BUTLER NATIONAL CORPORATION
19920 West 161st Street
Olathe, Kansas 66062
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 27, 1998
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 Stables, 530 H
Street Southeast, Miami, Oklahoma, on Tuesday, October 27, 1998, 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 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 September 18, 1998,
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
September 18, 1998
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
19920 West 161st Street
Olathe, Kansas 66062
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 27, 1998, 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 September 29, 1998. The Company's
corporate offices are located at 19920 West 161st Street, Olathe, Kansas
66062 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 11,640,521 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 September
18, 1998, 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 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.
<PAGE>
Auditor
As required by the Securities and Exchange Commission the following
information was reported on Form 8-K, on September 16, 1998, regarding the
change of auditor for Butler National Corporation for fiscal year 1999.
Item 4. Change in Registrant's Certifying Accountant
(a) (i) On September 14, 1998, Arthur Andersen LLP informed the Company
that it has declined to stand for reelection. A new independent auditor has
not been engaged by the Company.
(ii) The reports of Arthur Andersen LLP on the Company's
consolidated financial statements for each of the two fiscal years ended
April 30, 1997 and April 30, 1998, contained no adverse opinion or disclaimer
or opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
(iii) N/A
(iv) During the two most recent fiscal years and through the date of
this report, the Company has had no disagreements with Arthur Andersen LLP on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreement, if not resolved
would have caused them to make reference thereto in their report on the
consolidated financial statements or the Company for such years.
(v) During the Company's two most recent fiscal years and through
the date of this report, the Company has had no reportable events as defined
in Item 304 (a) (1) (v) of Regulation S-K.
(vi) The Company has requested that Arthur Andersen LLP furnish it
with a letter addressed to the Securities and Exchange Commission stating
whether it agrees with the above statements. A copy of that letter dated
September 16, 1998 is filed as exhibit 16 to this Form 8-K.
(b) During the Company's two fiscal years ended April 30, 1997 and April
30, 1998, and through date of this filing, the Company has not consulted with
a new independent accountant regarding any of the matters specified in Item
304 (a) (2) of Regulation S-K.
Item 7. Financial Statements and Exhibits
(c) Exhibits
16 Letter from Arthur Andersen LLP to the Securities and Exchange
Commission dated September 16, 1998.
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
1998 Annual Meeting of Shareholders is expected to be held on or about
September 30, 1999, and proxy materials in connection with that meeting are
expected to be mailed on or about August 29, 1999. Shareholder proposals
prepared in accordance with the proxy rules must be received by the Company
on or before June 3, 1999.
<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 July 17, 1998.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
Clark D. Stewart 3,058,920(2) 16.1%
19920 West 161st Street
Olathe, Kansas 66062
(1) 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.
(2) Includes 2,220,000 shares which may be acquired by Mr. Stewart pursuant
to the exercise of stock options which are exercisable.
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 July 17, 1998.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
Larry B. Franke 170,600(6) 0.9%
William A. Griffith 149,000(5) 0.8%
David B. Hayden 172,500(7) 0.9%
William E. Logan 360,000(3) 1.9%
Clark D. Stewart 3,058,920(2) 16.1%
R. Warren Wagoner 1,435,000(4) 7.5%
All Directors and Executive
Officers as a
Group (12 persons) 5,879,482(8) 30.9%
(1) 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.
(2) Includes 2,220,000 shares which may be acquired by Mr. Stewart pursuant
to the exercise of stock options which are exercisable.
(3) Includes 310,000 shares which may be acquired by Mr. Logan pursuant to
the exercise of stock options which are exercisable.
(4) Includes 1,335,000 shares which may be acquired by Mr. Wagoner pursuant
to the exercise of stock options which are exercisable.
(5) Includes 92,000 shares which may be acquired by Mr. Griffith pursuant to
the exercise of stock options which are exercisable.
(6) Includes 170,600 shares which may be acquired by Mr. Franke pursuant to
the exercise of stock options which are exercisable.
(7) Includes 150,000 shares which may be acquired by Mr. Hayden pursuant to
the exercise of stock options which are exercisable.
(8) Includes 4,277,600 shares for all directors and executive officers as a
group, which may be acquired pursuant to the exercise of stock options which
are exercisable.
<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. 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.
Name of Nominee
and Director and Served Principal Occupation for Last Five Years
Age Since and Other Directorships
Clark D. Stewart 1989 President of the Company from September 1,
(58)(2) 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 1986 Chairman of the Board of Directors of the
(46)(1)(2) 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 1990 Vice President and Treasurer of Wendy's
(60)(1)(2) 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 1990 Secretary of the Company, President of
(51)(1)(2) 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.
David B. Hayden 1996 Co-owner and President of Kings Avionics,
(52)(2) 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.
<PAGE>
(1) Audit Committee
(2) Compensation Committee
During the fiscal year ended April 30, 1998, 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 1998, 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, 1998 and all members of the
Audit Committee attended the meeting.
During fiscal 1998, 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, 1998 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:
Name Age Position
R. Warren Wagoner 46 Chairman of the Board of Directors
Clark D. Stewart 58 President and Chief Executive Officer
Larry W. Franke 55 Vice President, Aircraft Modifications
Jack L. Graham 74 President, Avcon Industries, Inc., a
wholly-owned subsidiary of the Company
Jon C. Fischrupp 58 President of Butler National Services, Inc.,
a wholly-owned subsidiary of the Company
Edward J. Matukewicz 50 Treasurer
William A. Griffith 51 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.
Larry W. Franke was Vice President and General Manager of Kansas City
Aviation Center from 1984 to 1992. From 1993 to 1994 he was Vice President of
Operations and Sales for Marketlink, an aircraft marketing company. Mr.
Franke joined the Company in July 1994 as Director of Marketing and was
promoted in August 1995 to Vice President of Operations and Sales. Mr.
Franke is currently Vice President of Aircraft Modifications at Avcon.
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 President of Avcon Industries, Inc.
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.).
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.
<PAGE>
Item 11. EXECUTIVE COMPENSATION
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 $100,000
(determined as of the end of the last fiscal year) for the fiscal years ended
April 30, 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
Name and
Principal
Position
Clark D. Stewart, President and CEO, Director
Annual Compensation
Year Salary ($) Bonus ($) Other Annual Compensation ($)
98 226,997 ---- ----
97 212,729 ---- ----
96 212,075 ---- ----
Long Term Compensation
Awards
Year Restricted Stock Award(s) Securities Underlying Options
($) (#)(1)
98 ---- 1,050,000
97 ---- 50,000
96 ---- 50,000
Payouts
Year LTIP Payouts ($)
98 ----
97 ----
96 ----
Year All Other Compensation ($)
98 ----
97 ----
96 ----
(1) Represents options granted pursuant to the Company's 1989 Nonqualified
Stock Option Plan (1,050,000) in 1998 and (50,000) in 1997 and 1996.
<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
The following table provides further information concerning grants of
stock options pursuant to the 1989 Nonqualified Stock Option Plan during the
fiscal 1998 year to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Name
Clark D. Stewart
Number of
Securities
Underlying
Options
Granted (#)
1,050,000
Percent of Total
Options
Granted to
Employees in
Fiscal Year
16.5%
Exercise or
Base Price
($/Sh)
0.90
Expiration Date
10/31/2007
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
for Option Term
5% ($) 10% ($)
-0- 420,000
(1) Except in the event of death or retirement for disability, if Mr.
Stewart ceases to be employed by the Company, his option shall terminate.
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 1,050,000 shares of Common Stock was granted on
November 1, 1997 from the 1989 Stock Option Plan. All such options are
immediately exercisable.
The following table provides information with respect to the named
executive officers concerning options exercised and unexercised options held
as of the end of the Company's last fiscal year:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Name
Clark D. Stewart, Chief Executive Officer
Shares Acquired on Exercise (#)
- -0-
Value Realized ($)
- -0-
Number of Securities Underlying Unexercised Options at FY-End (#)
Exercisable/Unexercisable
2,220,000 / 0
Value of Unexercised In-the-Money Options at FY-End ($)
Exercisable/Unexercisable
0/0
<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. Wagoner is the
Chairman, Mr. Stewart is the President and Chief Executive Officer of the
Company and Mr. Griffith is the Secretary of the Company.
During fiscal 1998, the consulting firm of Griffith & Associates was
paid for business consulting services rendered to the Company in the
approximate amount of $12,143. 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 1998, the Company paid consulting fees of approximately
$133,175 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 1998, the consulting firm of Butler Financial Corporation
was paid for business consulting services rendered to the Company in the
approximate amount of $56,000. 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 1998, the Company filed Form-8 registration statements
concerning the 1989, 1993-I, 1993-II, and 1995 Non-Qualified Stock Option
Plans. The plans were amended to increase the number of shares authorized by
8,000,000; 4,500,000; 3,500,000; and 3,500,000 respectively. The expiration
dates were also amended to reflect December 31, 2010 as the expiration date
for all four plans. As a part of the amendment process all eligible
outstanding options were canceled and reissued at the current market price of
$0.90.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
On May 6, 1997, the Company extended the March 17, 1994, 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.
The extended contract provides a minimum annual salary of $253,100, $265,700,
$278,900, $292,900, $307,600, respectively in years six through ten. 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.
<PAGE>
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 1998.
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.
1998 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. Franke (Vice President-Aircraft
Modifications),Mr. Graham (President-Avcon Industries, Inc.), Mr. Fischrupp
(President-BNSI), and Mr. Johnston (President-RFI). The Administrative
Officers consist of the remaining executive officer, Mr. Matukewicz
(Treasurer). For Mr. Fischrupp, Mr. Franke, and Mr. Graham, 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. 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 1998, Mr. Fischrupp, Mr. Franke, and Mr. Graham 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.
<PAGE>
In 1998, the Compensation Committee granted 2,300,000 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 1,050,000 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 1998
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. The Company discontinued the operation of its
Wholesale Food Distribution segment on April 14, 1998. Until April 1994, the
Company's largest business segment was Temporary Services. This segment
became inactive on June 3, 1994, due to the loss of its only customer.
Currently Aircraft Modifications represent the Company's largest business
segment. Therefore, in order to provide a representative comparison of the
Company's stock for the last five years with the cumulative return on the
Nasdaq Stock Index, an Industry Peer Group Index (based upon companies which
are traded on a listed exchange) for each Temporary Services Industry(1) and
the Food Distribution Industry(2). Because the Company does not feel it can
reasonably identify a peer group concerning the Aircraft Modification
segment, the Company has included a peer group with similar market
capitalization(3). The following chart assumes $100 invested May 1, 1993,
in each of the above groups. The total return assumes the reinvestment of
dividends.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company engaged Arthur Andersen LLP to audit the financial statements
for the year ended April 30, 1998, and 1997. Arthur Andersen LLP was able to
express an opinion on the financial statements for the year ended April 30,
1998, and 1997. 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.
On September 14, 1998, Arthur Andersen LLP informed the Company that it has
declined to stand for reelection. A new independent auditor has not been
engaged by the Company for fiscal year 1999. Appointment of a new
independent auditor will be selected by an action of the Board of Directors.
<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 1998 is enclosed. The
1998 Annual Report includes the Annual Report on Form 10-K containing the
Company's financial statements for the fiscal year ended April 30, 1998.
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>
