section 3.9(a)). Seller and Buyer shall be bound by such allocation for purposes of any California State Section 338(h)(10) Election. (iv) Seller and Buyer agree that the California State Section 338(h)(10) Elections shall apply only to the tax consequences of the transactions described in this Agreement for purposes of the laws of the State of California. Such election shall in no way govern the tax treatment of the transactions described in this Agreement for Federal or state (other than California) income tax purposes. (c) FILING OF TAX RETURNS AND PAYMENT OF TAXES. (i) Buyer shall prepare and timely file, or cause to be prepared and timely filed, with the appropriate authorities all tax returns, reports, and forms required to be filed with respect to the Banks for any taxable period ending after the Effective Time (a "Post-Closing Tax Period"), and for all 23 tax returns, reports and forms required to be filed subsequent to the Effective Time with respect to any taxable period of the Banks ending on or before the Effective Time other than for federal income taxes and state income, license or franchise taxes (a "State or Other Pre-Closing Tax Period"), and Buyer will pay, and indemnify Seller for, all Taxes, losses, costs or expenses related to or due with respect to such returns, reports, and forms described above. (ii) Seller shall prepare and timely file, or cause to be prepared and timely filed, with the Internal Revenue Service the consolidated federal income tax returns (which include the operations of the Banks), and with the appropriate state income tax authorities, the state income, license or franchise tax returns of the Banks with respect to any taxable period ending on or before the Effective Time (a "Pre-Closing Tax Period"), and Seller will pay, and indemnify Buyer for, all Taxes, losses, costs and expenses related to or due with respect to such returns unless otherwise provided for in this Agreement. Buyer shall permit, and shall cause its subsidiaries to permit, Seller reasonable access to any of the books and records of each Bank (or any successor thereto) which Seller may require in order to timely prepare the foregoing returns as well as reasonable access to and the services of each Bank's (or any successors thereto) employees for such purpose. (iii) Buyer will cause the Banks to close their permanent books and records (including work papers) as of the end of the day of the Effective Time according to Treasury Regulation Section 1.1502-76(b)(1)(ii)(A) or other applicable or reasonable rules so that the portion of each Bank's Taxes attributable to a Pre- Closing Tax Period, a State or Other Pre-Closing Tax Period, or a Post-Closing Tax Period may be determined. (iv) Seller, each Bank, and Buyer (and any of its subsidiaries) shall reasonably cooperate in preparing and filing all returns, reports, and forms relating to Taxes, and in resolving all disputes and audits with respect to all taxable period relating to Taxes. Seller, each Bank, and Buyer (and any of its subsidiaries) shall each maintain and preserve all information relating to Taxes of each Bank for so long as it may be needed by Seller, each Bank, or Buyer. (d) REFUNDS OF TAXES. (i) Any refund of Taxes with respect to a Bank that is received with respect to any Pre-Closing Tax Period, any State or Other Pre-Closing Tax Period, or to the portion of any Post- Closing Tax Period ending at or before the Effective Time shall be for the account of Seller. If Buyer, either of the Banks, or any affiliate thereof receives any such refund after 24 the Effective Time, the Buyer shall pay to Seller or cause the Bank or affiliate to pay to Seller, the amount of such refund received within 15 calendar days after the receipt thereof. Seller, Buyer, and Banks shall assist one another in preparing, filing, obtaining and defending any refund payable pursuant to this Section 3.9(d)(i). (ii) If Seller receives any refund of Taxes with respect to either Bank attributable to any Post-Closing Tax Period (or portion thereof) which begins after the Effective Time, then Seller shall pay to the Bank the amount of such refund received within 15 calendar days after the receipt thereof. Seller, Buyer, and Banks shall assist one another preparing, filing, obtaining and defending any refund payable pursuant to this Section 3.9(d)(ii). (e) CONTROL OF AUDITS. Each of Seller and the Buyer shall have the right, at its own expense, to control any audit or determination by any governmental entity, and to contest, resolve and defend against any assessment, notice of deficiency, or other adjustment or proposed adjustment of Taxes for any taxable period for which it may be obligated to indemnify the other party under this Agreement; provided, however, that no party shall have the right to agree to any assessment, deficiency, settlement, or other adjustment or proposed adjustment of Taxes that would adversely affect another party without such other party's written consent, which consent shall not be unreasonably withheld. With respect to any taxable period for which Seller and Buyer may both have liability for Taxes, Buyer shall be responsible for handling any audit or determination with respect to such tax liability; PROVIDED, HOWEVER, that Buyer shall not agree to any assessment, deficiency, settlement, or other adjustment or proposed adjustment of such Taxes without the consent of Seller, which consent shall not be unreasonably withheld. (f) RESOLUTION OF DISAGREEMENTS AMONG PARTIES ON TAX MATTERS. If Seller or the Buyer disagree as to any matter governed by this Section 3.9 the parties shall promptly consult with each other in an effort to resolve such dispute. Any amounts not in dispute shall be paid promptly, and any amounts payable upon the resolution of a dispute shall be made to a bank account designated by the payee no later than 10 business days after such resolution. If any such disagreement cannot be resolved within 30 days after Seller or Buyer asserts in writing that such dispute cannot be resolved, Seller and the Buyer shall jointly select a national accounting firm with no material relationship to either party to act as an arbitrator to resolve the disagreement. The accounting firm's determination shall be final and binding upon the parties, and any fees and expenses relating to the engagement of the accounting firm shall be shared equally by Seller and the Buyer. Upon the resolution of such dispute by the accounting firm, any amounts payable by Seller or the Buyer, as the case may be, shall be made to a bank account designated by the payee no later than 10 business days after such resolution. Simple interest will be paid with respect to any such amounts at the 25 federal funds rate from the date of the assertion in writing that the dispute cannot be resolved to the date of payment. (g) TAX SHARING AGREEMENTS. Any tax sharing agreements, arrangements, policies, or guidelines, formal or informal, express or implied, that may exist between Seller and a Bank (a "Tax Sharing Agreement") shall terminate, and, except as described in this Section 3.9, any obligations to make payments under any Tax Sharing Agreement shall be canceled as of the Effective Time. (h) PREDECESSORS AND SUCCESSORS. For purposes of this Section 3.9, all references to the Seller shall include any entity merged with and into the Seller and all references to a Bank shall include any successor of such entity and shall include all subsidiaries of such Bank or successor entity. 3.10 RIGHT TO CURE. Seller and Buyer shall have the right, but not the obligation, to cure a breach of any covenant as contained in this Article III. Any such breach must be cured within 30 days from the date the curing party learns of the breach or is advised in writing by the other party that a breach has occurred. Breaches which cannot be cured within 30 days may nonetheless be cured after the expiration of the 30-day period; PROVIDED, HOWEVER, that reasonable efforts to cure the breach have been commenced within the 30-day period, and PROVIDED further, that the breach has been cured prior to December 2, 1996. ARTICLE IV CONDITIONS 4.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE SALE. The respective obligation of each of Buyer and Seller to consummate the Sale is subject to the fulfillment or written waiver by Buyer and Seller prior to the Effective Time of each of the following conditions: (a) GOVERNMENTAL AND REGULATORY CONSENTS. The FRB Approval and the Wyoming Commissioner's approval shall have been obtained and shall be in full force and effect and all related waiting periods shall have expired; and all other material approvals and authorizations of, filings and registrations with, and notifications to, all Governmental Entities required for the consummation of the Sale and for the prevention of any termination of any right, privilege, license or agreement of Banks or their subsidiaries shall have been obtained or made and shall be in full force and effect (unless such termination would not have a Material Adverse Effect) and all waiting periods required by law shall have expired; PROVIDED, HOWEVER, that none of the preceding shall be deemed obtained or made if it shall be conditioned or restricted in a manner that would result in a Material Adverse Effect which is unduly burdensome or onerous. Without limiting the foregoing, examples of burdensome or onerous conditions include limitations on 26 the time, manner or amount of payment of dividends by Buyer or a Buyer subsidiary or requiring changes in the directorship of Buyer. (b) THIRD PARTY CONSENTS. All consents or approvals of all Persons (other than Governmental Entities) required for or in connection with the execution, delivery and performance of this Agreement and the consummation of the Sale shall have been obtained and shall be in full force and effect, unless the failure to obtain any such consent or approval would not have a Material Adverse Effect. (c) LITIGATION. No United States or state court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement. (d) EXECUTION OF LICENSE AGREEMENT. The parties have executed the License Agreement more particularly described in Section 6.6. (e) OCC APPROVAL. Subject to the provisions of 1.2(c), the OCC shall have approved, to the extent necessary under governing law, the Dividends. 4.2 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to consummate the Sale is also subject to the fulfillment or written waiver by Seller prior to the Effective Time of each of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Buyer set forth in this Agreement shall be true and correct (subject to Section 2.4) as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), and Seller shall have received a certificate, dated the date of the Effective Time, signed on behalf of Buyer by an Executive Officer of Buyer to such effect. (b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, including but not limited to the tender and payment of the Purchase Price, and Seller shall have received a certificate, dated the date of the Effective Time, signed on behalf of Buyer by an Executive Officer of Buyer to such effect. (c) OPINION OF COUNSEL. Buyer shall have delivered to Seller an opinion of counsel, dated the date of the Effective Time, in form and substance reasonably satisfactory to the Seller, with respect to the matters addressed in Section 2.2(a), (b), (c) and (d). 27 4.3 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to consummate the sale is also subject to the fulfillment or written waiver by Buyer prior to the Effective Time of each of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Seller set forth in this Agreement shall be true and correct (subject to Section 2.4) as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), and Buyer shall have received a certificate, dated the date of the Effective Time, signed on behalf of Seller by an Executive Officer of Seller to such effect. (b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Effective Time, and Buyer shall have received a certificate, dated the date of the Effective Time, signed on behalf of Seller by an Executive Officer of Seller to such effect. (c) OPINION OF COUNSEL. Seller shall have delivered to Buyer an opinion of outside counsel, dated the date of the Effective Time, in form and substance reasonably satisfactory to Buyer, with respect to the matter addressed in Sections 2.1(a), (b), (c), (d), (e), (f), (g) and (m). (d) RESIGNATION OF DIRECTORS. Banks' directors shall have resigned or been removed effective as of the Effective Time without further obligation or liability of Banks or Buyer. (e) TERMINATION OF INTERCOMPANY AGREEMENTS. Seller shall have caused the Banks to terminate the Intercompany Agreements without further liability or obligation of the Banks or Buyer. All sums due to or owed by the Banks pursuant to terminated Intercompany Agreements, other than the Tax Sharing Agreements referred to in Section 3.9(g), shall be settled prior to the Effective Time for the account and benefit of the Seller. (f) SERVICE CONTRACTS. Banks' rights or obligations under the Service Contracts shall have been terminated or, with the consent of Buyer and Seller, the Service Contracts shall have been assigned in whole or in part to Banks or Buyer. 28 ARTICLE V TERMINATION, AMENDMENT AND WAIVER 5.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time: (a) By the mutual written consent of Seller and Buyer; (b) By either Seller or Buyer, if (i) the Effective Time shall not have occurred on or prior to December 2, 1996, or (ii) any approval or authorization of any Governmental Entity, the lack of which would result in the failure to satisfy the closing condition set forth in Section 4.1(a), shall have been denied by such Governmental Entity or such Governmental Entity shall have requested the withdrawal of any application therefor or indicated an intention to deny, or impose a condition of a type referred to in the proviso to Section 4.1(a) with respect to such approval or authorization; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 5.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, either the failure of the Effective Time to occur on or prior to such date or such action by such Governmental Entity, as the case may be; (c) By Seller, if Buyer shall have breached any representation, warranty, covenant or agreement contained herein that would result in the failure to satisfy the closing condition set forth in Section 4.1(a) or 4.2(b) and such breach cannot be or has not been cured within 30 days after the giving of a written notice to Buyer of such breach; or (d) By Buyer, if Seller shall have breached any representation, warranty, covenant or agreement contained herein that would result in the failure to satisfy the closing condition set forth in Section 4.3(a) or 4.3(b) and such breach cannot be or has not been cured within 30 days after the giving of a written notice to Seller of such breach. 5.2 EFFECT OF TERMINATION. In the event of termination of this Agreement as provided in Section 5.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto. 5.3 WAIVER. Subject to Section 9.10, at any time prior to the Effective Time, either party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions contained herein. 29 ARTICLE VI FRANCHISE AGREEMENTS AND NAME 6.1 CONTINUED USE OF FIRST INTERSTATE NAME, LOGO AND TRADEMARK. (a) Effective as of the Effective Time, Seller shall grant Buyer an exclusive and perpetual license to use the name "First Interstate Bank" and the logo and trademark in the States of Montana, Wyoming, North Dakota, South Dakota and Nebraska. (b) Effective as of the fifth anniversary of the Effective Time, Seller shall grant Buyer an exclusive and perpetual license to use the name "First Interstate Bank" and the logo and trademark in the State of Colorado. (c) Effective as of the sixth anniversary of the Effective Time, Seller shall grant Buyer an exclusive and perpetual license to use the name "First Interstate Bank" and the logo and trademark in the States of Idaho and Utah. 6.2 MUTUAL RELEASE OF ALL CLAIMS. As of the date of this Agreement, Buyer and Seller, on behalf of themselves and their successors in interest, transferees, and assigns, shall release one another from any and all claims, causes of action or suit which each may have against the other and arising out of or related to the Franchise Agreement dated as of September 26, 1983, as amended from time to time (the "Franchise Agreement"). Except as provided in Section 6.5, after the date of this Agreement, neither Buyer nor Seller shall have any continuing obligation or responsibility to the other on account of the Franchise Agreement, and the ongoing relationship between the parties shall be governed by the provisions of this Agreement and the License Agreement described in Section 6.3. This Section 6.2 shall survive termination of this Agreement. 6.3 SEPARATE AGREEMENT. Concurrent with the execution of this Agreement, Seller and Buyer shall execute and deliver a licensing agreement in form and substance reasonably satisfactory to each party and incorporating the terms of this Article VI (the "License Agreement"). The License Agreement shall survive termination of this Agreement. 6.4 NON-COMPETITION. Seller, on behalf of itself, its affiliates and subsidiaries, shall refrain from conducting a depository institution business through an office or offices located in the states of Montana or Wyoming for a period of six years following the Effective Time. Subject to Section 3.6, nothing contained in this Section 6.7 shall prohibit Seller from contacting or soliciting potential customers in Montana and Wyoming in conjunction with a nationwide or regional general solicitation which does not specifically target Buyer's customers in Montana and Wyoming. Seller may conduct a depository institution business through an office or offices in the States of Montana or Wyoming before the expiration of six years following the Effective Time if a presence in these states is the result of an acquisition of or merger with another bank, bank holding company, savings association, savings bank, savings association holding company, or other company or entity which has its principal place of business outside the States of Montana 30 and Wyoming and which owns and operates banks, branches, loan or deposit production offices in these states. 6.5 RESOLUTION OF CERTAIN RELATIONSHIPS. (a) The parties agree to resolve, extend or terminate, as the case may be, the following relationships arising out of or related to the Franchise Agreement in the following manner: (i) Teller services: Terminate the service at a time mutually agreed upon, but no later than August 1, 1996. (ii) Automated Teller Machine gateway: Seller will continue to provide ATM gateway services and ATM interchange on terms and conditions applicable as of the date of this Termination Agreement. Either Buyer or Seller may terminate the ATM gateway and ATM interchange upon 180 days' written notice to the other party. Seller may alter the terms and conditions of the service to reasonable new terms and conditions upon 60 days' written notice to Buyer. (iii) ACTION: either party may terminate the ACTION service upon 60 days written notice to the other party. (iv) Mortgage servicing: the Wyoming Bank currently provides mortgage servicing. At any time following termination of this Agreement, Seller will cause the Wyoming Bank to continue mortgage servicing obligations on the terms and conditions currently in effect. Either Seller or Buyer may terminate mortgage servicing upon 60 days written notice to the other party. (v) Merchant processing: Seller will continue to provide merchant processing on terms and conditions in effect as of the date of this Agreement. Either Seller or Buyer may terminate merchant processing upon 120 days' written notice to the other party. Seller may alter the terms and conditions of the service to reasonable new terms and conditions upon 60 days' written notice to Buyer. (vi) Purchase discounts: terminated as of the date of this Agreement. (vii) Technical support: terminated as of the date of this Agreement. (viii) Advertising: terminated as of the date of this Agreement. (b) Franchise fees under the Franchise Agreement terminate effective as of the date of this Agreement. (c) The parties shall execute and deliver such instruments and agreements necessary or convenient to evidence the service provisions of this Section 6.5. 31 ARTICLE VII POST-EFFECTIVE TIME PROVISIONS 7.1 INDEMNIFICATION. From and after the Effective Time, subject to the terms and conditions of this Agreement, Seller shall indemnify, defend and hold harmless Buyer and each of its subsidiaries (including Banks following the Effective Time) from and against any and all losses, claims, damages or liabilities (collectively "Losses") that any of them actually suffer, incur or sustain arising out of or attributable to (whether or not arising out of third-party claims): (a) Any breach of any representation or warranty made by Seller as expressed in Sections 2.1(n) and 2.1(q); (b) Any breach of any of Seller's covenants set forth in Section 3.1(b)(xiv) to the extent that such breach relates to Seller's warranties set forth in Sections 2.1(n) and 2.1(q); or (c) Fiduciary accounts or relationships transferred by Banks to Seller, or a subsidiary or affiliate of Seller, at or prior to the Effective Time. 7.2 LIMIT ON INDEMNIFICATION. Buyer's right of indemnification under this Article VII is subject to the following conditions and limitations: (a) Notice for any claim of indemnification must be given before the third anniversary of the Effective Time; (b) Indemnification shall only be available to the extent the Losses of Buyer and its subsidiaries, collectively, exceed, in the aggregate for Banks, $500,000.00. 7.3 NOTICE. Buyer shall promptly notify Seller of the discovery by it of, or the assertion against it or any of its subsidiaries of, any claim or potential liability for which indemnification is provided under this Agreement or the commencement of any action or proceeding in respect of which indemnity may be sought under this Agreement. 7.4 SETTLEMENT. Seller shall have the right to settle or compromise any claim or liability subject to indemnification under this Agreement that is susceptible to being settled or compromised through the payment of money, provided that any such settlement shall require the consent of Buyer, which consent shall not be unreasonably withheld; and provided, further, that the consent of Buyer shall not be required if (i) the terms of the settlement require only the payment of damages, and (ii) the indemnified party is not otherwise materially and adversely affected by the terms of the settlement. 7.5 CONTROL DISBURSEMENT ACCOUNTS. Schedule 7.5 identifies certain customer account relationships (the "Control Disbursement Accounts") currently maintained by or through the 32 Wyoming Bank. Buyer and Seller acknowledge and agree that Seller has caused or will cause the Control Disbursement Accounts to be transferred to a Seller affiliate on or after the date of this Agreement and prior to the first anniversary of the Effective Time. Buyer shall cause Banks to cooperate with Seller on and after the Effective Time in the management, operation and transfer of the Control Disbursement Accounts as Seller may reasonably request. Seller shall pay Buyer or the Wyoming Bank a reasonable service fee for Buyer's or Wyoming Bank's management and servicing of the Control Disbursement Accounts. Seller shall not be obligated to pay Buyer or Wyoming Bank any further consideration in connection with the transfer of the Control Disbursement Accounts. 7.6 DATA PROCESSING SERVICES. Seller shall make available to Buyer and Banks data processing services for the business of the Banks for a period not to exceed three calendar months following the Effective Time. Buyer or Banks shall pay Seller for such data processing services on terms and at pricing consistent with industry practices and comparable arm's-length data processing services contracts. 7.7 TRANSFER OF BANK BOOKS, RECORDS AND INFORMATION. At or within a reasonable time following the Effective Time, Seller shall transfer and deliver to Buyer at the Banks' respective premises all Bank books, records and information, however maintained or stored, which then is or later comes within Seller's possession or control. ARTICLE VIII TRANSFERRED EMPLOYEES 8.1 TRANSFERRED EMPLOYEES. (a) As soon as reasonably practicable and in any event within fourteen (14) days of the date hereof, Seller shall deliver to Buyer a true and complete list of all Employees by name, date of hire and position, as of the date hereof, together with their most recent performance evaluations, current salaries and other compensation arrangements; provided that Seller shall not release a performance evaluation without having first obtained the written consent of the respective Employee. Seller shall promptly notify Buyer of the hiring and identity of additional employees by Banks. Buyer shall communicate to Seller those Employees whom Buyer wishes Banks to retain at least 30 business days prior to the Effective Time. Those Employees of Banks who remain employed by Banks as of the Effective Time shall be referred to as "Transferred Employees." Subject to the provisions of this Article VIII, Transferred Employees will be subject to the employment terms, conditions and rules applicable to other employees of Buyer. Nothing contained in this Agreement shall be construed as an employment contract between Buyer and any Transferred Employees. 33 (b) To the extent permitted under Buyer's 401(k) plan, Seller and Buyer shall cooperate in arranging for the transfer to Buyer's 401(k) plan, as soon as practicable after the Effective Time and in a manner that satisfies Sections 414(l) and 414(d)(6) of the Internal Revenue Code, of those accounts held under Seller's 401(k) plan on behalf of Transferred Employees. (c) Seller shall have the right to continue to employ after the Effective Time any employee who is not a Transferred Employee, or to release any such employee in its sole discretion. (d) Each Transferred Employee shall be provided continued employment by Buyer, Banks or a subsidiary or affiliate of either subject to the following terms and conditions: (i) Except as specifically provided herein, Transferred Employees shall be provided employee benefits that are no less favorable in the aggregate than those provided to similarly situated employees of Buyer. Buyer shall provide such Transferred Employee with credit for the Transferred Employee's period of service with Seller or Banks (including service credited from First Interstate Bancorp towards the calculation of eligibility for such purposes as vacation, severance and other benefits and participation and vesting in Buyer's qualified pension or profit sharing plan, as such plans may exist, but, except as set forth in (iv) below and for vacation, not for purpose of benefit accruals, including, without limitation, funding of accrued pension or profit sharing plans for such Transferred Employee with respect to any period prior to the Effective Time). (ii) Each Transferred Employee shall be eligible to participate in the medical, dental or other welfare plans of Buyer, as such plans may exist, effective as of the Effective Time and any pre-existing conditions provisions of such plans shall be waived with respect to such Transferred Employee, provided that if Buyer's relevant health or disability insurance policy or plan has a pre-existing condition limitation and an Employee's condition is being excluded (as a pre-existing condition) under Seller's plan as of the Effective Time, Buyer may treat such condition as a pre-existing condition for the period such condition would have been treated as a pre-existing condition under Seller's plan under which such employee would have been covered. (iii) With respect to any Transferred Employee on a short-term disability or temporary leave of absence, upon conclusion of his or her short-term disability or temporary leave of absence, subject to the terms and conditions of the Buyer's plans and policies and applicable law, each Transferred Employee on such leave shall receive the salary and vacation benefit in effect when he or she went on leave, shall otherwise be treated 34 as a Transferred Employee and, to the extent practicable, may be offered by Buyer the same or a substantially equivalent position to his or her position with Seller prior to leave. (iv) Until April 1, 1998, each Transferred Employee shall be eligible for benefits under the severance plans referred to in Schedule 2.1(q). Buyer shall be responsible for all payments and benefits due to Transferred Employees under the severance plans referred to in Schedule 2.1(q) with the exception of payments and benefits arising out of claims that Buyer's benefit plans, programs, policies, and practices do not provide participants in the severance plans with compensation and benefits at least substantially similar in the aggregate to those provided under the plans in effect with respect to the Transferred Employees on April 1, 1996. Seller shall have the right, but not the obligation, to compensate the Buyer for the cost of obtaining comparable benefits so as to avoid the occurrence of a "triggering event" under applicable severance plans. Buyer agrees to cooperate with any action taken by Seller to identify and implement any supplements to the compensation and benefits with respect to the Transferred Employees. After April 1, 1998, each Transferred Employee who is continuously employed by Buyer as of the Effective Time, shall be eligible for benefits under any severance or similar plans maintained by Buyer with credit for the period of years of credited service with Seller towards the calculation of benefits. (e) Except as provided herein, Seller shall pay, discharge and be responsible for (i) all salary and wages arising out of or relating to the employment of the Employees before the Effective Time, and (ii) any employee benefits (including, but not limited to, accrued vacation) arising under Seller's employee benefit plans and employee programs prior to the Effective Time (but not including any future retiree medical benefits), including benefits with respect to claims incurred prior to the Effective Time but reported after the Effective Time, consistent and in accordance with Seller's past practices and all applicable contractual, statutory, and regulatory requirements. From and after the Effective Time, Buyer shall pay, discharge and be responsible for all salary, wages and benefits arising out of or relating to the employment of the Transferred Employees by Buyer on and after the Effective Time, including all claims for welfare benefit plans incurred on or after the Effective Time. Seller shall promptly inform Buyer of any Employee who resigns prior to the Effective Time. Claims are incurred as of the date of injury or illness notwithstanding when the services are provided or disability benefits paid. (f) Buyer agrees to cooperate with any action taken by Seller to identify and implement (at an agreed-upon cost to Buyer) supplements to the compensation and benefits of the Transferred Employees to reduce where possible Seller's obligations under the assumed severance obligations referred to in Schedule 2.1(q) 35 to provide Transferred Employees with compensation and benefits at least substantially similar in the aggregate (in terms of benefit levels and/or reward opportunities) to those provided for under employee benefit plans, programs, policies and practices of Seller on April 1, 1996 (the effective date of its merger with First Interstate Bancorp). ARTICLE IX GENERAL PROVISIONS 9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties set forth in Article II hereof shall be deemed to have been relied upon by the party to whom they are made and shall not survive the Closing. 9.2 INTERPRETATION OF CERTAIN TERMS. Unless otherwise specifically provided in this Agreement or clearly required by the context, the following defined terms shall be interpreted as follows: (a) "Banks" shall be interpreted to mean the Banks collectively and each individually, together with their respective subsidiaries. (b) "Seller" shall be interpreted to mean the Seller, together with its affiliates and subsidiaries, excluding, however the Banks. (c) "Buyer" shall be interpreted to mean the Buyer together with its affiliates and subsidiaries. (d) "Executive Officer" shall be interpreted to include: (i) For Seller, chief executive officer, president and chief financial officer; (ii) For Banks, chief executive officer, president and executive vice presidents; and (iii) For Buyer, chief executive officer, president and chief financial officer. 9.3 EXPENSES. All costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred. 36 9.4 NOTICES. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered personally or by telefacsimile upon confirmation of receipt, (ii) on the first business day following the date of mailing if delivered by registered next-day courier service, or (iii) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices, requests, instructions or other documents to be given hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, request, instruction or document: (a) If to Seller: WELLS FARGO & COMPANY 420 Montgomery Street San Francisco, California 94163 Facsimile: 415-975-7151 Attention: Guy Rounsaville, Jr. with a copy to: Mr. Stephen J. Smith Schwabe, Williamson and Wyatt, P.C. 431 First Avenue West Kalispell, Montana 59901 Facsimile: 406-752-5108 or 1121 Southwest Fifth Avenue Suite 1600-1800 Portland, Oregon 97204 Facsimile: 503-796-2900 (b) If to Buyer: FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. 401 N. 31st Street Billings, Montana 59101-1200 Facsimile: 406-255-5069 Attention: Thomas W. Scott Terrill R. Moore 9.5 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 37 9.6 SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. 9.7 ENTIRE AGREEMENT; INTERPRETATION. This Agreement, including the Schedules, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral. It is the intention of the parties that this Agreement shall not be construed more strictly with regard to one party than with regard to any other party. 9.8 ASSIGNMENT. Without the written consent of the other parties hereto, this Agreement shall not be assigned by operation of law or otherwise (any attempted assignment in contravention hereof being null and void). 9.9 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 9.10 AMENDMENT; WAIVER. This Agreement may not be amended or modified except by written agreement executed and delivered by duly authorized officers of the parties. Waiver of any term or condition of this Agreement (including any extension of time required for performance) shall only be effective if in writing, executed and delivered by a duly authorized officer of the waiving party, and shall not be construed as a waiver of any subsequent breach of the same term or condition or as a waiver of any other term or condition of this Agreement. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. 9.11 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to agreements made and to be performed wholly within such State. 9.12 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 9.13 TIME. Time is of the essence. 38 IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be duly executed as of the date first written above by their respective officers thereunto duly authorized. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By: --------------------------------------------------- Thomas W. Scott Chairman, President & Chief Executive Officer WELLS FARGO & COMPANY By: --------------------------------------------------- Guy Rounsaville, Jr. Executive Vice President, Chief Counsel and Secretary 39 EX-3.1-1 3 AMENDMENT TO RESTATED ARTICLES OF INC. ARTICLES OF AMENDMENT 1. The name of the corporation is: FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. (the "Corporation"). 2. The text of the amendment to the Corporation's Restated Articles of Incorporation is as set forth on EXHIBIT A attached hereto and incorporated herein by this reference (the "Amendment"). 3. The Amendment was duly adopted by the Corporation's Board of Directors on September 19, 1996 without shareholders' action, and shareholders' action was not required pursuant to Section 35-1-619(4) of the Montana Business Corporation Act. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By:__________________________________________ Name of Officer:_____________________________ Office held:_________________________________ EXHIBIT A CERTIFICATE OF DESIGNATION OF PREFERENCE AND RIGHTS OF NONCUMULATIVE PERPETUAL PREFERRED STOCK OF FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. A. The Third Series of Preferred Stock to be issued by the Corporation shall be designated "Noncumulative Perpetual Preferred Stock," (the "Noncumulative Perpetual Preferred Stock") and the number of shares constituting such Noncumulative Perpetual Preferred Stock shall be Twenty Thousand (20,000) shares, no par value. B. The rights, preferences, privileges and restrictions of, and other matters relating to, the Noncumulative Perpetual Preferred Stock are as follows: 1. CERTAIN DEFINITIONS. Unless the context otherwise requires, the terms defined in this Section 1 shall have, for all purposes of this resolution, the meanings herein specified: "Common Stock" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation and any other stock of the Corporation, howsoever designated, authorized after the Issue Date, which has the right (subject always to the prior rights of any class or series of Preferred Stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount. "Issue Date" shall mean the date that shares of Noncumulative Perpetual Preferred Stock are issued by the Corporation, which shall be a single date. "Junior Stock" shall mean, for purposes of Section 2 below, the Common Stock and any other class or series of stock of the Corporation issued after the Issue Date not entitled to receive any dividends unless all dividends required to have been paid or declared and set apart for payment on the Noncumulative Perpetual Preferred Stock shall have been so paid or declared and set apart for payment and, shall mean, for purposes of Section 2 below, any class or series of stock of the Corporation issued after the Issue Date not entitled to receive any assets upon the liquidation, dissolution, or winding up of the affairs of the Corporation until the Noncumulative Perpetual Preferred Stock shall have received the entire amount to which such stock is entitled upon such liquidation, dissolution or winding up. "Noncumulative Perpetual Preferred Stock" shall have the meaning set forth in paragraph A, above. "Parity Stock" shall mean, for purposes of Section 4 below, any other class or series of stock of the Corporation entitled to receive payment of dividends on a parity with the Noncumulative Perpetual Preferred Stock and, shall mean, for purposes of Section 2 below, any other class or series of stock of the Corporation entitled to receive assets upon the liquidation, dissolution or winding up of the affairs of the Corporation on a parity with the Noncumulative Perpetual Preferred Stock. "Preferred Stock" shall mean the Noncumulative Perpetual Preferred Stock and the Parity Stock. "Senior Stock" shall mean any class or series of stock of the Corporation issued after the Issue Date entitled to receive payment of dividends and assets upon the liquidation, winding up or dissolution of the Corporation in preference and priority to the Preferred Stock. 2. LIQUIDATION RIGHTS. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the assets of the Corporation available for distribution to stockholders after the payment or provision for the payment of all claims against the Corporation has been made in accordance with applicable law ("Net Assets"), shall be distributed as follows: the holders of the Senior Stock shall first be entitled to receive an amount equal to their liquidation preference, plus any declared and unpaid dividends; the holders of the Noncumulative Perpetual Preferred Stock shall be entitled to receive $1,000 per share, plus any declared but unpaid dividends and the holders of the Parity Stock shall concurrently be entitled to receive their respective liquidation preferences, plus any declared but unpaid dividends; thereafter, the holders of the Junior Stock (other than the Common Stock) shall then be entitled to receive an amount equal to their respective liquidation preferences, plus any declared but unpaid dividends; and finally, the holders of the Common Stock shall then be entitled to receive all remaining Net Assets ratably in accordance with their liquidation preferences. If the assets or surplus funds to be distributed to the holders of the Noncumulative Perpetual Preferred Stock are insufficient to permit the payment to such holders and to the holders of any Parity Stock of their full preferential amount after paying the holders of the Senior Stock, the assets and surplus funds legally available for distribution shall be distributed ratably among the holders of the Noncumulative Perpetual Preferred Stock and the holders of any other Parity Stock in proportion to the full preferential amount each such holder is otherwise entitled to receive. The Corporation shall mail written notice of such liquidation, dissolution or winding up, not less than 30 days prior to the payment date stated therein, to each record holder of Noncumulative Perpetual Preferred Stock. 3 Neither the merger nor the consolidation of the Corporation into or with any other entity or entities, nor a sale, transfer, lease or exchange (for cash, securities or other consideration of all or part of the assets of the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation, unless such sale, transfer, lease or exchange shall be in connection with and intended to be a plan of complete liquidation, dissolution or winding up of the Corporation). 3. VOTING RIGHTS. Except as otherwise required by law, the holders of Noncumulative Perpetual Preferred Stock shall be entitled to notice of any shareholders' meeting and to vote upon the following matters submitted to shareholders for a vote, on the following basis: a. Holders of Noncumulative Perpetual Preferred Stock shall have one vote per share on the matters set forth in Section 3(b). b. Except as otherwise required by law, the holders of the Noncumulative Perpetual Preferred Stock shall be entitled to vote on the issuance of any Senior Stock and any amendment to the Articles of Incorporation or this Certificate of Designation that would adversely affect or otherwise impair the rights or relative priority of the holders of the Noncumulative Perpetual Preferred Stock. c. The Corporation shall not issue any Senior Stock without the approval of holders of at least two-thirds of the outstanding Noncumulative Perpetual Preferred Stock. d. The Corporation shall not, without first obtaining the affirmative vote or written consent of at least 66 2/3% of such outstanding shares of Noncumulative Perpetual Preferred Stock, amend, alter or repeal (by merger or otherwise) this Certificate or the Articles of Incorporation of the Corporation, if such actions would result in any adverse change in the rights, preferences, or privileges of the Noncumulative Perpetual Preferred Stock, or the restrictions provided for the benefit of, the Noncumulative Perpetual Preferred Stock. e. So long as any Noncumulative Perpetual Preferred Stock remains outstanding, if the Corporation fails to pay six full quarterly dividends to the holders of Noncumulative Perpetual Preferred Stock as provided in Section 4 hereof, and until the Corporation pays full dividends for four consecutive quarters, the holders of the Preferred Stock as a class shall have the right to select two representatives to be elected to the Corporation's board of directors, and the Corporation shall nominate such representatives for election to the board of directors. The Corporation shall use its best efforts to cause such representatives to be elected to the board of directors and 4 shall not take any action which would diminish the prospects of such representatives being elected to the Corporation's board of directors. 4. DIVIDEND RIGHTS. (a) The holders of outstanding Noncumulative Perpetual Preferred Stock shall be entitled to receive in any fiscal year, when and if declared by the Board of Directors, out of any assets at the time legally available therefor, dividends in cash at the rate of Eighty-Five Dollars and Thirty Cents ($85.30) per share of Noncumulative Perpetual Preferred Stock, accruing on a daily basis, per annum, from and including the Issue Date, to but not including the seventh anniversary of the Issue Date. From and after the seventh anniversary of the Issue Date, the holders of outstanding Noncumulative Perpetual Preferred Stock shall be entitled to receive in any fiscal year, when and if declared by the Board of Directors, out of any assets at the time legally available therefor, dividends in cash at a variable rate equal to Two Hundred and Fifty (250) basis points over the yield, on the seventh anniversary of the Issue Date, on U.S. Treasury Bills having a maturity of (i) 30 days, (ii) 10 years, or (iii) 30 years, whichever of (i), (ii), or (iii) has a higher yield as of 10:00 a.m. Mountain Time on such date, payable in preference and priority to any dividend on any shares of any Junior Stock and payable in preference and priority on parity with any dividend on any shares of Parity Stock. Notwithstanding the foregoing, dividends on the Noncumulative Perpetual Preferred Stock shall not be cumulative. In the event that such dividends accrue, they shall be payable in arrears, when declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of the year in which such dividends are declared. Each such dividend shall be paid to the holders of the record of the Noncumulative Perpetual Preferred Stock as their names appear on the share register of the Corporation on the corresponding record date. If one or more amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that change the percentage of the dividends received deduction (currently 70%) as specified in Section 243(a)(1) of the Code or any successor provision (the "Dividends Received Percentage"), the amount of each dividend payable per share of the Noncumulative Perpetual Preferred Stock for dividend payments made on or after the date of enactment of such change shall be adjusted by multiplying the amount of the dividend payable determined as described above (before adjustment) by a factor, which shall be the number determined in accordance with the following formula (the "DRD Formula"), and rounding the result to the nearest cent: 1-.35 (1-.70) -------------- 1-.35 (1-DRP) 5 For the purposes of the DRD Formula, "DRP" means the Dividends Received Percentage applicable to the dividend in question. No amendment to the Code, other than a change in the percentage of the dividends received deduction set forth in Section 243(a)(1) of the Code or any successor provision, will give rise to an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Corporation shall receive either an unqualified opinion of nationally recognized independent tax counsel selected by the Corporation or a private letter ruling or similar form of authorization from the Internal Revenue Service to the effect that such an amendment would not apply to dividends payable on the Noncumulative Perpetual Preferred Stock, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The opinion referenced in the previous sentence shall be based upon a specific exception in the legislation amending the DRP or upon a published pronouncement of the Internal Revenue Service addressing such legislation. Unless the context otherwise requires, references to dividends in this Certificate of Designation shall mean dividends as adjusted by the DRD Formula. The Corporation's calculation of the dividends payable as so adjusted and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Corporation, shall be final and not subject to review. If any amendment to the Code which reduces the Dividends Received Percentage is enacted after a dividend has been declared, the amount of such dividend payable on the payment date for such dividend ("Dividend Payment Date") will not be increased; but instead, an amount, equal to the excess of (x) the product of the dividends paid by the Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the reduced Dividends Received Percentage) and (y) the dividends paid by the Corporation on such Dividend Payment Date, will be payable to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date. In addition, if an amendment to the Code is enacted that reduces the Dividends Received Percentage and such reduction retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the Noncumulative Perpetual Preferred Stock (each an "Affected Dividend Payment Date"), the Corporation will pay (if declared) additional dividends (the "Additional Dividends") on the next succeeding Dividend Payment Date (or if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, on the second succeeding Dividend Payment Date following the date of enactment) to holders of record on such succeeding Dividend Payment Date in an amount equal to the excess of (x) the product of the dividends paid by the Corporation on each Affected 6 Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the Dividends Received Percentage applied to each Affected Dividend Payment Date) and (y) the dividends paid by the Corporation on each Affected Dividend Payment Date. In the event that the amount of dividend payable per share of the Noncumulative Perpetual Preferred Stock shall be adjusted pursuant to the DRD Formula and/or Additional Dividends are to be paid, the Corporation will cause notice of each such adjustment and, if applicable, any Additional Dividends, to be sent to the holders of the Noncumulative Perpetual Preferred Stock. 5. REDEMPTION. The Noncumulative Perpetual Preferred Stock shall not be redeemable by the Corporation prior to the seventh anniversary of the Issue Date. The Corporation may, at its option, redeem all or any part of the Noncumulative Perpetual Preferred Stock at any time on or after the seventh anniversary of the Issue Date, subject to the prior written approval of the Federal Reserve Bank of Minneapolis, at a price of $1,000 per share, plus accrued but unpaid dividends to the date fixed for redemption, including any changes in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends, if any. The election of the Corporation to redeem any shares of Noncumulative Perpetual Preferred Stock shall be evidenced by or pursuant to a resolution of the Corporation's Board of Directors. In case of any redemption by the Corporation of the Noncumulative Perpetual Preferred Stock, the Corporation shall, at least 60 days prior to the redemption date fixed by the Corporation, notify the holders of the Noncumulative Perpetual Preferred Stock of such redemption date and of the number of shares to be redeemed. If less than all of the shares are redeemed, the number of shares redeemed from each holder shall be in the same proportion as the number of shares owned by such holder bears to the number of shares outstanding. Upon surrender of any shares for redemption in accordance with such notice, the Corporation shall pay the redemption price therefor. The Noncumulative Perpetual Preferred Stock shall not be entitled to a sinking fund to be applied the redemption of the Noncumulative Perpetual Preferred Stock. Notwithstanding the preceding paragraph, if the Dividends Received Percentage is equal to or less than 35% and, as a result, the amount of dividends on the Noncumulative Perpetual Preferred Stock payable on any Dividend Payment Date will be or is adjusted upwards as described in Section 4 hereof, the Corporation, at its option, may redeem all, but not less than all, of the outstanding shares of the Noncumulative Perpetual Preferred Stock, provided, that within 60 days of the date on which an amendment to the Code is enacted which reduces the Dividends Received Percentage to 35% or less, the Corporation sends notice to holders of the Noncumulative Perpetual Preferred 7 Stock of such redemption. Any redemption of the Noncumulative Perpetual Preferred Stock pursuant to this Section will take place on the date specified in the notice, which shall not be less than 30 nor more than 60 days from the date such notice is sent to holders of the Noncumulative Perpetual Preferred Stock. Any redemption of the Noncumulative Perpetual Preferred Stock in accordance with this Section shall be on notice as aforesaid at a price of $1,000 per share, plus accrued but unpaid dividends to the date fixed for redemption., including any changes in dividends payable due to changes in the Dividends Received Percentage and Additional Dividends, if any. Any such redemption shall be subject to the prior written approval of the Federal Reserve Bank of Minneapolis. 6. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office a register for the registration of Noncumulative Perpetual Preferred Stock. Upon the surrender of any certificate representing Noncumulative Perpetual Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of share as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends, to the extent they have accrued, shall accrue on the Noncumulative Perpetual Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Noncumulative Perpetual Preferred Stock represented by the surrendered certificate. 7. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of any class of Noncumulative Perpetual Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is a financial institution or other institutional investor its own agreement shall be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Noncumulative Perpetual Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. 8 8. NONCUMULATIVE PERPETUAL PREFERRED STOCK NOT CONVERTIBLE. Shares of the Noncumulative Perpetual Preferred Stock shall not be convertible into shares of any other class or classes or any other series of the Preferred Stock. 9. AMENDMENT AND WAIVER. No amendment, modification or waiver shall be binding or effective with respect to any provisions hereof without the prior written consent of the holders of at least a majority of the Noncumulative Perpetual Preferred Stock outstanding at the time such action is taken. 10. NOTICES. All notices referred to herein shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered personally or by facsimile upon confirmation of receipt, (b) on the first business day following the date of mailing if delivered by next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices to be given hereunder shall be delivered as follows, or pursuant to such other instructions as may be designated in writing by the party to receive such notice in accordance with this Section 10: (i) to the Corporation, at its principal executive offices, and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation. 11. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 12. SEVERABILITY. If any right, preference or limitation of the Noncumulative Perpetual Preferred Stock set forth in this resolution (as such resolution may be amended from time to time is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other rights, preferences and limitations set forth in this resolution (as so amended) which can be given effect without the invalid, unlawful or unenforceable right, reference or limitation shall, nevertheless, remain in full force and effect, and no right, preference or limitation herein set forth shall be deemed dependent upon any other such right, preference or limitation unless so expressed herein. 9 EX-3.1-2 4 AMENDMENT TO RESTATED ARTICLES OF INC. ARTICLES OF AMENDMENT 1. The name of the corporation is: FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. 2. The text of the amendment to the Restated Articles of Incorporation of First Interstate BancSystem of Montana, Inc. is as set forth on EXHIBIT A attached hereto and incorporated herein by this reference (the "Amendment"). 3. The Amendment was duly adopted by the shareholders of First Interstate BancSystem of Montana, Inc. (the "Corporation") on September 19, 1996. 4. There are 1,981,489 shares of the Corporation's common stock outstanding, and there are no outstanding shares of the Corporation's preferred stock. The shareholders owning the outstanding common stock of the Corporation constitute one voting group and such voting group is the only voting group entitled to vote on the Amendment. The number of votes entitled to be cast by such voting group is 1,981,489 votes, and 1,502,538 votes of such voting group were indisputably represented at the meeting of shareholders on September 19, 1996. The total number of votes cast for the Amendment by such voting group was 1,502,522 votes, and the total number of votes cast against the Amendment by such voting group was 16 votes. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By:__________________________________________ Name of Officer:_____________________________ Office held:_________________________________ EXHIBIT A TO ARTICLES OF AMENDMENT Article IV, Subsection A., Subparagraphs (2) and (3) of the Restated Articles of Incorporation of FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. are amended in their entirety to read as follows: (2) Issuance in Series. The Preferred Shares may be issued from time to time in one or more series, each of which series shall have such designation and such relative rights, voting power, preferences and restrictions as are hereinafter determined and stated by the Board of Directors in the resolution or resolutions authorizing the creation of shares of such series. All Preferred Shares shall be of equal rank and shall be identical, except in respect of the particulars that may be determined by the Board of Directors as hereinafter provided, and, if the Board of Directors in the resolution or resolutions authorizing the creation of shares of a series of Preferred Shares states that dividends on such series shall be cumulative, then each share of such series shall be identical in all respects to the dates from which dividends thereon shall be cumulative. Preferred Shares shall be issued only as fully paid and nonassessable shares. Authority is hereby expressly granted to the Board of Directors, subject to the provisions of this Article IV, to authorize the issuance of Preferred Shares in one or more series, and to determine and state, by the resolution or resolutions authorizing the creation of each series: (a) The designation of the series and the number of shares which shall constitute such series, which number may be altered from time to time by like action of the Board of Directors in respect of shares then unissued; (b) Whether dividends on shares of such series shall be cumulative or noncumulative; (c) Unless such resolutions state that dividends on such series shall be noncumulative, the annual rate of dividends payable on the shares of such series; (d) The price or prices per share at which the shares of such series shall be redeemable; (e) The amount payable on shares of such series in the event of any dissolution, liquidation or winding up of the affairs of the Corporation; (f) Whether or not the shares of such series shall be entitled to the benefit of a sinking fund to be applied to the redemption of such series and, if so entitled, the amount of such fund and the manner of its application; (g) Whether or not the shares of such series shall be convertible into shares of any other class or classes or any other series of the same class of the Corporation and, if made so convertible, the conversion price or prices and the manner of making such conversion; and (h) Whether or not the shares of the series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights. (3) Dividends. The payment and declaration of any dividends on Common Shares shall be subject to any and all restrictions pertaining thereto contained in the resolution or resolutions adopted by the Board of Directors authorizing the creation of any series of the Preferred Shares for which dividends are noncumulative, and, before any dividends on Common Shares shall be paid or declared and set apart for payment (other than dividends payable in Common Shares of the corporation), the holders of the Preferred Shares of each series for which dividends thereon are cumulative shall be entitled to receive, out of any funds legally available for such purpose, cash dividends at the annual rate for such series theretofore fixed by the Board of Directors as hereinbefore provided, and no more, payable quarterly on such dates as may be fixed in the resolution or resolutions adopted by the Board of Directors authorizing the creation of such series. Unless the resolution or resolutions of the Board of Directors authorizing the creation of a series of Preferred Shares specify that dividends on such series shall be noncumulative, dividends on each series of Preferred Shares shall be cumulative in the case of shares of each particular series: (a) If issued prior to the record date for the first dividend on shares of such series, then from and including the date fixed for such purpose by the Board of Directors in the resolution or resolutions creating such series; (b) If issued during the period commencing immediately after the record date for a dividend on shares of such series and terminating at the close of the payment date for such dividend, then from and including such last mentioned dividend payment date; 2 (c) Otherwise from and including the quarterly dividend payment date next preceding the date of issue on such shares. No dividend shall be paid or declared and set apart for payment upon any Preferred Shares of any series for any series for any quarterly dividend period unless at the same time a like proportionate dividend for the same or comparable quarterly period, ratable in proportion to the annual dividend rates fixed therefor, shall be paid or declared and set apart for payment upon all Preferred Shares of all series then issued and outstanding for which dividends thereon are cumulative. In no event shall any dividend be paid or declared, nor shall any distribution be made, on the Common Shares of the Corporation, nor shall any Common Shares be purchased, redeemed or otherwise acquired by the Corporation for value, nor shall any monies be paid to or set aside or made available for a purchase fund or sinking fund for the purchase or redemption of any Common Shares of the Corporation unless there has been compliance with all restrictions and conditions thereon contained in the resolution or resolutions adopted by the Board of Directors authorizing the creation of any series of the Preferred Shares for which dividends are noncumulative and unless all dividends on the Preferred Shares of all series for which dividends thereon are cumulative for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, and unless all accrued sinking fund obligations, if any, of the Corporation shall have been satisfied in respect of each series for which a sinking fund has been provided for in the resolution or resolutions authorizing the creation of such series. In no event shall any Preferred Shares be purchased, redeemed or otherwise acquired by the Corporation for value, nor shall any monies be paid or set aside as a sinking fund for the benefit of any series of Preferred Shares unless all dividends on the Preferred Shares of all series for which dividends thereon are cumulative for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid or declared and a sum sufficient for the payment thereof set apart for payment, and all dividends declared by the Board of Directors on the Preferred Shares of all series for which dividends thereon are noncumulative for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid, except in the event all of the Preferred Shares shall be called for redemption. 3 Subject to the provisions of this Article IV and not otherwise, dividends may be declared by the Board of Directors and paid from time to time, out of any funds legally available therefor, upon the then outstanding Common Shares of the Corporation, and the holders of the Preferred Shares shall not be entitled to participate in any such dividends. 4 EX-4.4 5 PREFERRED STOCK PURCHASE AGREEMENT PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF SEPTEMBER 26, 1996 BETWEEN FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. AND FIRST SECURITY CORPORATION $20,000,000 NONCUMULATIVE PERPETUAL PREFERRED STOCK FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. $20,000,000 NONCUMULATIVE PERPETUAL PREFERRED STOCK PREFERRED STOCK PURCHASE AGREEMENT THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made as of September 26, 1996, between FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC., a Montana corporation (the "Company"), and the Persons listed on the Schedule of Purchasers attached (collectively referred to as the "Purchasers" and individually as a "Purchaser"). Except as otherwise indicated, capitalized terms are defined in Section 7. R E C I T A L S A. The Company has entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") dated as of May 24, 1996 by and among the Company and Wells Fargo & Company ("Wells Fargo") pursuant to which Wells Fargo has agreed to sell, and the Company has agreed to purchase, all of the issued and outstanding capital stock of First Interstate Bank of Montana, N.A. (the "Montana Bank") and First Interstate Bank of Wyoming, N.A. (the "Wyoming Bank") (the Montana Bank and the Wyoming Bank are collectively referred to as the "Banks"). B. In order to finance a portion of the purchase price to be paid by the Company for the acquisition of all of the issued and outstanding capital stock of the Banks (the "Acquisition"), the Company has agreed to sell, and the Purchasers have agreed to purchase, the Company's Noncumulative Perpetual Preferred Stock, on the terms and conditions set forth herein. AUTHORIZATION. AUTHORIZATION OF THE PREFERRED STOCK. The Company shall authorize the issuance and sale to the Purchasers of 20,000 shares of its Noncumulative Perpetual Preferred Stock, no par value (the "Preferred Stock"), having the rights and preferences set forth in the Certificate of Designation attached as EXHIBIT A (the Certificate of Designation"). PURCHASE AND SALE OF THE PREFERRED STOCK. At the Closing the Company shall sell to each Purchaser and, subject to the terms and conditions set forth herein, each Purchaser shall purchase from the Company the number of shares of Preferred Stock set forth opposite such Purchaser's name on the Schedule of Purchasers at a price of $1,000 per share. The sale of Preferred Stock to each Purchaser shall constitute a separate sale hereunder. THE CLOSING. The closing of the separate purchases and sales of the Preferred Stock (the "Closing") shall take place at the offices of Holland & Hart, 401 North 31st Street, Suite 1500, Billings, Montana at 10:00 a.m. after the date on which the conditions set forth in Section 2 of this Agreement have been met and simultaneously with the closing of the transactions contemplated by the Stock Purchase Agreement, or at such other place or on such other date as may be mutually agreeable to the Company and each Purchaser (the "Closing Date"), but in no event later than December 31, 1996 (the "Outside Closing Date"). At the Closing, the Company shall deliver to each Purchaser stock certificates evidencing the Preferred Stock to be purchased by each Purchaser, registered in such Purchaser's name, upon payment of the purchase price therefor by a cashier's or certified check, or by wire transfer of immediately available funds to the Company's account in accordance with the following wire transfer instructions, in the amount set forth opposite such Purchaser's name on the Schedule of Purchasers: ABA No. 092901683 First Interstate Bank of Commerce, Billings, MT Acct. No. 1101357554 Account Name: First Interstate BancSystem of Montana, Inc. 2. CONDITIONS PRECEDENT TO OBLIGATIONS TO CLOSE. 2.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE PURCHASE AND SALE OF THE PREFERRED STOCK. The respective obligation of the Company and each Purchaser to consummate the purchase and sale of the Preferred Stock is subject to the fulfillment, or written waiver by the Company and each Purchaser, of each of the following conditions: 2.1.1 GOVERNMENTAL AND REGULATORY CONSENTS. The approval of (i) the Federal Reserve Board ("FRB") of the issuance of the Preferred Stock on the terms and conditions set forth herein, (ii) the FRB of the inclusion of the Preferred Stock in the Company's Tier 1 Capital, and (iii) the FRB and the Wyoming state banking commissioner of the Acquisition, shall have been obtained and shall be in full force and effect and all related waiting periods, if any, shall have expired. 2.1.2 THIRD PARTY CONSENTS. All consents or approvals of all Persons (other than those set forth in Section 2.1.1) required for or in connection with the execution, delivery and performance of this Agreement and the consummation of the purchase and sale of the Preferred Stock shall have been obtained and shall be in full force and effect, unless the failure to obtain any such consent or approval would not have a Material Adverse Effect. 2.1.3 PURCHASE PERMITTED BY APPLICABLE LAWS. No United States or state court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement. ____________________2.1.4 CONSUMMATION OF THE ACQUISITION. All conditions to the Acquisition shall have been satisfied or waived on or prior to December 31, 1996. 2.2. CONDITIONS TO OBLIGATION OF EACH PURCHASER. The obligation of each Purchaser to consummate the purchase of the Preferred Stock is also subject to the fulfillment, or written waiver by such Purchaser, of each of the following conditions: 2.2.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in Section 3 of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct in all material respects 2 as of such date), and the Purchasers shall have received a certificate, dated as of the Closing Date, signed on behalf of the Company by an Executive Officer of the Company to such effect. 2.2.2 CERTIFICATE OF DESIGNATION. The Company shall have duly adopted, executed and filed with the Secretary of State of Montana Articles of Amendment establishing the terms and the relative rights and preferences of the Preferred Stock as set forth in the Certificate of Designation ("Articles of Amendment"). The Articles of Amendment shall be in full force and effect on the Closing Date and shall not have been amended or modified. 2.2.3 BLUE SKY CLEARANCES. The Company shall have made all filings under applicable state securities laws necessary to consummate the issuance of the Preferred Stock pursuant to this Agreement in compliance with such laws. 2.2.4 CLOSING DOCUMENTS. The Company shall have delivered to each Purchaser all of the following documents: (i) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in Sections 2.1 and 2.2.2 through 2.2.3, inclusive, have been fully satisfied; (ii) certified copies of the resolutions duly adopted by the Company's board of directors authorizing the execution, delivery and performance of this Agreement and each of the other agreements contemplated hereby, the filing of the Articles of Amendment, the issuance and sale of the Preferred Stock, and the consummation of all other transactions contemplated by this Agreement; (iii) certified copies of the Articles of Incorporation, the Articles of Amendment and the Company's bylaws, each as in effect at the Closing; (iv) copies of all third party and governmental consents, approvals and filings required in connection with the consummation of the transactions hereunder. 2.2.5 PROCEEDINGS. All corporate and other proceedings taken or required to be taken in connection with the transactions contemplated hereby to be consummated at or prior to the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser. 2.2.6 EXPENSES. The Company shall have reimbursed the Purchasers for the fees and expenses of their special counsel as provided in Section 8.5. 2.2.7 COMPLIANCE WITH APPLICABLE LAWS. The purchase of Preferred Stock by each Purchaser shall not be prohibited by any applicable law or governmental regulation, shall not subject any Purchaser to any penalty, liability or, in such Purchaser's reasonable judgment, other onerous condition under or pursuant to any applicable law or governmental regulation, and shall be permitted by laws and regulations of the jurisdictions to 3 which such Purchaser is subject. 2.2.8 DELIVERY OF STOCK CERTIFICATES. The Company shall have delivered to each Purchaser stock certificates for the number of shares of Preferred Stock set forth opposite such Purchaser's name on the Schedule of Purchasers. 2.2.9 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement and the Closing, there shall not have been any material adverse change in the business or financial condition of the Company. 2.2.10 PERFORMANCE OF OBLIGATIONS. The Company shall have performed all other obligations required by this Agreement to be performed by it prior to or at the Closing. 2.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company to consummate the sale of the Preferred Stock is also subject to the fulfillment, or written waiver by the Company, of the following conditions: 2.3.1 PROOF EACH PURCHASER IS AN INSTITUTIONAL INVESTOR. Each Purchaser shall have provided the Company with any documentation reasonably requested by the Company establishing that such Purchaser is an Institutional Investor. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material inducement to the Purchasers to enter into this Agreement and purchase the Preferred Stock, the Company represents, warrants and covenants that: 3.1. ORGANIZATION; BANK HOLDING COMPANY REGISTRATION. The Company has been duly organized and is a validly existing corporation in good standing under the laws of the State of Montana, with its chief executive offices located in Billings, Montana. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. 3.2. CORPORATE POWER; AUTHORIZATION. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly and validly authorized by the Company, and this Agreement has been duly executed by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The issuance of the Preferred Stock on the terms and conditions contained herein has been duly and validly authorized by the Company. 3.3. NO CONFLICT. The execution, delivery and performance of this Agreement does not and will not violate, conflict with or constitute a default under any provision of the charter documents of the Company or any regulation, order, arbitration award, judgment or decree or any contract to which the Company is a party or by which its property or assets are bound. 4 3.4. CAPITALIZATION. The Company's authorized capital stock consists of 5,000,000 shares of common stock, no par value, approximately 1,981,489 shares of which are outstanding, and 100,000 shares of preferred stock, none of which are outstanding prior to the issuance of the Preferred Stock. All of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. Except as set forth on Schedule 3.4, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of the Company. There are no preemptive rights to purchase securities of the Company. 3.5. DISCLOSURE. Neither this Stock Purchase Agreement, the Offering Memorandum nor any of the schedules, attachments, written statements, documents, certificates or other items prepared and supplied to any Purchaser by or on behalf of the Company with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. There is no fact which the Company has not disclosed to the Purchasers in writing and of which any of its Executive Officers or directors is aware (other than matters of a general economic nature) and which has had or would reasonably be anticipated to have a Material Adverse Effect. 3.6. FINANCIAL STATEMENTS. The Company has furnished to the Purchasers its consolidated financial statements for its three most recent fiscal years. (Such financial statements are collectively referred to as the "Reports".) The consolidated financial statements and related notes included in the Reports present fairly the consolidated financial position of the Company and its Subsidiaries at the dates of the balance sheets included therein and the consolidated results of their operations for the periods covered and were prepared in conformity with GAAP consistently applied, except as may be noted therein. Since January 1, 1996, there has been no change in the financial condition or business of the Company or its Subsidiaries, taken as a whole, which would constitute a Material Adverse Effect. 3.7. COMPLIANCE WITH LAW. Except where the failure to comply would not have a Material Adverse Effect, the Company and its Subsidiaries are in compliance, in the conduct of their respective businesses, with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Fair Lending Laws. 3.8. GOVERNMENTAL CONSENTS. Other than the consents described in Section 2.1.1 and the filing of the Articles of Amendment with the Montana Secretary of State, no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any governmental or regulatory authority, agency, court, commission or other entity ("Governmental Entities"), in connection with the execution, delivery or performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby. 3.9. LITIGATION. There are no criminal or administrative investigations or hearings of, before or by any Governmental Entity, or civil, criminal or administrative actions, suits, claims or proceedings of, before or by any person or entity (including any Governmental 5 Entity) pending or, to the knowledge of the Company's Executive Officers, threatened, against the Company or any of its Subsidiaries (including, without limitation, under any of the Fair Lending Laws); and neither the Company nor any of its Subsidiaries is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or similar submission to, any Governmental Entity charged with the supervision or regulation of depository institutions or engaged in the insurance of deposits (including, without limitation, the Federal Deposit Insurance Corporation (the "FDIC") or the supervision or regulation of it or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has been advised by any such Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, or similar submission. 3.10. TAXES. The Company has timely filed, for itself and on behalf of its Subsidiaries, all tax returns reasonably deemed by the Company to be required and has paid all Taxes due, payable or owed for all periods for which returns are required to be filed, other than Taxes contested in good faith. Except as set forth on Schedule 3.10, (a) no governmental entity has, during the past three years, examined or is in the process of examining any tax returns of either the Company or its Subsidiaries, and (b) no governmental entity has proposed any deficiency, assessment, or claim for Taxes against either the Company or its Subsidiaries. 3.11. TITLE TO ASSETS. Except as disclosed or reserved against in the Call Reports and except for security interests in securities of the Company's Subsidiaries which are banks granted by such Subsidiaries to deposit customers of such Subsidiaries in connection with repurchase agreements entered into by such Subsidiaries in the ordinary course of business with their deposit customers, the Company and its Subsidiaries have good and marketable title, free and clear of all liens, claims, security interests or other encumbrances (except those encumbrances which do not interfere in any material respect with the use of the property or the conduct of the business of the Company and its Subsidiaries) to their properties and assets, tangible or intangible, including all assets identified in the Latest Balance Sheet (except to the extent such properties or assets have been disposed of in the ordinary course of the business of the Company or its Subsidiaries). 3.12. REQUIRED LICENSES. Except where such failure would not have a Material Adverse Effect, the Company and its Subsidiaries have all permits, licenses, certificates of authority, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities, that are required in order to permit them to carry on their respective businesses as presently conducted. Neither the Company nor any of its Subsidiaries has received notification or communication from any Governmental Entity (including any bank, insurance and securities regulatory authorities) or the staff thereof, which remains in effect (a) asserting that the Company or any of its Subsidiaries is not in compliance with any of the statutes, regulations or ordinances that such Governmental Entity enforces; (b) threatening to revoke any license, franchise, permit or governmental authorization of the Company or any of its Subsidiaries; or (c) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance of the Company's Subsidiaries which are banks. 3.13. EMPLOYEE BENEFITS. (a) The Company and each of its Subsidiaries and each ERISA Affiliate have fulfilled all of their obligations in all material respects under ERISA and the Code with respect to each Plan, including but not limited to all minimum funding 6 standards, all reporting and disclosure requirements and, where applicable, the continuation coverage requirements in Part 6 of Title I of ERISA and Section 4980B of the Code; and they are in compliance in all material respects with the presently applicable provisions of ERISA and the Code; and they have not incurred any liability to the PBGC (other than premiums due and not delinquent under Section 4007 of ERISA) or a Plan under ERISA. The representations and warranties set forth in this Section 3.13(a) (other than as to the incurrence of any liability to a Plan under ERISA) are made to the best of the Company's knowledge to the extent they apply to any Multiemployer Plan. (b) Neither the Company nor any of its Subsidiaries nor any ERISA Affiliate has incurred any withdrawal liability with respect to any Multiemployer Plan under Title IV of ERISA, and no such liability is expected to be incurred. (c) Neither the Company nor any of its Subsidiaries nor any ERISA Affiliate has incurred any unpaid liability with respect to any Multiemployer Plan under Title IV of ERISA, and no such liability is expected to be incurred. 3.14. PRIVATE OFFERING BY THE COMPANY. Neither the Company nor anyone acting on its behalf has or will take any action that would cause the loss of exemption for the offer and sale of the Preferred Stock from the registration requirements of the Securities Act. 3.15. USE OF PROCEEDS; MARGIN REGULATIONS. The Company shall not, nor shall it permit any Subsidiary to, use any proceeds from the sale of the Preferred Stock hereunder, directly or indirectly, for the purposes of purchasing or carrying any "margin securities" within the meaning of Regulation G or T promulgated by the Board of Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit secured, indirectly or indirectly, in whole or in part by collateral that includes any "margin securities." 3.16. EXISTING INDEBTEDNESS. The Company and its Subsidiaries do not have any material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Company or any Subsidiary, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the Closing, or any state of facts or inaction at or prior to the Closing other than: (i) liabilities set forth on the balance sheet (including any notes thereto) of the Company at December 31, 1995 (the "Latest Balance Sheet"), (ii) liabilities and obligations which have arisen after the date of the Latest Balance Sheet in the ordinary course of business (none of which is a liability resulting from breach of contract, breach of warranty, tort, infringement, claim or lawsuit), and (iii) other liabilities and obligations expressly disclosed in the other Schedules to this Agreement. 3.17. FOREIGN ASSETS CONTROL REGULATIONS. The Company acknowledges that certain Purchasers may be foreign entities or have foreign persons and entities as partners and that the Company may be required, and hereby agrees, to file or cause to be filed in the future with the Internal Revenue Service ("IRS") all statements with its United States income tax returns required under Section 1.897-2(h) of the U.S. Treasury Regulations. To the Company's knowledge, it is not presently a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. The Company shall use its reasonable efforts consistent with sound business practice to avoid becoming a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. In the event the 7 Company in the future becomes aware that it is a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code, the Company shall promptly notify each Purchaser in writing of such fact. Promptly after receipt of a request from a Purchaser, the Company shall prepare and deliver to such Purchaser the statement required under U.S. Treasury Regulation Section 1.897-2(h)(1) under the Code. The Company shall provide a notice to the IRS with respect to such requested statement as required by U.S. Treasury Regulation Section 1.897(2)(h)(1) under the Code. Further, the Company shall prepare and deliver to the IRS within thirty days after the receipt of a request from a Purchaser either or both of the following documents: (i) an affidavit in conformance with the requirements of Section 1445(b)(3) of the Code, or (ii) a notarized statement, executed by an officer of the Company having actual knowledge of the facts, that the shares of the Company stock held by such Purchaser are of a class that is regularly traded on an established securities market, within the meaning of Section 1445(b)(6) of the Code. If the Company is unable to provide either of the documents described in (i) or (ii) above, if requested, it shall promptly notify such Purchaser in writing of the reasons for such inability. Finally, upon the request of a Purchaser and without regard to whether either document described in (i) or (ii) above has been requested, the Company shall cooperate fully with the efforts of such Purchaser to obtain a "qualifying statement," within the meaning of Section 1445(b)(4) of the Code, or such other documents as would excuse a transferee of a foreign investor's interest from withholding of income tax imposed pursuant to Section 897(a) and 1445 of the Code. 3.18. ENVIRONMENTAL MATTERS. (a) For purposes of this Section 3.18, the following terms shall have the indicated meaning: "BUSINESS" means the business conducted by the Company and its Subsidiaries. "ENVIRONMENTAL LAW: means any law, regulation, order or decree relating to Hazardous Substances or the protection of the environment. "HAZARDOUS SUBSTANCES" means substances which are listed or classified pursuant to any Environmental Law, including any petroleum products or byproducts, polychlorinated biphenyls ("PCBs"), radioactive materials or radon gas. (b) The Company and its Subsidiaries, and all real property owned by the Company or its Subsidiaries (collectively, "Real Property"), are in material compliance with applicable Environmental Laws. (c) There are no pending claims, actions, or proceedings involving the Company or any of its Subsidiaries relating to: (i) an asserted liability of the Company or its Subsidiaries under any Environmental Law or the terms and conditions of any permit, license, authority, settlement, agreement, decree or other obligation pursuant to any Environmental Law; (ii) the handling, storage, use, transportation, removal or disposal of Hazardous Substances; 8 (iii) the discharge, release or emission of Hazardous Substances from, on or under or within the Real Property into the air, water, surface water, ground water, land surface or subsurface strata; or (iv) personal injuries or damage to property caused by a release of Hazardous Substances. (d) To the knowledge of the Company's Executive Officers and the Executive Officers of the Company's Subsidiaries, no Hazardous Substances have been used, handled, stored, released or emitted by the Company or its Subsidiaries at or on any Real Property except in compliance with applicable Environmental Laws and as would not be reasonably expected to create conditions requiring remediation under any Environmental Law. 3.19. SUBSIDIARIES. The Subsidiaries of the Company and the percentage of issued and outstanding shares of stock of each such Subsidiary owned of record and beneficially by the Company are as set forth in Schedule 3.19. All of the issued and outstanding shares of capital stock of the Company's Subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable. Except as set forth on Schedule 3.19, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of any of the Company's Subsidiaries. Each such Subsidiary has been duly incorporated and is validly existing and in good standing under the laws of the state of its incorporation. Each such Subsidiary has the corporate power and authority to own its properties and conduct its business as presently conducted and is fully qualified to do business as a foreign corporation in good standing in each jurisdiction in which (a) its ownership or lease of real property or the conduct of its business makes such qualification necessary and (b) the failure to so qualify would have a Material Adverse Effect. Other than the Subsidiaries set forth on Schedule 3.19, the Company owns no capital stock or other equity, ownership or proprietary interest in any other entity. The deposit accounts of each of the Company's Subsidiaries which are banks are insured by the Bank Insurance Fund of the FDIC up to the maximum applicable amount in accordance with the rules and regulations of the FDIC, and no proceedings for the termination or revocation of such membership or insurance are pending, or, to the knowledge of the Company, threatened. 3.20. MAINTENANCE OF INSURANCE BY SUBSIDIARIES. The Company and the Company's Subsidiaries maintain (either in the Company's or the Subsidiary's own name), with financially sound and reputable insurance companies, insurance on their properties in at least such amounts and against such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar businesses. 3.21. SECURITIES LAWS. The Company (a) has not taken and will not take any action that would cause the sale of the Preferred Stock to be subject to the provisions of Section 5 of the Securities Act of 1933, as amended, and (b) directly or indirectly, has not offered and will not offer any interest in the Preferred Stock or any part thereof for sale to, or solicited any such sale from, anyone other than the Purchasers and not more than 29 other Persons. 3.22. BROKER'S FEES. No Person acting on behalf of the Company is 9 or will be entitled to any brokerage fee, commission, finder's fee or financial advisory fee, directly or indirectly, from the Purchasers in connection with the transactions contemplated by this Agreement. 3.23. USE OF PROCEEDS. The Company will use the proceeds of the sale of the Preferred Stock to purchase the stock of the Banks. 4. AFFIRMATIVE COVENANTS. The Company covenants and agrees that: 4.1. REPORTS AND NOTICES. The Company shall provide to each Purchaser the following reports, information and notices: (a) ANNUAL FINANCIAL STATEMENTS. As soon as available, but in no event later than 120 days after the end of any fiscal year of the Company occurring while the Preferred Stock is outstanding, annual financial statements for the Company and its Subsidiaries on a consolidated basis, prepared in accordance with GAAP consistently applied which shall: (i) be audited by independent certified public accountants selected by the Company ; (ii) be accompanied by a report of such accountants containing an opinion of such accountants; and (iii) include a balance sheet, an income statement, a statement of cash flow, a statement of stockholders' equity, and all notes and schedules relating thereto. (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in no event more than 60 days after the end of each of the first three quarters in any fiscal year of the Company occurring while the Preferred Stock is outstanding, the following financial statements of the Company and its Subsidiaries on a consolidated basis, prepared in accordance with GAAP consistently applied: (i) a balance sheet, (ii) an income statement, and (iii) a statement of stockholders' equity, for such quarter and for the year to date. 4.2. MAINTENANCE OF PROPERTIES. The Company will cause its properties and the properties of its Subsidiaries used or useful in the conduct of the business of the Company and its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary facilities and equipment and will cause to be made all necessary repairs, renewals, replacements and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that the foregoing shall not prevent the Company or a Subsidiary from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Purchasers. 4.3. INSURANCE. Subject to the right to sell, abandon or otherwise dispose of any building or property whenever in the opinion of the Company the retention thereof is inadvisable or not necessary to the business of the Company and its Subsidiaries, the Company will at all times cause all buildings, equipment and other insurable properties owned or operated by it or any Subsidiary to be insured with responsible insurance carriers against loss or damage by fire and other hazards, to the extent, and in such amounts, as is customary among corporations owning or operating properties of a similar character. 10 4.3. COMPLIANCE WITH LAW. The Company and its Subsidiaries shall comply with all statutes, rules, regulations and orders of and restrictions imposed by Governmental Entities applicable to the Company and its Subsidiaries. 4.5. MAINTENANCE OF CORPORATE EXISTENCE. The Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence of the Company and its Subsidiaries. 4.6. PAYMENT OF TAXES. The Company and the Company's Subsidiaries will pay or discharge or cause to be paid or discharge, before the same shall become delinquent, all Taxes levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any of the Company's Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. 5. NEGATIVE COVENANTS. So long as any of the Preferred Stock remains outstanding, the Company covenants and agrees: 5.1. NO CONFLICTING AGREEMENTS. The Company shall not become subject to, or permit any of its Subsidiaries to become subject to, any agreement or instrument which by its terms would (under any circumstances) restrict the Company's right to perform the provisions of this Agreement, the Articles of Amendment , the Articles of Incorporation or the Company's bylaws (including, without limitation, provisions relating to payment of dividends on the Preferred Stock). 5.2. RELATED PARTY TRANSACTIONS. The Company shall not enter into, or permit any Subsidiary to enter into, any transaction with any of its or any Subsidiary's officers, directors, employees or Affiliates, except for normal employment arrangements and benefit programs on reasonable terms and except as otherwise expressly contemplated by this Agreement. 11 6. TRANSFER OF THE PREFERRED STOCK. 6.1. PERMITTED TRANSFERS. The Preferred Stock is transferable (a) pursuant to public offerings registered under the Securities Act, (b) to Institutional Investors, and (c) subject to the conditions specified in Section 6.2, pursuant to any other legally available means of transfer. 6.2. RESTRICTIONS ON TRANSFER; RIGHT OF FIRST REFUSAL. In connection with any proposed transfer of the Preferred Stock (other than a transfer described in Section 6.1(a) or (b)), the holder thereof shall deliver written notice to the Company describing in reasonable detail the terms of the proposed transfer, including without limitation the identity of the proposed purchaser, the consideration to be paid, and the proposed date of the transfer (the "Sale Notice"). Upon receipt of a Sale Notice, the Company shall have the right (but shall not be obligated to exercise the right) to purchase the Preferred Stock proposed to be transferred on the same terms and conditions contained in the Sale Notice. The Company shall notify the holder proposing to transfer the Preferred Stock within 30 days after receipt of the Sale Notice whether or not it elects to purchase the Preferred Stock. If the Company elects to purchase such Preferred Stock, the holder proposing disposition shall be bound to transfer such Preferred Stock, free and clear of all liens and encumbrances, to the Company. If the Company does not elect to purchase such Preferred Stock, the holder proposing disposition may proceed with the disposition of the Preferred Stock, but only to the Persons and on the terms and conditions set forth in the Sale Notice. The purchaser of the Preferred Stock must agree in writing to be bound by the provisions of this Section 6.2 with respect to future transfers of the Preferred Stock. 7. DEFINITIONS. For purposes of this Agreement: "Affiliate" shall mean, with respect to the Company (or any other specified Person), any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company (or such specified Person), and shall include (a) any officer or director or general partner of the Company (or such specified Person) and (b) any Person of which the Company (or such specified Person) or any Affiliate (as defined in clause (a) above) of the Company (or such specified Person) shall, directly or indirectly, beneficially own either (i) at least 10% of the outstanding equity securities having the general power to vote or (ii) at least 10% of all equity interests. "Business Day" shall mean any day other than a Saturday or Sunday and other than a day which is a Federal legal holiday or a legal holiday for banks in the State of Montana or the State of New York. "Call Reports" shall mean the Consolidated Reports of Condition filed by the Company's Subsidiaries which are banks with respect to periods since January 1, 1996. "Code" shall mean the Internal Revenue Code of 1986, as amended, from time to time, or any successor statute thereto. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute. 12 "ERISA Affiliate" shall mean any Person which would be deemed to be under "common control" with the Company within the meaning of Section 4001(b)(1) of ERISA. "Executive Officer" shall mean (a) for the Company, the chief executive officer, president and chief financial officer; and (b) for the Company's Subsidiaries which are banks, the chief executive officer, president and executive vice presidents. "Fair Lending Laws" shall mean the National Bank Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable fair lending laws or other laws relating to discrimination. "GAAP" shall mean generally accepted accounting principles as from time to time defined by controlling pronouncements of the Financial Accounting Standards Board or any successor organization, consistently applied. "Institutional Investors" shall mean institutional accredited investors as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act or to Qualified Institutional Buyers, as defined in Rule 144A under the Securities Act. "Material Adverse Effect" shall mean an effect which (a) is materially adverse to the business, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole, (b) significantly and adversely affects the ability of the Company to consummate the transactions contemplated hereby or to perform its material obligations hereunder, or (c) enables any person or entity to prevent the consummation of the transactions contemplated hereby; PROVIDED, HOWEVER, that any effect resulting from (i) actions or omissions of the Company taken with the prior consent of the Purchasers in contemplation of the transactions provided for herein or (ii) circumstances affecting the banking industry in Montana or Wyoming generally shall be deemed not to be a Material Adverse Effect. "Offering Memorandum" shall mean the Private Placement Offering Memorandum dated August 16, 1996 relating to the offering of the Preferred Stock. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" shall mean a corporation, association, partnership, limited liability company, joint venture, trust, organization, business, individual or government or any governmental agency or political subdivision thereof. "Plan" shall mean any employee welfare benefit plan or employee pension benefit plan or any plan that is both an employee welfare benefit plan and an employee pension benefit plan, as defined in Section 3 of ERISA that the Company or any ERISA Affiliate maintains or is obligated to contribute to for the benefit of employees or former employees of the Company of any ERISA Affiliate. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 13 "Subsidiary" shall mean any Person of which the Company shall, directly or indirectly through one or more of its Subsidiaries, (a) own at least 50% of the issued and outstanding voting capital stock, (b) hold at least 50% of the partnership, joint venture or similar interests, or (c) be a general partner. "Tax" shall mean any tax or similar governmental charge, assessment or levy (including, without limitation, income taxes, franchise taxes, transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad valorem taxes, withholding taxes, employee withholding taxes, worker's compensation, payroll taxes, unemployment insurance, social security, or minimum taxes) together with any related liabilities, penalties, fines, additions to tax or interest, imposed by the United States or any state, county, provincial, local or foreign government or subdivisions or agency thereof. "Tier 1 Capital" shall have the meaning and characteristics ascribed to such term in Appendix A to 12 C.F.R. Part 225. The following terms are defined elsewhere in the Agreement: "Acquisition" Recitals "Agreement" Recitals "Articles of Amendment Section 2.2.2 "Banks" Recitals "Business" Section 3.16(a) "Certificate of Designation" Section 1.1 "Closing" Section 1.3 "Closing Date" Section 1.3 "Company" Recitals "Environmental Law" Section 3.16(a) "FRB" Section 2.1.1 "FDIC" Section 3.7 "Governmental Entities" Section 3.6 "Hazardous Substances" Section 3.16(a) "IRS" Section 3.15 "Latest Balance Sheet" Section 3.14 "Montana Bank" Recitals "Outside Closing Date" Section 1.3 "PCBs" Section 3.16(a) "Purchaser" Recitals "Real Property" Section 3.16(b) "Reports" Section 3.4 "Stock Purchase Agreement" Recitals "Wells Fargo" Recitals "Wyoming Bank" Recitals 8. MISCELLANEOUS. 8.1. COURSE OF DEALING. For the purposes of this Agreement and all documents and instruments executed pursuant hereto, except as otherwise specifically set forth 14 herein or therein, no course of dealing between the Company and the Purchasers and no delay on the part of any party hereto in exercising any rights hereunder or thereunder shall operate as a waiver of the rights hereof and thereof. 8.2. NOTICES. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered personally or by facsimile upon confirmation or receipt, (b) on the first business day following the date of mailing if delivered by next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices, requests, instructions or other documents to be given hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, request, instruction or document in accordance with this Section 8.2: 8.2. (a) If to the Company: First Interstate BancSystem of Montana, Inc. 401 N. 31st Street Billings, Montana 59101-1200 Facsimile: 406-255-5069 Attention: Thomas W. Scott Terrill R. Moore with a copy to: Holland & Hart LLP 401 North 31st Street Suite 1500 Billings, Montana 59101-1200 Facsimile: 406-252-1669 Attention: David R. Chisholm, Esq. (b) If to the Purchasers: First Security Corporation 79 South Main Salt Lake City, UT 84111 Facsimile: 801-359-6928 Attention: Scott C. Ulbrich 8.3. TREATMENT OF THE PREFERRED STOCK. The Company covenants and agrees that so long as federal income tax laws prohibit a deduction for distributions made by the Company with respect to preferred stock (a) it shall treat all distributions paid by it on the Preferred Stock as non-deductible dividends on all of its tax returns and (b) it shall treat the Preferred Stock as preferred stock in all of its financial statements and other reports and shall treat all distributions paid by it on the Preferred Stock as dividends on preferred stock in such statements and reports. 15 8.4. PURCHASER'S REPRESENTATIONS. Each Purchaser hereby represents (a) that it is an Institutional Investor, (b) that it is acquiring the Preferred Stock purchased hereunder for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; (c) that the acquisition of the Preferred Stock will not constitute a "prohibited transaction" (as such terms is defined under ERISA) under Section 406 of ERISA or Section 4975 of the Code, and (d) that it has not, directly or indirectly, incurred and will not directly or indirectly incur any obligation for any finder's or broker's or similar fees or commissions in connection with this Agreement, the issuance and delivery of the Preferred Stock, or the transactions contemplated hereby. The acquisition of the Preferred Stock by each Purchaser at Closing shall constitute confirmation by it of the accuracy of the foregoing representations and warranties on and as of the time the Preferred Stock is issued. 8.4. Each Purchaser acknowledges that the Preferred Stock has not been registered under the Securities Act, or the securities laws of any state or other jurisdiction. Each Purchaser agrees not to transfer the Preferred Stock except in accordance with all applicable securities laws. Each certificate for the Preferred Stock shall be imprinted with a legend in substantially the following form: "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or any state securities law and may be reoffered and sold only if so registered or if an exemption from such registration is available. The transfer of the securities represented hereby is subject to the conditions specified in the Preferred Stock Purchase Agreement, dated as of September 26, 1996, between the issuer (the "Company") and certain investors, and the Company reserves the right to refuse the transfer of such securities until such conditions have been fulfilled with respect to such transfer. A copy of such conditions shall be furnished by the Company to the holder hereof upon written request and without charge." 8.5. EXPENSES. The Company agrees to pay, and hold each Purchaser harmless against liability for the payment of, (i) the reasonable fees (not to exceed $25,000, provided that no material unforeseen issues or conditions arise) and expenses of one special counsel representing all of the Purchasers arising in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated by this Agreement which shall be payable at the Closing or, if the Closing does not occur, upon demand, (ii) the reasonable fees and expenses incurred with respect to any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement, the agreements contemplated hereby, the Articles of Incorporation or the Articles of Amendment, provided that if such amendment or waiver is initially requested by any holder, then each holder shall pay its own fees and expenses, (iii) stamp and other taxes which may be payable in respect of the execution and delivery of this Agreement or the issuance, delivery or acquisition of any shares of Preferred Stock and, (iv) the enforcement of the rights granted under this Agreement, the agreements contemplated hereby, the Articles of Incorporation and the Articles of Amendment. 16 8.6. REMEDIES. Each holder of Preferred Stock shall have all rights and remedies set forth in this Agreement, the Articles of Incorporation and the Articles of Amendment and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any holder having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 8.7. CONFIDENTIALITY. Each Purchaser will make no disclosure of confidential information furnished to it by the Company or any of the Company's Subsidiaries, unless such information shall have become public, except (i) in connection with enforcement of this Agreement to Persons who have a reasonable need to be furnished such confidential information and who agree to comply with the restrictions contained in this Section 8.7 with respect to such information; (ii) pursuant to any statutory or regulatory requirement or any mandatory court order, subpoena or other legal process; (iii) to any parent or corporate Affiliate of such Purchaser to any permitted transferee of the Preferred Stock; PROVIDED, HOWEVER, that any such Person shall agree to comply with the restrictions set forth in this Section 8.7 with respect to such information; (iv) to its independent counsel, auditors and other professional advisors, with an instruction to such Person to keep such information confidential; and (v) with the prior written consent of the Company,to any other Person. 8.8. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 8.9. SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstances is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances, other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. 8.10. ENTIRE AGREEMENT; INTERPRETATION. This Agreement, including the Schedules and Exhibits hereto, constitutes the entire agreement of the parties hereto with 17 respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral. It is the intention of the parties that this Agreement shall not be construed more strictly with regard to one party than with regard to any other party. 8.11. ASSIGNMENT. Without the written consent of the other parties hereto, this Agreement shall not be assigned by operation of law or otherwise (any attempted assignment in contravention hereof being null and void); PROVIDED, HOWEVER, that First Security Corporation may assign this Agreement to an Affiliate of First Security Corporation upon prior written notice to the Company. 8.12. CONSENT TO AMENDMENTS. Except as otherwise expressly provided herein, the provisions of this Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the holders of 66-2/3% of the shares of Preferred Stock. No other course of dealing between the Company and the holder of any Preferred Stock or any delay in exercising any rights hereunder or under the Articles of Incorporation or the Articles of Amendment shall operate as a waiver of any rights of any such holders. For purposes of this Agreement, shares of Preferred Stock held by the Company or any Subsidiaries shall not be deemed to be outstanding. 8.13. GOVERNING LAW; CONSENT TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah. Each party hereto for such party and such party's successors and assigns agrees that the State of Utah shall be the exclusive venue (to the extent that subject matter jurisdiction exists) for all causes of action arising out of this Agreement. This consent to jurisdiction and venue shall not be deemed a waiver of any right of any party to remove any litigation to a federal court located in the State of Utah. The Company hereby irrevocably designates, appoints and empowers CT Corporation System at its Salt Lake City, Utah, office, as its authorized agent for service of process in the State of Utah in any suit or proceeding with respect to this Agreement. 8.14. UNDERSTANDING AMONG THE PURCHASERS. The determination of each Purchaser to purchase the Preferred Stock pursuant to this Agreement has been made by such Purchaser independent of any statements or opinions as to the advisability of such purchase or as to the properties, business, prospects or condition (financial or otherwise) of the Company and its Subsidiaries which may have been made or given by any other Purchaser or by any agent or employee of any other Purchaser. 8.15. COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 8.16. JURY WAIVER. EACH OF THE COMPANY AND THE PURCHASERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, SUIT, OR COUNTERCLAIM ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. 18 8.17. TIME. Time is of the essence. IN WITNESS WHEREOF, the Company and the Purchasers have caused this Agreement to be duly executed as of the date first written above by their respective officers thereunto duly authorized. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By:_________________________ Name: Thomas W. Scott Title: President & Chief Executive Officer 19 PURCHASERS: FIRST SECURITY CORPORATION By: ---------------------- Name: Scott C. Ulbrich Title: Executive Vice President Finance and Capital Markets and Chief Financial Officer TABLE OF CONTENTS 1. Authorization .............................................................1 1.1. Authorization of the Preferred Stock ................................1 1.2. Purchase and Sale of the Preferred Stock ............................1 1.3. The Closing .........................................................1 2. Conditions Precedent to Obligations to Close ..............................2 2.1. Conditions to Each Party's Obligation to Effect the Purchase and Sale of the Preferred Stock .......................2 2.1.1 Governmental and Regulatory Consents ...............................2 2.1.2 Third Party Consents ...............................................2 2.1.3 Purchase Permitted by Applicable Laws ..............................2 2.1.4 Consummation of the Acquisition ....................................2 2.2. Conditions to Obligation of Each Purchaser ..........................2 2.2.1 Representations and Warranties .....................................2 2.2.2 Certificate of Designation .........................................3 2.2.3 Blue Sky Clearances ................................................3 2.2.4 Closing Documents ..................................................3 2.2.5 Proceedings ........................................................3 2.2.6 Expenses ...........................................................3 2.2.7 Compliance with Applicable Laws ....................................3 2.2.8 Delivery of Stock Certificates .....................................4 2.2.9 No Material Adverse Change .........................................4 2.2.10 Performance of Obligations ........................................4 2.3. Conditions to Obligation of the Company .............................4 2.3.1 Proof Each Purchaser is An Institutional Investor ..................4 i 3. Representations and Warranties of the Company .............................4 3.1. Organization; Bank Holding Company Registration .....................4 3.2. Corporate Power; Authorization ......................................4 3.3. No Conflict .........................................................4 3.4. Capitalization ......................................................5 3.5. Disclosure ..........................................................5 3.6. Financial Statements ................................................5 3.7. Compliance with Law .................................................5 3.8. Governmental Consents ...............................................5 3.9. Litigation ..........................................................5 3.10. Taxes ..............................................................6 3.11. Title to Assets ....................................................6 3.12. Required Licenses ..................................................6 3.13. Employee Benefits ..................................................6 3.14. Private Offering by the Company ....................................7 3.15. Use of Proceeds; Margin Regulations ................................7 3.16. Existing Indebtedness ..............................................7 3.17. Foreign Assets Control Regulations .................................7 3.18. Environmental Matters ..............................................8 3.19. Subsidiaries .......................................................9 3.20. Maintenance of Insurance by Subsidiaries ...........................9 3.21. Securities Laws ....................................................9 3.22. Broker's Fees ......................................................9 3.23. Use of Proceeds ...................................................10 4. Affirmative Covenants ....................................................10 ii 4.1. Reports and Notices ................................................10 4.2. Maintenance of Properties ..........................................10 4.3. Insurance ..........................................................10 4.4. Compliance With Law ................................................11 4.5. Maintenance of Corporate Existence .................................11 4.6. Payment of Taxes ...................................................11 5. Negative Covenants .......................................................11 5.1. No Conflicting Agreements ..........................................11 5.2. Related Party Transactions .........................................11 6. Transfer of the Preferred Stock ..........................................11 6.1. Permitted Transfers ................................................11 6.2. Restrictions on Transfer; Right of First Refusal ...................11 7. Definitions ..............................................................12 8. Miscellaneous ............................................................14 8.1. Course of Dealing ..................................................14 8.2. Notices ............................................................14 8.3. Treatment of the Preferred Stock ...................................15 8.4. Purchaser's Representations ........................................15 8.5. Expenses ...........................................................16 8.6. Remedies ...........................................................16 8.7. Confidentiality ....................................................16 8.8. Headings ...........................................................17 8.9. Severability .......................................................17 8.10. Entire Agreement; Interpretation ..................................17 8.11. Assignment ........................................................17 iii 8.12. Consent to Amendments .............................................17 8.13. Governing Law; Consent to Jurisdiction; Appointment of Agent for Service of Process .......................................18 8.14. Understanding Among the Purchasers ................................18 8.15. Counterparts ......................................................18 8.16. JURY WAIVER .......................................................18 8.17. Time ..............................................................18 iv SCHEDULES Schedule of Purchasers i Schedule 3.4 Options ii Schedule 3.10 Taxes ii Schedule 3.19 Subsidiaries vi EXHIBITS Exhibit A Certificate of Designation vii v EX-10.3 6 LOAN AGREEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LOAN AGREEMENT Dated effective as of October 1, 1996 Between FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC., THE LENDERS LISTED HEREIN and FIRST SECURITY BANK, N.A. as Agent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HTE&H Ref.: 16-179 TABLE OF CONTENTS Section Page - ------- ---- SECTION 1. BINDING COVENANTS............................................... 1 SECTION 2. DEFINITIONS..................................................... 2 2.1 "Acquisitions".............................................. 2 2.2 "Adjusted LIBOR Rate"....................................... 2 2.3 "Advance"................................................... 2 2.4 "Agent"..................................................... 2 2.5 "Aggregate Commitment"...................................... 2 2.6 "Agreement"................................................. 2 2.7 "Applicable Margin"......................................... 2 2.8 "Amortization Expense"...................................... 3 2.9 "Banking Subsidiary"........................................ 3 2.10 "Bankruptcy Act"............................................ 3 2.11 "Borrower".................................................. 3 2.12 "Borrower's Books".......................................... 3 2.13 "Borrowing"................................................. 3 2.14 "Business Day".............................................. 4 2.15 "Capital"................................................... 4 2.16 "Capital Lease"............................................. 4 2.17 "Capital Stock"............................................. 4 2.18 "CERCLA".................................................... 4 2.19 "Closing Date".............................................. 4 2.20 "Code"...................................................... 4 2.21 "Collateral"................................................ 4 2.22 "Commitment"................................................ 4 2.23 "Commitment Fee"............................................ 4 2.24 "Consolidated".............................................. 4 2.25 "Consolidated Assets"....................................... 4 2.26 "Credit Facility"........................................... 5 2.27 "Current Maturities of Funded Debt"......................... 5 2.28 "Default"................................................... 5 2.29 "Default Rate".............................................. 5 2.30 "Depreciation Expense"...................................... 5 2.31 "DOL"....................................................... 5 2.32 "Dollars" or "$"............................................ 5 2.33 "ERISA"..................................................... 5 2.34 "ERISA Affiliate"........................................... 5 2.35 "Eurocurrency Reserve Requirement".......................... 5 2.36 "Event of Default".......................................... 5 2.37 "Exchange Act".............................................. 6 2.38 "FASB" ..................................................... 6 2.39 "First Borrowing"........................................... 6 2.40 "Fiscal Year................................................ 6 2.41 "Funded Debt"............................................... 6 2.42 "GAAP"...................................................... 6 2.43 "Governmental Authority".................................... 6 2.44 "Interest Expense".......................................... 6 i 2.45 "Interest Rate Protection Agreements"....................... 6 2.46 "IRS"....................................................... 7 2.47 "Lender".................................................... 7 2.48 "Lending Office"............................................ 7 2.49 "LIBOR Business Day"........................................ 7 2.50 "LIBOR Advance"............................................. 7 2.51 "LIBOR Interest Period"..................................... 7 2.52 "LIBOR Rate"................................................ 7 2.53 "Lien"...................................................... 8 2.54 "Loan Documents"............................................ 8 2.55 "Majority Lenders".......................................... 8 2.56 "Margin Stock".............................................. 8 2.57 "Material Adverse Effect"................................... 8 2.58 "Multiemployer Plan"........................................ 9 2.59 "Net Income"................................................ 9 2.60 "Net Worth"................................................. 9 2.61 "Nonaccruing Loans"......................................... 9 2.62 "Non-Performing Loans....................................... 9 2.63 "Notes"..................................................... 9 2.64 "Notice of Borrowing"....................................... 9 2.65 "Obligations"............................................... 9 2.66 "OREO"...................................................... 9 2.67 "PBGC"...................................................... 10 2.68 "Person".................................................... 10 2.69 "Plan"...................................................... 10 2.70 "Pledge Agreement".......................................... 10 2.71 "Prime Rate"................................................ 10 2.72 "Prime Rate Advance"........................................ 10 2.73 "Principals and Related Parties"............................ 10 2.74 "Properties................................................. 10 2.75 "Regulation D".............................................. 11 2.76 "Regulation G".............................................. 11 2.77 "Regulation T".............................................. 11 2.78 "Regulation U".............................................. 11 2.79 "Regulation X".............................................. 11 2.80 "Renegotiated Loans"........................................ 11 2.81 "Reportable Event".......................................... 11 2.82 "Responsible Officer"....................................... 11 2.83 "Risk Weighted Assets" or "Risk Adjusted Assets............................................. 11 2.84 "Subordinated Debt"......................................... 12 2.85 "Subsidiary" or "Subsidiaries".............................. 12 2.86 "Tangible Net Worth"........................................ 12 2.87 "Tangible Primary Assets"................................... 12 2.88 "Tangible Primary Capital".................................. 12 2.89 "Termination Date".......................................... 12 2.90 "Tier One Capital........................................... 12 2.91 "Tier Two Capital........................................... 12 2.92 "Unused Commitment.......................................... 13 2.93 Other Definitional Provisions............................... 13 ii SECTION 3. CREDIT FACILITY............................................. 13 3.1 Commitments to Lend......................................... 13 3.2 Mandatory Reduction of Aggregate Commitment................. 14 3.3 Optional Termination or Reduction of Aggregate Commitment... 14 3.4 Method of Borrowing......................................... 14 3.5 LIBOR Advances Extensions and Conversions................... 16 3.6 Notes....................................................... 16 3.7 Maturity and Principal Payments of Advances................. 17 3.8 Interest Rates.............................................. 18 3.9 Determination of Applicable Margin.......................... 19 3.10 Illegality.................................................. 19 3.11 Increased Cost and Reduced Return........................... 20 3.12 Prime Rate Advances Substituted for LIBOR Advances.............................................. 22 3.13 Compensation................................................ 22 3.14 LIBOR Indemnification....................................... 22 3.15 Commitment Fee.............................................. 23 3.16 Unused Commitment Fee....................................... 23 3.17 Reimbursement for Out-of-Pocket Costs....................... 23 3.18 Agent Fee................................................... 23 3.19 General Provisions as to Payments........................... 23 SECTION 4. CLOSING..................................................... 25 4.1 Closing..................................................... 25 SECTION 5. CLOSING UNDER THIS AGREEMENT; PRECONDITIONS...................................................... 25 5.1 Closing Date................................................ 25 5.2 Preconditions to First Borrowing............................ 25 5.3 Conditions to all Borrowings................................ 28 SECTION 6. REPRESENTATIONS AND WARRANTIES.............................. 28 6.1 Existence and Power......................................... 28 6.2 Authorization; No Contravention............................. 29 6.3 Binding Effect.............................................. 29 6.4 Financial Information....................................... 29 6.5 No Litigation............................................... 29 6.6 Compliance with ERISA....................................... 30 6.7 Compliance with Laws; Payments of Taxes....................................................... 30 6.8 Subsidiaries................................................ 30 6.9 Not an Investment Company................................... 31 6.10 Ownership of Property; Liens................................ 31 6.11 No Default.................................................. 31 6.12 Full Disclosure............................................. 31 6.13 Environmental Matters....................................... 31 6.14 Capital Stock............................................... 31 iii 6.15 Margin Stock................................................ 32 6.16 Insolvency.................................................. 32 SECTION 7. COVENANTS................................................... 32 7.1 Information................................................. 32 7.2 Inspection of Property, Books and Records..................................................... 34 7.3 Financial Covenants......................................... 34 7.4 Subsidiaries' Cash Dividends................................ 35 7.5 Borrower's Dividends on Common Stock........................ 35 7.6 Maintenance of Ownership in Acquisitions................................................ 35 7.7 No Subsidiary Stock Dividends, Stock Splits, or Redemptions Without Consent...................... 35 7.8 Loans or Advances........................................... 35 7.9 Judgments and Claims........................................ 36 7.10 Funded Debt................................................. 36 7.11 No Amendment of Note Purchase Agreement................................................... 36 7.12 Negative Pledge............................................. 36 7.13 Preparation of Financial Statements......................... 37 7.14 Maintenance of Existence.................................... 37 7.15 Dissolution................................................. 37 7.16 Consolidations, Mergers and Sales of Assets...................................................... 37 7.17 Change in Control........................................... 37 7.18 Use of Proceeds............................................. 38 7.19 Compliance with Laws; Payment of Taxes...................... 38 7.20 Insurance................................................... 38 7.21 Change in Fiscal Year....................................... 38 7.22 Environmental Notices....................................... 38 7.23 Environmental Matters....................................... 39 7.24 Environmental Release....................................... 39 SECTION 8. SECURITY.................................................... 39 SECTION 9. ACCESS...................................................... 39 9.1 Access...................................................... 39 9.2 Examination................................................. 40 SECTION 10. DEFAULT..................................................... 40 10.1 Events of Default........................................... 40 10.2 Remedies.................................................... 42 10.3 Nonwaiver................................................... 42 SECTION 11. RIGHT OF SET-OFF............................................ 42 11.1 Set-off..................................................... 42 11.2 Sharing of Set-Offs......................................... 43 SECTION 12. THE AGENT................................................... 43 12.1 Appointment; Powers and Immunities.......................... 43 iv 12.2 Reliance by Agent........................................... 44 12.3 Defaults.................................................... 44 12.4 Rights of Agent as a Lender................................. 45 12.5 Indemnification............................................. 45 12.6 CONSEQUENTIAL DAMAGES....................................... 46 12.7 Payee of Note Treated as Owner.............................. 46 12.8 Nonreliance on Agent and Other Lenders...................... 46 12.9 Failure to Act.............................................. 46 12.10 Resignation of Agent........................................ 47 SECTION 13. MISCELLANEOUS............................................... 47 13.1 Notices..................................................... 47 13.2 No Waivers.................................................. 47 13.3 Expenses; Documentary Taxes................................. 48 13.4 Indemnification............................................. 48 13.5 Amendments and Waivers...................................... 48 13.6 Successors and Assigns...................................... 49 13.7 Confidentiality............................................. 51 13.8 Representation by Lenders................................... 52 13.9 Obligations................................................. 52 13.10 Idaho Law................................................... 52 13.11 Interpretation.............................................. 52 13.12 Waiver of Jury Trial; Consent to Jurisdiction............... 52 13.13 Counterparts................................................ 53 13.14 Severability................................................ 53 13.15 Interest.................................................... 53 v EXHIBITS "A" -- Promissory Notes "B" -- Notice of Borrowing "C" -- General Pledge & Security Agreement "D" -- List of Guarantees "E" -- Form of Opinion of Counsel "F" -- List of Pending Lawsuits "G" -- List of Existing Liens 6.8 -- List of Borrower's Subsidiaries vi FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. LOAN AGREEMENT THIS LOAN AGREEMENT dated effective as of October 1, 1996, among FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC., a Montana corporation, the LENDERS listed on the signature pages hereof and FIRST SECURITY BANK, N.A., a national banking association, as AGENT. WITNESSETH: WHEREAS, First Interstate BancSystem of Montana, Inc. desires to obtain up to a Forty-Five Million Dollar ($45,000,000) reducing revolving credit facility from the Lenders; and WHEREAS, the reducing revolving credit facility is to be used by First Interstate BancSystem of Montana, Inc. for the following purposes: (a) To acquire all of the stock of First Interstate Bank of Montana, N.A. and First Interstate Bank of Wyoming, N.A.; (b) To refinance approximately Nine Million Dollars ($9,000,000) in existing term debt; (c) To replace an existing Three Million Dollars ($3,000,000) revolving line of credit commitment; and (d) To pay the Commitment Fee and all out-of-pocket costs reasonably incurred by Agent incident to or in connection with the making of the reducing revolving credit facility, including, without limitation, reasonable attorney fees and the cost of lien and security interest searches. NOW, THEREFORE, in consideration of the terms and conditions hereinafter set forth, Lenders are willing and hereby commit to make available the reducing revolving credit facility desired by First Interstate BancSystem of Montana, Inc. SECTION 1. BINDING COVENANTS. The foregoing are binding covenants of this Loan Agreement, not mere recitals, and represent considerations, promises, conditions and warranties binding upon the parties hereto. - 1 - SECTION 2. DEFINITIONS. As used in this Loan Agreement, the following terms shall have the following definitions: 2.1 "Acquisitions" means collectively First Interstate Bank of Montana, N.A. and First Interstate Bank of Wyoming, N.A. 2.2 "Adjusted LIBOR Rate" means a rate per annum equal to the quotient obtained by dividing (i) the LIBOR Rate for such LIBOR Interest Period by (ii) one (1) minus the Eurocurrency Reserve Requirement for the applicable LIBOR Interest Period, rounded upward, if necessary, to the nearest one-sixteenth of one percent. The Adjusted LIBOR Rate shall be adjusted on and as of the effective date of any change in the Eurocurrency Reserve Requirement. 2.3 "Advance" means either a Prime Rate Advance or a LIBOR Advance under this Agreement, and "Advances" means either Prime Rate Advances or LIBOR Advances or both under this Agreement. 2.4 "Agent" means First Security Bank, N.A., a national banking association organized under the laws of the United States of America, in its capacity as agent for the Lenders hereunder, and its successors and permitted assigns in such capacity. 2.5 "Aggregate Commitment" means the sum of all of the Commitments. 2.6 "Agreement" means this Loan Agreement, any subsequent rider to this Loan Agreement, and any extensions, supplements, notes, amendments, or modifications to or in connection with this Loan Agreement. 2.7 "Applicable Margin" means (a) with respect to LIBOR Advances: (i) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is greater than or equal to 10.0%, 125 basis points; and (ii) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is less than 10.0% but greater than or equal to 8.0%, 150 basis points; and (iii) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is less than 8.0% but greater than or equal to 6.0%, 175 basis points; and - 2 - (iv) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is less than 6.0%, 200 basis points; and (b) with respect to Prime Rate Advances: (i) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is equal to or greater than 6.0%, 0 basis points; and (ii) If the Borrower's Consolidated Tier One Risk Based Capital Ratio is less than 6.0%, 25 basis points. The determination of the Applicable Margin from time-to-time shall be made in accordance with Section 3.8 and the calculation of the Borrower's Consolidated Tier One Risk Based Capital Ratio shall be made in accordance with Section 7.3(a)(ii). 2.8 "Amortization Expense" means for any period in time, the reduction in book value of intangible assets of the Borrower and its Subsidiaries for such period, as determined in accordance with GAAP. 2.9 "Banking Subsidiary" means a Subsidiary of Borrower engaged in the business of a depository institution, the deposits of which are insured by the Federal Deposit Insurance Corporation. 2.10 "Bankruptcy Act" means the Bankruptcy Reform Act of 1978, as amended. 2.11 "Borrower" means First Interstate BancSystem of Montana, Inc., a bank holding company organized and existing under the laws of the state of Montana. 2.12 "Borrower's Books" means all of Borrower's books and records, including but not limited to minute books; ledgers; records indicating, summarizing, or evidencing Borrower's assets, liabilities, and accounts; all information relating to Borrower's business operations or financial condition; and all computer programs, disc or tape files, printouts, runs, and other computer prepared information and the equipment containing such information. 2.13 "Borrowing" means a borrowing hereunder consisting of Advances made to Borrower by the Lenders pursuant to Section 3. A Borrowing is a "Prime Rate Borrowing" if such Advances are Prime Rate Advances or a "LIBOR Borrowing" if such Advances are LIBOR Advances. - 3 - 2.14 "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Idaho are authorized by law to close. 2.15 "Capital" means Tier One Capital plus Tier Two Capital. 2.16 "Capital Lease" means any lease or other agreement for the use of property which is required to be capitalized on a balance sheet of the lessee or other user of property in accordance with GAAP. 2.17 "Capital Stock" means any nonredeemable capital stock of the Borrower or any of Borrower's Subsidiaries, whether common or preferred. 2.18 "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. 2.19 "Closing Date" means October 1, 1996, or such other date as may be mutually agreed to by each Lender and Borrower. 2.20 "Code" means the Internal Revenue Code of 1986, as amended, or any successor federal tax code. 2.21 "Collateral" means the property in which a security interest is granted or is to be granted to the Agent for the benefit of the Lenders pursuant to this Agreement. 2.22 "Commitment" means, with respect to each Lender, the amount set forth opposite the name of such Lender on the signature pages hereof, as such amount may be proratably reduced based upon each Lender's share of the Aggregate Commitment from time to time pursuant to Section 3. 2.23 "Commitment Fee" has the meaning specified in Section 3. 2.24 "Consolidated" means, when used with reference to Funded Debt, Interest Expense, Depreciation Expense and Amortization Expense, as the case may be, Funded Debt, Interest Expense and Depreciation Expense and Amortization Expense of the Borrower and its Subsidiaries, determined on a consolidated basis, after eliminating all offsetting debits and credits between the Borrower and its Subsidiaries and other items to be eliminated in accordance with GAAP. 2.25 "Consolidated Assets" means, as of the date of determination thereof, the aggregate of all assets of the Borrower and its Subsidiaries in accordance with GAAP. - 4 - 2.26 "Credit Facility" means at any time Borrower's credit facility pursuant to Section 3 hereof. 2.27 "Current Maturities of Funded Debt" means any principal portion of Funded Debt due within one (1) year, as accounted for in accordance with GAAP. 2.28 "Default" means any Event of Default or the occurrence and continuance of an event which, with the giving of notice or the passage of time, or both, if required, would constitute any Event of Default. 2.29 "Default Rate" means with respect to any Advance, on any day, the Prime Rate plus 2.0%. 2.30 "Depreciation Expense" means for any period the decline in value of fixed assets, allocating purchase cost of the asset over its useful economic life for such period, as determined in accordance with GAAP. 2.31 "DOL" means the United States Department of Labor. 2.32 "Dollars" or "$" means dollars in lawful currency of the United States of America. 2.33 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute. 2.34 "ERISA Affiliate" means any Person which would be deemed to be under "common control" with the Borrower within the meaning of Section 4001(b)(1) of ERISA. 2.35 "Eurocurrency Reserve Requirement" means, for any LIBOR Advance for any LIBOR Interest Period thereof, the daily average of the stated maximum rate (expressed as a decimal) at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such LIBOR Interest Period under Regulation D by Lenders against "Eurocurrency Liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves required to be maintained by Lenders against (1) any category of liabilities that includes deposits by reference to which the Adjusted LIBOR Rate for LIBOR Advances is to be determined; or (2) any category of extension of credit or other assets that include LIBOR Advances. 2.36 "Event of Default" means the occurrence of any one of the events set forth in Section 10 of this Agreement. - 5 - 2.37 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.38 "FASB" means the Financial Accounting Standards Board. 2.39 "First Borrowing" means the occurrence of the initial borrowing of funds by the Borrower as set forth in Section 5.2 of this Agreement. 2.40 "Fiscal Year" means that twelve (12) month period beginning on January 1 of any year and ending on December 31 of such year. 2.41 "Funded Debt" means any and all indebtedness for money borrowed with respect to any Person including Capitalized Leases, Subordinated Debt and money borrowed evidenced by a promissory note, debentures or like written obligation to pay. 2.42 "GAAP" means the generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination consistently applied. 2.43 "Governmental Authority" means any federal, state, county, municipal, regional or other governmental entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 2.44 "Interest Expense" means, with respect to any indebtedness of any Person, for any period, the aggregate amount (determined in accordance with GAAP) of cash interest paid or accrued during such period by such Person in respect of all such indebtedness of any Person and including the interest component of all Capital Lease rents, provided that (a) there shall be added to Interest Expense any fees or commissions or net losses amortized during such period under Interest Rate Protection Agreements and any fees or commissions payable in connection with any letters of credit during such period and (b) there shall be subtracted from Interest Expense any net gains under Interest Rate Protection Agreements during such period. 2.45 "Interest Rate Protection Agreements" means any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party's assets, liabilities or exchange transactions, including, but not limited to, dollar-denominated or cross- - 6 - currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or dollar protection agreements, forward rate currency or interest rate options, puts and warranties. 2.46 "IRS" means the United States Internal Revenue Service. 2.47 "Lender" means each Lender listed on the signature pages hereof as having a Commitment, and its successors and assigns, and "Lenders" mean all such Lenders. 2.48 "Lending Office" shall mean with respect to any Lender any office or offices of such Lender or affiliate or affiliates of such Lender through which such Lender shall fund or shall have funded any portion of the Commitment. 2.49 "LIBOR Business Day" means any Business Day on which dealings in dollar deposits are carried out in the London interbank market. 2.50 "LIBOR Advance" means any advance under this Agreement bearing interest at a rate based upon the Adjusted LIBOR Rate. 2.51 "LIBOR Interest Period" means, with respect to any LIBOR Advance, the period commencing on the date such Advance is made and ending, as the Borrower may select, pursuant to this Agreement, on the numerically corresponding day in the first, second, third, sixth or twelfth, calendar month thereafter, except that each such LIBOR Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; provided that if a LIBOR Interest Period would end on a day that is not a Business Day, such LIBOR Interest Period shall be extended to the next Business Day unless such Business Day would fall in the next calendar month, in which event such LIBOR Interest Period shall end on the immediately preceding Business Day. No LIBOR Interest Period may be elected which would extend past the Termination Date. 2.52 "LIBOR Rate" means for any LIBOR Interest Period for a LIBOR Advance the rate per annum quoted at approximately 11:00 a.m. London time by Reuters 2 Business Days prior to the first day of such LIBOR Interest Period for the offering to leading banks in the London interbank market of dollar deposits for a period and an amount comparable to the LIBOR Interest Period and principal amount of the LIBOR Advance that shall be made by the Lender and outstanding during the LIBOR Interest - 7 - Period. The LIBOR Rate determined by Agent with respect to a particular LIBOR Advance shall be fixed at such rate for the duration of the associated LIBOR Interest Period. No election of a LIBOR Advance shall be effective if, prior to the commencement of the LIBOR Interest Period, the Agent determines that by reason of circumstances affecting the interbank market generally, adequate and reasonable methods do not exist for ascertaining the interest rate applicable to such deposits for the proposed LIBOR Interest Period. 2.53 "Lien" means with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement, which has the practical effect of constituting a security interest or encumbrance, or encumbrance or servitude of any kind in respect of such asset to secure or assure payment of a debt or a guarantee, whether by consensual agreement or by operation of statute or other law, or any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Borrower or any Banking Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. 2.54 "Loan Documents" means this Agreement, the Notes, any other document evidencing, relating to or securing the Advances including, without limitation, the Pledge Agreement, and any other document or instrument delivered from time to time in connection with this Agreement, the Notes, or the Advances, as such documents and instruments may be amended or modified from time to time. 2.55 "Majority Lenders" means at any time Lenders having at least 66-2/3% of the Aggregate Commitment or, if the Commitments are no longer in effect, Lenders holding at least 66-2/3% of the aggregate outstanding principal amount (or net discounted proceeds, as applicable) of the Notes. 2.56 "Margin Stock" means "margin stock" as defined in Regulations G, T, U or X. 2.57 "Material Adverse Effect" means, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse effect upon, any of (a) the current or future financial condition, operations, business, or properties of the - 8 - Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower to perform its obligations under the Loan Documents or (c) the legality, validity or enforceability (including the rights and remedies of the Agent and the Lenders) of any Loan Document. 2.58 "Multiemployer Plan" means a Plan described in Section 4001(a)(3) of ERISA. 2.59 "Net Income" means, as applied to any Person for any period, the aggregate amounts of net income of such Person, after taxes, for such period, as determined in accordance with GAAP. 2.60 "Net Worth" means, as applied to any Person as of the date of any determination thereof, (i) the assets of such Person, less (ii) all outstanding liabilities and deferred credits of such Person calculated in accordance with GAAP. 2.61 "Nonaccruing Loans" means loans on which interest is not being accrued for income statement purposes. 2.62 "Non-Performing Loans" means Nonaccruing Loans plus Renegotiated Loans plus OREO plus loans 90 days past the payment due date. 2.63 "Notes" means collectively the Promissory Notes of the Borrower in the form of EXHIBIT "A" hereto and "Note" shall mean any individual Promissory Note of the Borrower given to any of the Lenders hereunder. 2.64 "Notice of Borrowing" means a notice delivered by Borrower to Agent pursuant to Section 3.2 substantially in the form of EXHIBIT "B". 2.65 "Obligations" means the obligation of Borrower to repay the Advances under the Aggregate Commitment made herein, as evidenced by the Notes, together with all other obligations and liabilities owed to any Lender by Borrower or its Banking Subsidiaries, whether now or hereafter incurred, excluding Federal Funds Lines and Repurchase Agreements, including, without limitation, the Agent's, if any, and each Lender's reasonable attorney fees and costs of suit in the event of Default under this Agreement, or under the Loan Documents or under any other document or instrument given to any Lender by the Borrower or its Banking Subsidiaries and any advance (whether optional by any Lender or otherwise), which any Lender may make for or on behalf of the Borrower or in connection with this Agreement. 2.66 "OREO" means real estate owned and foreclosed assets. - 9 - 2.67 "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 2.68 "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 2.69 "Plan" means any employee welfare benefit plan or employee pension benefit plan or any plan that is both an employee welfare benefit plan and an employee pension benefit plan, as defined in Section 3 of ERISA that the Borrower or any ERISA Affiliate maintains or is obligated to contribute to for the benefit of employees or former employees of the Borrower or any ERISA Affiliate. 2.70 "Pledge Agreement" means the General Security and Pledge Agreement in the form attached as EXHIBIT "C" granting to the Lenders a security interest in the Collateral. 2.71 "Prime Rate" means First Security Bank, N.A.'s publicly announced in Boise, Idaho prime rate of interest used as a reference point from which the cost of credit to customers of the First Security Bank, N.A. may be calculated, and is subject to change from time to time. First Security Bank, N.A. may make loans bearing interest above, at or below its prime rate. 2.72 "Prime Rate Advance" means any advance hereunder bearing interest at a rate based upon the Prime Rate. 2.73 "Principals and Related Parties" means the following individuals, any trusts for their benefit, and their executors or heirs and any limited partnerships fully owned by any of the following: James R. Scott; Homer Scott, Jr.; Dan S. Scott; Thomas W. Scott; Susan Scott Heyneman; John M. Heyneman; Thomas Scott Heyneman; James R. Heyneman; Charles Matthew Heyneman; Alexander Paul Heyneman; Randall Isham Scott; Ronald Noel Scott; Riki Rae Scott Davidson; Risa Kae Scott; Rae Ann Scott; Sarah E. Scott Suzor; Samuel Moise Suzor; Jonathan R. Scott; Julie Anne Scott; Jeanne I. Scott; Susan Elizabeth Scott; James Marshall Scott; Homer Rollins Scott; Sandra Arlene Scott; Janet E. Scott; James R. Scott, Jr.; Courtney L. Scott; Dana A. Scott; and Joan Scott. 2.74 "Properties" means all real property owned, leased or otherwise used or acquired by either Borrower or any Subsidiary, wherever located. - 10 - 2.75 "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 2.76 "Regulation G" means Regulation G of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 2.77 "Regulation T" means Regulation T of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 2.78 "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 2.79 "Regulation X" means Regulation X of the Board of Governors of the Federal Reserve System, as in effect from time to time, together with all official rulings and interpretations issued thereunder. 2.80 "Renegotiated Loans" means loans where modifications of the terms of the loans have been made, making the terms of the loans more favorable than might be otherwise offered the debtor. 2.81 "Reportable Event" means any of the events set forth in Section 4043 of ERISA, other than an event for which notice or penalty for noncompliance has been waived by regulation or otherwise. 2.82 "Responsible Officer" means, at any particular time, the President, any Senior Vice-President, any Executive Vice-President, any Vice-President, the Treasurer or the Chief Financial Officer of the Borrower or any of its Subsidiaries. 2.83 "Risk Weighted Assets" or "Risk Adjusted Assets" shall have the meaning set forth on the date hereof under applicable regulations of any regulatory agency having authority on the date hereof as such regulations are applicable to the Borrower, or if such regulations are amended hereafter to define Risk Weighted Assets or Risk Adjusted Assets more restrictively, as set forth in such later definition; provided, that if such regulations are amended hereafter to define Risk Weighted Assets or Risk Adjusted Assets less restrictively than the regulations existing on the Closing Date, then the meaning of Risk Weighted - 11 - Assets or Risk Adjusted Assets shall not be changed to reflect such later modification. 2.84 "Subordinated Debt" means, on any date, all indebtedness of the Borrower, as reflected on its financial statements, which it now or hereafter owes or may owe to any creditor which is specifically and completely subordinated in a manner satisfactory to Lenders, to the repayment of the Obligations. 2.85 "Subsidiary" or "Subsidiaries" means any corporation, partnerships or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Borrower. 2.86 "Tangible Net Worth" means Net Worth less goodwill and other intangible assets. 2.87 "Tangible Primary Assets" means the sum of consolidated assets and reserve for loan losses less goodwill or other intangible assets. 2.88 "Tangible Primary Capital" means the sum of common equity, reserve for loan losses and perpetual preferred stock, less goodwill and other intangible assets. 2.89 "Termination Date" means the earlier to occur of (i) December 31, 2003, or (ii) the occurrence of an Event of Default as defined in Section 10.1 hereof, or (iii) the date the Commitments shall be reduced to zero, or (iv) such later date agreed to by all Lenders or, if in any case such day is not a Business Day, the next succeeding Business Day. 2.90 "Tier One Capital" shall have the meaning set forth on the date hereof under applicable regulations of any regulatory agency having authority on the date hereof as such regulations are applicable to the Borrower, or if such regulations are amended hereafter to define Tier One Capital more restrictively, as set forth in such later definition; provided, that if such regulations are amended hereafter to define Tier One Capital less restrictively than the regulations existing on the Closing Date, then the meaning of Tier One Capital shall not be changed to reflect such later modification. 2.91 "Tier Two Capital" shall have the meaning set forth on the date hereof under applicable regulations of any regulatory agency having authority on the date hereof as such regulations are applicable to the Borrower, or if such regulations are amended hereafter to define Tier Two Capital more - 12 - restrictively, as set forth in such later definition; PROVIDED, that if such regulations are amended hereafter to define Tier Two Capital less restrictively than the regulations existing on the Closing Date, then the meaning of Tier Two Capital shall not be changed to reflect such later modification. 2.92 "Unused Commitment" means at any date, with respect to any Lender, an amount equal to its Commitment less the aggregate outstanding principal amount of its Advances hereunder. 2.93 Other Definitional Provisions. All terms defined in this Agreement shall have the defined meanings when used herein and in the Loan Documents or in any other document made or delivered pursuant hereto. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. Except as otherwise specifically provided in this Agreement, the use of any term shall be equally applicable to any gender, "or" shall not be exclusive, and "including" shall not be limiting. SECTION 3. CREDIT FACILITY. 3.1 COMMITMENTS TO LEND. Subject to the terms and conditions herein, each Lender severally agrees to make Advances to the Borrower from time to time before the Termination Date; provided that, (i) immediately after each such Advance, the aggregate principal amount of Advances by such Lender shall not exceed the amount of its Commitment, and (ii) at no time shall the aggregate outstanding principal amount of all Advances to Borrower exceed the Aggregate Commitment. All Advances to Borrower shall be considered in determining whether the Aggregate Commitment has been exceeded in calculating the amount available for Borrowing by Borrower hereunder and in determining the amount of any mandatory payments required by Section 3.7(b), and for calculation of fees pursuant to Section 3.19. Each Prime Rate Borrowing under this Section 3.1 shall be in an aggregate principal amount of Two Hundred Fifty Thousand Dollars ($250,000) or more and each LIBOR Rate Borrowing under this Section 3.1 shall be in an aggregate principal amount of One Million Dollars ($1,000,000) or more (except that any such Borrowing may be in the aggregate amount of the Unused Commitment). Each Advance by a Lender shall not exceed such Lender's prorata share of the requested Advance and the Aggregate Commitment. Within the foregoing limits, the Borrower may borrow under this Section 3.1, repay or, to the extent permitted by Section 3.7(c), prepay Advances and reborrow under this Section up to the then-remaining Unused Commitment at any time before the Termination Date. - 13 - 3.2 MANDATORY REDUCTION OF AGGREGATE COMMITMENT. The Aggregate Commitment shall be reduced semiannually by Two Million Dollars ($2,000,000) beginning on June 30, 1997, and on December 31, 1997, and continuing on June 30th and December 31st of each and every year thereafter until the Termination Date. 3.3 OPTIONAL TERMINATION OR REDUCTION OF AGGREGATE COMMITMENT. The Borrower may, upon at least 10 Business Days' notice to the Agent (which notice the Agent shall promptly forward to the Lenders), terminate at any time, or proportionately reduce the Aggregate Commitment over and above the mandatory reductions required in Section 3.2 from time to time by an aggregate amount of at least One Million Dollars ($1,000,000), or multiple thereof. Any such termination or reduction in the Aggregate Commitment shall be a permanent termination and/or reduction. If the Aggregate Commitment is terminated in its entirety, all accrued fees (as provided herein) shall be due and payable on the Termination Date. 3.4 METHOD OF BORROWING. (a) The Borrower with respect to all Advances shall give the Agent a Notice of Borrowing, at least 1 Business Day prior to each Prime Rate Borrowing, and at least 3 LIBOR Business Days prior to each LIBOR Borrowing (all notices being effective on the day delivered so long as the Agent shall have received the required notice prior to 10:00 A.M. (Boise, Idaho time). Each Notice of Borrowing shall specify: (i) the date of such Borrowing, which shall be a Business Day in the case of a Prime Rate Borrowing or a LIBOR Business Day in the case of a LIBOR Borrowing, (ii) the aggregate amount of such Borrowing, (iii) which portion of such Borrowing, is to be a Prime Rate Advance and which portion is to be a LIBOR Advance, and (iv) in the case of a LIBOR Borrowing, the duration of the LIBOR Interest Period applicable thereto, subject to the provisions of the definition of LIBOR Interest Period. (b) Upon timely receipt of a Notice of Borrowing, the Agent shall on the same date of its receipt of the required Notice of Borrowing notify each Lender of the contents thereof and of such Lender's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. - 14 - (c) Not later than 12:00 P.M. (local time of the Agent) on the date of each Borrowing each Lender shall (except as provided in paragraph (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available to the Agent at the location designated by the Agent. Unless the Agent has been notified by a Lender that the conditions precedent to any Borrowing have not been satisfied or that an Event of Default has occurred, the Agent will make the funds so received from the Lenders available to the Borrower. Unless the Agent receives notice from a Lender, no later than 12:00 P.M. (local time of the Agent) on the date of any such Borrowing stating that such Lender will not make an Advance in connection with the Borrower's request, the Agent shall be entitled to assume that such Lender will make the requested Advance and, in reliance on such assumption, the Agent may (but shall not be obligated to) make available such Lender's ratable share of such requested Advance to the Borrower for the account of such Lender. If the Agent makes such Lender's ratable share available to the Borrower and such Lender does not in fact make its ratable share of such requested Advance available to Agent on such date, the Agent shall be entitled to recover such Lender's ratable share from such Lender or the Borrower (and for such purpose shall be entitled to charge such amount to any account of the Borrower maintained with the Agent), together with interest thereon for each day during the period from the date of such Borrowing until such sum shall be paid in full. (d) If any Lender makes a new Advance hereunder on a day on which the Borrower is to repay all or any part of an outstanding Advance from such Lender, such Lender shall apply the proceeds of its new Advance to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Agent. (e) Notwithstanding anything to the contrary contained in this Agreement, no Prime Rate Advance or LIBOR Advance may be made if there shall have occurred a Default or an Event of Default, which Default or Event of Default shall not have been cured or waived. (f) In the event any Notice of Borrowing fails to specify whether the requested Advances are to be Prime Rate Advances or LIBOR Advances, such Advances shall be made as Prime Rate Advances. If the Borrower is otherwise entitled under this Agreement to repay any Advances maturing at the end of a LIBOR Interest Period applicable thereto with the proceeds of a new Advance, and Borrower fails to repay such Advances using its own moneys and fails to give a Notice of Borrowing in connection with such new Borrowing or if a Default or Event of Default shall have occurred and shall not have been cured or waived, a new Borrowing - 15 - shall be deemed to be made on the date such Advances mature in an amount equal to the principal amount of the Advances so maturing, and the new Borrowing shall be Prime Rate Advances, PROVIDED, HOWEVER, that no such deemed Advance pursuant to the above clause shall constitute a cure or waiver of any Default or Event of Default then in existence (including without limitation the Default arising from the failure to repay the maturing Advance at the end of the Interest Period) or a limitation of or restriction on the right of the Agent, at the direction of the Lenders, to accelerate the obligations of the Borrower hereunder and impose any rights and remedies contained in Section 10. (g) Notwithstanding anything to the contrary contained herein, there shall not be more than 6 LIBOR Advances per Lender at any given time. 3.5 LIBOR ADVANCES EXTENSIONS AND CONVERSIONS. So long as no Event of Default has occurred and subject to the terms and conditions hereof, the Borrower may extend a LIBOR Advance beyond its current LIBOR Interest Period by providing Agent written notice of the requested extensions and of the duration of the next period which notice Agent shall promptly notify each Lender of the contents thereof. Such notice shall be given not later than 10:00 a.m., Boise, Idaho time, at least 3 Business Days prior to the end of the applicable LIBOR Interest Period. Subject to the terms and conditions hereof, the Borrower shall also have the option at any time to convert a LIBOR Advance into a Prime Rate Advance or a Prime Rate Advance into a LIBOR Advance as applicable; provided, however, that a LIBOR Rate Advance may be converted only on the last day of the applicable LIBOR Interest Period. The Borrower shall notify the Agent in writing of each proposed conversion, the proposed conversion date (which shall be a Business Day), and, in the case of a proposed conversion into a LIBOR Advance, the duration of the LIBOR Interest Period thereof. Upon receipt of such notice, Agent shall promptly notify each Lender of the contents thereof. In the case of a proposed extension of or conversion into a LIBOR Advance, such notice shall be at least 3 Business Days prior to the proposed conversion date, and if such notice is not forthcoming, the Advance shall automatically convert to or remain a Prime Rate Advance. Unless Agent receives notice of a proposed extension or conversion as and when required hereunder, then at the end of a LIBOR Interest Period for a LIBOR Advance, such LIBOR Advance shall automatically convert to a Prime Rate Advance; provided, in no event shall Borrower convert any or all of the Credit Facility into a LIBOR Advance with a LIBOR Interest Period that ends after the Termination Date. 3.6 NOTES. (a) The Advances of each Lender shall be evidenced by a single Note payable to the order of such Lender in - 16 - an amount equal to the original principal amount of such Lender's Commitment. (b) Upon receipt of each Lender's Note pursuant to Section 5.2, the Agent shall deliver such Note to such Lender. Each Lender shall record, and prior to any transfer of its Note, if permitted, shall endorse on the schedules forming a part of its Note, appropriate notations to evidence, the date, amount and maturity of, and effective interest rate for, each Advance made by it, the date and amount of each payment of principal made by the Borrower with respect thereto, and such schedules of each such Lender's Note shall constitute rebuttable presumptive evidence of the respective principal amounts owing and unpaid on such Lender's Note; provided that the failure of any Lender to make any such recordation or endorsement shall not affect the obligation of the Borrower hereunder or under the Note or the ability of any Lender to assign its Note in accordance with the provisions of this Agreement. Each Lender is hereby irrevocably authorized by the Borrower to enforce its Note and to attach to and make a part of the Note a continuation of any such schedule as and when required. 3.7 MATURITY AND PRINCIPAL PAYMENTS OF ADVANCES. (a) Subject to Section 3.7(d), each LIBOR Advance shall mature on the last day of the LIBOR Interest Period applicable to such LIBOR Borrowing. (b) On each date on which the Commitments are reduced pursuant to Section 3.2 or Section 3.3, the Borrower shall repay such principal amount of the outstanding Advances, as may be necessary so that after such payment the aggregate unpaid principal amount of the Advances does not exceed the amount of the Aggregate Commitment as then reduced. (c) (i) The Borrower may, without penalty, upon at least 1 Business Day's notice to the Agent, pay any Prime Rate Advance in whole or in part at any time, in minimum amounts of Two Hundred Fifty Thousand Dollars ($250,000) which shall be applied to principal. Each such optional payment shall be applied to pay ratably the principal portion of the Prime Rate Advances of the Lenders then outstanding. (ii) Except as provided in Section 3.10 (but subject in any event to Section 3.13), the Borrower may not, without the prior written consent of the Lenders, pay all or any portion of the principal amount of any LIBOR Advance prior to the end of the relevant LIBOR Interest Period applicable to such Advance. (iii) Upon receipt of a notice of payment pursuant to this Section 3.7, the Agent shall promptly - 17 - notify each Lender of the contents thereof and of such Lender's ratable share of such payment and such notice shall not thereafter be revocable by the Borrower. (d) In addition to the foregoing, the outstanding principal amount of the Prime Rate Advances and the LIBOR Advances, together with all accrued but unpaid interest thereon, if any, shall be due and payable, unless accelerated as provided for herein, on the Termination Date. 3.8 INTEREST RATES. (a) Each Prime Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from the date such Advance is made until it becomes due, at a rate per annum equal to the then applicable Prime Rate for such day plus the Applicable Margin. Interest accrued on each Prime Rate Advance shall be due and payable quarterly in arrears on the tenth (10th) calendar day of the month following the end of a calendar quarter in an amount equal to the interest accrued as of the last day of the immediately preceding calendar quarter beginning on the end of the first calendar quarter following the Closing Date and continuing thereafter until the Termination Date. (b) Each LIBOR Advance shall bear interest on the outstanding principal amount thereof, for the LIBOR Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin plus the Adjusted LIBOR Rate for such LIBOR Interest Period. Interest accrued on each LIBOR Advance that is for a LIBOR Interest Period of three (3) months or less shall be due and payable on the last day of the LIBOR Interest Period. Interest accrued on each LIBOR Advance that is for LIBOR Interest Period in excess of three (3) months shall be due and payable every three (3) months after the date the LIBOR Advance is made and on the last day of the LIBOR Interest Period. (c) Interest on Prime Rate Advances shall be computed on the basis of a year of 365/366 days and paid for the actual number of days elapsed (including the first but excluding the last day). Interest on LIBOR Advances shall be computed on the basis of the actual number of days in the calendar year of calculation divided by 360 days and paid for the actual number of days elapsed, calculated as to each applicable LIBOR Interest Period from and including the first day thereof to but excluding the last day thereof. (d) After the date any principal of any Advance is due and payable (whether on the maturity date, upon acceleration, or otherwise), or after any other monetary obligation of the Borrower to the Agent or the Lenders shall have become due and payable and is not then paid, the Borrower shall - 18 - pay, but only to the extent permitted by law, interest equal to the Default Rate. 3.9 DETERMINATION OF APPLICABLE MARGIN. In determining the Applicable Margin on a quarterly basis, the Borrower and the Lenders shall refer to the Borrower's most recent consolidated financial statements for the quarter delivered to the Lenders; PROVIDED THAT, any necessary changes in the Applicable Margin shall not be effective until the first day of the next succeeding calendar quarter. All determinations hereunder shall be made by the Agent. Notwithstanding anything to the contrary stated above in this Section 3.9, the Applicable Margin from the Closing Date through March 31, 1997 will be with respect to LIBOR Advances 175 basis points and with respect to Prime Rate Advances 0 basis points. 3.10 ILLEGALITY. If, after the date hereof, the adoption of any applicable law, rule, regulation, statute, treaty, judgment or decree, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof (any such agency being referred to as an "Authority" and any such event being referred to as a "Change of Law"), or compliance by any Lender (or its applicable Lending Office) with any request or directive, rule, consent, approval, authorization, guideline, order or policy (whether or not having the force of law) of any Authority shall make it unlawful or impossible for any Lender (or its applicable Lending Office) to make, maintain or fund its LIBOR Advances and such Lender shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender (but no other Lender unless such other Lender shall have notified the Agent of similar circumstances) to make LIBOR Advances shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Lender shall designate a different Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such Lender shall determine that it may not lawfully continue (i) to make any LIBOR Advances or (ii) to maintain and fund any of its outstanding LIBOR Advances to maturity and shall so specify in each such notice, in the case of clause (i), such Lender nevertheless shall be obligated to make Prime Rate Advances, and in the case of clause (ii), the Borrower shall immediately prepay in full the then outstanding principal amount of each LIBOR Advance of such Lender, together with accrued interest thereon. Concurrently with prepaying each such LIBOR Advance, the Borrower shall borrow a Prime Rate Advance in an equal principal amount from such - 19 - Lender (on which interest and principal shall be payable contemporaneously with the related LIBOR Advances of the other Lenders), and such Lender shall make such a Prime Rate Advance. 3.11 INCREASED COST AND REDUCED RETURN. (a) If after the date hereof, a change of law or compliance by any Lender (or its applicable Lending Office) with any request, directive, rule, consent, approval, authorization, guideline, order or policy (whether or not having the force of law) of any Authority: (i) shall subject any Lender (or its applicable Lending Office) to any tax, duty or other charge with respect to its Advances, Notes, or its obligation to make Advances, or shall change the basis of taxation of payments to any Lender (or its applicable Lending Office) of the principal of or interest on its Advances, or any other amounts due under this Agreement in respect of its Advances, (except for changes in the rate of tax on the overall net income of such Lender or its Lending Office imposed by the jurisdiction in which such Lender's principal executive office or Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any LIBOR Advance any such requirement included in an applicable Adjusted LIBOR Rate) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its applicable Lending Office); or (iii) shall impose on any Lender (or its applicable Lending Office) or on the London Interbank or other applicable market any other condition affecting its Advances, Notes, or its obligation to make Advances; and the result of any of the foregoing is to increase the cost to such Lender (or its applicable Lending Office) of making or maintaining any Advance or to reduce the amount of any sum received or receivable by such Lender (or its applicable Lending Office) under this Agreement or under its Notes in connection with LIBOR Advances, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. - 20 - (b) If any Lender shall have determined that after the date hereof the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof, or compliance by any Lender (or its applicable Lending Office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any Authority, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) and assuming that the capital of such Lender was fully utilized prior to such adoption, change or compliance by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. (c) Each Lender will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.11 and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section 3.11 and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. Each Lender will notify the Borrower of any change that will entitle the Lender to compensation pursuant to this Section 3.11 as promptly as practicable, but in any event within 45 days after the Lender obtains knowledge of such a change; PROVIDED, HOWEVER that if the Lender fails to give such notice within 45 days after it obtains knowledge of such an event, the Lender shall, with respect to compensation payable pursuant to this Section 3.11 of any costs resulting from such event, only be entitled to payment under this Section 3.11 for costs incurred from and after the date 45 days prior to the date that the Lender does give notice. (d) Subject to the provisions of Section 13.6(e), the provisions of this Section 3.11 shall be applicable with respect to any Participant, Assignee or other Transferee, and any calculations required by such provisions shall be made based upon the circumstances of such Participant, Assignee or other Transferee. - 21 - 3.12 PRIME RATE ADVANCES SUBSTITUTED FOR LIBOR ADVANCES. If (i) the obligation of any Lender to make or maintain LIBOR Advances has been suspended pursuant to Section 3.10 or (ii) any Lender has demanded compensation under Section 3.11, and the Borrower shall, by at least 5 LIBOR Business Days' prior notice to such Lender through the Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Advances which would otherwise be made by such Lender as LIBOR Advances shall be made instead as Prime Rate Advances (in all cases interest and principal on such Advances shall be payable contemporaneously with the related LIBOR Advances of the other Lenders), and (b) after each of its LIBOR Advances has been repaid, all payments of principal which would otherwise be applied to repay such LIBOR Advances shall be applied to repay its Prime Rate Advances instead. 3.13 COMPENSATION. (a) Upon the request of any Lender along with a certificate of the Lender setting forth the basis for determining such loss, cost or expense, delivered to the Borrower and the Agent, the Borrower shall pay to such Lender such amount or amounts as shall compensate such Lender for any loss, cost or expense incurred by such Lender as a result of: (i) any payment of any LIBOR Advance on a date other than the last day of an LIBOR Interest Period for such LIBOR Advance; (ii) any failure by the Borrower to prepay a LIBOR Advance on the date for such prepayment specified in the relevant notice of prepayment hereunder; or (iii) any failure by the Borrower to borrow a LIBOR Advance on the date for the LIBOR Advance as specified in the applicable Notice of Borrowing delivered pursuant to Section 3.2. 3.14 LIBOR INDEMNIFICATION. Borrower hereby agrees to indemnify and hold each Lender free and harmless from any loss or expense (including without limitation any loss or expense incurred by reason of the liquidation or redeployment of deposits or other funds acquired by any Lender to fund or maintain any LIBOR Advance which any Lender may incur as a result of (i) the Borrower's failure to make a borrowing, conversion, or extension with respect to a LIBOR Advance after making a request therefor; (ii) a prepayment (whether optional or mandatory) of a LIBOR - 22 - Advance prior to the expiration of a related LIBOR Interest Period; (iii) the conversion of a LIBOR Advance as a result of any of the events indicated in Section 3.10 hereof; and (iv) any demand, made in accordance with the terms of the Loan Documents, for payment of a LIBOR Advance by Lenders prior to the expiration of the related LIBOR Interest Period). 3.15 COMMITMENT FEE. FOR AND IN CONSIDERATION of the Lender's Commitments to establish the Credit Facility set forth herein, Borrower agrees to pay to Agent, for the account of each Lender, on the Closing Date a non-refundable Commitment Fee of twenty (20) basis points of each Lender's prorata share of the Aggregate Commitment. 3.16 UNUSED COMMITMENT FEE. Borrower agrees to pay to the Agent, for the account of each Lender, an Unused Commitment Fee equal to fifteen (15) basis points of each Lender's Unused Commitment annualized on the basis of a 360 day year and actual days elapsed on the daily unused portions of the Aggregate Commitment for each day from the Closing Date until the Termination Date or until this Agreement is sooner terminated. Said Unused Commitment Fee is payable on the tenth Business Day following the end of each calendar year quarter in arrears beginning with the calendar quarter ending on December 31, 1996 or on the Termination Date. 3.17 REIMBURSEMENT FOR OUT-OF-POCKET COSTS. In addition to the Commitment Fee described in Section 3.15 above, Borrower agrees to reimburse Agent for all out-of-pocket fees, costs and expenses reasonably incurred and paid by Agent incident to or in connection with the preparation of this Agreement and the documents and instruments attached hereto or referred to herein in anticipation of, and in effecting closing hereunder, including, without limitation, Agent's reasonable attorney fees, and the cost of lien and security interest searches and filing fees. Borrower hereby agrees that it will reimburse Agent for all such out-of-pocket fees, costs and expenses whether or not closing takes place. In the event closing takes place, all such fees, costs and expenses shall be paid at closing. If closing does not take place, such fees, costs and expenses shall be reimbursed to Agent within 10 days of Borrower's receipt of billing from Agent for such fees, costs and expenses. 3.18 AGENT FEE. Borrower agrees to pay to Agent, for the account and sole benefit of the Agent, such fees and other amounts at such times as agreed to by Agent and Borrower. 3.19 GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall make each payment of principal and interest and of fees hereunder, not later than 10:00 a.m. (local time of the Agent) on the date when due, in Federal or other funds - 23 - immediately available to the Agent at its address referred to in Section 13. The Agent will promptly distribute to each Lender (and, following the occurrence and during the continuance of an Event of Default, for application by such Lender against amounts owing to such Lender by the Borrower in such order as such Lender shall elect) its ratable share of each such payment received by the Agent for the account of the Lenders. (b) Whenever any payment of principal or interest on the Prime Rate Advances, or of fees shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. (c) All payments of principal, interest and fees and all other amounts to be paid by Borrower pursuant to this Agreement with respect to any Advance, or fee relating thereto shall be paid without deduction for, and free from, any tax, imposts, levies, duties, deductions, or withholdings of any nature now or at any time hereafter imposed by any governmental authority or by any taxing authority thereof or therein excluding taxes imposed on or measured by a Lender's net income ("Taxes"). In the event that Borrower is required by applicable law to make any such withholding or deduction of Taxes with respect to any Advance or fee or other amount, the Borrower shall pay such deduction or withholding to the applicable taxing authority, shall promptly furnish to the Agent in respect of which such deduction or withholding is made all receipts and other documents evidencing such payment and shall pay to each Lender additional amounts as may be necessary in order that the amount received by that Lender after the required withholding or other payment shall equal the amount that Lender would have received had no such withholding or other payment been made. Without limiting the foregoing, Borrower agrees to indemnify and hold harmless each Lender and the Agent for the full amount of all Taxes paid by such Lender or the Agent, as the case may be, and any liability (including penalties, interest, additions to tax and expenses) arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally asserted. In the event any Lender receives a subsequent recovery of any Taxes for which it has received payment from the Borrower under this Section 3.19, such Lender shall promptly pay the amount of such recovery to the Borrower. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and the Lenders contained in this Section 3.19(c) constitute a continuing agreement and shall survive the termination of this Agreement and the payment in full or cancellation of the Notes. - 24 - SECTION 4. CLOSING. 4.1 CLOSING. Closing under this Agreement shall take place when Borrower shall have complied with all preconditions to closing set forth in this Agreement and Borrower obtains its initial Advance under the Commitment. If the closing does not occur on the Closing Date, Lenders' Commitment under Section 3 shall expire, and Lenders shall have no further obligations hereunder, and this Agreement shall be of no further force or effect; PROVIDED, HOWEVER, Borrower shall nevertheless remain obligated to reimburse Agent for all of its out-of-pocket fees, costs and expenses as described in Section 3.17 hereof. SECTION 5. CLOSING UNDER THIS AGREEMENT; PRECONDITIONS. 5.1 CLOSING DATE. The closing under this Agreement shall take place on the Closing Date at the offices of Agent, Ninth and Idaho Street, Boise, Idaho, or such other place as Lenders shall designate in writing. If all preconditions to closing set forth in this Agreement have been met to Lenders' and Agent's satisfaction prior thereto, then closing may occur at such earlier date as may be mutually agreed to between Borrower and Lenders. 5.2 PRECONDITIONS TO FIRST BORROWING. The parties hereto agree that the obligation of each Lender to make an Advance on the occasion of the First Borrowing is subject to the satisfaction of the following conditions: (a) Prior to the Closing Date, Borrower shall have delivered to Agent the unqualified, audited, consolidated Financial Statements of Borrower and its Banking Subsidiaries dated as of December 31, 1995, prepared in accordance with GAAP and audited by KPMG Peat Marwick, L.L.P. Borrower also shall have delivered to Agent its unconsolidated, company prepared balance sheet and its unconsolidated, company prepared income and expense statement dated as of June 30, 1996, certified, as to their accurateness and as being prepared consistently in accordance with GAAP, by a Responsible Officer of Borrower. All of said Financial Statements and unconsolidated balance sheet and income and expense statements required above shall be satisfactory to Lenders. (b) On or before the Closing Date, Borrower shall have delivered to Agent the Loan Documents, including but not limited to a Note for the account of each Lender in the amount of each Lender's Commitment in the form of EXHIBIT "A," duly executed and acknowledged, where necessary. (c) On the Closing Date, Borrower shall have delivered to Agent a certificate of the Secretary of the - 25 - Borrower, certified as of the Closing Date, as to the incumbency and signatures of the officers signing this Agreement, the Loan Documents and any documents contemplated or delivered under this Agreement and a certification by a Responsible Officer as to the incumbency and signature of the Secretary of the Borrower. (d) On the Closing Date, Borrower shall have delivered to Agent a certificate or certificates signed by a Responsible Officer of the Borrower and its Banking Subsidiaries certifying that: (i) Borrower and its Banking Subsidiaries are validly organized and in good standing in the states in which each operates; and (ii) Borrower and its Banking Subsidiaries have delivered to Agent a certified copy of the Borrower's and its Banking Subsidiaries' Articles of Incorporation, By-Laws and all amendments thereto. (iii) No Default has occurred; and (iv) The representations and warranties of the Borrower set forth in this Agreement are true on and as of the Closing Date. (v) That neither the Borrower nor any of its Banking Subsidiaries nor any of the Acquisitions have guaranteed the repayment of any debt owed to any creditor by any Person, except for those guarantees specifically listed on EXHIBIT "D" attached hereto. (e) All representations, warranties and covenants required to be made by Borrower under this Agreement and the Loan Documents on or before the Closing Date shall be true and correct as of the Closing Date. Borrower shall have performed and complied with, and shall have caused its Banking Subsidiaries to have performed and complied with, all other agreements and conditions which are required to be performed and complied with, and shall have caused its Banking Subsidiaries to have performed and complied with, all other agreements and conditions which are required to be performed and complied with under this Agreement on or prior to the Closing Date. (f) Agent shall have received, at no cost to any Lender, an opinion of counsel addressed to each Lender, dated as of the Closing Date, substantially in the form of EXHIBIT "E" attached hereto. (g) Prior to the Closing Date, Borrower shall deliver to Agent documentation satisfactory to Agent verifying - 26 - that Borrower has obtained all Governmental Authority approvals for its acquisition of First Interstate Bank of Montana, N.A. and First Interstate Bank of Wyoming, N.A. (h) On or before the Closing Date, the Agent shall have received (i) a copy of the Borrower's certificate of incorporation, certified by the Secretary of State of the State of Montana; (ii) a certificate of such Secretary of State, dated as of a recent date, as to the good standing and charter documents of the Borrower on file in the office of such Secretary of State; (iii) a certificate of the Secretary of the Borrower dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the bylaws of the Borrower as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of resolutions adopted by the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Agreement, the Borrowings hereunder and the execution and delivery of the Notes, (C) that the certificate of incorporation of the Borrower has not been amended, and (iii) such other documents as any Lender or its counsel may reasonably request. (i) On the Closing Date, Borrower shall be in compliance with all material regulatory requirements. (j) On or before the Closing Date, Borrower shall have delivered to Agent documentation, satisfactory to Lenders, verifying and providing that all term indebtedness of Borrower owed to any Person and any security interests, mortgages and liens on or in any collateral given to secure the repayment thereof has been or will be on the Closing Date completely subordinated to the rights of the Lenders in a manner satisfactory to Lenders. (k) On or before the Closing Date, Borrower shall deliver to the Agent verification that Borrower has obtained or contemporaneously with the closing of this transaction will obtain funding in the amount of at least Forty Million Dollars ($40,000,000). Said funding shall consist of Twenty Million Dollars ($20,000,000) in Tier One Capital raised from the sale of preferred stock and Twenty Million Dollars ($20,000,000) in Tier Two Capital raised from the issuance of Subordinated Debt or other debt instruments the repayment of which is to be fully subordinate to the Borrower's Obligations hereunder. All loan agreements, purchase agreements and/or similar documents concerning such Forty Million Dollars ($40,000,000) shall be in a form acceptable to Lenders. (l) On the Closing Date, Borrower shall own all of the issued and outstanding shares of Capital Stock of the Acquisitions and Borrower shall deliver to Agent as Collateral - 27 - all of said Capital Stock of the Acquisitions and Capital Stock of each of its Banking Subsidiaries. (m) All documents and legal matters in connection with the transaction contemplated by this Agreement shall be satisfactory in form and substance to each Lender and its respective counsel. (n) On the Closing Date, the Agent shall have received the Commitment Fee and all other fees and costs due and payable under this Agreement. 5.3 CONDITIONS TO ALL BORROWINGS. The obligation of each Lender to make an Advance on the occasion of each requested Advance is subject to the satisfaction of the following conditions: (a) receipt by the Agent of a Notice of Borrowing; (b) immediately before and after such Advance, no Default shall be existing hereunder; (c) the representations and warranties of the Borrower contained in Sections 6.1, 6.2, 6.6, 6.7, 6.8, 6.11, 6.12, 6.13 and 6.16 below shall be true on and as of the date of such Advance; and (d) immediately after such Advance, the aggregate outstanding principal amount of the Advances of each Lender will not exceed the amount of the Aggregate Commitment. Each Advance shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the accuracy of the facts specified in Section 5.3(b), (c) and (d) above. SECTION 6. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that on the Closing Date: 6.1 EXISTENCE AND POWER. Borrower and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, by the nature of its business, such qualification is necessary and has all corporate powers and all governmental licenses, authorizations, consents and approvals required in all material respects to carry on its business as now conducted. - 28 - 6.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Borrower of this Agreement, the Notes, the Pledge Agreement and the other Loan Documents (i) are within Borrower's corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) require no action by or in respect of or filing with, any governmental body, agency or official; (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of Borrower or any of its Subsidiaries, or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries, and (v) do not result in the creation or imposition of any Lien on any asset of the Borrower or its Subsidiaries. 6.3 BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Borrower enforceable in accordance with its terms, and the Notes, the Pledge Agreement and the other Loan Documents when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, PROVIDED that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights generally. 6.4 FINANCIAL INFORMATION. (a) The consolidated balance sheet of the Borrower and its Banking Subsidiaries as of December 31, 1995 and the related consolidated statements of income, shareholders' equity and cash flows for the Fiscal Year then ended, reported on by KPMG Peat Marwick, L.L.P., copies of which have been delivered to each of the Lenders, and the unaudited consolidated financial statements of the Borrower and its Banking Subsidiaries for the interim period ended June 30, 1996, copies of which have been delivered to each of the Lenders, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Banking Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated. (b) Since June 30, 1996, no Material Adverse Effect has occurred. 6.5 NO LITIGATION. There is no action, suit or proceeding pending, or to the knowledge of Borrower threatened, against or affecting Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable probability of an adverse determination that would have or cause a Material Adverse Effect or which in any manner draws into question the validity of this - 29 - Agreement, the Notes or any of the other Loan Documents except as listed on EXHIBIT "F". 6.6 COMPLIANCE WITH ERISA. (a) The Borrower and each of its Subsidiaries and each ERISA Affiliate have fulfilled all of their obligations in all material respects under ERISA and the Code with respect to each Plan, including but not limited to all minimum funding standards, all reporting and disclosure requirements and, where applicable, the continuation coverage requirements in Part 6 of Title I of ERISA and Section 4980B of the Code; and they are in compliance in all material respects with the presently applicable provisions of ERISA and the Code; and they have not incurred any liability to the PBGC (other than premiums due and not delinquent under Section 4007 of ERISA) or a Plan under ERISA. The representations and warranties set forth in this Section 6.6(a) (other than as to the incurrence of any liability to a Plan under ERISA) are made to the best of Borrower's knowledge to the extent they apply to any Multiemployer Plan. (b) Neither the Borrower nor any of its Subsidiaries nor any ERISA Affiliate has incurred any withdrawal liability with respect to any Multiemployer Plan under Title IV of ERISA, and no such liability is expected to be incurred. (c) Neither the Borrower nor any of its Subsidiaries nor any ERISA Affiliate has incurred any unpaid liability for excise taxes under the Code with respect to any Plan, and no such liability is expected to be incurred. 6.7 COMPLIANCE WITH LAWS; PAYMENTS OF TAXES. The Borrower and its Subsidiaries are in compliance with all material applicable laws, regulations and similar requirements of governmental authorities, except where such compliance is being contested in good faith through appropriate proceedings. There have been filed on behalf of the Borrower and its Subsidiaries all material Federal, state and local income, excise, property and other tax returns which are required to be filed by them and all taxes due pursuant to such returns or pursuant to any assessment received by or on behalf of the Borrower or any Subsidiary have been paid, except for any taxes which are being contested in good faith and by proper proceedings and as to which adequate reserves have been maintained. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. 6.8 SUBSIDIARIES. Each of the Borrower's Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and all governmental - 30 - licenses, authorizations, consents and approvals required to carry on its business as now conducted. The Borrower has no Subsidiaries except for those Subsidiaries listed on Exhibit 6.8 (as such Exhibit may be supplemented from time to time by notice to the Agent from Borrower), which accurately sets forth each such Subsidiary's complete name and jurisdiction of incorporation or formation. 6.9 NOT AN INVESTMENT COMPANY. Neither Borrower nor any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 6.10 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its Subsidiaries has title to or valid lease interests in its Properties sufficient for the conduct of its business, and none of such Property is subject to any Lien except as permitted herein. 6.11 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its Property is bound which has a reasonable probability of having or causing a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 6.12 FULL DISCLOSURE. All information heretofore furnished by the Borrower to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Agent or any Lender will be, true, accurate and complete in every material respect, or based on reasonable estimates, on the date as of which such information is stated or certified. The Borrower has disclosed to the Lenders in writing any and all facts which have a reasonable probability of having or causing a Material Adverse Effect. 6.13 ENVIRONMENTAL MATTERS. (a) Neither the Borrower nor any of its Subsidiaries are subject to any environmental liability which has a reasonable probability of having or causing a Material Adverse Effect and neither the Borrower nor any of its Subsidiaries have been designated as a potentially responsible party under CERCLA or under any state statute similar to CERCLA. (b) The Borrower and each of its Subsidiaries are in compliance with all environmental requirements in connection with the operation of their Properties and their respective businesses. 6.14 CAPITAL STOCK. All Capital Stock, debentures, bonds, notes and all other securities of the Borrower and its Subsidiaries presently issued and outstanding are validly and - 31 - properly issued in accordance with all applicable laws. The issued shares of Capital Stock of Borrower's Subsidiaries and following closing hereunder, the Capital Stock of the Acquisitions, are owned by Borrower free and clear of any Lien or adverse claim, except for the Lien granted to the Lenders pursuant to this Agreement. 6.15 MARGIN STOCK. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Advance hereunder will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, or be used for any purpose which violates, or which is inconsistent with, the provisions of Regulation X. 6.16 INSOLVENCY. After giving effect to the execution and delivery of the Loan Documents and the making of the Advances under this Agreement, Borrower will not be "insolvent," within the meaning of such term as defined in Section 101 of Title 11 of the United States Code or Section 2 of the Uniform Fraudulent Transfer Act, as each is amended from time to time, or be unable to pay its debts generally as such debts become due, or have unreasonably little capital to engage in any business or transaction, whether current or contemplated. SECTION 7. COVENANTS The Borrower agrees that, so long as any Lender has any Commitment hereunder or Borrower owes any Obligations to any Lender or the Agent hereunder: 7.1 INFORMATION. The Borrower will deliver to each of the Lenders: (a) as soon as available, but not later than 120 days after the end of each Fiscal Year, a copy of the audited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, and accompanied by the opinion of independent public accountants of nationally recognized standing ("Independent Auditor") acceptable to Lenders which report shall state that such consolidated Financial Statements present fairly the financial position of the Borrower and its Subsidiaries for the periods indicated in conformity with GAAP applied on a basis consistent with prior periods. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor - 32 - of any material portion of the Borrower's or any Subsidiary's records; (b) as soon as available, but not later than 60 days after the end of each of the first three fiscal quarters of each Fiscal Year, a copy of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith year end audit adjustments), the financial position and the results of operations of the Borrower and its Subsidiaries; (c) within 60 days after the end of each fiscal quarter, CALL reports (Report of Condition and Income) for each Banking Subsidiary required to deliver a CALL report (Report of Condition and Income), as at the end of such fiscal quarter, each certified by a Responsible Officer of such Banking Subsidiary and reports filed on Form FR Y-9C and Form FR Y-9LP; (d) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its security holders, and all reports and registration statements which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange; (e) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Banking Subsidiaries as the Agent or any Lender may from time to time reasonably request; (f) simultaneously with the delivery of each set of financial statements referred to in paragraphs (a), (b) and (c) above, a certificate of a Responsible Officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower and its Banking Subsidiaries were in compliance with the financial covenants set forth herein on the date of such Financial Statements and (ii) stating whether, to the best knowledge of such person, any Default exists on the date of such certification and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; and (g) simultaneously with the delivery of each set of annual Financial Statements referred to in paragraph (a) above, a statement of the Independent Auditors which reported on such statements to the effect that nothing has come to their - 33 - attention to cause them to believe that any Default existed on the date of such Financial Statements. 7.2 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Borrower will (i) keep, and cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and cause each Subsidiary to permit, representatives of any Lender at such Lender's expense prior to the occurrence of a Default and at the Borrower's expense after the occurrence of a Default to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and Independent Auditors. The Borrower agrees to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired. 7.3 FINANCIAL COVENANTS. (a) The Borrower on a consolidated basis measured quarterly shall maintain the following: (i) TOTAL RISK BASED CAPITAL RATIO. A ratio of Tier One Capital plus Tier Two Capital to Risk Weighted Assets of not less than 8.0%. (ii) TIER ONE RISK BASED CAPITAL RATIO. A ratio of Tier One Capital to Risk Weighted Assets of not less than 6.0%. (iii) LEVERAGE RATIO. A ratio of Tangible Primary Capital to total Tangible Primary Assets of not less than 4.5%. (iv) NON-PERFORMING LOAN RATIO. A ratio of Non-Performing Loans to Tangible Net Worth of 25% or less. (b) Borrower shall cause each of its Subsidiaries, by individual State or in the aggregate should any of Borrower's Banking Subsidiaries merge, to each maintain the following measured quarterly: (i) RETURN ON AVERAGE ASSETS. A return on average assets of at least 00.75%. (ii) NON-PERFORMING RATIO. A ratio of Non-Performing Loans to total loans plus OREO of no more than 3.0%. - 34 - (c) The Borrower on a consolidated basis shall at all times maintain the following: (i) DEBT SERVICE RATIO. A ratio of (a) Net Income (b) plus Depreciation Expense plus (c) Amortization Expense related to the Acquisitions, to Current Maturities of Funded Debt plus dividends (preferred and common) of not less than 1.5:1. 7.4 SUBSIDIARIES' CASH DIVIDENDS. No more than 100% of the net profit of each of Borrower's Subsidiaries shall be distributed as a cash dividend to Borrower in any Fiscal Year. 7.5 BORROWER'S DIVIDENDS ON COMMON STOCK. No more than 33.0% of Borrower's Net Income for any Fiscal Year shall be declared and paid out as a dividend on common stock for any Fiscal Year. Notwithstanding anything to the contrary stated in this Section 7.5 no dividends shall be paid by Borrower if an Event of Default as defined herein exists. 7.6 MAINTENANCE OF OWNERSHIP IN ACQUISITIONS. The Borrower will not cease to own 100% of the outstanding shares of Capital Stock of the Acquisitions and its Banking Subsidiaries. 7.7 NO SUBSIDIARY STOCK DIVIDENDS, STOCK SPLITS, OR REDEMPTIONS WITHOUT CONSENT. Borrower will not and will not permit its Banking Subsidiaries, including the Acquisitions, to issue any additional shares of their Capital Stock, or any warrant, right or option relating thereto or any security convertible into any of the foregoing or authorize any stock splits or redeem, any of its Banking Subsidiaries, including the Acquisitions, own Capital Stock without the prior consent of Lenders, provided, however, that if any such additional shares of its Banking Subsidiaries, including the Acquisitions, additional Capital Stock, or any warrant, right or option relating thereto or any security convertible into any of the foregoing are approved by the Lenders all of the foregoing additional Capital Stock resulting from such action shall be delivered to Agent as additional Collateral and properly endorsed as required herein. 7.8 LOANS OR ADVANCES. Neither the Borrower nor any of its Subsidiaries shall make loans or advances to any Person except: (i) deposits required by government agencies, public utilities or others in the ordinary course of business, (ii) loans in the normal course of its business, (iii) loans to Subsidiaries, PROVIDED that after giving effect to the making of any loans, advances or deposits permitted by clauses (i), (ii) and (iii) of this Section 7.8, the Borrower will be in full compliance with all the provisions of this Agreement and no Default shall be in existence or caused thereby; AND FURTHER PROVIDED, that, all loans permitted by clause (iii) of this - 35 - Section 7.8 shall at all times be evidenced by a legally enforceable promissory note made by the recipient of any such relevant loan payable to the Borrower in the amount of any such relevant loan. 7.9 JUDGMENTS AND CLAIMS. The Borrower will and will cause each of its Subsidiaries to notify each Lender and the Agent in writing within 30 days of the rendering of any judgment against the Borrower or any of its Subsidiaries in an amount of One Million Dollars ($1,000,000) or more. Furthermore, the Borrower will and will cause each of its Subsidiaries to notify each Lender and the Agent in writing within 30 days of Borrower's receipt of notice that any litigation or governmental proceeding is threatened or commenced against Borrower or any of its Subsidiaries which may create a liability or liabilities for the Borrower or any of its Subsidiaries in an amount of One Million Dollars ($1,000,000) or more. 7.10 FUNDED DEBT. Neither the Borrower nor any of its Subsidiaries shall incur any additional Funded Debt without the Lenders' prior written consent, except for the repurchase of its Capital Stock provided that Borrower is in compliance with this Agreement. 7.11 NO AMENDMENT OF NOTE PURCHASE AGREEMENT. The Borrower will not amend, without the prior written consent of each Lender, the terms and provisions of that certain Note Purchase Agreement dated as of August 30, 1996 by and among the Montana Board of Investments and the Borrower. 7.12 NEGATIVE PLEDGE. Neither the Borrower nor any of its Subsidiaries will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement as listed on EXHIBIT "G" attached hereto; (b) Liens imposed by operation of law such as mechanics', landlords', carriers' and similar liens arising in the ordinary course of business and which are not delinquent or remain payable without penalty or are being contested in good faith by proper proceedings and for which adequate reserves have been established; and (c) Liens, pledges or deposits required in connection with workers compensation, unemployment, social security or similar legislation. (d) Liens on property of any corporation at the time such corporation becomes a Subsidiary of Borrower. - 36 - (e) Liens for taxes, assessments and governmental charges or levies not yet due and payable. 7.13 PREPARATION OF FINANCIAL STATEMENTS. Borrower will not, except as permitted by FASB, modify, amend or revise the manner of the preparation of its financial statements as the same exists as of June 30, 1996 without the prior written consent of the Lenders. Borrower agrees that if it does modify, amend or revise the manner of the preparation of its financial statements as permitted by FASB, it will provide the Lenders and the Agent with written notice of such modification, amendment or revision within 45 days of such event. 7.14 MAINTENANCE OF EXISTENCE. Except as permitted by Section 7.15 or 7.16, Borrower shall, and shall cause each Subsidiary to, maintain its corporate existence and carry on its business in substantially the same manner and in substantially the same fields as such business is now carried on and maintained. 7.15 DISSOLUTION. Neither the Borrower nor any of its Subsidiaries shall suffer or permit dissolution or liquidation either in whole or in part or purchase, repurchase, redeem, or retire any shares of the stock of the Borrower or that of any Subsidiary which is a corporation, except through corporate reorganization to the extent permitted by Section 7.16. 7.16 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower will not, nor will it permit any Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise transfer all or any substantial part of its assets (other than sales of assets in the ordinary course of business or the disposition of obsolete equipment) to, any Person, or discontinue or eliminate any material business line or segment, PROVIDED that: (a) the Borrower or any corporate Subsidiary of Borrower may merge with another Person if (i) such Person was organized under the laws of the United States of America or one of its states, (ii) the Borrower or any corporate Subsidiary (except that the Borrower shall be the remaining corporation upon a merger of a Subsidiary with the Borrower) is the corporation surviving such merger, and (iii) immediately after giving effect to such merger, no default shall have occurred; (b) corporate Subsidiaries of Borrower may consolidate or merge with or into or transfer assets to the Borrower or one another; and (c) the Acquisitions may consolidate or merge with or into one or more of the Borrower's existing Banking Subsidiaries. 7.17 CHANGE IN CONTROL. Borrower will not, without Lenders' prior written consent, enter into any transaction or series of transactions (including without limitation a sale, tender offer, merger or consolidation) the result of which being - 37 - that the Principals and their Related Parties following such transaction would then own less than 60% of the issued and outstanding shares of stock of Borrower. 7.18 USE OF PROCEEDS. The proceeds of the Advances will be used for general corporate purposes, including the purchase of all of the stock of the Acquisitions and will not be used by either Borrower or any Subsidiary (i) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (ii) for any purpose in violation of any applicable law or regulation. 7.19 COMPLIANCE WITH LAWS; PAYMENT OF TAXES. (a) The Borrower will, and will cause each of its Subsidiaries and ERISA Affiliates to, comply in all material respects with applicable laws (including but not limited to ERISA), regulations and similar requirements of governmental authorities (including but not limited to IRS, DOL and PBGC), except to the extent any failure to comply would not have a Material Adverse Effect or where the necessity of such compliance is being contested in good faith through appropriate proceedings. The Borrower will, and will cause each of its Subsidiaries and ERISA Affiliates to, keep all Plans in compliance with ERISA and the Code and all applicable regulations and similar requirements of governmental authorities (including, but not limited to, IRS, DOL and PBGC), except where the necessity of such compliance is being contested in good faith through appropriate proceedings. The Borrower will, and will cause each of its Subsidiaries and ERISA Affiliates to, pay promptly when due all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien against the property of Borrower or any Subsidiary or ERISA Affiliate, except liabilities being contested in good faith and against which such Borrower or Subsidiary or ERISA Affiliate will set up reserves in accordance with GAAP. 7.20 INSURANCE. The Borrower will maintain, and will cause each of its Subsidiaries to maintain (either in Borrower or Subsidiary's own name), with financially sound and reputable insurance companies, insurance on all its Property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar business. 7.21 CHANGE IN FISCAL YEAR. Borrower will not change its Fiscal Year without the consent of the Lenders. 7.22 ENVIRONMENTAL NOTICES. Within 30 days after Borrower becomes aware thereof, Borrower shall furnish to the Agent prompt written notice of all environmental liabilities, pending, threatened or anticipated environmental proceedings, - 38 - environmental notices, environmental judgments and orders, and environmental releases that are required to be reported to an environmental authority, at, on, in, under or in any way affecting the Properties or any adjacent property, in the amount of Two Hundred Fifty Thousand Dollars ($250,000) or more in any one instance or the aggregate amount of One Million Dollars ($1,000,000) or more for all such instances, and all facts, events, or conditions that could have a reasonable probability of leading to any of the foregoing. 7.23 ENVIRONMENTAL MATTERS. Borrower will not, or will not permit any third party to, use, produce, manufacture, process, treat, recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or transport to or from the Properties any Hazardous Materials except for Hazardous Materials used, produced, manufactured, processed, treated, recycled, generated, stored, disposed, managed, or otherwise handled in the ordinary course of business in compliance in all material respects with all applicable environmental requirements. 7.24 ENVIRONMENTAL RELEASE. Borrower agrees that upon the occurrence of an environmental release for which it or a Subsidiary may be subject to any environmental liability or at, on, in, under or in any way affecting the Properties, it will act or will cause its Subsidiary, as applicable, to act as promptly as practicable (and to the fullest extent within its or such Subsidiary's control) immediately to investigate the extent of, and to take appropriate remedial, removal or response action with respect to such environmental release, whether or not ordered or otherwise directed to do so by any environmental authority. SECTION 8. SECURITY As Collateral for the repayment of the Obligations, Borrower hereby agrees to pledge, assign, transfer, deliver and convey to Agent, for the benefit of Lenders, prior to or on the Closing Date, all of the issued and outstanding common stock of the Acquisitions and of any of Borrower's other Banking Subsidiaries by delivery to Agent of a duly executed Pledge Agreement, in the form of EXHIBIT "C" attached hereto, the stock certificate(s) thereof, and duly executed assignments thereof in blank to allow Agent to transfer the Collateral to itself or any third party. SECTION 9. ACCESS 9.1 ACCESS. From the date hereof and until all of Borrower's Obligations to each Lender hereunder have been paid in full, each Lender and Agent shall, during normal business hours, have full access to all of Borrower's and its Subsidiaries' books and records. In addition to access, each Lender and Agent may - 39 - make copies of all or any portion of such books and records. Lenders and Agent agree, that in examining the books and records of the Borrower and/or its Subsidiaries they will use their best efforts not to disrupt the normal business activities of the Borrower and/or its Subsidiaries. 9.2 EXAMINATION. Agent may, at a Lender's request, and at any time, employ accountants and other agents to examine Borrower's and/or its Subsidiaries' books and records. Any fees and expenses of Agent in connection with such examination shall be paid by Borrower to Agent on demand, together with interest at the Prime Rate from date of demand by Agent, and the repayment of such fees and expenses shall be secured by the Loan Documents, provided, in the event the financial reports prepared by agents employed by the Lenders to examine Borrower's books and records do not disclose any adverse material discrepancy from those provided to Lenders by Borrower as herein required, Borrower shall not be obligated to reimburse Lenders for the fees and expenses of such agents, nor shall the same be secured by the Loan Documents. SECTION 10. DEFAULT 10.1 EVENTS OF DEFAULT. The following events shall constitute Events of Default under this Agreement: (a) The failure of the Borrower to pay any payment of principal as required in the Notes or herein, within 10 calendar days after any such payment becomes due and payable, whether at maturity, upon acceleration or otherwise. (b) The failure of the Borrower to pay any obligation or fees required in said Notes or herein within 10 days after any such amount becomes due in accordance with the terms thereof or hereof. (c) The breach by Borrower of any covenant, warranty, representation, agreement, provision or condition contained in this Agreement or in the Loan Documents. (d) If any written warranty or representation given by the Borrower or any Subsidiary in connection with or contained in this Agreement, or if any financial data or other information provided to Lenders to induce them to make the Advances proves to be false or misleading in any material respect. (e) If the Borrower or any Subsidiary shall (i) fail to pay any amount of Funded Debt in excess of One Million Dollars ($1,000,000) within 10 calendar days after the expiration of any applicable grace period, whether at maturity, at a date - 40 - fixed for payment, upon acceleration or otherwise, or (ii) default in the performance or observance of any other provision contained in any instrument or agreement evidencing such Funded Debt (which default shall not have been waived) if the effect of such default is to cause or permit the holder of such Funded Debt or a trustee or agent to cause, such Funded Debt or a trustee or agent to cause, such Funded Debt to become or be declared due and payable prior to its scheduled maturity. (f) (i) Any Plan shall incur an "accumulated funding deficiency," within the meaning of Section 412(a) of the Code, with respect to any plan year, or (ii) any waiver of such standard shall be sought or granted under Section 412(d) of the Code, or (iii) any Plan shall be, have been or be likely (in the reasonable opinion of the Lenders) to be terminated or the subject of termination proceedings under ERISA, or (iv) the Borrower shall incur or be likely to incur a liability to or on account of a Plan under Section 4062, 4063, 4064, or 4201 of ERISA, or (v) a Reportable Event occurs, or (vi) the Borrower shall incur or be likely to incur a liability for any excise tax under Sections 4970 through 5000 of the Code, or (vii) the funded vested benefit percentage (as determined under Section 4043(b)(1)(B) of ERISA for any Plan shall be less than 90%, and there shall result from any such event or events either a liability or a material risk of incurring a liability to the IRS, DOL, PBGC or a Plan, which in the reasonable opinion of the Lenders could have a Material Adverse Effect on the business, earnings, prospects, properties or condition (financial or other) of the Borrower and its Subsidiaries. (g) There shall be rendered against the Borrower or any of its Subsidiaries one or more final judgments or decrees involving an aggregate liability of Five Million Dollars ($5,000,000) or more, which has or have become non-appealable and shall remain undischarged, unsatisfied by insurance and unstayed for more than 30 days, whether or not consecutive. (h) The Borrower or any Subsidiary shall become insolvent or fail to pay its debts as such debts become due, or ceases to conduct its business, or shall be enjoined, restrained, or in any way prevented by court order from conducting all or any material part of its business affairs, or shall make a general assignment for the benefit of creditors or shall file a voluntary petition in bankruptcy or a petition or answer seeking reorganization, to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Act, or under any other state or federal law relating to bankruptcy or reorganization granting relief to debtors, whether now or hereafter in effect, or shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition filed against the Borrower or any Subsidiary - 41 - pursuant to the Bankruptcy Act or any such other state or federal law, or any order for relief shall be entered against the Borrower or any Subsidiary in any involuntary proceeding under the Bankruptcy Act or any such other state or federal law, or the Borrower or any Subsidiary shall be adjudicated bankrupt, or shall make an assignment for the benefit of creditors, or shall apply for or consent to the appointment of any custodian, receiver or trustee for all or any substantial part of the Property of Borrower or any Subsidiary, or shall take any action to authorize any of the actions set forth above in this subsection for an involuntary petition seeking any of the relief specified in this subsection shall be filed against the Borrower or any Subsidiary and shall not be dismissed within 60 days. 10.2 REMEDIES. Upon the occurrence of any Event of Default specified in Section 10.1(a), the Commitments of the Lenders, if they have not theretofore terminated, shall immediately terminate and all Obligations of Borrower shall immediately become due and payable without any presentment, demand, protest, or notice of any kind. In the event of the occurrence of any other Event of Default, set forth in Section 10.1, and following Borrower's failure to cure such default within 15 calendar days after Agent's notice to Borrower of such default, Agent, at the discretion of Lenders, may declare the Commitments of the Lenders, if they have not theretofore terminated, immediately terminated and all Obligations of Borrower shall immediately become due and payable without any presentment, demand, protest, or notice (except to the extent required by this Agreement) of any kind to the extent permitted by applicable law which cannot be waived. In the event all Obligations of the Borrower become immediately due and payable as provided above, Lenders may thereupon effect any and all remedies granted to it under this Agreement, the Loan Documents and/or governing law. 10.3 NONWAIVER. The failure of Lenders, for any reason, to declare a Default or breach, or to enforce or insist on the strict performance of the covenants, obligations and conditions of this Agreement or the Loan Documents, or to seek any redress available to Lenders under this Agreement or the Loan Documents, shall not be deemed a waiver of such Default or breach or waiver of strict performance of any covenant, obligation or condition of this Agreement or the Loan Documents nor prevent a subsequent act by Borrower from having all the force and effect of an original Default or breach. SECTION 11. RIGHT OF SET-OFF 11.1 SET-OFF. Upon the occurrence and during the continuance of any Event of Default as defined herein, each Lender is hereby authorized at any time and from time to time, - 42 - without further notice to the Borrower, such notice is hereby expressly waived by the Borrower, to set-off and apply any and all deposits at any time held and other indebtedness at any time owing by any Lender to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under this Agreement and the Loan Documents, irrespective of whether or not Lenders shall have made any demand under this Agreement or the Loan Documents. Lenders hereby agree to promptly notify the Borrower and each other Lender after any such set-off and application made by it, provided that the failure to give such notice shall not affect the validity of such set-off and application of such deposits. The rights of Lenders under this section are in addition to other rights and remedies, including, without limitation, any other rights of set-off, which Lenders and/or Agent may have. 11.2 SHARING OF SET-OFFS. Each Lender agrees that if it shall, by exercising any right of set-off or otherwise, receive payment of all or any part of the Note held by it, in a greater proportion than any such payment received by any other Lender, if any, in respect of such other Lender's Note held by it, the Lender receiving the payment shall purchase for cash from the other Lenders such portion of each such other Lender's Notes as shall be necessary to cause the Lender receiving the payment to share it ratably with each of the Lenders, PROVIDED, HOWEVER, that if all or any portion of such payment received pursuant to said set-off is recovered by the Borrower, such purchase from each of the other Lenders shall be rescinded and the purchase price returned to the Lender receiving the payment but without interest. Borrower agrees that each Lender so purchasing a portion of another Lender's Note may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. SECTION 12. THE AGENT 12.1 APPOINTMENT; POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the other Loan Documents with such powers as are specifically delegated to the Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental thereto. The Agent: (a) shall have no duties or responsibilities except as expressly set forth in this Agreement and the other Loan Documents, and shall not by reason of this Agreement or any other Loan Document be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any other Loan Document, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement or any other Loan Document, or - 43 - for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or any other document referred to or provided for herein or therein or for any failure by Borrower to perform any of its obligations hereunder or thereunder; (c) shall not be required to initiate or conduct any litigation or collection proceedings hereunder or under any other Loan Document except to the extent requested by the Lenders, and then only on terms and conditions satisfactory to the Agent, and (d) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other Loan Document or any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or wilful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The provisions of this Section 12 are solely for the benefit of the Agent and the Lenders, and the Borrower shall not have any rights as a third party beneficiary of any of the provisions hereof. In performing its function and duties under this Agreement and under the other Loan Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Borrower. The duties of the Agent shall be ministerial and administrative in nature, and the Agent shall not have by reason of this Agreement or any other Loan Document a fiduciary relationship in respect of any Lender. 12.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telefax, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants or other experts selected by the Agent. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and thereunder in accordance with instructions signed by the Majority Lenders, and such instructions of the Majority Lenders in any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. 12.3 DEFAULTS. The Agent shall not be deemed to have knowledge of the occurrence of a Default or an Event of Default (other than the nonpayment of principal of or interest of the Advances) unless the Agent has received notice from a Lender or Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that the Agent receives such a notice of the occurrence of a Default or an - 44 - Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall give each Lender prompt notice of each nonpayment of principal of or interest on the Advances whether or not it has received any notice of the occurrence of such nonpayment. The Agent shall take such action hereunder with respect to such Default or Event of Default as shall be directed by the Lenders, PROVIDED THAT, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 12.4 RIGHTS OF AGENT AS A LENDER. With respect to the Advances made by it, First Security Bank in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include First Security Bank in its individual capacity. The Agent may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Subsidiaries) as if it were not acting as the Agent, and the Agent may accept fees and other consideration from the Borrower (in addition to any agency fees and arrangement fees heretofore agreed to between the Borrower and the Agent) for services in connection with this Agreement or any other Loan Document or otherwise without having to account for the same to the Lenders. 12.5 INDEMNIFICATION. Each Lender severally agrees to indemnify the Agent, to the extent the Agent shall not have been reimbursed by the Borrower, ratably in accordance with its Commitment, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including, without limitation, counsel fees and disbursements) or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of this Agreement or any other Loan Document or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (excluding, unless an Event of Default has occurred and is continuing, the normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or any such other documents; PROVIDED, HOWEVER, that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or wilful misconduct of the Agent. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent, be insufficient or become impaired, the Agent may call for additional indemnity and cease, or not - 45 - commence, to do the acts indemnified against until such additional indemnity is furnished. 12.6 CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE RESPONSIBLE OR LIABLE TO THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. 12.7 PAYEE OF NOTE TREATED AS OWNER. The Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof shall have been filed with the Agent and the provisions of this Agreement have been satisfied. Any requests, authority or consent of any Person who at the time of making such request or giving such authority or consent is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Note or of any Note or Notes issued in exchange therefor or replacement thereof. 12.8 NONRELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower, its Subsidiaries and the Acquisitions, and its own decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Loan Documents. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any of the other Loan Documents or any other document referred to or provided for herein or therein or to inspect the Properties or books of the Borrower or any other Person. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder or under the other Loan Documents, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower, its Subsidiaries, the Acquisitions, or any other Person which may come into the possession of the Agent. 12.9 FAILURE TO ACT. Except for action expressly required of the Agent hereunder or under the other Loan Documents, the Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction by the Lenders of their indemnification obligations under Section 12.5 against any and all liability and expense which may be incurred - 46 - by the Agent by reason of taking, continuing to take, or failing to take any such action. 12.10 RESIGNATION OF AGENT. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving at least 60 days' notice thereof to the Lenders and the Borrower. Upon any such resignation Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring Agent's notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 12 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent hereunder. SECTION 13. MISCELLANEOUS 13.1 NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telecopier or similar writing) and shall be given to such party at its address or telecopier number set forth on the signature pages hereof or such other address or telecopier number as such party may hereafter specify for the purpose by notice to each other party. Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified on the signature pages hereof or as otherwise specified hereafter and the appropriate confirmation is received, (ii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in this Section 13.1; PROVIDED that notices to the Agent under Section 3 or Section 12 shall not be effective until received. 13.2 NO WAIVERS. No failure or delay by the Agent or any Lender in exercising any right, power or privilege hereunder or under any Note or other Loan Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. - 47 - 13.3 EXPENSES; DOCUMENTARY TAXES. The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including fees and disbursements of special counsel for the Lenders and the Agent, in connection with any waiver or consent hereunder or thereunder or any amendment hereof or thereof or any Default or alleged Default hereunder or thereunder and (ii) if a Default occurs, all reasonable out-of-pocket expenses incurred by the Agent and the Lenders, including fees and disbursements of counsel, other professionals and consultants and any allocated costs of internal counsel, other professionals and consultants in connection with such Default and collection and other enforcement proceedings resulting therefrom, including out-of-pocket expenses incurred in enforcing this Agreement and the other Loan Documents and on any appeal. The Borrower shall indemnify the Agent and each Lender against any transfer taxes, documentary taxes, assessments or charges made by any Governmental Authority by reason of the execution and delivery of this Agreement or the other Loan Documents. 13.4 INDEMNIFICATION. The Borrower shall indemnify the Agent, the Lenders and their respective directors, officers, employees and agents from, and hold each of them harmless against, any and all losses, liabilities, claims or damages to which any of them may become subject, insofar as such losses, liabilities, claims or damages arise out of or result from any actual or proposed use by Borrower of the proceeds of any extension of credit by any Lender hereunder or are in any way associated with any of the Loan Documents and the transactions and events (including the enforcement or defense thereof) at any time associated therewith or contemplated therein or breach by Borrower of this Agreement or any other Loan Document or from any investigation, litigation (including, without limitation, any actions taken by the Agent or any of the Lenders to enforce this Agreement [except an enforcement action on which Borrower prevails on the merits] or any of the other Loan Documents) or other proceeding (including, without limitation, any threatened investigation or proceeding) relating to the foregoing, and the Borrower shall reimburse the Agent and each Lender and their respective directors, officers, employees and agents, upon demand for any reasonable expenses (including, without limitation, legal fees and any allocated costs of internal counsel) incurred in connection with any such investigation or proceeding; but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or wilful misconduct of the Person to be indemnified. 13.5 AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement, the Notes or any other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Lenders and, if the rights or duties of the Agent are affected thereby, by the Agent; - 48 - PROVIDED that, no such amendment or waiver shall, unless signed by all Lenders, (i) change the Commitment of any Lender or subject any Lender to any additional obligation, (ii) change the principal of or rate of interest on any Advance or any fees hereunder, (iii) change the date fixed for any payment of principal of or interest on any Advance or any fees due on any date fixed for the payment thereof, (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the percentage of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement, (vi) change the manner of application of any payments made under this Agreement or the Notes, (vii) release or substitute all or any part of the Collateral held as security for the Obligations. (b) The Borrower will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement unless each Lender shall be informed thereof by the Borrower and shall be afforded an opportunity of considering the same and shall be supplied by the Borrower with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Agreement shall be delivered by the Borrower to each Lender forthwith following the date on which the same shall have been executed and delivered by the Lenders. The Borrower will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any Lender (in its capacity as such) as consideration for or as an inducement to the entering into by such Lender of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to all such Lenders. 13.6 SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that Borrower may not assign or otherwise transfer any of its rights under this Agreement. (b) Any Lender may, with the prior written consent of the Agent and the Borrower, which consent shall not be unreasonably withheld, at any time sell to one or more Persons (each a "Participant") participating interests in any Advance owing to such Lender, any Note held by such Lender, any Commitment hereunder or any other interest of such Lender hereunder. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance - 49 - thereof, such Lender shall remain the holder of any such Note for all purposes under this Agreement, and the Borrower and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder except that such Lender may agree that it will not (except as provided below), without the consent of the Participant, agree to (i) the change of any date fixed for the payment of principal of or interest on the related Advances, (ii) the change of the amount of any principal, interest or fees due on any date fixed for the payment thereof with respect to the related Advance or Advances, (iii) any change in the rate at which either interest is payable thereon or (if the Participant is entitled to any part thereof) Commitment Fee is payable hereunder from the rate at which the Participant is entitled to receive interest or Commitment Fee (as the case may be) in respect of such participation, or (iv) the release or substitution of all or any part of the Collateral held as security for the Advances. Each Lender selling a participating interest in any Advance, Note, Commitment or other interest under this Agreement shall, within 10 Business Days of such sale, provide the Borrower and the Agent with written notification stating that such sale has occurred and identifying the Participant and the interest purchased by such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Section 3 with respect to its participation in Advances outstanding from time to time. (c) Any Lender may, with the prior written consent of the Agent and the Borrower, which consent shall not be unreasonably withheld, at any time assign to one or more banks or financial institutions (each an "Assignee") all, or a proportionate part of all of its Advances and Commitments, of its rights and obligations under this Agreement, the Notes and the other Loan Documents, and such Assignee shall assume all such rights and obligations, pursuant to an Assignment and Acceptance executed by such Assignee, such transferor Lender, the Agent and the Borrower; provided that no interest may be sold by a Lender pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably equivalent portions of the transferor Lender's Commitment. Upon (A) execution of the Assignment and Acceptance by such transferor Lender, such Assignee, the Agent and the Borrower, (B) delivery of an executed copy of the Assignment and Acceptance to the Borrower and the Agent, (C) payment by such Assignee to such transferor Lender of an amount equal to the purchase price agreed between such transferor Lender and such Assignee, and (D) payment of a processing and recordation fee of Two Thousand Dollars ($2,000) to the Agent, such Assignee shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this - 50 - Agreement to the same extent as if it were an original party hereto with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by the Borrower, the Lenders or the Agent shall be required. Upon the consummation of any transfer to an Assignee pursuant to this paragraph (c), the transferor Lender, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note or Notes is issued to such Assignee. (d) Subject to the provisions of Section 13.7, the Borrower authorizes each Lender to disclose to any Participant, Assignee or other transferee (each a "Transferee") and, with the Borrower's consent (which shall not be unreasonably withheld), any and all financial information in such Lender's possession concerning the Borrower which has been delivered to such Lender by the Borrower pursuant to this Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation prior to entering into this Agreement. (e) No Transferee shall be entitled to receive any greater payment under Section 3.11 than the transferor Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 3.10 requiring such Lender to designate a different Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. (f) Anything in this Section 13.6 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the assigning and/or pledging Lender in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Advances to the extent of such payment. No such assignment shall release the assigning and/or pledging Lender from its obligations hereunder. 13.7 CONFIDENTIALITY. Each Lender agrees to exercise its best efforts to keep confidential any information delivered or made available by the Borrower to it other than from persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Advances; PROVIDED, HOWEVER, that nothing herein shall prevent any Lender from disclosing such information - 51 - (i) to any other Lender, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Lender, (iv) which has been publicly disclosed, (v) to the extent reasonably required in connection with any litigation to which the Agent or any Lender may be a party, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors and (viii) to any actual or proposed Participant, Assignee or other Transferee of all or part of its rights hereunder which has agreed in writing to be bound by the provisions of this Section 13.7. The agreements and obligations of the Lenders contained in this Section 13.7 constitute a continuing agreement and shall survive termination of this Agreement and the payment in full of the Notes. 13.8 REPRESENTATION BY LENDERS. Each Lender hereby represents that it is a commercial lender or financial institution which makes loans in the ordinary course of its business and that it will make its Advances hereunder for its own account in the ordinary course of such business; PROVIDED, HOWEVER, that, subject to Section 13.7, the disposition of the Notes and other Loan Documents held by that Lender shall at all times be within its exclusive control. 13.9 OBLIGATIONS. The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or commitment of any other Lender hereunder. Nothing contained in this Agreement and no action taken by Lenders pursuant hereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement or any other Loan Document and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 13.10 IDAHO LAW. This Agreement and each Note shall be construed in accordance with and governed by the law of the State of Idaho. 13.11 INTERPRETATION. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or dictated such provision. 13.12 WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. The Borrower and each of the Lenders and the Agent (a) - 52 - irrevocably waive any and all right to trial by jury in any legal proceeding arising out of this Agreement, any of the other Loan Documents, or any of the transactions contemplated hereby or thereby, (b) submit to the nonexclusive personal jurisdiction in the State of Idaho, County of Ada, the courts thereof and the United States District Court sitting therein, for the enforcement of this Agreement, the Notes and the other Loan Documents, and (c) waive any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of Idaho for the purpose of litigation to enforce this Agreement, the Notes or the other Loan Documents. The Borrower agrees that service of process may be made upon them in the manner prescribed in Section 13.1 for the giving of notice to the Borrower. Nothing herein contained, however, shall prevent the Agent from bringing any action or exercising any rights against any security and against the Borrower personally, and against any assets of the Borrower, within any other state or jurisdiction. 13.13 COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 13.14 SEVERABILITY. In case any one or more of the provisions contained in this Agreement, the Notes, or any of the other Loan Documents should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby and shall be enforced to the greatest extent permitted by law. 13.15 INTEREST. In no event shall the amount of interest due or payable hereunder or under the Notes exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently made to any Lender by Borrower or inadvertently received by any Lender, then such excess sum shall be credited as a payment of principal, unless Borrower shall notify such Lender in writing that it elects to have such excess sum returned forthwith. It is the express intent hereof that the Borrower not pay and the Lenders not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may legally be paid by the Borrower under applicable law. - 53 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, under seal, by their respective authorized officers as of the day and year first above written. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By:________________________________ Name:______________________________ Title:_____________________________ (A duly authorized officer) 401 North 31st Street Billings, Montana 59116-0918 Attention: Chief Financial Officer Telecopier Number (406) 255-5350 Telephone Number (406) 255-5304 COMMITMENTS ----------- Commitment Percentage Amount Amount - ------------ ------------ $18,000,000 40.0% FIRST SECURITY BANK, N.A., a national banking association By:_______________________________ Vicki V. Riga Vice President (A duly authorized officer) LENDING OFFICE -------------- First Security Bank 119 North 9th Street P.O. Box 7069 Boise, Idaho 83730 Attention: Corporate Banking Telecopier Number (208) 393-2472 Telephone Number (208) 393-2163 $13,500,000 30.0% WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association By:________________________________ James L. Franzen Vice President (A duly authorized officer) - 54 - LENDING OFFICE -------------- Wells Fargo Bank, National Association 1300 S.W. Fifth Avenue Portland, Oregon 97201 Attention: Portland RCBO (6101-192) Telecopier Number (503) 220-4896 Telephone Number (503) 225-2288 $13,500,000 30.0% COLORADO NATIONAL BANK, a national banking association By:_________________________________ Jeffrey M. Parr Assistant Vice President (A duly authorized officer) LENDING OFFICE -------------- Colorado National Bank 950 17th Street (CNDT 0312) Denver, Colorado 80202 Attention: Financial Institution Division Telecopier Number (303) 585-6273 Telephone Number (303) 585-4239 FIRST SECURITY BANK, N.A., a national banking association By:________________________________ Vicki V. Riga Vice President (A duly authorized officer) AGENT - 55 - EX-10.14 7 NOTE PURCHASE AGREEMENT EXECUTION COPY FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. $20,000,000 PRINCIPAL AMOUNT OF SUBORDINATED NOTES DUE OCTOBER 1, 2006 NOTE PURCHASE AGREEMENT dated as of August 30, 1996 NOTE PURCHASE AGREEMENT TABLE OF CONTENTS SECTION 1. DEFINITIONS................................................... 1 1.1 Definitions........................................................ 1 SECTION 2. ISSUE OF NOTES................................................ 1 2.1 The Note........................................................... 1 2.1.1 Maturity.................................................... 1 2.1.2 Principal Amount............................................ 2 2.1.3 Interest.................................................... 2 2.1.4 Interest Payments........................................... 2 2.1.5 Principal Payments.......................................... 2 2.1.6 Prepayment.................................................. 2 2.2 Manner of Payment.................................................. 3 2.3 Use of Proceeds.................................................... 3 2.4 Closing............................................................ 3 2.5 Failure to Close................................................... 4 2.6 Legend............................................................. 4 SECTION 3. CLOSING CONDITIONS............................................ 4 3.1 Conditions to Each Party's Obligation to Effect the Purchase and Sale of the Note.................................. 4 (a) Governmental and Regulatory Consents.......................... 4 (b) Third Party Consents.......................................... 5 (c) Purchase Permitted by Applicable Laws......................... 5 (d) Consummation of the Acquisition............................... 5 3.2 Conditions to Obligation of the Purchaser.......................... 5 (a) Representations and Warranties................................ 5 (b) Event of Default.............................................. 5 (c) Delivery of Documents......................................... 5 3.3 Conditions to Obligation of the Company............................ 6 SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 6 4.1 Organization; Bank Holding Company Registration.................... 6 4.2 Corporate Power; Authorization..................................... 6 4.3 No Conflicts....................................................... 7 4.4 Governmental Consents.............................................. 7 4.5 Subsidiaries....................................................... 7 4.6 Compliance with Law................................................ 8 4.7 Required Licenses.................................................. 8 4.8 Litigation......................................................... 8 4.9 Title to Assets.................................................... 9 4.10 Employee Benefits................................................. 9 4.11 Environmental Matters............................................. 10 4.12 Taxes............................................................. 11 4.13 Financial Statements.............................................. 11 ii 4.14 No Broker's Fee................................................... 11 SECTION 5. COVENANTS..................................................... 11 5.1 Payment of Note.................................................... 11 5.2 Payment of Taxes................................................... 11 5.3 Reports and Notices................................................ 12 (a) Annual Financial Statements.................................... 12 (b) Quarterly Financial Statements................................ 12 5.4 Maintenance of Properties.......................................... 12 5.5 Maintenance of Corporate Existence................................. 12 5.6 Compliance With Law................................................ 12 5.7 Insurance.......................................................... 13 SECTION 6. EVENTS OF DEFAULT; REMEDIES................................... 13 6.1 Events of Default.................................................. 13 6.2 Rights and Remedies................................................ 13 6.3 Costs and Expenses................................................. 13 SECTION 7. SUBORDINATION................................................. 13 7.1 Note Subordinated to Senior Indebtedness........................... 13 7.2 Payment Permitted if No Default.................................... 15 SECTION 8. PAYMENT, REGISTRATION, EXCHANGE AND TRANSFER OF THE NOTE................................................... 15 8.1 Appointment of Paying Agent........................................ 15 8.2 Payments........................................................... 16 8.3 Registration.................................................. 16 8.4 Exchange and Transfer......................................... 16 8.5 Replacement................................................... 16 SECTION 9. MISCELLANEOUS................................................. 16 9.1 Definitions....................................................... 16 9.2 Course of Dealing.................................................. 19 9.3 Notices............................................................ 19 9.4 Purchaser Representations.......................................... 21 9.5 Headings........................................................... 21 9.6 Severability....................................................... 21 9.7 Entire Agreement; Interpretation................................... 22 9.8 Assignment......................................................... 22 9.9 Amendment; Waiver.................................................. 22 9.10 Governing Law; Consent to Jurisdiction............................ 22 9.11 Counterparts...................................................... 22 9.12 JURY WAIVER........................................................ 22 9.13 Time.............................................................. 23 iii EXHIBITS AND SCHEDULES Exhibit A Form of Subordinated Note Schedule 4.4 Governmental Consents Schedule 4.5 Subsidiaries Schedule 4.6 Violations of Laws Schedule 4.9 Encumbrances Schedule 4.10 Employee Benefit Plans Schedule 4.11 Violations of Environmental Laws; Hazardous Substances Schedule 4.12 Tax Matters iv FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. 401 NORTH 31ST STREET BILLINGS, MONTANA 59103-0639 NOTE PURCHASE AGREEMENT This Note Purchase Agreement ("Agreement") is made as of the 30th day of August, 1996 by and among the MONTANA BOARD OF INVESTMENTS (the "Purchaser") and FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC., a Montana corporation (the "Company"). R E C I T A L S A. The Company has entered into a Stock Purchase Agreement ("Stock Purchase Agreement") dated as of May 24, 1996 by and among the Company and Wells Fargo & Company ("Wells Fargo") pursuant to which Wells Fargo has agreed to sell, and the Company has agreed to purchase, all of the issued and outstanding capital stock of First Interstate Bank of Montana, N.A. ("Montana Bank") and First Interstate Bank of Wyoming, N.A. ("Wyoming Bank"), (the Montana Bank and the Wyoming Bank shall be collectively referred to herein as the "Banks"). B. In order to finance a portion of the purchase price to be paid by the Company for the acquisition of all of the issued and outstanding capital stock of the Banks (the "Acquisition"), the Company has agreed to sell, and the Purchaser has agreed to purchase, the Company's Subordinated Note in the principal amount of $20,000,000 (the "Note"), on the terms and conditions set forth herein. A G R E E M E N T SECTION 1. DEFINITIONS 1.1 DEFINITIONS. Certain terms are used in this Agreement as specifically defined herein. These definitions are set forth or referred to in Section 9.1. SECTION 2. ISSUE OF NOTES 2.1 THE NOTE. The Company will authorize the issue of the Note. The Note shall be dated October 1, 1996 ("Issuance Date"), shall be in substantially the form set forth on EXHIBIT A, and shall have the following terms: 2.1.1 MATURITY. The Note shall mature and all unpaid principal and accrued interest shall be due and payable on October 1, 2006 ("Maturity Date"). 2.1.2 PRINCIPAL AMOUNT. The principal amount of the Note shall be $20,000,000 and the purchase price for the Note shall be 100% of the principal amount. 2.1.3 INTEREST. The Note shall bear interest from the Closing Date, computed on the basis of actual days elapsed and a year of 360 days and months of 30 days, on the unpaid principal amount thereof at a rate per annum equal to the yield to maturity on actively traded U.S. Treasury instruments having a maturity date closest to the weighted average life of the Note, taking into account the amortization schedule set forth in Section 2.1.5, three Business Days prior to the Closing Date, and rounded to the nearest one-eighth of a percent (the "Base Rate") plus 90 basis points (the "Spread"), (the Base Rate plus the Spread shall be referred to herein as the "Treasury Rate"); PROVIDED, HOWEVER, that if the Treasury Rate is less than 7.00% per annum, the Note shall bear interest at the rate of 7.00% per annum, and if the Treasury Rate is greater than 8.25% per annum, the Note shall bear interest at the rate of 8.25% per annum. The parties agree that if the Base Rate cannot be established by examining a single U.S. Treasury instrument, the parties shall in good faith establish the Base Rate by a process of interpolation using yields on actively traded U.S. Treasury instruments having maturities near the weighted average maturity life of the Note. 2.1.4 INTEREST PAYMENTS. Interest shall be payable semiannually in arrears, commencing on April 1, 1997 and continuing on each October 1 and April 1 thereafter until the Note has been paid in full. On the first interest payment date, interest shall be payable for the period from the Closing Date to such payment date. 2.1.5 PRINCIPAL PAYMENTS. Interest shall be payable in the amounts and on the dates set forth below: Date Repayment Amount ---- ---------------- October 1, 2002 $3,400,000 October 1, 2003 $3,700,000 October 1, 2004 $4,000,000 October 1, 2005 $4,300,000 October 1, 2006 $4,600,000 2.1.6 PREPAYMENT. Upon the occurrence of a Change of Control of the Company, the Company shall have the right to prepay in full, but not in part, the outstanding principal balance on the Note, provided that: (a) the Company shall, at least thirty (30) calendar days prior to making any such prepayment, deliver to the Holder a written notice which sets forth the amount of the prepayment and the date on which the prepayment will be made ("Prepayment Date"); (b) on the Prepayment Date the Company shall pay all accrued and unpaid 2 interest relating to the amount prepaid through the Prepayment Date; and (c) on the Prepayment Date, the Company shall pay the Make-Whole Amount, if any, resulting from the prepayment. "Make-Whole Amount" shall mean (i) the amount by which (A) the present value of the amount of interest which would have accrued on the amount prepaid during the period commencing on the Prepayment Date and ending on the Maturity Date ("Remaining Loan Period") exceeds (B) the present value of the amount of interest that Holder would earn if the amount prepaid were reinvested for the "Remaining Loan Period" in U.S. Treasury obligations having a weighted average life approximately equal to the Remaining Loan Period. For purposes of calculating present value, the discount rate will be the rate of interest accruing on the U.S. Treasury obligations selected in (i)(B) above. If the Make-Whole Amount would be less than zero, it shall be deemed to be zero. 2.2 MANNER OF PAYMENT. The Company shall deposit with the Paying Agent all payments that the Company is required or permitted to make under this Agreement no later than noon, Mountain Time, on the date payment is due or permitted, by wire transfer of immediately available funds in accordance with wire transfer instructions as designated in writing by the Paying Agent. All amounts deposited with the Paying Agent shall be held in trust by it and applied by it to the payment to the Holder of such amounts, no later than 3:00 p.m. Mountain Time on the date payment is received by the Paying Agent, by wire transfer of immediately available funds, (a) if the Purchaser is the Holder, to the following account of Purchaser in accordance with wire transfer instructions as designated in writing by the Purchaser, or (b) if Purchaser is not the Holder, to the account of the Holder, and in accordance with the wire transfer instructions set forth in the register maintained pursuant to Section 8.2 of this Agreement. Whenever any payment required under this Agreement is due on a day which is not a Business Day, such payment shall be made on the next Business Day. 2.3 USE OF PROCEEDS. The proceeds of the sale and purchase of the Note shall be used to fund the Acquisition and the balance, if any, to fund the Company's working capital. 2.4 CLOSING. The closing of the sale and purchase of the Note ("Closing") shall take place at 10:00 a.m. Mountain Time, at the offices of Holland & Hart, 401 North 31st Street, Suite 1500, Billings, Montana, on October 1, 1996, or such other date as the Company and the Purchaser mutually agree (the "Closing Date"), which date shall be no later than December 31, 1996 ("Outside Closing Date"). At the Closing, the Company will deliver to the Purchaser a single Note, in the principal amount of $20,000,000, dated the Closing Date, and payable to the Purchaser or its designated nominee or custodian. 3 2.5 FAILURE TO CLOSE. (a) It is agreed that it is impossible to determine with certainty the damages which will accrue to Purchaser in the event that the Closing does not occur on or before the Outside Closing Date as a result of the Company's failure to satisfy, or to cause the satisfaction of, any of the conditions set forth in Section 3.1(b) or 3.2(a) of this Agreement. Therefore, the Company agrees that if Closing does not occur on or before the Outside Closing Date as a result of the Company's failure to satisfy, or to cause the satisfaction of, any of the conditions set forth in Section 3.1(b) or 3.2(a) of this Agreement, the Company shall pay the Purchaser a fee of $200,000 on January 1, 1997 by wire transfer of immediately available funds in accordance with the wire transfer instructions set forth in Section 2.2 of this Agreement. (b) It is agreed that it is impossible to measure in money the damages which will accrue to the Company in the event that the Closing does not occur on or before the Outside Closing Date as a result of the Purchaser's failure to satisfy, or cause the satisfaction of, any of the conditions set forth in Section 3.1(b) or 3.3 of this Agreement. Therefore, the Purchaser agrees that if Closing does not occur on or before the Outside Closing Date as a result of the Purchaser's failure to satisfy, or to cause the satisfaction of, any of the conditions set forth in Sections 3.1(b) or 3.3 of this Agreement, the Company may pursue all remedies available to it under applicable law, including without limitation, specific performance. 2.6 LEGEND. The Note shall contain the following legend: "THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY AND IS SUBORDINATE IN RIGHT OF PAYMENT TO ALL SENIOR INDEBTEDNESS (AS DEFINED IN THE NOTE PURCHASE AGREEMENT DATED AS OF AUGUST 30, 1996) OF THE COMPANY." SECTION 3. CLOSING CONDITIONS 3.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE PURCHASE AND SALE OF THE NOTE. The respective obligation of each of the Company and the Purchaser to consummate the purchase and sale of the Note is subject to the fulfillment, or written waiver by the Company and the Purchaser, of each of the following conditions: (a) GOVERNMENTAL AND REGULATORY CONSENTS. The approval of (i) the Federal Reserve Board ("FRB") of the issuance of the Note on the terms and conditions set forth herein, and (ii) the FRB of the inclusion of the indebtedness of the Company 4 evidenced by the Note in the Company's Tier 2 Capital, and (iii) the FRB and the Wyoming state banking commissioner of the Acquisition, shall have been obtained and shall be in full force and effect and all related waiting periods, if any, shall have expired. (b) THIRD PARTY CONSENTS. All consents or approvals of all Persons (other than the consents set forth in Section 3.1(a)) required for or in connection with the execution, delivery and performance of this Agreement and the consummation of the purchase and sale of the Note shall have been obtained and shall be in full force and effect, unless the failure to obtain any such consent or approval would not have a Material Adverse Effect. (c) PURCHASE PERMITTED BY APPLICABLE LAWS. No United States or state court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the transactions contemplated by this Agreement. (d) CONSUMMATION OF THE ACQUISITION. All conditions to the Acquisition shall have been satisfied or waived on or prior to December 31, 1996. 3.2 CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the Purchaser to consummate the purchase of the Note is also subject to the fulfillment, or written waiver by the Purchaser, of each of the following conditions: (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company set forth in Section 4 of this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct in all material respects as of such date), and the Purchaser shall have received a certificate, dated as of the Closing Date, signed on behalf of the Company by an Executive Officer of the Company to such effect. (b) EVENT OF DEFAULT. No event shall have occurred which, if the Note had been outstanding on and after the date hereof, would constitute an Event of Default on such Closing Date. (c) DELIVERY OF DOCUMENTS. The Company shall have executed and delivered to the Purchaser the following: (i) the Note; 5 (ii) a copy of (A) the bylaws of the Company, and (B) the resolutions of the Board of Directors of the Company authorizing the execution and delivery of this Agreement, the issuance of the Note, and the consummation of the transactions contemplated by this Agreement, certified as true and complete copies by the Secretary of the Company; (iii) a copy of the certificate of incorporation of the Company, certified as true and complete by the Montana Secretary of State; and (iv) a certificate issued by the Montana Secretary of State certifying that the Company is in good standing in such State. 3.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the Company to consummate the sale of the Note is also subject to the fulfillment, or written waiver by the Company, prior to the Closing Date of each of the following conditions: (a) the Company shall have received a copy of the resolutions of the Purchaser authorizing the execution and delivery of this Agreement and the purchase of the Note, certified as true and complete by the Secretary of the Purchaser. (b) the Company shall have received payment from the Purchaser, by wire transfer of immediately available funds, in the amount of $20,000,000, to the account specified in and in accordance with wire transfer instructions as designated in writing by the Company. SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 ORGANIZATION; BANK HOLDING COMPANY REGISTRATION. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Montana, with its chief executive offices located in Billings, Montana. The Company is a bank holding company registered under the Bank Holding Company Act of 1956, as amended. 4.2 CORPORATE POWER; AUTHORIZATION. The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly authorized by the Company and constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. The issuance of the Note on the terms and conditions contained herein has been duly and validly authorized by the Company and, when the 6 Note is issued, sold and delivered in the manner set forth in this Agreement, will be the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity. 4.3 NO CONFLICTS. Neither the execution and delivery of this Agreement nor the performance of the transactions contemplated hereby, will: (a) violate, conflict with or result in a default under (i) any material contract, instrument, agreement, indenture, obligation or commitment to which the Company is a party or by which the Company or its assets are bound, (ii) any provision of the certificate of incorporation or bylaws of the Company, or (iii) any law, rule, ordinance or regulation or judgment, decree, order, award or governmental or non-governmental permit or license to which the Company is subject. 4.4 GOVERNMENTAL CONSENTS. Except as set forth in Schedule 4.4, no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any governmental or regulatory authority, agency, court, commission or other entity ("Governmental Entities"), in connection with the execution, delivery or performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby. 4.5 SUBSIDIARIES. The Subsidiaries of the Company and the percentage of issued and outstanding shares of stock of each such Subsidiary owned of record and beneficially by the Company are as set forth in Schedule 4.5. All of the issued and outstanding shares of capital stock of the Company's Subsidiaries have been duly and validly authorized and issued and are fully paid and nonassessable. Except as set forth on Schedule 4.5, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of any of the Company's Subsidiaries. Each such Subsidiary has been duly incorporated and is validly existing and in good standing under the laws of the state of its incorporation. Each such Subsidiary has the corporate power and authority to own its properties and conduct its business as presently conducted and is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which (a) its ownership or lease of real property or the conduct of its business makes such qualification necessary and (b) the failure to so qualify would have a Material Adverse Effect. Other than the Subsidiaries set forth on Schedule 4.5, the Company owns no capital stock or other equity, ownership or proprietary interest in any other entity. The deposit accounts 7 of each of the Company's Subsidiaries which are banks are insured by the Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") up to the maximum applicable amount in accordance with the rules and regulations of the FDIC, and no proceedings for the termination or revocation of such membership or insurance are pending, or, to the knowledge of the Company, threatened. 4.6 COMPLIANCE WITH LAW. Except where the failure to comply would not have a Material Adverse Effect and except as disclosed in Schedule 4.6, the Company and its Subsidiaries are in compliance, in the conduct of their respective businesses, with all applicable federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders or decrees applicable thereto or to the employees conducting such businesses, including, without limitation, the Fair Lending Laws. 4.7 REQUIRED LICENSES. Except where such failure would not have a Material Adverse Effect, the Company and its Subsidiaries have all permits, licenses, certificates of authority, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities, that are required in order to permit them to carry on their respective businesses as presently conducted. Neither the Company nor any of its Subsidiaries has received notification or communication from any Governmental Entity (including the OCC and any other bank, insurance and securities regulatory authorities) or the staff thereof, which remains in effect (a) asserting that the Company or any of its Subsidiaries is not in compliance with any of the statutes, regulations or ordinances that such Governmental Entity enforces; (b) threatening to revoke any license, franchise, permit or governmental authorization of the Company or any of its Subsidiaries; or (c) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance of the Company's Subsidiaries which are banks. 4.8 LITIGATION. There are no criminal or administrative investigations or hearings of, before or by any Governmental Entity, or civil, criminal or administrative actions, suits, claims or proceedings of, before or by any person or entity (including any Governmental Entity) pending or, to the knowledge of the Company's Executive Officers, threatened, against the Company or any of its Subsidiaries (including, without limitation, under any of the Fair Lending Laws); and neither the Company nor any of its Subsidiaries is a party to or is subject to any order, decree, agreement, memorandum of understanding or similar arrangement with, or similar submission to, any Governmental Entity charged with the supervision or regulation of depository institutions or engaged in the insurance of deposits (including, without limitation, the Comptroller of the Currency (the "OCC") and the FDIC) or the supervision or regulation of it 8 or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries has been advised by any such Governmental Entity that such Governmental Entity is contemplating issuing or requesting (or is considering the appropriateness of issuing or requesting) any such order, decree, agreement, memorandum of understanding, or similar submission. 4.9 TITLE TO ASSETS. Except as disclosed or reserved against in the Call Reports or as disclosed in Schedule 4.9, the Company and its Subsidiaries have good and marketable title, free and clear of all liens, claims, security interests or other encumbrances (except those encumbrances which do not interfere in any material respect with the use of the property or the conduct of the business of the Company and its Subsidiaries) their properties and assets, tangible or intangible. 4.10 EMPLOYEE BENEFITS. (a) Schedule 4.10 sets forth, as of the date of this Agreement, a true and complete list of each employee benefit plan, arrangement or agreement (the "Plans") that covers employees or former employees (the "Employees") of the Company and its Subsidiaries (each, an "ERISA Affiliate"), which together would be deemed a "single employer" within the meaning of Section 4001 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (b) All of the Plans of the Company and its ERISA Affiliates have been operated and administered in all material respects in accordance with ERISA and the Internal Revenue Code (the "Code") and each of the Plans which is an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA and which is intended to be "qualified" under Section 401(a) of the Code is so qualified. There are no pending, threatened or anticipated claims (other than routine claims for benefits) by, or on behalf of or against any of the Plans or any trusts related thereto. (c) All required contributions which are due from the Company and its ERISA Affiliates have either been made or properly accrued, and no Plan has an accumulated or waived funding deficiency within the meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA. Neither the Company nor any ERISA Affiliate has incurred, directly or indirectly, any liability (including material contingent liability) to or on account of a Plan pursuant to Title IV of ERISA. No proceedings have been instituted to terminate any Plan that is subject to Title IV of ERISA. The current value of the assets of each of the Plans that is subject to Title IV of ERISA, based upon the actuarial assumptions (to the extent reasonable) presently used by such Plan, exceeds the present value of the accrued benefits under such Plan. 9 4.11 ENVIRONMENTAL MATTERS. (a) For purposes of this Section 4.11, the following terms shall have the indicated meaning: "BUSINESS" means the business conducted by the Company and its Subsidiaries. "ENVIRONMENTAL LAW" means any law, regulation, order or decree relating to Hazardous Substances or the protection of the environment. "HAZARDOUS SUBSTANCES" means substances which are listed or classified pursuant to any Environmental Law, including any petroleum products or byproducts, polychlorinated biphenyls ("PCBs"), radioactive materials or radon gas. (b) Except as disclosed in Schedule 4.11, the Company and its Subsidiaries, and all real property owned by the Company or its Subsidiaries (collectively, "Real Property"), are in material compliance with applicable Environmental Laws. (c) There are no pending claims, actions, or proceedings involving the Company or any of its Subsidiaries relating to: (i) an asserted liability of the Company or its Subsidiaries under any Environmental Law or the terms and conditions of any permit, license, authority, settlement, agreement, decree or other obligation pursuant to any Environmental Law; (ii) the handling, storage, use, transportation, removal or disposal of Hazardous Substances; (iii) the discharge, release or emission of Hazardous Substances from, on or under or within the Real Property into the air, water, surface water, ground water, land surface or subsurface strata; or (iv) personal injuries or damage to property caused by a release of Hazardous Substances. (d) Except as disclosed in Schedule 4.11, to the knowledge of the Company's Executive Officers and the Executive Officers of the Company's Subsidiaries, no Hazardous Substances have been used, handled, stored, released or emitted by the Company or its Subsidiaries at or on any Real Property except in compliance with applicable Environmental Laws and as would not be reasonably expected to create conditions requiring remediation under any Environmental Law. 10 4.12 TAXES. The Company has timely filed, for itself and on behalf of its Subsidiaries, all tax returns reasonably deemed by the Company to be required and has paid all Taxes due, payable or owed for all periods for which returns are required to be filed, other than Taxes contested in good faith. Except as set forth on Schedule 4.12, (a) no governmental entity has, during the past three years, examined or is in the process of examining any tax returns of either the Company or its Subsidiaries, and (b) no governmental entity has proposed any deficiency, assessment, or claim for Taxes against either the Company or its Subsidiaries. 4.13 FINANCIAL STATEMENTS. The Company has furnished to the Purchaser its consolidated financial statements for its three most recent fiscal years. (Such financial statements are collectively referred to as the "Reports".) The consolidated financial statements and related notes included in the Reports present fairly the consolidated financial position of the Company and its Subsidiaries at the dates of the balance sheets included therein and the consolidated results of their operations for the periods covered and were prepared in conformity with GAAP consistently applied, except as may be noted therein. Since January 1, 1996, there has been no change in the financial condition or business of the Company or its Subsidiaries, taken as a whole, which would constitute a Material Adverse Effect. 4.14 NO BROKER'S FEE. Except for fees payable to D.A. Davidson & Co., which are payable by the Company, the Company has not incurred any liability for any finder's or broker's fee in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby. SECTION 5. COVENANTS The Company covenants and agrees that: 5.1 PAYMENT OF NOTE. The Company will punctually pay or cause to be paid the principal and interest to become due in respect of the Note according to the terms thereof and hereof. 5.2 PAYMENT OF TAXES. The Company and its subsidiaries will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all Taxes levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings. 11 5.3 REPORTS AND NOTICES. The Company shall provide to the Purchaser the following reports, information and notices: (a) ANNUAL FINANCIAL STATEMENTS. As soon as available, but in no event later than 120 days after the end of any fiscal year of the Company occurring while the Note is outstanding, annual financial statements of the Company and its Subsidiaries on a consolidated basis, prepared in accordance with GAAP consistently applied which shall: (i) be audited by independent certified public accountants selected by the Company; (ii) be accompanied by a report of such accountants containing an opinion of such accountants; and (iii) include a balance sheet, an income statement, a statement of cash flows, a statement of stockholders' equity, and all notes and schedules relating thereto. (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in no event more than 60 days after the end of each of the first three quarters in any fiscal year of the Company occurring while this Agreement is in effect, the following financial statements of the Company and its Subsidiaries on a consolidated basis, prepared in accordance with GAAP consistently applied: (i) a balance sheet, (ii) an income statement, and (iii) a statement of stockholders' equity, for such quarter and for the year to date. 5.4 MAINTENANCE OF PROPERTIES. The Company will cause its properties and the properties of its Subsidiaries used or useful in the conduct of the business of the Company and its Subsidiaries to be maintained and kept in good conditions, repair and working order and supplied with all necessary facilities and equipment and will cause to be made all necessary repairs, renewals, replacements and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; PROVIDED, HOWEVER, that the foregoing shall not prevent the Company or a Subsidiary from discontinuing the operation and maintenance of any of its properties if such discontinuance is, in the judgment of the Company desirable in the conduct of its business and not disadvantageous in any material respect to the Purchaser. 5.5 MAINTENANCE OF CORPORATE EXISTENCE. The Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, of the Company and its Subsidiaries. 5.6 COMPLIANCE WITH LAW. The Company and its subsidiaries shall comply with all statutes, rules, regulations and orders of and restrictions imposed by governmental and administrative authorities and agencies applicable to the Company and its subsidiaries. 12 5.7 INSURANCE. Subject to the right to sell, abandon or otherwise dispose of any building or property whenever in the opinion of the Company the retention thereof is inadvisable or not necessary to the business of the Company and its Subsidiaries, the Company will at all times cause all buildings, equipment and other insurable properties owned or operated by it or any Subsidiary to be insured with responsible insurance carriers against loss or damage by fire and other hazards, to the extent, and in such amounts, as is customary among corporations owning or operating properties of a similar character. SECTION 6. EVENTS OF DEFAULT; REMEDIES 6.1 EVENTS OF DEFAULT. Upon the commencement by the Company of any voluntary bankruptcy proceeding or the entry of a decree or order for relief in an involuntary bankruptcy proceeding under Chapter 7 or Chapter 11 of the Bankruptcy Code (an "Event of Default"), the outstanding principal amount of the Note, and the interest accrued thereon, shall be immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character. 6.2 RIGHTS AND REMEDIES. Subject to the provisions of Section 7 of this Agreement, upon the occurrence of an Event of Default, the Purchaser shall be entitled to institute a judicial proceeding for the collection of the money so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company and collect the money adjudged or decreed to be payable in the manner provided by law out of the property of the Company. 6.3 COSTS AND EXPENSES. The Company covenants that if payment of the outstanding principal of, and accrued interest on, the Note is accelerated, the Company will pay to the Purchaser, to the extent permitted under applicable law such further amount (in addition to any amounts due under the Note) as shall be sufficient to cover the reasonable costs and expenses of collection, including reasonable attorneys' fees and expenses for all services rendered in connection therewith. SECTION 7. SUBORDINATION 7.1 NOTE SUBORDINATED TO SENIOR INDEBTEDNESS. The Company covenants and agrees, and the Purchaser and each subsequent Holder, by such Holder's acceptance thereof, likewise covenants and agrees, that the indebtedness evidenced by the Note is subordinate and junior in right of payment to all Senior Indebtedness. Senior Indebtedness shall continue to be Senior Indebtedness and entitled to the benefits of these subordination provisions irrespective of any amendment, modification or waiver 13 of any term of the Senior Indebtedness or extension or renewal of the Senior Indebtedness. (a) Upon the occurrence of a Senior Indebtedness Default, then, upon written notice of such Senior Indebtedness Default to the Company by the holders of such Senior Indebtedness, unless and until such Senior Indebtedness Default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash, property, securities, by set-off or otherwise) shall be made or agreed to be made on account of the principal of or interest on the Note, or in respect of any redemption of the Note. (b) In the event of: (i) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company; (ii) any proceeding for the liquidation, dissolution or other winding up of the Company, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings; (iii) any assignment by the Company for the benefit of creditors; or (iv) any other marshalling of the assets of the Company, all Senior Indebtedness of the Company (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution, whether in cash, securities or other property, shall be made to the Holder of the Note. Any payment or distribution, whether in cash or other property, which would otherwise (but for these subordination provisions) be payable or deliverable in respect of the Note shall be paid or delivered directly to the holders of the Senior Indebtedness in accordance with the priorities then existing among such holders until all Senior Indebtedness (including any interest accruing thereon after the commencement of any such proceedings) shall have been paid in full. (c) In the event that, notwithstanding the foregoing, any payment or distribution of any character, whether in cash or other property, shall be received by the Holder in contravention of any of the terms hereof, such payment or distribution shall be received in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of the Senior Indebtedness at the time outstanding in accordance with the priorities then existing among such holders for application to the payment of all Senior Indebtedness remaining unpaid, to the 14 extent necessary to pay all such Senior Indebtedness in full. In the event of the failure of the Holder to endorse or assign any such payment or distribution, each holder of Senior Indebtedness of the Company is hereby irrevocably authorized to endorse or assign the same. (d) No present or future holder of any Senior Indebtedness shall be prejudiced in the right to enforce subordination of the indebtedness evidenced by the Note by any act or failure to act on the part of the Company. Nothing contained herein shall impair, as between the Company and Holder, the obligation of the Company to pay to Holder, the principal of and interest on, the Note or prevent Holder from exercising all rights, powers and remedies otherwise permitted by applicable law or hereunder upon the occurrence of an Event of Default, all subject to the rights of the holders of the Senior Indebtedness of the Company to receive cash or other property otherwise payable or deliverable to Holder. (e) Upon any payment or distribution of assets of the Company referred to in this Section 7.1, Holder shall be entitled to rely upon an order or decree made by any court of competent jurisdiction in which such dissolution or winding up or liquidation or reorganization or arrangement proceedings are pending or upon a certificate of the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other person making such payment or distribution, delivered to Holder, for the purpose of ascertaining the persons entitled to participate in such distribution, the holders of the Senior Indebtedness, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto. In the absence of any such bankruptcy trustee, receiver, assignee or other person, Holder shall be entitled to rely upon a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee or representative on behalf of such holder) as evidence that such Person is a holder of such Senior Indebtedness (or is such a trustee or representative). 7.2 PAYMENT PERMITTED IF NO DEFAULT. Notwithstanding any provision in this Agreement to the contrary, the Company may make payments of the principal of, and interest on, the Note so long as no Senior Indebtedness Default has occurred and is continuing. SECTION 8. PAYMENT, REGISTRATION, EXCHANGE AND TRANSFER OF THE NOTE. 8.1 APPOINTMENT OF PAYING AGENT. The Company and the Purchaser agree to appoint First Trust Company of Montana, or another independent third party acceptable to the Purchaser as paying agent and registrar for the Notes. 15 8.2 PAYMENTS. Payments of principal and interest in respect of the Note shall be paid at the Holder's address for payment set forth in the register maintained by the Company or the Paying Agent pursuant to Section 8.3 of this Agreement. Presentment or notation of payment shall not be required. 8.3 REGISTRATION. The Paying Agent shall maintain a true and complete register showing the name, address, and wire transfer instructions of the Holder, and all transfers of the Note and the names and addresses of the transferees. The Person in whose name the Note is registered shall be deemed and treated as the owner of the Note for all purposes of this Agreement and shall be entitled to the principal and interest evidenced by the Note in accordance with the provisions of this Agreement, and the Company shall not be affected by any notice or knowledge to the contrary. 8.4 EXCHANGE AND TRANSFER. A Holder may surrender any outstanding Note issued pursuant to the terms of this Agreement and held by Holder for exchange at the principal office of the Paying Agent. Within a reasonable time thereafter and without expense (other than any applicable transfer taxes) to the Holder, the Company shall issue another Note in exchange. Such Note shall be of like tenor, shall be dated and bear interest from the date to which interest has been paid on, and shall be for the same aggregate principal amount as the unpaid principal amount of, the surrendered note. Each new Note shall be registered by the Company in such name or names as the surrendering Holder may designate. Any Holder transferring its Note hereunder (x) will, prior to the delivery of such Note make a notation thereon of all principal, if any, prepaid on such Note and will also note thereon the date to which interest has been paid on such Note, and (y) will notify the Company of the name and address of the transferee of any Note so transferred. 8.5 REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any Note and upon delivery of indemnity reasonably satisfactory to the Company, and in the case of mutilation, upon surrender and cancellation of such Note, the Company will issue a new Note, of like tenor and principal amount and dated the date to which interest has been paid. SECTION 9. MISCELLANEOUS 9.1 DEFINITIONS. For purposes of this Agreement: "Bankruptcy Code" shall mean Title 11 of the United States Code, as amended from time to time. 16 "Business Day" shall mean any day other than a Saturday or Sunday and other than a day which is a Federal legal holiday or a legal holiday for banks in the State of Montana. "Call Reports" shall mean the each Consolidated Report of Condition filed by the Company's Subsidiaries which are banks with respect to periods since January 1, 1996. "Change of Control" shall mean any transaction or series of transactions (including without limitation a tender offer, merger or consolidation) the result of which is that any "person" (as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than the Principals and their Related Parties, or a trustee or other fiduciary holding equity securities under an employee benefit plan of the Company becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of 50% or more of the aggregate voting power of all classes of voting stock of the Company. "Code" shall mean the Internal Revenue Code of 1986, as amended, from time to time, or any successor statute thereto. "Executive Officer" shall mean (a) for the Company, the chief executive officer, president and chief financial officer; and (b) for the Company's Subsidiaries which are banks, the chief executive officer, president and executive vice presidents. "Fair Lending Laws" shall mean the National Bank Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act and all other applicable fair lending laws or other laws relating to discrimination. "GAAP" shall mean generally accepted accounting principles as from time to time defined by controlling pronouncements of the Financial Accounting Standards Board or any successor organization, consistently applied. "Holder" shall mean the Person in whose name the Note is registered pursuant to Section 8.2. "Material Adverse Effect" shall mean an effect which (a) is materially adverse to the business, financial condition, results of operations or prospects of the Company and its Subsidiaries taken as a whole, (b) significantly and adversely affects the ability of the Company to consummate the transactions contemplated hereby or to perform its material obligations hereunder, or (c) enables any person or entity to prevent the consummation of the transactions contemplated hereby; PROVIDED, HOWEVER, that any effect resulting from (i) actions or omissions of the Company taken with the prior consent of the Purchaser in 17 contemplation of the transactions provided for herein or (ii) circumstances affecting the banking industry in Montana or Wyoming generally shall be deemed not to be a Material Adverse Effect. "Person" shall mean a corporation, association, partnership, joint venture, trust, organization, business, individual or government or any governmental agency or political subdivision thereof. "Principals and Related Parties" shall mean the following individuals, any trusts for their benefit, and their executors or heirs: James R. Scott; Homer Scott, Jr.; Dan S. Scott; Thomas W. Scott; Susan Scott Heyneman; John M. Heyneman; Thomas Scott Heyneman; James R. Heyneman; Charles Matthew Heyneman; Alexander Paul Heyneman; Randall Isham Scott; Ronald Noel Scott; Riki Rae Scott Davidson; Risa Kae Scott; Rae Ann Scott; Sarah E. Scott Suzor; Samuel Moise Suzor; Jonathan R. Scott; Julie Anne Scott; Jeanne I. Scott; Susan Elizabeth Scott; James Marshall Scott; Homer Rollins Scott; Sandra Arlene Scott; Janet E. Scott; James R. Scott, Jr.; Courtney L. Scott; Dana A. Scott; Joan Scott. "Senior Indebtedness" shall mean any obligation of the Company to pursuant to the Loan Agreement between the Company, First Security Bank, N.A., Wells Fargo Bank, National Association and Colorado National Bank, as amended from time to time, or to its general creditors, whether now outstanding or subsequently incurred. "Senior Indebtedness Default" shall mean an event of default or a default under any of the Senior Indebtedness. "Subsidiary" shall mean any Person of which the Company owns, directly or indirectly, 50% or more of the issued and outstanding voting capital stock or general partnership interest. "Tax" shall mean any tax or similar governmental charge, assessment or levy (including, without limitation, income taxes, franchise taxes, transfer taxes or fees, stamp taxes, sales taxes, use taxes, excise taxes, ad valorem taxes, withholding taxes, employee withholding taxes, worker's compensation, payroll taxes, unemployment insurance, social security, or minimum taxes), together with any related liabilities, penalties, fines, additions to tax or interest, imposed by the United States or any state, county, provincial, local or foreign government or subdivisions or agency thereof. "Tier 2 Capital" shall have the meaning and characteristics ascribed to such term in Appendix A to 12 C.F.R. Part 225. 18 The following terms are defined elsewhere in the Agreement: Term Section ---- -------- "Acquisition" Recitals "Agreement" Recitals "Banks" Recitals "Base Rate" Section 2.1.3 "Business" Section 4.11(a) "Closing" Section 2.4 "Closing Date" Section 2.4 "Code" Section 4.10(b) "Company" Recitals "Employees" Section 4.10(a) "Environmental Law" Section 4.11(a) "ERISA" Section 4.10(a) "ERISA Affiliate" Section 4.10(a) "Event of Default" Section 6.1 "FDIC" Section 4.5 "FRB" Section 3.1(a) "Governmental Entities" Section 4.4 "Hazardous Substances" Section 4.11(a) "Issuance Date" Section 2.1 "Make-Whole Amount" Section 2.1.6 "Maturity Date" Section 2.1.1 "Montana Bank" Recitals "Note" Recitals "OCC" Section 4.8 "Outside Closing Date" Section 2.4 "Paying Agent" Section 8.1 "Prepayment Date" Section 2.1.6 "Purchaser" Recitals "Real Property" Section 4.11(b) "Remaining Loan Period" Section 2.1.6 "Reports" Section 4.14 "Securities Act" Section 9.4 "Spread" Section 2.1.3 "Stock Purchase Agreement" Recitals "Treasury Rate" Section 2.1.3 "Wells Fargo" Recitals "Wyoming Bank" Recitals 9.2 COURSE OF DEALING. For the purposes of this Agreement and all documents and instruments executed pursuant hereto, except as otherwise specifically set forth herein or therein, no course of dealing between the Company and Holder and no delay on the part of any party hereto in exercising any rights hereunder or thereunder shall operate as a waiver of the rights hereof and thereof. 9.3 NOTICES. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be 19 in writing and shall be deemed to have been duly given (a) on the date of delivery if delivered personally or by facsimile upon confirmation of receipt, (b) on the first business day following the date of mailing if delivered by next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices, requests, instructions or other documents to be given hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice, request, instruction or document in accordance with this Section 9.3: (a) If to the Company: FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. 401 N. 31st Street Billings, Montana 59101-1200 Facsimile: 406-255-5069 Attention: Thomas W. Scott Terrill R. Moore with a copy to: Holland & Hart LLP 401 North 31st Street Suite 1500 Billings, Montana 59101-1200 Facsimile: 406-252-1669 Attention: David R. Chisholm, Esq. (b) If to the Purchaser: MONTANA BOARD OF INVESTMENTS P.O. Box 200126 555 Fuller Avenue Helena, Montana 59620-0126 Facsimile: 406-449-6579 Attention: Chief Investment Officer (c) If to the Paying Agent: First Trust Company of Montana First Trust Building 303 North Broadway, 2nd Floor P.O. Box 30678 Billings, Montana 59115 Facsimile: 406-657-8034 Attention: Corporate Trust Officer 20 9.4 PURCHASER REPRESENTATIONS. Purchaser represents and warrants to the Company (a) that it will acquire the Note for its own account, for the purpose of investment and not with a view to the distribution of the Note or any part thereof; PROVIDED, HOWEVER, that the disposition of the Purchaser's property shall be at all times within its own control and the provisions hereof shall be without prejudice to the Purchaser's right at all times to sell or otherwise dispose of all or any part of the Note in compliance with applicable securities law, (b) that the acquisition of the Note will not constitute a "prohibited transaction" (as such term is defined under ERISA) under Section 406 of ERISA or Section 4975 of the Code, and (c) that it has not, directly or indirectly, incurred and will not directly or indirectly incur any obligation for any finder's or broker's or similar fees or commissions in connection with this Agreement, the issuance and delivery of the Note, or the transactions contemplated hereby. The acquisition of the Note by the Purchaser at Closing shall constitute confirmation by it of the accuracy of the foregoing representations and warranties on and as of the time the Note is issued. The Purchaser acknowledges that the Note has not been registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"), or the securities laws of any state or other jurisdiction and cannot be disposed of unless it is subsequently registered under the Securities Act and any applicable state laws or exemption from such registration is available. The Purchaser agrees not to transfer the Note except in accordance with all applicable securities laws. The Purchaser agrees to the imprinting, so long as the securities are not registered under the Securities Act or the securities laws of any state, of the following legend on the Note: "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY BE REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." 9.5 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.6 SEVERABILITY. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the 21 economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. 9.7 ENTIRE AGREEMENT; INTERPRETATION. This Agreement, including the Schedules hereto, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral. It is the intention of the parties that this Agreement shall not be construed more strictly with regard to one party than with regard to any other party. 9.8 ASSIGNMENT. Without the written consent of the other parties hereto, this Agreement shall not be assigned by operation of law or otherwise (any attempted assignment in contravention hereof being null and void). 9.9 AMENDMENT; WAIVER. This Agreement may not be amended or modified except by written agreement executed and delivered by duly authorized officers of the parties. Waiver of any term or condition of this Agreement (including any extension of time required for performance) shall only be effective if in writing, executed and delivered by a duly authorized officer of the waiving party, and shall not be construed as a waiver of any subsequent breach of the same term or condition or as a waiver of any other term or condition of this Agreement. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. 9.10 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Montana. Each party hereto for such party and such party's successors and assigns agrees that the State of Montana shall be the exclusive venue (to the extent that subject matter jurisdiction exists) for all causes of action arising out of this Agreement. This consent to jurisdiction and venue shall not be deemed a waiver of any right of any party to remove any litigation to a federal court located in the State of Montana. 9.11 COUNTERPARTS. This Agreement may be executed in any number of separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 9.12 JURY WAIVER. EACH OF THE COMPANY AND THE PURCHASER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, SUIT, OR COUNTERCLAIM ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY 22 WAY CONNECTED WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. 9.13 TIME. Time is of the essence. IN WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement to be duly executed as of the date first written above by their respective officers thereunto duly authorized. FIRST INTERSTATE BANCSYSTEM OF MONTANA, INC. By:___________________________ Name: Thomas W. Scott Title: President & Chief Executive Officer MONTANA BOARD OF INVESTMENTS By:___________________________ Name: Robert T. Bugni, CFA Title: Assistant Investment Officer 23 -----END PRIVACY-ENHANCED MESSAGE-----