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                       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):
                               September 20, 2000

                              GLACIER BANCORP, INC.

             (Exact name of registrant as specified in its charter)

                                    DELAWARE
                 (State or other jurisdiction of incorporation)

               000-18911                            81-0519541
       ------------------------           -------------------------------
       (Commission File Number)           IRS Employer Identification No.

                                 49 Commons Loop
                               Kalispell, MT 59901
               (Address of principal executive offices) (zip code)

        Registrant's telephone number, including area code: 406-756-4200

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ITEM 5 - OTHER EVENTS

        On September 20, 2000, Glacier Bancorp, Inc., Kalispell, Montana
("Glacier") entered into a Plan and Agreement of Merger (the "Merger Agreement")
with WesterFed Financial Corporation, a Delaware corporation. Under the terms of
the Merger Agreement, all of the outstanding shares of WesterFed common stock
(other than Dissenting Shares and Exception Shares) will be exchanged for shares
of Glacier common stock, cash, or a combination of both, and WesterFed will be
merged (the "Merger") with and into Glacier, with Glacier continuing as the
surviving entity in the Merger, and Western Security Bank will become a
wholly-owned subsidiary of Glacier.

        Consummation of the Merger is subject to several conditions, including
receipt of applicable regulatory approvals and approval by the shareholders of
both Glacier and WesterFed. For information regarding the terms of the proposed
transaction, reference is made to the Merger Agreement and the press release
dated September 20, 2000, which are attached hereto as Exhibits 2 and 99,
respectively, and incorporated herein by reference. In connection with the
Merger, the parties have executed a stock option agreement, attached hereto as
Exhibit 10, pursuant to which WesterFed will issue to Glacier 19.9% of
WesterFed's outstanding shares, including exercised options, in the event
WesterFed agrees to a third party acquisition proposal.

ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS

        (a)  Financial statements - not applicable.

        (b)  Pro forma financial information - not applicable.

        (c)  Exhibits:

             (2)    Plan and Agreement of Merger, dated as of September 20, 2000

             (10)   Stock Option Agreement, dated as of September 20, 2000

             (99)   Press Release issued by Glacier and WesterFed, dated
                    September 20, 2000

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                                   SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

        Dated: September 25, 2000

                                       GLACIER BANCORP, INC.

                                       By: /s/ MICHAEL J. BLODNICK
                                           -------------------------------------
                                           Michael J. Blodnick
                                           President and Chief Executive Officer

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================================================================================

                          PLAN AND AGREEMENT OF MERGER

                                     BETWEEN

                              GLACIER BANCORP, INC.

                                       AND

                         WESTERFED FINANCIAL CORPORATION

================================================================================

                         DATED AS OF SEPTEMBER 20, 2000

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                          PLAN AND AGREEMENT OF MERGER
                                     BETWEEN
                              GLACIER BANCORP, INC.
                                       AND
                         WESTERFED FINANCIAL CORPORATION

        This Plan and Agreement of Merger (the "Agreement"), dated as of
September 20, 2000, is between GLACIER BANCORP, INC. ("Glacier") and WESTERFED
FINANCIAL CORPORATION ("WesterFed")

                                    PREAMBLE

        The management and boards of directors of Glacier and WesterFed,
respectively, believe that the proposed transaction between Glacier and
WesterFed, on the terms and conditions set forth in this Agreement, is in the
best interests of Glacier's and WesterFed's shareholders.

                                    RECITALS

A.      THE PARTIES.  The parties to the Merger are as follows:

        (1)    Glacier is a corporation duly organized and validly existing
               under Delaware law and is a registered bank holding company under
               the Bank Holding Company Act of 1956, as amended ("BHCA").
               Glacier's principal office is located in Kalispell, Montana.
               Glacier owns (1) all of the outstanding common stock of Mountain
               West Bank, Glacier Bank, First Security Bank of Missoula, Valley
               Bank of Helena, and Big Sky Western Bank; and (2) more than 90%
               of the outstanding common stock of Glacier Bank of Whitefish and
               Glacier Bank of Eureka, respectively.

        (2)    WesterFed is a corporation duly organized and validly existing
               under Delaware law, and is a registered savings and loan holding
               company under the Home Owners' Loan Act, as amended ("HOLA").
               WesterFed's principal offices are located in Missoula, Montana.
               WesterFed owns all of the outstanding common stock of Western
               Security Bank ("the Bank").

B.      THE MERGER. On the Effective Date, all of the outstanding shares of
        WesterFed common stock (other than Dissenting Shares and Exception
        Shares) will be exchanged for shares of Glacier common stock, cash, or a
        combination of both, and WesterFed will be merged (the "Merger") with
        and into Glacier in accordance with the applicable corporation law of
        the State of Delaware, with Glacier continuing as the surviving entity
        in the Merger, and the Bank will become a wholly-owned subsidiary of
        Glacier.

C.      BOARD APPROVALS. Glacier's and WesterFed's respective boards of
        directors have deemed the Merger advisable, and have approved this
        Agreement and authorized its execution and delivery.

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D.      OTHER APPROVALS.  The Merger is subject to:

        (1)    satisfaction of the conditions described in Section 5 of this
               Agreement or waiver by a party of those conditions that may be
               waived by it; and

        (2)    each approval required by Section 5.1 of this Agreement being
               granted and all applicable waiting periods having expired.

E.      EMPLOYMENT AGREEMENTS. Glacier has entered into employment agreements as
        of the date hereof but to become effective as of the Effective Date with
        Ralph K. Holliday, President and Chief Executive Officer of WesterFed
        and the Bank; James A. Salisbury, Executive Vice President, Treasurer
        and Chief Financial Officer of WesterFed and the Bank; Marcia Johnson,
        Senior Vice President - Central Operations Manager of the Bank; Barry
        Johnston, Senior Vice President - Credit Administration of the Bank and
        John Cromwell, Senior Vice President - Human Resources of the Bank.

F.      VOTING AGREEMENTS. In association with the parties' execution of this
        Agreement, the directors and executive officers of WesterFed (other than
        David W. Jorgenson) and Glacier have entered into agreements,
        substantially in the form attached to this Agreement as Exhibit A,
        pursuant to which, among other things, each such individual has agreed
        to vote his or her shares of WesterFed or Glacier common stock,
        whichever is applicable, in favor of the actions contemplated by this
        Agreement.

G.      FAIRNESS OPINIONS. WesterFed has received from Putnam Lovell Securities,
        Inc. ("Putnam Lovell") a written opinion to the effect that the Merger
        Consideration to be received in the Merger is fair to the shareholders
        of WesterFed from a financial point of view, a copy of which has been
        provided to Glacier. As a condition to Closing of the Transaction,
        Putnam Lovell will update this fairness opinion immediately before
        WesterFed mails the Prospectus/Proxy Statement to its shareholders.
        Glacier has received from D.A. Davidson & Co. ("Davidson") a written
        opinion to the effect that the Merger Consideration to be paid by
        Glacier in connection with the Merger is fair to the shareholders of
        Glacier from a financial point of view, a copy of which has been
        provided to WesterFed. As a condition to Closing of the Transaction,
        Davidson will update the fairness opinion immediately before Glacier
        mails the Prospectus/Proxy Statement to its shareholders.

H.      INTENTION OF THE PARTIES--ACCOUNTING AND TAX TREATMENT. The parties
        intend the Merger to be treated for accounting purposes as a "purchase."
        The parties intend the Merger to qualify, for federal income tax
        purposes, as a tax-free reorganization under Section 368(a) of the
        Internal Revenue Code of 1986, as amended ("IRC").

I.      STOCK OPTION AGREEMENT. As an inducement to and condition of Glacier's
        execution of this Agreement, WesterFed has approved the grant of an
        option to Glacier under the Stock Option Agreement, as provided in
        Section 1.15.

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                                    AGREEMENT

Glacier and WesterFed agree as follows:

                                    SECTION 1
                              TERMS OF TRANSACTION

1.1     TRANSACTION. Under and subject to this Agreement and the other documents
        referred to in this Agreement, WesterFed will be merged with and into
        Glacier in accordance with the applicable corporation law of the State
        of Delaware ("Corporate Law"). The Merger will become effective on the
        date ("Effective Date") and at the time the Certificate of Merger is
        accepted for filing by the Secretary of the State of Delaware. The term
        "Transaction" means the Merger transaction contemplated by this
        Agreement, subject to any modifications Glacier elects in accordance
        with Section 1.14.

1.2     EFFECT OF TRANSACTION. On the Effective Date, the corporate existence of
        WesterFed will be merged into and continued in Glacier (sometimes
        referred to as the "Combined Corporation"). The name of the Combined
        Corporation will be "Glacier Bancorp, Inc." The principal office of the
        Combined Corporation will be located in Kalispell, Montana. The
        Certificate of Incorporation and the Bylaws of the Combined Corporation
        will be the Certificate of Incorporation and the Bylaws of Glacier in
        effect immediately before the Effective Date. The directors of the
        Combined Corporation will be the persons who were the directors of
        Glacier immediately prior to the Effective Date with the addition of
        Ralph K. Holliday. The officers of the Combined Corporation will be the
        officers of Glacier and WesterFed immediately prior to the Effective
        Date. Consistent with Corporate Law, all rights, franchises and
        interests of each of Glacier and WesterFed in and to every type of
        property (real, personal and mixed) and choses in action will be
        transferred to and vested in the Combined Corporation by virtue of the
        Merger without any deed or other transfer, and the Combined Corporation,
        upon the Effective Date and without any order or other action on the
        part of any court of otherwise, will hold and enjoy all rights of
        property, franchises, and interests in the same manner and to the same
        extent as such rights, franchises and interests were held or enjoyed by
        each of Glacier and WesterFed immediately prior to the Effective Date.

1.3     CONSIDERATION. Subject to the provisions of this Agreement, on the
        Effective Date, by virtue of the Merger and without any action on the
        part of Glacier or WesterFed, each share of WesterFed Common Stock
        issued and outstanding immediately prior to the Effective Date (other
        than Dissenting Shares and Excluded Shares) will, automatically and
        without any action on the part of the holder of such share, be converted
        into the right to receive from Glacier consideration (the "Merger
        Consideration") consisting of either cash, stock, or a combination of
        both, subject to the provisions of Subsections 1.6.4 and 1.6.5.

1.4     PRICE.

        1.4.1  DEFINITIONS. For purposes of this Agreement, the following terms
               will have the meanings set forth below:

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               (a)    "Aggregate Merger Consideration" means the sum of (i) the
                      Calculated Cash Consideration and (ii) the Calculated
                      Stock Consideration.

               (b)    "Average Closing Price" means the average, rounded to the
                      second decimal (rounding down if the third decimal is four
                      or less and rounding up if the third decimal is five or
                      more), of the daily closing price per share of Glacier
                      Common Stock as reported on the Nasdaq National Market or
                      such successor exchange on which Glacier Common Stock may
                      then be traded (as reported in the Wall Street Journal or,
                      if not reported therein, in another mutually agreed upon
                      authoritative source) for 20 consecutive trading days
                      ending on the Determination Date. The "Determination Date"
                      means the date occurring 15 trading days prior to the
                      Effective Date.

               (c)    "Calculated Cash Consideration" means (i) $9.05, if the
                      Average Closing Price is equal to or greater than $9.90,
                      or (ii) $10.04 if the Average Closing Price is less than
                      $9.00.

               (d)    "Calculated Stock Consideration" means (i) the Exchange
                      Ratio multiplied by (ii) the Average Closing Price.

               (e)    "Exchange Ratio" is 1.1.

               (f)    "Final Exchange Ratio" means the quotient, rounded to the
                      nearest ten-thousandth, obtained by dividing the Per Share
                      Consideration by the Average Closing Price.

               (g)    "Per Share Consideration" has the following meanings:

                      (1)    AVERAGE CLOSING PRICE GREATER THAN $9.90. If the
                             Average Closing Price of Glacier Common Stock is
                             greater than or equal to $9.90, then the Per Share
                             Consideration will be the Aggregate Merger
                             Consideration;

                      (2)    AVERAGE CLOSING PRICE BETWEEN $9.00 AND $9.90. If
                             the Average Closing Price of Glacier Common Stock
                             is less than $9.90 and greater than or equal to
                             $9.00, then the Per Share Consideration will be
                             $19.94.

                      (3)    AVERAGE CLOSING PRICE LESS THAN $9.00. If the
                             Average Closing Price of Glacier Common Stock is
                             less than $9.00, then the Per Share Consideration
                             will be the Aggregate Merger Consideration, unless
                             Glacier timely makes the election contemplated by
                             Section 7.2.7, in which case the Per Share
                             Consideration will be $19.94.

        1.4.2  MERGER CONSIDERATION. The Merger Consideration to be received by
               the holder for each share of WesterFed Common Stock will be:

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               (a)    a number of shares of Glacier Common Stock equal to the
                      Final Exchange Ratio ("Stock Distribution"), or

               (b)    cash in an amount equal to the Per Share Consideration
                      ("Cash Distribution").

1.5     EFFECT ON GLACIER COMMON STOCK. Glacier Common Stock shares issued and
        outstanding immediately before the Effective Date will remain
        outstanding and unchanged after the Merger.

1.6     CONVERSION ELECTION PROCEDURES AND ALLOCATION.

        1.6.1  ELECTION OPTIONS. Subject to the election and allocation
               procedures set forth in this Section 1.6, each record holder of
               WesterFed Common Stock as of the Election Deadline will be
               entitled to elect to receive (i) the Cash Distribution for all or
               a portion of the holder's shares of WesterFed Common Stock ("Cash
               Election Shares") or (ii) the Stock Distribution for all or a
               portion of the holder's shares of WesterFed Common Stock ("Stock
               Election Shares"). All such elections shall be made on a form
               mutually agreed to by Glacier and WesterFed for that purpose
               ("Form of Election"). Glacier and WesterFed will mail the Form of
               Election with the Prospectus/Proxy Statement to all holders of
               WesterFed Common Stock on the record date for the meeting of
               shareholders of WesterFed to vote on the adoption of this
               Agreement and will use commercially reasonable efforts to make
               the Form of Election available to all persons who become holders
               of WesterFed Common Stock subsequent to such date and no later
               than the close of business on the Business Day immediately prior
               to the Election Deadline.

        1.6.2  EFFECTIVE ELECTION. Any election for the purposes of this Section
               1.6 will be effective only if the Exchange Agent has received a
               properly completed and signed Form of Election with the
               associated certificate(s) representing shares of WesterFed Common
               Stock by the Election Deadline. The "Election Deadline" means
               7:00 p.m., Mountain Time, on the date of the WesterFed
               shareholders meeting ("WesterFed Meeting") called to vote on the
               adoption of this Agreement. A Form of Election may be revoked or
               changed by the person submitting such Form of Election or any
               other person to whom the subject shares are subsequently
               transferred by written notice by such person to the Exchange
               Agent at or prior to the Election Deadline. All Forms of
               Elections will be deemed to be revoked if the Exchange Agent is
               notified in writing by either Glacier or WesterFed that this
               Agreement has been terminated in accordance with its terms and
               the Exchange Agent shall promptly return certificates
               representing shares of WesterFed Common Stock to those persons
               who submitted such certificates to the Exchange Agent.

        1.6.3  NON-ELECTION; DISCRETION OF EXCHANGE AGENT. Any holder of
               WesterFed Common Stock who does not submit a properly completed
               and signed Form of Election that is received by the Exchange
               Agent at or prior to the Election Deadline, and any holder who
               has failed to perfect or has effectively withdrawn or

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               lost the right to payment for Dissenting Shares, will be deemed
               to hold "Non-Election Shares" for the purposes of Section 1.6.5.
               Glacier will have the discretion, which it may delegate in whole
               or in part to the Exchange Agent, to determine whether Forms of
               Election have been properly completed and signed, and to
               disregard immaterial defects in Forms of Election. If Glacier or
               the Exchange Agent determines that any purported election for
               Cash Election Shares or Stock Election Shares was not properly
               made, such purported election will be deemed to be of no force
               and effect and the holder making such election will be deemed to
               have Non-Election Shares for the purposes of Section 1.6.5. The
               decision of Glacier or the Exchange Agent as to such matters will
               be conclusive and binding. Neither Glacier nor the Exchange Agent
               will be under any obligation to notify any holder of any defect
               in a Form of Election submitted to the Exchange Agent.

        1.6.4  MAXIMUM STOCK AND CASH CONVERSION AMOUNTS. The maximum number of
               shares of WesterFed Common Stock to be converted into the right
               to receive Glacier Common Stock in the Merger will be the
               Exchange Ratio multiplied by the number of shares of WesterFed
               Common Stock that are issued and outstanding immediately prior to
               the Effective Date divided by the Final Exchange Ratio
               ("Calculated Stock Election Number"). The maximum number of
               shares of WesterFed Common Stock to be converted into the right
               to receive cash in the Merger will be such number of Cash
               Election Shares when aggregated with the Dissenting Shares that
               represents 55% of the total value of the Merger Consideration
               based upon the per share closing price of Glacier Common Stock on
               the Effective Date, and if the Effective Date is not a trading
               day, then the closing price on the most recent trading day prior
               to the Effective Date. If the application of the provisions of
               Subsections 1.6.1, 1.6.2, and 1.6.3 would otherwise result in
               aggregate Cash Distributions or aggregate Stock Distributions in
               excess of the limits set forth in this Subsection 1.6.4, then the
               Cash Distributions and Stock Distributions will be allocated in
               the manner set forth in Subsection 1.6.5.

        1.6.5  ALLOCATION. As soon as practicable after the Effective Date,
               Glacier will cause the Exchange Agent to allocate among the
               holders of WesterFed Common Stock the rights to receive the Cash
               Distribution or the Stock Distribution as follows:

               (a)    EXCESS CASH ELECTION SHARES. If the number of Cash
                      Election Shares exceeds the Calculated Cash Election
                      Number, then:

                      (1)    Each Stock Election Share will be converted into
                             the right to receive the Stock Distribution;

                      (2)    Each Non-Election Share will be converted into the
                             right to receive the Stock Distribution; and

                      (3)    The Exchange Agent will reallocate the Merger
                             Consideration payable to each holder of Cash
                             Election Shares pro rata (based

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                             upon the number of Cash Election Shares owned by
                             such holder, as compared with the total number of
                             Cash Election Shares owned by all holders) such
                             that the holders of Cash Election Shares will
                             receive an amount of Cash Distributions that, in
                             the aggregate, will be equal to the product of the
                             Calculated Cash Election Number multiplied by the
                             Per Share Consideration and will receive the
                             remainder of the Merger Consideration due to them
                             as Stock Distributions.

               (b)    EXCESS STOCK ELECTION SHARES. If the number of Stock
                      Election Shares exceeds the Calculated Stock Election
                      Number, then:

                      (1)    Each Cash Election Share will be converted into the
                             right to receive the Cash Distribution;

                      (2)    Each Non-Election Share will be converted into the
                             right to receive the Cash Distribution; and

                      (3)    The Exchange Agent will reallocate the Merger
                             Consideration payable to each holder of Stock
                             Election Shares pro rata (based upon the number of
                             Stock Election Shares owned by such holder, as
                             compared with the total number of Stock Election
                             Shares owned by all holders) such that the holders
                             of Stock Election Shares will receive, as Stock
                             Distributions, a number of shares of Glacier Common
                             Stock equal to the product of the Calculated Stock
                             Election Number multiplied by the Final Exchange
                             Ratio, and will receive the remainder of the Merger
                             Consideration due to them as Cash Distributions.

               (c)    NO EXCESS. If neither of Subsections (a) or (b) above is
                      applicable, all Cash Election Shares will be converted
                      into the right to receive the Cash Distribution, all Stock
                      Election Shares will be converted into the right to
                      receive the Stock Distribution, and the Non-Election
                      Shares will be converted into the right to receive the
                      Cash Distribution and/or the Stock Distribution as
                      follows:

                      (1)    Non-Election Shares shall first be converted to a
                             right to receive the Cash Distribution until the
                             aggregate of the Non-Election Shares and Cash
                             Election Shares equals the Calculated Cash Election
                             Number.

                      (2)    Any excess Non-Election Shares shall then be
                             converted to a right to receive the Stock
                             Distribution.

                      (3)    All allocations pursuant to this Subsection (c)
                             shall be made on a pro rata basis, if applicable.

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               (d)    PRO RATA COMPUTATIONS. The pro rata computations performed
                      by the Exchange Agent pursuant to this Subsection 1.6.5
                      shall be binding and conclusive as to the allocation of
                      the Merger Consideration among the holders of WesterFed
                      Common Stock.

1.7     CONVERSION OF WESTERFED OPTIONS. On the Effective Date, by virtue of the
        Merger, and without any action on the part of any holder of a WesterFed
        Option, each WesterFed Option that is then outstanding and unexercised
        will be converted into and become an option to purchase Glacier Common
        Stock ("Assumed Option") on the same terms and conditions as are in
        effect with respect to the WesterFed Option immediately prior to the
        Effective Date, except that (A) each such Assumed Option may be
        exercised solely for shares of Glacier Common Stock, (B) the number of
        shares of Glacier Common Stock subject to such Assumed Option will be
        equal to the number of shares of WesterFed Common Stock subject to such
        Option immediately prior to the Effective Date multiplied by the Final
        Exchange Ratio, the product being rounded, if necessary, up or down to
        the nearest whole share, and (C) the per share exercise price under each
        such Assumed Option will be adjusted by dividing the per share exercise
        price of the WesterFed Option by the Final Exchange Ratio, and rounding
        up or down to the nearest cent. It is intended that the foregoing
        assumption shall be undertaken consistent with and in a manner that will
        not constitute a "modification" under Section 424 of the IRC as to any
        WesterFed Option which is an "incentive stock option". The number of
        shares of WesterFed Common Stock subject to WesterFed Options (whether
        vested or unvested) as of the date of this Agreement are set forth on
        Schedule 3.1.3(b)(2)-W.

1.8     SHAREHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date, holders of
        WesterFed Common Stock will cease to be, and will have no rights as,
        shareholders of WesterFed, other than to receive the Merger
        Consideration provided under Section 1.3 or payment under Section 1.10.
        After the Election Deadline, there will be no transfers on the stock
        transfer books of WesterFed or the Combined Corporation of the shares of
        WesterFed Common Stock that were issued and outstanding immediately
        prior to the Election Deadline, other than Non-Election Shares which may
        be transferred at any time prior to the Effective Date.

1.9     FRACTIONAL SHARES. Notwithstanding any other provision of this
        Agreement, no fractional shares of Glacier Common Stock and no
        certificates or scrip for, or other evidence of ownership of fractional
        shares, will be issued in the Merger. Glacier will pay to each holder of
        WesterFed Common Stock who would otherwise be entitled to a fractional
        share of Glacier Common Stock an amount in cash determined by
        multiplying such fraction by the closing price per share of Glacier
        Common Stock on the Nasdaq National Market (or any successor exchange)
        on the Effective Date, or if the Effective Date is not a trading day,
        then the closing price on the most recent trading day prior to the
        Effective Date.

1.10    PAYMENT TO DISSENTING SHAREHOLDERS. For the purposes of this Agreement,
        "Dissenting Shares" means any shares of WesterFed Common Stock held by a
        holder who dissents from the Merger in accordance with the Corporate Law
        and becomes entitled to obtain payment for the fair value of such shares
        of WesterFed Common Stock pursuant to the

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        applicable provisions of the Corporate Law. Notwithstanding any other
        provision of this Agreement, any Dissenting Share will not, after the
        Effective Date, be entitled to vote for any purpose or receive any
        dividends or other distributions and will be entitled only to such
        rights as are accorded to Dissenting Shares by the Corporate Law.

1.11    EXCHANGE PROCEDURES.

        1.11.1 SURRENDER OF CERTIFICATE. As promptly as practicable after the
               Effective Date, Glacier will send or cause to be sent to each
               former shareholder of WesterFed of record immediately prior to
               the Effective Date (other than with respect to Dissenting Shares,
               Excluded Shares and holders who tendered their certificates with
               their Forms of Election) instructions for exchanging such
               shareholder's certificates for WesterFed Common Stock for the
               Merger Consideration set forth in Section 1.3. WesterFed
               shareholders will exchange WesterFed Common Stock certificates by
               surrendering them to the exchange agent appointed by Glacier (the
               "Exchange Agent"), in accordance with the instructions provided
               by the Exchange Agent and together with a properly completed and
               executed form of transmittal letter. Until a holder's certificate
               evidencing WesterFed Common Stock is so surrendered, the holder
               will not be entitled to receive any Merger Consideration with
               respect thereto.

        1.11.2 ISSUANCE OF MERGER CONSIDERATION IN OTHER NAMES. Any person
               requesting that any Merger Consideration be issued (or paid) in a
               name other than the name in which the surrendered WesterFed
               Common Stock certificate is registered, must: (1) establish to
               the Exchange Agent's satisfaction the right to receive the Merger
               Consideration and (2) either pay to the Exchange Agent any
               applicable transfer or other taxes or establish to the Exchange
               Agent's satisfaction that all applicable taxes have been paid or
               are not required.

        1.11.3 LOST, STOLEN, AND DESTROYED CERTIFICATES. The Exchange Agent will
               be authorized to issue the Merger Consideration in exchange for a
               WesterFed Common Stock certificate that has been lost, stolen or
               destroyed, if the holder provides the Exchange Agent with: (1)
               satisfactory evidence that the holder owns the WesterFed Common
               Stock represented by the certificate and that the certificate is
               lost, stolen, or destroyed, (2) any appropriate affidavit the
               Exchange Agent may require, and (3) any indemnification
               assurances that the Exchange Agent may require.

        1.11.4 RIGHTS TO DIVIDENDS AND DISTRIBUTIONS. In the case of WesterFed
               Common Stock to be exchanged for the Stock Distribution, until
               the holder properly surrenders for exchange his/her certificates
               for WesterFed Common Stock, no dividends or other distributions
               payable to the holders of Glacier Common Stock shall be paid
               thereon. Surrender of WesterFed Common Stock certificates will
               not deprive the holder of any dividends or distributions that the
               holder is entitled to receive as a record holder of WesterFed
               Common Stock on a date before the Effective Date. When the holder
               surrenders his or her certificates, the holder will receive the
               amount, without interest, of any dividends and any other
               distributions

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               distributed on or after the Effective Date on the whole number
               of shares of Glacier Common Stock into which the holder's
               WesterFed Common Stock was converted at the Effective Date.

        1.11.5 DELIVERY OF MERGER CONSIDERATION TO EXCHANGE AGENT. Within three
               days after the Effective Date, Glacier shall deliver to the
               Exchange Agent the aggregate Merger Consideration to be paid for
               all of the issued and outstanding shares of WesterFed Common
               Stock other than Dissenting and Excluded Shares. On an
               as-required basis, Glacier shall promptly and timely tender to
               the Exchange Agent additional cash funds required for the payment
               of cash in lieu of fractional shares. The Merger Consideration
               remaining in the hands of the Exchange Agent for non-surrendered
               certificates representing shares of WesterFed Common Stock shall
               be returned to Glacier at the expiration of six months from the
               Effective Date.

        1.11.6 AFFILIATES' CERTIFICATES. Certificates surrendered for exchange
               by any person constituting an "affiliate" of WesterFed for
               purposes of Rule 145 of the Securities Act will not be exchanged
               for certificates representing Glacier Common Stock until Glacier
               has received a written agreement from such person as specified in
               Section 4.4.

1.12    MERGER CONSIDERATION ADJUSTMENTS. If, prior to the Effective Date,
        shares of Glacier Common Stock shall be changed into a different number
        of shares or a different class of shares by reason of any
        reclassification, recapitalization, split-up, combination, exchange of
        shares or readjustment, or there occurs a distribution of warrants or
        rights with respect to Glacier Common Stock, or a stock dividend, stock
        split or other general distribution of Glacier Common Stock is declared
        with a record date prior to the Effective Date, then in any such event
        the Exchange Ratio shall be appropriately adjusted.

1.13    EXCEPTION SHARES. "Exception Shares" mean any shares of WesterFed Common
        Stock held by Glacier or any of its Subsidiaries or WesterFed or any of
        its Subsidiaries, in any case other than in a fiduciary capacity or as a
        result of debts previously contracted. Each of the Exception Shares of
        WesterFed Common Stock will be canceled and retired upon consummation of
        the Merger, and no consideration shall be issued in exchange therefor.

1.14    RESERVATION OF RIGHT TO REVISE STRUCTURE. In its sole discretion, and
        notwithstanding any other provision in this Agreement to the contrary,
        Glacier may at any time change the method of effecting the Transaction;
        provided, however, that (A) no such change will alter or change the
        amount or kind of consideration to be issued to holders of WesterFed
        Common Stock as provided for in this Agreement, (B) no such change will
        adversely affect the tax treatment to WesterFed shareholders as a result
        of receiving such consideration, (C) no such change will materially
        impede or delay the consummation of the Transaction and (D) no such
        change shall diminish the benefits to be received by the directors,
        officers or employees of WesterFed or the Bank set forth in this
        Agreement or in any other agreement entered into by the parties in
        connection with the Transaction. If Glacier elects to change the method
        of effecting the Transaction, WesterFed and the Bank will cooperate with
        and assist Glacier with any necessary amendment to this Agreement, and
        with the preparation and filing of such applications, documents,
        instruments and

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        notices as may be necessary or desirable, in the opinion of counsel for
        Glacier, to obtain all necessary shareholder approvals and approvals of
        any regulatory agency, administrative body or other governmental entity.

1.15    STOCK OPTION AGREEMENT. As a condition to execution of this Agreement,
        Glacier and WesterFed have executed a Stock Option Agreement, dated the
        same date as this Agreement, a copy of which is attached as Exhibit B.

                                    SECTION 2
                           CLOSING OF THE TRANSACTION

2.1     CLOSING. Closing will occur on the Effective Date. If Closing does not
        occur on or before June 30, 2001 ("Termination Date"), either Glacier or
        WesterFed may terminate this Agreement in accordance with Section 7.1.
        Unless Glacier and WesterFed agree upon another date, the Effective Date
        will be the later of (i) January 15, 2001, or (ii) the date selected by
        Glacier 30 days after the following:

        (a)    all conditions precedent set forth in Section 5 having been
               either fulfilled or waived; and

        (b)    all approvals required by Section 5.1 having been granted, and
               the expiration of all applicable waiting periods.

2.2     EVENTS OF CLOSING. On the Effective Date, all properly executed
        documents required by this Agreement will be delivered by the parties in
        form consistent with this Agreement. If any party fails to deliver a
        required document on the Effective Date or otherwise defaults under this
        Agreement on or before the Effective Date, then the Transaction will not
        occur unless the adversely affected party waives the default.

2.3     PLACE OF CLOSING. Unless Glacier and WesterFed agree otherwise, Closing
        will occur on the Effective Date at Glacier's corporate office, 49
        Commons Loop, Kalispell, Montana.

                                    SECTION 3
                                 REPRESENTATIONS

3.1     REPRESENTATIONS OF GLACIER AND WESTERFED. Subject to Section 3.2 and
        except as expressly set forth in Schedule 3.1-G (in the case of
        Glacier), Schedule 3.1-W (in the case of WesterFed), or the other
        Schedules described in this Section 3.1, Glacier represents to
        WesterFed, and WesterFed represents to Glacier, the following:

        3.1.1  CORPORATE ORGANIZATION AND QUALIFICATION.

               (a)    It is a corporation duly organized and validly existing
                      under the state laws of Delaware, its activities do not
                      require it to be qualified in any jurisdiction other than
                      Montana (for WesterFed) and Montana and Idaho (for
                      Glacier), and it is duly qualified and in good standing in
                      such jurisdiction(s).

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               (b)    It has the requisite corporate power and authority to own
                      and lease its properties and assets and to carry on its
                      business as it is now being conducted.

               (c)    It has made available to the other party to this Agreement
                      a complete and correct copy of its certificate of
                      incorporation and bylaws, each as amended to date and
                      currently in full force and effect.

        3.1.2  SUBSIDIARIES.

               (a)    Schedules 3.1.2(a)-G and 3.1.2(a)-W list all of the
                      Subsidiaries of Glacier and WesterFed, respectively, and
                      each party's respective percentage ownership of these
                      Subsidiaries, as of the date of this Agreement. In this
                      Agreement, the term "Subsidiary" with respect to a party
                      means any corporation, partnership, financial institution,
                      trust company, or other entity owned or controlled by that
                      party or any of its subsidiaries or affiliates (or owned
                      or controlled by that party together with one or more of
                      its subsidiaries or affiliates). A Subsidiary is
                      considered to be owned or controlled by a party if that
                      party or any of its Subsidiaries (individually or together
                      with the party) directly or indirectly owns, controls, or
                      has the ability to exercise 50% or more of the voting
                      power of the Subsidiary.

               (b)    Each of its Subsidiaries is either a federally chartered
                      stock savings bank, a bank, or a corporation or limited
                      partnership duly organized and validly existing under
                      Montana, Idaho or Delaware law, as the case may be, and is
                      qualified to do business and in good standing in each
                      jurisdiction where the property owned, leased, or
                      operated, or the business conducted by the Subsidiary,
                      requires qualification.

               (c)    With respect to WesterFed only, (i) the Bank is a member
                      in good standing of the Federal Home Loan Bank System;
                      (ii) all eligible deposit accounts issued by the Bank are
                      insured by the Federal Deposit Insurance Corporation
                      ("FDIC") to the full extent permitted under applicable
                      law; (iii) the Bank is a "qualified thrift lender" as
                      defined in Section 10(m) of HOLA; and (iv) the liquidation
                      account established by the Bank in connection with its
                      conversion from mutual to stock form has been maintained
                      since its establishment in accordance with applicable laws
                      and the records with respect to said account (including
                      subaccounts) are complete and accurate in all material
                      respects.

               (d)    Each of its Subsidiaries has the requisite corporate power
                      and authority to own and lease its properties and assets
                      and to carry on its business as it is now being conducted.

        3.1.3  CAPITAL STOCK.

               (a)    Glacier. Glacier represents:

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                      (1)    on the date of this Agreement, Glacier's authorized
                             capital stock consists of 51 million shares divided
                             into two classes: (i) 50 million shares of common
                             stock, par value $.01 per share ("Glacier Common
                             Stock"), 11,441,234 shares of which are issued and
                             outstanding and (ii) 1 million shares of
                             blank-check preferred stock, par value $.01 per
                             share, none of which is outstanding ("Glacier
                             Preferred Stock");

                      (2)    options or rights to acquire not more than an
                             aggregate of 912,715 Glacier Common Stock shares
                             (subject to adjustment on the terms set forth in
                             the Glacier Stock Plans) are outstanding under the
                             stock option plans listed in Schedule 3.1.3(a)(2)-G
                             ("Glacier Stock Plans");

                      (3)    no Glacier Common Stock shares are reserved for
                             issuance, other than the shares reserved for
                             issuance under the Glacier Stock Plans or pursuant
                             to this Agreement, and Glacier has no shares of
                             Glacier Preferred Stock reserved for issuance;

                      (4)    all outstanding shares of Glacier Common Stock have
                             been, and all of the Glacier Common Stock to be
                             issued in the Merger and upon the exercise of
                             Assumed Options will be, duly authorized and
                             validly issued, and are or will be, as the case may
                             be, fully paid and nonassessable;

                      (5)    all outstanding shares of capital stock of each of
                             Glacier's Subsidiaries owned by Glacier or a
                             Subsidiary of Glacier have been duly authorized and
                             validly issued and are fully paid and
                             nonassessable, except to the extent any assessment
                             is required under state or federal law, and are
                             owned by Glacier or a Subsidiary of Glacier free
                             and clear of all liens, pledges, security
                             interests, claims, proxies, preemptive or
                             subscription rights or other encumbrances or
                             restrictions of any kind (collectively, "Liens");

                      (6)    except as set forth in this Agreement or in the
                             Glacier Stock Plans, there are no preemptive rights
                             or any outstanding subscriptions, options,
                             warrants, rights, convertible securities, or other
                             agreements or commitments of Glacier or any of its
                             Subsidiaries of any character relating to the
                             issued or unissued capital stock or other equity
                             securities of Glacier (including those relating to
                             the issuance, sale, purchase, redemption,
                             conversion, exchange, registration, voting or
                             transfer of such stock or securities); and

                      (7)    Glacier has taken all corporate action necessary to
                             reserve for issuance a sufficient number of shares
                             of Glacier Common Stock to satisfy the maximum
                             Stock Distribution under Subsection 1.6.4

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                             and the maximum number of shares deliverable upon
                             the exercise of Assumed Options.

               (b)    WesterFed. WesterFed represents:

                      (1)    as of the date of this Agreement, WesterFed's
                             authorized capital stock consists of (i) 10 million
                             shares of common stock, $0.01 par value ("WesterFed
                             Common Stock"), 4,069,524 shares of which are
                             issued and outstanding, and (ii) 5 million shares
                             of preferred stock, par value $0.01 per share, none
                             of which is outstanding ("WesterFed Preferred
                             Stock");

                      (2)    options or rights to acquire not more than an
                             aggregate of 580,397 WesterFed Common Stock shares
                             (subject to adjustment on the terms set forth in
                             the WesterFed Stock Plans) are outstanding under
                             the stock option plans listed in Schedule
                             3.1.3(b)(2)-W ("WesterFed Stock Plans");

                      (3)    no WesterFed Common Stock shares are reserved for
                             issuance, other than the shares reserved for
                             issuance under the WesterFed Stock Plans and the
                             Stock Option Agreement;

                      (4)    all outstanding WesterFed Common Stock shares have
                             been duly authorized and validly issued and are
                             fully paid and nonassessable;

                      (5)    all outstanding shares of capital stock (or
                             partnership interests) of each of WesterFed's
                             Subsidiaries have been duly authorized and validly
                             issued and in the case of capital stock are fully
                             paid and nonassessable except to the extent any
                             assessment is required under state or federal law,
                             and, except for partnership interests in COAD
                             Limited Partnerships 2 and 3 that are owned by
                             others, at Closing will be owned by WesterFed or a
                             Subsidiary of WesterFed free and clear of all
                             Liens;

                      (6)    except as set forth in this Agreement, in the
                             WesterFed Stock Plans, or in the Stock Option
                             Agreement, there are no preemptive rights or any
                             outstanding subscriptions, options, warrants,
                             rights, convertible securities, or other agreements
                             or commitments of WesterFed or any of its
                             Subsidiaries of any character relating to the
                             issued or unissued capital stock or other equity
                             securities of WesterFed or any of its Subsidiaries
                             (including those relating to the issuance, sale,
                             purchase, redemption, conversion, exchange,
                             registration, voting or transfer of such stock or
                             securities);

                      (7)    WesterFed has taken all corporate action necessary
                             to reserve for issuance a sufficient number of
                             shares of WesterFed Common Stock to satisfy the
                             full exercise of the option granted to Glacier
                             under the Stock Option Agreement.

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                      (8)    except for the partnership interests owned by
                             others in COAD Limited Partnerships 2 and 3, it
                             (alone or together with any of its Subsidiaries)
                             owns all of the shares of capital stock (or 100% of
                             any other applicable form of ownership interest if
                             the Subsidiary is not a corporation) of each of its
                             Subsidiaries free and clear of all Liens.

        3.1.4  CORPORATE AUTHORITY.

               (a)    It has the requisite corporate power and authority and has
                      taken all corporate action necessary in order to execute
                      and deliver this Agreement and the Stock Option Agreement,
                      subject in the case of this Agreement only to the adoption
                      of this Agreement by its shareholders to the extent
                      required by the Corporation Law and the rules of the
                      exchange on which its stock is traded to complete the
                      Transaction.

               (b)    Each of this Agreement and the Stock Option Agreement is a
                      valid and legally binding agreement of it, enforceable in
                      accordance with the terms of this Agreement (except as may
                      be limited by applicable bankruptcy, insolvency,
                      reorganization, moratorium or other laws affecting
                      creditors' rights generally or by general equity
                      principles).

        3.1.5  REPORTS AND FINANCIAL STATEMENTS.

               (a)    Filing of Reports. Since January 1, 1997, it and each of
                      its Subsidiaries has filed all reports and statements,
                      together with any required amendments to these reports and
                      statements, that it was required to file with (1) the
                      Securities and Exchange Commission ("SEC"), (2) the
                      National Association of Securities Dealers ("NASD"), (3)
                      Board of Governors of the Federal Reserve System (the
                      "Federal Reserve Board"), (4) the Office of Thrift
                      Supervision ("OTS"), (5) the FDIC, and (6) any other
                      applicable federal or state banking, insurance,
                      securities, or other regulatory authorities. Each of these
                      reports and statements, including the related financial
                      statements and exhibits, complied (or will comply, in the
                      case of reports or statements filed after the date of this
                      Agreement) as to form in all material respects with all
                      applicable statutes, rules and regulations as of their
                      respective dates (and, in the case of reports or
                      statements filed before the date of this Agreement,
                      without giving effect to any amendments or modifications
                      filed after the date of this Agreement).

               (b)    Delivery to Other Party of Reports. It has delivered to
                      the other party a copy of each registration statement,
                      offering circular, report, definitive proxy statement or
                      information statement under the Securities Act of 1933, as
                      amended, ("Securities Act"), the Securities Exchange Act
                      of 1934, as amended, ("Exchange Act"), and state
                      securities and "Blue Sky" laws (collectively, the
                      "Securities Laws") filed, used or circulated by it with
                      respect to periods since January 1, 1997, through the date
                      of this

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                      Agreement. It will promptly deliver to the other party
                      each such registration statement, offering circular,
                      report, definitive proxy statement or information
                      statement filed, used or circulated after the date of this
                      Agreement and before the Effective Date (collectively, its
                      "Reports"), each in the form (including related exhibits
                      and amendments) filed with the SEC (or if not so filed, in
                      the form used or circulated).

               (c)    Compliance with Securities Laws. As of their respective
                      dates (and without giving effect to any amendments or
                      modifications filed after the date of this Agreement),
                      each of the Reports, including the related financial
                      statements, exhibits and schedules, filed, used or
                      circulated before the date of this Agreement complied (and
                      each of the Reports filed after the date of this
                      Agreement, will comply) in all material respects with
                      applicable Securities Laws, and did not (or in the case of
                      reports, statements, or circulars filed after the date of
                      this Agreement, will not) contain any untrue statement of
                      a material fact or omit to state a material fact required
                      to be stated therein or necessary to make the statements
                      made therein, in light of the circumstances under which
                      they were made, not misleading.

               (d)    Financial Statements. Each of its balance sheets included
                      in the Financial Statements fairly presents (or, in the
                      case of Financial Statements for periods ending on a date
                      following the date of this Agreement, will fairly present)
                      the consolidated financial position of it and its
                      Subsidiaries as of the date of the balance sheet. Each of
                      the consolidated statements of income, cash flows and
                      shareholders' equity included in the Financial Statements
                      fairly presents (or, in the case of Financial Statements
                      for periods ending on a date following the date of this
                      Agreement, will fairly present) the consolidated results
                      of operations, retained earnings and cash flows, as the
                      case may be, of it and its Subsidiaries for the periods
                      set forth in these statements (subject, in the case of
                      unaudited statements, to normal year-end audit adjustments
                      and the absence of footnotes), in each case in accordance
                      with generally accepted accounting principles,
                      consistently applied ("GAAP"), except as may be noted in
                      these statements.

                      (1)    "Financial Statements" means: (i) in Glacier's
                             case, the Glacier Financial Statements (or for
                             periods ending on a date following the date of this
                             Agreement, the Subsequent Glacier Financial
                             Statements); and (ii) in WesterFed's case, the
                             WesterFed Financial Statements (or for periods
                             ending on a date following the date of this
                             Agreement, the Subsequent WesterFed Financial
                             Statements).

                      (2)    "Glacier Financial Statements" means Glacier's (i)
                             audited consolidated statements of financial
                             condition as of December 31, 1999, 1998 and 1997,
                             and the related audited statements of income, cash
                             flows and changes in shareholders' equity for each
                             of the years ended December 31, 1999 and 1998 and
                             1997; and (ii)

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                             unaudited consolidated statements of financial
                             condition as of the end of each fiscal quarter
                             following December 31, 1999 but preceding the date
                             of this Agreement, and the related unaudited
                             statements of income, cash flows and statements of
                             comprehensive income for each such quarter.

                      (3)    "Subsequent Glacier Financial Statements" means
                             unaudited balance sheets and related statements of
                             income and comprehensive income for each of the
                             fiscal quarters ending after the date of this
                             Agreement and before Closing.

                      (4)    "WesterFed Financial Statements" means (i) audited
                             statements of financial condition as of December
                             31, 1999 and June 30, 1999, 1998 and 1997, and the
                             related audited statements of income, cash flows
                             and changes in shareholders' equity for each of the
                             periods ended December 31, 1999, June 30, 1999,
                             1998 and 1997; and (ii) unaudited consolidated
                             statements of financial condition as of the end of
                             each fiscal quarter following December 31, 1999 but
                             preceding the date of this Agreement, and the
                             related unaudited statements of income, cash flows
                             and changes in shareholders' equity for each such
                             quarter.

                      (5)    "Subsequent WesterFed Financial Statements" means
                             (i) unaudited balance sheets and related statements
                             of income and shareholders' equity for each of
                             WesterFed's fiscal quarters ending after the date
                             of this Agreement and before Closing.

        3.1.6  ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed in its
               Financial Statements and Reports, since December 31, 1999: (1) it
               and its Subsidiaries have conducted their respective businesses
               only in the ordinary and usual course of the businesses and (2)
               no change or development or combination of changes or
               developments has occurred that, individually or in the aggregate,
               is reasonably likely to result in a Material Adverse Effect with
               respect to it and its Subsidiaries, taken as a whole.

        3.1.7  MATERIAL AGREEMENTS.

               (a)    Except for the Glacier and WesterFed Stock Plans,
                      respectively, this Agreement, the Stock Option Agreement,
                      any other agreement executed by the parties, and
                      arrangements made after the date of this Agreement in
                      accordance with the terms of this Agreement, it and its
                      Subsidiaries are not bound by any material contract (as
                      defined in Item 601(b)(10) of Regulation S-K under the
                      Securities Act) that: (1) is to be performed after the
                      date of this Agreement and (2) has not been filed with or
                      incorporated by reference in its Reports or set forth in
                      Schedule 3.1.7(a)-G (in the case of Glacier) or Schedule
                      3.1.7(a)-W (in the case of WesterFed).

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               (b)    Neither it nor any of its Subsidiaries is in default under
                      any material contract, agreement, commitment, arrangement,
                      lease, insurance policy, or other instrument.

        3.1.8  KNOWLEDGE AS TO CONDITIONS. Its President, Chief Executive
               Officer, and Chief Financial Officer (collectively, "Executive
               Officers") know of no reason the Regulatory Approvals 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 that is reasonably
               likely to have a Material Adverse Effect with respect to it, its
               Subsidiaries, or the Combined Corporation, or the opinions of the
               tax experts referred to in Subsections 5.2.6 and 5.3.6.

        3.1.9  BROKERS AND FINDERS. Neither it, its Subsidiaries, nor any of
               their respective 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 in this Agreement, except Putnam Lovell
               (in the case of WesterFed) and Davidson (in the case of Glacier).

        3.1.10 CORPORATE RECORDS. Its corporate record books, transfer books and
               stock ledgers (and each of those of its Subsidiaries) are
               complete and accurate in all material respects and reflect all
               meetings, consents and other material actions of its organizers,
               incorporators, shareholders, Boards of Directors and committees
               of the Boards of Directors (and those of its Subsidiaries) and
               all transactions in their respective capital stocks, since their
               respective inceptions.

        3.1.11 LOAN AND LEASE LOSSES. Its Executive Officers know of no reason
               why the allowance for loan and lease losses shown in the balance
               sheets included in the Financial Statements for the periods ended
               December 31, 1999, March 31, 2000, and June 30, 2000, was not
               adequate as of those dates, respectively, to provide for
               estimable and probable losses, net of recoveries relating to
               loans not previously charged off, inherent in its loan portfolio.

        3.1.12 NO STOCK OPTION PLANS. Neither it nor any of its Subsidiaries has
               adopted any stock option plans or granted any options or rights
               to acquire any shares of its common stock or capital stock or
               other ownership interest of any Subsidiary except as expressly
               set forth in Schedule 3.1.3(a)(2)-G (in the case of Glacier) or
               Schedule 3.1.3(b)(2)-W (in the case of WesterFed).

        3.1.13 GOVERNMENTAL FILINGS; NO VIOLATIONS.

               (a)    Filings. Other than the approval of the Federal Reserve
                      Board (the "Regulatory Approval"), the filing of a
                      certificate of merger with the Secretary of State of
                      Delaware, and other requirements under the Securities Act,
                      the Exchange Act, and state securities and "Blue Sky"
                      laws, no notices, reports or other filings are required to
                      be made by it with, nor are any consents, registrations,
                      approvals, permits or authorizations

                                       18
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                      required to be obtained by it from, any governmental or
                      regulatory authority, agency, court, commission or other
                      entity, domestic or foreign ("Governmental Entity"), in
                      connection with the execution, delivery or performance of
                      this Agreement by it and the consummation by it of the
                      Transaction.

               (b)    Violations. The execution, delivery and performance of
                      this Agreement does not and will not, and the consummation
                      by it of the Transaction will not, constitute or result
                      in: (1) a breach or violation of, or a default under, its
                      certificate of incorporation or bylaws, or the comparable
                      governing instruments of any of its Subsidiaries; (2) a
                      breach or violation of, or a default under, or the
                      acceleration of or the creation of a Lien (with or without
                      the giving of notice, the lapse of time or both) under,
                      any provision of any material agreement, lease, contract,
                      note, mortgage, indenture, arrangement or other obligation
                      ("Contracts") of it or any of its Subsidiaries; or (3) a
                      violation of any law, rule, ordinance or regulation or
                      judgment, decree, order, award, or governmental or
                      non-governmental permit or license to which it or any of
                      its Subsidiaries is subject; or (4) any change in the
                      rights or obligations of any party under any of the
                      Contracts. A list of all consents it or its Subsidiaries
                      must obtain from third parties under any Contracts before
                      consummation of the Transaction is contained in Schedule
                      3.1.13(b)-G (in the case of Glacier), or Schedule
                      3.1.13(b)-W (in the case of WesterFed).

        3.1.14 ASSET CLASSIFICATION.

               (a)    An accurate and complete list as of August 31, 2000,
                      except as otherwise expressly noted in the appropriate
                      Schedule, and separated by category of classification or
                      criticism ("Asset Classification"), of the aggregate
                      amounts of loans, extensions of credit and other assets of
                      it and its Subsidiaries that have been criticized or
                      classified by any Governmental Entity, by any outside
                      auditor, or by any internal audit, is set forth in
                      Schedule 3.1.14(a)-G (in the case of Glacier) or Schedule
                      3.1.14(a)-W (in the case of WesterFed).

               (b)    Except as shown on such Schedules, no amounts of loans,
                      extensions of credit or other assets that have been
                      classified or criticized as of August 31, 2000 by any
                      representative of any Governmental Entity as "Other Assets
                      Especially Mentioned," "Substandard," "Doubtful," "Loss"
                      or words of similar effect are excluded from the amounts
                      disclosed in the Asset Classification, other than amounts
                      of loans, extensions of credit or other assets that were
                      paid off or charged off by it or its Subsidiaries before
                      the date of this Agreement.

        3.1.15 INVESTMENTS. All investments (except investments in securities
               issued by federal state or local government or any subdivision or
               agency thereof and investments in Subsidiaries) made by it or any
               of its Subsidiaries which represent an ownership

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               interest of more than 5% in any corporation, company,
               partnership, or other entity are listed on Schedule 3.1.15-G (in
               the case of Glacier) or Schedule 3.1.15-W (in the case of
               WesterFed). All investments comply in all material respects with
               all applicable laws and regulations.

        3.1.16 PROPERTIES.

               (a)    A complete list of all banking offices of Glacier and
                      WesterFed appears in Schedule 3.1.16(a)-G or Schedule
                      3.1.16(a)-W, respectively.

               (b)    Except as disclosed or reserved against in its Financial
                      Statements or in Schedule 3.1.16(b)-G (in the case of
                      Glacier) or Schedule 3.1.16(b)-W in the case of
                      WesterFed), it and its Subsidiaries have good and
                      marketable title, free and clear of all Liens (other than
                      Liens for current taxes not yet delinquent or pledges to
                      secure deposits) to all of the properties and assets,
                      tangible or intangible, reflected in its Reports as being
                      owned by it or its Subsidiaries as of the date of this
                      Agreement.

               (c)    To the knowledge of its Executive Officers, all buildings
                      and all fixtures, equipment and other property and assets
                      that are material to its business on a consolidated basis
                      and are held under leases or subleases by it or its
                      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).

               (d)    A list of all its and its Subsidiaries' existing branches
                      and offices and all new branches or offices it or any of
                      its Subsidiaries' has applied to establish or purchase,
                      along with the cost to establish or purchase those
                      branches, appears in Schedule 3.1.16(d)-G (in the case of
                      Glacier) or Schedule 3.1.16(d)-W (in the case of
                      WesterFed).

        3.1.17 ANTI-TAKEOVER PROVISIONS. Each party has taken all action
               required to be taken by it in order to exempt this Agreement and
               the Stock Option Agreement, and the transactions contemplated
               hereby and thereby from, and this Agreement, the Stock Option
               Agreement and the transactions contemplated hereby and thereby
               are exempt from, the requirements of any "moratorium" "control
               share", "fair price", "affiliate transaction", "business
               combination" or other anti-takeover laws and regulations of any
               state (collectively, "Takeover Laws"), including the State of
               Delaware, or any takeover-related provisions of its certificate
               of incorporation or bylaws.

        3.1.18 COMPLIANCE WITH LAWS. Except as disclosed in Schedule 3.1.18-G
               (with respect to Glacier) or Schedule 3.1.18-W (with respect to
               WesterFed), it and each of its Subsidiaries:

               (a)    are in compliance, in the conduct of their businesses, in
                      all material respects with all applicable federal, state,
                      local, and foreign statutes, laws,

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                      regulations, ordinances, rules, judgments, orders or
                      decrees, including the Bank Secrecy Act, the Truth in
                      Lending Act, the Equal Credit Opportunity Act, the Fair
                      Housing Act, the Community Reinvestment Act, the Home
                      Mortgage Disclosure Act and all applicable fair lending
                      laws or other laws relating to discrimination;

               (b)    have all permits, licenses, certificates of authority,
                      orders, and approvals of, and have made all filings,
                      applications, and registrations with, federal, state,
                      local, and foreign governmental or regulatory bodies
                      (including the Federal Reserve, FDIC and OTS) that are
                      required in order to permit them to carry on their
                      businesses as they are presently conducted;

               (c)    have received since January 1, 1997, no notification or
                      communication from any Governmental Entity (including any
                      bank, insurance and securities regulatory authorities) or
                      its staff (1) asserting a failure to comply with any of
                      the statutes, regulations or ordinances that such
                      Governmental Entity enforces, (2) threatening to revoke
                      any license, franchise, permit or governmental
                      authorization, or (3) threatening or contemplating
                      revocation or limitation of, or that would have the effect
                      of revoking or limiting, FDIC deposit insurance (nor, to
                      the knowledge of its Executive Officers, do any grounds
                      for any of the foregoing exist); and

               (d)    are not required to notify any federal banking agency
                      before adding directors to its board of directors or
                      employing senior executives.

        3.1.19 LITIGATION. Except as disclosed in its Financial Statements or in
               Schedule 3.1.19-G (in the case of Glacier) or Schedule 3.1.19-W
               (in the case of WesterFed), before the date of this Agreement:

               (a)    no criminal or administrative investigations or hearings,
                      before or by any Governmental Entity, or civil, criminal
                      or administrative actions, suits, claims or proceedings,
                      before or by any person (including any Governmental
                      Entity) are pending or, to the knowledge of its Executive
                      Officers, threatened, against it or any of its
                      Subsidiaries (including under the Truth in Lending Act,
                      the Equal Credit Opportunity Act, the Fair Housing Act,
                      the Community Reinvestment Act, the Home Mortgage
                      Disclosure Act, or any other fair lending law or other law
                      relating to discrimination); and

               (b)    neither it 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 the FDIC) or the supervision or regulation of
                      it or of its Subsidiaries, and neither it nor any of its
                      Subsidiaries has been advised by any such

                                       21
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                      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.

        3.1.20 TAXES.

               (a)    For purposes of this Subsection, "Tax" includes any tax or
                      similar governmental charge, impost, or levy (including
                      income taxes, franchise taxes, transfer taxes or fees,
                      stamp taxes, sales taxes, use taxes, excise taxes, ad
                      valorem taxes, 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
                      subdivision or agency of the United States.

               (b)    All Tax returns, including all information returns, it and
                      its Subsidiaries are required to file have been timely
                      filed or requests for extensions have been timely filed.
                      If any extensions were filed, they have been or will be
                      granted by Closing and will not have expired prior to
                      Closing. All filed returns are complete and accurate in
                      all material respects.

               (c)    Except as disclosed in its most recent Financial
                      Statements:

                      (1)    all Taxes attributable to it or any of its
                             Subsidiaries that were due or payable (without
                             regard to whether such taxes have been assessed) as
                             of the date of its most recent Financial Statements
                             have been paid in full or have been adequately
                             provided for in such Financial Statements in
                             accordance with GAAP;

                      (2)    adequate provision in accordance with GAAP has been
                             made in its most recent Financial Statements
                             relating to all Taxes for the periods covered by
                             such Financial Statements that were not yet due and
                             payable as of the date thereof, regardless of
                             whether the liability for such Taxes is disputed;

                      (3)    as of the date of this Agreement and except as
                             disclosed in its Financial Statements, there is no
                             outstanding audit examination, deficiency, refund,
                             litigation or outstanding waiver or agreement
                             extending the applicable statute of limitations for
                             the assessment or collection of any Taxes for any
                             period with respect to any Taxes of it or its
                             Subsidiaries;

                      (4)    all Taxes with respect to completed and settled
                             examinations or concluded litigation relating to it
                             or any of its Subsidiaries have been paid in full
                             or have been adequately provided for in its most
                             recent Financial Statements (in accordance with
                             GAAP);

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   24

                      (5)    neither it nor any of its Subsidiaries is a party
                             to a Tax sharing or similar agreement or any
                             agreement under which it or any of its Subsidiaries
                             has indemnified any party (other than it or one of
                             its Subsidiaries) with respect to Taxes; and

                      (6)    proper and accurate amounts have been (or will be)
                             withheld from all employees (and timely paid to the
                             appropriate Governmental Entity or set aside in an
                             account for these purposes) for all periods prior
                             to the Effective Date in compliance with all Tax
                             withholding provisions of applicable federal,
                             state, local and foreign laws (including income,
                             social security and employment tax withholding for
                             all types of compensation).

        3.1.21 INSURANCE. It and each of its Subsidiaries maintain insurance
               with insurers which in its best judgment are sound and reputable,
               on their respective assets, and upon their respective businesses
               and operations, against loss or damage, risks, hazards and
               liabilities as in their judgment they deem appropriate. It and
               its Subsidiaries maintain in effect all insurance required to be
               carried by law or by any agreement by which they are bound, and
               also maintain directors' and officers' liability policies with
               coverage levels consistent with their best judgment. All material
               claims and notices under all policies of insurance maintained by
               it and its Subsidiaries have been filed in due and timely
               fashion. All directors' and officers' liability insurance
               policies and other insurance policies maintained by it or its
               Subsidiaries are listed in Schedule 3.1.21-G (in the case of
               Glacier) or in Schedule 3.1.21-W (in the case of WesterFed).

        3.1.22 LABOR MATTERS. Neither it nor any of its Subsidiaries is a party
               to, or is bound by, any collective bargaining agreement, contract
               or other agreement or understanding with any labor union or labor
               organization. Neither it nor any of its Subsidiaries is the
               subject of any proceeding: (1) asserting that it or any of its
               Subsidiaries has committed an unfair labor practice or (2)
               seeking to compel it or any of its Subsidiaries to bargain with
               any labor organization as to wages or conditions of employment.
               No strike involving it or any of its Subsidiaries is pending or,
               to the knowledge of its Executive Officers, threatened. Its
               Executive Officers are not aware of any activity involving its or
               any of its Subsidiaries' employees seeking to certify a
               collective bargaining unit or engaging in any other
               organizational activity.

        3.1.23 EMPLOYEE BENEFITS.

               (a)    For purposes of this Agreement, "Plan" or "Plans",
                      individually or collectively, means any "employee benefit
                      plan," as defined in Section 3(3) of the Employee
                      Retirement Income Security Act of 1974, ("ERISA"), as
                      amended, maintained by it or any of its Subsidiaries, as
                      the case may be. No Plan is a multi employer plan within
                      the meaning of Section 3(37) of ERISA, other than the
                      Financial Institutions Retirement Fund Plan (the "FIRF
                      Plan") sponsored by WesterFed and its Subsidiaries.

                                       23
   25

               (b)    A list, as of the date of this Agreement, of (1) all
                      Plans, stock purchase plans, restricted stock and stock
                      option plans, and other deferred compensation
                      arrangements, (2) all other material employee benefit
                      plans that cover employees or former employees of it and
                      its Subsidiaries (its "Compensation Plans") is set forth
                      in Schedule 3.1.23(b)-G (in the case of Glacier) or
                      Schedule 3.1.23(b)-W (in the case of WesterFed). True and
                      complete copies of the Compensation Plans (and, as
                      applicable, copies of summary plan descriptions, annual
                      reports on Form 5500, actuarial reports and reports under
                      Financial Accounting Standards Board Statement No. 106
                      relating to such Compensation Plans) covering current or
                      former employees or directors of it or its Subsidiaries
                      (its "Employees"), including Plans and related amendments,
                      have been made available to the other party.

               (c)    Each of its Plans that is intended to be a pension, profit
                      sharing, stock bonus, thrift, savings or employee stock
                      ownership plan that is qualified under IRC Section 401(a)
                      ("Qualified Plans") has been determined by the Internal
                      Revenue Service to qualify under IRC Section 401(a), or an
                      application for determination of such qualification has
                      been timely made to the Internal Revenue Service prior to
                      the end of the applicable remedial amendment period under
                      IRC Section 401(b), and, to the knowledge of its Executive
                      Officers, there exist no circumstances likely to
                      materially adversely affect the qualified status of any
                      such Qualified Plan. All such Qualified Plans established
                      or maintained by it or any of its Subsidiaries or to which
                      it or any of its Subsidiaries contribute are in compliance
                      in all material respects with all applicable requirements
                      of ERISA, and are in compliance in all material respects
                      with all applicable IRC requirements (including
                      qualification and non-discrimination requirements in
                      effect as of the Effective Time) for obtaining the Tax
                      benefits the IRC thereupon permits with respect to such
                      Qualified Plans. All accrued contributions and other
                      payments required to be made by it or any of its
                      Subsidiaries have been made or reserves adequate for such
                      purposes as of such date have been set aside therefor and
                      reflected in its Financial Statements. Neither it nor any
                      of its Subsidiaries is in material default in performing
                      any of its respective contractual obligations under any of
                      Plans or any related trust agreement or insurance
                      contract, and there are no material outstanding
                      liabilities of any such Plan other than liabilities for
                      benefits to be paid to participants in such Plan and their
                      beneficiaries in accordance with the terms of such Plan.

               (d)    Under each Qualified Plan that is a defined benefit plan,
                      as of the last day of the most recent plan year, the
                      actuarially determined present value of all "benefit
                      liabilities", within the meaning of Section 4001(a)(16) of
                      ERISA (as determined on the basis of the actuarial
                      assumptions contained in the Plan's most recent actuarial
                      valuation) did not exceed the then current value of the
                      assets of such Plan, and there has been no material change
                      in

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                      the financial condition of such Plan since the last day of
                      the most recent plan year.

               (e)    There is no pending or, to the knowledge of its Executive
                      Officers, threatened litigation or pending claim (other
                      than benefit claims made in the ordinary course) by or on
                      behalf of or against any of the Plans (or with respect to
                      the administration of any of the such Plans) now or
                      heretofore maintained by it or any of its Subsidiaries
                      which allege violations of applicable state or federal law
                      which are reasonably likely to result in a liability on
                      the part of it or any of its Subsidiaries or any such
                      Plan.

               (f)    It and its Subsidiaries and all other persons having
                      fiduciary or other responsibilities or duties with respect
                      to any Plan are and have since the inception of each such
                      Plan been in substantial compliance with, and each such
                      Plan is and has been operated in all material respects in
                      accordance with, its provisions and in substantial
                      compliance with the applicable laws, rules and regulations
                      promulgated by the Department of Labor, the Pension
                      Benefit Guaranty Corporation ("PBGC") and the Internal
                      Revenue Service under ERISA, the IRC or any other
                      applicable law. Notwithstanding the foregoing, no
                      representation is made with respect to compliance by a
                      third party insurance company. No "reportable event" (as
                      defined in Section 4043(b) of ERISA) has occurred with
                      respect to any Qualified Plan. Neither it, any Subsidiary
                      nor any Plan has incurred or is reasonably likely to incur
                      any liability for any "prohibited transactions" (as
                      defined in Section 406 of ERISA or IRC Section 4975(c)),
                      or any material liability under Section 601 of ERISA or
                      IRC Section 4980B.

               (g)    It and its Subsidiaries have filed or caused to be filed,
                      and will continue to file or cause to be filed, in a
                      timely manner all filings pertaining to each Plan with the
                      Internal Revenue Service, the PBGC, the Department of
                      Labor, and as prescribed by the IRC or ERISA, or
                      regulations issued thereunder. All such filings, as
                      amended, were complete and accurate in all material
                      respects as of the dates of such filings, and there were
                      no misstatements or omissions in any such filing which
                      would be material to its financial condition on a
                      consolidated basis. Notwithstanding the foregoing, no
                      representation is made with respect to filings by a third
                      party insurance company.

               (h)    Except as disclosed in its Financial Statements, neither
                      it nor its Subsidiaries have any obligations for retiree
                      health and life benefits.

               (i)    No restrictions exist on the rights of it or its
                      Subsidiaries to amend or terminate any Plan without
                      incurring liability under the Plan in addition to normal
                      liabilities for benefits, except no amendment will be
                      permitted to alter the vested rights and benefits of
                      participants and termination will result in all
                      participant benefits becoming fully vested.

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               (j)    Except as disclosed in its Financial Statements or as
                      provided in a Schedule to this Agreement, the transactions
                      contemplated by this Agreement and the Stock Option
                      Agreement will not result in: (1) vesting, acceleration,
                      or increase of any amounts payable under any Compensation
                      Plan, (2) any material increase in benefits under any
                      Compensation Plan or (3) payment of any severance or
                      similar compensation under any Compensation Plan.

        3.1.24 ENVIRONMENTAL MATTERS.

               (a)    For purposes of this Subsection 3.1.24, the following
                      definitions apply:

                      (1)    "Subject Property" with respect to a party means
                             (i) all real property at which the businesses of it
                             or its Subsidiaries have been conducted, and any
                             property where under any Environmental Law it or
                             any of its Subsidiaries is deemed to be the owner
                             or operator of the property; (ii) any facility in
                             which it or its Subsidiaries participates in the
                             management, including participating in the
                             management of the owner or operator of the
                             property; and (iii) all other real property that,
                             for purposes of any Environmental Law, it or any of
                             its Subsidiaries otherwise could be deemed to be an
                             owner or operator of or as otherwise having control
                             over.

                      (2)    "Environmental Laws" means any federal, state,
                             local or foreign law, regulation, agency policy,
                             order, decree, judgment, judicial opinion, or any
                             agreement with any Governmental Entity, presently
                             in effect or subsequently adopted relating to: (i)
                             the manufacture, generation, transport, use,
                             treatment, storage, recycling, disposal, release,
                             threatened release or presence of Hazardous
                             Substances, or (ii) the preservation, restoration
                             or protection of the environment, natural resources
                             or human health.

                      (3)    "Hazardous Substances" means any hazardous or toxic
                             substance, material or waste that is regulated by
                             any local governmental authority, any state
                             government or the United States Government,
                             including any material or substance that is (a)
                             defined as a "hazardous substance" in 42 USC
                             Section 9601(14), (b) defined as a "pollutant or
                             contaminant" in 42 USC Section 9604(a)(2), or (c)
                             defined as a "hazardous waste" in 42 USC Section
                             6903(5).

               (b)    It and each of its Subsidiaries and the Subject Property
                      are, and have been, in compliance with all applicable
                      Environmental Laws, and no circumstances exist that with
                      the passage of time or the giving of notice would be
                      reasonably likely to result in noncompliance with such
                      Environmental Laws.

                                       26
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               (c)    None of the following, and no reasonable basis for any of
                      the following, exists: pending or threatened claims,
                      actions, investigations, notices of non-compliance,
                      information requests or notices of potential
                      responsibility or proceedings involving it or any of its
                      Subsidiaries or any Subject Property, relating to:

                      (1)    an asserted liability of it or any of its
                             Subsidiaries or any prior owner, occupier or user
                             of Subject Property under any applicable
                             Environmental Law or the terms and conditions of
                             any permit, license, authority, settlement,
                             agreement, decree or other obligation arising under
                             any applicable Environmental Law;

                      (2)    the handling, storage, use, transportation, removal
                             or disposal of Hazardous Substances;

                      (3)    the actual or threatened discharge, release or
                             emission of Hazardous Substances from, on or under
                             or within Subject Property into the air, water,
                             surface water, ground water, land surface or
                             subsurface strata; or

                      (4)    personal injuries or damage to property related to
                             or arising out of exposure to Hazardous Substances.

               (d)    No storage tanks underground or otherwise are present on
                      the Subject Property or, if present, none of such tanks
                      are leaking and each of them is in full compliance with
                      all applicable Environmental Laws. With respect to any
                      Subject Property, it and its Subsidiaries do not own,
                      possess or control any PCBs, PCB-contaminated fluids,
                      wastes or equipment, or any asbestos or
                      asbestos-containing material which is dangerous to the
                      health of human beings. No Hazardous Substances have been
                      used, handled, stored, discharged, released or emitted, or
                      are threatened to be discharged, released or emitted, at
                      or on any Subject Property, except for those types and
                      quantities of Hazardous Substances typically used in an
                      office environment and that have not created conditions
                      requiring remediation by it or any of its Subsidiaries
                      under any applicable Environmental Law.

               (e)    Except for the investigation or monitoring by the
                      Environmental Protection Agency or similar state agencies
                      in the ordinary course, no part of the Subject Property
                      has been or is scheduled for investigation or monitoring
                      under any applicable Environmental Law.

3.2     EXCEPTIONS TO REPRESENTATIONS.

        3.2.1  DISCLOSURE OF EXCEPTIONS. Each exception set forth in a Schedule
               is disclosed only for purposes of the representations referenced
               in that exception; but the following conditions apply:

                                       27
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               (a)    no exception is required to be set forth in a Schedule if
                      its absence would not result in the related representation
                      or warranty being found untrue or incorrect under the
                      standard established by Subsection 3.2.2; and

               (b)    the mere inclusion of an exception in a Schedule is not an
                      admission by a party that such exception represents a
                      material fact, material set of facts, or material event or
                      would result in a Material Adverse Effect with respect to
                      that party.

        3.2.2  NATURE OF EXCEPTIONS. No representation contained in Section 3.1
               will be found untrue or incorrect and no party to this Agreement
               will have breached a representation or warranty due to the
               following: the existence of any fact, set of facts, or event, if
               the fact or event individually or taken together with other facts
               or events would not, or, in the case of Subsection 3.1.19, is not
               reasonably likely to, have a Material Adverse Effect with respect
               to such party.

        3.2.3  MATERIAL ADVERSE EFFECT. For purposes of this Agreement,
               "Material Adverse Effect" with respect to a party means an effect
               that: (1) is materially adverse to the business, financial
               condition, results of operations or prospects of a party and its
               Subsidiaries taken as a whole; (2) significantly and adversely
               affects the ability of a party to consummate the transactions
               contemplated by this Agreement by the Termination Date or to
               perform its material obligations under this Agreement; or (3)
               enables any persons to prevent the consummation by the
               Termination Date of the transactions contemplated by this
               Agreement. No Material Adverse Effect will be deemed to have
               occurred on the basis of any effect resulting from actions or
               omissions of a party taken with the explicit prior consent of the
               other party to this Agreement.

                                    SECTION 4
                            CONDUCT AND TRANSACTIONS
                                 BEFORE CLOSING

4.1     CONDUCT OF WESTERFED'S BUSINESS BEFORE CLOSING. Before Closing,
        WesterFed promises as follows:

        4.1.1  AVAILABILITY OF WESTERFED'S BOOKS, RECORDS AND PROPERTIES.

               (a)    WesterFed will make its, and cause its Subsidiaries to
                      make their, books, records, properties, contracts and
                      documents available at all reasonable times to Glacier and
                      its counsel, accountants and other representatives. These
                      items will be open for inspection, audit and direct
                      verification of: (1) loan or deposit balances, (2)
                      collateral receipts and (3) any other transactions or
                      documentation Glacier may find reasonably relevant to the
                      Transaction. WesterFed will, and will cause its
                      Subsidiaries to, cooperate fully in any such inspection,
                      audit, or direct verification procedures, and WesterFed
                      will, and will cause its Subsidiaries to, make available
                      all information reasonably required by or on behalf of
                      Glacier.

                                       28
   30

               (b)    At Glacier's request, WesterFed will request any third
                      parties involved in the preparation or review of (1)
                      WesterFed Financial Statements, (2) Subsequent WesterFed
                      Financial Statements, or (3) any audits of WesterFed's
                      operations, loan portfolios or other assets, to disclose
                      to Glacier the work papers or any similar materials
                      related to these items (to the extent permitted by
                      WesterFed's outside auditors).

        4.1.2  ORDINARY AND USUAL COURSE. WesterFed will, and will cause its
               Subsidiaries to, conduct business only in the ordinary and usual
               course and, without the prior written consent of Glacier (which
               consent shall not be unreasonably withheld or delayed with
               respect to subsections (g), (h) and (j) below), will not, and
               will not allow its Subsidiaries to, do any of the following:

               (a)    effect any stock split or other recapitalization with
                      respect to WesterFed Common Stock or the capital stock of
                      a WesterFed Subsidiary, or issue, pledge, redeem, or
                      encumber in any way any shares of WesterFed's or a
                      WesterFed Subsidiary's capital stock, except shares issued
                      pursuant to the exercise of WesterFed Options; or grant
                      any option or other right to shares of WesterFed's or a
                      WesterFed Subsidiary's capital stock other than pursuant
                      to the Stock Option Agreement or as otherwise provided in
                      an agreement entered into by the parties;

               (b)    declare or pay any dividend, or make any other
                      distribution, either directly or indirectly, with respect
                      to WesterFed Common Stock or the capital stock of any
                      WesterFed Subsidiary, other than dividends or
                      distributions from the Bank to WesterFed, and regular
                      quarterly cash dividends on WesterFed Common Stock and a
                      bonus dividend on WesterFed Common Stock in an aggregate
                      amount not to exceed $325,000 to be declared in December,
                      2000 provided; however, the declaration and payment of the
                      last dividend (not the bonus dividend) by WesterFed prior
                      to the Effective Date shall be coordinated with Glacier in
                      a manner to preclude any loss or duplication of dividends
                      received by the holders of WesterFed Common Stock;

               (c)    acquire, sell, transfer, assign, encumber or otherwise
                      dispose of assets or make any commitment with respect to
                      its assets other than in the ordinary and usual course of
                      business;

               (d)    solicit or accept deposit accounts of a different type
                      from accounts previously accepted by it or at rates
                      materially in excess of rates previously paid by it,
                      except to reflect changes in prevailing interest rates in
                      the places where it does business, or incur any
                      indebtedness for borrowed funds greater than $10 million
                      (except for borrowings from the Federal Home Loan Bank in
                      the ordinary course of business and consistent with past
                      practices);

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               (e)    acquire an ownership interest or a leasehold interest in
                      any real property, whether by foreclosure or otherwise,
                      without: (1) making an appropriate environmental
                      evaluation in advance of obtaining the interest and
                      providing the evaluation to Glacier, except no
                      environmental evaluation will be required with respect to
                      one to four family residential property and (2) providing
                      Glacier with at least 30 days' advance written notice
                      before it acquires the interest;

               (f)    subject to the exercise of its board of directors'
                      fiduciary duties and on the advice of counsel, enter into
                      or recommend the adoption by WesterFed's shareholders of
                      any agreement involving a possible merger or other
                      business combination or asset sale by WesterFed not
                      involving the Transaction;

               (g)    enter into, renew, or terminate any contracts (including
                      real property leases and data or item processing
                      agreements) with or for a term of one-year or more, except
                      for its contracts of deposit and agreements to lend money
                      not otherwise restricted under this Agreement and (1)
                      entered into in the ordinary course of business, (2)
                      consistent with past practices, and (3) providing for not
                      less (in the case of loans) or more (in the case of
                      deposits) than prevailing market rates of interest in the
                      places where it does business;

               (h)    enter into or amend any contract (other than contracts for
                      deposits or agreements to lend money not otherwise
                      restricted by this Agreement) calling for a payment by it
                      of more than $100,000, unless the contract may be
                      terminated without cause or penalty upon 30 days notice or
                      less;

               (i)    enter into any personal services contract with any person
                      or firm, except contracts, agreements, or arrangements for
                      legal, accounting, investment advisory, or tax services
                      entered into directly to facilitate the Transaction;

               (j)    (1) sell any securities, whether held for investment or
                      sale, other than in the ordinary course of business or
                      sell any securities, whether held for investment or sale,
                      even in the ordinary course of business, if the aggregate
                      gain realized from all sales after the date of this
                      Agreement would be more than $100,000 or (2) transfer any
                      investment securities between portfolios of securities
                      available for sale and portfolios of securities to be held
                      to maturity;

               (k)    amend its certificate of incorporation, bylaws, or other
                      formation agreements, or convert its charter or form of
                      entity;

               (l)    implement or adopt any material changes in its operations,
                      policies, or procedures, including loan loss reserve
                      policies, unless the changes are requested by Glacier or
                      are necessary or advisable, on the advice of legal

                                       30
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                      counsel, to comply with applicable laws, regulations, or
                      regulatory policies;

               (m)    implement or adopt any change in its accounting
                      principles, practices or methods, other than as may be
                      required (1) by GAAP, (2) for tax purposes, or (3) to take
                      advantage of any beneficial tax or accounting methods;

               (n)    other than in accordance with binding commitments existing
                      on the date of this Agreement, make any capital
                      expenditures for fixed assets in excess of $50,000 per
                      project or related series of projects or $100,000 in the
                      aggregate; or

               (o)    enter into any other transaction or make any expenditure
                      other than in the ordinary and usual course of its
                      business and made or entered into in a manner consistent
                      with its well-established practices or as required by this
                      Agreement, except for the expenses to be incurred by it
                      relating to this Agreement and the Transaction, which
                      expenses to Putnam, Lovell and Silver, Freedman & Taff,
                      shall not exceed the amounts set forth in their engagement
                      letters included as attachments to Schedule 3.1.7(a)-W.

        4.1.3  CONDUCT REGARDING REPRESENTATIONS. WesterFed will not do or cause
               to be done anything that would cause any representation made by
               it in Section 3.1 to be untrue at Closing, except as consented to
               in writing by Glacier.

        4.1.4  MAINTENANCE OF PROPERTIES. WesterFed will, and will cause each of
               its Subsidiaries to, maintain its properties and equipment (and
               related insurance or its equivalent) in accordance with good
               business practice.

        4.1.5  PRESERVATION OF BUSINESS ORGANIZATION. WesterFed will, and will
               cause each of its Subsidiaries to, use all reasonable efforts to:

               (a)    preserve its business organization;

               (b)    retain the services of present employees; and

               (c)    preserve the goodwill of suppliers, customers and others
                      with whom it has business relationships.

        4.1.6  SENIOR MANAGEMENT. WesterFed will obtain Glacier's approval
               before making any change, including hiring of replacements, with
               respect to present management personnel having the rank of
               vice-president or higher at WesterFed or the Bank.

        4.1.7  COMPENSATION AND EMPLOYMENT AGREEMENTS. WesterFed will not permit
               any increase in the current or deferred compensation payable or
               to become payable by WesterFed or the Bank to any of its
               directors, officers, employees, agents, or consultants other than
               normal increments in compensation in accordance with WesterFed's
               or the Bank's past practices with respect to the timing and
               amounts of such increments, Christmas bonuses and incentive
               bonuses for calendar year

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               2000. Without the prior written approval of Glacier and except as
               contemplated in this Agreement, WesterFed will not (and will not
               permit the Bank to) commit to, execute or deliver any employment
               agreement with any party not terminable upon two weeks' notice
               and without expense.

        4.1.8  UPDATE OF FINANCIAL STATEMENTS. WesterFed will promptly deliver
               its Financial Statements to Glacier. WesterFed will deliver
               Subsequent WesterFed Financial Statements to Glacier by the
               earlier of: (1) 5 days after WesterFed has prepared and issued
               them or (2) 60 days after year-end for year-end statements and 30
               days after the end of the quarter for quarterly statements. The
               Subsequent WesterFed Financial Statements:

               (a)    will be prepared from the books and records of WesterFed
                      and its Subsidiaries;

               (b)    will present fairly the consolidated financial position
                      and consolidated operating results of WesterFed at the
                      times indicated and for the periods covered;

               (c)    will be prepared in accordance with GAAP (except for the
                      absence of notes) and with the regulations promulgated by
                      applicable regulatory authorities, to the extent then
                      applicable, subject to normal year-end adjustments; and

               (d)    will reflect all WesterFed's consolidated liabilities,
                      contingent or otherwise, on the respective dates and for
                      the respective periods covered, except for liabilities:
                      (1) not required to be so reflected in accordance with
                      GAAP or (2) not significant in amount.

        4.1.9  NO SOLICITATION. Neither WesterFed nor any of its officers,
               directors or any other person acting at the direction of
               WesterFed or the Bank, directly or indirectly, will solicit,
               encourage, entertain, or facilitate any other proposals or
               inquiries for an acquisition of the shares or assets of WesterFed
               or any of its Subsidiaries or enter into discussions concerning
               any such acquisition, except as WesterFed's board of directors
               deems necessary to comply with its fiduciary duties to
               shareholders. Neither WesterFed nor any person acting on its
               behalf will make available to any person not affiliated with
               WesterFed or Glacier any information about WesterFed or its
               Subsidiaries that is not either routinely made available to the
               public generally or required by law, except as WesterFed's board
               of directors deems necessary to comply with its fiduciary duties
               to shareholders.

4.2     CONDUCT OF GLACIER'S BUSINESS BEFORE CLOSING. Before Closing, Glacier
        promises as follows:

        4.2.1  AVAILABILITY OF GLACIER'S BOOKS, RECORDS AND PROPERTIES.

               (a)    Glacier will make its, and cause its Subsidiaries to make
                      their, books, records, properties, contracts and documents
                      available at all reasonable

                                       32
   34

                      times to WesterFed and its counsel, accountants and other
                      representatives. These items will be open for inspection,
                      audit and direct verification of: (1) loan or deposit
                      balances, (2) collateral receipts and (3) any other
                      transactions or documentation WesterFed may find
                      reasonably relevant to the Transaction. Glacier will, and
                      will cause its Subsidiaries to, cooperate fully in any
                      such inspection, audit, or direct verification procedures,
                      and Glacier will, and will cause its Subsidiaries to, make
                      available all information reasonably required by or on
                      behalf of WesterFed.

               (b)    At WesterFed's request, Glacier will request any third
                      parties involved in the preparation or review of (1)
                      Glacier Financial Statements, (2) Subsequent Glacier
                      Financial Statements, or (3) any audits of Glacier's
                      operations, loan portfolios or other assets, to disclose
                      to WesterFed the work papers or any similar materials
                      related to these items (to the extent permitted by
                      Glacier's outside auditors).

        4.2.2  CERTAIN PROHIBITED ACTIVITIES.

               (a)    Glacier shall not declare or pay any cash dividend, or
                      make any other cash distribution, with respect to Glacier
                      Common Stock, other than its regular quarterly dividend in
                      an amount not to exceed $0.15 per share and special
                      dividends consistent with past practice, in an amount not
                      to exceed $0.05 per share; and

               (b)    neither Glacier nor any of its Subsidiaries will acquire
                      any assets (including the capital stock of, or ownership
                      interest in, another entity) outside the ordinary course
                      of business, except that Glacier and/or its financial
                      institution Subsidiaries may acquire the assets and
                      liabilities of or capital stock of one or more financial
                      institutions so long as the deposit liabilities acquired
                      or assumed in all such transactions do not exceed $200
                      million in the aggregate; provided the foregoing shall not
                      apply to the purchase of branches, deposits and associated
                      loan assets from Wells Fargo and First Security Bank, N.A.
                      on terms and conditions consistent with those previously
                      disclosed by Glacier to WesterFed.

        4.2.3  CONDUCT REGARDING REPRESENTATIONS. Glacier will not do or cause
               to be done anything that would cause any representation made by
               it in Section 3.1 to be untrue at Closing, except as consented to
               in writing by WesterFed.

        4.2.4  MAINTENANCE OF PROPERTIES. Glacier will, and shall cause each of
               its Subsidiaries to, maintain its properties and equipment (and
               related insurance or its equivalent) in accordance with good
               business practice.

        4.2.5  PRESERVATION OF BUSINESS ORGANIZATION. Glacier will, and shall
               cause each of its Subsidiaries to, use all reasonable efforts to:

               (a)    preserve its business organization;

                                       33
   35

               (b)    retain the services of present employees; and

               (c)    preserve the goodwill of suppliers, customers and others
                      with whom it has business relationships.

        4.2.6  UPDATE OF FINANCIAL STATEMENTS. Glacier will promptly deliver its
               Financial Statements to WesterFed. Glacier will deliver
               Subsequent Glacier Financial Statements to WesterFed by the
               earlier of: (1) 5 days after WesterFed has prepared and issued
               them or (2) 60 days after year-end for year-end statements and 30
               days after the end of the quarter for quarterly statements. The
               Subsequent Glacier Financial Statements:

               (a)    will be prepared from the books and records of Glacier and
                      its Subsidiaries;

               (b)    will present fairly the consolidated financial position
                      and consolidated operating results of Glacier at the times
                      indicated and for the periods covered;

               (c)    will be prepared in accordance with GAAP (except for the
                      absence of notes) and with the regulations promulgated by
                      applicable regulatory authorities, to the extent then
                      applicable, subject to normal year-end adjustments; and

               (d)    will reflect all Glacier's consolidated liabilities,
                      contingent or otherwise, on the respective dates and for
                      the respective periods covered, except for liabilities:
                      (1) not required to be so reflected in accordance with
                      GAAP or (2) not significant in amount.

4.3     REGISTRATION STATEMENT.

        4.3.1  PREPARATION OF REGISTRATION STATEMENT.

               (a)    A Registration Statement on Form S-4 ("Registration
                      Statement") will be filed by Glacier with the SEC under
                      the Securities Act for registration of the shares of
                      Glacier Common Stock to be issued in the Transaction, and
                      the parties will prepare a related prospectus/proxy
                      statement ("Prospectus/Proxy Statement") to be mailed
                      together with any amendments and supplements to
                      shareholders of Glacier and WesterFed.

               (b)    The parties will cooperate with each other in preparing
                      the Registration Statement and Prospectus/Proxy Statement,
                      and will use their best efforts to: (1) file the
                      Registration Statement with the SEC within 45 days
                      following the date of this Agreement, and (2) obtain the
                      clearance of the SEC, any appropriate state securities
                      regulators and any other required regulatory approvals, to
                      issue the Prospectus/Proxy Statement.

                                       34
   36

               (c)    Nothing will be included in the Registration Statement or
                      the Prospectus/Proxy Statement or any proxy solicitation
                      materials with respect to any party to this Agreement or
                      its Subsidiaries unless approved by that party, which
                      approval will not be unreasonably withheld.

               (d)    Glacier will pay all costs associated with the preparation
                      by Glacier's counsel and the filing of the Registration
                      Statement and the Prospectus/Proxy Statement. WesterFed
                      will pay all costs associated with the review and
                      preparation by WesterFed's counsel of the Registration
                      Statement and the Prospectus/Proxy Statement. Glacier and
                      WesterFed will each pay the costs associated with the
                      printing and mailing of the Prospectus/Proxy Statement to
                      its shareholders and any other direct costs incurred by it
                      in connection with the Prospectus/Proxy Statement.

        4.3.2  SUBMISSION TO SHAREHOLDERS.

               (a)    Glacier and WesterFed will submit the Prospectus/Proxy
                      Statement to, and will use their best efforts in good
                      faith to obtain the prompt approval of the
                      Prospectus/Proxy Statement by, all applicable regulatory
                      authorities. The parties will provide each other with
                      copies of such submissions for review.

               (b)    Glacier and WesterFed will each promptly take the actions
                      necessary in accordance with applicable law and its
                      Certificate of Incorporation and Bylaws to convene a
                      shareholders' meeting to consider the adoption of this
                      Agreement and to authorize the transactions contemplated
                      by this Agreement. This shareholders' meetings will be
                      held on the earliest practical date after the date the
                      Prospectus/Proxy Statement may first be sent to
                      shareholders of Glacier and WesterFed without objection by
                      applicable Governmental Entities; but each party will have
                      at least 20 calendar days to solicit proxies. Except as
                      otherwise deemed necessary by its board of directors to
                      comply with its fiduciary duties to shareholders,
                      Glacier's and WesterFed's boards of directors will
                      recommend adoption of this Agreement to their respective
                      shareholders.

4.4     AFFILIATE LIST. Certain persons may be deemed "affiliates" of WesterFed
        under Securities Act Rule 145. Within 30 days following the date of this
        Agreement, WesterFed will deliver to Glacier, after consultation with
        legal counsel, a list of names and addresses of WesterFed's "affiliates"
        with respect to the Transaction within the meaning of Rule 145. By the
        Effective Date, WesterFed will use its best efforts to deliver, or cause
        to be delivered, to Glacier a letter from each of these "affiliates,"
        and any additional person who becomes an "affiliate" before the
        Effective Date and after the date of the list, dated as of the date of
        its delivery and in the form attached as Exhibit C.

4.5     SUBMISSION TO REGULATORY AUTHORITIES. Representatives of Glacier, at
        Glacier's expense, will prepare and file with applicable regulatory
        agencies, applications for approvals, waivers or other actions their
        counsel finds necessary or desirable in order to consummate the
        Transaction. Glacier will provide copies of these applications for

                                       35
   37

        WesterFed's review. These applications and filings are expected to
        include an application to the Federal Reserve Board.

4.6     ANNOUNCEMENTS. The parties will cooperate and consult with each other in
        the development and distribution of all news releases and other public
        information disclosures with respect to this Agreement or the
        Transaction, unless otherwise required by law in the reasonable opinion
        of such party's counsel.

4.7     CONSENTS. Glacier and WesterFed will use their best efforts to obtain
        the consent or approval of any person, organization or other entity
        (including any applicable Governmental Entity) whose consent or approval
        is required in order to consummate the Transaction.

4.8     FURTHER ACTIONS. Glacier and WesterFed, respectively, in the name and on
        behalf of those respective parties, will use their best efforts in good
        faith to make all such arrangements, do or cause to be done all such
        acts and things, and execute and deliver all such certificates and other
        instruments and documents as may be reasonably necessary or appropriate
        in order to consummate the Transaction as promptly as practicable.

4.9     NOTICE. Glacier and WesterFed will each provide the other with prompt
        written notice of the following:

               (a)    any events, individually or in the aggregate, that could
                      have a Material Adverse Effect with respect to the
                      notifying party; or

               (b)    the commencement of any proceeding against the notifying
                      party, or any of its Subsidiaries or affiliates, by or
                      before any court or governmental agency that, individually
                      or in the aggregate, might have a Material Adverse Effect
                      with respect to the notifying party.

4.10    CONFIDENTIALITY. Glacier and WesterFed each will hold in confidence all
        nonpublic information obtained from the other in connection with the
        Transaction, other than information that: (1) is required by law to be
        disclosed; (2) is otherwise available on a nonconfidential basis; (3)
        has become public without fault of the disclosing party; or (4) is
        necessary to the defense of one of the parties in a legal or
        administrative action brought against that party by the other party. If
        the Transaction is not completed, Glacier and WesterFed will: (1) each
        return to the other all confidential documents obtained by it from such
        other party and (2) not use or disclose any nonpublic information
        obtained under this Agreement or in connection with the Transaction or
        the nature or extent of any negotiations between the parties.

4.11    NASDAQ LISTING. Glacier agrees to use its reasonable best efforts to
        list, prior to the Effective Date, on the Nasdaq National Market,
        subject to official notice of issuance, the shares of Glacier Common
        Stock to be issued to the holders of WesterFed Common Stock in the
        Merger, and the shares of Glacier Common Stock to be issued upon the
        exercise of Assumed Options.

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   38

4.12    REGISTRATION OF ASSUMED OPTION SHARES. As soon as practicable after the
        Effective Date, Glacier shall file an appropriate registration statement
        with respect to the shares of Glacier Common Stock subject to Assumed
        Options and shall use its reasonable best efforts to maintain the
        effectiveness of such registration statement or registration statements
        (and maintain the current status of the prospectus or prospectuses
        contained therein) for so long as such options remain outstanding.

4.13    CERTAIN POLICIES. After all conditions to the consummation of the Merger
        set forth in Section 5 have been satisfied or waived, WesterFed and the
        Bank will, consistent with GAAP and methodology agreed upon by the
        parties, modify its loan, litigation, and real estate valuation policies
        and practices (including loan classifications and levels of reserves) so
        as to be applied on a basis that is consistent with that of Glacier.

                                    SECTION 5
                            APPROVALS AND CONDITIONS

5.1     REQUIRED APPROVALS. The obligations of the parties to this Agreement are
        subject to the approval of this Agreement and the Transaction by all
        appropriate regulatory agencies having jurisdiction with respect to the
        Transaction.

5.2     CONDITIONS TO GLACIER'S OBLIGATIONS. All of Glacier's obligations under
        this Agreement are subject to satisfaction (or waiver by Glacier) of the
        following conditions at or before Closing:

        5.2.1  REPRESENTATIONS. WesterFed's representations in this Agreement
               and in any certificate or other instrument delivered in
               connection with this Agreement are true and correct in all
               material respects at Closing (except to the extent that they
               expressly relate to an earlier date, in which case they are true
               in all material respects as of that earlier date). These
               representations have the same force and effect as if they had
               been made at Closing. WesterFed has delivered to Glacier its
               certificate, executed by a duly authorized officer of WesterFed
               and dated as of Closing, stating that these representations
               comply with this Subsection 5.2.1.

        5.2.2  COMPLIANCE. WesterFed has performed and complied with all
               material terms, covenants and conditions of this Agreement.
               WesterFed's certificate referred to in Subsection 5.2.1 states
               that the conditions identified in this Subsection 5.2.2 are
               satisfied.

        5.2.3  NO MATERIAL ADVERSE EFFECT. No damage, destruction, or loss
               (whether or not covered by insurance) or other event or sequence
               of events has occurred which, individually or in the aggregate,
               has had or is reasonably likely to have a Material Adverse Effect
               with respect to WesterFed. WesterFed's certificate referred to in
               Subsection 5.2.1 states that the conditions identified in this
               Subsection 5.2.3 are satisfied.

        5.2.4  NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
               commenced or threatened by any governmental agency to restrain or
               prohibit or invalidate the Transaction.

                                       37
   39

        5.2.5  ACTION. The shareholders of Glacier and WesterFed, respectively,
               have each adopted this Agreement.

        5.2.6  TAX OPINION. Glacier, at Glacier's expense, has obtained from
               Graham & Dunn, P.C. an opinion to the effect that, the
               Transaction will qualify as a reorganization within the meaning
               of IRC Section 368(a)(1)(A) and that each of Glacier and
               WesterFed will be a "party to a reorganization" within the
               meaning of Section 368(b).

        5.2.7  REGISTRATION STATEMENT. The Registration Statement, as described
               in Section 4.3 and as it may have been amended, has become
               effective, and no stop order suspending the effectiveness of such
               Registration Statement has been issued or remains in effect, and
               no proceedings for that purpose have been initiated or threatened
               by the SEC the basis for which still exists.

        5.2.8  CONSENTS. WesterFed has obtained the consents as indicated in
               Schedule 3.1.13(b)-W, but only to the extent that the absence of
               one or more consents is reasonably likely to result in a Material
               Adverse Effect to Glacier.

        5.2.9  SOLICITATION OF EMPLOYEES. Neither any member of WesterFed's
               board of directors nor any entity with which any such director is
               affiliated has solicited any employee of WesterFed, Glacier or
               any of their respective Subsidiaries with the intention of
               causing the employee to terminate his or her employment with
               WesterFed, Glacier or any of their respective Subsidiaries, as
               the case may be.

        5.2.10 DIRECTOR APPOINTMENT. Effective as of Closing, WesterFed has
               appointed Michael J. Blodnick and William L. Bouchee to serve on
               the Bank's board of directors.

        5.2.11 OTHER MATTERS. Glacier has received any other opinions,
               certificates, and documents that Glacier reasonably requests in
               connection with this Agreement and the Transaction.

        5.2.12 FAIRNESS OPINIONS.

               (a)    WesterFed has received from Putnam Lovell, an updated
                      fairness opinion at WesterFed's expense, dated as of or
                      immediately before WesterFed mails the Prospectus/Proxy
                      Statement to its shareholders, to the effect that the
                      Merger Consideration is fair to the shareholders of
                      WesterFed from a financial point of view, and a copy of
                      such updated opinion has been supplied to Glacier. Glacier
                      will provide WesterFed's investment advisor with any
                      information reasonably requested for the purpose of
                      issuing a fairness opinion.

               (b)    Glacier has received from Davidson an updated fairness
                      opinion at Glacier's expense, dated as of or immediately
                      before Glacier mails the Prospectus/Proxy Statement to its
                      shareholders, to the effect that the Merger Consideration
                      to be paid by Glacier in connection with the Merger

                                       38
   40

                      is fair to the shareholders of Glacier from a financial
                      point of view. WesterFed will provide Glacier's investment
                      advisor with any information reasonably requested for the
                      purpose of issuing a fairness opinion.

5.3     CONDITIONS TO WESTERFED'S OBLIGATIONS. All of WesterFed's obligations
        under this Agreement are subject to satisfaction (or waiver by
        WesterFed) of the following conditions at or before Closing:

        5.3.1  REPRESENTATIONS. Glacier's representations and warranties in this
               Agreement and in any certificate or other instrument delivered in
               connection with this Agreement are true and correct in all
               material respects at Closing (except to the extent that they
               expressly relate to an earlier date, in which case they are true
               in all material respects as of that earlier date). These
               representations and warranties have the same force and effect as
               if they had been made at Closing. Glacier has delivered to
               WesterFed its certificate, executed by a duly authorized officer
               of Glacier and dated as of Closing, stating that these
               representations and warranties comply with this Subsection 5.3.1.

        5.3.2  COMPLIANCE. Glacier has performed and complied in all material
               respects with all terms, covenants and conditions of this
               Agreement. Glacier's certificate referred to in Subsection 5.3.1
               states that the conditions identified in this Subsection 5.3.2
               are satisfied.

        5.3.3  NO MATERIAL ADVERSE EFFECT. No damage, destruction, loss or other
               event or sequence of events has occurred which, individually or
               in the aggregate, has had or is reasonably likely to have a
               Material Adverse Effect with respect to Glacier. Glacier's
               certificate referred to in Subsection 5.3.1 states that the
               conditions identified in this Subsection 5.3.3 are satisfied.

        5.3.4  NO GOVERNMENTAL PROCEEDINGS. No action or proceeding has been
               commenced or threatened by any governmental agency to restrain,
               prohibit or invalidate the Transaction.

        5.3.5  SHAREHOLDER ACTION. The shareholders of Glacier and WesterFed,
               respectively, have each adopted this Agreement.

        5.3.6  TAX OPINION. WesterFed has, at WesterFed's expense, obtained from
               Silver, Freedman & Taff, L.L.P., an opinion to the effect that
               the Transaction will qualify as a reorganization within the
               meaning of IRC Section 368(a)(1)(A) and that each of Glacier and
               WesterFed will be a "party to a reorganization" within the
               meaning of Section 368(b).

        5.3.7  REGISTRATION STATEMENT. The Registration Statement described in
               Subsection 4.3 and as it may have been amended, has become
               effective, and no stop order suspending the effectiveness of such
               Registration Statement has been issued or remains in effect, and
               no proceedings for that purpose have been initiated or threatened
               by the SEC the basis for which still exists.

                                       39
   41

        5.3.8  DIRECTOR APPOINTMENT. Effective as of Closing, Glacier has
               appointed Ralph K. Holliday to serve on Glacier's board of
               directors.

        5.3.9  NASDAQ LISTING. The shares of Glacier Common Stock to be issued
               in the Merger shall have been approved for listing on the Nasdaq
               National Market, subject to official notice of issuance.

        5.3.10 FAIRNESS OPINION.

               (a)    WesterFed has received from Putnam Lovell an updated
                      fairness opinion at WesterFed's expense, dated as of or
                      immediately before WesterFed mails the Prospectus/Proxy
                      statement to its shareholders, to the effect that the
                      Merger Consideration is fair to the shareholders of
                      WesterFed from a financial point of view. Glacier will
                      provide WesterFed's investment advisor with any
                      information reasonably requested for the purpose of
                      issuing a fairness opinion.

               (b)    Glacier has received from Davidson an updated fairness
                      opinion at Glacier's expense, dated as of or immediately
                      before Glacier mails the Prospectus/Proxy Statement to its
                      shareholders, to the effect that the Merger Consideration
                      to be paid by Glacier in connection with the Merger is
                      fair to the shareholders of Glacier from a financial point
                      of view, and a copy of such updated opinion has been
                      supplied to WesterFed. WesterFed will provide Glacier's
                      investment advisor with any information reasonably
                      requested for the purpose of issuing a fairness opinion.

                                    SECTION 6
                        DIRECTORS, OFFICERS AND EMPLOYEES

6.1     DIRECTORS. As a condition to the execution of this Agreement, each
        member of WesterFed's (other than David W. Jorgenson) and Glacier's
        boards of directors has entered into the written agreement described in
        Recital F with Glacier and WesterFed on or before the date of this
        Agreement.

6.2     EMPLOYMENT AGREEMENTS. As a condition to the execution of this
        Agreement, Glacier has entered into employment agreements, effective as
        of the Effective Date, with Ralph K. Holliday, WesterFed's and the
        Bank's current President and Chief Executive Officer; James A.
        Salisbury, WesterFed's and the Bank's Executive Vice President and Chief
        Financial Officer; Marcia Johnson, the Bank's current Senior Vice
        President - Central Operations Manager; Barry Johnston, the Bank's
        current Senior Vice President - Credit Administration and John Cromwell,
        the Bank's current Senior Vice President - Human Resources. As part of
        these employment agreements, all such individuals will, as of the
        Effective Date, waive all rights they may have under any previous
        employment or change in control agreements with WesterFed and/or the
        Bank.

6.3     EMPLOYEES. Employees of WesterFed and its Subsidiaries who remain
        employed after the Effective Date will be eligible to participate in all
        of the benefit, welfare, bonus, incentive, stock, and similar plans of
        Glacier and its Subsidiaries that are generally

                                       40
   42

        available to similarly situated employees of Glacier and/or its
        Subsidiaries in accordance with and subject to the terms and provisions
        of such plans, with credit for years of service with WesterFed and its
        Subsidiaries (including service with any entity acquired by WesterFed or
        the Bank) for the purpose of determining eligibility for participation,
        vesting and accrual of benefits (including vacation time and sick pay,
        but not for the purpose of accrual of benefits under any qualified
        defined benefit plan of Glacier or any of its Subsidiaries).
        Contributions to (and accrual of benefits, to the extent applicable, if
        any) under plans of Glacier and its Subsidiaries on behalf of continuing
        employees of WesterFed and its Subsidiaries shall only relate to
        compensation earned by such employees after the Effective Date subject
        to the terms and provisions of such plans. Glacier shall use
        commercially reasonable efforts to cause any and all pre-existing
        condition limitations (to the extent such limitations did not apply to a
        pre-existing condition under the corresponding WesterFed health plan)
        and eligibility waiting periods under its health plan to be waived with
        respect to the employees of WesterFed and its Subsidiaries who continue
        employment after the Effective Date and their eligible dependents. To
        the extent that any employee of WesterFed or its Subsidiaries continues
        employment after the Effective Date and he or she has satisfied in whole
        or in part any annual deductible under the WesterFed health plan, or has
        paid any out-of-pocket expenses pursuant to the WesterFed health plan
        co-insurance provisions, such amount shall be counted toward the
        satisfaction of any applicable deductible or out-of-pocket expense
        maximum, respectively, under Glacier's health plan.

6.4     INDEMNIFICATION; DIRECTOR AND OFFICER INSURANCE.

        6.4.1  Glacier agrees that from and after the Effective Date until six
               years following the Effective Date, Glacier will indemnify and
               hold harmless each present and former director and officer of
               WesterFed and its Subsidiaries, determined as of the Effective
               Date (the "Indemnified Parties"), against any costs or expenses
               (including reasonable attorneys' fees), judgments, fines, losses,
               claims, damages or liabilities (collectively, "Costs") incurred
               in connection with any claim, action, suit, proceeding or
               investigation, whether civil, criminal, administrative or
               investigative, arising out of or pertaining to matters existing
               or occurring at or prior to the Effective Date, whether asserted
               or claimed prior to, at or after the Effective Date, to the
               fullest extent that WesterFed would have been permitted under
               Delaware law (or the Bank would have been permitted under federal
               law, if applicable) and the certificate of incorporation (or
               charter of the Bank, if applicable) or bylaws of WesterFed or the
               Bank in effect on the date of this Agreement to indemnify such
               person (and Glacier will also advance expenses as incurred to the
               fullest extent permitted under applicable law; provided, that the
               person to whom expenses are advanced provides an undertaking to
               repay such advances if it is ultimately determined that such
               person is not entitled to indemnification).

        6.4.2  To the extent that Subsection 6.4.1 will not serve to indemnify
               and hold harmless an Indemnified Party, for a period of six years
               after the Effective Date, Glacier agrees that it will, subject to
               the terms set forth herein, indemnify and hold harmless, to the
               fullest extent permitted under applicable law (and Glacier will

                                       41
   43

               also advance expenses as incurred to the fullest extent permitted
               under applicable law, provided, that the person to whom expenses
               are advanced provides an undertaking to repay such advances if it
               is ultimately determined that such person is not entitled to
               indemnification), each Indemnified Party against any Costs
               incurred in connection with any claim, action, suit, proceeding
               or investigation, whether civil, criminal, administrative or
               investigative, arising out of or pertaining to the Transaction.
               In the event any claim or claims are asserted or made within such
               six-year period, all rights to indemnification in respect of any
               such claim or claims will continue until final disposition of any
               and all such claims.

        6.4.3  Any Indemnified Party wishing to claim indemnification under
               Subsection 6.4.1 or 6.4.2, upon learning of any such claim,
               action, suit, proceeding or investigation, will promptly notify
               Glacier, but the failure to so notify will not relieve Glacier of
               any liability it may have to such Indemnified Party if such
               failure does not materially prejudice Glacier. In the event of
               any such claim, action, suit, proceeding or investigation
               (whether arising before or after the Effective Date), Glacier
               will have the right to assume the defense thereof and Glacier
               will not be liable to such Indemnified Parties for any legal
               expenses of other counsel or any other expenses subsequently
               incurred by such Indemnified Parties in connection with the
               defense thereof, except that, if Glacier elects not to assume
               such defense or counsel for the Indemnified Parties advises that
               there are issues which raise conflicts of interest between
               Glacier and the Indemnified Parties, the Indemnified Parties may
               retain counsel satisfactory to them, and Glacier will pay all
               reasonable fees and expenses of such counsel for the Indemnified
               Parties promptly as statements therefore are received. If such
               indemnity is not available with respect to any Indemnified Party,
               then Glacier and the Indemnified Parties will contribute to the
               amount payable in such proportion as is appropriate to reflect
               relative faults and benefits.

        6.4.4  For a period of six years from and after the Effective Date,
               Glacier shall use commercially reasonable efforts to cause to be
               maintained in effect the current policies of directors' and
               officers' liability insurance maintained by WesterFed and its
               Subsidiaries (provided that Glacier may substitute therefor
               policies from a financially capable insurer of at least the same
               coverage and amount containing terms and conditions which are
               substantially no less advantageous, or in the event such coverage
               is provided through Glacier's current insurer it may be on terms
               and conditions (other than coverage and amounts) consistent with
               Glacier's current coverage), or in lieu thereof Glacier will
               obtain or permit WesterFed to obtain single limit tail coverage
               for such period, with respect to claims arising from facts or
               events which occurred on or before the Effective Date. Following
               consummation of the Merger, the directors and officers of Glacier
               and its Subsidiaries (including the Bank) will be covered by the
               directors' and officers' liability insurance maintained by
               Glacier and its Subsidiaries.

        6.4.5  The obligations of Glacier provided under Subsections 6.4.1 -
               6.4.4 are intended to be enforceable against Glacier directly by
               the Indemnified Parties and will be binding on all respective
               successors and assigns of Glacier.

                                       42
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6.5     EMPLOYEE BENEFIT ISSUES.

        6.5.1  EMPLOYEE STOCK OWNERSHIP PLAN. With respect to WesterFed's
               Employee Stock Ownership Plan (the "ESOP"), WesterFed will:

               (a)    take any action it deems appropriate to amend the ESOP to
                      allocate contributions on a pro-rata basis (based upon
                      existing methodology for allocating annual contributions)
                      through the day next preceding the Effective Date and to
                      eliminate any requirement that a participant must be
                      employed on the last day of the plan year to receive a
                      contribution allocation;

               (b)    take any actions necessary to cause the ESOP to be
                      terminated and for the balances in all Accounts (as
                      defined in the ESOP) to become fully vested and
                      nonforfeitable as of the Effective Date;

               (c)    use its best efforts to cause the Trustee of the ESOP to
                      make such elections under Section 1.6 of this Agreement
                      with respect to unallocated WesterFed Common Stock as are
                      necessary to obtain cash at least equal to the remaining
                      ESOP indebtedness;

               (d)    cause the Trustee to use such cash (and convert
                      unallocated Glacier Common Stock received in the Merger to
                      cash, if applicable), to repay in full all such
                      outstanding ESOP indebtedness as soon as is practicable
                      after the Effective Date;

               (e)    take any action it deems appropriate (including amending
                      the ESOP) to cause the shares of Glacier Common Stock
                      received in the Merger and/or any cash remaining in the
                      suspense account maintained under the ESOP, after giving
                      effect to the repayment of ESOP indebtedness referred to
                      in subparagraph (c) above, to be allocated as investment
                      earnings of the ESOP (as of the Effective Date) to the
                      accounts of all ESOP participants who have account
                      balances as of the Effective Date, in proportion to the
                      aggregate value of their respective Stock Accounts and
                      Investment Accounts (as defined in the ESOP) in accordance
                      with the applicable provisions of the ESOP;

               (f)    cause the account balances of all ESOP participants to be
                      distributed in a lump sum (or transferred in accordance
                      with Section 401(a)(31) of the IRC) as soon as practicable
                      following the later of (A) the Effective Date or (B) the
                      date of receipt of a favorable determination letter from
                      the Internal Revenue Service regarding the qualified
                      status of the ESOP upon its termination; and

               (g)    adopt amendment(s) to the ESOP, in form and substance
                      reasonably satisfactory to Glacier, which includes and
                      provides for the actions described in subparagraphs (b),
                      (c), (d), (e) and (f) above or as may be requested by the
                      Internal Revenue Service in connection with the request

                                       43
   45

                      for a determination letter (including provisions to comply
                      with applicable tax law changes).

        6.5.2  FIRF PLAN. WesterFed will, and will cause its participating
               Subsidiaries to, withdraw from the FIRF Plan effective on or
               before the Effective Date. In addition, WesterFed will, and will
               cause its participating Subsidiaries to, take all necessary
               action prior to their withdrawal from the FIRF Plan to amend the
               benefit formula for their employee participants under the FIRF
               Plan to eliminate any unfunded liability on the part of WesterFed
               and its participating Subsidiaries to the FIRF Plan, or if the
               unfunded liability cannot be eliminated, to minimize the amount
               of the unfunded liability, in each case, to the extent permitted
               by the FIRF Plan, ERISA, the IRC or any other applicable law.

        6.5.3  TERMINATION AND TRANSFER/MERGER OF PLANS. As soon as practicable
               after Effective Date, all other employee benefit plans of
               WesterFed and its Subsidiaries will be terminated and the
               interests of continuing employees in those plans will be
               transferred or merged into Glacier's employee benefit plans.

        6.5.4  NO CONTRACT CREATED. Nothing in this Agreement gives any employee
               of WesterFed or its Subsidiaries a right to continuing
               employment.

                                    SECTION 7
                          TERMINATION OF AGREEMENT AND
                           ABANDONMENT OF TRANSACTION

7.1     TERMINATION BY REASON OF LAPSE OF TIME. If Closing does not occur before
        the Termination Date, either Glacier or WesterFed may terminate this
        Agreement and the Transaction if all of the following conditions are
        present:

        (a)    the terminating party's board of directors decides to terminate
               by a majority vote of its members;

        (b)    the terminating party delivers to the other party written notice
               that its board of directors has voted in favor of termination;
               and

        (c)    the failure to consummate the Transaction by the Termination Date
               is not due to a breach by the party seeking termination of any of
               its obligations, covenants, or representations in this Agreement.

7.2     OTHER GROUNDS FOR TERMINATION. This Agreement and the Transaction may be
        terminated at any time before Closing (whether before or after
        applicable approval of this Agreement by the shareholders of the
        parties, unless otherwise provided) as follows:

        7.2.1  MUTUAL CONSENT. By mutual consent of WesterFed and Glacier, if
               the boards of directors of each party agrees to terminate by a
               majority vote of its members.

        7.2.2  WESTERFED'S CONDITIONS NOT MET. By Glacier's board of directors
               if, by June 30, 2001, any condition set forth in Section 5.1 or
               5.2 has not been satisfied

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   46

               (or at any time following the failure of the shareholders of
               either party to adopt this Agreement at a duly convened meeting
               held to vote on the adoption of this Agreement).

        7.2.3  GLACIER'S CONDITIONS NOT MET. By WesterFed's board of directors
               if, by June 30, 2001, any condition set forth in Section 5.1 or
               5.3 has not been satisfied (or at any time following the failure
               of the shareholders of either party to adopt this Agreement at a
               duly convened meeting held to vote on the adoption of this
               Agreement).

        7.2.4  WESTERFED FAILS TO RECOMMEND SHAREHOLDER APPROVAL. By Glacier's
               board of directors before WesterFed's shareholders adopt this
               Agreement, if WesterFed's board of directors: (a) fails to
               recommend to its shareholders the adoption of this Agreement or
               (b) modifies, withdraws or changes in a manner adverse to Glacier
               its recommendation to shareholders to adopt this Agreement.

        7.2.5  GLACIER FAILS TO RECOMMEND SHAREHOLDER APPROVAL. By WesterFed's
               board of directors before Glacier's shareholders adopt this
               Agreement, if Glacier's board of directors: (a) fails to
               recommend to its shareholders the adoption of this Agreement or
               (b) modifies, withdraws or changes in a manner adverse to
               WesterFed its recommendation to shareholders to adopt this
               Agreement.

        7.2.6  IMPRACTICABILITY. By either Glacier or WesterFed, upon written
               notice given to the other party, if the board of directors of the
               party seeking termination under this Subsection 7.2.6 has
               determined in its sole judgment, made in good faith and after due
               consideration and consultation with counsel, that the Transaction
               has become inadvisable or impracticable by reason of the
               institution of litigation by the federal government or the
               government of any state to restrain or invalidate the Transaction
               or this Agreement.

        7.2.7  AVERAGE CLOSING PRICE LESS THAN $9.00. By WesterFed, if its board
               of directors so determines by an affirmative vote of the majority
               of its members, if the Average Closing Price is less than $9.00.
               If WesterFed elects to exercise its termination right pursuant to
               the preceding sentence, the following provisions will apply:

               (a)    WesterFed will give written notice of its election to
                      Glacier no later than the end of the third Business Day
                      following the Determination Date. A "Business Day" means a
                      calendar day other than a Saturday, Sunday or any other
                      day that is a day on which banking institutions in Montana
                      are authorized or obligated by law or executive order to
                      close.

               (b)    Within ten Business Days following the Determination Date,
                      Glacier may elect by written notice to WesterFed to
                      increase the Merger Consideration to be received by the
                      holder of each share of WesterFed Common Stock as provided
                      in Subsection 1.4.1(g)(3).

                                       45
   47

               (c)    If Glacier elects to increase the Merger Consideration, it
                      may do so in a combination of additional cash or
                      additional shares of Glacier Common Stock, notwithstanding
                      any election made pursuant to Section 1.6, provided that
                      (notwithstanding any other provision of this Agreement) in
                      no event will less than 45% of the total value of the
                      Merger Consideration be paid in Glacier Common Stock based
                      upon the per share closing price of Glacier Common Stock
                      on the Effective Date, or if the Effective Date is not a
                      trading day, then the closing price on the most recent
                      trading day prior to the Effective Date calculated as if
                      all Dissenting Shares received the Cash Distribution.

               (d)    If Glacier makes the election contemplated by paragraphs
                      (b) and (c) above, by giving timely written notice to
                      WesterFed, no termination will occur pursuant to this
                      Subsection 7.2.7 and this Agreement will remain in effect
                      according to its terms (except as the Merger Consideration
                      has been supplemented).

        7.2.8  AVERAGE CLOSING PRICE LESS THAN $7.50. By Glacier, if its board
               of directors so determines by an affirmative vote of the majority
               of its members of the Average Closing Price is less than or equal
               to $7.50.

7.3     GLACIER LIQUIDATED DAMAGES.

        7.3.1  PAYMENT OF LIQUIDATED DAMAGES. Due to expenses, direct and
               indirect, incurred by WesterFed in negotiating and executing this
               Agreement and in taking steps to effect the Transaction, and the
               loss by it of other opportunities, Glacier will pay to WesterFed
               $3.5 million if (1) after a Triggering Event the shareholders of
               Glacier fail to adopt this Agreement or (2) WesterFed terminates
               this Agreement under Subsection 7.2.5. The foregoing amount
               represents agreed upon liquidated damages and will be payable on
               WesterFed's demand and must be paid by Glacier within three (3)
               Business Days after the date WesterFed makes the demand. However,
               if demand and payment is made pursuant to this subsection 7.3.1,
               then WesterFed will have no other rights or claims against
               Glacier under this Agreement, it being agreed that acceptance of
               liquidated damages under this subsection 7.3.1 by WesterFed will
               constitute its sole and exclusive remedy against Glacier.

        7.3.2  LIMITATION ON PAYMENT OF LIQUIDATED DAMAGES. No liquidated
               damages shall be payable pursuant to Subsection 7.3.1 if (i)
               Glacier terminates, or has the right to terminate, this Agreement
               pursuant to Subsection 7.2.2 (solely on account of the willful
               breach of WesterFed) or Section 7.2.4; or (ii) if at the
               WesterFed Meeting, the WesterFed shareholders fail to adopt this
               Agreement.

        7.3.3  DEFINITIONS. For purposes of this Agreement, the following terms
               will have the meanings set forth below:

                                       46
   48

               (a)    "Acquisition Proposal" means a proposal to engage in any
                      of the following: (1) a merger, consolidation or any
                      similar transaction involving Glacier or any of its
                      financial institution Subsidiaries (other than the
                      Transaction, acquisitions by Glacier and its financial
                      institution Subsidiaries that are not prohibited under
                      Subsection 4.2.2(b) or a merger or other transactions
                      between financial institution Subsidiaries of Glacier),
                      (2) a purchase, lease or other acquisition of all or
                      substantially all the assets of Glacier or any of its
                      financial institution Subsidiaries, other than in a
                      transaction between financial institution Subsidiaries of
                      Glacier, (3) a purchase or other acquisition of
                      "beneficial ownership" by any "person" or "group" (as such
                      terms are defined in Section 13(d)(3) of the Exchange Act)
                      (including by way of merger, consolidation, share
                      exchange, or otherwise) which would cause such person or
                      group to become the beneficial owner of securities
                      representing more than 19.9% of the voting power of
                      Glacier or any of its financial institution Subsidiaries,
                      (4) a tender or exchange offer to acquire securities
                      representing more than 19.9% of the voting power of
                      Glacier, (5) a public proxy or consent solicitation made
                      to the shareholders of Glacier seeking proxies in
                      opposition to the Transaction, or (6) the filing of an
                      application or notice with the Federal Reserve Board, the
                      FDIC, the OTS, the SEC, or any other federal or state
                      regulatory authority (which application has been accepted
                      for processing) seeking approval to engage in one or more
                      of the transactions referenced in clauses (1) through (5)
                      above.

               (b)    "Triggering Event" means Glacier's entering into, or the
                      public announcement of or any filing with a regulatory
                      authority or the SEC with respect to, an Acquisition
                      Proposal.

7.4     WESTERFED LIQUIDATED DAMAGES.

        7.4.1  PAYMENT OF LIQUIDATED DAMAGES. Due to expenses, direct and
               indirect, incurred by Glacier in negotiating and executing this
               Agreement and in taking steps to effect the Transaction, and the
               loss by it of other opportunities, WesterFed will pay to Glacier
               $4.5 million if (i) Glacier terminates this Agreement under
               subsection 7.2.4, or (ii) the shareholders of WesterFed do not
               adopt this Agreement at the WesterFed meeting after there has
               been proposed by a third party a WesterFed Acquisition
               Transaction (the "WesterFed Proposal"). The foregoing amount
               represents agreed upon liquidated damages and will be payable on
               Glacier's demand and must be paid by WesterFed within three (3)
               Business Days after the date Glacier makes the demand. However,
               if demand and payment is made pursuant to this subsection 7.4.1,
               then Glacier will have no other rights or claims against
               WesterFed under this Agreement, it being agreed that acceptance
               of liquidated damages under this subsection 7.4.1 by Glacier will
               constitute its sole and exclusive remedy against WesterFed.

        7.4.2  LIMITATION ON PAYMENT OF LIQUIDATED DAMAGES. No liquidated
               damages will be payable pursuant to subsection 7.4.1 if (i)
               Glacier or its assigns has acquired

                                       47
   49

               any shares pursuant to the exercise of its Option (as defined in
               the Stock Option Agreement), WesterFed has repurchased the Option
               pursuant to the Stock Option Agreement or WesterFed has paid
               Glacier or its assigns the Surrender Price (as defined in the
               Stock Option Agreement) pursuant to the Stock Option Agreement,
               (ii) Glacier refuses to execute and deliver a written release of
               all of Glacier's rights under the Stock Option Agreement and all
               claims, demands or causes of action that Glacier has or might
               have against WesterFed, under this Agreement against delivery by
               WesterFed of the $4.5 million liquidated damages set forth above,
               (iii) WesterFed terminates, or has the right to terminate, this
               Agreement pursuant to subsection 7.2.3 (solely on account of the
               willful breach of Glacier) or subsection 7.2.5, or (iv) if at the
               Glacier shareholders' meeting to vote on the adoption of this
               Agreement, the Glacier shareholders fail to adopt this Agreement.

        7.4.3  For purposes of the foregoing, "WesterFed Acquisition
               Transaction" shall have the same meaning as the term "Acquisition
               Transaction" in the Stock Option Agreement except that a
               percentage referred to in Section 2.1(a)(iii) thereof shall be
               25%.

7.5     COST ALLOCATION UPON TERMINATION. In connection with the termination of
        this Agreement under this Section 7, except as provided in Sections 7.3
        and 7.4, Glacier and WesterFed will each pay their own out-of-pocket
        costs incurred in connection with this Agreement, and neither party will
        have any liability to the other party, unless this Agreement is
        terminated or the Transaction is not consummated due to the willful
        breach of a party.

                                    SECTION 8
                                  MISCELLANEOUS

8.1     NOTICES. Any notice, request, instruction or other document given under
        this Agreement must be in writing and must either be delivered
        personally or via facsimile transmission or be sent by registered or
        certified mail, postage prepaid, and addressed as follows (or to any
        other address or person representing any party as designated by that
        party through written notice to the other party):

        Glacier                            Glacier Bancorp, Inc.
                                           49 Commons Loop
                                           Kalispell, MT  59903-0027
                                           Attn: Michael J. Blodnick

               with a copy to:             Graham & Dunn, P.C.
                                           1420 Fifth Avenue, 33rd Floor
                                           Seattle, WA  98101-2390
                                           Attn: Stephen M. Klein, Esq.
                                           Mark C. Lewington, Esq.

        WesterFed                          WesterFed Financial Corporation
                                           110 East Broadway

                                       48
   50

                                           P.O. Box 5388
                                           Missoula, MT 59806-5388
                                           Attn: Ralph K. Holliday

               with a copy to:             Silver, Freedman & Taff, L.L.P.
                                           1100 New York Avenue NW
                                           Suite 700 Washington, D.C. 20005-3934
                                           Attn: Barry P. Taff, P.C.

8.2     WAIVERS AND EXTENSIONS. Subject to Section 9, Glacier or WesterFed may
        grant waivers or extensions to the other party, but only through a
        written instrument executed by the Chief Executive Officer or President
        of the party granting the waiver or extension. Waivers or extensions
        which do not comply with the preceding sentence are not effective. In
        accordance with this Section 8.2, a party may extend the time for the
        performance of any of the obligations or other acts of any other party,
        and may waive:

               (a)    any inaccuracies in the representations and warranties of
                      the other party contained in this Agreement or in any
                      document delivered by the other party in connection with
                      this Agreement;

               (b)    compliance with any of the covenants of the other party;
                      and

               (c)    the other party's performance of any obligations under
                      this Agreement and any other condition precedent set out
                      in Section 5.

8.3     GENERAL INTERPRETATION. Except as otherwise expressly provided in this
        Agreement or unless the context clearly requires otherwise: (1) the
        defined terms defined in this Agreement include the plural as well as
        the singular and (2) references in this Agreement to Sections,
        Subsections, Schedules, and Exhibits refer to Sections and Subsections
        of and Schedules and Exhibits to this Agreement. Whenever the words
        "include", "includes", or "including" are used in this Agreement, the
        parties intend them to be interpreted as if they are followed by the
        words "without limitation." All accounting terms used in this Agreement
        that are not expressly defined in this Agreement have the respective
        meanings given to them in accordance with GAAP.

8.4     CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise
        expressly provided in this Agreement or in any other agreement executed
        by the parties on or as of the date of this Agreement, this Agreement:
        (1) contains the parties' entire understanding, and no modification or
        amendment of its terms or conditions will be effective unless in writing
        and signed by the parties, or their respective duly authorized agents;
        (2) will not be interpreted by reference to any of the titles or
        headings to the Sections or Subsections, which have been inserted for
        convenience only and are not deemed a substantive part of this
        Agreement; (3) includes all amendments to this Agreement, each of which
        is made a part of this Agreement by this reference; and (4) may be
        executed in one or more counterparts, each of which will be deemed an
        original, but all of which taken together will constitute one and the
        same document.

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   51

8.5     SURVIVAL OF REPRESENTATIONS AND COVENANTS. The representations and
        covenants in this Agreement will not survive the Effective Date or
        termination of this Agreement, except that (1) Section 4.10
        (confidentiality), Sections 7.3 and 7.4 (liquidated damages fee), and
        Section 7.5 (expense allocation) will survive termination, (2) the
        representations and covenants will survive termination for the purpose
        of the pursuit and determination of the willful breach by a party which
        resulted in termination or non-consummation of the Transaction, and (3)
        the covenants in this Agreement that impose duties or obligations on a
        party following the Effective Date will survive the Effective Date.

8.6     ATTORNEYS' FEES AND COSTS. In the event of any dispute or litigation
        with respect to the terms and conditions or enforcement of rights or
        obligations arising by reason of this Agreement or the Transaction, the
        prevailing party in any such litigation will be entitled to
        reimbursement from the other party for its costs and expenses, including
        reasonable judicial and extra-judicial attorneys' fees, expenses and
        disbursements, and fees, costs and expenses relating to any such
        litigation.

8.7     ARBITRATION AND SPECIFIC PERFORMANCE. At either party's request, the
        parties must submit any dispute, controversy or claim arising out of or
        in connection with, or relating to, this Agreement or any breach or
        alleged breach of this Agreement, to arbitration under the American
        Arbitration Association's rules then in effect (or under any other form
        of arbitration mutually acceptable to the parties). A single arbitrator
        agreed on by the parties will conduct the arbitration. If the parties
        cannot agree on a single arbitrator, each party must select one
        arbitrator and those two arbitrators will select a third arbitrator.
        This third arbitrator will hear the dispute. The arbitrator's decision
        is final (except as otherwise specifically provided by law) and will
        bind the parties, and either party may request any court having
        jurisdiction to enter a judgment and to enforce the arbitrator's
        decision. The arbitrator will provide the parties with a written
        decision naming the substantially prevailing party in the action. This
        prevailing party is entitled to reimbursement from the other party for
        its costs and expenses, including reasonable attorneys' fees. The
        parties hereto agree that irreparable damage would occur in the event
        that any of the provisions of this Agreement were not performed in
        accordance with their specific terms or were otherwise breached. It is
        accordingly agreed that the parties will be entitled to an injunction or
        injunctions to prevent breaches of this Agreement and to enforce
        specifically the terms and provisions hereof in any court of the United
        States or any state having jurisdiction, this being in addition to any
        other remedy to which they are entitled at law or in equity.

8.8     GOVERNING LAW AND VENUE. This Agreement will be governed by and
        construed in accordance with Montana law, except to the extent that
        certain matters may be governed by federal law.

8.9     SEVERABILITY. If a court determines that any term of this Agreement is
        invalid or unenforceable under applicable law, the remainder of this
        Agreement will not be affected thereby, and each remaining term will
        continue to be valid and enforceable to the fullest extent permitted by
        law.

                                       50
   52

                                    SECTION 9
                                   AMENDMENTS

        At any time before the Effective Date, whether before or after the
parties have obtained any applicable shareholder approvals of this Agreement,
the boards of directors of Glacier and WesterFed may: (1) amend or modify this
Agreement or any attached Exhibit or Schedule and (2) grant waivers or time
extensions in accordance with Section 8.2. But, after WesterFed's shareholders
have adopted this Agreement, the parties' boards of directors may not without
WesterFed shareholder approval amend or waive any provision of this Agreement if
the amendment or waiver would reduce the amount or change the form of
consideration WesterFed shareholders will receive in the Transaction. All
amendments, modifications, extensions and waivers must be in writing and signed
by the party agreeing to the amendment, modification, extension or waiver.
Failure by any party to insist on strict compliance by the other party with any
of its obligations, agreements or conditions under this Agreement, does not,
without a writing, operate as a waiver or estoppel with respect to that or any
other obligation, agreement, or condition.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

                                       51
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Signed as of _______________, 2000:

                                            GLACIER BANCORP, INC.

                                            By
                                               ---------------------------------
                                            Name: Michael J. Blodnick
                                            Title: President and Chief Executive
                                                   Officer

                                            WESTERFED FINANCIAL CORPORATION

                                            By
                                               ---------------------------------
                                            Name: Ralph K. Holliday
                                            Title: President and Chief Executive
                                                   Officer

                                       52
   54

STATE OF ___________ )
                     ) ss.
COUNTY OF __________ )

        On this _____ day ____________, 2000, before me personally appeared
Michael J. Blodnick, to me known to be the President and Chief Executive Officer
of GLACIER BANCORP, INC., the corporation that executed the foregoing
instrument, who acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes mentioned there, and who
stated on oath that he was authorized to execute said instrument, and that the
seal affixed (if any) was the official seal of said corporation. IN WITNESS OF
THE FOREGOING, I have set my hand and official seal to this document as of the
day and year first written above.

                                           -------------------------------------
                                           NOTARY PUBLIC in and for the State of
                                           _____________, residing at __________
                                           Title:
                                                 -------------------------------
                                           My commission expires:
                                                                 ---------------

STATE OF _____________________ )
                               ) ss.
COUNTY OF_____________________ )

        On this ____ day of ___________, 2000, before me personally appeared
Ralph K. Holliday, to me known to be the President and Chief Executive Officer
of WESTERFED FINANCIAL CORPORATION, the corporation that executed the foregoing
instrument, who acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes mentioned there, and who
stated on oath that he was authorized to execute said instrument, and that the
seal affixed (if any) was the official seal of said corporation. IN WITNESS OF
THE FOREGOING, I have set my hand and official seal to this document as of the
day and year first written above.

                                           -------------------------------------
                                           NOTARY PUBLIC in and for the State of
                                           _____________, residing at __________
                                           Title:
                                                 -------------------------------
                                           My commission expires:
                                                                 ---------------

                                       53
   55

                                TABLE OF CONTENTS

                                                                                           PAGE
                                                                                           ----
                                                                                        
SECTION 1 TERMS OF TRANSACTION...............................................................3

        1.1    Transaction...................................................................3
        1.2    Effect of Transaction.........................................................3
        1.3    Consideration.................................................................3
        1.4    Price.........................................................................3
               1.4.1  Definitions............................................................3
               1.4.2  Merger Consideration...................................................4
        1.5    Effect on Glacier Common Stock................................................5
        1.6    Conversion Election Procedures and Allocation.................................5
               1.6.1  Election Options.......................................................5
               1.6.2  Effective Election.....................................................5
               1.6.3  Non-election; Discretion of Exchange Agent.............................5
               1.6.4  Maximum Stock and Cash Conversion Amounts..............................6
               1.6.5  Allocation.............................................................6
        1.7    Conversion of WesterFed Options...............................................8
        1.8    Shareholder Rights; Stock Transfers...........................................8
        1.9    Fractional Shares.............................................................8
        1.10   Payment to Dissenting Shareholders............................................8
        1.11   Exchange Procedures...........................................................9
               1.11.1 Surrender of Certificate...............................................9
               1.11.2 Issuance of Merger Consideration in Other Names........................9
               1.11.3 Lost, Stolen, and Destroyed Certificates...............................9
               1.11.4 Rights to Dividends and Distributions..................................9
               1.11.5 Delivery of Merger Consideration to Exchange Agent....................10
               1.11.6 Affiliates' Certificates..............................................10
        1.12   Merger Consideration Adjustments.............................................10
        1.13   Exception Shares.............................................................10
        1.14   Reservation Of Right To Revise Structure.....................................10
        1.15   Stock Option Agreement.......................................................11

SECTION 2 CLOSING OF THE TRANSACTION........................................................11

        2.1    Closing......................................................................11
        2.2    Events of Closing............................................................11
        2.3    Place of Closing.............................................................11

SECTION 3 REPRESENTATIONS...................................................................11

        3.1    Representations of Glacier and WesterFed.....................................11
               3.1.1  Corporate Organization and Qualification..............................11
               3.1.2  Subsidiaries..........................................................12
               3.1.3  Capital Stock.........................................................12
               3.1.4  Corporate Authority...................................................15
               3.1.5  Reports and Financial Statements......................................15
               3.1.6  Absence of Certain Events and Changes.................................17

                                       i

   56

                                                                                        
               3.1.7  Material Agreements...................................................17
               3.1.8  Knowledge as to Conditions............................................18
               3.1.9  Brokers and Finders...................................................18
               3.1.10 Corporate Records.....................................................18
               3.1.11 Loan and Lease Losses.................................................18
               3.1.12 No Stock Option Plans.................................................18
               3.1.13 Governmental Filings; No Violations...................................18
               3.1.14 Asset Classification..................................................19
               3.1.15 Investments...........................................................19
               3.1.16 Properties............................................................20
               3.1.17 Anti-takeover Provisions..............................................20
               3.1.18 Compliance with Laws..................................................20
               3.1.19 Litigation............................................................21
               3.1.20 Taxes.................................................................22
               3.1.21 Insurance.............................................................23
               3.1.22 Labor Matters.........................................................23
               3.1.23 Employee Benefits.....................................................23
               3.1.24 Environmental Matters.................................................26
        3.2    Exceptions to Representations................................................27
               3.2.1  Disclosure of Exceptions..............................................27
               3.2.2  Nature of Exceptions..................................................28
               3.2.3  Material Adverse Effect...............................................28

SECTION 4 CONDUCT AND TRANSACTIONS BEFORE CLOSING...........................................28

        4.1    Conduct of WesterFed's Business Before Closing...............................28
               4.1.1  Availability of WesterFed's Books, Records and Properties.............28
               4.1.2  Ordinary and Usual Course.............................................29
               4.1.3  Conduct Regarding Representations.....................................31
               4.1.4  Maintenance of Properties.............................................31
               4.1.5  Preservation of Business Organization.................................31
               4.1.6  Senior Management.....................................................31
               4.1.7  Compensation and Employment Agreements................................31
               4.1.8  Update of Financial Statements........................................32
               4.1.9  No Solicitation.......................................................32
        4.2    Conduct of Glacier's Business Before Closing.................................32
               4.2.1  Availability of Glacier's Books, Records and Properties...............32
               4.2.2  Certain Prohibited Activities.........................................33
               4.2.3  Conduct Regarding Representations.....................................33
               4.2.4  Maintenance of Properties.............................................33
               4.2.5  Preservation of Business Organization.................................33
               4.2.6  Update of Financial Statements........................................34
        4.3    Registration Statement.......................................................34
               4.3.1  Preparation of Registration Statement.................................34
               4.3.2  Submission to Shareholders............................................35
        4.4    Affiliate List...............................................................35
        4.5    Submission to Regulatory Authorities.........................................35
        4.6    Announcements................................................................36
        4.7    Consents.....................................................................36

                                       ii

   57

                                                                                           PAGE
                                                                                           ----
                                                                                        
        4.8    Further Actions..............................................................36
        4.9    Notice.......................................................................36
        4.10   Confidentiality..............................................................36
        4.11   NASDAQ Listing...............................................................36
        4.12   Registration of Assumed Option Shares........................................37
        4.13   Certain Policies.............................................................37

SECTION 5 APPROVALS AND CONDITIONS..........................................................37

        5.1    Required Approvals...........................................................37
        5.2    Conditions to Glacier's Obligations..........................................37
               5.2.1  Representations.......................................................37
               5.2.2  Compliance............................................................37
               5.2.3  No Material Adverse Effect............................................37
               5.2.4  No Governmental Proceedings...........................................37
               5.2.5  Action................................................................38
               5.2.6  Tax Opinion...........................................................38
               5.2.7  Registration Statement................................................38
               5.2.8  Consents..............................................................38
               5.2.9  Solicitation of Employees.............................................38
               5.2.10 Director Appointment..................................................38
               5.2.11 Other Matters.........................................................38
               5.2.12 Fairness Opinions.....................................................38
        5.3    Conditions to WesterFed's Obligations........................................39
               5.3.1  Representations.......................................................39
               5.3.2  Compliance............................................................39
               5.3.3  No Material Adverse Effect............................................39
               5.3.4  No Governmental Proceedings...........................................39
               5.3.5  Shareholder Action....................................................39
               5.3.6  Tax Opinion...........................................................39
               5.3.7  Registration Statement................................................39
               5.3.8  Director Appointment..................................................40
               5.3.9  NASDAQ Listing........................................................40
               5.3.10 Fairness Opinion......................................................40

SECTION 6 DIRECTORS, OFFICERS AND EMPLOYEES.................................................40

        6.1    Directors....................................................................40
        6.2    Employment Agreements........................................................40
        6.3    Employees....................................................................40
        6.4    Indemnification; Director and Officer Insurance..............................41
        6.5    Employee Benefit Issues......................................................43
               6.5.1  Employee Stock Ownership Plan.........................................43
               6.5.2  FIRF Plan.............................................................44
               6.5.3  Termination and Transfer/Merger of Plans..............................44
               6.5.4  No Contract Created...................................................44

                                      iii

   58

                                                                                        
SECTION 7 TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION...........................44

        7.1    Termination by Reason of Lapse of Time.......................................44
        7.2    Other Grounds for Termination................................................44
               7.2.1  Mutual Consent........................................................44
               7.2.2  WesterFed's Conditions Not Met........................................44
               7.2.3  Glacier's Conditions Not Met..........................................45
               7.2.4  WesterFed Fails to Recommend Shareholder Approval.....................45
               7.2.5  Glacier Fails to Recommend Shareholder Approval.......................45
               7.2.6  Impracticability......................................................45
               7.2.7  Average Closing Price Less Than $9.00.................................45
               7.2.8  Average Closing Price Less Than $7.50.................................46
        7.3    Glacier Liquidated Damages...................................................46
               7.3.1  Payment of Liquidated Damages.........................................46
               7.3.2  Limitation on Payment of Liquidated Damages...........................46
               7.3.3  Definitions...........................................................46
        7.4    WesterFed Liquidated Damages.................................................47
               7.4.1  Payment of Liquidated Damages.........................................47
               7.4.2  Limitation on Payment of Liquidated Damages...........................47
        7.5    Cost Allocation Upon Termination.............................................48

SECTION 8 MISCELLANEOUS.....................................................................48

        8.1    Notices......................................................................48
        8.2    Waivers and Extensions.......................................................49
        8.3    General Interpretation.......................................................49
        8.4    Construction and Execution in Counterparts...................................49
        8.5    Survival of Representations and Covenants....................................50
        8.6    Attorneys' Fees and Costs....................................................50
        8.7    Arbitration and Specific Performance.........................................50
        8.8    Governing Law and Venue......................................................50
        8.9    Severability.................................................................50

SECTION 9 AMENDMENTS........................................................................51

                                       iv

   59

                                                                                        
SECTION 7 TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION...........................44

        7.1    Termination by Reason of Lapse of Time.......................................44
        7.2    Other Grounds for Termination................................................44
               7.2.1  Mutual Consent........................................................44
               7.2.2  WesterFed's Conditions Not Met........................................44
               7.2.3  Glacier's Conditions Not Met..........................................45
               7.2.4  WesterFed Fails to Recommend Shareholder Approval.....................45
               7.2.5  Glacier Fails to Recommend Shareholder Approval.......................45
               7.2.6  Impracticability......................................................45
               7.2.7  Average Closing Price Less Than $9.00.................................45
               7.2.8  Average Closing Price Less Than $7.50.................................46
        7.3    Glacier Liquidated Damages...................................................46
               7.3.1  Payment of Liquidated Damages.........................................46
               7.3.2  Limitation on Payment of Liquidated Damages...........................46
               7.3.3  Definitions...........................................................46
        7.4    WesterFed Liquidated Damages.................................................47
               7.4.1  Payment of Liquidated Damages.........................................47
               7.4.2  Limitation on Payment of Liquidated Damages...........................47
        7.5    Cost Allocation Upon Termination.............................................48

SECTION 8 MISCELLANEOUS.....................................................................48

        8.1    Notices......................................................................48
        8.2    Waivers and Extensions.......................................................49
        8.3    General Interpretation.......................................................49
        8.4    Construction and Execution in Counterparts...................................49
        8.5    Survival of Representations and Covenants....................................50
        8.6    Attorneys' Fees and Costs....................................................50
        8.7    Arbitration and Specific Performance.........................................50
        8.8    Governing Law and Venue......................................................50
        8.9    Severability.................................................................50

SECTION 9 AMENDMENTS........................................................................51

                                       iv

   1

                             STOCK OPTION AGREEMENT

        STOCK OPTION AGREEMENT ("Option Agreement"), dated as of September 20,
2000, between Glacier Bancorp, Inc., a Delaware corporation ("Grantee"), and
WesterFed Financial Corporation, Inc., a Delaware corporation ("Issuer").

                                    RECITALS

        A. Grantee and Issuer have entered into a Plan and Agreement of Merger
(the "Merger Agreement") on even date herewith;

        B. As an inducement to Grantee to enter into the Merger Agreement,
Issuer has agreed to grant Grantee the Option (as hereinafter defined);

        C. The Board of Directors of Issuer has approved this Option Agreement,
the grant of the Option and the Merger Agreement.

                                    AGREEMENT

        In consideration of the mutual promises set forth below and in the
Merger Agreement, the parties agree as follows:

                                    SECTION 1
                                     OPTION

        1.1 Option Grant. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms in this
Agreement, up to an aggregate of 809,835 shares of the fully paid and
nonassessable shares of the common stock, par value $0.01 per share, of Issuer
("Common Stock") representing 19.9% of the outstanding stock of the Issuer
without giving effect to shares subject to or to be issued pursuant to this
Option Agreement, at a price per share (the "Option Price") equal to the average
of last reported sale prices per share of Common Stock as reported on the NASDAQ
National Market on September 18 and September 19, 2000.

        1.2 Adjustment of Exercise Price. If Issuer issues or agrees to issue
any shares of Common Stock (other than shares of Common Stock issued pursuant to
stock options granted pursuant to any employee benefit plan prior to the date
hereof) at a price less than such average price per share (as adjusted pursuant
to subsection 5.2), the Option price will be equal to such lesser price (in
which case such price, as adjusted, will be the Option Price).

        1.3 Shares Subject to the Option.

                1.3.1 In no event will the number of shares for which this
Option is exercisable exceed 19.9% of the issued and outstanding shares of
Common Stock immediately prior to such exercise without giving effect to any
shares subject or issued pursuant to the Option. The

                                       1
   2

number of shares of Common Stock that may be received upon the exercise of the
Option and the Option Price are subject to adjustment under this Option
Agreement.

        1.3.2 If any additional shares of Common Stock are issued or otherwise
become outstanding after the date of this Option Agreement (other than pursuant
to (i) this Option Agreement or (ii) an event described in Section 5 hereof),
the number of shares of Common Stock subject to the Option will be increased so
that, after such issuance, such number together with any shares of Common Stock
previously issued pursuant hereto, equals 19.9% of the number of shares of
Common Stock then issued and outstanding without giving effect to any shares
subject or issued pursuant to the Option. Nothing contained in this Section l.3
or elsewhere in this Option Agreement will be deemed to authorize Issuer to
issue shares in breach of any provision of the Merger Agreement.

                                    SECTION 2
                                TRIGGERING EVENTS

        2.1 Definitions. For purposes of this Option Agreement, the following
terms will have the meanings set forth below:

                (a) "Acquisition Transaction" means (i) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary (defined below), (ii) a purchase, lease or other acquisition of all
or any substantial part of the assets or deposits of Issuer or any Issuer
Subsidiary, or (iii) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities representing
10% or more of the voting power of Issuer or any Issuer Subsidiary.
Notwithstanding clause (i) above, the term "Acquisition Transaction" does not
include any mergers, consolidations or similar transactions entered into without
violating any of the terms of the Merger Agreement and (x) involving solely
Issuer and/or one or more wholly-owned (except for directors' qualifying shares
and a de minimis number of other shares) Subsidiaries of the Issuer, or (y) in
which the stockholders of Issuer immediately prior to the completion of such
transaction own at least 80% of the Common Stock of the Issuer (or the resulting
or surviving entity in such transaction) immediately after completion of such
transaction.

                (b) "Holder" means any holder or holders of the Option.

                (c) "Initial Triggering Event" means any of the following events
or transactions occurring on or after the date hereof:

                        (i) Issuer or any Significant Subsidiary (an "Issuer
Subsidiary"), without having received Grantee's prior written consent, enters
into an agreement to engage in an Acquisition Transaction with any person other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer (the "Issuer Board") recommends that the
stockholders of Issuer approve or accept any Acquisition Transaction other than
the Merger.

                        (ii) Any person other than the Grantee or any Grantee
Subsidiary acquires beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this

                                       2
   3

Agreement having the meaning assigned thereto in Section 13(d) of the 1934 Act,
and the rules and regulations thereunder);

                        (iii) The stockholders of Issuer vote and fail to adopt
the Merger Agreement at a meeting which has been held for that purpose or any
adjournment or postponement thereof, or such meeting is not held or is cancelled
prior to termination of the Merger Agreement if, prior to such meeting (or if
such meeting is not held or is cancelled, prior to such termination), it is
publicly announced that any person (other than Grantee or any of its
Subsidiaries) has made, or publicly disclosed an intention to make, a proposal
to engage in an Acquisition Transaction;

                        (iv) (x) The Issuer Board withdraws or modifies (or
publicly announces its intention to withdraw or modify) in any manner adverse in
any respect to Grantee its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement, (y) Issuer or any
Issuer Subsidiary, without having received Grantee's prior written consent,
authorizes, recommends, proposes (or publicly announces its intention to
authorize, recommend or propose) an agreement to engage in an Acquisition
Transaction with any person other than Grantee or a Grantee Subsidiary, or (z)
Issuer provides information to or engages in negotiations or discussions with a
third party relating to a possible Acquisition Transaction.

                        (v) Any person other than Grantee or any Grantee
Subsidiary has made a proposal to Issuer or its stockholders to engage in an
Acquisition Transaction and such proposal has been publicly announced;

                        (vi) Any person other than Grantee or any Grantee
Subsidiary has filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that would
constitute an Acquisition Transaction (or filed a preliminary proxy statement
with the SEC with respect to a potential vote by its stockholders to approve the
issuance of shares to be offered in such an exchange offer);

                        (vii) Issuer willfully breaches any covenant or
obligation contained in the Merger Agreement in anticipation of engaging in an
Acquisition Transaction, and following such breach Grantee is entitled to
terminate the Merger Agreement (whether immediately or after the giving of
notice or passage of time or both); or

                        (viii) Any person other than Grantee or any Grantee
Subsidiary (other than in connection with a transaction to which Grantee has
given its prior written consent) has filed an application or notice with the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board")
or other federal or state bank or thrift regulatory or antitrust authority, and
the application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.

                (d) "Person" has the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations thereunder.

                                       3
   4

                (e) "Significant Subsidiary" has the meaning assigned thereto in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC").

                (f) "Subsequent Triggering Event" means any of the following
events or transactions occurring after the date hereof:

                        (i) The acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 25% or more of the then
outstanding Common Stock; or

                        (ii) The occurrence of the Initial Triggering Event
described in clause 2.1(c)(i) except that if the Triggering Event is based upon
an Acquisition Transaction described in clause 2.1(a)(iii), then the percentage
referred to in clause 2.1(a)(iii) will be 25%.

                (g) "Exercise Termination Event" means any of (i) the Effective
Date of the Merger; (ii) termination of the Merger Agreement before an Initial
Triggering Event except a termination by Grantee pursuant to subsection 7.2.2
(solely on the account of a willful breach by Issuer) or subsection 7.2.4 of the
Merger Agreement (each, a "Listed Termination"); (iii) the passage of fifteen
(15) months (or such longer period as provided in Section 10) after termination
of the Merger Agreement if such termination follows an Initial Triggering Event
or a Listed Termination, (iv) the date on which the stockholders of the Grantee
have voted and failed to adopt the Merger Agreement (unless (A) Issuer is then
in material breach of its covenants or agreements contained in the Merger
Agreement or (B) on or prior to such date, the stockholders of Issuer have also
voted and failed to approve and adopt the Merger Agreement), or (v) upon a
termination of this Option Agreement as provided in subsection 2.2.2.

        2.2 Exercise of Option.

                2.2.1 Triggering Events. The Holder may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event and a
Subsequent Triggering Event have occurred before an Exercise Termination Event,
provided that the Holder must have sent the written notice of such exercise (as
provided in clause 2.2.3) within six (6) months following such Subsequent
Triggering Event (or such later period as provided in Section 10).

                2.2.2 Limitations on Exercise. Notwithstanding anything to the
contrary (a) the Option may not be exercised at any time when Grantee is in
willful breach of the Merger Agreement giving Issuer the right to terminate
pursuant to subsection 7.2.3 of the Merger Agreement or at any time when Issuer
has a right to terminate the Merger Agreement pursuant to subsection 7.2.5, and
(b) this Option Agreement will automatically terminate upon (i) the proper
termination of the Merger Agreement by Issuer pursuant to subsection 7.2.3
thereof as a result of the willful breach by Grantee of the Merger Agreement, by
Issuer pursuant to subsection 7.2.5 of the Merger Agreement or by Issuer or
Grantee pursuant to subsection 7.2.1 of the Merger Agreement, or (ii) the
acceptance by the Grantee of the $4.5 million liquidated damages from Issuer
pursuant to subsection 7.4.1 of the Merger Agreement.

                2.2.3 Notice of Triggering Event. Issuer will notify Grantee
promptly in writing of the occurrence of any Initial Triggering Event or
Subsequent Triggering Event (together, a "Triggering Event"), it being
understood that the giving of such notice by Issuer is not a condition to the
right of the Holder to exercise the Option.

                                       4
   5

                2.2.4 Notice of Exercise. If Holder is entitled to and wishes to
exercise the Option (or any portion thereof), it will send to Issuer a written
notice (the date of which is the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided,
that if prior notification to or approval of the Federal Reserve Board or any
other regulatory or antitrust agency is required in connection with such
purchase, the Holder will promptly file the required notice or application for
approval, will promptly notify Issuer of such filing, and will expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence will run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed. Any exercise of the
Option will be deemed to occur on the Notice Date relating to that exercise.

                2.2.5 Closing. At the closing referred to in subsection 2.2.4,
the Holder will (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Option Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Option Agreement will not preclude the
Holder from exercising the Option.

                2.2.6 Delivery of Certificates.

                        (a) At the closing, simultaneously with the delivery of
immediately available funds as provided in subsection 2.2.5, Issuer will deliver
to the Holder a certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option is exercised in part
only, a new Option evidencing the rights of the Holder to purchase the balance
of the shares purchasable hereunder.

                        (b) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that reads substantially as
follows:

        The transfer of the shares represented by this certificate is subject to
        certain provisions of an agreement between the registered holder hereof
        and Issuer and to resale restrictions arising under the Securities Act
        of 1933, as amended. A copy of such agreement is on file at the
        principal office of Issuer and will be provided to the holder hereof
        without charge upon receipt by Issuer of a written request therefor.

                        (c) The reference to the resale restrictions of the
Securities Act of 1933, as amended (the "1933 Act") in the above legend will be
removed by delivery of substitute certificate(s) without such reference if the
Holder has delivered to Issuer a copy of a letter from the staff of the SEC, or
an opinion of counsel, in form and substance reasonably satisfactory to Issuer,
to the effect that such legend is not required for purposes of the 1933 Act. The
reference to the provisions of this Option Agreement in the above legend will be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in

                                       5
   6

compliance with the provisions of this Option Agreement and under circumstances
that do not require the retention of such reference in the opinion of counsel to
the Holder. The legend will be removed in its entirety if the conditions in the
preceding two sentences are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.

                2.2.7 Rights of Holder. Upon the giving by the Holder to Issuer
of the written notice of exercise of the Option provided for under subsection
2.2.4 and the tender of the applicable purchase price in immediately available
funds, the Holder will be deemed, subject to the receipt of any necessary
regulatory approvals, to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer are then closed or that certificates representing such shares of Common
Stock have not then actually been delivered to the Holder. Issuer will pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.

                                    SECTION 3
                               COVENANTS OF ISSUER

        Issuer agrees:

                (a) that it will at all times maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be exercised without additional authorization of Common
Stock after giving effect to all other options, warrants, convertible securities
and other rights to purchase Common Stock;

                (b) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed by
Issuer under this Option Agreement;

                (c) promptly to take all action as may from time to time be
required (including (i) complying with all applicable premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (ii) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), or the Change in Bank Control Act
of 1978, as amended, or any state or other federal thrift or banking law, prior
approval of or notice to the Federal Reserve Board or to any state or other
federal regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state or other
federal regulatory authority as they may require) in order to permit the Holder
to exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and

                (d) promptly to take all action provided herein to protect the
rights of the Holder against dilution.

                                       6
   7

                                    SECTION 4
                       EXCHANGE OR REPLACEMENT OF OPTIONS

        This Option Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Option Agreement at the principal office of Issuer, for other Agreements
providing for Options of different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions as are set forth
herein, in the aggregate the same number of shares of Common Stock purchasable
hereunder. The terms "Option Agreement" and "Option" include any Agreements and
related Options for which this Option Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Option Agreement, and
(in the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Option Agreement,
if mutilated, Issuer will execute and deliver a new Option Agreement of like
tenor and date. Any such new Option Agreement executed and delivered will
constitute an additional contractual obligation on the part of Issuer, whether
or not the Option Agreement so lost, stolen, destroyed or mutilated is at any
time enforceable by anyone.

                                    SECTION 5
                           ADJUSTMENT OF OPTION SHARES

        5.1 Adjustment of Number of Shares. In addition to the adjustment in the
number of shares of Common Stock that are purchasable upon exercise of the
Option pursuant to Section 1 of this Option Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the Option Price
are subject to adjustment from time to time as provided in this subsection 5.1.
In the event of any change in, or distributions in respect of, the Common Stock
by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon exercise of the
Option will be appropriately adjusted and proper provision will be made so that,
in the event that any additional shares of Common Stock are to be issued or
otherwise become outstanding as a result of any such change (other than pursuant
to an exercise of the Option), the number of shares of Common Stock that remain
subject to the Option will be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the exercise
of the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common Stock issued
and outstanding immediately prior to such issuance.

        5.2 Adjustment of Exercise Price. Whenever the number of shares of
Common Stock purchasable upon exercise hereof is adjusted as provided in
subsection 5.1, the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which is equal to the number of shares of
Common Stock purchasable prior to the adjustment and the denominator of which is
equal to the number of shares of Common Stock purchasable after the adjustment.

                                       7
   8

                                    SECTION 6
                          REGISTRATION OF OPTION SHARES

        6.1 Registration. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer will, at the request
of Grantee delivered within twelve (12) months (or such later period as provided
in Section 10) of such Subsequent Triggering Event (whether on its own behalf or
on behalf of any subsequent holder of this Option (or part thereof) or any of
the shares of Common Stock issued pursuant hereto), promptly prepare, file and
keep current a registration statement under the 1933 Act covering any shares
issued and issuable pursuant to this Option and will use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee will have the right to demand two such registrations. The
Issuer will bear the costs of such registrations (including, but not limited to,
Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto).

        6.2 Limitation on Registration Rights. Notwithstanding subsection 6.1,
if, at the time of any request by Grantee for registration of Option Shares as
provided in subsection 6.1, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided,

                (a) that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder must
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and

                (b) that if such reduction occurs, then Issuer will file a
registration statement for the balance as promptly as practicable thereafter as
to which no reduction pursuant to this Section 6 will be permitted or occur and
the Holder will thereafter be entitled to one additional registration and the
twelve (12) month period referred to in the first sentence of this section shall
be increased to twenty-four (24) months. Notwithstanding anything to the
contrary contained herein, in no event will the number of registrations that
Issuer is obligated to effect be increased by reason of the fact that there is
more than one Holder as a result of any assignment or division of this Option
Agreement.

        6.3 Information from Holder. Each Holder will provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer will become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating

                                       8
   9

itself in respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements for Issuer.

        6.4 Notice to Other Parties. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.

                                    SECTION 7
                                REPURCHASE EVENTS

        7.1 Definitions. For purposes of the Option Agreement, the following
terms will have the meanings set forth below:

                (a) "Option Repurchase Price" means to the amount by which (i)
the market/offer price exceeds (ii) the Option Price, multiplied by the number
of shares for which this Option may then be exercised.

                (b) "Repurchase Event" means the occurrence of any of the
following events or transactions after the date of this Option Agreement:

                        (i) the acquisition by any person (other than Grantee or
any Grantee Subsidiary) of beneficial ownership of 50% or more of the then
outstanding Common Stock; or

                        (ii) the consummation of any Acquisition Transaction
described in subsection 2.1(a) hereof, except that the percentage referred to in
clause (iii) will be 50%.

                (c) "Option Share Repurchase Price" means the market/offer price
multiplied by the number of Option Shares designated by the Holder in any
repurchase request.

                (d) "Market/offer price" means the highest of (i) the price per
share of Common Stock at which a tender or exchange offer therefor has been
made, (ii) the price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing price for shares
of Common Stock within the six-month period immediately preceding the date the
Holder gives notice of the required repurchase of this Option or the Owner gives
notice of the required repurchase of Option Shares, as the case may be, or (iv)
in the event of a sale of all or any substantial part of Issuer's assets or
deposits, the sum of the net price paid in such sale for such assets or deposits
and the current market value of the remaining net assets of Issuer as determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such sale.
In determining the market/offer price, the value of consideration other than
cash will be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as the case may be, and reasonably acceptable
to Issuer.

        7.2 Repurchase Request. At any time after a Repurchase Event (i) at the
request of the Holder, delivered prior to an Exercise Termination Event (or such
later period as provided in Section 10), Issuer (or any successor thereto) will
repurchase the Option from the Holder at the

                                       9
   10

Option Repurchase Price and (ii) at the request of the owner of Option Shares
from time to time (the "Owner"), delivered prior to an Exercise Termination
Event (or such later period as provided in Section 10), Issuer (or any successor
thereto) will repurchase the number of the Option Shares from the Owner as the
Owner designates at the Option Share Repurchase Price.

        7.3 Surrender of Option for Repurchase. The Holder and the Owner, as the
case may be, may exercise its right to require Issuer to repurchase the Option
and any Option Shares pursuant to this Section 7 by surrendering for such
purpose to Issuer, at its principal office, a copy of this Option Agreement or
certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that the Holder or the Owner, as the case may be, elects to
require Issuer to repurchase this Option and/or the Option Shares in accordance
with the provisions of this Section 7. As promptly as practicable, and in any
event within five business days after the surrender of the Option and/or
certificates representing Option Shares and the receipt of such notice or
notices relating thereto, Issuer will deliver or cause to be delivered to the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase Price therefor or the portion thereof that Issuer is not then
prohibited under applicable law and regulation from so delivering.

        7.4 Legal Restrictions on Repurchases.

                7.4.1 To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from
repurchasing the Option and/or the Option Shares in full, Issuer will
immediately so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited. Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish such repurchase.

                7.4.2 If Issuer at any time after delivery of a notice of
repurchase pursuant to subsection 7.3 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full, the Holder or Owner may
revoke its notice of repurchase of the Option and/or the Option Shares whether
in whole or to the extent of the prohibition.

                7.4.3 In the event of a partial repurchase under clause 7.4.2,
Issuer will promptly (i) deliver to the Holder and/or the Owner, as appropriate,
that portion of the Option Repurchase Price and/or the Option Share Repurchase
Price that Issuer is not prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Agreement evidencing the right of
the Holder to purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the surrendered
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, and/or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing. If an Exercise

                                       10
   11

Termination Event has occurred prior to the date of the notice by Issuer
described in clause 7.4.1, or is scheduled to occur at any time before the
expiration of a period ending on the thirtieth day after such date, the Holder
will nonetheless have the right to exercise the Option until the expiration of
such 30-day period.

                                    SECTION 8
                           CHANGE IN CONTROL OF ISSUER

        8.1 Definitions. For the purposes of this Option Agreement, the
following terms have the meanings indicated:

                (a) "Acquiring Corporation" means (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other than
Issuer), (ii) the acquiring person in a plan of exchange in which Issuer is
acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer is
the continuing or surviving or acquiring person, and (iv) the transferee of all
or a substantial part of Issuer's assets or deposits (or the assets or deposits
of the Issuer Subsidiary).

                (b) "Substitute Common Stock" means the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.

                (c) "Assigned Value" means the market/offer price, as defined in
subsection 7.1(d).

                (d) "Average Price" means the average closing price of a share
of the Substitute Common Stock for one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price will be computed with respect to a share of
common stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.

                (e) "Change of Control Agreement" means an agreement (i) to
consolidate with or merge into any person, other than Grantee or a Grantee
Subsidiary, or engage in a plan of exchange with any person, other than Grantee
or a Grantee Subsidiary and Issuer is not the continuing or surviving
corporation of such consolidation or merger or the acquirer in such plan of
exchange, (ii) to permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer or be acquired by Issuer in a plan of exchange and Issuer
is the continuing or surviving or acquiring corporation, but, in connection with
such merger or plan of exchange, the then outstanding shares of Common Stock
will be changed into or exchanged for stock or other securities of any other
person or cash or any other property or the then outstanding shares of Common
Stock will after such merger or plan of exchange represent less than 50% of the
outstanding shares and share equivalents of the merged or acquiring company, or
(iii) to sell or otherwise transfer all or a substantial part of its or the
Issuer Subsidiary's assets or deposits to any person, other than Grantee or a
Grantee Subsidiary.

                                       11
   12

        8.2 Substitute Options.

                8.2.1 If before an Exercise Termination Event, Issuer enters
into a Change of Control Agreement then, the Change of Control Agreement will
make proper provision so that the Option shall, upon the consummation of any
such transaction and upon the terms and conditions set forth in this Option
Agreement, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (i) the Acquiring Corporation
(as hereinafter defined) or (ii) any person that controls the Acquiring
Corporation.

                8.2.2 The Substitute Option will have the same terms as the
Option, provided that if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms will be as similar as possible
and in no event less advantageous to the Holder. The issuer of the Substitute
Option will also enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this Agreement (after giving
effect for such purpose to the provisions of Section 9), which agreement will be
applicable to the Substitute Option.

                8.2.3 The Substitute Option will be exercisable for such number
of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option was
exercisable immediately prior to the event described in subsection 8.2.1,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock will then be equal to the Option Price
multiplied by a fraction, the numerator of which will be the number of shares of
Common Stock for which the Option was exercisable immediately prior to the event
described in subsection 8.2.1 and the denominator of which will be the number of
shares of Substitute Common Stock for which the Substitute Option is
exercisable.

                8.2.4 In no event, pursuant to any of the foregoing paragraphs,
will the Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding immediately prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the shares of Substitute Common Stock outstanding
immediately prior to exercise but for this clause 8.2.4, the issuer of the
Substitute Option (the "Substitute Option Issuer") shall make a cash payment to
Holder equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (e). This
difference in value will be determined by a nationally recognized investment
banking firm selected by the Holder.

        8.3 Requirements for Change in Control Agreement. Issuer will not enter
into any Change of Control Agreement unless the Acquiring Corporation and any
person that controls the Acquiring Corporation assume in writing all the
obligations of Issuer hereunder.

                                    SECTION 9
                   REPURCHASE OF SUBSTITUTE OPTIONS OR SHARES

        9.1 Definitions. For the purposes of this Option Agreement, the
following terms have the meanings indicated:

                                       12
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                (a) "Highest Closing Price" means the highest closing price for
shares of Substitute Common Stock within the six-month period immediately
preceding the date the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner gives notice
of the required repurchase of the Substitute Shares, as applicable.

                (b) "Substitute Option Repurchase Price" means the amount by
which the Highest Closing Price exceeds the exercise price of the Substitute
Option multiplied by its number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised.

                (c) "Substitute Share Repurchase Price" means the Highest
Closing Price multiplied by the number of shares designated by the Substitute
Share Option.

        9.2 Repurchase. At the request of the holder of the Substitute Option
(the "Substitute Option Holder"), the issuer of the Substitute Option (the
"Substitute Option Issuer") will repurchase the Substitute Option from the
Substitute Option Holder at the Substitute Option Repurchase Price, and at the
request of the owner (the "Substitute Share Owner") of shares of Substitute
Common Stock (the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at the Substitute Share Repurchase Price.

        9.3 Exercise of Repurchase Rights. The Substitute Option Holder and the
Substitute Share Owner, as the case may be, may exercise its respective rights
to require the Substitute Option Issuer to repurchase the Substitute Option and
the Substitute Shares pursuant to this Section 9 by surrendering for such
purpose to the Substitute Option Issuer, at its principal office, the agreement
for such Substitute Option (or, in the absence of such an agreement, a copy of
this Agreement) and/or certificates for Substitute Shares accompanied by a
written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the Substitute Shares
in accordance with the provisions of this Section 9. As promptly as practicable
and in any event within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer will
deliver or cause to be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the Substitute
Share Repurchase Price therefor or the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law and regulation from so
delivering.

        9.4 Limitations on Repurchase.

                9.4.1 To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer will
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Option Repurchase Price and/or the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five (5) business days after the date on which the

                                       13
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Substitute Option Issuer is no longer so prohibited. Substitute Option Issuer
will use its reasonable best efforts to receive all required regulatory and
legal approvals as promptly as practicable in order to accomplish such
repurchase.

                9.4.2 If the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection 9.3 prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
delivering to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full, the Substitute Option Holder and/or
Substitute Share Owner may revoke its notice of repurchase of the Substitute
Option or the Substitute Shares either in whole or to the extent of prohibition.

                9.4.3 In the event of a partial repurchase under subsection
9.4.2, the Substitute Option Issuer will promptly (i) deliver to the Substitute
Option Holder or Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share Repurchase Price that
the Substitute Option Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event has occurred prior to the date of the notice by the
Substitute Option Issuer described in subsection 9.3, or is scheduled to occur
at any time before the expiration of a period ending on the thirtieth day after
such date, the Substitute Option Holder will nevertheless have the right to
exercise the Substitute Option until the expiration of such 30-day period.

                                   SECTION 10
                          EXTENSION OF EXERCISE PERIODS

        The 30-day, 6-month, 12-month, 18-month or 24-month periods for exercise
of certain rights under Sections 2, 6, 7, 9, 12 and 15 will be extended: (i) to
the extent necessary to obtain all regulatory approvals for the exercise of such
rights (for so long as the Holder, Owner, Substitute Option Holder or Substitute
Share Owner, as the case may be, is using commercially reasonable efforts to
obtain such regulatory approvals), and for the expiration of all statutory
waiting periods; and (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise.

                                       14
   15

                                   SECTION 11
                            ISSUER'S REPRESENTATIONS

        Issuer hereby represents to Grantee as follows:

        11.1 Issuer has full corporate power and authority to execute and
deliver this Option Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Option Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
the Issuer Board prior to the date hereof and no other corporate proceedings on
the part of Issuer are necessary to authorize this Option Agreement or to
consummate the transactions so contemplated. This Option Agreement has been duly
and validly executed and delivered by Issuer.

        11.2 This Option Agreement, and the transactions contemplated by it are
not subject to the requirements of any "moratorium," "control share", "fair
price", "affiliate transactions", "business combination" or other antitakeover
laws and regulations of any state applicable to Issuer. The provisions of
Article "Eighth" of Issuer's certificate of incorporation do not apply to the
entering into of this Option Agreement and the transactions contemplated hereby.

        11.3 Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Option Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.

                                   SECTION 12
                           LIMITS ON OPTION VALUE AND
                               SURRENDER OF OPTION

        12.1 Definitions.

                12.1.1 "Total Profit" means the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 7, (ii)
(x) the amount received by Grantee pursuant to Issuer's repurchase of Option
Shares pursuant to Section 7, less (y) Grantee's purchase price for such Option
Shares, (iii) (x) the net cash amounts received by Grantee pursuant to the sale
of Option Shares (or any other securities into which Option Shares are converted
or exchanged) to any unaffiliated party (but specifically excluding any amounts
in excess of the market value thereof on the date purchased by Grantee), less
(y) the Grantee's purchase price of such Option Shares, (iv) any amounts
received by Grantee on the transfer of the Option (or any portion thereof) to
any unaffiliated party, and (v) any amount equivalent to the foregoing with
respect to the Substitute Option.

                12.1.2 "Notional Total Profit" means, with respect to any number
of shares as to which Grantee may propose to exercise this Option, the Total
Profit determined as of the date of

                                       15
   16

such proposed exercise assuming that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).

                12.1.3 "Surrender Price" means an amount equal to $4.5 million
(i) plus, if applicable, Grantee's purchase price with respect to any Option
Shares and (ii) minus, if applicable, the excess of (A) the net cash amounts, if
any, received by Grantee pursuant to the arms' length sale of Option Shares (or
any other securities into which such Option Shares were converted or exchanged)
to any unaffiliated party, over (B) Grantee's purchase price of such Option
Shares.

        12.2 Limitations.

                12.2.1 Notwithstanding any other provision of this Option
Agreement, in no event will the Grantee's Total Profit exceed $4.5 million and,
if it otherwise would exceed such amount, the Grantee, at its sole election,
will either (i) reduce the number of shares of Common Stock subject to this
Option, (ii) deliver to Issuer for cancellation Option Shares previously
purchased by Grantee, (iii) pay cash to Issuer, or (iv) any combination thereof,
so that Grantee's actually realized Total Profit does not exceed $4.5 million
after taking into account the foregoing actions.

                12.2.2 Notwithstanding any other provision of this Option
Agreement, this Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit of more than $4.5
million; provided that nothing in this sentence will restrict any exercise of
the Option permitted hereby on any subsequent date.

        12.3 Surrender of Option.

                12.3.1 Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later period
as provided in Section 10), surrender the Option (together with any Option
Shares issued to and then owned by Grantee) to Issuer in exchange for a cash fee
equal to the Surrender Price; provided, however, that Grantee may not exercise
its rights pursuant to this subsection 12.3 if Issuer has repurchased the Option
(or any portion thereof) or any Option Shares pursuant to Section 7.

                12.3.2 Grantee may exercise its right to relinquish the Option
and any Option Shares pursuant to this subsection 12.3.1 by surrendering to
Issuer, at its principal office, a copy of this Agreement together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to relinquish the Option and Option Shares, if any, in
accordance with the provisions of this Section 12 and (ii) accept the Surrender
Price. The Surrender Price will be payable in immediately available funds on or
before the second business day following receipt of such notice by Issuer.

                12.3.3 To the extent that Issuer is prohibited under applicable
law or regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer will immediately so notify Grantee
and thereafter deliver or cause to be delivered, from

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time to time, to Grantee, the portion of the Surrender Price that it is no
longer prohibited from paying, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a notice of surrender pursuant to subsection 12.3.2 is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Grantee the Surrender Price in full, (i)
Issuer will (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of the
submission or receipt of any documents relating to any such regulatory and legal
approvals, provide Grantee with copies of the same, and (C) keep Grantee advised
of both the status of any such request for regulatory and legal approvals, as
well as any discussions with any relevant regulatory or other third party
reasonably related to the same, and (ii) Grantee may revoke such notice of
surrender by delivery of a notice of revocation to Issuer and, upon delivery of
such notice of revocation, the Exercise Termination Event will be extended to a
date six months from the date on which the Exercise Termination Event would have
occurred if not for the provisions of this subsection 12.3 (during which period
Grantee may exercise any of its rights hereunder, including any and all rights
pursuant to this subsection 12.3.

                                   SECTION 13
                                  MISCELLANEOUS

        13.1 Assignment. Neither of the parties to this Option Agreement may
assign any of its rights or obligations under this Option Agreement or the
Option to any other person, without the express written consent of the other
party, except that if a Subsequent Triggering Event occurs prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder; provided, however,
that until the date 15 days following the date on which the Federal Reserve
Board or other applicable regulatory authority has approved an application by
Grantee to acquire the shares of Common Stock subject to the Option, Grantee may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on Grantee's behalf or (iv)
any other manner approved by the Federal Reserve Board or other applicable
regulatory authority.

        13.2 Best Efforts. Each of Grantee and Issuer will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the consummation of the
transactions contemplated by this Option Agreement, including, without
limitation, applying to the Federal Reserve Board under the BHCA, to the extent
required, for approval to acquire the shares issuable hereunder, but Grantee
will not be obligated to apply to state banking authorities for approval to
acquire the shares of Common Stock issuable hereunder until such time, if ever,
as it deems appropriate to do so.

        13.3 Equitable Relief. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Option Agreement by either party
hereto and that the obligations of the parties hereto will be enforceable by
either party hereto through injunctive or other equitable relief. In connection
therewith both parties waive the posting of any bond or similar requirement.

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        13.4 Severance. If any term, provision, covenant or restriction
contained in this Option Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in this Option Agreement will remain in full force and
effect, and will in no way be affected, impaired or invalidated. If for any
reason such court or regulatory agency determines that the Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in subsection 1.1
hereof (as adjusted pursuant to Section 5 hereof), it is the express intention
of Issuer to allow the Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible, without any amendment or
modification hereof.

        13.5 Notices. All notices, requests, claims, demands and other
communications hereunder will be deemed to have been duly given when delivered
in person, by fax, telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.

        13.6 Governing Law. This Option Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the conflict of law principles thereof (except to the extent that mandatory
provisions of Federal law are applicable).

        13.7 Counterparts. This Option Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.

        13.8 Expenses. Except as otherwise expressly provided herein, each of
the parties hereto will bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.

        13.9 Entire Agreement. Except as otherwise expressly provided herein or
in the Merger Agreement, this Option Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Option Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assignees. Nothing in this Option Agreement, expressed
or implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors except as assignees, any rights, remedies,
obligations or liabilities under or by reason of this Option Agreement, except
as expressly provided herein.

        13.10 Capitalized Terms. Capitalized terms used in this Option Agreement
and not defined herein will have the meanings assigned thereto in the Merger
Agreement.

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        Each of the parties has caused this Option Agreement to be executed on
its behalf by its officer thereunto duly authorized, all as of the date first
above written.

                                            GLACIER BANCORP, INC.

                                            By
                                               ---------------------------------
                                            Name:  Michael J. Blodnick
                                            Title: Chief Executive Officer

                                            WESTERFED FINANCIAL CORPORATION

                                            By
                                               ---------------------------------
                                            Name: Ralph K. Holliday
                                            Title: Chief Executive Officer

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                                                                      EXHIBIT 99

Press Release

Glacier Bancorp, Inc. Announces Acquisition Of Missoula-based WesterFed
Financial

KALISPELL, Mont., Sept. 20 /PRNewswire/ -- Glacier Bancorp, Inc. Kalispell,
Montana, and WesterFed Financial Corporation Missoula, Montana, jointly
announced today the signing of a definitive agreement whereby Glacier Bancorp,
Inc. will acquire WesterFed Financial Corporation for a combination of cash and
stock in a transaction valued at approximately $95 million. The combined company
will be the largest publicly traded bank holding company headquartered in the
inland northwest with approximately $2 billion in assets, $1.3 billion in loans
and $1.2 billion in deposits.

WesterFed Financial Corporation is the holding company for Montana's largest
savings bank, Western Security Bank, which operates twenty-seven offices in
fourteen Montana communities. At June 30, 2000, WesterFed had total assets of
$946 million, total loans of $619 million, total deposits of $607 million and
total equity of $89 million. For the six months ended June 30, 2000, WesterFed
had net income of $3.9 million or $0.95 per share.

Under the terms of the agreement, approved by the boards of both companies,
Glacier Bancorp, Inc. will issue 1.1 shares of Glacier Bancorp stock for each
WesterFed share outstanding and pay $9.05 per WesterFed share in cash, subject
to certain adjustments provided for in the definitive agreement. WesterFed
shareholders will have the opportunity to receive Glacier Bancorp stock, cash or
a combination thereof, subject to election, proration and allocation procedures,
as more fully described in the definitive agreement. At the determination date,
which will be 15 days prior to closing, the value of the combined cash and stock
that each shareholder will receive will have the same value. Based on Glacier's
closing price on September 20, 2000, of $12.88, the transaction has an implied
per share value of $23.21 per WesterFed share.

The transaction requires approval from banking regulators and by Glacier Bancorp
and WesterFed Financial shareholders. The acquisition will be recorded as a
purchase for accounting purposes and is expected to close in the first quarter
of 2001. The deal is expected to be accretive to earnings in 2001, with only
modest cost savings and no revenue enhancements. It is anticipated that
initially WesterFed's banking subsidiary, Western Security Bank, will continue
to operate with certain administrative functions consolidated. Over time, the
offices of Western Security Bank located in Western and Central Montana are
expected to be integrated into Glacier's various commercial banking subsidiaries
based on logistical and efficiency considerations.

"The acquisition of WesterFed complements our organizations and will further
strengthen our presence in key markets throughout Montana," said Mick Blodnick,
President and Chief Executive Officer of Glacier Bancorp, Inc. "In addition,
WesterFed provides the opportunity to extend Glacier's community style banking
to a much larger base of customers. Together with our announcement last week to
purchase seven offices in Idaho and Utah from Wells Fargo & Co., with
approximately $185 million in deposits, this will truly expand our market share
and the number of customers we serve."

Ralph Holliday, President and Chief Executive Officer of WesterFed Financial
Corporation, who will continue as President and Chief Executive Officer of
Western Security Bank, commented "The new larger Glacier franchise will provide
our organization with the ability to provide more

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banking products and services to our customers, as well as accelerating our
transition to a commercial lending organization."

In connection with the transaction, WesterFed Financial has granted to Glacier
Bancorp an option exercisable, in whole or in part, under certain circumstances
to purchase authorized but unissued shares of WesterFed common stock up to 19.9%
of WesterFed's shares currently outstanding.

D.A. Davidson & Co. acted as financial advisor to Glacier Bancorp, Inc., and
Graham & Dunn P.C. served as legal counsel. Putnam Lovell Securities Inc. acted
as financial advisor to WesterFed Financial Corporation, and Silver Freedman &
Taff, LLP served as legal counsel.

Forward Looking Statements

When used in this press release or other public shareholder communications, or
in oral statements made with the approval of an authorized executive officer,
the words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," "project," "significantly" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Glacier Bancorp and WesterFed
Financial wish to caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors including regional and national economic
conditions, changes in levels of market interest rates, credit risks of lending
activities, competitive and regulatory factors could affect the combined
company's financial performance and could cause the combined company's actual
results for future periods to differ materially from those anticipated or
projected.

Glacier Bancorp and WesterFed Financial do not undertake, and specifically
disclaim, any obligation to publicly release the result of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.

Glacier Bancorp, Inc. will file a registration statement on Form S-4 with the
SEC in connection with the proposed transaction. The registration statement will
include a joint prospectus/proxy statement which will be sent to the
shareholders of both Glacier Bancorp, Inc. and WesterFed Financial Corporation
seeking their approval of the proposed transaction. Investors and security
holders are advised to read the registration statement and joint proxy
statement/prospectus because they will contain important information. When
filed, these documents can be obtained at the Internet Word Wide Web site
maintained by the SEC at "http://www.sec.gov."

Glacier Bancorp and WesterFed Financial and their respective directors and
executive officers may be deemed to be participants in the solicitation of
proxies to approve the merger. Information about the participants may be
obtained through the SEC's web site from the definitive proxy statement filed
with the SEC by Glacier Bancorp on March 30, 2000 and the definitive proxy
statement filed with the SEC by WesterFed Financial on March 30, 2000.

For more information please contact: Mick Blodnick, President and Chief
Executive Officer, of Glacier Bancorp, Inc. (406) 756-4200 or Ralph K. Holliday,
President and Chief Executive Officer, of WesterFed Financial Corporation (406)
721-5254.