On July 8, 2020, Covenant Transport Solutions LLC (“CTS”), doing business as Transport Financial Services (“TFS”) and an indirect wholly owned subsidiary of Covenant Logistics Group, Inc., a Nevada corporation (the “Company”), entered into an Accounts Receivable Purchase Agreement (the “Purchase Agreement”) with Advance Business Capital LLC (“ABC”), an indirect wholly owned subsidiary of Triumph Bancorp, Inc. (“Triumph”).  Pursuant to the Purchase Agreement, CTS sold, and ABC purchased, substantially all of TFS’ operations and assets (the “Transaction”).  CTS sold approximately $103.3 million of net accounts receivable and related transportation factoring assets. In exchange, the Company received cash proceeds, net of transaction expenses of approximately $0.9 million, totaling approximately $107.5 million, plus Triumph common stock valued at approximately $13.9 million, and the opportunity to earn deferred net contingent cash consideration (net of allocations to former TFS management) of up to approximately $9.0 million after the twelve-month period ending July 31, 2021. The Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions and includes certain ancillary agreements relating to registration rights, transition services, and ongoing referrals.

The Company is updating a statement made in its July 8, 2020, press release regarding the Transaction.  Such press release noted an expected third quarter pretax gain ranging from $34.0 to $38.0 million, which was expected to modestly exceed the net amount of multiple second quarter gains, impairments, and expenses relating primarily to the sale or exit of certain real estate, downsizing unprofitable operations, reallocating fleet assets toward contract logistics operations, and other actions consistent with the strategic plan.  The Company now expects such third quarter pretax gain to be approximately $26.0 to $27.0 million, which is anticipated to be less than the net amount of the second quarter gains, impairments, and expenses that were noted in the press release.  The transaction consideration described in the press release was accurate.