BUTLER NATIONAL CORPORATION
                           1546 East Spruce Road19920 W. 161st Street
                          Olathe, Kansas 6606166062

          NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                          OCTOBER 1, 1996November 15, 2001


To the Shareholders of Butler National Corporation:

Notice is hereby given that the Annual Meeting of Shareholders of
Butler National Corporation (the "Company") will be held at the
Holiday Inn-Olathe, 1010 West 151st Street, Olathe, Kansas, on
Tuesday, October 1, 1996,January 8, 2002, at 11:00 a.m., for the following purposes:

  1. To elect five (5) directors to hold office until the next Annual
     Meeting of Shareholders or until their successors are elected.

  2.To2. To ratify the selection of Arthur Andersen LLPWeaver & Martin, L.L.C. as auditors
     for the fiscal year ending April 30, 1997.2002.

  3. To consider and vote upon a proposal to approve changing the Company'sour
     state incorporation from MinnesotaDelaware to DelawareKansas by merging the Company into a
     wholly owned subsidiary of the  
CompanyButler National Corporation which
     is a DelawareKansas corporation.

  4. To transact such other business as may properly come before
     the meeting or any adjournment or adjournments thereof.

The Board of Directors has fixed the close of business on August
16, 1996,November
15, 2001, as the record date for the determination of shareholders
entitled to notice of and to vote at the meeting.


                                By Order of the Board of Directors,



                                WILLIAM A. GRIFFITH, Secretary

Olathe, Kansas
August 16, 1996November 15, 2001


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 Road19920 W. 161st Street
                           Olathe, Kansas 6606166062


                       PROXY STATEMENT

General

  This Proxy Statement is furnished to theour shareholders of Butler
National Corporation (the "Company") in
connection with the solicitation of proxies by theour Board of Directors of the Company to
be voted at the Annual Meeting of Shareholders to be held on October 1, 1996,January
8, 2002, or any adjournment or adjournments thereof.  The cost of this
solicitation will be borne by the Company.us, Butler National Corporation (the
"Company").  In addition to solicitation by mail, our officers, directors
and employees
of the Company may solicit proxies by telephone, telegraph, or in
person.  The CompanyWe may also request banks and brokers to solicit their
customers who have a beneficial interest in the Company'sour 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 our shareholders of
the Company commenced on or about August 26, 1996.  The
Company'sNovember
20, 2001.  Our corporate offices are located at 1546 East Spruce
Road,19920 W. 161st Street,
Olathe, Kansas 6606166062 and itsour telephone number is (913) 780-9595.

  The Company hasWe have outstanding only one class of Common Stock, par value
$.01$0.01 per share ("Common Stock"), of which 9,280,89037,283,031 shares were
issued, outstanding and entitled to vote at the Annual Meeting.  Each
share is entitled to one vote.  Shareholders may not cumulate votes in
the election of directors.  Only shareholders of record at the close of
business on August
16, 1996,November 15, 2001, 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

  TheOur 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 theour 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-votesnon-
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 19972002 Annual Meeting of Shareholders
is expected to be held on or about September 30, 1997,October 8, 2002, and proxy materials
in connection with that meeting are expected to be mailed on or about
August 29, 1997.September 1, 2002.  Shareholder proposals prepared in accordance
with the proxy rules must be received by the Company on or before
June 3, 1997.
5, 2002.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The following table sets forth, with respect to the Company's
common stockour
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'sour voting securities as of June
27, 1996.
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 2,205,920 18.73% Marvin J. Eisenbath 1546 East Spruce Road Olathe, Kansas 66061 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 1,120,000July 30, 2001. Name and Address of Beneficial Owner Clark D. Stewart 19920 West 161st Street Olathe, Kansas 66062 Amount and Nature of Beneficial Ownership (1) 5,096,390(2) Percent of Class 13.7% Name and Address of Beneficial Owner William E. Logan 19920 West 161st Street Olathe, Kansas 66062 Amount and Nature of Beneficial Ownership (1) 2,073,683(3) Percent of Class 5.6% Name and Address of Beneficial Owner R. Warren Wagoner 19920 West 161st Street Olathe, Kansas 66062 Amount and Nature of Beneficial Ownership (1) 3,988,983(4) Percent of Class 10.7% (1) Unless otherwise indicated by footnote, nature of beneficial ownership of securities is direct, and beneficial ownership as shown in the table arises from sole voting power and sole investment power. (2) Includes 2,225,000 shares which may be acquired by Mr. Stewart pursuant to the exercise of stock options which are exercisable. (3) Includes 785,000 shares which may be acquired by Mr. Logan pursuant to the exercise of stock options which are exercisable. (4) Includes 1,325,000 shares which may be acquired by Mr. Wagoner pursuant to the exercise of stock options which are exercisable.
The following table sets forth, with respect to the Company's common stockour Common Stock (the only class of voting securities), (i) shares beneficially owned by all directors and named executive officers of the Company,Butler National Corporation, and (ii) total shares beneficially owned by directors and officers as a group, as of June 27, 1996.
Name of Amount and Nature of Percent Beneficial Owner Beneficial Ownership of Class Clark D. Stewart 2,205,920 18.73% Marvin J. Eisenbath 650,000 5.52% William E. Logan 260,000 2.21% R. Warren Wagoner 335,000 2.84% William A. Griffith 172,000 1.46% David B. Hayden 60,000 .51% All Directors and 4,162,900 35.34% Officers as a Group (12 persons) 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 1,120,000 shares which may be acquired by Mr. Stewart pursuant to the exercise of stock options which are exercisable. Includes 210,000 shares which may be acquired by Mr. Logan pursuant to the exercise of stock options which are exercisable. Includes 235,000 shares which may be acquired by Mr. Wagoner pursuant to the exercise of stock options which are exercisable. Includes 92,000 shares which may be acquired by Mr. Griffith pursuant to the exercise of stock options which are exercisable. Includes 50,000 shares which may be acquired by Mr. Hayden pursuant to the exercise of stock options which are exercisable. Includes 2,154,700April 30, 2001. Name of Beneficial Owner Amount and Nature of Percent of Beneficial Ownership Class (1) Larry B. Franke 420,600(6) 1.1% William A. Griffith 1,381,983(5) 3.7% David B. Hayden 1,363,683(7) 3.7% William E. Logan 2,073,683(3) 5.6% Clark D. Stewart 5,096,390(2) 13.7% R. Warren Wagoner 3,988,983(4) 10.7% All Directors and Executive Officers as a Group (12 persons) 14,325,320(8) 38.4% (1) Unless otherwise indicated by footnote, nature of beneficial ownership of securities is direct and beneficial ownership as shown in the table arises from sole voting power and sole investment power. (2) Includes 2,225,000 shares, which may be acquired by Mr. Stewart pursuant to the exercise of stock options, which are exercisable. (3) Includes 785,000 shares, which may be acquired by Mr. Logan pursuant to the exercise of stock options which are exercisable. (4) Includes 1,325,000 shares, which may be acquired by Mr. Wagoner pursuant to the exercise of stock options, which are exercisable. (5) Includes 575,000 shares, which may be acquired by Mr. Griffith pursuant to the exercise of stock options, which are exercisable. (6) Includes 420,600 shares, which may be acquired by Mr. Franke pursuant to the exercise of stock options, which are exercisable. (7) Includes 625,000 shares, which may be acquired by Mr. Hayden pursuant to the exercise of stock options, which are exercisable. (8) Includes 5,955,600 shares for all directors and executive officers as a group, which may be acquired pursuant to the exercise of stock options, which are exercisable.
ELECTION OF DIRECTORS (Proposal No. 1) The number of directors constituting theour Board of Directors has been fixed byat five (5). A director holds office until the Company at five. The termnext election of office for a director is one year or until his successor is elected an qualified.Board members. The Board of Directors has nominated for election the five (5) persons named below. All of the nominees are currently members of the Board of Directors. All of the nominees except Mr. Hayden were elected by the shareholders. Mr. Hayden was appointed as a director by the Board of Directors on December 1, 1995 to fill a vacancy. It is intended that proxies solicited will be voted for such nominees. The Board of Directors believes that each nominee named below will be able to serve, but should any nominee be unable to serve as a director, the persons named in the proxies have advised that they will vote for the election of such substitute nominee as the Board of Directors may propose. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of the directors, their principal occupations for at least the past five years are set forth below, based on information furnished to the Company by the directors. Name of Nominee and Director and Age Clark D. Stewart (56)(2)(61) (n2) Served Since 1989 Principal Occupation for Last Five Years and Other Directorships President of theour 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. Mr. Stewart is also a member of the Board of Directors of TransFinancial Holdings, Inc. Name of Nominee and Director and Age R. Warren Wagoner (44)(1)(2)(49) (n2) Served Since 1986 Principal Occupation for Last Five Years and Other Directorships Chairman of the Board of Directors of theour Company since August 30, 1989 and President of theour 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. Name of Nominee and Director and Age William E. Logan (58)(1)(2)A. Griffith (54) (n1)(n2) Served Since 1990 Vice PresidentPrincipal Occupation for Last Five Years and Treasurer of Wendy's Hamburgers of Kansas City, Inc. June, 1984 to present. Vice President and Treasurer of Valley Foods Services, Inc. (wholesale food distributor) June, 1988 to April, 1993. Professional practice as a Certified Public Accountant 1965 to 1984. William A. Griffith (49)(1)(2) Served Since 1990Other Directorships. Secretary of theour 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. Name of Nominee and Director and Age David B. Hayden(50)(2)Hayden (55) (n1)(n2) Served Since 1996 Principal Occupation for Last Five Years and Other Directorships. 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 1994.1994 to 2000. Field Engineer for King Radio Corporation (avionics manufacturing) 1966 to 1974. Mr. Hayden was appointedName of Nominee and Director and Age William E. Logan (63) (n1)(n2) Served Since 1990 Principal Occupation for Last Five Years and Other Directorships. Vice President and Treasurer of WH of KC, Inc. (Wendy's franchisee) 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. Name of Nominee and Director by the Board of Directors on December 1, 1995. (1)and Age (n1) Audit Committee (2)(n2) Compensation Committee During the fiscal year ended April 30, 1996,2001, 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 our paid employees of the Company (all except Mr. Stewart) are paid $100 for each meeting attended. The Board of Directors has an Audit Committee and Compensation Committee, but no Nominating Committee. During fiscal 1996,2001, the Audit Committee consisted of R. Warren Wagoner,David Hayden, William E. Logan and William A. Griffith. Its function is to assist the President in the review of theour financial performance and operations of the Company.operations. The Audit Committee met oncefour times during the fiscal year ended April 30, 19962001 and all members of the Audit Committee attended the meeting. During fiscal 1996,2001, the Compensation Committee consisted of the Board of Directors. Its function is to assist the President in periodic reviews of the performance of management which in turn leads to salary review and recommendations for salary adjustment. The Compensation Committee met one time during the fiscal year ended April 30, 19962001 and all members of the Audit Committee attended the meeting. The Board of Directors recommends a vote "FOR" each of Messrs. Wagoner, Stewart, Logan, Griffith and Hayden for election as directors of the Company. TheButler National Corporation. Our 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 44,49 Chairman of the Board of Directors Clark D. Stewart 56,61 President and Chief Executive Officer Jack L. Graham, 72, ViceLarry W. Franke 57 President Aircraft Modifications Thomas E. Woodson, 58, Vice President, Avionicsof Avcon Industries, Inc., a wholly-owned subsidiary of Butler National Corporation Jon C. Fischrupp 56,61 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,Butler National Corporation Angela Seba 37 Chief Financial Officer and Assistant Secretary Edward J. Matukewicz, 48, Treasurer William A. Griffith 49,54 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 our 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 our President in September of 1989. Larry W. Franke was Vice President and General Manager of Kansas City Aviation Center from 1984 to 1992. From 1993 to 1994 he was Vice President of theOperations and Sales for Marketlink, an aircraft marketing company. Mr. Franke joined our Company in September 1989. Jack L. GrahamJuly 1994 as Director of Marketing and was promoted in August 1995 to Vice President of Operations and Sales. Mr. Franke is currently 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.our Aircraft Modifications segment. Jon C. Fischrupp was President of Lauderdale Services, Inc. ("LSI") from June 14, 1978, until May 1, 1986, at which time the Companywe acquired LSI and he became President of LSI (now known as Butler National Services, Inc.). Marvin J. Eisenbath was President of RFI from January 1988 to April 1994, at which time the Company acquired RFI and he continued as its President. Mr. EisenbathAngela Seba was the Vice Presidentcontroller of PurchasingA&M products, a subsidiary of SyscoFirst Brands Corporation from 19811995 to 1987. Stephanie S. Ruskey, CPA,1998. From 1998 to 2000 Ms. Seba was a senior accountant with Arthur Andersen LLPSenior Business Systems Analyst for Black & Veatch of Kansas City; the largest privately held engineering firm in the United States. Ms. Seba was the CFO of Peerless Prducts, Inc. a manufacturer of customized windows from May 1987 until December 1990.2000 to 2001. Ms. RuskeySeba joined the Companyus in December, 1990,October of 2001 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.Officer. William A. Griffith was Chief Executive Officer of Southwest Medical Center (hospital) from 1981 to 1984. Mr. Griffith was a management consultant for Health Pro from 1984 to 1986 and for Diversified Health Companies from 1986 to 1989. Mr. Griffith has been President of Griffith and Associates, management consulting, since 1984. Mr. Griffith became our Secretary of the Company in 1992. Except for the following, based solely upon a review of Forms 3 and 4 and amendment thereto filed with the Company during the most recent fiscal year and Form 5 and amendments thereto filed with the Company with respect to its most recent fiscal year, all reports required to be filed for the fiscal years ending April 30, 1995 and 1996 with the Securities and Exchange Commission under Section 16 of the Securities Exchange Act of 1934, as amended, by the Company's executive officers, directors and 10% stockholders have been filed on a timely basis in accordance with applicable rules. Ms. Brenda Brainard Shadwick has not filed a Form 3 reflecting her employment with the Company (beginning July 1994), a Form 4 reflecting her holdings of 8,333 shares of the Company's common stock (restricted shares issued per her employment agreement on June 24, 1994) or a Form 5 reflecting her status as of April 30, 1995. On April 17, 1995, Ms. Shadwick's employment was terminated. COMPENSATION OF EXECUTIVE OFFICERS The following table provides certain summary information concerning compensation paid or accrued by us to or on behalf of our Chief Executive Officer and each of our other most highly compensated executive officers whose salary and bonus exceeded $100,000 (determined as of the end of the last fiscal year) for the fiscal years ended April 30, 2001, 2000, and 1999: Summary Compensation Table The following table provides certain summary information concerning compensation paid or accrued by our Company to or on behalf of the Company'sour Chief Executive Officer and each of the other most highly compensated executive officers of theour Company whose salary and bonus exceeded $100,000 (determined as of the end of the last fiscal year) for the fiscal years ended April 30, 1996, 19952001, 2000 and 1994:
Summary Compensation Table Name and Other Annual Principal Compensation Position Year Salary($) Bonus($) ($) Clark D. Stewart, President and CEO, Director 96 212,075 0 0 95 195,590 0 0 94 166,185 0 0 Marvin J. Eisenbath, President, R. F., Inc. 96 331,791 0 0 95 307,469 0 0 94 6,923 0 0 Brenda Brainard Shadwick, Indian Affairs counsel 96 N/A N/A N/A 95 133,709 N/A N/A 94 N/A N/A N/A Long Term Compensation Awards Payouts Restricted Securities LTIP Stock Underlying All Other Awards(s) Options Payouts Compensation ($) (#) ($) ($) 0 50,000 0 0 0 100,000 0 0 0 970,000 0 0 0 0 0 0 0 0 0 0 N/A N/A N/A N/A N/A N/A N/A N/A 24,999 N/A N/A N/A N/A N/A N/A N/A 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 $24,999 on June 24, 1994. Ms. Shadwick received these shares on her termination date.
1999: SUMMARY COMPENSATION TABLE Name and Principal Position Clark D. Stewart, President and CEO, Director Annual Compensation Year Salary Bonus($) Other Annual Compensation ($) 01 237,986 --- --- 00 237,986 --- --- 99 218,743 --- --- Long Term Compensation Awards Payouts Year Restricted Securities LTIP All Other Stock Underlying Payouts Compensation Award(s) Options ($) ($) ($) (no.) (1) 01 --- 250,000 --- --- 00 --- 575,000 --- --- 99 --- (820,000) --- --- (1) Represents options granted or (cancelled) pursuant to our Nonqualified Stock Option Plans 250,000 in 2001; 575,000 in 2000; and (820,000) in 1999. OPTION GRANTS, IN LAST FISCAL YEAREXERCISES AND HOLDINGS The following table provides further information concerning grants of stock options pursuant to the 19951989 Nonqualified Stock Option Plan during the fiscal 19962001 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 Total Exercise or Securities Options Base Price Underlying Granted to ($/Sh) Options Employees in Granted (#) Fiscal Year Clark D. Stewart, 50,000 7.1% 2.00 Chief Executive Officer Marvin J. Eisenbath -0- N/A N/A Brenda Brainard Shadwick N/A N/A N/A Expiration Date Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term* 5% ($) 10% ($) 12/01/05 81,445 126,687 N/A N/A N/A N/A N/A N/A Except in the event of death or retirement for disability, if Mr. Stewart ceases to be employed by the Company, his option shall terminate immediately.OPTION GRANTS IN LAST FISCAL YEAR Individual Grants Name and Position Clark D. Stewart, Chief Executive Officer (1) Number of Securities Underlying Options Granted 250,000 Percent of Total Options Granted to Employees in Fiscal Year 8.8% Exercise or Base Price ($/Sh) .09 Expiration Date 12/31/2010 Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term 5% ($) 10% ($) 0 10,000 (1) Except in the event of death or retirement for disability, if Mr. Stewart ceases to be employed by us, his option shall terminate. Upon death or retirement for disability, Mr. Stewart (or his representative) shall have three months or one year, respectively, following the date of death or retirement, as the case may be, in which to exercise such options. The option granted for 50,000 shares of Common Stock was granted on December 1, 1995 from the 1995 Stock Option Plan. All such options are immediately exercisable. * The dollar amounts set forth under these columns are the result of the 5% and 10% rates set by the Securities and Exchange Commission and are not intended to forecast possible future appreciation.
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'sour last fiscal year (Aprilyear: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES Name Clark D. Stewart, Chief Executive Officer Shares Acquired on Exercise (no.) 0 Value Realized ($) 0 Number of Securities Underlying Unexercised Options at FY-End (no.) Exercisable/Unexercisable 2,225,000 / 0 Value of Unexercised In-the-Money Options at FY-End ($) 0/0 COMPENSATION OF DIRECTORS Each non-officer director is entitled to a director's fee of $100 for meetings of the Board of Directors which he attends. Officer-directors are not entitled to receive fees for attendance at meetings. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS. On April 30, 1996):
Name Shares Acquired on Exercise (#) Value Realized ($) Clark D. Stewart, Chief Executive Officer 400,000 340,000 Marvin J. Eisenbath 0 0 Brenda Brainard Shadwick N/A N/A Number of Securities Underlying Value of Unexercised Unexercised Options at FY-End (#) In-the-Money Options at FY-End ($) 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 Tuesday, April 30, 1996 and the exercise price of the options.
2001, we extended the employment agreement through August 31, 2006 with Clark D. Stewart under the terms of which Mr. Stewart was employed as our President and Chief Executive Officer. The contract provides a minimum annual salary of $265,700, $278,900, $292,900, $307,600, $322,980, $339,129 respectively in the next six years. In the event Mr. Stewart is terminated from employment with us 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 is also granted an automobile allowance of $600 per month. AUDIT COMMITTEE REPORT - Item 7(d)(3) Our Board of Directors has adopted a written charter for a standing Audit Committee. A copy of the Audit Committee charter is included as Appendix C to this Proxy. The Audit Committee is comprised of Mr. David Hayden, Mr. William A. Griffith, and Mr. William Logan. The Audit Committee has reviewed and discussed the audited financial statements with our management. The Audit Committee has also discussed with the independent auditors the matters required to be discussed by SAS No. 61, and received from the auditors disclosures regarding the auditors independence as required by Independence Standards Board Standard No. 1. Based upon the Audit Committees review of the audited financials, the Audit Committee recommended to the Board of Directors that the audited financials be included in our Annual Report on Form 10-K. We have assessed the independence of the members of the Audit Committee according to the definition of independence in Sections 303.01(B)(2)(a) and (3) of the New York Stock Exchange (NYSE) listing standards. Mr. Logan and Mr. Hayden are independent within the NYSE listing standard definition. Mr. Griffith is not independent under the NYSE definition. Mr. Griffith is our Secretary. Officers are not independent under the NYSE definition. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Board of Directors is comprised of Mr. Wagoner, Mr. Stewart, Mr. Griffith and Mr. Logan. Mr. Wagoner is the Chairman, Mr. Stewart is the President and Chief Executive Officer of theour Company, and Mr. Griffith is the Secretary of theour Company. During fiscal 1996,2001, the consulting firm of Griffith & Associates was paid for business consulting services rendered to the Company in the approximate amount of $47,000.$92,993. William A. Griffith, who is a director for the Company,one of our directors, is a principal at Griffith & Associates. It is anticipated that Griffith & Associates will continue to provide services for theour Company. During fiscal 1996, the Company paid2001, we did not pay consulting fees of approximately $110,000 to Mr. Logan for business consulting services. It is anticipated that Mr. Logan will continue tomay provide services for the Company. During the 1995 fiscal year, salesus. Mr. Logan was granted an option to Wendy's Hamburgerspurchase 500,000 shares of Kansas City, Inc. ("WHcommon stock at an exercise price of KC, Inc.") accounted$0.50 per share on November 2, 1998. Mr. Logan exercised this option by agreeing to provide consulting services to us for approximately 6%an additional three years without receiving any further cash payments other than for out of pocket expenses. The cost of the net sales ofconsulting services are charged to various projects including advances under 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.Indian consulting agreements. During fiscal 1996,2001, the consulting firm of Butler Financial Corporation was paid for business consulting services rendered to the Companyus in the approximate amount of $20,000.$56,000. R. Warren Wagoner, who is a director for the Company,one of our directors, 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.us. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS, LITIGATION. On March 17, 1994,April 30, 2001, we extended the Company entered into a five-year employment agreement through August 31, 2006 with Clark D. Stewart under the terms of which Mr. Stewart was employed as theour President and Chief Executive Officer of the Company at an initialOfficer. The contract provides a minimum annual salary of $198,000 and a minimum salary of $208,000, $218,500, $229,500 and $241,000,$265,700, $278,900, $292,900, $307,600, $322,980, $339,129 respectively in years two through five.the next six years. In the event Mr. Stewart is terminated from employment with theour Company other than "for cause,"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 wasis 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'sour 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 theour Company's compensation policy as it related to the executive officers for fiscal 1996.2001. 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'sour 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. 19962001 Compensation. To accomplish the Company'sour 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'sour 1989, 1993 and 1995 and 1993 Plans. The overall compensation policy, as implemented, endeavors to enhance theour profitability of the Company (and, thus, shareholder value) by tying the financial interests of the management with those of the Company.our financial interests. 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. GrahamFranke (Vice President-Aircraft Modifications), Mr. WoodsonWagoner (Vice President-Avionics), Mr. Fischrupp (President- BNSI)President- Avionics), 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)Fischrupp, (President-BNSI). For Mr. Fischrupp and Mr. Eisenbath, the Company haswe have in place a Performance Plan which couples the executive's cash compensation with specific improvements in the Company'sour operating income. Each Performance Plan is specific to the Operating Officer's segment. Generally, the incentive bonus is five percent (5%) of the business segment net income before income taxes from the business segment currently under the control of the officer. Business segment net income is defined to include all ordinary and necessary business expenses associated with the operations and financing of the business segment but does not include an allocation of corporate overhead. In 1996,2001, Mr. Fischrupp and Mr. EisenbathFranke 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 19951989, 1993 and 19931995 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'sour stock price. Obviously, when shareholder value decreases, the stock options granted to executives either decrease in value or have no value. In 1996,2001, the Compensation Committee granted 410,0002,835,000 options to executive officers. President and CEO Compensation. Clark D. Stewart, our President and CEO, of the Company, entered into a five yearhas an employment agreement with the Company.our Company through August 31, 2006. The Compensation Committee granted to Mr. Stewart 50,000250,000 options subjectively based upon his performance. Summary. The Compensation Committee believes that theour 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 19962001 adequately reflect the Company'sour 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 GRAPH In April 1994, the Company acquired R F, Inc., and thereby entered into the Food Distribution Industry. Until April 1994, the Company'sOur 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.is Aircraft Modifications. Therefore, in order to provide a representative companion of the Company'sour stock performance, the following chart compares the cumulative stockholder return on the Company's common stockour Common Stock for the last five years with the cumulative return on the NASDAQOTCBB 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, 1990,2000, in each of the above groups.group. The total return assumes the reinvestment of dividends. AGGREGATE AUDIT FEES DISCLOSURE We retained Weaver & Martin, L.L.C. to perform the review of our annual financial statements for the past fiscal year, and for review of quarterly reports for that fiscal year. The aggregate fees billed for professional services rendered by Weaver & Martin, L.L.C. for the fiscal year ended April 30, 2001 were approximately $57,035. INDEPENDENT PUBLIC ACCOUNTANTS (Proposal No. 2) The CompanyWe have engaged Arthur Andersen LLPWeaver & Martin, L.L.C. to audit theour financial statements for the year ended April 30, 1996,1999, 2000, 2001, and 1995. Arthur Andersen LLP2002. Weaver & Martin, L.L.C. was able to express an opinion on the financial statements for the year ended April 30, 1996,1999, 2000, and 1995.2001. Representatives of Arthur Andersen LLPWeaver & Martin, L.L.C. 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 hasWe selected Arthur Andersen LLPWeaver & Martin, L.L.C. to be the independent public accountants for fiscal year 19972002 which ends April 31, 2002, and recommendsrecommend that the appointment of the auditors be ratified by the Shareholders. Although Shareholder approval is not required, it is the policy of theour 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 LLPWeaver & Martin, L.L.C. as the Company'sour independent public accountant. CHANGE OF DOMICILE (Proposal No. 3) TheOur Board of Directors has recommended, subject to the approval of theour 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 itswe change our corporate domicile (i.e. state of incorporation) from the State of MinnesotaDelaware to the State of DelawareKansas (the "Reincorporation") pursuant to the Agreement and Plan of Merger (the "Merger Agreement") between theour Company and Butler National Corporation Kansas, a DelawareKansas corporation ("Butler-Delaware"Butler-Kansas"). The sole purpose of the merger transaction is to change our domicile from Delaware to Kansas. 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 MINNESOTADELAWARE AND DELAWAREKANSAS 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 CertificateAmended and Restated Articles of Incorporation of Butler-DelawareButler-Kansas (the "Delaware Certificate""Kansas Articles"), a copy of which is attached to this Proxy Statement as Exhibit B, and the Bylaws of Butler-DelawareButler-Kansas (the "Delaware"Kansas Bylaws"), a copy of which is attached to this Proxy Statement as Exhibit C. Copies of the Articlesour Certificate of Incorporation and the Bylaws of the Company (the "Minnesota Articles""Delaware Certificate" and the "Minnesota"Delaware Bylaws," respectively) are available for inspection at theour 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,William A. Griffith, Secretary, Butler National Corporation, 1546 East Spruce Road,19920 W. 161st Street, Olathe, Kansas 66061,66062, Telephone Number: (913) 780-9595. In this discussion of the Reincorporation, the terms "Company" or "Butler-Minnesota""Butler-Delaware" refer to theour existing MinnesotaDelaware corporation and the term "Butler- Delaware""Butler-Kansas" refers to the new DelawareKansas corporation which is the proposed successor to Butler-Minnesota.Butler-Delaware. 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,We are one of such companies that elected to change domicile to Delaware. While having favorable corporate policies, there are considerable fees and expenses associated with maintaining a corporate domicile in Delaware. The corporation laws of the State of Kansas generally track the Delaware Lawlaws. The source of most of the Kansas corporation statutes is comparatively well knownDelaware law. The fees and understood. It is anticipatedexpenses associated with domicile of a corporation in Kansas are generally less than the fees required for a corporation in Delaware. The fees charged to Butler National Corporation for the year ended December 31, 2000 by the State of Delaware for franchise and filing fees was $150,020.00. The franchise fee that as in the past, Delaware Law will continuewe expect to be interpreted and explained in a numbercharged by the State of significant court decisions.Kansas upon reincorporation is $2,500.00. The BoardState of Director believes that reincorporation in Delaware should provide greater predictability with respect toKansas does not have an annual filing fee separate from the Company's corporate affairs.franchise fee. As one of the effectsanticipated results of the proposed Reincorporation, the Companywe may be able to expand the scope of its indemnification of directors, officers and key employees andsave money by having our corporate domicile relocated to limit the liability of its directors in a broader range of circumstances than permitted under Minnesota Law.Kansas. See "COMPARISON OF MINNESOTADELAWARE AND DELAWAREKANSAS 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 CompanyAdditionally, we have no longer has any business operations in Minnesota,Delaware, and consequently, no longer generally retainsdo not retain counsel licensed to practice law in Minnesota.Delaware. Thus, the Company haswe have been and will be (absent the Reincorporation) required to incur additional expenses to retain MinnesotaDelaware counsel in most transactions involving the Company Delaware,and to advise the Companyus when issues of MinnesotaDelaware Law arise. Possible Disadvantages of Reincorporation Shareholders should be aware, that the courts applying the Kansas Corporation Statutes have not developed a history of rulings and guidance that may be found with 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,law. Additionally, as a result of the proposed Reincorporation, the rights of shareholders and the authorized stock will change in a number of importantsome 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 MinnesotaDelaware Law and DelawareKansas Law, see Appendix A attached to this Proxy Statement. TheOur Board of Directors believes that the advantage of the Reincorporation to the CompanyButler National Corporation and itsour shareholders outweigh its possible disadvantages. SHAREHOLDERS ARE URGED TO READ THE SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES IN THE PROVISIONS OF MINNESOTADELAWARE AND DELAWAREKANSAS 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-MinnesotaButler-Delaware with and into Butler-Delaware,Butler-Kansas, which will beis incorporated under DelawareKansas Law as a wholly- ownedwholly-owned subsidiary of Butler-MinnesotaButler-Delaware for purposes of the Merger. Butler-DelawareButler-Kansas will be the surviving corporation in the Merger and will continue under the name "Butler National Corporation". Butler-MinnesotaButler-Delaware 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 theour outstanding shares of Common Stock is obtained, and the Merger Agreement or an appropriate certificateCertificate of mergerMerger is filed with the Secretary of State of the State of DelawareKansas and articlesCertificate of mergerMerger with the Secretary of State of the State of Minnesota.Delaware. At the effective time of the Merger, the Companywe will be governed by the Kansas Articles, the Kansas Bylaws, and Kansas Law. A summary of the differences between the Kansas Articles and Bylaws and the Delaware Certificate the Delawareand Bylaws and Delaware Law.is described below. Upon completion of the Merger, each outstanding share of Common Stock, par value $.01$0.01 per share, of Butler-MinnesotaButler-Delaware will be converted into one share of Common Stock, $.01$0.01 par value, of Butler-Delaware.Butler-Kansas. As a result, the existing shareholders of Butler-MinnesotaButler- Delaware will automatically become shareholders of Butler-Kansas, Butler-Delaware Butler-Minnesota will cease to exist and Butler- DelawareButler-Kansas will continue to operate theour business of the Company under the name "Butler National Corporation." Butler-MinnesotaButler-Delaware stock certificates will be deemed to represent the same number of Butler-DelawareButler-Kansas shares as were represented by such Butler- MinnesotaDelaware stock certificates prior to the Reincorporation. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR BUTLER-MINNESOTABUTLER-Delaware STOCK CERTIFICATES FOR BUTLER-DELAWAREBUTLER-Kansas STOCK CERTIFICATES. Following the Reincorporation, previously outstanding Butler-MinnesotaButler-Delaware stock will constitute "good delivery" in connection with sales through a broker, or otherwise, of shares of Butler-Delaware.Butler-Kansas. The Butler-DelawareButler-Kansas Common Stock willis expected to be listed on the NASDAQ Small CapOTCBB Market as the Common Stock of Butler-MinnesotaButler-Delaware is presently listed. Upon completion of the Reincorporation, the authorized capital stock of Butler-DelawareButler-Kansas will consist of 40,000,000100,000,000 shares of Common Stock, $.01$0.01 par value and 200,00050,000,000 shares of Preferred Stock $5$5.00 par value, which is identical toan increase in the authorized capital stock of Butler-Minnesota.compared to Butler- Delaware. The Reincorporation will not result in any change to theour daily business operations of the Company or the present location of theour principal executive offices of the Company in Olathe, Kansas. The consolidated financial condition and results of operations of Butler-DelawareButler-Kansas immediately after the consummation of the Reincorporation will be identical to that of Butler-MinnesotaButler- Delaware immediately prior to the consummation of the Reincorporation. In addition,Additionally, at the effective time of the Merger, the Board of Directors of Butler-DelawareButler-Kansas will consist of those persons who currently are our directors, of the Company, all of whom are nominees for re-election at theour Annual Meeting. In addition, the individuals serving as executive officers of Butler-MinnesotaButler- Delaware immediately prior to the Merger will serve as executive officers of Butler-DelawareButler-Kansas upon the effectiveness of the Merger. Pursuant to the Merger Agreement, each option or right to purchase a share of Butler-MinnesotaButler-Delaware Common Stock outstanding immediately prior to the effective time of the Merger will become an option or right to purchase a share of Butler-DelawareButler-Kansas 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-DelawareButler-Kansas Common Stock. Butler-Kansas has adopted and will assume the obligations and benefits of Butler- Delaware under the Rights Agreement ("Rights Agreement"), dated as of October 26, 1998 between Butler National Corporation and Wells Fargo Shareowner Services, as Rights Agent. A vote for approval and adoption of the Merger Agreement and Reincorporation Proposal will also constitute specific approval of the Delaware CertificateKansas Articles and the DelawareKansas Bylaws. In addition, a vote for approval and adoption of the Merger Agreement and Reincorporation Proposal will constitute approval of the assumption by Butler-DelawareButler-Kansas of the Plans and agreements of Butler-Minnesota,Butler-Delaware, and the substitution of shares of Butler- DelawareButler-Kansas Common Stock for shares of Butler-MinnesotaButler-Delaware 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'sour Common Stock have the right to dissent from the Reincorporation and receive from the Companyus payment in cash the value of the shares. In general, to exercise dissenters' rights under MinnesotaDelaware Law, a dissenting shareholder must file with the Companyour Secretary 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 MinnesotaDelaware Law. After the proposed action has been approved by the shareholders the Companywe 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 MinnesotaDelaware 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 Companyus of the notice that the proposed action has been approved by the required vote of the shareholders. After the corporate action takes effect, the Companywe must remit to each dissenting shareholder who has complied with the requirements of law, the amount the Company estimatesthat we estimate 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 corporationour Secretary of the dissenters' own estimate of the fair value of the shares plus interest within 30 days after the Company mailswe mail 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 MinnesotaDelaware Law setting forth the procedures for a holder of Companyour 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;our shareholders; but no such amendment, modification or supplement may be made if it would have a material adverse effect upon the rights of the Company'sour shareholders unless it has been approved by the shareholders. The Merger Agreement also provides that the Companywe 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 theour best interests of the Company and its shareholders.our shareholders best interests. 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, theour Board of Directors of the Company has indicated that it will likely terminate the Reincorporation if the Company haswe have received notices of exercise of appraisal rights, with respect to, in excess of 1% of the shares of the Common Stock of the Companyour outstanding. Federal Income Tax Consequences of the Reincorporation The Company has been advised by counsel that, forFor 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-MinnesotaButler-Delaware or Butler- Delaware.Butler-Kansas. Each holder of Common Stock will have the same basis in the Butler-DelawareButler-Kansas 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-DelawareButler-Kansas 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-MinnesotaButler-Delaware will not recognize gain or loss for Federal income tax purposes as a result of the Merger, and that Butler-DelawareButler-Kansas will succeed without adjustment to the tax attributes of Butler-Minnesota.Butler-Delaware. Butler- MinnesotaDelaware is currently subject to state income taxation in Minnesota.Delaware. If the Reincorporation is approved, Butler-DelawareButler-Kansas will be obligated to pay an annual franchise tax in Kansas and no longer be taxed in Delaware, which the Company believeswe believe to be immaterial.beneficial. Articles of Incorporation The Kansas Articles provide for an increase in the number of authorized shares to 100,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock. The par value of the Butler- Kansas common stock is $0.01 and preferred stock is $5.00. 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.Butler-Delaware. 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. TheOur Annual Report of the Company for the fiscal year 19962001 is enclosed. The 19962001 Annual Report includes the Annual Report on Form 10-K containing the Company'sour financial statements for the fiscal year ended April 30, 1996.2001. A copy of Form 10-K and the Annual Report as we have 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 Companyus 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 MINNESOTADELAWARE AND DELAWAREKANSAS CORPORATE LAW Minnesota LawPURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF BUTLER NATIONAL-KANSAS ARTICLES OF INCORPORATION, BY-LAWS AND KANSAS STATUTORY LAW General In a change of our domicile from Delaware to Kansas, the resulting Kansas corporation will have different provisions for the Kansas Articles and Bylaws compared to the Delaware Certificate and Bylaws. A description of certain material differences between the Kansas Articles and Kansas Bylaws is provided in the following sections. Articles of Incorporation Authorized Shares Kansas Articles generally track the provisions of the Delaware Certificate of Incorporation. In addition to the changes in referencing the Kansas Code instead of the Delaware Code, there is an increase in the number of authorized shares of common and preferred stock. The number of authorized shares is increased in the Kansas Articles to 100,000,000 shares of Common Stock and 50,000,000 of Preferred Stock. The foregoing description of changes in the provisions of the Amended and Restated Articles of Incorporation does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Amended and Restated Articles of Incorporation, including definitions of certain terms in the document. A copy of the Kansas Articles are attached as Exhibit B. Kansas Bylaws The Kansas Bylaws generally track the Delaware Bylaws. The substantive differences between the bylaws is the reference to Kansas statutes in the Kansas Bylaws and Delaware Law differstatutes in the Delaware Bylaws. Forms of the Kansas Articles and Bylaws are attached as Exhibits B and C. The foregoing description of certain provisions of the Kansas Articles and the Bylaws does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Kansas Articles and the Bylaws, including definitions of certain terms in each respective document. Statutory Differences between the Kansas and Delaware Corporation Codes Delaware Corporate Code and Kansas Corporate Code are similar in many respects, and consequently,however, the exact wording of each states corresponding code is not identical. Therefore, it is not practical to summarize all of the differences.differences between Kansas and Delaware Law. The following, however, is a summary of certain significant differences in such laws which may affect the rights and interests of the Company'sour shareholders as a result of the Reincorporation. Vote Required for Certain Mergers and ConsolidationsCorporate Powers Kansas Statutes Annotated "K.S.A." Section 17-6102 generally tracks the language of Section 122 of the Delaware Law relatingCode. However, Section 122(17) expressly gives a corporation the power to mergers and other corporate reorganizationsrenounce any interest or expectancy of the corporation in, or being offered an opportunity to participate in, specified business opportunities or specified classes or categories of business opportunities that are presented to the corporation or one or more of its officers, directors or stockholders. There is no analogous provision in K.S.A. 17-6102, but the Kansas Code does not prohibit such action. Committees of the Board of Directors Delaware Code Section 141 differs from Minnesota LawK.S.A. 17-6301 in that the Delaware Code limits the powers of committees of the Board of Directors if the company was incorporated after July 1, 1996, or the Board of Directors by resolution adopts the limiting provision. Presently, the Kansas Code Section, 17-6301, tracks the Delaware provision for incorporations prior to July 1, 1996 that have not adopted the limitations on committees. The Kansas Code expressly allows committees, to the extent authorized by resolution of the Board of Directors, to provide for the issuance of shares of stock, fix the designations and preferences or rights of shares related to dividends, redemption, dissolution, any distribution of assets or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation, or fix the numbers of shares of any series of stock or authorized the increase or decrease of the shares of any series of stock. Indemnification of officers, directors, employees and agents Delaware Code Section 145(k) expressly gives the state court exclusive jurisdiction to resolve disputes for the advancement of expenses or indemnification brought under the indemnification provision of the code, any bylaw, agreement, vote of stockholders or otherwise. The Kansas Code has no such express provision for exclusive jurisdiction, but the Kansas state courts implicitly have the power to resolve the disputes. Taxation of Shares of Stock Delaware Code Section 159 expressly prohibits the State of Delaware from taxing stock held by non-residents. The Kansas equivalent code section does not address taxation of stock held by non- residents. Liability of Stockholder for Stock Not Paid In Full Under the Kansas Code, Section 17-7101 and Section 60-511, the Statue of Limitations for a claim for the unpaid balance of consideration for the issuance of stock shares is five years. The equivalent Delaware Code provision, Section 162, has a six-year statute of limitation. Dividends; Payment The Kansas Code, Section 17-6420, generally tracks the language of Section 170 of the Delaware Code related to the payment of dividends. Unlike the Kansas Code, the Delaware Code expressly provides that nothing in the code section shall invalidate or otherwise affect a note, debenture or other obligation of the corporation paid by it as a dividend on shares of its stock, or any payment made thereon, if at the time of such note, debenture or obligation was delivered by the corporation, and the corporation had either surplus or net profits from which the dividend could be lawfully paid. The Kansas Code does not contain an equivalent express statement. Declaration and Payment of Dividends Both the Kansas Code and Delaware Code require that if dividends are paid in unissued capital stock, then the Board of Directors shall designate as capital, an amount which is not less than the aggregate par value being declared as a dividend. Delaware Code also expressly states that no such designation as capital is necessary if shares are being distributed pursuant to a split-up or division of its stock rather than a payment of a dividend payable in stock. The equivalent Kansas Code provision is silent about designations in a numbersplit-up or a non-dividend division of respects. Generally, Minnesota Law requiresstock. Liability of Directors for Unlawful Dividend, Stock Purchase or Redemption Section 17-6424 of the Kansas Code generally tracks the language of Section 174 of the Delaware Code except for the statute of limitations for the unlawful payment of a shareholder vote in more situations thandividend or unlawful stock purchase or unlawful redemption. The Delaware Code provides for a six-year statute of limitations. The similar Kansas Code statute of limitations is three years. Restrictions on the Transfer and Ownership of Securities Delaware Code section 202 expressly states that restrictions may be placed on the amount of the corporation's securities that may be owned by any person or group of persons. The analogous Kansas Code Section, K.S.A. 17-6426, does Delaware Law. Both Minnesotanot expressly provide for that restriction. However, the restriction may be implied. Additionally, these sections of both the Kansas and Delaware LawCodes describe when restrictions on securities are permitted. Section 202 of the Delaware Code permits a securities restriction that obligates the holder of restricted securities to sell or transfer an amount of restricted securities to the corporation or to any other person. Delaware Code also authorizes a restriction allowing the automatic sale or transfer, or that causes the automatic sale or transfer of an amount of the restricted securities to the corporation or any other person. The Kansas Code provision, K.S.A. 17-6426, governing restrictions, does not have a provision that recognizes a restriction that would obligate a sale or transfer, or cause an automatic sale or transfer of a restricted security from a security holder. The Kansas Code is also more vague about reasonable purposes for restrictions on the transfer securities, registration of transfer of securities, and the amount of securities that may be owned by a group or person. The Delaware Code lists specific reasons for restrictions that are presumptively reasonable. Under the Kansas Code, any restriction on the transfer of securities to maintain sub-chapter S status of the United States Internal Revenue Code or for maintaining any other tax advantage to the corporation is conclusively presumed to be a reasonable purpose. Meeting of Stockholders Section K.S.A. 17-6501 provides that if the bylaws do not provide for a shareholder vote (exceptlocation for an annual meeting, the location will be at the registered office. The analogous Delaware Code provision provides for an annual meeting location as indicated below anddesignated by the Board of Directors if not otherwise specified. The Kansas Bylaws specifically provide 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 andlocation of the selling corporationannual meeting to be determined by the Board of Directors. The Delaware Code also allows for attendance at meetings by remote communication and electronic submission of ballots. The Kansas Code does not specify such an option. The Kansas Code only requires an annual meeting in any year in which the election of directors is required to be acted upon under the Investment Company Act of 1940. Voting Rights of Stockholders; Proxies Section 212 of the Delaware Code contains a provision for the sale bydetermination of validity of electronic submission of documents from stockholders. Because Kansas does not have a corporationprovision for the electronic submission of all or substantially all of its assets. Both Minnesota Lawdocuments 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 majorityballots, there is no equivalent Kansas Code provision. Voting Trusts and Other Voting Agreements Section K.S.A. 17-6508 of the outstanding shares inKansas Code limits the length of time to ten (10) years for the term of an agreement that a varietystockholder may transfer capital stock to another for the purpose of transactionsvoting. Under the Kansas provision, the voting trust agreement as originally fixed or extended, maybe extended by one or more fully set forth below.beneficiaries by written agreement with consent of the trustees within the two years prior to expiration of any voting trust agreement. Delaware LawCode, section 218 does not requirespecify a shareholder votetime limit or renewal limitation. List of Stockholders Entitled To Vote Section 219 of the surviving corporation in a merger if (i) the merger agreement does not amend the existing certificateDelaware Code provides that lists 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 sharesstockholders entitled to vote immediately aftermay be provided on a reasonably accessible electronic network (with instructions given related to accessing the merger, pluslist at the voting powertime of notice of the shares entitled to vote issuable on conversionmeeting) or during ordinary business hours at the principal place of or on the exercise of rights to purchase, securities issued in the transaction, will not exceed by more than 20 percent, the voting powerbusiness of the outstanding shares entitledCorporation. The Kansas code does not have an equivalent provision. Consent of Stockholders in Lieu of Meeting Section K.S.A. 17-6518 states that unless the Articles of Incorporation provide otherwise, any action that is required by Kansas law to be accomplished at an annual or special meeting of stockholders may only be taken without a meeting, without prior notice and without a vote, immediately beforeif consent in writing, setting forth 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 exceedaction so taken is signed 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 approvalholders of a majority of the outstanding stock entitled to vote thereon. Minnesota Lawon the action. Delaware Code, section 228 only requires the approval of a majoritywritten consent of the votingminimum number of shares (votes) that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote on the action would be present. Reduction of Capital Section 244 of the Delaware Code expressly allows the Board of Directors to reduce capital by the conversion or exchange of outstanding capital or capital represented by the shares being converted to the extent that such capital exceeds the total aggregate par value or the stated capital of any previously unissued shares issuable upon such conversion or exchange. The analogous Kansas Code provision, K.S.A. 17-6604, does not expressly address this situation. Merger or Consolidation Section K.S.A. 17-6709 of the Kansas Code expressly provides that a company cannot merge or consolidate until all corporate fees and taxes due to the state have been paid. The analogous Delaware Code provision, Section 259, does expressly not include this requirement. Business Combinations The language of section 203 of the Delaware Code provides that an amendment to the certificate of incorporation or bylaws pursuant to Section 203 shall be immediately effective if the corporation has never had stock on a national securities exchange (including quotation by NASDAQ) or more that 2,000 stockholders, and has not elected by a provision in its original certificate of incorporation to be governed by section 203. The similar Kansas Code section, K.S.A. 12,100, does not expressly provide for such a rule. The Delaware Code business combination section also provides that the business combination restrictions do not apply when a business combination is with an interested stockholder who became an interested stockholder prior to the effective date of the amendment of the certificate of incorporation or bylaws adopting the restriction against business combinations. Dissolution by Court Order Section 285 of the Delaware Code provides for the filing of a court ordered dissolution decree or judgment with the Register in the Chancery of the county in which the decree or judgment was entered. The Kansas Code provisions do not have a similar requirement. APPENDIX B Sec. 262. Appraisal rights. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has other compiled with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to Sec. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to Sec. 251 (other than a merger effected pursuant to Sec. 251(g) of this title), Sec. 252, Sec. 254, Sec. 257, Sec. 258, Sec. 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of Sec. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to Sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under Sec. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or 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 tocorporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which would increaseappraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or decrease the aggregate number of authorized shares of the class, increase(c) hereof that appraisal rights are available for any or decrease the par valueall of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to 228 or 253 of this title, each constituent corporation, either before the effective date of the merger or consolidation or within ten days thereafter, shall notify each of the holders of any class or alter or change the powers, preferences or specialseries of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section; provided that, if the notice is given on or after the effective date of the merger or consolidation, such notice shall be given by the surviving or resulting corporation to all such holders of any class or series of stock of a constituent corporation that are entitled to appraisal rights. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register of Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the class so assurviving or resulting corporation to affect them adversely. Anti-Takeover Laws Delaware Law provides somewhat less protectionwhich the shares of such objecting stockholders would have been converted had they assented 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 shall have the status of authorized and unissued shares of the surviving or resulting corporation. (8 Del. C. 1953, Sec. 262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, Sec. 24; 57 Del. Laws, c. 148, Sec. 27-29; 59 Del. Laws, c. 106, Sec. 12; 60 Del. Laws, c. 371, Sec. 3-12; 63 Del. Laws c. 25, Sec. 14; 63 Del. Laws, c. 152, Sec. 1, 2; 64 Del. Laws, c. 112, Sec. 46-54; 66 Del. Laws, c. 136, Sec. 30-32; 66 Del. Laws, c. 352, Sec. 9; 67 Del. Laws, c. 376, Sec. 19, 20; 68 Del. Laws, c. 337, Sec. 3, 4; 69 Del. Laws, c. 61, Sec.10; 69 Del. Laws, c. 262, Sec. 1-9; 70 Del. Laws, c. 79, Sec. 16; 70 Del. Laws, c. 186, Sec. 1; 70 Del. Laws, c. 299, Sec. 2, 3; 70 Del. Laws, c. 349, Sec. 22; 71 Del. Laws, c. 120, Sec. 15; 71 Del. Laws, c. 339, Sec. 49-52.) APPENDIX C AUDIT COMMITTEE CHARTER BUTLER NATIONAL CORPORATION The Board of Directors Butler National Corporation (the "Company") hereby adopts this charter to govern the composition of its Audit Committee (the "Committee") and the scope of the Committee's duties and responsibilities, and to set forth specific actions the Board of Directors expects the Committee to undertake to fulfill those duties and responsibilities. I. STATEMENT OF PURPOSE The Committee will assist the Board of Directors in overseeing and monitoring the Company's financial reporting process. The duties of the Committee are ones of oversight and supervision. It is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles- that is the responsibility of management and the Company's independent auditors. Similarly, it is not the duty of the Committee to conduct investigations or sale or dispositionto assure compliance with laws and regulations. The Board of a substantial amountDirectors recognizes that the Committee will rely on the advice and information it receives from the Company's management and its internal and outside auditors. The Board does, however, expect the Committee to exercise independent judgment in assessing the quality of assetsthe Company's financial reporting process and its internal controls. In doing so, the Board expects that the Committee will maintain free and open communication with the other directors, the Company's independent and internal auditors and the financial management of the Company. II. COMPOSITION OF THE AUDIT COMMITTEE The Committee shall be comprised of at least three members of the Board of Directors, with the number of members to an Interested Stockholder) with a Delaware corporation for three years followingbe determined from time to time by the date such person became an Interested Stockholder unless certain conditions (such as approvalBoard. The members shall be designated by the Board of Directors) are met. Minnesota Law defines an interested shareholder as anyDirectors. Each member of the Committee shall have experience or education in business or financial matters sufficient to provide him or her with a working familiarity with basic finance and accounting matters. In addition, the Audit Committee shall include at least one person that owns 10%with financial management or accounting expertise. Unless the Board has previously designated the Chair, the members of the Committee may designate a Chair by majority vote. III. MEETINGS The Committee shall meet at least 4 times annually, or more frequently if circumstances dictate. One or more of these meetings shall include separate executive sessions with the outstanding voting securities ofCompany's Chief Financial Officer, and the independent auditors. Unless circumstances dictate otherwise, the meetings should occur quarterly in conjunction with 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 committeereview of the board pursuantCompany's quarterly financial results. IV. DUTIES AND RESPONSIBILITIES OF THE AUDIT COMMITTEE The duties and responsibilities of the Committee shall include the following: 1. Receive the written disclosures and letter from the Company's independent auditors required by Independence Standards Board Standard No. 1. 2. Review the Company's Annual Report on Form l0-K and the financial statements contained therein with the Company's financial management and independent auditors. Discuss any significant financial judgments made in connection with the preparation of the Company's financial statements. Receive assurances from financial management that the financial statements proposed to specific qualifications. In addition, Minnesotabe included in the Company's Annual Report contain no material misstatements, and receive assurances from the independent auditors that, in the course of their audit, they learned of no material misstatement. If deemed appropriate, after consideration of the reviews and assurances, recommend to the Board of Directors that they be included in the Annual Report on Form 10-K. 3. Review the Company's Quarterly Reports on Form 10-Q and the financial statements contained therein with the Company's financial management. Receive assurances from the Company's financial management that the financial statements included in the Company's reports do not contain any material misstatements, and receive assurances that the auditors learned of no material misstatements in the course of their review of such financial statements. 4. Discuss at least annually with the Company's independent auditors the adequacy and effectiveness of the Company's internal controls. Review the management letter issued by the independent auditor and management's response thereto. Periodically assess action management has taken or progress it has made in addressing issues raised by the independent auditors. 5. Appoint or reappoint the senior internal auditing executive, and approve the responsibilities. 6. Discuss at least annually with the internal auditor the effectiveness of the Company's internal accounting controls, as well as any significant letters or reports to management issued by the internal auditors, and management's responses thereto. 7. Discuss at least annually with the Company's attorneys the effectiveness of the Company's legal compliance programs, any legal matters that may have a material impact on the Company's financial statements and any material reports or inquiries received from regulators or government agencies. 8. Authorize and oversee investigations deemed appropriate into any matters within the Committee's scope of responsibility, with the power to retain independent counsel, accountants and other advisors and experts to assist the Committee if deemed appropriate. 9. Prepare the disclosure required by the Rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement. 10. Review this charter on an annual basis and make recommendations to the Board of Directors concerning any changes deemed appropriate. 11. Report actions of the Committee to the Board of Directors with such recommendations as the Committee deems appropriate. End of Charter. Exhibit A AGREEMENT AND PLAN OF MERGER Parties: THIS AGREEMENT AND PLAN OF MERGER ("Merger Agreement") is entered into by and between Butler National Corporation, a Delaware corporation ("Butler-Delaware"), and Butler National Corporation Kansas, a Kansas corporation ("Butler-Kansas"). Recitals: 1. Butler-Delaware is a corporation duly organized and existing under the laws of the State of Delaware. 2. Butler-Kansas is a corporation duly organized and existing under the laws of the State of Kansas. 3. On the date of this Merger Agreement, Butler-Delaware's authorized capital consists of 40,200,000 shares of stock, consisting of 40,000,000 shares of Common Stock, par value $0.01 per share (the "Butler-Delaware Common Stock"), of which 37,283,278 common shares are issued and outstanding, and no shares of preferred stock, par value $5.00 per share, are issued and outstanding. 4. On the date of this Merger Agreement, Butler-Kansas' authorized capital consists of 100,000,000 shares of Common Stock, par value $0.01 per share (the "Butler-Kansas Common Stock"), of which one share is issued and outstanding and owned by Butler-Delaware, and 50,000,000 shares of preferred stock, par value $5.00, none of which are issued and outstanding. 5. The respective Boards of Directors of Butler-Delaware and Butler-Kansas have determined that it is advisable and in the best interests of each such corporation that Butler-Delaware merge with and into Butler-Kansas upon the terms and subject to the conditions of this Merger Agreement for the purpose of effecting the reincorporation of Butler-Delaware in the State of Kansas. 6. The respective Boards of Directors of Butler-Delaware and Butler-Kansas have, by resolutions duly adopted, approved and adopted this Merger Agreement. Butler-Delaware has adopted this Merger Agreement as the sole stockholder of Butler-Kansas and the Board of Directors of Butler-Delaware has directed that this Merger Agreement be submitted to a Control Share Acquisition Act ("CSAA") which has no comparable provision under Delaware Law.vote of its shareholders. 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 shares of the Butler-Delaware Common Stock outstanding must approve this Merger Agreement for it is to become effective. 7. The parties intend by this Merger Agreement to effect a "reorganization" under Section 368 of the Internal Revenue Code of 1986, as amended. Terms and Provisions: In consideration of the foregoing recitals and of the following terms and provisions, and subject to the following conditions, it is agreed: 1. Merger. At the Effective Time (as defined in this Section 1), Butler-Delaware shall be merged with and into Butler- Kansas (the "Merger"). Butler-Kansas shall be the surviving corporation of the Merger (hereinafter sometimes referred to as the "Surviving Corporation"), and the separate corporate existence of Butler-Delaware shall cease. The Merger shall become effective upon the filing of a Certificate of Merger with the Secretary of State of the State of Kansas. The date and time when the Merger shall become effective is herein referred to as the "Effective Time." 2. Governing Documents. 1. The Amended and Restated Articles of Incorporation of Butler-Kansas as it may be amended or restated subject to applicable law, and as in effect immediately prior to the Effective Time, shall constitute the Articles of Incorporation of the Surviving Corporation without further change or amendment until thereafter amended in accordance with the provisions thereof and applicable law except that Article First is amended to read in its entirety: "The name of the corporation is Butler National Corporation". 2. The Bylaws of Butler-Kansas as in effect immediately prior to the Effective Time shall constitute the Bylaws of the Surviving Corporation without change or amendment until thereafter amended in accordance with the provisions thereof and applicable law. 3. Officers and Directors. The persons who are officers and directors of Butler-Delaware immediately prior to the Effective Time shall, after the Effective Time, be the officers and directors of the Surviving Corporation, without change until their successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Articles of Incorporation and Bylaws and applicable law. 4. Name. The name of the Surviving Corporation shall be Butler National Corporation. 5. Succession. At the Effective Time, the separate corporate existence of Butler-Delaware shall cease, and the Surviving Corporation shall possess all the rights, privileges, powers and franchises of a public or private nature and be subject to all the restrictions, disabilities and duties of Butler-Delaware; and all the rights, privileges, powers and franchises of Butler-Delaware, and all property, real, personal and mixed, and all debts due to Butler- Delaware on whatever account, as well for share subscriptions and all other things in action, shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as the same were of Butler-Delaware, and the title to any real estate vested by deed or otherwise shall not revert or be in any way impaired by reason of the Merger, but all rights of creditor and liens upon any property of Butler-Delaware shall be preserved unimpaired, and all debts, liabilities and duties of Butler-Delaware shall thenceforth attach to the Surviving Corporation and may be enforced against it to the same extent as if such debts, liabilities and duties had been incurred or contracted by it; provided, however, that such liens upon property of Butler-Delaware will be limited to the property affected thereby immediately prior to the Merger. All corporate acts, plans, policies, agreements, arrangements, approvals and authorizations of Butler-Delaware, its shareholders, Board of Directors and committees thereof, officers and agents, which were valid and effective immediately prior to the Effective Time, shall be taken for all purposes as the acts, plans, policies, agreements, arrangements, approvals and authorizations of the Surviving Corporation, its shareholders, Board of Directors and committees thereof, respectively, and shall be as effective and binding thereon as the same were with respect to Butler-Delaware. 6. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof: 1. Each share of Butler-Delaware Common Stock outstanding immediately prior to the Effective Time shall be converted into, and shall become, one fully paid and nonassessable share of Butler-Kansas Common Stock. 2. The one share of Butler-Kansas Common Stock issued and outstanding in the name of Butler-Delaware shall be cancelled and retired, and no payment shall be made with respect thereto, and such shares shall resume the status of unauthorized and unissued shares of Butler-Kansas Common Stock. 7. Stock Certificates. At and after the Effective Time, all of the outstanding certificates which immediately prior to the Effective Time represented shares of Butler-Delaware Common Stock shall be deemed for all purposes to evidence ownership of, and to represent shares of, Butler-Kansas Common Stock into which the shares of Butler-Delaware Common Stock formerly represented by such certificates have been converted as herein provided. The registered owner on the books and records of Butler-Delaware or its transfer agent of any such outstanding stock certificate shall, until such certificate shall have been surrendered for transfer or otherwise accounted for to the Surviving Corporation or its transfer agent, have and be entitled to exercise any voting or other rights with respect to and to receive any dividends and other distributions upon the shares of Butler-Kansas Common Stock evidenced by such outstanding certificate as above provided. Nothing contained herein shall be deemed to require the holder of any shares of Butler-Delaware Common Stock to surrender the certificate or certificates representing such shares in exchange for a certificate or certificates representing shares of Butler-Kansas Common Stock. 8. Options. Each right in or to, or option to purchase, shares of Butler-Delaware Common Stock, granted under Butler- Delaware's 1989 Nonqualified Option Plan, the 1993 Nonqualified Option Plan I, the 1993 Nonqualified Option Plan II and the 1995 Nonqualified Option Plan (collectively the "Plans") and otherwise, which is outstanding immediately prior to the Effective Time, shall, by virtue of the Merger and without any action of the part of the holder thereof, be converted into and become a right in or to, or an option to purchase at the same option price per share, the same number of shares of Butler-Kansas Common Stock, upon the same terms and subject to the same conditions as set forth in the Plans or otherwise as in effect at the Effective Time. The same number of shares of Butler-Kansas Common Stock shall be reserved for purposes of the outstanding options as is equal to the number of shares of Butler-Delaware Common Stock so reserved as of the Effective Time. As of the Effective Time, the Surviving Corporation hereby assumes the Plans and all obligations of Butler-Delaware under the Plans including the outstanding rights or options or portions thereof granted pursuant to the Plans and otherwise. 9. Other Employee Benefit Plans. As of the Effective Time, the Surviving Corporation hereby assumes all obligations of Butler-Delaware under any and all employee benefit plans in effect as of the Effective Time or with respect to which employee rights or accrued benefits are outstanding as of the Effective Time. 10. Conditions. The consummation of the Merger is subject to satisfaction of the following conditions prior to the Effective Time: 1. The Merger shall have received the requisite approval of the holders of Butler-Delaware Common Stock and all necessary action shall have been taken to authorize the execution, delivery and performance of the Merger Agreement by Butler-Delaware and Butler- Kansas. 2. All approvals and consents necessary or desirable, if any, in connection with the consummation of the Merger shall have been obtained. 3. No suit, action, proceeding or other litigation shall have been commenced or threatened to be commenced which, in the opinion of Butler-Delaware or Butler-Kansas, would pose a material restriction on or impair consummation of the Merger, performance of this Merger Agreement or the conduct of the business of Butler-Kansas after the Effective Time, or create a risk of subjecting Butler-Delaware or Butler-Kansas, or their respective shareholders, officers or directors, to material damages, costs, liability or other relief in connection with the Merger or this Merger Agreement. 4. The Board of Directors of Butler-Delaware has not received sufficient numbers of notices of exercise of appraisal rights to, in the sole discretion of the Board of Directors, impact the Reincorporation. 11. Governing Law. This Merger Agreement shall be governed by and construed in accordance with the State of Kansas applicable to contracts entered into and to be performed wholly within the State of Kansas, except to the extent that the laws of the State of Kansas are mandatorily applicable to the Merger. 12. Amendment. Subject to applicable law and subject to the rights of Butler-Delaware's shareholders further to approve any amendment which would have a material adverse effect on such shareholders, this Merger Agreement may be amended, modified or supplemented by written agreement of the parties hereto at any time prior to the Effective Time with respect to the terms contained herein. 13. Deferral or Abandonment. At any time prior to the Effective Time, this Merger Agreement may be terminated and the Merger may be abandoned or the time of consummation of the Merger may be deferred for a reasonable time by the Board of Directors of either Butler-Delaware or Butler-Kansas or both, notwithstanding approval of this Merger Agreement by the shareholders of Butler- Delaware or the stockholders of Butler-Kansas, or both, if circumstances arise which, in the opinion of the Board of Directors of Butler-Delaware or Butler-Kansas, make the Merger inadvisable or such deferral of the time of consummation thereof advisable. 14. Counterparts. This Merger Agreement may be executed in any number of counterparts each of which when taken alone shall constitute an original instrument and when taken together shall constitute one and the same Agreement. 15. Further Assurances. From time to time, as and when required or requested by either Butler-Delaware or Butler-Kansas, as applicable, or by its respective successors and assigns, there shall be executed and delivered on behalf of the other corporation, or by its respective successors and assigns, such deeds, assignments and other instruments, and there shall be taken or caused to be taken by it all such further and other action, as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation the title to and possession of all property, interests, assets, rights, privileges, immunities, powers, franchise and authority of Butler- Delaware and otherwise to carry out the purposes of this Merger Agreement, and the officers and directors of each corporation are fully authorized in the name and on behalf of such corporation or otherwise, to take any and all such action and to execute and deliver any and all such deeds, assignments and other instruments. IN WITNESS WHEREOF, Butler-Delaware and Butler-Kansas have caused this Merger Agreement to be signed by their respective duly authorized officers and delivered this 29th day of October, 2001. BUTLER NATIONAL CORPORATION a Delaware corporation By: /S/ Clark D. Stewart Title: President and CEO ATTEST: /S/ William A. Griffith By: /S/ William A. Griffith Secretary BUTLER NATIONAL CORPORATION KANSAS a Kansas corporation By: /S/ Clark D. Stewart Title: President and CEO ATTEST: /S/ William A. Griffith By: /S/ William A. Griffith Secretary Exhibit B AMENDED AND RESTATED ARTICLES OF INCORPORATION OF Butler National Corporation Kansas THE UNDERSIGNED, does hereby certify these Amended and Restated Articles of Incorporation that amend and restate the original Articles of Incorporation that was filed on February 23, 2001 are as follows: FIRST: The name of the corporation is changed to Butler National Corporation Kansas SECOND: The registered office of the Corporation is to be located at 19920 West 161st Street, Olathe, Kansas 66062. The name of its registered agent at that address is Christopher J. Reedy, Esq. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Kansas Corporation Code. FOURTH: Section 1. The authorized capital of this Corporation shall be $251,000,000 consisting of 100,000,000 shares of common stock, $0.01 par value (the "Common Stock") and 50,000,000 shares of preferred stock, the par value of $5.00 per share (the "Preferred Stock"). The relative voting rights, preferences and other privileges of such capital stock shall be as follows: (a) Common Stock. Each share of Common Stock shall entitle the holder thereof to one (1) vote; all such shares of Common Stock shall be equal in all respects and shall confer equal rights upon the holders thereof. (b) Preferred Stock. Each share of Preferred Stock shall entitle the holder thereof to such rights, voting power, preferences and restrictions as may be fixed by the board of directors by resolution thereof. Section 2. A shareholder shall have no pre-emptive rights to subscribe for or purchase any shares of capital stock or other securities of whatsoever kind of nature which may be issued by this Corporation; voting for directors shall not be cumulative. FIFTH: The name and address of the incorporator was as follows: Name - Address William A. Griffith - Butler National Corporation 19920 West 161st Street Olathe, KS 66062 SIXTH: Except as otherwise specifically provided by applicable statute, all powers of management, direction and control of the Corporation shall be vested in its Board of Directors. The total number of directors of the Corporation which shall constitute the whole Board of Directors of the Corporation shall be fixed from time to time in the manner provided in the bylaws, such number in no event shall be less than three (3) nor more than eleven (11) persons. The names and mailing addresses of the persons who are to serve as the initial directors of the Corporation until the first annual meeting of Stockholders or until their successors are elected and qualified are as follows: Name-Address-City Clark D. Stewart - 19920 West 161st Street Olathe, KS 66062 William E. Logan - 19920 West 161st Street Olathe, KS 66062 R. Warren Wagoner - 19920 West 161st Street Olathe, KS 66062 William A. Griffith - 19920 West 161st Street Olathe, KS 66062 SEVENTH: In furtherance, and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized: (a) To make, adopt, alter, amend or repeal the Bylaws of the Corporation; (b) To, in its sole discretion, call special meetings of the Stockholders of the Corporation; (c) To set apart out of any of the money or funds of the Corporation available for dividends a reserve or reserves for any proper purpose or to abolish any such reserve in the manner in which it was created; (d) When and as authorized by the Stockholders' vote, to sell, lease or exchange all or substantially all of the property or assets of the Corporation, including its goodwill and its corporate franchises, upon such terms and conditions and for such consideration, which may be in whole or in part shares of stock in, or other securities of (or both), any other corporation or corporations as the Board of Directors may deem expedient and for the best interests of the Corporation; and (e) To sell, issue or otherwise dispose of common stock or any other securities of the Corporation, including preferred stock, debentures, bonds, mortgages, notes, certificates, and any and all other securities whatsoever, for such consideration as the Board of Directors in its discretion shall determine; provided, however, that no shares of stock shall be sold for any consideration not in accordance with the laws of the State of Kansas. The Corporation may in its bylaws confer powers additional to the foregoing upon the directors, in addition to the powers, authorities and duties expressly conferred upon them by law. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its Stockholders or any class of them, any court of competent jurisdiction within the State of Kansas may, on the application in a summary way of this Corporation or of any creditor or Stockholders thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of K.S.A. Sec. 17- 6901 of the Kansas Corporation Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of K.S.A. Sec. 17-6808 of the Kansas Corporation Code order a meeting of the creditors or class of creditors, and/or of the Stockholders or class of Stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the Stockholders or class of Stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the Stockholders or class of Stockholders, of this Corporation, as the case may be, and also on this Corporation. NINTH: No director shall be personally liable to the Corporation or its Stockholders for monetary damages for any breach of fiduciary duty by such director as a director, except to the extent such exemption from liability or limitation thereof is not permitted by Kansas Corporation Code as it now exists or may hereafter be amended. Notwithstanding the foregoing, a director shall be liable to the extent provided by the existing Kansas Corporation Code (i) for breaches of the directors' duty of loyalty to the Corporation or its Stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under the provisions of K.S.A. Sec. 17-6424 of the Kansas Corporation Code (relating to unlawful stock purchase or redemption) and any amendments thereto, or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of these provisions shall not adversely affect any right of any director of the Corporation existing at the time of such repeal or modification. The provisions of this Article shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director which has not been eliminated by the provisions of this Article. If Kansas Corporation Code hereafter is amended to authorize the further elimination or limitation of liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Kansas Corporation Code, as so amended. TENTH: The Corporation shall have the power to indemnify officers, directors, employees and agents to the extent permitted by the bylaws, as amended from time to time. I certify that these Amended and Restated Articles of Incorporation have been amended and restated in accordance with K.S.A. 17-6605. IN WITNESS WHEREOF, I declare under the penalty of perjury according to the laws of the State of Kansas that the foregoing is true and correct, and I have hereunto set my hand, the 29th day of October, 2001. By: /S/ Clark D. Stewart Clark D. Stewart, President and CEO ATTEST: /S/William A. Griffith William A. Griffith, Secretary Exhibit C BYLAWS OF BUTLER NATIONAL CORPORATION-KANSAS ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held on the 1st Tuesday of October of each year, or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which the stockholders shall elect directors by a plurality vote to serve until the next meeting of stockholders and shall transact such other business as may properly be brought before the meeting. The meeting may be held either within or without the State of Kansas as may be designated by the Board of Directors from time to time. Section 1.2. Special Meetings. Special meetings of stockholders may be called at any time by the Chairman of the Board, the Vice Chairman of the Board, if any, the Chief Executive Officer, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Kansas as may be stated in the notice of the meeting. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the Articles of Incorporation or these bylaws, the holders of a 35% of the outstanding shares of each class of stock entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 1.4 of these Bylaws until a quorum shall attend. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including all sharesbut not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the acquiringChairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the Chief Executive Officer, President, or in their absence by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. Voting; Proxies. Unless otherwise provided in the Articles of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Reference to the Articles of Incorporation in these Bylaws shall mean the Company's Articles of Incorporation as may be amended and/or restated. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and (ii)if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the affirmativemeeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect. All other elections and questions shall, unless otherwise provided by law or by the Articles of Incorporation or these Bylaws, be decided by the vote of the holders of a majority of the voting poweroutstanding shares of all sharesclasses of stock entitled to vote excluding all "Interested Shares" (i.e. shares heldthereon present in person or by proxy at the meeting, provided that (except as otherwise required by law or by the acquiring person,Articles of Incorporation) the Board of Directors may require a larger vote upon any officerelection or question. Section 1.8. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed; and (3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the issuing public corporationmeeting; provided, however, that the Board may fix a new record date for the adjourned meeting. Section 1.9. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any directorstockholder who is also an employeepresent. Section 1.10. Consent of the corporation). Cumulative Voting Under Delaware Law, cumulative voting (which permits holdersStockholders in Lieu 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 soMeeting. Unless otherwise provided in the corporation'sArticles of Incorporation, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all the holders of outstanding stock entitled to vote thereon. In the event that the action which is consented is such as would have required the filing of a certificate under any section of incorporation. Under Minnesota Law,the Kansas Statutes, if such action had been voted upon by stockholders at a corporation will have cumulative voting unlessmeeting thereof, the certificate filed under such right is deniedother section shall state, in lieu of any statement required by such section concerning a vote of stockholders, that written consent has been given in accordance with the provision of this section. ARTICLE II Board of Directors Section 2.1. Powers; Number; Tenure. Except as otherwise specifically provided by applicable statute, all powers of management, direction and control of the Corporation shall be vested in its Board of Directors. The total number of directors of the Corporation which shall initially constitute the whole Board of Directors of the Corporation shall be five (5). Thereafter, the minimum and maximum number of directors shall be as set forth in the Articles of Incorporation. Cumulative voting has been specifically denied inThe Board of Directors shall have the charter documentspower to change the number of both Butler-Minnesota and Butler- Delaware. Furthermore, in Minnesota, no amendmentdirectors by resolution adopted by a majority of the whole Board. Section 2.2. Resignation; Removal; Vacancies. Any director may resign at any time upon written notice to the articlesBoard of incorporationDirectors or bylaws which hasto the Chief Executive Officer, President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of denying or modifying cumulative voting rights for directorssuch resignation shall be adopted if the votes of a proportionnecessary to make it effective. Section 2.3. Regular Meetings. Regular meetings of the voting power sufficientBoard of Directors may be held at such places within or without the State of Kansas and at such times as the Board may from time to elect a director at an electiontime determine, and if so determined, notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the entire board under cumulative voting are cast againstBoard of Directors may be held at any time or place within or without the amendment. Dividends Minnesota Law provides that a corporation board may authorizeState of Kansas whenever called by the Chairman of the Board, or by the Vice Chairman of the Board, if any, distribution, including dividends, ifby the board determines thatChief Executive Officer, President or by any two directors. Reasonable notice thereof shall be given by the corporation will be able to pay its debts inperson or persons calling 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, unlessmeeting. Section 2.5. Telephonic Meetings Permitted. Unless otherwise restricted by its certificatethe Articles of incorporation, declareIncorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and pay dividends outparticipation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of surplus or, if no surplus exists, outthe Board of net profitsDirectors a majority of the total number of directors shall constitute a quorum for the fiscal year in which the dividend is declared or the preceding fiscal year (provided that the amounttransaction of capitalbusiness. The vote of a majority of the corporation followingdirectors present at a meeting at which a quorum is present shall be the declaration and paymentact of the dividend is not less thanBoard unless the aggregate amountArticles of Incorporation or these Bylaws shall require a vote of a greater number. In case at any meeting of the capital representedBoard a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall attend. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the issuedChairmen of the Board or in his absence by the Vice Chairman of the Board, if any, or in his absence by the Chief Executive Officer or President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Informal Action by Directors. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing, and outstanding sharesthe writing or writings are filed with the minutes of all classes havingproceedings of the Board or committee. ARTICLE III Committees Section 3.1. Committees. The Board of Directors may, by resolution passed by a preference uponmajority of the distributionwhole Board, designate one or more committees, each committee to consist of assets).one or more of the directors of the Corporation. The Delaware Certificate contains no restriction onBoard may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the payment of dividends. Additionally, Delaware Law provides, that, in general, a corporation may redeemcommittee. In the absence or repurchase its shares only out of surplus. Appraisal Rights in Mergers Under both Minnesota Law and Delaware Law, a dissenting shareholderdisqualification of a corporation participatingmember of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in certain transactions may, in certain circumstances, receive cashplace of any such absent or disqualified member. Any such committee, to the extent provided in the amountresolution of the fair value of his or her shares (as determined by a court) in lieuBoard, shall have and may exercise all the powers and authority of the consideration otherwise receivableBoard in anythe management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such transaction. Unless a Delaware corporation's certificatecommittee shall have power or authority in reference to amending the Articles of incorporation provides otherwise (which the Delaware Certificate does not), Delaware Law does not require these dissenters' rights with respect to (i) a saleIncorporation, adopting an agreement 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 ofrecommending to 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 dispositionexchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these Bylaws; and, unless the resolution expressly so provided, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Section 3.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws. ARTICLE IV Officers Section 4.1. Officers; Election; Qualification; Term of Office; Resignation; Removal; Vacancies. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members Co-Chairmen of the Board and a Vice Chairman of the Board. The Board may also elect a Chief Executive Officer, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and may give any of them such further designations or alternate titles as it considers desirable. Each such officer shall hold office until the first meeting of the Board after the annual meeting of stockholders next succeeding his election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the Chairman, the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election or appointment of an officer shall not of itself create contractual rights. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. Section 4.2. Powers and Duties of Executive Officers. The officers of the Corporation shall have such powers and duties in the management of the Corporation as may be prescribed by the Board of Directors and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board. The Board may require any officer, agent or employee to give security for the faithful performance of his duties. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the Chief Executive Officer, President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number of shares owned by him in the Corporation. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate assets (subjectseal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to certain limited exceptions);time by the Board of Directors. The corporate seal may be used by causing it or a planfacsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of merger;Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the Articles of Incorporation or these Bylaws, a planwritten waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of exchangea person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in whichany written waiver of notice unless so required by the corporation's sharesArticles of Incorporation or these Bylaws. Section 6.4. Indemnification of Directors, Officers, Employees and Agents. (a) Directors. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he is or was a director of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, judgment, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding, including attorneys' fees, to the full extent permitted by Kansas Corporation Code, as amended, K.S.A. 17-6305. (b) Officers, Employees and Agents. The Corporation may, at the discretion of the Board of Directors, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or contemplated action, suit, or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, by reason of the fact that he is or was an officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding, including attorneys' fees, to the full extent permitted by Kansas Corporation Code, as amended, K.S.A. 17- 6305. (c) Expenses. (i) The Corporation shall pay the director, or such person or entity as the director may designate, on a continuing and current basis and in any event not later than 10 business days following receipt by the Corporation of the director's request for reimbursement of all expenses, including attorneys fees, costs, settlement, fines and judgment incurred by or levied upon the director in connection with any action, suit or proceeding referred to in Section 6.4, subsection (a). (ii) To the extent that an officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 6.4, subsection (b) or in defense of any claim, issue or matter therein, he shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith, including attorneys' fees. (iii) Expenses incurred by a director or officer in defending a civil or criminal action, suit, or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it is ultimately determined that the director or officer is not entitled to be indemnified by the Corporation as authorized in these Bylaws. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board of Directors deems appropriate. (d) Board Authorization. Any indemnification of directors, officers, employees or agents pursuant to this Section 6.4, unless ordered by a court, shall be made by the Corporation only as authorized in the specific case upon a determination that such indemnification is proper in the circumstances because such director, officer, employee or agent has met the applicable standard of conduct set forth in Kansas Corporation Code, as amended, K.S.A. 17-6305. Such determination shall be made by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to the action, suit, or proceeding, or if such a quorum is not obtainable, or even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or by the stockholders. (e) Notification and Defense of Claim. Promptly after receipt by a director, officer, employee or agent of notice of the commencement of any action, suit or proceeding, the director, officer, employee or agent will, if a claim in respect thereof is to be acquired,made, against the Corporation, notify the Corporation of the commencement thereof. The failure to promptly notify the Corporation will not relieve the Corporation from any liability that it may have to the director, officer, employee or agent hereunder, except to the extent the Corporation is prejudiced in its defense of such claim as a result of such failure. Unless otherwise requested by the Board of Directors, written notification shall not be necessary if the shares are entitleddirector, officer, employee or agent informs a majority of the Board of Directors of the commencement of any such action, or, independent of such notification by the director, officer, employee or agent, a majority of the Board of Directors has reason to vote;believe such action has been initiated or threatened. With respect to any other corporatesuch action, taken pursuant to shareholder vote with respectsuit or proceeding as to which the articles, bylaws,director, officer, employee or a resolution directs that dissenting shareholders may obtain payment for their shares; and, when amendmentagent notified, or is deemed to have notified, the Corporation of the articles would materiallycommencement thereof; the following shall apply: (i) The Corporation will be entitled to participate therein at its own expense; (ii) Except as otherwise provided below, to the extent that it may wish, the Corporation, jointly with any other indemnifying party similarly notified, will be entitled to assume the defense thereof with counsel reasonably satisfactory to the director, officer, employee or agent. After notice from the Corporation to the director, officer, employee or agent of its election so to assume the defense thereof, the Corporation will not be liable to the director, officer, employee or agent for any legal or other expenses subsequently incurred by the director, officer, employee or agent in connection with the defense thereof other than reasonable costs of investigation or unless: (A) the employment of separate counsel by the director, officer, employee or entity has been authorized by the Corporation; (B) the director, officer, employee or agent reasonably concludes that there may be a conflict of interest between the Corporation and adversely affect the rightsdirector, officer, employee or preferencesagent in the conduct of the sharesdefense of such action and that such conflict may lead to exposure for the director, officer, employee or agent and the director, officer, employee or agent notifies the Corporation of such conclusion and decision to employ separate counsel; or (C) the Corporation fails to employ counsel to assume the defense of such action. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the dissenterCorporation or as to which the director, officer, employee or agent reasonably makes the conclusion provided for 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(B) above; 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(iii) The Corporation shall not be liable to indemnify the director, officer, employee or agent for any amount paid in settlement of any action or claim effected without its agents.written consent. The Minnesota Articles andCorporation shall not settle any action or claim in any manner which would impose any penalty or limitation on the Delaware Certificate contain substantially identical liability limitation provisions. However, duedirector, officer, employee or agent without the written consent of the director, officer, employee or agent. Neither the Corporation nor the director, officer, employee or agent will unreasonably withhold their consent to 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 thatany proposed settlement. (f) Not Exclusive. The indemnification and advancement of expenses specifically provided under Delaware Law isby this Section 6.4 shall not be deemed exclusive of any other right to indemnificationrights to which a covered personthose seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation, as amended from time to time, or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such person. (g) Further Indemnity. The Delaware Bylaws provide that the CompanyCorporation shall have the power to give any further indemnity, in addition to the indemnity authorized or contemplated under this Section 6.4, to any person who is or was a director, officer, employee or agent or to any person who is or was serving at the request of the CompanyCorporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise; provided, no such indemnity shall indemnify any person from or on account of such personsperson's conduct which iswas finally adjudged to have been knowingly fraudulent, deliberately dishonest or wilfulwillful misconduct, or if it is determined by a final judgment or other final adjudication by a court of confidentcompetent 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 provideThe Corporation may enter into indemnification agreements with each director 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 noneofficer of the existing members ofCorporation whom 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 employeeauthorizes by vote of the Company's in his capacity as such (which is already covered by indemnity by the Company).a majority of a quorum of disinterested directors. (h) Insurance. The Company believes, however, that it is important to continue to provide the Company's directorsCorporation may purchase 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 outmaintain insurance on behalf 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) actsperson who is 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 thatwas a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, (i)partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Section 6.4. When, and if, the Corporation obtains such insurance coverage, the Corporation shall not be indemnifiedrequired to maintain such insurance coverage in effect; provided, however, that the Corporation notifies the covered person in writing within five business days of the making of the decision to not renew or replace such insurance policy. The maintenance of such insurance shall not diminish, relieve or replace the Corporation's liability for indemnification under the provisions hereof. A claim for reimbursement hereunder, shall not be denied on the basis that such amount may or will be covered by the corporation for expenses in defense of any action or proceedingsuch insurance policy, if such person is sued by reason of his servicepayments from the insurance company will not be made to the covered person within 10 business days of the claim for reimbursement. (i) Definitions. For the purpose of this Section 6.4, references to "the Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that any person who is or was a director or officer of such a constituent corporation or is or was serving at the request of such constituent corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Section 6.4, with respect to the extent that such person has been successful in defense of such actionresulting or proceeding,surviving corporation as he would if he had served the resulting or in defense of any claim, issue or matter raised in such litigation, (ii) may, in actions other than actions by orsurviving corporation in the rightsame capacity. For purposes of this Section 6.4, the following definitions shall apply (i) The term "other enterprise" shall include employee benefit plans. (ii) The term "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan. (iii) The term "serving at the request of the corporation (suchCorporation" shall include any service as derivative actions), be indemnified for expenses, judgments, fines, amounts paid in settlementa director or officer of the Corporation which imposes duties on, or involves services by, such litigation, even if he is not successful on the merits, if hedirector or officer with respect to an employee benefit plan, its participants, or beneficiaries. (iv) A person who acted in good faith and in a manner he reasonably believed to be in or notthe interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation". Section 6.5. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, (andpartnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a criminal proceeding, if he did not have reasonable cause to believe his conduct was unlawful), and (iii) mayfinancial interest, shall be indemnified by the corporationvoid or voidable solely for expenses (but not judgmentsthis reason, or settlements) of any action by the corporation or a derivative action (such as a suit by a stockholder alleging a breach bysolely because the director or officer of a duty owed tois present at or participates in 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 actionmeeting of the Board of Directors provide indemnificationor committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to employeeshis relationship or interest and other agentsas to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of 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 conducta majority of the person in question is knowingly fraudulent, deliberately dishonestdisinterested directors, even though the disinterested directors be less than a quorum; or willful misconduct. Minnesota Law provides for mandatory indemnification (as opposed(2) the material facts as to optional indemnification under Delaware Law) in generally the same circumstanceshis relationship or interest and 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 Lawcontract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and if the Boardcontract or transaction is specifically approved in good faith by vote of Directors so determines,the stockholders; or (3) the contract or transaction is fair as to provide indemnification protection to employees and other agentsthe Corporation as of Butler-Delaware. In addition, the Delaware Indemnification Provisions will enable Butler-Delaware in the future, iftime it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of Directors,a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to enter into indemnification agreements with its directors, officers, employeesinspect the same. Section 6.7. Amendment of Bylaws. The Bylaws of the Corporation may from time to time be repealed, amended or agents. As stated above,altered, or new Bylaws may be adopted, in either of the Company does not currently intendfollowing ways: (i) By the vote of a majority of the stockholders entitled to enter intovote at any such agreements. The shareholders should note that sinceannual or special meeting thereof; and (ii) By resolution adopted by a majority of the members of the Board of Directors will be beneficiariesthen in office; provided, however that the power of the Delaware Indemnification Provisions,directors to suspend, repeal, amend or otherwise alter the Board membersBylaws or any portion thereof may be vieweddenied as having a personal interest into any Bylaws or portion thereof enacted by the approval of the Reincorporationstockholders if at the potential expensetime of such enactment the shareholders. Possible Consequencesstockholders shall so expressly provide. CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting Secretary of IndemnificationButler National Corporation Kansas, a Kansas Corporation; and Directors' Limited Liability Generally The Delaware Director Liability Provision and(2) That the Delaware Indemnification Provisions could, under certain circumstances, have an adverse impact on Butler-Delaware. Inforegoing Bylaws, comprising nine (9) pages, constitute the event that Butler-Delaware is injuredoriginal bylaws of said Corporation, as a result of a Director's breach of fiduciary duties, including in connection with a takeover attempt,duly adopted at 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 Chairmanfirst meeting 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 votedthereof duly held 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 all29th day 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 theOctober, 2001. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and addressaffixed the seal of each beneficial owner on whose behalf the shareholder dissents. In that event, the rightssaid corporation this day 25th 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. October, 2001. _________________________ /S/ William A. Griffith (SEAL) William A. Griffith, Secretary