AMENDMENT NO. 3
TO LOAN AND SECURITY AGREEMENT
AND OTHER TRANSACTION DOCUMENTS
The Loan and Security Agreement dated June 11, 1997, between OTR EXPRESS,
INC., as Debtor, and HSBC BUSINESS LOANS, INC., as Secured Party (the Loan
and Security Agreement, as amended from time to time, is hereinafter
referred to as the "Loan Agreement"), and the Transaction Documents (as
defined in the Loan Agreement), are hereby amended as follows:
RECITALS
A. Debtor has requested that Secured Party amend the Loan Agreement and
the other Transaction Documents by (i) amending the Tangible Net Worth
covenant, and (ii) amending the Leverage Ratio covenant; and
B. Secured Party is willing to agree to the requested amendments, but
only if Debtor executes and delivers this Amendment to Secured Party.
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants of the parties, the parties agree as follows:
1. Debtor acknowledges and agrees that the security interests and liens
granted by Debtor to Secured Party under the Loan Agreement and the other
Transaction Documents remain first and valid security interests in and liens
on the Collateral. Debtor represents and warrants that as of the date of
this Amendment, there are no claims, setoffs or defenses to Secured Party's
exercise of any rights or remedies available to Secured Party under the
Transaction Documents.
2. The Loan Agreement and the other Transaction Documents are hereby
amended in the following respects:
a. Item 30(a) of the Schedule to the Loan Agreement is hereby
deleted and the following is inserted in place thereof:
"(a) Minimum Tangible Net Worth: Debtor shall maintain a
minimum Tangible Net Worth in the amounts set forth
below for the time periods set forth below:
Amount Time Period
$8,900,000.00 12/31/99
$8,200,000.00 3/31/00
$8,000,000.00 6/30/00
$8,000,000.00 9/30/00
$8,100,000.00 12/31/00 and thereafter
"Tangible Net Worth" means the sum of stockholders' equity plus the
principal balance of any debt that is subordinated to the
Indebtedness in a manner satisfactory to Secured Party, minus
the book value of Intangible Assets (as defined below), all
determined in accordance with generally accepted accounting
principles consistently applied.
"Intangible Assets" means (1) all loans or advances to, and other
Receivables owing from, any employee or Affiliate, other than
advances of expenses to drivers in the ordinary course of
business not to exceed $400,000.00 in the aggregate
outstanding at any one time, (2) all investments, whether in a
subsidiary or otherwise, (3) goodwill, (4) any other assets
deemed intangible under generally accepted accounting
principles, and (5) any other assets determined to be
intangible by Secured Party in its reasonable credit judgment.
The foregoing Tangible Net Worth covenant shall be tested for
compliance at the end of each calendar quarter."
b. Item 30(b) of the Schedule to the Loan Agreement is hereby deleted
and the following is inserted in place thereof:
"(b) Leverage Ratio: Debtor shall maintain a Leverage
Ratio (as defined below) of not greater than the following
ratios for the applicable time periods, determined in
accordance with generally accepted accounting principles
consistently applied:
Ratio Time Period
6.1 to 1 12/31/99
7 to 1 3/31/00
6.75 to 1 6/30/00
6.25 to 1 9/30/00
6 to 1 12/31/00 and thereafter
"Leverage Ratio" means the ratio of Debtor's total liabilities
(excluding indebtedness of Debtor for borrowed money that is
subordinated in writing to the Indebtedness in form acceptable
to Secured Party) to Tangible Net Worth (as defined above).
The foregoing Leverage Ratio shall be tested for compliance with
this covenant at the end of each calendar quarter."
c. Item 30(c) of the Schedule to the Loan Agreement
is hereby deleted and the following is inserted in place
thereof:
"(c) Debt Service Coverage Ratio: Debtor shall maintain a
Debt Service Coverage Ratio (as defined below) of not less
than the following ratios for the applicable time periods,
determined in accordance with generally accepted
accounting principles consistently applied:
Ratio Time Period
.9 to 1 1/1/00 through 12/31/00
1 to 1 1/1/01 and thereafter
"Debt Service Coverage Ratio means the ratio of (a) net income,
plus depreciation, plus deferred income taxes, plus increases in
operating liabilities, plus interest expense, plus proceeds from
equipment disposal, plus proceeds of other financings, less pay-
downs from equipment trades, less unfinanced capital
expenditures, less increases in operating assets, to (b)
principal and interest payments on indebtedness for borrowed
money and capitalized leases.
The foregoing Debt Service Coverage Ratio will be tested
annually at the end of each calendar year."
3. Contemporaneously with the execution of this Amendment by Debtor,
Debtor shall pay to Secured Party a loan modification fee of $7,500.00.
4. Debtor represents and warrants to Secured Party that as of the date
of this Amendment:
a. Except as disclosed in writing to Secured Party on the date
hereof, Debtor is not in default under the terms and provisions of the
Loan Agreement or any other Transaction Document. No Event of
Default, nor any condition, event, act or omission which with notice
or lapse of time, or both, would become an Event of Default, exists
under the terms and provisions of the Loan Agreement or the other
Transaction Documents.
b. Debtor is duly organized, validly existing and in good standing
under the laws of the State of Kansas.
c. The execution, delivery and performance by Debtor of this
Amendment have been duly authorized by all necessary corporate action
and have received the requisite corporate approvals.
d. This Amendment constitutes the valid and legally binding
obligation of Debtor and is enforceable against Debtor in accordance
with its terms.
e. The execution and delivery of this Amendment shall not constitute
a violation of, or default under, or conflict with any term or
provision of any contract, lease or other agreement to which Debtor is
a party or by which Debtor is bound. Debtor is not in default under
any material contract or agreement to which it is a party or by which
it is bound, or to which any of this property is subject, nor has any
event occurred which after the giving of notice or the passage of
time, or both, would constitute a default under any such contract or
agreement other than those which have been waived by the non-
defaulting party or satisfied by Debtor.
5. Except as specifically amended or modified herein, all of the terms,
conditions and covenants contained in the Loan Agreement and the other
Transaction Documents shall remain in full force and effect and are hereby
fully ratified and confirmed. If and to the extent that any of the terms
and provisions of the Loan Agreement and the other Transaction Documents, as
originally executed and previously amended, are in conflict with or
inconsistent with any of the terms and provisions of this Amendment, this
Amendment shall govern. All Transaction Documents shall be deemed amended
to be consistent with the terms of this Amendment.
6. Debtor agrees that it has no defenses, setoffs or counterclaims to
Secured Party's enforcement of its rights and remedies under the Loan
Agreement and the other Transaction Documents.
7. Capitalized terms used in this Amendment shall have the same
meanings as specified in the Loan Agreement, except as otherwise expressly
provided herein.
8. The terms and conditions of this Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns.
9. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT DEBTOR AND SECURED PARTY
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED COVERING
SUCH MATTERS ARE CONTAINED IN THE TRANSACTION DOCUMENTS, WHICH ARE THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES,
EXCEPT AS THEY MAY LATER AGREE IN WRITING TO MODIFY IT.
IN WITNESS WHEREOF, this Amendment No. 3 to Loan and Security Agreement
and Other Transaction Documents (the "Amendment") has been executed by the
parties as of the 24th day of February, 2000.
DEBTOR:
OTR EXPRESS, INC.
By:/s/ William P. Ward
William P. Ward
President and Chief Executive Officer
By:/s/ Steven W. Ruben
Steven W. Ruben
Vice President and Chief Financial
Officer
SECURED PARTY:
HSBC BUSINESS LOANS, INC.
By:/s/ M. Catherine Draper
M. Catherine Draper
Vice President