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 June 30, 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 July 31, 1998)
<PAGE>
PART 1 FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
OTR EXPRESS, INC.
BALANCE SHEETS
<CAPTION>
June 30 December 31
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 132,535 $ 318,760
Accounts receivable, freight 7,504,350 7,542,557
Accounts receivable, other 242,150 193,803
Inventory 590,670 687,303
Prepaid expenses and other 1,072,266 480,976
TOTAL CURRENT ASSETS 9,541,971 9,223,399
PROPERTY AND EQUIPMENT 49,498,750 46,810,777
TOTAL ASSETS $59,040,721 $56,034,176
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, trade $ 1,713,817 $ 1,603,654
Accrued payroll and taxes 1,131,680 861,857
Other accrued expenses 1,560,496 1,414,721
Current portion of long-term debt 14,449,763 14,259,700
TOTAL CURRENT LIABILITIES 18,855,756 18,139,932
LONG-TERM DEBT 28,612,133 26,688,357
DEFERRED INCOME TAXES 2,095,000 1,859,803
STOCKHOLDERS' EQUITY 9,477,832 9,346,084
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $59,040,721 $56,034,176
</TABLE>
<PAGE>
<TABLE>
OTR EXPRESS, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
Second Quarter Ended Six Months Ended
June 30 June 30
(Unaudited) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
OPERATING REVENUE
Freight revenue $16,853,310 $14,772,396 $32,613,268 $27,644,872
Brokerage revenue 895,943 890,529 1,883,339 1,849,044
Total operating revenue 17,749,253 15,662,925 34,496,607 29,493,916
OPERATING EXPENSES
Salaries, wages and benefits 6,659,833 6,216,571 13,158,043 11,740,174
Purchased transportation 1,850,256 846,968 3,240,493 1,787,379
Fuel 1,480,426 1,876,073 3,068,975 3,700,475
Maintenance 1,164,400 932,475 2,238,517 1,788,299
Depreciation 1,954,251 1,810,702 3,830,319 3,527,092
Insurance and claims 553,380 534,870 1,099,740 851,388
Taxes and licenses 1,678,262 1,512,610 3,287,235 2,967,285
Supplies and other 1,100,082 894,550 2,223,754 1,701,284
Total operating expenses 16,440,890 14,624,819 32,147,076 28,063,376
Operating income 1,308,363 1,038,106 2,349,531 1,430,540
Interest expense 834,831 799,826 1,673,249 1,520,468
Income (loss) before income
taxes 473,532 238,280 676,282 (89,928)
Income tax expense (benefit) 180,364 90,546 257,561 (34,173)
Net income (loss) $ 293,168 $ 147,734 $ 418,721 $ (55,755)
Weighted average number
of shares
Basic 1,835,955 1,840,515 1,836,342 1,839,659
Diluted 1,850,914 1,840,515 1,854,695 1,839,659
Earnings (loss) per share
Basic $ 0.16 $ 0.08 $ 0.23 $ (0.03)
Diluted 0.16 0.08 0.23 (0.03)
</TABLE>
<PAGE>
<TABLE>
OTR EXPRESS, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended
June 30
(Unaudited) 1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,546,202 $ 2,797,238
INVESTING ACTIVITIES
Acquisition of property and equipment (7,138,516) (10,884,554)
Proceeds from disposition of property
and equipment 589,723 3,279,957
NET CASH USED IN INVESTING ACTIVITIES (6,548,793) (7,604,597)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 10,696,638 14,168,142
Repayments of long-term debt (9,357,319) (10,762,186)
Net increase in bank note payable 534,520 1,487,136
Other (57,473) (9,650)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,816,366 4,883,442
NET INCREASE (DECREASE) IN CASH (186,225) 76,083
CASH, BEGINNING OF PERIOD 318,760 43,107
CASH, END OF PERIOD $ 132,535 $ 119,190
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 1,673,249 $ 1,520,905
Cash paid (received) for income taxes 22,364 (3,526)
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Guarantee of executive officers stock
purchase plan loans $ 240,000 $ -
</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 six months ended June 30, 1998, the Company financed the
purchase of revenue equipment through the issuance of long-term debt
totaling $6,700,000. This debt bears interest at effective rates between
7.06% and 7.33%. 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 June 30, 1998, the Company had purchase and finance commitments
outstanding for additional revenue equipment approximately $15,200,000.
The Company anticipates receiving proceeds from the sale or trade-in of 149
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.
<PAGE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES
As more fully described below in Item 5, the Company has agreed to
guarantee payment of four key executive stock loans for such executives'
private purchase of a total of approximately 69,000 shares of the Company's
common stock. The Company has agreed to guarantee 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 guarantee as of June 30, 1998 was approximately
$240,000. Stockholders' equity was reduced by this amount and long-term
debt was increased by this amount to record the guarantee.
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.
<PAGE>
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Second Quarter Ended Six Months Ended
June 30 June 30
(Unaudited) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Operating Revenue $17,749,253 $15,662,925 $34,496,607 $29,493,916
Operating Expenses 16,440,890 14,624,819 32,147,076 28,063,376
Interest Expense 834,831 799,826 1,673,249 1,520,468
Net Income (Loss) 293,168 147,734 418,721 (55,755)
</TABLE>
2nd Quarter 1998 v. 1997
Operating Revenue. Operating revenue improved by 13.3% in the second
quarter ended June 30, 1998 compared to 1997. Freight revenue increased by
14.1% and brokerage revenue increased by 0.06%.
Freight revenue improved due to increases in tractor utilization, rate
per mile and average number of units in service. The rate per mile
increased to $1.053 in the second quarter of 1998 compared to $1.032 in
1997. The higher rate is primarily a result of a higher level of direct
shipper miles in 1998 compared to 1997 and a rate increase effective May 7,
1998. The average number of tractors in service increased by 11.0% to 583
in the second quarter of 1998 compared to 525 in 1997. Tractors in service
in 1998 includes 39 owner operators. There were no owner operators in the
second quarter of 1997. Average miles per truck per week also increased to
2,129 from 2,106 due to improved demand from the Company's direct shipper
customers.
Operating Expenses. The operating ratio (total operating expenses as a
percent of operating revenue) improved to 92.6% in the second quarter of
1998 compared to 93.4% in 1997.
Salaries, wages and benefits decreased to 37.5% of revenue in 1998 from
39.7% in 1997 primarily because revenue per truck per week increased.
Also, the addition of owner operators, who own their trucks and contract
with the Company to haul freight, increased the revenues but not the wages.
Owner operators pay their own expenses, including payroll taxes, fuel,
insurance, licenses and interest expense. The cost of owner operators is
classified in purchased transportation.
Purchased transportation, which represents payments to other trucklines
for hauling loads contracted through the Company's freight brokerage
division and the cost of owner operators, increased to 10.4% of revenue in
1998 from 5.4% in 1997. The increase is a result of the addition of owner
operators to the fleet beginning in September 1997.
<PAGE>
Fuel was 8.3% of revenue in 1998 compared to 12.0% in 1997. This is a
result of lower diesel fuel prices nationwide in the second quarter of
1998, higher revenue rates per mile and the addition of owner operators.
Insurance and claims represented 3.1% and 3.4% of revenue in the second
quarter of 1998 and 1997, respectively. This is a result of an increase in
revenue rates per mile. 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.
Insurance and claims expense will vary as a percentage of revenue from
period to period based on the frequency and severity of claims incurred in
a given period as well as changes in claims development trends.
Depreciation as a percent of revenue decreased to 11.0% in 1998 from
11.6% in 1997 as a result of higher revenue per truck per week and the
addition of owner operators.
Taxes and licenses as a percent of revenue decreased from 9.7% in 1997
to 9.5% in 1998 as a result of the increased revenue per mile and the
addition of owner operators.
Supplies and other expenses increased to 6.2% of revenue in 1998 from
5.7% 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 4.7% of revenue in 1998
from 5.1% in 1997 as a result of lower debt levels per unit and the
addition of owner operators.
Net Income. The Company reported net income of $293,000, or $0.16 per
share, for the second quarter of 1998 compared to $148,000, or $0.08 per
share, in 1997. The effective income tax rate was 38.0% in 1997 and 1998.
Six Months Comparison 1998 v. 1997
Operating Revenue. Operating revenue for the six months ended June 30,
1998 increased by 17.0% to compared to 1997. Freight revenue increased by
18.0% and brokerage revenue increased by 1.9%.
Freight revenue improved due to an increase in the rate per mile,
tractor utilization and average number of units in service. The rate per
mile increased to $1.047 during the period from $1.022 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 566
for the six months of 1998 compared to 516 in 1997. The average number of
tractors in service in 1998 includes 31 owner operator drivers. There
<PAGE>
were no owner operator drivers in the six months of 1997. Average miles per
truck per week also increased to 2,144 from 2,039 due to improved demand
from the Company's direct shipper customers. The Company's empty mile
percent increased to 9.1% from 7.3% in 1997. Brokerage revenue decreased
to 5.5% of revenue from 6.3% in 1997.
Operating Expenses. The operating ratio improved to 93.2% for the first
six months of 1998 compared to 95.1% in 1997.
Salaries, wages and benefits decreased to 38.1% of revenue in 1998 from
39.8% in 1997 primarily because of increased revenue rates per mile and the
addition of owner operators in September 1997.
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 9.4% of
revenue in 1998 from 6.1% in 1997. The increase is a result of the
addition of owner operators to the fleet beginning in September 1997.
Fuel was 8.9% of revenue in 1998 compared to 12.5% in 1997. This is a
result of lower diesel fuel prices nationwide for the first six months of
1998, higher revenue rates per mile and the addition of owner operator
drivers.
Insurance and claims represented 3.2% and 2.9% of operating revenue for
the first six months of 1998 and 1997, respectively. This is a result of
favorable settlement of a substantial workers' compensation case in the
first quarter of 1997. The settlement offset insurance and claims expense
in that quarter. 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. This is
a result of lower premiums on insurance policies and an increase in revenue
rates per mile.
Depreciation as a percent of revenue decreased to 11.1% in 1998 from
12.0% in 1997 as a result of higher revenue per truck per week and the
addition of owner operator drivers.
Taxes and licenses as a percent of revenue decreased to 9.5% in 1998
from 10.1% in 1998 as a result of the increased revenue per mile.
Supplies and other expenses increased to 6.4% 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 4.9% of revenue in 1998
from 5.2% in 1997 as a result of lower debt levels per unit and the
addition of owner operators.
<PAGE>
Net Income. The Company reported net income of $419,000, or $0.23 per
share, for the first six months of 1998 compared to a net loss of $56,000,
or $0.03 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 $6,700,000 for the six months ended June 30, 1998. The
Company received $590,000 in proceeds from the disposition of revenue
equipment. The Company has outstanding purchase commitments for 149
replacement tractors at a cost of $11.3 million and 157 expansion trailers
at a cost of $3.2 million. The Company has finance commitments for all of
the expansion trailers and 21 of the replacement tractors totaling $4.8
million at rates that will be fixed at time of origination. The remaining
128 replacement tractors are scheduled for delivery between October 1998
and March 1999. The Company expects to obtain financing commitments on
those 128 replacement tractors by September 1998 to more closely match
delivery dates. 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 June 30, 1998 was
$9.3 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 June 30, 1998. The Company had borrowings
of $4.3 million under this line
<PAGE>
at June 30, 1998. A total of $1.3 million
of the available credit line was committed for letters of credit issued by
the financial institution. Approximately $240,000 of the available line of
credit was committed for the Company's Guaranty of Executive Officer Stock
Loans.
At June 30, 1998, the Company owned 31 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 $1.1
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
The annual meeting of shareholders of the registrant was held on May 13,
1998. In addition to the election of three Class B directors to serve
three-year terms, the stockholders approved the Amended and Restated 1996
Stock Option Plan and the Amended and Restated Directors' 1996 Stock Option
Plan and ratified the appointment of Arthur Andersen LLP as independent
auditors for the Company.
Stockholders representing at least 1,417,579 shares or 77% were present in
person or by proxy at the Annual Meeting. A tabulation with respect to each
nominee, approval of the Amended and Restated 1996 Stock Option Plan, approval
of the Amended and Restated Directors' 1996 Stock Option Plan and appointment
of Arthur Andersen LLP as independent auditors for 1998 is as follows:
<PAGE>
Votes
Votes Votes Against or
Cast For Withheld
Dr. James P. Anthony 1,418,369 1,417,171 1,198
Charles M. Foudree 1,418,369 1,417,171 1,198
Janice K. Ward 1,415,999 1,414,801 1,198
Approval of the Amended and
Restated 1996 Stock Option Plan 1,114,621 1,076,811 37,810
Approval of the Amended and
Restated 1996 Directors' Stock
Option Plan 1,111,320 1,075,732 35,588
Appointment of Arthur Andersen
LLP as independent auditors 1,417,579 1,393,549 24,030
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 two personal loans of $60,000 each (the "Stock Loans")
obtained from HSBC Business Loans, Inc. ("HSBC") by Jeffrey T. Brown, the
Company's Vice President- Dispatch and Eric T. Janzen, the Company's Vice
President-Marketing, for such each officer's private purchase of 10,000 shares
of the 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
June 8, 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 June 8, 1998 between the Company and
Messrs. Brown and Janzen, 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
<PAGE>
the Company (or by a successor entity after a change of control).
Such officers remain the primary 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
officers 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).
In March of 1998, Gary J. Klusman, the Company's President and Chief
Executive Officer and Steven W. Ruben, the Company's Chief Financial
Officer, obtained loans of $240,000 and $120,000, respectively, from HSBC
for such officers' combined purchase of approximately 49,000 shares of the
Company's common stock. Messrs. Klusman and Ruben entered into Assistance
Agreements with terms and conditions similar to Messrs. Brown and Janzen.
See Item 5 of the Company's Form 10-Q for the fiscal period ended March 31,
1998.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10 (t) - Guaranty Agreement dated June 8, 1998 by the Company in
favor of HSBC Business Loans, Inc. as secured party relating to payment of
$60,000 principal amount loan to Jeffrey T. Brown.
Exhibit 10 (u) - Guaranty Agreement dated June 8, 1998 by the Company in
favor of HSBC Business Loans, Inc. as secured party relating to payment of
$60,000 principal amount loan to Eric T. Janzen.
Exhibit 10 (v) - Stock Purchase Assistance Agreement dated June 8, 1998
between the Company and Jeffrey T. Brown.
Exhibit 10 (w) - Stock Purchase Assistance Agreement dated June 8, 1998
between the Company and Eric T. Janzen.
(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
six months ended Jun 30, 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: August 13, 1998 /s/ Gary J. Klusman
By: Gary J. Klusman
President and Principal
Executive Officer
Date: August 13, 1998 /s/ Steven W. Ruben
By: Steven W. Ruben
Principal Financial Officer
and Principal Accounting
Officer
Exhibit 10 (t)
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
June 8, 1998
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (the "Guaranty") is made as of June 8, 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 Jeffrey T. Brown (the "Debtor")
pursuant to the terms of a Promissory Note of even date herewith in the
principal amount of $60,000.00 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 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 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.
(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 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;
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.
(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
Jeffrey T. Brown and Eric T. Janzen, 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.
(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.
(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 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/Gary J. Klusman
Name (print): Gary J. Klusman
Title: President
ACKNOWLEDGED AND ACCEPTED:
HSBC BUSINESS LOANS, INC.
By:/s/ M. Catherine Draper
M. Catherine Draper
Vice President
Exhibit 10 (u)
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
June 8, 1998
GUARANTY AGREEMENT
This GUARANTY AGREEMENT (the "Guaranty") is made as of June 8, 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 Eric T. Janzen (the "Debtor") pursuant
to the terms of a Promissory Note of even date herewith in the principal
amount of $60,000.00 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 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 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.
(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 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;
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.
(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
Jeffrey T. Brown and Eric T. Janzen, 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.
(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.
(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 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/Gary J. Klusman
Name (print): Gary J. Klusman
Title: President
ACKNOWLEDGED AND ACCEPTED:
HSBC BUSINESS LOANS, INC.
By:/s/ M. Catherine Draper
M. Catherine Draper
Vice President
Exhibit 10 (v)
STOCK PURCHASE ASSISTANCE AGREEMENT
THIS AGREEMENT is dated as of June 8, 1998 and is by and between OTR
Express, Inc. (the "Company") and Jeff Brown, Vice President of the Company
("Brown").
1. Purpose. The purpose of this Agreement is to promote the long-term
interests of the Company and its stockholders by encouraging and assisting
Brown, as an 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 Brown 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 Brown, 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 Brown 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) Brown's willful malfeasance or misfeasance towards the Company
or any Subsidiary of the Company;
ii) Brown'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) Brown's conviction of a misdemeanor involving moral turpitude
or the conviction of any felony;
iv) the commission by Brown 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 Brown or affiliates of Brown 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 Brown of this Agreement; or
vi) a failure by Brown to keep confidential the trade secrets and
other material proprietary information of the Company.
d) "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.
e) "Code" means the Internal Revenue Code, as amended.
f) "Compensation Committee" means the Compensation Committee of the
Board, or any successor committee thereto.
g) "Common Stock" means the shares of common stock of the Company.
h) "Company" means OTR Express, Inc., a Kansas corporation.
i) "Disability" shall mean the physical or mental illness or
incapacity of Brown such that, in the judgment of a physician chosen or
approved by theCompany and specializing in the area of such physical or
mental illness or disability, Brown 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.
j) "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.
k) "Loan" means the loan made by Bank to Brown which is guarantied by
the Company pursuant to this Agreement.
l) "Agreement" means this Stock Purchase Assistance Agreement.
m) "Principal Payment Reimbursement" means the periodic payment by the
Company to Brown of an amount, as incentive compensation, not greater than
the amount of principal due and owing under the Loan for such period.
n) "Subsidiary" means any corporation at least 80 percent of the
outstanding voting stock of which is owned by the Company.
3. 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.
4. 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 Brown 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.
5. Loan/Guaranty Amount; General Terms.
a) Brown 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 $60,000 to provide funds to purchase Common Stock and for no
other purpose. If the Loan is approved by Brown 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 Brown have outstanding Loans which are
guaranteed by the Company under this Agreement in excess of $60,000
original principal amount. The Compensation Committee shall not approve
any Loan unless such Loan is payable by Brown over a term of six (6) years
and shall be full recourse against Brown and evidenced by a promissory note
by Brown to Bank.
b) The Company shall not be a party or in any way construed as a
lender or party under the Loan. Brown 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 Brown 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.
6. Purchase of Common Stock with Loan Proceeds. Upon Brown obtaining a
Loan which is guaranteed by the Company under this Agreement, Brown shall
purchase shares of Common Stock in the open market, in private transactions
and/or upon exercise of Company stock options hitherto granted to Brown.
Any purchases of Common Stock under this Agreement shall be (A) personally
negotiated by Brown 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. Brown 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, Brown shall not have any obligation to
purchase Common Stock at greater than $9.00 per share. Any amount
available under the Loan which are not invested in the purchase of Common
Stock by June 10, 1998 shall not deemed loaned to Brown and shall not be
subject or beneficiary of any Guaranty by the Company.
7. Principal Payment Reimbursement; Other Payments.
a) For each full Principal Payment Reimbursement period (quarterly or
annually, as determined by the Compensation Committee) as Brown is employed
by the Company in an officer position, the Company shall make payments to
Brown (or directly to the Bank, if instructed by Brown but if Brown is in
default under the Loan, then if instructed by 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 Brown
has a 6 year loan with principal payable in equal installments of $10,000,
on June 8 of every year, the Company's Principal Payment Reimbursement
would equal such installments assuming continuing eligibility throughout
such periods). Upon Brown'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 Brown ceases to be so employed by the Company in an officer
position (for whatever reason), dies or experiences Disability, Brown 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 Brown's employment is terminated by the Company without Cause
(or if there is a Change of Control of the Company and Brown'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 Brown's Loan
for the benefit of Brown (which amount may be taxable to Brown 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) Brown 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 Brown, his representatives and heirs against the Company (and/or
such successor).
8. Reimbursement Obligation of Brown.
a) In the event that Brown 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 Brown 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 Brown 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 and duly owes to Brown
(or, at the Company's sole discretion, will owe in the future, but in no
way obligating the Company to continue Brown'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.
9. 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 Brown 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 Brown
for "Cause" and without any obligation to make further or subsequent
payments to Brown (as salary, bonus, severance compensation or otherwise
but excluding accrued and unpaid compensation).
10. Security for Guaranty.
a) Brown'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 Brown 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 Brown 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), Brown 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
$10,000 and the Company has a first and prior pledge of Common Stock worth
$20,000, the Company would release Common Stock worth $5,000 from such
pledge. It is understood that the Bank may have a first and prior pledge in
all shares of Common Stock acquired by Brown under the Bank's Loan until
full and final payment thereof, and therefor this subsection may never
provide for release of any such shares.
11. Obligation to Hold Shares. For so long as Brown 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 Brown.
12. 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 loca laws or regulations in
connection with the Guaranty and any payments provided for herein.
13. General Provisions.
a) No Right to Employment. Brown 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, Brown 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 Brown. This Agreement shall be binding,
upon all successors and permitted assigns of Brown. including, without
limitations his estate, 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/ Jeff Brown
Jeff Brown
OTR Express, Inc.
By: /s/ William P. Ward
Name: William P. Ward
Title: Chairman of the Board
Exhibit 10 (w)
STOCK PURCHASE ASSISTANCE AGREEMENT
THIS AGREEMENT is dated as of June 8, 1998 and is by and between OTR
Express, Inc. (the "Company") and Eric Janzen, Vice President of the
Company ("Janzen").
1. Purpose. The purpose of this Agreement is to promote the long-term
interests of the Company and its stockholders by encouraging and assisting
Janzen, as an 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 Janzen 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 Janzen, 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 Janzen 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) Janzen's willful malfeasance or misfeasance towards the Company
or any Subsidiary of the Company;
ii) Janzen'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) Janzen's conviction of a misdemeanor involving moral turpitude
or the conviction of any felony;
iv) the commission by Janzen 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 Janzen or affiliates of Janzen 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 Janzen of this Agreement; or
vi) a failure by Janzen to keep confidential the trade secrets and
other material proprietary information of the Company.
d) "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 an change in control of the Company for purposes of this
Agreement.
e) "Code" means the Internal Revenue Code, as amended.
f) "Compensation Committee" means the Compensation Committee of the
Board, or] any successor committee thereto.
g) "Common Stock" means the shares of common stock of the Company.
h) "Company" means OTR Express, Inc., a Kansas corporation.
i) "Disability" shall mean the physical or mental illness or
incapacity of Janzen 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, Janzen 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.
j) "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.
k) "Loan" means the loan made by Bank to Janzen which is guarantied by
the Company pursuant to this Agreement.
l) "Agreement" means this Stock Purchase Assistance Agreement.
m) "Principal Payment Reimbursement" means the periodic payment by the
Company to Janzen of an amount, as incentive compensation, not greater than
the amount of principal due and owing under the Loan for such period.
n) "Subsidiary" means any corporation at least 80 percent of the
outstanding voting stock of which is owned by the Company.
3. 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.
4. 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 Janzen 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.
5. Loan/Guaranty Amount; General Terms.
a) Janzen 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 $60,000 to provide funds to purchase Common Stock and for no
other purpose. If the Loan is approved by Janzen 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 Janzen have outstanding Loans which are
guaranteed by the Company under this Agreement in excess of $60,000
original principal amount. The Compensation Committee shall not approve
any Loan unless such Loan is payable by Janzen over a term of six (6) years
and shall be full recourse against Janzen and evidenced by a promissory
note by Janzen to Bank.
b) The Company shall not be a party or in any way construed as a
lender or party under the Loan. Janzen 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 Janzen 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.
6. Purchase of Common Stock with Loan Proceeds. Upon Janzen obtaining a
Loan which is guaranteed by the Company under this Agreement, Janzen shall
purchase shares of Common Stock in the open market, in private transactions
and/or upon exercise of Company stock options hitherto granted to Janzen.
Any purchases of Common Stock under this Agreement shall be (A) personally
negotiated by Janzen 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. Janzen 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, Janzen 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 Janzen and shall not be subject or beneficiary of any
Guaranty by the Company.
7. Principal Payment Reimbursement; Other Payments.
a) For each full Principal Payment Reimbursement period (quarterly or
annually, as determined by the Compensation Committee) as Janzen is
employed by the Company in an officer position, the Company shall make
payments to Janzen (or directly to the Bank, if instructed by Janzen but if
Janzen is in default under the Loan, then if instructed by 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 Janzen has a 6 year loan with principal payable in equal installments of
$10,000, on June 8 of every year, the Company's Principal Payment
Reimbursement would equal such installments assuming continuing eligibility
throughout such periods). Upon Janzen'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 Janzen ceases to be so employed by the Company in an officer
position (for whatever reason), dies or experiences Disability, Janzen 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 Janzen's employment is terminated by the Company without Cause
(or if there is a Change of Control of the Company and Janzen'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 Janzen's Loan
for the benefit of Janzen (which amount may be taxable to Janzen 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) Janzen 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 Janzen, his representatives and heirs against the Company
(and/or such successor).
8. Reimbursement Obligation of Janzen.
a) In the event that Janzen 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 Janzen 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 Janzen 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 and duly owes to Janzen
(or, at the Company's sole discretion, will owe in the future, but in no
way obligating the Company to continue Janzen'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.
9. 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 Janzen 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 Janzen for "Cause" and without any obligation to make further
or subsequent payments to Janzen (as salary, bonus, severance compensation
or otherwise but excluding accrued and unpaid compensation).
10. Security for Guaranty.
a) Janzen'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 Janzen 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 Janzen 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), Janzen 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
$10,000 and the Company has a first and prior pledge of Common Stock worth
$20,000, the Company would release Common Stock worth $5,000 from such
pledge. It is understood that the Bank may have a first and prior pledge in
all shares of Common Stock acquired by Janzen under the Bank's Loan until
full and final payment thereof, and therefor this subsection may never
provide for release of any such shares.
11. Obligation to Hold Shares. For so long as Janzen 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 Janzen.
12. 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.
13. General Provisions.
a) No Right to Employment. Janzen 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, Janzen 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 Janzen. This Agreement shall be binding,
upon all successors and permitted assigns of Janzen. including, without
limitations his estate, 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/ Eric Janzen
Eric Janzen
OTR Express, Inc.
By: /s/ William P. Ward
Name: William P. Ward
Title: Chairman of the Board
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