BANK OF MONTANASYSTEM
PROXY STATEMENT
For Annual Meeting of Shareholders
of
BANK OF MONTANA SYSTEM
#9 Third Street North
Great Falls, Montana 59401 Telephone: (406) 727-3100
INTRODUCTION
This Proxy Statement, the accompanying form of proxy, and the Annual Report for the year ended
December 31, 1984 (the "1984 Annual Report"), which were first mailed to shareholders on April 19,
1985, are furnished in connection with the solicitation of proxies by and on behalf of the Board of
Directors of Bank of Montana System (the “Company") to be voted at the Company's 1985 Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Sheraton Great Falls Hotel, 400 Tenth
Avenue South, Great Falls, Montana, on May 10, 1985, at 2:00 P.M. (local time).
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of the Com-
pany's Common Stock, $2.50 par value per share (the "Shares"), is necessary to constitute a quorum at the
Annual Meeting. The record date for the determination of shareholders entitled to notice of, and to vote at,
the Annual Meeting or any adjournment thereof was the close of business on April 12, 1985. As of the
record date, there were issued and outstanding 823,013 Shares, each of which is entitled to one vote at the
Annual Meeting or at any adjournment thereof. The Shares constitute the sole class of the Company's
stock. A shareholder may vote cumulatively in the election of the Company's directors by either casting as
many votes as the number of directors to be elected multiplied by the number of Shares held by such
shareholder in favor of a single nominee, or by dividing such number of votes among several nominees.
Any shareholder has the unconditional right to revoke his or her proxy at any time prior to the voting
thereof at the Annual Meeting by either (I) filing with the Company a written revocation of his or her
proxy, (ii) appearing at the annual Meeting and casting a vote contrary to that indicated on his or her
proxy, or (iii) giving a duly-executed proxy bearing a later date. Attendance by a shareholder at the
Annual Meeting will not in itself revoke his or her proxy. Unless revoked, each proxy will be voted as
specified.
In addition to the election of directors of the Company, shareholders will vote on a proposal to amend the
Restated Articles of Incorporation of the Company to reduce the number of authorized Shares of the
Company to effect a reverse stock split in which one new Share, par value $2.50 per Share ("New Share"),
will be exchanged for every 125 old Shares, par value $2.50 per Share ("Old Shares"), presently issued
and outstanding. No fractional New Shares will be issued for any fractional New Share interest.
Shareholders will receive from the Company $40.00 for each Old Share which is less than a multiple of
125, unless a shareholder elects to round up at $40.00 per 1/125 fractional New Share interest sufficiently
to receive a whole New Share (the "Reverse Stock Split Proposal"). The affirmative vote of a majority of
the outstanding Shares is required for approval of the Reverse Stock Split Proposal. The Company has
been advised that members of the Adams Group intend to vote all their 446,458 Shares in favor of the
proposal and, therefore, that the proposal would be approved by a vote of 54.2% even if no other votes
were cast for the proposal. See "CERTAIN BENEFICIAL OWNERSHIP OF SHARES * " Members of
the Adams Group, however, may vote their Shares against the Reverse Stock Split Proposal under certain
circumstances. See "SPECIAL FACTORS Federal Reserve Board Limitation."Shareholders who would have fractional New Share interests as a result of approval of the Reverse Stock
Split Proposal and who object to the price of $40.00 per Old Share to be paid for resulting fractional New
Share interests ("Dissenting Shareholders"), may dissent from the Reverse Stock Split Proposal and, if the
Reverse Stock Split Proposal is approved, Dissenting Shareholders may seek to have the price paid for
fractional New Share interests determined in accordance with the procedures of Sections 35-1-810 and 35-
1-812, Montana Code Annotated. The price so determined could be higher or lower than the price set forth
in the Reverse Stock Split Proposal. See "RIGHTS OF DISSENTING SHAREHOLDERS."
SUMMARY OF SPECIAL FACTORS
The effect of the proposed amendment to the Restated Articles of Incorporation will be significant to
shareholders, and each shareholder should read carefully the information with respect to such amendment
contained in this Proxy Statement.
The purpose of the Reverse Stock Split Proposal is to reduce the number of shareholders of the Company
below 300 thereby enabling the Company to terminate registration of the Shares under, and be relieved of
the periodic reporting, proxy solicitation and other informational requirements of, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). As of April 12, 1985, the Company had 362 shareholder
accounts in the 1 to 124 Share range aggregating 23,821 Shares. Based on 646 shareholder accounts
overall and 823,013 Shares outstanding, shareholders with 124 or fewer Shares constituted 56% of the
Company's shareholders, but accounted for less than 3% of the Shares outstanding. Expenses attributable
to reporting requirements of the Exchange Act were approximately $100,000 in 1984, which is
approximately $155 per shareholder. See "SPECIAL FACTORS - Purpose of Reverse Stock Split
Proposal."
Upon termination of registration under the Exchange Act, the Shares will cease to be authorized for
quotation on NASDAQ and shareholders should expect a limited public market for their Shares as a result
of the limited number of New Shares which will be outstanding and the higher price for New Shares. The
Company estimates the Shares outstanding will be reduced to approximately 6,590 New Shares after pay-
ment for fractional New Share interests, assuming no shareholders round up and taking into account cer-
tain purchases of New Shares. The effect of the reverse stock split will be to increase holdings of the
Adams Group by 4.4%. It is contemplated that the Employee Stock Ownership Plan established by the
Company will invest in Shares purchased from existing shareholders at a price which may be in excess of
the price to be paid for fractional New Share interests. The Shares will be eligible for removal from the
Federal Reserve Board's OTC margin list upon termination of registration under the Exchange Act. The
Company believes termination of registration under the Exchange Act will result in savings in
management time and out-of-pocket expenses. See "SPECIAL FACTORS - Effects of Reverse Stock
Split."
Although the Board did not retain an appraiser or an unaffiliated representative to evaluate the Reverse
Stock Split Proposal or the price to be paid for fractional New Share interests, the price to be paid for frac-
tional New Share interests was determined after consideration of the price per Share paid by the Company
and affiliates of the Company for acquisition of Shares in various transactions since 1982, including
acquisitions pursuant to a tender offer made in September, 1984, recent market prices of the Company's
Shares and shareholders' equity per Share. See "SPECIAL FACTORS - Fairness."
Various alternatives to the Reverse Stock Split Proposal were considered and rejected by the Board of
Directors. See "SPECIAL FACTORS - Alternatives."
The Reverse Stock Split Proposal, including certain purchases of New Shares after the effective date
thereof, has been structured so that the limitation imposed by Federal Reserve Board Regulation Y, Sec-
tion 225.4 will not be exceeded; however, if it appears such limitation will be exceeded by reason of the
exercise of dissenters' rights, the Company has been advised that members of the Adams Group may vote
their Shares against the Reverse Stock Split Proposal. See "SPECIAL FACTORS - Federal Reserve Board
Limitation."
CERTAIN BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth, as of the record date, the beneficial ownership (as defined by regulations of
the Securities and Exchange Commission) of the Shares by each person or group of persons known by the
Company to beneficially own more than 5% of the outstanding Shares. information appearing in the
following table has either been furnished to the Company or taken from reports on file with the Securities
and Exchange Commission.
Amount and Nature
Name and Address of Beneficial Percentage
of Beneficial Owner Ownership (1) of Class
Stephen Adams; Waite & Company of 446,458 Shares (3) 54.2%
Bozeman, Associated Bankers Corporation-,
Eagle Agency, Inc. ' Wayne A, Boysen; Merritt
J. Gates: Alfred T. Burke; David Ray Adams:
Cedric Adams (the "Adams Group") (2)
Suite 100, 109 Bushaway Road
Wayzata, Minnesota 55391
Montana Bancsystem, Inc. (4) 58,548 Shares 7.1%
400 Securities Building
Billings, Montana 59101
Lloyd A. Amundson (5) 58,821 Shares 7.1%
418 South Minnesota Street
Sioux Falls, South Dakota 57102_____________
(1) Except to the extent indicated in the explanatory notes below, all beneficial ownership is sole and
direct.
(2) As of the record date, the beneficial ownership of Shares among the members of the Adams Group
was as follows:Shares Owned
Individually Shares Subject to Option
(and Percentage or Purchase Agreements
of Class) (and Percentage of Class)
Stephen Adams 168,591 (20.5%) 43,388 (5.3%)
Waite & Company of Bozeman 41,886 (5.1%) -0
Associated Bankers Corporation 40,331 (4.9%) -0
Eagle Agency, Inc. 41,000 (5.0%) -0
Wayne A. Boysen 6,550 (0.8%) -0
Merritt J Gates 12,550 (1.5%) -0
Alfred T Burke 66,642 (8.1%) -0
David Ray Adams 13,000 (1.6%) -0
Cedric Adams 12,520 (1.5%) -0
TOTAL 403,070 43,388
(3) Beneficial ownership of 3,143 Shares is shared by the Adams Group with a group consisting of
Joanne C. Rubie, individually and as guardian of Kim E. Rubie and Jon R. Rubie, Richard G. Rubie,
Michael C. Rubie, James D. Rubie and Joanne C. Rubie, and Richard G. Rubie and Michael C. Rubie as
trustees of the Richard D. Rubie Trust (the 'Rubie Group"). Beneficial ownership of 40,245 Shares is
shared by the Adams Group with a group consisting of James T. Brown, James T. Brown as trustee for
Helen J. Brown, Allen D. Brown, Corinne Faetchner, Jack E. Brown, Jr., Jack E. Brown, Jr. as trustee for
Lydia Brown, Jack E. Brown, Jr. as trustee for Jack E. Brown, Sr., and Dorothea L. Beck (the "Brown
Group"). Mr. Stephen Adams has entered into a purchase agreement for the purchase over time of such
Shares and the members of the Brown Group have agreed to execute and deliver to Mr. Adams proxies to
vote the Shares subject thereto. See "ADDITIONAL FACTORS TO BE CONSIDERED - Certain
Transactions."
(4) Beneficial ownership is shared with Mr. Adams by virtue of an option agreement made with Eldon
E. Kuhns in September, 1984. who controls these Shares. See "ADDITIONAL FACTORS TO BE
CONSIDERED - Certain Transactions."
(5) Beneficial ownership of 24,771 Shares held in the name of L.A. international, Inc., of which Mr.
Amundson is president, is shared with certain of Mr. Amundson's children and grandchildren; 32,350
Shares are held in the name of Madison Agency, Inc., of which Mr. Amundson is president; and 1,700
Shares are held in the name of Country Bankers Agency, Inc., of which Mr. Amundson is president.
The following table sets forth, as of the record date, information concerning the beneficial ownership of
Shares by each director, nominee and officer of the Company and all directors, nominees and officers of
the Company as a group: Percentage
Name of Beneficial Owner Shares of Class (1)
Stephen Adams 335,196(l) 40.7%
Merritt J. Gates 12,550(2)(3) 1.5%
Joseph Friend 225 0.1%
Lloyd A. Amundson 58,821 7.1%
Alfred T Burke 66,642(2)(3) 8.1%
Thomas R. Zorr 4,194(2) 0.5%
All Officers, Directors and Nominees as a Group
(6 Persons) 477,628 58.0%
__________________
(1) Includes Shares owned indirectly through Associated Bankers Corporation, Waite & Company of
Bozeman and Eagle Agency, Inc., and Shares subject to option or purchase agreements, but excludes
Shares owned by other members of the Adams Group and Shares subject to an option agreement between
Mr. Adams and Mr. Kuhns. See "ADDITIONAL FACTORS TO BE CONSIDERED - Certain
Transactions!
(2) Pursuant to the terms of separate option agreements made between Mr. Adams and each of Messrs.
Gates, Zorr and Burke, until 2002 Mr. Adams has the right to purchase and, under certain circumstances,
Messrs. Gates, Zorr and Burke have the right to require Mr. Adams to purchase, such Shares.
(3) Excludes Shares owned by other members of the Adams Group.
The information contained in this section is for explanatory purposes only, and certain persons disclaim
beneficial ownership of Shares designated as owned by or held in a trust for any other persons or indicated
as owned as a member of a group.
Certain Indebtedness. Mr. Adams and certain of the other members of the Adams Group have pledged
Shares beneficially owned by them to secure personal indebtedness to various commercial banks. Such
loan agreements with the banks in question contain customary provisions concerning default, in the event
of which a change in control of the Company could result.
ELECTION OF DIRECTORS
(Proposal No. 1 in the accompanying Notice)
The Restated Articles of Incorporation of the Company provide that the number of directors (not to exceed
15 and not less than three) may be fixed from time to time by amendment to the By-laws of the Company.
Effective at the 1984 Annual Meeting, the membership of the Board of Directors was set at five in
number. Five directors of the Company are to be elected at the Annual Meeting, each for a term of one
year or until their successors shall be duly elected and qualified. The Company's Board of Directors pro.
poses the election of the five nominees named below. Unless otherwise instructed, all proxies received
will be voted in favor of the election of such persons.The following table sets forth certain information concerning each person nominated for election as a
director:
Served as
Director
Name and Age Principal Occupation Since
Stephen Adams, 47 Chairman, President and Chief 1980 Executive Officer, Bank of Montana
System; President, Associated Bankers
Corporation (banking and real estate in
vestment), Wayzata, Minnesota
Merritt J. Gates, 46 Vice Chairman, Bank of Montana 1980 System; Executive Vice President,
Associated Bankers Corporation
(banking and real estate investment),
Wayzata, Minnesota
Lloyd A. Amundson, 58 Vice President, Bank of Montana 1982 System; Banking and Business
Management (self-employed),
Sioux Falls, South Dakota
Alfred T Burke, 56 President, Mid-South Bottling 1982 Company (soft drink bottling firm),
Longview, Texas
Thomas R. Zorr, 37 Treasurer, Bank of Montana System; 1984 Treasurer, Associated Bankers
Corporation (banking and real estate
investment), Wayzata, Minnesota
All Shares represented by properly executed proxies will be voted for the election of the foregoing
nominees who have indicated a willingness to serve, if elected, provided that if any such nominee should
withdraw or otherwise become unavailable for reasons not presently known, such Shares may be voted for
another person in place of such nominee, in accordance with the best judgment of the persons named in
the proxy.
Messrs. Adams, Gates and Burke have been engaged in the principal occupations set forth above for at
least the last five years. Mr. Zorr became the Treasurer of Bank of Montana System on October 24, 1984,
and continues as Treasurer of Associated Bankers Corporation, a position he has held since July, 1979.
Mr. Amundson became Vice President of the Company in February, 1985, and continues to provide
banking and business management services through a company he controls, an occupation in which he has
been engaged for at least the last five years. All of the nominees for director are United States citizens.
Meetings and Committees of the Board of Directors. The Board of Directors held ten meetings during
1984. All incumbent directors attended more than 75% of the aggregate of all Board meetings and
meetings of committees on which such persons served; Mr. Zorr attended two of the three Board meetings
held since his election on October 24, 1984.The organizational documents of the Company provide for an Executive Committee and an Audit Com-
mittee of the Board of Directors. The Board of Directors has no standing nominating or compensation
committees.
The Executive Committee has been generally empowered by the Board of Directors to act on its behalf
with respect to matters arising between Board meetings. In addition, it is responsible for preparing recom-
mendations to the Board regarding compensation of the Company's employees and for proposing
nominees for election to the Board. The current members of the Executive Committee are Stephen Adams
(Chairman), Merritt J. Gates, Lloyd A. Amundson and Thomas R. Zorr. The Executive Committee met ten
times during 1984.
The Audit Committee is responsible for reviewing with the independent auditors the scope and results of
their audit examination, reviewing the scope, frequency and results of internal audits and examinations,
overseeing the Company's systems of internal accounting controls and reviewing significant accounting
policies or changes. The current members of the Audit Committee are Lloyd A. Amundson (Chairman),
Alfred T. Burke, Merritt J. Gates and Thomas R. Zorr. The Audit Committee met once during 1984.
MANAGEMENT
The following table sets forth the name, address and principal occupation during the last five years of each
executive officer of the Company who is not also a nominee for director. Each of the persons listed are
United States citizens.
Name Principal Occupation
Joseph Friend Senior Vice President and Senior Credit Officer, Bank of Montana System, Great Falls, Montana,
since February, 1982; President of Midstate Bank
of Montana prior thereto.
C. Robert Paciotti Vice President, Bank of Montana System, Great Falls, Montana, since September, 1984; President
and Director of Missoula Bank of Montana from
November, 1982, to September, 1984, and Executive
Vice President and Chief Executive Officer
of the First National Bank of Marinette,
Wisconsin, prior thereto.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation paid during 1984 for services of
each executive officer of the Company whose total remuneration exceeded $60,000, and all executive
officers of the Company as a group.
CASH COMPENSATION TABLE
Name of Individual
or Number in Capacities In
Group Which Served Cash Compensation
Stephen Adams Chairman, President $207,500 and Chief Executive
Officer
Merritt J. Gates Vice Chairman $ 97,879
All executive officers $547,385
as a group (8 persons)
Stock Option Plan. The company has had in effect a Qualified Stock Option Plan adopted in 1975. Since
January 1, 1982, no options have been granted or exercised under the Plan. The Company has no present
plan to grant options for any of the remaining 150 Shares available for issuance under the Plan.
Pension Plan. Effective January 1, 1983, the Company elected to terminate its defined contribution
retirement plan. The plan was funded solely by employer contributions. Upon termination of the plan, all
participants became fully vested. Final distributions aggregating $755,054 were made during 1984. No
plan assets reverted to the Company.
Profit Sharing Plan. The Company's Profit Sharing Plan is a defined contribution plan funded solely by
employer contributions. Participation in the Profit Sharing Plan is available to all salaried employees of
the Company and its subsidiaries who are over the age of 21 and who have completed 60 days of service.
Under the terms of the Profit Sharing Plan, each employer's board of directors sets aside annually a
percentage of that company's net profits to be contributed to the Profit Sharing Plan for the benefit of its
employees. The amount set aside for each individual employee is determined by the ratio which that
employee's compensation bears to the aggregate compensation of all employees of the employer. All
employer contributions to the Profit Sharing Plan are held in trust for employees by Trust Corporation of
Montana as trustee. Benefits under the Profit Sharing Plan are payable in the form of monthly installments
or in a single lump sum at the election of the employee. Benefits are payable upon an employee's death,
disability or at normal retirement at age 65. In addition, benefits are payable upon earlier termination of
employment provided that certain vesting requirements are met. In general, through the 1984 plan year, an
employee becomes 20% vested in contributions made on his or her behalf after two years of service,
which percentage increases incrementally up to 100% after six years of service. No amounts were accrued
under the Profit Sharing Plan for 1984 for the account of the individuals and group named in the Cash
Compensation Table. See the subheading "Employee Stock Ownership Plan" below.Employee Stock Ownership Plan. An employee stock ownership plan has been established by the
Company. The Employee Stock Ownership Plan is presently unfunded; however, the following amounts
were accrued under the Employee Stock Ownership Plan for 1984 for the account of the individuals and
group named in the Cash Compensation Table: Mr. Adams, $26,948; Mr. Gates, $16,747; all executive
officers as a group, $58,517. It is contemplated that the Employee Stock Ownership Plan will invest
primarily in Shares. See "SPECIAL FACTORS - Effects of Reverse Stock Split."
Directors' Fees. Each nonsalaried director of the Company receives directors' fees of $350 per month. All
directors are reimbursed for travel expenses.
Loans to Management. The Company makes bank credit cards available to its employees on terms and
conditions identical to bank credit cards issued to customers of the Company's subsidiary banks except
that the interest rate thereunder is set at 15% per annum. In addition, during 1984 the Company's sub-
sidiary banks lent money in the ordinary course of business to a number of the Company's officers and
directors. All loans to officers or directors during the period were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for comparable transactions wit h
unaffiliated persons and did not involve more than a normal risk of collectibility or present other
unfavorable features.
CERTAIN TRANSACTIONS
Until 1984, Associated Bankers Life insurance Company, a company indirectly beneficially owned by Mr.
Adams, had participated in writing the credit life insurance provided by the Company's subsidiary banks.
During 1984, Associated Bankers Life Insurance Company was dissolved and the Company acquired a
nominal interest in a company which now participates in credit life insurance provided by the Company's
subsidiary banks.
During 1984, Metropolitan Agency, Inc., a company in which the majority of the outstanding shares are
owned by Mr. Adams, acted as insurance broker in the placement of long-term disability and group life
and health insurance carried by the Company. Such insurance is provided on terms and conditions at least
as favorable as would prevail between unrelated parties. Commissions earned by Metropolitan Agency,
Inc. from insurance carriers with respect to the placement of such insurance were $6,138 in 1984.
AMENDMENT TO RESTATED ARTICLES OF INCORPORATION(Proposal No. 2 in the accompanying Notice)
The Board of Directors of the Company has unanimously approved, subject to shareholder approval, the
Reverse Stock Split Proposal on the conditions described in this Proxy Statement and, in connection
therewith, the Board of Directors has unanimously approved, subject to shareholder approval, an amend-
ment to the Company's Restated Articles of Incorporation, deleting Article VII in its entirety and inserti ng,
in lieu thereof, a new Article VII to read as follows:
"ARTICLE VII. The total authorized capital stock of the corporation is $200,000
consisting of 80,000 shares of the par value of $2.50 per share.
No holder of stock in this corporation shall have any preemptive or preferential right to
purchase or subscribe to any stock of this corporation, or to any bonds, debentures or other
obligations convertible into stock of this corporation."
The Reverse Stock Split Proposal will be effective when the amendment to the Restated Articles of
Incorporation is approved and Articles of Amendment are filed with and a Certificate of Amendment
issued by the Secretary of State of the State of Montana, which is expected to be as soon as possible after
the Annual Meeting (the “Effective Date"). On the Effective Date, each shareholder then owning 125 or
more Old Shares will be deemed to own one New Share for every 125 Old Shares and a fractional New
Share interest equivalent to 1/125 of a New Share for each additional Old Share. Shareholders owning less
than 125 Old Shares on the Effective Date will be deemed to own a fractional New Share interest
consisting of 11125 of a New Share for each Old Share.
No fractional New Shares will be issued for any fractional New Share interest. Consequently, on the
Effective Date each shareholder will cease to have any equity interest in the Company with respect to a ny
fractional New Share interest, but will have the nontransferable right either to receive $40.00 per Old
Share in cash for such fractional New Share interest or, for a period of 30 days following the Effective
Date, to round up his holdings to the next whole New Share at a rate of $40.00 per 1/125 New Share
($5,000 per New Share). Fractional New Share interests will be provided to shareholders desiring to round
up by the Company's Transfer Agent, Trust Corporation of Montana, in Great Falls, Montana, from
available fractional New Share interests created by the reverse stock split or from authorized and unissued
Shares to be issued by the Company. (See "SPECIAL FACTORS - Fairness" herein for pricing factors
used in arriving at the $40.00 per Old Share price.).Shareholders owning less than 125 Old Shares on the
Effective Date will cease to have any equity interest whatsoever in the Company unless they elect to
round up their holdings to a whole New Share.
The Company is not making any recommendation as to whether or not a shareholder should round up.
Prior to the Effective Date, neither the Company nor any of its officers, directors or affiliates will pur-
chase or sell any Old Shares. After the Effective Date, such persons may round up their holdings to the
next whole New Share.
The Board of Directors unanimously recommends a vote "For" this proposal. SUMMARY
Reverse Stock Split Proposal.
Approval of the Reverse Stock Split Proposal will reduce the number of outstanding and authorized
Shares through a reverse stock split in which one New Share, par value $2.50 per Share, will be
exchanged for every 125 Old Shares, par value $2.50 per Share, presently issued and outstanding. No
fractional New Shares will be issued for any fractional New Share interest.
Cash Payment for Fractional Interests.
After the Effective Date of the Reverse Stock Split Proposal, holders of Old Shares otherwise entitled to
fractional interests in New Shares will instead receive payment in cash at the rate of $40.00 per Old Share,
unless a shareholder elects to round up at $40.00 per 1/125 New Share sufficiently to receive a whole New
Share. The Company anticipates that most holders of fractional New Share interests will not elect to round
up and, therefore, the total cost to the Company in connection with payment for fractional New Share in-
terests will be approximately $1,750,000. See the subheadings "Exchange of Certificates; Fractional New
Share Interests; Escheat" and "Source and Amount of Funds; Expenses" under the heading
"ADDITIONAL FACTORS TO BE CONSIDERED."
Reasons for Reverse Stock Split Proposal.
The Company believes that the benefits received from registration under the Exchange Act are dispropor-
tionate to the expense and management time associated therewith. The probable effect of approval of the
Reverse Stock Split Proposal will be to reduce the number of shareholders below 300, thereby enabling
the Company to terminate registration of the Shares under, and be relieved of the periodic reporting, proxy
solicitation and other informational requirements of, the Exchange Act. See "SPECIAL FACTORS -
Purpose of Reverse Stock Split Proposal."
Fairness.
The Board believes the Reverse Stock Split Proposal to be fair because holders of fractional New Share
interests will have the opportunity to liquidate or round up their holdings at a price the Board believes to
be fair by taking into consideration many factors, including the following: (a) a bid price of $35.25 per
Share quoted by three regional brokerage firms on April 15, 1985; (b) a recent tender offer by the
Company for up to 50,000 shares at $40.00 per Share pursuant to which an aggregate of 72,949 shares
were tendered; (c) shareholders' equity of $34.12 per Share as of December 31, 1984, and (d) sales of
small holdings such as those represented by fractional New Share interests are not equivalent to the sale of
a single large block of Shares. See 'SPECIAL FACTORS - Fairness! Subject to compliance with
applicable requirements, Dissenting Shareholders may elect to have the price paid for a fractional New
Share interest determined by a court. See "RIGHTS OF DISSENTING SHAREHOLDERS."
Federal Income Tax Consequences.
Shareholders who receive cash for all of their Old Shares under the Reverse Stock Split Proposal will
recognize a capital gain or loss, depending on the tax basis of the Old Shares, provided the Old Shares
were held as capital assets. Shareholders who receive only New Shares will not recognize gain or loss, and
will have the same aggregate tax basis and holding period for the New Shares as they had for the Old
Shares. Shareholders receiving both cash and New Shares may recognize income or gain in an amount not
to exceed the amount of cash received. See "ADDITIONAL FACTORS TO BE CONSIDERED - Federal
Income Tax Consequences of the Reverse Stock Split Proposal."
Vote Required; Vote of Principal Shareholders.
In order to effect the Reverse Stock Split Proposal, the Company's Restated Articles of Incorporation must
be amended, which requires the approval of a majority of the outstanding Shares. Members of the Adams
Group own, in the aggregate, 54.2% of the Company's outstanding Shares, and the Company is advised
that such Shares will be voted in favor of the Reverse Stock Split Proposal. Approval of a majority of
unaffiliated shareholders is not required or being sought. Accordingly, the required vote is assured, and it
is expected that the Reverse Stock Split Proposal will be approved. See "CERTAIN BENEFICIAL
OWNERSHIP OF SHARES." The Company is advised, however, that members of the Adams Group may
vote their shares against the Reverse Stock Split Proposal if at the time of the Annual Meeting it appears
approval of the Reverse Stock Split Proposal and the exercise of dissenters' rights might require notice
pursuant to Federal Reserve Board Regulation Y. See "SPECIAL FACTORS - Federal Reserve Board
Limitation."
Withdrawal of Reverse Stock Split Proposal.At its option, the Company may withdraw the Reverse Stock Split Proposal from consideration and voting
at the Annual Meeting if (a) any legal action or proceeding concerning the Reverse Stock Split Proposal
or, in the opinion of the Board of Directors of the Company, materially adversely affecting the Company,
is instituted or threatened in any court or by or before any governmental agency; (b) a state of war or
national emergency, bank moratorium, suspension of payments by banks in the states of Montana or
Minnesota or general suspension of trading or limitation of prices on the National Over-The-Counter
Market shall have been declared; or (c) there shall have been, in the opinion of the Board of Directors of
the Company, any material adverse change in the business, financial condition or operations of the
Company. In the event of a determination to withdraw the Reverse Stock Split Proposal from
consideration and voting at the Annual Meeting, the Company will notify the shareholders by mail of such
withdrawal and the reason therefor.
Limited Market for New Shares.
Because the Shares will cease to be authorized for quotation on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") following termination of registration under the
Exchange Act, it is expected that approval of the Reverse Stock Split Proposal will reduce marketability
of the Company's Shares. Although shareholders may sell New Shares in privately negotiated transactions,
and although it is possible that an over-the-counter market may develop, shareholders will be dependent to
a great extent upon the Company's willingness to purchase Shares. Depending upon the Company's
earnings, financial condition and such other factors the Company deems relevant, the Company may make
a tender offer to holders of the New Shares, which tender offer could be at a price higher or lower than
$40.00 per 1/125 New Share depending upon the factors then existing. In addition, members of the Adams
Group or others may purchase Shares in the future. Neither the Company nor members of the Adams
Group has any present specific plan or proposal to make a tender offer. Furthermore, it is unlikely that any
person desiring to acquire control of the Company would be interested in acquiring small holdings of New
Shares and, therefore, any future opportunities for sale may be limited to persons with substantial holdings
such as members of the Adams Group and Lloyd A. Amundson. See "SPECIAL FACTORS - Effects of
Reverse Stock Split."
Rights of Dissenting Shareholders
Dissenting Shareholders may seek to have the price paid for a fractional New Share interest determined in
accordance with the procedures of Sections 35-1-810 and 35-1-812, Montana Code Annotated (the
"Montana Business Corporation Act"). See 'RIGHTS OF DISSENTING SHAREHOLDERS."
Financial Information.Summary financial information is contained in the Company's 1984 Annual Report, which accompanies
this Proxy Statement.
SPECIAL FACTORS
Purpose of Reverse Stock Split Proposal. The Company services a large number of small shareholders. As of December 31, 1984, the Company had
362 shareholder accounts in the 1 to 124 Share range. Such 362 shareholder accounts represented holdings
of only 23,621 Shares. As of April 12, 1985, the Company had a total of 646 shareholder accounts and
823,013 Shares outstanding. Shareholders with 124 or fewer Shares constituted 56% of the Company's
shareholders, but accounted for less than 3% of the Shares outstanding.
The Company is registered under the Exchange Act and, therefore, is required to file annual and other
periodic reports and comply with the proxy rules of the Securities and Exchange Commission ("SEC") in
the solicitation of proxies for annual and special meetings of shareholders. If the number of shareholders
of a class of securities is reduced to less than 300, a certification of that fact may be filed with the SEC ,
registration of the securities may be terminated, and the Issuer would no longer be subject to the proxy
requirements of Section 12(g) of the Exchange Act. If the number of shareholders is also less than 300 on
the first day of a fiscal year, the issuer would no longer be subject to the reporting requirements of Section
15(d) of the Exchange Act. The purpose of the Reverse Stock Split Proposal is to reduce the number of
shareholders to less than 300 so that the Company may terminate registration of the Shares under Section
12(g) (4) of the Exchange Act and, commencing January 1, 1986, be relieved of the reporting
requirements of the Exchange Act. Shareholders are afforded the opportunity to round up their fractional
New Share interests to whole New Shares. See "ADDITIONAL FACTORS TO BE CONSIDERED-
Exchange of Certificates; Fractional New Share Interests; Escheat." If no shareholders holding fewer than
125 Old Shares exercise such right, the number of shareholders of record would be reduced to 284. In the
event a sufficient number of shareholders round up their fractional New Share interests to whole New
Shares so that the Company is unable to file a certificate with the SEC that the number of shareholders
of*the Company has been reduced to less than 300, the Company may consider other proposals to reduce
the number of shareholders below 300. In that regard, the Company may propose further stock splits, offer
to purchase shares, seek to cause shareholders holding Shares in multiple names to consolidate or pursue
other means of reducing the number of shareholders to less than 300.
Effects of Reverse Stock Split
On the Effective Date it is expected that the number of shareholders will be reduced to fewer than 300
persons. The Company will file the appropriate certification with the SEC to terminate registration of the
New Shares under Section 12(g) (4) of the Exchange Act, which termination will become effective not
more than 90 days after the Company files a certificate of termination. Thereafter, shareholders will no
longer receive informational material such as the annual report and proxy materials in their present format .
It is expected that as of January 1, 1986, the Company will no longer be subject to the reporting
requirements of Section 15(d) of the Exchange Act and thereafter periodic reports which would have been
filed with the SEC will not be available to shareholders. In addition, upon termination of registration the
Company's principal shareholders, directors and officers will no longer be subject to certain insider
reporting and trading rules under the Exchange Act. At this time the Company does not contemplate
sending proxy solicitation material to holders of New Shares, although notices of any meetings of
shareholders will be sent as required by the Montana Business Corporation Act. The Company does
intend, however, to send shareholders the results of its operations and a statement of its financial condition
at least once each year; these financial statements will either be audited or reviewed by the Company's
accountants. The Company has no present plans to send shareholders interim reports on results of
operations. Such interim reports are not required under applicable law or the By-laws of the Company.
The Shares have been traded in the National Over-The-Counter Market. Following the effective date of
termination of registration under Section 12(g) (4) of the Exchange Act, the Shares will cease to be
authorized for quotation on NASDAQ and, therefore, shareholders may encounter more difficulty in
disposing of their New Shares. In addition, the number of New Shares outstanding may not be sufficient
to support an active trading market. Trading could also be affected by a higher price per New Share; using
the price for each Old Share to be paid by the Company for fractional New Share interests as the basis for
calculation, the value of each New Share will be approximately $5,000 following adoption of the Reverse
Stock Split Proposal. Consequently, shareholders should expect a limited public trading market for the
New Shares. Remaining shareholders who desire to sell their Shares may be dependent to a great extent
upon the Company's willingness to purchase Shares. Depending upon the Company's earnings, financial
condition and such other factors the Company deems relevant, the Company may make a tender offer to
holders of the New Shares, which tender offer could be at a price higher or lower than $40.00 per 1/125
New Share depending upon the factors then existing. In addition, members of the Adams Group or others
may purchase Shares in the future. Neither the Company nor members of the Adams group has any
present specific plan or proposal to make a tender offer. Furthermore, it is unlikely that any person
desiring to acquire control of the Company would be interested in acquiring small holdings of New Shares
and, therefore, any future opportunities for sale may be limited to persons with substantial holdings such
as members of the Adams Group and Lloyd A. Amundson.
On the Effective Date, the Company estimates that Shares outstanding will be reduced to approximately
6,590 New Shares after payment for all fractional New Share interests, assuming no shareholders round
up and taking into account the purchase of Shares by Cedric Adams and David Adams, brothers of Mr.
Adams (see "SPECIAL FACTORS - Federal Reserve Board Limitation"). The effect on the holdings of
~the Adams Group, assuming no shareholders round up, will be an increase from 54.2% to 58.6%, or
4.4%, taking into account the purchase of New Shares by Cedric Adams and David Adams. Book value of
New Shares, assuming no shareholders round up, will decrease 1.2%.
An Employee Stock Ownership Plan has been established by the Company. The Employee Stock Owner-
ship Plan is presently unfunded, but the Company has allocated $715,706 to the Employee Stock Owner-
ship Plan for the accounts of participants for 1984. It is contemplated that the Employee Stock Ownership
Plan will invest primarily in Shares and will purchase Shares from existing shareholders, including Mr.
Adams. If the Reverse Stock Split Proposal is approved, with resulting deregistration and cessation of
quotation in the National Over-The-Counter Market, the trustees of the Employee Stock Ownership Plan
may purchase Shares at fair market value, as determined by the trustees, instead of at the public price for
the Shares. In determining fair market value, the trustees will take into account the size of the block of
Shares, financing terms and related considerations. Consequently, it is anticipated that any block of New
Shares purchased by the Employee Stock Ownership Plan from Mr. Adams or others would be at a price
substantially in excess of the equivalent of $40.00 per Old Share. In connection with obtaining financing
for the ESOP, the ESOP has obtained preliminary valuation estimates of $60 to $70 per Old Share for the
purchase of a block of approximately 100,000 to 150,000 Old Shares from Mr. Adams assuming put
options and other favorable terms for the ESOP.The Shares are currently classified by the Federal Reserve Board as "OTC margin stock." As such, certain
lenders, including banking institutions and brokers, are prohibited from making loans for the purpose of
purchasing or carrying the Shares, if secured directly or indirectly by the Shares, in an amount in excess of
50% of the market value of such Shares. If registration of the Shares is terminated under Section 12(g) (4)
of the Exchange Act, the Shares would be eligible for removal from the Federal Reserve Board's OTC
margin list. Mr. Adams and members of the Adams Group have made substantial borrowings which are
secured by Shares. If the Shares were removed from the Federal Reserve Board's OTC margin list,
assuming the lending institutions were prepared to do so, the removal from the OTC margin list would
permit any shareholder, including Mr. Adams, to borrow against the Shares without the restrictions
imposed on OTC margin stock. It is anticipated that such removal from the OTC margin list would have a
substantial positive effect on Mr. Adams' ability to borrow additional amounts secured by Shares.
The Company believes that termination of registration of the Shares under Section 12(g) (4) of the Ex-
change Act and termination of the reporting requirements of Section 15(d) of the Exchange Act will result
in significant savings in management time and out-of-pocket expenses. The Company has been publicly
owned since 1962. Compliance with the proxy solicitation and reporting requirements of the Exchange
Act has entailed substantial management time and annual expense principally for legal, accounting and
printing services in respect of soliciting proxies, filing reports with the SEC and furnishing detailed
information to shareholders. Expenses attributable to compliance with the reporting requirements of the
Exchange Act were approximately $100,000 for 1984, which is $155 per shareholder.
Notwithstanding approval of the Reverse Stock Split Proposal, after the Effective Date the officers and
directors of the Company will continue to owe fiduciary obligations to shareholders under Montana law.
Fairness
The Company and its Board of Directors reasonably believe that the Reverse Stock Split Proposal is fair
to minority, unaffiliated shareholders. On January 14,1985, the Company's Board of Directors
unanimously approved the Reverse Stock Split Proposal. In approving the Reverse Stock Split Proposal,
the Board of Directors did not engage an appraiser to make an independent evaluation of the Reverse
Stock Split Proposal nor did it employ the advice of an unaffiliated representative to act solely on behalf
of the minority shareholders either for the purpose of structuring the Reverse Stock Split Proposal,
including a determination of the price to be paid for a fractional New Share interest, or for the purpose of
preparing a report concerning its fairness. The Board determined that the cost of retaining an appraiser or
unaffiliated representative was not warranted in light of the considerable expense in relation to the
expected cash payments to be made pursuant to the Reverse Stock Split Proposal and in light of rights
given to Dissenting Shareholders (see "RIGHTS OF DISSENTING SHAREHOLDERS").
In determining that it believes that the price to be paid for a fractional New Share interest created by the
Reverse Stock Split Proposal is fair, the Board of Directors of the Company considered current and
historical market prices, including the prices per Share paid by the Company, Mr. Adams and other
affiliates of the Company in their acquisitions of Shares. Since January, 1982, members of the Adams
Group have made acquisitions of an aggregate of approximately 140,000 Shares at prices ranging from
$26.75 per Share to $37.50 per Share. Since January, 1982, Lloyd Amundson has made acquisitions of an
aggregate of 58,821 Shares at prices ranging from $22.00 per Share to $36.00 per Share. In October, 1983,
Montana Bancsystem, Inc. acquired 20,904 Shares at $32.50 per Share pursuant to its March, 1983 offer
to purchase up to 185,000 Shares. As of September, 1984, the Company acquired 10,000 Shares from
Samuel R. Noel at a price of $39.50 per Share. By option agreement made in September, 1984, Eldon E.
Kuhns granted to Mr. Adams the option to purchase, through November, 1985, and Mr. Adams granted to
Mr. Kuhns the right to require him to purchase, in November, 1985, 58,548 Shares at $41.50 per Share.
See "ADDITIONAL FACTORS TO BE CONSIDERED - Certain Transactions." Mr. Adams' purchases
were privately negotiated and involved large blocks of Shares and some below market rate financing. The
purchase of Mr. Noel's Shares involved a large block of Shares and was made in connection with his
termination of employment and. determination of benefits due him. The option agreement between
Montana Bancsystem, Inc. and Mr. Adams involves a block transaction to be concluded, if at all, in
November, 1985. Therefore, the prices paid in such transactions were considered by the Board of
Directors not to be controlling.On September 27, 1984, the Company offered to purchase 50,000 Shares, first from shareholders owning
less than 100 Shares, and next from all other shareholders, at $40.00 per Share, net to seller. Shareholders
owning less than 100 Shares tendered 10,438 Shares to the Company, and 62,511 Shares were tendered to
the Company from all other shareholders for a total of 72,949 Shares tendered. The total number of Shares
purchased by the Company in accordance with the terms and conditions of the offer was 55,906, which
was 6.4% of Shares then outstanding. The funds used by the Company to purchase Shares pursuant to the
tender offer were obtained under the Company's line of credit from American National Bank and Trust
Company, St. Paul, Minnesota.
The recent market prices of the Company's Shares have been below the price per Old Share to be paid for
a fractional New Share interest which will be created by the Reverse Stock Split Proposal. See
"ADDITIONAL FACTORS TO BE CONSIDERED- Stock Price Range' " Shareholders' equity per Share
of $34.12 as of December 31, 1984 was also considered. The price per Old Share to be paid for a
fractional New Share interest which will be created by the Reverse Stock Split Proposal is substantially
above shareholders' equity per Share. Going concern value and liquidation value were not given
substantial consideration by the Board of Directors in determining the fairness of the price per Old Share
to be paid for a fractional New Share interest which will be created by the Reverse Stock Split Proposal
because the Company has received no firm offers for the purchase of the Company within the past several
years and does not presently intend to sell, and because of the small number of Shares (less than 125)
involved for each shareholder receiving cash for a fractional New Share interest.
Subsequent to the Board's initial determination that the price to be paid for a fractional New Share interest
is fair, the Trustees of the Employee Stock Ownership Plan received a preliminary appraisal of the
Company's banking and nonbanking subsidiaries in connection with a purchase of a block of not less than
100,000 to 150,000 Old Shares. Assuming put options and other favorable terms for the ESOP, the
preliminary appraisal estimated a value of approximately $60 to $70 per Old Share. (See SPECIAL
FACTORS - Effects of the Reverse Stock Split.) The Board did not consider such preliminary appraisal to
be controlling for purposes of the price to be paid for a fractional New Share in the Reverse Stock Split
Proposal because it assumed a purchase by the ESOP of a significant block of shares in a transaction
involving a put option and terms unique to an ESOP transaction, it appraised the assets of each of the
banking and non-banking subsidiaries separately without giving effect to their being commonly owned
and operated by the Company as a going concern not withstanding the expectation that they will continue
to be so operated and not sold.
AlternativesThe Board of Directors of the Company has determined that the Reverse Stock Split Proposal is the most
direct and appropriate and least expensive method of reducing the number of the Company's shareholders
to less than 300. The Company intends to continue its operations for the indefinite future and has no
present plans to merge or consolidate with, or sell its assets to, another company or person. The alternative
of a cash merger with a subsidiary created by the Company for that purpose was considered and rejected
by the Board of Directors because the approval of the Federal Reserve Board would have been necessary
and substantially greater funds would have been required to pay for the entire minority interest in the
Company. A cash tender offer to holders of fewer than 125 Shares was rejected because there could be no
assurance that a sufficient number of Shares would be tendered to reduce the number of shareholders to
fewer than 300.
Federal Reserve Board Limitation
Pursuant to Federal Reserve Board Regulation Y, Section 225.4, the Company would be required to give
the Federal Reserve Board prior written notice before purchasing or redeeming Shares if the gross con-
sideration for the purchase or redemption, when aggregated with the net consideration paid by the Com-
pany for all such purchases during the preceding 12 months, is equal to 10% or more of the Company's
consolidated net worth. The Company paid $2,236,240 in respect of a tender offer which was made on
September 27, 1984, and expired on October 25, 1984 (see 'SPECIAL FACTORS - Fairness"). In
September, 1984, the Company purchased 10,000 Shares from Mr. Noel for $395,000 in connection with
his termination of employment with the Company. After the Effective Date, Cedric Adams and David
Adams, brothers of Mr. Adams, have agreed to purchase a total of 290 New Shares for a total purchase
price of $1,450,000. Such sale of Shares will permit the Company to purchase fractional New Share
interests under the Reverse Stock Split Proposal without requiring that notice be given to the Federal
Reserve Board. The Company intends to repurchase Shares sold to Cedric Adams and David Adams on
mutually acceptable terms and conditions when such repurchase would not cause the limitation of
Regulation Y, Section 225.4, to be exceeded. If at the time of the Annual Meeting it appears that the
consideration which may be required to be paid as a result of the exercise of dissenters' rights, when
aggregated with the consideration to be paid for fractional New Share interests and the net consideration
described above, may require notice to the Federal Reserve Board, the Company has been advised that
members of the Adams Group may vote their Shares against the Reverse Stock Split Proposal if they
conclude that, as a result of giving such notice, effectuation of the Reverse Stock Split Proposal would be
unduly delayed or additional regulatory constraints would be imposed upon the Company.
CAPITALIZATION
The following table sets forth the capitalization of the Company on a consolidated basis as of December
31, 1984, and the pro forma capitalization giving effect to the Reverse Stock Split Proposal and the sale of
Shares after the Effective Date to Cedric Adams and David Adams. See "SPECIAL FACTORS - Federal
Reserve Board Limitation. This table should be read in conjunction with the financial statements and notes
related thereto of the Company appearing in the 1984 Annual Report accompanying this Proxy Statement.
Pro Forma
December 31, 1984 Adjustment (1)
Total Liabilities $ 317,035,298 $ 317,335,298
Shareholder Equity Common Stock, $2.50 par value
Authorized shares: 10,000,000
Outstanding Shares: 822,416 $ 2,056,040
Common Stock, $2.50 par value
Authorized Shares: 80,000
Outstanding Shares: 6,590 (1) $ 16,475
Additional paid in capital $ 8,141,826 $ 9,881,391
Retained earnings $ 17,859,838 $ 17,859,838
Total shareholder equity $ 28,057,704 $ 27,757,704
Total liabilities and shareholder equity $345,093,002 $345,093,002
(1) Assumes no rounding up of fractional New Share Interests and assumes the purchase of 290 New
Shares at the equivalent of $40.00 per Old Share after the Effective Date by Cedric and David Adams. ADDITIONAL FACTORS TO BE CONSIDERED
Federal Income Tax Consequences of the Reverse Stock Split Proposal A surrender of Shares by holders of a multiple of 124 or fewer Old Shares pursuant to the Reverse Stock
Split Proposal will be a taxable transaction under federal income tax laws. Because the tax consequences
may vary depending upon the particular facts relating to each shareholder, it is recommended that each
shareholder consult a tax advisor concerning the federal, state or local income tax consequences of the
surrender of Shares. There will be no tax consequences to the Company as a result of implementation of
the Reverse Stock Split Proposal.
A shareholder who receives only cash and does not thereafter, directly or constructively, own any New
Shares will recognize a capital gain or loss upon the surrender of Old Shares, provided the Old Shares
have been held as a capital asset. Such capital gain or loss will be equal to the difference between the cash
received and the shareholder's basis for the Old Shares surrendered, and will be a long-term capital gain or
loss if the Old Shares have been held for the required holding period. To the extent that the capital gain is
a long-term capital gain, a portion of such gain may, in some cases, be subject to the federal alternative
minimum tax.A shareholder who receives only New Shares will not recognize any gain or loss. The aggregate tax basis
and holding period in New Shares will be the same as for the Old Shares exchanged therefor.
A shareholder who receives New Shares and cash will recognize gain, if any, in an amount equal to the
lesser of (i) the excess of the sum of the cash and the fair market value of the New Shares received over
the shareholder's basis in the Old Shares, or (ii) the amount of cash received. No loss will be recognized.
Section 302 of the Internal Revenue Code of 1954, as amended, and the regulations thereunder, will
determine whether the cash payment in respect of fractional New Share interests will be treated as a divi -
dend. Due to the complex nature of Section 302 and the differing circumstances of each shareholder, the
Company is unable to determine whether any individual shareholder would be required to report the
distribution as a capital gain or dividend or otherwise, and each individual shareholder should consult a
tax advisor regarding the application of Section 302 to particular facts and circumstances. If the cash
distribution has the effect of distribution of a dividend, then so much of the gain recognized as is not in
excess of the shareholder's ratable share of the Company's earnings and profits would be taxed as a
dividend at ordinary income rates and the remainder of the gain recognized would be taxed as capital gain
(provided the Old Shares had been held as a capital asset). If the cash distribution does not have the effect
of distribution of a dividend, then the entire gain recognized by a shareholder will be long-term capital
gain, assuming such shareholder's Old Shares were held as capital assets. A portion of such gain may, in
some cases, be subject to the federal alternative minimum tax. The aggregate tax basis in New Shares will
be the same as for the Old Shares exchanged therefor, decreased by the cash received and increased by the
amount of any gain recognized. The holding period in New Shares will be the same as for the Old Shares
exchanged therefor.
A shareholder who rounds up to a whole New Share will not recognize any gain or loss, and will have a
basis in the New Share equal to his cost of the Old Shares plus $40.00 per 1/125 New Share so rounded up.
Dividends
The Company has paid the following quarterly dividends since January 1, 1982:
Fiscal
Quarter 1982 1983 1984
1 $ .45 $ .60 $ 85
2 .45 .75 .85
3 .60 .80 .85
4 .60 .85 .85
The Company presently intends to continue paying dividends. The amount and timing of the dividends
will, however, be determined by actual earnings, cash needs and other factors. State and federal laws and
regulations restrict payment of dividends under certain circumstances but are not expected to restrict pay-
ment of dividends at present levels.
Stock Price RangeAs of April 12, 1985, the Company had 823,013 Shares outstanding and 646 shareholders of record.
The table below shows the nigh and low closing bid prices of the Shares in. the National Over-TheCounter
Market from January 1, 1982 through April 15, 1985 as reported by the National Quotation Bureau.
Closing Bid Prices (1)
Calendar YearHigh Low
1982 First Quarter 30 21½
1982 Second Quarter 24 3/4 22 3/4
1982 Third Quarter 25 1/4 23 7/8
1982 Fourth Quarter 27½ 25 1/4
1983 First Quarter 30 25 1/4
1983 Second Quarter 34½ 29
1983 Third Quarter 35 32
1983 Fourth Quarter 36½ 34
1984 First Quarter 37 33
1984 Second Quarter 38 30½
1984 Third Quarter 35½ 33
1984 Fourth Quarter 36½ 34
1985 First Quarter 37½ 36
1985 Second Quarter through April 15, 1985 36 35
(1) The above prices are those quoted between dealers, do not include retail markup on commission
and are not representative of actual transactions.
Certain Transactions In January, 1981, Stephen Adams entered into 11 separate purchase agreements with the "Brown Group"
for the purchase of an aggregate of 58,331 Shares at $37.50 per Share. In February, 1981, Mr. Adams
entered Into four separate purchase agreements for the purchase of an aggregate of 50,928 Shares at
$35.00 per Share with the Rubie Group. In May, 1981, Mr. Adams entered into an option agreement with
First Montana Title Insurance Company and Diversified Realty, Inc. under which agreement, as extended,
he had the right to purchase an aggregate of 30,246 Shares through March, 1985, at prices from $30.00 to
$34.00 per Share. Pursuant to the agreements made with the Brown Group, Mr. Adams and other
members of the Adams Group purchased 1,556 Shares in January, 1982, 8,555 Shares in January, 1983,
3,072 Shares in January, 1984 and 3,348 in March, 1985. Pursuant to the agreements made with the Rubie
Group, Mr. Adams and other members of the Adams Group purchased 10,000 Shares in February,
1982,9,550 Shares in February, 1983,18,189 Shares in February, 1984 and 10,046 in March, 1985.
Although there has been no formal agreement or undertaking, Mr. Adams has proposed to defer the
purchase of 3,143 Shares from the Rubie Group until August, 1985. Pursuant to the option agreement with
First Montana Title Insurance and Diversified Realty, Inc., as amended, Mr. Adams acquired 15,123
Shares in February, 1984, at $33.50 per Share.
In February and March, 1982, members of the Adams Group acquired an aggregate of 61,214 Shares in
open market purchases at an average price of $29.50 per Share. In March, 1982, Mr. Adams acquired 179
Shares by virtue of the conversion of $3,000 in principal amount of the 9% Convertible Subordinated
Debentures of the Company. Since January, 1982, Lloyd A. Amundson has acquired an aggregate of
58,821 Shares at prices ranging from $22.00 per Share to $36.00 per Share. In October, 1983, Montana
Bancsystem, Inc. acquired 20,904 Shares at a price of $32.50 per Share pursuant to its March, 1983, offer
to purchase up to 185,000 Shares. As of September, 1984, the Company purchased 10,000 Shares from
Samuel R. Noel at $39.50 per Share pursuant to an agreement made between the Company and Mr. Noel
in connection with his termination of employment with the Company. In September, 1984, Mr. Adams
entered into an option agreement with Eldon E. Kuhns under which he has the right to acquire through
November, 1985, and Mr. Kuhns has the right to require him to purchase in November, 1985, 58,548
Shares at $41.50 per Share. In March, 1985, Cedric Adams and David Adams entered into an agreement
with the Company to purchase 290 New Shares at $5,000 per New Share ($40.00 per Old Share) after the
Effective Date of the Reverse Stock Split Proposal.
According to filings made by the Adams Group with the securities and Exchange Commission, the funds
used by Mr. Adams and other members of the Adams Group in making the purchases described above
were obtained from American National Bank and Trust Company, St. Paul, Minnesota ("American
National"). The funds used by the Company in making the purchase described above also were obtained
from American National. Members of the Adams Group have outstanding indebtedness of approximately
$11,750,000 with respect to such purchases. Such indebtedness bears interest at annual rates ranging from
nine percent to two percent above American National's prime rate of interest. Substantially all of such
indebtedness is evidenced by demand notes.
Exchange of Certificates; Fractional New Share Interests; Escheat
On the Effective Date each certificate representing Old Shares will be deemed for all corporate purpose s
to evidence ownership of the appropriate reduced number of New Shares or the right to receive payment
for appropriate fractional New Share interests without any action by the shareholder thereof. However, as
soon as practicable after the Effective Date shareholders holding certificates representing fractional Ne w
Share interests will be notified and requested to tender their certificates for Old Shares with instructions
either to buy additional fractional New Share interests sufficient to round up their holdings or to receive
payment for their fractional New Share interests. Such certificates for Old Shares will be exchanged for
any certificates representing New Shares and any cash to which transmitting shareholders are entitled. The
Transfer Agent of the Company has been appointed the Exchange Agent to act for shareholders in ef-
fecting the exchange of their certificates and the purchase of or payment for fractional New Share
interests.
The Company presently expects to take no further action to solicit shareholders who are entitled to cash
for fractional New Share interests but who do not surrender their certificates after the mailing. Under state
escheat laws
