BUTLER NATIONAL CORPORATION
1546 East Spruce Road
Olathe, Kansas 66061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 1, 1996
To the Shareholders of Butler National Corporation:
Notice is hereby given that the Annual Meeting of Shareholders
of Butler National Corporation (the "Company") will be held at
the Holiday Inn-Olathe, 1010 West 151st Street, Olathe, Kansas,
on Tuesday, October 1, 1996, at 11:00 a.m., for the following
purposes:
1. To elect five (5) directors to hold office until the next Annual Meeting
of Shareholders or until their successors are elected.
2.To ratify the selection of Arthur Andersen LLP as auditors for the fiscal
year ending April 30, 1997.
3. To consider and vote upon a proposal to approve changing
the Company's state incorporation from Minnesota to Delaware
by merging the Company into a wholly owned subsidiary of the
Company which is a Delaware corporation.
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on August
16, 1996, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
WILLIAM A. GRIFFITH, Secretary
Olathe, Kansas
August 16, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT
TO ATTEND IN PERSON. SHAREHOLDERS WHO ATTEND
THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY DESIRE.
<PAGE>
BUTLER NATIONAL CORPORATION
1546 East Spruce Road
Olathe, Kansas 66061
PROXY STATEMENT
General
This Proxy Statement is furnished to the shareholders of Butler
National Corporation (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company
to be voted at the Annual Meeting of Shareholders to be held on
October 1, 1996, or any adjournment or adjournments thereof.
The cost of this solicitation will be borne by the Company. In
addition to solicitation by mail, officers, directors and employees
of the Company may solicit proxies by telephone, telegraph, or in
person. The Company may also request banks and brokers to
solicit their customers who have a beneficial interest in the
Company's Common Stock registered in the names of nominees
and will reimburse such banks and brokers for their reasonable
out-of-pocket expenses.
Any proxy may be revoked at any time before it is voted by
written notice to the Secretary, by receipt of a proxy properly
signed and dated subsequent to an earlier proxy, or by revocation
of a written proxy by request in person at the Annual Meeting;
but if not so revoked, the shares represented by such proxy will
be voted. The mailing of this proxy statement to shareholders of
the Company commenced on or about August 26, 1996. The
Company's corporate offices are located at 1546 East Spruce
Road, Olathe, Kansas 66061 and its telephone number is (913)
780-9595.
The Company has outstanding only one class of Common Stock,
par value $.01 per share ("Common Stock"), of which 9,280,890
shares were issued, outstanding and entitled to vote at the
Annual Meeting. Each share is entitled to one vote.
Shareholders may not cumulate votes in the election of directors.
Only shareholders of record at the close of business on August
16, 1996, will be entitled to vote at the meeting. The presence in
person or by proxy of the holders of 35% of the shares of
Common Stock entitled to vote at the Annual Meeting of
Shareholders constitutes a quorum for the transaction of business.
The shares represented by the enclosed proxy will be voted if the
proxy is properly signed and received prior to the meeting.
Voting
The Charter Documents of the Company require that a 35% of
the votes of the shares of Common Stock issued, outstanding and
entitled to vote at the Annual Meeting be present in person or
represented by Proxy at the Annual Meeting in order to
constitute a quorum for the transaction of business. Provided a
quorum is present, the affirmative vote of (a) a plurality of the
votes cast by the holders of the Common Stock present in person
or represented by Proxy at the Annual Meeting and entitled to
vote on the subject matter is required for the election of directors
and (b) the holders of a majority of the voting power of all shares
is required for the approval of the Reincorporation described
herein. Votes that are cast against the proposals are counted
both for purposes of determining the presence or absence of a
quorum for the transaction of business and for purposes of
determining the total number of votes cast on a given proposal.
Abstentions will be counted for purposes of determining both the
presence or absence of a quorum for the transaction of business
and the total number of votes cast on a given proposal, and
therefore will have the same effect as a vote against a given
proposal. Broker non-votes (i.e., a proxy card returned by a
holder on behalf of its beneficial owner that is not voted on a
particular matter because voting instructions have not been
received and the broker has no discretionary authority to vote)
will be counted as present or
<PAGE>
represented for purposes of determining the presence or absence
of a quorum for the transaction of business but will not be
counted for purposes of determining the number of votes cast
with respect to a particular proposal for which authorization to
vote was withheld. Accordingly, broker non-votes will not be
considered as votes cast and thus will not affect the outcome of
voting on a proposal.
Stockholder Proposals
The proxy rules of the Securities and Exchange Commission
permit shareholders of a company, after timely notice to the
company, to present proposals for shareholder action in the
company's proxy statements where such proposals are consistent
with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by company
action in accordance with the proxy rules. The Butler National
Corporation 1997 Annual Meeting of Shareholders is expected to
be held on or about September 30, 1997, and proxy materials in
connection with that meeting are expected to be mailed on or
about August 29, 1997. Shareholder proposals prepared in
accordance with the proxy rules must be received by the
Company on or before June 3, 1997.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, with respect to the Company's
common stock (the only class of voting securities), the only
persons known to be beneficial owners of more than five percent
(5%) of any class of the Company's voting securities as of June
27, 1996.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership <FN1> of Class
<S> <C> <C>
Clark D. Stewart
1546 East Spruce Road
Olathe, Kansas 66061 2,205,920<FN2> 18.73%
Marvin J. Eisenbath
1546 East Spruce Road
Olathe, Kansas 66061 650,000 5.52%
<FN>
<FN1> Unless otherwise indicated by footnote, nature of beneficial ownership
of securities is direct, and beneficial ownership as shown in the table
arises from sole voting power and sole investment power.
<FN2> Includes 1,120,000 shares which may be acquired by Mr. Stewart pursuant
to the exercise of stock options which are exercisable.
</FN>
</TABLE>
The following table sets forth, with respect to the Company's
common stock (the only class of voting securities), (i) shares
beneficially owned by all directors and named executive officers
of the Company, and (ii) total shares beneficially owned by
directors and officers as a group, as of June 27, 1996.
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership <FN1> of Class
<S> <C> <C>
Clark D. Stewart 2,205,920<FM2> 18.73%
Marvin J. Eisenbath 650,000 5.52%
William E. Logan 260,000<FN3> 2.21%
R. Warren Wagoner 335,000<FN4> 2.84%
William A. Griffith 172,000<FN5> 1.46%
David B. Hayden 60,000<FN6> .51%
All Directors and 4,162,900<FN7> 35.34%
Officers as a
Group (12 persons)
<FN>
<FN1> Unless otherwise indicated by footnote, nature of beneficial
ownership of securities is direct, and beneficial ownership as shown in
the table arises from sole voting power and sole investment power.
<FN2> Includes 1,120,000 shares which may be acquired by Mr. Stewart pursuant
to the exercise of stock options which are exercisable.
<FN3> Includes 210,000 shares which may be acquired by Mr. Logan pursuant to
the exercise of stock options which are exercisable.
<FN4> Includes 235,000 shares which may be acquired by Mr. Wagoner pursuant
to the exercise of stock options which are exercisable.
<FN5> Includes 92,000 shares which may be acquired by Mr. Griffith pursuant
to the exercise of stock options which are exercisable.
<FN6> Includes 50,000 shares which may be acquired by Mr. Hayden pursuant
to the exercise of stock options which are exercisable.
<FN7> Includes 2,154,700 shares for all directors and executive officers as a
group, which may be acquired pursuant to the exercise of stock options which are
exercisable.
</FN>
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
(Proposal No. 1)
The number of directors constituting the Board of Directors has
been fixed by the Company at five. The term of office for a
director is one year or until his successor is elected an qualified.
The Board of Directors has nominated for election the five (5)
persons named below. All of the nominees are currently
members of the Board of Directors. All of the nominees except
Mr. Hayden were elected by the shareholders. Mr. Hayden was
appointed as a director by the Board of Directors on December
1, 1995 to fill a vacancy. It is intended that proxies solicited will
be voted for such nominees. The Board of Directors believes
that each nominee named below will be able to serve, but should
any nominee be unable to serve as a director, the persons named
in the proxies have advised that they will vote for the election of
such substitute nominee as the Board of Directors may propose.
DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The names and ages of the directors, their principal occupations
for at least the past five years are set forth below, based on
information furnished to the Company by the directors.
Clark D. Stewart (56)(2) Served Since 1989 President of the
Company from September 1, 1989 to present. President of
Tradewind Systems, Inc. (consulting and computer sales) 1980 to
present; Executive Vice President of RO Corporation
(manufacturing) 1986 to 1989; President of Tradewind Industries,
Inc. (manufacturing) 1979 to 1985.
R. Warren Wagoner (44)(1)(2) Served Since 1986 Chairman of
the Board of Directors of the Company since August 30, 1989
and President of the Company from July 26, 1989 to September
1, 1989. Sales Manager of Yamazen Machine Tool, Inc. from
March, 1992 to March, 1994; President of Stelco, Inc.
(manufacturing) 1987 to 1989; General Manager, AmTech Metal
Fabrications, Inc., Grandview, MO 1982 to 1987.
William E. Logan (58)(1)(2) Served Since 1990 Vice President
and Treasurer of Wendy's Hamburgers of Kansas City, Inc. June,
1984 to present. Vice President and Treasurer of Valley Foods
Services, Inc. (wholesale food distributor) June, 1988 to April,
1993. Professional practice as a Certified Public Accountant 1965
to 1984.
William A. Griffith (49)(1)(2) Served Since 1990 Secretary of the
Company, President of Griffith and Associates (management
consulting) since 1984. Management consultant for Diversified
Health Companies (management consulting) from 1986 to 1989
and for Health Pro (health care) from 1984 to 1986. Chief
Executive Officer of Southwest Medical Center (hospital) from
1981 to 1984.
<PAGE>
David B. Hayden(50)(2) Served Since 1996 Co-owner and
President of Kings Avionics, Inc. since 1974 (avionics sales and
service). Co-owner of Kings Aviation LLP (aircraft fixed base
operation and maintenance) since 1994. Field Engineer for King
Radio Corporation (avionics manufacturing) 1966 to 1974. Mr.
Hayden was appointed as a Director by the Board of Directors
on December 1, 1995.
(1) Audit Committee
(2) Compensation Committee
During the fiscal year ended April 30, 1996, the Board of
Directors met two times. Each director attended 100% of the
meetings of the Board of Directors. Members of the Board who
are not otherwise paid employees of the Company (all except Mr.
Stewart) are paid $100 for each meeting attended. The Board of
Directors has an Audit Committee and Compensation
Committee, but no Nominating Committee. During fiscal 1996,
the Audit Committee consisted of R. Warren Wagoner, William
E. Logan and William A. Griffith. Its function is to assist the
President in the review of the financial performance and
operations of the Company. The Audit Committee met once
during the fiscal year ended April 30, 1996 and all members of
the Audit Committee attended the meeting.
During fiscal 1996, the Compensation Committee consisted of
the Board of Directors. Its function is to assist the President in
periodic reviews of the performance of management which in
turn leads to salary review and recommendations for salary
adjustment. The Compensation Committee met one time during
the fiscal year ended April 30, 1996 and all members of the Audit
Committee attended the meeting.
The Board of Directors recommends a vote "FOR" each of
Messrs. Wagoner, Stewart, Logan, Griffith and Hayden for
election as directors of the Company.
The executive officers of the Company are elected each year at
the annual meeting of the Board of Directors held in conjunction
with the annual meeting of shareholders and at special meetings
held during the year. The executive officers are as follows:
R. Warren Wagoner, 44,Chairman of the Board of Directors
Clark D. Stewart, 56, President and Chief Executive Officer
Jack L. Graham, 72, Vice President, Aircraft Modifications
Thomas E. Woodson, 58, Vice President, Avionics
Jon C. Fischrupp, 56, President of Butler National Services, Inc.,
a wholly-owned subsidiary of the Company
Marvin J. Eisenbath, 44, President of R. F. Inc., a wholly-owned
subsidiary of the Company ("RFI")
Stephanie S. Ruskey, 31, Vice President, Chief Financial Officer
and Assistant Secretary
Edward J. Matukewicz, 48, Treasurer
William A. Griffith, 49, Secretary
<PAGE>
R. Warren Wagoner was General Manager, Am-Tech Metal
Fabrications, Inc. from 1982 to 1987. From 1987 to 1989,
Mr. Wagoner was President of Stelco, Inc. Mr. Wagoner was
Sales Manager for Yamazen Machine Tool, Inc. from March
1992 to March 1994. Mr. Wagoner was President of the
Company from July 26, 1989, to September 1, 1989. He became
Chairman of the Board of the Company on August 30, 1989.
Clark D. Stewart was President of Tradewind Industries, Inc., a
manufacturing company, from 1979 to 1985. From 1986 to 1989,
Mr. Stewart was Executive Vice President of RO Corporation. In
1980, Mr. Stewart became President of Tradewind Systems, Inc.
He became President of the Company in September 1989.
Jack L. Graham was President of Avcon Industries for 19 years
and joined the Company in December 1983, at the time of the
acquisition of Avcon Industries by the Company. Mr. Graham is
Vice President, Aircraft Modifications.
Thomas E. Woodson has been President of Plectron
Corporation since 1980. Mr. Woodson became General Manager
of Woodson Avionics, Inc. in February 1990, and Vice President
of Avionics in November 1990.
Jon C. Fischrupp was President of Lauderdale Services, Inc.
("LSI") from June 14, 1978, until May 1, 1986, at which time the
Company acquired LSI and he became President of LSI (now
known as Butler National Services, Inc.).
Marvin J. Eisenbath was President of RFI from January 1988 to
April 1994, at which time the Company acquired RFI and he
continued as its President. Mr. Eisenbath was the Vice President
of Purchasing of Sysco Corporation from 1981 to 1987.
Stephanie S. Ruskey, CPA, was a senior accountant with Arthur
Andersen LLP from May 1987 until December 1990. Ms. Ruskey
joined the Company in December, 1990, as controller and was
promoted to Vice President - Chief Financial Officer in 1991.
Edward J. Matukewicz was Vice President of Master Fund
Company from 1987 to 1990 and Vice President of First Trust of
Mid America from 1990 to 1991. Mr. Matukewicz joined the
Company in May, 1991, as Treasurer.
William A. Griffith was Chief Executive Officer of Southwest
Medical Center (hospital) from 1981 to 1984. Mr. Griffith was a
management consultant for Health Pro from 1984 to 1986 and for
Diversified Health Companies from 1986 to 1989. Mr. Griffith
has been President of Griffith and Associates, management
consulting, since 1984. Mr. Griffith became Secretary of the
Company in 1992.
Except for the following, based solely upon a review of Forms 3
and 4 and amendment thereto filed with the Company during the
most recent fiscal year and Form 5 and amendments thereto filed
with the Company with respect to its most recent fiscal year, all
reports required to be filed for the fiscal years ending April 30,
1995 and 1996 with the Securities and Exchange Commission
under Section 16 of the Securities Exchange Act of 1934, as
amended, by the Company's executive officers, directors and 10%
stockholders have been filed on a timely basis in accordance with
applicable rules. Ms. Brenda Brainard Shadwick has not filed a
Form 3 reflecting her employment with the Company (beginning
July 1994), a Form 4 reflecting her holdings of 8,333 shares of the
Company's common stock (restricted shares issued per her
employment agreement on June 24, 1994) or a Form 5 reflecting
her status as of April 30, 1995. On April 17, 1995, Ms.
Shadwick's employment was terminated.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table provides certain summary information
concerning compensation paid or accrued by the Company to or
on behalf of the Company's Chief Executive Officer and each of
the other most highly compensated executive officers of the
Company whose salary and bonus exceeded $100,000 (determined
as of the end of the last fiscal year) for the fiscal years ended
April 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Other Annual
Principal Compensation
Position Year Salary($) Bonus($) ($)
<S> <C> <C> <C> <C>
Clark D. Stewart,
President and
CEO, Director 96 212,075 0 0
95 195,590 0 0
94 166,185 0 0
Marvin J. Eisenbath,
President, R. F., Inc.
<FN2> 96 331,791 0 0
95 307,469 0 0
94 6,923 0 0
Brenda Brainard
Shadwick, Indian
Affairs counsel
<FN3> 96 N/A N/A N/A
95 133,709 N/A N/A
94 N/A N/A N/A
Long Term Compensation
Awards Payouts
Restricted Securities LTIP
Stock Underlying All Other
Awards(s) Options Payouts Compensation
($) (#)<FN1> ($) ($)
<C> <C> <C> <C>
0 50,000 0 0
0 100,000 0 0
0 970,000 0 0
0 0 0 0
0 0 0 0
N/A N/A N/A N/A
N/A N/A N/A N/A
24,999 N/A N/A N/A
N/A N/A N/A N/A
<FN>
<FN1>Represents options granted pursuant to the Company's 1989 Nonqualified
Stock Option Plan (100,000) in 1995 and 1993 Nonqualified Stock Option Plan
(20,000) and 1993 Nonqualified Stock Option Plan II (950,000) in 1994.
<FN2>Mr. Eisenbath, President of RFI, became an executive officer of the
Company on April 22, 1994.
<FN3>Ms. Shadwick, Indian Affairs counsel, employed July 5, 1994 to April 17,
1995. Ms. Shadwick was issued 8,333 shares of common stock with a value of
$24,999 on June 24, 1994. Ms. Shadwick received these shares on her
termination date.
</FN>
</TABLE>
<PAGE>
OPTION GRANTS, IN LAST FISCAL YEAR
The following table provides further information concerning
grants of stock options pursuant to the 1995 Nonqualified Stock
Option Plan during the fiscal 1996 year (the only Plan under
which options were granted in such fiscal year ) to the named
executive officers:
<TABLE>
<CAPTION>
Individual Grants
Name Number of Percent of Total Exercise or
Securities Options Base Price
Underlying Granted to ($/Sh)
Options Employees in
Granted (#) Fiscal Year
<S> <C> <C> <C>
Clark D. Stewart, 50,000 7.1% 2.00
Chief Executive
Officer<FN1>
Marvin J. Eisenbath -0- N/A N/A
Brenda Brainard
Shadwick N/A N/A N/A
Expiration Date Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term*
5% ($) 10% ($)
<C> <C> <C>
12/01/05 81,445 126,687
N/A N/A N/A
N/A N/A N/A
<FN>
<FN1>Except in the event of death or retirement for disability,
if Mr. Stewart ceases to be employed by the Company, his option
shall terminate immediately. Upon death or retirement for
disability, Mr. Stewart (or his representative) shall have three
months or one year, respectively, following the date of death or
retirement, as the case may be, in which to exercise such options.
The option granted for 50,000 shares of Common Stock was
granted on December 1, 1995 from the 1995 Stock Option Plan.
All such options are immediately exercisable.
* The dollar amounts set forth under these columns are the
result of the 5% and 10% rates set by the Securities and
Exchange
Commission and are not intended to forecast possible future
appreciation.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES
AT APRIL 30, 1996
The following table provides information with respect to the
named executive officers concerning options exercised and value
of unexercised options held as of the end of the Company's last
fiscal year (April 30, 1996):
<TABLE>
<CAPTION>
Name Shares Acquired on
Exercise (#) Value Realized ($)
<S> <C> <C>
Clark D. Stewart,
Chief Executive
Officer 400,000 340,000
Marvin J.
Eisenbath 0 0
Brenda Brainard
Shadwick N/A N/A
Number of Securities Underlying Value of Unexercised
Unexercised Options at FY-End (#) In-the-Money Options
at FY-End ($)<FN1>
Exercisable/Unexercisable Exercisable/Unexercisable
<C> <C>
1,120,000/0 43,750/0
0 0
N/A N/A
<FN>
<FN1>Based on the price of the Company's common stock at
the close of business on Tuesday, April 30, 1996 and the exercise
price of the options.
</FN>
</TABLE>
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Compensation Committee of the Board of Directors is
comprised of Mr. Wagoner, Mr. Stewart, Mr. Griffith and
Mr. Logan. Mr. Stewart is the President and Chief Executive
Officer of the Company and Mr. Griffith is the Secretary of the
Company.
During fiscal 1996, the consulting firm of Griffith & Associates
was paid for business consulting services rendered to the
Company in the approximate amount of $47,000. William A.
Griffith, who is a director for the Company, is a principal at
Griffith & Associates. It is anticipated that Griffith & Associates
will continue to provide services for the Company.
During fiscal 1996, the Company paid consulting fees of
approximately $110,000 to Mr. Logan for business consulting
services. It is anticipated that Mr. Logan will continue to provide
services for the Company. During the 1995 fiscal year, sales to
Wendy's Hamburgers of Kansas City, Inc. ("WH of KC, Inc.")
accounted for approximately 6% of the net sales of the Company
($790,000). William E. Logan, who is a director for the
Company, is Vice President and Treasurer of WH of KC, Inc.
Mr. Logan sold the WH of KC, Inc. restaurants as of June 3,
1994. The Company no longer provided temporary services
subsequent to June 3, 1994.
During fiscal 1996, the consulting firm of Butler Financial
Corporation was paid for business consulting services rendered to
the Company in the approximate amount of $20,000. R. Warren
Wagoner, who is a director for the Company, is a principal at
Butler Financial Corporation. It is anticipated that Butler
Financial Corporation will continue to provide services for the
Company.
During fiscal 1996, the Company paid rent payments totalling
approximately $30,000 to Eisenbath Properties, Inc. for office
space leased by RFI. Marvin J. Eisenbath, who is an officer of
the Company, owns Eisenbath Properties, Inc. It is anticipated
the Company will continue to lease office space from Eisenbath
Properties, Inc.
EMPLOYMENT CONTRACTS, TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS, LITIGATION.
On March 17, 1994, the Company entered into a five-year
employment agreement with Clark D. Stewart under the terms of
which Mr. Stewart was employed as the President and Chief
Executive Officer of the Company at an initial minimum annual
salary of $198,000 and a minimum salary of $208,000, $218,500,
$229,500 and $241,000, respectively, in years two through five. In
the event Mr. Stewart is terminated from employment with the
Company other than "for cause," Mr. Stewart shall receive as
severance pay an amount equal to the unpaid salary for the
remainder of the term of the employment agreement.
Mr. Stewart was also granted an automobile allowance of $600
per month.
On April 22, 1994, the Company entered into a five-year
employment agreement with Marvin J. Eisenbath under the terms
of which Mr. Eisenbath was employed at an annual salary of
$300,000 plus an annual incentive bonus based on the net profits
of the food distribution division. This incentive arrangement is
consistent with the incentive arrangements made with the
Company's other division managers. In the event Mr. Eisenbath
is terminated from employment with the Company other than
"for cause," Mr. Eisenbath shall receive as severance pay an
amount equal to the unpaid salary for the remainder of the term
of the employment agreement.
On June 6, 1994, the Company entered into a five-year
employment agreement with Brenda Brainard Shadwick under
the terms of which Ms. Shadwick was employed at an annual
salary of $150,000 plus additional compensation to be issued in
stock options or warrants having fair market value of $25,000.
The contract provided that in the event Ms. Shadwick was
terminated from employment with the Company other than "for
cause," Ms. Shadwick would receive as severance pay an amount
equal to the unpaid salary for the remainder of the term of the
employment agreement.
<PAGE>
The Company terminated Ms. Shadwick's employment in April
1995. This individual filed a lawsuit against the Company, the
President of the Company and various corporate subsidiaries
alleging the Company wrongfully terminated the individual's
employment in breach of the contract. The suit was filed in
October, 1995, in State Court in Johnson County, Kansas. The
individual has asserted a claim for damages in excess of
$1,400,000. The individual had proposed a settlement offer for
$500,000, but has recently withdrawn the settlement offer. The
individual has withdrawn the suit in State Court in July 1996, and
has filed a substantially similar suit in Federal Court in the
District of Kansas. It is management's position that the Company
will defend the claim vigorously and in that pursuit the Company
has asserted a counterclaim against the individual for negligence
in the performance of the individual's professional duties.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
On an annual basis, the Compensation Committee reviews the
salaries and performance adjustments of the executive officers
and oversees the administration of the Company's compensation
program.
In accordance with Securities and Exchange Commission rules
designed to enhance disclosure of companies' policies toward
executive compensation, the following report is submitted by the
below listed committee members in their capacity as the Board's
Compensation Committee. The report addresses the Company's
compensation policy as it related to the executive officers for
fiscal 1996.
General Compensation Policy. The Compensation Committee
of the Board of Directors was, and continues to be, guided by a
belief that executive compensation should reflect the Company's
performance (as evidenced by revenue, operating ratio (operating
expenses divided by operating revenue), operating income and
earnings per share), while at the same time considering
surrounding competitive pressures, retention of key executive
officers and individual performance as evidenced by informal
evaluations. The Compensation Committee has not yet adopted
a policy with respect to the $1,000,000 limitation on deductibility
of executive compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended.
1996 Compensation. To accomplish the Company's
compensation policy, the executive compensation package
integrates (i) annual base salary, (ii) current year performance
adjustments to such salary, and (iii) stock option grants under the
Company's 1995 and 1993 Plans. The overall compensation
policy, as implemented, endeavors to enhance the profitability of
the Company (and, thus, shareholder value) by tying the financial
interests of the management with those of the Company.
Base Salary. The Compensation Committee, upon the
recommendation of the CEO, initially determines the amount of
executive officer base salary based on factors such as prior level
of pay, quality of experience, responsibilities of position and
salary levels of similarly positioned executives in other companies.
For all officers, raises are determined subjectively by
recommendation of the CEO and which are approved by the
Compensation Committee. Such raises are based upon informal
evaluation by the CEO and, to a lesser extent, other executive
officers.
Performance Adjustments. Once base salary has been
determined, the Compensation Committee divides the executive
officers into two groups: Operating Officers and Administrative
Officers. The Operating Officers consist of Mr. Stewart (CEO),
Mr. Graham (Vice President-Aircraft Modifications), Mr.
Woodson (Vice President-Avionics), Mr. Fischrupp (President-
BNSI), and Mr. Eisenbath (President-RFI). The Administrative
Officers consists of the remaining executive officers, Mrs. Ruskey
(Vice President-Chief Financial Officer) and Mr. Matukewicz
(Treasurer). For Mr. Fischrupp and Mr. Eisenbath, the Company
has in place a Performance Plan which couples the executive's
cash compensation with specific improvements in the Company's
operating income. Each Performance Plan is specific to the
Operating Officer's segment. Generally, the incentive bonus is
five percent (5%) of the business segment net income before
income taxes from the business segment currently under the
control of the officer.
<PAGE>
Business segment net income is defined to include all ordinary
and necessary business expenses associated with the operations
and financing of the business segment but does not include an
allocation of corporate overhead.
In 1996, Mr. Fischrupp and Mr. Eisenbath received performance
adjustments.
Administrative Officers do not participate in the Performance
Plan and, thus, do not receive a performance incentive bonus.
Stock Option Awards. The Compensation Committee may also
award stock options to executive officers under the 1995 and 1993
Plans. In general, the Committee believes that stock options are
an effective incentive for executive to create value for
shareholders since the value of an option bears a direct
relationship to appreciation in the Company's stock price.
Obviously, when shareholder value decreases, the stock options
granted to executives either decrease in value or have no value.
In 1996, the Compensation Committee granted 410,000 options
to executive officers.
President and CEO Compensation. Clark D. Stewart, President
and CEO of the Company, entered into a five year employment
agreement with the Company. The Compensation Committee
granted to Mr. Stewart 50,000 options subjectively based upon his
performance.
Summary. The Compensation Committee believes that the
executive officers of the Company are dedicated to achieving
significant improvements in long-term financial performance and
that the compensation policies and programs contribute to
achieving this senior management focus. The Compensation
Committee believes that the compensation levels during 1996
adequately reflect the Company's compensation goals and
policies.
The Compensation Committee report is submitted by:
Randal W. Wagoner Clark D. Stewart
William A. Griffith William E. Logan
<PAGE>
STOCK PERFORMANCE GRAPH
In April 1994, the Company acquired R F, Inc., and thereby
entered into the Food Distribution Industry. Until April 1994,
the Company's largest business segment was Temporary Services.
The Company entered into the Temporary Services segment in
December 1990. This segment became inactive on June 3, 1994,
due to the loss of its only customer. Therefore, in order to
provide a representative companion of the Company's stock
performance, the following chart compares the cumulative
stockholder return on the Company's common stock for the last
five years with the cumulative return on the NASDAQ Stock
Market Index and an industry peer group index (based upon
companies which are traded on a listed exchange) for each the
Temporary Services industry and the Food Distribution industry.
The following chart assumes $100 invested May 1, 1990, in each
of the above groups. The total return assumes the reinvestment
of dividends.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal No. 2)
The Company engaged Arthur Andersen LLP to audit the
financial statements for the year ended April 30, 1996, and 1995.
Arthur Andersen LLP was able to express an opinion on the
financial statements for the year ended April 30, 1996, and 1995.
Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting of Shareholders, and they will
have an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
The Company has selected Arthur Andersen LLP to be the
independent public accountants for fiscal year 1997 and
recommends that the appointment of the auditors be ratified by
the Shareholders. Although Shareholder approval is not
required, it is the policy of the Board of Directors to request,
whenever possible, Shareholder ratification of the appointment or
reappointment of independent public accountants.
The Board of Directors recommends a vote "FOR" the
shareholder ratification of Arthur Andersen LLP as the
Company's independent public accountant.
CHANGE OF DOMICILE
(Proposal No. 3)
The Board of Directors has recommended, subject to the
approval of the stockholders of the Company and subject to the
right of the Board of Directors to determine not to proceed in
certain circumstances, that the Company changes its domicile (i.e.
state of incorporation) from the State of Minnesota to the State
of Delaware (the "Reincorporation") pursuant to the Agreement
and Plan of Merger (the "Merger Agreement") between the
Company and Butler National Corporation, a Delaware
corporation ("Butler-Delaware"). The following discussion
summarizes certain aspects of the Reincorporation and the
Merger Agreement. This summary is not intended to be
complete and is subject to, and qualified in its entirety by,
reference to the "COMPARISON OF MINNESOTA AND
DELAWARE CORPORATE LAW" attached as Appendix A to
this Proxy Statement, the Merger Agreement, a copy of which is
attached to this Proxy Statement as Exhibit A, the Certificate of
Incorporation of Butler-Delaware (the "Delaware Certificate"), a
copy of which is attached to this Proxy Statement as Exhibit B,
and the Bylaws of Butler-Delaware (the "Delaware Bylaws"), a
copy of which is attached to this Proxy Statement as Exhibit C.
Copies of the Articles of Incorporation and the Bylaws of the
Company (the "Minnesota Articles" and the "Minnesota Bylaws,"
respectively) are available for inspection at the principal executive
office of the Company and copies will be sent to shareholders,
without charge, upon oral or written request directed to:
Stephanie S. Ruskey, Vice-President, Butler National
Corporation, 1546 East Spruce Road, Olathe, Kansas 66061,
Telephone Number: (913) 780-9595. In this discussion of the
Reincorporation, the terms "Company" or "Butler-Minnesota"
refer to the existing Minnesota corporation and the term "Butler-
Delaware" refers to the new Delaware corporation which is the
proposed successor to Butler-Minnesota.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED AND, FOR THE REASONS DESCRIBED BELOW
UNDER "PRINCIPAL REASONS FOR THE
REINCORPORATION," UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS APPROVE AND ADOPT THE
MERGER AGREEMENT AND THE REINCORPORATION
PROPOSAL.
Principal Reasons for the Reincorporation
For many years the State of Delaware has followed a policy of
encouraging incorporation in that state and, in furtherance of that
policy, has adopted comprehensive, modern and flexible
corporate laws which are periodically updated and revised to
meet changing business needs. As a result, many corporations
have been initially incorporated in Delaware or have subsequently
reincorporated in Delaware in a manner similar to that proposed
by the Company. Because of Delaware's prominence as a state
of incorporation for many corporations, the Delaware courts have
developed considerable expertise in dealing with
corporate issues and a substantial body of case law has developed
construing the Delaware General
<PAGE>
Corporation Law ("Delaware Law") and establishing public
policies with respect to corporations incorporated in Delaware.
Consequently, Delaware Law is comparatively well known and
understood. It is anticipated that, as in the past, Delaware Law
will continue to be interpreted and explained in a number of
significant court decisions. The Board of Director believes that
reincorporation in Delaware should provide greater predictability
with respect to the Company's corporate affairs. As one of the
effects of the proposed Reincorporation, the Company may be
able to expand the scope of its indemnification of directors,
officers and key employees and to limit the liability of its
directors in a broader range of circumstances than permitted
under Minnesota Law. See "COMPARISON OF MINNESOTA
AND DELAWARE CORPORATE LAW" attached as
Appendix A to this Proxy Statement. The Board of Directors has
not viewed the increased protections permitted under Delaware
Law as a reason for recommending the Reincorporation. The
Board, however, believes that the Company will benefit from
having the ability to provide its directors, officers and employees
protections equivalent to those provided by other Delaware
corporations. Shareholders should note however that since
members of the Board of Directors will receive the benefit of
expanded indemnification provisions and limitations on liability,
the Board members may be viewed as having a personal interest
in the approval of the Reincorporation at the potential expense
of shareholders.
In addition, the Company no longer has any business operations
in Minnesota, and consequently, no longer generally retains
counsel licensed to practice law in Minnesota. Thus, the
Company has been and will be (absent the Reincorporation)
required to incur additional expenses to retain Minnesota counsel
in most transactions involving the Company and to advise the
Company when issues of Minnesota Law arise.
Possible Disadvantages of Reincorporation
Shareholders should be aware, that Delaware Law has been
publicly criticized on the grounds that it does not afford minority
shareholders all the same substantive rights and protections that
are available under the laws of a number of other states
(including Minnesota) and that, as a result of the proposed
Reincorporation, the rights of shareholders will change in a
number of important respects. For example if the
Reincorporation is consummated, the Company will not be
required in the future under Delaware Law to obtain shareholder
approval, or to grant class voting and appraisal rights, in
connection with certain kinds of mergers and corporate
reorganizations which under Minnesota Law would be subject to
those requirements. For information regarding those and other
material differences between Minnesota Law and Delaware Law,
see Appendix A attached to this Proxy Statement. The Board of
Directors believes that the advantage of the Reincorporation to
the Company and its shareholders outweigh its possible
disadvantages.
SHAREHOLDERS ARE URGED TO READ THE SUMMARY
OF CERTAIN SIGNIFICANT DIFFERENCES IN THE
PROVISIONS OF MINNESOTA AND DELAWARE LAWS
AFFECTING THE RIGHTS AND INTERESTS OF
SHAREHOLDERS SET FORTH IN APPENDIX A ATTACHED
TO THIS PROXY STATEMENT
Principal Features of the Reincorporation
The Reincorporation will be affected by the merger (the
"Merger") of Butler-Minnesota with and into Butler-Delaware,
which will be incorporated under Delaware Law as a wholly-
owned subsidiary of Butler-Minnesota for purposes of the
Merger. Butler-Delaware will be the surviving corporation in the
Merger and will continue under the name "Butler National
Corporation". Butler-Minnesota will cease to exist as result of
the Merger.
The Merger will not become effective until approval of the
Reincorporation Proposal by the holders of a majority of the
outstanding shares of Common Stock is obtained and the Merger
Agreement or an appropriate certificate of merger is filed with
the Secretary of State of the State of Delaware and articles of
merger with the Secretary of State of the State of Minnesota.
At the effective time of the Merger, the Company will be
governed by the Delaware Certificate, the
<PAGE>
Delaware Bylaws and Delaware Law.
Upon completion of the Merger, each outstanding share of
Common Stock, par value $.01 per share, of Butler-Minnesota
will be converted into one share of Common Stock, $.01 par
value, of Butler-Delaware. As a result, the existing shareholders
of Butler-Minnesota will automatically become shareholders of
Butler-Delaware, Butler-Minnesota will cease to exist and Butler-
Delaware will continue to operate the business of the Company
under the name "Butler National Corporation." Butler-Minnesota
stock certificates will be deemed to represent the same number of
Butler-Delaware shares as were represented by such Butler-
Minnesota stock certificates prior to the Reincorporation. IT
WILL NOT BE NECESSARY FOR SHAREHOLDERS TO
EXCHANGE THEIR BUTLER-MINNESOTA STOCK
CERTIFICATES FOR BUTLER-DELAWARE STOCK
CERTIFICATES. Following the Reincorporation, previously
outstanding Butler-Minnesota stock will constitute "good delivery"
in connection with sales through a broker, or otherwise, of shares
of Butler-Delaware. The Butler-Delaware Common Stock will be
listed on the NASDAQ Small Cap Market as the Common Stock
of Butler-Minnesota is presently listed. Upon completion of the
Reincorporation, the authorized capital stock of Butler-Delaware
will consist of 40,000,000 shares of Common Stock, $.01 par value
and 200,000 shares of Preferred Stock $5 par value, which is
identical to the authorized capital stock of Butler-Minnesota.
The Reincorporation will not result in any change to the daily
business operations of the Company or the present location of
the principal executive offices of the Company in Olathe, Kansas.
The consolidated financial condition and results of operations of
Butler-Delaware immediately after the consummation of the
Reincorporation will be identical to that of Butler-Minnesota
immediately prior to the consummation of the Reincorporation.
In addition, at the effective time of the Merger, the Board of
Directors of Butler-Delaware will consist of those persons who
currently are directors of the Company, all of whom are
nominees for re-election at the Annual Meeting. In addition, the
individuals serving as executive officers of Butler-Minnesota
immediately prior to the Merger will serve as executive officers of
Butler-Delaware upon the effectiveness of the Merger.
Pursuant to the Merger Agreement, each option or right to
purchase a share of Butler-Minnesota Common Stock outstanding
immediately prior to the effective time of the Merger will become
an option or right to purchase a share of Butler-Delaware
Common Stock upon the same terms and conditions as existed
immediately prior to the effective time of the Merger. Future
options and rights, if any, granted under the 1989 Nonqualified
Option Plan, the 1993 Nonqualified Option Plan I, the 1993
Nonqualified Option Plan II and the 1995 Nonqualified Option
Plan (collectively the "Plans") or otherwise will be for shares of
Butler-Delaware Common Stock.
A vote for approval and adoption of the Merger Agreement and
Reincorporation Proposal will also constitute specific approval of
the Delaware Certificate and the Delaware Bylaws. In addition, a
vote for approval and adoption of the Merger Agreement and
Reincorporation Proposal will constitute approval of the
assumption by Butler-Delaware of the Plans and agreements of
Butler-Minnesota, and the substitution of shares of Butler-
Delaware Common Stock for shares of Butler-Minnesota
Common Stock as the security to be received upon exercise of
options, if any, granted in the future under the Plans.
Confirmation and adoption of the Merger Agreement and the
Reincorporation Proposal will affect certain rights of
shareholders. Accordingly, shareholders are urged to read
carefully this entire Proxy Statement, the Appendices and the
Exhibits to the Proxy Statement before voting.
Dissenters' Rights of Appraisal
The holders of the Company's Common Stock have the right to
dissent from the Reincorporation and receive from the Company
payment in cash the value of the shares. In general, to exercise
dissenters' rights under Minnesota Law, a dissenting shareholder
must file with the Company before the vote on the proposed
action a written notice of intent to demand the fair value of the
shares owned by the shareholder and must not vote the shares in
favor of the proposed action. The failure by a holder to vote
against the Reincorporation will not constitute a waiver of the
holder's appraisal rights. A vote against the
<PAGE>
Reincorporation by a holder of Common Stock will not satisfy
the required notice requirement under Minnesota Law. After the
proposed action has been approved by the shareholders the
Company must send a notice to all shareholders who have
properly filed notices of objection and not voted in favor of the
Reincorporation that the action has been approved and providing
them a copy of the Minnesota Law regarding exercise of
dissenter's rights. A dissenting shareholder desiring to exercise
appraisal rights must then demand payment and deposit
certificated shares or comply with any restrictions on transfer of
uncertificated shares within 30 days after receipt from the
Company of the notice that the proposed action has been
approved by the required vote of the shareholders. After the
corporate action takes effect, the Company must remit to each
dissenting shareholder who has complied with the requirements
of law, the amount the Company estimates to be the fair value of
the shares. If a dissenter believes that the amount remitted is
less than the fair value of the shares plus interest, the dissenter
shall give written notice to the corporation of the dissenters' own
estimate of the fair value of the shares plus interest within 30
days after the Company mails the remittance.
The foregoing is merely a summary of the procedures for a
shareholder to exercise dissenters' rights, which summary is
qualified in its entirety by reference to the provisions of
Minnesota Law setting forth the procedures for a holder of
Company Common Stock to exercise appraisal rights which is
attached to this Proxy Statement as Appendix B. If the
Reincorporation is not consummated then no shareholder will be
entitled to dissenters' rights.
Amendment, Deferral or Termination of the Merger Agreement
If approved by the shareholders at the Annual Meeting, it is
anticipated that the Reincorporation will become effective at the
earliest practicable date. However, the Merger Agreement
provides that the Merger Agreement may be amended, modified
or supplemented before or after approval by the shareholders of
the Company; but no such amendment, modification or
supplement may be made if it would have a material adverse
effect upon the rights of the Company's shareholders unless it has
been approved by the shareholders. The Merger Agreement also
provides that the Company may terminate and abandon the
Merger or defer its consummation for a reasonable period,
notwithstanding shareholder approval, if in the opinion of the
Board of Directors or, in the case of deferral, of an authorized
officer, such action would be in the best interests of the Company
and its shareholders. The Merger Agreement provides that the
consummation of the Merger is subject to certain conditions,
including the absence of pending or threatened litigation
regarding the Reincorporation. In addition, the Board of
Directors of the Company has indicated that it will likely
terminate the Reincorporation if the Company has received
notices of exercise of appraisal rights, with respect to, in excess of
1% of the shares of the Common Stock of the Company
outstanding.
Federal Income Tax Consequences of the Reincorporation
The Company has been advised by counsel that, for federal
income tax purposes, no gain or loss will be recognized by the
holders of Common Stock or options to purchase Common Stock
as a result of the consummation of the Reincorporation and no
gain or loss will be recognized by Butler-Minnesota or Butler-
Delaware. Each holder of Common Stock will have the same
basis in the Butler-Delaware Common Stock received pursuant to
the Reincorporation as he had in the Common Stock held
immediately prior to the Reincorporation, and his holding period
with respect to the Butler-Delaware Common Stock will include
the period during which he held the corresponding Common
Stock, so long as the Common Stock was held as a capital asset
at the time of consummation of the Reincorporation.
ALTHOUGH IT IS NOT ANTICIPATED THAT STATE OR
LOCAL INCOME TAX CONSEQUENCES TO
SHAREHOLDERS WILL VARY FROM THE FEDERAL
INCOME TAX CONSEQUENCES DESCRIBED ABOVE,
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE EFFECT OF THE
REINCORPORATION UNDER STATE, LOCAL OR FOREIGN
INCOME TAX LAWS.
Butler-Minnesota has also been advised by legal tax counsel that
Butler-Minnesota will not recognize
<PAGE>
gain or loss for Federal income tax purposes as a result of the
Merger, and that Butler-Delaware will succeed without
adjustment to the tax attributes of Butler-Minnesota. Butler-
Minnesota is currently subject to state income taxation in
Minnesota. If the Reincorporation is approved, Butler-Delaware
will be obligated to pay an annual franchise tax in Delaware,
which the Company believes to be immaterial.
Vote Required and Board of Directors' Recommendation
The Merger Agreement and the Reincorporation Proposal have
been approved by the Board of Directors of Butler-Minnesota.
In order to approve and adopt the Merger Agreement and the
Reincorporation Proposal, the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock is required.
The Board of Directors unanimously recommends that the
shareholders vote "FOR" the approval and adoption of the
Merger Agreement and the Reincorporation Proposal.
<PAGE>
OTHER MATTERS
Management knows of no other matters that will be presented at
the meeting. If any other matter arises at the meeting, it is
intended that the shares represented by the proxies in the
accompanying form will be voted in accordance with the
judgment of the persons named in the proxy.
The Annual Report of the Company for the fiscal year 1996 is
enclosed. The 1996 Annual Report includes the Annual Report
on Form 10-K containing the Company's financial statements for
the fiscal year ended April 30, 1996.
A copy of Form 10-K and the Annual Report filed by the
Company with the Securities and Exchange Commission, will be
furnished without charge to any shareholder who requests it in
writing to the Company at the address noted on the first page of
this Statement.
By Order of the Board of Directors
WILLIAM A. GRIFFITH, Secretary
<PAGE>
APPENDIX A
COMPARISON OF MINNESOTA AND DELAWARE
CORPORATE LAW
Minnesota Law and Delaware Law differ in many respects, and
consequently, it is not practical to summarize all of the
differences. The following, however, is a summary of certain
significant differences in such laws which may affect the rights
and interests of the Company's shareholders as a result of the
Reincorporation.
Vote Required for Certain Mergers and Consolidations
Delaware Law relating to mergers and other corporate
reorganizations differs from Minnesota Law in a number of
respects. Generally, Minnesota Law requires a shareholder vote
in more situations than does Delaware Law. Both Minnesota and
Delaware Law provide for a shareholder vote (except as indicated
below and for certain "short-form mergers" between a parent
corporation and its 90 percent owned subsidiaries) of both the
acquiring and acquired corporation to approve mergers and of
the selling corporation for the sale by a corporation of all or
substantially all of its assets. Both Minnesota Law and Delaware
Law provide for a shareholder vote to approve the dissolution of
a corporation. In addition, Minnesota Law requires the
affirmative vote of a majority of the outstanding shares in a
variety of transactions more fully set forth below.
Delaware Law does not require a shareholder vote of the
surviving corporation in a merger if (i) the merger agreement
does not amend the existing certificate of incorporation; (ii) each
outstanding or treasury share of the surviving corporation in the
merger is unchanged after the merger; and (iii) the number of
shares to be issued by the surviving corporation in the merger
does not exceed 20 percent of the shares outstanding immediately
prior to such issuance. Minnesota Law contains a similar
exception to its voting requirements for reorganizations if (i) the
articles of the corporation will not be amended; (ii) each holder
of shares that were outstanding immediately before the effective
time of the transaction will hold the same number of shares with
identical rights immediately thereafter; (iii) the voting power of
the outstanding shares entitled to vote immediately after the
merger, plus the voting power of the shares entitled to vote
issuable on conversion of, or on the exercise of rights to
purchase, securities issued in the transaction, will not exceed by
more than 20 percent, the voting power of the outstanding shares
entitled to vote immediately before the transaction; and (iv) the
number of participating shares immediately after the merger, plus
the number of participating shares issuable on conversion of, or
on the exercise of rights to purchase, securities issued in the
transaction, will not exceed by more than 20 percent, the number
of participating shares immediately before the transaction.
Under Delaware Law, a corporation may sell all or substantially
all of its assets with the approval of a majority of the outstanding
stock entitled to vote thereon. Minnesota Law requires the
approval of a majority of the voting shares entitled to vote for the
sale of all or substantially all of the corporate assets, including
goodwill, not in the usual and regular course of business.
Class Vote for Certain Reorganizations
With certain exceptions, Minnesota Law requires that a merger
or reorganization and certain sales of assets or similar
transactions be approved by a majority vote of each class or series
of shares outstanding and entitled to vote if any provision of the
plan would, if contained in a proposed amendment to the articles,
entitle the class or series of shares to vote as a class or series,
and, in an exchange, if the class or series is included in the
exchange. Delaware Law generally does not require class voting,
except in circumstances where the transaction involves an
amendment to the certificate of incorporation which would
increase or decrease the aggregate number of authorized shares
of the class, increase or decrease the par value of the shares of
the class, or alter or change the powers, preferences or special
rights of the shares of the class so as to affect them adversely.
<PAGE>
Anti-Takeover Laws
Delaware Law provides somewhat less protection to the
Company against potentially undesirable takeovers than
Minnesota Law. In general, Section 203 of Delaware Law
("Section 203") prevents an "Interested Stockholder" (which is
defined in Section 203 generally as any person that, individually
or with others, owns 15 percent or more of the outstanding voting
securities of a corporation), from engaging in a "Business
Combination" (which is defined to include, among other
transactions, any merger or consolidation with, or sale or
disposition of a substantial amount of assets to, an Interested
Stockholder) with a Delaware corporation for three years
following the date such person became an Interested Stockholder
unless certain conditions (such as approval by the Board of
Directors) are met. Minnesota Law defines an interested
shareholder as any person that owns 10% or more of the
outstanding voting securities of a corporation. Moreover,
Minnesota Law provides for limitation on Business Combinations
a period of four years following the interested shareholder's share
acquisition date unless the business combination or share
acquisition is approved by a committee of the board pursuant to
specific qualifications.
In addition, Minnesota has adopted a Control Share Acquisition
Act ("CSAA") which has no comparable provision under
Delaware Law. The CSAA generally limits the voting rights of a
shareholder acquiring a substantial percentage of the voting
shares of a corporation in an attempt to takeover or otherwise
becoming a substantial shareholder, unless holders of the majority
of the voting power of the disinterested shares approve full voting
rights for such substantial shareholder. The CSAA provides that,
generally, a person who becomes a beneficial owner of 20% or
more of the voting power of the shares of an issuing public
corporation in the election of directors may exercise only an
aggregate of 20% of the voting power of the corporation's shares
in the absence of special shareholder approval. That approval
can be obtained only by resolution adopted by (i) the affirmative
vote of the holders of a majority of the voting power of all shares
entitled to vote, including all shares held by the acquiring person
and (ii) the affirmative vote of the holders of a majority of the
voting power of all shares entitled to vote, excluding all
"Interested Shares" (i.e. shares held by the acquiring person, any
officer of the issuing public corporation or any director who is
also an employee of the corporation).
Cumulative Voting
Under Delaware Law, cumulative voting (which permits holders
of less than a majority of the voting securities of a corporation to
cumulate their votes and elect a director in certain situations) is
not available unless so provided in the corporation's certificate of
incorporation. Under Minnesota Law, a corporation will have
cumulative voting unless such right is denied in the Articles of
Incorporation. Cumulative voting has been specifically denied in
the charter documents of both Butler-Minnesota and Butler-
Delaware. Furthermore, in Minnesota, no amendment to the
articles of incorporation or bylaws which has the effect of denying
or modifying cumulative voting rights for directors shall be
adopted if the votes of a proportion of the voting power sufficient
to elect a director at an election of the entire board under
cumulative voting are cast against the amendment.
Dividends
Minnesota Law provides that a corporation board may authorize
any distribution, including dividends, if the board determines that
the corporation will be able to pay its debts in the ordinary
course of business after making the distribution and the board
does not know prior to the distribution that the determination
was or has become erroneous.
Delaware Law provides that a corporation may, unless otherwise
restricted by its certificate of incorporation, declare and pay
dividends out of surplus or, if no surplus exists, out of net profits
for the fiscal year in which the dividend is declared or the
preceding fiscal year (provided that the amount of capital of the
corporation following the declaration and payment of the
dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding shares of all classes
having a preference upon the distribution of assets). The
Delaware Certificate contains no restriction on the
<PAGE>
payment of dividends. Additionally, Delaware Law provides, that,
in general, a corporation may redeem or repurchase its shares
only out of surplus.
Appraisal Rights in Mergers
Under both Minnesota Law and Delaware Law, a dissenting
shareholder of a corporation participating in certain transactions
may, in certain circumstances, receive cash in the amount of the
fair value of his or her shares (as determined by a court) in lieu
of the consideration otherwise receivable in any such transaction.
Unless a Delaware corporation's certificate of incorporation
provides otherwise (which the Delaware Certificate does not),
Delaware Law does not require these dissenters' rights with
respect to (i) a sale of assets; (ii) a merger or consolidation by a
corporation, the shares of which are either listed on a national
securities exchange or widely held (by more than 2,000
stockholders), if such stockholders receive shares of the surviving
corporation or of such a listed or widely held corporation; or (iii)
stockholders of a corporation surviving a merger if no vote of the
stockholders is required to approve the merger. Under Delaware
Law, no vote of the stockholders of the surviving corporation is
required if the number of shares to be issued in the merger does
not exceed 20 percent of the shares of the surviving corporation
outstanding immediately prior to the merger and certain other
conditions are met. Minnesota Law does, in general, afford
dissenters' rights in a sale, lease, transfer or other disposition of
all or substantially all of the corporate assets (subject to certain
limited exceptions); a plan of merger; a plan of exchange in
which the corporation's shares will be acquired, if the shares are
entitled to vote; or any other corporate action taken pursuant to
shareholder vote with respect to which the articles, bylaws, or a
resolution directs that dissenting shareholders may obtain
payment for their shares; and, when amendment of the articles
would materially and adversely affect the rights or preferences of
the shares of the dissenter in that the amendment alters or
abolishes preferential rights; creates, alters or abolishes a right to
share redemption; alters or abolishes a preemptive right; or,
excludes or limits a voting right.
Indemnification of Officers and Directors and Liability of
Directors
Both Delaware Law and Minnesota Law allow a corporation to
include in its certificate of incorporation or articles of
incorporation, respectively, a provision which eliminates, in
certain circumstances, a director's personal liability for breach of
fiduciary duties and a provision which authorizes the corporation
to indemnify its agents. The Minnesota Articles and the
Delaware Certificate contain substantially identical liability
limitation provisions.
However, due to certain differences between Minnesota Law and
Delaware Law, Butler-Delaware will be able to provide
indemnification of its officers and directors under a somewhat
broader range of circumstances than currently permitted under
Minnesota Law as Delaware Law provides that indemnification
and advancement of expenses specifically provided under
Delaware Law is not exclusive of any other right to
indemnification to which a covered person may be entitled under
any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. The Delaware Bylaws provide that the
Company shall have the power to give any further indemnity to
any person who is or was a director, officer, employee or agent,
or to any person who was serving at the request of the Company
as a director, officer, employee or agent of another corporation
or other enterprise; provided, no such indemnity shall indemnify
any person from or on account of such persons conduct which is
finally adjudged to have been knowingly fraudulent, deliberately
dishonest or wilful misconduct, or if it is determined by a final
judgment or other final adjudication by a court of confident
jurisdiction considering the question of indemnification that any
such payment of indemnification is or would be in violation of
applicable law. As a result, under Delaware Law, the Company
will be able to provide indemnification and advancement of
expenses in a broader range of circumstances than under
Minnesota Law.
The Company has not experienced any difficulty in recruiting
qualified directors and none of the existing members of the
Board of Directors has indicated an intention to resign if the
Reincorporation is not approved. Except for the claim against
Clark Stewart in the Shadwick matter (See page 9), no claim has
been threatened or asserted against any director, officer or
employee of the Company's in his capacity as such (which is
already covered by indemnity by the Company). The Company
believes, however, that it
<PAGE>
is important to continue to provide the Company's directors and
officers with protection from the risk of litigation and personal
liability, and thereby ensure that the Company can continue to
attract and retain experienced individuals to serve as directors
and officers and that the directors and officers will continue to
consider all possible alternatives when making business decisions.
Accordingly, the Board of Directors has determined that it is in
the best interests of the stockholders of Butler-Delaware that
Butler-Delaware include a Delaware Director Liability Provision
(as defined below) and Delaware Indemnification Provisions (as
defined below) in its charter documents in order to take full
advantage of the protections permitted under Delaware Law.
Butler-Delaware will therefore continue to indemnify its officers,
directors and key employees and to provide limited liability for its
directors.
Director Liability
The Delaware Certificate includes a provision which eliminates
the directors' personal liability for monetary damages to the full
extent permitted by Delaware Law (the "Delaware Director
Liability Provision"). The Delaware Director Liability Provision
would eliminate the liability of Directors to Butler-Delaware and
its stockholders for monetary damages arising out of any violation
by a director of his fiduciary duty of due care. Under Delaware
Law, however, the Delaware Director Liability Provision would
not eliminate the personal liability of a director for (i) breach of
the director's duty of loyalty, (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of
law, (iii) payment of dividends or repurchases or redemptions of
stock other than from lawfully available funds, or (iv) any
transaction from which the Director derived an improper benefit.
The Delaware Director Liability Provision also would not affect a
Director's liability under the federal securities laws or the
recovery of damages by third parties. Furthermore, while
pursuant to Delaware Law the limitation on liability afforded by
the Delaware Director Liability Provision would eliminate a
Director's personal monetary liability for breach of the Director's
duty of due care, it will not eliminate the duty of due care. The
Directors would remain subject to equitable remedies, such as
actions for injunction or rescission, although such remedies,
whether as a result of timeliness or otherwise, may not be
effective in all situations. Furthermore, the Delaware Certificate
would have no effect on any liability arising by virtue of any act
or omission by a director which occurred prior to the effective
date of the Reincorporation. With regard to directors who are
also officers of Butler-Delaware, these persons would be insulated
from liability only with respect to their conduct as directors and
would not be insulated from liability for acts or omissions in their
capacity as officers. The Minnesota provisions are substantially
identical.
Indemnification
Delaware Law provides a detailed statutory framework covering
indemnification of directors, officers, employees or agents of the
corporation against liabilities and expenses arising out of legal
proceedings brought against them by reason of their status or
service as directors, officers, employees or agents. Section 145 of
Delaware Law ("Section 145") provides that a director, officer,
employee or agent of a corporation (i) shall be indemnified by
the corporation for expenses in defense of any action or
proceeding if such person is sued by reason of his service to the
corporation, to the extent that such person has been successful in
defense of such action or proceeding, or in defense of any claim,
issue or matter raised in such litigation, (ii) may, in actions other
than actions by or in the right of the corporation (such as
derivative actions), be indemnified for expenses, judgments, fines,
amounts paid in settlement of such litigation, even if he is not
successful on the merits, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation (and in a criminal proceeding, if
he did not have reasonable cause to believe his conduct was
unlawful), and (iii) may be indemnified by the corporation for
expenses (but not judgments or settlements) of any action by the
corporation or a derivative action (such as a suit by a stockholder
alleging a breach by the director or officer of a duty owed to the
corporation), even if he is not successful, provided that he acted
in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the corporation, provided that no
indemnification is permitted without court approval if the director
has been adjudged liable to the corporation.
<PAGE>
The Delaware Certificate takes full advantage of the permissive
Delaware indemnification laws, and both the Delaware Certificate
and Delaware Bylaws include provisions (the "Delaware
Indemnification Provisions") which provide that: (i) Butler-
Delaware is required to indemnify its officers and directors to the
full extent permitted by law, including those circumstances in
which indemnification would otherwise be discretionary; (ii)
Butler-Delaware may, by action of the Board of Directors,
provide indemnification to employees and other agents of Butler-
Delaware with the same scope and effect as the foregoing
indemnification of officers and directors; and (iii) Butler-
Delaware may adopt bylaws or enter into one or more
agreements with any person which provide for indemnification
greater or different than that provided in the Delaware
Certificate. As noted above, the Delaware Bylaws provide for
indemnification unless the conduct of the person in question is
knowingly fraudulent, deliberately dishonest or willful misconduct.
Minnesota Law provides for mandatory indemnification (as
opposed to optional indemnification under Delaware Law) in
generally the same circumstances as Delaware Law provided
certain criteria are met, and also provides that corporations are
permitted to limit the scope of indemnification through bylaw
provisions, agreements or other corporate action. However,
Minnesota Law (unlike Delaware Law) does not authorize a
corporation to provide indemnification greater than that specified
in Minnesota Law. Thus, on the whole, Minnesota Law offers
less indemnification protection than that which can be offered by
corporations to directors, officers and other key employees under
Delaware Law.
The Delaware Indemnification Provisions are intended to
indemnify Butler-Delaware's officers and directors to the full
extent permitted under Delaware Law and, if the Board of
Directors so determines, to provide indemnification protection to
employees and other agents of Butler-Delaware. In addition, the
Delaware Indemnification Provisions will enable Butler-Delaware
in the future, if approved by the Board of Directors, to enter into
indemnification agreements with its directors, officers, employees
or agents. As stated above, the Company does not currently
intend to enter into any such agreements. The shareholders
should note that since the members of the Board of Directors will
be beneficiaries of the Delaware Indemnification Provisions, the
Board members may be viewed as having a personal interest in
the approval of the Reincorporation at the potential expense of
the shareholders.
Possible Consequences of Indemnification and Directors' Limited
Liability Generally
The Delaware Director Liability Provision and the Delaware
Indemnification Provisions could, under certain circumstances,
have an adverse impact on Butler-Delaware. In the event that
Butler-Delaware is injured as a result of a Director's breach of
fiduciary duties, including in connection with a takeover attempt,
the Delaware Director Liability Provision may prevent Butler-
Delaware from recovering compensation from the Director for
damage it has suffered. In addition, the Delaware
Indemnification Provision may require Butler-Delaware to pay
the costs of a legal defense and legal judgment arising out of
injuries to third parties caused by the acts of its directors, officers
or third parties acting on behalf of Butler-Delaware which Butler-
Delaware would not otherwise be obligated to pay.
Loans to Officers and Employees
Under Delaware Law, a corporation may make loans to, or
guarantee the obligations of, or otherwise assist, its officers and
other employees and those of its subsidiaries (including a director
who is an officer or employee of the corporation or its
subsidiaries) when such action, in the judgment of the
corporation's board of directors, may reasonably be expected to
benefit the corporation. Under Minnesota Law, a majority of
directors present must approve such transactions and such loans,
guarantees, sureties or other financial assistance must be in the
usual and regular course of the business of the corporation; with,
or for the benefit of, a related organization, an organization in
which the corporation has a financial interest, a business
relationship with, or to which the corporation has the power to
make donations; with, or for the benefit of, an officer or other
employee of the corporation or a subsidiary and must reasonably
be expected to benefit the corporation; or, such action must be
approved by two-thirds vote of disinterested shareholders or a
unanimous vote of all outstanding shares whether or not they are
entitled to vote.
<PAGE>
Voting by Ballot
The Delaware Certificate provides that the election of directors
need not be by written ballot unless requested by the Chairman
of the Board of Directors or by a majority of the outstanding
shares entitled to vote in the election of directors that are present
or represented by proxy at a meeting at which directors are to be
elected. Minnesota Law has no comparable provision, but
expressly provides that the method of election may be imposed by
or in the manner provided in the articles of incorporation or
bylaws.
Inspection of Shareholder Lists
Minnesota Law grants an absolute right of inspection of the
corporate records and books, including all stocks subscribed,
transferred, cancelled, or retired. Delaware Law does not
provide any similar absolute right of inspection, but does grant
any stockholder of record of a corporation the right to inspect the
stockholder list of the corporation for any purpose reasonably
related to such person's interest as a stockholder and, for a ten-
day period preceding a stockholder meeting, for any purpose
germane to the meeting.
Special Shareholder Meetings
The holders of 10% or more of the voting power of the shares
entitled to vote generally have an absolute right to demand a
special meeting of shareholders under Minnesota Law.
Shareholders of Delaware corporations are not entitled to
demand special meetings unless so authorized by the
corporation's certificate of incorporation or bylaws. Under
Butler-Delaware's Bylaws, special meetings may not be called by
the shareholders but only by the officers or the Board of
Directors.
<PAGE>
APPENDIX B
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS. -
Subdivision 1. Actions creating rights. A shareholder of a
corporation may dissent from, and obtain payment for the fair
value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) An amendment of the articles that materially and adversely
affects the rights or preferences of the shares of the dissenting
shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a
sinking fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded
or limited through the authorization or issuance of securities of
an existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing
public corporation that provides that section 302A.671 does not
apply to a control share acquisition does not give rise to the right
to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation not
made in the usual or regular course of its business, but not
including a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of
a court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed
to the shareholders in accordance with their respective interests
within one year after the date of disposition.
(c) A plan of merger to which the corporation is a party, except
as provided in subdivision 3;
(d) A plan of exchange to which the corporation is a party as the
corporation whose shares will be acquired by the acquiring
corporation, if the shares of the shareholder are entitled to be
voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder
vote with respect to which the articles, the bylaws, or a resolution
approved by the board directs that dissenting shareholders may
obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the
name of the shareholder, unless the shareholder dissents with
respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and
discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of
the dissenter shall be determined as if the shares as to which the
shareholder has dissented and the other shares were registered in
the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of
the beneficial owner, and shall be treated as a dissenting
shareholder under the terms of this section and section 302A.
473, if the beneficial owner submits to the corporation at the time
of or before the assertion of the rights a written consent of the
shareholder.
Subd. 3. Rights not to apply. The right to obtain payment under
this section does not apply to a shareholder of the surviving
corporation in a merger, if the shares of the shareholder are not
entitled to be voted on the merger.
<PAGE>
Subd. 4. Other rights. The shareholders of a corporation who
have a right under this section to obtain payment for their shares
do not have a right at law or in equity to have a corporate action
described in subdivision 1 set aside or rescinded, except when the
corporate action is fraudulent with regard to the complaining
shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS'
RIGHTS. - Subdivision 1. Definitions. (a) For purposes of this
section, the terms defined in this subdivision have the meanings
given them.
(b) "Corporation" means the issuer of the shares held by a
dissenter before the corporate actions referred to in section
302A.471, subdivision 1 or the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the
corporate action referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the
effective date of the corporate action referred to in section
302A.471, subdivision 1 up to and including the date of payment,
calculated at the rate provided in section 549.09 for interest on
verdicts and judgments.
Subd.2. Notice of action. If a corporation calls a shareholder
meeting at which any action described in section 302A.471,
subdivision 1 is to be voted upon, the notice of the meeting shall
inform each shareholder of the right to dissent and shall include
a copy of section 302A.471 and this section and a brief
description of the procedure to be followed under these sections.
Subd.3. Notice of dissent. If a proposed action must be
approved by the shareholders, a shareholder who wishes to
exercise dissenters' rights must file with the corporation before
the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder
and must not vote the shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the
proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all
shareholders who have complied with subdivision 3 and to all
shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:
(1) The address to which a demand for payment and certificates
of certificated shares must be sent in order to obtain payment
and the date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares or an interest in them
and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares
or comply with any restrictions on transfer of uncertificated
shares within 30 days after the notice was given, but the dissenter
retains all other rights of a shareholder until the proposed action
takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate
action takes effect, or after the corporation receives a valid
demand for payment, whichever is later, the corporation shall
remit to each dissenting shareholder who has complied with
subdivisions 3 and 4 the amount the corporation estimates to be
the fair value of the shares, plus interest, accompanied by:
<PAGE>
(1) The corporation's closing balance sheet and statement of
income for a fiscal year ending not more than 16 months before
the effective date of the corporate action, together with the latest
available interim financial statements;
(2) An estimate by the corporation of the fair value of the shares
and a brief description of the method used to reach the estimate;
and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding
supplemental payment.
(b) The corporation may withhold the remittance described in
paragraph (a) from a person who was not a shareholder on the
date the action dissented from was first announced to the public
or who is dissenting on behalf of a person who was not a
beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the
dissenter the materials described in paragraph (a), a statement of
the reasons for withholding the remittance, and an offer to pay to
the dissenter the amount listed in the materials if the dissenter
agrees to accept that amount in full satisfaction. The dissenter
may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered.
If the dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of
the deposit of certificates or the imposition of transfer restrictions
on uncertificated shares, it shall return all deposited certificates
and cancel all transfer restrictions. However, the corporation
may again give notice under subdivision 4 and require deposit or
restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes
that the amount remitted under subdivision 5 is less than the fair
value of the shares plus interest the dissenter may give written
notice to the corporation of the dissenter's own estimate of the
fair value of the shares, plus interest within 30 days after the
corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is
entitled only to the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after
receiving the demand, either pay to the dissenter the amount
demanded or agreed to by the dissenter after discussion with the
corporation or file in court a petition requesting that the court
determine the fair value of the shares, plus interest. The petition
shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation
that receives a demand relating to the shares of a constituent
domestic corporation shall file the petition in the county in this
state in which the last registered office of the constituent
corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and
who have not reached agreement with the corporation. The
jurisdiction of the court is plenary and exclusive. The court may
appoint appraisers, with powers and authorities the court deems
proper, to receive evidence on and recommend the amount of the
fair value of the shares. The court shall determine whether the
shareholder or shareholders in question have fully complied with
the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the
court finds relevant, computed by any method or combination of
methods that the court, in its discretion, sees fit to use, whether
or not used by the corporation or by a dissenter. The fair value
of the shares as determined by the court is binding on all
shareholders, wherever located. A dissenter is entitled to
judgment for the amount by which the fair value of the shares as
determined by the court, plus interest, exceeds the amount, if any,
remitted under subdivision 5, but shall not be liable to the
corporation for the amount, if any, by which the amount, if any,
remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine
the costs and expenses of a proceeding under subdivision 7,
including the reasonable expenses and compensation of any
appraiser appointed by the court, and shall assess those costs and
expenses against the corporation, except that the
<PAGE>
court may assess part or all of those costs and expenses against a
dissenter whose action in demanding payment under subdivision 6
is found to be arbitrary, vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and
expenses of any experts or attorneys as the court deems equitable.
These fees and expenses may also be assessed against a person
who has acted arbitrarily, vexatiously, or not in good faith in
bringing the proceeding, and may be awarded to a party injured
by those actions.
(c) The court may award, in its discretion, fees and expenses to
an attorney for the dissenters out of the amount awarded to the
dissenters, if any.
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF MERGER
Parties:
THIS AGREEMENT AND PLAN OF MERGER ("Merger
Agreement") is entered into by and between Butler National
Corporation, a Minnesota corporation ("Butler-Minnesota"), and
Butler National Corporation, a Delaware corporation ("Butler-
Delaware").
Recitals:
1. Butler-Minnesota is a corporation duly organized and existing
under the laws of the State of Minnesota.
2. Butler-Delaware is a corporation duly organized and existing
under the laws of the State of Delaware.
3. On the date of this Merger Agreement, Butler-Minnesota's
authorized capital consists of 40,200,000 shares of stock,
consisting of 40,000,000 shares of Common Stock, par value $0.01
per share (the "Butler-Minnesota Common Stock"), of which
9,280,980 common shares are issued and outstanding, and 200,000
shares of preferred stock, par value $5.00 per share, none of
which shares are issued and outstanding.
4. On the date of this Merger Agreement, Butler-Delaware's
authorized capital consists of 40,200,000 shares of stock,
consisting of 40,000,000 shares of Common Stock, par value $0.01
per share (the "Butler-Delaware Common Stock"), of which one
share is issued and outstanding and owned by Butler-Minnesota,
and no shares of preferred stock are issued and outstanding.
5. The respective Boards of Directors of Butler-Minnesota and
Butler-Delaware have determined that it is advisable and in the
best interests of each such corporation that Butler-Minnesota
merge with and into Butler-Delaware upon the terms and subject
to the conditions of this Merger Agreement for the purpose of
effecting the reincorporation of Butler-Minnesota in the State of
Delaware.
6. The respective Boards of Directors of Butler-Minnesota and
Butler-Delaware have, by resolutions duly adopted, approved and
adopted this Merger Agreement. Butler-Minnesota has adopted
this Merger Agreement as the sole stockholder of Butler-
Delaware and the Board of Directors of Butler-Minnesota has
directed that this Merger Agreement be submitted to a vote of its
shareholders. The affirmative vote of the holders of a majority of
the shares of the Butler-Minnesota Common Stock outstanding
must approve this Merger Agreement for it to become effective.
7. The parties intend by this Merger Agreement to effect a
"reorganization" under Section 368 of the Internal Revenue Code
of 1986, as amended.
Terms and Provisions:
In consideration of the foregoing recitals and of the following
terms and provisions, and subject to the following conditions, it is
agreed:
1. Merger. At the Effective Time (as defined in this Section 1),
Butler-Minnesota shall be merged with and into Butler-Delaware
(the "Merger"). Butler-Delaware shall be the surviving
corporation of the Merger (hereinafter sometimes referred to as
the "Surviving Corporation"), and the separate corporate
existence of Butler-Minnesota shall cease. The Merger shall
become effective upon the filing of a Certificate of Merger with
the Secretary of State of the State of Delaware. The date and
time when the
<PAGE>
Merger shall become effective is herein referred to as the
"Effective Time."
2. Governing Documents.
a. The Certificate of Incorporation of Butler-Delaware as it
may be amended or restated subject to applicable law, and as in
effect immediately prior to the Effective Time, shall constitute
the Certificate of Incorporation of the Surviving Corporation
without further change or amendment until thereafter amended
in accordance with the provisions thereof and applicable law.
b. The Bylaws of Butler-Delaware as in effect immediately
prior to the Effective Time shall constitute the Bylaws of the
Surviving Corporation without change or amendment until
thereafter amended in accordance with the provisions thereof and
applicable law.
3. Officers and Directors. The persons who are officers and
directors of Butler-Minnesota immediately prior to the Effective
Time shall, after the Effective Time, be the officers and directors
of the Surviving Corporation, without change until their
successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and
Bylaws and applicable law.
4. Name. The name of the Surviving Corporation shall continue
to be Butler National Corporation.
5. Succession. At the Effective Time, the separate corporate
existence of Butler-Minnesota shall cease, and the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises of a public or private nature and be subject to all the
restrictions, disabilities and duties of Butler-Minnesota; and all
the rights, privileges, powers and franchises of Butler-Minnesota,
and all property, real, personal and mixed, and all debts due to
Butler-Minnesota on whatever account, as well for share
subscriptions and all other things in action, shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers
and franchises, and all and every other interest shall be thereafter
as effectively the property of the Surviving Corporation as the
same were of Butler-Minnesota, and the title to any real estate
vested by deed or otherwise shall not revert or be in any way
impaired by reason of the Merger, but all rights of creditor and
liens upon any property of Butler-Minnesota shall be preserved
unimpaired, and all debts, liabilities and duties of Butler-
Minnesota shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such
debts, liabilities and duties had been incurred or contracted by it;
provided, however, that such liens upon property of Butler-
Minnesota will be limited to the property affected thereby
immediately prior to the Merger. All corporate acts, plans,
policies, agreements, arrangements, approvals and authorizations
of Butler-Minnesota, its shareholders, Board of Directors and
committees thereof, officers and agents, which were valid and
effective immediately prior to the Effective Time, shall be taken
for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving
Corporation, its shareholders, Board of Directors and committees
thereof, respectively, and shall be as effective and binding thereon
as the same were with respect to Butler-Minnesota.
6. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
a. Each share of Butler-Minnesota Common Stock outstanding
immediately prior to the Effective Time shall be converted into,
and shall become, one fully paid and nonassessable share of
Butler-Delaware Common Stock.
b. The one share of Butler-Delaware Common Stock issued
and outstanding in the name of Butler-Minnesota shall be
cancelled and retired, and no payment shall be made with respect
thereto, and such shares shall resume the status of unauthorized
and unissued shares of Butler-Delaware Common Stock.
<PAGE>
7. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which immediately prior to the Effective
Time represented shares of Butler-Minnesota Common Stock
shall be deemed for all purposes to evidence ownership of, and to
represent shares of, Butler-Delaware Common Stock into which
the shares of Butler-Minnesota Common Stock formerly
represented by such certificates have been converted as herein
provided. The registered owner on the books and records of
Butler-Minnesota or its transfer agent of any such outstanding
stock certificate shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled
to exercise any voting or other rights with respect to and to
receive any dividends and other distributions upon the shares of
Butler-Delaware Common Stock evidenced by such outstanding
certificate as above provided. Nothing contained herein shall be
deemed to require the holder of any shares of Butler-Minnesota
Common Stock to surrender the certificate or certificates
representing such shares in exchange for a certificate or
certificates representing shares of Butler-Delaware Common
Stock.
8. Options. Each right in or to, or option to purchase, shares
of Butler-Minnesota Common Stock, granted under Butler-
Minnesota's 1989 Nonqualified Option Plan, the 1993
Nonqualified Option Plan I, the 1993 Nonqualified Option Plan
II and the 1995 Nonqualified Option Plan (collectively the
"Plans") and otherwise, which is outstanding immediately prior to
the Effective Time, shall, by virtue of the Merger and without any
action of the part of the holder thereof, be converted into and
become a right in or to, or an option to purchase at the same
option price per share, the same number of shares of Butler-
Delaware Common Stock, upon the same terms and subject to
the same conditions as set forth in the Plans or otherwise as in
effect at the Effective Time. The same number of shares of
Butler-Delaware Common Stock shall be reserved for purposes of
the outstanding options as is equal to the number of shares of
Butler-Minnesota Common Stock so reserved as of the Effective
Time. As of the Effective Time, the Surviving Corporation
hereby assumes the Plans and all obligations of Butler-Minnesota
under the Plans including the outstanding rights or options or
portions thereof granted pursuant to the Plans and otherwise.
9. Other Employee Benefit Plans. As of the Effective Time, the
Surviving Corporation hereby assumes all obligations of Butler-
Minnesota under any and all employee benefit plans in effect as
of the Effective Time or with respect to which employee rights or
accrued benefits are outstanding as of the Effective Time.
10. Conditions. The consummation of the Merger is subject to
satisfaction of the following conditions prior to the Effective
Time:
a. The Merger shall have received the requisite approval of the
holders of Butler-Minnesota Common Stock and all necessary
action shall have been taken to authorize the execution, delivery
and performance of the Merger Agreement by Butler-Minnesota
and Butler-Delaware.
b. All approvals and consents necessary or desirable, if any, in
connection with the consummation of the Merger shall have been
obtained.
c. No suit, action, proceeding or other litigation shall have been
commenced or threatened to be commenced which, in the
opinion of Butler-Minnesota or Butler-Delaware, would pose a
material restriction on or impair consummation of the Merger,
performance of this Merger Agreement or the conduct of the
business of Butler-Delaware after the Effective Time, or create a
risk of subjecting Butler-Minnesota or Butler-Delaware, or their
respective shareholders, officers or directors, to material damages,
costs, liability or other relief in connection with the Merger or
this Merger Agreement.
11. Governing Law. This Merger Agreement shall be governed
by and construed in accordance with the State of Delaware
applicable to contracts entered into and to be performed wholly
within the State of Delaware, except to the extent that the laws of
the State of Minnesota are mandatorily applicable to the Merger.
<PAGE>
12. Amendment. Subject to applicable law and subject to the
rights of Butler-Minnesota's shareholders further to approve any
amendment which would have a material adverse effect on such
shareholders, this Merger Agreement may be amended, modified
or supplemented by written agreement of the parties hereto at
any time prior to the Effective Time with respect to the terms
contained herein.
13. Deferral or Abandonment. At any time prior to the
Effective Time, this Merger Agreement may be terminated and
the Merger may be abandoned or the time of consummation of
the Merger may be deferred for a reasonable time by the Board
of Directors of either Butler-Minnesota or Butler-Delaware or
both, notwithstanding approval of this Merger Agreement by the
shareholders of Butler-Minnesota or the stockholders of Butler-
Delaware, or both, if circumstances arise which, in the opinion of
the Board of Directors of Butler-Minnesota or Butler-Delaware,
make the Merger inadvisable or such deferral of the time of
consummation thereof advisable.
14. Counterparts. This Merger Agreement may be executed in
any number of counterparts each of which when taken alone shall
constitute an original instrument and when taken together shall
constitute one and the same Agreement.
15. Further Assurances. From time to time, as and when
required or requested by either Butler-Minnesota or Butler-
Delaware, as applicable, or by its respective successors and
assigns, there shall be executed and delivered on behalf of the
other corporation, or by its respective successors and assigns, such
deeds, assignments and other instruments, and there shall be
taken or caused to be taken by it all such further and other
action, as shall be appropriate or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving
Corporation the title to and possession of all property, interests,
assets, rights, privileges, immunities, powers, franchise and
authority of Butler-Minnesota and otherwise to carry out the
purposes of this Merger Agreement, and the officers and
directors of each corporation are fully authorized in the name
and on behalf of such corporation or otherwise, to take any and
all such action and to execute and deliver any and all such deeds,
assignments and other instruments.
IN WITNESS WHEREOF, Butler-Minnesota and Butler-
Delaware have caused this Merger Agreement to be signed by
their respective duly authorized officers and delivered this
_______ day of ________________, 1996.
BUTLER NATIONAL CORPORATION
a Minnesota corporation
By:
Title:
ATTEST:
By:
Secretary
BUTLER NATIONAL CORPORATION
a Delaware corporation
By:
Title:
ATTEST:
By:
Secretary
<PAGE>
Exhibit B
CERTIFICATE OF INCORPORATION
OF
BUTLER NATIONAL CORPORATION
THE UNDERSIGNED, in order to form a corporation for the
purposes hereinafter stated, under and pursuant to the provisions
of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
FIRST: The name of the corporation is
Butler National Corporation
SECOND: The registered office of the Corporation is to be
located at 1209 Orange Street, Wilmington, Delaware 19801. The
name of its registered agent at that address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware.
FOURTH: Section 1. The authorized capital of this Corporation
shall be $1,400,000 consisting of 40,000,000 shares of common
stock, $.01 par value (the "Common Stock") and 200,000 shares of
preferred stock, the par value of $5.00 per share (the "Preferred
Stock"). The relative voting rights, preferences and other
privileges of such capital stock shall be as follows:
(a) Common Stock. Each share of Common Stock shall entitle
the holder thereof to one (1) vote; all such shares of Common
Stock shall be equal in all respects and shall confer equal rights
upon the holders thereof.
(b) Preferred Stock. Each share of Preferred Stock shall entitle
the holder thereof to such rights, voting power, preferences and
restrictions as may be fixed by the board of directors by
resolution thereof.
Section 2. A shareholder shall have no pre-emptive rights to
subscribe for or purchase any shares of capital stock or other
securities of whatsoever kind of nature which may be issued by
this Corporation; voting for directors shall not be cumulative.
FIFTH: The name and address of the incorporator is as follows:
Name Address
James P. Pryde 1200 Main Street
Kansas City, MO 64105-2100
SIXTH: Except as otherwise specifically provided by applicable
statute, all powers of management, direction and control of the
Corporation shall be vested in its Board of Directors.
The total number of directors of the Corporation which shall
constitute the whole Board of Directors of the Corporation shall
be fixed from time to time in the manner provided in the bylaws,
such number in no event shall be less than three (3) nor more
than eleven (11) persons.
<PAGE>
The names and mailing addresses of the persons who are to
serve as the initial directors of the Corporation until the first
annual meeting of Stockholders or until their successors are
elected and qualified are as follows:
Name Address
Clark D. Stewart 1546 East Spruce Road, Olathe, KS 66061
William E. Logan 1546 East Spruce Road, Olathe, KS 66061
R. Warren Wagoner 1546 East Spruce Road, Olathe, KS 66061
William A. Griffith 1546 East Spruce Road, Olathe, KS 66061
David B. Hayden 1546 East Spruce Road, Olathe, KS 66061
SEVENTH: In furtherance, and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is
expressly authorized:
(a) To make, adopt, alter, amend or repeal the Bylaws of the
Corporation;
(b) To, in its sole discretion, call special meetings of the
Stockholders of the Corporation;
(c) To set apart out of any of the money or funds of the
Corporation available for dividends a reserve or reserves for any
proper purpose or to abolish any such reserve in the manner in
which it was created;
(d) When and as authorized by the Stockholders' vote, to sell,
lease or exchange all or substantially all of the property or assets
of the Corporation, including its goodwill and its corporate
franchises, upon such terms and conditions and for such
consideration, which may be in whole or in part shares of stock
in, or other securities of (or both), any other corporation or
corporations as the Board of Directors may deem expedient and
for the best interests of the Corporation; and
(e) To sell, issue or otherwise dispose of common stock or any
other securities of the Corporation, including preferred stock,
debentures, bonds, mortgages, notes, certificates, and any and all
other securities whatsoever, for such consideration as the Board
of Directors in its discretion shall determine; provided, however,
that no shares of stock shall be sold for any consideration not in
accordance with the laws of the State of Delaware.
The Corporation may in its bylaws confer powers additional to
the foregoing upon the directors, in addition to the powers,
authorities and duties expressly conferred upon them by law.
EIGHTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them
and/or between this Corporation and its Stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or Stockholders thereof or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of
the Stockholders or class of Stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths
in value of the creditors or class of creditors, and/or of the
Stockholders or class of Stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such
compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding
on all the creditors or class of creditors, and/or on all the
Stockholders or class of Stockholders, of this Corporation, as the
case may be, and also on this Corporation.
<PAGE>
NINTH: No director shall be personally liable to the Corporation
or its Stockholders for monetary damages for any breach of
fiduciary duty by such director as a director, except to the extent
such exemption from liability or limitation thereof is not
permitted by Delaware General Corporation Law as it now exists
or may hereafter be amended. Notwithstanding the foregoing, a
director shall be liable to the extent provided by the existing
Delaware General Corporation Law (i) for breaches of the
directors' duty of loyalty to the Corporation or its Stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii)
under the provisions of section 174 of Title 8 of the Delaware
Code (relating to unlawful stock purchase or redemption) and
any amendments thereto, or (iv) for any transaction from which
the director derived an improper personal benefit. Any repeal or
modification of these provisions shall not adversely affect any
right of any director of the Corporation existing at the time of
such repeal or modification.
The provisions of this Article shall not be deemed to limit or
preclude indemnification of a director by the Corporation for any
liability of a director which has not been eliminated by the
provisions of this Article.
If Delaware Corporation code hereafter is amended to authorize
the further elimination or limitation of liability of directors, then
the liability of a director of the Corporation shall be eliminated
or limited to the fullest extent permitted by the Delaware
Corporation Code, as so amended.
TENTH: The Corporation shall have the power to indemnify
officers, directors, employees and agents to the extent permitted
by the bylaws, as amended from time to time.
IN WITNESS WHEREOF, I have hereunto set my hand, the
_____ day of August, 1996.
___________________________________
James P. Pryde, Incorporator
<PAGE>
Exhibit C
BY-LAWS
OF
BUTLER NATIONAL CORPORATION
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of
stockholders shall be held on the 1st Tuesday of October of each
year, or at such other date and time as shall be designated from
time to time by the board of directors and stated in the notice of
the meeting, at which the stockholders shall elect directors by a
plurality vote to serve until the next annual meeting of the
stockholders and shall transact such other business as may
properly be brought before the meeting. The meeting may be
held either within or without the State of Delaware as may be
designated by the Board of Directors from time to time.
Section 1.2. Special Meetings. Special meetings of stockholders
may be called at any time by the Chairman of the Board, the
Vice Chairman of the Board, if any, the Chief Executive Officer,
the President or the Board of Directors, to be held at such date,
time and place either within or without the State of Delaware as
may be stated in the notice of the meeting.
Section 1.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by law, the written notice of any
meeting shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to
vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders,
annual or special, may adjourn from time to time to reconvene at
the same or some other place, and notice need not be given of
any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
meeting.
Section 1.5. Quorum. At each meeting of stockholders, except
where otherwise provided by law or the certificate of
incorporation or these by-laws, the holders of a 35%of the
outstanding shares of each class of stock entitled to vote at the
meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, two or more
classes or series of stock shall be considered a single class if the
holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum, the stockholders so
present may, by majority vote, adjourn the meeting from time to
time in the manner provided by Section 1.4 of these by-laws until
a quorum shall attend. Shares of its own capital stock belonging
on the record date for the meeting to the Corporation or to
another corporation, if a majority of the shares entitled to vote in
the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
<PAGE>
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his
absence by the Chief Executive Officer, President, or in their
absence by a Vice President, or in the absence of the foregoing
persons by a chairman designated by the Board of Directors, or
in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at
any meeting of stockholders shall be entitled to one vote for each
share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with
the Secretary of the Corporation. Voting at meetings of
stockholders need not be by written ballot and need not be
conducted by inspectors unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon
present in person or by proxy at such meeting shall so determine.
At all meetings of stockholders for the election of directors, a
plurality of the votes cast shall be sufficient to elect. All other
elections and questions shall, unless otherwise provided by law or
by the certificate of incorporation or these by-laws, be decided by
the vote of the holders of a majority of the outstanding shares of
all classes of stock entitled to vote thereon present in person or
by proxy at the meeting, provided that (except as otherwise
required by law or by the certificate of incorporation) the Board
of Directors may require a larger vote upon any election or
question.
Section 1.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. If no record date is
fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held;
(2) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting,
when no prior action by the Board is necessary, shall be the day
on which the first written consent is expressed; and (3) the record
date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board adopts the
resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for
the adjourned meeting.
Section 1.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder
who is present.
<PAGE>
Section 1.10. Consent of Stockholders in Lieu of Meeting.
Unless otherwise provided in the certificate of incorporation, any
action required by law to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which
may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Tenure. Except as otherwise
specifically provided by applicable statute, all powers of
management, direction and control of the Corporation shall be
vested in its Board of Directors.
The total number of directors of the Corporation which shall
initially constitute the whole Board of Directors of the
Corporation shall be 5. Thereafter, the minimum and maximum
number of directors shall be as set forth in the certificate of
incorporation. The Board of Directors shall have the power to
change the number of directors by resolution adopted by a
majority of the whole Board.
Section 2.2. Resignation; Removal; Vacancies. Any director
may resign at any time upon written notice to the Board of
Directors or to the Chief Executive Officer, President or the
Secretary of the Corporation. Such resignation shall take effect
at the time specified therein, and unless otherwise specified
therein no acceptance of such resignation shall be necessary to
make it effective.
Section 2.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the
State of Delaware and at such times as the Board may from time
to time determine, and if so determined, notice thereof need not
be given.
Section 2.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without
the State of Delaware whenever called by the Chairman of the
Board, or by the Vice Chairman of the Board, if any, by the
Chief Executive Officer, President or by any two directors.
Reasonable notice thereof shall be given by the person or persons
calling the meeting.
Section 2.5. Telephonic Meetings Permitted. Unless otherwise
restricted by the certificate of incorporation or these by-laws,
members of the Board of Directors, or any committee designated
by the Board, may participate in a meeting of the Board or of
such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all
meetings of the Board of Directors a majority of the total
number of directors shall constitute a quorum for the transaction
of business. The vote of a majority of the directors present at a
meeting at which a quorum is present shall be the act of the
Board unless the certificate of incorporation or these by-laws
shall require a vote of a greater number. In case at any meeting
of the Board a quorum shall not be present, the members of the
Board present may adjourn the meeting from time to time until a
quorum shall attend.
Section 2.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairmen of the Board or in his
absence by the Vice Chairman of the Board, if any, or in his
absence by the Chief Executive Officer or President, or in their
absence by a chairman chosen at the meeting. The Secretary
shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint
<PAGE>
any person to act as secretary of the meeting.
Section 2.8. Informal Action by Directors. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any
action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one
or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in place of any such
absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and
may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have
power or authority in reference to amending the certificate of
incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the
Corporation or a revocation of dissolution, removing or
indemnifying directors or amending these by-laws; and, unless the
resolution expressly so provided, no such committee shall have
the power or authority to declare a dividend or to authorize the
issuance of stock.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may
make, alter and repeal rules for the conduct of its business. In
the absence of a provision by the Board or a provision in the
rules of such committee to the contrary, a majority of the entire
authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a
majority of the members present at a meeting at the time of such
vote if a quorum is then present shall be the act of such
committee, and in other respects each committee shall conduct its
business in the same manner as the Board conducts its business
pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election; Qualification; Term of Office;
Resignation; Removal; Vacancies. As soon as practicable after
the annual meeting of stockholders in each year, the Board of
Directors shall elect a President and a Secretary, and it may, if it
so determines, elect from among its members Co-Chairmen of
the Board and a Vice Chairman of the Board. The Board may
also elect a Chief Executive Officer, one or more Vice Presidents,
one or more Assistant Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers
and may give any of them such further designations or alternate
titles as it considers desirable. Each such officer shall hold office
until the first meeting of the Board after the annual meeting of
stockholders next succeeding his election, and until his successor
is elected and qualified or until his earlier resignation or removal.
Any officer may resign at any time upon written notice to the
Board or to the Chairman, the President or the Secretary of the
Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no
acceptance of such resignation shall be necessary to make it
effective. The Board may remove any officer with or without
cause at any time. Any such removal shall be without prejudice
to the
<PAGE>
contractual rights of such officer, if any, with the Corporation, but
the election or appointment of an officer shall not of itself create
contractual rights. Any number of offices may be held by the
same person. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any
regular or special meeting.
Section 4.2. Powers and Duties of Executive Officers. The
officers of the Corporation shall have such powers and duties in
the management of the Corporation as may be prescribed by the
Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control
of the Board. The Board may require any officer, agent or
employee to give security for the faithful performance of his
duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in
the name of the Corporation by the Chairman or Vice Chairman
of the Board of Directors, if any, or the Chief Executive Officer,
President or a Vice President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary, of
the Corporation, certifying the number of shares owned by him in
the Corporation. If such certificate is manually signed by one
officer or manually countersigned by a transfer agent or by a
registrar, any other signature on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 5.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft
or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal
which shall have the name of the Corporation inscribed thereon
and shall be in such form as may be approved from time to time
by the Board of Directors. The corporate seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Whenever notice is required to be
given by law or under any provision of the certificate of
incorporation or these by-laws, a written waiver thereof, signed
by the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice unless
so required by the certificate of incorporation or these by-laws.
<PAGE>
Section 6.4. Indemnification of Directors, Officers, Employees
and Agents.
(a) Directors. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any
threatened pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation, by reason of the
fact that he is or was a director of the Corporation, or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgment,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the defense or settlement of
such action, suit or proceeding, including attorneys' fees, to the
full extent permitted by Delaware General Corporation Law, as
amended, Section 145.
(b) Officers, Employees and Agents. The Corporation may, at
the discretion of the Board of Directors, indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or contemplated action, suit, or proceeding,
whether civil, criminal, administrative or investigative, including
an action by or in the right of the Corporation, by reason of the
fact that he is or was an officer, employee or agent of the
Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the
defense or settlement of such action, suit or proceeding, including
attorneys' fees, to the full extent permitted by Delaware General
Corporation Law, as amended, Section 145.
(c) Expenses.
(i) The Corporation shall pay the director, or such person or
entity as the director may designate, on a continuing and current
basis and in any event not later than 10 business days following
receipt by the Corporation of the director's request for
reimbursement of all expenses, including attorneys fees, costs,
settlement, fines and judgment incurred by or levied upon the
director in connection with any action, suit or proceeding referred
to in Section 6.4, subsection (a).
(ii) To the extent that an officer, employee or agent of the
Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to Section 6.4,
subsection (b) or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses actually and reasonably
incurred by such person in connection therewith, including
attorneys' fees.
(iii) Expenses incurred by a director or officer in defending a
civil or criminal action, suit, or proceeding may be paid by the
Corporation in advance of the final disposition of such action,
suit, or proceeding upon receipt of an undertaking by or on
behalf of the director or officer to repay such amount if it is
ultimately determined that the director or officer is not entitled
to be indemnified by the Corporation as authorized in these
Bylaws. Such expenses incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the
Board of Directors deems appropriate.
(d) Board Authorization. Any indemnification of directors,
officers, employees or agents pursuant to this Section 6.4, unless
ordered by a court, shall be made by the Corporation only as
authorized in the specific case upon a determination that such
indemnification is proper in the circumstances because such
director, officer, employee or agent has met the applicable
standard of conduct set forth in Delaware General Corporation
Law, as amended, Section 145. Such determination shall be
made by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the action, suit, or
proceeding, or if such a quorum is not obtainable, or even if
obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or by the
stockholders.
(e) Notification and Defense of Claim. Promptly after receipt
by a director, officer, employee or agent of notice of the
commencement of any action, suit or proceeding, the director,
officer, employee
<PAGE>
or agent will, if a claim in respect thereof is to be made, against
the Corporation, notify the Corporation of the commencement
thereof. The failure to promptly notify the Corporation will not
relieve the Corporation from any liability that it may have to the
director, officer, employee or agent hereunder, except to the
extent the Corporation is prejudiced in its defense of such claim
as a result of such failure. Unless otherwise requested by the
Board of Directors, written notification shall not be necessary if
the director, officer, employee or agent informs a majority of the
Board of Directors of the commencement of any such action, or,
independent of such notification by the director, officer,
employee or agent, a majority of the Board of Directors has
reason to believe such action has been initiated or threatened.
With respect to any such action, suit or proceeding as to which
the director, officer, employee or agent notified, or is deemed to
have notified, the Corporation of the commencement thereof; the
following shall apply:
(i) The Corporation will be entitled to participate therein at its
own expense;
(ii) Except as otherwise provided below, to the extent that it
may wish, the Corporation, jointly with any other indemnifying
party similarly notified, will be entitled to assume the defense
thereof with counsel reasonably satisfactory to the director,
officer, employee or agent. After notice from the Corporation to
the director, officer, employee or agent of its election so to
assume the defense thereof, the Corporation will not be liable to
the director, officer, employee or agent for any legal or other
expenses subsequently incurred by the director, officer, employee
or agent in connection with the defense thereof other than
reasonable costs of investigation or unless: (A) the employment
of separate counsel by the director, officer, employee or entity
has been authorized by the Corporation; (B) the director, officer,
employee or agent reasonably concludes that there may be a
conflict of interest between the Corporation and the director,
officer, employee or agent in the conduct of the defense of such
action and that such conflict may lead to exposure for the
director, officer, employee or agent and the director, officer,
employee or agent notifies the Corporation of such conclusion
and decision to employ separate counsel; or (C) the Corporation
fails to employ counsel to assume the defense of such action.
The Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of the
Corporation or as to which the director, officer, employee or
agent reasonably makes the conclusion provided for in (B) above;
and
(iii) The Corporation shall not be liable to indemnify the
director, officer, employee or agent for any amount paid in
settlement of any action or claim effected without its written
consent. The Corporation shall not settle any action or claim in
any manner which would impose any penalty or limitation on the
director, officer, employee or agent without the written consent of
the director, officer, employee or agent. Neither the Corporation
nor the director, officer, employee or agent will unreasonably
withhold their consent to any proposed settlement.
(f) Not Exclusive. The indemnification and advancement of
expenses provided by this Section 6.4 shall not be deemed
exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled
under the Certificate of Incorporation, as amended from time to
time, or any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors
and administrators of such person.
(g) Further Indemnity. The Corporation shall have the power
to give any further indemnity, in addition to the indemnity
authorized or contemplated under this Section 6.4, to any person
who is or was a director, officer, employee or agent or to any
person who is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; provided, no
such indemnity shall indemnify any person from or on account of
such person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct,
or if it is determined by a final judgment or other final
adjudication by a court of competent jurisdiction considering the
question of indemnification that such payment of indemnification
is or would be in violation of applicable law. The Corporation
may enter into indemnification agreements with each director and
officer of the Corporation whom the Board of Directors
authorizes by vote of a
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majority of a quorum of disinterested directors.
(h) Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, of-
ficer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status
as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this
Section 6.4. When, and if, the Corporation obtains such
insurance coverage, the Corporation shall not be required to
maintain such insurance coverage in effect; provided, however,
that the Corporation notifies the covered person in writing within
five business days of the making of the decision to not renew or
replace such insurance policy. The maintenance of such
insurance shall not diminish, relieve or replace the Corporation's
liability for indemnification under the provisions hereof. A claim
for reimbursement hereunder, shall not be denied on the basis
that such amount may or will be covered by such insurance
policy, if such payments from the insurance company will not be
made to the covered person within 10 business days of the claim
for reimbursement.
(i) Definitions. For the purpose of this Section 6.4, references
to "the Corporation" include all constituent corporations absorbed
in a consolidation or merger as well as the resulting or surviving
corporation, so that any person who is or was a director or officer
of such a constituent corporation or is or was serving at the
request of such constituent corporation as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise shall stand in the same position under the provisions of
this Section 6.4, with respect to the resulting or surviving
corporation as he would if he had served the resulting or
surviving corporation in the same capacity.
For purposes of this Section 6.4, the following definitions shall
apply
(i) The term "other enterprise" shall include employee benefit
plans.
(ii) The term "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan.
(iii) The term "serving at the request of the Corporation" shall
include any service as a director or officer of the Corporation
which imposes duties on, or involves services by, such director or
officer with respect to an employee benefit plan, its participants,
or beneficiaries.
(iv) A person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the
corporation".
Section 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in
which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for
such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are
known to the Board or the committee, and the Board or
committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors,
even though the disinterested directors be less than a quorum; or
(2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified,
by the Board, a committee thereof or the stockholders. Common
or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or
<PAGE>
of a committee which authorizes the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account and minute books, may be kept
on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into
clearly legible form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any
person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. The Bylaws of the
Corporation may from time to time be repealed, amended or
altered, or new Bylaws may be adopted, in either of the following
ways:
(i) By the vote of a majority of the stockholders entitled to
vote at any annual or special meeting thereof; and
(ii) By resolution adopted by a majority of the members of the
Board of Directors then in office; provided, however that the
power of the directors to suspend, repeal, amend or otherwise
alter the Bylaws or any portion thereof may be denied as to any
Bylaws or portion thereof enacted by the stockholders if at the
time of such enactment the stockholders shall so expressly
provide.
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