BUTLER NATIONAL CORPORATION
1546 East Spruce Road
Olathe, Kansas 66061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 3, 19951, 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 3, 1995,1, 1996, at 11:00 a.m., for the following
purposes:
1. To elect four (4)five (5) directors to hold office until the next Annual Meeting
of Shareholders or until their successors are elected.
2. To2.To ratify the selection of Arthur Andersen LLP as auditors for the fiscal
year ending April 30, 1996.1997.
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
11, 1995,16, 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 11, 199516, 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.
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 3, 1995,1, 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 21, 1995.26, 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 8,507,1009,280,890
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
11, 1995,16, 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
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 19961997 Annual Meeting of Shareholders is expected to
be held on or about September 24, 1996,30, 1997, and proxy materials in
connection with that meeting are expected to be mailed on oraboutor
about August 21, 1996.29, 1997. Shareholder proposals prepared in
accordance with the proxy rules must be received by the
Company on or before June 5, 1996.3, 1997.
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.
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, 1995.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Clark D. Stewart
1546 East Spruce Road
Olathe, Kansas 66061 2,220,100 21.11%2,205,920 18.73%
Marvin J. Eisenbath
1546 East Spruce Road
Olathe, Kansas 66061 670,000 6.37%650,000 5.52%
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.
Includes 1,470,0001,120,000 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 June 27, 1996.
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, 1995.
Name of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Clark D. Stewart 2,220,100 21.11%2,205,920 18.73%
Marvin J. Eisenbath 670,000 6.37%650,000 5.52%
William E. Logan 270,000 2.57%260,000 2.21%
R. Warren Wagoner 235,000 2.23%335,000 2.84%
William A. Griffith 224,000 2.13%
Brenda Brainard Shadwick 8,333 -172,000 1.46%
David B. Hayden 60,000 .51%
All Directors and 4,162,900 35.34%
Officers as a
Group (11(12 persons)
3,896,213 37.04%
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.
Includes 1,470,0001,120,000 shares which may be acquired by Mr. Stewart pursuant
to the exercise of stock options which are exercisable.
Includes 160,000210,000 shares which may be acquired by Mr. Logan pursuant to
the exercise of stock options which are exercisable.
Includes 135,000235,000 shares which may be acquired by Mr. Wagoner pursuant
to the exercise of stock options which are exercisable.
Includes 110,00092,000 shares which may be acquired by Mr. Griffith pursuant
to the exercise of stock options which are exercisable.
Includes 2,111,50050,000 shares which may be acquired by Mr. Hayden pursuant
to the exercise of stock options which are exercisable.
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
subject to options exercisable. Since Ms. Shadwick is no longer with the Company, and further
information is not available, included are 8,333 shares which
were held by Ms. Shadwick at her termination.
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 four (4)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.
Name of Nominee
and Director 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 Principal Occupation for Last Five Years
Age Since and other Directorships
Clark D. Stewart (55) 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 (43) 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 (57) 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 (48) 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.
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, 1995,1996, 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 1995,1996,
the Audit Committee consisted of Randal W.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, 1995.
1996 and all members of
the Audit Committee attended the meeting.
During fiscal 1995,1996, 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 two
timesone time during
the fiscal year ended April 30, 1995.1996 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 GriffithHayden 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 43 ChairmAn of the Board of Directors
Clark D. Stewart 55 President and Chief Executive Officer
Jack L. Graham 71 Vice President, Aircraft Modifications
Thomas E. Woodson 57 Vice President, Avionics
Jon C. Fischrupp 55 President of Butler National Services, Inc.,
a wholly-owned subsidiary of the Company
Marvin J. Eisenbath 43 President of R F, Inc., a wholly-owned subsidiary
of the Company ("RFI")
Stephanie S. Ruskey 30The 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 47 Treasurer
William A. Griffith 48 Secretary
Edward J. Matukewicz, 48, Treasurer
William A. Griffith, 49, Secretary
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.
JohnJon 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 a sole-proprietorPresident of Redi-FoodsRFI from January 1988 to
December 1993, was President of Duffers Outlet Golf, Inc. from January 1994
to April 21, 1994, at which time the Company acquired Duffers Outlet Golf,
Inc. (RFI)RFI and he
became President of RFI.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 &
Co.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
consultants,consulting, since 1984. Mr. Griffith became Secretary of the
Company in 1992.
Except for the following, based on the informationsolely 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 yearyears ending April 30,
1995 and 1996 with the Securities and exchangeExchange 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.
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 $100,000 (determined
as of the end of the last fiscal year) for the fiscal years ended
April 30, 1996, 1995 1994 and 1993:
1994:
Summary Compensation Table
Annual Compensation
Name and Other Annual
Name and Salary BonusPrincipal Compensation
Principal
Position Year ($Salary($) ($Bonus($) ($)
Clark D. Stewart,
President 95 195,590 --- ---
and
CEO, Director 96 212,075 0 0
95 195,590 0 0
94 166,185 --- ---
93 158,348 --- ---0 0
Marvin J. Eisenbath, 95 307,469 --- ---
President, R. F., Inc. 96 331,791 0 0
95 307,469 0 0
94 6,923 --- ---
930 0
Brenda Brainard
Shadwick, Indian
Affairs counsel
96 N/A N/A N/A
Brenda Brainard Shadwick, 95 133,709 --- ---
Indian Affairs counselN/A N/A
94 N/A N/A N/A
93 N/A N/A N/A
Annual Compensation (Continued)
Long Term Compensation
Awards Payouts
Restricted Securities LTIP
Stock Underlying All Other
Name and Award(s)Awards(s) Options Payouts Compensation
Principal Position Year($) (#) ($) ($) ($) ($)
Clark D. Stewart, President 95 ---0 50,000 0 0
0 100,000 --- ---
and CEO, Director 94 ---0 0
0 970,000 --- ---
93 --- --- --- ---
Marvin Eisenbath, 95 --- --- --- ---
President, R.F. Inc. 94 --- --- --- ---
930 0
0 0 0 0
0 0 0 0
N/A N/A N/A N/A
Brenda Brainard Shadwick, 95 24,999 --- --- ---
Indian Affairs Counsel 94 N/A N/A N/A N/A
9324,999 N/A N/A N/A
N/A N/A N/A N/A
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.
Mr. Eisenbath, President of RFI, became an executive officer of the
Company on April 22, 1994.
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
$24,999 on June 24, 1994. Ms. Shadwick received these shares on her
termination date.
OPTION GRANTS, EXERCISES AND HOLDINGS
IN LAST FISCAL YEAR
The following table provides further information concerning
grants of stock options pursuant to the 1989 Nonqualified Stock Option Plan during the fiscal 1995 Nonqualified Stock
Option Plan during the fiscal 1996 year (the only Plan under
which options were granted in such fiscal year ) to the named
executive officers:
Individual Grants
Name Number of Percent of Number of Total Exercise or
Securities Options Base Price
Underlying Granted to Exercise or($/Sh)
Options Employees Base Price Expiration
Name Granted(#) in
FY ($/Sh) DateGranted (#) Fiscal Year
Clark D. Stewart, 100,000 57.9% 2.3125 09/08/9950,000 7.1% 2.00
Chief Executive
Officer
Marvin J. Eisenbath -0- N/A N/A
N/A
Brenda Brainard
Shadwick -0- N/A N/A N/A
Individual Grants (continued)Expiration Date Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Forfor Option Term
NameTerm*
5% ($) 10% ($)
Clark D. Stewart,
Chief Executive Officer 162,889 259,374
Marvin J. Eisenbath
12/01/05 81,445 126,687
N/A N/A Brenda Brainard ShadwickN/A
N/A N/A N/A
Except in the event of death or retirement for disability,
if Mr. Stewart ceases to be employed by the Company, his option
shall terminate immediately. Upon death or retirement for
disability, Mr. Stewart (or his representative) shall have three
months or one year, respectively, following the date of death or
retirement, as the case may be, in which to exercise such options.
The option granted for 100,00050,000 shares of Common Stock was
granted on January 3,December 1, 1995 from the 19891995 Stock Option Plan.
All such options are immediately exercisable.
* The dollar amounts set forth under these columns are the
result of the 5% and 10% rates set by the Securities and
Exchange
Commission and are not intended to forecast possible future
appreciation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES
AT APRIL 30, 1996
The following table provides information with respect to the
named executive officers concerning options exercised and value
of unexercised options held as of the end of the Company's last
fiscal year (April 30, 1996):
The following table provides information with respect to the named executive
officers concerning options exercised and unexercised options held as of the
end of the Company's last fiscal year:
Number of SecuritiesName Shares Acquired on
Exercise (#) Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-EndRealized ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
Clark D. Stewart,
Chief Executive
Officer 1,470,000 / 0 2,915,000 / 0400,000 340,000
Marvin J.
Eisenbath N/A N/A0 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 ($)
Exercisable/Unexercisable Exercisable/Unexercisable
1,120,000/0 43,750/0
0 0
N/A N/A
Based on the price of the Company's common stock at
the close of business on Friday,Tuesday, April 28, 199530, 1996 and the exercise
price of the options.
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 1995,1996, the President and CEO, Clark D. Stewart, exercised his
option to purchase 400,000 shares of the Company's common stock under the terms
of the 1989 Nonqualified Stock Option Plan through a loan by the Company. The
shares were purchased at prices ranging from $.70 to $1.00 per share. The
largest aggregate amount of indebtedness outstanding was $367,000 during fiscal
1996. The amount outstanding at June 27, 1996, is $359,027. Interest is
charged at the prime rate beginning May 1, 1996.
During fiscal 1996, the consulting firm of Griffith & Associates
was paid for business consulting services rendered to the
Company in the approximate amount of $130,000.$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 pastCompany 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.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.
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 1995.1996.
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.
19951996 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)(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 some
of the Operating Officers,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 segmentnetsegment 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 1995, two of the Operating Officers1996, 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 1995,1996, the Compensation Committee did not grant anygranted 410,000 options
to executive officers, other than Mr. Stewart, President and CEO.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 100,00050,000 options subjectively based upon his
performance. See Employment Contracts, Termination of
Employment and Change-In-Control Arrangements.
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 19951996
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
STOCK PERFORMANCE CHARTGRAPH
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.
PERFORMANCE GRAPH
Assumes $100 invested December 3, 1990.
Assumes dividends reinvested.
Fiscal year ending April 30, 1995.
The Peer Group was chosen as having a representative group of companies that
consist of: Watsco Inc., General Employment Enterprises and Joule Inc. The
Industry Index was developed in the absence of a published index and
represents a broad market group consisting of the following companies:
Kelly Temporary Services, Adia Personnel, Olsten, Staff Builders, Uniforce
Temporary Personnel Inc., Winston Resources Inc., and Raycomm Transworld
Industries.
INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal No. 2)
The Company engaged Arthur Andersen LLP to audit the
financial statements for the year ended April 30, 1995,1996, and 1994.1995.
Arthur Andersen LLP was able to express an opinion on the
financial statements for the year ended April 30, 1995,1996, and 1994.1995.
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 19961997 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
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
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
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
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.
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 19951996 is
enclosed. The 19951996 Annual Report includes the Annual Report
on Form 10-K containing the Company's financial statements for
the fiscal year ended April 30, 1995.1996.
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
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.
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
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
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.
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.
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.
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.
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:
(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
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.