UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-12321
TRANSFINANCIAL HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 46-0278762
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8245 Nieman Road, Suite 100
Lenexa, Kansas 66214
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 859-0055
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 13, 1998
Common stock, $0.01 par value 3,932,372 Shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Operating Revenues.......................................................... $ 39,614 $ 35,100
Operating Expenses.......................................................... 43,645 34,234
Operating Income (Loss)..................................................... (4,031) 866
Nonoperating Income
Interest income, net..................................................... 106 142
Other.................................................................... 68 39
Total nonoperating income............................................ 174 181
Income (Loss) Before Income Taxes........................................... (3,857) 1,047
Income Tax Provision (Benefit).............................................. (1,383) 478
Net Income (Loss)........................................................... $ (2,474) $ 569
Basic and Diluted Earnings (Loss) Per Share................................. $ (0.50) $ 0.09
Basic Average Shares Outstanding............................................ 4,964 6,111
Diluted Average Shares Outstanding.......................................... 4,980 6,178
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Operating Revenues.......................................................... $ 113,652 $ 98,670
Operating Expenses.......................................................... 117,117 95,805
Operating Income (Loss)..................................................... (3,465) 2,865
Nonoperating Income
Interest income, net..................................................... 192 525
Other.................................................................... 163 86
Total nonoperating income............................................ 355 611
Income (Loss) Before Income Taxes........................................... (3,110) 3,476
Income Tax Provision (Benefit).............................................. (973) 1,571
Net Income (Loss)........................................................... $ (2,137) $ 1,905
Basic and Diluted Earnings (Loss) Per Share................................. $ (0.38) $ 0.30
Basic Average Shares Outstanding............................................ 5,684 6,268
Diluted Average Shares Outstanding.......................................... 5,715 6,332
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and temporary cash investments...................................... $ 3,390 $ 4,778
Short-term investments................................................... 517 3,543
Freight accounts receivable, less allowance
for credit losses of $419 and $464................................... 13,727 14,909
Finance accounts receivable, less allowance
for credit losses of $791 and $499................................... 13,109 14,016
Current deferred tax assets.............................................. 2,877 1
Other current assets..................................................... 2,669 1,831
AFS net assets........................................................... 218 7,993
Total current assets................................................. 36,507 47,071
Operating Property, at Cost:
Revenue equipment........................................................ 31,064 32,275
Land..................................................................... 3,681 3,585
Structures and improvements.............................................. 10,831 10,506
Other operating property................................................. 9,876 9,624
55,452 55,990
Less accumulated depreciation........................................ (23,407) (22,969)
Net operating property........................................... 32,045 33,021
Intangibles, net of accumulated amortization................................ 9,922 9,243
Other Assets................................................................ 834 420
$ 79,308 $ 89,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Cash overdrafts.......................................................... $ 862 $ 754
Accounts payable......................................................... 3,899 2,855
Line of credit payable................................................... -- 2,500
Accrued payroll and fringes.............................................. 7,480 5,956
Other accrued expenses................................................... 4,301 2,940
Total current liabilities............................................ 16,542 15,005
Long-Term Debt.............................................................. 10,000 --
Deferred Income Taxes....................................................... 1,802 2,265
Shareholders' Equity
Preferred stock with $0.01 par value, authorized 1,000,000 shares,
none outstanding..................................................... -- --
Common stock with $0.01 par value, authorized 13,000,000 shares,
issued 7,593,592 and 7,509,622 shares................................ 76 75
Paid-in capital.......................................................... 6,090 5,581
Retained earnings........................................................ 77,257 79,394
Treasury stock, 3,661,220 and 1,481,935 shares, at cost.................. (32,459) (12,565)
Total shareholders' equity........................................... 50,964 72,485
$ 79,308 $ 89,755
<FN>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
</TABLE>
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss)................................................... $ (2,137) $ 1,905
Adjustments to reconcile net income (loss) to cash provided by operating activities
Depreciation and amortization..................................... 5,053 3,404
Provision for credit losses....................................... 1,033 722
Deferred income tax provision (benefit)........................... (3,047) 1,697
Net increase (decrease) from change in other
working capital items affecting operating activities........... 3,459 (4,052)
4,361 3,676
Cash Flows From Investing Activities
Proceeds from discontinued operations .............................. 6,345 --
Purchase of finance subsidiary...................................... (4,178) --
Purchase of operating property, net................................. (2,415) (8,792)
Origination of finance accounts receivable.......................... (117,599) (95,626)
Sale of finance accounts receivable................................. 92,078 62,871
Collection of owned finance accounts receivable..................... 28,749 30,520
Purchases of short-term investments................................. (2,998) (10,411)
Maturities of short-term investments................................ 6,024 17,116
Other............................................................... (329) (743)
5,677 (5,065)
Cash Flows From Financing Activities
Borrowings on Long-Term Note Payable................................ 10,000 --
Payments to acquire treasury stock.................................. (18,847) (1,973)
Borrowing (repayments) on line of credit agreements, net............ (2,500) 8
Other............................................................... (79) (384)
(11,426) (2,349)
Net Increase (Decrease) in Cash and Temporary Cash Investments........ (1,388) (3,738)
Cash and Temporary Cash Investments at beginning of period............ 4,778 9,021
Cash and Temporary Cash Investments at end of period.................. $ 3,390 $ 5,283
Cash Paid During the Period for
Interest............................................................ $ 62 $ --
Income Tax.......................................................... $ 363 $ 35
<FN>
Supplemental Schedule of Noncash Investing and Financing Activities
On May 29, 1998, the Company acquired all of the capital stock of Oxford Premium Finance, Inc. ("Oxford") for approximately
$4,178,000. In conjunction with the acquisition, liabilities were assumed as follows:
1998
Fair Value of Assets acquired $ 22,338
Cash paid for capital stock and acquisition expenses (4,178)
Intangibles 1,876
Liabilities assumed $ 20,036
In connection with the acquisition of Oxford, $19.0 million of its finance accounts receivables were sold under the securitization
agreement. The proceeds of the sale were paid directly to Oxford's former line of credit bank to repay the balance outstanding
under the line at the date of acquisition.
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<CAPTION>
Total
Share
Common Paid-In Retained Treasury holders'
Stock Capital Earnings Stock Equity
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.................. $ 76 $ 5,529 $ 79,242 $(10,286) $ 74,561
Net income.................................... -- -- 1,100 -- 1,100
Fractional shares cancelled in reverse stock
split....................................... (1) -- (948) -- (949)
Issuance of shares under Incentive Stock Plan. -- 52 -- (2) 50
Purchase of 257,099 shares of common stock.... -- -- -- (2,277) (2,277)
Balance at December 31, 1997.................. 75 5,581 79,394 (12,565) 72,485
Net loss...................................... -- -- (2,137) -- (2,137)
Issuance of shares under Incentive Stock Plan. 1 509 -- (591) (81)
Purchase of 2,115,472 shares of common stock.. -- -- -- (19,303) (19,303)
Balance at September 30, 1998 (unaudited)..... $ 76 $ 6,090 $ 77,257 $(32,459) $ 50,964
<FN>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include TransFinancial Holdings, Inc.
("TransFinancial") and all of its subsidiary companies (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation. The condensed financial statements included herein have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") and have not been examined or reviewed by independent public
accountants. The yearend condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. In the opinion of management, all adjustments
necessary to fairly present the results of operations have been made.
Pursuant to SEC rules and regulations, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
from these statements unless significant changes have taken place since the end
of the most recent fiscal year. TransFinancial believes that the disclosures
contained herein, when read in conjunction with the financial statements and
notes included in TransFinancial's Annual Report on Form 10-K, filed with the
SEC on March 30, 1998, are adequate to make the information presented not
misleading. It is suggested, therefore, that these statements be read in
conjunction with the statements and notes included in the aforementioned report
on Form 10-K.
As of January 1, 1998, the Company prospectively increased the estimated
remaining useful lives of certain revenue equipment to reflect the Company's
actual utilization of such equipment. This change decreased depreciation and
increased operating income by approximately $160,000 for the third quarter and
$470,000 for the first nine months of 1998. Net income was increased by
approximately $96,000 or $0.02 per share for the third quarter and $282,000 or
$0.05 per share for the first nine months of 1998. This change will decrease
depreciation and increase operating income by approximately $328,000 for the
remaining three months of 1998 from amounts which would have been recorded had
the change not been made.
As of July 1, 1998, the Company prospectively decreased the estimated
remaining useful life of certain purchased software to reflect the Company's
plan to substantially revise and replace the software. This change increased
amortization expense in the third quarter by $333,000 and decreased net income
by approximately $200,000 or $0.04 per share. This change will decrease
amortization expense and increase operating income by approximately $50,000 for
the remaining three months of 1998 from amounts which would have been recorded
had the change not been made.
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. An evaluation of certain equipment and intangible assets of
the Company's industrial technology operation resulted in the determination that
these assets were impaired. The impaired assets were written down by $525,000
effective September 30, 1998. Fair value was based on estimated discounted
future cash flows to be generated by these assets and management's estimate of
the value realizable from sale of the assets. This writedown is included in
"Depreciation and Amortization" in the Consolidated Statement of Income.
2. SEGMENT REPORTING
The Company operates in three business segments: transportation, financial
services, and industrial technology. Other items are shown in the table below
for purposes of reconciling to consolidated amounts.
<TABLE>
<CAPTION>
Third Quarter Nine Months
Operating Operating
Operating Income Operating Income Total
($ in thousands) Revenues (Loss) (1) Revenues (Loss) (1) Assets
<S> <C> <C> <C> <C> <C> <C>
Transportation 1998 $ 37,666 $ (812) $ 108,440 $ 675 $46,564
1997 33,274 989 93,110 2,850 43,386
Financial Services 1998 1,914 (886) 5,107 (826) 25,312
1997 1,772 207 5,459 868 26,171
Industrial Technology 1998 -- (926) -- (1,388) 195
1997 -- (71) -- (71) 665
Total Segments 1998 39,580 (2,624) 113,547 (1,539) 72,071
1997 35,046 1,125 98,569 3,647 70,222
General Corporate and Other 1998 34 (1,407) 105 (1,926) 7,237
1997 54 (259) 101 (782) 18,272
Consolidated 1998 39,614 (4,031) 113,652 (3,465) 79,308
1997 35,100 866 98,670 2,865 88,494
<FN>
(1) A failed attempt at a hostile takeover of the Company, together with other events, led the Company to record charges for
management and personnel restructuring, asset and liability valuation adjustments, and transaction costs and other expenses related
to the takeover attempt. These charges are included in operating results for the third quarter and nine months of 1998 of the
Company's business segments as follows: $1,544,000 for transportation; $1,075,000 for financial services and $769,000 for
industrial technology, as well as $1,200,000 in general corporate.
</TABLE>
3. ACQUISITION OF PREMIUM FINANCE SUBSIDIARY
On May 29, 1998, TransFinancial Holdings, Inc. ("TransFinancial" or "the
Company") through Universal Premium Acceptance Corporation ("UPAC"), its
insurance premium finance subsidiary, completed the acquisition of all of the
issued and outstanding stock of Oxford Premium Finance, Inc. ("Oxford") for
approximately $4.2 million. Oxford offers short-term collateralized financing
of commercial insurance premiums through approved insurance agencies in 17
states throughout the United States. At May 29, 1998, Oxford had outstanding
net finance receivables of approximately $22.5 million. This transaction was
accounted for as a purchase. UPAC sold an additional $4.2 million of its
receivables under its receivable securitization agreement to obtain funds to
consummate the purchase. Concurrently with the closing of the acquisition, UPAC
amended its receivables securitization agreement to increase the maximum
allowable amount of receivables to be sold under the agreement and to permit the
sale of Oxford's receivables under the agreement. Effective on May 29, 1998,
Oxford sold approximately $19 million of its receivables under the
securitization agreement using the proceeds to repay the balance outstanding
under its prior financing arrangement. The terms of the acquisition and the
purchase price resulted from negotiations between UPAC and Oxford Bank & Trust
Company, the former sole shareholder of Oxford. In connection with the purchase
of Oxford, based on a preliminary allocation of the purchase price,
TransFinancial has recorded goodwill of $1.9 million, which will be amortized on
the straight-line basis over 15 years.
In addition to the stock purchase agreement, UPAC entered into employment
agreements with certain marketing and operating personnel of Oxford to ensure
continuity of service and relationships with Oxford's key insurance agencies.
The operating results of Oxford are included in the consolidated operating
results of TransFinancial after May 29, 1998. The following reflects the
consolidated operating results of TransFinancial for the third quarter ended
September 30, 1997, and the nine months ended September 30, 1998 and 1997,
assuming the acquisition occurred as of the beginning of each of the respective
periods:
PRO FORMA OPERATING RESULTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Third
Quarter Nine Months
1997 1998 1997
Operating Revenues............... $35,376 $114,125 $ 99,489
Net Income (Loss)................ $ 590 $ (2,104) $ 1,942
Basic and Diluted
Earnings (Loss) Per Share $ 0.10 $ (0.37) $ 0.31
The pro forma results of operations are not necessarily indicative of the
actual results that would have been obtained had the acquisitions been made at
the beginning of the respective periods, or of results which may occur in the
future.
4. PROFIT SHARING
In September 1988, the employees of Crouse Cartage Company ("Crouse"), a
wholly owned subsidiary of TransFinancial, approved the establishment of a
profit sharing agreement ("the Agreement"). The Agreement was structured to
allow all employees (union and non-union) to ratably share 50% of Crouse's
income before income taxes (excluding extraordinary items and gains or losses on
the sale of assets) in return for a 15% reduction in their wages. Distributions
were made on a quarterly basis. The Agreement was recertified in 1991 and 1994,
and continued in effect until a replacement of the Collective Bargaining
Agreement was reached between the parties. Crouse continued to operate under
the terms of its Teamsters union contract which expired March 31, 1998,
including the profit sharing provisions, through October 3, 1998. On October 4,
1998, a newly ratified collective bargaining agreement became effective for
approximately 80% of Crouse's union employees. The new agreement did not
continue the provisions of the profit sharing agreement, substituting instead a
separate wage reduction provision. The accompanying consolidated balance sheets
as of September 30, 1998 include an accrual for profit sharing costs of
$677,000. The accompanying consolidated statements of income include profit
sharing expenses of $677,000 and $989,000 for the third quarter and $2,013,000
and $2,812,000 for the first nine months of 1998 and 1997.
5. FINANCING AGREEMENTS
Securitization of Receivables
In December, 1996, TransFinancial, UPAC and APR Funding Corporation (a wholly-
owned subsidiary) entered into an extendible three year securitization agreement
whereby undivided interests in a designated pool of accounts receivable can be
sold on an ongoing basis. Effective September 11, 1998, the securitization
agreement was amended to modify the definition of eligible receivables under the
securitization agreement and to increase the maximum allowable amount of
receivables to be sold under the agreement to $85.0 million. The purchaser
permits principal collections to be reinvested in new financing agreements. The
Company had securitized receivables of $64.8 million and $34.8 million at
September 30, 1998 and 1997. The cash flows from the sale of receivables are
reported as investing activities in the accompanying consolidated statement of
cash flows. The securitized receivables are reflected as sold in the
accompanying balance sheet.
The terms of the agreement require UPAC to maintain a minimum tangible net
worth of $5.0 million and contain restrictions on the payment of dividends by
UPAC to TransFinancial without prior consent of the financial institution. The
terms of the agreement also require the Company to maintain a minimum
consolidated tangible net worth of $40.0 million. The Company was in compliance
with all such provisions at September 30, 1998. The terms of the securitization
agreement also require that UPAC maintain a default reserve at specified levels
which serves as collateral. At September 30, 1998, approximately $7.1 million
of owned finance receivables served as collateral under the default reserve
provision.
Secured Loan Agreements
In January 1998, Crouse entered into a three-year Secured Loan Agreement with
a commercial bank which provides for a $4.5 million working capital line of
credit loan ("Working Capital Line") and a $4.5 million equipment line of credit
loan ("Equipment Line"). There were no borrowings under the Equipment Line in
the quarter or nine months ended September 30, 1998. The following table
summarizes activity under the Working Capital Line in the quarter and nine
months ended September 30, 1998 (in thousands, except percentages):
Third Nine
Quarter Months
1998 1998
Balance outstanding at end of period.................. $ -- $ --
Average amount outstanding ........................... -- 773
Maximum month end balance outstanding................. -- 2,752
Interest rate at end of period........................ 8.25% 8.25%
Weighted average interest rate........................ 8.50% 8.50%
In September 1998, the Company entered into a two-year secured loan agreement
with a commercial bank which enabled the Company to borrow $10.0 million (the
"Loan"), secured by freight accounts receivable and a second lien on revenue
equipment. The Loan bears interest at the bank's prime rate, 8.25% at September
30, 1998 The terms of the Loan provide for monthly payments of interest only
through September 30, 1999, with monthly principal payments thereafter of
$100,000 plus interest through maturity on September 30, 2000.
The terms of the Loan require the Company to maintain a minimum tangible net
worth of $40 million, a ratio of current assets to current liabilities of 1.25
to 1.00, a ratio of total liabilities to tangible net worth of 1.0 to 1.0, and
contain restrictions on the payment of dividends without prior consent of the
Lender. The Company was in compliance with all such provisions at September 30,
1998. The proceeds of the Loan were used to repurchase shares of the Company's
common stock (see Note 8 of Notes to Consolidated Financial Statements).
Operating Leases
In the third quarter of 1998, the Company entered into long-term operating
leases for certain new and used tractors and new trailers. The terms of such
leases are five to seven years. The minimum future rental payments under these
leases total $5.4 million at September 30, 1998. Additionally, the Company has
commitments to acquire more new tractors and trailers in the fourth quarter of
1998 under operating leases with future minimum rentals of approximately $3.2
million.
6. AFS NET ASSETS
Under the provisions of a Joint Plan of Reorganization ("the Joint Plan"), AFS
is responsible for the administration of pre-July 12, 1991 creditor claims and
conversion of assets owned before that date. As claims were allowed and cash
was available, distributions to the creditors occurred. The Joint Plan also
provided for distributions to TransFinancial as unsecured creditor distributions
occurred in excess of 50% of allowed claims. TransFinancial also will receive
the full benefit of any remaining assets of AFS through its ownership of AFS
stock, after unsecured creditors received distributions, including interest,
equivalent to 130% of their claims.
On April 24, 1998, the lawsuit against TransFinancial, AFS and certain
directors and officers of those companies by a former employee of AFS was
settled with no material impact on the Company's financial position or results
of operations.
On April 30, 1998, AFS paid a dividend to TransFinancial of substantially all
of its remaining net assets, including approximately $6.3 million of cash and
investments.
AFS has made full payment of all its resolved claims and liabilities. There
are no material claims outstanding against AFS as of September 30, 1998.
7. SHAREHOLDER RIGHTS PLAN
On July 14, 1998, the Board of Directors adopted a Shareholder Rights Plan by
declaring a dividend distribution of one Preferred Stock Purchase Right for
each outstanding share of TransFinancial Common Stock.
The Shareholder Rights Plan was adopted by the Board of Directors in part in
response to the announcement by TJS Partners, L.P. ("TJSP") of its intention to
increase its beneficial ownership of shares of Common Stock of the Company to
approximately 35% of outstanding shares by purchasing substantially all of the
shares owned by the Crouse family and to solicit the written consent of
shareholders to remove the existing Board of Directors (other than Larry Crouse)
and replace the Board with designees of TJSP. The Board of Directors determined
that the proposed hostile takeover of the Company by TJSP was not in the best
interests of the Company and its stockholders.
Under the Shareholder Rights Plan, Rights were issued on July 27, 1998 to
shareholders of record as of that date and will expire in ten years, unless
earlier redeemed or exchanged by the Company. The distribution of Rights was
not taxable to the Company or its shareholders.
The Rights become exercisable only if a person or entity is an "Acquiring
Person" (as defined in the Plan) or announces a tender offer, the consummation
of which would result in any person or group becoming an "Acquiring Person."
Each Right initially entitles the holder to purchase one one-hundredth of a
newly issued share of Series A Preferred Stock of the Company at an exercise
price of $50.00. If, however, a person or group becomes an "Acquiring Person",
each Right will entitle its holder, other than an Acquiring Person and its
affiliates, to purchase, at the Right's then current exercise price, a number of
shares of the Company's common stock having a market value of twice the Right's
exercise price.
In addition, if after a person or group becomes an Acquiring Person, the
Company is acquired in a merger or other business combination transaction, or
sells 50% or more of its assets or earning power, each Right will entitle its
holder, other than an Acquiring Person and its affiliates, to purchase, at the
Right's then current exercise price, a number of shares of the acquiring
company's common stock having a market value at the time of twice the Right's
exercise price.
Under the Shareholder Rights Plan, an "Acquiring Person" is any person or
entity which, together with any affiliates or associates, beneficially owns 15%
or more of the shares of Common Stock of the Company then outstanding. The
Shareholder Rights Plan contains a number of exclusions from the definition of
Acquiring Person. The Shareholders Rights Plan will not apply to a Qualifying
Offer, which is a cash tender offer to all shareholders satisfying certain
conditions set forth in the Plan.
The Company's Board of Directors may redeem the Rights at any time prior to a
person or entity becoming an Acquiring Person. Under the Shareholders Rights
Plan, for a period of one-hundred eighty (180) days after July 14, 1998, and for
a period of one-hundred eighty (180) days after the time any Person becomes an
Acquiring Person, the Board of Directors may redeem the rights or take any other
action with respect to the Rights only if a majority of the members of the Board
of Directors are Continuing Directors (as defined in the Plan) and the action is
approved by a majority of such Continuing Directors.
8. STOCK REPURCHASE
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company repurchased 2,115,422 shares of its common stock held by the Crouse
family, including 881,550 shares registered in the name of TJS Partners, LP, all
at a price of $9.125 per share. In addition, the Company paid $350,000 of legal
and other expenses which the Crouse family incurred in connection with the
takeover attempt. All but $456,000 of the total purchase price for the stock of
approximately $19.3 million was paid on September 30, 1998. The Company funded
the payment out of available cash and short-term investments, the proceeds from
the sale and leaseback of approximately $4.2 million of revenue equipment and
the proceeds from the $10.0 million secured loan from one of the Company's
existing bank lenders.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Reference is made to Item 3 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Third quarter ended September 30, 1998 compared to the third quarter ended
September 30, 1997 and nine months ended September 30, 1998 compared to the nine
months ended September 30, 1997.
TransFinancial operates primarily in three distinct segments; transportation,
through its subsidiary, Crouse; financial services, through its subsidiary,
UPAC; and industrial technology, through its subsidiary, Presis.
TRANSPORTATION
Operating Revenue - The changes in transportation operating revenue are
summarized in the following table (in thousands):
Qtr. 3 1998Nine Months 1998
vs. vs.
Qtr. 3 1997Nine Months 1997
Increase (decrease) from:
Increase in LTL tonnage........................ $2,830 $10,493
Increase (decrease) in LTL revenue per hundredweight (84) 156
Increase in truckload revenues................. 1,646 4,681
Net increase............................... $4,392 $15,330
Less-than-truckload ("LTL") operating revenues rose by 9.7% and 13.6% for the
third quarter and first nine months of 1998, as compared to the same periods in
1997. Crouse achieved increases of 10.0% and 13.4% in LTL tons for the third
quarter and first nine months of 1998, compared to 1997. Crouse's LTL revenue
yield has been relatively flat overall in 1998 as compared to 1997. The effects
of a softening in the economy, a slowing in the growth of LTL tons and an
increase in competitive pressures on freight rates, were substantially offset by
additional, high yield freight handled as a result of the Company's partnership
with a southeastern regional carrier which was initiated in the third quarter.
Truckload operating revenues were more than 32.9% and 32.3% higher in the
third quarter and first nine months of 1998, on approximately 35.3% and 35.2%
more shipments, primarily reflecting continued strength in the meat industry.
Operating Expenses - A comparative summary of transportation operating expenses
as a percent of transportation operating revenue follows:
<TABLE>
<CAPTION>
Percent of Operating Revenue
Third Quarter Nine Months
1998(1) 1997 1998(1) 1997
<S> <C> <C> <C> <C>
Salaries, wages and employee benefits.................... 57.7% 57.0% 57.4% 56.8%
Operating supplies and expenses.......................... 13.6% 11.9% 12.5% 12.3%
Operating taxes and licenses............................. 2.6% 2.5% 2.6% 2.7%
Insurance and claims..................................... 3.3% 2.4% 2.4% 2.1%
Depreciation............................................. 2.3% 2.9% 2.3% 3.0%
Purchased transportation................................. 22.7% 20.3% 22.2% 20.0%
Total operating expenses............................. 102.2% 97.0% 99.4% 96.9%
<FN>
(1) In connection with the failed takeover attempt by certain shareholders, an in-depth evaluation was performed on each of the
Company's business enterprises utilizing both internal and external resources. As a result of this process the Company effected
certain changes in its management team and corporate structure, and recorded valuation adjustments to certain assets and
liabilities. The resulting charges relative to the Company's transportation business are included in operating expenses for the
third quarter and nine months of 1998 as follows: $494,000 in Salaries, Wages and Employee Benefits; $450,000 in Operating Supplies
and Expenses; and $600,000 in insurance and claims.
</TABLE>
Crouse's operating expenses as a percentage of operating revenue, or operating
ratio, excluding the charges discussed above, was 98.1% and 98.0% for the third
quarter and nine months ended September 30, 1998, which was higher than the same
periods of 1997, as a result of the Company's substantial investments in market
expansion; the replacement and modernization of its fleet; and the development
of management information systems for the 21st century. The effects of these
investments will continue to impact Crouse's operating ratio into 1999.
Crouse's operating expenses were positively impacted by approximately $160,000
and $310,000 for the third quarter and nine months of 1998 as a result of a
change in accounting estimate of the remaining useful lives of certain revenue
equipment. This change is expected to decrease operating expenses by
approximately $328,000 for the remaining three months of 1998.
FINANCIAL SERVICES
As a result of the in-depth evaluation of the Company's business enterprises,
changes in its management team and adjustments to certain assets and liabilities
discussed in "Transportation - Operating Expenses", the Company recorded charges
relative to its financial services business in the third quarter and nine months
ended September 30, 1998. These charges include $392,000 relative to management
and personnel costs and $683,000 of charges related to adjustments in asset
values, including $333,000 of additional depreciation related to the change in
estimated useful life for purchased software (See Note 1 of Notes to
Consolidated Financial Statements).
For the third quarter and first nine months of 1998 UPAC reported operating
income, excluding the charges discussed above, of $189,000 and $249,000 on net
financial services revenue of $1.9 million and $5.1 million, as compared to
operating income of $207,000 and $868,000 on net financial services revenue of
$1.8 million and $5.5 million for the comparable periods of 1997. The decrease
in net financial services revenue and operating income was the result of reduced
average total receivables outstanding, an increase in the percentage of finance
contracts originated which were sold under the securitization agreement, a lower
average yield on finance contracts and a slight increase in the Company's cost
of funds. On May 29, 1998, UPAC acquired Oxford Premium Finance, Inc., an
insurance premium finance business serving the Chicago area and the industrial
Midwest, as part of the Company's strategy to build revenue and profitability by
increasing the financing volumes handled by UPAC's existing administrative
infrastructure.
INDUSTRIAL TECHNOLOGY
As a result of the in-depth evaluation of the Company's business enterprises,
changes in its management team and adjustments to certain assets and liabilities
discussed previously, the Company recorded charges related to its industrial
technology investment in the third quarter and nine months ended September 30,
1998. These charges include $244,000 related to management and consulting
contracts and $525,000 resulting from the adjustment of the carrying value of
certain equipment and intangibles to fair value (see Note 1 of Notes to
Consolidated Financial Statements).
In the third quarter and first nine months of 1998, Presis, the Company's
start-up industrial technology business incurred operating expenses, excluding
the charges discussed above, of $157,000 and $619,000, primarily in salaries,
wages and employee benefits as compared to operating expenses of $71,000 for the
third quarter and nine months ended September 30, 1997. In its initial phase
Presis has focused on continued research and testing of its technology. The
Company expects this operation to incur operating losses in the remainder of
1998, which are likely to be material in relation to its consolidated results of
operations.
OTHER
In connection with the failed takeover attempt, the Company incurred $500,000
in transaction costs and expenses which are included in general corporate
expenses in the third quarter and nine months of 1998. Additionally, general
corporate charges of $700,000 were recorded relative to lawsuits filed by the
Company against an environmental engineering firm to recover certain excess
costs incurred to remove contaminated soil from a site formerly owned by the
Company and against an excess loss insurance carrier to recover costs incurred
to settle workers' compensation claims. The Company has not recorded the
benefit of any anticipated recovery pursuant to these lawsuits.
Net interest income decreased in the third quarter and first nine months of
1998 as compared to the third quarter and first nine months of 1997 as a result
of reduced average balances invested and interest expense on borrowed funds
under Crouse's Working Capital Line. TransFinancial's effective income tax
rates for the third quarter and nine months of 1998 were 35.9% and 31.3% as
compared to 45.2% and 45.7% for the same periods of 1997. The effective income
tax rates for the periods of 1998 are lower due to the impact of non-deductible
intangibles amortization and non-deductible meals and entertainment expenses,
which reduce the tax benefit of pre-tax losses in 1998, as compared to the
impact of these items on pre-tax income for the periods of 1997.
Outlook
The following statements are forward-looking statements, within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and as such
involve risks and uncertainties which are detailed below under the caption
"Forward-Looking Statements".
The Company developed a three-year strategic plan with the goals of continuing
the growth of each of its business segments, and making the financial services
segment a more equal contributor to the Company's earnings per share. In the
transportation segment, the plan calls for the Company to continue to provide
and improve upon its already superior service to its customers, while extending
its operations throughout the Midwest. As the Company makes the strategic
investments necessary to support this expansion, the Company intends to continue
to improve the efficiency and effectiveness of its existing base of operations.
The financial services segment will also focus on increasing its market
penetration in certain states with substantial population and industrial base.
The additional volume of premium finance contracts is expected to be handled
within the Company's existing administrative operations without incurring
significant additional fixed costs.
The industrial technology operation will focus on continued research and
testing and product development. The Company expects this operation to incur
operating losses in the remainder of 1998, which are likely to be material in
relation to its consolidated results of operations.
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q which are
not statements of historical fact constitute forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
including, without limitation, the statements specifically identified as
forward-looking statements in this Form 10-Q. In addition, certain statements
in future filings by the Company with the Securities and Exchange Commission, in
the Company's press releases, and in oral statements made by or with the
approval of an authorized executive officer of the Company which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Act. Examples of forward-looking statements include, but are not
limited to (i) projections of revenues, income or loss, earnings or loss per
share, capital expenditures, the payment or non-payment of dividends, capital
structure and other financial items, (ii) statements of plans and objectives of
the Company or its management or Board of Directors, including plans or
objectives relating to the products or services of the Company, (iii) statements
of future economic performance, and (iv) statements of assumptions underlying
the statements described in (i), (ii) and (iii). These forward-looking
statements involve risks and uncertainties which may cause actual results to
differ materially from those anticipated in such statements. The following
discussion identifies certain important factors that could affect the Company's
actual results and actions and could cause such results or actions to differ
materially from any forward-looking statements made by or on behalf of the
Company that related to such results or actions. Other factors, which are not
identified herein, could also have such an effect.
Transportation
Certain specific factors which may affect the Company's transportation
operation include: competition from other regional and national carriers for
freight in the Company's primary operating territory; price pressure; changes in
fuel prices; labor matters, including changes in labor costs, and other labor
contract issues resulting from the negotiation and ratification of new contracts
to replace current contracts, covering certain office, shop and terminal
employees, which expired March 31, 1998; and, environmental matters.
Financial Services
Certain specific factors which may affect the Company's financial services
operation include: the performance of financial markets and interest rates; the
performance of the insurance industry; competition from other premium finance
companies and insurance carriers for finance business in the Company's key
operating states; adverse changes in interest rates in states in which the
Company operates; greater than expected credit losses; the acquisition and
integration of additional premium finance operations or receivables portfolios;
and, the inability to obtain continued financing at a competitive cost of funds.
Industrial Technology
Presis is a start-up business formed to develop, sell and/or finance equipment
utilizing an industrial technology for dry particle processing. This technology
is subject to risks and uncertainties in addition to those generally applicable
to the Company's operations described herein. These additional risks and
uncertainties include the efficacy and commercial viability of the technology,
the ability of the venture to market the technology, the acceptance of such
technology in the marketplace, the general tendency of large corporations to be
slow to change from known technology, the business' reliance on third parties to
manufacture the equipment utilizing the technology, the ability to protect its
proprietary information in the technology and potential future competition from
third parties developing equivalent or superior technology. As result of these
and other risks and uncertainties, the future results of operations of the
venture are difficult to predict, and such results may be materially better or
worse than expected or projected.
Other Matters
With respect to statements in this Report which relate to the current
intentions of the Company and its subsidiaries or of management of the Company
and its subsidiaries, such statements are subject to change by management at any
time without notice.
With respect to statements in "Financial Condition" regarding the adequacy of
the Company's capital resources, such statements are subject to a number of
risks and uncertainties including, without limitation: the future economic
performance of the Company (which is dependent in part upon the factors
described above); the ability of the Company and its subsidiaries to comply with
the covenants contained in the financing agreements; future acquisitions of
other businesses not currently anticipated by management of the Company; and
other material expenditures not currently anticipated by management.
With respect to statements in "Financial Condition" regarding the adequacy of
the allowances for credit losses, such statements are subject to a number of
risks and uncertainties including, without limitation: greater than expected
defaults by customers, fraud by insurance agents and general economic
conditions.
General Factors
Certain general factors which could affect any or all of the Company's
operations include: changes in general business and economic conditions; changes
in governmental regulation; tax changes; and the ability of the Company and its
major service providers, vendors, suppliers and customers to adequately address
the year 2000 issue. Expansion of these businesses into new states or markets
is substantially dependent on obtaining sufficient business volumes from
existing and new customers in these new markets at compensatory rates.
The cautionary statements made pursuant to Section 21E of the Securities
Exchange Act of 1934, as amended, are made as of the date of this Report and are
subject to change. The cautionary statements set forth in this Report are not
intended to cover all of the factors that may affect the Company's businesses in
the future. Forward-looking information disseminated publicly by the Company
following the date of this Report may be subject to additional factors hereafter
published by the Company.
FINANCIAL CONDITION
The Company's financial condition remained strong at September 30, 1998 with
more than $3.9 million in cash and investments. The Company's current ratio was
2.2 to 1.0 and its ratio of total liabilities to tangible net worth was 0.7 to
1.0. Effective April 30, 1998, AFS paid a dividend to TransFinancial of
substantially all of its remaining net assets, including approximately $6.3
million of cash and investments. During the first nine months of 1998, the
Company has purchased $2.4 million, net, of operating equipment using operating
cash flows. In addition, the Company has entered into long-term operating
leases of revenue equipment with minimum future rental payments of $5.4 million
and has committed to additional leases with $3.2 million of minimum rentals.
A substantial portion of the capital required for UPAC's insurance premium
finance operations has been provided through the sale of undivided interests in
a designated pool of receivables on an ongoing basis under receivables
securitization agreements. The current securitization agreement, which matures
December 31, 1999, currently provides for the sale of a maximum of $85.0 million
of eligible receivables. As of September 30, 1998, $64.8 million of such
receivables had been securitized.
In January 1998, Crouse entered into a three-year Secured Loan Agreement with
a commercial bank which provides for a $4.5 million working capital line of
credit loan ("Working Capital Line") and a $4.5 million equipment line of
credit loan ("Equipment Line"). There were no borrowings under the Equipment
Line in the quarter ended and nine months September 30, 1998. As of September
30, 1998, no borrowings were outstanding under the Working Capital Line.
The Company has a controlling interest in Presis, L.L.C., and the exclusive
finance and/or sale rights to equipment produced by Presis. Presis owns rights
to a proprietary, industrial technology for dry particle processing. Presis
intends to market equipment utilizing this technology to companies which would
benefit from the use of dry particle processing in their manufacturing
processes. In its initial phase, Presis will focus on continued research,
product development, establishing sources of supply, recruiting and training
personnel, developing markets and contracting for production. The Company
expects this operation to incur initial operating losses during the remainder of
1998, which are likely to be material in relation to its consolidated results of
operations.
Crouse has achieved ratification of new five year pacts with the
International Brotherhood of Teamsters covering in excess of 80% of its union
employees. The new contracts, which became effective October 4, 1998, provide
for all of the terms of the National Master Freight Agreement with a separate
addendum for wages. Crouse will continue to maintain its past work rules,
practices and flexibility within its operating structure. Crouse continues to
negotiate with union locals representing the remaining employees. There can be,
however, no assurance that Crouse's remaining union employees will ratify new
contracts acceptable to both the Company and the union, or that work stoppages
will not occur. If a work stoppage should occur, Crouse's customer base would be
put at risk inasmuch as its competition would have a continuing operating
advantage. Any of these actions could have a material adverse effect on the
Company's business, financial condition, liquidity or results of operations.
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company repurchased 2,115,422 shares of its common stock held by the Crouse
family, including 881,550 shares registered in the name of TJS Partners, LP, all
at a price of $9.125 per share. Also pursuant to the Stock Purchase Agreement,
the Company reimbursed the Crouse family for $350,000 of legal and other
expenses incurred in connection with the takeover attempt. All but $456,000 of
the total purchase price for the stock of approximately $19.3 million was paid
on September 30, 1998. The Company funded the payment out of available cash and
short-term investments, the proceeds from the sale and leaseback of
approximately $4.2 million of revenue equipment and the proceeds from a $10.0
million secured loan from one of the Company's existing bank lenders (see Note 5
of Notes to Consolidated Financial Statements).
Year 2000 Issues
The Year 2000 Issue is the result of computer programs being written using two
digits to represent years rather than four digits, which include the century
designation. Without corrective action, it is possible that the Company's
computer programs, or its major service providers, vendors, suppliers, partners
or customers that have date-sensitive software could recognize a date using "00"
as the year 1900 rather than the year 2000. Additionally, certain other assets
may contain embedded chips that include date functions that could be affected by
the transition to the year 2000. In some systems this could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has developed and is executing a Year 2000 Compliance Strategic
Plan ("Year 2000 Plan") to enable management of TransFinancial Holdings, Inc.
and each of its business operations to ensure that each of its critical business
systems are "Year 2000 Compliant". The Company considers a business system to
be Year 2000 Compliant if it is able to transition into the year 2000 without
significant disruption to the Company's internal operations or those of its key
business partners. The Year 2000 Plan encompasses the Company's information
technology assets, including computer hardware and software ("IT assets") and
non-information technology assets, goods and services, including assets
utilizing embedded chip technology and significant customer and vendor
relationships ("non-IT assets").
The Company's Year 2000 Plan includes three principal sections: (1) mainframe
computer and personal computer hardware and software utilized by the Company's
transportation operations ("Transportation IT assets"); (2) desktop computer
applications, embedded chips, significant business partners of the
transportation operations ("Transportation non-IT assets"); and (3) personal
computer hardware and software, desktop computer applications, embedded chips,
significant business partners of the financial services operations ("Financial
Services IT and non-IT assets"). The general phases common to all sections are:
(1) inventorying, assessing and assigning priorities to Year 2000 items
("Inventory Phase"); (2) taking corrective actions to modify, repair or replace
items that are determined not to be Year 2000 Compliant ("Corrective Action
Phase"); (3) testing material items ("Testing Phase"); and (4) developing and
implementing contingency plans for each organization and location ("Contingency
Planning Phase"). The Company intends to utilize primarily internal personnel
and resources to execute its Year 2000 Plan but may utilize external consultants
as needed in certain phases.
Transportation IT assets
With regard to the Transportation IT assets section, the Inventory Phase is
substantially completed. The Company has identified its computer applications,
programs and hardware and is in the processing of assessing the Year 2000 risk
associated with each item. The Company has begun executing the Corrective
Action Phase by modifying or upgrading items that are not Year 2000 compliant.
This phase is expected to be complete by the end of the first quarter of 1999.
The Testing Phase is ongoing as corrective actions are completed. The Testing
Phase is anticipated to be complete in the second quarter of 1999. The
Contingency Planning Phase will begin in the first quarter of 1999 and be
completed in the second quarter of 1999.
Transportation non-IT assets
With regard to the Transportation non-IT assets section, the Inventory Phase
is substantially completed. The Company has identified assets that may contain
embedded chip technologies and has contacted the related vendors to gain
assurance of Year 2000 status on each item. The Company has also identified its
significant business relationships and has contacted key vendors, suppliers and
customers to attempt to reasonably determine their Year 2000 status. The
Company is in the process of effecting the Corrective Action Phase, which is
anticipated to be complete by the end of the first quarter of 1999. The Testing
Phase is ongoing as corrective actions are completed. This phase is anticipated
to be complete in the first quarter of 1999. The Contingency Planning Phase
will begin in the first quarter of 1999 and be completed in the third quarter of
1999.
Financial Services IT and non-IT assets
With regard to the Financial Services IT and non-IT assets section, the
Inventory Phase is completed. The Company has identified its computer
applications, programs and hardware and non-IT assets and has assessed the Year
2000 risk associated with each item. The Company has also identified its
significant business relationships and has contacted key vendors, suppliers and
customers to attempt to reasonably determine their Year 2000 status. The
Company has substantially completed the Corrective Action Phase. The Company's
financial services' database, operating systems and computer applications have
been upgraded or modified to address the Year 2000. The Testing Phase has been
ongoing as corrective actions were completed and is anticipated to be complete
in the fourth quarter of 1998. The Contingency Planning Phase will begin in the
first quarter of 1999 and be completed in the second quarter of 1999.
Costs
It is currently estimated that the aggregate cost of the Company's Year 2000
efforts will be approximately $150,000 to $200,000, of which approximately
$40,000 has been spent. These costs are being expensed as they are incurred and
are being funded out of operating cash flow. These amounts do not include
approximately $100,000 of costs to be capitalized as the Company replaces
certain non-IT assets, in part to address the Year 2000 issue, as part of the
Company's normal capital replacement and upgrades. These amounts also do not
include any costs associated with the implementation of contingency plans that
will be developed in 1999.
Risks
The failure to correct a material Year 2000 issue could result in an
interruption in, or failure of, certain normal business operations. Such
failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 issue, resulting in part from the uncertainty of the
Year 2000 readiness of third-party vendors, suppliers and customers, the Company
is unable to determine at this time whether the consequences of Year 2000
failures will have a material impact on the Company's results of operations,
liquidity and financial condition. The Company's Year 2000 Plan is designed to
gather information concerning Year 2000 issues facing the Company and to address
and resolve such issues to the extent reasonably possible. Even if the Company
successfully implements its Year 2000 Plan, there can be no assurance that the
Company's operations will not be affected by Year 2000 failures or that such
failures will not have a material adverse effect on the Company's results of
operations, liquidity and financial condition.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings Reference is made to Item 3 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997.
On April 24, 1998, the lawsuit against TransFinancial, AFS and certain
directors and officers of those companies by a former employee of AFS was
settled with no material impact on the Company's financial position or results
of operations.
Item 2. Changes in Securities and Use of Proceeds
On July 14, 1998, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of Common Stock of the
Company, payable on July 27, 1998 to stockholders of record at the close of
business on that date. Each Right entitles the registered holder to purchase
from the Company at any time following the Distribution Date (as defined below)
a unit consisting of one one-hundredth of a share of Series A Preferred Stock
for $50. A description of the terms of the Rights is set forth in a Rights
Agreement dated July 14, 1998, (the "Rights Agreement") between the Company and
UMB Bank, N.A., as Rights Agent.
Initially, the Rights will be evidenced by certificates of Common Stock and
will automatically trade with the Common Stock. Upon occurrence of a
Distribution Date, the Rights will become exercisable and separate certificates
representing the Rights will be issued. The "Distribution Date" will occur
upon the earlier of (a) the date of a public announcement or a public
disclosure of facts by the Company or any Person that such Person has become an
"Acquiring Person" (as defined below) and (b) 10 business days (or such later
date as the Board shall determine prior to such time as there is an Acquiring
Person) following the commencement of, or announcement of an intention to make,
a tender or exchange offer, the consummation of which would result in a Person
becoming an Acquiring Person.
In the event that a Person becomes an Acquiring Person, each holder of a
Right (except the Acquiring Person and certain other persons) will no longer
have the right to purchase units of Preferred Stock, but instead will thereafter
have the right to receive, upon exercise of the Right, shares of Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a Current Market Value (as defined in the Rights Agreement)
equal to two times the then current exercise price of the Right. Once a Person
becomes an Acquiring Person, all Rights that are, or under certain circumstances
were, owned by the Acquiring Person ( or certain related parties) will be null
and void. In the event that, at any time after a Person becomes an Acquiring
Person, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger which satisfies certain requirements), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the then current exercise
price of the Right.
Under the Rights Agreement, an Acquiring Person is a Person who, together
with all affiliates and associates of such Person, and without the prior written
approval of the Company, is the Beneficial Owner (as defined in the Rights
Agreement) of 15% or more of the outstanding shares of Common Stock of the
Company, subject to a number of exceptions set forth in the Rights Agreement.
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may under certain circumstances exchange the Rights
(except Rights which previously have been voided as set forth above), in whole
or in part, at an exchange ratio of one share of Common Stock for each Right.
The Rights will expire at the close of business on July 14, 2008, unless the
Company redeems or exchanges the Rights prior to such date.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Registration Statement on Form 8-A
dated July 15, 1998 and to the Current Report on Form 8-K dated July 15, 1998.
A copy of the Rights Agreement is available free of charge from the Rights
Agent. This summary of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference. See also Footnote 7 to Consolidated
Financial Statements set forth herein.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1* Amendment No. 5 to Receivables Purchase Agreement by and among APR
Funding Corporation, Universal Premium Acceptance Corporation, TransFinancial
Holdings, Inc., EagleFunding Capital Corporation and BankBoston, N.A., dated
August 25, 1998.
10.2* Amendment No. 6 to Receivables Purchase Agreement by and among APR
Funding Corporation, Universal Premium Acceptance Corporation, TransFinancial
Holdings, Inc., EagleFunding Capital Corporation and BankBoston, N.A., dated
September 11, 1998.
10.3* Secured Loan Agreement by and between Bankers Trust of Des Moines,
Iowa, TransFinancial Holdings, Inc., and Crouse Cartage Company, dated September
29, 1998.
27* Financial Data Schedule.
* Filed herewith.
(b) Reports on Form 8-K -
(1) A Current Report on Form 8-K, dated July 15, 1998, filed July 16,
1998, to report the declaration of a rights dividend.
(SIGNATURE)
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TransFinancial Holdings, Inc.
Registrant
By: /s/ Timothy P. O'Neil
Timothy P. O'Neil, President &
Chief Executive Officer
By: /s/ Mark A. Foltz
Mark A. Foltz
Vice President, Finance and
Secretary
Date: November 16, 1998
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
10.1 Amendment No. 5 to Receivables Purchase Agreement by and among APR
Funding Corporation, Universal Premium Acceptance Corporation, TransFinancial
Holdings, Inc., EagleFunding Capital Corporation and BankBoston, N.A., dated
August 25, 1998.
10.2 Amendment No. 6 to Receivables Purchase Agreement by and among APR
Funding Corporation, Universal Premium Acceptance Corporation, TransFinancial
Holdings, Inc., EagleFunding Capital Corporation and BankBoston, N.A., dated
September 11, 1998.
10.3 Secured Loan Agreement by and between Bankers Trust of Des Moines,
Iowa, TransFinancial Holdings, Inc., and Crouse Cartage Company, dated September
29, 1998.
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
TransFinancial Holdings, Inc.'s consolidated statement of income for the nine
months ended September 30, 1998 and consolidated balance sheet as of September
30, 1998, and is qualified in ite entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000719271
<NAME> TRANSFINANCIAL HOLDINGS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3390
<SECURITIES> 517
<RECEIVABLES> 28046
<ALLOWANCES> 1210
<INVENTORY> 0
<CURRENT-ASSETS> 36507
<PP&E> 55452
<DEPRECIATION> 23407
<TOTAL-ASSETS> 79308
<CURRENT-LIABILITIES> 16542
<BONDS> 0
0
0
<COMMON> 76
<OTHER-SE> 50888
<TOTAL-LIABILITY-AND-EQUITY> 79308
<SALES> 0
<TOTAL-REVENUES> 113652
<CGS> 0
<TOTAL-COSTS> 117117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3110)
<INCOME-TAX> (973)
<INCOME-CONTINUING> (2137)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2137)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
AMENDMENT NO. 5
TO
RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT NO. 5 TO RECEIVABLES PURCHASE AGREEMENT (the
"Amendment") dated as of August 25, 1998 is entered into by and among APR
FUNDING CORPORATION, a Delaware corporation (the "Seller"), UNIVERSAL PREMIUM
ACCEPTANCE CORPORATION, a Missouri corporation, individually ("UPAC") and as
Servicer (in such capacity, the "Servicer"), TRANSFINANCIAL HOLDINGS, INC.
(formerly known as Anuhco, Inc.), a Delaware corporation (the "Parent"),
EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation (the "Purchaser"), and
BANKBOSTON, N.A. (formerly known as THE FIRST NATIONAL BANK OF BOSTON) (as
"Agent", as "Custodian" and in its individual capacity). Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to such
terms in Appendix A to the "Agreement" (as defined below).
W I T N E S S E T H:
WHEREAS, the Seller, UPAC, the Servicer, the Parent, the Purchaser and
the Agent have entered into that certain Receivables Purchase Agreement dated as
of December 31, 1996 (as the same shall have been amended through the date
hereof, the "Agreement"; the terms defined therein being used herein as therein
defined unless otherwise defined herein), pursuant to which, among other things,
the Seller has agreed to sell to the Purchaser, and the Purchaser has agreed to
purchase from the Seller, undivided percentage interests in the Seller's
Receivables;
WHEREAS, pursuant to certain correspondence received by the Purchaser
from the Virginia Bureau of Insurance (the "Bureau"), all Receivables in the
Receivables Pool owing by Direct Obligors resident in the Commonwealth of
Virginia (collectively, "Virginia Receivables") have become Adverse
Determination Receivables;
WHEREAS, under Section 3.07(b) of the Agreement, upon the Purchaser's
demand, the Seller is required to repurchase the Purchaser's ownership interest
in Adverse Determination Receivables at the end of related applicable Yield
Periods;
WHEREAS, the Purchaser is so demanding the repurchase of its ownership
interest in the Virginia Receivables under Section 3.07(b) of the Agreement; and
WHEREAS, in accordance with certain instructions received by the
Purchaser from the Bureau, the parties hereto have agreed to modify certain
terms and provisions of the Agreement as set forth herein in order to avoid the
inclusion, after the effectiveness of this Amendment, of any additional Virginia
Receivables in the Receivables Pool;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. REPURCHASE OF ADVERSE DETERMINATION RECEIVABLES. The
Purchaser hereby demands that the Seller repurchase the Purchaser's ownership
interest in all of the Virginia Receivables outstanding at the opening of
business of the Servicer on , 1998 (the "Repurchase Date")
(which date corresponds with the end of a Yield Period) for a repurchase price
calculated on such day in accordance with the terms of Section 3.07(b) of the
Agreement (the "Repurchase Price"). The Seller represents and warrants that
attached hereto as Exhibit A is a complete and accurate list of all Virginia
Receivables outstanding at the opening of business of the Servicer on
, 1998 (the "Estimation Date"), and a calculation of the
corresponding estimated repurchase price based on Virginia Receivables
outstanding at the opening of business on the Estimation Date. The Seller
covenants that it shall calculate the Repurchase Price on and as of the opening
of business of the Servicer on the Repurchase Date, and shall give prompt notice
to the Purchaser of the Repurchase Price (in all events, such notice to be given
no later than 10:30 A.M. Boston, Massachusetts time on the same day). In the
event that the Seller requests that the Purchaser make an additional Purchase on
the Repurchase Date under Section 1.02(a) of the Agreement, the Seller shall
also calculate, and give the Purchaser notice of, an amount equal to the
remainder of the Repurchase Price minus the amount otherwise payable by the
Purchaser to the Seller in respect of such Purchase (such net amount being (x)
the "Net Seller Remittance" in the event such net amount is positive, and (y)
the "Net Purchaser Remittance" in the event such net amount is negative).
Immediately upon (i) receipt by the Purchaser from the Seller of the notice of
the Repurchase Price, and (ii) (A) receipt of the amount of the Repurchase Price
in the Purchaser's account at Bankers Trust Company, 4 Albany Street, New York,
New York 10006, Account No. 22062, ABA No.: 021-001-033; Reference: APR Funding
Collateral Account (the "Purchaser's Account"), or (B) in the event that the
Seller requests that the Purchaser make an additional Purchase on the Repurchase
Date under Section 1.02(a) of the Agreement, to the extent applicable (1)
receipt of the amount of the Net Seller Remittance in the Purchaser's Account,
or (2) receipt by the Seller of an amount equal to the absolute value of the Net
Purchaser Remittance in the Agent's Account, such Adverse Determination
Receivables shall thereupon be deemed removed from the Receivables Pool for all
purposes hereunder and under the Agreement (the consummation of such removal
being hereinafter referred to as the "Repurchase"). Notwithstanding anything
herein or elsewhere to the contrary, the occurrence of the Repurchase shall not
substitute for, or limit the applicable indemnification obligations under,
Article XIII of the Agreement in favor of any of the Indemnified Parties
(including, without limitation, the Purchaser), which may have been incurred in
connection with the Adverse Determination and the negotiation and execution of
the Repurchase.
SECTION 2. AMENDMENTS TO THE AGREEMENT. Effective as of the first
date on which each of the conditions set forth in Section 3 hereof shall have
been satisfied, the Agreement is amended as follows:
(a) The definition of "Receivable" in Appendix A of the Agreement is
hereby amended to insert the following parenthetical phrase after the first
reference to the word "Obligor" therein:
"(other than a Virginia Obligor)".
(b) Appendix A of the Agreement is hereby further amended to insert
the following definition after the definition of the term "Unpaid Principal
Balance":
"'Virginia Obligor' means a Direct Obligor resident in the
Commonwealth of Virginia.".
SECTION 3. CONDITIONS PRECEDENT. This Amendment shall become
effective upon the satisfaction of each of the following conditions precedent:
(a) The Agent shall have received the following (including all
attachments thereto), each in form and substance satisfactory to the Agent:
(i) Eight fully executed copies of this Amendment; and
(ii) Such other further documents and information as the Agent
shall reasonably request.
(b) No event or condition has occurred and is continuing, or would
result from the execution, delivery or performance of this Amendment, which
would constitute a Liquidation Event or Unmatured Liquidation Event; and
(c) The Repurchase shall have occurred in accordance with Section 1
hereof.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. Upon the
effectiveness of this Amendment, each of the Seller, UPAC, the Servicer and the
Parent, hereby remakes and reaffirms all covenants, representations and
warranties made by it (or deemed made by it) in the Agreement, the Backup
Servicing Agreement, the Custody Agreement and the Parent Support Agreement
(except, in each case, to the extent that such covenants, representations or
warranties expressly speak as to another date).
SECTION 5. CONSENT AND REAFFIRMATION. The Parent, by its execution
hereof, hereby (i) consents to the execution, delivery and performance of this
Amendment by all of the parties hereto and (ii) reaffirms all of its obligations
and liabilities under that certain Parent Support Agreement dated as of December
31, 1996 executed by the Parent in favor of the Seller and its successors and
assigns, which obligations and liabilities shall remain in full force and
effect.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. SEVERABILITY. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof in one jurisdiction shall not have the
effect of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 8. REFERENCE TO AND EFFECT ON THE AGREEMENT. Upon the
effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import shall mean
and be, and references to the Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Agreement shall mean
and be, a reference to the Agreement as previously amended and as amended
hereby. Except as otherwise amended by this Amendment, the Agreement as
previously amended shall continue in full force and effect and is hereby
ratified and confirmed.
SECTION 9. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
SECTION 10. FEES AND EXPENSES{TC ". FEES AND EXPENSES"}. The Seller
hereby confirms its agreement to pay on demand all reasonable costs and expenses
in connection with the preparation, execution and delivery of this Amendment and
any of the other instruments, documents and agreements to be executed and/or
delivered in connection herewith, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel to the Agent with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
APR FUNDING CORPORATION,
as Seller
By
Title
UNIVERSAL PREMIUM ACCEPTANCE CORPORATION,
individually and
as initial Servicer
By
Title
TRANSFINANCIAL HOLDINGS, INC.
(formerly known as Anuhco, Inc.)
as Parent
By
Title:
EAGLEFUNDING CAPITAL CORPORATION,
as Purchaser
By: BANKBOSTON, N.A.(formerly known as The First
National Bank of Boston) as its attorney-in-
fact
By
Title
BANKBOSTON, N.A.(formerly known as THE FIRST
NATIONAL BANK OF BOSTON), as Agent
By
Title
Exhibit A
List of Virginia Receivables
[TO BE PROVIDED BY THE SELLER]
Calculation of Repurchase Price as of Estimation Date
[TO BE PROVIDED BY THE SELLER]
AMENDMENT NO. 6
TO
RECEIVABLES PURCHASE AGREEMENT
THIS AMENDMENT NO. 6 TO RECEIVABLES PURCHASE AGREEMENT (the
"Amendment") dated as of September 11, 1998 is entered into by and among APR
FUNDING CORPORATION, a Delaware corporation ("Seller"), UNIVERSAL PREMIUM
ACCEPTANCE CORPORATION, a Missouri corporation, individually ("UPAC") and as
Servicer (in such capacity, the "Servicer"), TRANSFINANCIAL HOLDINGS, INC.
(formerly known as Anuhco, Inc.), a Delaware corporation (the "Parent"),
EAGLEFUNDING CAPITAL CORPORATION, a Delaware corporation ("Purchaser"), and
BANKBOSTON, N.A. (formerly known as THE FIRST NATIONAL BANK OF BOSTON) (as
"Agent", as "Custodian" and in its individual capacity). Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to such
terms in Appendix A to the "Agreement" (as defined below).
W I T N E S S E T H:
WHEREAS, the Seller, UPAC, the Servicer, the Parent, the Purchaser and
the Agent have entered into that certain Receivables Purchase Agreement dated as
of December 31, 1996 (as the same shall have been amended through the date
hereof, the "Agreement"; the terms defined therein being used herein as therein
defined unless otherwise defined herein), pursuant to which, among other things,
the Seller has agreed to sell to the Purchaser, and the Purchaser has agreed to
purchase from the Seller, undivided percentage interests in the Seller's
Receivables; and
WHEREAS, the parties hereto have agreed to modify certain terms and
provisions of the Agreement as set forth herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. AMENDMENTS TO THE AGREEMENT. Effective as of the first
date on which each of the conditions set forth in Section 2 hereof shall have
been satisfied, the Agreement is amended as follows:
(a) Section 1.01 of the Agreement is hereby amended to delete the
amount "$65,000,000" and to substitute therefor "$85,000,000".
(b) Section 7.09(a) of the Agreement is hereby amended to delete the
amount "$50,000,000" and to substitute therefor "$40,000,000".
(c) The definition of "Excess Concentration Deduction" in Appendix A
of the Agreement is hereby amended as follows:
(1) Clause (C) of such definition is amended to reduce the
Concentration Limits for each of The Lockton Companies and Wycon Corp. from
10.0% to 5.0%.
(2) Clause (E) of such definition is amended to reduce the
Concentration Limit for Workers compensation policies from 30.0% to 20.0%.
(3) Clause (F) of such definition is amended to increase the
Concentration Limit for Loan Term "B" from 5.0% to 10.0%.
(4) Clause (I) of such definition is amended in its entirety to read
as follows:
(I) Certain Insurance Obligors in the
Aggregate. The amount by which (x) the aggregate
unpaid principal balance of all Eligible
Receivables having Insurance Obligors which either
(1) have a Best's Rating of B- or lower, or (2)
are not otherwise described in any of clauses 1
through 3 of Section (A) of this definition,
exceeds (y) an amount equal to 5.0% of the unpaid
principal balance of all Eligible Receivables.
(5) The definition of "Excess Concentration Deduction" in Appendix A
of the Agreement is hereby further amended to add the following Section (J)
thereto:
(J) Certain Loan Term "B" Obligors. The amount by which
(x) the unpaid principal balance of Eligible Receivables for
policies that have been originated under Loan Term "B" and which
either (1) have a Best's Rating of lower than B-, or (2) are not
otherwise described in any of clauses 1 through 3 of Section (A)
of this definition, exceeds (y) an amount equal to 1.0% of the
unpaid principal balance of all Eligible Receivables.
(d) The definition of "Scheduled Termination Date" in Appendix A of
the Agreement is hereby amended to delete the date "December 30, 1999" and to
substitute therefor "December 30, 2001".
SECTION 2. CONDITIONS PRECEDENT. This Amendment shall become
effective upon the satisfaction of the following conditions precedent:
(a) The Agent shall have received:
(i) eight fully executed copies of this Amendment; and
(ii) such other further documents and information
as the Agent shall reasonably request.
(b) No event or condition has occurred and is continuing, or would
result from the execution, delivery or performance of this Amendment, which
would constitute a Liquidation Event or Unmatured Liquidation Event;
(c) The Purchaser shall have obtained confirmation from each of the
three rating agencies rating the Commercial Paper Notes that the amendments
herein, the amendments to the Liquidity Agreement of even date herewith and
the addition of Lloyds Bank Plc as a Liquidity Bank will not result in a
withdrawal or reduction of the ratings of the Commercial Paper Notes;
(d) All of the fees and expenses referred to in Section 9 below and
any other fees and expenses owing under Section 14.05 of the Agreement or any
other agreement between the parties thereto shall have been paid in full; and
(e) The conditions precedent to the effectiveness of that certain
Amendment No. 3 to the Liquidity Agreement of even date herewith shall have been
fully satisfied.
(f) The conditions precedent to the effectiveness of that certain
Assignment and Acceptance between BankBoston, N.A. and Lloyds Bank Plc of even
date herewith and related to the Liquidity Agreement shall have been fully
satisfied.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
Upon the effectiveness of this Amendment, each of the Seller, UPAC,
the Servicer and the Parent, hereby remakes and reaffirms all covenants,
representations and warranties made by it (or deemed made by it) in the
Agreement, the Backup Servicing Agreement, the Custody Agreement and the Parent
Support Agreement (except, in each case, to the extent that such covenants,
representations or warranties expressly speak as to another date).
SECTION 4. CONSENT AND REAFFIRMATION. The Parent, by its execution
hereof, hereby (i) consents to the execution, delivery and performance of the
Amendment by all of the parties hereto and (ii) reaffirms all of its obligations
and liabilities under that certain Parent Support Agreement dated as of December
31, 1996 executed by the Parent in favor of the Seller and its successors and
assigns, which obligations and liabilities shall remain in full force and
effect.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS DISTINGUISHED FROM THE
CONFLICT OF LAW PROVISIONS) OF THE STATE OF NEW YORK.
SECTION 6. SEVERABILITY. Each provision of this Amendment shall be
severable from every other provision of this Amendment for the purpose of
determining the legal enforceability of any provision hereof, and the
unenforceability of any provision hereof in one jurisdiction shall not have the
effect of rendering such provision or provisions unenforceable in any other
jurisdiction.
SECTION 7. REFERENCE TO AND EFFECT ON THE AGREEMENT. Upon the
effectiveness of this Amendment, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like import shall mean
and be, and references to the Agreement in any other document, instrument or
agreement executed and/or delivered in connection with the Agreement shall mean
and be, a reference to the Agreement as previously amended and as amended
hereby. Except as otherwise amended by this Amendment, the Agreement as
previously amended shall continue in full force and effect and is hereby
ratified and confirmed.
SECTION 8. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
SECTION 9. FEES AND EXPENSES. The Seller
hereby confirms its agreement to pay on demand all reasonable costs and expenses
in connection with the preparation, execution and delivery of this Amendment and
any of the other instruments, documents and agreements to be executed and/or
delivered in connection herewith, including, without limitation, the reasonable
fees and out-of-pocket expenses of counsel to the Agent with respect thereto.
[Amendment No. 6 Signature Page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
APR FUNDING CORPORATION,
as Seller
By
Title
UNIVERSAL PREMIUM ACCEPTANCE CORPORATION,
individually and
as initial Servicer
By
Title
TRANSFINANCIAL HOLDINGS, INC.
(formerly known as Anuhco, Inc.)
as Parent
By
Title:
EAGLEFUNDING CAPITAL CORPORATION,
as Purchaser
By: BANKBOSTON, N.A.(formerly known as The
First National Bank of Boston) as its
attorney-in-fact
By
Title
BANKBOSTON, N.A.(formerly known as THE FIRST
NATIONAL BANK OF BOSTON), as Agent
By
Title
[Amendment No. 6 Signature
Page]
Acknowledged and agreed to
as of this day of September, 1998 in
accordance with Section 5.03 of that
certain Liquidity Agreement dated as of
December 31, 1996, as amended, among the
Purchaser, the financial institutions from
time to time parties thereto (the "Liquidity
Providers"), BankBoston, N.A.(formerly
known as The First National Bank of Boston),
as liquidity agent (the "Liquidity
Agent") and Bankers Trust Company, as
collateral agent (the "Collateral Agent")
BANKBOSTON, N.A. (formerly known as THE
FIRST NATIONAL BANK OF BOSTON), as a
Liquidity Provider
By
Title
HARRIS TRUST AND SAVINGS BANK,
as a Liquidity Provider
By
Title
LLOYDS BANK PLC, as a Liquidity Provider
By
Title
SECURED LOAN AGREEMENT
This Secured Loan Agreement is made and entered into this 29th day of
September, 1998, by and between Bankers Trust Company of Des Moines, Iowa,
(hereinafter referred to as the "Bank"), TransFinancial Holdings, Inc.
(hereinafter referred to as "TransFinancial") and Crouse Cartage Company
(hereinafter referred to as "Crouse"), (TransFinancial and Crouse hereinafter
collectively referred to as the "Borrowers" and individually as a "Borrower").
WITNESSETH
WHEREAS, Borrowers desire to borrow monies from Bank in the amounts
described below; and
WHEREAS, Bank is willing to loan monies to Borrowers subject to the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties agree as follows:
1. Definitions
For purpose of this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean: (i) any natural person who is a controlling
shareholder of either Borrower, or who is an officer, director or managing agent
of either Borrower; (ii) any corporation, partnership or entity that is a
controlling shareholder of either Borrower; and (iii) any person who directly or
indirectly controls, is controlled by or is under common control or ownership
with either Borrower or any controlling shareholder of either Borrower. For
this the purposes of this definition, the term "Control" shall mean the
ownership of ten percent (10%) or more of the beneficial interest in the entity
being referred to.
"Agreement" shall mean this Secured Loan Agreement, as amended or modified
from time to time, together with all exhibits or schedules attached hereto or
hereafter.
"Bank's Prime Rate" shall mean the fluctuating interest rate per annum from
time to time designated by Bank as its prime rate. The Bank's Prime Rate shall
not be deemed the lowest rate or most favored rate charged by Bank to its
customers. Changes in the Bank's Prime Rate shall be effective without notice
to Borrowers on the date of each change.
"Borrowing Base" shall mean an amount equal to eighty-five percent (85%) of
Crouse's Eligible Accounts Receivable owned by Crouse as of the date of each
Borrowing Base Certificate.
"Borrowing Base Certificate" shall mean a document duly certified by an
authorized officer of Crouse in the form attached hereto as Exhibit A.
"Collateral" shall mean without limitation Crouse's assets pledged to Bank
as security for the Note, now or in the future, as more particularly described
in Section 4 of this Agreement.
"Commitment Letter" shall mean the letter dated August 14, 1998 from Bank
to Borrowers, which described the terms and conditions of the Loan and which was
accepted by Borrowers on August 31, 1998.
"Current Assets" shall mean TransFinancial's current assets which shall be
determined in accordance with GAAP.
"Current Liabilities" shall mean TransFinancial's current liabilities which
shall be determined in accordance with GAAP.
"Current Ratio" shall be calculated by dividing TransFinancial's Current
Assets by its Current Liabilities.
"Debt To Tangible Net Worth Ratio" shall mean that number calculated by
dividing TransFinancial's total liabilities in accordance with GAAP by its
Tangible Net Worth.
"Default" or "Event of Default" shall have the meaning delineated in
Section 9 of this Agreement.
"Eligible Accounts Receivable" shall mean those accounts receivable owing
to Crouse which are free and clear of any security interest, lien or encumbrance
except that granted to Bank herein, and which are not more than ninety (90) days
past due from date of original invoice or with respect to which there exists no
dispute with Crouse. Further, to be an Eligible Accounts Receivable, the
receivable must not be subject to any dispute, counterclaim or defense asserted
by the account debtor thereunder and the account debtor must not be insolvent or
be the subject of any bankruptcy or reorganization proceedings or other
proceedings for relief of debtors. An account receivable shall be deemed to
exist when the invoice giving rise to such account receivable is mailed or when
debt to Crouse from its customers arises, whichever shall first occur.
Receivables due Crouse from any Affiliate shall not be included in calculating
Eligible Accounts Receivable.
"GAAP" shall mean those Generally Accepted Accounting Principles and
Practices that are recognized as such by the American Institute of Certified
Public Accountants and by the Financial Accounting Standards Board.
"Hazardous Substances." The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. section
9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules
or regulations adopted pursuant to any of the foregoing.
"Indebtedness" shall mean and include without limitation all Loans,
together with all other obligations, debts and liabilities of Borrowers to Bank
as well as all claims by Bank against Borrowers, whether now or hereafter
existing, voluntary or involuntary, due or not due, absolute or contingent,
liquidated or unliquidated; whether Borrowers may be liable individually or
jointly with others; whether Borrowers may be obligated as a guarantor, surety,
or otherwise; whether recovery upon such indebtedness may be or hereafter may
become barred by any statute of limitations; and whether such indebtedness may
be or hereafter may become otherwise unenforceable.
"Loan" or "Loans" means and includes any and all extensions of credit and
financial accommodations from Bank to Borrowers, whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.
"Loan Documents" shall mean this Agreement, the Note, the Security
Agreement and any other instrument executed in connection with or evidencing the
Indebtedness.
"Maximum Credit" shall mean the lesser of Ten Million Dollars
($10,000,000.00) or the Borrowing Base.
"Note" shall refer to the promissory note more particularly described in
Section 2 of this Agreement executed by Borrowers in favor of Bank, together
with any and all extensions, modifications, substitutions or renewals thereof.
"Revenue Equipment" shall mean and include all of Crouse's (i) commercial
and highway trucks, (ii) commercial and highway tractors and trailers, (iii)
automobiles and (iv) pickup and delivery vehicles, all for which titles have
been issued in the name of Crouse and which titles are in the possession of
Bank, or in possession of another party acting as agent for Bank; and (v) all
mechanical refrigeration units attached to, or held for use upon, such trucks,
tractors and trailers.
"Security Agreement" shall mean the Commercial Security Agreement executed
by Crouse in favor of Bank of even date herewith granting Bank a first lien on
Crouse's Eligible Accounts Receivable and a Second Lien on Crouse's Revenue
Equipment.
"Tangible Net Worth" shall be determined in accordance with GAAP and shall
mean that number calculated by subtracting from the sum of TransFinancial's
equity, all sums relating to goodwill, patents, copyrights, trademarks,
licenses, franchises, or other assets normally considered an intangible asset
under GAAP.
2. Loan
Subject to the terms and conditions of this Agreement and the other Loan
Documents, the Bank agrees to lend to Borrowers the amount as provided in the
following described Loan:
A. Loan. A term loan in the principal amount not to exceed the lesser
of Ten Million Dollars ($10,000,000.00) or the Borrowing Base, and
Borrowers shall execute and deliver to Bank a promissory note ("Note")
for $10,000,000.00 dated as of the date of this Agreement. Such funds
shall be used to purchase certain outstanding stock of TransFinancial.
Interest and principal payments shall be payable on the dates and in
the manner set forth in the Note. Interest shall accrue at a floating
rate which shall at all times equal the Bank's Prime Rate, as adjusted
to the date of change. In the event at any time the Borrowing Base is
less than the unpaid principal balance of the Note, Borrowers will
immediately pay that amount necessary to reduce the unpaid principal
balance to an amount equal to the Borrowing Base. The Note shall
mature and be due and payable in full on September 30, 2000. Bank's
determination as to the outstanding principal balance owed by
Borrowers shall be presumed to be correct and binding on all parties
whomsoever and Bank's documentation to support said outstanding
balance will be sufficient to establish and sustain Borrowers'
obligations under the Note, unless Borrowers are able to provide
documentation to the contrary satisfactory to Bank which is sufficient
to rebut the aforesaid presumption.
3. Advances
A. Any checks or other charges presented against the regular checking
account of Borrowers in excess of the balance of said regular checking
account may be treated by the Bank as a request for an advance under
the Note, and payment by the Bank of any check may at its option
constitute a loan to the Borrowers pursuant to this Agreement of the
amounts so paid. However, the amounts debited to the Note and
credited to the checking account shall at no time exceed the unused
portion of the Maximum Credit available under the Note.
B. In the event Borrowers shall fail to provide adequate insurance, pay
taxes, or pay any other charges which may affect the assets
collateralized to Bank, Bank may, at its option, without notice, but
without any obligation or liability to do so, procure insurance, pay
taxes or pay any other charges and add said sum to the balance of the
Note.
C. Although it is contemplated that at no time during the term of this
Agreement shall the outstanding principal amount of the Note exceed
the Maximum Credit thereunder, it is understood and agreed that the
contemplated Maximum Credit may be exceeded at any time, in Bank's
sole discretion, and Borrowers shall nevertheless remain liable for
the repayment in full of all sums advanced by or to Borrowers by Bank,
together with interest, late charges, attorneys' fees and costs, if
any, as more fully set forth herein.
4. Collateral
A. Eligible Accounts Receivable and Revenue Equipment. As security for
the Note and all advances made pursuant to this Agreement, and any
renewals, modifications, substitutions or extensions thereof, Crouse herein
grants to Bank a first lien on all of its Eligible Accounts Receivable and
a second lien (behind the first lien previously granted by Crouse to Bank)
on its Revenue Equipment, together with all proceeds therefrom. The titles
to the vehicles included within the Revenue Equipment shall be physically
delivered by Crouse to the Commercial Savings Bank in Carroll, Iowa as
agent for Bank, or such other party as designated by Bank, and Bank (and/or
its designated agent) is herein granted a power of attorney to affix Bank's
lien on all such titles and file such liens of record in the event
Borrowers commit an Event of Default hereunder. Bank acknowledges that
Crouse will, in the ordinary course of its business, buy, sell or trade
items of Revenue Equipment and thus will be allowed access to such titles.
B. Bank Deposits, Bank shall at all times have a perfected first security
interest in and right of setoff against any and all deposit balances of
Borrowers whether now existing or hereafter established, and may at any
time, after an Event of Default hereunder, without notice, apply the same
against payment of any obligations of Borrowers to Bank, whether or not due
regardless of the existence or amount of any other security held by the
Bank.
5. Borrowers' Representations and Warranties
To induce Bank to make Loans and advances hereunder, Borrowers represent
and warrant to Bank from the date of this Agreement and thereafter until all
Indebtedness of the Borrowers to Bank is paid in full that:
A. Borrowers' Authority. (1) Borrowers have full power, right, and
authority to make and execute this Agreement, and to borrow the funds
provided for in this Agreement; (2) the execution of this Agreement,
the Note, the Security Agreement and all other Loan Documents will not
conflict with any provision of law of Borrowers' articles of
incorporation or bylaws or any other organizational requirement, or
under any agreement or instrument to which Borrowers are a party or by
which Borrowers or any of their property may be bound or affected; (3)
the individual who, on behalf of each Borrower, executes and delivers
this Agreement, Note, Security Agreement and other Loan Documents is
authorized to do so and has provided to the Bank the appropriate
authorization evidencing same.
B. No Litigation. No material litigation or governmental proceedings are
pending or threatened against Borrowers and Borrowers have no material
liabilities, actual or contingent, not previously disclosed to Bank.
C. Lien For Bank. The lien of the Bank on the Eligible Accounts
Receivable shall be a first lien at all times during the term of this
Agreement and the lien of the Bank on the Revenue Equipment shall be a
second lien at all times during the term of this Agreement.
D. No Other Liens. None of Borrowers' assets are subject to any
mortgage, pledge, encumbrance, or other lien, except as otherwise
disclosed to the Bank in writing.
E. Tax Returns. Borrowers have filed all federal and state income tax
returns which are required to be filed and has paid all taxes and
assessments which are due.
F. Financial Statements. All financial statements previously delivered
to Bank by Borrowers fairly present in all material respects and
accurately represent the financial condition of Borrowers as of the
respective dates thereof. No material adverse change in the financial
condition of Borrowers has occurred since the date of the most recent
financial statement given to Bank.
G. Year 2000 Compliance. Borrowers represent and warrant that they will
take all measures reasonably necessary to make their computer hardware
and software compliant with the year 2000. Borrowers acknowledge that
the failure to take such measures may seriously impair or damage
Borrowers' businesses.
H. Ownership of Collateral. Borrowers warrant that they own the entire
legal and beneficial ownership in all assets set forth in their
financial statements and in all Collateral Borrowers are furnishing to
Bank as security for the Loans hereunder, except as otherwise
disclosed to the Bank.
I. No Violation of Occupational Safety and Environmental Protection.
Borrowers are not in violation in any material manner of any federal,
state, county or city statutes, orders, rules or regulations
pertaining to occupational safety or environmental protection, nor do
Borrowers presently anticipate that future expenditures needed to meet
the provisions of existing federal, state, county or city statutes,
orders, rules or regulations will be so burdensome as to affect or
impair in a materially adverse manner Borrowers' financial conditions.
J. Indemnification and Hold Harmless Obligation. Borrowers represent and
warrant that neither the Collateral given to Bank as security for the
Note, nor any other assets owned by Borrowers have been, or ever will
be, so long as the Note remains unpaid, used for the generation,
manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substances, provided however, it is
understood that Crouse, in the ordinary course of its business, does
transport items which may be deemed Hazardous Substances. The
representations and warranties contained herein are based on
Borrowers' due diligence in investigating the collateralized
properties for Hazardous Substances. Borrowers hereby (i) releases
and waives any future claims against Bank for indemnity or
contribution in the event Borrowers become liable for cleanup or other
costs under any such laws; (ii) agrees that Bank may recover against
Borrowers to the full extent of any damages, claims or other
liabilities suffered by Bank as a result of the violation of any such
environmental laws, whether or not such violation occurred while the
Collateral was owned by a predecessor or successor in interest to
Crouse; and (iii) agrees to indemnify and hold Bank harmless against
any and all claims and losses resulting from a breach of this
provision of this Agreement, including reasonable attorney's fees and
expenses. This obligation to indemnify and hold Bank harmless shall
survive the payment of the Note.
K. Address of Borrowers. The addresses appearing on the signatory page
of this Agreement represent the chief executive offices of the
Borrowers.
L. No Material Damage To Collateral. The Collateral is not now
materially damaged or injured as a result of any uninsured fire,
explosion, accident, flood or other casualty.
M. Collateral Not In Flood Zone. None of the Collateral is situated in
any federal or state designated flood zone.
6. Affirmative Covenants
From the date of this Agreement and thereafter until all Indebtedness is
paid in full, Borrowers, will:
A. Accounting. Maintain a modern system of accounting in accordance with
GAAP.
B. Financial Statements. Furnish to Bank (i) within one hundred-twenty
(120) days of each fiscal year end, consolidated and unqualified
financial statements of Borrowers audited by an independent certified
public accountant acceptable to Bank in reasonable detail and dated as
of the immediately preceding fiscal year end, and prepared in
accordance with GAAP; (ii) within forty-five (45) days following the
end of each calendar quarter, a consolidated unaudited financial
statement of Borrowers which shall contain a balance sheet, statement
of income and retained earnings, and cash flow, each as of the end of
such calendar quarter; (iii) within forty-five (45) days following the
end of each calendar quarter, the 10-Q Report filed by TransFinancial
with the Securities and Exchange Commission; (iv) within thirty (30)
days following the end of each calendar quarter, a duly completed
Borrowing Base Certificate as of the end of such calendar quarter; and
(v) at such times as requested by Bank, a list of Crouse's inventory
and equipment, cash flow projections and such other information as the
Bank may reasonably request .
C. Access To Books and Collateral. At all times, keep proper books of
account in a manner satisfactory to Bank, and permit the Bank and its
agents access to the books, records, premises, assets and operations
of the Borrowers at all reasonable times.
D. Notification of Legal Proceedings. Notify the Bank promptly of any
material litigation or legal proceedings involving the Collateral.
E. Insurance. Obtain such insurance or evidence of insurance as Bank may
reasonably require, including but not limited to, an all-risk policy
of casualty insurance, and such other hazard insurance in such amount,
form and substance as Bank may require with Bank named as loss payee
thereunder as it pertains to the Collateral and with standard waiver
of subrogation clauses, it being understood by Bank that Crouse self-
insures the first $100,000.00 of casualty damages. This insurance
shall be issued by such companies as shall be approved by Bank, and
the originals of such policies (together with appropriate endorsements
thereto, evidence of payment of premiums thereon and written agreement
by the insurers therein to give Bank 30 days prior written notice of
intention to cancel) shall be promptly delivered to Bank. This
insurance shall be kept in full force and effect at all times
hereafter until the Note has been paid in full.
F. Maintenance and Preservation of Collateral. At all times maintain,
preserve and protect the Collateral and keep the same in good repair,
working order and condition.
G. Payment of Obligations. Except as otherwise disclosed to and approved
by the Bank, Borrowers will at times during the term hereof pay all
obligations relating to the Collateral as they come due in the
ordinary course of business.
H. Collected Funds. At all times maintain in Borrowers' accounts at the
Bank collected funds sufficient to pay all items presented for payment
from such accounts and sufficient to pay service charges imposed by
the Bank. Borrowers agree to pay to Bank interest on any overdraft or
deficit balance in any such account at the rate set forth in the Note.
I. Submission of Environmental Reports. Promptly upon receipt thereof,
Borrowers shall submit to Bank copies of any reports, inspections or
examinations conducted by the Iowa Department of Natural Resources or
the Federal Environmental Protection Agency, or any similar agency,
with respect to the assets of Borrowers.
J. Operating Accounts at Bank. Crouse shall maintain its primary cash
concentration accounts with Bank.
K. Tangible Net Worth. TransFinancial shall maintain at all times a
Tangible Net Worth of no less than $40,000,000.00.
L. Debt To Tangible Net Worth Ratio. TransFinancial shall maintain at
all times a Debt to Tangible Net Worth Ratio no greater than
1.00:1.00.
M. Current Ratio. TransFinancial shall maintain at all times a Current
Ratio of not less than 1.25:1.00.
N. New Entities. Borrowers shall not make any material sales or
transfers of their assets to any new or existing entities.
O. ERISA Compliance. Borrowers shall meet their minimum funding
requirements under the Employee Retirement Income Security Act of 1974
(ERISA), as amended, with respect to any employee benefit plan or
other class of benefit plan, which the Pension Benefit Guaranty
Corporation, established under ERISA (PBGC) has elected to insure, in
either case, whether now in existence or hereafter instituted by
Borrowers.
7. Negative Covenants
From the date of this Agreement and thereafter until all Indebtedness is
paid in full, Borrowers will not, without the prior written consent of the Bank:
A. Grant Liens. Pledge, mortgage, lease or otherwise encumber, or permit
any lien to exist on the Collateral, except as may exist and be
reflected on the financial statements provided at the time of this
Agreement.
B. Sell Assets Out of Ordinary Course. Sell, lease or otherwise dispose
of any part of Borrowers' real or personal property other than in the
ordinary course of Borrowers' business.
C. Dividends. Declare and/or distribute in cash or other assets any
dividends on Crouse's outstanding stock, or redeem any of Crouse's
outstanding stock, without Bank's prior approval.
D. Sale, Change In Control, Merger, Etc. Suffer or permit majority
control of Borrowers to be sold, assigned or otherwise transferred, or
allow a material change in the executive officers of Borrowers, or
merge or consolidate with any entity or enterprise.
E. No Other Guaranties. Grant guarantees to any other financial
institutions or entities without the Bank's prior approval, which
shall not be unreasonably withheld, except that those guarantees which
TransFinancial is required to make on behalf of its subsidiary,
Universal Premium Acceptance Corporation, to Bank Boston, and except
for any other guarantees which collectively do not exceed
$1,000,000.00, shall not require the Bank's prior approval.
8. Conditions of Bank's Obligations
Bank's obligations to perform hereunder shall be subject to satisfaction of
the following conditions on or before closing:
A. No Breach of Covenants. Borrowers shall have substantially performed
all agreements required to be performed, and shall not be in any
material breach of any covenant, agreement, representation or warranty
made herein or in any other Loan Document.
B. No Default. No Event of Default and no event or condition which, with
notice or the lapse of time, or both, would constitute an Event of
Default, shall exist.
C. No Material Change in Financial Condition. Borrowers shall not have
incurred any material liabilities, direct or contingent, other than in
the ordinary course of business, since the date of the last financial
statement given to Bank by Borrowers.
D. Insurance. Crouse shall have obtained hazard or fire and extended
coverage insurance (and flood insurance if the Collateral is located
in a flood zone) on the Collateral, issued by a company or companies
approved by Bank and in amounts acceptable to Bank which policy or
policies shall name Bank as loss payee as it pertains to the
Collateral under a standard loss payee clause, and Bank shall also
have been provided with such additional policies of insurance as Bank
may reasonably require insuring against such risks and in such amounts
as are customarily carried by like businesses operating in the same
vicinity.
E. Reimbursement of Bank's Expense. The payment by Borrowers of all out-
of-pocket expenses incurred by Bank and any participants in making and
administering this Loan, including, without limitation, all costs of
appraisals, attorneys' fees and expenses, filings and recordings.
F. Authorized Action. Receipt by Bank of a duly executed certificate
from Borrowers authorizing the borrowings and the execution of the
various Loan Documents contemplated by this Agreement.
G. Legal Opinion. Receipt by Bank of an opinion from Borrowers' legal
counsel to the effect that (i) Borrowers each are corporations duly
organized, validly existing and in good standing under the laws of the
state of their incorporation and to the best of such counsel's
knowledge and belief, are duly qualified and in good standing as a
foreign corporation authorized to do business in Iowa (if not
incorporated in Iowa) and in each state where, because of the nature
of its activities or properties, such qualification is required; (ii)
Borrowers have full power to execute and deliver the Note and other
Loan Documents, and to perform their obligations under this Agreement
and such Loan Documents; (iii) such actions have been duly authorized
by all necessary corporate action, and are not in conflict with any
provision of the law or of the articles of incorporation or bylaws of
Borrowers, nor in conflict with any agreement binding upon Borrowers
of which such counsel has knowledge; and (iv) this Agreement and the
other Loan Documents are the legal and binding obligations of
Borrowers, enforceable in accordance with their terms.
H. Loan Documents. Receipt by Bank of the Note, Security Agreement and
other Loan Documents duly executed by an authorized officer of
Borrowers.
I. Borrowing Base Certificate. Crouse shall have delivered to Bank a
duly completed Borrowing Base Certificate.
9. Events of Default
If any of the following events occur, the Bank may, at its option, without
notice or demand, except as otherwise specifically provided, declare the entire
Indebtedness of Borrowers to Bank immediately due and payable.
A. Late Payment. Any payment of principal or interest due under the
terms of any Note is not made on the due date and such default
continues unremedied for five (5) days after written notice thereof
shall have been given to Borrowers by Bank.
B. Misrepresentation. Any representation or warranty made by Borrowers
in this Agreement shall prove to be materially incorrect or untrue, or
any statement, report or writing furnished by Borrowers to the Bank is
untrue in any material aspect.
C. Breach of Covenants. Borrowers materially fail to perform or observe
any term, covenant or condition of this Agreement and such failure is
not remedied or corrected within ten (10) days after written notice
thereof shall have been given to Borrowers by Bank.
D. Breach Under Other Loan Documents. Any breach of any provisions
contained in the Note or any other Loan Documents and such breach is
not remedied within ten (10) days after written notice thereof shall
have been sent to Borrowers by Bank.
E. Bankruptcy, Etc. If either Borrower becomes insolvent or bankrupt or
makes an assignment for the benefit of creditors, or is petitioned
into bankruptcy, either voluntarily or involuntarily.
F. Adverse Impairment in Collateral. Bank's interest in the Collateral
is adversely impaired in any manner, and Crouse is unable to remedy,
to the Bank's satisfaction, such adverse impairment within 30 days
after written notice from the Bank.
10. Remedies
Upon the occurrence of a Default (it being understood that a Default under
any Note shall constitute a Default under all Notes), the Bank may, after
expiration of any notice period referenced above (it being understood that in
regard to the Events of Default described in Paragraphs 9 (C), 9 (D) or 9 (F),
if any such default cannot reasonably be cured within such grace period, as
solely determined by Bank, the period of time within which to cure such default
shall be extended for such reasonable time as is necessary to cure such default,
as long as Borrowers promptly, diligently and continuously act to cure such
default), (it being further understood that Borrowers shall not be entitled to
any grace period or notice prior to acceleration if the Bank reasonably and in
good faith believes that the granting of such grace period or notice would
jeopardize Bank's lien position) declare the unpaid principal balance and
interest on the Note(s) immediately due and payable, together with any other
debt owed by Borrowers to Bank, and all such principal, interest and other debt
shall thereupon be immediately due and payable in full. The Bank shall
thereupon have all remedies set forth herein and in the Note and any other Loan
Documents, and all remedies otherwise available to a secured creditor under the
Uniform Commercial Code of Iowa.
12. Miscellaneous
A. The Bank As Attorney-In-Fact. In the event of a Default, Borrowers
hereby appoint Bank to be Borrowers' attorney-in-fact, without
requiring the Bank to act as such, for the purpose of carrying out the
provisions hereof and taking any action and executing any document or
instrument which the Bank may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact
is irrevocable and coupled with an interest. Without limiting the
generality of the foregoing, Bank shall, as attorney-in-fact of
Crouse, have the right to receive, collect and endorse all vehicle
titles, checks, drafts or other remittance made payable to Course, or
Crouse's order, representing any payment on account of any of the
Collateral and to give full discharge therefor.
B. Waiver Not Binding. Any waiver of any default by Bank is not a waiver
of any subsequent default. Further, no delay on the part of the Bank
in the exercise of any power or right shall constitute a waiver
thereof, nor shall any single or partial exercise of any power or
right preclude other or further exercise thereof.
C. Notice. Any notice hereunder to Borrowers shall be in writing, and
shall be deemed to be given on the date delivered, personally, or on
the date when mailed by ordinary mail, postage prepaid, or by
facsimile and addressed to the Borrowers as appearing on the signature
page of this Agreement, or at such other address as the Borrowers may,
by written notice received by the Bank, designate as the Borrowers'
addresses for purposes of notice hereunder.
D. Governing Law. This Agreement, the Note, the Security Agreement and
all other Loan Documents shall be covered in all respects by the laws
of the State of Iowa. A determination that any provision of this
Agreement is unenforceable or invalid shall not affect the validity or
enforceability of any other provision.
E. Enforcement in Iowa. Borrowers acknowledges that this Agreement is
being entered into by the Bank in partial consideration of Bank's
right to enforce in Iowa the terms and provisions of this Agreement
and the Loan Documents. Borrowers consents to jurisdiction in Iowa
and construction of this Agreement under the laws of the State of
Iowa. Borrowers waives any right to commence any action against the
Bank except in Iowa.
F. Term of Agreement. The term of this Agreement shall coincide with the
terms of the Note executed by Borrowers in favor of the Bank, as
modified, extended, substituted, renewed or until all Indebtedness is
paid in full and any commitment to extend credit has terminated.
G. Incorporation of Commitment Letter. The terms and conditions of the
Commitment Letter are incorporated herein. If any inconsistency
exists between the Commitment Letter and this Agreement, this
Agreement shall control.
H. Assignment. This Agreement shall not be assigned by Borrowers without
the written consent of the Bank.
I. Participation. The Bank may enter into participation agreements with
other financial institutions with regard to any Indebtedness of
Borrowers, provided, however, Bank shall remain the lead bank in any
such participations.
J. Successors and Assigns. This Agreement shall be binding upon
Borrowers' successors and assigns.
K. Additional Documents. Borrowers agrees to execute and cause to be
executed such additional documents as the Bank may require in order to
effectuate the terms of this Agreement. All documents shall be on the
Bank's standard forms for the same or forms otherwise acceptable to
Bank.
L. Conflict in Documents. In the event of a conflict between the terms
and conditions of this Agreement and those of any other documents
pertaining to Borrowers' Indebtedness to Bank, the terms of this
Agreement shall be controlling.
M. Survival of Representations and Warranties. All representations,
warranties, covenants, and agreements of Borrowers herein shall
survive the execution and delivery of this Agreement and shall be
deemed continuing until the Indebtedness is paid in full to the Bank
and any commitment to extend credit has terminated.
N. Release of Bank. Borrowers hereby release and forever discharge Bank
and any participants, their officers, directors, employees,
shareholders, agents and representatives from all claims or causes of
actions of every kind or character, known or unknown, without limit,
which Borrowers allegedly may have as of the date of this Agreement.
O. Collection Costs. If Bank hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Agreement,
the Note, the Security Agreement or any other Loan Document, Borrowers
agree to pay the reasonable attorney fees and expenses incurred by
Bank.
IMPORTANT - READ BEFORE SIGNING, THE TERMS OF THIS AGREEMENT SHOULD BE READ
CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS
OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED.
YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
Borrowers warrant that they have received a copy of this Agreement and
further state that they understand fully the terms and conditions described
herein.
BANKERS TRUST COMPANY
Steven D. Simon, Vice President
P.O. Box 897
665 Locust Street
Des Moines, Iowa 50304-9987
"BANK"
TRANSFINANCIAL HOLDINGS, INC.
Timothy P. O'Neil, Chief Executive Officer
"TRANSFINANCIAL"
CROUSE CARTAGE COMPANY
By:
Mark A. Foltz, Secretary
"BORROWERS"
