-----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, IvVrIRh1O+SYcY5bou8auljQTm09TJ6ss8r1yyCV09yxct62kc6Lhc8U2He/b2Bb RPe5PguLWwprke4dp/Uo9Q== /in/edgar/work/20000814/0000719271-00-000011/0000719271-00-000011.txt : 20000921 0000719271-00-000011.hdr.sgml : 20000921 ACCESSION NUMBER: 0000719271-00-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSFINANCIAL HOLDINGS INC CENTRAL INDEX KEY: 0000719271 STANDARD INDUSTRIAL CLASSIFICATION: [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: 700861 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 0001.txt 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, 2000 [ ] 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. 1-12070 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 ( ) No (X) 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 7, 2000 Common stock, $0.01 par value 3,278,291 shares PART I. FINANCIAL INFORMATION Item 1. Financial Statements TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED JUNE 30, (In thousands, except per share amounts) (Unaudited)
2000 1999 Operating Revenues.......................................................... $ 38,777 $ 40,261 Operating Expenses.......................................................... 41,659 40,438 Operating Income (Loss)..................................................... (2,882) (177) Nonoperating Income (Expense) Interest income.......................................................... 3 27 Interest expense......................................................... (525) (290) Other.................................................................... -- (15) Total nonoperating income (expense).................................. (522) (278) Income (Loss) Before Income Taxes........................................... (3,404) (455) Income Tax Provision (Benefit).............................................. 21 (134) Net Income (Loss)........................................................... $ (3,425) $ (321) Basic and Diluted Earnings (Loss) Per Share................................. $ (1.05) $ (0.09) Basic Average Shares Outstanding............................................ 3,278 3,612 Diluted Average Shares Outstanding.......................................... 3,290 3,613 The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, (In thousands, except per share amounts) (Unaudited)
2000 1999 Operating Revenues.......................................................... $ 77,645 $ 80,118 Operating Expenses.......................................................... 83,673 80,291 Operating Income (Loss)..................................................... (6,028) (173) Nonoperating Income (Expense) Interest income.......................................................... 8 48 Interest expense......................................................... (961) (546) Other.................................................................... -- 9 Total nonoperating income (expense).................................. (953) (489) Income (Loss) Before Income Taxes........................................... (6,981) (662) Income Tax Provision (Benefit).............................................. 43 (169) Net Income (Loss)........................................................... $ (7,024) $ (493) Basic and Diluted Earnings (Loss) Per Share................................. $ (2.14) $ (0.14) Basic Average Shares Outstanding............................................ 3,278 3,612 Diluted Average Shares Outstanding.......................................... 3,422 3,613 The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
JUNE 30, DECEMBER 31, 2000 1999 ASSETS (Unaudited) Current Assets: Cash and cash equivalents................................................ $ 550 $ 1,076 Freight accounts receivable, less allowance for credit losses of $211 and $203................................... 15,127 14,373 Finance accounts receivable, less allowance for credit losses of $1,552 and $870 (Note 3)........................ 82,948 15,305 Other current assets..................................................... 3,801 3,579 Total current assets................................................. 102,406 34,333 Operating Property, at Cost: Revenue equipment........................................................ 30,987 31,415 Land..................................................................... 3,402 3,402 Structures and improvements.............................................. 12,352 11,336 Other operating property................................................. 11,224 11,289 57,965 57,442 Less accumulated depreciation........................................ (26,981) (25,400) Net operating property........................................... 30,984 32,042 Intangibles, net of accumulated amortization................................ 9,239 9,005 Other Assets................................................................ 1,362 1,513 $ 143,991 $ 76,893 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Cash overdrafts.......................................................... $ 3,537 $ 2,673 Secured borrowings....................................................... 72,284 3,659 Accounts payable......................................................... 9,002 5,312 Current maturities of long-term debt (Note 3)............................ -- 14,800 Accrued payroll and fringes.............................................. 8,108 5,006 Claims and insurance accruals............................................ 933 1,361 Other accrued expenses................................................... 2,405 3,686 Total current liabilities............................................ 96,269 36,497 Long-term Debt.............................................................. 14,200 -- Contingencies and Commitments (Note 5)...................................... -- -- Shareholders' Equity (Note 4) 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 7,623,852 and 7,597,931 shares................................ 76 76 Paid-in capital.......................................................... 6,254 6,104 Retained earnings........................................................ 62,259 69,283 Treasury stock 4,345,561 shares, at cost................................. (35,067) (35,067) Total shareholders' equity........................................... 33,522 40,396 $ 143,991 $ 76,893 The accompanying notes to condensed consolidated balance sheets are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (In thousands) (Unaudited)
2000 1999 Cash Flows From Operating Activities Net loss............................................................ $ (7,024) $ (493) Adjustments to reconcile net loss to cash used in operating activities Depreciation and amortization..................................... 2,488 2,526 Provision for credit losses....................................... 714 559 Deferred income tax benefit....................................... -- (227) Other............................................................. 95 23 Net increase (decrease) from change in other working capital items affecting operating activities........... 4,148 (41) 421 2,347 Cash Flows From Investing Activities Purchase of operating property, net................................. (1,153) (1,269) Origination of finance accounts receivable.......................... (101,093) (101,361) Sale of finance accounts receivable................................. 37,530 74,622 Collection of owned finance accounts receivable..................... 62,428 21,542 Other............................................................... (455) (137) (2,743) (6,603) Cash Flows From Financing Activities Cash overdrafts..................................................... 864 228 Borrowings on long-term debt........................................ -- 5,000 Repayments on long-term debt........................................ (600) -- Payments to acquire treasury stock.................................. -- (2,603) Borrowing on secured credit agreements, net......................... 1,525 346 Other............................................................... 7 (4) 1,796 2,967 Net Decrease in Cash and Cash Equivalents............................. (526) (1,289) Cash and Cash Equivalents at beginning of period...................... 1,076 3,256 Cash and Cash Equivalents at end of period............................ $ 550 $ 1,967 Cash Paid During the Period for Interest............................................................ $ 961 $ 546 Income taxes........................................................ $ 25 $ 29 The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands) (Unaudited)
Total Share Common Paid-In Retained Treasury holders' Stock Capital Earnings Stock Equity Balance at December 31, 1998.................. $ 76 $ 6,090 $ 77,367 $(32,459) $ 51,074 Net loss...................................... -- -- (8,084) -- (8,084) Issuance of shares under incentive plans...... -- 14 -- (5) 9 Purchase of 683,241 shares of common stock.... -- -- -- (2,603) (2,603) Balance at December 31, 1999.................. 76 6,104 69,283 (35,067) 40,396 Net loss...................................... -- -- (7,024) -- (7,024) Issuance of shares under incentive plans...... -- 7 -- -- 7 Issuance of shares under deferred compensation arrangements................... -- 143 -- -- 143 Balance at June 30, 2000...................... $ 76 $ 6,254 $ 62,259 $(35,067) $ 33,522 The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. PRINCIPLES OF CONSOLIDATION AND SIGNIFICANT ACCOUNTING POLICIES The unaudited condensed 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 unaudited condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The year end 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 July 6, 2000, 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. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has experienced operating losses in the first six months of 2000 and for the years 1999 and 1998 and significantly reduced cash flows from operating activities in 1999 and 2000. In addition, the Company has violated certain covenants in its financing agreements. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is ultimately dependent on its ability to refinance its outstanding debt with new lenders and make changes in its operations to allow it to operate profitably and sustain positive operating cash flows. Effective May 26, 2000, UPAC entered into a new receivable securitization agreement (See Note 3). Effective July 6, 2000, the Company executed an Amended and Restated Secured Loan Agreement that provides approximately $21 million of credit for one year and waives the existing covenant violations under its prior credit agreements. Management continues to seek replacement financing that would enable it to repay its secured loan agreement and provide additional liquidity. The Company has also effected changes in its operations intended to bring operating expenses in line with operating revenue levels and to increase the levels of revenues. Management believes that it will be successful in closing on replacement financing and that the operational changes should result in improved operating results. However, there can be no assurance that replacement financing will be successfully closed or that the operational changes will result in improved financial performance. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 2. SEGMENT REPORTING The Company operates in two business segments: transportation and financial services. Other items are shown in the table below for purposes of reconciling to consolidated amounts (in thousands).
Second quarter Six Months Operating Operating Operating Operating Total RevenuesIncome (Loss) Revenues Income (Loss) Assets Transportation 2000 $ 37,444 $ (1,750) 74,463 (4,875) $ 48,088 1999 38,013 (349) 75,869 (359) 47,575 Financial Services 2000 1,324 (871) 3,163 (653) 93,742 1999 2,220 490 4,189 780 27,969 Total Segments 2000 38,768 (2,621) 77,626 (5,528) 141,830 1999 40,233 141 80,058 421 75,544 General Corporate and Other 2000 9 (261) 19 (500) 2,161 1999 28 (318) 60 6,182 Consolidated 2000 38,777 (2,882) 77,645 (6,028) 143,991 1999 40,261 3 80,118 (613) 81,726
3. FINANCING AGREEMENTS SECURITIZATION OF RECEIVABLES TransFinancial, UPAC and APR Funding Corporation (a wholly-owned subsidiary) have entered into a securitization agreement with a financial institution whereby undivided interests in a designated pool of accounts receivable can be transferred on an ongoing basis. Effective May 26, 2000, the securitization agreement was assigned to and assumed by a new purchaser. UPAC and APR Funding Corporation amended the securitization agreement with the new purchaser increasing the maximum allowable amount of receivables to be sold under the new agreement to $80.0 million, extending the term of the agreement by five years with annual liquidity renewals and amending certain financial covenants. As a result of certain call provisions in the amended agreement, the receivables transferred under the agreement after the date of the amendment are not reflected as sold in subsequent balance sheets. The funds advanced under the amended agreement are accounted for as secured borrowings. The purchaser permits principal collections to be reinvested in new financing agreements. The Company had transferred receivables of $67.3 million at June 30, 2000. The cash flows from the sale of receivables are reported as investing activities in the accompanying consolidated statement of cash flows. Previously the transferred receivables were reflected as sold. As of December 31, 1999, $63.9 million of receivables had been transferred and were considered sold. The terms of the securitization agreement also required that UPAC maintain a default reserve at specified levels that serves as additional collateral. At June 30, 2000, approximately $7.6 million of owned finance receivables served as collateral under the default reserve provision. Among other things, the terms of the agreement require UPAC to maintain a minimum tangible net worth of $10.0 million, contain restrictions on the payment of dividends by UPAC to TransFinancial without prior consent of the financial institution and require UPAC to report any material adverse changes in its financial condition. UPAC was in compliance with such covenants at June 30, 2000. SECURED LOAN AGREEMENTS In January 1998, Crouse Cartage Company entered into a three-year secured loan agreement with a commercial bank that provides for a $4.5 million working capital line of credit loan ("Working Capital Line"). The following table summarizes activity under the Working Capital Line in the second quarter and six months ended June 30, 2000 and 1999 (in thousands, except percentages): Second quarter Six Months 2000 1999 2000 1999 Balance outstanding at end of period $ 5,034 $ 346 $5,034 $ 346 Average amount outstanding.......... $4,678 $ 115 $4,550 $521 Maximum month end balance outstanding $ 5,034 $ 346 $5,034 $ 2,414 Interest rate at end of period...... 9.25% 7.25% 9.25% 7.25% Weighted average interest rate...... 9.01% 7.50% 8.76% 7.72% In September 1998, the Company entered into a two-year secured loan agreement with the same commercial bank which enabled the Company to borrow $10.0 million (the "Loan"), secured by freight accounts receivable and a second lien on revenue equipment. In March 1999, the Loan was amended and restated to increase the borrowing to $15.0 million. The proceeds of the Loan were used to repurchase shares of the Company's common stock and fund operations. The Loan bears interest at 25 basis points below the bank's prime rate. The interest rate was 9.25% at June 30, 2000. Effective July 6, 2000, the Company executed an Amended and Restated Secured Loan Agreement (the "Loan Agreement") that provides approximately $21 million of credit, including the term loan of $14.2 million, the Working Capital Line of $4.5 million and a new bridge loan of $2.2 million. The Loan Agreement is secured by freight accounts receivable, revenue equipment, mortgages on real property and the stock of UPAC. The Loan Agreement bears interest at 25 basis points below the bank's prime rate. The terms of the Working Capital Line require TransFinancial to maintain a minimum consolidated tangible net worth of $23 million, a ratio of current assets to current liabilities of 1.0 to 1.0, a ratio of debt to tangible net worth of 1.2 to 1.0, and contain restrictions on the payment of dividends without prior consent of the Lender. 4. STOCK REPURCHASE In the first quarter of 1999, the Board of Directors authorized the repurchase of 1,030,000 shares of the Company's common stock. In 1999, a total of 683,241 shares had been repurchased at a cost of approximately $2.6 million. 5. CONTINGENCIES AND COMMITMENTS Crouse has been named as a defendant in two lawsuits arising out of a motor vehicle accident. The first suit was instituted on June 16, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Kimberly Idalski, Personal Representative of the Estate of Lori Cothran, Deceased against Crouse. The second suit was instituted on August 17, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Jeanne Cothran, as Legal Guardian, on behalf of Kaleb Cothran, an infant child against Crouse. The suits allege that Crouse negligently caused the death of Lori Cothran in a motor vehicle accident involving a Crouse driver. The first suit seeks damages in excess of $50,000,000, plus costs, interest and attorney fees. The second suit seeks damages in excess of $100,000,000, plus costs, interest and attorney fees. These suits were settled by Crouse's insurance carrier without additional charges to Crouse. The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to the proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000 and the Company has filed for dismissal of the suit. The defendant filed an amended class action complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties by the defendants. The Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company. The Company is also party to certain other claims and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such claims and litigation will not materially affect the Company's results of operations, cash flows or financial position. In 1998 and 1999, TFH L&T entered into a long-term operating leases for new and used tractors and new trailers. Lease terms are five years for tractors and seven years for trailers. Rental expense relating to these leases was $1,215,000 and $832,000 for the six months ended June 30, 2000 and 1999. Minimum future rentals for operating leases are as follows: remaining six months of 2000 - $1,199,000; 2001 - $2,399,000; 2002 - $2,399,000; 2003 - $1,961,000; 2004 - $862,000; 2005 - $791,000; and thereafter - $501,000. Additionally, TFH L&T has limited contingent rental obligations of $1,019,000 if the fair market value of such equipment at the end of the lease term is less than certain residual values. Such lease also requires TFH L&T to maintain tangible net worth of $26.0 million, increasing by $1.0 million per year beginning in 1999. TFH L&T was not in compliance with this covenant at June 30, 2000. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Second quarter ended June 30, 2000 compared to the second quarter ended June 30, 1999 and the six months ended June 30, 2000 compared to the six months ended June 30, 1999 TransFinancial operates primarily in two segments; transportation, through its subsidiary, TFH Logistics & Transportation Services, Inc. and its subsidiaries ("TFH L&T"); and financial services, through its subsidiary, Universal Premium Acceptance Corporation ("UPAC"). TRANSPORTATION Operating Revenue - The changes in transportation operating revenue are summarized in the following table (in thousands): Qtr. 2 2000 Six Months 2000 vs. vs. Qtr. 2 1999 Six Months 1999 Increase (decrease) from: Decrease in LTL tonnage........................ $ (1,137) $ (2,119) Decrease in LTL revenue per hundredweight...... (522) (1,222) Increase in truckload revenues................. 1,090 1,935 Net increase (decrease).................... $ (569) $ (1,406) Less-than-truckload ("LTL") revenues declined 4.9%, from $33.8 million for the second quarter of 1999 to $32.2 million for the second quarter of 2000, and 5.0%, from $67.5 million for the first six months of 1999 to $64.2 million for the first half of 2000. The principal causes of the declines in the periods of 2000 were a more than three percent decrease in LTL tons hauled and a decline in LTL revenue yield. Management believes the decline in LTL tons hauled and revenue yield was the result of targeted marketing of Crouse's customers by certain competitors due to uncertainty amongst shippers about TFH L&T's future resulting from the terminated management buyout, recent operating losses and covenant violations under its financing arrangements.* Truckload ("TL") operating revenues rose 26.1%, from $4.2 million for the second quarter of 1999 to $5.3 million for the second quarter of 2000, and 23.2%, from $8.3 million for the first six months of 1999 to $10.3 million for the same period in 2000. The increases in TL shipments and revenues were due to improved focus on this market resulting from the Company's restructuring of its TL operations as a separate subsidiary. Also, the 1999 TL revenues were depressed due to the temporary closing of a meat processing plant operated by one of Crouse's customers. 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 2000 1999 2000 1999 Salaries, wages and employee benefits.................... 63.2% 58.9% 63.6% 59.4% Operating supplies and expenses.......................... 14.2% 14.5% 15.4% 13.9% Operating taxes and licenses............................. 1.2% 1.1% 1.3% 1.0% Insurance and claims..................................... 2.1% 2.4% 2.1% 2.2% Depreciation............................................. 2.8% 2.7% 2.8% 2.8% Purchased transportation and rents....................... 21.2% 21.3% 21.4% 21.2% Total operating expenses............................. 104.7% 100.9% 106.5% 100.5%
TFH L&T's operating expenses as a percentage of operating revenue, or operating ratio, increased in the second quarter of 2000, in relation to the comparable period of 1999. The deterioration in operating ratio occurred principally in two cost categories: salaries, wages and employee benefits; and operating supplies and expenses. Operating expenses as a percentage of revenue were also higher for all cost categories as the result of dividing their fixed cost components by lower revenues in the second quarter of 2000. Salaries, wages and employee benefits increased 5.7% from $22.4 million for the second quarter of 1999 to $23.7 million for the second quarter of 2000. The increase in the second quarter of 2000 was principally the result of a scheduled increase in union wages and benefits effective April 1, 2000, pursuant to the Crouse's collective bargaining agreement and increased utilization of Company drivers and tractors to provide transportation of freight between terminals ("linehaul transportation") and decreased utilization of owner- operator leased equipment. Salaries, wages and employee benefits increased 4.9% from $45.1 million for the six months of 1999 to $47.3 million for the six months of 2000 due principally to the same causes as discussed for the second quarter. Operating supplies and expenses increased 9.3% from $10.5 million for the first six months of 1999 to $11.5 million for the first half of 2000. The increase in 2000 was primarily the result of increases in diesel fuel prices, as well as increased general supplies and expenses, particularly in the first quarter of 2000. The Company's transportation net loss for the second quarter of 2000 was $1,148,000, not considering the valuation allowance provided against consolidated deferred tax assets, as compared to a net loss of $188,000 for the second quarter of 1999, as a result of the decrease in operating revenues and increases in operating expenses discussed above. The Company's transportation net loss for the six months of 2000 was $3,013,000, not considering the valuation allowance provided against consolidated deferred tax assets, as compared to a net loss of $246,000 for the first half of 1999, as a result of the decrease in operating revenues and increases in operating expenses discussed above. FINANCIAL SERVICES For the second quarter of 2000, UPAC reported an operating loss of $871,000 on net financial services revenue of $1.3 million, as compared to operating income of $490,000 on net revenue of $2.2 million for the comparable period of 1999. For the six months of 2000, UPAC reported an operating loss of $653,000 on net financial services revenue of $3.2 million, as compared to operating income of $780,000 on net revenue of $4.2 million for the comparable period of 1999. The decreases in net financial services revenue and operating income in 2000 was primarily the result of transition from gain on sale treatment of receivables transferred under UPAC's previous securitization agreement to secured borrowing treatment under the agreement as amended. This change had no effect on the total earnings recognized over the term of each finance contract or the cash flow received by UPAC on each such contract. The timing of earnings recognition was changed. The non-cash effect on net financial services revenues and operating loss for the second quarter and six months of 2000 was approximately $500,000. Also, reducing net financial services revenues and operating income were increased costs of funds under UPAC's securitization agreement and fees and expenses relating to the extension and replacement of the previous securitization agreement. These decreases were offset in part by increased average total receivables outstanding. The growth in average total receivables was due to the addition of marketing representatives since the beginning of 1999 and increased finance contracts in existing markets. UPAC reported a net loss of $617,000 for the second quarter of 2000, not considering the valuation allowance provided against consolidated deferred tax assets, as compared to net income of $259,000 for the second quarter of 1999, and a net loss of $476,000 for the six months of 2000, not considering the valuation allowance provided against consolidated deferred tax assets, as compared to net income of $425,000 for the same period of 1999, as a result of the factors discussed above. OTHER Interest expense increased substantially in the second quarter and six months of 2000 due to additional borrowings on long-term debt incurred to repurchase stock and fund operations in 1999, increased working capital borrowings in 2000 and increased interest rates on borrowings in 2000. In the second quarter and six months of 2000, the Company's income tax provision was $21,000 and $43,000 on a pre-tax losses of $3.4 million and $7.0 million, primarily as a result of increases in its valuation allowance provided against consolidated deferred tax assets. FORWARD-LOOKING STATEMENTS The Company believes certain statements contained in this Quarterly Report on Form 10-Q which are not statements of historical fact may 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. These statements can often be identified by the use in such statements of forward- looking terminology, such as "believes," "expects," "may," "will," "should," "could," "intends," "plans," "estimates," or "anticipates," or the negative thereof, or comparable terminology. Certain of such statements contained herein are marked by an asterisk ("*") or otherwise specifically identified herein. In addition, the Company believes 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 may 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 that 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 relate 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; 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 statutory interest rates or other regulations 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. 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 Part II - Item 1 regarding the outcome of claims and litigation, such statements are subject to a number of risks and uncertainties, including without limitation the difficulty of predicting the results of the discovery process and the final resolution of ongoing claims and litigation. 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 ability of management to effect operational changes to improve the future economic performance of the Company (which is dependent in part upon the factors described above); the ability of management to obtain replacement financing, 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 Company's intention to refinance, extend or replace certain financing arrangements, the Company's ability to do so is subject to a number of risks and uncertainties, including, without limitation, the future economic performance of the Company, the ability of the Company to comply with the terms of such financing arrangements, general conditions in the credit markets and the availability of credit to the Company on acceptable terms. GENERAL FACTORS Certain general factors that could impact 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 As of June 30, 2000, the Company's net working capital was $6.1 million as compared to a working capital deficit of $2.2 million as of December 31, 1999. The Company's current ratio was 1.1 and its ratio of total liabilities to tangible net worth was 4.6 as of June 30, 2000, as compared to a current ratio of 0.9 and a ratio of total liabilities to tangible net worth of 1.2 as of December 31, 1999. Cash provided by operating activities decreased in the six months ended June 30, 2000 as compared to the six months ended June 30, 1999, due primarily to current operating losses in the Company's transportation operations. The Company has experienced operating losses in second quarter of 2000, and for the years 1999 and 1998 and significantly reduced cash flows from operating activities in 1999 and 2000. In addition, the Company has violated certain covenants in its financing agreements. The report of the Company's Independent Accountants included in TransFinancial's Annual Report on Form 10-K for the year ended December 31, 1999, contains an explanatory paragraph indicating that these factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's ability to continue as a going concern is ultimately dependent on its ability to refinance its outstanding debt with new lenders and make changes in its operations to allow it to operate profitably and sustain positive operating cash flows. Effective May 26, 2000, UPAC entered into a new receivable securitization agreement (See Note 3 of Notes to Consolidated Financial Statements). Effective July 6, 2000, the Company executed an Amended and Restated Secured Loan Agreement that provides approximately $21 million of credit for one year and waives the existing covenant violations under its prior credit agreements. Management continues to seek replacement financing that would enable it to repay its secured loan agreement and provide additional liquidity. The Company has also effected changes in its operations intended to bring operating expenses in line with operating revenue levels and to increase the levels of revenues. Management believes that it will be successful in closing on replacement financing and that the operational changes should result in improved operating results. However, there can be no assurance that replacement financing will be successfully closed or that the operational changes will result in improved financial performance. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. A substantial portion of the capital required for UPAC's insurance premium finance operations has been provided through the transfer of undivided interests in a designated pool of receivables on an ongoing basis under a receivables securitization agreement. As of June 30, 2000, $67.3 million of such receivables had been sold. Effective May 26, 2000, the securitization agreement was assigned to and assumed by a new purchaser. UPAC and APR Funding Corporation (wholly-owned subsidiary of UPAC) amended the securitization agreement with the new purchaser increasing the maximum allowable amount of receivables to be financed under the new agreement to $80.0 million, extending the term of the agreement by five years with annual liquidity renewals and amending certain financial covenants. Receivables transferred prior to the amendment were accounted for as sold, removed from the balance sheet and a gain on sale was recognized for the discounted interest strip retained as of the date of transfer. As a result of certain call provisions in the amended agreement, the receivables transferred under the amended agreement are not reflected as sold in future balance sheets. The funds advanced are accounted for as secured borrowings and earnings on receivables financed are recognized on an interest earned basis over the term of the finance contracts. This change will have no effect on the total earnings recognized over the term of each finance contract or the cash flow received by UPAC on each such contract. The timing of earnings recognition will however be changed. The effect of this change on operating results in 2000 could be material.* Crouse had a three-year secured loan agreement with a commercial bank that provided for a $4.5 million working capital line of credit loan, ("Working Capital Line"). Borrowings on the Working Capital Line bear interest at 25 basis points below the bank's prime rate. The interest rate was 9.25% at June 30, 2000. As of June 30, 2000, borrowings of $4,500,000 were outstanding under the Working Capital Line. Crouse's banking arrangements with its primary bank provide for automatic borrowing under the Working Capital Line to cover checks presented in excess of collected funds. On certain occasions the timing of cash disbursements and cash collections results in a net cash overdraft. The outstanding checks representing such overdrafts are generally funded from the next days cash collections, or if not sufficient, from borrowings on the Working Capital Line. In September 1998, the Company entered into a two-year secured loan agreement with the same commercial bank to borrow $10.0 million (the "Loan"). Freight accounts receivable and a second lien on revenue equipment are pledged as collateral for the Loan. In March 1999, the Company amended and restated this agreement increasing the borrowings to $15 million. The Loan bears interest at 25 basis points below the bank's prime rate. The interest rate was 9.25% at June 30, 2000. Effective July 6, 2000, the Company executed an Amended and Restated Secured Loan Agreement that provides approximately $21 million of credit for one year and waives the existing covenant violations under its prior credit agreements. Management continues to seek replacement financing that would enable it to repay its secured loan agreement and provide additional liquidity. The Company had limited working capital at June 30, 2000, and was not in compliance with certain covenants in its financing agreements and was experiencing reduced cash flows from operating activities. In order to remedy the working capital problems and covenant violations, the Company executed an Amended and Restated Secured Loan Agreement that provides approximately $21 million of credit and waived the covenant violations. Management is continuing to seek replacement financing for TFH L&T that would enable it to pay off its existing financing arrangements and provide additional liquidity. In addition, the Company has effected changes in its operations intended to bring operating expenses in line with operating revenue levels, and to increase the levels of revenues. Management believes that replacement financing, if closed, together with the changes in operations should provide sufficient funds to meet the Company's short-term and long-term cash requirements.* If the Company is unable to close on replacement financing or improve operating results, the Company will suffer increased liquidity problems in the future.* In the first quarter of 1999, the Board of Directors authorized the repurchase of 1,030,000 shares of the Company's common stock. In 1999, a total of 683,241 shares had been repurchased at a cost of $2.6 million. The repurchase of these shares was funded from the proceeds of the additional term loan borrowings described above. Crouse has been named as a defendant in two lawsuits arising out of a motor vehicle accident. The first suit was instituted on June 16, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Kimberly Idalski, Personal Representative of the Estate of Lori Cothran, Deceased against Crouse. The second suit was instituted on August 17, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Jeanne Cothran, as Legal Guardian, on behalf of Kaleb Cothran, an infant child against Crouse. The suits allege that Crouse negligently caused the death of Lori Cothran in a motor vehicle accident involving a Crouse driver. The first suit seeks damages in excess of $50,000,000, plus costs, interest and attorney fees. The second suit seeks damages in excess of $100,000,000, plus costs, interest and attorney fees. These suits were settled by Crouse's insurance carrier without additional charges to Crouse. The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to the proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000 and the Company has filed for dismissal of the suit. The defendant filed an amended class action complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties by the defendants. The Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company.* PART II - OTHER INFORMATION Item 1. Legal Proceedings -- Crouse has been named as a defendant in two lawsuits arising out of a motor vehicle accident. The first suit was instituted on June 16, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Kimberly Idalski, Personal Representative of the Estate of Lori Cothran, Deceased against Crouse. The second suit was instituted on August 17, 1999 in the United States District Court in the Eastern District of Michigan (Northern Division) by Jeanne Cothran, as Legal Guardian, on behalf of Kaleb Cothran, an infant child against Crouse. The suits allege that Crouse negligently caused the death of Lori Cothran in a motor vehicle accident involving a Crouse driver. The first suit seeks damages in excess of $50,000,000, plus costs, interest and attorney fees. The second suit seeks damages in excess of $100,000,000, plus costs, interest and attorney fees. These suits were settled by Crouse's insurance carrier without additional charges to Crouse. The Company and its directors have been named as defendants in a lawsuit filed on January 12, 2000 in the Chancery Court in New Castle County, Delaware. The suit seeks declaratory, injunctive and other relief relating to the proposed management buyout of the Company. The suit alleges that the directors of the Company failed to seek bidders for the Company's subsidiary, Crouse, failed to seek bidders for its subsidiary, UPAC, failed to actively solicit offers for the Company, imposed arbitrary time constraints on those making offers and favored a management buyout group's proposal. The suit seeks certification as a class action complaint. The proposed management buyout was terminated on February 18, 2000 and the Company has filed for dismissal of the suit. The defendant filed an amended class action complaint on August 9, 2000, seeking damages in excess of $4.50 per share for the alleged breaches of fiduciary duties by the defendants. The Company believes this suit will not have a material adverse effect on the financial condition, liquidity or results of operations of the Company.* Item 2. Changes in Securities -- None Item 3. Defaults Upon Senior Securities -- None Item 4. Submission of Matters to Vote of Security Holders -- None Item 5. Other Information -- None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amended and Restated Secured Loan Agreement, dated July 5 2000. by and among Bankers Trust Company, N.A. of Des Moines, Iowa, TransFinancial Holdings, Inc., Crouse Cartage Company, Specialized Transport, Inc., TFH Logistics & Transportation Services, Inc., Transport Brokerage, Inc., Phoenix Computer Services, Inc., Custom Client Services, Inc. and TFH Properties, Inc. 27 Financial Data Schedule. (b) Reports on Form 8-K - Current Report on Form 8-K, filed May 18, 2000, announcing the date of the Company's Annual Meeting of Shareholders. (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 (Principal executive and financial officer) Date: August 14, 2000 TRANSFINANCIAL HOLDINGS, INC. EXHIBIT INDEX 10.1 Amended and Restated Secured Loan Agreement, dated July 5 2000. by and among Bankers Trust Company, N.A. of Des Moines, Iowa, TransFinancial Holdings, Inc., Crouse Cartage Company, Specialized Transport, Inc., TFH Logistics & Transportation Services, Inc., Transport Brokerage, Inc., Phoenix Computer Services, Inc., Custom Client Services, Inc. and TFH Properties, Inc. 27 Financial Data Schedule. EX-10 2 0002.txt AMENDED AND RESTATED SECURED LOAN AGREEMENT This Amended and Restated Secured Loan Agreement ("Agreement") is made and entered into this 5th day of July, 2000, by and among Bankers Trust Company, N.A., of Des Moines, Iowa ("Bank"), TransFinancial Holdings, Inc. ("TransFinancial") and Crouse Cartage Company ("Crouse"), (TransFinancial and Crouse being hereinafter collectively referred to as the "Borrowers" and individually as a "Borrower"), and Specialized Transport, Inc. ("Specialized Transport"), TFH Logistics & Transportation Services, Inc., Transport Brokerage, Inc., Phoenix Computer Services, Inc., Custom Client Services, Inc. and TFH Properties, Inc. f/k/a Anuhco Properties, Inc. ("TFH Properties") (hereinafter collectively referred to as the "Co-Borrowers" and individually as a "Co- Borrower"). WITNESSETH WHEREAS, on or about September 30, 1998, Bank and Borrowers entered into a certain Secured Loan Agreement wherein, among other things, Bank extended to Borrowers a term loan in the principal sum of $10,000,000.00 ("Term Loan"), and Borrowers granted to Bank a lien on certain collateral therein described; and WHEREAS, on or about October 31, 1998 Bank and Crouse entered into a certain Secured Loan Agreement, which renewed and replaced a Security Agreement dated January 5, 1998, wherein, among other things, Bank extended to Crouse a working capital line of credit loan in the principal sum of $4,500,000.00 ("Working Capital Line of Credit Loan"), and Crouse granted to Bank a lien on certain collateral therein described; and WHEREAS, on or about March 25, 1999, Bank and Borrowers entered into a certain Secured Loan Agreement wherein, among other things, Bank extended to Borrowers $5,000,000.00 which was merged into the $10,000.000.00 Term Loan dated September 30, 1998; and WHEREAS, on or about June 23, 2000, Bank extended to Borrowers a loan in the principal sum of $700,000.00, to cover certain overdrafts then existing in Borrowers' account ("Overdraft Loan"), which loan matured and became due and payable in full on June 30, 2000, and is now in default; and WHEREAS, Borrowers are now in default under certain terms of the two Secured Loan Agreements described above, which defaults Borrowers are unable to timely cure; and WHEREAS, as a result of Borrowers' defaults, Bank could accelerate the indebtedness owing under the Term Loan, the Working Capital Line of Credit Loan and the Overdraft Loan; and WHEREAS, Borrowers are seeking replacement financing from other lenders sufficient in amount to pay in full all indebtedness now or hereafter owing to Bank, which refinancing Borrowers believe, in good faith, they can obtain prior to December 31, 2000; and WHEREAS, Borrowers have requested Bank to modify and replace the aforesaid loans in accordance with the terms of this Agreement; and WHEREAS, Borrowers have further requested Bank to waive all defaults existing as of the date of this Agreement; and WHEREAS, Borrowers have further requested Bank to extend them additional credit of $1,500,000.00; and WHEREAS, Co-Borrowers are willing to be co-obligors of all indebtedness now or hereafter owing to Bank pursuant to this Agreement; and WHEREAS, in consideration for Borrowers and Co-Borrowers' compliance with the terms and conditions of this Agreement and the other loan documents executed in connection herewith, Bank is willing to modify and replace the aforesaid loans, waive the existing defaults and extend additional credit to Borrowers and Co-Borrowers; and WHEREAS, as of the date of this Agreement, the unpaid principal balances owing or commitments on the Term Loan, Working Capital Line of Credit Loan and Overdraft Loan are $14,200,000.00, $4,500,000.00 and $700,000.00, respectively, plus accrued interest thereon. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties agree that the two Secured Loan Agreements described above shall be deemed amended, restated and superseded by this Agreement. I. DEFINITIONS. For purpose of this Agreement and in addition to the terms defined above, the following terms shall have the following meanings: "AFFILIATE" shall mean: (i) any natural person who is a controlling shareholder of any Obligor or who is an officer, director or managing agent of any Obligor; (ii) any corporation, partnership or entity that is a controlling shareholder of any Obligor; and (iii) any person who directly or indirectly controls, is controlled by or is under common control or ownership with any Obligor any controlling shareholder of any Obligor. For the purposes of this definition, the term "control" or "controlling" shall mean the ownership of ten percent (10%) or more of the beneficial interest in the entity being referred to. "AGREEMENT" shall mean this Amended and Restated Secured Loan Agreement, as amended or modified from time to time, together with all exhibits or schedules attached hereto or hereafter. "BANK'S PRIME RATE" shall mean the fluctuating interest rate per annum from time to time designated by Bank as its prime rate. The Bank's Prime Rate shall not be deemed the lowest rate or most favored rate charged by Bank to its customers. Changes in the Bank's Prime Rate shall be effective without notice to Obligors on the date of each change. "BORROWING BASE" shall mean an amount equal to eighty-five percent (85%) of Crouse's Eligible Accounts Receivable owned by Crouse as of the date of each Borrowing Base Certificate. "BORROWING BASE CERTIFICATE" shall mean a document duly certified by an authorized officer of Crouse and TransFinancial in the form attached hereto as Exhibit "A". "CENTRAL STATES PENSION FUNDS" means Central States, Southeast and Southwest Areas Health and Welfare Pension Funds. "COLLATERAL" shall mean without limitation the various assets pledged to Bank as security for the Notes, now or in the future, as more particularly described in Section 4 of this Agreement. "COVENANT COMPLIANCE CERTIFICATE" shall mean a document duly certified by an authorized officer of TransFinancial, Crouse, and Specialized Transport in the form attached hereto as Exhibit "B". "CROUSE'S REVENUE EQUIPMENT" shall mean and include all of Crouse's (i) commercial and highway trucks, (ii) commercial and highway tractors and trailers, (iii) automobiles and (iv) pickup and delivery vehicles, all for which titles have been issued in the name of Crouse; and (v) all mechanical refrigeration units attached to, or held for use upon, such trucks, tractors and trailers. "CURRENT ASSETS" shall mean TransFinancial's current assets which shall be determined on a consolidated basis and in accordance with GAAP. "CURRENT LIABILITIES" shall mean TransFinancial's current liabilities which shall be determined on a consolidated basis and in accordance with GAAP. "CURRENT RATIO" shall be calculated by dividing TransFinancial's Current Assets by its Current Liabilities. "DEBT TO TANGIBLE NET WORTH RATIO" shall be determined on a consolidated basis and in accordance with GAAP and shall mean that number calculated by dividing TransFinancial's aggregate liabilities by its Tangible Net Worth. "DEFAULT" OR "EVENT OF DEFAULT" shall have the meaning delineated in Section 9 of this Agreement. "ELIGIBLE ACCOUNTS RECEIVABLE" shall mean those accounts receivable owing to Crouse which are free and clear of any security interest, lien or encumbrance except that previously granted or herein granted to Bank, and which are not more than eighty-four (84) days past due from date of original invoice or with respect to which there exists no dispute with Crouse. Further, to be an Eligible Accounts Receivable, the receivable must not be subject to any dispute, counterclaim or defense asserted by the account debtor thereunder and the account debtor must not be insolvent or be the subject of any bankruptcy or reorganization proceedings or other proceedings for relief of debtors. An account receivable shall be deemed to exist when the invoice giving rise to such account receivable is mailed or when debt to Crouse from its customers arises, whichever shall first occur. Receivables due Crouse from any Affiliate or employee(s) shall not be included in calculating Eligible Accounts Receivable. "GAAP" shall mean those Generally Accepted Accounting Principles and Practices that are recognized as such by the American Institute of Certified Public Accountants and by the Financial Accounting Standards Board. "HAZARDOUS SUBSTANCES." The terms "hazardous waste," "hazardous substance," "disposal," "release," and "threatened release," as used in this Agreement, shall have the same meanings as set forth in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules or regulations adopted pursuant to any of the foregoing. "INDEBTEDNESS" shall mean and include without limitation all Notes and/or Loans, together with all other obligations, debts and liabilities of Obligors to Bank as well as all claims by Bank against Obligors, whether now or hereafter existing, voluntary or involuntary, due or not due, absolute or contingent, liquidated or unliquidated; whether Obligors may be liable individually or jointly with others; whether Obligors may be obligated as a guarantor, surety, or otherwise; whether recovery upon such indebtedness may be or hereafter may become barred by any statute of limitations; and whether such indebtedness may be or hereafter may become otherwise unenforceable. "LOAN" OR "LOANS" means and includes any and all extensions of credit and financial accommodations from Bank to Obligors, whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Security Agreements, the Mortgages and any other instrument executed in connection with or evidencing the Indebtedness. "MAXIMUM CREDIT" shall mean Twenty Million Nine Hundred Thousand Dollars ($20,900,000.00), which represents the maximum credit Bank is willing to extend to Obligors, jointly or severally. "MORTGAGES" means collectively the Crouse Mortgages and the TFH Properties Mortgage. "NOTES" shall refer to the promissory notes more particularly described in Section 2 of this Agreement executed by Obligors in favor of Bank, together with any and all extensions, modifications, substitutions or renewals thereof. "NOTE" shall refer to any one of such Notes. "OBLIGORS" shall refer collectively to Borrowers and Co-Borrowers and "Obligor" shall refer to any of the Obligors. "SECURITY AGREEMENTS" shall mean any and all Security Agreements executed by Crouse, TransFinancial or Specialized Transport in favor of Bank prior to, contemporaneously with, or subsequent to the execution of this Agreement, granting Bank a lien on Crouse's Eligible Accounts Receivable, Crouse's Revenue Equipment, TransFinancial's stock in UPAC, or Specialized Transport's Revenue Equipment, as well as any other Security Agreements executed by any other Obligor granting Bank a lien on assets therein described. "SPECIALIZED TRANSPORT'S REVENUE EQUIPMENT" shall mean and include all of Specialized Transport's (i) commercial and highway trucks, (ii) commercial and highway tractors and trailers, (iii) automobiles, and (iv) pickup and delivery vehicles, all for which titles have been issued in the name of Specialized Transport, and (v) all mechanical refrigeration units attached to, or held for use upon, such trucks, tractors and trailers. "TANGIBLE NET WORTH" shall be determined on a consolidated basis and in accordance with GAAP and shall mean that number calculated by subtracting from the sum of TransFinancial's equity, all sums relating to goodwill, patents, copyrights, trademarks, licenses, franchises, or other assets normally considered an intangible asset under GAAP. "UPAC" shall mean Universal Premium Acceptance Corporation, a wholly owned subsidiary of TransFinancial. II. LOANS. Subject to the terms and conditions of this Agreement and the other Loan Documents, the Bank agrees to lend to Obligors, or modify and replace existing loans to Borrowers, the following: A. Term Loan. A term loan in the principal amount of $14,200,000.00, which shall constitute a modification and replacement of the term loan previously executed by Borrowers to Bank on March 25, 1999 and Obligors shall execute and deliver to Bank a promissory note ("Term Note") for $14,200,000.00 dated as of the date of this Agreement. No additional funds shall be advanced by Bank to Obligors pursuant to the Term Note other than those funds already advanced. Interest and principal payments shall be payable on the dates and in the manner set forth in the Term Note. Interest shall accrue at a floating rate which shall at all times equal the Bank's Prime Rate, as adjusted to the date of change. The Term Note shall mature and be due and payable in full on July 5, 2001. B. Working Capital Line of Credit Loan. A working capital line of credit loan in the principal amount of $4,500,000.00 which shall constitute a modification and replacement of the working capital line of credit note executed by Crouse to Bank on October 31, 1998, and Obligors shall execute and deliver to Bank a promissory note ("Working Capital Line of Credit Note") for $4,500,000.00 dated as of the date of this Agreement. Although all Obligors are executing such Note, it is understood and agreed that all advances thereunder shall only be made to Crouse, which may borrow, repay and re-borrow under the Working Capital Line of Credit Note during the term of this Agreement provided such funds are used solely to provide working capital for Crouse. Interest and principal payments shall be payable on the dates and in the manner set forth in the Working Capital Line of Credit Note. Interest shall accrue at a floating rate which shall at all times equal the Bank's Prime Rate, as adjusted to the date of change. The Working Capital Line of Credit Note shall mature and be due and payable in full on July 5, 2001. C. Bridge Loan. Contemporaneously with the execution of this Agreement, and for the purpose of providing Crouse with additional working capital until replacement financing is realized, Bank will extend to Obligors a loan in the principal amount of $2,200,000.00 which shall consist of $1,500,000.00 of new advances and $700,000.00 evidenced by the Overdraft Note, and the Overdraft Note shall be deemed replaced and incorporated into the Bridge Loan. Obligors shall execute and deliver to Bank a promissory note ("Bridge Note") for $2,200,000.00 dated as of the date of this Agreement. Although all Obligors are executing such Note, it is understood and agreed that all advances thereunder shall only be made to Crouse. Interest and principal payments shall be payable on the dates and in the manner set forth in the Bridge Note. Interest shall accrue at a floating rate which shall at all times equal the Bank's Prime Rate, as adjusted to the date of change. The Bridge Note shall mature and be due and payable in full on July 5, 2001. Bank's determination as to the outstanding principal balance owed by Obligors under the respective Notes shall be presumed to be correct and binding on all parties whomsoever and Bank's documentation to support said outstanding balances will be sufficient to establish and sustain Obligors' obligations under the Notes, unless Obligors are able to provide documentation to the contrary satisfactory to Bank which is sufficient to rebut the aforesaid presumption. Obligors' liability under the Notes is joint and several. III. ADVANCES. A. Each request by Crouse for an advance of funds shall be made by Crouse either orally or in writing not later than 2:00 o'clock P.M. on the day such advance is requested. Upon receipt by Bank of each request for advance, Bank shall lend to Crouse the amount requested provided, however, that Bank shall not be obligated to make any advance (i) during the existence of any Event of Default; or (ii) if Bank has given notice to Obligors of the violation of any terms or conditions of this Agreement, the Notes, or any other Loan Documents, which violation(s) remain unremedied by Obligors; or (iii) if Obligors are out of compliance with any of the Affirmative Covenants or Negative Covenants required by this Agreement, or (iv) if the amount of the advance requested together with the unpaid principal balance of the Working Capital Line of Credit Note exceeds the lesser of $4,500,000.00 or the Borrowing Base, or (v) any Obligor becomes insolvent, or voluntarily or involuntarily becomes a debtor in bankruptcy; or (vi) there occurs a material adverse change in any Obligor's financial condition, or in the value of the Collateral; or (vii) any Obligor seeks, claims or otherwise attempts to limit, modify or revoke its unconditional and unlimited liability for the Indebtedness. B. Any checks or other charges presented against the account of any Obligors in excess of the balance of said account may be treated by the Bank as a request for an advance under the Working Capital Line of Credit Note, and payment by the Bank of any check may at its option constitute a loan to the Obligors pursuant to this Agreement of the amounts so paid. C. In the event Obligors shall fail to: provide adequate insurance, pay taxes, or pay any other charges which may affect the assets collateralized to Bank, Bank may, at its option, without notice, but without any obligation or liability to do so, procure insurance, pay taxes or pay any other charges and add said sum to the balance of the Working Capital Line of Credit Note. D. Although it is contemplated that at no time during the term of this Agreement shall the outstanding principal amount of the Notes exceed the Maximum Credit, it is understood and agreed that the contemplated Maximum Credit may be exceeded at any time, in Bank's sole discretion, and Obligors shall nevertheless remain liable for the repayment in full of all sums advanced by Bank on Obligors' behalf, together with interest, late charges, attorneys' fees and costs, if any, as more fully set forth herein. IV. COLLATERAL. As security for the Notes and all advances made pursuant to this Agreement, and any renewals, modifications, substitutions or extensions thereof, and any other Loans or advances made by Bank to Obligors, the Bank is herein granted (or previous security grants are renewed) a security interest in and lien against, but not limited to the following assets: A. Crouse's Eligible Accounts Receivable and Revenue Equipment. Crouse herein grants and/or renews its grant to Bank of a first lien on all of Crouse's Eligible Accounts Receivable and all of Crouse's Revenue Equipment, together with all proceeds therefrom. Crouse shall cooperate with Bank to take all requisite action to cause Bank's lien to be affixed to all of Crouse's Revenue Equipment now or hereafter existing or now owned or hereafter acquired and to otherwise assist Bank in the perfection of its liens thereon. B. Specialized Transport's Revenue Equipment. Specialized Transport herein grants to Bank a first lien on all of Specialized Transport's Revenue Equipment together with all proceeds therefrom. Specialized Transport shall cooperate with Bank to take all requisite action to cause Bank's lien to be affixed to all of Specialized Transport's Revenue Equipment now or hereafter existing or now owned or hereafter acquired, and to otherwise assist Bank in the perfection of its liens thereon. C. Crouse Real Estate. Crouse herein grants to bank a lien on all of its real estate, as more particularly described in Exhibit "C" attached hereto (collectively the "Crouse Real Estate"), and all proceeds from the sale thereof, which shall be evidenced by real estate mortgages or deeds of trust, as the case may be (collectively the "Crouse Mortgages"), previously executed and/or executed contemporaneously with this Agreement. Additionally, Crouse shall assign to Bank all rents, profits or other income generated by or from the Crouse Real Estate which shall be evidenced by an Assignment of Rents executed contemporaneously with this Agreement. D. TFH Properties Real Estate. TFH Properties herein grants to Bank a lien on its property located in Lenexa, Kansas, more particularly described in Exhibit "D" attached hereto ("TFH Properties Real Estate") and all proceeds from the sale thereof, which shall be evidenced by a real estate mortgage or deed of trust, as the case may be ("TFH Properties Mortgage"), previously executed and/or executed contemporaneously with this Agreement. Additionally, TFH Properties shall assign to Bank all rents, profits or other income generated by or from TFH Properties Real Estate which shall be evidenced by an Assignment of Rents executed contemporaneously with this Agreement. E. UPAC Stock. TransFinancial herein grants to Bank a security interest in 400 shares of UPAC stock, which constitutes all outstanding shares of UPAC Stock, owned by TransFinancial evidenced by Certificate No. 14 issued March 29, 1996, the original of which shall be delivered to Bank along with appropriate stock powers on Bank's standard form for same. The Bank will at all times have a security interest in One Hundred Percent of the outstanding shares of the UPAC stock. V. REPRESENTATIONS AND WARRANTIES. Obligors herein represent and warrant to Bank the following: A. Obligors' Authority. (1) Each Obligor as full power, right and authority to make and execute this Agreement, the Notes, and all other documents Bank may reasonably request be executed in connection herewith; (2) the execution of this Agreement and the Notes, and all other related documents will not conflict with any agreement or instrument to which any Obligor is a party or by which any Obligor or any of its property may be bound or affected; (3) the individuals who, on behalf of Obligors, execute and deliver this Agreement, Notes, and the other related documents are authorized to do so and have provided Bank the appropriate authorizations evidencing same. B. No Litigation. No litigation or governmental proceedings are pending or threatened against any Obligor and no Obligor has any liabilities, actual or contingent, not previously disclosed to Bank. C. First Lien For Bank. The lien of the Bank on all of the Collateral described in Section 4 above shall be a first lien at all times during the term of this Agreement, except as otherwise disclosed to and approved by Bank. In such regard, Bank acknowledges the mortgage lien of Central States Pension Funds on certain parcels of Crouse's Real Estate. D. No Other Liens. None of Obligors' assets are subject to any mortgage, pledge, encumbrance or other lien, except as otherwise disclosed to the Bank in writing. In such regard, Bank acknowledges the mortgage lien of Central States Pension Funds on certain parcels of Crouse's Real Estate. E. Tax Returns. Obligors have filed all federal and state income tax returns which are required to be filed and have paid all taxes and assessments which are due. F. Financial Statements. All financial statements previously delivered to Bank by Obligors are true and correct in all respects and accurately represent the financial condition of Obligors as of the respective dates thereof. No adverse change in the financial condition of Obligors has occurred since the date of the most recent financial statement given to Bank. G. No Violation of Occupational Safety and Environmental Protection. Obligors are not in violation in any material manner of any federal, state, county or city statutes, orders, rules or regulations pertaining to occupational safety or environmental protection, nor do Obligors presently anticipate that future expenditures needed to meet the provisions of existing federal, state, county or city statutes, orders, rules or regulations will be so burdensome as to affect or impair in a materially adverse manner Obligors' financial conditions. H. Indemnification and Hold Harmless Obligation. None of the Crouse Real Estate or the TFH Properties Real Estate or other collateral given to Bank as security for the Notes, nor any other assets owned by Obligors have been, or ever will be, so long as any of the Notes remain unpaid, used for the generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substances, provided however, it is understood that Crouse in the ordinary course of its business, does transport items which may be deemed Hazardous Substances. The representations and warranties contained herein are based on Obligors' due diligence in investigating the collateralized properties for Hazardous Substances. Obligors hereby (i) release and waive any future claims against Bank for indemnity or contribution in the event Obligors become liable for cleanup or other costs under any such laws; (ii) agree that Bank may recover against Obligors to the full extent of any damages, claims or other liabilities suffered by Bank as a result of the violation of any such environmental laws, whether or not such violation occurred while any real estate or other collateral was owned by a predecessor or successor in interest to Obligors; and (iii) agree to indemnify and hold Bank harmless against any and all claims and losses resulting from a breach of this provision, including reasonable attorney's fees and expenses. This obligation to indemnify and hold Bank harmless shall survive the payment of the Notes. I. No Damage to Collateral. None of the Collateral is now damaged or injured as a result of any uninsured fire, explosion, accident, flood or other casualty. J. Collateral Not in Flood Zone. None of the Collateral is situated in any federal or state designated flood zone. Should it be determined that a property is located in a flood zone, Obligors shall obtain flood insurance coverage, issued by a company or companies approved by the Bank and in amounts acceptable to Bank which policy or policies shall name the Bank as loss payee thereunder, and Bank shall also have been provided with such additional policies of insurance as Bank may reasonably require insuring against such risks and in such amounts as are customarily carried by like businesses operating in the same vicinity. K. Ownership of Collateral. The entire legal and beneficial ownership in all assets pledged as Collateral hereunder is held by the entity representing to Bank its ownership thereunder. L. Addresses of Obligors. The addresses appearing on the signature page of this Agreement represent the chief executive offices of the Obligors. VI. AFFIRMATIVE COVENANTS. From the date of this Agreement and thereafter until all Indebtedness is paid in full, Obligors will: A. Accounting. Maintain a modern system of accounting in accordance with GAAP. B. Financial Statements. Furnish to Bank (i) within one hundred twenty (120) days of each fiscal year end, consolidated, audited and unqualified financial statements from TransFinancial prepared by an independent certified public accountant acceptable to Bank in reasonable detail and dated as of the immediately preceding fiscal year end, and prepared in accordance with GAAP; (ii) within forty-five (45) days following the end of each calendar quarter, a consolidated, unaudited financial statement of TransFinancial which shall contain a balance sheet, statement of income and retained earnings, and cash flow, each as of the end of such calendar quarter; (iii) within forty- five (45) days following the end of each calendar quarter, the 10-K Report filed by TransFinancial with the Securities and Exchange Commission; and (iv) within one week following the end of each business week, a duly completed Borrowing Base Certificate; (v) within one week following the end of each business week, a duly completed Covenant Compliance Certificate; and (vi) at such times as requested by Bank, any Obligors' cash flow projections and such other information as the Bank may reasonably request. C. Access to Books and Collateral. At all times, keep proper books of account in a manner satisfactory to Bank, and permit the Bank and its agents access to the books, records, premises, assets and operations of Obligors at all reasonable times. D. Notification of Legal Proceedings. Notify the Bank promptly of any litigation or legal proceedings involving any Obligor as a party defendant wherein the amount at issue exceeds $100,000.00. E. Insurance. Obtain such insurance or evidence of insurance as Bank may reasonably require, including but not limited to, an all-risk policy of casualty insurance, and such other hazard insurance in such amount, form and substance as Bank will require with Bank named as loss payee thereunder as it pertains to the Collateral and with standard waiver of subrogation clauses, it being understood by Bank that Obligors self-insure the first $100,000.00 of casualty damages. This insurance shall be issued by such companies as shall be approved by Bank, and the originals of such policies (together with appropriate endorsements thereto, evidence of payment of premiums thereon and written agreement by the insurers therein to give Bank 30 days prior written notice of intention to cancel) shall be promptly delivered to Bank. This insurance shall be kept in full force and effect at all times hereafter until the Notes have been paid in full. F. Maintenance and Preservation of Collateral. At all times maintain, preserve and protect the Collateral and keep the same in good repair, working order and condition. G. Submission of Environmental Reports. Promptly upon receipt thereof, Obligors shall submit to Bank copies of any reports, inspectors or examinations conducted by the Iowa Department of Natural Resources or the Federal Environmental Protection Agency, or any similar agency, with respect to the assets of Obligors, H. Operating Accounts at Bank. Crouse shall maintain its primary cash concentration accounts with Bank. I. Tangible Net Worth. TransFinancial, on a consolidated basis, shall always maintain a Tangible Net Worth of no less than $23,000,000.00. J. Debt To Tangible Net Worth Ratio. TransFinancial on a consolidated basis, shall always maintain a Debt to Tangible Net Worth Ratio no greater than 1.20 to 1.00. K. Current Ratio. TransFinancial, on a consolidated basis, shall always maintain a Current Ratio of not less than 1.0 to 1.0. L. Receivables and Revenue Equipment Valuation. The aggregate value of Crouse's Eligible Accounts Receivable, Crouse's Revenue Equipment and Specialized Transport's Revenue Equipment shall always total at least 115% of the Indebtedness. The value of Crouse's Revenue Equipment and Specialized Transport's Revenue Equipment shall equal the Net Depreciated Value. "Net Depreciated Value" shall mean the actual original cost of those items comprising such Revenue Equipment, as of the date of acquisition thereof, minus the related accumulated depreciation as reflected on the books of Crouse or Specialized Transport as of the date of the Covenant Compliance Certificate then submitted to Bank. M. New Entities. If any Obligor causes any new entities to be created to conduct business activities similar to, or related to, its current business activities, such new entities shall immediately execute unlimited guaranties of the Indebtedness. N. ERISA Compliance. Obligors shall meet their minimum funding requirements under the Employee Retirement Income Security Act of 1974 (ERISA), as amended, with respect to any employee benefit plan or other class of benefit plan, which the Pension Benefit Guaranty Corporation, established under ERISA (PBGC), has elected to insure, in either case, whether now in existence or hereafter instituted by Obligors. O. Collected Funds. At all times maintain in Obligors accounts at Bank collected funds sufficient to pay all items presented for payment from such accounts and sufficient to pay service charges imposed by Bank. Obligors agree to pay to Bank interest on any overdraft or deficit balance in any such account at the rate set forth in the Working Capital Line of Credit Note. Obligors acknowledge that any and all drafts or checks drawn on any of their accounts which cause an overdraft to occur will be returned by Bank. P. Expenses. Obligors shall pay all of Bank's out-of-pocket costs incurred in connection with the preparation, closing and administration of this Agreement, which costs include but are not limited to attorneys' fees, environmental and other consultant fees, appraisal costs, filing and recording expenses, long distance telephone charges, hand delivery and telefax charges, overnight and other mail charges, and similar items. Q. Collateral Proceeds. In the event Obligors, or any of them, sell any of the Collateral other than in the ordinary course of their business, all of the net proceeds therefrom, after payment of any sale-related expenses, shall be remitted to Bank for paydown of the Term Note. Such paydown shall not alter or modify the monthly payment of principal and interest otherwise required of Obligors pursuant to the Term Note. R. Replacement Financing. Obligors shall utilize their best efforts to procure, on or before December 31, 2000, but no later than July 5, 2001 replacement financing sufficient to pay in full the Indebtedness. VII. NEGATIVE COVENANTS. From the date of this Agreement and thereafter until all of the Indebtedness is paid in full, Obligors will not, without the prior written consent of Bank: A. Incur Debt. Incur, permit or remain outstanding, assume or in any way become committed for indebtedness except the indebtedness incurred herein, the indebtedness incurred with Central States Pension Funds, and those debts incurred in the ordinary course of Obligors' businesses consistent with past practices, or as otherwise approved by Bank. B. Grant Liens. Pledge, mortgage, lease or otherwise encumber, or permit any lien to exist on any asset or property of any kind owned by Obligors, except for the mortgage lien granted to Central States Pension Funds, and except as may exist at and be reflected on the financial statements provided at the time of this Agreement, other than accounts payable to suppliers incurred in the normal course of Obligors' businesses, or as otherwise approved by Bank. C. Sell Assets Out of Ordinary Course. Sell, lease or otherwise dispose of any part of Obligors' real or personal property other than in the ordinary course of Obligors' businesses without Bank's permission. D. Dividends. Declare and/or distribute in cash or other assets any dividends on any Obligors' outstanding stock, or redeem any Obligors' outstanding stock. E. Sale, Change In Control, Merger, Etc. Suffer or permit majority control of any Obligor to be sold, assigned or otherwise transferred, or change management, or merge or consolidate with any entity or enterprise. F. No Other Guaranties. Grant guarantees to any other financial institutions or entities. G. Acquisitions. Acquire other entities. VIII.CONDITIONS OF BANK'S OBLIGATIONS. Bank's obligations to perform hereunder shall be subject to satisfaction of the following conditions on or before closing: A. No Breach of Covenants. Obligors shall have substantially performed all agreements required to be performed hereunder, and shall not be in any material breach of any covenant, agreement, representation or warranty made herein or in any other loan document. B. No Default. No Event of Default and no event or condition which, with notice or the lapse of time, or both, would constitute an Event of Default, shall exist. C. No Material Change in Financial Condition. Obligors shall not have incurred any material liabilities, direct or contingent, other than in the ordinary course of business, since the dates of the last financial statements given to Bank by Obligors. D. Insurance. Obligors shall have obtained hazard or fire and extended coverage insurance (and flood insurance if any Collateral is located in a flood zone) on the Collateral, issued by a company or companies approved by Bank and in amounts acceptable to Bank which policy or policies shall name Bank as loss payee thereunder, and Bank shall also have been provided with such additional policies of insurance as Bank may reasonably require insuring against such risks and in such amounts as are customarily carried by like businesses operating in the same vicinity. E. Reimbursement of Bank's Expense. The payment by Obligors of all out- of-pocket expenses incurred by Bank in the preparation, closing and administration of this Agreement as provided in Section 6.P. above. F. Authorized Action. Receipt by Bank of duly executed certificates from Obligors authorizing the execution of this Agreement, the Notes, the Mortgages, and all other documents contemplated by this Agreement. G. Legal Opinion. Receipt by Bank of an opinion from each Obligors' legal counsel to the effect that (i) each Obligor is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and to the best of such counsel's knowledge and belief, is duly qualified and in good standing as a foreign corporation authorized to do business in Iowa (if not incorporated in Iowa) and in each state where, because of the nature of its activities or properties, such qualification is required; (ii) each Obligor has full power to execute and deliver this Agreement, the Notes and other loan documents, and to perform its obligations thereunder; (iii) such actions have been duly authorized by all necessary corporate action, and are not in conflict with any provision of the law or of the articles of incorporation or bylaws of each Obligor, nor in conflict with any agreement binding upon each Obligor of which such counsel has knowledge; and (iv) this Agreement, the Notes, and the other loan documents are the legal and binding obligations of each Obligor, enforceable in accordance with their terms. H. Title Opinion or Lender's Policy. Receipt by Bank of an attorney's title opinion, from an attorney acceptable to Bank, or receipt by Bank of an ALTA lender's policy, from a title insurance company acceptable to Bank, at the expense of Obligors, confirming that Crouse or TFH Properties, as the case may be, has merchantable title to the real estate parcels offered as Collateral, and that the lien of Bank, does or will constitute a first lien thereon, except for the prior lien on certain parcels granted to Central States Pension Funds. I. Loan Documents. Receipt by Bank of the Notes, the Crouse Mortgages, the TFH Properties Mortgage, any requested Security Agreements, title certificates with Bank's lien noted thereon on Crouse's Revenue Equipment, on Specialized Transport's Revenue Equipment and on any other Revenue Equipment of any of the Borrowers or Co-Borrowers, and all other loan documents requested by Bank, duly executed by an authorized officer of the respective entity. J. Environmental Reports. Receipt by Bank of environmental reports, satisfactory to Bank, on all of the Crouse Real Estate and the TFH Properties Real Estate, from firms acceptable to Bank. K. Appraisals. Receipt by the Bank of appraisals, satisfactory to Bank, on all of the Crouse Real Estate and the TFH Properties Real Estate, Crouse's Revenue Equipment and Specialized Transport's Revenue Equipment, from appraisers acceptable to Bank. L. Deferral By Central States Pension Funds. Receipt by Bank of written confirmation from an authorized officer of Central States Pension Funds that such entity is deferring any principal installments now due from Obligors until July 5, 2001, or any of them, and waiving existing defaults or penalty payments under loan documents executed by Obligors, or any of them. IX. EVENTS OF DEFAULT. If any of the following events occur, Bank may, at its option, without notice or demand, except as otherwise specifically provided, declare the entire Indebtedness of Obligors to Bank immediately due and payable. A. Late Payment. Any payment of principal or interest due under the terms of any Note is not made on the due date and such default continues unremedied for ten (10) days after written notice thereof shall have been given to Obligors by Bank. B. Misrepresentation. Any representation or warranty made by Obligors in this Agreement shall prove to be materially incorrect or untrue, or any statement, report or writing furnished by Obligors to Bank is untrue in any material aspect. C. Breach of Covenants. Obligors fail to perform or observe any term, covenant or condition of this Agreement and such failure is not remedied or corrected within thirty (30) days after written notice thereof shall have been given to Obligors by Bank. D. Breach Under Other Loan Documents. Any breach of any provisions contained in the Notes, or any other loan documents and such breach is not remedied within thirty (30) days after written notice thereof shall have been sent to Obligors by Bank. E. Bankruptcy, Etc. If any Obligor becomes insolvent or bankrupt or makes an assignment for the benefit of creditors, or is petitioned into bankruptcy, either voluntarily or involuntarily. F. Adverse Impairment in Collateral. Bank's interest in any portion of the Collateral is adversely impaired in any manner, and Obligors are unable to remedy, to the Bank's satisfaction, such adverse impairment within 30 days after written notice from the Bank. G. Adverse Change in Financial Condition. Any adverse material change in any Obligor's financial condition shall have occurred. H. Bank Deems Itself Insecure. If Bank at any time reasonably deems itself insecure. X. REMEDIES. Upon the occurrence of a Default, it being understood that a Default under any Note shall constitute a Default under all of the Notes, Bank may, after expiration of any notice period referenced above, declare the unpaid principal balance and interest on the Notes immediately due and payable, together with any other debt owed by Obligors to Bank, and all such principal, interest and other debt shall thereupon be immediately due and payable in full. Bank shall thereupon have all remedies set forth in the Notes, Security Agreements, Mortgages and any other Loan Documents, and all remedies otherwise available to a mortgagee or secured creditor under the laws of Iowa or any other state where any portion of the Collateral is located. XI. NO ADDITIONAL LOANS OR ADVANCES. Obligors acknowledge that Bank has made no commitment, and has no intention, of making any additional loans or advances to Obligors or any of them, except as specifically provided in this Agreement. XII. WAIVER OF EXISTING DEFAULTS. Upon execution of this Agreement by all parties, together with satisfaction of all the conditions of Bank's obligations described in Section 8 above, Bank shall be deemed to have waived all defaults existing as of the date of this Agreement. Any defaults under this Agreement or any other Loan Documents hereinafter occurring are not waived by Bank and will be enforced. XIII.FEE. As an inducement to Bank to enter into this Agreement, Obligors agree to pay Bank a fee determined as follows: (i) if the Indebtedness is paid in full within 30 days of the date of this Agreement, there shall be no fee; (ii) if the Indebtedness is paid in full more than 30 but less than 60 days from the date of this Agreement, the fee shall be $25,000.00; (iii) if the Indebtedness is paid in full more than 60 but less than 90 days from the date of this Agreement , the fee shall be $50,000.00; (iv) if the Indebtedness is paid in full more than 90 days but less than 120 days from the date of this Agreement the fee shall be $75,000.00; and (v) if the Indebtedness is paid in full more than 120 days from the date of this Agreement, the fee shall be $100,000.00. Obligors herein authorize Bank to debit any of their accounts to pay such fee. MISCELLANEOUS A. The Bank As Attorney-In-Fact. In the event of a Default, Obligors hereby appoint Bank to be Obligors' attorney-in-fact, without requiring Bank to act as such, for the purpose of carrying out the provisions hereof and taking any action and executing any document or instrument which Bank may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. B. Waiver Not Binding. Any waiver of any default by Bank is not a waiver of any subsequent default. Further, no delay on the part of Bank in the exercise of any power or right shall constitute a waiver thereof, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof. C. Notice. Any notice hereunder to Obligors shall be in writing, and shall be deemed to be given on the date delivered, personally, or on the date when mailed by ordinary mail, postage prepaid, or by facsimile and addressed to Obligors as appearing on the signature page of this Agreement, or at such other address as Obligors may, by written notice received by Bank, designate as their addresses for purposes of notice hereunder. D. Governing Law. This Agreement, the Notes, the Mortgages and all other loan documents shall be covered in all respects by the laws of the State of Iowa, except to the extent the law of the state in which any Collateral is located, provides otherwise. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the validity or enforceability of any other provision. E. Enforcement in Iowa. Obligors acknowledge that this Agreement is being entered into by Bank in partial consideration of Bank's right to enforce in Iowa the terms and provisions of this Agreement and the other loan documents. Obligors consent to jurisdiction in Iowa and construction of this Agreement under the laws of the State of Iowa. Obligors waive any right to commence any action against Bank except in Iowa. F. Term of Agreement. The term of this Agreement shall coincide with the terms of the Notes executed by Obligors in favor of Bank, as modified, extended, substituted, renewed or until all of the Indebtedness is paid in full. G. Assignment. This Agreement shall not be assigned by Obligors. H. Participation. Bank may enter into participation agreements with other financial institutions with regard to the Indebtedness. I. Successors and Assigns. This Agreement shall be binding upon Obligors' successors and assigns. J. Additional Documents. Obligors agree to execute and cause to be executed such additional documents as Bank may require in order to effectuate the terms of this Agreement. All documents shall be on Bank's standard forms for the same or forms otherwise acceptable to Bank. K. Conflict in Documents. In the event of a conflict between the terms and conditions of this Agreement and those of any other documents pertaining to Obligors' indebtedness to Bank, the Bank, in its sole discretion, shall determine which document is controlling. L. Survival of Representations and Warranties. All representations, warranties, covenants, and agreements of Obligors herein shall survive the execution and delivery of this Agreement and shall be deemed continuing until the Indebtedness is paid in full to Bank. M. Release of Bank. Obligors hereby release and forever discharge Bank and any participants, their officers, directors, employees, shareholders, agents and representatives, from all claims or causes of actions of every kind or character, known or unknown, without limit, which Obligors allegedly may have as of the date of this Agreement. N. Collection Costs. If Bank hires an attorney to assist in collecting any amount due or enforcing any right or remedy under this Agreement, the Notes, the Mortgages, or any other loan document, Obligors agree to pay the reasonable attorney fees and expenses incurred by Bank. IMPORTANT - READ BEFORE SIGNING, THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT. Obligors warrant that they have received a copy of this Agreement and further state that they understand fully the terms and conditions described herein. BANKERS TRUST COMPANY, N.A. By: /s/ Steve Simon Its: Vice President P.O. Box 897 665 Locust Street Des Moines, Iowa 50304-9987 "BANK" CROUSE CARTAGE COMPANY By: /s/ Timothy P. O'Neil Its: Vice President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 TRANSFINANCIAL HOLDINGS, INC. By: /s/ Timothy P. O'Neil Its: President & CEO 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 "BORROWERS" SPECIALIZED TRANSPORT, INC. By: /s/ Timothy P. O'Neil Its: Vice President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 TFH LOGISTICS & TRANSPORTATION SERVICES, INC. By: /s/ Timothy P. O'Neil Its: CEO 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 TRANSPORT BROKERAGE, INC. By: /s/ Timothy P. O'Neil Its: Vice President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 PHOENIX COMPUTER SERVICES, INC. By: /s/ Timothy P. O'Neil Its: Vice President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 CUSTOM CLIENT SERVICES, INC. By: /s/ Timothy P. O'Neil Its: Vice President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 TFH PROPERTIES, INC. F/K/A ANUHCO PROPERTIES, INC. By: /s/ Timothy P. O'Neil Its: President 8245 Nieman Road, Suite #100 Lenexa, Kansas 66214 "CO-BORROWERS" EX-27 3 0003.txt
5 0000719271 TRANSFINANCIAL HOLDINGS, INC. 1000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 550 0 99838 1763 0 102406 57965 26981 143991 96269 14200 0 0 76 33446 143991 0 77645 0 83673 0 0 961 (6981) 43 (7024) 0 0 0 (7024) (2.14) (2.14)
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