OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1999
TO ALL STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Annual Meeting") of OTR Express, Inc. (the
"Company") to be held on Thursday, May 6, 1999, at 3:00 p.m.,
Kansas City time, at the Overland Park Marriott Hotel, 10800
Metcalf Avenue, Overland Park, Kansas, for the following purposes:
(1) To elect three Class A directors to serve until the
2002 Annual Meeting of Stockholders or until their
successors are duly elected and qualified;
(2) To ratify the selection by the Board of Directors of
the firm of Arthur Andersen LLP as the independent
auditors for the Company for 1999;
(3) To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
Holders of record of the Company's Common Stock, $.01 par
value, as of the close of business on March 15, 1999, will be
entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. A list of stockholders entitled to vote at
the Annual Meeting will be kept at the Company's offices at 804 N.
Meadowbrook Drive, Olathe, Kansas 66062 for a period of ten days
prior to the Annual Meeting and will be available at the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
William P. Ward, Chairman of the Board
Dated: March 31, 1999
IMPORTANT----YOUR PROXY AND A RETURN ENVELOPE ARE ENCLOSED
You are urged to sign, date and mail your proxy
even though you may plan to attend the Annual Meeting.
No postage is required if your proxy is mailed in the
United States in the enclosed return envelope. If you
attend the Annual Meeting, you may vote by proxy or you
may withdraw your proxy and vote in person. By
returning your proxy promptly, a quorum will be assured
at the Annual Meeting, which will prevent costly follow-
up and delays.
<PAGE>
OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1999
PROXY STATEMENT
The proposals in the accompanying form of proxy (the "Proxy") are
solicited by the Board of Directors of OTR Express, Inc. (the "Company") for
use at its Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, May 6, 1999, at 3:00 p.m., Kansas City time, at the Overland Park
Marriott Hotel, 10800 Metcalf Avenue, Overland Park, Kansas, and any
adjournment or postponement thereof. This Proxy Statement, the Proxy and the
Company's Annual Report for the year ended December 31, 1998 (the "Annual
Report") are being mailed or given to stockholders on or about March 31, 1999.
Proxies. Shares represented by a duly executed proxy received prior
to the Annual Meeting will be voted at the Annual Meeting. If a stockholder
specifies a choice on a duly executed proxy with respect to any matter to be
acted upon, the shares will be voted in accordance with the choices specified
in the proxy with respect to the proposals described in this Proxy Statement.
If a duly executed proxy is returned but no voting choice is specified, the
shares represented by the proxy will be voted in favor of the proposals set
forth in this Proxy Statement. None of the proposals are related to or
conditioned on the approval of any other proposal. Any person delivering a
duly executed proxy has the power to revoke it at any time before it is voted
by delivering to the Secretary of the Company either (i) a written notice of
revocation or (ii) a properly executed later-dated proxy with different voting
instructions, or by attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not, by itself, constitute the
revocation of a proxy.
Other Matters. Management of the Company does not intend to present
any matter at the Annual Meeting except as indicated herein, and presently
knows of no other matter to be presented at the Annual Meeting. Should any
other matters properly come before the Annual Meeting, the persons named in
the Proxy will vote the Proxy in accordance with their judgment of the best
interests of the Company on such matters.
Solicitation and Expense. The Company will bear all the costs of
solicitation of proxies and preparing, assembling, printing and mailing the
Proxy Statement, the proxy and additional materials which may be furnished to
stockholders. In addition to the use of the mails, proxies may be solicited
by personal contact, telephone, facsimile or telegraph by regular employees of
the Company, and the Company will reimburse brokers, custodians, fiduciaries
or other persons for their reasonable expenses in sending proxy solicitation
material to beneficial owners of shares.
Voting. Only stockholders of record of the Company's common stock,
$.01 par value (the "Common Stock"), at the close of business on March 15,
1999 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. On the Record Date, the Company had 1,831,671 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. Each
holder of Common Stock is entitled to one vote per share on each matter to
properly come before the Annual Meeting, except for the election of directors,
in which case each stockholder shall have the right to
<PAGE>
cumulatively vote such stockholder's shares. Cumulative voting entitles each
stockholder to cast as many votes in the aggregate as shall equal the number
of shares held by such stockholder multiplied by the number of directors to be
elected. The stockholder may cast the whole number of such votes for one
nominee or distribute the votes among two or more nominees.
The Bylaws of the Company require that a majority of the votes of the
shares of Common Stock issued, outstanding and entitled to vote at the Annual
Meeting be present in person or represented by proxy at the Annual Meeting in
order to constitute a quorum for the transaction of business. Provided a
quorum is present, the affirmative vote of (a) a plurality of the votes cast
by the holders of the Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote is required for the election of
directors and (b) a majority of the votes cast by the holders of the Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote is required for the approval and ratification of the Board of
Directors' selection of independent auditors. Stockholders do not have any
dissenters' rights of appraisal in connection with any of the matters to be
voted upon. Votes that are cast against the proposals are counted both for
purposes of determining the presence or absence of a quorum for the
transaction of business and for purposes of determining the total number of
votes cast on a given proposal. Abstentions are counted for purposes of
determining both the presence or absence of a quorum for the transaction of
business and the total number of votes cast on a given proposal, and therefore
will have the same effect as a vote against a given proposal. Shares held by
a broker in "street name" and for which the beneficial owner of such shares
has not executed and returned to such broker a proxy card indicating voting
instructions may be voted on a discretionary basis by such broker with respect
to the election of directors and ratification of the appointment of the
independent auditors.
The Company. The Company's principal executive office is located at
804 N. Meadowbrook Drive, Olathe, Kansas 66062.
(The remainder of this page has been left blank intentionally.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<TABLE>
The following table sets forth the beneficial ownership of the Company's
voting securities (the "Common Stock") as of March 15, 1999 by each person and
group known to the Company to be the beneficial owner of more than 5% of its
Common Stock.
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership(FN1) Percent of Class(FN1)
<S> <C> <C>
William P. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 265,661(FN2) 14.32%
Janice K. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 265,661(FN2) 14.32%
Robert B. Westphal
109 N. 6th Street
Fort Smith, AR 72901 207,000(FN3) 11.30%
Dr. Ralph E. MacNaughton
#17 Wycklow
Overland Park, KS 66207 129,237(FN4) 7.04%
Robert Fleming, Inc.
320 Park Avenue
New York, NY 10022 124,120(FN5) 6.78%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 95,700(FN6) 5.22%
<FN>
(FN1) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. Nature of beneficial ownership of shares of
Common Stock is direct unless indicated otherwise by footnote.
Beneficial ownership as shown in the table arises from sole voting power
and sole investment power unless otherwise indicated by footnote.
(FN2) Includes 64,768 shares owned of record by Associated Commercial Analysts
Corporation ("ACA"), which is 100% owned by Mr. and Mrs. Ward. Also
includes 109,352 shares held jointly by Mr. and Mrs. Ward; 4,700 shares
held directly by each of Mr. Ward and Mrs. Ward; 6,320 shares held by a
family trust for which Mr. Ward is sole trustee with voting and
dispositive power; and 14,514 and 8,705 shares purchasable pursuant to
options which are currently exercisable by Mr. Ward and Mrs. Ward,
respectively. In addition, includes 52,602 shares owned by the ESOP of
which Mr. Ward is the sole trustee, with sole voting and dispositive
power. Of the shares owned by the ESOP, 5,251 and 1,960 shares have
been allocated to the ESOP accounts of Mr. Ward and Mrs. Ward,
respectively.
(FN3) As reflected on Mr. Westphal's Schedule 13D dated March 15, 1999.
(FN4) Includes 116,237 shares held in a family limited partnership of which
Dr. MacNaughton is trustee. Also includes 3,000 shares purchasable
pursuant to options that are currently exercisable by Dr. MacNaughton.
(FN5) As reflected on Robert Fleming, Inc.'s Schedule 13G dated February 10,
1999.
(FN6) As reflected on Dimensional Fund Advisors Inc.'s ("Dimensional")
Schedule 13G dated February 11, 1999. Dimensional disclaims beneficial
ownership of all such shares.
</FN>
</TABLE>
<PAGE>
<TABLE>
The following table sets forth, with respect to the Company's voting
securities (Common Stock) as of March 15, 1999, (i) shares beneficially owned
by all directors (current and nominee) and named executive officers of the
Company, and (ii) total shares beneficially owned by all executive officers
and directors as a group.
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(FN1) Percent of Class(FN1)
<S> <C> <C>
William P. Ward 265,661(FN2) 14.32%
Janice K. Ward 265,661(FN2) 14.32%
Dr. Ralph E. MacNaughton 129,237(FN3) 7.04%
Gary J. Klusman 82,671(FN4) 4.40%
Dr. James P. Anthony 72,615(FN5) 3.96%
Dean W. Graves 53,413(FN6) 2.91%
Steven W. Ruben 46,985(FN7) 2.52%
Frank J. Becker 32,000(FN8) 1.75%
Terry G. Christenberry 11,000(FN9) *
Charles M. Foudree 5,000(FN10) *
All executive officers and
directors as a group
(13 persons) 749,005(FN11) 37.85%
* Less than one percent (1%).
<FN>
(FN1) See footnote (1) to the table on the preceding page.
(FN2) See footnote (2) to the table on the preceding page.
(FN3) See footnote (4) to the table on the preceding page.
(FN4) Includes 1,400 shares held in Mr. Klusman's individual retirement
account. Also includes 48,281 shares purchasable pursuant to options which are
currently exercisable by Mr. Klusman.
(FN5) Includes 2,700 and 24,400 shares held by Dr. Anthony's pension trust and
profit sharing trust, respectively, 26,220 shares owned by his spouse and
5,580 shares held for the benefit of his minor children. Also includes
3,000 shares purchasable pursuant to options which are currently exercisable
by Dr. Anthony.
(FN6) Includes 13,100 shares owned by Mr. Graves' spouse for which Mr. Graves
disclaims beneficial ownership, 500 shares owned jointly with his spouse,
and 19,650, 13,383 and 1,000 shares held by his HR-10 retirement plan,
profit sharing trust and individual retirement account, respectively. Also
includes 3,000 shares purchasable pursuant to options which are currently
exercisable by Mr. Graves.
(FN7) Includes 1,000 shares held in Mr. Ruben's individual retirement account.
Also includes 29,508 shares purchasable pursuant to options which are
currently exercisable by Mr. Ruben.
(FN8) Includes 15,000 shares held by Mr. Becker's HR-10 retirement plan. Also
includes 2,000 shares purchasable pursuant to options which are currently
exercisable by Mr. Becker.
(FN9) Includes 2,000 shares held in Mr. Christenberry's individual retirement
account and 2,000 shares held by Mr. Christenberry's spouse in her
individual retirement account, for which Mr. Christenberry disclaims
beneficial ownership. Also includes 3,000 shares purchasable pursuant to
options which are currently exercisable by Mr. Christenberry.
(FN10) Includes 1,000 shares held by Mr. Foudree's trust and 1,000 shares held
in the individual retirement account of his spouse. Also includes 3,000 shares
purchasable pursuant to options which are currently exercisable by Mr.
Foudree.
(FN11) Includes 146,971 shares purchasable pursuant to options which are
currently exercisable and 52,602 shares owned by the ESOP of which Mr. Ward is
the sole trustee, with sole voting and dispositive power. Of the shares owned
by the ESOP, a total of 9,679 of the ESOP shares have been allocated to the
accounts of the Company's executive officers.
</FN>
</TABLE>
<PAGE>
PROPOSAL ONE:
ELECTION OF CLASS A DIRECTORS
The number of directors constituting the Board of Directors has been
fixed at nine. The Articles of Incorporation of the Company divide the Board
of Directors into three classes of directors, as nearly equal in number as
possible, who serve staggered terms. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
Annual Meeting of Stockholders for a full three-year term.
Nominees. The following table contains certain information concerning
each of the individuals nominated by the Board of Directors for election as a
Class A Director at the 1999 Annual Meeting. Each is presently a director
whose term expires in 1999. Each Class A Director to be elected at the 1999
Annual Meeting will serve until the Annual Meeting of Stockholders in 2002 or
until his successor is elected and qualified. Shares represented by a signed,
dated and returned Proxy will be voted, unless otherwise indicated, for the
election of the three nominees for Class A Director named below. In the
unanticipated event that any nominee should become unavailable, the Board of
Directors, in its discretion, may designate a substitute nominee, in which
event such shares will be voted for such substitute nominee. Management
recommends a vote for the election of the three nominees for Class
A Director named below.
Name of Nominee Director Principal Occupation for Last
for Director Age Since Five Years and Directorships Held
Terry G. Christenberry 52 1992 Mr. Christenberry has been the
(1)(2)(3) President and a director of
Christenberry Collet & Company Inc.,
an investment banking firm located
in Kansas City, Missouri, since its
incorporation in June 1994. From
1987 to June 1994, Mr. Christenberry
was Executive Vice President and a
director of H.B. Oppenheimer &
Company Inc., an investment banking
firm located in Kansas City, Missouri.
Mr. Christenberry is a director of
Smithway Motor Xpress Corporation.
Dean W. Graves (1)(4) 64 1991 Mr. Graves has been the sole owner
of Dean Graves, FAIA Architectural
Firm, located in Kansas City,
Missouri, for more than the prior
five years. Mr. Graves is the
brother-in-law of Mr. and Mrs. Ward.
Gary J. Klusman (1) 39 1995 Mr. Klusman has been the President
and Chief Executive Officer since
February 1998 and a director since
1995. From October 1994 through
January 1998 Mr. Klusman was
Executive Vice President of the
Company. Mr. Klusman was the Vice
President-Finance and Chief Financial
Officer of the Company from December
1991 to October 1994.
(1) Member of the Strategy Committee.
(2) Member of the Mergers and Acquisitions Committee.
(3) Member of the Audit Committee.
(4) Member of the Investor and Public Relations Committee.
<PAGE>
The Board of Directors
Continuing Directors. The following table contains certain
information concerning the Board members whose terms do not expire in 1999 and
continue after the Annual Meeting:
Current
Director Term Principal Occupation for Last
Name Age Since Expires Five Years and Directorships Held
Frank J. Becker (2)(5) 63 1997 2000 Mr. Becker has been President of
Becker Investments, Inc., an
investment company located in
Lawrence, Kansas since January
1993. Mr. Becker is also a
director of Western Resources,
Inc. and a member of the Board
of Trustees of the Kansas
University Endowment Association.
Dr. Ralph E. MacNaughton 70 1988 2000 Dr. MacNaughton has been retired
(3)(6)(7) since June 1994. He had been a
radiologist in the Carondelet
Radiology Group at St. Joseph's
Hospital in Kansas City,
Missouri, for more than the
prior five years.
William P. Ward 60 1985 2000 Mr. Ward founded the Company and
(1)(2)(4)(5)(6)(7) has been Chairman of the Board
since its incorporation in 1985.
From 1985 to February 1998, Mr.
Ward was President and Chief
Executive Officer of the
Company. Since 1974, Mr. Ward
has been Chairman and an officer
of Associated Commercial
Analysts Corporation ("ACA"), an
affiliate of the Company that
has acted as a general partner
for numerous real estate limited
partnerships. ACA is presently
managing six such partnerships.
Mr. Ward is the husband of
Janice K. Ward and the
brother-in-law of Dean W.
Graves.
Dr. James P. Anthony 50 1989 2001 Dr. Anthony has been a
(3)(5) radiologist in the Carondelet
Radiology Group at St. Joseph's
Hospital in Kansas City,
Missouri, for more than the
prior five years.
Charles M. Foudree 53 1994 2001 Mr. Foudree has been Executive
(4)(5)(6) Vice President-Finance and a
director of Harmon Industries,
Inc., a manufacturer of signal
and control systems for
railroads and mass transit
systems worldwide, located in
Blue Springs, Missouri, and has
been with Harmon in a variety of
executive positions for more
than the prior five years.
Janice K. Ward (7) 58 1985 2001 Mrs. Ward has been a Vice
President and a director of the
Company since its incorporation
in 1985. Mrs. Ward was secretary
of the Company from 1985 until
February 1998. Mrs. Ward has
been an officer and director of
ACA, an affiliate of the
Company, since 1984. Mrs. Ward
is the wife of William P. Ward
and the sister-in-law of Mr.
Graves.
<PAGE>
(1) Member of the Strategy Committee
(2) Member of the Mergers and Acquisitions Committee.
(3) Member of the Audit Committee.
(4) Member of the Investor and Public Relations Committee.
(5) Member of the Governance Committee.
(6) Member of the Compensation Committee.
(7) Member of the Risk Management Committee.
Meetings of Board of Directors and Committees. The business and
affairs of the Company are managed by its Board of Directors. During the
second quarter of 1998, the Board established a new organizational structure
consisting of a Governance Committee, an Audit Committee, a Compensation
Committee, an Investor and Public Relations ("IR/PR") Committee, a Strategy
Committee, a Mergers and Acquisitions ("M&A") Committee and a Risk Management
Committee. The entire Board of Directors acts as the nominating committee
exclusively responsible for selecting candidates for election as directors.
The Governance Committee's primary responsibility is to provide the
organization framework and guidance for the affairs of the Board of Directors.
The Audit Committee's responsibilities include making recommendations to the
Board of Directors of the firm to be engaged to audit the Company and
reviewing with the independent auditors the plan for, and results of, the
auditing engagement and the Company's internal accounting controls. The
Compensation Committee is responsible for reviewing and approving the salaries
and classifications of the Company's executive officers and other significant
employees and the Company's personnel policies and administering the Company's
stock option plans. The Investor and Public Relations Committee's
responsibilities include creating oversight policies for investor and public
relations objectives. The Strategy Committee's primary responsibility is to
review and participate in the development of strategic plans with management.
The M&A Committee is primarily responsible for reviewing the objective of a
merger and/or acquisition strategy relating to acceptable risk criteria. The
Risk Management Committee is responsible for reporting to the board on the
Company's compliance with overall risk management policy guidelines. The
Board of Directors of the Company held 6 meetings last year. During 1998, the
Audit Committee held two meetings, the Compensation Committee held two
meetings, the Governance Committee held one meeting, the IR/PR Committee held
two meetings, the Strategy Committee did not meet, the M&A Committee did not
meet and the Risk Management Committee held one meeting. During 1998, each
director attended at least 75% of the directors' meetings (and at least 75% of
the meetings of committees on which he or she served) during the period for
which he or she was a director (and during the period for which he served as a
committee member).
Compensation Committee Interlocks and Insider Participation.
The Compensation Committee consists entirely of non-employee Directors of the
Company with the exception of Mr. Ward, who beginning February 1, 1998 is an
employee but is no longer an officer of the Company. There are no
Compensation Committee interlocks with other companies.
Compensation of Directors. Non-employee directors are each paid
annual fees of $2,400 for serving on the Company's Board of Directors, plus
$200 for each meeting of the Board (and $100 for each meeting of a committee
of the Board) they attend. Mr. Christenberry's director's fees were paid to
his employer, Christenberry Collet & Company Inc. ("Christenberry Collet"). A
total of $21,700 was earned by non-employee directors for service on the Board
during 1998. Employee-directors do not receive annual fees or fees for
attendance at meetings. In addition to the foregoing fees, commencing in 1996
and annually thereafter each non-employee director who has served as a
director for more than one year is granted a stock option for 1,000 shares of
Common Stock pursuant to the 1996 Directors' Stock Option Plan.
<PAGE>
Executive Officers
Information About Other Executive Officers. In addition to
those executive officers listed in the foregoing table of Board nominees and
continuing Directors, the Company's other executive officers as of December
31, 1998 are listed below. Each executive officer is appointed by the Board
of Directors annually and will serve until reappointed or until his or her
successor is appointed and qualified. The following information relating to
the Company's executive officers is with respect to their ages, principal
occupations and positions during the past five years and other biographical
information.
Name Age Principal Occupation for Last Five Years
Steven W. Ruben 37 Mr. Ruben has been Vice President-
Finance and Chief Financial Officer of
the Company since November 1995. From
October 1987 to November 1995, Mr. Ruben
was an Audit Manager for Mayer Hoffman
McCann, Certified Public Accountants,
in Kansas City, Missouri.
Jeffrey T. Brown 39 Mr. Brown has been Vice-President-
Operations of the Company since October
1997. From April 1997 through October
1997, Mr. Brown was a General Manager of
G&K Services, Inc. From January 1992
through March 1997, Mr. Brown was a
Regional Sales Manager/ District Manager
of Roadway Express, Inc.
Eric T. Janzen 33 Mr. Janzen has been Vice-President-
Marketing for the Company since January
1997. From July 1995 through December
1996, Mr. Janzen was Director of
Marketing for the Company. From
February 1993 through June 1995, Mr.
Janzen was a sales account executive for
the Company. Effective March 31, 1999,
Mr. Janzen has resigned his position with
the Company.
Christine D. Schowengerdt 45 Ms. Schowengerdt has been the Company's
Treasurer since its incorporation in
1985.
(The remainder of this page has been left blank intentionally.)
<PAGE>
Executive Compensation. The following table provides certain
summary information concerning compensation paid or accrued by the Company to
or on behalf of the Company's Chief Executive Officer and each of the other
most highly compensated executive officers of the Company whose salary and
bonus exceeded $100,000 (determined as of the end of the last year) for the
years ended December 31, 1998, 1997 and 1996. Mr. Ward served as President
and Chief Executive Officer until February 1, 1998, and Mr. Klusman served as
President and Chief Executive Officer after such time.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities All
Name and Annual Stock Underlying LTIP Other
Principal Year Salary Bonus Compen- Award(s) Options/ Payouts Compen-
Position ($) ($) sation ($) SARs ($) sation
($) (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William P. 1998 121,557 0 0 0 0 0 0
Ward, 1997 183,365 0 0 0 3,383 0 0
Chairman of 1996 150,509 0 0 0 3,676 0 0
the Board
Gary J. 1998 155,802 0 0 0 40,000 0 0
Klusman, 1997 147,070 0 0 0 3,383 0 0
President 1996 120,958 0 0 0 3,676 0 0
and CEO
Steven W. 1998 107,240 0 0 0 20,000 0 0
Ruben, Vice 1997 78,105 0 0 0 2,029 0 0
President- 1996 65,595 0 0 0 2,206 0 0
Finance and
Chief Financial
Officer
</TABLE>
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Number of Annual Rates of
Securities % of Total Stock Price
Underlying Options Exercise Appreciation
Options Granted to or Base for Option Term*
Granted Employees in Price Expiration
Name (#)(A,B) Fiscal Year ($/share)(C) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Gary J.
Klusman 40,000 45.8% 7.00 2/19/08 125,780 318,740
Steven W.
Ruben 20,000 22.9% 7.00 2/19/08 62,890 159,370
* The dollar amounts set forth under these columns are the result of
calculations of the 5% and 10% rates set by the Securities and Exchange
Commission and are not intended to forecast possible future appreciation.
(A) Mr. Klusman's options were granted for a term of 10 years. 100% of Mr.
Klusman's options became exercisable on February 19, 1998.
(B) Mr. Ruben's options were granted for a term of 10 years. 100% of Mr.
Ruben's options became exercisable on February 19, 1998.
(C) The exercise price and tax withholding obligations related to exercise
may be paid by delivery of already owned shares or by offset of the
underlying shares, subject to certain conditions.
</TABLE>
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year And Option Values at
December 31, 1998
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options Option
Acquired at Year End at Year End
on Value (#) ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
William P. Ward -0- -0- 11,131/3,383 -0-/-0-
Gary J. Klusman -0- -0- 43,676/10,838 -0-/-0-
Steven W. Ruben -0- -0- 27,479/2,029 -0-/-0-
(A) Market value of underlying securities at year-end minus the exercise
or base price of "in-the-money" options.
</TABLE>
Stock Purchase Assistance Agreements. The Company has entered into
certain agreements designed to help facilitate increased investments in the
Company's Common Stock by certain key executive officers. The Company has
such Stock Purchase Assistance Agreements dated February 27, 1998 ("Assistance
Agreements") with each of Messrs. Klusman and Ruben. The Company has agreed
to guarantee payment of personal loans in the amount of $240,000 and $120,000
(the "Stock Loans") obtained from HSBC Business Loans, Inc. ("HSBC") by Mr.
Klusman and Mr. Ruben, respectively, for their purchase in March 1998 of
32,920 shares and 16,460 shares of Common Stock, respectively, to the extent
that the pledge value of the stock purchase (equal to one-half of its market
value) is less than the outstanding principal balance of such loans (the
"Guaranty Agreements"). Pursuant to the Assistance Agreements, the Company
has agreed to pay to such officers during the six year term of each officer's
respective Stock Loan the amount of principal owed from time to time under
their respective Stock Loan (i) for such periods as such officer remains
employed by the Company in an officer position or (ii) if such officer's
employment is terminated without cause by the Company (or by a successor
entity after a change of control). Such officers remain the primary obligor
under their respective Stock Loans, however, and to the extent the Company is
required to pay amounts to HSBC under Guaranty Agreements, 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).
Compensation Committee Report On Executive Compensation
On an annual basis, the Compensation Committee reviews the salaries and
performance adjustments of the executive officers, is responsible for
administration of the OTR Express, Inc. 1991 Stock Option Plan ("1991 Option
Plan") and the Amended and Restated 1996 Stock Option Plan ("1996 Option
Plan"), and oversees the administration of the Company's compensation program.
In accordance with Securities and Exchange Commission rules designed to
enhance disclosure of companies' policies toward executive compensation, the
following report is submitted by the below listed committee members in their
capacity as the Board's Compensation Committee. The report addresses the
Company's compensation policy as it related to the executive officers for
1998.
<PAGE>
General Compensation Policy. The Compensation Committee of the
Board of Directors was, and continues to be, guided by a belief that executive
compensation should reflect the Company's performance consisting of the
Company's revenue, operating ratio (operating expenses divided by operating
revenue), operating income, earnings per share, return on equity and return on
assets while at the same time considering surrounding competitive pressures,
retention of key executive officers and individual performance as evidenced by
informal evaluations. The Compensation Committee has not yet adopted a policy
with respect to the $1,000,000 limitation on deductibility of executive
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended.
1998 Compensation. To accomplish the Company's compensation policy,
the executive compensation package integrates (i) annual base salary, (ii)
current year performance adjustments to such salary, and (iii) stock option
grants under the 1996 Option Plan. The overall compensation policy, as
implemented, endeavors to enhance the profitability of the Company (and, thus,
stockholder value) by tying the financial interests of the management with
those of the Company.
Base Salary. The Compensation Committee initially determines the
amount of executive officer base salary based on factors such as prior level
of pay, quality of experience, responsibilities of position and salary levels
of similarly positioned executives in other companies. Once base salary has
been determined, the Compensation Committee divides the executive officers
into two groups: Operating Officers and Administrative Officers. The
Operating Officers consist of Mr. Klusman (Chief Executive Officer), Mrs. Ward
(Vice President) and Mr. Ruben (Chief Financial Officer). The Administrative
Officers consist of Mr. Brown (Vice President-Operations), Mr. Janzen (Vice
President-Marketing) and Ms. Schowengerdt (Treasurer and Assistant Secretary).
For Operating Officers, the Compensation Committee has adopted a policy
that base salaries will be annually adjusted based on factors such as prior
level of pay, quality of experience, responsibilities of position, salary
levels of similarly positioned executives in other companies and the general
changes in the cost of living standards as published by the Department of
Labor.
For Administrative Officers, raises are determined subjectively by the
CEO and approved by the Compensation Committee. Such raises are based upon
informal evaluations by the CEO and, to a lesser extent, other executive
officers.
Performance Adjustments. For the Operating Officers, the Company
has in place a Performance Adjustment Plan which couples the executive's cash
compensation with specific target improvements in the Company's revenues,
operating ratio, operating income, earnings per share, return on equity and
return on assets (the "Performance Factors"), which are each weighted equally.
For 1998, the Compensation Committee set the target level of improvement in
Performance Factors with at least a 50% improvement target in five of the six
factors.
Under the Performance Adjustment Plan, each Operating Officer will
receive a maximum 35% of his or her annual base salary ("Target Adjustment")
if the target level of improvement in Performance Factors is reached.
Achievement of less than the target level of improvement in Performance
Factors will result in a 1% decrease in the Target Adjustment for each 1%
deviation in such target level. For example, if the Target Adjustment is
$20,000 and the Company reaches 50% of its target level of improvement in
Performance Factors, then the amount of actual performance adjustment would be
$10,000.
In 1998, the Company reached 34% of its target level of improvement in
Performance Factors. Accordingly, the Operating Officers received an actual
performance adjustment of 34% of their Target Adjustments.
Administrative Officers do not participate in the Performance Adjustment
Plan and, thus, do not receive a performance adjustment.
<PAGE>
Stock Option Awards. The Compensation Committee may also award
stock options to executive officers under the 1996 Option Plan. In general,
the Committee believes that stock options are an effective incentive for
executives to create value for stockholders since the value of an option bears
a direct relationship to appreciation in the Company's stock price.
Obviously, when stockholder value decreases, the stock options granted to
executives either decrease in value or have no value.
In February 1998, the Committee authorized the granting of options to
the executive officers to acquire 80,000 shares of Common Stock under the 1996
Stock Option Plan. In December 1998, the Committee authorized the granting of
options to an executive officer to acquire 705 shares of Common Stock under
the 1996 Option Plan. A total of 6,551 shares authorized under the 1996
Option Plan were granted to employees other than executive officers in
December 1998.
CEO Compensation. Gary J. Klusman, CEO of the Company effective
February 1, 1998, is subject to the same general compensation package as the
other Operating Officers as set forth above.
The Compensation Committee decided to increase Mr. Klusman's annual base
salary by 25.0% effective July 1, 1998 based on factors including quality of
experience, responsibilities of position, and salary levels of similarly
positioned executives in other Companies.
Mr. Klusman also received $16,347 in performance adjustment to his base
annual salary under the Performance Adjustment Plan. As noted above, such
performance adjustment was 34% of his Targeted Adjustment of $48,809.
In February 1998, the Committee authorized a grant of options to Mr.
Klusman to acquire 40,000 shares of Common Stock under the 1996 Stock Option
Plan.
Summary. The Compensation Committee believes that the executive
officers of the Company are dedicated to achieving significant improvements in
long-term financial performance and that the compensation policies and
programs contribute to achieving this senior management focus. The
Compensation Committee believes that the compensation levels during 1998
adequately reflect the Company's compensation goals and policies.
The Compensation Committee report is submitted by:
Dr. Ralph E. MacNaughton
William P. Ward
Charles M. Foudree
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<PAGE>
Company Performance
<TABLE>
The following graph shows a comparison of cumulative total returns for
the Company, the Nasdaq Market Index, and an industry index based the
applicable Standard Industrial Classification code ("SIC Industry Index").
<CAPTION>
Comparison of Cumulative Total Return
(OTR Express, Inc., Nasdaq Market Index and SIC Industry Index)
SIC Industry
Measurement Period OTRX Nasdaq Market Index Trucking, except local
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/31/94 165.22 104.99 96.14
12/31/95 78.26 136.18 81.51
12/31/96 60.87 169.23 76.99
12/31/97 102.17 207.00 111.25
12/31/98 86.96 291.96 107.04
</TABLE>
The above graph compares the performance of the Company with that of the
Nasdaq Market Index and the SIC Industry Index, with the investment weighted
on market capitalization. The total cumulative return on investment (change
in stock price plus reinvested dividends) for the Company, the Nasdaq Market
Index and the SIC Industry Index is based on the stock prices as of December
31, 1993, assuming a $100 investment.
The SIC Industry Index is comprised of all those companies with a four
digit SIC code of 4213 (Trucking, except local).
<PAGE>
PROPOSAL TWO:
APPROVAL OF INDEPENDENT AUDITORS
For 1998, Arthur Andersen LLP served as the independent auditors for the
Company and audited the financial statements of the Company including reports
to the stockholders and others. The Board of Directors has selected and
appointed Arthur Andersen LLP as the independent auditors for the Company for
the year ending December 31, 1999. A representative of Arthur Andersen LLP is
expected to be present at the Annual Meeting. Such representative will have
the opportunity to make a statement and is expected to be available to respond
to appropriate questions from stockholders. The affirmative vote of the
holders of a majority of the shares present or represented by Proxy at the
Annual Meeting is necessary for the approval of the selection of independent
auditors. The Board of Directors recommends that the stockholders
vote for the following resolution which will be presented at the
Annual Meeting:
"RESOLVED, that the selection by the Board of Directors of Arthur
Andersen LLP as the Company"s independent auditors for the year ending
December 31, 1999 be, and hereby is, ratified."
MISCELLANEOUS
Certain Relationships and Other Transactions. Mr. Terry
Christenberry, a director of the Company, is affiliated with Christenberry
Collet & Company, Inc. ("Christenberry"), a company which provided financial
advisory services to the Company in 1998, and is the president and director of
Christenberry.
Section 16 Reporting. Based solely upon a review of Forms 3, 4 and
5 and amendments thereto furnished to the Company with respect to the
Company's last fiscal year, the Company is not aware of any reports required
to be filed with the Securities and Exchange Commission under Section 16(a) of
the Securities Exchange Act of 1934, as amended, that were filed late or not
filed by the Company's officers or directors with respect to such year. Mr.
Robert Westphal became an owner of more than 10% of the Company's Common Stock
during 1998, and is the only beneficial owner of more than 10% of the
Company's Common Stock that is not also an officer or director.
Stockholder Proposals. In the event any stockholder intends to
present a proposal at the next annual meeting of Stockholders to be held in
2000, such proposal must be received by the Secretary of the Company, in
writing, on or before December 2, 1999, to be considered for inclusion in the
Company's proxy statement relating to the next annual meeting of Stockholders.
Annual Report. A copy of the Company's Annual Report (including
financial statements and schedules, as filed with the SEC) accompanies this
Proxy Statement. The Annual Report is not part of the proxy solicitation
materials.
<PAGE>
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN TO THE COMPANY THE
ACCOMPANYING PROXY.
BY THE BOARD OF DIRECTORS
William P. Ward
March 31, 1999 Chairman of the Board
