Exhibit 10(r)
STOCK PURCHASE ASSISTANCE AGREEMENT
THIS AGREEMENT is dated as of February 27, 1998 and is by and between
OTR Express, Inc. (the "Company") and Gary J. Klusman, President and Chief
Executive Officer of the Company ("Klusman").
1.Purpose. The purpose of this Agreement is to promote the long-term
interests of the Company and its stockholders by encouraging and assisting
Klusman, as executive officer of the Company, to make meaningful
investments in the Common Stock of the Company so that, as stockholders, his
views and interests will be identified with the views and interests of the
other stockholders. Meaningful stock ownership will provide Klusman with an
additional incentive to exert his best efforts to increase the value of
the Company for the benefit of all stockholders. This Agreement
will also strengthen the Company's ability to retain Klusman, who has
special competence to contribute to the Company's success.
2.Definitions.
a."Bank" means a third party source of financing, such as a bank (including
but not limited to HSBC Business Loans, Inc.), which has agreed to (and
which does) loan money to Klusman for the purposes of his purchase of Common
Stock.
b."Board" means the Board of Directors of the Company.
c."Cause" means any of the following:
i.Klusman's willful malfeasance or misfeasance towards the Company or
any Subsidiary of the Company;
ii.Klusman's failure to discharge all or any material part of his duties
or obligations to the Company as have been customarily performed by
his position, after notice thereof and a reasonable opportunity to
cure such failure;
iii.Klusman's conviction of a misdemeanor involving moral turpitude or
the conviction of any felony;
iv.the commission by Klusman of any act of fraud, embezzlement,
misappropriation of funds or breach of fiduciary duty against the
Company, any Subsidiary of the Company or any customer, vendor or
affiliate of the Company, including but not limited to any acts of
material personal enrichment of Klusman or affiliates of Klusman at
the expense of the Company, any Subsidiary of the Company or any
customer, vendor or affiliate of the Company;
v.a failure to make timely Guaranty Payments when due under this
Agreement or any other material breach by Klusman of this Agreement;
or
vi.a failure by Klusman to keep confidential the trade secrets and other
material proprietary information of the Company.
a."Change in Control" means the first to occur of any one of the events
described below:
i.A tender offer or exchange offer is made whereby the effect of such offer
is to take over and control the affairs of the Company and such offer
is consummated for the ownership of securities of the Company
representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities.
ii.The Company is merged or consolidated with another corporation and, as a
result of such merger or consolidation, less than fifty percent (50%)
of the outstanding voting securities of the surviving or resulting
corporation shall then be owned in the aggregate by the former
stockholders of the Company other than affiliates
within the meaning of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any party to such merger or consolidation.
iii.The Company transfers substantially all of its assets to another
corporation or entity that is not a wholly-owned subsidiary of the
Company.
iv.Any person or group (as such terms are used in Sections 13(d)(3) and
14(d)(3) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding securities, and that in
related Schedule 13D/G filings such person or group has expressed the
intention to take over and control the affairs of the Company.
v.Any other event or series of events which, notwithstanding any other
provisions of this definition, is determined by the Board to
constitute a change in control of the Company for purposes of this
Agreement.
a."Code" means the Internal Revenue Code, as amended.
b."Compensation Committee" means the Compensation Committee of the
Board, or any successor committee thereto.
c."Common Stock" means the shares of common stock of the Company.
d."Company" means OTR Express, Inc., a Kansas corporation.
e."Disability" shall mean the physical or mental illness or incapacity of
Klusman such that, in the judgment of a physician chosen or approved by
the Company and specializing in the area of such physical or mental illness
or disability, Klusman is unable to perform the essential
functions of his employment with or without reasonable accommodation,
for a period of at least three (3) consecutive months or for shorter periods
totaling more than three (3) months during any period of six (6) months.
f."Guaranty" means the guaranty of payment of the principal and certain
other amounts owing under the Loan, by the Company in favor of the Bank,
as provided in the Guaranty executed by the Company in favor of the Bank.
g."Loan" means the loan made by Bank to Klusman which is guarantied by the
Company pursuant to this Agreement.
h."Agreement" means this Stock Purchase Assistance Agreement.
i."Principal Payment Reimbursement" means the periodic payment by the
Company to Klusman of an amount, as incentive compensation, not greater
than the amount of principal due and owing under the Loan for such period.
j."Subsidiary" means any corporation at least 80 percent of the outstanding
voting stock of which is owned by the Company.
1.Administration on Behalf of Company.
a.The Compensation Committee. The Compensation Committee shall be
comprised of two or more members of the Board, all of whom shall be
"disinterested persons" as defined in Rule 16b-3 under the Exchange Act
and "outside directors" as that term is used in Section 162 of the Code
and the regulations promulgated thereunder, but in any event
consistent with the Bylaws of the Company and applicable Kansas
corporate law.
b.Powers. The Compensation Committee shall have full and exclusive
discretionary power to interpret this Agreement on behalf of the Company
and to determine eligibility for the Guaranty and Principal Payment
Reimbursement and to make such other discretionary decisions as may be
provided under this Agreement.
1.Guaranty.
a.Benefit to Company. The Board has determined that this Agreement may
reasonably be expected to benefit the Company, in conformity with KSA
17-6303 (or its successor provision).
b.Purpose of Guaranty. The Company may Guaranty all or part of the
principal amount of such Loans from time to time to Klusman to be used
solely for the purpose of:
i.Acquiring Common Stock at fair market value in open market transactions
or at negotiated prices in private transactions;
ii.Acquiring Common Stock upon the exercise of stock options granted under
a stock option plan of, or otherwise by, the Company; or
iii.Any combination of the above.
1.Loan/Guaranty Amount; General Terms.
a.Klusman shall use his commercially reasonable efforts to obtain from a
Bank a line of credit for, or loans in the aggregate original principal
amount of $240,000 to provide funds to purchase Common Stock and for no
other purpose. If the Loan is approved by Klusman and the
Compensation Committee, the Company shall offer to guaranty such Loan
provided that the amount of the Loan does not exceed the fair market value
of the shares of Common Stock to be purchased with the proceeds of the Loan,
as determined at purchase, and in no event shall Klusman have outstanding
Loans which are guaranteed by the Company
under this Agreement in excess of $240,000 original principal amount.
The Compensation Committee shall not approve any Loan unless such Loan is
payable by Klusman over a term of six (6) years and shall be full recourse
against Klusman and evidenced by a promissory note by Klusman to Bank.
b.The Company shall not be a party or in any way construed as a lender or
party under the Loan. Klusman shall be solely liable to Bank for payment
of all principal, interest and charges under the Loan.
c.Each Guaranty shall be made only for such Loans which are reviewed and
approved by both Klusman and the Compensation Committee. Each Guaranty
shall be in such form as is consistent with this Agreement and approved
by the Compensation Committee.
d.In the event that the Company's collateral or other security arrangements
in favor of the Bank respecting the Guaranty are terminated or released
and Bank either desires (i) new or replacement collateral or other security
arrangements or (ii) to declare a default under the
Loan documents or be paid the Loan in full, the Company shall use its best
commercially reasonable efforts to provide such new or replacement
collateral or other security arrangements or to refinance the Loan (through
another bank or directly by the Company), as the case may be.
1.Purchase of Common Stock with Loan Proceeds. Upon Klusman obtaining a
Loan which is guaranteed by the Company under this Agreement, Klusman shall
purchase shares of Common Stock in the open market, in private transactions
and/or upon exercise of Company stock options hitherto granted to Klusman.
Any purchases of Common Stock under this Agreement shall be (A) personally
negotiated by Klusman or his broker, without Company involvement, (B) made
in compliance with the Company's "insider" trading policies, applicable
securities laws and other laws and (C) reported, as applicable, pursuant
to Section 16 of the Securities Act of 1933, as amended. The Company does
not make any guarantees or representations whatsoever as to the
price or fair market value of any shares so purchased nor as to the future
performance of the Company. Klusman shall use his commercially reasonable
efforts to fully invest all the Loan proceeds in the purchase of Common
Stock prior to June 10, 1998 but for purposes only of determining the
reasonableness of such efforts, Klusman shall not have any obligation to
purchase Common Stock at greater than $9.00 per share. Any amounts
available under the Loan which are not invested in the purchase of Common
Stock by June 10, 1998 shall not deemed loaned to Klusman and shall not be
subject or beneficiary of any Guaranty by the Company.
2.Principal Payment Reimbursement; Other Payments.
a.For each full Principal Payment Reimbursement period (quarterly or
annually, as determined by the Compensation Committee) as Klusman is
employed by the Company in an officer position, the Company shall make
payments to Klusman (or directly to the Bank, if instructed by Klusman but
if Klusman is in default under the Loan, then if instructed by
the Bank) of an amount of Principal Payment Reimbursement equal to the
amount of principal scheduled due and owing to the Bank under the Loan for
such period (e.g., if Klusman has a 6 year loan with principal payable in
equal installments of $40,000, on February 27 of every year, the Company's
Principal Payment Reimbursement would equal such installments assuming
continuing eligibility throughout such periods). Upon
Klusman's receipt of any such payment, he shall apply such funds to the
payment of the principal amount of the Loan to which it relates (unless
he has already made such Loan payment from personal or other sources).
b.If Klusman ceases to be so employed by the Company in an officer position
(for whatever reason), dies or experiences Disability, Klusman and (as
required by the Guaranty) the Company shall give notice thereof to the
Bank; further, the Company's obligation to make Principal Payment
Reimbursement payments shall thereupon immediately cease and terminate.
c.If Klusman's employment is terminated by the Company without Cause (or
if there is a Change of Control of the Company and Klusman's employment
with the Company or a successor entity is terminated by the Company or
such successor entity without Cause after such Change of Control), then
the Company (or such successor) shall pay, directly to the Bank,
the balance of principal amount outstanding (if any) at such termination
on Klusman's Loan for the benefit of Klusman (which amount may be taxable
to Klusman as compensation) provided that contemporaneously with such
payment (i) the Bank shall execute and deliver to the Company (and/or
such successor) a termination of the Guaranty and a release of the Company
(or such successor) from any and all obligations thereunder and (ii) Klusman
executes and delivers to the Company (and/or such successor) a comprehensive
release of claims, including any employment related claims,
that are or may be alleged by Klusman, his representatives and heirs
against the Company (and/or such successor).
1.Reimbursement Obligation of Klusman.
a.In the event that Klusman defaults on the Loan or otherwise entitles Bank
to make demand for payment to the Company under the Guaranty and the Bank
does in fact make such demand and the Company does in fact make payment
to the Bank therefor (in any partial or full amount, a "Guaranty Payment"),
then Klusman hereby irrevocably agrees to make payment to the Company a
money amount equal to the Guaranty Payment (the "Guaranty Reimbursement")
no later than fifteen (15) days after written demand by the Company
therefor provided that the Company is not then in default with respect to
Section 7 of this Agreement.
b.The Guaranty Reimbursement may be made (i) by cash payment (or wire
transfer) made by Klusman to the Company and to the extent payment by (i)
is not timely made, (ii) by offset
or credit to the Company against any amount or amounts (dollar for dollar)
that it indisputably and duly owes to Klusman (or, at the Company's sole
discretion, will owe in the future, but in no way obligating the Company
to continue Klusman's employment, accrue such amounts or mitigate its
damages), including those amounts related to or in
connection with wages, compensation, expense reimbursement, Principal
Payment Reimbursement and any other amounts howsoever derived.
1.Failure to Make Guaranty Reimbursement. If the Guaranty Reimbursement
is not timely paid or satisfied in full as described in Section 8(b), then
(i) such deficient amount shall accrue, and Klusman shall owe to the
Company, interest per annum (360 day year) thereon at the prime rate
(as reported in the Wall Street Journal with regard to large money center
banks) plus two percent (2%) compounded quarterly until paid in full and
(ii) such nonpayment shall entitle the Company, at its discretion, to
terminate the employment (whether or not under any written employment
contract) of Klusman for "Cause" and without any obligation to make
further or subsequent payments to Klusman (as salary, bonus, severance
compensation or otherwise but excluding accrued and unpaid compensation).
2.Security for Guaranty.
a.Klusman's obligations to make the Guaranty Reimbursement shall be
secured by the pledge, subject to any prior or senior pledge in favor
of the Bank relating to the Loan applicable to such Guaranty, of those
shares of Common Stock acquired with the proceeds of the Loan. Such
pledge shall be evidenced by a pledge agreement executed by
Klusman in favor of the Company, in form satisfactory to Company's
counsel. To the extent permissible under the Loan, shares of Common
Stock so pledged shall, from time to time, be physically delivered to
the Company, together with a stock power endorsed in blank by Klusman
in favor of the Company and such other documentation as the Company,
with advice of counsel, may request.
b.Except for shares released under Section 10(c), Klusman shall not pledge,
hypothecate, grant a security interest in or otherwise transfer, sell
or assign any of the shares of Common Stock acquired with the proceeds
of the Loan to any person or entity except to the Bank
(but only in connection with such Loan) or the Company (in connection
with such Guaranty), and any such prohibited action shall be void and
of no effect against the Bank and the Company.
c.On an annual basis, the Company shall release from any first and prior
pledge (not subject to the pledge favoring the Bank) it holds (if any)
that number of shares (to the nearest 100 shares) of Common Stock, if
any, of a value in excess of 150% of the amount of the maximum Guaranty
Reimbursement that exists and could theoretically still then arise
under this Agreement. For example, if the maximum Guaranty
Reimbursement that exists and could theoretically still then arise under
this Agreement is $100,000 and the
Company has a first and prior pledge of Common Stock worth $200,000,
the Company would release Common Stock worth $50,000 from such pledge.
It is understood that the Bank may have a first and prior pledge in all
shares of Common Stock acquired by Klusman under the Bank's Loan until
full and final payment thereof, and therefor this subsection may never
provide for release of any such shares.
1. Obligation to Hold Shares. For
so long as Klusman is employed by the Company, he agrees not
to sell, transfer or assign any of the shares of Common Stock purchased
under Loans made in connection with this Agreement (and free of any
pledge benefiting the Bank or the Company) except (a) for 25% of such
shares and (b) as the Compensation Committee or Company may
permit him to do, in their discretion, because of a financial hardship
incurred by Klusman.
2.Tax Withholding. The Company may make such withholding and take such
action as may be necessary or appropriate to satisfy tax withholding
requirements for any federal, state or local laws or regulations in
connection with the Guaranty and any payments provided for herein.
3.General Provisions.
a.No Right to Employment. Klusman shall not have any claim or right to be
retained in the employment of the Company or a Subsidiary by reason
of this Agreement or any Guaranty or Loan to him.
b.Compliance With Laws. No Guaranty or payment shall be made hereunder
unless counsel for the Company shall be satisfied that such Guaranty
or payment will be in compliance with all applicable federal, state,
and local laws.
c.Agreement Expenses. The expenses of this Agreement and its
administration shall be borne by the Company.
d.Agreement Not Funded. This Agreement shall be unfunded. The Company
shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the making of any
Guaranty or payment under this Agreement.
e.Acceptance of Actions Taken Under Agreement. By accepting a Guaranty
under this Agreement, Klusman shall be deemed conclusively to have
indicated his acceptance and consent to any action taken under this
Agreement by the Company, the Board, or the Compensation Committee.
f.Reports. The appropriate officers of the Company shall cause to be filed
any reports, returns, or other information regarding Guaranties and
payments hereunder, as may be required by any applicable statute, rule,
or regulation.
g.Governing Law. The validity, construction, and effect of this Agreement,
and any actions relating to this Agreement, shall be determined in
accordance with the laws of the State of Kansas and applicable federal
law.
h.Successors and Assigns of Klusman. This Agreement shall be binding, upon
all successors and permitted assigns of Klusman. including, without
limitations his estate,
the personal representative, executor, administrator, or trustee of such
estate, or any trustee in bankruptcy or representative of his creditors.
i.Amendment of this Agreement. This Agreement may not be modified or
amended except by a writing executed by all parties hereto.
j.Effective Date of Agreement. This Agreement shall be effective as of the
date hereof but subject to the approval of the stockholders of the
Company if required by applicable law, the certificate of incorporation
or bylaws of the Company or applicable SEC or Nasdaq regulations.
IN WITNESS WHEREOF, each of the parties have executed this Agreement
intending to be bound thereby.
/s/ Gary J. Klusman
Gary J. Klusman
OTR Express, Inc.
By: /s/William P.Ward
Name: William P. Ward
Title: Chairman of the Board