-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AZbTj4alw9Zjfd1paxAXRLAhNnOYmFPht7sPknYve6ypbKNRq4RI2ZQoS8+5HDJz ZobGbzGUFtalc5CfFBUjrA== 0000719271-98-000014.txt : 19980817 0000719271-98-000014.hdr.sgml : 19980817 ACCESSION NUMBER: 0000719271-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSFINANCIAL HOLDINGS INC CENTRAL INDEX KEY: 0000719271 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 460278762 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12070 FILM NUMBER: 98691748 BUSINESS ADDRESS: STREET 1: 8245 NIEMAN ROAD, STE 100 STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 BUSINESS PHONE: 9138590055 MAIL ADDRESS: STREET 1: 8245 NIEMAN ROAD STREET 2: SUITE 100 CITY: LENEXA STATE: KS ZIP: 66214 FORMER COMPANY: FORMER CONFORMED NAME: ANUHCO INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN CARRIERS INC DATE OF NAME CHANGE: 19910812 10-Q 1 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 TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, (In thousands, except per share amounts) (Unaudited)
1998 1997 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 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, (In thousands, except per share amounts) (Unaudited)
1998 1997 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 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
JUNE 30, DECEMBER 31, 1998 1997 ASSETS (Unaudited) 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 The accompanying notes to consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (In thousands) (Unaudited)
1998 1997 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 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.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands)
Total Share Common Paid-In Retained Treasury holders' Stock Capital Earnings Stock Equity 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 The accompanying notes to consolidated financial statements are an integral part of these statements.
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 $328,000 for the remaining six months of 1998 from amounts which would have been recorded had the change not been made. 2. SEGMENT REPORTING The Company operates in three business segments: transportation, financial services, and industrial technology. Other items are shown in the table below for purposes of reconciling to consolidated amounts.
Second Quarter Six Months Operating Operating Operating Operating Total ($ in thousands) Revenues Income Revenues Income Assets 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
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:
Percent of Operating Revenue Second Quarter Six Months 1998 1997 1998 1997 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%
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. EX-27 2
5 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. 0000719271 TRANSFINANCIAL HOLDINGS, INC. 1000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 5197 3523 31819 697 0 44299 58891 23083 91744 16569 0 0 0 75 72773 91744 0 74038 0 73472 0 0 0 748 410 338 0 0 0 338 .06 .06
EX-4 3 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. EX-4 4 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. EX-10 5 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.. -1- 247630V1 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.), -2- 247630V1 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 -3- 247630V1 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 -4- 247630V1 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 -5- 247630V1 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. -6- 247630V1 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 -7- 247630V1 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 -8- 247630V1 /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) -9- 247630V1 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 -10- 247630V1 /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 -11- 247630V1 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 -12- 247630V1 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. -13- 247630V1 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. -14- 247630V1 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 -15- 247630V1 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. -16- 247630V1 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. -17- 247630V1 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 -18- 247630V1 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 -19- 247630V1 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: -20- 247630V1 Timothy P. O'Neil President -21- 247630V1 -----END PRIVACY-ENHANCED MESSAGE-----