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 June 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 August 14, 1998
Common stock, $0.01 par value 4,844,974 Shares
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Operating Revenues.......................................................... $ 37,036 $ 32,513
Operating Expenses.......................................................... 36,770 31,448
Operating Income............................................................ 266 1,065
Nonoperating Income (Expense)
Interest income, net..................................................... 70 168
Other.................................................................... 61 47
Total nonoperating income (expense).................................. 131 215
Income Before Income Taxes.................................................. 397 1,280
Income Tax Provision........................................................ 221 576
Net Income.................................................................. $ 176 $ 704
Basic and Diluted Earnings Per Share........................................ $ 0.03 $ 0.11
Basic Average Shares Outstanding............................................ 6,055 6,320
Diluted Average Shares Outstanding.......................................... 6,118 6,363
<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 SIX MONTHS ENDED JUNE 30,
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Operating Revenues.......................................................... $ 74,038 $ 63,570
Operating Expenses.......................................................... 73,472 61,571
Operating Income............................................................ 566 1,999
Nonoperating Income (Expense)
Interest income, net..................................................... 87 383
Other.................................................................... 95 47
Total nonoperating income (expense).................................. 182 430
Income Before Income Taxes.................................................. 748 2,429
Income Tax Provision........................................................ 410 1,093
Net Income.................................................................. $ 338 $ 1,336
Basic and Diluted Earnings Per Share........................................ $ 0.06 $ 0.21
Basic Average Shares Outstanding............................................ 6,054 6,347
Diluted Average Shares Outstanding.......................................... 6,120 6,383
<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>
JUNE 30, DECEMBER 31,
1998 1997
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and temporary cash investments...................................... $ 5,197 $ 4,778
Short-term investments................................................... 3,523 3,543
Freight accounts receivable, less allowance
for doubtful accounts of $228 and $464............................... 13,658 14,909
Finance accounts receivable, less allowance
for doubtful accounts of $469 and $499............................... 17,464 14,016
Current deferred tax assets.............................................. 1,542 1
Other current assets..................................................... 2,697 1,831
AFS net assets........................................................... 218 7,993
Total current assets................................................. 44,299 47,071
Operating Property, at Cost:
Revenue equipment........................................................ 32,555 32,275
Land..................................................................... 3,585 3,585
Structures and improvements.............................................. 10,512 10,506
Other operating property................................................. 12,239 9,624
58,891 55,990
Less accumulated depreciation........................................ (23,083) (22,969)
Net operating property........................................... 35,808 33,021
Intangibles, net of accumulated amortization................................ 10,762 9,243
Other Assets................................................................ 875 420
$ 91,744 $ 89,755
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Cash overdrafts.......................................................... $ 3,468 $ 754
Accounts payable......................................................... 4,722 2,855
Notes payable............................................................ -- 2,500
Accrued payroll and fringes.............................................. 6,883 5,956
Claims and insurance accruals............................................ 351 566
Other accrued expenses................................................... 1,145 2,374
Total current liabilities............................................ 16,569 15,005
Deferred Income Taxes....................................................... 2,327 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 7,512,892 and 7,509,622 shares................................ 75 75
Paid-in capital.......................................................... 5,606 5,581
Retained earnings........................................................ 79,732 79,394
Treasury stock, 1,481,935 shares, at cost................................ (12,565) (12,565)
Total shareholders' equity........................................... 72,848 72,485
$ 91,744 $ 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 SIX MONTHS ENDED JUNE 30,
(In thousands)
(Unaudited)
<CAPTION>
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities
Net income.......................................................... $ 338 $ 1,336
Adjustments to reconcile net income to
cash provided by operating activities
Depreciation and amortization................................... 2,689 2,212
Provision for credit losses..................................... 268 403
Deferred income tax provision (benefit)......................... (1,187) 602
Net increase (decrease) from change in other
working capital items affecting operating activities........... 2,241 (1,840)
4,349 2,713
Cash Flows From Investing Activities
Proceeds from discontinued operations .............................. 6,345 --
Purchase of finance subsidiary...................................... (4,178) --
Purchase of operating property...................................... (5,213) (5,441)
Origination of finance accounts receivable.......................... (71,682) (63,229)
Sale of finance accounts receivable................................. 54,722 41,263
Collection of owned finance accounts receivable..................... 16,315 19,978
Purchases of short-term investments................................. (2,998) (6,868)
Maturities of short-term investments................................ 3,018 9,829
Other............................................................... (303) (55)
(3,974) (4,523)
Cash Flows From Financing Activities
Cash overdrafts........................................................ 2,593 --
Payments to acquire treasury stock.................................. -- (1,114)
Repayments on credit agreements, net................................ (2,500) --
Other............................................................... (49) --
44 (1,114)
Net Increase (Decrease) in Cash and Temporary Cash Investments........ 419 (2,924)
Cash and Temporary Cash Investments at beginning of period............ 4,778 9,021
Cash and Temporary Cash Investments at end of period.................. $ 5,197 $ 6,097
Cash Paid During the Period for
Interest............................................................ $ 62 $ --
Income Tax.......................................................... $ 363 $ 27
<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 Income.................................... -- -- 338 -- 338
Issuance of shares under Incentive Stock Plan. -- 25 -- -- 25
Balance at June 30, 1998 (unaudited).......... $ 75 $ 5,606 $ 79,732 $(12,565) $ 72,848
<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 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 second quarter and $310,000
for the first six months of 1998. Net income was increased by approximately
$96,000 or $0.02 per share for the second quarter and $186,000 or $0.03 per
share for the first six months of 1998. This change will decrease depreciation
and increase operating income by approximately $328,000 for the remaining six
months of 1998 from amounts which would have been recorded had the change not
been made.
2. SEGMENT REPORTING
The Company operates in three business segments: transportation, financial
services, and industrial technology. Other items are shown in the table below
for purposes of reconciling to consolidated amounts.
<TABLE>
<CAPTION>
Second Quarter Six Months
Operating Operating Operating Operating Total
($ in thousands) Revenues Income Revenues Income Assets
<S> <C> <C> <C> <C> <C> <C>
Transportation 1998 $ 35,227 $ 658 $70,774 $ 1,487 $50,359
1997 30,692 1,071 59,836 1,862 40,472
Financial Services 1998 1,773 114 3,193 60 25,750
1997 1,797 288 3,687 661 26,573
Industrial Technology 1998 -- (269) -- (462) 717
1997 -- -- -- -- --
Total Segments 1998 37,000 503 73,967 1,085 76,826
1997 32,489 1,359 63,523 2,523 67,045
General Corporate and Other 1998 36 (237) 71 (519) 14,918
1997 24 (294) 47 (524) 21,944
Consolidated 1998 37,036 266 74,038 566 91,144
1997 32,513 1,065 63,570 1,999 88,989
</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 from $50 million
to $65 million 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 second quarter and six
months ended June 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)
Second Quarter Six Months
1998 1997 1998 1997
Operating Revenues............... $37,235 $32,779 $74,511 $ 64,113
Net Income....................... $ 188 $ 712 $ 371 $ 1,352
Basic and Diluted Earnings Per Share$ 0.03 $ 0.11 $ 0.06 $ 0.21
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 plan ("the Plan"). The Plan is 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. Plan distributions are made on a
quarterly basis. The Plan was recertified in 1991 and 1994, and will continue
in effect until a replacement of the Collective Bargaining Agreement is reached
between the parties. Crouse has continued to operate under the terms of its
Teamsters union contract which expired March 31, 1998, including the profit
sharing provisions. On July 27, 1998, Crouse entered into an interim agreement
with the International Brotherhood of Teamsters on a new five-year contract,
subject to ratification of the profit sharing plan by its union employees. The
contract provides for the reduction of the amount of wage contribution subject
to the profit sharing plan from 15% in 1998 to 10% in 2002. The accompanying
consolidated balance sheets as of June 30, 1998 include an accrual for profit
sharing costs of $589,000. The accompanying consolidated statements of income
include profit sharing expenses of $589,000 and $1,047,000 for the second
quarter and $1,336,000 and $1,826,000 for the first six months of 1998 and 1997.
5. FINANCING AGREEMENTS
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 May 29, 1998, the securitization agreement
was amended to permit the sale of Oxford's receivables under the securitization
agreement and to increase the maximum allowable amount of receivables to be sold
under the agreement to $65.0 million. The purchaser permits principal
collections to be reinvested in new financing agreements. The Company had
securitized receivables of $59.9 million and $35.2 million at June 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 $50.0 million. The Company was in compliance
with all such provisions at June 30, 1998. The terms of the securitization
agreement also require that UPAC maintain a default reserve at specified levels
which serves as collateral. At June 30, 1998, approximately $8.0 million of
owned finance receivables served as collateral under the default reserve
provision.
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 six months ended June 30, 1998. The following table summarizes
activity under the Working Capital Line in the quarter and six months ended June
30, 1998 (in thousands, except percentages):
Second Six
Quarter Months
1998 1998
Balance outstanding at end of period.................. $ -- $ --
Average amount outstanding ........................... 343 1,160
Maximum month end balance outstanding................. 1,029 2,752
Interest rate at end of period........................ 8.5% 8.5%
Weighted average interest rate........................ 8.5% 8.5%
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.
AFS has made full payment of all its resolved claims and liabilities There
are no material claims outstanding as of June 30, 1998.
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.
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 has
determined that the proposed hostile takeover of the Company by TJSP is 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 nor 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.
Under the Shareholder Rights Plan, none of TJS Partners, L.P. or its
affiliates or associates is deemed to beneficially own shares of Common Stock
owned by members of the Crouse family solely as a result of the Stock Purchase
Agreement dated June 30, 1998 by and among TJS Partners, L.P. and certain
members of the Crouse family. However, the exclusion in the Shareholder Rights
Plan does not apply to the purchase of shares from members of the Crouse family
pursuant to the Stock Purchase Agreement or to any amendment or modification of
the Stock Purchase Agreement or any other agreement entered into by any of the
parties.
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. SUBSEQUENT EVENT
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company has repurchased 1,202,820 shares of its common stock held by the
Crouse family, and agreed to repurchase an additional 912,602 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 has 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 is due on September 30, 1998. Such amounts may be
prepaid by the Company without penalty. The Company currently intends to fund
the payment out of available cash short term investments, the proceeds from the
sale and leaseback of approximately $4.0 million of revenue equipment and the
proceeds from a $10.0 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
Second quarter ended June 30, 1998 compared to the second quarter ended June 30,
1997 and six months ended June 30, 1998 compared to the six months ended June
30, 1997.
TransFinancial operates primarily in three distinct segments; transportation,
through its subsidiary, Crouse; and 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. 2 1998 Six Months 1998
vs. vs.
Qtr. 2 1997 Six Months 1997
Increase (decrease) from:
Increase in LTL tonnage........................ $3,012 $ 7,267
Increase in LTL revenue per hundredweight...... 172 565
Increase in truckload revenues................. 1,351 3,106
Net increase............................... $4,535 $10,938
Less-than-truckload ("LTL") operating revenues rose by 12.4% and 15.6% for the
second quarter and first six months of 1998, as compared to the same period in
1997. Crouse achieved increases of 11.7% and 14.4% in LTL tons for the second
quarter and first half of 1998, compared to 1997. Crouse's LTL revenue yield
improved approximately 1.0% from 1997 to 1998. The improvement in revenue yield
was the result of a general rate increase placed in effect January 1, 1998 and
negotiated rate increases on certain shipping contracts, offset in part by
reductions or elimination of fuel surcharges in place in 1997 to recover the
high cost of diesel fuel in that period.
Truckload operating revenues were more than 27.4% and 32.7% higher in the
second quarter and first six months of 1998, on approximately 32.7% and 35.1%
more shipments, reflecting increased 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
Second Quarter Six Months
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Salaries, wages and employee benefits.................... 56.6% 56.7% 57.3% 56.7%
Operating supplies and expenses.......................... 12.8% 12.5% 12.2% 13.0%
Operating taxes and licenses............................. 2.8% 2.7% 2.6% 2.8%
Insurance and claims..................................... 1.8% 1.9% 1.9% 1.9%
Depreciation............................................. 2.3% 3.0% 2.3% 3.0%
Purchased transportation................................. 21.8% 19.7% 21.6% 19.5%
Total operating expenses............................. 98.1% 96.5% 97.9% 96.9%
</TABLE>
Crouse's operating expenses as a percentage of operating revenue, or operating
ratio, was higher for the second quarter and first half of 1998, as compared to
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. 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 second quarter and six 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 six months of 1998.
FINANCIAL SERVICES
For the second quarter and first six months of 1998, UPAC reported operating
income of $114,000 and $60,000 on net financial services revenue of $1.8 million
and $3.2 million, as compared to operating income of $288,000 and $661,000 on
net financial services revenue of $1.8 million and $3.7 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, 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
In the second quarter and first six months of 1998, Presis, the Company's
start-up industrial technology business incurred operating expenses of $269,000
and $462,000, primarily in salaries, wages and employee benefits. 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
Net interest income decreased in the second quarter and first half of 1998 as
compared to the second quarter and first half 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
second quarter and six months of 1998 were 55.7% and 54.8% as compared to 5.0%
for the same periods of 1997. This increase was the result of the greater
significance of non-deductible intangibles amortization and non-deductible meals
and entertainment expenses relative to reduced pre-tax income.
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 in its primary
operating territory, 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.
In its initial phase Presis will focus on continued research and testing,
product development, establishing sources of supply, recruiting and training
personnel, developing markets and contracting for production. The Company
expects this operation to generate minimal, if any, revenues and to incur
operating losses in the remainder of 1998, which are likely to be material in
relation to its consolidated results of operations.
In addition to the expansion of its existing operations in each of its
business segments, the Company continues to consider potential acquisitions
which would complement these 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 a new
contract to replace the current contract 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; and, tax changes. 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 June 30, 1998 with no
long-term debt and more than $8.7 million in cash and investments. 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. In addition, during the first half of 1998, the Company has
purchased $5.2 million of operating equipment without incurring any long-term
indebtedness. In addition, the Company expects to acquire approximately $4.7
million of operating equipment through a long-term operating lease by December
31, 1998.
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 $65.0 million
of eligible receivables. As of June 30, 1998, $59.9 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 six months June 30, 1998. As of June 30, 1998,
no borrowings were outstanding under the Working Capital Line.
Effective July 31, 1997, the Company entered into a subscription agreement
with a start-up business, Presis, L.L.C., pursuant to which TransFinancial
committed to a $2.9 million capital contribution over two years in exchange for
the exclusive finance and/or sale rights to equipment produced by, and a
controlling interest in, 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. Capital
contributions through June 30, 1998 total approximately $1.3 million. 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.
On April 8, 1998, 70% of the voting members of the International Brotherhood
of Teamsters ("Teamsters Union") approved a new national contract effective
April 1, 1998 for five years. The new national contract provides, among other
things, for a first year $750 bonus in lieu of a pay increase and total wage,
pension and health and welfare increases of approximately 2.8% per year. On
July 27, 1998, Crouse entered into an interim agreement with the Teamsters Union
on a new five-year contract, subject to ratification of the profit sharing plan
by Crouse's union employees. The interim agreement provides all of the benefits
of the national contract plus the continuation of the profit sharing plan and
work flexibility provisions. There can be, however, no assurance that Crouse's
union employees will ratify the profit sharing plan 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.
Subsequent Event
Pursuant to a definitive stock purchase agreement, effective August 14, 1998,
the Company has repurchased 1,202,820 shares of its common stock held by the
Crouse family, and agreed to repurchase an additional 912,602 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 has 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 is due on September 30, 1998. Such amounts may be
prepaid by the Company without penalty. The Company currently intends to fund
the payment out of available cash short term investments, the proceeds from the
sale and leaseback of approximately $4.0 million of revenue equipment and the
proceeds from a $10.0 secured loan from one of the Company's existing bank
lenders. In addition, the Company is evaluating various strategic and financial
alternatives in its businesses, and may record certain charges related to this
evaluation and financial restructuring in the third quarter of 1998, in an
amount estimated to be less than $2.5 million on an after tax basis.
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. 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 - Pursuant to a definitive stock purchase agreement,
effective August 14, 1998, the Company has repurchased 1,202,820 shares of its
common stock held by the Crouse family, and agreed to repurchase an additional
912,602 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 has
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 is due on September 30, 1998.
Such amounts may be prepaid by the Company without penalty. The Company
currently intends to fund the payment out of available cash short term
investments, the proceeds from the sale and leaseback of approximately $4.0
million of revenue equipment and the proceeds from a $10.0 secured loan from one
of the Company's existing bank lenders. The Company incurred approximately
$150,000 of legal, financial advisory and other expenses in fending off this
takeover attempt.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1* Certificate of Designations of Series A Preferred Stock, dated
July 15, 1998
4.2 Rights Agreement, Between TransFinancial Holdings, Inc. and UMB
Bank, N.A., dated July 14, 1998. Filed as Exhibit 1 to Current
Report on Form 8-K dated July 15, 1998.
4.3*Specimen Certificate of Common Stock, $.01 par value, of the
Registrant.
10.1*Stock Purchase Agreement, dated August 14, 1998, by and between
TransFinancial Holdings, Inc. and certain members of the Crouse
family.
27* Financial Data Schedule.
* Filed herewith.
(b) Reports on Form 8-K -
(1) A Current Report on Form 8-K, dated May 29, 1998, filed June 12,
1998, to report the completion of the acquisition of all of the
outstanding stock of Oxford Premium Finance, Inc.
(2) 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: August 14, 1998
EXHIBIT INDEX
Assigned
Exhibit
Number Description of Exhibit
4.1 Certificate of Designations of Series A Preferred Stock, dated July 15,
1998.
4.3 Specimen Certificate of Common Stock, $.01 par value, of the Registrant.
10.1Stock Purchase Agreement, dated August 14, 1998, by and between
TransFinancial Holdings, Inc. and certain members of the Crouse family.
27 Financial Data Schedule.
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<LEGEND>
This schedule contains summary financial information extracted from
TransFinancial Holdings, Inc.'s consolidated statement of income for the six
months ended June 30, 1998 and consolidated balance sheet as of June 30, 1998,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
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<NAME> TRANSFINANCIAL HOLDINGS, INC.
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> DEC-31-1998
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<PERIOD-END> JUN-30-1998
<CASH> 5197
<SECURITIES> 3523
<RECEIVABLES> 31819
<ALLOWANCES> 697
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<CURRENT-ASSETS> 44299
<PP&E> 58891
<DEPRECIATION> 23083
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0
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<COMMON> 75
<OTHER-SE> 72773
<TOTAL-LIABILITY-AND-EQUITY> 91744
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<TOTAL-REVENUES> 74038
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<TOTAL-COSTS> 73472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 748
<INCOME-TAX> 410
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</TABLE>
TRANSFINANCIAL HOLDINGS, INC.
CERTIFICATE OF DESIGNATIONS OF
SERIES A PREFERRED STOCK
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, Timothy P. O'Neil, President, and Mark A. Foltz, Corporate Secretary,
of TransFinancial Holdings, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions thereof, DO HEREBY CERTIFY:
That pursuant to authority expressly vested in the Board of Directors of
the Corporation by the provisions of the Restated Certificate of Incorporation
of the Corporation, the Board of Directors on July 14, 1998 adopted the
following resolutions creating a series of One Hundred Thousand (100,000) shares
of Preferred Stock, $.01 par value per share, of the Corporation ("Preferred
Stock") designated as Series A Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation by the provisions of Restated Certificate of
Incorporation of the Corporation, there is hereby created a series of Preferred
Stock designated as Series A Preferred Stock, consisting of One Hundred Thousand
Shares (100,000) shares of the authorized but unissued shares of preferred
stock, $.01 par value per share, of the Corporation; and
FURTHER RESOLVED, that the Series A Preferred Stock shall have the
powers, designations, preferences and relative, participating, optional or other
rights and the qualifications, limitations or restrictions set forth in Appendix
I attached hereto.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its President and attested by its Secretary on this
15th day of July, 1998.
TRANSFINANCIAL HOLDINGS, INC.
By: /s/Timothy P. O'Neil
Timothy P. O'Neil
President
ATTEST:
/s/ Mark A. Foltz
Mark A. Foltz
Corporate Secretary
APPENDIX I
RELATIVE RIGHTS AND PREFERENCES OF
SERIES A PREFERRED STOCK
1. Designation. One Hundred Thousand (100,000) authorized and unissued
shares of preferred stock, $.01 par value per share, of the Corporation are
hereby designated as "Series A Preferred Stock" ("Series A").
2. Dividends.
(a) Each holder of a share of Series A shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for that purpose, subject to adjustment as hereinafter set forth, 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions (except any Excluded Dividend), declared (but not withdrawn) on
the Common Stock, $.01 par value per share, of the Corporation (the "Common
Stock"), at any time after July 14, 1998 (the "Rights Dividend Declaration
Date"). As used herein, an "Excluded Dividend" shall mean a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise).
(b) Except with respect to an Excluded Dividend, the Corporation
shall declare a dividend or distribution on the Series A as provided in
paragraph (a) above concurrently with or immediately after it declares a
dividend or distribution on the Common Stock, and such dividend or distribution
shall be payable concurrently with the dividend or distribution on the Common
Stock. Except with respect to an Excluded Dividend, the Corporation shall not
pay a dividend or make a distribution to holders of Common Stock unless the
Corporation concurrently pays a dividend or makes a distribution to holders of
the Series A in accordance with paragraph (a) above.
(c) In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A were entitled
immediately prior to such event under paragraph (a) above shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
3. Voting Rights. In addition to any other voting rights required by law,
the holders of shares of Series A shall have the following voting rights:
(a) The holders of shares of Series A shall be entitled to 100 votes
for each share of Series A held on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Dividend Declaration Date (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders of
shares of the Series A were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein or required by law, the
holders of shares of Series A and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of stockholders of
the Corporation.
(c) Except as otherwise provided herein or required by law, the
holders of shares of Series A shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of shares of Common Stock as set forth herein or as otherwise
required by law) for the taking of any corporate action.
4. Reacquired Shares. Any shares of Series A purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock, and
may be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein, in the Restated Certificate of
Incorporation, in any other Certificate of Designations establishing a series of
Preferred Stock or any similar stock or as otherwise required by law.
5. Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the shares of the
Series A shall be entitled to receive the greater of (i) $100.00 per share
($1.00 per one one-hundredth of a share), or (ii) an amount per share, subject
to adjustment as hereinafter set forth, equal to 100 times the aggregate amount
to be distributed per share to holders of Common Stock. No distribution upon
liquidation, dissolution or winding up shall be made to holders of shares of
Common Stock or holders of any other shares of stock ranking junior to the
Series A with respect to the distribution of assets upon liquidation,
dissolution or winding up until all holders of shares of Series A shall have
received the amounts to which such holders are entitled under this Section.
(b) In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A were entitled
immediately prior to such event pursuant to clause (ii) of paragraph (a) above
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
6. Consolidation, Merger, etc.
(a) In the event the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such event shares of Series A shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.
(b) In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount set forth in paragraph (a) above with respect to the
exchange or change of shares of the Series A shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
7. Ranking. Nothing herein shall preclude the Board of Directors of the
Corporation from creating any series of Preferred Stock or any similar stock
ranking on a parity with or prior to Series A shares as to the payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up.
8. Redemption. Shares of Series A shall not be redeemable at the option
of the Corporation or any holder thereof. Notwithstanding the foregoing
sentence of this Section, the Corporation may acquire shares of Series A in any
other manner permitted by law and the Restated Certificate of Incorporation and
By-laws of the Corporation.
9. Conversion. Shares of Series A are not convertible into shares of any
other class or series of stock of the Corporation.
10. Amendment. The Restated Certificate of Incorporation of the
Corporation, including without limitation the provisions hereof, shall not
hereafter be amended, either directly or indirectly, or through merger,
consolidation or share exchange with another corporation or entity, in any
manner which would alter or change the powers, preferences or special rights of
the Series A so as to affect the holders thereof adversely, without the
affirmative vote of the holders of a majority of the shares of Series A, voting
separately as a class.
11. Fractional Shares. The Series A may be issued in fractions of a share
which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of shares
of the Series A.
SPECIMEN STOCK CERTIFICATE EXHIBIT 4.3
TRANSFINANCIAL
(Company mark in two-color gray and green)
Common Stock Common Stock
Number Shares
TF
TransFinancial Holdings, Inc.
Incorporated Under the Laws of the State of Delaware
See reverse for certain definitions
CUSIP 89365P 10 6
This Certifies that
is the owner of
Fully paid and Non-Assessable Shares of Common Stock, $.01 par value, of
TransFinancial Holdings, Inc. transferable on the books of the Corporation in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Company and the facsimile signatures of its
duly authorized officers.
Dated:
/s/Mark A. Foltz /s/Timothy P. O'Neil
Secretary President
Countersigned and Registered:
UMB Bank, N.A.
Transfer Agent and Registrar
BY:
Authorized Signature
TRANSFINANCIAL HOLDINGS, INC.
Corporate Seal
1976
Delaware
The Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
Please Insert Social Security or Other
Identifying Number of Assignee:
(Please print or typewrite name and address including zip code of assignee)
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer
the said stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated
X
X
Notice: The signature to this assignment
must correspond with the name as written
upon the face of this Certificate in every
particular, without alteration or enlargement
or any change whatever.
Signature(s) Guaranteed:
BY
The signature(s) should be guaranteed by an eligible guarantor
Institution (Banks, Stock Brokers, Savings and Loan Associations
And credit unions with membership in an approved signature
Guarantee medallion program). Pursuant to S.E.C. Rule 17Ad-15.
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement (the "Rights Agreement"), between
TransFinancial Holdings, Inc. (the "Company") and UMB Bank, N.A. (the "Rights
Agent"), the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of the Rights Agent. Under
certain circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without charge,
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or any Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any subsequent holder, may
become null and void.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made this 14th day of August, 1998 by,
between and among TRANSFINANCIAL HOLDINGS, INC., a Delaware corporation ("TFH")
and those persons whose signatures are affixed hereto and whose signatures are
deemed to be affixed hereto by tendering shares in accordance with Section 16
hereof (collectively the "Sellers" and individually a "Seller").
RECITALS
I. The parties wish to set forth herein all of their agreements with respect
to the purchase by TFH of (a) those shares of the issued and outstanding capital
stock of TFH listed below the signature of each Seller, and (b) 881,550 shares
which Sellers shall between the date hereof and the Second Closing (as defined
below) acquire from TJS Partners, L.P. (the "Shares").
NOW, THEREFORE, in consideration of the premises and the terms and
provisions hereinafter set forth, the parties hereto do hereby agree as follows:
AGREEMENTS
1. TFH agrees to buy, and each Seller severally agrees to sell, that number of
Shares set forth under such Seller's signature hereon, free and clear of any and
all security interests and claims of others. TFH further agrees to buy from
Sellers or any one or more of them, and such persons agree to sell to TFH,
881,550 shares of issued and outstanding common stock of TFH acquired between
the date hereof and the Second Closing from TJS Partners, L.P..
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2. The Purchase Price for the Shares shall be NINE DOLLARS AND TWELVE AND ONE-
HALF CENTS ($9.125) per share, payable as follows: (a) by delivery of one
promissory note in the form attached hereto as Exhibit A in the amount of the
aggregate Purchase Price of the Shares to be acquired at the First Closing less
Seven Hundred Thirty-Nine Thousand Five Hundred Ninety-Nine and 52/100 Dollars
($739,599.52); (b) by delivery of one promissory note in the form attached
hereto as Exhibit B in the amount of Four Hundred Fifty Six Thousand Two Hundred
Fifty and no/100 Dollars ($456,250); and (d) (i) payment of $215,194.88 to the
Larry Crouse IRA at the Second Closing, against delivery of 23,583 Shares held
by the Larry Crouse IRA on the date hereof, (ii) payment of $16,178.63 to George
Crouse at the Second Closing, against delivery of 1,773 Shares held by him on
the date hereof, (iii) payment of $16,178.63 to Kenneth Crouse at the Second
Closing, against delivery of 1,773 Shares held by him on the date hereof,
(iv) payment of $35,797.38 to Renee Crouse Butler at the Second Closing, against
delivery of 3,923 Shares held by her on the date hereof and (v) payment of
$8,044,143.75 to the Sellers at the Second Closing, against delivery of 881,550
Shares acquired by Sellers from TJS Partners, L.P. prior to the Second Closing.
3. The Closing shall take place at the offices of Hillix, Brewer, Hoffhaus,
Whittaker & Wright LLC, 2420 Pershing Road, Suite 400, Kansas City, Missouri at
9:00 a.m., local time, on August 14, 1998. At the Closing, Sellers shall
deliver certificates, duly endorsed or with duly endorsed stock powers attached,
representing the Shares, against payment of the Purchase Price as provided
herein (provided that certificates representing the Shares described in
Paragraph 2(d) hereof, duly endorsed or with duly endorsed stock powers
attached, shall be delivered against payment of the purchase price for such
Shares in accordance with Paragraph 2(d) hereof).
4. TFH shall at Closing reimburse Sellers THREE HUNDRED AND FIFTY THOUSAND
DOLLARS ($350,000.00), for all expenses and other costs incurred by them in
connection with the transactions contemplated by this Stock Purchase Agreement
(including expenses incurred on acquiring any shares from TJS Partners, L.P.),
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and Larry D. Crouse, one of the Sellers, shall resign from the TFH Board of
Directors. Sellers have submitted to TFH a written request for such
reimbursement, listing the costs and expenses for which such reimbursement is
claimed, in form satisfactory to TFH. Aside from such reimbursement, each of
the parties hereto shall bear its own costs and expenses, and TFH shall not be
responsible for any part of the filing fee, if any, under the Hart-Scott-Rodino
Act.
5. Each of the Sellers represents, warrants and covenants to TFH as follows:
a. That such Seller is the owner of and has the full right to sell
the number of Shares set forth opposite such Seller's signature
hereto.
b. That the Shares being sold by each Seller are free and clear of
any and all security interests and claims of others, whatsoever.
c. That each Seller has the authority and capacity to execute this
Stock Purchase Agreement and perform the terms and conditions hereof
to be performed by such Seller.
d. That the representations and warranties of such Seller set forth
in subparagraphs a, b and c of this Paragraph 5 shall be true and
correct as of Closing with respect to the Shares owned by such Seller
on the date hereof and any Shares acquired from TJS Partners, L.P. as
provided in Paragraph 1 hereof.
1. TFH's obligation to purchase the Shares is subject to the following
conditions precedent:
a. The representations and warranties of Sellers contained in this
Stock Purchase Agreement shall be true and correct in all respects at
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and as of Closing with the same force and effect as though made at
such time;
b. Sellers shall have complied with all agreements, covenants and
obligations to be complied with by Sellers prior to or at Closing.
1. TFH warrants, represents and covenants to the Sellers as follows:
a. That all requisite corporate action has been taken to authorize
the execution of this Stock Purchase Agreement by TFH, and the
performance of the terms and provisions hereof to be performed by it.
b. That the Board of Directors of TFH has adopted a resolution,
which is now and at the Closing will be in full force and effect, to
the effect that neither Sellers, collectively, nor any Seller,
individually, shall, pursuant to a Rights Agreement between TFH and
UMB Bank, N.A., dated as of July 14, 1998, become an Acquiring Person
(as therein defined) solely by purchase from TJS Partners, L.P. of up
to [881,550] shares of the issued and outstanding capital stock of
TFH, provided that all such shares so acquired shall be included
within the Shares to be sold and purchased hereunder, and that such
resolution further authorized the issuance of the written consent
attached hereto as Exhibit C. TFH shall deliver a duly executed
consent in the form attached hereto as Exhibit C to Sellers' counsel
promptly after execution and delivery of this Stock Purchase Agreement
by the parties hereto.
c. That the Board of Directors of TFH has adopted a resolution,
which is now and hereafter will be in full force and effect, approving
the execution and delivery of the written consent attached hereto as
Exhibit D and the acquisitions of shares of capital stock of TFH
described therein pursuant to the terms and conditions set forth
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therein. TFH shall deliver a duly executed consent in the form
attached hereto as Exhibit D to Sellers' counsel at the Closing.
1. No Seller shall, until Closing, or the earlier written consent of TFH,
disclose the existence or terms of this Stock Purchase Agreement, and until
forty-eight (48) hours after public announcement by TFH of the existence and
terms of this Agreement or the consummation of the transactions contemplated
hereby, all such Sellers shall refrain from trading in TFH stock or otherwise
using for themselves or others their knowledge of the terms hereof. Any
agreement between Sellers, or any one or more of them, and TJS Partners, L.P.,
in furtherance of Paragraph 1 hereof, shall provide, and be structured in a
manner to legally permit, no disclosure of the existence or terms thereof, by
required public filings with any governmental agency or otherwise, until the
first business day following the date of the Closing. Between the date hereof
and the Closing, and with respect to the Shares identified in Paragraph 2(d),
between the date hereof and September 30, 1998, except as otherwise contemplated
herein or requested in writing by TFH, Sellers will not pledge, hypothecate or
grant any security interest in or enter into any agreement or execute any proxy
or written stockholder's consent with respect to any shares of TFH stock now or
hereafter owned by Sellers.
2. Any notice required or permitted to be given hereunder may be personally
delivered or transmitted by facsimile or first class mail, postage pre-paid, as
follows:
If to TFH:
TransFinancial Holdings, Inc.
Attn: Timothy P. O'Neil, President
8245 Nieman Road, Suite 100
Lenexa, KS 66214
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With a copy to:
Kent E. Whittaker
Hillix, Brewer, Hoffhaus, Whittaker & Wright, L.L.C.
2420 Pershing Road, 4th Floor
Kansas City, MO 64108
If to Sellers or any Seller:
Scudder Law Firm
Attn: Mark Scudder
Second Floor, 411 S. 13th St.
Post Office Box 81277
Lincoln, Nebraska 68508
3. This Stock Purchase Agreement contains the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof, and
no promise, warranty, representation or assurance has been given by any party
hereto to induce the execution of any other party, except as herein expressly
provided.
4. This Stock Purchase Agreement may be modified or amended only by the
subsequent written agreement of the party or parties sought to be charged with
such amendment.
5. The covenants, agreements, representations and warranties of TFH and each
of the Sellers contained in this Stock Purchase Agreement or in any document
delivered in connection herewith shall survive the Closing.
6. This Stock Purchase Agreement shall be construed in accordance with and
governed by the laws of the State of Delaware and shall inure to the benefit of
and be binding upon the parties hereto and their respective successors, personal
representatives and assigns.
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7. If the day upon which any action is to be taken hereunder shall not be a
regular business day, the action then to be taken shall be timely if taken on
the next following business day.
8. The parties hereto agree that the subject matter of this Stock Purchase
Agreement is unique, that there may be no adequate legal remedy for breach or
nonperformance, and that specific performance of the provisions hereof may be
ordered by any court having jurisdiction.
16. The following members of the Crouse family (the "Other Crouses")
beneficially own the number of shares set forth opposite their names:
Name Number of Shares
Heather Watt 18,833
Matthew Crouse 11,833
Shannon Crouse 19,000
Chris Crouse 19,000
Julie Crouse Daniel 14,833
Renee Crouse Butler 3,923
TFH hereby offers to purchase the Shares owned by the Other Crouses on the
terms and conditions set forth for the Sellers under this Stock Purchase
Agreement. To the extent any Other Crouses have not signed this Stock Purchase
Agreement, such Other Crouses may accept the offer by tendering their Shares at
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Closing, in which event they shall be deemed to be Sellers under this Stock
Purchase Agreement and shall be entitled to the benefits and bound by the terms
and conditions hereof. Larry Crouse, Kenneth Crouse, George Crouse, Jeffrey
Crouse and Jean Crouse Watt hereby represent, warrant and covenant as provided
in Section 5 hereof with respect to the Other Crouses who tender Shares pursuant
to this Paragraph and the Shares tendered by the Other Crouses.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement, or caused it to be executed by their duly authorized officers, as of
the day and year first above written.
TRANSFINANCIAL HOLDINGS, INC.
By: /s/ Timothy P. O'Niel
Timothy P. O'Neil
President
SELLERS:
/s/ Jeffrey Crouse
Signature
Jeffrey Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
246,315
Number of Shares
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/s/ Jean Crouse Watt
Signature
Jean Crouse Watt (by Mark A. Scudder, attorney-in-fact)
Printed Name
246,315
Number of Shares
/s/ Larry Crouse
Signature
Larry Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
137,346
Number of Shares
/s/ Larry Crouse
Signature
Larry Crouse IRA (by Mark A. Scudder, attorney-in-fact for Larry
Crouse, director of such account)
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Printed Name
23,583
Number of Shares
/s/ Kenneth Crouse
Signature
Kenneth Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
251,803
Number of Shares
/s/ George Crouse
Signature
George Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
241,088
Number of Shares
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/s/ Heather Watt
Signature
Heather Watt (by Mark A. Scudder, attorney-in-fact)
Printed Name
18,833
Number of Shares
/s/ Matthew Crouse
Signature
Matthew Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
11,833
Number of Shares
/s/ Shannon Crouse
Signature
Shannon Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
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19,000
Number of Shares
/s/ Chris Crouse
Signature
Chris Crouse (by Mark A. Scudder, attorney-in-fact)
Printed Name
19,000
Number of Shares
/s/ Renee Crouse Butler
Signature
Renee Crouse Butler (by Mark A. Scudder, attorney-in-fact)
Printed Name
3,923
Number of Shares
EXHIBIT A
COLLATERAL NOTE
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August 14, 1998 $10,519,482.53
FOR VALUE RECEIVED, the undersigned, TransFinancial Holdings, Inc., a
Delaware corporation ("Maker") promises to pay to the order of each of the
persons listed on Exhibit A attached hereto (sometimes referred to herein
individually as the "Payee" and collectively as the "Payees"), at 8245 Nieman
Road, Suite 100, Lenexa, Kansas, such Payee's share, as reflected on Exhibit A,
of the principal sum of Ten Million Five Hundred Nineteen Thousand Four Hundred
Eighty Two and 53/100 Dollars ($10,519,482.53) (the "Principal Amount"), in
lawful money of the United States, on September 30, 1998. Interest shall not be
paid on the unpaid Principal Amount or other amounts payable hereunder except to
the extent provided below.
In the event that the Principal Amount is not paid in full on or before
September 30, 1998, (a) the Maker shall pay to each Payee a penalty equal to
Five Percent (5%) of the unpaid Principal Amount owed to such Payee, payable
upon demand, and (b) after September 30, 1998 the unpaid Principal Amount owed
to each Payee shall bear interest at a rate of Twelve Percent per annum, payable
upon demand.
The Maker grants to the Payees a security interest in the Collateral (as
defined below) for the payment of all amounts due under this Collateral Note and
all renewals and extensions hereof and for the performance and payment of any
and all obligations and indebtedness of the Maker to the Payees hereunder.
The following certificates, registered in the name of the Maker, with stock
powers duly endorsed in blank and otherwise in proper form for transfer, are
delivered together with this Collateral Note to The Scudder Law Firm, as the
agent for the Payees ("Agent"):
Certificate No. TF1212, representing 1,152,820 shares
of the common stock of TransFinancial Holdings, Inc.,
a Delaware corporation.
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The term "Collateral" as used herein shall mean (a) the above-described
shares of the common stock of TransFinancial Holdings, Inc. and all accruals
thereto, including those by way of dividend, corporate reorganization,
liquidation, split or change in capital structure, all of which will be promptly
delivered to the Agent with stock powers and other forms of assignment duly
endorsed in blank, if endorsement is required, and otherwise in proper form for
transfer; and (b) Exhibit D to the Stock Purchase Agreement. All deliveries to
the Agent shall be deemed to have placed the Payees in possession of the
Collateral. The Payees shall not have the right to vote or to receive dividends
on shares of stock pledged hereunder unless an event of default shall have
occurred hereunder and shall remain unremedied.
Privilege is hereby given to prepay all or part of the Principal Amount at
any time without penalty. All payments made under this Collateral Note shall be
applied first against penalties and accrued interest and then against the
outstanding Principal Amount due under this Collateral Note.
Maker hereby waives presentment for payment, diligence, demand and notice
of demand, protest and notice of protest, notice of nonpayment, notice of
acceleration, and any defense by reason of extension of time for payment or
other indulgence granted by any Payee.
Time is of the essence with respect to all of Maker's obligations under
this Collateral Note.
This Collateral Note shall be governed by, interpreted, construed and
enforced in accordance with the domestic laws of the State of Kansas without
regard to principles of conflict of laws.
TRANSFINANCIAL HOLDINGS, INC.
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By:
Timothy P. O'Neil
President
EXHIBIT A TO COLLATERAL NOTE
SHARE OF
NAME SHARES PRINCIPAL AMOUNT
Larry Crouse 127,346 $ 1,162,032.25
Jeffrey Crouse 236,315 2,156,374.38
Kenneth Crouse 240,030 2,190,273.75
George Crouse 229,315 2,092,499.38
Jean Crouse Watt 236,315 2,156,374.38
Heather Watt 18,833 171,851.13
Matthew Crouse 11,833 107,976.13
Shannon Crouse 19,000 173,375.00
Chris Crouse 19,000 173,375.00
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Julie Pruitt 14,833 135,351.13
1,152,820 $10,519,482.53
EXHIBIT B
COLLATERAL NOTE
August 14, 1998 $456,250
FOR VALUE RECEIVED, the undersigned, TransFinancial Holdings, Inc., a
Delaware corporation ("Maker") promises to pay to the order of each of the
persons listed on Exhibit A attached hereto (sometimes referred to herein
individually as the "Payee" and collectively as the "Payees"), at 8245 Nieman
Road, Suite 100, Lenexa, Kansas, such Payee's percentage interest, as reflected
on Exhibit A, of the principal sum of Four Hundred Fifty Six Thousand Two
Hundred Fifty and no/100 Dollars ($456,250) (the "Principal Amount"), in lawful
money of the United States, on December 31, 1998. Interest shall not be paid on
the unpaid Principal Amount or other amounts payable hereunder except to the
extent provided below.
In the event that the Principal Amount is not paid in full on or before
December 31, 1998, (a) the Maker shall pay to each Payee a penalty equal to Five
Percent (5%) of the unpaid Principal Amount owed to such Payee, payable upon
demand, and (b) after December 31, 1998 the unpaid Principal Amount owed to each
Payee shall bear interest at a rate of Twelve Percent per annum, payable upon
demand.
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The Maker grants to the Payees a security interest in the Collateral (as
defined below) for the payment of all amounts due under this Collateral Note and
all renewals and extensions hereof and for the performance and payment of any
and all obligations and indebtedness of the Maker to the Payees hereunder.
The following certificates, registered in the name of the Maker, with stock
powers duly endorsed in blank and otherwise in proper form for transfer, are
delivered together with this Collateral Note to The Scudder Law Firm, as the
agent for the Payees ("Agent"):
Certificate No. TF1211, representing 50,000 shares of
the common stock of TransFinancial Holdings, Inc., a
Delaware corporation.
The term "Collateral" as used herein shall mean the above-described shares
of the common stock of TransFinancial Holdings, Inc. and all accruals thereto,
including those by way of dividend, corporate reorganization, liquidation, split
or change in capital structure, all of which will be promptly delivered to the
Agent with stock powers and other forms of assignment duly endorsed in blank, if
endorsement is required, and otherwise in proper form for transfer. All
deliveries to the Agent shall be deemed to have placed the Payees in possession
of the Collateral. The Payees shall not have the right to vote or to receive
dividends on shares of stock pledged hereunder unless an event of default shall
have occurred hereunder and shall remain unremedied.
Privilege is hereby given to prepay all or part of the Principal Amount at
any time without penalty. All payments made under this Collateral Note shall be
applied first against penalties and accrued interest and then against the
outstanding Principal Amount due under this Collateral Note.
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Maker hereby waives presentment for payment, diligence, demand and notice
of demand, protest and notice of protest, notice of nonpayment, notice of
acceleration, and any defense by reason of extension of time for payment or
other indulgence granted by any Payee.
Time is of the essence with respect to all of Maker's obligations under
this Collateral Note.
This Collateral Note shall be governed by, interpreted, construed and
enforced in accordance with the domestic laws of the State of Kansas without
regard to principles of conflict of laws.
TRANSFINANCIAL HOLDINGS, INC.
By:
Timothy P. O'Neil
President
EXHIBIT A TO COLLATERAL NOTE
SHARE OF
NAME SHARES PRINCIPAL AMOUNT
Larry Crouse 10,000 $ 91,250
Jeffrey Crouse 10,000 91,250
Kenneth Crouse 10,000 91,250
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George Crouse 10,000 91,250
Jean Crouse Watt 10,000 91,250
50,000 $456,250
EXHIBIT C
TransFinancial Holdings, Inc., a Delaware corporation, hereby expressly
consents for all purposes to the acquisition by any one or more of the Sellers
of up to 881,550 shares of the common stock of the undersigned from TJS
Partners, L.P., provided that all such shares so acquired are offered for sale
to the undersigned pursuant to the Stock Purchase Agreement of August 14, 1998,
to which this consent is attached as Exhibit C.
This written consent was duly adopted by the Board of Directors at a
meeting held on August 13, 1998.
Dated: , 1998 TRANSFINANCIAL HOLDINGS, INC.
By:
EXHIBIT D
TransFinancial Holdings, Inc., a Delaware corporation ("TFH"), upon
satisfaction of the conditions precedent set forth below, hereby irrevocably and
expressly consents for all purposes, pursuant to Section 1(z) of the Rights
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Agreement dated July 14, 1998 between TFH and UMB Bank, N.A. ("Rights
Agreement"), to (a) the acquisition by any one or more of the Crouse Family
Members (as defined in the Rights Agreement) of the shares of TFH stock pledged
("Pledged Shares") under that certain Collateral Note dated August 14, 1998
issued by TFH to the order of certain Crouse Family Members in the principal
amount of $10,519,482.50 (the "Collateral Note") and (b) the acquisition by TJS
Partners, L.P. from any one or more of the Crouse Family Members of any or all
of the Pledged Shares.
The consent to the acquisition described in clause (a) above shall become
effective only if TFH shall default in the payment of any amounts owing under
the Collateral Note. The consent to the acquisition described in clause (b)
above shall become effective with respect to that number of shares equal to the
number of shares owned by TJS Partners, L.P. as of August 13, 1998 only if TFH
shall default in the payment of any amounts owing under the Collateral Note.
The consent to the acquisition described in clause (b) above shall become
effective with respect to the acquisition of shares in excess of the number of
shares owned by TJS Partners, L.P. as of August 13, 1998 only if TFH shall
default in the payment of any amounts owing under the Collateral Note and such
default shall not have been caused by TFH having been enjoined or prohibited by
court order in an action initiated by a party other than TFH from paying such
amounts under the Collateral Note.
This written consent was duly adopted by the Board of Directors of TFH at a
meeting held on August 13, 1998.
Dated: , 1998 TRANSFINANCIAL HOLDINGS, INC.
By:
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Timothy P. O'Neil
President
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