0001014108-01-500061.txt : 20011009
0001014108-01-500061.hdr.sgml : 20011009
ACCESSION NUMBER: 0001014108-01-500061
CONFORMED SUBMISSION TYPE: 10-K/A
PUBLIC DOCUMENT COUNT: 2
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010921
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TRANSFINANCIAL HOLDINGS INC
CENTRAL INDEX KEY: 0000719271
STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213]
IRS NUMBER: 460278762
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-12070
FILM NUMBER: 1742085
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: AMERICAN CARRIERS INC
DATE OF NAME CHANGE: 19910812
FORMER COMPANY:
FORMER CONFORMED NAME: ANUHCO INC
DATE OF NAME CHANGE: 19920703
10-K/A
1
tf-form10ka.txt
FORM 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Year Ended December 31, 2000
Commission File Number - 1-12070
TRANSFINANCIAL HOLDINGS, INC.
State of Incorporation - Delaware
IRS Employer Identification No. - 46-0278762
8245 Nieman Road, Suite 100, Lenexa, Kansas 66214
Telephone Number - (913) 859-0055
Securities Registered Pursuant to Section 12(b) of the Act
Name of Each Exchange
Title of Each Class on Which Registered
------------------------------------ -------------------
TransFinancial Holdings, Inc. Common Stock, American Stock Exchange
par value $0.01 per share,
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates of
TransFinancial Holdings, Inc. as of March 30, 2001, was $2,130,889 based on the
last sale price on the American Stock Exchange prior to that date.
The number of outstanding shares of the registrant's common stock as of March
30, 2001 was 3,278,291 shares.
1
Forward-Looking Statements
The Company believes certain statements contained in this Annual Report on
Form 10-K that are not statements of historical fact may constitute
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. 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
the forward-looking statements contained herein are marked by an asterisk ("*")
or otherwise specifically identified herein. These statements involve risks and
uncertainties that may cause actual results to differ materially from those in
such statements. See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Forward-Looking Statements" for additional
information and factors to be considered concerning forward-looking statements.
2
Part II
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of TransFinancial Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of TransFinancial
Holdings, Inc. as of December 31, 2000 and 1999 and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements schedule
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TransFinancial
Holdings, Inc. as of December 31, 2000 and 1999 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has experienced significantly reduced cash flows from operating
activities and has violated covenants of financing agreements that raise
substantial doubt in its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WEAVER & MARTIN, LLC
Kansas City, Missouri
September 19, 2001
3
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
----------------------
2000 1999
--------- ---------
(In Thousands)
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 258 $ 1,076
Finance accounts receivable,
less allowance for credit losses of $1,490 and $870
(Note 4) 80,945 15,305
Discontinued Operations, net (Note 2).............. -- 17,888
Other current assets............................... 753 964
--------- ---------
Total current assets............................ 81,956 35,233
--------- ---------
Operating Property, at Cost
Land............................................... 339 322
Structures and improvements........................ 1,474 1,429
Other operating property........................... 1,083 1,101
--------- ---------
2,896 2,852
Less accumulated depreciation...................... (1,069) (847)
--------- ---------
Net operating property.......................... 1,827 2,005
--------- ---------
Intangibles, net of accumulated amortization.......... 8,946 9,005
Other Assets.......................................... 108 910
--------- ---------
$ 92,837 $ 47,153
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash overdrafts.................................... $ 1,161 $ 1,049
Accounts payable................................... 2,309 2,477
Revolving bank loan (Note 4)....................... 66,250 --
Accrued payroll and fringes........................ 66 326
Other accrued expenses............................. 1,674 2,905
Discontinued Operations, net (Note 2).............. 3,500 --
--------- ---------
Total current liabilities....................... 74,960 6,757
--------- ---------
Deferred Income Taxes (Note 6)........................ -- --
Contingencies and Commitments (Note 7)................ -- --
Shareholders' Equity (Notes 5 and 8)
Preferred stock $0.01 par value,
authorized 1,000,000 shares, none outstanding... -- --
Common stock $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.................................. 46,614 69,283
Treasury stock, 4,345,561 shares, at cost.......... (35,067) (35,067)
--------- ---------
Total shareholders' equity...................... 17,877 40,396
--------- ---------
$ 92,837 $ 47,153
========= =========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
4
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
----------------------------------
2000 1999 1998
--------- --------- ---------
(In Thousands, Except
Per Share Amounts)
Interest and Servicing Revenue............ $ 9,742 $ 9,431 $ 8,128
Fee Revenue............................... 2,801 2,689 2,030
Other..................................... 178 219 218
--------- --------- ---------
Total operating revenue............. 12,721 12,339 10,376
--------- --------- ---------
Operating Expenses
Salaries, wages and employee benefits.. 3,042 3,121 3,267
Interest and securitization costs (Note 4) 5,439 3,897
3,275
Operating supplies and expenses........ 3,136 3,153 4,529
Provision for credit losses............ 1,366 1,193 827
Insurance and claims................... 178 175 148
Depreciation and amortization.......... 816 893 2,238
--------- --------- ---------
Total operating expenses............ 13,977 12,432 14,284
--------- --------- ---------
Operating Income (Loss)................... (1,256) (93) (3,908)
--------- --------- ---------
Nonoperating Income (Expense)
Interest income........................ 8 81 430
Interest expense....................... (123) (3) (11)
Other, net............................. 651 31 (1)
--------- --------- ---------
Total nonoperating income (expense). 536 109 418
--------- --------- ---------
Income (Loss) Before Income Taxes......... (720) 16 (3,490)
Income Tax Provision (Benefit) (Note 6)... (51) 433 (1,183)
---------- --------- ---------
Income (Loss) from Continuing Operations.. (669) (417) (2,307)
---------- ---------- ---------
Discontinued Operations (Note 2).......... (12,900) (7,667) 624
Income Tax Provision (Benefit) (Note 4)... -- -- 344
--------- --------- ---------
Income (Loss) from Discontinued Operations (Note 2) (12,900) (7,667)
280
Loss on Closing of Discontinued
Operations................................ (9,100) -- --
Net Income (Loss)......................... $ (22,669) $ (8,084) $ (2,027)
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share
of Continuing Operations................... $ (0.20) $ (0.12) $ (0.43)
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share
of Discontinued Operations................. $ (6.71) $ (2.25) $ 0.04
========= ========= =========
Basic and Diluted Earnings (Loss) Per Share $ (6.91) $ (2.37) $ (0.39)
========= ========= =========
Basic Average Shares Outstanding.......... 3,278 3,415 5,249
========= ========= =========
Diluted Average Share Outstanding......... 3,506 3,425 5,263
========= ========= =========
The accompanying notes to consolidated financial statements are
an integral part of these statements.
5
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
-----------------------------------
2000 1999 1998
--------- -------- ----------
(In Thousands)
Cash Flows From Operating Activities-
Net income (loss)...................... $ (22,669) $ (8,084) $ (2,027)
Adjustments to reconcile net income (loss)
to net cash generated by operating
activities-
Depreciation and amortization....... 816 893 2,238
Debt cost amortization.............. 365 133 64
Provision for credit losses......... 1,366 1,193 827
Deferred tax provision.............. 0 681 (2,644)
Other...............................
Net increase (decrease) from change in
working capital items affecting
operating activities-
Accounts Receivable.............. (3,132) (6,219) (1,447)
Accounts Payable................. (168) 883 (196)
Other............................ (1,148) (198) 809
Loss from and on discontinued
operations....................... 22,000 7,667 (280)
---------- ---------- ----------
(2,570) (3,051) (2,656)
---------- ---------- ----------
Cash Flows From Investing Activities-
Cash from (to) discontinued operations. (613) 1,542 20,622
Purchase of operating property......... (93) (731) (4,270)
Net sales/ repurchase of accounts
receivables, net....................... (63,875) 2,305 5,058
Purchase of finance subsidiary, net of
cash acquired.......................... 0 0 (4,178)
Purchase of short-term investments..... 0 0 (2,998)
Maturities of short-term investments... 0 0 6,541
Other.................................. (37) (646) (190)
---------- ---------- ----------
(64,618) 2,470 20,585
---------- ---------- ----------
Cash Flows From Financing Activities-
Line of credit borrowings (repayments),
net.................................... 66,250 0 0
Cash overdrafts........................ 112 1,049 (13)
Payments to acquire treasury stock..... 0 (2,603) (19,303)
Payment for fractional shares from reverse
stock split............................ 0 (11) (96)
Other.................................. 8 9 (82)
---------- ---------- ----------
66,370 (1,556) (19,494)
---------- ---------- ----------
Net Decrease in Cash and Cash Equivalents. (818) (2,137) (1,565)
Cash and Cash Equivalents:
Beginning of period.................... 1,076 3,213 4,778
---------- ---------- ----------
End of period.......................... $ 258 $ 1,076 $ 3,213
========== ========== ==========
6
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Supplemental Schedule of Noncash Investing Activities:
In 1998, the Company acquired all of the capital stock of Oxford for
approximately $4,178,000. In conjunction with the acquisition, liabilities
were assumed as follows:
1998
Fair value of assets acquired............................ $22,338
Cash paid for capital stock and acquisition expenses..... (4,178)
Intangibles.............................................. 1,876
-------
Liabilities assumed...................................... $20,036
=======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
7
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Total
Share-
Common Paid-In Retained Treasury holders'
Stock Capital Earnings Stock Equity
----- ------- -------- ----- ------
(In Thousands)
Balance at December 31, 1997.... $ 75 $ 5,581 $ 79,394 $ (12,565) $ 72,485
Net loss........................ -- -- (2,027) -- (2,027)
Issuance of shares under
Incentive Stock Plan......... 1 509 -- (591) (81)
Purchase of 2,115,422 shares
of common stock.............. -- -- -- (19,303) (19,303)
-------- -------- --------- ---------- ---------
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 Stock Plan......... -- 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 income...................... -- -- (22,669) -- (22,669)
Issuance of shares under Deferred
Compensation Arrangements.... -- 143 -- -- 143
Issuance of shares under
Incentive Stock Plan......... -- 7 -- -- 7
-------- -------- --------- ---------- ---------
Balance at December 31, 2000.... $ 76 $ 6,254 $ 46,614 $ (35,067) $ 17,877
======== ======== ========= ========== =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
8
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements include
TransFinancial Holdings, Inc. and its subsidiary companies ("the Company" or
"TransFinancial"). TransFinancial's principal operations include TFH Logistics &
Transportation Services, Inc. ("TFH L&T") and its subsidiaries, Crouse Cartage
Company ("Crouse") and Specialized Transport, Inc. ("Specialized"), Universal
Premium Acceptance Corporation and its affiliates, Agency Premium Resource, Inc.
("APR"), Oxford Premium Finance, Inc. ("Oxford") and UPAC of California, Inc.
(together "UPAC"), and Presis, L.L.C. ("Presis"). The operating results of
Oxford are included from May 29, 1998, the date of its acquisition. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Going Concern - The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
experienced operating losses in 2000, 1999 and 1998 and significantly reduced
cash flows from operating activities. In addition, the Company violated certain
covenants in its financing agreements in 2000. The Company discontinued its
transportation operations during 2000 (See Note 2). 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 successfully liquidate the transportation operations
outside bankruptcy. Management believes that it will be successful in that
liquidation process.* The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Accounting for the Impairment of Long-Lived Assets - The Company
periodically reviews its long-lived assets and associated intangible assets and
has identified no events or changes in circumstances which indicate that the
carrying amount of these assets may not be recoverable, except as described
below. When potential impairments are indicated, impairment losses, if any, are
measured by the excess of carrying values over fair values. An evaluation of
certain equipment and intangible assets of the Company's industrial technology
operation resulted in the determination that these assets were impaired. The
impaired assets were written down by $525,000 effective September 30, 1998. Fair
value was based on estimated discounted future cash flows to be generated by
these assets and management's estimate of the value realizable from sale of the
assets. This writedown is included in "Depreciation and Amortization" in the
Consolidated Statements of Income. This writedown is included in "Other" in the
Consolidated Statements of Income.
Recognition of Revenue - Finance charges on premium finance receivables are
recognized when earned under applicable state regulations using methods that
approximate the interest method. Recognition of earned finance charges on
delinquent accounts is suspended when it is determined that collectibility of
principal and interest is not probable. Interest on delinquent accounts is
recognized when collected. Gains on sale of receivables under the securitization
agreement are recorded when the receivables are sold (See Note 4). Late fees and
other ancillary fees are recognized when chargeable. Accounts are generally
charged off when deemed uncollectible. Recoveries of charged off accounts are
recognized when collected.
The Company and UPAC had 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. Under the
securitization agreement UPAC recognized gains on sales of receivables. These
gains are shown as service revenue on the accompanying income statement.
Effective May 26, 2000, the securitization agreement was assigned to and assumed
by a new financial institution. UPAC and APR Funding amended the securitization
agreement that resulted in a discontinuation of the prior gain on sale treatment
of receivables. This change in accounting treatment had no effect on the total
earnings recognized over the term of each finance contract or the cash flow
received by UPAC on each contract. The timing of earnings recognition was
altered by the accounting change. The non-cash effect on operating revenue and
operating income from the change in gain on sale treatment of receivables was a
negative charge to earnings of $768,000.
Segment Information - The Company has adopted Statement of Financial
Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of this statement did not
require significant changes in the way the Company's segments were disclosed.
TransFinancial operates in two industry segments,
9
financial services and industrial technology. The Company discontinued its
transportation operations during 2000. TransFinancial operates as an insurance
premium finance company through UPAC. The Company provides short-term secured
financing for commercial and personal insurance premiums through insurance
agencies throughout the United States. Approximately 50% of the insurance
premiums financed by UPAC are placed through insurance agencies in California,
Illinois, Florida, Texas and Minnesota. Presis is a startup company that is
developing an industrial technology for dry particle processing. Information
regarding the Company's industry segments for the years ended December 31, 2000,
1999, and 1998 is as follows (in thousands):
Operating Depreciation
Operating Income and Capital Total
Revenues (Loss) Amortization Additions Assets
----------- -------- --------------- ---------- -----------
Financial Services 2000 12,686 (90) 708 31 91,023
1999 12,227 1,341 740 100 26,597
1998 10,247 (653) 1,172 197 25,558
Industrial Technology 2000 0 (38) 15 0 58
1999 0 (212) 90 21 81
1998 0 (1,469) 610 104 185
Total Segments 2000 12,686 (128) 723 31 91,081
1999 12,227 1,129 830 121 26,678
1998 10,247 (2,122) 1,782 301 25,743
Corporate and Other 2000 35 (1,128) 93 62 1,756
1999 112 (1,222) 63 609 20,475
1998 129 (1,786) 456 3,969 31,013
Total from Continuing
Operations 2000 12,721 (1,256) 816 93 92,837
1999 12,339 (93) 893 731 47,153
1998 10,376 (3,908) 2,238 4,270 56,756
Transportation
(Discontinued Operations) 2000 111,445 (22,000) 3,105 3,434 8,268
1999 149,125 (7,667) 4,265 5,209 29,740
1998 144,592 624 4,048 4,832 21,706
Consolidated Continuing
Operations 2000 124,166 (23,256) 3,921 3,527 101,105
and Discontinued 1999 161,464 (7,760) 5,158 5,939 76,893
Operations 1998 154,976 (3,284) 6,286 9,102 78,462
Depreciation - Depreciation is computed using the straight-line method and
the following useful lives:
Structures and Improvements............ 19 - 39 years
Other Operating Property............... 2 - 10 years
As of July 1, 1998, the Company prospectively decreased the estimated
remaining useful life of certain purchased software to reflect the Company's
plan to substantially revise and replace the software. This change increased
amortization expense in 1998 by $333,000 and decreased net income by
approximately $200,000, or $0.04 per share.
10
Allowance for Credit Losses - The allowances for credit losses is
maintained at an amount considered adequate to provide for potential losses. The
amount of allowance for credit losses is based on periodic (not less than
quarterly) evaluations of the portfolios based on historical loss experience,
detail account-by-account agings of the portfolios and management's evaluation
of specific accounts. The following is an analysis of changes in the allowance
for credit losses on finance accounts receivable:
2000 1999
------ ------
Balance, beginning of year................ $ 870 $ 566
Provision for credit losses............... 1,367 1,193
Reclass provision - gain on sale
accounting change......................... 567 -
Charge-offs, net of recoveries of
$550 and $443, respectively............... (1,314) (889)
------ ------
Balance, at the end of year............... $1,490 $ 870
====== ======
Income Taxes - The Company accounts for income taxes in accordance with
the liability method. Deferred income taxes are determined based upon the
difference between the book and the tax basis of the Company's assets and
liabilities. Deferred taxes are provided at the enacted tax rates expected to be
in effect when these differences reverse.
Cash Equivalents - The Company considers all highly liquid investments
purchased with a maturity of three months or less to be cash equivalents. The
Company maintains cash and cash equivalents with various major financial
institutions. At times such amounts may exceed the F.D.I.C. limits. The Company
believes that no significant concentration of credit risk exists with respect to
cash and cash equivalents.
Disclosures about Fair Value of Financial Instruments - The following
methods and assumptions are used to estimate the fair value of each class of
financial instruments:
a. Cash Equivalents - The carrying amount approximates fair value because
of the short maturity of these instruments.
b. Finance Accounts Receivable - The carrying amount approximates fair
value because of the short maturity of these instruments.
c. Long-Term Debt - The carrying amount approximates fair value as the
debt bears interest at a variable market rate.
Pervasiveness of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Intangible Assets and Accumulated Amortization - Intangible assets,
consisting primarily of goodwill and intangibles recorded in connection with the
acquisition of insurance premium finance companies, totaled $11,499,000 at
December 31, 2000. These intangible assets are generally being amortized on the
straight-line basis over 15 - 25 years. The accumulated amortization of
intangible assets as of December 31, 2000 was $2,553,000.
Reclassifications - Certain amounts in the accompanying consolidated
balance sheet for the prior period have been reclassified to conform with the
current period's presentations.
11
2. Discontinued Operations
On September 16, 2000, the Company ceased operations of Crouse, its
less-than-truckload motor carrier subsidiary, as a result of its continuing
operating losses. The Company continued to operate Specialized Transport, Inc.
("Specialized"), its truckload motor carrier subsidiary until December 16, 2000.
Prior to Crouse's closure, approximately 33% of Specialized's revenues were
received from Crouse for providing linehaul transportation between terminals.
Specialized was in the process of securing additional freight to replace
revenues previously received from Crouse when its insurance coverages were
revoked and it was forced the close its operation.
The Company is conducting orderly liquidations of the Crouse and
Specialized assets for distribution to its secured and unsecured creditors. An
independent "Advisory Committee" of unsecured creditors has been formed for each
of Crouse and Specialized to provide advice and oversight to management during
this liquidation process. The Company has closed on the bulk sale of all of
Crouse's tractors, trailers, other equipment and real property. The Company
expects to collect a substantial portion of Crouse's remaining receivables and
liquidate the assets of Specialized over the next six months.* The Company is in
the process of verifying unsecured claims. The proceeds of asset liquidations
are anticipated to allow the full payment of the secured claims and a partial
distribution to priority creditors and, in the case of Specialized, to the
general unsecured creditors on their claims.*
A summary of the net liabilities of discontinued operations as of December
31, 2000, follows (in thousands):
Assets
------
Cash......................................... $ -
Freight accounts receivable, net............. 3,532
Operating property, at estimated
net realizable value......................... 3,617
Deposits, prepayments and other.............. 1,127
-------
Total assets................................. 8,276
-------
Liabilities
-----------
Secured notes and other...................... 3,141
Post-cessation administrative costs.......... 1,052
Priority wages, taxes and other.............. 1,934
Unsecured liabilities........................ 5,649
-------
Total liabilities............................ 11,776
-------
Net deficit.................................. $(3,500)
=======
After distribution of all of the proceeds to creditors, TFH expects to
incur approximately $3.5 million of residual liabilities for certain claims
included in the net deficit above.* This estimate of residual liabilities
considers the reduction of the transportation operations general unsecured
liabilities of Crouse and Specialized by $18.5 million.* Such forgiveness
relates to debts specific to these corpoations and without recourse to TFH L&T,
and various settlements with other creditors.* In connection with the closure of
the transportation businesses the Company has recorded an estimated "Loss on
Discontinued Operations" of $9.1 million, or approximately $2.78 per share. The
loss includes adjustments of asset and liability carrying values to liquidation
values, accruals of liabilities for multi-employer pension withdrawal and WARN
Act liabilities and estimated post-cessation administrative costs to conduct the
liquidation. Management believes that it will be successful in conducting an
orderly liquidation of the assets and disposition of claims of Crouse and
Specialized.*
12
3. Employee Benefit Plans
UPAC Plans
Effective June 1, 1995, the Company established a 401(k) Savings Plan and
a Money Purchase Pension Plan, both of which are defined contribution plans.
Employees of UPAC and TransFinancial are eligible to participate in the plans
after they attain age 21 and complete one year of employment.
Participants in the 401(k) Savings Plan may defer up to 13% of annual
compensation. The Company matches 50% of the first 10% deferred by each
employee. Company contributions vest after five years. Company matching
contributions in 2000, 1999, and 1998 were $52,000, $70,000 and $63,000.
Under the Money Purchase Pension Plan, the Company contributes 7% of each
eligible employee's annual compensation plus 5.7% of any compensation in excess
of the Social Security wage base. Company contributions in 2000, 1999 and 1998
were $128,000, $137,000 and $108,000.
Non-Union Pension Plan
TFH L&T has a defined contribution pension plan ("the Non-Union Plan")
providing for a mandatory Company contribution of 5% of annual earned
compensation of the non-union employees. Additional discretionary contributions
may be made depending upon the profitability of TFH L&T. Any discretionary funds
contributed to the Non-Union Plan were invested 100% in TransFinancial Common
Stock. TFH L&T has taken action to terminate the Non-Union Plan effective March
31, 2001.
401(k) Plan
Effective January 1, 1990, TFH L&T established a salary deferral program
under Section 401(k) of the Internal Revenue Code. To date, participant
contributions to the 401(k) plan have not been matched with Company
contributions. All employees of TFH L&T are eligible to participate in the
401(k) plan after they attain age 21 and complete one year of qualifying
employment. TFH L&T has taken action to terminate this plan effective March 31,
2001.
Stock Option Plans
A Long-Term Incentive Plan adopted in 1998 ("1998 Plan") provides that
options for shares of TransFinancial Common Stock be granted to directors, and
that options and other shares may be granted to officers and other employees.
All such option grants are at or above fair market value at the date of grant.
Options granted generally become exercisable ratably over two to five years and
remain exercisable for ten years from the date of grant. Initially, 600,000
shares were reserved for issuance pursuant to the 1998 Plan. As of December 31,
2000, 236,900 shares were available for grant pursuant to the 1998 Plan.
An Incentive Stock Plan was adopted in 1992 ("1992 Plan") which provides
that options for shares of TransFinancial Common Stock shall be granted to
directors, and may be granted to officers and key employees at fair market value
of the stock at the time such options are granted. Initially, 500,000 shares of
TransFinancial common stock were reserved for issuance pursuant to the 1992
Plan. As of December 31, 2000, options for 47,230 shares were available for
grant pursuant to the 1992 Plan. These options generally become exercisable
ratably over two to five years and remain exercisable for ten years from the
date of grant.
In each of 1995 and 1996 the Company granted non-qualified options to
acquire 10,000 shares of common stock to an officer of UPAC pursuant to an
employment agreement. These options become exercisable in 1998 and 1999 and
expire in 2005 and 2006.
The Company follows Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of each of the Company's stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
13
SFAS No. 123 "Accounting for Stock-Based Compensation," requires the use
of option valuation models to estimate the fair value of stock options granted
and recognize that estimated fair value as compensation expense. Pro forma
information regarding net income and earnings per share is required by SFAS No.
123, and has been determined as if the Company had accounted for its stock
options under the fair value method of SFAS No.123. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 2000, 1999 and 1998:
risk-free interest rates of 6.2%, 5.2% and 5.5%; expected life of options of 4.4
years, 4.3 years and 4.4 years; and a volatility factor of the expected market
price of the Company's common stock of .54 in 2000, .36 in 1999 and .20 in 1998.
The preceding assumptions used as inputs to the option valuation model are
highly subjective in nature. Changes in the subjective input assumptions can
materially affect the fair value estimates; thus, in management's opinion, the
estimated fair values presented do not necessarily represent a reliable single
measure of the fair value of its employee stock options. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting periods. The Company's unaudited pro forma
information follows (in thousands, except for per share amounts):
2000 1999 1998
------ ------ -------
Pro forma net income (loss).............. $(22,846) $(8,275) $(2,234)
Pro forma basic earnings (loss) per share $ (6.96) $ (2.43) $ (0.43)
The following table is a summary of data regarding stock options granted
during the three years ended December 31, 1999:
2000 1999 1998
------------------ -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- ----- ------- ----- ------- -----
Options outstanding at
beginning of year........ 408,050 $7.33 353,150 $8.17 350,650 $7.47
Granted..................... 345,750 $1.48 99,500 $4.26 131,050 $9.03
Forfeited................... (71,200) $5.61 (42,600) $7.35 (44,580) $9.13
Exercised................... (1,300) $4.41 (2,000) $2.41 (83,970) $6.07
------- ------ -------
Options outstanding at end
of year.................. 681,300 $4.31 408,050 $7.33 353,150 $8.17
======= ======= =======
Options exercisable at end
of year.................. 188,630 $7.63 160,520 $7.93 114,180 $7.49
======= ======= =======
Estimated weighted average
fair value per share of
options granted during
the year.................. $1.48 $ 1.33 $2.12
The per share exercise prices of options outstanding as of December 31,
2000, ranged from $.81 to $9.79 per share. The weighted average remaining
contractual life of those options was 7.9 years.
14
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 2000.
Weighted
Average Weighted Weighted
Number of Remaining Average Number of Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices Options Life Price Options Price
--------------- ----------- ---------- ----- ----------- -----
$0.00-$2.50 341,900 9.3 $1.51 2,150 $2.41
$2.50-$5.50 97,000 7.5 $4.35 32,000 $4.54
$5.50-$8.00 111,500 5.7 $7.66 77,220 $7.69
$8.00-$10.00 130,900 6.4 $8.71 77,260 $8.99
------- -------
681,300 188,630
======= =======
4. Financing Agreements
Securitization of Receivables/Loan Agreements
In December 1996, UPAC and TransFinancial entered into a securitization
agreement whereby undivided interests in a designated pool of finance accounts
receivable can be sold on an ongoing basis. Effective May 26, 2000, the
securitization agreement was assigned to and assumed by a new financial
institution. UPAC and APR Funding amended the securitization agreement with the
new financial institution increasing the maximum allowable amount of receivables
to be sold under the new agreement to $80 million, extending the term of the
agreement by five years with annual liquidity renewals and amending certain
covenants. On August 31, 2000, UPAC and APR Funding Corporation executed a Loan
and Security Agreement with the same financial institution under essentially the
same terms as the securitization agreement. UPAC and APR Funding borrow under a
revolving loan arrangement with maturities from 1 to 270 days. The loan bears
interest at commercial paper rates plus bank program fees.
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 the Combined Group to report any material adverse
changes in its financial condition. The terms of the loan agreement require UPAC
to maintain a reserve at specified levels that serves as collateral.
5. Common Stock and Earnings Per Share
Stock Repurchases
In February 1999, the Board of Directors authorized the repurchase of
1,030,000 shares of the Company's common stock. During 1999, a total of 683,241
share were repurchased at a cost of approximately $2.6 million.
In June 1998, TJS Partners, LP ("TJS"), a shareholder of the Company,
announced its intent to acquire an additional 23% of the Company's outstanding
common stock held by one family (the "Crouse family"), obtain control of the
Company's board of directors and study possible actions such as the liquidation
or sale of part or all of the Company's businesses or assets. The board of
directors determined that the hostile takeover attempt was not in the best
interest of the Company and its shareholders and agreed to repurchase the shares
held by TJS and the Crouse family. The failed attempt at a hostile takeover of
the Company, together with other events, led the Company to record charges for
management and personnel restructuring, asset and liability valuation
adjustments, and transaction costs and other expenses related to the takeover
attempt.
Pursuant to a definitive stock purchase agreement resolving the hostile
takeover attempt, the Company repurchased 2,115,422 shares of its common stock
held by the Crouse family, including 881,550 shares registered in the name of
TJS Partners, LP, all at a price of $9.125 per share, effective August 14, 1998.
In addition, the Company paid and expensed $350,000 of legal and other costs
incurred by the Crouse family in connection with the takeover attempt. The
Company funded the payment out of available cash and short-term investments, the
proceeds from the sale and leaseback of approximately $4.2 million of revenue
equipment and the proceeds from the $10.0 million secured loan from one of the
Company's existing bank lenders.
15
Earnings Per Share
Because of the Company's simple capital structure, income (loss) available
to common shareholders is the same for the basic and diluted earnings per share
computations. Such amounts were $(22,669,000), $(8,084,000) and $(2,027,000) for
2000, 1999 and 1998. Following is a reconciliation of basic weighted average
common shares outstanding, weighted average common shares outstanding adjusted
for the dilutive effects of outstanding stock options, and basic and diluted
earnings per share for each of the periods presented (in thousands, except per
share amounts).
2000 1999 1998
----------------- -------------- ----------------
Per Share Per Share Per Share
Shares Amounts Shares Amounts Shares Amounts
Basic earnings (loss)
per share................ 3,278 $(6.91) 3,415 $ (2.37) 5,249 $(0.39)
====== ======= =======
Plus incremental shares
from assumed conversion of
stock options............ 0 10 14
----- ----- ------
Diluted earnings (loss)
per share................ 3,278 $(6.91) 3,425 $ (2.37) 5,263 $(0.39)
===== ====== ===== ======= ====== =======
Options to purchase 188,630 shares of common stock at an average exercise
price of $ $7.63 per share were outstanding at December 31, 2000, but were not
included in the computation of diluted earnings per share because the options'
average exercise price was greater than the average market price of the common
shares. These options remain outstanding and expire through 2008.
6. Income Taxes
Deferred tax assets (liabilities) are comprised of the following at
December 31 (in thousands):
2000 1999
-------- --------
Deferred Tax Assets:
Employee benefits.................... $ 835 $ 521
Claims accruals and other............ 2,553 1,706
Allowance for credit losses.......... 809 571
Net operating loss carryforwards..... 9,130 4,225
Alternative minimum tax and other
credits........................... 754 754
-------- --------
Total gross deferred tax assets......... 14,081 7,777
Less valuation allowance................ (12,331) (3,197)
-------- --------
Net deferred tax assets................. 1,750 4,580
-------- --------
Deferred Tax Liabilities:
Financial services revenue........... - (314)
Operating property, principally
due to differences in depreciation (1,424) (4,038)
Amortization of intangibles.......... (326) (228)
-------- --------
Total gross deferred tax liabilities.... (1,750) (4,580)
-------- --------
Net deferred tax........................ $ - $ -
======== ========
16
In 2000 and 1999, the Company assessed the likelihood that all or a
portion of its deferred tax assets would not be realized. Such assessment
included consideration of positive and negative factors, including the Company's
current financial position and results of operations, projected future taxable
income and available tax planning strategies. As a result of such assessment, it
was determined that it was more likely than not that the net deferred tax assets
will not be realized. Therefore, the Company recorded a valuation allowance of
$9,134,000 and $3,197,000 in its deferred income tax provision in 2000 and 1999,
respectively.
At December 31, 2000, the Company had approximately $22.8 million of net
operating loss carryforwards that were available for Federal income tax purposes
and expire in 2018 through 2020. At December 31, 2000, the Company had $709,000
of alternative minimum tax and other credit carryforwards available which do not
expire. As noted above, the carryforwards of net operating losses and
alternative minimum tax credits may not be realized. The Internal Revenue
Service ("IRS") has examined the Company's 1994 through 1996 tax returns. In
April 1998, the Company and the IRS settled all issues for tax years 1994
through 1996 within the tax reserves that the Company made provision for in
1997.
The following is a reconciliation of the Federal statutory income tax rate
to the effective income tax provision (benefit) rate:
2000 1999 1998
----- ----- -----
Federal statutory income tax rate. (35.0)% (35.0)% (35.0)%
State income tax rate, net........ (4.6) (4.7) (3.8)
Amortization of non-deductible
acquisition intangibles........ 0.4 1.3 3.0
Non-deductible meals and
entertainment.................. - 1.1 3.2
Change in valuation allowance..... 40.3 41.8 -
Other............................. (1.3) 1.2 3.5
----- ----- -----
Effective income tax rate......... (0.2)% 5.7% (29.1)%
===== ===== =====
The components of the income tax provision (benefit) consisted of the
following (in thousands):
2000 1999 1998
------- -------- -------
Current:
Federal................................ $ (61) $ (198) $ 1,444
State.................................. 10 (50) 361
------- --------- -------
Total............................... (51) (248) 1,805
-------- --------- -------
Deferred:
Federal................................ (7,308) (2,013) (2,115)
State.................................. (1,827) (503) (529)
Change in valuation allowance.......... 9,135 3,197 -
------- -------- -------
Total............................... - 681 (2,644)
------- -------- -------
Total income tax provision (benefit)...... $ (51) $ 433 $ (839)
======== ======== =======
17
7. Contingencies and Commitments
The Company is party to certain 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.*
Crouse was 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 alleged that Crouse negligently caused
the death of Lori Cothran in a motor vehicle accident involving a Crouse driver.
These suits were settled within Crouse's insurance coverage.
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 a 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. The plaintiff filed an amended class action complaint on August 9, 2000,
seeking damages in excess of $4.50 per share for alleged breaches of fiduciary
duties. A motion to dismiss and an amended complaint have been filed and the
Company believes this suit will not have a material adverse effect on the
financial condition, liquidity or results of operations of the Company.*
8. Shareholder Rights Plan
On February 18, 1999, the Board of Directors authorized the amendment of
the previously adopted Shareholder Rights Plan by which the Board of Directors
declared a dividend distribution of one Preferred Stock Purchase Right for each
outstanding share of TransFinancial Common Stock.
Under the Shareholder Rights Plan, Rights were issued on July 27, 1998 to
shareholders of record as of that date and will expire in ten years, unless
earlier redeemed or exchanged by the Company. The distribution of Rights was not
taxable to the Company or its shareholders.
The Rights become exercisable only if a person or entity is an "Acquiring
Person" (as defined in the Plan) or announces a tender offer, the consummation
of which would result in any person or group becoming an "Acquiring Person."
Each Right initially entitles the holder to purchase one one-hundredth of a
newly issued share of Series A Preferred Stock of the Company at an exercise
price of $50.00. If, however, a person or group becomes an "Acquiring Person",
each Right will entitle its holder, other than an Acquiring Person and its
affiliates, to purchase, at the Right's then current exercise price, a number of
shares of the Company's common stock having a market value of twice the Right's
exercise price.
In addition, if after a person or group becomes an Acquiring Person, the
Company is acquired in a merger or other business combination transaction, or
sells 50% or more of its assets or earning power, each Right will entitle its
holder, other than an Acquiring Person and its affiliates, to purchase, at the
Right's then current exercise price, a number of shares of the acquiring
company's common stock having a market value at the time of twice the Right's
exercise price.
Under the Shareholder Rights Plan, an "Acquiring Person" is any person or
entity which, together with any affiliates or associates, beneficially owns 15%
or more of the shares of Common Stock of the Company then outstanding. The
Shareholder Rights Plan contains a number of exclusions from the definition of
Acquiring Person. The Shareholders Rights Plan will not apply to a Qualifying
Offer, which is a cash tender offer to all shareholders satisfying certain
conditions set forth in the Plan. The Company's Board of Directors may redeem
the Rights at any time prior to a person or entity becoming an Acquiring Person.
18
TRANSFINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
December 31, 2000 and 1999
Summary of Quarterly Financial Information (Unaudited):
TransFinancial's quarterly operating results from Crouse, as well as those
of the motor carrier industry in general, fluctuate with the seasonal changes in
tonnage levels and with changes in weather related operating conditions.
Inclement weather conditions during the winter months may adversely affect
freight shipments and increase operating costs.
The following table sets forth selected unaudited financial information
for each quarter of 2000 and 1999 (in thousands, except per share amounts).
2000
First Second Third Fourth Total
----------- ---------- --------- -------- ---------
Revenue.................................... $ 3,039 $ 2,780 $ 3,323 $ 3,579 $ 12,721
Operating Income (Loss).................... (20) (1,132) (80) (24) (1,256)
Nonoperating Income (Expense).............. (228) 151 (38) 651 536
Net Income (Loss).......................... (3,598) (3,427) (10,551) (5,093) (22,669)
Basic and Diluted Earnings (Loss) per Share (1.10) (1.05) (3.22) (1.55) (6.91)
1999
First Second Third Fourth Total
----------- ---------- --------- -------- ---------
Revenue.................................... $ 2,882 $ 3,125 $ 3,209 $ 3,123 $ 12,339
Operating Income (Loss).................... 13 173 143 (422) (93)
Nonoperating Income (Expense).............. 38 7 41 23 109
Net Income (Loss).......................... (172) (321) (1,035) (6,556) (8,084)
Basic and Diluted Earnings (Loss) per Share (0.04) (0.09) (.32) (2.00) (2.37)
9. Subsequent Events
On September 14, 2001, the Board of Directors unanimously approved a plan
of liquidation for the Company. Under the plan of liquidation, the Company will
sell all of its assets, and after paying off its debts and setting aside
required reserves, will distribute the remaining proceeds as one or more
"liquidating dividends" within the next several months. The preliminary
estimates of the total distribution under the plan range from $1.50 to $2.00 per
share.
In conjunction with the plan, a definitive agreement was executed on
September 18, 2001 for the sale of the financial services businesses and certain
related assets for $14 million, subject to certain adjustments and due
diligence.
These proposals are subject to approval by a majority of TransFinancial's
outstanding shares at a meeting to be held after preparation and mailing of
proxy material. The Board of Directors will recommend approval of each of these
proposals to the shareholders.
19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
--------------------
Included in Item 8, Part II of this Report -
Consolidated Balance Sheets at December 31, 2000 and 1999
Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
Supplemental Financial Information (Unaudited) - Summary of
Quarterly Financial Information for 2000 and 1999
(a)2. Financial Statement Schedules
-----------------------------
Included in Item 14, Part IV of this Report -
Financial Statement Schedules for the three years ended December 31,
2000:
Schedule II - Valuation and Qualifying Accounts
Other financial statement schedules are omitted either because of the
absence of the conditions under which they are required or because the
required information is contained in the consolidated financial
statements or notes thereto.
20
(a)3. Exhibits
--------
The following exhibits have been filed as part of this report in
response to Item 14(c) of Form 10-K.
Exhibit No. Exhibit Description
----------- -------------------
10(bb) Agreement between the registrant and Mr. Tim O'Neil.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 20, 2001 By /s/William D. Cox
----------------------------------------
William D. Cox
Chairman of the Board, President,
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ William D. Cox President, Chief Executive Officer
------------------------------ (Principal Financial Officer)
William D. Cox
/s/ Clark D. Stewart /s/ Harold C. Hill
------------------------------ -----------------------
Clark D. Stewart, Director Harold C. Hill, Jr., Director
/s/ Roy R. Laborde
------------------------------
Roy R. Laborde, Vice Chairman of
the Board of Directors
September 20, 2001
Date of all signatures
22
EX-10
3
tf-ex10_347681.txt
AGREEMENT BETWEEN REGISTRANT AND MR. TIM O'NEIL
AGREEMENT
This Agreement is made and entered into as of this 21st day of June, 2001
by and between TransFinancial Holdings, Inc. a Delaware Corporation ("TFH"), and
Timothy P. O'Neil of Johnson County, Kansas ("O'Neil).
RECITALS
The parties hereto entered into an Employment Agreement effective as of
July 2, 1998, and here wish to record their Agreement concerning the performance
and discharge, by each of them of their duties and obligations thereunder.
Now therefore, in consideration of the foregoing and the mutual promises
hereinafter set forth, the parties agree as follows:
AGREEMENTS
The terms of the Employment Agreement and the rights and obligations of the
parties thereunder, shall remain in effect and unchanged until the execution of
an agreement between TFH and Central States Southeast and Southwest Areas Health
and Welfare and Pension Funds resolving and settling satisfactorily to the TFH
directors all claims of such funds as a result of the withdrawal therefrom of
the transportation subsidiaries of TFH, which latter date is hereby referred to
as the "Effective Date".
On the Effective Date, O'Neil shall resign as a officer and director of TFH
and TFH shall pay to him the sum of $475,000.00 less required withholding.
At or promptly after the Effective Date, O'Neil shall purchase from TFH the
automobile presently provided by it for his use for the price of $16,300.00 and
TFH shall thereupon transfer to him such automobile and any and all interest
that it has in the split dollar life insurance policy maintained on the life of
O'Neil, including the right to reimbursement for premiums paid thereon.
As of the Effective Date, all options to purchase stock of TFH heretofore
granted to O'Neil, shall become fully vested and shall be exercisable by O'Neil
at anytime within two years thereafter, subject to earlier liquidation of TFH or
the occurrence of any other act terminating its corporate existence.
From and after the Effective Date, and through December 31, 2001, O'Neil
agrees to provide to TFH such consulting services as it shall reasonably request
at the rate of $100.00 per hour, provided, however, that no charge shall be made
by O'Neil for the first 200 hours less that number of hours devoted by him to
TFH Logistics & Transportation Services, Inc. pursuant to an Agreement of even
date herewith. In his role as consultant to TFH, O'Neil shall be an independent
contractor and not an (employee or) agent of TFH, and shall not be entitled to
further participate in any benefit programs maintained or adopted by it, other
than as allowed under COBRA. In connection with performance of such consulting
services, O'Neil shall be entitled to reimbursement of all reasonable expenses
by him. Such reimbursement and consulting compensation shall be paid to O'Neil
by TFH within ten days after the end of each month during which the same were
rendered or incurred.
As of the Effective Date, O'Neil shall release TFH of and from all rights
and claims by him pursuant to the earlier mentioned Employment Agreement, but
acknowledges that certain provisions thereof, including paragraphs 6 and 7
thereof, shall remain in effect and binding upon him.
TFH acknowledges and agrees that, as of the Effective Date, O'Neil will
have rendered in excess of 1,000 hours of service since January 1, 2001, and
that, for purposes of benefit plans maintained by it or its affiliates, and in
which O'Neil has participated, he shall, absent his earlier death, be deemed an
employee as of December 31, 2001.
This Agreement shall be construed and interpreted in accordance with, and
governed by the laws of the State of Kansas, and shall be binding upon and inure
to the benefit of TFH and O'Neil, and their respective heirs, personal and legal
representatives, successors and assigns, provided, however, that O'Neil may not
assign or delegate any of his obligations hereunder.
This Agreement contains the entire understanding of TFH and O'Neil with
respect to the subject matter hereof, and no representations, promises,
Agreements, understandings, or assurances written or oral not herein contained
shall be of any force or effect. No change or modification hereof, or of any
term or provision hereof, shall be valid or binding unless the same is in
writing and signed by the party intended to be bound. No waiver of any provision
of this Agreement shall be valid unless it is in writing and signed by the party
against whom such waiver is sought to be enforced, and no valid waiver of any
provision of this Agreement shall be deemed a waiver of any other provision
hereof, or a waiver of such provision at any other time.
If any party to this Agreement files suit or takes legal action to enforce
or avoid its provisions, the losing party shall pay the prevailing party's
reasonable attorney's fees and expenses.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date herein first above written.
/s/ Timothy P. O'Neil
--------------------------------------------
Timothy P. O'Neil
TransFinancial Holdings, Inc.
By: /s/ William D. Cox
---------------------------------------
2