Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant To Section 13 or 15(d) of The Securities
Exchange Act of 1934 For The Quarter Ended March 31, 1998
[ ] Transition Report Pursuant To Section 13 or 15 (d) of the Securities
Exchange Act of 1934
Commission file number 1-19773
OTR EXPRESS, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0993128
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
804 N. Meadowbrook Drive
PO Box 2819, Olathe, Kansas 66063-0819
(Address of principal executive offices) (Zip Code)
(913) 829-1616
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
1,835,955
(Number of shares of common stock outstanding as of April 30, 1998)
<PAGE>
PART 1 FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
OTR EXPRESS, INC.
BALANCE SHEETS
<CAPTION>
March 31 December 31
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 99,383 $ 318,760
Accounts receivable, freight 7,211,680 7,542,557
Accounts receivable, other 297,749 193,803
Inventory 631,739 687,303
Prepaid expenses and other 1,210,251 480,976
TOTAL CURRENT ASSETS 9,450,802 9,223,399
PROPERTY AND EQUIPMENT 46,100,855 46,810,777
TOTAL ASSETS $55,551,657 $56,034,176
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 2,018,214 $ 1,603,654
Accrued payroll and taxes 1,495,215 861,857
Other accrued expenses 1,359,737 1,414,721
Current portion of long-term debt 13,271,486 14,259,700
TOTAL CURRENT LIABILITIES 18,144,652 18,139,932
NOTE PAYABLE, BANK 2,802,244 3,481,312
LONG-TERM DEBT 23,428,347 23,207,045
DEFERRED INCOME TAXES 1,937,000 1,859,803
STOCKHOLDERS' EQUITY 9,239,414 9,346,084
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $55,551,657 $56,034,176
</TABLE>
<PAGE>
<TABLE>
OTR EXPRESS, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Ended
March 31
(Unaudited) 1998 1997
<S> <C> <C>
OPERATING REVENUE
Freight revenue $15,759,958 $12,872,476
Brokerage revenue 987,396 958,515
Total operating revenue 16,747,354 13,830,991
OPERATING EXPENSES
Salaries, wages and benefits 6,498,210 5,523,603
Purchased transportation 1,390,237 940,411
Fuel 1,588,549 1,824,402
Maintenance 1,074,117 855,824
Depreciation 1,876,068 1,716,390
Insurance and claims 546,360 316,518
Taxes and licenses 1,608,973 1,454,675
Supplies and other 1,123,672 806,734
Total operating expenses 15,706,186 13,438,557
Operating income 1,041,168 392,434
Interest expense 838,418 720,642
Income (loss) before income taxes 202,750 (328,208)
Income tax expense (benefit) 77,197 (124,719)
Net income (loss) $ 125,553 $ (203,489)
Weighted average number
of shares
Basic 1,836,342 1,841,205
Diluted 1,850,656 1,841,205
Earnings (loss) per share
Basic $ 0.07 $ (0.11)
Diluted 0.07 (0.11)
</TABLE>
<PAGE>
<TABLE>
OTR EXPRESS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31
(Unaudited) 1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
NET CASH PROVIDED BY OPERATING ACTIVITIES $2,629,275 $1,053,151
INVESTING ACTIVITIES
Acquisition of property and equipment (1,209,072) (4,044,607)
Proceeds from disposition of property and equipment 43,873 1,360,000
NET CASH USED IN INVESTING ACTIVITIES (1,165,199) (2,684,607)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 5,140,552 7,291,017
Repayments of long-term debt (5,907,464) (6,759,453)
Net increase (decrease) in bank note payable (859,068) 1,137,000
Other (57,473) (9,649)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,683,453) 1,658,915
NET INCREASE (DECREASE) IN CASH (219,377) 27,459
CASH, BEGINNING OF PERIOD 318,760 43,107
CASH, END OF PERIOD $ 99,383 $ 70,566
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 838,418 $ 720,436
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Guarantee of executive officers stock
purchase plan loans $ 180,000 $ -
</TABLE>
<PAGE>
OTR EXPRESS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The financial statements included herein have been prepared by
management, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to enable a reasonable understanding of the
information presented. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial statements have been
included. For further information, refer to the Company's financial
statements and footnotes thereto included in the Annual Report and Form 10-K
for the year ended December 31, 1997.
NOTE 2 - LONG-TERM DEBT AND COMMITMENTS
During the three months ended March 31, 1998, the Company financed the
purchase of revenue equipment through the issuance of long-term debt totaling
$1,100,000. This debt bears interest at effective rate of 7.14%. The Company
refinanced encumbered revenue equipment through the issuance of long-term debt
totaling $4,040,000. This debt bears interest at an effective rate of
7.45%.
At March 31, 1998, the Company had purchase and finance commitments
outstanding for additional revenue equipment approximately $6,600,000.
The Company anticipates receiving proceeds from the sale or trade-in of 34
tractors in association with these commitments.
NOTE 3 - EARNINGS PER SHARE
In February, 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings Per Share",
effective for periods ending after December 15, 1997, requiring presentation
of basic and diluted earnings per share. SFAS 128 supersedes Accounting
Principles Board Opinion (APB) No. 15 and related pronouncements and replaces
the computations of primary and fully diluted earnings per share (EPS) with
basic and diluted EPS, respectively. Basic earnings per share is based upon
the weighted average common shares outstanding during the year. Diluted
earnings per share is based upon the weighted average common and common
equivalent shares outstanding during each year. Employee stock options are
the company's only common stock equivalents; there are no other
potentially dilutive securities.
There was no effect of this accounting change on previously reported
earnings per share.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
As more fully described below in Item 5, the Company has agreed to guaranty
payment of two key executive stock loans for such executives' private purchase
of a total of 49,380 shares of the Company's common stock. The Company has
agreed to guaranty payment of the stock loans to the extent that the pledged
value of the stock purchase (equal to one-half of its market value) is less
than the outstanding principal balance of such loans.
The amount of the Company's guaranty as of March 31, 1998 was $180,000.
Stockholders'equity was reduced by this amount and long-term debt was
increased by this amount to record the guaranty.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATIONS AND FINANCIAL CONDITION
Overview. The discussion set forth below as well as other documents
incorporated by reference herein and oral statements made by officers of the
Company relating thereto, may contain forward looking statements. Such
comments are based upon information currently available to management
and management's perception thereof as of the date of this Form 10-Q.
Actual results of the Company's operations could materially differ from those
forward looking statements. Such differences could be caused by a number of
factors including, but not limited to, potential adverse effects of regulation;
changes in competition and the effects of such changes; increased competition;
changes in fuel prices; changes in economic, political or regulatory
environments; litigation involving the Company; changes in the availability of
a stable labor force; ability of the Company to hire drivers meeting Company
standards; changes in management strategies; environmental or tax matters; and
risks described from time to time in reports filed by the Company with
the Securities and Exchange Commission. Readers should take these factors into
account in evaluating any such forward looking statements.
RESULTS OF OPERATIONS
First Quarter Ended
March 31
1998 1997
Operating Revenue $16,747,354 $13,830,991
Operating Expenses 15,706,186 13,438,557
Interest Expense 838,418 720,642
Net Income (Loss) 125,553 (203,489)
1st Quarter 1998 v. 1997
Operating Revenue. Operating revenue improved by 21.1% to $16.7
million in the first quarter ended March 31, 1998 from $13.8 million in 1997.
Freight revenue increased by 22.4% and brokerage revenue increased by 3.0%.
Freight revenue improved due to an increase in the rate per mile to
$1.041 in the first quarter of 1998 compared to $1.012 in 1997. The higher
rate is primarily a result of a higher level of direct shipper miles in 1998
compared to 1997. The average number of tractors in service was 548 in the
first quarter of 1998 compared to 506 in 1997. The average number of
tractors in service in 1998
<PAGE>
includes 27 owner operator drivers. There were no owner operator drivers
in the first quarter of 1997. Average miles per truck per week also increased
to 2,161 from 1,974 due to improved demand from the Company's direct shipper
customers. The Company's empty mile percent increased to 8.5% from
7.3% in 1997.
Brokerage revenue decreased to 5.9% of revenue from 6.9% in 1997.
Operating Expenses. The operating ratio (total operating expenses as a
percent of operating revenue) improved to 93.8% in the first quarter of 1998
compared to 97.2% in 1997.
Salaries, wages and benefits decreased to 38.8% of revenue in 1998
from 39.9% in 1997 primarily because of increased revenue rates per mile.
Purchased transportation, which represents payments to other
trucklines for hauling loads contracted through the Company's freight brokerage
division, and the cost of owner operator drivers, increased to 8.3% of revenue
in 1998 from 6.8% in 1997. The increase is a result of the addition of
owner operators to the fleet beginning in September 1997.
Fuel was 9.5% of revenue in 1998 compared to 13.2% in 1997. This is a
result of lower diesel fuel prices nationwide in the first quarter of 1998 and
higher revenue rates per mile.
Insurance and claims represented 3.3% and 2.3% of operating revenue in
the first quarter of 1998 and 1997, respectively. The Company's insurance
program for liability, physical damage, cargo damage and worker's compensation
involves insurance with varying deductible levels. Claims in
excess of these deductible levels are covered by insurance in the amounts
management considers adequate. The Company accrues the estimated cost of the
uninsured portion of pending claims. These accruals are estimated based on
management's evaluation of the nature and severity of individual claims and
an estimate of future claims development based on historical claims development
trends.
Depreciation as a percent of revenue decreased to 11.2% in 1998 from
12.4% in 1997 as a result of higher revenue per truck per week.
Taxes and licenses as a percent of revenue decreased from 10.5% in
1997 to 9.6% in 1998 as a result of the increased revenue per mile.
Supplies and other expenses increased to 6.7% of revenue in 1998 from
5.8% in 1997 as a result of an increase in advertising costs for new drivers
and an increase in commissions paid to independent sales agents.
Interest Expense. Interest expense decreased to 5.0% of revenue in 1998
from 5.2% in 1997 as a result of lower debt levels per unit.
<PAGE>
Net Income. The Company reported net income of $126,000, or $0.07 per
share, for the first quarter of 1998 compared to a net loss of $203,000, or
$0.11 per share, in 1997. The effective income tax rate was 38.0% in 1997 and
1998.
LIQUIDITY AND CAPITAL RESOURCES
The growth of the Company's business has required significant investments
in new revenue equipment, which has been acquired primarily through secured
borrowings. Capital expenditures for revenue equipment purchases totaled
$1,100,000 for the three months ended March 31, 1998. The Company received
$44,000 in proceeds from the disposition of revenue equipment. The Company
has outstanding purchase commitments for 34 replacement tractors at a
cost of $2.7 million. The Company has finance commitments for 100% of the
equipment purchases at rates that will be fixed at time of origination. The
Company's other capital expenditures will be financed through internally
generated funds and secured borrowings.
Historically, the Company has obtained loans for revenue equipment
which are of shorter duration than the economic useful lives of the equipment.
While such loans have current maturities that tend to create working capital
deficits that could adversely affect cash flows, it was management's belief that
these factors were mitigated by the more attractive interest rates and
terms available on these shorter maturities. This financing practice has been
a significant cause of the working capital deficit which has
existed since the Company's inception. This method of financing can be
expected to continue to produce working capital deficits in the future. The
Company's working capital deficit at March 31, 1998 was $8.7 million.
Primarily due to the Company's equity position and the potential for refinancing
of both unencumbered and encumbered assets, working capital deficits
historically have not been a barrier to the Company's ability to borrow funds
for operations and expansion.
In June 1997, the Company entered into a new revolving line of credit
agreement with a financial institution. The maximum borrowing on the line was
$7.0 million through December 31, 1997. Since the Company's tangible net worth
exceeded $9.0 million based on the December 31, 1997 audited financial
statements, under the terms of the credit agreement the maximum borrowing on
the line increased to $8.0 million. The line bears interest at a variable rate,
based upon the prime rate or LIBOR, at the Company's election, expires June 9,
2000 and is secured by accounts receivable of the Company. The agreement
allows for maximum advances of 85% of eligible accounts receivable less
than 60 days past invoice date. The agreement contains certain covenants
relating to tangible net worth, leverage ratios, debt service coverage and other
factors. The Company was in compliance with all required covenants at March 31,
1998. The Company had borrowings of $2.8 million under this line
at March 31, 1998. A total of $1.5 million of the available credit line was
committed for letters of credit issued by the financial institution.
<PAGE>
At March 31, 1998, the Company owned 26 tractors which were not
pledged as collateral for any liabilities and were free and clear of any debt
obligations. This equipment has an approximate market value of $1.0 million.
In management's opinion, the Company has adequate liquidity for the
foreseeable future based upon funds expected to be generated from operations,
the availability of equity in the Company's assets and the Company's ability to
obtain secured equipment financing.
PART II OTHER INFORMATION
ITEM 1 - Legal Proceedings.................................................*
ITEM 2 - Changes in Securities and Use of Proceeds.........................*
ITEM 3 - Defaults Upon Senior Securities...................................*
ITEM 4 - Submission of Matters to a Vote of Security Holders...............*
ITEM 5 - Other Information
Guaranty of Executive Officer Stock Loans
The Company has entered into certain agreements designed to help facilitate
increased investments in the Company's common stock by certain key executive
officers in order to better align such officers' interests with those of
stockholders and to provide incentives for such officers to remain with
the Company for the next several years.
In relation to personal loans of $240,000 and $120,000 (the "Stock
Loans") obtained from HSBC Business Loans, Inc. ("HSBC") by Gary J. Klusman,
the Company's President and Chief Executive Officer and Steven W. Ruben, the
Company's Vice President-Finance and Chief Financial Officer,
respectively, for such officers' private purchase of 32,920 shares and
16,460 shares, respectively, of Company common stock, the Company has agreed
to guaranty payment of the Stock Loans to the extent that the pledge value of
the stock purchased (equal to one-half of its market value) is less than
the outstanding principal balance of such loans. Copies of the Guaranty
Agreement dated February 27, 1998 by the Company in favor of HSBC as secured
party evidencing such guaranties are filed as exhibits hereto and incorporated
by reference.
In addition, pursuant to the Stock Purchase Assistance Agreements
("Assistance Agreements") dated February 27, 1998 between the Company and
Messrs. Klusman and Ruben, respectively (copies of which are filed as exhibits
hereto and incorporated by reference), the Company has agreed to pay to such
officers during the six year term of the Stock Loans the amount of principal
owed from time to time under their respective Stock Loans (I) for such periods
as such officer remains employed by the Company in an officer position or (ii)
if such officer's employment is terminated without cause by the Company (or by
a successor entity after a change of control). Such officers remain the primary
<PAGE>
obligors under their respective Stock Loans, however, and to the extent
the Company is required to pay amounts to HSBC under Guaranty Agreements
described in the preceding paragraph, such officer's have agreed to reimburse
the Company and failure by either such officer to make such reimbursement
entitles the Company to terminate officer's employment for cause (thereby
eliminating the Company's obligations to make further payments under such
officer's Assistance Agreement).
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 (p) - Guaranty Agreement dated February 2 , 1998 by the
Company in favor of HSBC Business Loans, Inc. as secured party relating to
payment of $240,000 principal amount loan to Gary J. Klusman.
Exhibit 10 (q) - Guaranty Agreement dated February 27, 1998 by the
Company in favor of HSBC Business Loans, Inc. as secured party relating to
payment of $120,000 principal amount loan to Steven W. Ruben.
Exhibit 10(r) - Stock Purchase Assistance Agreement dated February 27,
1998 between the Company and Gary J. Klusman.
Exhibit 10(s) - Stock Purchase Assistance Agreement dated February 27,
1998 between the Company and Steven W. Ruben.
(b) Reports on Form 8-K
* No information submitted under this caption.
The Company did not file any exhibits or reports on Form 8-K during the
three months ended March 31, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OTR EXPRESS, INC.
(Registrant)
Date: May 11, 1998 /s/ Gary J. Klusman
By: Gary J. Klusman
President and Principal
Executive Officer
Date: May 11, 1998 /s/ Steven W. Ruben
By: Steven W. Ruben
Principal Financial Officer and
Principal Accounting Officer
Exhibit 10(p)
GUARANTY AGREEMENT
by
OTR Express, Inc. (the "Guarantor")
804 North Meadowbrook Drive
Olathe, Kansas 66063
in favor of
HSBC BUSINESS LOANS, INC. (the "Secured Party")
2405 Grand Avenue, Suite 800
Kansas City, Missouri 64108
February 27, 1998
<PAGE>
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (the "Guaranty") is made as of February 27,
1998, by the Guarantor in favor of the Secured Party.
RECITALS
A. At the request of Guarantor, as of the date of this Guaranty, Secured
Party has extended credit to Gary J. Klusman (the "Debtor") pursuant to the
terms of a Promissory Note of even date herewith in the principal amount of
$240,000.00 from Debtor, as maker, payable to the order of Secured Party (as
amended, modified, extended, renewed or otherwise amended from time to
time, the "Note").
B. Debtor is a key employee of Guarantor, and Guarantor has requested
and arranged for the extensions of credit described in the Note to Debtor in
order to permit Debtor to purchase shares of Guarantor's common stock in open
market transactions, in private transactions at negotiated prices or
pursuant to the exercise of stock options granted by the Guarantor.
C. Guarantor has independently determined that the execution, delivery
and performance of this Guaranty will directly benefit it and are within its
corporate purposes and best interests.
NOW, THEREFORE, in consideration of these background recitals, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the
Guarantor and the Secured Party agree as follows:
Section 1. Reference to Loan Agreement. Reference is hereby made to
the Note and Security Documents (as defined in the Note) for a statement of
the terms and conditions thereof.
Section 2. Guaranty of Payment.
(A) Subject to the limitations on liability contained in Section 10 of
this Guaranty, the Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees the full and prompt payment to the Secured Party when due, whether
by acceleration or otherwise, of any and all indebtedness evidenced by the
<PAGE>
Note and the other Security Documents, including, without limitation, all
extensions, renewals, and replacements of such indebtedness:
i) whether such indebtedness exists now or is hereafter incurred;
ii) whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred; and
iii) whether such indebtedness is incurred by the Debtor prior to,
during, or after any filing by the Debtor or against the Debtor of any petition
or request for liquidation, reorganization, arrangement, adjudication as a
bankrupt, relief as a debtor, or other relief under bankruptcy,
insolvency, or similar laws now or hereafter in effect in the United States
of America or any state or territory thereof, and notwithstanding the Debtor's
legal status as a debtor or a debtor-in-possession or the Debtor's discharge
in any such proceeding;
(collectively, the "Obligations").
(B) The Guarantor hereby acknowledges and agrees that:
i) although applicable bankruptcy or insolvency laws may relieve all
or part of the Debtor's obligations for principal, interest, default interest,
fees, costs, or expenses under the Note or otherwise, the
Guarantor shall continue to be liable for such obligations as if the
bankruptcy or insolvency of the Debtor had not occurred;
ii) the obligations of the Guarantor under this Guaranty may exceed
allowable obligations of the Debtor to the Secured Party under such bankruptcy
or insolvency laws; and
iii) to this extent, the Guarantor's liability to the Secured Party
hereunder may not be co-extensive with the Debtor's liability to the Secured
Party under the Note and the other Security Documents or otherwise.
Section 3. Nature of Guaranty; Termination.
(A) This Guaranty is a continuing guaranty of the Obligations,
independent of and in addition to any other guaranty, collateral, or other
agreement held by the Secured Party for the Obligations or any part
thereof, whether executed or granted by the Guarantor or otherwise. The
liability of the Guarantor
<PAGE>
hereunder shall be absolute and unconditional irrespective of, and the
Guarantor waives any defense which might otherwise arise as a result of, any
of the following:
i) any lack of validity or enforceability of the Note or any other
Security Document or any other document, agreement, or writing creating or
evidencing any of the Obligations, including, without limitation, the lack of
validity or enforceability of all or any portion of any liens or security
interests securing all or any part of the Obligations;
ii) any non-perfection of any lien on or security interest in any
collateral securing all or any part of the Obligations or this Guaranty or any
failure by the Secured Party to protect, preserve, or insure the
collateral securing all or any part of the Obligations or this Guaranty; or
iii) any event or circumstance which might operate under applicable
law to discharge the liability of the Guarantor hereunder or might otherwise
constitute or give rise to a defense available to the
Debtor, the Guarantor, or any other guarantor of any of the Obligations.
(B) This Guaranty is a guaranty of payment, not of collection.
(C) This Guaranty shall remain in full force and effect until all of the
Obligations and other fees, costs, and expenses payable by the Guarantor
pursuant to Section 4 hereof have been paid or performed in full and
the Secured Party has no further obligation or commitment to the Debtor
to advance funds under the Note or otherwise. This Guaranty shall continue
to be effective or shall be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded, voided,
or rendered void or voidable as a preferential transfer, impermissible set-off,
or fraudulent conveyance or must otherwise be returned or
disgorged by the Secured Party, as if such rescinded, avoided, voided, or
voidable payment had not been made.
Section 4. Costs and Expenses.
(A) The Guarantor agrees to pay on demand all fees, costs, and expenses
of every kind incurred by the Secured Party for any purpose arising from,
relating to, or in connection with the Obligations, the Debtor,
or this Guaranty, including, without limitation, fees, costs, and expenses
incurred by the Secured Party in enforcing this Guaranty, in collecting any
Obligations from the Debtor or the Guarantor, or in realizing upon
or protecting any collateral securing all or any part of the Obligations or
this Guaranty.
<PAGE>
(B) The Guarantor specifically acknowledges and agrees that the fees,
costs, and expenses described in the preceding subsection include, without
limitation, actual attorneys' fees and expenses incurred by
the Secured Party in retaining counsel for any purpose arising from,
relating to, or in connection with the Obligations, the Debtor, or this
Guaranty, including, without limitation, attorneys' fees and expenses
incurred by the Secured Party in retaining counsel for advice, suit, or
appeal, or for any bankruptcy, insolvency, or similar proceeding under the
Federal Bankruptcy Code or otherwise.
Section 5. Collateral. Guarantor's obligations under this Guaranty
constitute indebtedness that is secured by the Collateral (as that term is
defined in the that certain Loan and Security Agreement dated
June 11, 1997 between Guarantor and Secured Party) (as amended from
time to time, the "Loan Agreement").
Section 6. Waivers of the Guarantor. The Guarantor hereby agrees that the
Guarantor shall not have, and hereby expressly waives:
(A) Any right to subrogation, indemnification, or contribution and any
other right to payment from or reimbursement by the Debtor in connection with
or as a consequence of any payment made by the Guarantor hereunder, until such
time as the Obligations have been paid in full and Secured Party has no
further commitment to extend credit to Debtor;
(B) Any right to enforce any right or remedy which the Secured Party
has or may hereafter have against the Debtor, until such time as the Obligations
have been paid in full and Secured Party has no further commitment to extend
credit to Debtor;
(C) Any benefit of, and any right to participate in, any collateral
securing all or any part of the Obligations or this Guaranty or any payment
made to the Secured Party or collection by the Secured Party from the
Debtor, until such time as the Obligations have been paid in full and
Secured Party has no further commitment to extend credit to Debtor;
(D) Any right to require promptness and diligence on the part of the
Secured Party;
(E) Any right to receive notices, including, without limitation, notice
of the acceptance of this Guaranty or of the incurrence of any Obligation by
the Debtor, notice of any action taken by the Secured Party or the
Debtor pursuant to any document, agreement, or writing relating to the
Obligations (including, without limitation, the release of any collateral
securing the Obligations), or notice of the intended disposition of
any collateral securing all or any part of the Obligations or this Guaranty;
provided, that
<PAGE>
Secured Party shall not voluntarily release any shares of the
Guarantor's common stock pledged by Debtor to Secured Party without the prior
written consent of the Guarantor; and
(F) Any right to require the Secured Party to advise the Guarantor of
any information known to the Secured Party regarding the financial or other
condition of the Debtor, the Guarantor acknowledging that the Guarantor is
responsible for being and keeping informed regarding such condition.
Section 7. Payment of the Obligations. If any Obligation is not paid
punctually when due, subject to any applicable grace period, including, without
limitation, any Obligation due by acceleration of the maturity thereof, the
Guarantor shall immediately pay such Obligation or cause such Obligation to be
paid in full:
(A) without deduction for any set-off, recoupment, defense, or
counterclaim;
(B) without requiring and notwithstanding the lack of protest or notice
of nonpayment or default to the Guarantor, the Debtor, or any other person;
(C) without demand for payment or proof of such demand; and
(D) without requiring and without any obligation on the part of the
Secured Party to resort first to the Debtor or to any collateral securing all
or any part of the Obligations or this Guaranty, or to any other
guaranty which the Secured Party may hold as security for payment of the
Obligations.
Section 8. Rights and Remedies of the Secured Party.
(A) The Guarantor acknowledges and agrees that the Secured Party may,
without the consent of, notice or demand to, or reservation of rights against
the Guarantor, and without affecting the Guarantor's obligations hereunder,
from time to time:
i) accept and hold collateral securing payment of the Obligations, or
any part thereof, and exchange, enforce, or release such collateral, or any
part thereof;
ii) accept and hold any guaranty of payment of the Obligations or any
part thereof, and partially or fully discharge, release, or substitute the
obligations of any such guarantor, or any person or entity
who has pledged any collateral as security for payment of the Obligations,
or waive any rights or remedies with respect to any thereof;
<PAGE>
iii) partially or fully discharge or release, or waive any rights or
remedies with respect to, the Debtor;
iv) dispose of any collateral securing all or any part of the
Obligations or this Guaranty in any manner or order as the Secured Party, in
its sole discretion, deems appropriate; and
v) determine the manner, amount, and time of application of
payments and credits to be made on all or any part of the Obligations (whether
for principal, interest, fees, costs, expenses, or otherwise),
and, if this Guaranty is limited in amount pursuant to Section 10 hereof,
apply such payments and credits first to reduce Obligations exceeding the amount
of this Guaranty.
(B) Upon the occurrence of any Event of Default, the Secured Party may,
at any time and from time to time without prior notice to the Guarantor,
set-off and apply any and all deposits (general or special, time or
demand, provisional or final) held and other indebtedness owing by the
Secured Party to or for the credit of the Guarantor against the Obligations,
irrespective of whether the Secured Party shall have made any
demand under this Guaranty. The Secured Party agrees to notify the
Guarantor after any such set-off and application, provided that failure to give
such notice to the Guarantor shall not affect the validity of such set-off
and application.
Section 9. Representations, Warranties and Agreements of the Guarantor.
The Guarantor hereby represents and warrants to the Secured Party, and
agrees with Secured Party, as follows:
(A) The Guarantor is duly organized and existing in good standing under
the laws of the state of its incorporation and is duly licensed or qualified
to do business and is in good standing in every state in which the nature of
its business or ownership of its property requires such licensing or
qualification.
(B) The execution, delivery, and performance of this Guaranty is within
the Guarantor's corporate powers, have been duly authorized by all necessary
and appropriate corporate action, and are not in contravention of any law or
the terms of the Guarantor's articles or certificate of incorporation or
by-laws or any amendment thereto, or of any indenture, agreement, undertaking,
or other document to which the Guarantor is a party or by which the Guarantor
or any of the Guarantor's property is bound or affected.
<PAGE>
(C) No consent, license, approval, or authorization of, or registration,
declaration, or filing with, any court, governmental body, authority, or other
person or entity is required in connection with the valid execution,
delivery, or performance of this Guaranty, other than filings and recordings
in connection with this Guaranty.
(D) This Guaranty constitutes the legal, valid, and binding obligation of
the Guarantor, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy and insolvency
laws and laws affecting creditors' rights generally.
(E) The Stock Purchase Assistance Agreements among the Guarantor
and Gary J. Klusman and Steven W. Ruben, respectively (true and correct
copies of which have been provided by the Guarantor to the
Secured Party) (the "Assistance Agreements") shall have been adopted and
approved by the Guarantor's Board of Directors and stockholders (if necessary),
and are and shall be binding and enforceable on the parties thereto in
accordance with their terms.
(F) The Guarantor agrees that it shall not consent to or approve any
amendment to or modification of the Assistance Agreements without the prior
written consent of Secured Party.
(G) If requested to do so by the Secured Party, the Guarantor shall make
all Principal Payment Reimbursement (as defined in the Assistance Agreements
as in effect on the date of this Guaranty) directly to the Secured Party.
Section 10. Limited Guaranty; Reserves.
(A) This Guaranty is limited in amount to (a) an amount equal to the
difference between (1) the principal balance of the Obligations, and (2)
fifty percent (50%) of the Value (as defined below) of any shares of
common stock of the Guarantor purchased by Debtor using proceeds of
advances under the Note and upon which Secured Party has a perfected first
priority security interest less accrued and unpaid interest on the Note, plus
(b) costs and expenses provided for in Section 4 hereof (collectively, the
"Maximum Amount"). For purposes of this paragraph: (i) the term "Value" shall
mean an amount equal to the "Bid" price for the Guarantor's common stock as
published in the Wall Street Journal on the applicable Determination Date (as
defined below), and (ii) the Value of the Guarantor's common stock purchased
by Debtor using proceeds of advances under this Note and upon which Secured
Party has a perfected first priority security interest shall be done on a
monthly basis on the first Business Day (as defined in the Loan
Agreement) of each month (a "Determination Date") and the amount of this
Guaranty shall be adjusted on each such Determination Date.
<PAGE>
(B) The Guarantor acknowledges that a reserve against availability on
the credit facility provided by the Secured Party to the Guarantor under the
Loan Agreement will be maintained in an amount equal to the then applicable
Maximum Amount, as adjusted from time to time.
(C) Upon demand for payment on the Guarantor pursuant to this
Guaranty, the Guarantor hereby authorizes the Secured Party to make on advance
(without notice to or approval of the Guarantor) under the Loan Agreement in
an amount equal to the Guarantor's liability hereunder to be applied to the
Obligations.
(D) Notwithstanding anything to the contrary provided in this Guaranty,
the Guarantor shall not be liable to Secured Party for any interest charges
relating to the Note.
Section 11. Notices. Any notices and other communications provided for
hereunder shall be made by fax, overnight air courier, or certified or
registered mail, return receipt requested, and shall be deemed
to be received by the party to whom sent one (1) Business Day after
sending, if sent by fax, or overnight air courier, and three (3) Business Days
after mailing, if sent by certified or registered mail. All such notices
and other communications to a party shall be addressed to such party at
the address set forth on the cover page hereof or to such other address as
such party may designate for itself in a notice to the other party
given in accordance with this Section.
Section 12. Miscellaneous.
(A) The Guarantor will make each payment hereunder in lawful money
of the United States of America and in immediately available funds to the
Secured Party at its address as reflected on the cover page hereof.
(B) No modification, rescission, waiver, release, or amendment of any
provision of this Guaranty shall be made, except by a written agreement signed
by the Guarantor and a duly authorized officer of the Secured Party.
(C) "Secured Party" shall include the successors and assigns of the
Secured Party.
(D) The rights and benefits of the Secured Party hereunder shall, if the
Secured Party so agrees, inure to any party acquiring any interest in the
Obligations, or any part thereof.
(E) No course of dealing between the Debtor or the Guarantor and the
Secured Party, and no delay or omission by the Secured Party in exercising
any right or remedy hereunder or with respect to the
<PAGE>
Obligations shall operate as a waiver thereof or of any other right or
remedy, and no single or partial exercise thereof shall preclude any other or
further exercise thereof or the exercise of any other right or
remedy. All rights and remedies of the Secured Party are cumulative.
(F) From time to time, the Guarantor shall take such action and execute
and deliver to the Secured Party such additional documents, instruments,
certificates, and agreements as the Secured Party may reasonably request to
effectuate the purposes of this Guaranty.
(G) Section headings used in this Guaranty are for convenience only and
shall not affect the construction of this Guaranty.
(H) The provisions of this Guaranty are independent of and separable
from each other, and no such provision shall be affected or rendered invalid
or unenforceable by virtue of the fact that for any reason any
other such provision may be invalid or unenforceable in whole or in part.
If any provision of this Guaranty is prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective in such jurisdiction only
to the extent of such prohibition or unenforceability, and such prohibition
or unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable nor render prohibited or
unenforceable such provision in any other jurisdiction.
(I) THIS GUARANTY AND THE TRANSACTIONS EVIDENCED HEREBY SHALL
BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF MISSOURI,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, AS THE SAME MAY FROM TIME
TO TIME BE IN EFFECT.
(J) THE GUARANTOR AND THE SECURED PARTY AGREE THAT ANY ACTION
OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS GUARANTY MAY BE COMMENCED IN
THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI OR THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF MISSOURI, AND THE GUARANTOR WAIVES PERSONAL
SERVICE OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN
ACTION OR PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL
CONFER PERSONAL JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE
GUARANTOR, OR AS OTHERWISE PROVIDED BY THE LAWS OF SUCH STATE OR THE UNITED
STATES.
(K) This Guaranty may be executed in any number of counterparts and by
the Secured Party and the Guarantor on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same Guaranty.
<PAGE>
Section 13. Waiver of Jury Trial. THE GUARANTOR AND THE SECURED
PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT
TO TRIAL BY JURY THE GUARANTOR OR THE SECURED PARTY MAY HAVE IN ANY
ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN CONNECTION WITH THIS
GUARANTY OR THE TRANSACTIONS RELATED THERETO. THE GUARANTOR
REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF THE
SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
SECURED PARTY WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THIS RIGHT TO JURY TRIAL WAIVER. THE GUARANTOR ACKNOWLEDGES THAT
THE SECURED PARTY HAS BEEN INDUCED TO ENTER INTO THIS GUARANTY BY,
AMONG OTHER THINGS, THE PROVISIONS OF THIS SECTION.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by a duly authorized officer as of the date first above written.
GUARANTOR:
OTR EXPRESS, INC.
By: /s/ William P. Ward
Name (print): William P. Ward
Title: Chairman of Board
ACKNOWLEDGED AND ACCEPTED:
HSBC BUSINESS LOANS, INC.
By: /s/ M. Catherine Draper
M. Catherine Draper
Vice President
</PAGE>
Exhibit 10(q)
GUARANTY AGREEMENT
by
OTR EXPRESS, INC. (the "Guarantor")
804 North Meadowbrook Drive
Olathe, Kansas 66063
in favor of
HSBC BUSINESS LOANS, INC. (the "Secured Party")
2405 Grand Avenue, Suite 800
Kansas City, Missouri 64108
February 27, 1998
<PAGE>
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (the "Guaranty") is made as of February 27,
1998, by the Guarantor in favor of the Secured Party.
RECITALS
A. At the request of Guarantor, as of the date of this Guaranty, Secured
Party has extended credit to Steven W. Ruben (the "Debtor") pursuant to the
terms of a Promissory Note of even date herewith in the principal amount of
$120,000.00 from Debtor, as maker, payable to the order of Secured Party (as
amended, modified, extended, renewed or otherwise amended from time to
time, the "Note").
B. Debtor is a key employee of Guarantor, and Guarantor has requested
and arranged for the extensions of credit described in the Note to Debtor in
order to permit Debtor to purchase shares of Guarantor's common stock in open
market transactions, in private transactions at negotiated prices or
pursuant to the exercise of stock options granted by the Guarantor.
C. Guarantor has independently determined that the execution, delivery
and performance of this Guaranty will directly benefit it and are within its
corporate purposes and best interests.
NOW, THEREFORE, in consideration of these background recitals, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Guarantor
and the Secured Party agree as follows:
Section 1. Reference to Loan Agreement. Reference is hereby made to
the Note and Security Documents (as defined in the Note) for a statement of
the terms and conditions thereof.
Section 2. Guaranty of Payment.
(A) Subject to the limitations on liability contained in Section 10 of
this Guaranty, Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees the full and prompt payment to the Secured Party when due, whether
by acceleration or otherwise, of any and all indebtedness evidenced by the
Note and the other Security Documents, including, without limitation, all
extensions, renewals, and replacements of such indebtedness:
<PAGE>
i) whether such indebtedness exists now or is hereafter incurred;
ii) whether such indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and thereafter reincurred; and
iii) whether such indebtedness is incurred by the Debtor prior to,
during, or after any filing by the Debtor or against the Debtor of any
petition or request for liquidation, reorganization, arrangement, adjudication
as a bankrupt, relief as a debtor, or other relief under bankruptcy,
insolvency, or similar laws now or hereafter in effect in the United States
of America or any state or territory thereof, and notwithstanding the Debtor's
legal status as a debtor or a debtor-in-possession or the Debtor's discharge
in any such proceeding;
(collectively, the "Obligations").
(B) The Guarantor hereby acknowledges and agrees that:
i) although applicable bankruptcy or insolvency laws may relieve all
or part of the Debtor's obligations for principal, interest, default interest,
fees, costs, or expenses under the Note or otherwise, the Guarantor shall
continue to be liable for such obligations as if the bankruptcy or insolvency
of the Debtor had not occurred;
ii) the obligations of the Guarantor under this Guaranty may exceed
allowable obligations of the Debtor to the Secured Party under such bankruptcy
or insolvency laws; and
iii) to this extent, the Guarantor's liability to the Secured Party
hereunder may not be co-extensive with the Debtor's liability to the Secured
Party under the Note and the other Security Documents or otherwise.
Section 3. Nature of Guaranty; Termination.
(A) This Guaranty is a continuing guaranty of the Obligations,
independent of and in addition to any other guaranty, collateral, or other
agreement held by the Secured Party for the Obligations or any part
thereof, whether executed or granted by the Guarantor or otherwise. The
liability of the Guarantor hereunder shall be absolute and unconditional
irrespective of, and the Guarantor waives any defense which might otherwise
arise as a result of, any of the following:
<PAGE>
i) any lack of validity or enforceability of the Note or any other
Security Document or any other document, agreement, or writing creating or
evidencing any of the Obligations, including, without limitation, the lack of
validity or enforceability of all or any portion of any liens or security
interests securing all or any part of the Obligations;
ii) any non-perfection of any lien on or security interest in any
collateral securing all or any part of the Obligations or this Guaranty or
any failure by the Secured Party to protect, preserve, or insure the
collateral securing all or any part of the Obligations or this Guaranty; or
iii) any event or circumstance which might operate under applicable
law to discharge the liability of the Guarantor hereunder or might otherwise
constitute or give rise to a defense available to the Debtor, the Guarantor,
or any other guarantor of any of the Obligations.
(B) This Guaranty is a guaranty of payment, not of collection.
(C) This Guaranty shall remain in full force and effect until all of the
Obligations and other fees, costs, and expenses payable by the Guarantor
pursuant to Section 4 hereof have been paid or performed in full and
the Secured Party has no further obligation or commitment to the Debtor
to advance funds under the Note or otherwise. This Guaranty shall continue
to be effective or shall be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded, voided,
or rendered void or voidable as a preferential transfer, impermissible set-off,
or fraudulent conveyance or must otherwise be returned or
disgorged by the Secured Party, as if such rescinded, avoided, voided, or
voidable payment had not been made.
Section 4. Costs and Expenses.
(A) The Guarantor agrees to pay on demand all fees, costs, and expenses
of every kind incurred by the Secured Party for any purpose arising from,
relating to, or in connection with the Obligations, the Debtor,
or this Guaranty, including, without limitation, fees, costs, and expenses
incurred by the Secured Party in enforcing this Guaranty, in collecting any
Obligations from the Debtor or the Guarantor, or in realizing upon
or protecting any collateral securing all or any part of the Obligations or
this Guaranty.
(B) The Guarantor specifically acknowledges and agrees that the fees,
costs, and expenses described in the preceding subsection include, without
limitation, actual attorneys' fees and expenses incurred by
the Secured Party in retaining counsel for any purpose arising from,
relating to, or in connection with the Obligations, the Debtor, or this
Guaranty, including, without limitation, attorneys' fees
<PAGE>
and expenses incurred by the Secured Party in retaining counsel for advice,
suit, or appeal, or for any bankruptcy, insolvency, or similar proceeding
under the Federal Bankruptcy Code or otherwise.
Section 5. Collateral. Guarantor's obligations under this Guaranty
constitute indebtedness that is secured by the Collateral (as that term is
defined in the that certain Loan and Security Agreement dated
June 11, 1997 between Guarantor and Secured Party) (as amended from
time to time, the "Loan Agreement").
Section 6. Waivers of the Guarantor. The Guarantor hereby agrees that the
Guarantor shall not have, and hereby expressly waives:
(A) Any right to subrogation, indemnification, or contribution and any
other right to payment from or reimbursement by the Debtor in connection with
or as a consequence of any payment made by the Guarantor hereunder, until such
time as the Obligations have been paid in full and Secured Party has no
further commitment to extend credit to Debtor;
(B) Any right to enforce any right or remedy which the Secured Party
has or may hereafter have against the Debtor, until such time as the Obligations
have been paid in full and Secured Party has no further commitment to extend
credit to Debtor;
(C) Any benefit of, and any right to participate in, any collateral
securing all or any part of the Obligations or this Guaranty or any payment
made to the Secured Party or collection by the Secured Party from the
Debtor, until such time as the Obligations have been paid in full and
Secured Party has no further commitment to extend credit to Debtor;
(D) Any right to require promptness and diligence on the part of the
Secured Party;
(E) Any right to receive notices, including, without limitation, notice
of the acceptance of this Guaranty or of the incurrence of any Obligation by
the Debtor, notice of any action taken by the Secured Party or the
Debtor pursuant to any document, agreement, or writing relating to the
Obligations (including, without limitation, the release of any collateral
securing the Obligations), or notice of the intended disposition of
any collateral securing all or any part of the Obligations or this Guaranty;
provided, that Secured Party shall not voluntarily release any shares of the
Guarantor's common stock pledged by Debtor to Secured Party
without the prior written consent of the Guarantor; and
(F) Any right to require the Secured Party to advise the Guarantor of
any information known to the Secured Party regarding the financial or other
condition of the Debtor, the Guarantor
<PAGE>
acknowledging that the Guarantor is responsible for being and keeping informed
regarding such condition.
Section 7. Payment of the Obligations. If any Obligation is not paid
punctually when due, subject to any applicable grace period, including, without
limitation, any Obligation due by acceleration of the maturity thereof, the
Guarantor shall immediately pay such Obligation or cause such Obligation to be
paid in full:
(A) without deduction for any set-off, recoupment, defense, or
counterclaim;
(B) without requiring and notwithstanding the lack of protest or notice
of nonpayment or default to the Guarantor, the Debtor, or any other person;
(C) without demand for payment or proof of such demand; and
(D) without requiring and without any obligation on the part of the
Secured Party to resort first to the Debtor or to any collateral securing all
or any part of the Obligations or this Guaranty, or to any other
guaranty which the Secured Party may hold as security for payment of the
Obligations.
Section 8. Rights and Remedies of the Secured Party.
(A) The Guarantor acknowledges and agrees that the Secured Party may,
without the consent of, notice or demand to, or reservation of rights against
the Guarantor, and without affecting the Guarantor's obligations hereunder,
from time to time:
i) accept and hold collateral securing payment of the Obligations, or
any part thereof, and exchange, enforce or release such collateral, or any part
thereof;
ii) accept and hold any guaranty of payment of the Obligations or any
part thereof, and partially or fully discharge, release, or substitute the
obligations of any such guarantor, or any person or entity
who has pledged any collateral as security for payment of the Obligations,
or waive any rights or remedies with respect to any thereof;
iii) partially or fully discharge or release, or waive any rights or
remedies with respect to, the Debtor;
<PAGE>
iv) dispose of any collateral securing all or any part of the
Obligations or this Guaranty in any manner or order as the Secured Party, in
its sole discretion, deems appropriate; and
v) determine the manner, amount, and time of application of
payments and credits to be made on all or any part of the Obligations (whether
for principal, interest, fees, costs, expenses, or otherwise),
and, if this Guaranty is limited in amount pursuant to Section 10 hereof,
apply such payments and credits first to reduce Obligations exceeding the
amount of this Guaranty.
(B) Upon the occurrence of any Event of Default, the Secured Party may,
at any time and from time to time without prior notice to the Guarantor, set-off
and apply any and all deposits (general or special, time or demand,
provisional or final) held and other indebtedness owing by the Secured Party
to or for the credit of the Guarantor against the Obligations, irrespective of
whether the Secured Party shall have made any demand under this Guaranty. The
Secured Party agrees to notify the Guarantor after any such set-off and
application, provided that failure to give such notice to the Guarantor
shall not affect the validity of such set-off and application.
Section 9. Representations, Warranties and Agreements of the Guarantor.
The Guarantor hereby represents and warrants to the Secured Party, and
agrees with Secured Party, as follows:
(A) The Guarantor is duly organized and existing in good standing under
the laws of the state of its incorporation and is duly licensed or qualified
to do business and is in good standing in every state in which the nature of
its business or ownership of its property requires such licensing or
qualification.
(B) The execution, delivery, and performance of this Guaranty is within
the Guarantor's corporate powers, have been duly authorized by all necessary
and appropriate corporate action, and are not in contravention of any law or
the terms of the Guarantor's articles or certificate of incorporation or by-laws
or any amendment thereto, or of any indenture, agreement, undertaking, or
other document to which the Guarantor is a party or by which the Guarantor or
any of the Guarantor's property is bound or affected.
(C) No consent, license, approval, or authorization of, or registration,
declaration, or filing with, any court, governmental body, authority, or other
person or entity is required in connection with the valid execution, delivery,
or performance of this Guaranty, other than filings and recordings in
connection with this Guaranty.
<PAGE>
(D) This Guaranty constitutes the legal, valid, and binding obligation of
the Guarantor, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy and insolvency
laws and laws affecting creditors' rights generally.
(E) The Stock Purchase Assistance Agreements between the Guarantor
and Gary J. Klusman and Steven W. Ruben, respectively (true and correct copies
of which have been provided by the Guarantor to the Secured Party) (the
"Assistance Agreements") shall have been adopted and approved by the
Guarantor's Board of Directors and stockholders (if necessary), and are and
shall be binding and enforceable on the parties thereto in accordance with their
terms.
(F) The Guarantor agrees that it shall not consent to or approve any
amendment to or modification of the Assistance Agreements without the prior
written consent of Secured Party.
(G) If requested to do so by the Secured Party, the Guarantor shall make
all Principal Payment Reimbursement (as defined in the Assistance Agreements as
in effect on the date of this Guaranty) directly to the Secured Party.
Section 10. Limited Guaranty; Reserves.
(A) This Guaranty is limited in amount to (a) an amount equal to the
difference between (1) the principal balance of the Obligations, and (2) fifty
percent (50%) of the Value (as defined below) of any shares of
common stock of the Guarantor purchased by Debtor using proceeds of
advances under the Note and upon which Secured Party has a perfected first
priority security interest less accrued and unpaid interest
on the Note, plus (b) costs and expenses provided for in Section 4 hereof
(collectively, the "Maximum Amount") For purposes of this paragraph: (i) the
term "Value" shall mean an amount equal to the "Bid" price for the Guarantor's
common stock as published in the Wall Street Journal on the applicable
Determination Date (as defined below), and (ii) the Value of the
Guarantor's common stock purchased by Debtor using proceeds of advances under
this Note and upon which Secured Party has a perfected first
priority security interest shall be done on a monthly basis on the first
Business Day (as defined in the Loan Agreement) of each month (a "Determination
Date") and the amount of this Guaranty shall be adjusted on
each such Determination Date.
(B) The Guarantor acknowledges that a reserve against availability on
the credit facility provided by the Secured Party to the Guarantor under the
Loan Agreement will be maintained in an amount equal to the then applicable
Maximum Amount, as adjusted from time to time.
<PAGE>
(C) Upon demand for payment on the Guarantor pursuant to this
Guaranty, the Guarantor hereby authorizes the Secured Party to make on advance
(without notice to or approval of the Guarantor) under the Loan Agreement in
an amount equal to the Guarantor's liability hereunder to be applied to the
Obligations.
(D) Notwithstanding anything to the contrary provided in this Guaranty,
the Guarantor shall not be liable to Secured Party for any interest charges
relating to the Note.
Section 11. Notices. Any notices and other communications provided for
hereunder shall be made by fax, overnight air courier, or certified or
registered mail, return receipt requested, and shall be deemed to
be received by the party to whom sent one (1) Business Day after sending,
if sent by fax, or overnight air courier, and three (3) Business Days after
mailing, if sent by certified or registered mail. All such notices
and other communications to a party shall be addressed to such party at
the address set forth on the cover page hereof or to such other address as
such party may designate for itself in a notice to the other party
given in accordance with this Section.
Section 12. Miscellaneous.
(A) The Guarantor will make each payment hereunder in lawful money
of the United States of America and in immediately available funds to the
Secured Party at its address as reflected on the cover page hereof.
(B) No modification, rescission, waiver, release, or amendment of any
provision of this Guaranty shall be made, except by a written agreement signed
by the Guarantor and a duly authorized officer of the Secured Party.
(C) "Secured Party" shall include the successors and assigns of the
Secured Party.
(D) The rights and benefits of the Secured Party hereunder shall, if the
Secured Party so agrees, inure to any party acquiring any interest in the
Obligations, or any part thereof.
(E) No course of dealing between the Debtor or the Guarantor and the
Secured Party, and no delay or omission by the Secured Party in exercising any
right or remedy hereunder or with respect to the Obligations shall operate as
a waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or
the exercise of any other right or remedy. All rights and remedies of the
Secured Party are cumulative.
<PAGE>
(F) From time to time, the Guarantor shall take such action and execute
and deliver to the Secured Party such additional documents, instruments,
certificates, and agreements as the Secured Party may reasonably request to
effectuate the purposes of this Guaranty.
(G) Section headings used in this Guaranty are for convenience only and
shall not affect the construction of this Guaranty.
(H) The provisions of this Guaranty are independent of and separable
from each other, and no such provision shall be affected or rendered invalid
or unenforceable by virtue of the fact that for any reason any
other such provision may be invalid or unenforceable in whole or in part.
If any provision of this Guaranty is prohibited or unenforceable in any
jurisdiction, such provision shall be ineffective in such jurisdiction only
to the extent of such prohibition or unenforceability, and such prohibition
or unenforceability shall not invalidate the balance of such provision to the
extent it is not prohibited or unenforceable nor render
prohibited or unenforceable such provision in any other jurisdiction.
(I) THIS GUARANTY AND THE TRANSACTIONS EVIDENCED HEREBY SHALL
BE GOVERNED BY AND CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF MISSOURI,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, AS THE SAME MAY FROM TIME TO
TIME BE IN EFFECT.
(J) THE GUARANTOR AND THE SECURED PARTY AGREE THAT ANY ACTION
OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS GUARANTY MAY BE COMMENCED IN THE
CIRCUIT COURT OF JACKSON COUNTY, MISSOURI OR THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI, AND THE GUARANTOR WAIVES PERSONAL SERVICE
OF PROCESS AND AGREES THAT A SUMMONS AND COMPLAINT COMMENCING AN ACTION OR
PROCEEDING IN ANY SUCH COURT SHALL BE PROPERLY SERVED AND SHALL CONFER PERSONAL
JURISDICTION IF SERVED BY REGISTERED OR CERTIFIED MAIL TO THE GUARANTOR, OR AS
OTHERWISE PROVIDED BY THE LAWS OF SUCH STATE OR THE UNITED STATES.
(K) This Guaranty may be executed in any number of counterparts and by
the Secured Party and the Guarantor on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same Guaranty.
Section 13. Waiver of Jury Trial. THE GUARANTOR AND THE SECURED
PARTY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL
BY JURY THE GUARANTOR OR THE SECURED PARTY MAY HAVE IN ANY ACTION OR PROCEEDING,
IN LAW OR IN EQUITY, IN CONNECTION WITH THIS GUARANTY OR THE TRANSACTIONS
RELATED THERETO. THE
<PAGE>
GUARANTOR REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR
AGENT OF THE SECURED PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE
SECURED PARTY WILL NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THIS RIGHT
TO JURY TRIAL WAIVER. THE GUARANTOR ACKNOWLEDGES THAT THE SECURED PARTY HAS
BEEN INDUCED TO ENTER INTO THIS GUARANTY BY, AMONG OTHER THINGS, THE PROVISIONS
OF THIS SECTION.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by a duly authorized officer as of the date first above written.
GUARANTOR:
OTR EXPRESS, INC.
By: /s/ William P. Ward
Name (print): William P. Ward
Title: Chairman of Board
ACKNOWLEDGED AND ACCEPTED:
HSBC BUSINESS LOANS, INC.
By: M. Catherine Draper
M. Catherine Draper
Vice President
Exhibit 10(r)
STOCK PURCHASE ASSISTANCE AGREEMENT
THIS AGREEMENT is dated as of February 27, 1998 and is by and between
OTR Express, Inc. (the "Company") and Gary J. Klusman, President and Chief
Executive Officer of the Company ("Klusman").
1.Purpose. The purpose of this Agreement is to promote the long-term
interests of the Company and its stockholders by encouraging and assisting
Klusman, as executive officer of the Company, to make meaningful
investments in the Common Stock of the Company so that, as stockholders, his
views and interests will be identified with the views and interests of the
other stockholders. Meaningful stock ownership will provide Klusman with an
additional incentive to exert his best efforts to increase the value of
the Company for the benefit of all stockholders. This Agreement
will also strengthen the Company's ability to retain Klusman, who has
special competence to contribute to the Company's success.
2.Definitions.
a."Bank" means a third party source of financing, such as a bank (including
but not limited to HSBC Business Loans, Inc.), which has agreed to (and
which does) loan money to Klusman for the purposes of his purchase of Common
Stock.
b."Board" means the Board of Directors of the Company.
c."Cause" means any of the following:
i.Klusman's willful malfeasance or misfeasance towards the Company or
any Subsidiary of the Company;
ii.Klusman's failure to discharge all or any material part of his duties
or obligations to the Company as have been customarily performed by
his position, after notice thereof and a reasonable opportunity to
cure such failure;
iii.Klusman's conviction of a misdemeanor involving moral turpitude or
the conviction of any felony;
iv.the commission by Klusman of any act of fraud, embezzlement,
misappropriation of funds or breach of fiduciary duty against the
Company, any Subsidiary of the Company or any customer, vendor or
affiliate of the Company, including but not limited to any acts of
material personal enrichment of Klusman or affiliates of Klusman at
the expense of the Company, any Subsidiary of the Company or any
customer, vendor or affiliate of the Company;
v.a failure to make timely Guaranty Payments when due under this
Agreement or any other material breach by Klusman of this Agreement;
or
vi.a failure by Klusman to keep confidential the trade secrets and other
material proprietary information of the Company.
<PAGE>
a."Change in Control" means the first to occur of any one of the events
described below:
i.A tender offer or exchange offer is made whereby the effect of such offer
is to take over and control the affairs of the Company and such offer
is consummated for the ownership of securities of the Company
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities.
ii.The Company is merged or consolidated with another corporation and, as a
result of such merger or consolidation, less than fifty percent (50%)
of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former
stockholders of the Company other than affiliates
within the meaning of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any party to such merger or consolidation.
iii.The Company transfers substantially all of its assets to another
corporation or entity that is not a wholly-owned subsidiary of the
Company.
iv.Any person or group (as such terms are used in Sections 13(d)(3) and
14(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, and that in
related Schedule 13D/G filings such person or group has expressed the
intention to take over and control the affairs of the Company.
v.Any other event or series of events which, notwithstanding any other
provisions of this definition, is determined by the Board to
constitute a change in control of the Company for purposes of this
Agreement.
a."Code" means the Internal Revenue Code, as amended.
b."Compensation Committee" means the Compensation Committee of the
Board, or any successor committee thereto.
c."Common Stock" means the shares of common stock of the Company.
d."Company" means OTR Express, Inc., a Kansas corporation.
e."Disability" shall mean the physical or mental illness or incapacity of
Klusman such that, in the judgment of a physician chosen or approved by
the Company and specializing in the area of such physical or mental illness
or disability, Klusman is unable to perform the essential
functions of his employment with or without reasonable accommodation,
for a period of at least three (3) consecutive months or for shorter periods
totaling more than three (3) months during any period of six (6) months.
f."Guaranty" means the guaranty of payment of the principal and certain
other amounts owing under the Loan, by the Company in favor of the Bank,
as provided in the Guaranty executed by the Company in favor of the Bank.
<PAGE>
g."Loan" means the loan made by Bank to Klusman which is guarantied by the
Company pursuant to this Agreement.
h."Agreement" means this Stock Purchase Assistance Agreement.
i."Principal Payment Reimbursement" means the periodic payment by the
Company to Klusman of an amount, as incentive compensation, not greater
than the amount of principal due and owing under the Loan for such period.
j."Subsidiary" means any corporation at least 80 percent of the outstanding
voting stock of which is owned by the Company.
1.Administration on Behalf of Company.
a.The Compensation Committee. The Compensation Committee shall be
comprised of two or more members of the Board, all of whom shall be
"disinterested persons" as defined in Rule 16b-3 under the Exchange Act
and "outside directors" as that term is used in Section 162 of the Code
and the regulations promulgated thereunder, but in any event
consistent with the Bylaws of the Company and applicable Kansas
corporate law.
b.Powers. The Compensation Committee shall have full and exclusive
discretionary power to interpret this Agreement on behalf of the Company
and to determine eligibility for the Guaranty and Principal Payment
Reimbursement and to make such other discretionary decisions as may be
provided under this Agreement.
1.Guaranty.
a.Benefit to Company. The Board has determined that this Agreement may
reasonably be expected to benefit the Company, in conformity with KSA
17-6303 (or its successor provision).
b.Purpose of Guaranty. The Company may Guaranty all or part of the
principal amount of such Loans from time to time to Klusman to be used
solely for the purpose of:
i.Acquiring Common Stock at fair market value in open market transactions
or at negotiated prices in private transactions;
ii.Acquiring Common Stock upon the exercise of stock options granted under
a stock option plan of, or otherwise by, the Company; or
iii.Any combination of the above.
1.Loan/Guaranty Amount; General Terms.
a.Klusman shall use his commercially reasonable efforts to obtain from a
Bank a line of credit for, or loans in the aggregate original principal
amount of $240,000 to provide funds to purchase Common Stock and for no
other purpose. If the Loan is approved by Klusman and the
Compensation Committee, the Company shall offer to guaranty such Loan
provided that the amount of the Loan does not exceed the fair market value
of the shares of Common Stock to be purchased with the proceeds of the Loan,
as determined at purchase, and in no event shall Klusman have outstanding
Loans which are guaranteed by the Company
<PAGE>
under this Agreement in excess of $240,000 original principal amount.
The Compensation Committee shall not approve any Loan unless such Loan is
payable by Klusman over a term of six (6) years and shall be full recourse
against Klusman and evidenced by a promissory note by Klusman to Bank.
b.The Company shall not be a party or in any way construed as a lender or
party under the Loan. Klusman shall be solely liable to Bank for payment
of all principal, interest and charges under the Loan.
c.Each Guaranty shall be made only for such Loans which are reviewed and
approved by both Klusman and the Compensation Committee. Each Guaranty
shall be in such form as is consistent with this Agreement and approved
by the Compensation Committee.
d.In the event that the Company's collateral or other security arrangements
in favor of the Bank respecting the Guaranty are terminated or released
and Bank either desires (i) new or replacement collateral or other security
arrangements or (ii) to declare a default under the
Loan documents or be paid the Loan in full, the Company shall use its best
commercially reasonable efforts to provide such new or replacement
collateral or other security arrangements or to refinance the Loan (through
another bank or directly by the Company), as the case may be.
1.Purchase of Common Stock with Loan Proceeds. Upon Klusman obtaining a
Loan which is guaranteed by the Company under this Agreement, Klusman shall
purchase shares of Common Stock in the open market, in private transactions
and/or upon exercise of Company stock options hitherto granted to Klusman.
Any purchases of Common Stock under this Agreement shall be (A) personally
negotiated by Klusman or his broker, without Company involvement, (B) made
in compliance with the Company's "insider" trading policies, applicable
securities laws and other laws and (C) reported, as applicable, pursuant
to Section 16 of the Securities Act of 1933, as amended. The Company does
not make any guarantees or representations whatsoever as to the
price or fair market value of any shares so purchased nor as to the future
performance of the Company. Klusman shall use his commercially reasonable
efforts to fully invest all the Loan proceeds in the purchase of Common
Stock prior to June 10, 1998 but for purposes only of determining the
reasonableness of such efforts, Klusman shall not have any obligation to
purchase Common Stock at greater than $9.00 per share. Any amounts
available under the Loan which are not invested in the purchase of Common
Stock by June 10, 1998 shall not deemed loaned to Klusman and shall not be
subject or beneficiary of any Guaranty by the Company.
2.Principal Payment Reimbursement; Other Payments.
a.For each full Principal Payment Reimbursement period (quarterly or
annually, as determined by the Compensation Committee) as Klusman is
employed by the Company in an officer position, the Company shall make
payments to Klusman (or directly to the Bank, if instructed by Klusman but
if Klusman is in default under the Loan, then if instructed by
<PAGE>
the Bank) of an amount of Principal Payment Reimbursement equal to the
amount of principal scheduled due and owing to the Bank under the Loan for
such period (e.g., if Klusman has a 6 year loan with principal payable in
equal installments of $40,000, on February 27 of every year, the Company's
Principal Payment Reimbursement would equal such installments assuming
continuing eligibility throughout such periods). Upon
Klusman's receipt of any such payment, he shall apply such funds to the
payment of the principal amount of the Loan to which it relates (unless
he has already made such Loan payment from personal or other sources).
b.If Klusman ceases to be so employed by the Company in an officer position
(for whatever reason), dies or experiences Disability, Klusman and (as
required by the Guaranty) the Company shall give notice thereof to the
Bank; further, the Company's obligation to make Principal Payment
Reimbursement payments shall thereupon immediately cease and terminate.
c.If Klusman's employment is terminated by the Company without Cause (or
if there is a Change of Control of the Company and Klusman's employment
with the Company or a successor entity is terminated by the Company or
such successor entity without Cause after such Change of Control), then
the Company (or such successor) shall pay, directly to the Bank,
the balance of principal amount outstanding (if any) at such termination
on Klusman's Loan for the benefit of Klusman (which amount may be taxable
to Klusman as compensation) provided that contemporaneously with such
payment (i) the Bank shall execute and deliver to the Company (and/or
such successor) a termination of the Guaranty and a release of the Company
(or such successor) from any and all obligations thereunder and (ii) Klusman
executes and delivers to the Company (and/or such successor) a comprehensive
release of claims, including any employment related claims,
that are or may be alleged by Klusman, his representatives and heirs
against the Company (and/or such successor).
1.Reimbursement Obligation of Klusman.
a.In the event that Klusman defaults on the Loan or otherwise entitles Bank
to make demand for payment to the Company under the Guaranty and the Bank
does in fact make such demand and the Company does in fact make payment
to the Bank therefor (in any partial or full amount, a "Guaranty Payment"),
then Klusman hereby irrevocably agrees to make payment to the Company a
money amount equal to the Guaranty Payment (the "Guaranty Reimbursement")
no later than fifteen (15) days after written demand by the Company
therefor provided that the Company is not then in default with respect to
Section 7 of this Agreement.
b.The Guaranty Reimbursement may be made (i) by cash payment (or wire
transfer) made by Klusman to the Company and to the extent payment by (i)
is not timely made, (ii) by offset
<PAGE>
or credit to the Company against any amount or amounts (dollar for dollar)
that it indisputably and duly owes to Klusman (or, at the Company's sole
discretion, will owe in the future, but in no way obligating the Company
to continue Klusman's employment, accrue such amounts or mitigate its
damages), including those amounts related to or in
connection with wages, compensation, expense reimbursement, Principal
Payment Reimbursement and any other amounts howsoever derived.
1.Failure to Make Guaranty Reimbursement. If the Guaranty Reimbursement
is not timely paid or satisfied in full as described in Section 8(b), then
(i) such deficient amount shall accrue, and Klusman shall owe to the
Company, interest per annum (360 day year) thereon at the prime rate
(as reported in the Wall Street Journal with regard to large money center
banks) plus two percent (2%) compounded quarterly until paid in full and
(ii) such nonpayment shall entitle the Company, at its discretion, to
terminate the employment (whether or not under any written employment
contract) of Klusman for "Cause" and without any obligation to make
further or subsequent payments to Klusman (as salary, bonus, severance
compensation or otherwise but excluding accrued and unpaid compensation).
2.Security for Guaranty.
a.Klusman's obligations to make the Guaranty Reimbursement shall be
secured by the pledge, subject to any prior or senior pledge in favor
of the Bank relating to the Loan applicable to such Guaranty, of those
shares of Common Stock acquired with the proceeds of the Loan. Such
pledge shall be evidenced by a pledge agreement executed by
Klusman in favor of the Company, in form satisfactory to Company's
counsel. To the extent permissible under the Loan, shares of Common
Stock so pledged shall, from time to time, be physically delivered to
the Company, together with a stock power endorsed in blank by Klusman
in favor of the Company and such other documentation as the Company,
with advice of counsel, may request.
b.Except for shares released under Section 10(c), Klusman shall not pledge,
hypothecate, grant a security interest in or otherwise transfer, sell
or assign any of the shares of Common Stock acquired with the proceeds
of the Loan to any person or entity except to the Bank
(but only in connection with such Loan) or the Company (in connection
with such Guaranty), and any such prohibited action shall be void and
of no effect against the Bank and the Company.
c.On an annual basis, the Company shall release from any first and prior
pledge (not subject to the pledge favoring the Bank) it holds (if any)
that number of shares (to the nearest 100 shares) of Common Stock, if
any, of a value in excess of 150% of the amount of the maximum Guaranty
Reimbursement that exists and could theoretically still then arise
under this Agreement. For example, if the maximum Guaranty
Reimbursement that exists and could theoretically still then arise under
this Agreement is $100,000 and the
<PAGE>
Company has a first and prior pledge of Common Stock worth $200,000,
the Company would release Common Stock worth $50,000 from such pledge.
It is understood that the Bank may have a first and prior pledge in all
shares of Common Stock acquired by Klusman under the Bank's Loan until
full and final payment thereof, and therefor this subsection may never
provide for release of any such shares.
1. Obligation to Hold Shares. For
so long as Klusman is employed by the Company, he agrees not
to sell, transfer or assign any of the shares of Common Stock purchased
under Loans made in connection with this Agreement (and free of any
pledge benefiting the Bank or the Company) except (a) for 25% of such
shares and (b) as the Compensation Committee or Company may
permit him to do, in their discretion, because of a financial hardship
incurred by Klusman.
2.Tax Withholding. The Company may make such withholding and take such
action as may be necessary or appropriate to satisfy tax withholding
requirements for any federal, state or local laws or regulations in
connection with the Guaranty and any payments provided for herein.
3.General Provisions.
a.No Right to Employment. Klusman shall not have any claim or right to be
retained in the employment of the Company or a Subsidiary by reason
of this Agreement or any Guaranty or Loan to him.
b.Compliance With Laws. No Guaranty or payment shall be made hereunder
unless counsel for the Company shall be satisfied that such Guaranty
or payment will be in compliance with all applicable federal, state,
and local laws.
c.Agreement Expenses. The expenses of this Agreement and its
administration shall be borne by the Company.
d.Agreement Not Funded. This Agreement shall be unfunded. The Company
shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the making of any
Guaranty or payment under this Agreement.
e.Acceptance of Actions Taken Under Agreement. By accepting a Guaranty
under this Agreement, Klusman shall be deemed conclusively to have
indicated his acceptance and consent to any action taken under this
Agreement by the Company, the Board, or the Compensation Committee.
f.Reports. The appropriate officers of the Company shall cause to be filed
any reports, returns, or other information regarding Guaranties and
payments hereunder, as may be required by any applicable statute, rule,
or regulation.
g.Governing Law. The validity, construction, and effect of this Agreement,
and any actions relating to this Agreement, shall be determined in
accordance with the laws of the State of Kansas and applicable federal
law.
h.Successors and Assigns of Klusman. This Agreement shall be binding, upon
all successors and permitted assigns of Klusman. including, without
limitations his estate,
<PAGE>
the personal representative, executor, administrator, or trustee of such
estate, or any trustee in bankruptcy or representative of his creditors.
i.Amendment of this Agreement. This Agreement may not be modified or
amended except by a writing executed by all parties hereto.
j.Effective Date of Agreement. This Agreement shall be effective as of the
date hereof but subject to the approval of the stockholders of the
Company if required by applicable law, the certificate of incorporation
or bylaws of the Company or applicable SEC or Nasdaq regulations.
IN WITNESS WHEREOF, each of the parties have executed this Agreement
intending to be bound thereby.
/s/ Gary J. Klusman
Gary J. Klusman
OTR Express, Inc.
By: /s/William P.Ward
Name: William P. Ward
Title: Chairman of the Board
<PAGE>
Exhibit 10(s)
STOCK PURCHASE ASSISTANCE AGREEMENT
THIS AGREEMENT is dated as of February 27, 1998 and is by and between
OTR Express, Inc. (the "Company") and Steven W. Ruben, Vice President-Finance
and Chief Financial Officer of the Company ("Ruben").
1.Purpose. The purpose of this Agreement is to promote the long-term
interests of the Company and its stockholders by encouraging and
assisting Ruben, as executive officer of the Company, to make
meaningful investments in the Common Stock of the Company so
that, as stockholders, his views and interests will be identified
with the views and interests of the other stockholders. Meaningful
stock ownership will provide Ruben with an additional incentive to
exert his best efforts to increase the value of the Company for the
benefit of all stockholders. This Agreement will also strengthen the
Company's ability to retain Ruben, who has special competence to
contribute to the Company's success.
2.Definitions.
a."Bank" means a third party source of financing, such as a bank (including
but not limited to HSBC Business Loans, Inc.), which has agreed to (and
which does) loan money to Ruben for the purposes of his purchase of
Common Stock.
b."Board" means the Board of Directors of the Company.
c."Cause" means any of the following:
i.Ruben's willful malfeasance or misfeasance towards the Company or any
Subsidiary of the Company;
ii.Ruben's failure to discharge all or any material part of his duties or
obligations to the Company as have been customarily performed by
his position, after notice thereof and a reasonable opportunity to
cure such failure;
iii. Ruben's conviction of a misdemeanor involving moral turpitude or
the conviction of any felony;
iv.the commission by Ruben of any act of fraud, embezzlement,
misappropriation of funds or breach of fiduciary duty against the
Company, any Subsidiary of the Company or any customer, vendor or
affiliate of the Company, including but not limited to
any acts of material personal enrichment of Ruben or affiliates of
Ruben at the expense of the Company, any Subsidiary of the Company
or any customer, vendor or affiliate of the Company;
v.a failure to make timely Guaranty Payments when due under this
Agreement or any other material breach by Ruben of this Agreement; or
vi.a failure by Ruben to keep confidential the trade secrets and other
material proprietary information of the Company.
<PAGE>
a."Change in Control" means the first to occur of any one of the events
described below:
i.A tender offer or exchange offer is made whereby the effect of such
offer is to take over and control the affairs of the Company and
such offer is consummated for the ownership of securities of the
Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding
voting securities.
ii.The Company is merged or consolidated with another corporation and,
as a result of such merger or consolidation, less than fifty percent
(50%) of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the
former stockholders of the Company other than affiliates
within the meaning of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any party to such merger or consolidation.
iii.The Company transfers substantially all of its assets to another
corporation or entity that is not a wholly-owned subsidiary of the
Company.
iv.Any person or group (as such terms are used in Sections 13(d)(3) and
14(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of
the Company's then outstanding securities, and that in
related Schedule 13D/G filings such person or group has expressed
the intention to take over and control the affairs of the Company.
v.Any other event or series of events which, notwithstanding any other
provisions of this definition, is determined by the Board to
constitute a change in control of the Company for purposes of this
Agreement.
a."Code" means the Internal Revenue Code, as amended.
b."Compensation Committee" means the Compensation Committee of the
Board, or any successor committee thereto.
c."Common Stock" means the shares of common stock of the Company.
d."Company" means OTR Express, Inc., a Kansas corporation.
e."Disability" shall mean the physical or mental illness or incapacity of
Ruben such that, in the judgment of a physician chosen or approved by
the Company and specializing in the area of such physical or mental
illness or disability, Ruben is unable to perform the essential
functions of his employment with or without reasonable accommodation,
for a period of at least three (3) consecutive months or for shorter
periods totaling more than three (3) months during any period of six
(6) months.
f."Guaranty" means the guaranty of payment of the principal and certain
other amounts owing under the Loan, by the Company in favor of the Bank,
as provided in the Guaranty executed by the Company in favor of the Bank.
<PAGE>
g."Loan" means the loan made by Bank to Ruben which is guarantied by the
Company pursuant to this Agreement.
h."Agreement" means this Stock Purchase Assistance Agreement.
i."Principal Payment Reimbursement" means the periodic payment by the
Company to Ruben of an amount, as incentive compensation, not greater
than the amount of principal due and owing under the Loan for such
period.
j."Subsidiary" means any corporation at least 80 percent of the outstanding
voting stock of which is owned by the Company.
1.Administration on Behalf of Company.
a.The Compensation Committee. The Compensation Committee shall be
comprised of two or more members of the Board, all of whom shall be
"disinterested persons" as defined in Rule 16b-3 under the Exchange Act
and "outside directors" as that term is used in Section 162 of the Code
and the regulations promulgated thereunder, but in any event consistent
with the Bylaws of the Company and applicable Kansas corporate law.
b.Powers. The Compensation Committee shall have full and exclusive
discretionary power to interpret this Agreement on behalf of the Company
and to determine eligibility for the Guaranty and Principal Payment
Reimbursement and to make such other discretionary decisions as may be
provided under this Agreement.
1.Guaranty.
a.Benefit to Company. The Board has determined that this Agreement may
reasonably be expected to benefit the Company, in conformity with KSA
17-6303 (or its successor provision).
b.Purpose of Guaranty. The Company may Guaranty all or part of the
principal amount of such Loans from time to time to Ruben to be used
solely for the purpose of:
i.Acquiring Common Stock at fair market value in open market transactions
or at negotiated prices in private transactions;
ii.Acquiring Common Stock upon the exercise of stock options granted under
a stock option plan of, or otherwise by, the Company; or
iii.Any combination of the above.
1.Loan/Guaranty Amount; General Terms.
a.Ruben shall use his commercially reasonable efforts to obtain from a Bank
a line of credit for, or loans in the aggregate original principal amount
of $120,000 to provide funds to purchase Common Stock and for no other
purpose. If the Loan is approved by Ruben and the Compensation
Committee, the Company shall offer to guaranty such Loan provided that
the amount of the Loan does not exceed the fair market value of the shares
of Common Stock to be purchased with the proceeds of the Loan, as
determined at purchase, and in no event shall Ruben have outstanding
Loans which are guaranteed by the Company
<PAGE>
under this Agreement in excess of $120,000 original principal amount.
The Compensation Committee shall not approve any Loan unless such Loan
is payable by Ruben over a term of six (6) years and shall be full
recourse against Ruben and evidenced by a promissory note by Ruben to
Bank.
b.The Company shall not be a party or in any way construed as a lender or
party under the Loan. Ruben shall be solely liable to Bank for payment
of all principal, interest and charges under the Loan.
c.Each Guaranty shall be made only for such Loans which are reviewed and
approved by both Ruben and the Compensation Committee. Each Guaranty
shall be in such form as is consistent with this Agreement and approved
by the Compensation Committee.
e.In the event that the Company's collateral or other security arrangements
in favor of the Bank respecting the Guaranty are terminated or released
and Bank either desires (i) new or replacement collateral or other
security arrangements or (ii) to declare a default under the
Loan documents or be paid the Loan in full, the Company shall use its best
commercially reasonable efforts to provide such new or replacement
collateral or other security arrangements or to refinance the Loan
(through another bank or directly by the Company), as the case may be.
1.Purchase of Common Stock with Loan Proceeds. Upon Ruben obtaining a
Loan which is guaranteed by the Company under this Agreement, Ruben shall
purchase shares of Common Stock in the open market, in private transactions
and/or upon exercise of Company stock options hitherto granted to Ruben.
Any purchases of Common Stock under this Agreement shall be (A) personally
negotiated by Ruben or his broker, without Company involvement, (B) made
in compliance with the Company's "insider" trading policies, applicable
securities laws and other laws and (C) reported, as applicable, pursuant
to Section 16 of the Securities Act of 1933, as amended. The Company does
not make any guarantees or representations whatsoever as to the
price or fair market value of any shares so purchased nor as to the future
performance of the Company. Ruben shall use his commercially reasonable
efforts to fully invest all the Loan proceeds in the purchase of Common
Stock prior to June 10, 1998 but for purposes only of
determining the reasonableness of such efforts, Ruben shall not have any
obligation to purchase Common Stock at greater than $9.00 per share. Any
amounts available under the Loan which are not invested in the purchase of
Common Stock by June 10, 1998 shall not deemed loaned to
Ruben and shall not be subject or beneficiary of any Guaranty by the
Company.
2.Principal Payment Reimbursement; Other Payments.
a.For each full Principal Payment Reimbursement period (quarterly or
annually, as determined by the Compensation Committee) as Ruben is
employed by the Company in an officer position, the Company shall make
payments to Ruben (or directly to the Bank, if instructed by Ruben but
if Ruben is in default under the Loan, then if instructed by the
<PAGE>
Bank) of an amount of Principal Payment Reimbursement equal to the
amount of principal scheduled due and owing to the Bank under the Loan
for such period (e.g., if Ruben has a 6 year loan with principal payable
in equal installments of $20,000, on February 27 of every year, the
Company's Principal Payment Reimbursement would equal such installments
assuming continuing eligibility throughout such periods). Upon Ruben's
receipt of any such payment, he shall apply such funds to the payment of
the principal amount of the Loan to which it relates (unless he has
already made such Loan payment from personal or other sources).
b.If Ruben ceases to be so employed by the Company in an officer position
(for whatever reason), dies or experiences Disability, Ruben and (as
required by the Guaranty) the Company shall give notice thereof to the
Bank; further, the Company's obligation to make Principal Payment
Reimbursement payments shall thereupon immediately cease and
terminate.
c.If Ruben's employment is terminated by the Company without Cause (or if
there is a Change of Control of the Company and Ruben's employment with
the Company or a successor entity is terminated by the Company or such
successor entity without Cause after such Change of Control), then the
Company (or such successor) shall pay, directly to the Bank,
the balance of principal amount outstanding (if any) at such termination
on Ruben's Loan for the benefit of Ruben (which amount may be taxable
to Ruben as compensation) provided that contemporaneously with such
payment (i) the Bank shall execute and deliver to the Company (and/or
such successor) a termination of the Guaranty and a release of the
Company (or such successor) from any and all obligations thereunder and
(ii) Ruben executes and delivers to the Company (and/or such successor) a
comprehensive release of claims, including any employment related
claims, that are or may be alleged by Ruben, his representatives and
heirs against the Company (and/or such successor).
1.Reimbursement Obligation of Ruben.
a.In the event that Ruben defaults on the Loan or otherwise entitles Bank to
make demand for payment to the Company under the Guaranty and the Bank
does in fact make such demand and the Company does in fact make payment
to the Bank therefor (in any partial or full amount, a "Guaranty
Payment"), then Ruben hereby irrevocably agrees to make
payment to the Company a money amount equal to the Guaranty Payment
(the "Guaranty Reimbursement") no later than fifteen (15) days after
written demand by the Company therefor provided that the Company is not
then in default with respect to Section 7 of this Agreement.
b.The Guaranty Reimbursement may be made (i) by cash payment (or wire
transfer) made by Ruben to the Company and to the extent payment by (i)
is not timely made, (ii) by offset or credit to the Company against any
amount or amounts (dollar for dollar) that it indisputably
<PAGE>
and duly owes to Ruben (or, at the Company's sole discretion, will owe in
the future, but in no way obligating the Company to continue Ruben's
employment, accrue such amounts or mitigate its damages), including
those amounts related to or in connection with wages,
compensation, expense reimbursement, Principal Payment Reimbursement
and any other amounts howsoever derived.
1.Failure to Make Guaranty Reimbursement. If the Guaranty Reimbursement
is not timely paid or satisfied in full as described in Section 8(b),
then (i) such deficient amount shall accrue, and Ruben shall owe to the
Company, interest per annum (360 day year) thereon at the prime rate (as
reported in the Wall Street Journal with regard to large money center
banks) plus two percent (2%) compounded quarterly until paid in full and
(ii) such nonpayment shall entitle the Company, at its
discretion, to terminate the employment (whether or not under any
written employment contract) of Ruben for "Cause" and without any obligation
to make further or subsequent payments to Ruben (as salary, bonus, severance
compensation or otherwise but
excluding accrued and unpaid compensation).
2.Security for Guaranty.
a.Ruben's obligations to make the Guaranty Reimbursement shall be secured
by the pledge, subject to any prior or senior pledge in favor of the
Bank relating to the Loan applicable to such Guaranty, of those shares
of Common Stock acquired with the proceeds of the Loan. Such pledge
shall be evidenced by a pledge agreement executed by Ruben in
favor of the Company, in form satisfactory to Company's counsel. To the
extent permissible under the Loan, shares of Common Stock so pledged
shall, from time to time, be physically delivered to the Company,
together with a stock power endorsed in blank by Ruben in favor of the
Company and such other documentation as the Company, with
advice of counsel, may request.
b.Except for shares released under Section 10(c), Ruben shall not pledge,
hypothecate, grant a security interest in or otherwise transfer, sell
or assign any of the shares of Common Stock acquired with the proceeds
of the Loan to any person or entity except to the Bank (but
only in connection with such Loan) or the Company (in connection with
such Guaranty), and any such prohibited action shall be void and of no
effect against the Bank and the Company.
c.On an annual basis, the Company shall release from any first and prior
pledge (not subject to the pledge favoring the Bank) it holds (if any)
that number of shares (to the nearest 100 shares) of Common Stock, if
any, of a value in excess of 150% of the amount of the maximum Guaranty
Reimbursement that exists and could theoretically still then arise
under this Agreement. For example, if the maximum Guaranty
Reimbursement that exists and could theoretically still then arise under
this Agreement is $100,000 and the Company has a first and prior pledge
of Common Stock worth $200,000, the Company
<PAGE>
would release Common Stock worth $50,000 from such pledge. It is
understood that the Bank may have a first and prior pledge in all shares
of Common Stock acquired by Ruben under the Bank's Loan until full and
final payment thereof, and therefor this subsection may never provide for
release of any such shares.
1.Obligation to Hold Shares. For so long as Ruben is employed by the
Company, he agrees not to sell, transfer or assign any of the shares of
Common Stock purchased under Loans made in connection with this Agreement
(and free of any pledge benefiting the Bank or the Company)
except (a) for 25% of such shares and (b) as the Compensation Committee
or Company may permit him to do, in their discretion, because of a financial
hardship incurred by Ruben.
2.Tax Withholding. The Company may make such withholding and take such
action as may be necessary or appropriate to satisfy tax withholding
requirements for any federal, state or local laws or regulations in
connection with the Guaranty and any payments provided for herein.
3.General Provisions.
a.No Right to Employment. Ruben shall not have any claim or right to be
retained in the employment of the Company or a Subsidiary by reason of
this Agreement or any Guaranty or Loan to him.
b.Compliance With Laws. No Guaranty or payment shall be made hereunder
unless counsel for the Company shall be satisfied that such Guaranty
or payment will be in compliance with all applicable federal, state,
and local laws.
c.Agreement Expenses. The expenses of this Agreement and its
administration shall be borne by the Company.
d.Agreement Not Funded. This Agreement shall be unfunded. The Company
shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the making of any
Guaranty or payment under this Agreement.
e.Acceptance of Actions Taken Under Agreement. By accepting a Guaranty
under this Agreement, Ruben shall be deemed conclusively to have
indicated his acceptance and consent to any action taken under this
Agreement by the Company, the Board, or the Compensation Committee.
f.Reports. The appropriate officers of the Company shall cause to be filed
any reports, returns, or other information regarding Guaranties and
payments hereunder, as may be required by any applicable statute, rule,
or regulation.
g.Governing Law. The validity, construction, and effect of this Agreement,
and any actions relating to this Agreement, shall be determined in
accordance with the laws of the State of Kansas and applicable federal
law.
h.Successors and Assigns of Ruben. This Agreement shall be binding, upon
all successors and permitted assigns of Ruben. including, without
limitations his estate, the
<PAGE>
personal representative, executor, administrator, or trustee of such
estate, or any trustee in bankruptcy or representative of his creditors.
i.Amendment of this Agreement. This Agreement may not be modified or
amended except by a writing executed by all parties hereto.
j.Effective Date of Agreement. This Agreement shall be effective as of
the date hereof but subject to the approval of the stockholders of the
Company if required by applicable law, the certificate of incorporation
or bylaws of the Company or applicable SEC or Nasdaq regulations.
IN WITNESS WHEREOF, each of the parties have executed this Agreement
intending to be bound thereby.
/s/ Steven W. Ruben
Steven W. Ruben
OTR Express, Inc.
By: /s/ William P. Ward
Name: William P. Ward
Title: Chairman of the Board
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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0
0
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