OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 13, 1998
TO ALL STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
of OTR Express, Inc. (the "Company") to be held on Wednesday, May 13, 1998,
at 3:00 p.m., Kansas City Time, at the Doubletree Hotel, 10100 College
Boulevard, Overland Park, Kansas, for the following purposes:
(1) To elect three Class C directors to serve until the
2001 Annual Meeting of Stockholders or until their successors
are duly elected and qualified;
(2) To approve the OTR Express, Inc. Amended and Restated
1996 Stock Option Plan;
(3) To approve the OTR Express, Inc. Amended and Restated
1996 Directors' Stock Option Plan;
(4) To ratify the selection by the Board of Directors of
the firm of Arthur Andersen LLP as the independent auditors for
the Company for 1998; and
(5) To transact such other business as may properly come
before the meeting or any adjournment thereof.
Holders of record of the Company's Common Stock, $.01 par value, as of
the close of business on March 15, 1998 will be entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof. A
list of stockholders entitled to vote at the Annual Meeting will be kept at
the Company's offices at 804 N. Meadowbrook Drive, Olathe, Kansas 66062 for a
period of ten days prior to the Annual Meeting and will be available at the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
William P. Ward, Chairman of the Board
Dated: April 3, 1998
IMPORTANT --- YOUR PROXY AND A RETURN ENVELOPE ARE ENCLOSED
You are urged to sign, date and mail your proxy even though you may
plan to attend the Annual Meeting. No postage is required if your proxy is
mailed in the United States in the enclosed return envelope. If you attend
the Annual Meeting, you may vote by proxy or you may withdraw your proxy and
vote in person. By returning your proxy promptly, a quorum will be assured
at the Annual Meeting, which will prevent costly follow-up and delays.
<PAGE>
OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
PROXY STATEMENT
The proposals in the accompanying form of proxy (the "Proxy") are solicited by
the Board of Directors of OTR Express, Inc. (the "Company") for use at its
Annual Meeting of Stockholders (the "Annual Meeting") to be held on Wednesday,
May 13, 1998, at 3:00 p.m., Kansas City Time, at the Doubletree Hotel,
10100 College Boulevard, Overland Park, Kansas, and any adjournment or
postponement thereof. This Proxy Statement, the accompanying form of Proxy
and the Company's Annual Report for the year ended December 31, 1997 (the
"Annual Report") are being mailed or given to stockholders on or about
April 3, 1998.
Proxies. Shares represented by a duly executed Proxy received prior to the
Annual Meeting will be voted at the Annual Meeting. If a stockholder
specifies a choice on the Proxy with respect to any matter to be acted upon,
the shares will be voted in accordance with the choices specified in the Proxy
with respect to the proposals described in this Proxy Statement. If no choice
is specified, the shares represented by the Proxy will be voted in favor of
the proposals set forth in this Proxy Statement. None of the proposals are
related to or conditioned on the approval of any other proposal. Any person
giving a Proxy has the power to revoke it at any time before it is exercised
by giving written notice to the Secretary of the Company at any time prior to
the voting of the shares represented by the Proxy.
Other Matters. Management of the Company does not intend to present any
matter to the Annual Meeting except as indicated herein, and presently knows
of no other matter to be presented at the Annual Meeting. Should any other
matters properly come before the Annual Meeting, the persons named in the
accompanying form of Proxy will vote the Proxy in accordance with their
judgment of the best interests of the Company on such matters.
Solicitation and Expense. The Company will bear all the costs of solicitation
of Proxies and preparing, assembling, printing and mailing the Proxy
Statement, the Proxy and additional materials which may be furnished to
stockholders. In addition to the use of the mails, Proxies may be solicited
by personal contact, telephone or telegraph by regular employees of the
Company, and the Company will reimburse brokers, custodians, fiduciaries or
other persons for their reasonable expenses in sending proxy solicitation
material to beneficial owners of shares.
Voting. Only stockholders of record of the Company's common stock, $.01 par
value (the "Common Stock") at the close of business on March 15, 1998 (the
"Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. On the Record Date, the Company had 1,835,955 shares of Common Stock
outstanding and entitled to vote at the Annual Meeting.
<PAGE>
Each holder of Common Stock is entitled to one vote per share on each matter
to properly come before the Annual Meeting, except for the election of
directors, in which case each stockholder shall have the right to
cumulatively vote such stockholder's shares. Cumulative voting entitles each
stockholder to cast as many votes in the aggregate as shall equal the number
of shares held by such stockholder multiplied by the number of directors to
be elected. The stockholder may cast the whole number of such votes for one
nominee or distribute the votes among two or more nominees.
The Bylaws of the Company require that a majority of the votes of the shares
of Common Stock issued, outstanding and entitled to vote at the Annual Meeting
be present in person or represented by Proxy at the Annual Meeting in order to
constitute a quorum for the transaction of business. Provided a quorum is
present, the affirmative vote of (a) a plurality of the votes cast by the
holders of the Common Stock present in person or represented by Proxy at the
Annual Meeting and entitled to vote on the subject matter is required for the
election of directors and (b) a majority of the votes cast by the holders of
the Common Stock present in person or represented by Proxy at the Annual
Meeting and entitled to vote on the subject matter is required for: (i) the
approval of the OTR Express, Inc. Amended and Restated 1996 Stock Option Plan;
and (ii) the approval of the OTR Express, Inc. Amended and Restated 1996
Directors' Stock Option Plan. Stockholders do not have any dissenters' rights
of appraisal in connection with any of the matters to be voted upon. Votes
that are cast against the proposals are counted both for purposes of
determining the presence or absence of a quorum for the transaction of
business and for purposes of determining the total number of votes cast on a
given proposal. Abstentions will be counted for purposes of determining both
the presence or absence of a quorum for the transaction of business and the
total number of votes cast on a given proposal, and therefore will have the
same effect as a vote against a given proposal. Broker non-votes (i.e., a
proxy card returned by a holder on behalf of its beneficial owner that is not
voted on a particular matter because voting instructions have not been
received and the broker has no discretionary authority to vote) are not
counted for purposes of determining the number of shares present or
represented with respect to a particular proposal for which there is no
authorization to vote and will not be considered as votes cast and thus will
not affect the outcome of voting.
The Company. The Company's principal executive office is located at 804 N.
Meadowbrook Drive, Olathe, Kansas 66062.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<TABLE>
The following table sets forth the beneficial ownership of the Company's
voting securities (the "Common Stock") as of March 15, 1998 by each person and
group known to the Company to be the beneficial owner of more than 5% of its
Common Stock.
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership(FN1) Percent of Class(FN1)
<S> <C> <C>
William P. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 264,534(FN2) 14.27%
Janice K. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 264,534(FN2) 14.27%
Robert B. Westphal
109 N. 6th Street
Fort Smith, AR 72901 162,500(FN3) 8.85%
Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022 152,620(FN4) 8.31%
Dr. Ralph E. MacNaughton
#17 Wycklow
Overland Park, KS 66207 128,237(FN5) 6.98%
Dimensional Fund Advisors
Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 93,900(FN6) 5.11%
<FN>
(FN1) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. Nature of beneficial ownership of shares of Common
Stock is direct unless indicated otherwise by footnote. Beneficial ownership
as shown in the table arises from sole voting power and sole investment power
unless otherwise indicated by footnote.
(FN2) Includes 64,768 shares owned of record by Associated Commercial Analysts
Corporation ("ACA"), which is 100% owned by Mr. and Mrs. Ward. Also includes
109,352 shares held jointly by Mr. and Mrs. Ward; 4,700 shares held directly
by each of Mr. Ward and Mrs. Ward; 6,320 shares held by a family trust for
which Mr. Ward is sole trustee with voting and dispositive power; and 11,131
and 6,676 shares purchasable pursuant to options which are currently
exercisable by Mr. Ward and Mrs. Ward, respectively. In addition, includes
56,887 shares owned by the ESOP of which Mr. Ward is the sole trustee, with
sole voting and dispositive power. Of the shares owned by the ESOP, 5,251 and
1,960 shares have been allocated to the ESOP accounts of Mr. Ward and Mrs.
Ward, respectively.
(FN3) As reflected on Mr. Westphal's Schedule 13D dated February 26, 1998.
(FN4) The Robert Fleming, Inc. Schedule 13G dated February 23, 1998 reflects
179,000 shares. On March 5, 1998, Robert Fleming, Inc. sold a total of 26,380
shares to two executive officers of the Company.
(FN5) Includes 62,602 shares held in family trusts of which Dr. MacNaughton is
trustee and 53,635 shares held in family trusts of which his spouse is
trustee. Also includes 2,000 shares purchasable pursuant to options that are
currently exercisable by Dr. MacNaughton.
(FN6) As reflected on Dimensional Fund Advisors Inc. ("Dimensional") Schedule
13G dated February 7, 1996 and orally confirmed in March 1998 by a
representative of Dimensional to a Company executive officer. Dimensional, a
registered investment advisor, is deemed to have beneficial ownership of
93,900 shares of the Company's Common Stock as of December 31, 1997, all of
which shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee benefit
plans, all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
</FN>
</TABLE>
<PAGE>
<TABLE>
The following table sets forth, with respect to the Company's voting
securities (Common Stock) as of March 15, 1998, (i) shares beneficially owned
by all directors (current and nominee) and named executive officers of the
Company, and (ii) total shares beneficially owned by all executive officers
and directors as a group.
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(FN1) Percent of Class
<S> <C> <C>
William P. Ward 264,534(FN2) 14.27%
Janice K. Ward 264,534(FN2) 14.27%
Dr. Ralph E. MacNaughton 128,237(FN3) 6.98%
Gary J. Klusman 78,066(FN4) 4.15%
Dr. James P. Anthony 71,615(FN5) 3.90%
Dean W. Graves 52,413(FN6) 2.85%
Frank J. Becker 25,000(FN7) 1.36%
Terry G. Christenberry 9,000(FN8) .49%
Charles M. Foudree 4,000(FN9) .22%
All executive officers
and directors as a group
(11 persons) 681,405(FN10) 35.16%
<FN>
(FN1) See footnote (1) to the table on the preceding page.
(FN2) See footnote (2) to the table on the preceding page.
(FN3) See footnote (5) to the table on the preceding page.
(FN4) Includes 1,400 shares held in Mr. Klusman's individual retirement
account. Also includes 43,676 shares purchasable pursuant to options which
are currently exercisable by Mr. Klusman.
(FN5) Includes 2,700 and 24,400 shares held by Dr. Anthony's pension trust and
profit sharing trust, respectively, 26,220 shares owned by his spouse and
5,580 shares held for the benefit of his minor children. Also includes 2,000
shares purchasable pursuant to options which are currently exercisable by Dr.
Anthony.
(FN6) Includes 13,100 shares owned by Mr. Graves' spouse for which Mr. Graves
disclaims beneficial ownership, 500 shares owned jointly with his spouse, and
19,650, 13,383 and 1,000 shares held by his HR-10 retirement plan, profit
sharing trust and individual retirement account, respectively. Also includes
2,000 shares purchasable pursuant to options which are currently exercisable
by Mr. Graves.
(FN7) Includes 10,000 shares held by Mr. Becker's HR-10 retirement plan.
(FN8) Includes 2,000 shares held in Mr. Christenberry's individual retirement
account and 2,000 shares held by Mr. Christenberry's spouse in her individual
retirement account, for which Mr. Christenberry disclaims beneficial
ownership. Also includes 2,000 shares purchasable pursuant to options which
are currently exercisable by Mr. Christenberry.
(FN9) Includes 1,000 shares held by Mr. Foudree's trust and 1,000 shares held
in the individual retirement account of his spouse. Also includes 2,000
shares purchasable pursuant to options which are currently exercisable by Mr.
Foudree.
(FN10) Includes 102,301 shares purchasable pursuant to options which are
currently exercisable and 56,887 shares owned by the ESOP of which Mr. Ward is
the sole trustee, with sole voting and dispositive power. Of the shares owned
by the ESOP, a total of 9,531 have been allocated to the accounts of the
Company's executive officers.
</FN>
</TABLE>
<PAGE>
PROPOSAL ONE:
ELECTION OF CLASS C DIRECTORS
The number of directors constituting the Board of Directors has been fixed at
nine. The Articles of Incorporation of the Company divide the Board of
Directors into three classes of directors, as nearly equal in number as
possible, who serve staggered terms. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
Annual Meeting of Stockholders for a full three-year term.
Nominees. The following table contains certain information concerning each of
the individuals nominated by the Board of Directors for election as a Class C
Director at the 1998 Annual Meeting. Each is presently a director whose term
expires in 1998. Each Class C Director to be elected at the 1998 Annual
Meeting will serve until the Annual Meeting of Stockholders in 2001 or until
his or her successor is elected and qualified. The shares represented by the
enclosed Proxy will be voted, unless otherwise indicated, for the election of
the three nominees for Class C Director named below. In the unanticipated
event that any nominee should become unavailable, the Board of Directors, in
its discretion, may designate a substitute nominee, in which event such shares
will be voted for such substitute nominee. Management recommends a vote for
the election of the three nominees for Class C Director named below.
Name of Nominee Director Principal Occupation for
for Director Age Since Last Five Years and
Directorships Held
Dr. James P. Anthony (1) 50 1989 Dr. Anthony has been a
radiologist in the Carondelet
Radiology Group at St. Joseph's
Hospital in Kansas City,
Missouri, for more than the
prior five years.
Charles M. Foudree (1)(2) 53 1994 Mr. Foudree has been Executive
Vice President-Finance and a
director of Harmon Industries,
Inc., a manufacturer of signal
and control systems for railroads
and mass transit systems
worldwide, located in Blue
Springs, Missouri, and has been
with Harmon in a variety of
executive positions for more
than the prior five years.
Janice K. Ward 58 1985 Mrs. Ward has been Vice
President-Compensation and
Administration and a director
of the Company since its
incorporation in 1985. Mrs.
Ward was secretary of the
Company from 1985 until
February 1998. Mrs. Ward has
been an officer and director of
ACA, an affiliate of the
Company, since 1984. Mrs. Ward
is the wife of William P. Ward
and the sister-in-law of Mr.
Graves. Mrs. Ward supervises
the Company's personnel
relations, employee benefits
and payroll. She is also the
manager in charge of the driver
incentive profit centers.
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
<PAGE>
THE BOARD OF DIRECTORS
Continuing Directors. The following table contains certain information
concerning the Board members whose terms do not expire in 1998 and continue
after the Annual Meeting.
Current Principal Occupation for Last
Director Term Five Years and Directorship
Name Age Since Expires Held
Frank J. Becker 62 1997 2000 Mr. Becker has been President
of Becker Investments, Inc.,
an investment company
located in Lawrence, Kansas
since January 1993 and prior
to that time, Mr. Becker was
a private investor. From 1979
to 1988, Mr. Becker was
Chairman of the Board and
Chief Executive Officer of
Becker Corporation, a tank
trucking company. Mr. Becker
is also a director of
Western Resources, Inc. and a
member of the Board of
Trustees of the Kansas
University Endowment
Association.
Dr. Ralph E.
MacNaughton (2) 69 1988 2000 Dr. MacNaughton has been
retired since June 1994.
He had been a radiologist
in the Carondelet Radiology
Group at St. Joseph's
Hospital in Kansas City,
Missouri, for more than the
prior five years.
William P. Ward (3) 59 1985 2000 Mr. Ward founded the
Company and has been
Chairman of the Board since
its incorporation in 1985.
From 1985 to January 1998,
Mr. Ward served as President
and Chief Executive Officer
of the Company. Since 1974,
Mr. Ward has been Chairman
and an officer of Associated
Commercial Analysts
Corporation ("ACA"), an
affiliate of the Company that
has acted as a general
partner for numerous real
estate limited partnerships.
Since the formation of the
Company in 1985, ACA has
not formed any new real
estate limited partnerships.
ACA is presently managing
six such partnerships. Mr.
Ward is the husband of
Janice K. Ward and the
brother-in-law of Dean W.
Graves.
Terry G.
Christenberry (1) 51 1992 1999 Mr. Christenberry has been
the President and a director
of Christenberry Collet &
Company Inc., an investment
banking firm located in
Kansas City, Missouri, since
its incorporation in June
1994. From 1987 to June
1994, Mr. Christenberry was
Executive Vice President and
a director of H.B.
Oppenheimer & Company Inc.,
also an investment banking
firm located in Kansas City,
Missouri. Mr. Christenberry
is also a director of
Smithway Motor Xpress
Corporation and Wilbert,
Inc.
Dean W. Graves (3) 63 1991 1999 Mr. Graves has been the
sole owner of Dean Graves,
FAIA Architectural Firm,
located in Kansas City,
Missouri, for more than the
prior five years. Mr.
Graves is the brother-in-
law of Mr. and Mrs. Ward.
Gary J. Klusman (3) 38 1995 1999 Mr. Klusman has been the
President and Chief
Executive Officer since
February 1998 and a director
since 1995. From October
1994 through January 1998
Mr. Klusman was Executive
Vice President of the
Company. Mr. Klusman was
the Vice President-Finance
and Chief Financial Officer
of the Company from December
1991 to October 1994.
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
<PAGE>
Meetings of Board of Directors and Committees. The business and affairs of
the Company are managed by its Board of Directors. The Board has established
an Executive Committee, an Audit Committee and a Compensation Committee. The
entire Board of Directors acts as the nominating committee exclusively
responsible for selecting candidates for election as directors. The Executive
Committee is empowered to act between meetings of the Board of Directors with
powers of the full Board, except with respect to certain matters. The Audit
Committee's responsibilities include making recommendations to the Board of
Directors of the firm to be engaged to audit the Company and reviewing with
the independent auditors the plan for, and results of, the auditing engagement
and the Company's internal accounting controls. The Compensation Committee is
responsible for reviewing and approving the salaries and classifications of
the Company's executive officers and other significant employees and the
Company's personnel policies and administering the Company's 1991 Incentive
Stock Option Plan, 1996 Stock Option Plan and 1996 Directors' Option Plan.
The Board of Directors of the Company held 6 meetings last year. The Audit
Committee held one meeting during the last year; the Compensation Committee
held four meeting during the last year; and the Executive Committee did not
meet during the last year. Except as set forth below, during the last year
each director attended at least 75% of the directors' meetings (and at least
75% of the meetings of committees on which he or she served) during the period
for which he or she was a director (and during the period for which he or she
served as a committee member). Mr. Foudree was not in attendance at three of
the six board meetings held during 1997.
Compensation Committee Interlocks and Insider Participation. The Compensation
Committee consists entirely of non-employee Directors of the Company and there
are no Compensation Committee interlocks with other companies.
Compensation of Directors. Non-officer directors are each paid annual fees of
$2,400 for serving on the Company's Board of Directors, plus $200 for each
meeting of the Board (and $100 for each meeting of a committee of the Board)
they attend. Mr. Christenberry's director's fees were paid to his employer,
Christenberry Collet & Company Inc. A total of $20,400 was earned by non-
officer directors for service on the Board during 1997. Officer-directors do
not receive annual fees or fees for attendance at meetings. In addition to
the foregoing fees, commencing in 1996 each non-officer director who had
served as a director for more than one year was granted a 1,000 share stock
option annually pursuant to the 1996 Directors' Stock Option Plan for his
service on the Board.
<PAGE>
EXECUTIVE OFFICERS
Information About Other Executive Officers. Each executive officer is elected
annually and will serve until reelected or until his or her successor is
elected and qualified. In addition to Mr. Ward, Mrs. Ward and Mr. Klusman,
the following persons served as executive officers of the Company during 1997.
Name Age Principal Occupation for
Last Five Years
Steven W. Ruben 36 Mr. Ruben has been Vice President -
Finance and Chief Financial Officer
of the Company since November 1995.
From October 1987 to November 1995,
Mr. Ruben was an Audit Manager for
Mayer Hoffman McCann, Certified Public
Accountants, in Kansas City, Missouri.
Christine D. Schowengerdt 44 Ms. Schowengerdt has been the Company's
Treasurer since its incorporation
in 1985.
Executive Compensation. The following table provides certain summary
information concerning compensation paid or accrued by the Company to or on
behalf of the Company's Chief Executive Officer and each of the other most
highly compensated executive officers of the Company whose salary and bonus
exceeded $100,000 (determined as of the end of the last year) for the years
ended December 31, 1997, 1996 and 1995:
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term
Compensation Awards
Securities Underlying All Other
Name Year Salary($) Options/SARS(#) Compensation ($)
<S> <C> <C> <C> <C>
William P. Ward,
President, CEO 1997 183,365 3,383 0
1996 150,509 3,676 0
1995 142,086 7,455 0
Gary J. Klusman,
Executive Vice 1997 147,070 3,383 0
President 1996 120,958 3,676 0
1995 101,367 7,455 0
</TABLE>
<PAGE>
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term*
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees in Price Expiration
Name (#)(1)(2) Fiscal Year ($/SH)(3) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
William P.
Ward 3,383 13.5% 6.00 12/16/02 5,491 12,134
Gary J.
Klusman 3,383 13.5% 6.00 12/16/07 12,499 31,675
* The dollar amounts set forth under these columns are the result of
calculations of the 5% and 10% rates set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation.
(1) Mr. Ward's options were granted for a term of 5 years. 100% of Mr.
Ward's options become exercisable on January 1, 1999.
(2) Mr. Klusman's options were granted for a term of 10 years. 100% of Mr.
Klusman's options become exercisable on January 1, 1999.
(3) The exercise price and tax withholding obligations related to exercise
may be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
</TABLE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year And Option Values at December
31, 1997
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options Options
Acquired at Year End at Year End
on (#) ($)
Exercise Value Realized(1) Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexerciseable
<S> <C> <C> <C> <C>
William P.
Ward -0- -0- 7,455/7,059 4,659/3,217
Gary J.
Klusman -0- -0- 3,676/10,838 -0-/7,876
(1) Market value of underlying securities at year-end minus the exercise or
base price of "in-the-money" options.
</TABLE>
Compensation Committee Report on Executive Compensation. On an annual basis,
the Compensation Committee reviews the salaries and performance adjustments of
the executive officers, is responsible for administration of the OTR Express,
Inc. 1991 Stock Option Plan (the "1991 Option Plan") and the 1996 Stock Option
Plan (the "1996 Option Plan"), and oversees the administration of the
Company's compensation program.
In accordance with Securities and Exchange Commission rules designed to
enhance disclosure of companies' policies toward executive compensation, the
following report is submitted by the below listed committee members in their
capacity as the Board's Compensation Committee. The report addresses the
Company's compensation policy as it related to the executive officers for
1997.
<PAGE>
General Compensation Policy. The Compensation Committee of the Board of
Directors was, and continues to be, guided by a belief that executive
compensation should reflect the Company's performance consisting of the
Company's revenue, operating ratio (operating expenses divided by operating
revenue), operating income and earnings per share, while at the same time
considering surrounding competitive pressures, retention of key executive
officers and individual performance as evidenced by informal evaluations. The
Compensation Committee has not yet adopted a policy with respect to the
$1,000,000 limitation on deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code of 1986, as amended.
1997 Compensation. To accomplish the Company's compensation policy, the
executive compensation package integrates (i) annual base salary, (ii) current
year performance adjustments to such salary, and (iii) stock option grants
under the Company's 1996 Option Plan. The overall compensation policy, as
implemented, endeavors to enhance the profitability of the Company (and, thus,
stockholder value) by tying the financial interests of the management with
those of the Company.
Base Salary. The Compensation Committee initially determines the amount of
executive officer base salary based on factors such as prior level of pay,
quality of experience, responsibilities of position and salary levels of
similarly positioned executives in other companies. Once base salary has been
determined, the Compensation Committee divides the executive officers into two
groups: Operating Officers and Administrative Officers. The Operating
Officers consist of Mr. Ward (Chairman of the Board), and Mr. Klusman (Chief
Executive Officer), and Mrs. Ward (Vice President - Compensation and
Administration). The Administrative Officers are the remaining executive
officers, Mr. Ruben (Vice President-Chief Financial Officer) and
Ms. Schowengerdt (Treasurer).
For Operating Officers, the Compensation Committee has adopted a policy that
base salaries will be annually adjusted based on factors such as prior level
of pay, quality of experience, responsibilities of position, salary levels of
similarly positioned executives in other companies and the general changes in
the cost of living standards as published by the Department of Labor.
Accordingly, effective January 1, 1997, each Operating Officer was given a
base annual salary raise equal to 3.3% over the prior year.
For Administrative Officers, raises are determined subjectively by the
Chairman and the CEO and approved by the Compensation Committee. Such raises
are based upon informal evaluations by the CEO and, to a lesser extent, other
executive officers.
Performance Adjustments. For the Operating Officers, the Company has in place
a Performance Adjustment Plan which couples the executive's cash compensation
with specific target improvements in the Company's revenues, operating ratio,
operating income, stock price and earnings per share (the "Performance
Factors"), which are each weighted equally. For 1997, the Compensation
Committee set the target level of improvement in Performance Factors with at
least a 29% improvement target in four of the five factors.
Under the Performance Adjustment Plan, each Operating Officer will receive a
maximum 35% of his or her annual base salary ("Target Adjustment") if the
target level of improvement in
<PAGE>
Performance Factors is reached. Achievement of
less than the target level of improvement in Performance Factors will result
in a 1% decrease in the Target Adjustment for each 1% deviation in such target
level. For example, if the Target Adjustment is $20,000 and the Company
reaches 50% of its target level of improvement in Performance Factors, then
the amount of actual performance adjustment would be $10,000.
In 1997, the Company reached 51% of its target level of improvement in
Performance Factors. Accordingly, the Operating Officers received an actual
performance adjustment of 51% of their Target Adjustments.
Administrative Officers do not participate in the Performance Adjustment Plan
and, thus, do not receive a performance adjustment.
Stock Option Awards. The Compensation Committee may also award stock options
to executive officers under the 1996 Stock Option Plan. In general, the
Committee believes that stock options are an effective incentive for
executives to create value for stockholders since the value of an option bears
a direct relationship to appreciation in the Company's stock price.
Obviously, when stockholder value decreases, the stock options granted to
executives either decrease in value or have no value.
In December 1997, the Committee authorized the granting of options to the
executive officers to acquire 11,839 shares of Common Stock under the 1996
Stock Option Plan. A total of 13,161 shares authorized under the 1996 Stock
Option Plan were granted to employees other than executive officers in
December 1997.
Chairman and CEO Compensation. William P. Ward, Chairman and CEO of the
Company during 1997, is subject to the same general compensation package as
the other Operating Officers as set forth above.
The Compensation Committee decided to increase Mr. Ward's annual base salary
by 3.3% effective January 1, 1997 based on factors including quality of
experience, responsibilities of position, and salary levels of similarly
positioned executives in other Companies.
Mr. Ward also received $27,888 in performance adjustment to his base annual
salary under the Performance Adjustment Plan. As noted above, such
performance adjustment was 51% of his Targeted Adjustment of $54,233.
In December 1997, the Committee authorized a grant of options to Mr. Ward to
acquire 3,383 shares of Common Stock under the 1996 Stock Option Plan.
Summary. The Compensation Committee believes that the executive officers of
the Company are dedicated to achieving significant improvements in long-term
financial performance and that the compensation policies and programs
contribute to achieving this senior management focus. The Compensation
Committee believes that the compensation levels during 1997 adequately reflect
the Company's compensation goals and policies.
The Compensation Committee report is submitted by:
Dr. Ralph E. MacNaughton
Charles M. Foudree
<PAGE>
COMPANY PERFORMANCE
<TABLE>
The following graph shows a comparison of cumulative total returns for the
Company, the NASDAQ Market Index, and an industry index based on the
applicable Standard Industrial Classification code ("SIC Industry Index").
<CAPTION>
SIC Code
Measurement Period OTRX NASDAQ Market Index 4213 Trucking, except local
<S> <C> <C> <C>
12/31/92 100.00 100.00 100.00
12/31/93 170.37 119.95 113.27
12/31/94 281.48 125.94 108.90
12/31/95 133.33 163.35 92.32
12/31/96 103.70 202.99 87.21
12/31/97 174.07 248.30 126.02
</TABLE>
The above graph compares the performance of the Company with that of the
NASDAQ Market Index and the SIC Industry Index, with the investment weighted
on market capitalization. The total cumulative return on investment (change
in stock price plus reinvested dividends) for the Company, the NASDAQ Market
Index and the SIC Industry Index is based on the stock prices as of
December 31, 1992, assuming a $100 investment.
The SIC Industry Index is comprised of all those companies with a four digit
SIC code of 4213 (Trucking, except local).
<PAGE>
PROPOSAL TWO:
APPROVAL OF THE AMENDED AND RESTATED
1996 STOCK OPTION PLAN
Background.
The Company's 1996 Stock Option Plan (the "1996 Option Plan") was originally
approved by the Company's Stockholders at the 1996 Annual Stockholders
Meeting. On January 29, 1998, the Board of Directors adopted, subject to
stockholder approval, the Amended and Restated 1996 Stock Option Plan (the
"Restated 1996 Option Plan") containing certain amendments to the 1996 Option
Plan, as more fully described below. The Restated 1996 Option Plan provides
eligible key employees of the Company and its subsidiaries the right to
receive incentive and/or nonqualified stock options. Approximately 25 persons
would be considered "key employees," including all of the Company's executive
officers, under the Restated 1996 Option Plan. The purposes of the Restated
1996 Option Plan are to attract and retain key employees and to provide
incentives and economic inducements to key employees by offering them an
opportunity to acquire a proprietary stake in the Company's financial future.
The Restated 1996 Option Plan expires on January 29, 2008 (unless sooner
terminated or suspended) and is administered by the Compensation Committee
consisting of at least two non-officer directors. The selection of
Participants, allotment of shares, determination of price, determination of
the timing of the exercise of the options and other conditions of purchase of
options is determined by the Compensation Committee in its sole discretion.
Summary of Proposed Amendments.
The summary of the proposed amendments is qualified in entirety by the copy of
the Restated 1996 Option Plan, marked to show the amendments, attached hereto
as Exhibit A.
Increase in Number of Shares. As of January 1, 1998, there were outstanding
options covering 50,000 shares of Common Stock held by 23 persons and no
shares of Common Stock remained available for future awards. The amendments
propose to increase the aggregate number of shares of Common Stock that may be
issued under the Restated 1996 Option Plan to 130,000.
Transfer of Options. The current text of the 1996 Option Plan provides that
options may not be transferred other than pursuant to a Participant's will or
the laws of descent. The amendments propose to increase the Plan's
flexibility by permitting the Compensation Committee to allow a Participant to
transfer non-qualified options (but not incentive stock options) to his or her
immediate family or any organization, trust or entity which is owned or
controlled by such Participant (the "Transferees"). The amendments also
propose to increase the Restated 1996 Option Plan's flexibility by permitting
the Compensation Committee to cause the Company to issue non-qualified options
(but not incentive stock options), which would otherwise be granted to a
Participant, directly to one or more Transferees. In either case, a
Transferee's ability to exercise a non-qualified option will be limited by
provisions in the Restated 1996 Option Plan applicable to exercisability
during the Participant's employment.
<PAGE>
Cashless Exercise of Options. The Restated 1996 Option Plan currently
provides that payment for shares of Common Stock upon exercise of an option
must be made either in cash, or at the discretion of the Compensation
Committee, in Common Stock having a fair market value equal to the cash
exercise price of the options being exercised. In order to permit
Participants in the Restated 1996 Option Plan to exercise options without
expending substantial amounts of cash for their shares of Common Stock, the
proposed amendments also provide for the Participant to utilize a "cashless
exercise" arrangement, subject to approval of such arrangement by the
Compensation Committee. Depending on the terms and conditions of the cashless
exercise arrangement, all or a portion of a Participant's Common Stock
received from his or her exercise of an incentive stock option (or his or her
disposition of such stock) may cease to qualify for the favorable federal
income tax treatment normally extended to stock acquired from the exercise of
an incentive stock option. Common Stock acquired or disposed of by a
Participant under conditions not meeting Code conditions applicable to
incentive stock options will be treated for federal income tax purposes as
acquired or disposed of, as the case may be, pursuant to a non-qualified
option.
Loans. The proposed amendments would provide that subject to the approval of
the Compensation Committee, the Company may loan up to 100% of the purchase
price of the shares of Common Stock purchased by the Participant upon exercise
of an option. Such loan would be evidenced by a promissory note bearing an
interest rate and such other terms (which may, but need not, provide for its
forgiveness as the Participant continues in employment) as may be determined
by the Compensation Committee.
Reload Option. The proposed amendments would authorize the Compensation
Committee to provide in future award agreements that Participants who use
already-owned shares of the Company's Common Stock to pay for the exercise of
options will simultaneously be granted "reload options". The reload options
would give the Participant the right to purchase the same number of shares of
the Company's Common Stock as such Participant used to pay for the exercise of
such Participant's options, and will be exercisable by the Participant upon
the terms and conditions established by the Compensation Committee. The terms
and conditions of a reload option may qualify it as an incentive stock option,
or, if not, as a non-qualified stock option. The purchase price of the reload
options would not be less than 100% of the fair market value of a share of
Common Stock on the date of exercise of the initial option to which the reload
option relates.
Description of the Restated 1996 Option Plan.
Options granted under the Restated 1996 Option Plan are designated by the
Compensation Committee as either incentive stock options under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or non-qualified
stock options. The aggregate fair market value of the stock (at the time the
option is granted) with respect to which incentive stock options (including
reload options which qualify as incentive stock options under the Code) are
exercisable for the first time by any key employee during any calendar year
shall not exceed $100,000. Stock options granted under the Restated 1996
Option Plan are exercisable for a period of up to ten years from the date of
grant and at an exercise price which is not less than
<PAGE>
100% of the fair market value of the Common Stock on the date of the grant,
except that the term of an incentive stock option granted under the Restated
1996 Option Plan to any stockholder owning more than 10% of the outstanding
Common Stock may not exceed five years and the exercise price of an incentive
stock option granted to such stockholder may not be less than 110% of the fair
market value of the Common Stock on the date of the grant. An option must be
exercised while the optionee is employed by the Company or within three months
after termination of the key employee's employment or his or her retirement
(if the option is an incentive stock option) and within one year in the case
of termination by reason of death, retirement (if the option is a nonqualified
stock option) or disability.
The Board of Directors may amend and terminate the Restated 1996 Option Plan
at any time; provided, however, that it may not, without stockholder approval,
(a) materially increase the maximum number of shares for which options may be
granted under the Restated 1996 Option Plan, (b) materially increase the
benefits accruing to participating employees under the Restated 1996 Option
Plan or (c) materially change the eligibility provisions regarding employees
to whom options may be granted.
Federal Tax Consequences.
The following is a summary of the federal tax consequences of (i) incentive
stock options granted under the Restated 1996 Option Plan, and
(ii) nonqualified stock options granted under the Restated 1996 Option Plan
and the Amended and Restated 1996 Directors' Option Plan discussed under
Proposal Three.
Tax Consequences for Incentive Stock Options. An option-holder does not
recognize income upon receipt of the grant of an incentive stock option. If
an option-holder exercises an incentive stock option in accordance with its
terms, and does not dispose of the stock acquired upon its exercise within two
years from the date the option was granted or within one year from the date
the option was exercised, the option-holder will not realize any income by
reason of exercise of the option, and the Company will be allowed no deduction
by reason of either the grant of the incentive stock option or its exercise.
However, see the discussion of the effects of the Alternative Minimum Tax
discussed below. The option-holder's tax basis in the shares acquired upon
exercise of the option will be the amount of cash paid upon exercise.
However, see the discussion below for the tax consequences of the exercise of
an option with stock already owned by the option-holder. Provided the option-
holder holds the shares as a capital asset at the time of sale or other
disposition of the stock, his or her gain or loss, if any, recognized on the
sale or other disposition will be capital gain or loss. The amount of his or
her gain or loss will be the difference between the amount realized on the
disposition of the shares and the option-holder's tax basis in the shares.
If an option-holder exercises an incentive stock option, but disposes of the
stock acquired upon its exercise within two years from the date the option was
granted or within one year from the date the option was exercised (an "Early
Disposition"), the stock will not be treated as having been received pursuant
to an incentive stock option for federal income tax purposes. The option-
holder will realize ordinary (compensation) income at the time of such Early
Disposition which
<PAGE>
will equal the excess, if any, of the lesser of (a) the gain
realized on disposition of the stock, or (b) the excess of the stock's fair
market value on the exercise date over the option-holder's exercise price
(normally the option-holder's tax basis in the stock). The Company will be
entitled to a deduction in an amount equal to such income. The excess, if
any, of the amount realized on the Early Disposition of such shares over the
fair market value of the shares on the date of exercise will be long-term or
short-term capital gain, depending upon the holding period of the stock,
provided the option-holder holds the stock as a capital asset at the time of
Early Disposition. If an option-holder disposes of such stock for less than
his or her tax basis in the shares, the difference between the amount realized
and the option-holder's basis will be long-term or short-term capital loss,
depending upon the holding period of the stock, provided the option-holder
holds the stock as a capital asset at the time of disposition.
The excess of the fair market value of the shares at the time the incentive
stock option is exercised over the exercise price for the shares is an
adjustment that must be taken into account in calculating a Participant's
federal alternative minimum tax liability for the year in which the incentive
stock option is exercised. See the "Alternative Minimum Tax" discussion
below.
Tax Consequences for Non-Qualified Stock Options. Non-qualified stock options
do not qualify for the special tax treatment accorded to incentive stock
options under the Code. Although an option-holder does not recognize income
at the time a non-qualified option is granted, he or she recognizes ordinary
(compensation) income upon the exercise of a non-qualified option (whether by
him or her or by his or her Transferee(s)). This income is equal to the
difference between the fair market value of the stock on the date the non-
qualified option was exercised and the amount paid for the stock. When an
option-holder (or his or her Transferee) exercises a non-qualified stock
option, the Company will be entitled to deduct as compensation an amount equal
to the amount included in the option-holder's gross income. The Company's
deduction generally will be taken in the Company's taxable year in which the
non-qualified option is exercised.
However, so long as the sale of the shares received upon exercise of a non-
qualified option would subject the option-holder to suit under Section 16(b)
of the Securities Exchange Act of 1934 (the "Section 16(b) restriction"), the
option-holder does not recognize income (and no tax deduction is allowed to
the Company) until the earlier of (1) the expiration of six months from the
date of the option was exercised, or (2) the date on which the option would no
longer be subject to the Section 16(b) restriction (the earlier of such two
dates hereinafter referred to as the "date the Section 16(b) restriction
lapses"). At such time, the option-holder will recognize income in an amount
equal to the excess of the fair market value of the shares on the date the
Section 16(b) restriction lapses over the option exercise price, and the
Company will be entitled to a tax deduction of the same amount at the same
time. The option-holder may elect to recognize income at the time of exercise
of the option, instead of on the date the Section 16(b) restriction lapses, in
which case the tax consequences to the option-holder and the Company are the
same as if the option-holder were not subject to the Section 16(b)
restriction.
The excess of the fair market value of the stock on the date a non-qualified
stock option is exercised over the option exercise price is not an adjustment
that must be taken into account in
<PAGE>
calculating a Participant's federal alternative minimum tax liability for
the year in which the non-qualified option is exercised. See the "Alternative
Minimum Tax" discussion below.
Payment in Shares. If the option-holder exercises an incentive stock option
and surrenders stock already owned by him ("Old Shares") in payment of the
option exercise price, the following rules apply:
1. To the extent the number of shares acquired ("New Shares") does not
exceed the number Old Shares exchanged, no gain or loss will be recognized on
such exchange, and the tax basis of the New Shares received will be equal to
the tax basis of the Old Shares surrendered, and the holding period of the New
Shares received will include the holding period of the Old Shares surrendered.
2. To the extent the New Shares received exceeds the number of Old Shares
exchanged, the option-holder will not recognize gain or loss on such exchange,
and the basis of the New Shares will be equal to zero, and the holding period
of the New Shares will commence when the option-holder acquires the New
Shares.
3. If the Old Shares surrendered were acquired by the option-holder by prior
exercise of an incentive stock option, and if the surrender occurs prior to
the expiration of the holding period(s) pertinent to incentive stock options
applicable to the Old Shares, the surrender will be deemed to be an Early
Disposition of the Old Shares. The federal income tax consequences of an
Early Disposition are discussed above. If the surrender occurs after the
holding period(s) pertinent to incentive stock options applicable to the Old
Shares have been satisfied, the surrender will not be deemed to be an early
Disposition of the Old Shares.
If the option-holder (or a Transferee) exercises a non-qualified option and
surrenders stock already owned by him ("Old Shares") in payment of the option
exercise price, the following rules apply:
1. To the extent the New Shares received do not exceed the number Old Shares
exchanged, no ordinary (compensation) income will be recognized on such
exchange, and the tax basis for the New Shares will carry over from (and be
equal to) the tax basis for the Old Shares, and the holding period of the New
Shares received will include the holding period of the Old Shares surrendered.
2. To the extent the New Shares exceeds the number of Old Shares exchanged,
the option-holder will recognize ordinary (compensation) income on the receipt
of such New Shares in an amount equal to their fair market value, less any
cash paid for them, and the Company will be entitled to a deduction equal to
such income. The tax basis of such New Shares will be equal to their fair
market value of the exercise date, and the holding period for such New Shares
will commence on the date the option is exercised (or the date the
Section 16(b) restriction lapses, if applicable, if the option-holder has not
elected to recognize income upon the exercise of the option).
<PAGE>
Alternative Minimum Tax. In addition to the federal income tax consequences
described above, a Participant may be subject to the federal alternative
minimum tax (the "AMT"), which is payable only to the extent that it exceeds
the Participant's regular tax liability. The AMT is assessed on the
recipient's "alternative minimum taxable income" in excess of an exemption
amount that varies by filing status.
For purposes of computing the AMT, the alternative minimum taxable income is
equal to taxable income (a) increased by tax preference items, and (b)
increased or reduced by certain AMT "adjustments." One such adjustment
arises, for example, when an option-holder exercises an incentive stock
option. The excess of the fair market value of the stock received upon the
option's exercise over the exercise price will be an adjustment to the option-
holder's alternative minimum taxable income and may be subject to the AMT.
For AMT purposes only, the tax basis of the stock acquired upon the exercise
of the incentive stock option will be increased by the amount of such excess
(its "AMT Basis"). The excess of the fair market value of the stock on the
date a non-qualified stock option is exercised over the option exercise price
is not an adjustment that must be taken into account in calculating a
Participant's AMT liability.
Federal law currently provides for a minimum tax credit that may be applied
against the Participant's regular tax liability in years following a year in
which the Participant is subject to the AMT. The minimum tax credit is
limited to the excess, if any, of the Participant's regular federal income tax
over the tentative AMT for the year. Any credit not used because of the
limitation may be carried forward indefinitely.
(Remainder of page intentionally left blank)
<PAGE>
New Plan Benefits Table. The following table sets forth the number and value
of options for Common Stock, subject to stockholder approval, that were
granted under the Restated 1996 Option Plan to (i) each executive officer
named in the Summary Compensation Table, (ii) all current executive officers
of the Company as a group (five persons), (iii) all non-executive directors as
a group, and (iv) all employees (other than executive officers) of the
Company, as a group (18 persons). Directors who are not employees of the
Company are not eligible to participate under the Restated 1996 Stock Option
Plan. The closing market price of the Common Stock as of March 20, 1998 was
$7.00, as reported by the NASDAQ Stock Market.
<TABLE>
<CAPTION>
Amended and Restated 1996 Stock Option Plan
Name and Position Dollar Option Percent of
Value ($)(FN1) Shares (#) Options Granted
<S> <C> <C> <C>
William P. Ward,
President and CEO 0 0 0%
Gary J. Klusman,
Executive Vice
President 0 40,000(FN2) 50%
All Executive Officers
as a Group 0 60,000(FN2) 75%
All Employees (other
than Executives) as
a group 0 20,000(FN2) 25%
<FN>
(FN1) The dollar value of options granted was determined based on the
difference between the exercise price of $7.00 for options granted and the
closing price per share of the Common Stock on March 20, 1998.
(FN2) Options are fully vested, have an exercise price of $7.00 per share and
expire February 19, 2008.
</FN>
</TABLE>
In recommending approval of the Restated 1996 Option Plan, the Board of
Directors believes that the addition of the amendments described above would
further the underlying purposes of the 1996 Option Plan. Each such feature is
designed to encourage key executives of the Company to increase their equity
interest in the Company without increasing their compensation.
The affirmative vote of the holders of a majority of the shares present or
represented by Proxy at the Annual Meeting is necessary for the approval of
the Restated 1996 Option Plan. The Board of Directors recommends that the
stockholders vote for the following resolution which will be presented at the
Annual Meeting:
"RESOLVED, that the OTR Express, Inc.'s Amended and Restated 1996 Stock Option
Plan is hereby approved."
<PAGE>
PROPOSAL THREE:
APPROVAL OF THE AMENDED AND RESTATED
DIRECTORS' 1996 STOCK OPTION PLAN
Background
The Company's 1996 Directors' Stock Option Plan was originally approved by the
Company's stockholders at the 1996 Annual Stockholders Meeting. On January
29, 1998, the Board of Directors, subject to stockholder approval, adopted the
Amended and Restated 1996 Directors' Stock Option Plan (the "Restated 1996
Directors' Option Plan") which increased the number of shares of Common Stock
that may be issued under the Restated 1996 Directors' Option Plan to 30,000,
as more fully described below. The Restated 1996 Directors' Option Plan
provides that each outside director of the Company (a director who is not an
employee of the Company or any subsidiary of the Company) will automatically
be granted an option to purchase 1,000 shares of the Company's Common Stock at
each annual stockholders' meeting. Approximately 6 persons would be
considered "outside directors" under the Restated 1996 Directors' Option Plan.
The purposes of the Restated 1996 Directors' Option Plan are to provide an
incentive which will motivate and reward outside directors and promote the
best interests and long-term performance of the Company by encouraging
ownership of the Company's Common Stock. The Restated 1996 Directors' Option
Plan expires on January 29, 2008 (unless sooner terminated or suspended).
Options granted under the Restated 1996 Directors' Option Plan will not
qualify as incentive stock options under Section 422 of the Code. Stock
options are exercisable for a period of ten years from the date of grant and
at an exercise price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant.
Summary of Proposed Amendment.
The summary of the amendment below is qualified in its entirety by the copy of
the Amended and Restated 1996 Directors' Stock Option Plan, marked to show the
amendments, attached hereto as Exhibit B.
Increase in Number of Shares. As of January 1, 1998, there were outstanding
options covering 10,000 shares of common stock held by five persons and no
shares of Common Stock remain available for future awards. The amendment
proposes to increase the aggregate number of shares of Common Stock that may
be issued under the Restated 1996 Directors' Option Plan to 30,000.
<PAGE>
Description of the Restated 1996 Directors' Option Plan.
Options granted under the Restated 1996 Directors' Option Plan are not
qualified as incentive stock options under Section 422 of the Code. Stock
options are exercisable for a period of ten years from the date of grant and
at an exercise price equal to 100% of the fair market value of the Company's
Common Stock on the date of grant.
A non-qualified option must be exercised while the option-holder is serving as
a director of the Company, within three months after termination of service as
an outside director, except that if the outside director terminates on account
of death, disability, or on or after attaining age 65, the option may be
exercised within 12 months after such termination of service, but in no event
after ten years from the date of grant.
Options may be assigned or transferred by will or by the laws of descent and
distribution. The Compensation Committee may allow a Participant to transfer
non-qualified options to his or her immediate family or any organization,
trust or entity which is owned or controlled by such Participant (the
"Transferees"). The Compensation Committee may cause the Company to issue
non-qualified options, which would otherwise be granted to a Participant,
directly to one or more Transferees. In either case, a Transferee's ability
to exercise a non-qualified option will be limited by provisions in the
Restated 1996 Directors' Option Plan applicable to exercisability during the
Participant's employment.
The Board of Directors of the Company may amend the Restated 1996 Directors'
Stock Option Plan, except that it may not amend it without approval of
stockholders of the Company if such approval is required by Rule 16b-3.
Furthermore, the Restated 1996 Directors' Stock Option Plan, may not be
amended more than once every six months, other than to comply with changes in
the Internal Revenue Code, the Employee Retirement Income Security Act of
1974, or the rules thereunder.
The complete text of the Restated 1996 Directors' Option Plan is set forth in
Exhibit B to this Proxy Statement. The foregoing summary of certain
provisions of the Restated 1996 Directors' Option Plan is qualified by
reference to the text of the Restated 1996 Directors' Option Plan itself.
Federal Tax Consequences.
The federal tax consequences of options granted under the Restated 1996
Directors' Option Plan are the same as discussed above with respect to the
federal tax consequences of non-qualified options, pages 16 through 18.
<PAGE>
New Plan Benefits Table.
The following table sets forth the number of options for Common Stock that,
subject to stockholder approval, were granted in fiscal 1997 and will be
granted to all non-executive directors as a group on the date of the Annual
Meeting. The closing market price of the common stock as of March 20, 1998
was $7.00, as reported by the NASDAQ Stock Market.
<TABLE>
Amended and Restated 1996 Directors' Stock Option Plan
<CAPTION>
Name and Position(FN1) Option Shares (#)(FN2)
<S> <C>
All Non-Executive Directors
as a Group (6 persons) 7,000(FN3)
<FN>
(FN1) The table does not include any information regarding each of the
officers named in the Summary Compensation Table, all Executive Officers as a
group or all employees who are not Executive Officers as a group, as none of
those individuals or groups is eligible to participate in the Restated 1996
Directors' Stock Option Plan.
(FN2) The value of such options is not determinable because the exercise price
thereof will not be determined until the date of grant (i.e., The date of the
Annual Meeting).
(FN3) Stockholder approval is sought for the issuance of options for 1,000
shares of Common Stock to Mr. Becker for his service as an outside director on
the 1997 Annual Meeting date and for the issuance of options for 6,000 shares
of Common Stock in the aggregate to the six outside directors on the 1998
Annual Meeting date.
</FN>
</TABLE>
In recommending approval of the Restated 1996 Directors' Option Plan, the
Board of Directors believes that the addition of these features would further
the underlying purposes of the Restated 1996 Directors' Option Plan to provide
effective compensation for outside directors, wherein the value to the outside
director is tied directly to the Company's stock price, tying the outside
director financially to the Company's long-term success and increases in
market value. This allows the Company to offer additional compensation to
outside directors without sacrificing immediate cash flow. In addition,
current accounting treatment allows options to be recorded directly to the
balance sheet at the exercise date without a charge to the income statement.
The affirmative vote of the holders of a majority of the shares present or
represented by Proxy at the Annual Meeting is necessary for the approval of
the Restated 1996 Directors' Option Plan. The Board of Directors recommends
that the stockholders vote for the following resolution which will be
presented at the Annual Meeting:
"RESOLVED, that the OTR Express, Inc.'s Amended and Restated 1996 Directors'
Stock Option Plan is hereby approved."
<PAGE>
PROPOSAL FOUR:
RATIFICATION OF INDEPENDENT AUDITORS
For 1997, Arthur Andersen LLP served as the independent auditors for the
Company and audited the financial statements of the Company including reports
to the stockholders. The Board of Directors has selected and appointed Arthur
Andersen LLP as the independent auditors for the Company for the year ending
December 31, 1998. A representative of Arthur Andersen LLP is expected to be
present at the Annual Meeting. Such representative will have the opportunity
to make a statement and is expected to be available to respond to appropriate
questions from stockholders. The Board of Directors recommends that the
stockholders vote for the following resolution which will be presented at the
Annual Meeting:
"RESOLVED, that the selection by the Board of Directors of the Company of
Arthur Andersen LLP as the Company's independent auditors for the year ending
December 31, 1998, be and hereby is, ratified."
Certain Transactions
On February 27, 1998, the Company entered into a Stock Purchase Assistance
Agreement (the "Purchase Assistance Agreement") with each of Gary J. Klusman
("Klusman"), Chief Executive Officer and President, and Steven W. Ruben
("Ruben"), Vice President - Finance and Chief Financial Officer (collectively,
the "Key Officers") that allows Klusman and Ruben to purchase up to $240,000
and $120,000, respectively, of Common Stock with funds from personal loans
which are partially guaranteed by the Company. To provide incentive for the
Key Employees to remain with the Company, if such Key Employee has remained an
executive officer of the Company for the entire year in which a loan payment
is due, the Company would pay to such Key Employee as compensation an amount
equal to the principal installment loan payments due for such year. Such Key
Employee would then be responsible for paying to the lender the principal
installment loan payment due and any accrued interest for the year. The
purpose of the Purchase Assistance Agreement is to strengthen the Company's
ability to retain the Key Officers and promote the long-term interests of the
Company and its stockholders by assisting the Key Officers in making a
meaningful investment in the Company so that the Key Officers interests are
aligned with the Company's stockholders. On March 5, 1998, Klusman purchased
$240,000 and Ruben purchased $120,000 worth of Common Stock pursuant to this
arrangement.
Miscellaneous
Section 16(a) Beneficial Ownership Reporting Compliance. Based solely upon a
review of Forms 3, 4 and 5 and amendments thereto furnished to the Company
with respect to the Company's last fiscal year, the Company is not aware of
any reports required to be filed with the Securities and Exchange Commission
under Section 16(a) of the Securities Exchange Act of 1934, as amended, that
were filed late or not filed by the Company's officers or directors with
<PAGE>
respect to such year. The Company is not aware of any person, other than
officers or directors, who owns more than 10% of the Company's Common Stock.
Stockholder Proposals. In the event any stockholder intends to present a
proposal at the next Annual Meeting of Stockholders to be held in 1999, such
proposal must be received by the Secretary of the Company, in writing, on or
before December 4, 1998, to be considered for inclusion in the Company's Proxy
Statement relating to the next Annual Meeting of Stockholders.
Annual Report. A copy of the Company's Annual Report (including financial
statements and schedules, as filed with the SEC) accompanies this Proxy
Statement. The Annual Report is not part of the proxy solicitation materials.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN TO THE COMPANY THE ACCOMPANYING PROXY. IF YOU ARE PRESENT AT
THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
BY THE BOARD OF DIRECTORS,
William P. Ward
April 3, 1998 Chairman of the Board
<PAGE>
EXHIBIT A
AMENDED AND RESTATED 1996 STOCK OPTION PLAN
<PAGE>
OTR EXPRESS, INC. 1996 STOCK OPTION PLAN
(As Amended and Restated January 1998)
SECTION I. PURPOSE
The purpose of this Plan is to provide an incentive which will attract,
retain, motivate and reward "Key Employees" of the Company and promote the
best interests and long-term performance of the Company by encouraging the
ownership of interests in the Company's stock by such "Key Employees". It is
intended that options may be granted pursuant to this Plan which will qualify
as Incentive Stock Options ("ISO's"), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended ("Code"), and that options may be
granted pursuant to this Plan which will not qualify as ISO's and will be non-
qualified options ("NQO's"). It is also intended that this Plan comply in all
respects with the requirements of Rule 16b-3 under the Securities Exchange Act
of 1934, and any amendment or successor provision thereto ("Rule 16b-3"); any
provision of this Plan deemed not to be in compliance with the requirements of
Rule 16b-3 shall be deemed null and void. This Plan is not intended to
preclude the use of Common Stock for other compensation purposes in line with
the needs and objectives of the Company.
SECTION II. DEFINITIONS
A. "Board of Directors" means the board of directors of the Company.
B. A "Change in Control" shall be deemed to occur (1) upon the approval by
the Board of Directors of the Company (or if approval of the Board of
Directors of the Company is not required as a matter of law, the stockholders
of the Company) of (a) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Common Stock would be converted into cash, securities, or other
property, other than a consolidation or merger in which the holders of Common
Stock immediately prior thereto will have the same or proportionate ownership
of Common Stock of the surviving corporation immediately thereafter, (b) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company,
or (c) any plan or proposal for the liquidation or dissolution of the Company,
or (2) when any person or group of persons acting in concert, other than the
Company, any stockholder at the time of the initial public offering of the
Common Stock or any employee benefit plan or trust maintained by the Company
or any of its Subsidiaries, shall become the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934) directly or indirectly,
of 25% or more of the combined voting power of the Company's then outstanding
stock, without the prior approval of at least 80% of the members of the Board
of Directors of the Company.
C. "Compensation Committee" means the committee established by the Board of
Directors of the Company pursuant to Section VII.
D. "Common Stock" means the shares of the common stock (including treasury
stock), par value $0.01 per share, of the Company.
E. "Company" means OTR Express, Inc., a Kansas corporation, or any
successor thereto.
F. "Disability" means inability of a Participant to perform his or her
duties as a Key Employee by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
A Participant shall not be considered to be permanently and totally disabled
unless the Participant
<PAGE>
furnishes the Company proof of the existence thereof
in such form and manner, and at such times, as the Compensation Committee may
require.
G. "Fair Market Value," as of a given date, means the fair market value of
one share of Common Stock as determined by the Compensation Committee in
accordance with the provisions of the Code and the regulations thereunder.
If, on or on the trading day immediately prior to such given date,
shares of the Common Stock have been traded on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), "Fair Market Value"
shall generally be considered to be the last price of the Common Stock as
reported by NASDAQ on such given date or, if none, on the last day preceding
such given date on which a sale of the Common Stock was so reported.
H. "Key Employee" means a person who is employed in a position of
administrative or managerial responsibility by the Company or a Subsidiary.
I. "Parent" means any corporation (other than the Company or a Subsidiary)
in an unbroken chain of corporations ending with the Company or a Subsidiary,
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
J. "Participant" means a Key Employee who is granted a stock option
hereunder.
K. " Plan" means this OTR Express, Inc. 1996 Stock Option Plan.
L. "Subsidiary" means any corporation, other than the Company, in
an unbroken chain of corporations beginning with the Company if,
at the time of a grant hereunder, each of the corporations, other than
the last corporation in the unbroken chain, owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
M. "Ten Percent Stockholder" means a person who owns, on the date of grant
of an ISO hereunder, more than 10% of the total combined voting power
of all classes of stock of the Company, or its Parent or Subsidiary.
SECTION III. STOCK
The total amount of stock which may be granted or sold under this Plan
shall not exceed 50,000 130,000 shares of the Company's Common
Stock. If an option expires or is terminated or surrendered without having
been fully exercised, the unpurchased shares of Common Stock subject to the
option shall again be available for the purposes of this Plan.
SECTION IV. ELIGIBILITY
A stock option, or a stock option may be granted under the Plan only to
a Key Employee.
SECTION V. STOCK OPTIONS
A. Option Price. Except as provided below, the purchase price of the
Common Stock under each option granted hereunder shall be as determined by the
Compensation Committee but not less than one hundred percent (100%) of the
Fair Market Value of the Common Stock at the time of the grant of the option.
The purchase price of Common Stock under
<PAGE>
each ISO granted to a Ten Percent Stockholder shall be as determined by the
Compensation Committee but not less that 110% of the Fair Market Value of the
Common Stock at the time of the grant of the ISO.
B. Term and Exercise of Options. The term of each option shall be not more
than ten (10) years from the date of granting thereof and the term of each ISO
granted to a Ten Percent Stockholder shall not be more than five (5) years
from the date of granting thereof. Within such limits, options will be
exercisable at such time or times, and subject to such restrictions and
conditions, as the Compensation Committee shall, in each instance, approve,
which need not be uniform for all Participants; provided, however, that except
as provided in Subsection D of this Section and Section X, no option may be
exercised at any time unless the Participant is then an employee of the
Company or a Subsidiary and has been continuously since the granting of the
option or was an employee of the Parent of the Company at the time of grant
and has been continuously employed since that time by either such Parent or by
the Company or a Subsidiary.
C. Non-Transferability of Options. Each option granted under this Plan
shall by its terms be non-transferable by the Participant other than by will
or the laws of descent and distribution. An option may be exercised, during
the lifetime of the Participant, only by the Participant. Notwithstanding the
foregoing, the Compensation Committee may permit a Participant to transfer an
NQO or cause the Company to grant an NQO that would otherwise be granted to a
Participant, to any one or more of the following: a Participant's descendant,
spouse, descendant of a spouse, spouse of any of the foregoing, a trust
established primarily for the benefit of any of the foregoing, or of such
Participant, or to an entity which is a corporation, partnership, or limited
liability company (or any other similar entity) the owners of which are
primarily the aforementioned persons or trusts. Any such option so transferred
or granted directly to the aforementioned persons, trust or entities in
respect of a Participant shall be subject to the provisions of Subsection D
concerning the exercisability during the Participant's employment.
D. Termination of Employment. Except as otherwise provided herein, if a
Participant voluntarily or involuntarily terminates employment with the
Company or any of its Subsidiaries, the Participant may exercise any option
held by such Participant, to the extent the Participant was entitled to
exercise if at the date of termination of employment, at any time within three
(3) months after the date of such termination, but not after the expiration of
the option; provided, however, if the Participant voluntarily terminates
employment (except upon retirement after age 65), the Participant may only
exercise any such option after such termination if the Compensation Committee
consents to such exercise. Any option not so exercised shall expire.
However, subject to the provisions of Subsection G of this Section:
1. If a Participant retires after reaching age 65, the Participant (or the
personal representative of the Participant if the Participant has died) may
exercise any or all of the Participant's unexercised unexpired options,
whether otherwise eligible for immediate exercise by the terms of the option
agreement or not, provided such exercise is within three (3) months in the
case of an ISO or twelve (12) months in the case of an NQO after the date of
the Participant's retirement but not after the expiration of the option;
2. If a Participant retires after attaining age 55 but not age 65, the
Compensation Committee, in its sole discretion, may provide that the
Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's unexercised
unexpired options, whether
<PAGE>
otherwise eligible for immediate exercise by the
terms of the option agreement or not, provided such exercise is within three
(3) months (or, in the discretion of the Compensation Committee, twelve (12)
months in the case of an NQO) after the date of the Participant's retirement,
but not after the expiration of the option;
3. If a Participant's employment is terminated by reason of death, the
personal representative of the Participant may exercise any or all of the
Participant's unexercised unexpired options, whether otherwise eligible for
immediate exercise by the terms of the option agreement or not, provided such
exercise occurs within twelve (12) months of the date of the Participant's
death but not after the expiration of the option; and
4. If a Participant's employment is terminated by reason of Disability, the
Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's unexercised
unexpired options, whether otherwise eligible for immediate exercise by the
terms of the option agreement or not, provided such exercise is within twelve
(12) months of the date of the Participant's employment termination but not
after the expiration of the option.
Notwithstanding the forgeoing foregoing , if the employment of
any Participant shall be terminated because of the Participant's violation of
law or the business conduct rules of the Company or for other breach of duty,
all unexercised options of such Participant shall lapse and be unexercisable
on and after the date of termination of the Participant's employment. The
existence or nonexistence of such violation or breach and the date of
termination of employment shall be determined by the Compensation Committee in
its sole discretion, and such determination shall be final. No change in the
duties of a Participant, while in the employ of the Company, a Parent or a
Subsidiary, or transfer, if still employed after the transfer by a Company, a
Parent or a Subsidiary, shall constitute a termination of employment.
E. Leaves of Absence. The option agreements issued pursuant to this Plan
may contain such provisions as the Compensation Committee shall determine with
respect to approved leaves of absence.
F. Payment of Option Price. The purchase price is to be paid in full upon
exercise of an option, either (1) in cash, or (2) in the discretion of the
Compensation Committee, in shares of Common Stock having a Fair Market Value
equal to the cash exercise price of the option being exercised, or (3)
(3) through such cashless exercise arrangement as may be approved by the
Compensation Committee, or (4) in the discretion of the Compensation
Committee, by any combination of the payment methods specified in clauses (1)
and (2) hereof; provided, however, that (a) shares of Common Stock tendered in
payment must be either shares owned by the Participant and registered in the
Participant's name and may not include shares of Common Stock acquired by the
Participant through exercise of an option granted less than six months prior
to the date of exercise of the option being exercised, and (b) no shares of
Common Stock may be tendered in exercise of an ISO if such shares were
acquired by the Participant through the exercise of an ISO, unless (I) such
shares have been held by the Participant for at least one year; and (ii) at
least two (2) years have elapsed since such ISO was granted. The proceeds
received by the Company upon exercise of an option are to be added to the
general funds of the Company, if cash, or to the shares of the Common Stock
held in treasury, if shares of Common Stock, and used for the corporate
purposes of the Company as the Compensation Committee shall determine.
Subject to the approval of the Compensation Committee, the Company may loan
to any Participant a
<PAGE>
sum equal to not more than one hundred percent (100%) of
the purchase price of the shares of Common Stock purchased upon exercise of an
option, such loan to be evidenced by the execution and delivery of a
promissory note. Interest on such unpaid balance of the note shall be at such
rate as the Compensation Committee may determine. The note may, but need not,
provide for its forgiveness as the Participant continues in employment. The
Compensation Committee may, in its discretion, include within any option
agreement, a provision entitling the Participant to a further option (a "Re-
load Option") in the event the Participant exercises an option by surrendering
other shares of Common Stock in accordance with (2), above. Any such Re-load
Option shall be for the number of shares of Common Stock surrendered upon
exercise under (2), above, and shall become exercisable upon such terms and
conditions as the Compensation Committee shall determine, but the purchase
price shall be not less than one hundred percent (100%) of the Fair Market
Value of the shares of Common Stock on the date of exercise of such option
under (2), above.
G. Limitation on Exercise of Options. The maximum aggregate Fair Market
Value determined at the time an ISO is granted) of the Common Stock with
respect to which ISO's are exercisable for the first time by any Participant
during any calendar year (under all plans of the Company and its Parent and
Subsidiaries) shall not exceed $100,000. If the provisions of this Section
limit the exercisability of certain ISO's which would otherwise become
exercisable on account of an event described in Subsection D of this Section
or Section X, the Compensation Committee, in its sole discretion, shall
determine the times at which such ISO's become exercisable so that the
provisions of this Subsection G are not violated; provided that in no event
shall any ISO be exercisable more than ten (10) years from the date of
granting thereof (five (5) years in the case of ISO's granted to Ten Percent
Stockholders).
SECTION VI. ADMINISTRATION
This Plan shall be administered by the Compensation Committee. Subject
to the express provisions of this Plan, the Compensation Committee shall have
complete authority to:
A. determine the individuals to whom and the time or times when options
shall be granted , ;
B. determine the number of shares to be subject to each option, and the
terms and provisions of each option , ;
C. interpret the Plan , ;
D. prescribe, amend and rescind rules and regulations relating to the
Plan , ;
E. cancel, with the consent of a Participant, any option previously granted
to such Participant and to grant a new option in place thereof; and
F. make all determinations not specifically set forth in (A) through (E)
above which it considers necessary or advisable for the administration of this
Plan.
All determinations by the Compensation Committee with respect to (A)
through (F) above shall be final. In the event the Company or any Subsidiary
enters into a transaction described in Section 424(a) of the Code with any
other corporation, the Compensation Committee may grant options to employees,
former employees of such corporation in substitution of options previously
granted to them by such corporation upon such terms and conditions as shall be
necessary to qualify such grant as a substitution described in Section 424(a)
of the Code.
SECTION VII. COMPENSATION COMMITTEE
<PAGE>
The Compensation Committee shall at all times be constituted to comply
with the requirements of Rule 16b-3; as of the date of adoption of this Plan
by the Board of Directors of the Company, Rule 16b-3 requires that the
Compensation Committee shall consist of two (2) or more members of the Board
of Directors each of whom is a "disinterested person" "Non-Employee
Director" within the meaning of Rule 16b- 3(c) (2)(I) 3(b)(3)
. The members of the Compensation Committee shall be appointed by and
shall serve at the pleasure of the Board of Directors, which may from time to
time appoint members in substitution for members previously appointed and
fill vacancies, however caused, in the Compensation Committee. The
Compensation Committee may select one of its members as its Chairman and shall
hold its meetings at such times and places as it may determine. A majority of
its members shall constitute a quorum. All recommendations by the Compensation
Committee shall be made by a majority of its members.
SECTION VIII. EFFECT OF CHANGE IN STOCK
Notwithstanding any other provision in the Plan, if there is any change
in the Common Stock of the Company by reason of stock dividends, spinoffs,
split ups, recapitalizations, mergers, consolidations, reorganizations,
combinations or exchange of shares and the like, number and class of
shares available for grants of options and the number of shares subject to any
outstanding options, and the price thereof, as applicable, shall be
appropriately adjusted by the Compensation Committee.
SECTION IX. AMENDMENT OR TERMINATION
Unless this Plan shall theretofore have been terminated as hereinafter
provided, this Plan shall terminate, and no stock option shall be granted
hereunder, after ten (10) years from the date of its adoption by the Board of
Directors. Any option, outstanding at the termination of this Plan, shall
continue in full force and effect in accordance with its terms and shall not
be affected by such termination of this Plan. The Board of Directors of the
Company may, at any time prior to that date, terminate this Plan or make such
modifications of the Plan as it may deem advisable; provided, however, that,
if approval by stockholders of the Company of any amendment is required to
comply with Rule 16b-3 or other applicable requirement, such amendment shall
be subject to stockholder approval.
SECTION X. CHANGE OF CONTROL
In the event that a Change of Control of the Company occurs, and if a
Participant's employment with the Company or a Parent or Subsidiary is
terminated within one (1) year thereafter, any then outstanding stock option
held by such Participant shall immediately mature and vest in full and any
such stock option shall be settled by the payment to such Participant of an
amount equal to the excess, if any, of the aggregate Fair Market Value of the
shares subject thereto on the Special Maturity Date as hereinafter defined,
over the aggregate exercise price of such option. For purposes of an event
described in clause (2) of Paragraph B of Section II above, the Special
Maturity Date for purposes hereof shall be the date securities are first
purchased by a tender or exchange offeror, or the date upon which the Company
first receives written notice of acquisition of 25% of its Common Stock,
whichever shall first occur. For purposes of an event described in Clause (1)
of Paragraph B of Section II, the Special Maturity Date shall be the effective
date of such event. Settlement shall be made in cash within not less than
five (5) days following the Participant's termination of employment.
SECTION XI. WITHHOLDING
The Company, at the time any distribution is made under this Plan,
whether in cash or in shares of stock, may withhold from such payment any
amount necessary to satisfy any federal and state income tax withholding
requirements with respect to such distribution. Such withholding may be in
cash or in shares of stock.
SECTION XII. MISCELLANEOUS
<PAGE>
A. Rights to Continued Employment. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer on any individual any right to
continue in the employ of the Company or a Subsidiary or interfere with the
right of the Company or a Subsidiary to terminate the individual's employment.
B. Retirement Plan Rights. Benefits received under this Plan by a
Participant shall not effect or be used in the calculation of the
Participant's pension or other retirement benefits under any other plan
maintained by the Company.
C. Investment Undertakings. Until and unless the issuance of shares of
Common Stock pursuant to this Plan shall have been registered pursuant to the
Securities Act of 1933 and applicable state securities laws, each Participant
acquiring shares of Common Stock under this Plan may be required, as a
condition precedent to such issuance, to execute and deliver to the Company a
letter or certificate containing such investment representations, agreements
restricting sale (including, without limitation, provision for stop transfer
orders and restrictive legend on stock certificates) and confirmation of other
relevant facts to support any exemption from the registration requirements
under the Securities Act of 1933 and such state securities laws on which the
Company intends to rely, all as shall be deemed reasonably necessary by
counsel for the Company and in such form as such counsel shall determine.
SECTION XIII. EFFECTIVENESS OF THE PLAN
This amended and restated Plan will be effective upon adoption by
the Board of Directors of the Company, subject, however, to its approval by the
stockholders of the Company given within 12 months after the date the Plan is
adopted by the Board of Directors, at a regular meeting of the stockholders or
at a special meeting of the stockholders duly called and held for such
purpose, or by written consent of the stockholders. Grants of options made
prior to stockholder approval shall be subject to the obtaining of such
approval and if such approval is not obtained as aforesaid, such grants shall
not be effective for any purpose.
The foregoing Plan amendment and restatement} was adopted by the
Board of Directors of the Company on February 20, 1996 January ,
1998 and approved by the stockholders of the Company on , 1996
1998 .
OTR EXPRESS, INC.
By
William P. Ward, President
<PAGE>
EXHIBIT B
AMENDED AND RESTATED 1996 DIRECTORS' OPTION PLAN
<PAGE>
OTR EXPRESS, INC. 1996 DIRECTORS' STOCK OPTION PLAN
(As Amended and Restated January 1998)
SECTION I. PURPOSE
The purpose of this Plan is to provide an incentive which will motivate
and reward "Outside Directors" of the Company and promote the best interests
and long-term performance of the Company by encouraging the ownership of the
Company's stock by such "Outside Directors". None of the options granted
pursuant to this Plan will qualify as Incentive Stock Options ("ISO's"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended
("Code"). It is also intended that grants under this Plan not
constitute a "formula plan" Discretionary Transactions" under
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934, and
any amendment or successor provision thereto ("Rule 16b-3") so
and that any "Outside Directors" participating hereunder may
still qualify as a "Disinterested Person" shall not be disqualified,
because of this Plan, as a "Non-Employee Director" under Rule 16b-3; any
provision of this Plan deemed not to be in compliance with the requirements
of Rule 16b-3 shall be deemed null and void. This Plan is not intended to
preclude the use of Common Stock for other compensation purposes in line with
the needs and objectives of the Company.
SECTION II. DEFINITIONS
A. "Board of Directors" means the board of directors of the Company.
B. "Common Stock" means the shares of the common stock (including treasury
stock), par value $0.01 per share, of the Company.
C. "Company" means OTR Express, Inc., a Kansas corporation, or any successor
thereto.
D. "Disability" means inability of a Participant to perform his or her
duties as an Outside Director by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 12
months.
E. "Fair Market Value," as of a given date, means the fair market value of
one share of Common Stock as reported by determined by the
Compensation Committee in accordance with the Code and regulations thereunder.
If on or on the trading day immediately prior to such given date, the shares
of Common Stock have been traded on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), "Fair Market Value shall
generally be considered to be the last price of the Common Stock as reported
by NASDAQ on such given date, or , if none, on the last day preceding such
given date on which a sale of the Common Stock was so reported.
F. "Outside Director" means a person who is a member of the Board of
Directors but is not an employee of the Company or any subsidiary of the
Company.
G. "Participant" means an Outside Director who is granted a stock option
hereunder.
H. " Plan" means this OTR Express, Inc. 1996 Directors' Stock Option Plan.
SECTION III. STOCK
The total amount of stock which may be granted or sold under this Plan
shall not exceed 10,000 30,000 shares of the Company's Common
Stock. If an option expires or is terminated or
<PAGE>
surrendered without having been fully
exercised, the unpurchased shares of Common Stock subject to the option shall
again be available for the purposes of this Plan.
SECTION IV. ELIGIBILITY
Stock options may be granted under the Plan only to Outside Directors.
SECTION V. STOCK OPTIONS
A. Grant of Stock Options. Each Outside Director shall be granted an option
to purchase 1,000 shares of Common Stock on the day of each annual
shareholders' meeting.
B. Option Price. The purchase price of the Common Stock under each option
granted hereunder shall be one hundred percent (100%) of the Fair Market Value
of the Common Stock at the time of the grant of the option.
C. Term and Exercise of Options. The term of each option shall be ten (10)
years from the date of granting thereof. Each option will be exercisable in
full on the date of granting thereof; provided, however, that except as
provided in Subsection E of this Section, no option may be exercised at any
time unless the Participant is then an Outside Director and has been so
continuously since the granting of the option
D. Non-Transferability of Options. Each option granted under the Plan
shall by its terms be non-transferable by the Participant other than by will
or the laws of descent and distribution. An option may be exercised, during
the lifetime of the Participant, only by the Participant. Notwithstanding the
foregoing, the Compensation Committee may permit a Participant to transfer an
NQO or cause the Company to grant an NQO that would otherwise be granted to a
Participant, to any one or more of the following: a Participant's descendant,
spouse, descendant of a spouse, spouse of any of the foregoing, a trust
established primarily for the benefit of any of the foregoing, or of such
Participant, or to an entity which is a corporation, partnership, or limited
liability company (or any other similar entity) the owners of which are
primarily the aforementioned persons or trusts. Any such option so transferred
or granted directly to the aforementioned persons, trust or entities in
respect of a Participant shall be subject to the provisions of Subsection D
concerning the exercisability during the Participant's employment.
E. Termination of Service. Except as otherwise provided herein, if a
Participant voluntarily or involuntarily terminates service as an Outside
Director, the Participant may exercise any option held by such Participant, at
any time within three (3) months after the date of such termination, but not
after the expiration of the option. Any option not so exercised shall expire
notwithstanding the foregoing:
1. If a Participant retires as an Outside Director on or after reaching age
65, the Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's unexercised
unexpired options, provided such exercise is within twelve (12) months after
the date of the Participant's retirement but not after the expiration of the
option;
2. If a Participant's employment is terminated by reason of death, the
personal representative of the Participant may exercise any or all of the
Participant's unexercised unexpired options, provided such exercise occurs
within twelve (12) months of the date of the Participant's death but not after
the
<PAGE>
expiration of the option; and
3. If a Participant's employment is terminated by reason of Disability, the
Participant (or the personal representative of the Participant if the
Participant has died) may exercise any or all of the Participant's unexercised
unexpired options, provided such exercise is within twelve (12) months of the
date of the Participant's employment termination but not after the expiration
of the option.
Notwithstanding the forgoing, if the services of any Participant shall be
terminated because of the Participant's violation of law or the business
conduct rules of the Company or for other breach of duty, all unexercised
options of such Participant shall lapse and be unexercisable on and after the
date of termination of the Participant's service
F. Payment of Option Price. The purchase price is to be paid in full upon
exercise of an option, either (1) in cash, or (2) in shares of Common Stock
having a Fair Market Value equal to the cash exercise price of the option
being exercised, or (3) by any combination of the payment methods specified in
clauses (1) and (2) hereof; provided, however, that (a) shares of Common Stock
tendered in payment must be either shares owned by the Participant and
registered in the Participant's name and may not include shares of Common
Stock acquired by the Participant through exercise of an option granted less
than six months prior to the date of exercise of the option being exercised.
The proceeds received by the Company upon exercise of an option are to be
added to the general funds of the Company, if cash, or to the shares of the
Common Stock held in treasury, if shares of Common Stock, and used for the
corporate purposes of the Company as the Compensation Committee shall
determine.
SECTION VI. EFFECT OF CHANGE IN STOCK
Notwithstanding any other provision in the Plan, if there is any change
in the Common Stock of the Company by reason of stock dividends, spinoffs,
split ups, recapitalizations, mergers, consolidations, reorganizations,
combinations or exchanges of shares and the like, the number and class of
shares available for grants of options and the number of shares subject to any
outstanding options, and the price thereof, as applicable, shall be
appropriately adjusted by the President of the Company.
SECTION VII. AMENDMENT OR TERMINATION
Unless this Plan shall theretofore have been terminated as hereinafter
provided, this Plan shall terminate, and no stock option shall be granted
hereunder, after ten (10) years from the date of its adoption by the Board of
Directors. Any option, outstanding at the termination of this Plan, shall
continue in full force and effect in accordance with its terms and shall not
be affected by such termination of this Plan. The Board of Directors of the
Company may, at any time prior to that date, terminate this Plan or make such
modifications of the Plan as it may deem advisable; provided, however, that,
if approval by stockholders of the Company of any amendment is required to
comply with Rule 16b-3 or other applicable requirement, such amendment shall
be subject to stockholder approval. Notwithstanding the foregoing, the Plan
may not be amended more than once every six (6) months, other than to comply
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act of 1974, or the rules thereunder.
SECTION VIII. WITHHOLDING
The Company, at the time any distribution is made under this Plan,
whether in cash or in shares of stock, may withhold from such payment any
amount necessary to satisfy any federal and state income tax withholding
requirements with respect to such distribution. Such withholding may be in
cash or in shares of stock.
SECTION IX. MISCELLANEOUS
A. Rights to Continued Service. Nothing in this Plan or in any option
granted pursuant to this Plan shall confer on any individual any right to
continue as an Outside Director.
D. Investment Undertakings. Until and unless the issuance of shares of
Common Stock pursuant to this Plan shall have been registered pursuant to the
Securities Act of 1933 and applicable state securities laws, each Participant
acquiring shares of Common Stock under this Plan may be required, as a
condition precedent to such issuance, to execute and deliver to the Company a
letter or certificate containing such investment representations, agreements
restricting sale (including, without limitation, provision for stop transfer
orders and restrictive legend on stock certificates) and confirmation of other
relevant facts to support any exemption from the registration requirements
under the Securities Act of 1933 and such state securities laws on which the
Company intends to rely, all as shall be deemed reasonably necessary by
counsel for the Company and in such form as such counsel shall determine.
SECTION X. EFFECTIVENESS OF THE PLAN
This amended and restated Plan will be effective upon adoption by
the Board of Directors of the Company, subject, however, to its approval by the
stockholders of the Company given within 12 months after the date the Plan is
adopted by the Board of Directors, at a regular meeting of the stockholders or
at a special meeting of the stockholders duly called and held for such
purpose, or by written consent of the stockholders. Grants of options made
prior to stockholder approval shall be subject to the obtaining of such
approval and if such approval is not obtained as aforesaid, such grants shall
not be effective for any purpose.
The foregoing Plan amendment and restatement was adopted by the
Board of Directors of the Company on, 1996 January , 1998 and
approved by the stockholders of the Company on , 1996 1998 .
OTR EXPRESS, INC.
By
William P. Ward, President
