As filed with the Securities and Exchange Commission on March 7, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR
REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
INDIAN GAMING CORPORATION
(Exact name of registrant as specified in its charter)
Kansas 48-1242590
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
19920 West 161st Street, Olathe, Kansas 66062
(Address of Principal Executive Offices)(Zip Code)
Registrant's telephone number, including area code: (913) 780-4672
Copies of notices and other communications should be sent to:
Clark D. Stewart, Chief Executive Officer
Indian Gaming Corporation
19920 W. 161st Street
Olathe, Kansas 66062
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Including the related Preferred Stock Purchase Rights)
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Business.
The information required by this item is contained in the Information
Statement sections entitled "Summary of Certain Information,"
"Introduction," "The Distribution," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business of the Company" in the Information Statement dated January
31, 2000 (the "Information Statement") attached hereto as Annex A
and such sections are incorporated herein by reference.
Item 2. Financial Information.
The information required by this item is contained in the sections
entitled "Summary of Certain Information," "Capitalization," "Selected
Historical Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
Information Statement and such sections are incorporated herein by
reference.
Item 3. Properties.
The information required by this item is contained in the section
entitled "Business of the Company" in the Information Statement and
such section is incorporated herein by reference.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is contained in the sections
entitled "Security Ownership of Certain Beneficial Owners" and
"Management of the Company - Security Ownership of Directors and
Executive Officers" in the Information Statement and such sections are
incorporated herein by reference.
Item 5. Directors and Executive Officers.
The information required by this item is contained in the sections
entitled "Management of the Company - Directors" and
"Management of the Company - Executive Officers" in the
Information Statement and such sections are incorporated herein by
reference.
Item 6. Executive Compensation.
The information required by this item is contained in the section
entitled "Management of the Company - Directors' Compensation"
and "Executive Compensation" in the Information Statement and such
sections are incorporated herein by reference.
Item 7. Certain Relationships and Related Transactions.
The information required by this item is contained in the sections
entitled "Summary of Certain Information," "The
Distribution-Relationship Between Butler National Corporation and
the Company After the Distribution" and "Business of the Company -
Transactions and Agreements Between the Company and Butler
National Corporation" in the Information Statement and such sections
are incorporated herein by reference.
Item 8. Legal Proceedings.
The information required by this item is contained in the section
entitled "Business of the Company - Legal Proceedings" in the
Information Statement and such section is incorporated herein by reference.
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters.
The information required by this item is contained in the sections
entitled "Summary of Certain Information," "The Distribution -
Manner of Effecting the Distribution," "The Distribution - Results of
the Distribution," "The Distribution - Listing and Trading of Shares
of Company Common Stock," "The Distribution - Dividend Policy,"
"Security Ownership of Certain Beneficial Owners," "Management of
the Company - Security Ownership of Directors and Executive
Officers" and "Description of Company Capital Stock" in the
Information Statement and such sections are incorporated herein by
reference.
Item 10. Recent Sales of Unregistered Securities.
On April 30, 2001, the Company issued one share of its common stock,
in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act of 1933, for a total consideration of $100 to
Butler National Service Corporation (BNSC). The Company will
exchange 18,187,181 shares of its common stock and common stock
options to purchase 5,670,300 shares at $0.153 per share to the
Company for the contract rights and related obligations of the
operating Indian gaming business. BNSC will transfer the BNGC
common shares to Butler National Corporation for distribution to the
shareholders of Butler National Corporation. BNSC holds and will
transfer to the Company contract rights to manage an operating Indian
Gaming facility (The Stables) and the Company expects to manage all
operating Indian Gaming facilities developed by Butler National
Corporation and its subsidiaries when there is an effective contract
between the Tribe and BNSC. Butler National Service Corporation
was the sole shareholder of Indian Gaming Corporation before the
Distribution Date. Subsequent to the Distribution, Butler National
Corporation will hold 600,000 shares of capital stock of the Indian
Gaming Corporation.
Item 11. Description of Registrant's Securities to be Registered.
The information required by this item is contained in the sections
entitled "Summary of Certain Information," "The Distribution -
Listing and Trading of Shares of Company Common Stock," "The
Distribution - Dividend Policy," "Description of Company Capital
Stock," "Purposes and Effects of Certain Provisions of the Company's
Articles of Incorporation, Bylaws and Kansas Statutory Law" and
"Rights Plan" in the Information Statement and such sections are
incorporated herein by reference.
Item 12. Indemnification of Directors and Officers.
The information required by this item is contained in the section
entitled "Liability and Indemnification of Officers and Directors of the
Company" in the Information Statement and such section is
incorporated herein by reference.
Item 13. Financial Statements and Supplementary Data.
The information required by this item is contained (i) in the sections
entitled "Summary of Certain Information," "Capitalization," "Selected
Historical Financial Information," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
Information Statement and such sections are incorporated herein by
reference and (ii) in the Historical Financial Statements and Other
Financial Information incorporated by reference in Item 15 hereof, to
which reference is made and incorporated herein by reference.
Item 14. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) Financial Statements. The following Historical Financial
Statements of BUTLER NATIONAL SERVICE CORPORATION and the Pro
Forma Financial Statements of INDIAN GAMING CORPORATION are
included in the Information Statement and incorporated herein
by reference:
(i) Exhibit 20.2 - Historical Financial Statements of
Butler National Service Corporation at January 31, 2001(not
audited) and April 30, 2000:
-- Report of independent public accountants
-- Balance sheets
-- Statement of operations
-- Statement of shareholders' equity
-- Statement of cash flows
-- Notes to financial statements
(ii) Exhibit 20.3 - Pro Forma Financial Statements at
February 23, 2001 (inception):
-- Pro Forma balance sheets
-- Notes to Pro Forma financial statements
(b) Exhibits. See Exhibit Index following Signatures page in this
Registration Statement, which Exhibit Index is incorporated
herein by reference.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly
authorized.
Indian Gaming Corporation
(Registrant)
Date: March 2, 2001 By: /s/Clark D. Stewart,
President and Chief Executive Officer
Indian Gaming Corporation
EXHIBIT INDEX
FORM 10 REGISTRATION STATEMENT
Exhibit Description
2.1 ** Form of Distribution Agreement
3.1 ** Form of Articles of Incorporation of the
Indian Gaming Corporation
3.2 ** Form of By-Laws of Indian Gaming
Corporation
4.1 ** Form of Articles of Incorporation of the
Indian Gaming Corporation
(filed as Exhibit 3.1)
4.2 ** Form of By-Laws of Indian Gaming
Corporation (filed as Exhibit 3.2)
4.3 ** Form of Shareholder Rights Agreement
between Indian Gaming Corporation and
Wells Fargo Bank, Minnesota N.A. as
Shareholder Rights Agent
4.4 ** Form of Certificate representing Indian
Gaming Corporation Common Stock
10.1** Form of Distribution Agreement (filed as
Exhibit 2.1)
10.2** Form of Management Services Agreement
10.3** Form of Administrative Services Agreement
10.4** Form of Indian Gaming Corporation 2001
Non-qualified Stock Option Incentive Plan
10.5** Form of Employee 401(k) Plan
10.6** Form of Employment Agreement between
the Butler National Corporation
and its President
10.7** Form of Confidentiality and Non-Disclosure
Agreement between Butler National
Corporation and Indian Gaming Corporation
20.1 Index to Financial Statements
20.2 Fiscal Year 2000 Audited Financial
Statements
20.3 Fiscal Year 2001 Pro Forma Unaudited
Financial Statements
23.1 Consent of Independent Public Accountant
99.1 Information Statement
99.2 Safe Harbor Provisions
____________________________________
** To be filed by amendment
ANNEX A
PRELIMINARY INFORMATION STATEMENT DATED MARCH 2, 2001
RELATED TO THE DISTRIBUTION BY BUTLER NATIONAL CORPORATION OF
INDIAN GAMING CORPORATION COMMON STOCK
INFORMATION STATEMENT
Indian Gaming Corporation
$0.001 Par Value Common Stock
We are furnishing this Information Statement to you in
connection with the spin-off by Butler National Corporation
to holders of its $0.01 par value common stock the outstanding shares
of Indian Gaming Corporation ("IGC") common stock, $.001 par value
per share (the "Common Stock" owned by Butler National Corporation).
Butler National Corporation will effect the spin-off by distributing shares
of our Common Stock owned by Butler National Corporation to you.
That is why we also refer to the spin-off as the "Distribution". Upon
the effectiveness of the Distribution, we will manage the operation of
the Stables Indian Gaming business that is currently managed by Butler
National Service Corporation as a subsidiary of Butler National
Corporation. See "Business of the Company."
The number of shares of our Common Stock that will be
distributed to you will depend on the number of shares of Butler
National Corporation $0.01 par value common stock that you held of
record as of the close of business on May 24, 1999 (the "Record
Date"). Each holder of Butler National Corporation stock will receive
one share of our Common Stock for every share of $0.01 par value
common stock of Butler National Corporation held on the Record Date.
The Distribution is scheduled to occur at 12:01 a.m. on April 30, 2001
(the "Distribution Date"). No consideration will be paid by Butler
National Corporation shareholders for shares of our Common Stock.
There is no current trading market for our Common Stock.
Application has been made for listing of the shares of our Common
Stock (and associated preferred stock purchase rights) on the National
Association of Securities Dealers Automated Quotations System
("NASDAQ"), as an Over the Counter Bulletin Board ("OTCBB")
security under the symbol "IGAM".
NO SHAREHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. THIS INFORMATION
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES.
Shareholders of Butler National Corporation with inquiries
related to the Distribution should contact William A. Griffith,
Secretary, Butler National Corporation, 19920 West 161st Street,
Olathe, Kansas 66062, telephone: (913) 780-9595; or the Company's
stock transfer agent, Wells Fargo Shareholder Services, P.O. Box
64854, St. Paul, Minnesota 55164-0854, telephone (800) 468-9716.
The date of this Information Statement is April __, 2001.
INFORMATION STATEMENT
TABLE OF CONTENTS
Page
SUMMARY OF CERTAIN INFORMATION 6
The Distribution 6
Summary of Historical and Pro Forma Financial Information 9
INTRODUCTION 10
THE DISTRIBUTION 12
Reasons for the Distribution 12
Distribution Agent 14
Manner of Effecting the Distribution 14
Results of the Distribution 15
Certain Federal Income Tax Consequences of the
Distribution 15
Listing and Trading of Shares of Company Common Stock 16
Dividend Policy 16
Relationship Between Butler National Corporation and the
Company After the Distribution 16
Reasons for Furnishing the Information Statement 17
FINANCING 17
RISK FACTORS 18
Lack of Recent Operating History as an Independent Entity 18
Specific Industry Concentration 19
Dependence Upon One Tribal Enterprise - Competition 19
No Public Market for Common Stock 20
Dividend Policy 20
Company Indebtedness 20
Key Persons - Relationships With Tribes 21
Limited Recourse Against the Tribes and Tribal Assets 21
Management Agreement - Regulatory Control and Control of
the Company 21
Termination and/or Buyout of Management Agreement 23
Indian Lands Risks 23
Possible Anti-takeover Effects of Certain Articles and
By-Law 24
Provisions and the Rights Plan 24
Indian Gaming Risks 24
Other Risks Related to Our Separation from Butler
National Corporation 25
CAPITALIZATION 26
SELECTED HISTORICAL FINANCIAL INFORMATION 27
Page
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 29
BUSINESS OF THE COMPANY 30
General 30
Business Strategy 32
Properties 33
Principal Services 33
Dependence Upon One Tribal Enterprise 33
Competition 33
Environmental Compliance 34
Employees 34
Legal Proceedings 34
Transactions and Agreements Between the Company and
Butler National Corporation 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 36
MANAGEMENT OF THE COMPANY 37
Directors 37
Committees of the Board of Directors 38
Directors Compensation 38
Executive Officers 38
Security Ownership of Directors and Executive Officers 39
EXECUTIVE COMPENSATION 40
Historical Compensation 40
Option Grants, Exercises and Holdings 40
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements 41
Compensation Committee Interlocks and Insider
Participation 41
Related-Party Transactions 41
Stock Options 41
Non-qualified Stock Option Incentive Plan 42
Employment Agreement 44
Defined Contribution Plan 44
DESCRIPTION OF COMPANY CAPITAL STOCK 45
Authorized Capital Stock 45
Common Stock 45
Rights 45
Transfer Agent and Registrar 45
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE
COMPANY'S ARTICLES OF INCORPORATION, BY-LAWS AND KANSAS
STATUTORY LAW 46
Page
General 46
Number of Directors; Removal; Vacancies 46
Classified Board of Directors 46
Shareholder Action by Written Consent; Special Meetings 47
Advance Notice for Raising Business or Making Nominations
at Annual Meetings 48
Amendments to the Articles of Incorporation 48
Amendments to By-Laws 48
Additional Common Stock 48
Kansas Anti-Takeover Statutes 48
Certain Anti-Takeover Effects 49
RIGHTS PLAN 50
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
OF THE COMPANY 52
Limitation on Liability of Directors Indemnification 52
Indemnification 52
AVAILABLE INFORMATION 53
INDEX TO HISTORICAL FINANCIAL STATEMENTS AND OTHER
FINANCIAL INFORMATION F-1
A. Documents filed as part of the Form 10 Report.
1. Financial Statements of Butler National Service
Corporation Report of Independent Accountants F-2
Balance Sheets as of January 31, 2001 (not
audited) and April 30, 2000 F-3
Statement of Operations for the year ended
January 31, 2001 (not audited) and April 30,
2000 F-4
Statement of Cash Flows for the year ended
January 31, 2001 (not audited) and April 30,
2000 F-5
Notes to Financial Statements F-6
2. Pro Forma Financial Statements of Indian Gaming
Corporation at February 23, 2001
Pro Forma balance sheets F-12
Notes to Pro Forma financial statements F-13
3. All other financial statements and schedules
not listed have been omitted because the
required information is inapplicable or the
information is presented in the financial
statements or related notes.
CAUTIONARY STATEMENTS FOR PURPOSE OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 F-15
EXHIBIT INDEX TO THE FORM 10 REGISTRATION STATEMENT
Exhibit Description
2.1 ** Form of Distribution Agreement
3.1 ** Form of Articles of Incorporation of the Indian Gaming
Corporation
3.2 ** Form of By-Laws of Indian Gaming Corporation
4.1 ** Form of Articles of Incorporation of the Indian Gaming
Corporation (filed as Exhibit 3.1)
4.2 ** Form of By-Laws of Indian Gaming Corporation (filed
as Exhibit 3.2)
4.3 ** Form of Shareholder Rights Agreement between Indian
Gaming Corporation and Wells Fargo Bank, Minnesota N.A. as
Shareholder Rights Agent
4.4 ** Form of Certificate representing Indian Gaming
Corporation Common Stock
10.1** Form of Distribution Agreement (filed as Exhibit 2.1)
10.2** Form of Management Services Agreement
10.3** Form of Administrative Services Agreement
10.4** Form of Indian Gaming Corporation 2001 Non-
qualified Stock Option Incentive Plan
10.5** Form of Employee 401(k) Plan
10.6** Form of Employment Agreement between the Butler
National Corporation and its President
10.7** Form of Confidentiality and Non-Disclosure
Agreement between Butler National Corporation and Indian
Gaming Corporation
20.1 Index to Financial Statements
20.2 Fiscal Year 2000 Audited Financial Statements
20.3 Fiscal Year 2001 Pro Forma Unaudited Financial Statements
23.1 Consent of Independent Public Accountant
99.1 Information Statement
99.2 Safe Harbor Provisions
____________________________________
** To be filed by amendment
SUMMARY OF CERTAIN INFORMATION
The following is a summary of some of the information
contained in this Information Statement. Capitalized terms used but
not defined in the Summary are defined elsewhere in this Information
Statement. In addition to this summary, we urge you to read the entire
Information Statement carefully, especially the risks of investing in our
Common Stock discussed under "Risk Factors" and our financial
statements.
We are sending you this document because you were a record
holder of Butler National Corporation common stock on the Record
Date. When we mention Butler National Corporation in this
Information Statement, we are referring to Butler National Corporation
and all of its subsidiaries, including Butler National Service
Corporation. This document describes Indian Gaming Corporation's
business, the risks associated with that business, the relationship
between Butler National Corporation and Indian Gaming Corporation
after the Distribution, and other information to assist you in evaluating
the risks and benefits of holding or disposing of Indian Gaming
Corporation Stock.
We describe in this Information Statement the business to be
contributed to us by Butler National Corporation immediately prior to
the Distribution, described under "The Distribution," as if it were
our business for all historical periods described. Following the
Distribution, we will be an independent public company, and Butler
National Corporation will have less than 3.3 percent of continuing
stock ownership in us. Accordingly, our historical financial results as
part of Butler National Corporation contained herein may not reflect
our financial results in the future as an independent company, or what
our financial results would have been had we been a stand-alone
company during the periods presented.
The Distribution
Distributing Company Butler National Corporation, a
Delaware corporation ("Butler National
Corporation"), formed in 1960, has
its corporate headquarters at 19920
West 161st Street, Olathe, Kansas
66062. Butler National Corporation's
current product lines and services
include Aircraft Modification including
Classic Aviation Products; Avionics;
Indian Gaming; Scada Systems and
Monitoring Services; and Construction,
Business Consulting and Temporary
Services. References herein to Butler
National Corporation include its
consolidated subsidiaries, including
Butler National Service Corporation,
except where the context otherwise
requires.
Distributed Company Indian Gaming Corporation is a recently
formed Kansas corporation which will
provide contract management services
for the existing Indian gaming business
that currently operates and is managed
by Butler National Service Corporation as a
subsidiary of Butler National
Corporation (the "Indian Gaming
Management"). At the present time,
only one gaming establishment is
managed by Butler National Service
Corporation. References herein to the
Company prior to the Distribution mean
Butler National Service Corporation, a
subsidiary of Butler National
Corporation, conducting the Indian
Gaming Management. References
herein to Indian Gaming Corporation
following the Distribution include its
operation as a former consolidated
subsidiary of Butler National Corporation
except where the context otherwise requires.
Distribution Ratio In the Distribution, each holder of Butler
National Corporation common stock will receive
one share of our Common Stock, and the
associated preferred stock purchase right,
for every one share of Butler National
Corporation $0.01 par value common stock held
on the Record Date.
Securities to be
Distributed Based on 18,187,181 shares and rights
to shares of Butler National Corporation
common stock outstanding on May 24,
1999, 18,187,181 shares of our Common Stock
plus associated preferred stock purchase rights
pursuant to a shareholder rights plan (the
"Rights" and, collectively with the
distributed Common Stock, the
"Shares") will be distributed. The
Shares to be distributed will constitute
all of the outstanding Shares of the
Indian Gaming Corporation
immediately after the Distribution.
Fractional Share
Interests There are no Fractional Shares of our
Stock. Fractional Shares will not be
distributed.
Record Date May 24, 1999 (close of business).
Distribution Date April 30, 2001 (12:01 a.m., Central
Standard Time).
Tax Consequences Butler National Corporation did not
obtain an opinion concerning the
taxable nature of the Distribution.
Butler National Corporation
shareholders will be required to
apportion their tax basis in the Butler
National Corporation common stock
held immediately before the
Distribution between such common
stock and the our Common Stock
received in the Distribution, based on
the relative fair market values of such
stock as of the Distribution Date. As
part of the distribution, we have
assumed that the value of our Common
Stock is 20 percent of the value of
Butler National Corporation $0.01
common stock before the Distribution.
See "The Distribution--Certain Federal
Income Tax Consequences of the
Distribution."
Trading Market and
Symbol Application has been made for listing
the Shares on NASDAQ/OTCBB under
the symbol "IGAM".
Distribution Agent,
Transfer Agent, and
Registrar for the Shares Wells Fargo Bank Minnesota NA will
be the Distribution Agent, transfer agent
and registrar for the shares of our
Common Stock.
Dividends We do not anticipate paying any
dividends on our Common Stock in the
foreseeable future. The payment and
amount of dividends after Distribution,
however, will be subject to the
discretion of our Board of Directors.
Certain Factors See "Risk Factors" for a discussion of
certain factors that should be considered
by you in connection with the Shares received
in the Distribution.
Anti-Takeover Provisions Our Articles of Incorporation and our
By-Laws, as well as our shareholder
Rights Plan contain provisions that may
have the effect of discouraging an
acquisition of control of us if not
approved by our Board of Directors.
Such provisions may also have the
effect of discouraging third parties from
making proposals involving an
acquisition or a change of control,
although such proposals, if made, might
be considered desirable by a majority of
our shareholders. Such provisions could
further have the effect of making it
more difficult for third parties to cause
the replacement of our current
management without the concurrence of
the Board of Directors. These
provisions have been designed to enable
us to develop our business and foster our
long-term growth without disruptions
caused by the threat of a takeover not
deemed by our Board of Directors to be
in the best interests of our
shareholders. See "Description of
Company Capital Stock," "Purposes and
Effects of Certain Provisions of our
Articles of Incorporation, By-Laws and
Kansas Statutory Law" and "Rights
Plan."
Principal Office of
Company INDIAN GAMING CORPORATION,
19920 West 161st Street, Olathe, Kansas
66062; telephone: (913) 780-9595
prior to the Distribution and (913)
780-4672 following the Distribution.
Relationship with Butler
National Corporation
after the Distribution Butler National Corporation will own
600,000 shares of our Common Stock,
which is approximately 3.3 percent of
our outstanding Common Stock after
the Distribution. We will have entered
into several agreements with Butler
National Corporation, however, for the
purpose of giving effect to the
Distribution and defining our ongoing
relationships. These include agreements
include a Management Services
Agreement in which we expect to
receive certain contract rights to
manage and fees related to the Stables.
We will also assume obligations to Miller
& Schroeder of $1,026,138 upon the
Distribution related to the Stables.
Pursuant to the Distribution Agreement, Butler
National Corporation generally will indemnify us
against liabilities, litigation and claims
arising out of all Butler National
Corporations retained operations, and
we generally will indemnify Butler
National Corporation against liabilities,
litigation and claims arising out of the
Indian Gaming Management business.
Additional agreements between us and
Butler National Corporation will relate
to employee benefit matters,administrative
services, insurance, and other miscellaneous
matters. See "The
Distribution-Relationship Between
Butler National Corporation and the
Company After the Distribution" and
"Business of the
Company--Transactions and
Agreements between the Company and
Butler National Corporation."
SUMMARY OF PRO FORMA FINANCIAL INFORMATION
The following table sets forth certain historical financial data
derived from Butler National Corporation's consolidated financial
statements for the fiscal year ended April 30, 2000 (audited), and the
nine-month period ended January 31, 2001 and 2000 (not audited). The
historical financial data for the year ended April 30, 2000 (audited),
and the nine months ended January 31, 2001 (not audited), and 2000 (not
audited), were derived from the financial statements of the Indian Gaming
Management business included elsewhere in this Information
Statement. In the opinion of our management, the historical financial
data of the Indian Gaming Management business as of, and for the year
ended April 30, 2000, (audited) and as of and for the nine months ended
January 31, 2001 (not audited) and 2000 (not audited), include all adjusting
entries (consisting only of normal recurring adjustments) considered
necessary to present fairly the information. The historical financial data
are not necessarily indicative of the results of operations for any future
period. Furthermore, the results of operations for the nine months ended
January 31, 2001 should not be regarded as indicative of the results that
may be expected for the full year. The summary financial information
should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations", the
unaudited pro forma financial statements and the notes thereto and the
financial statements and the notes thereto included elsewhere in this
Information Statement.
The summary income statement data for the year ended April 30,
2000 (audited) and the nine months ended January 31, 2001 and 2000 (not
audited), and the summary balance sheets at April 30, 2000 (audited) and
January 31, 2001 (not audited) and 2000 (not audited), reflect the effects on
the historical results of the Indian Gaming Management business of: (i) the
receipt of contract management rights and fees related to Butler National
Service Corporation's existing Indian Gaming Management operations (the
Stables); (ii) indebtedness associated with the contract management rights
and the Stables as described in "Business of the Company - Transactions and
Agreements Between the Company and Butler National Corporation";
(iii) the distribution of the Shares to Butler National Corporation
shareholders; and (iv) additional expenses expected to be incurred by
us once operating as a stand-alone business.
The summary pro forma financial data are not necessarily
indicative of the results of operations or financial position of the Indian
Gaming Management business after the Distribution and it does not
reflect the many significant changes that may occur after the
Distribution with our financing plans and cost structures.
Statement of operations information
Year Nine months Nine months
April 30, January 31, January 31,
2000 2000 2001
(audited) (not audited) (not audited)
Revenue $ 384,041 $ 245,710 $ 272,615
Sales, General and Administrative
Expense 353,827 267,176 249,934
Net Ordinary Income 30,214 (21,466) 22,681
Interest Income 154,920 115,315 106,296
Interest Expense (151,882) (102,925) (102,261)
Net Income Before Tax 33,252 (9,076) 26,716
Net income $ 33,252 $ (9,076) $ 26,716
Balance sheet information April 30, January 31, January 31,
2000 2000 2001
(audited) (not audited) (not audited)
Total assets $ 1,630,516 $ 1,684,427 $ 1,240,733
Total debt 1,286,065 1,396,024 1,026,138
Total shareholders' equity 36,270 (6,058) 62,986
INTRODUCTION
We are engaged in the ("Indian Gaming Management")
business of providing management services to Indian tribes in
connection with the Indian Gaming Regulatory Act of 1988, PL 100-
497, 102 Stat. 2467, 25 U.S.C. 2701-2721 (sometimes referred to as
"IGRA"). The Indian Gaming Management business has historically
operated by Butler National Service Corporation, a wholly-owned
subsidiary of Butler National Corporation. Upon the Distribution, we will
receive from Butler National Service Corporation, a subsidiary of
Butler National Corporation, contract rights to manage for a fee the
Stables casino, an Indian joint venture between the Miami Tribe of
Oklahoma and the Modoc Tribe of Oklahoma. We will also enter into
an agreement with Butler National Corporation that gives us certain
rights of first offer to acquire contract rights to manage other Indian
tribal gaming ventures on terms that are to be determined at the time of
offer, should such future gaming establishments become operational.
The prospective rights of first offer shall depend upon factors related to
the start up, approval, construction and operation of each proposed
gaming establishment. There is no guarantee that future Indian gaming
establishments will be constructed or become operational.
The rights to manage the Stables casino arise from the
Management Agreement. During fiscal 1997, Butler National
Corporation through its subsidiary Butler National Service Corporation
received approval from the National Indian Gaming Commission
("NIGC") of the Management Agreement between the Miami Tribe of
Oklahoma, the Modoc Tribe of Oklahoma and Butler National
Corporation's subsidiary, Butler National Service Corporation, to
construct and manage a Class II (High Stakes Bingo) and Class III
(Off-Track Betting) establishment now known as the Stables Casino within
the territorial boundaries of teh City of Miami, Oklahoma. The Management
Agreement for the Stables casino is authorized and approved by the NIGC
pursuant to the Indian Gaming Regulatory Act of 1988. The Management
Agreement between an Indian tribe (the owner of the casino) and Butler
National Service Corporation (the manager) is the final approval document
issued by the National Indian Gaming Commission ("NIGC") before Indian
gaming is authorized under the Management Agreement.
We were incorporated by Butler National Service Corporation
on February 23, 2001. Our business purpose is to pursue the
management of Indian gaming establishments owned and operated by
Indian tribes under the Indian Gaming Regulatory Act of 1988 (IGRA)
as administered by the National Indian Gaming Commission (NIGC).
As a part of the distribution, we will receive contract rights to
manage and fees related to the Stables gaming establishment, located in
Miami, Oklahoma. Butler National Service Corporation has operated the
Stables since its opening day. Under the terms of the management agreement,
the Manager is responsible for all operating management of the establishment
for a fee equal to thirty percent of the net income, if any, including
compliance with all federal laws and regulations.
Butler National Corporation will continue its business
segments related to the pre-operation of the Indian gaming facilities.
Butler National Corporation has formed subsidiary companies for the
purpose of potential development of other Indian gaming opportunities.
Butler National Service Corporation was one of the subsidiaries
responsible for the development of the Stables. These Butler National
Corporation companies are responsible for:
1. obtaining approval for use of the Indian land from
the beneficial owners;
2. research and documentation of the Indian heritage of
the Indian land;
3. assisting the Indian tribe with the organization and
documentation to operate a gaming establishment;
4. obtaining approval from the NIGC, the Bureau of
Indian Affairs (BIA) and other federal authorities to
operate a gaming establishment;
5. obtaining approval of a Class III compact with the
state within which territorial boundary the Indian
land is located to allow operation of a Class III
gaming establishment;
6. assisting the Indian tribe with the design and
engineering required to construct the buildings and
related features of the gaming complex;
7. arranging financing for the approval, design,
construction and working capital to open the
establishment;
8. arranging and supervising the construction of the
gaming complex; and
9. planning, staffing, train and opening the
establishment.
We expect to receive rights of first offer to receive contract
management rights for each prospective establishment after opening
day of the establishment, through the term of the management contract
with the Indian tribe. We also expect to continue to provide management
services to these establishments under renewed agreements after the initial
term. The contractual rights and obligations between Butler National Service
Corporation and us are described in the Management Services
Agreement (see Exhibit 10.2).
Butler National Corporation's ventures with Indian tribes
generally begin with management consulting engagement letters. The
management consulting engagement letters provide for the
advancement of funds to the Indian tribes by Butler National
Corporation and its subsidiaries for professional services, fees, licenses,
travel, administrative costs, documentation, procedure manuals,
purchases of property and equipment and other costs related to the
approval, construction and opening of an establishment. The pre-
opening management consulting engagement letters are not part of the
spin-off to us. Butler National Corporation, through its subsidiaries,
maintains the management, design and construction services necessary
for development of potential gaming establishments. Advances are
considered to be a receivable from the tribe, and to be repaid by the
tribe from the funding received during the operation of the enterprise.
If future Indian gaming establishments are opened, Butler National
Corporation may enter into an agreement with us for contract
management rights to the business, subject to terms to be determined
at the time of the prospective transfer.
Upon the Distribution, we will receive Butler National
Service Corporation's contract rights to manage the Stables for a fee
equal to thirty percent of the net income, if any. At the Distribution, we
would assume obligationsto Miller & Schroeder of $1,026,138 of Butler
National Service Corporation.
Butler National Corporation and Butler National Service
Corporation follow the law and regulations of the Indian Gaming
Regulatory Act of 1988, and the state laws as they may apply. We
intend to do the same. At this time, we do not foresee any substantial
risks associated with maintaining and obtaining any required licenses needed
to assist the Indian tribe with the operation of the Stables casino.
However, you are asked to read the entire Information Statement carefully,
especially the risks of investing in our Common Stock discussed under "Risk
Factors" and our financial statements.
Construction of the Stables casino was completed, and the
establishment opened in September of 1998. Butler National
Corporation and Miller & Schroeder, a private capital firm, provided
the necessary funds to Butler National Service Corporation to construct
the facilities, and they are being repaid the principal plus interest out of
the profits of the operation. The principal amount of $3.5 million
carries an interest rate of prime plus two percent. In addition to interest,
Butler National Service Corporation is entitled to receive a thirty percent
share of the profits from the Stables for past and present management services
provided to the tribes. Upon Distribution, we will receive from Butler
National Service Corporation contract rights to manage subject to the
existing management agreement, for a fee of thirty percent of net income, if
any, and assume obligations to Miller & Schroeder of $1,026,138, subject to
the terms of the Management Services Agreement and the Distribution
Agreement. (see Exhibits 2.1 and 10.2).
The Board of Directors of Butler National Corporation has
declared a distribution (the "Distribution"), payable to the holders of
Butler National Corporation $0.01 par value common stock at the close
of business on May 24, 1999 (the "Record Date"), of one share of our
Common Stock, for every one share of common stock of Butler
National Corporation (the "Distribution Ratio") held on the Record
Date. The 18,187,181 Shares to be distributed will constitute all of the
outstanding Shares of the Company immediately after the Distribution.
See "Description of Company Capital Stock" and "Rights Plan" for
information about the Shares to be distributed. The Distribution is
scheduled to occur at 12:01 a.m. on April 30, 2001 (the"Distribution Date" ).
See "The Distribution - Manner of Effecting the Distribution." Following
the Distribution, we will be an independent company whose Common
Stock shares may be publicly traded on NASDAQ/OTCBB. Butler
National Corporation has reserved the right to abandon or postpone the
Distribution at any time prior to the Distribution Date. See "The
Distribution - Manner of Effecting the Distribution."
Our principal executive offices are located at 19920 West
161st Street, Olathe, Kansas 66062; telephone: (913) 780-9595 prior to
the Distribution and (913) 780-4672 following the Distribution.
THE DISTRIBUTION
Reasons for the Distribution
The primary business purpose for the Distribution is to enable
us to independently pursue our competitive and operational challenges.
Butler National Corporation's board of directors has determined that
separation of us from Butler National Corporation's other businesses is
in the best interests of Butler National Corporation and its shareholders.
The separation will allow us to focus greater management attention and
resources on opportunities in the Indian gaming market, and to
focus on better managing our cost structure. Butler National
Corporation will similarly benefit by being able to focus on its retained
businesses and its growth opportunities.
Different Business
Butler National Corporation operates in the five major
business segments described below.
a. Aircraft Modifications - principally includes the
modification of customer and company owned business-
size aircraft from passenger to freighter configuration,
addition of aerial photography capability, and stability
enhancing modifications for Learjet, Beechcraft, Cessna,
and Dasault Falcon aircraft along with other
modifications. Butler National Corporation provides
these services through its subsidiary, Avcon Industries,
Inc. Avcon Industries, Inc. also acquires, modifies and
resells aircraft, principally Learjets.
b. Avionics (Classic Aviation Products)- principally
includes the manufacture of airborne radio and
instrument switching units used in DC-9, DC-10, DC-
9/80, MD-80, MD-90 and the KC-10 aircraft. The
avionics segment also manufactures the Transient
Suppression Device for Classic Boeing 747 Aircraft.
Butler National Corporation provides these services
through its subsidiary, Butler National Corporation -
Tempe, Arizona formerly Woodson Avionics, Inc.
("Switching Units", "Avionics" or "Classic Aviation
Products").
c. Gaming - principally includes business management,
design and construction services, and advances to Indian
tribes in connection with the Indian Gaming Regulatory
Act of 1988. Butler National provides these services and
advances through its Butler National Service
Corporation subsidiaries. The segment of this business
that involves the management of operating Indian
gaming establishments is the business that is the subject
of the Distribution. See "Business of the Company".
d. SCADA Systems and Monitoring Services -
principally includes the monitoring of water and
wastewater remote pumping stations through electronic
surveillance for municipalities and the private sector and
related repair services. Butler National Corporation
provides these services through its subsidiary, Butler
National Services, Inc.
e. Temporary Services - provides temporary employee
services for corporate clients. Butler National
Corporation provides these services through its
subsidiary, Butler Temporary Services, Inc.
Our business is retail customer service oriented while Butler National
Corporation's business is the deisng and manufacturing of technical aviation
products. As a result, these businesses experience different growth
characteristics, sell to different customers, and have different operational
needs. Those differences are expected to continue in the
future. Butler National Corporation's management believes that the
different needs require inherently different strategies in order to
maximize their long-term value. Consequently, Butler National
Corporation's current structure, which involves the operation of each
of these segments under a corporate consolidated group, is not the most
effective structure to design and implement the distinct strategies
necessary to operate each segment successfully in a manner that
maximizes its long-term value to the shareholders.
Additional Benefits
We believe several additional benefits may result from the
separation. The ability for Butler National Corporation and us to
pursue strategies and other investment opportunities is expected to be
enhanced by providing differentiated access to the capital markets,
such as using our own securities for a transaction. We will also be
able to create more focused strategies that meet the different needs of
the business.
Additional business purposes for the Distribution include the
following:
1. The Distribution will permit Butler National
Corporation to focus on its core business, the
manufacturing, certification and sale of products for
Classic Aircraft. Conversely, we will be able to
pursue our own business strategies and objectives
tailored to our unique financial and operating
requirements in the management of Indian gaming
pursuant to IGRA.
2. We will gain direct access to the capital markets to
finance our operational and financial requirements
that are independent of Butler National Corporations
requirements.
3. It is expected that as a stand-alone operation, we will
have greater flexibility in our capital structure and
leverage capability, as well as formulating
appropriate performance criteria.
4. Butler National Corporation and we recognize that a
business unit only adds value to an enterprise by
providing or accruing tangible benefits, such as
integrating efficiencies through shared skills or
activities, that offset the inherent cost of lost
independence. Butler National Corporation is an
aviation-oriented business in which there are no
significant synergies between Butler National
Corporation and us in terms of customer base,
operations or strategic plans.
5. Segregating us as an independent entity will provide
Butler National Corporation shareholders with a new
source of value by gaining market recognition for the
independent worth of us. Butler National
Corporation management believes that heretofore our
market value has not been reflected in the market
price of Butler National Corporation common stock.
Distribution Agent
The distribution agent ("Distribution Agent") is Wells Fargo
Bank Minnesota NA, 161 North Concord Exchange, South St. Paul,
Minnesota 55075, telephone: (651) 450-4064.
Manner of Effecting the Distribution
The Distribution will be made on the Distribution Date to
shareholders of record of Butler National Corporation at the close of
business on the Record Date. Prior to the Distribution Date, Butler
National Corporation will deliver outstanding Shares to the
Distribution Agent for distribution. The Distribution Agent will mail,
beginning on or about the Distribution Date, certificates representing
the Shares to Butler National Corporation shareholders of record on the
Record Date. Each Butler National Corporation shareholder will
receive one Share for every one share of Butler National Corporation
$0.01 par value common stock held on the Record Date. Butler
National Corporation shareholders will not be required to pay for
Shares received in the Distribution, or to surrender or exchange Butler
National Corporation common stock in order to receive our Shares. No
vote of Butler National Corporation shareholders is required or sought
in connection with the Distribution, and Butler National Corporation
shareholders have no appraisal rights in connection with the
Distribution. In addition, at the time of the Distribution, each
outstanding vested option to purchase Butler National Corporation
stock held on the Record Date by the current employees of Butler
National Corporation (the "Qualified" individuals) will be
converted into a similar option for our Common Stock. Qualified
holders of common stock options to purchase Butler National
Corporation common stock on the Record Date will be entitled to
receive one option to purchase our Common Stock, exercisable only
when, and subject to the terms of the 2001 Indian Gaming Corporation
Non-qualified Stock Option Plan. (see Exhibit 10.4).
There are no fractional shares of Butler National Corporation
common stock and therefore there will be no fractional shares of our
Common Stock.
IN ORDER TO BE ENTITLED TO RECEIVE OUR SHARES IN THE DISTRIBUTION,
BUTLER NATIONAL CORPORATION SHAREHOLDERS MUST BE SHAREHOLDERS
OF $0.01 PAR VALUE BUTLER NATIONAL CORPORATION COMMON STOCK AT THE
CLOSE OF BUSINESS ON THE RECORD DATE, MAY 24, 1999.
Results of the Distribution
After the Distribution, we will be an independent,
publicly-traded company, owning certain contract rights for the
management of the Indian gaming business at the Stables casino. The
number and identity of our shareholders immediately after the
Distribution will be the same as the number and identity of
shareholders of Butler National Corporation on the Record Date.
Immediately after the Distribution, we expect to have approximately
3,500 holders of record of Shares and approximately 18,187,181
Shares outstanding, based on the number of record shareholders and
outstanding shares of common stock of Butler National Corporation on
May 24, 1999, and the Distribution Ratio of one Share of our Common
Stock for every one share of Butler National Corporation $0.01 par
value common stock. The Distribution will not affect the number of
outstanding shares of Butler National Corporation common stock or
any rights of Butler National Corporation shareholders as such.
In addition, at the time of the Distribution, each outstanding
vested common stock option to purchase Butler National Corporation
stock held by Qualified individuals on the Record Date will be
converted into a similar option for our Common Stock. At the
Distribution Date, 5,670,300 of our common stock options at $0.153 per
share will be outstanding.
Certain Federal Income Tax Consequences of the Distribution
While no ruling from the Internal Revenue Service has been
requested or obtained, Butler National Corporation expects that the
Distribution will have the following attributes:
1. A gain or loss should not be recognized by, or be
includible in the income of, a shareholder of Butler
National Corporation common stock solely as the result
of the receipt of our Common Stock in the Distribution
because the we do not feel the ownership of the
shareholder changed at the Distribution. Every effort
has been made to place the shareholder in the same relative
equity position of ownership before and after the Distribution.
This included potential risks of dilution, shareholder rights
plan, assets, and liabilities;
2. The basis of the Butler National Corporation common
stock and our Common Stock in the hands of Butler
National Corporations shareholders immediately after
the Distribution will be the same as the basis of the
Butler National Corporation common stock immediately
before the Distribution, allocated between the common
stock of Butler National Corporation and us in
proportion to their relative fair market values on the date
of the Distribution
We have used a twenty to eight percent ratio between our value
and the value of Butler National Corporation. We believe
the ratio is reasonable measure of value based upon an
analysis of the financial statements; and
4. The holding period of our Common Stock received by
Butler National Corporation shareholders should include
the holding period of their Butler National Corporation
common stock, provided that such Butler National
Corporation common stock is held as a capital asset on
the date of the Distribution.
Although Butler National Corporation has no ruling from the
Internal Revenue Service relating to the qualification of the
Distribution as a tax-free transaction, we are not aware of any facts or
circumstances that would cause the above representations and
assumptions to be untrue.
NO RULING OF THE INTERNAL REVENUE SERVICE HAS BEEN REQUESTED OR OBTAINED
WITH RESPECT TO THE TAX CONSEQUENCES OF THE DISTRIBUTION, AND NONE WILL BE
SOUGHT. THIS SUMMARY DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX
CONSEQUENCES (INCLUDING THOSE THAT MAY APPLY TO PARTICULAR CATEGORIES OF
SHAREHOLDERS). NOR DOES THIS SUMMARY PURPORT TO COVER ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF OTHER JURISDICTIONS.
EACH SHAREHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO HIM OR HER, INCLUDING
APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND HOW POSSIBLE
CHANGES IN TAX LAWS MAY AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE.
Listing and Trading of Shares of Company Common Stock
There is not currently a public market for our Common Stock.
We may be approved, subject to issuance, to list our Common Stock on
the over-the-counter bulletin board under the symbol "IGAM".
We cannot assure you as to the price at which our Common
Stock may trade on or after the Distribution Date. The price at which
such stock trades may fluctuate significantly until our Common Stock
is fully distributed and an orderly market develops. The combined
trading prices of the our Common Stock and Butler National
Corporation common stock held by shareholders after the Distribution
may be less than, equal to or greater than the trading price of Butler
National Corporation common stock prior to Distribution.
The Shares distributed to Butler National Corporation
shareholders will be freely transferable, except for Shares received by
persons who may be deemed to be our "affiliates" under the Securities
Act of 1933, as amended (the "Securities Act"). Persons who may be
deemed to be our affiliates after the Distribution generally include
individuals or entities that control, are controlled by, or are under
common control with the Company and may include our directors and
certain officers, as well as our principal shareholders. Persons who are
our affiliates will be permitted to sell Shares owned by them only
pursuant to an effective registration statement under the Securities Act
or an exemption from the registration requirements of the Securities
Act, such as the exemption afforded by Section 4(1) of the Securities
Act and Rule 144 thereunder. See "Security Ownership of Certain
Beneficial Owners" and "Management of the Company - Security
Ownership of Directors and Executive Officers."
Dividend Policy
We do not anticipate paying any dividends on our Common
Stock in the foreseeable future because we expect to retain future
earnings for use in the operation of our business. Our payment and the
amount of dividends, however, will be subject to the discretion of our
Board of Directors and will depend, among other things, upon our
results of operations, financial condition, cash requirements, future
prospects and other factors which may be considered relevant by our
Board of Directors. Certain covenants in our credit agreements may
restrict the payment of dividends by limiting the amount of dividends
and/or by requiring the maintenance of certain financial ratios. See
"Financing."
Relationship Between Butler National Corporation and the
Company After the Distribution
After the Distribution, Butler National Corporation own
approximately 3.3% of our stock. We have entered into a series of
agreements with Butler National Corporation providing for the transfer
of certain rights to and the assumption of certain liabilities by us. As a
result of these arrangements, we will obtain substantially all of the
rights and liabilities of the Indian Gaming Management business at the
Stables casino as reflected in the financial information of Butler
National Service Corporation and related notes included herein. (see
the "Capitalization" section and Exhibit 20.2). This will include the
transfer of certain rights taken subject to $1,177,747 of indebtedness,
and the obligations in the Administrative Services Agreement and the
Distribution Agreement, in each case relating to the Indian Gaming
Management business at the Stables casino. (see Exhibit 2.1 and
Exhibit 10.3). See also "Summary of Historical and Pro Forma
Financial Information," "Capitalization" and "Business of the
Company - Transactions and Agreements Between the Company and
Butler National Corporation." See also the Historical Financial
Statements and notes thereto and the Unaudited Pro Forma Financial
Information and notes thereto included elsewhere herein.
In addition, the parties have provided for certain
cross-indemnities principally to place financial responsibility for the
Indian Gaming Management at the Stables casino with us and to place
financial responsibility for other Butler National Corporation
businesses with Butler National Corporation and its other subsidiaries.
(see Exhibit 2.1).
We also will have entered into agreements with Butler
National Corporation that will, as of the Distribution, fix the respective
responsibilities of Butler National Corporation and us regarding the
following: employee benefit matters, taxes, intellectual property rights,
administrative services, insurance, potential litigation or other
claims, ongoing supply arrangements and other miscellaneous matters.
Following the Distribution Date, we and Butler National Corporation
may enter into additional commercial transactions pursuant to
arms-length negotiations in the ordinary course of business. See
"Business of the Company - Transactions and Agreements Between
the Company and Butler National Corporation."
Reasons for Furnishing the Information Statement
This Information Statement is being furnished solely to provide
information to shareholders of Butler National Corporation who will receive
Shares in the Distribution. It is not, and is not to be construed as, an
inducement or encouragement to buy or sell any securities of Butler National
Corporation or Indian Gaming Corporation. The information contained
in this Information Statement is believed to be accurate as of the date
set forth on the cover of this Information Statement. Changes may occur
after that date, and neither Butler National Corporation nor we will update
the information except as required by law in the normal course of their
respective public disclosure practices.
FINANCING
Our financing requirements, as a segment of Butler National
Service Corporation, have historically been met by Butler National
Corporation and Miller & Schroeder. We intend to continue using Butler
National Corporation and Miller & Schroeder as sources to finance our
ongoing business obligations pursuant to the debt obligations identified in
the Distribution Agreement. We may establish our own credit facilities
prior to or after the Distribution. It is anticipated that our credit
agreements may contain financial and other covenants and provisions customary
for such arrangements. Among other things, our credit agreements may
restrict the payment of dividends by limiting the amount of dividends and/or
requiring the maintenance of certain financial ratios as a condition to the
payment of dividends.
The remainder of this page is intended to be blank.
RISK FACTORS
Our shareholders should be aware that the Distribution and
ownership of the Shares involves certain considerations and factors,
including those described below and elsewhere in this Information
Statement, which could adversely affect the value of their holdings.
When we mention Butler National Corporation, we are referring to
Butler National Corporation and its subsidiaries. Neither Butler
National Corporation nor we make, nor is any other person authorized
to make, any representation as to the future market value of the Shares
of our Common Stock.
Any forward-looking statements contained in this Information
Statement should not be relied upon as predictions of future events.
Such statements are necessarily dependent on assumptions, data or
methods that may be incorrect or imprecise and that may be incapable
of being realized. Investors are hereby notified that such information
reflects the opinions of our management as to the future. Investors
should use their own judgment as to the significance of this
information to their individual investment decisions.
You should carefully consider the following risk factors and
all the other information contained in this Information Statement in
evaluating us and our Common Stock. (see Exhibit 99.2).
Lack of Recent Operating History as an Independent Entity
We have no history operating as an independent company,
and we may be unable to make the changes necessary to operate as a
stand-alone business, or we may incur greater costs as a stand-alone
company that may cause our profitability to decline. Prior to the
Distribution, Butler National Corporation operated our business as a
segment of its broader corporate organization rather than as a stand-
alone company. Following the Distribution, Butler National
Corporation will have no obligation to provide assistance to us other
than for the services described in the Administrative Services
Agreement and which are also described in "Relationship Between
Butler National Corporation and Our Company After the Distribution".
These services include, among others, various data processing and
telecommunications services and corporate support services, including
accounting, financial management, tax, payroll, legal, human resources
administration, procurement and other general support. Because we
have never been operated as an independent company, there is no
assurance that we will be able to successfully implement the changes
necessary to operate independently or that we will not incur additional
costs operating independently that will cause our profitability to
decline. (see Exhibit 10.3).
The Stables casino has been managed by Butler National
Service Corporation as a subsidiary of Butler National Corporation for
less than three years and, accordingly, we do not have an operating
history as an independent public company. The Indian Gaming
Management business for which we will receive contract rights was
conducted by Butler National Service Corporation (a Delaware
corporation originally formed in 1992) as a wholly-owned subsidiary
of Butler National Corporation. Butler National Corporation formed
Indian Gaming Corporation, a Kansas Corporation, in February of
2001 for the purpose of effecting the Distribution, and we expect to
receive contract rights to manage the Stables, an Indian gaming
establishment, that was previously managed by Butler National Service
Corporation, a subsidiary of Butler National Corporation. Butler
National Corporation will retain its assets, liabilities and
responsibilities of the construction services and development segment
of the Butler National Service Corporation business.
As a part of Butler National Corporation, the business that we
will receive had only the Stables related debt. Following the
Distribution, we will be responsible for maintaining our own financing
relationships. See "Financing."
Our historical financial information may not be representative
of our results as a separate company and, therefore, may not be
reliable as an indicator of our historical or future results. The
historical financial information that is included in this Information
Statement may not reflect what our results of operations, financial
position and cash flows would have been had we been a stand-alone
company during the periods presented or what our results of
operations, financial position and cash flows will be in the future. This
is because:
1. Our financial statements reflect allocations, primarily
with respect to corporate overhead and operations, for
services provided by Butler National Corporation, which
allocations may not reflect the costs we will incur for
similar services as a stand-alone company; and
2. The financial information also does not reflect any
changes that we may expect to occur in the future as a
result of our separation from Butler National
Corporation, including changes in how we fund our
operations and tax matters.
For additional information about our past financial
performance and the basis of presentation of our financial statements,
please see "Selected Financial Information", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the notes thereto included
elsewhere in this Information Statement. (see Exhibits 20.2 and 20.3).
Specific Industry Concentration
Our business is highly focused in the management of Indian
gaming establishments pursuant to IGRA with 100% of sales ( fees for
management) coming from the Stables casino in the territorial
boundaries of Miami, Oklahoma. Management believes that the best
use of our resources is in serving this industry and continuously
improving our responsiveness to our customers' needs. It is therefore
unlikely that our customer base will significantly broaden beyond the
Indian tribes eligible to game pursuant to IGRA.
Dependent Upon One Tribal Enterprise - Competition
We have only one Indian venture as our customer. Upon the
Distribution, we will receive the contract rights to manage the
Stables, a joint venture between the Miami Tribe of Oklahoma and the
Modoc Tribe of Oklahoma. We will have no other rights to manage
for any tribe. Butler National Corporation will have and retain all
interests in consulting management agreements with Indian tribes
related to all prospective casino sites. There is no assurance that we
will acquire any other rights to manage other establishments. We
compete with many casino management companies on the basis of
customer service, management style, and cost, among other factors.
See "Business of the Company - Competition."
There is a real risk of competition. As of the date of the
Distribution, Oklahoma has in excess of twenty "high
stakes" bingo facilities on Indian Land. We anticipate that any future
Class III Management Agreements, if we would ever acquire rights to
manage such establishments, would likely be in the Kansas City area and
have numerous competitors in the area, including other Indian casinos and
riverboat casinos (as many as six) on the Missouri river in the Kansas City,
Missouri area. We estimate that as many as nine Indian casinos could be
operational in Kansas, as well as state controlled casinos at the two
operating and one closed pari-mutuel tracks in Kansas. We estimate
that at least ten Indian casinos could be operated in the State of
Oklahoma. Additional competition to our proposed management
operations exist or may come from Alabama, Colorado, Illinois, Iowa,
Louisiana, Missouri, Nevada, New Jersey, South Dakota, Tennessee
and other states, as well as from various gaming operations on Indian
reservations.
Possibility of Market Saturation. Because of the rapid rate at
which the gaming industry has expanded and continues to expand, the
gaming industry may be at risk of market saturation, both as to specific
areas and generally. Overbuilding of gaming facilities may have a material
adverse effect on our operations.
No Prior Public Market for Common Stock
There is presently no market for our Common Stock. We have
applied for listing of the Shares on NASDAQ/OTCBB, but there is
presently no public market for the Shares and there can be no assurance
that an active market will develop before or following the Distribution.
The prices at which the Shares trade will be determined by the
marketplace and could be subject to significant fluctuations in response
to many factors, including, among others, variations in our quarterly
operating results, changing economic conditions in the industries in
which the we participate and changes in governmental regulations. In
addition, the general stock market has in recent years experienced
significant price fluctuations, often unrelated to the operating
performance of the specific companies whose stock is traded. Market
fluctuations, as well as economic conditions, may adversely affect the
market price of the our Common Stock. Furthermore, given our
relatively small market capitalization, the market for the Shares may be
subject to greater volatility than would be the case for a larger
company. See "The Distribution - Listing and Trading of Shares of
Company Common Stock."
Dividend Policy
No dividends are foreseeable. Butler National Corporation
has not paid any dividends on its capital stock since its incorporation.
We do not anticipate paying any dividends on our Common Stock in the
foreseeable future because we expect to retain future earnings for use in
the operation of our business. Our payment and amount of dividends,
however, will be subject to the discretion of our Board of Directors and
will depend, among other things, upon our results of operations,
financial condition, cash requirements, future prospects and other
factors which may be considered relevant by our Board of Directors.
Certain covenants in our credit agreements may restrict the payment of
dividends by limiting the amount of dividends and/or by requiring the
maintenance of certain financial ratios. See "The Distribution -
Dividend Policy" and "Financing."
Company Indebtedness
At the time of Distribution, we will assume a significant
amount of debt and may substantially increase our debt in the future,
which could subject us to various restrictions and higher interest costs,
and decrease our profitability. In connection with the Distribution,
Butler National Corporation will transfer to us certain contract
management rights for fees subject to $1,177,747 indebtedness to a
third party lender, Miller & Schroeder. Our ability
to meet our debt service obligations will depend primarily on our future
financial results and cash flow. Our indebtedness could make us
vulnerable to a downturn in the operating performance of our business
or in economic conditions generally and could impair our ability to
obtain additional financing for working capital, capital expenditures,
acquisitions and general corporate purposes. See "Financial" and
"Business of the Company - Transactions and Agreements Between
the Company and Butler National Corporation".
There may be requirements for additional capital in the
servicing of management to an establishment. There is no assurance
such additional financing would be available when required or, if
available, would be on terms favorable to us. Accordingly, if we are
unable to arrange for additional financing on acceptable terms, our
potential return on the management agreement may be lost.
Key Persons - Relationships With Tribes
We depend on key individuals to run the business and for
contacts with the Miami and Modoc Indian Tribes. Additionally,
Butler National Corporation has only a limited experience in the
gaming industry. We are highly dependent upon Butler National
Corporations management team. The contacts of the current Butler
National Corporation management may be critical to obtaining the
gaming management experience required at such time, if ever,
additional Class II and/or Class III Gaming Enterprises are managed by
us. Losing the services of the current Butler National Corporation
management team could have a material adverse effect on our ability to
achieve our objectives. Although we have significant general business
experience, we have yet limited experience in gaming
Relationship with Indian Tribes is a considerable risk. Good
working business relationships with Indian tribes and their officials are
critical to our Indian-related gaming activities, including our ability to
obtain, retain and renew rights to manage establishments. As sovereign
nations, Indian Tribes establish their own governmental systems, under
which tribal officials are subject to replacement by appointment or
election. Our relationship with a Tribe could improve or deteriorate
under new tribal administrations. A deterioration in the relationship
between a Tribe and us could have a material adverse effect on our
business.
Limited Recourse Against the Tribes and Tribal Assets
Limited Recourse Against Tribes and Tribal Assets. Indian
tribes are sovereign nations and generally immune from legal
proceedings commenced in State and Federal courts. Further, Federal
legislation has granted limited liability to Indian tribes. Therefore, if a
Tribe were to breach an agreement for any reason, our recourse to
collect damages may be to attach undistributed and/or future proceeds,
if any, in the gaming enterprise. Accordingly, in the event of such a
breach or a default of an agreement by a Tribe, we may not be able to
collect any damages or even recover any funds related to the
management of any casino facility or the debt obligations of the Indian
Tribe.
Management Agreement - Regulatory Control and Control of the
Company
The general governmental regulation of gaming operations
extends beyond our complete control. Our proposed operations will be
subject to extensive gaming laws and regulations, many of which were
recently adopted and have not been the subject of definitive
interpretations. The political and regulatory environment in which we
will be operating, with respect to gaming activities on both non-Indian
and Indian Land, is dynamic and rapidly changing. This environment
makes it impossible to predict the effects, including costs, that adoption
of and changes in gaming laws and regulations would have on us and
our proposed operations.
The NIGC controls the approval of management agreements
for Indian gaming. Butler National Service Corporation has entered
into a gaming Management Agreement with the Miami and Modoc
Tribes in Oklahoma which defines the relationship between Butler
National Corporation and the Miami and Modoc Tribes. The
Management Agreement has been approved by the NIGC. We believe
the Management Agreement conforms to the requirements defined by
the IGRA. The approval is based upon our relationship with Butler
National Corporation. There is no assurance that the NIGC will sustain
its approval of the Management Agreement. If the Management
Agreement approval is revoked due to a substantial change in control of
our business, there could be a material adverse effect on our business.
Licensing and Regulation under Indian Law. Before
commencing management of gaming operations (Class II or Class III)
on Indian Land, approval of various regulatory entities must be
obtained. Gaming on Indian Land is extensively regulated by Federal,
Tribal and in some cases State governments and authorities.
Regulatory changes could limit or otherwise materially affect the types
of gaming that may be conducted on Indian Land. All aspects of our
management and operations of establishments on Indian Lands are
subject to approval, regulation and oversight by the BIA, the Secretary
of the United States Department of the Interior (the "Secretary") and
the Commission. Management of Class III gaming operations, to the
extent, if ever, we receive rights related to manage Class III gaming
operations, are also subject to approval of a Class III Gaming Compact
between the Indian Tribe and the state governmental authorities.
Failure to comply with applicable laws or regulations, whether Federal,
State or Tribal, could result in, among other things, the termination of
any management agreements which would have a material adverse
effect on our business. Management agreement terms are also
regulated by the IGRA, which restricts initial terms of the agreement to
five years and management fees to 30% of the net profits of the casino,
except in certain circumstances where the term may be extended to
seven years and the management fee increased to 40%. Any
management agreements with an Indian Tribe will not be approved by
the Commission unless, among other things, background checks of the
directors and officers of the manager and our ten largest holders of
capital stock have been satisfactorily completed. We will also be
required to comply with background checks as specified in Tribal-State
Compacts before the we may provide any services to manage gaming
operations on Indian Land, if such an opportunity would arise.
Background checks by the Commission may take up to 180 days, and
may be extended to 270 days by written notice to the particular tribe.
There can be no assurance that we would be successful in obtaining the
necessary regulatory approvals for proposed gaming operations on a
timely basis, or at all.
Licensing and Regulation under Oklahoma Law for the
Stables casino creates some risk to our business. Although Class III is
not the direct focus of our business, our present and future shareholders
are and will continue to be subject to review by regulatory agencies. In
connection with our rights to manage a Class III casino in Oklahoma or
to the extent that Class III Indian gaming might ever be managed by us
within the territorial boundaries of any state, we, the appropriate Indian
Tribe and the key personnel of all entities may be required to hold
Class III licenses approved in the respective state prior to managing
such operations. The failure of us or the key personnel to obtain or
retain a license in these states could have a material adverse effect on
our business or on our ability to obtain or retain Class III licenses in
other jurisdictions. Oklahoma has granted a Class III license to the
Miami and Modoc Indian Tribes of Oklahoma. Each such agency has
broad discretion in granting, renewing and revoking licenses.
Obtaining such licenses and approvals will be time consuming and
cannot be assured. There is no assurance that any Compact between
the Tribes and any state can be completed in the future. If a Compact
is not approved, there could be a material adverse effect on our ability
to expand our business.
As a condition to obtaining and maintaining a Class III license, we
must submit detailed financial and other reports to the Indian Tribe and
the Agency. Any person owning or acquiring 5% or more of our
Common Stock of must be found suitable by the Agency, and the
Agency has the authority to require a finding of suitability with respect
to any shareholder regardless of the percentage of ownership. If found
unsuitable by the Agency or the Indian Tribe, the shareholder must
offer all of the Shares held by such shareholder to us for cash at the
current market value less a twenty-five percent (25%) administrative
charge, and the we must purchase such shares within ten days of the
offer. The shareholder is required to pay all costs of investigation with
respect to a determination of his/her suitability. In addition, each
member of our Board of Directors and certain officers are subject to a
finding of suitability by the Agency and the Indian Tribe.
The Kansas Legislature, through the Attorney General of Kansas,
has from time to time requested an opinion from the Supreme Court of
Kansas, to identify what games of chance are legal in the State of
Kansas. Any decision by the Supreme Court of Kansas may have an
adverse effect on the Class III gaming plans of our prospective
business opportunities in Kansas.
Redemption of Unsuitable Shareholders. Any person acquiring
five percent (5%) or more of our Common Stock, either directly, or
indirectly through the purchase of Warrants, Options, convertible or
common stock, must be found suitable by the Commission and/or the
Agency, each of which have the authority to require a finding of
suitability with respect to any shareholder regardless of the percentage
of ownership. If found unsuitable by the Commission and/or Agency,
the shareholder must offer all of the shares held by such shareholder to
us for cash at the current market value price less a twenty-five percent
(25%) administrative charge, and we must purchase such shares within
ten days of the offer. The shareholder is required to pay all costs of
investigation with respect to a determination of his/her suitability.
Termination and/or Buyout of Management Agreement
Expiration and Potential Termination of Management
Contracts are considerable risks. The rights received by us will expire
on September 17, 2003, which is five years after the opening of the
Stables establishment. There is no assurance that the Management
Agreement with the Miami Tribe and Modoc Tribe will be renewed
upon expiration. Further, if renewed, such Management Agreements
are likely to be on terms less favorable then the present Management
Agreements. If we breach our obligations, our right to share in the net
profits from the gaming Enterprise could be terminated, which would
have a material adverse effect on our business.
Buyout of Management Contracts. The Miami and Modoc
Tribes joint venture at the Stables has an option to purchase the
management rights, at any time, after the Stables casino has been
in operation for one year. The purchase price is equal to the Management
Agreement share of the net profits of the respective Enterprise in the year
preceding the buyout, multiplied by the number of years (or portion thereof)
remaining on the Management Agreement, plus repayment of any
related debt owed by the Tribe. If the Tribe exercises either of its
buyout options, we may obtain less than we otherwise might have
received if the Management Agreement continued until expiration of its
initial term.
Indian Lands Risks
There is a risk related to the Indian Land Requirements for
establishing any potential future gaming facility under IGRA. To the
extent that any gaming may be established at the Princess Maria facility,
if any gaming is ever established, the status of the Indian land on which
the Miami Tribe's proposed bingo facility is to be constructed within
territorial boundaries of Miami County, Kansas is being challenged by
the State of Kansas. The United States Government by and through the
Bureau of Indian Affairs (the "BIA") holds the 35 acre tract of Indian
Land, known as Maria Christiana Reserve No. 35, in trust for the
benefit of the Indian owners being the heirs of a Miami Indian, Maria
Christiana. The status of the land is also known as restricted, restricted
fee, restricted against alienation. This land was originally set apart and
assigned to the Miami Tribe by Treaty with the United States dated
November 20, 1840, and is known as the Miami Reservation in Kansas
Territory. Another Treaty, dated June 5, 1854, allowed the Miami
Chief to select and assign parcels of land for the benefit of individual
members of the Miami Tribe. A formal assignment of a beneficial
interest in the 35 acre tract was made to Maria Christiana on December
31, 1859. Maria Christiana died in 1860 and her probate was processed
by the BIA in 1940, distributing her interest to her heirs. The Miami
Tribe has reaffirmed its jurisdiction and governing powers over the
Miami Reservation in Kansas Territory including this land. The BIA
has acknowledged this position of the Miami Tribe. The Miami Tribe
believes that no further changes of jurisdiction have occurred since
1840 and that no changes in beneficial ownership have occurred, other
than distribution to the heirs, since the assignment in 1859.
There can be no assurance that the jurisdiction assumed by the
Miami Tribe would be upheld by the Federal Courts or the status of
Maria Christiana Reserve No. 35 as Indian land continued to be
recognized. If the jurisdiction and the Indian land status is not upheld,
there could be a material adverse effect on Butler National
Corporations business and our potential business.
While the Maria Christiana Reserve No. 35 Indian land is
located within the territorial boundaries of the State of Kansas, the State
of Kansas has stated that it does not recognize the Miami Tribe as a
Kansas Indian tribe because the headquarters of the Miami Tribe is
located in Miami, Oklahoma. Therefore, the State of Kansas has
refused to negotiate a Tribal-State Compact with the Miami Tribe. A
Compact is not required for the Class II bingo Enterprise contemplated
by Butler National Corporation. However, the State of Kansas may
attempt to prohibit the Miami Tribe from conducting Class II bingo on
the Indian Land. The State of Kansas has sued Butler National
Corporation, its CEO, Clark D. Stewart, and representatives of the
Miami Tribe, among other federal government officials in the United
States District Court for the District of Kansas ("District Court"). The
District Court entered an order granting the State of Kansas a
preliminary injunction that prevented Butler National Corporation, Mr.
Stewart, and representatives of the Miami Tribe for conducting any
activity that would further gaming on Maria Christiana Reserve No. 35.
Butler National Corporation, Mr. Stewart, the Miami Tribe,
representatives of the Tribe, and representatives of the federal
government are vigorously contesting the ruling of the District Court,
and an appeal is pending before the United States Court of Appeals for
the Tenth Circuit. These is no assurance that the State of Kansas would
negotiate a Class III gaming Compact with the Miami Tribe even if,
and when, directed to by the Federal Court. Butler National
Corporation will continue to control all functions related to the
management and potential construction of Maria Christiana Reserve
No. 35 until such time, if it ever occurs, that gaming is operation. If
gaming is ever established and operation on Maria Christiana Reserve
No. 35, we would have a right of first offer to receive rights to manage
the establishment, based upon terms and conditions determined at the
time of the offer. There is no assurance that any form of gaming will
ever occur on the Miami Reserve No. 35. These events could have a
material adverse effect on Butler National Corporation and our
potential business related to the management of Indian gaming
enterprises.
Possible Anti-takeover Effects of Certain Articles and By-Law
Provisions and the Rights Plan
Certain provisions of our Articles of Incorporation and
By-Laws, including provisions classifying the Board of Directors,
along with our shareholder Rights Plan and Kansas statutory law, could
discourage potential acquisition proposals and could delay or prevent a
change in our control. Such provisions could diminish the opportunities
for a shareholder to participate in tender offers, including tender offers
at a price above the then current market value of our Common Stock.
Such provisions may also inhibit fluctuations in the market price of our
Common Stock that could result from takeover attempts. In addition,
our Board of Directors, without further shareholder approval, may
issue additional Common Stock which could have the same effect of
delaying, deterring or preventing a change in our control, and could
adversely affect the voting power of the existing holders of our
Common Stock, including the loss of voting control to others. We have
no present plans to issue any such additional Common Stock. See
"Purposes and Effects of Certain Provisions of our Articles of
Incorporation, By-Laws and Kansas Statutory Law" and "Rights Plan."
Gaming Risks
Risks Relating to Seasonality and Travel Patterns. The
demand for gaming frequently varies seasonally and from one part of
the week to another and is affected by changes in national and local
economic conditions. In addition, the demand for gaming at a particular
casino may be affected by changes or cancellations in local tourist,
athletic or cultural events or changes in travel patterns and preferences,
which may in turn be affected adversely by increases in gasoline prices,
strikes, weather patterns and/or relocation of highways, among other
factors.
Gaming Industry Risks. In addition to the above
factors, adverse changes in general and local economic conditions
would adversely impact investments in gaming Enterprises, like other
entertainment investments. These conditions and other beyond our
control include: (i) changes in regional and local population and
disposable income composition; (ii) the need for renovations,
refurbishment and improvements; (iii) unanticipated increases in
operating costs; (iv) legal restrictions as to the use of signs, billboards
and other forms of roadside advertising typically utilized in marketing
entertainment properties; (v) restrictive changes in zoning and similar
land use laws and regulations, or in health, safety and environmental
laws and regulations; (vi) the inability to secure property and liability
insurance to fully protect against all losses or to obtain such insurance
at reasonable costs; and (vii) the exercise of the power of eminent
domain.
Other Risks Related to Our Separation from Butler National
Corporation
Control of the Company. Butler National Corporations
directors and officers will own, after the Distribution, 25.3% of our
outstanding stock, and may be able to control our business and affairs,
including appointing officers and determining officers' compensation.
Indemnification of Company Representatives. Our Articles of
Incorporation allow us to limit the liability of our officers and directors.
Our Articles of Incorporation provide, as permitted by law, that our
directors and officers may not be personally liable to us or any of our
shareholders for monetary damages, for breach of his or her fiduciary
duty of care as a director or officer, with certain exceptions. In
addition, our By-Laws provide for elective indemnification of directors
and officers to the fullest extent permitted by law.
Lack of Agency Review. This Memorandum has not been
approved or disproved by the Securities and Exchange Commission or
by any state securities agency.
Lack of Gaming Operating History. Our gaming activities are
a new enterprise with limited or no operating history for prospective
investors to evaluate with respect to the economic risks of an
investment.
Environmental Matters. Various federal, state and local laws
impose liability for releases of hazardous substances into the environment.
Examples of hazardous substances include asbestos, solvents, petroleum,
polychlorinated biphenyls (PCBs) and pesticides. Releases may occur due
to leaks, spills, emissions, escapes and groundwater injection. Liability
under the various environmental laws generally is strict, joint and several
among all persons responsible for any part of a release, including
persons who own the property and persons who are deemed to operate
the property, who could be held responsible for a hazardous substance
even after it is removed from his property. Accordingly, we could
potentially be a party subject to liability under the various
environmental laws for releases that have occurred or may occur on
Indian land on which the any establishment would be located and
managed by us.
CAPITALIZATION
The following table sets forth the unaudited historical and
unaudited pro forma capitalization of our business. The unaudited pro
forma capitalization reflects: (i) our receipt of rights to manage the
operating Indian Gaming Management business at the Stables for fees;
(ii) indebtedness associated with the rights as described in "Business of
the Company - Transactions and Agreements Between the Company
and Butler National Corporation"; and (iii) distribution of the Shares to
the shareholders of Butler National Corporation.
This table should be read in conjunction with Historical
Financial Statements and notes thereto and the Unaudited Pro Forma
Financial Information and notes thereto included elsewhere herein. The
unaudited pro forma information set forth below does not necessarily
reflect the capitalization of the Company in the future or as it would
have been had the Distribution occurred on February 23, 2001.
CAPITALIZATION
April 30, (not audited) (Pro Forma)
2000 January 31, February 23,
2001 2001
Long Term Debt:
Current Long Term Debt
(note 1) $ 363,368 $ 363,368 $ 363,368
Long Term Debt (note 1) 922,697 662,770 662,770
--------- --------- ---------
Total Long Term Debt 1,286,065 1,026,138 1,026,138
Shareholders' Equity:
Common Stock, par value
$.001: authorized
100,000,000 shares,
issued and outstanding
1,700,000 and 18,187,181 1,700 1,700 18,187
Contributed in excess
of par value 1,307,549 1,307,549 44,799
Retained (deficit)
(note 2) (1,272,979) (1,246,263) -
--------- --------- ---------
Total shareholders' equity 36,270 62,986 62,986
--------- --------- ---------
Total Capitalization $ 1,322,335 $ 1,089,124 $ 1,089,124
========= ========= =========
--------------
Notes:
1. Reflects the long term debt obligation to Miller &
Schroeder.
2. Reflects the reclassification of total combined equity in
excess of par value to paid-in capital.
SELECTED HISTORICAL FINANCIAL INFORMATION
The following selected historical financial information as of
and for the fiscal year ended April 30, 2000, and for the nine months
ended January 31, 2001 and 2000 (not audited) have been derived from
the Butler National Service Corporation financial statements. The
selected historical financial information as of and for the fiscal year
ended April 30, 2000 is audited. The selected historical financial
information as of the nine months ended January 31, 2001 and 2000
have been derived from the unaudited financial statements of Butler
National Service Corporation. In the opinion of management, the
historical financial statements of the Indian Gaming Management as of
and for the year ended April 30, 2000, and as of and for the nine
months ended January 31, 2001 and 2000, include all adjusting entries
(consisting only of normal recurring adjustments) necessary to present
fairly the information set forth therein. Historical financial information
may not be indicative of our future performance as an independent
company. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Historical Financial Statements and
notes thereto included elsewhere herein. Historical earnings per share
and dividend data have not been presented as the Company was not a
public-held company during the periods presented below.
STATEMENT OF OPERATIONS DATA: (not audited) (not audited) (audited)
nine months nine months year ended
January 31, January 31, April 30,
2001 2000 2000
------------ ------------ ------------
<
Net fee revenue $ 272,615 $ 245,710 $ 384,041
Selling, general and
administrative expenses 249,934 267,176 353,827
----------- ------------ ------------
Operating Income 22,681 (21,466) 30,214
Other Income (Expense)
Interest expense (102,261) (102,925) (151,882)
Interest revenue 106,296 115,315 154,920
Other - - -
----------- ------------ ------------
Other income 4,035 12,390 3,038
Income from operations
before taxes 26,716 (9,076) 33,252
Provision for income taxes - - -
----------- ------------ ------------
Net income $ 26,716 $ (9,076) $ 33,252
=========== ============ ============
BALANCE SHEET DATA: (not audited) (not audited) (audited)
January 31, January 31, April 30,
2001 2000 2000
----------- ------------ ------------
ASSETS
Current assets:
Cash $ 68,725 $ 59,938 $ 85,852
Accounts receivable 133,396 243,163 246,375
Interest receivable 10,255 12,390 12,224
Note receivable from Indian
Gaming developments 363,368 300,000 363,368
----------- ----------- ------------
Total current assets 575,744 615,491 707,819
Note receivable from Indian
Gaming 664,989 1,068,936 922,697
----------- ----------- ------------
Total assets $ 1,240,733 $ 1,684,427 $ 1,630,516
=========== =========== ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current maturities of long-
term debt $ 363,368 $ 300,000 $ 363,368
Due to affiliate 151,609 294,461 308,181
----------- ----------- ------------
Total current
liabilities 514,977 594,461 671,549
Long-term debt, net of
current maturities 662,770 1,096,024 922,697
Commitments and contingencies - - -
----------- ----------- ------------
Total liabilities 1,177,747 1,690,485 1,594,246
Shareholders' equity:
Common stock, par value
$.001: 1,700 1,700 1,700
Contributed in excess of
par value 1,307,549 1,307,549 1,307,549
Retained deficit (1,246,263) (1,315,307) (1,272,979)
----------- ----------- ------------
Total shareholders'
equity 62,986 (6,058) 36,270
----------- ----------- ------------
Total liabilities and
shareholders' equity $ 1,240,733 $ 1,684,427 $ 1,630,516
=========== =========== ============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial
Condition and Results of Operations covers periods when we were
owned by Butler National Corporation and the business was operated
as Butler National Service Corporation, a subsidiary of Butler National
Corporation. These comments should be read in conjunction with our
Historical Financial Statements and notes thereto included elsewhere
herein. It covers the fiscal year ended April 30, 2000 (audited), and the
nine month period ended January 31, 2001 and 2000 (not audited).
Results of Operations
First Nine Months Fiscal Year 2001 Compared to 2000
As part of Butler National Corporation, the management of
operational Indian gaming establishments is a relatively new venture.
Butler National Service Corporation, as a subsidiary of Butler National
Corporation, commenced operations as the manager of an operating
Indian gaming establishment (the Stables) on October 1, 1998 (during
fiscal year 1999), which was prior to the decision to distribute our
Shares to the shareholders of Butler National Corporation $0.01 par
value common stock.
During the period from October 1, 1998 through April 30,
1999, no fees were earned and paid to Butler National Service
Corporation because of the start up cash flow shortages and the losses
at the Stables. The related losses were included in the consolidated
statements of Butler National Corporation for the fiscal year ended
April 30, 1999. On a pro forma basis, the operations related to this
period would have been approximately a breakeven , applying the
financial assumptions and relationships after the distribution
accounting date of May 5, 1999.
Based upon the limited historical financial information, an
analysis of operations for the first three quarters is discussed. For the
three quarters of fiscal year 2001 (ending January 31, 2001), net
income was, $26,716, compared to the year earlier period which the
business experienced a loss of $9,076. The increase in net income
reflects a growing increase in gaming activity at the Stables casino and
the continued expansion of the Stables market share. The increase in
gaming activity directly impacts the management fees received. Butler
National Service Corporation operated with a net profit of $33,252 for
the year-ended April 30, 2000. We believe that recurring patronage to
the Stables casino has increased because people are becoming more
aware of the establishment. We also believe that the Stables
establishment is cleaner and more customer oriented than the area
competitors.
Liquidity and Capital Resources
As part of Butler National Service Corporation, we have
continued to reduce our outstanding debt through the receipt of
operating payments from the Stables casino. As of January 31, 2001,
the amount of outstanding debt to Miller & Schroeder was $1,026,138,
as compared to $1,607,641.82 on May 5, 1999, and $1,286,065 as of
April 30, 2000. The increased customer activity at the Stables casino
allowed an increase in payments to reduce debt obligations.
Butler National Service Corporation has not made any
substantial capital equipment acquisitions in the last nine months and none
are planned in the future. Funding of cash used for investing and operating
activities was provided by Butler National Corporation. Our financing
requirements through the date of the Distribution have been met by Butler
National Corporation. We intend to continue our credit relationship with
Butler National Corporation and also evaluate other facilities which it
anticipates will be adequate, along with cash flow from operations, to
fund our cash needs.
We have not been significantly impacted by inflationary pressures over
the last several months.
BUSINESS OF THE COMPANY
General
We are engaged in the ("Indian Gaming Management")
business of providing management services to Indian tribes in
connection with the Indian Gaming Regulatory Act of 1988, PL 100-
497, 102 Stat. 2467, 25 U.S.C. 2701-2721 (sometimes referred to as
"IGRA"). Our business has historically operated as Butler National
Service Corporation, a wholly-owned subsidiary of Butler National
Corporation. Upon the Distribution, we will receive from Butler National
Service Corporation, a subsidiary of Butler National Corporation,
contract rights to manage the Stables casino. We will also enter into an
agreement with Butler National Corporation that gives us rights
of first offer to acquire other contract management rights, should future
gaming establishments become operational. There is no guarantee that future
Indian gaming establishments will be constructed or become operational.
The rights to manage the Stables casino derive from the
Management Agreement. During fiscal 1997, Butler National
Corporation through its subsidiary Butler National Service Corporation
received approval from the National Indian Gaming Commission
("NIGC") of the Management Agreement between the Miami Tribe of
Oklahoma, the Modoc Tribe of Oklahoma and Butler National
Corporation's subsidiary, Butler National Service Corporation, to
construct and manage a Class II (High Stakes Bingo) and Class III
(Off-Track Betting) establishment. The Management Agreement for
the Stables casino is authorized and approved by the NIGC pursuant to
the Indian Gaming Regulatory Act of 1988.
The Management Agreement between an Indian tribe (the
owner and operator) and Butler National Service Corporation
(manager) is the final approval document issued by the National Indian
Gaming Commission ("NIGC") before Indian gaming is authorized at a
particular establishment. The Management Agreement or Contract is
authorized and approved by the NIGC pursuant to the Indian Gaming
Regulatory Act of 1988, PL 100-497, 102 Stat. 2467,25 U.S.C. 2701-
2721 (sometimes referred to as "IGRA").
We were incorporated by Butler National Service Corporation
on February 23, 2001. Our business purpose is to pursue the
management of Indian gaming establishments owned and operated by
Indian tribes under the Indian Gaming Regulatory Act of 1988 (IGRA)
as administered by the National Indian Gaming Commission (NIGC).
As a part of the distribution, we will receive rights to manage the
Stables gaming establishment, located in Miami, Oklahoma, for the
Miami and Modoc Indian tribes of Oklahoma. (see Exhibit 10.2).
Butler National Service Corporation has been operating the Stables
since its opening day.
Butler National Corporation will continue its business
segments related to the pre-operation of the Indian gaming facilities.
Butler National Corporation has formed subsidiary companies for the
purpose of potential development of other Indian gaming opportunities.
Butler National Service Corporation was one of the subsidiaries
responsible for the development of the Stables. These Butler National
Corporation companies are responsible for:
1. obtaining approval for use of the Indian land from
the beneficial owners;
2. research and documentation of the Indian heritage of
the Indian land;
3. assisting the Indian tribe with the organization and
documentation to operate a gaming establishment;
4. obtaining approval from the NIGC, the Bureau of
Indian Affairs (BIA) and other federal authorities to
operate a gaming establishment;
5. obtaining approval of a Class III compact with the
state within which territorial boundary the Indian
land is located to allow operation of a Class III
gaming establishment;
6. assisting the Indian tribe with the design and
engineering required to construct the buildings and
related features of the gaming complex;
7. arranging financing for the approval, design,
construction and working capital to open the
establishment;
8. arranging and supervising the construction of the
gaming complex; and
9. planning, staffing, train and opening the
establishment.
We expect to receive rights to manage each prospective
establishment after opening day through the term of the management
agreement with the Indian tribe. We also expect to continue to manage
these establishments under renewed agreements after the initial term.
The contractual rights and obligations between Butler National Service
Corporation and us is described in the Management Services
Agreement (see Exhibit 10.2).
Currently, Butler National Corporation is waiting for court
affirmation of the Bureau of Indian Affairs approval of the Princess
Maria Casino, owned and to be operated by the Miami Tribe and
located within territorial boundary of Miami County, Kansas. Butler
National Corporation is working through the approval process of the
prospective Shawnee Trails Casino, owned and to be operated by the
Shawnee Tribe and located within the territorial boundary of Johnson
County, Kansas.
Butler National Corporations ventures with Indian tribes
generally begin with management consulting engagement letters. The
management consulting engagement letters provide for the
advancement of funds to the Indian tribes by Butler National Service
Corporation and its subsidiaries for professional services, fees, licenses,
travel, administrative costs, documentation, procedure manuals,
purchases of property and equipment and other costs related to the
approval, construction and opening of an establishment. The pre-
opening management consulting engagement letters are not part of the
spin-off to us. Butler National Corporation, through its subsidiaries,
maintains the management, design and construction services necessary
for development of potential gaming establishments. Advances are
considered to be a receivable from the tribe, and to be repaid by the
tribe from the funding received during the operation of the enterprise.
If future Indian gaming establishments are opened, we will have a right
of first offer to acquire management rights, subject to terms to be
determined at the time of the prospective offer.
Upon the Distribution, we will receive rights to fees for our
management services to the Stables. At the Distribution, we will
assume obligations to Miller & Schroeder of $1,026,138 and obligations
to Butler National Corporation. The ability to collect the funds from the
Indian tribes depends upon the patronage to the establishment. If the
establishment is closed or not successful, we may suffer a significant
loss of asset value. The same would hold true for any anticipated agreement
to provide management services, to the extent any future gaming establishment
may be operated and we would receive those rights.
Construction of the Stables began with the ground breaking on
March 27, 1997. Construction of the Stables casino was completed,
and the establishment opened in September of 1998. Butler National
Corporation and Miller & Schroeder, a private capital firm, provided
the necessary funds to Butler National Service Corporation to construct
the facilities, and they are being repaid the principal plus interest out of
the profits of the operation. The principal amount of $3.5 million
carries an interest rate of prime plus 2%. In addition to interest, Butler
National Service Corporation is entitled to receive a 30% share of the
profits from the Stables for past and present management services
provided to the tribes. Upon Distribution, we will receive from Butler
National Service Corporation contract rights to manage and assume
obligations, to Miller & Schroeder of $1,026,138. At May 5, 1999, the
Stables note receivable was $1,607,642 due to Butler National Service
Corporation, and $1,770,351 due to Butler National Corporation.
As part of Butler National Corporation, Butler National
Service Corporation has provided consulting management services in
the joint-venture operation for the tribes. The Stables facility is
approximately 22,000 square feet and located directly south of the
Modoc Tribal Headquarters building in the territorial boundaries of
Miami, Oklahoma. The complex contains off-track betting windows, a
bingo hall, sports bar, and a restaurant.
As a part of the Distribution, we have received rights to fees for
management, and we have assumed certain liabilities from Butler National
Service Corporation under the terms of the Management Services Agreement
(see Exhibit 10.2). We have acquired the liability to Miller & Schroeder
Investment Corporation, which debt obligation is approximately $1,026,138 as
of January 31, 2001, and which has been guaranteed by Butler National
Service Corporation and Butler National Corporation. We have received
certain rights in a note receivable from the Stables of $1,028,357 (as of
January 31, 2001), and certain rights to receive thirty percent 30
percent of the Stables profit, up to a threshold, as a management fee.
(see Exhibit 10.2, the Management Services Agreement). Butler
National Corporation retains the note receivable from the Stables to
repay Butler National Corporation for advances during construction
and opening of the Stables.
Security under the Management Agreement includes the
Tribes' profits from all tribal gaming enterprises and all assets of the
Stables except the land and building.
Our principal executive offices are located at 19920 West
161st Street, Olathe, Kansas 66062; telephone: (913) 780-9595 prior to
the Distribution and (913) 780-4672 following the Distribution.
Business Strategy
We seek to differentiate our business from competitors by
providing superior customer service to our customers (the Indian
tribes) and indirectly to the Indian tribes' gaming patrons.
Our management has targeted several opportunities for
strategic revenue and profit growth, including:
Securing additional customer market share by working
with the Miami and Modoc Tribes to create a greater
awareness by the gaming patron of the Stables as a
quality entertainment establishment.
Maintaining contacts with key representatives of the
Tribes to open opportunities for other potential gaming
establishments and continued extension of the existing
agreements.
Promote our alliance with Butler National Corporation to
design, finance, construct, and open other potential
gaming establishments.
Gaining continued efficiencies through the operation of
the Stables.
Reviewing gaming devices available to increase attraction
to the establishment.
Properties
We do not own any real property or improvements. We have
entered into an Administrative Services Agreement with Butler
National Corporation for our operations. We will conduct our business
operations using the administrative services and facility of Butler
National Corporation at 19920 W. 161st Street, Olathe, Kansas 66062.
Principal Services
Our principal services include, among others, various data
processing and telecommunications services and corporate support
services, including accounting, financial management, tax, payroll,
legal, human resources administration, procurement and other general
support. These services are provided through the Management
Services Agreement. (see Exhibit 10.2).
We are further supported by contracting with an extensive
staff of accountants, attorneys, administrative personnel and engineers
who work directly with the representatives of the Stables to oversee our
operations. Additionally, this staff is available to the tribes for problem
solving and other activities that arise during operations. See the
Administrative Services Agreement. (see Exhibit 10.3).
Competition
As of the date of the Distribution, three Class II Indian bingo
establishments (high stakes) are operating within fifteen miles of the
Stables in Northeast Oklahoma. Additionally, there are a number of
other Indian tribes in the Stables market area qualified to open high
stakes bingo facilities the could be competing establishments.
Although currently closed, a Kansas based dog racing facility is located
within the market area of the Stables. If opened, the dog racing facility
would compete with the Stables horse off-track betting department.
As of the date of the Distribution, there are over 20 bingo
(limited stakes) halls in the Kansas City area and two "high stakes"
facilities within approximately a two hour drive from Kansas City.
Oklahoma has in excess of twenty "high stakes" bingo facilities on
Indian Land. We anticipate that any future Class III management
opportunities, if we would ever rights to manage such establishments,
would have numerous competitors in the Kansas City area, including
other Indian casinos and riverboat casinos (as many as six) on the
Missouri river in the Kansas City, Missouri area. We estimate that as
many as nine Indian casinos could be operational in Kansas as well as
State controlled casinos at the two operating and one proposed
pari-mutuel tracks in Kansas. We estimate that at least ten Indian
casinos could be operated in the State of Oklahoma. Additional
competition to our proposed management operations exist or may come
from Alabama, Colorado, Illinois, Iowa, Louisiana, Missouri, Nevada,
New Jersey, South Dakota, Tennessee and other states, as well as from
various gaming operations on Indian reservations.
Because of the rapid rate at which the gaming industry has
expanded and continues to expand, the gaming industry may be at risk
of market saturation, both as to specific areas and generally.
Overbuilding of gaming facilities at particular sites that we have
chosen for management may have a material adverse effect on our
operations.
Environmental Compliance
As is the case with all companies, we are subject to federal,
state, local and foreign laws and other legal requirements relating to the
generation, storage, transport, treatment and disposal of materials as a
result of our operations. These laws include the Resource Conservation
and Recovery Act (as amended), the Clean Air Act (as amended), the
Clean Water Act (as amended) and the Comprehensive Environmental
Response, Compensation and Liability Act (as amended). We believe
that our existing environmental management policies and procedures
are adequate and it has no current plans for substantial capital
expenditures in the environmental area. Butler National Corporation
has an environmental policy which commits to compliance with
environmental laws and recognizes its citizenship obligations to the
environment. Our management intends to continue a similar
environmental policy and maintain an active management program
designed to ensure compliance with existing environmental laws and
implement planning objectives which incorporate an aggressive
pollution prevention and waste minimization program. As part of the
approval process for the Stables, Butler National Service Corporation
complied with the National Environmental Policy Act ("NEPA").
We do not currently anticipate any materially adverse impact
on our results of operations, financial condition or competitive position
as a result of compliance with federal, state, local and foreign
environmental laws of other legal requirements.
Employees
As of February 23, 2001, we had only one employee, Clark D.
Stewart. Mr. Stewart is an employee pursuant to a contract with Butler
National Corporation that we have adopted. We will receive additional
services to operate the business through our contract with Butler
National Corporation. See the Administrative Services Agreement.
(see Exhibit 10.3).
Legal Proceedings
As of Distribution date, there are no significant pending legal
proceedings relating to the us, the Stables, or Butler National Service
Corporation. We considered all such unknown proceedings, if any, to
be ordinary litigation incident to the character of the business. We
believe that the resolution of those unknown claims will not,
individually or in the aggregate, have a material adverse effect on the
financial position, results of operations, or liquidity of the our business.
In connection with the Distribution, we will be assuming certain
liabilities relative to litigation and claims related to the Indian Gaming
Management, if any, which may arise following the Distribution. See
"Business of the Company - Transactions and Agreements Between
the Company and Butler National Corporation".
Transactions and Agreements Between the Company and Butler
National Corporation
In connection with the Distribution, we have entered into
several agreements with Butler National Corporation for the purpose of
giving effect to the Distribution and defining ongoing relationships.
These agreements have been reached while we were wholly-owned by
Butler National Corporation, and therefore will not be the result of
arms-length negotiations between independent parties, although we
believe the various terms to be comparable to what could be achieved
through arms-length negotiations.
Following the Distribution, additional or modified
agreements, arrangements and transactions maybe entered into among
the us, Butler National Corporation and their respective affiliates and
subsidiaries. Any such future agreements, arrangements and
transactions will be determined through arms-length negotiations
between parties in the ordinary course of business.
The following is a summary of certain agreements,
arrangements and transactions between us and Butler National
Corporation. Certain of these agreements have been filed as exhibits to
our Registration Statement on Form 10 registering the Shares under the
Securities Exchange Act of 1934 (the "Exchange Act"). The following
descriptions do no purport to be complete and are qualified in their
entirety by reference to such exhibits. See "Available Information."
Management Services Agreement
Pursuant to a Management Services Agreement effective as of
the Distribution Date (the "Distribution Agreement") with Butler National
Service Corporation, we receive contract rights to manage and receive fees
related to the operation of the Stables. We will also assume financial
obligations that were previously obligations of Butler National Service
Corporation. (See Exhibit 10.2). The rights related to the management of
the Stables, is taken subject to obligations to Miller & Schroeder of
$1,026,138, and substantially all of the liabilities of the Butler
National Service Corporation business related to its management of the
Stables. Butler National Corporation has agreed to execute and deliver
such further agreements and instruments as may be necessary for the
effective implementation of the Distribution.
Distribution Agreement
As part of the Distribution Agreement and Administrative
Services Agreement, Butler National Corporation will agree to identify
Indian Gaming Corporation as an additional insured related to activities
at the Stables. The Distribution Agreement will also contain
indemnity provisions related to the Distribution. (see Exhibit 10.1).
Confidentiality Agreement
As of the Distribution Date, Butler National Corporation will
enter into a Confidentiality and Non-disclosure Agreement with us
whereby, subject to certain exceptions, each party will agree to treat as
confidential and not disclose certain proprietary information. (see
Exhibit 10.7).
Administrative Services Agreement
As of the May 5, 1999, Butler National Corporation entered
into an Administrative Services Agreement (the "Administrative
Services Agreement") with Butler National Service Corporation. This
agreement governs the administrative services that Butler National
Corporation will continue to provide to us. In general, Butler National
Corporation, pursuant to the Administrative Services Agreement, will
provide certain financial services, information system services,
accounting services, consulting management services, and technical
support that include, among other services, various data processing and
telecommunications services and corporate support services, including
accounting, financial management, tax, payroll, legal, human resources
administration, procurement and other general support. Under the terms
of the Administrative Services Agreement, the Company will
compensate Butler National Corporation at negotiated amounts which,
we believe, will be comparable to rates we could have achieved
through arms-length negotiations. (see Exhibit 10.3)
Other Agreements
We may enter into certain other leases, operating agreements,
service agreements, and other agreements that will serve to define the
various aspects of the relationship that will exist between the parties
after the Distribution. None of these agreements, either alone or in the
aggregate, is expected to materially affect our results of operations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All of our outstanding Shares are currently held by Butler National
Corporation. The following table sets forth the projected beneficial
ownership of the Shares immediately following the Distribution by any
person projected to own beneficially more than 5% of the Shares based
upon such person's reported ownership of Butler National Corporation
securities and related Distribution rights.
Name and Address of Number of Shares of Projected Percent of Class
Beneficial Owner Beneficial Ownership (note 1)
-------------------------------------------------------------------------
Clark D. Stewart 2,658,550 11.1%
19920 West 161st Street (note 2)
Olathe, Kansas 66062
(1) Unless otherwise indicated by footnote, nature of beneficial
ownership of securities is direct, and beneficial ownership as shown in
the table arises from sole voting power and sole investment power.
(2) Includes 1,475,000 shares which may be acquired by Mr. Stewart
pursuant to the exercise of stock options which are exercisable.
MANAGEMENT OF THE COMPANY
Directors
The following table sets forth information as to the persons
who are expected to serve as our directors following the Distribution.
As provided in our By-Laws, our Board of Directors are divided into
three classes. The table also sets forth the names of the directors of
each class and their original terms. Our initial Board of Directors
following the Distribution will be comprised of five directors.
Our Board of Directors are divided into three classes. Mr.
Stewart and Mr. Wagoner are Class 3 directors, with terms expiring
after the election of directors at the annual meeting of shareholders to
be held in fiscal 2004. Mr. Griffith and Mr. Logan are Class 2
Directors, with terms expiring after the election of directors in fiscal
2003. Presently there is no one appointed for the fifth director position
as Class 1 director. Directors are elected for a term of three years. 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 us by the directors. To be a director, the individual must be found
suitable after a personal background check performed by the NIGC per
the requirement of IGRA.
Name of Director, Term Principal Occupation for Last Five Years
Age, Expires Directorships
Class
----------------- ------- -----------------------------------------
Clark D. Stewart 2004 President since incorporation. President of
(61) Butler National Corporation from September 1,
Class 3 1989 to present. President of Tradewind
Systems, Inc. (consulting and computer sales)
1980 to present; Executive Vice President of
RO Corporation (manufacturing) 1986 to 1989;
President of Tradewind Industries, Inc.
(manufacturing) 1979 to 1985.
R. Warren Wagoner 2004 Chairman of the Board since incorporation.
(49) Chairman of the Board of Directors of Butler
Class 3 National Corporation since August 30, 1989
and President of the Company from July 26,
1989 to September 1, 1989. Sales Manager of
Yamazen Machine Tool, Inc. from March, 1992
to March, 1994; President of Stelco, Inc.
(manufacturing) 1987 to 1989; General Manager,
AmTech Metal Fabrications, Inc., Grandview, MO
1982 to 1987.
William E. Logan 2003 Director since incorporation. Vice President
(62) and Treasurer of WH of KC, Inc. (Wendy's
Class 2 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.
Willam A. Griffith 2003 Secretary since incorporation. Secretary of
(54) Butler National Corporation, President of
Class 2 Griffith and Associates (management consulting)
since 1984. Management consultant for
Diversified Health Companies (management
consulting) from 1986 to 1989 and for Health
Pro (health care) from 1984 to 1986. Chief
Executive Officer of Southwest Medical Center
(hospital) from 1981 to 1984.
Committees of the Board of Directors
We will be managed under the direction of our Board of
Directors. Our Board of Directors has established and designated specific
functions and areas of oversight to an Audit Committee and a Compensation
Committee.
Directors Compensation
Each non-officer director is entitled to a directors fee of $100.00
for meetings of the Board of Directors which he attends. Officer-directors
are not entitled to receive fees for attendance at meetings. Directors may
be changed from time-to-time by the Board of Directors.
Executive Officers
Our executive officers 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 49 Chairman of the Board of Directors
Clark D. Stewart 61 President and Chief Executive Officer
Stanley D. Nolind 57 Chief Financial Officer
William A. Griffith 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 has served as
Chairman of the Board of the Butler National Corporation since
August of 1989. He has been our Chairman of the Board since
incorporation in May of 2000.
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 has served as President of the
Butler National Corporation since August of 1989. He has been
our President since incorporation in May of 2000.
Stanley D. Nolind is a certified public accountant and was formerly
with KTTR Services, Inc. from 1984 to 2000. Mr. Nolind has
been Chief Financial Officer of Butler National Corporation
since January of 2001. Mr. Nolind became our Chief Financial
Officer in January of 2001.
William A. Griffith was Chief Executive Officer of Southwest Medical
Center (hospital) from 1981 to 1984. Mr. Griffith was a
management consultant for Health Pro from 1984 to 1986 and
for Diversified Health Companies from 1986 to 1989. Mr.
Griffith has been President of Griffith and Associates,
management consulting, since 1984. Mr. Griffith became
Secretary of Butler National Corporation in 1992.
SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth information concerning Shares
that are projected to be beneficially owned after the Distribution by
each of the directors and each of the executive officers named in the
Summary Compensation Table under "Executive Compensation" below
and by all persons chosen to be directors and executive officers as a
group.
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership (note 1) Percent of Class
--------------------- ----------------------------- ----------------
William A. Griffith 777,830 (note 5) 3.3%
William E. Logan 1,479,130 (note 3) 6.2%
Clark D. Stewart 2,658,550 (note 2) 11.1%
R. Warren Wagoner 1,119,130 (note 4) 4.7%
All Directors and
Executive Officers
as a Group (4 persons) 6,034,640 (note 6) 25.3%
(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 1,475,000 shares, which may be acquired by Mr. Stewart
pursuant to the exercise of stock options, which are exercisable.
(3) Includes 485,000 shares, which may be acquired by Mr. Logan pursuant
to the exercise of stock options which are exercisable.
(4) Includes 575,000 shares, which may be acquired by Mr. Wagoner
pursuant to the exercise of stock options, which are exercisable.
(5) Includes 275,000 shares, which may be acquired by Mr. Griffith
pursuant to the exercise of stock options, which are exercisable.
(6) Includes 2,810,000 shares for all directors and executive officers
as a group, which may be acquired pursuant to the exercise of stock
options, which are exercisable.
The above beneficial ownership information is based on
information furnished by the specified persons and is determined in
accordance with Rule 13d-3, as required for purposes of this
information Statement. It is not necessarily to be construed as an
admission of beneficial ownership for other purposes.
EXECUTIVE COMPENSATION
Historical Compensation
Summary Compensation Table
The compensation of our executive officers is approved by
our compensation committee of our Board of Directors. The
compensation of Mr. Stewart, our chief executive officer, has been
determined by contracting with Butler National Corporation, as
approved by Mr. Stewart, for a portion of Mr. Stewart's employment
time under the Employment Agreement between Mr. Stewart and
Butler National Corporation. We will assume a fifty percent share
of the contracted salary amount through the Administrative Services
Agreement, which may increase or decrease from time to time. Additionally,
our compensation committee is authorized to make awards to Mr. Stewart
based upon the compensation committee's assessment of his
responsibilities, experience, performance, compensation data of other
companies, and the competitive environment for attracting and
retaining executives. Under the agreement with Mr. Stewart, he will
receive options to purchase our shares of our Common Stock based
upon the options of Butler National Corporation common stock that
were issued to him pursuant to his employment agreement.
The following table sets forth certain information with respect
to the annual and long-term compensation of Mr. Stewart, our Chief
Executive Officer, for services rendered to the us and Butler National
Corporation. During this period, Mr. Stewart compensated in
accordance with our plans and policies, as a subsidiary of Butler
National Corporation. In accordance with the general instruction to
Item 402(b) of Regulation S-K under the rules and regulations adopted
by the Securities and Exchange Commission, only information with
respect to the last completed fiscal year is being provided. All
references in the following table to securities relate to awards of stock
options of Butler National Corporation.
SUMMARY COMPENSATION TABLE
Name and Principal Position:
Clark D. Stewart, President and CEO, Director
Year:
00
Annual Compensation Long Term Compensation:
-------------------------------------------
Salary (note 2):
$237,986
Bonus:
-
Other Annual Compensation:
-
Long Term Compensation:
--------------------------------------------
Restricted Stock Award(s):
-
Securities Underlying Options (note 1):
575,000
LTIP Payouts:
-
All Other Compensation:
-
(1) Represents options granted or (cancelled) pursuant to the Butler National
Corporation Nonqualified Stock Option Plans 575,000 in 2000. These are
not options to purchase our common stock.
(2) Our share of the salary compensation was $118,993.
Option Grants, Exercises and Holdings
In conjunction with the Distribution we have granted options to purchase
5,670,300 shares of our Common Stock at a weighted average purchase
price of $0.153 per share.
Employment Contracts, Termination of Employment and Change-
in-Control Arrangements
On May 6, 1997, the Butler National Corporation extended the
March 17, 1994, employment agreement with Clark D. Stewart under
the terms of which Mr. Stewart was employed as the President and
Chief Executive Officer of the Butler National Corporation at an initial
minimum annual salary of $198,000 and a minimum salary of
$208,000, $218,500, $229,500 and $241,000, respectively, in years two
through five. The extended contract provides a minimum annual salary
of $253,100, $265,700, $278,900, $292,900, $307,600, respectively in
years six through ten. In the event Mr. Stewart is terminated from
employment with the Butler National Corporation other than "for
cause," Mr. Stewart shall receive as severance pay an amount equal to
the unpaid salary for the remainder of the term of the employment
agreement. Mr. Stewart was also granted an automobile allowance of
$600 per month. We have entered into an agreement with Mr. Stewart
and Butler National Corporation to assume approximately fifty percent
of the salary and car allowance obligations to Mr. Stewart in exchange
for approximately thirty-five percent of his present working time at
Butler National Corporation being attributed to services for us. Mr.
Stewart is not required to keep time tracking records.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of our Board of Directors is
comprised of Mr. Wagoner, Mr. Stewart, Mr. Griffith and Mr. Logan.
Mr. Wagoner is the Chairman, Mr. Stewart is our President and Chief
Executive Officer and Mr. Griffith is the Secretary.
Related-Party Transactions
Butler National Service Corporation paid administrative fees of
approximately $238,500 and $318,000 to Butler National Corporation for
the period ended January 31, 2001 and April 30, 2000, respectively.
Administrative services fees include charges for management of the
Company, management staff, professional staff, accounting services,
SEC filing services, rent, utilities, travel and other out-of-pocket
expenses related to the operation of the Company and the management
service to the Stables. The administrative fees will vary depending
upon the level of activity of the Company.
Stock Options
We currently maintain and have outstanding awards under a
Stock Incentive Plan (the "Indian Gaming Corporation 2001 Non-
qualified Stock Option Plan"). Following the Distribution, individuals
who were Qualified holders of Butler National Corporation Options
pursuant to the Butler National Corporation Stock Option Plans on
May 24, 1999, will also hold Indian Gaming Corporation Options (one
Option of Indian Gaming Corporation for every Option of Butler
National Corporation).
Under the terms of the Indian Gaming Corporation Plan and
subject to adjustment by the Indian Gaming Corporation compensation
committee, any other individuals who hold Butler National Corporation
stock options at the Distribution Date who are not employees, officers,
Directors of Indian Gaming Corporation, or previously qualified
holders of Butler National Corporation Options as of the Distribution
Date do not have any rights to our Options.
Non-qualified Stock Option Incentive Plan
Introduction
On February 23, 2001 our Board of Directors adopted the
Indian Gaming Corporation 2001Non-qualified Stock Option Plan
effective February 23, 2001 (the "2001 Incentive Plan"). Butler
National Service Corporation, as our sole shareholder approved the
Incentive Plan. The Incentive Plan provides for the granting of stock
options ("Awards") as defined in the Incentive Plan. The purpose of
the Incentive Plan is to enable key persons and key advisors and
consultants to participate in our future by offering to them the
opportunity to acquire a proprietary interests in our company and
thereby develop a stronger incentive to put forth maximum effort for
our continued growth and success. The Incentive Plan is also intended
to provide a means through which we can attract and retain key
employees of merit.
The text of the Incentive Plan is attached to this Information
Statement as Exhibit 10.4. The following description is intended to be a
summary of the Incentive Plan's principal terms and is qualified in its
entirety by reference to the complete text set forth in Exhibit 10.4.
General
The Incentive Plan authorizes the Compensation Committee of
the Board of Directors (the "Committee") or the Board of Directors if
the Committee is not elected, to grant to key persons and key advisors
and consultants stock option awards. A maximum of 25,000,000 shares
of our Common Stock are reserved and available for distribution
pursuant to Awards granted under the Incentive Plan, subject to
adjustment to reflect stock splits, mergers, reorganizations, and other
changes in corporate structure affecting our Common Stock. If shares
subject to an Award granted under the Incentive Plan cease to be
subject to such Awards, such shares will again be available for
distribution under the Incentive Plan. Shares may be distributed under
the Incentive Plan, in whole or in part, from authorized and unissued
shares or treasury shares. The Committee or the Board of Directors (if
the Committee is not elected) administers the Incentive Plan. The
Committee or Board of Directors has complete discretion, subject to the
terms of the Incentive Plan, to determine, among other things, which
key persons and key advisors and consultants will receive Awards,
number and frequency of and the number of shares subject to such
Awards, and, to the extent not otherwise expressly provided in the
Incentive Plan, the terms and conditions of the Awards.
Awards
Stock Options. Options granted under the Incentive Plan may
be non-qualified stock options ("NSOs") under the Internal Revenue
Code.
The options will be exercisable at such times and subject to
such terms and conditions as the Committee or Board of Directors may
determine. All options will expire no later than ten years from the date
of grant. Generally, options will expire upon the earlier of the option's
express expiration date or: an optionee's termination of employment or
termination of contractor relationship to us; or twelve months following
the termination of employment due to death; or one year following
termination due to retirement or disability.
The Committee in its discretion may permit key persons, key
advisors or consultants to use shares of our Common Stock for payment
of the exercise price for additional stock purchased pursuant to an
option.
Stock options are not transferable except by will or the laws of
descent and distribution, and shall be exercisable during his lifetime,
only be him.
Change in Control Provisions
Upon a change in control, optionees may elect to surrender all
or any part of their stock options and receive a per share amount in cash
equal to the excess of the "change in control price" over the exercise
price of the stock option. The "change in control price" will be the
highest price per share paid in any transaction reported on the
NASDAQ OTCBB System, or paid or offered to be paid in any bona
fide transaction relating to a potential or actual change in our control at
any time during the 60-day period immediately preceding the change in
control as determined by the Committee.
If an optionee's employment is terminated at or following a
change in control (other than by death, disability or retirement), the
exercise periods of an optionee's stock options will be extended to the
earlier of one year from the date of employment termination or the
options' respective expiration dates.
Miscellaneous
The Incentive Plan may be amended or discontinued by the
Board of Directors, provided that the Board may not, without the
approval of our stockholders, (a) except as expressly provided in the
Incentive Plan, increase the number of shares reserved for distribution
or decrease the option price of a stock option below 100% of the fair
market value at grant or change the pricing terms applicable to stock
purchase rights, (b) change the class of employees eligible to receive
Awards under the Incentive Plan, or (c) extend maximum exercise
periods for Awards. No amendment or discontinuance may impair the
rights of an optionee or recipient under an outstanding stock option or
other Award without the recipient's consent.
The Committee may amend the terms of any outstanding stock
option or other Award prospectively or retroactively (but no such
amendment may impair the rights of any holder without such holder's
consent) and may substitute new stock options for previously granted
stock options, including prior options with higher exercise prices.
The Incentive Plan contains special provisions that apply
specifically to participants who are subject to Section 16(b) of the
Exchange Act. In general, those provisions restrict the timing of
exercise of Awards and sales of securities received under the Incentive
Plan by said individuals.
In the event of any merger, stock split, consolidation,
recapitalization, stock dividend, reorganization or other change in
corporate structure affecting our Common Stock, the Board of Directors
may, in its sole discretion, make such substitutions or adjustments in the
aggregate number of shares reserved for issuance under the Incentive
Plan, in the number and option price of shares subject to outstanding
options (and related stock appreciation rights), in the number and
purchase price of shares subject to outstanding stock purchase rights,
and in the number of shares subject to other Awards granted under the
Incentive Plan.
Under the Incentive Plan, the Committee has wide discretion
and flexibility, enabling the Committee to administer the Incentive Plan
in the manner it determines to be in our best interests. Thus, options
may be granted in various combinations and sequences and may be
subject to various conditions, restrictions and limitations at grant or
upon exercise or payment not inconsistent with the terms of the
Incentive Plan. The Committee's determinations with respect to which
employees will receive Awards, and the form, amount and frequency
and the terms and conditions thereof, need not be uniform as to
similarly situated persons. The designation of an employee to receive
one form of an Award under the Incentive Plan does not require the
Committee to designate nor entitle such employee to receive any other
form of Award.
The Incentive Plan does not limit either the number of key
persons or key advisors or consultants eligible to receive Awards or the
type or number of shares which may be subject to options or other
Awards which may be granted to any one person. In addition, the
Incentive Plan does not limit the aggregate number of Awards that may
be granted except that the number of shares reserved for distribution
under the Incentive Plan cannot exceed 25,000,000 shares.
Proposed Awards
In connection with the Distribution, there are no Proposed
Awards. NSOs will be granted to the qualified holders of Butler
National Corporation common stock options as described in the
Distribution Agreement. These qualified holders will receive options
to purchase 5,670,300 shares at a weighted average price of $0.153 per
share.
Federal Income Tax Aspects
The following is a brief summary of our understanding of the
principal anticipated federal income tax consequences of Awards made
under the Incentive Plan based upon the applicable provisions of the
Code in effect on the date hereof. This summary is not intended to be
exhaustive and does not describe foreign, state or local tax
consequences.
Non-qualified Stock Options. An optionee will not recognize
taxable income at the time an NSO is granted, but taxable income will
be realized, and we will generally be entitled to a deduction, at the time
of exercise of the NSO. The amount of income (and our deduction) will
be equal to the difference between the NSO exercise price and the fair
market value of the shares on the date of exercise. The income realized
will be taxed at ordinary income tax rates for federal income tax
purposes. On subsequent disposition of the shares acquired upon
exercise of an NSO, capital gain or loss as determined under the normal
capital asset holding period rules will be realized in the amount of the
difference between the proceeds of sale and the fair market value of the
shares on the date of exercise. Where the NSO exercise price is paid in
"delivered stock," the exercise is treated as a tax-free exchange of the
shares of delivered stock (without recognizing any taxable gain with
respect thereto) for a like number of shares. The optionee's basis in the
number of new shares that equals the number of shares used to exercise
the NSO will equal the basis of the shares used to exercise the NSO,
and the optionee's holding period for the new shares will include the
optionee's holding period in the shares used to exercise the NSO. The
optionee's basis in any remaining shares will equal the amount of
compensation income recognized upon exercise of the NSO and the
optionee's holding period for such shares will begin on the date the
optionee acquires them. This mode of payment does not affect the
ordinary income tax liability incurred upon exercise of the NSO
described above.
Employment Agreement
As of February 23, 2001, we had only one employee, Clark D.
Stewart. Mr. Stewart is an employee pursuant to a contract with Butler
National Corporation that we have adopted. We will receive additional
services to operate the business through our contract with Butler
National Corporation. See the Administrative Services Agreement.
(see Exhibits 10.3 and 10.6).
Defined Contribution Plan
We maintain a defined contribution plan ("401(k) Plan") that
will cover all potential salaried employees. Under the 401(k) Plan,
participants make elective contributions from wages on a salary
reduction basis. Participants may contribute whole percentages of
compensation. Compensation under the 401(k) Plan is subject to the
maximum compensation amount set by law. Each year we may make a
matching contribution based on participants' elective deferrals. Loans
shall be available to participants for one or more purposes that are
deemed to be a hardship. Participants must direct investment of elective
deferrals and any potential matching contributions among investment
options determined by us. Distributions will be available soon after
employees terminate employment and will be made in a lump sum equal
to the entire vested account balance. (see Exhibit 10.5).
DESCRIPTION OF COMPANY CAPITAL STOCK
Authorized Capital Stock
Under our Articles of Incorporation, which are Exhibit 3.1 to
this Information Statement, the total number of shares of all classes of
stock that we shall have authority to issue is: 100,000,000 of our
Common Stock, par value $0.001 per share; 50,000,000 shares of our
Preferred Stock, par value of $0.001 per share. As of the date hereof,
one share of our Common Stock is issued and outstanding.
Based on the number of shares of Butler National Corporation
stock outstanding on May 24, 1999 and the Distribution Ratio, it is
expected that approximately 18,187,181 shares of our Common Stock
(with associated Rights) will be issued to shareholders of Butler
National Corporation in the Distribution. The Shares to be distributed
will constitute all of the outstanding our Common Stock (with
associated Rights) immediately after the Distribution. All of the Shares
to be distributed to Butler National Corporation shareholders in the
Distribution will be fully paid and non-assessable except as provided
under applicable Kansas statutory law.
Common Stock
Holders of our Common Stock are entitled to one vote for each
share on all matters voted on by shareholders. Holders of our Common
Stock do not have cumulative voting rights in the election of directors.
The first annual meeting of shareholders is expected to be held during
November, 2001.
Holders of our Common Stock do not have preemptive rights,
or any subscription, redemption or conversion privileges. To the extent
that dividends are ever issued, holders of our Common Stock are
entitled to participate ratably in dividends on our Common Stock as
declared by the Board of Directors, and are entitled to share ratably in
all assets available for distribution to shareholders in the event of our
liquidation or dissolution. We do not anticipate the payment of any
dividends in the foreseeable future. See "The Distribution - Dividend
Policy" for information concerning dividend restrictions.
Rights
Until a Right is exercised pursuant to the terms of the
shareholder Rights Plan, the holder thereof, as such, will have no rights
as our shareholder, including without limitation the right to vote or
receive dividends. See "Rights Plan."
Transfer Agent and Registrar
Wells Fargo Bank Minnesota NA will be the transfer agent
and registrar for the Shares immediately following the Distribution.
The remainder of this page is intended to be blank.
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF
INCORPORATION, BY-LAWS AND KANSAS STATUTORY LAW
General
The provisions of the Articles of Incorporation, our By-Laws
and Kansas statutory law described in this section may delay or make
more difficult acquisitions or changes of our control not approved by
our Board of Directors. Such provisions have been implemented to
enable us, particularly (but not exclusively) in the initial years of our
existence as an independent, publicly-traded company, to develop our
business in a manner which will foster our long-term growth without
disruption caused by the threat of a takeover not deemed by our Board
of Directors to be in our best interests and our shareholders. See also
"Rights Plan." Such provisions could have the effect of discouraging
third parties from making proposals involving an acquisition or change
of our control, although such proposals, if made, might be considered
desirable by a majority of our shareholders. Such provisions may also
have the effect of making it more difficult for third parties to cause the
replacement of our current management without the concurrence of the
Board of Directors.
Number of Directors; Removal; Vacancies
The Articles of Incorporation provide that the number of
directors shall be determined from time to time in a manner provided by
our By-Laws. Our's Board of Directors has the power to make, alter or
amend our By-Laws. The Articles of Incorporation provide that no
event shall the authorized number of directors be less than three (3) or
more than eleven (11) persons. Our By-Laws provide that our Board
shall have the exclusive right to fill vacancies in the Board of Directors,
including vacancies created by expansion of the Board, and that any
director elected to fill a vacancy shall serve until the next election of the
class for which such director shall have been chosen. The Articles of
Incorporation further provide that directors may be removed by the
shareholders but only for cause and only by the affirmative vote of the
holders of at least a majority of the votes then entitled to be cast in an
election of directors. This provision, in conjunction with the provision
of the By-Laws authorizing the Board to fill vacant directorships, could
prevent shareholders from removing incumbent directors without cause
and filling the resulting vacancies with their own nominees.
Classified Board of Directors
Our By-laws provide for our Board of Directors to be divided
into three classes of directors serving staggered terms. Accordingly,
approximately one-third of our Board of Directors will be elected each
year. See "Management of the Company - Directors."
We believe that three classes of the Board will help assure the
continuity and stability of our Board of Directors, and our business
strategies and policies as determined by our Board, because at least
some the directors at any given time will have prior experience as our
directors. This provision should also help to insure that our Board of
Directors, if confronted with an unsolicited proposal from a third party
that has acquired a block of our voting stock, will have sufficient time
to review the proposal and appropriate alternatives and to seek the best
available result for all shareholders.
In addition, this provision could prevent a party who acquires
control of a majority of the outstanding voting stock from obtaining
control of our Board of Directors until the second annual shareholders
meeting following the date the acquirer obtains the controlling stock
interest, could have the effect of discouraging a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us
and could thus increase the likelihood that incumbent directors will
retain their positions.
Shareholder Action by Written Consent; Special Meetings
Our By-Laws provide that shareholder action permitted to be
taken at a shareholders meeting may be taken without a meeting by a
unanimous action by the shareholders. Such shareholder action must be
evidenced by one or more written consents describing the action taken,
signed by the shareholders consenting thereto and delivered to us for
inclusion in our corporate records. The By-Laws provide that special
meetings of shareholders may be called by our Chairman of the Board, the
President or a majority of the Board of Directors, and shall be called, if
and as required by Kansas Corporation Code.
Advance Notice for Raising Business or Making Nominations at
Annual Meetings
Our By-Laws establish an advance notice procedure for
shareholder proposals to be brought before an annual meeting of our
shareholders and for nominations by shareholders of candidates for
election as directors at an annual meeting or a special meeting at which
directors are to be elected. Subject to any other applicable
requirements, including, without limitation, Rule 14a-8 under the
Exchange Act, or any successor provision, only such business may be
conducted at an annual meeting of shareholders as has been brought
before the meeting by, or at the direction of, our Board of Directors, or
by a shareholder who has provided the Secretary of Indian Gaming
Corporation timely written notice of the shareholder's intention to bring
such business before the meeting. Only persons who are nominated by,
or at the direction of, our Board of Directors, or who are nominated by
a shareholder who has given timely written notice to the Secretary prior
to the meeting at which directors are to be elected, will be eligible for
election as one of our directors.
To be timely, notice of nominations or other business to be
brought before an annual meeting must be received by our Secretary not
later than one hundred eighty days prior to the anniversary date of the
annual meeting of shareholders in the immediately preceding year.
All such notices shall include: (i) a representation that the
person sending the notice is a shareholder of record and will remain
such through the record date for the meeting: (ii) the name and address,
as they appear on our books, of such shareholder; (iii) the class and
number of our shares which are owned beneficially and of record by
such shareholder; and (iv) a representation that such shareholder
intends to appear in person or by proxy at such meeting to make the
nomination or move the consideration of other business set forth in the
notice.
Notice as to proposals with respect to any business to be
brought before the meeting other than the election of directors shall also
set forth the text of the proposal and may set forth any statement in
support thereof that the shareholder wishes to bring to our attention, and
shall specify any material interest of such shareholder in such business.
Notice as to nominations of a director shall set forth the
name(s) of the nominee(s), address(es) of each, a description of all
arrangements or understandings between the shareholder and each
nominee and any person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder, the written consent of each nominee to serve as a director
if so elected and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
nominee(s) of such shareholder.
The chairman of the meeting shall refuse to acknowledge the
nomination of any person or the consideration of any business not made
in compliance with the foregoing procedures.
Amendments to the Articles of Incorporation
The Kansas Corporation Code provides us with authority to
amend our Articles of Incorporation at any time to add or change a
provision that is required or permitted to be included in the Articles of
Incorporation or to delete a provision that is not required to be included
in the Articles of Incorporation. Our Board of Directors may propose one or
more amendments to the Articles of Incorporation for submission to
shareholders and may condition our submission of the proposed amendment on
any basis if the Board of Directors notifies each shareholder, whether or
not entitled to vote, of the shareholders meeting at which the proposed
amendment shall be voted upon. The meeting notice shall state that the
purpose, or one of the purposes, of the meeting is to consider and to act
upon a proposed amendment to the Articles of Incorporation. Any such notice
shall contain or be accompanied by a copy or summary of the
amendment. A majority of shareholders of the outstanding stock
entitled to vote on the amendment to the Articles of Incorporation is
necessary to approve the amendment.
Amendments to By-Laws
The By-Laws provide that the holders of at least a majority of
all shares of our Common Stock then outstanding and entitled to vote
thereon shall have the power to adopt, amend, alter, change or repeal
our By-Laws. The By-Laws further provide that our Board of Directors
may amend or repeal existing By-Laws and adopt new By-Laws by the
vote of at least a majority of the directors present at a meeting at which
a quorum is present, provided that: (i) no By-Law adopted by
shareholders shall be amended, repealed or re-adopted by the Board of
Directors if the By-Law so adopted so provides; and (ii) a By-Law
adopted or amended by the shareholders that fixes a greater or lower
quorum requirement or a greater voting requirement for the Board of
Directors than otherwise provided in the Kansas Corporation Code may
not be amended or repealed by the Board of Directors unless the
By-Law expressly provides that it may be amended or repealed by a
specified vote of the Board of Directors. Action by the Board of
Directors to adopt or amend a By-Law that changes the quorum or
voting requirement for the Board of Directors must meet the same
quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect, unless a
different voting requirement is specified as provided by the preceding
sentence. A By-Law that fixes a greater or lower quorum requirement
or a greater voting requirement for shareholders or voting groups of
shareholders than otherwise is provided in the Kansas Corporation
Code may not be adopted, amended or repealed by the Board of
Directors.
Additional Common Stock
Under our Articles of Incorporation, our Board of Directors
has the authority to issue additional Common Stock. We believe that
the Board's ability to issue additional our Common Stock could
facilitate certain financing and acquisitions and provide a means for
meeting other corporate needs that might arise. The authorized but
unissued shares of our Common Stock will be available for issuance
without further action by our shareholders, unless shareholder action is
required by applicable law or the rules of any stock exchange or system
on which our Common Stock may then be listed. The Board's ability to
issue additional Common Stock could, under certain circumstances,
either impede or facilitate the completion of a merger, tender offer or
other takeover attempt.
Kansas Anti-Takeover Statutes
Section 17-12,100 of the Kansas Corporation Code provides
that, subject to exceptions set forth therein, an interested stockholder of
a Kansas corporation shall not engage in any business combination,
including mergers or consolidations or acquisitions of additional shares
of the corporation, with the corporation for a three-year period
following the date that such stockholder becomes an interested
stockholder unless:
prior to such date the board of directors of the corporation
approved either the business combination or the transaction
which resulted in the shareowner becoming an interested
shareholder;
upon consummation of the transaction which resulted in the
stockowner becoming an "interested stockholder", the
interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction
commenced, excluding those statutorily excluded for purposes
of determining the number of shares outstanding; or
on or subsequent to such date the business combination is
approved by the board of directors and authorized at an annual
or special meeting of the stockholders by the affirmative vote
of 66 2/3% of the outstanding voting stock which is not owned
by the interested stockholder.
Certain Anti-Takeover Effects
Certain provisions of our Articles of Incorporation and
By-Laws may have significant anti-takeover effects, including our
staggered election of the Board of Directors, the inability of
shareholders to remove directors without cause, and the limitation on
the number of directors.
In addition, we have implemented a Rights Plan effective on
the date of the Distribution. The Rights Plan provides for the issuance
of additional shares of our Common Stock on terms that would cause
substantial dilution to a person or group that attempts to acquire our
control on terms not approved by our Board of Directors. See "Rights
Plan."
Our Articles of Incorporation and By-Law provisions
referenced above are intended to encourage persons seeking to acquire
control of us to initiate such an acquisition through arms-length
negotiations with our Board of Directors, and to ensure that sufficient
time for consideration of such a proposal, and any alternatives, is
available. Such measures are also designed to discourage investors from
attempting to accumulate a significant minority position in us and then
use the threat of a proxy contest as a means to pressure us to repurchase
shares at a premium over the market value. To the extent that such
measures make it more difficult for, or discourage, a proxy contest or
the assumption of control by a holder of a substantial block of our
stock, they could increase the likelihood that incumbent directors will
retain their positions, and may also have the effect of discouraging a
tender offer or other attempt to obtain control of us, even though such
attempt might be beneficial to us and our shareholders.
Forms of our Articles of Incorporation and By-Laws are
incorporated by reference into this Information Statement as Exhibits
3.1 and 3.2, respectively, and are incorporated herein by reference. The
foregoing description of certain provisions of the Articles of
Incorporation and the By-Laws does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Articles of
Incorporation and the By-Laws, including definitions of certain terms in
each respective document.
RIGHTS PLAN
At the time of the Distribution, each share of our Common
Stock, par value $0.001 per share, has attached to it one preferred
share purchase right (a "Right"), issued pursuant to the Rights
Agreement (as defined below). Except as set forth below and subject to
adjustment as provided in the Rights Agreement, each Right entitles the
registered holder to purchase from us one-two hundredth of a share of
Series A Participating Preferred Stock, par value $5.00 per share (the
"Preferred Stock") of our company at a price of $10.00 per one-two
hundredth of a share of Preferred Stock (the "Purchase Price"), subject
to adjustment. The description and terms of the Rights are set forth in a
Rights Agreement dated April 30, 2001, as the same may be amended
from time to time (the "Rights Agreement"), between us and Wells
Fargo Bank Minnesota, N.A., as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the
tenth business day following the date of public announcement or the
date on which we first have notice or determine that a person or group
of affiliated or associated persons (other than our company, any of our
subsidiaries or any employee benefit plan of our company) (an
"Acquiring Person") has acquired, or obtained the right to acquire, 15%
or more of the outstanding shares of voting stock of our company
without our prior express written consent executed on our behalf by a
duly our authorized officer following express approval by action of at
least a majority of the members of our Board of Directors then in office
(the "Stock Acquisition Date") or (ii) the close of business on the tenth
business day (or such later date as may be determined by action of the
Board of Directors but not later than the Stock Acquisition Date)
following the commencement of a tender offer or exchange offer,
without our prior written consent with approval of a majority of the
Board of Directors, by a person (other than the our company, any
subsidiary of our company or an employee benefit plan of our
company) which, upon consummation, would result in such party's
control of 15% or more of our voting stock (the earlier of the dates in
clause (i) or (ii) above being called the "Allocation Date"), the Rights
will be evidenced, with respect to any of the Common Stock certificates
outstanding as of the Record Date, by such Common Stock certificates.
The Rights Agreement provides that, until the Allocation Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with our Common Stock. Until the Allocation
Date (or earlier redemption, exchange or expiration of the Rights), new
Common Stock certificates issued after the Record Date upon transfer
or new issuances of Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Allocation
Date (or earlier redemption, exchange or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Record Date, even without such notation or a copy
of this Summary of Rights, will also constitute the transfer of the Rights
associated with our Common Stock represented by such certificate. As
soon as practicable following the Allocation Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of the Common Stock as of the close of business on the
Allocation Date and such separate certificates alone will then evidence
the Rights.
The Rights are not exercisable until the Allocation Date. The
Rights will expire, if not previously exercised, on the date which is 10
years from the Record Date (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by us.
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities or property issuable, upon exercise
of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of the Preferred Stock, (ii) upon the
grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock with a conversion price, less than the
then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends or
dividends payable in Preferred Stock) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of one-two
hundredths of a share of Preferred Stock issuable upon exercise of each
Right are also subject to adjustment in the event of a stock split of the
Common Stock or a stock dividend on the Common Stock payable in
shares of Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior
to the Allocation Date.
Shares of Preferred Stock purchasable upon exercise of the
Rights will not be redeemable or convertible to any other series of
preferred stock that we may issue (unless otherwise provided in the
terms of such stock). Each share of Preferred Stock will have a
preferential dividend in an amount equal to 200 times any dividend
declared on each share of Common Stock. In the event of liquidation,
the holders of the Preferred Stock will receive a preferred liquidation
payment of equal to the greater of $200 and 200 times the payment
made per share of Common Stock. Each share of Preferred Stock will
have 200 votes, voting together with the Common Stock. In the event
of any merger, consolidation or other transaction in which shares of
Common Stock are converted or exchanged, each share of Preferred
Stock will be entitled to receive 200 times the amount and type of
consideration received per share of Common Stock. The rights of the
Preferred Stock as to dividends, liquidation and voting, and in the event
of mergers and consolidations, are protected by customary antidilution
provisions.
Because of the nature of the Preferred Stock's dividend,
liquidation and voting rights, the value of the one-two hundredth
interest in a share of Preferred Stock purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
If any person or group (other than our company, any potential
subsidiary of our company or any employee benefit plan of our
company) acquires 15% or more of our outstanding voting stock
without the prior written consent of the Board of Directors, each Right,
except those held by such persons, would entitle each holder of a Right
to acquire such number of shares of our Common Stock as shall equal
the result obtained by multiplying the then current Purchase Price by
the number of one-two hundredths of a share of Preferred Stock for
which a Right is then exercisable and dividing that product by 50% of
the then current per-share market price of our Common Stock.
If any person or group (other than our company, any
subsidiary of our company or any employee benefit plan of our
Company) acquires more than 15% but less than 50% of the our
outstanding Common Stock without prior written consent of the Board
of Directors, each Right, except those held by such persons, may be
exchanged by the Board of Directors for one share of our Common
Stock.
If we were acquired in a merger or other business combination
transaction where we are not the surviving corporation or where our
Common Stock is exchanged or changed or 50% or more of our assets
or earnings power is sold in one or several transactions without the
prior written consent of the Board of Directors, each Right would
entitle the holders thereof (except for the Acquiring Person) to receive
such number of shares of the acquiring company's common stock as
shall be equal to the result obtained by multiplying the then current
Purchase Price by the number one-two hundredths of a share of
Preferred Stock for which a Right is then exercisable and dividing that
product by 50% of the then current market price per share of the
Common Stock of the acquiring company on the date of such merger or
other business combination transaction.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of
at least 1% in such Purchase Price. No fractional shares of Preferred
Stock will be issued (other than fractions which are integral multiples of
one-two hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), and in
lieu thereof an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the time an Acquiring Person becomes
such, our Board of Directors may redeem the Rights in whole, but not
in part, at a price of $.0025 per Right (the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the
Rights, the right to exercise the Rights will terminate and the only right
of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by our Board of
Directors without the consent of the holders of the Rights, including,
but not limited to, an amendment to lower certain thresholds described
above to not less than the greater of (i) any percentage greater than the
largest percentage of the voting power of all securities of our Company
then known to us to be beneficially owned by any person or group of
affiliated or associated persons (other than an excepted person) and (ii)
10%, except that from and after such time as any person or group of
affiliated or associated persons becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of the
Rights.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration
Statement. A copy of the Rights Agreement is available free of charge
from the Company or upon request to the Rights Agent, Wells Fargo
Bank Minnesota N.A., 161 North Concord Exchange, South St. Paul,
Minnesota 55075, telephone: (651) 450-4064. This summary
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, as the
same may be amended from time to time, which is hereby incorporated
herein by reference.
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY
Limitation on Liability of Directors
Our By-laws provide that we may indemnify any person made
or threatened to be made a party to any proceeding by reason of the
former or present official capacity of the person, provided the person
seeking indemnification meets criteria set forth in K.S.A. Section 17-
6305(a) of the Kansas Corporation Code.
Section 17-6305(a) of the Kansas Corporation Code provides
that a corporation may indemnify a person made or threatened to be
made a party to a proceeding by reason that such person is or was a
director, officer, employee or agent of the company, and the person may
be indemnified against judgments, penalties, fines, including, without
limitation, excise taxes assessed against the person with respect to an
employee benefit plan, settlements, and reasonable expenses, including
attorney's fees and disbursements, incurred by the person in connection
with the proceeding, if, such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best
interests of the corporation; and with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct
was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself , create a presumption
that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interest
of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that such person's conduct
was unlawful.
Indemnification
Under K.S.A. 17-6305(c) of the Kansas Corporation Code, we
are required to indemnify a director, officer, employee or agent of the
Company to the extent such person is successful on the merits or
otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if such person was a party because he or she
was a director, officer, employee or agent of the Company. In all other
cases, the Company may by Section K.S.A. 17-6305(a) of the Kansas
Corporation Code elect to indemnify a director, officer, employee or
agent of the Company against liability incurred in a proceeding to
which such person was a party because he or she was an officer,
director, employee or agent of the Company, unless it is determined that
he or she breached or failed to act in good faith, or acted in such a
manner not to be in the best interests of the Company. K.S.A. 17-
6305(f) of the Kansas Corporation Code provides that, subject to
certain limitations, the mandatory indemnification provisions do not
preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under our Articles of
Incorporation, By-Laws, a written agreement or a resolution of the
Board of Directors or shareholders.
Section 6.4 of our By-Laws contains provisions that generally
parallel the indemnification provisions of the Kansas Corporation Code.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form 10 under the
Exchange Act with respect to the Shares being received by shareholders
of Butler National Corporation in the Distribution. This Information
Statement does not contain all of the information set forth in the Form
10 Registration Statement and the exhibits thereto, to which reference is
hereby made. Statements in this Information Statement as to the
contents of any contract, agreement or other documents referred to
herein are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be
deemed to be qualified in its entirety by such reference. The
Registration Statement and the exhibits thereto filed by the Company
with the Commission may be inspected at the public reference facilities
of the Commission.
After the Distribution, we will be subject to the informational
requirements of the Exchange Act, and in accordance therewith will file
reports, proxy statements and other information with the Commission.
We expect to furnish holders of Shares with annual reports
containing financial statements (beginning with the fiscal
year ending April 30, 2002 including financial statements audited by an
independent public accountant.