OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 4, 2000
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 4, 2000, 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 two Class B directors to serve until the 2003 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 2000;
(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, 2000, 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 30, 2000
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.
OTR EXPRESS, INC.
804 N. Meadowbrook Drive
Olathe, Kansas 66062
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2000
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 4, 2000, 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, 1999 (the "Annual
Report") are being mailed or given to stockholders on or about March 30, 2000.
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,
2000 (the "Record Date") will be entitled to notice of, and to vote at, the
Annual Meeting. On the Record Date, the Company had 1,782,022 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
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. If a duly
executed proxy is returned but no voting requirement is specified, the shares
represented by the Proxy may be cumulated and will be voted FOR management's
nominees for Class B directors in the Proxy's discretion.
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.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
voting securities (the "Common Stock") as of March 15, 2000 by each person and
group known to the Company to be the beneficial owner of more than 5% of its
Common Stock.
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership(1) Percent of Class(1)
William P. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 265,012(2) 14.68%
Janice K. Ward
804 N. Meadowbrook Dr.
Olathe, KS 66062 265,012(2) 14.68%
Estate of Robert B. Westphal
109 N. 6th Street
Fort Smith, AR 72901 247,600(3) 13.89%
Dr. Ralph E. MacNaughton
#17 Wycklow
Overland Park, KS 66207 130,237(4) 7.29%
Dimensional Fund Advisors Inc.
1299 Ocean Avenue
Santa Monica, CA 90401 89,600(5) 5.03%
<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 51,953 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 the Schedule 13D dated March 10, 2000.
(FN4) Includes 116,237 shares held in a family limited partnership of which
Dr. MacNaughton is trustee. Also includes 4,000 shares purchasable
pursuant to options that are currently exercisable by Dr. MacNaughton.
(FN5) As reflected on Dimensional Fund Advisors Inc.'s ("Dimensional")
Schedule 13G dated February 4, 2000. Dimensional disclaims beneficial
ownership of all such shares.
</FN>
The following table sets forth, with respect to the Company's voting
securities (Common Stock) as of March 15, 2000, (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.
Amount and Nature of Beneficial
Name of Beneficial Owner Ownership(1) Percent of Class(1)
William P. Ward 265,012(2) 14.68%
Janice K. Ward 265,012(2) 14.68%
Dr. Ralph E. MacNaughton 130,237(3) 7.29%
Dr. James P. Anthony 73,615(4) 4.12%
Dean W. Graves 54,413(5) 3.05%
Steven W. Ruben 48,985(6) 2.70%
Jeffrey T. Brown 22,000(7) 1.23%
Terry G. Christenberry 12,000(8) *
Charles M. Foudree 6,000(9) *
All executive officers and
directors as a group
(11 persons) 657,566(10) 34.41%
* 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 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 4,000 shares purchasable pursuant to options which are
currently exercisable by Dr. Anthony.
(FN5) 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 4,000 shares purchasable
pursuant to options which are currently exercisable by Mr. Graves.
(FN6) Includes 3,000 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.
(FN7) Includes 11,000 shares purchasable pursuant to options which are
currently exercisable by Mr. Brown.
(FN8) Includes 2,000 shares held in Mr. Christenberry's individual retirement
account and 2,000 shares held by Mr. Christenberry's spouse in her
individual retirement account, for which Mr. Christenberry disclaims
beneficial ownership. Also includes 4,000 shares purchasable pursuant
to options which are currently exercisable by Mr. Christenberry.
(FN9) Includes 1,000 shares held by Mr. Foudree's trust and 1,000 shares held
in the individual retirement account of his spouse. Also includes
4,000 shares purchasable pursuant to options which are currently
exercisable by Mr. Foudree.
(FN10) Includes 128,786 shares purchasable pursuant to options which are
currently exercisable and 51,953 shares owned by the ESOP of which Mr.
Ward is the sole trustee, with sole voting and dispositive power. Of
the shares owned by the ESOP, a total of 9,531 of the ESOP shares have
been allocated to the accounts of the Company's executive officers.
</FN>
PROPOSAL ONE:
ELECTION OF CLASS B DIRECTORS
The number of directors constituting the Board of Directors has been
fixed at seven. 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 B Director at the 2000 Annual Meeting. Each is presently a director
whose term expires in 2000. Each Class B Director to be elected at the 2000
Annual Meeting will serve until the Annual Meeting of Stockholders in 2003 or
until his successor is elected and qualified. Shares represented by a signed,
dated and returned Proxy may be cumulated, in the Company's discretion, and
will be voted, unless otherwise indicated, for the election of the two
nominees for Class B 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 cumulated, in the Company's discretion, and will be voted FOR such
substitute nominee. Management recommends a vote for the election of
the two nominees for Class B Director named below.
Name of Nominee Director Principal Occupation for Last
for Director Age Since Five Years and Directorships Held
Dr. Ralph E.
MacNaughton (2)(3)(6) 71 1988 Dr. MacNaughton has been retired
since June 1994. He had been a
radiologist in the Carondelet
Radiology Group at St. Joseph's
Hospital in Kansas City,
Missouri, for more than the prior
five years.
William P. Ward
(1)(2)(4)(5) 61 1985 Mr. Ward founded the Company and
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.
In October 1999, Mr. Ward resumed
the position of 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. ACA also
performs bookkeeping and tax
preparation services for a
variety of customers with a
current emphasis in serving owner
operators. Mr. Ward is the
husband of Janice K. Ward and the
brother-in-law of Dean W. Graves.
(1) Member of the Strategy Committee.
(2) Member of the Risk Management Committee.
(3) Member of the Compensation Committee.
(4) Member of the Investor and Public Relations Committee.
(5) Member of the Governance Committee.
(6) Member of the Audit Committee.
The Board of Directors
Continuing Directors. The following table contains certain
information concerning the Board members whose terms do not expire in 2000 and
continue after the Annual Meeting:
Current
Director Term Principal Occupation for Last
Name Age Since Expires Five Years and Directorship Held
Dr. James P. Anthony 51 1989 2001 Dr. Anthony has been a
(5)(6) 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 54 1994 2001 Mr. Foudree was Executive
(1)(3)(4)(5) 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
served with Harmon in a
variety of executive positions
from 1972 until he retired in
June 1999.
Janice K. Ward 60 1985 2001 Mrs. Ward has been a Vice
(2) 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.
Terry G.
Christenberry 53 1992 2002 Mr. Christenberry has been
(1)(6) the President and a director
of Christenberry Collet &
Company Inc., an investment
banking firm located in Kansas
City, Missouri, since its
incorporation in June 1994.
From 1987 to June 1994, Mr.
Christenberry was Executive
Vice President and a director
of H.B. Oppenheimer & Company
Inc., an investment banking
firm located in Kansas City,
Missouri. Mr. Christenberry
is a director of Smithway
Motor Xpress Corporation.
Dean W. Graves 65 1991 2002 Mr. Graves has been the sole
(4)(5) 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.
(1) Member of the Strategy Committee.
(2) Member of the Risk Management Committee.
(3) Member of the Compensation Committee.
(4) Member of the Investor and Public Relations Committee.
(5) Member of the Governance Committee.
(6) Member of the Audit Committee.
Meetings of Board of Directors and Committees. The business and
affairs of the Company are managed by its Board of Directors. The Board has
established a Governance Committee, an Audit Committee, a Compensation
Committee, an Investor and Public Relations ("IR/PR") Committee, a Strategy
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 IR/PR Committee's
responsibilities include creating oversight policies for investor and public
relations objectives. The Strategy Committee primary responsibility is to
review and participate in the development of strategic plans with management.
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 nine meetings last year. During 1999,
the Audit Committee held two meetings and the Compensation Committee held four
meetings. Except for organizational meetings, the Governance Committee, IR/PR
Committee, Risk Management Committee, and Strategy Committee did not formally
meet during 1999. During 1999, except as noted below, each director attended
at least 75% of the directors' meetings (and at least 75% of the meetings of
committees on which he or she served) during the period for which he or she
was a director (and during the period for which he or she served as a
committee member). Mr. James P. Anthony attended 67% of the board meetings
held during 1999.
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee consists entirely of non-employee Directors of the
Company. Mr. Ward, who was an employee of the Company and prior to 1999 was
an executive officer of the Company, served on the Compensation Committee in
1999 until he resumed the role of President and Chief Executive Officer in
October 1999. Mr. Ward still attends Compensation Committee meetings as an ex
officio, nonvoting participant. 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 $16,900 was earned by non-employee directors for service on the Board
during 1999. 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.
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, 1999 are listed below. Each executive officer is appointed by the Board
of Directors annually and will serve until re-appointed 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 38 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 40 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.
Glen P. Rittgers 47 Mr. Rittgers has been Vice President-
Sales and Marketing of the Company since
August 1999. From May 1996 through
August 1999, Mr. Rittgers was Director,
Corporate Accounts for Viking Freight,
Inc. ("Viking"). From February 1995
through March 1996, Mr. Rittgers was
Director, Western Region Sales for
Viking. From June 1994 through
February 1995, he was a District Sales
Manager for Viking.
Christine D.
Schowengerdt 46 Ms. Schowengerdt has been the Company's
Treasurer since its incorporation in
1985.
(The remainder of this page has been left blank intentionally.)
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 $100,000 (determined as of the end of the last year) for the
years ended December 31, 1999, 1998 and 1997. Mr. Ward served as President
and Chief Executive Officer until February 1, 1998, Mr. Klusman served as
President and Chief Executive Officer from February 1, 1998 until October 18,
1999, and Mr. Ward resumed the role of President and Chief Executive Officer
after such time. There were no option grants to executive officers who are
listed in the following table during 1999.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted Securities All
Name and Annual Stock Underlying LTIP Other
Principal Year Salary Bonus Compen- Award(s) Options/ Payouts Compen-
Position ($) ($) sation ($) SARs ($) sation
($) (#) ($)
William P. 1999 79,658 0 0 0 0 0 0
Ward 1998 121,557 0 0 0 0 0 0
Chairman 1997 183,365 0 0 0 3,383 0 0
and CEO
Gary J. 1999 220,648 0 0 0 0 0 200,000
Klusman, (1)(2) (3)
President 1998 155,802 0 0 0 40,000 0 0
and CEO 1997 147,070 0 0 0 3,383 0 0
Steven W. 1999 149,601 0 0 0 0 0 0
Ruben, (2)
Vice 1998 107,240 0 0 0 20,000 0 0
President- 1997 78,105 0 0 0 2,029 0 0
Finance and
Chief
Financial
Officer
Jeffrey T. 1999 101,760 0 0 0 0 0 0
Brown, (2)
Vice 1998 80,160 0 0 0 10,000 0 0
President, 1997 15,006 0 0 0 1,000 0 0
Operations (4)
<FN>
(F1) Mr. Klusman's employment with the Company terminated on October 18,
1999. This total includes severance pay of $13,110.
(F2) Includes the scheduled annual principal payments in connection with the
Stock Purchase Assistance Agreements. The payments for Mr. Klusman,
Mr. Ruben and Mr. Brown were $40,000, $20,000 and $10,000,
respectively. For more information, see "Stock Purchase Assistance
Agreements" below.
(F3) This represents the payoff of the principal balance of Mr. Klusman's
stock loan in connection with his stock purchase assistance agreement.
For a description of this transaction, see "Stock Purchase Assistance
Agreements" below.
(F4) Mr. Brown joined the Company in October 1997. Accordingly, the 1997
information for Mr. Brown is for the period from October 1997 through
December 1997.
</FN>
Aggregated Option Exercises in Last Fiscal Year And Option Values at
December 31, 1999
Number of (A)
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options Options
Acquired at Year End at Year End
on Value (#) ($)
Exercise Realized Exercisable/ Excercisable/
Name (#) ($) Unexercisable Unexercisable
William P. Ward -0- -0- 14,514/-0- -0-/-0-
Gary J. Klusman -0- -0- 48,281/6,233 -0-/-0-
Steven W. Ruben -0- -0- 29,508/-0- -0-/-0-
Jeffrey T. Brown -0- -0- 11,000/-0- -0-/-0-
<FN>
(FA) Market value of underlying securities at year-end minus the exercise
or base price of "in-the-money" options.
</FN>
Stock Purchase Assistance Agreements. In 1998, the Company entered
into certain agreements designed to help facilitate increased investments in
the Company's Common Stock by certain key executive officers. The Company had
such Stock Purchase Assistance Agreements ("Assistance Agreements") with each
of Messrs. Klusman, Ruben and Brown. The Company has agreed to guarantee
payment of personal loans in the amount of $240,000, $120,000 and $60,000 (the
"Stock Loans") obtained from HSBC Business Loans, Inc. ("HSBC") by Mr.
Klusman, Mr. Ruben and Mr. Brown, respectively, for their purchase in 1998 of
32,920 shares, 16,460 shares and 10,000 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 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
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). During 1999, Mr. Klusman was
terminated without cause and the Company paid off the remaining balance of
$200,000 on his Stock Loan. Mr. Klusman retained ownership of his 32,920
shares of Common Stock after the Company paid the loan principal balance in
full. Additionally, Mr. Klusman's 54,514 stock options expired unexercised in
January 2000.
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
1999.
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.
1999 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 management with those
of the Company.
Base Salary. The Compensation Committee initially determines the
amount of executive officer base salary based on factors such as prior level
of pay, quality of experience, responsibilities of position and salary levels
of similarly positioned executives in other companies. Once base salary has
been determined, the Compensation Committee divides the executive officers
into two groups: Operating Officers and Administrative Officers. The
Operating Officers consist of Mr. Ward (Chief Executive Officer), Mr. Klusman
(Former Chief Executive Officer), Mr. Ruben (Chief Financial Officer), Mr.
Brown (Vice President-Operations) and Mr. Rittgers (Vice President-Sales and
Marketing). The administrative officers consist of Mrs. Ward (Vice President)
and Ms. Schowengerdt (Treasurer and 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"). The performance factors are
weighted as follows: revenues (25%), operating ratio (10%), operating income
(10%), earnings per share (25%), return on equity (10%) and return on assets
(20%). For 1999, the Compensation Committee set the target level of
improvement in Performance Factors with at least a 16% improvement target in
five of the six factors.
Under the Performance Adjustment Plan, each Operating Officer will
receive 20% of his 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 1999, the Company reached 10% of its target level of improvement in
Performance Factors. Accordingly, the Operating Officers received an actual
performance adjustment of 10% of their Target Adjustments.
Administrative Officers do not participate in the Performance Adjustment
Plan and, thus, do not receive a performance adjustment.
Stock Option Awards. The Compensation Committee may also award
stock options to executive officers under the 1996 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. There were no stock
option grants to named executive officers in 1999.
In August 1999, the Committee authorized the granting of options to an
executive officer to acquire 10,000 shares of Common Stock under the 1996
Option Plan. No options authorized under the 1996 Option Plan were granted to
employees other than executive officers in 1999.
CEO Compensation. Gary J. Klusman, CEO of the Company until October
1999, at which time his employment was terminated, is subject to the same
general compensation package as the other Operating Officers as set forth
above. When Mr. Ward resumed the CEO position in October 1999, the
compensation committee authorized that he be paid the same base salary as Mr.
Klusman in 1999. However, Mr. Ward did not participate in the Performance
Adjustment Plan during 1999.
The Compensation Committee decided to increase Mr. Klusman's annual base
salary by 10.0% effective January 1, 1999 based on factors including quality
of experience, responsibilities of position, and salary levels of similarly
positioned executives in other Companies.
Mr. Klusman also received $2,600 in performance adjustment to his base
annual salary under the Performance Adjustment Plan pro rata for the period of
time he was employed by the Company in 1999. As noted above, such performance
adjustment was 10% of his Targeted Adjustment of $26,000 for the approximately
ten months he was employed by the Company in 1999.
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 1999
adequately reflect the Company's compensation goals and policies.
The Compensation Committee report is submitted by:
Dr. Ralph E. MacNaughton
Charles M. Foudree
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Company Performance
The following graph shows a comparison of cumulative total returns for
the Company, the American Stock Exchange ("AMEX") Market Index, and an
industry index based the applicable Standard Industrial Classification code
("SIC Industry Index").
Comparison of Cumulative Total Return
(OTR Express, Inc., AMEX Market Index and SIC Industry Index)
SIC Industry
Measurement Period OTRX AMEX Market Index Trucking, except local
12/31/94 100.00 100.00 100.00
12/31/95 47.37 128.90 84.78
12/31/96 36.84 136.01 80.08
12/31/97 61.84 163.66 115.71
12/31/98 52.63 161.44 111.33
12/31/99 16.45 201.27 107.57
The above graph compares the performance of the Company with that of the
AMEX 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 AMEX Market Index
and the SIC Industry Index is based on the stock prices as of December 31,
1994, 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).
PROPOSAL TWO:
APPROVAL OF INDEPENDENT AUDITORS
For 1999, 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, 2000. 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, 2000 be, and hereby is, ratified."
MISCELLANEOUS
Certain Relationships and Other Transactions. Mr. Terry
Christenberry, a director of the Company, is the president and a director of
Christenberry Collet, a company which provided financial advisory services to
the Company in 1999 for which the Company paid less than $10,000. The Company
expects that Christenberry Collet will provide financial advisory services in
2000.
Mr. William P. Ward, Chairman and CEO of the Company, is also president
and a director of ACA, which provides bookkeeping services to owner operators
hired by the Company. ACA did not provide services to the Company in 1999.
However, the Company expects that ACA will provide services to the Company in
2000.
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. The
Estate of Robert Westphal 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
2001, such proposal must be received by the Secretary of the Company, in
writing, on or before December 1, 2000, to be considered for inclusion in the
Company's proxy statement relating to the next annual meeting of Stockholders.
Annual Report. A copy of the Company's Annual Report (including
financial statements and schedules, as filed with the SEC) accompanies this
Proxy Statement. The Annual Report is not part of the proxy solicitation
materials.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN TO THE COMPANY THE
ACCOMPANYING PROXY.
BY THE BOARD OF DIRECTORS
William P. Ward
March 30, 2000 Chairman of the Board